2017 Investor Roundtable:General Discussion

[ValueAnalyst]

So some summation speculations of mine that have been pinging in this thread recently:

1) Gigafactories announced this year: China, Europe, India and the potential fourth in the USA or Canada. These locations will be all-in-one battery to finished vehicle facilities.
2) Future satellite network will definitely be the future reusability customer, with Tesla buying a stake of bandwidth, allowing the transferring of cash from Tesla to SpaceX
3) Refreshed interiors Model S and X will be announced to coincide with the Model 3 reveal, to include whatever fancy new (non-HUD) advancements they've come up with, spurring demand for MS and MX, and re-differentiating the product from M3
4) While disrupting the transport business is capital intensive, and could only result in 5-10% of market share being transferred to Tesla in the next 3-5 years, this reduction in revenue will be enough to begin an irreversible slide into bankruptcy for most if not all existing auto makers, as their margins (and liability structures) are simply not set up to absorb that loss of revenue. (Exhibit A: 2009) Any unfulfilled demand will simply be met with more and more people waiting for M3/MY availability, starving out existing options. The blackberries and Nokias will sit in the lots, as consumer sentiment simply shifts away from that product.
5) Tesla semi debuts as fully autonomous capable fleet machine
6) All major multi-dozen supercharger stations installed in 2017 are 450+ KWh capable with robotic charging capability

As a result of these developments (and a few I can't think of right now), $TSLA finishes 2018 between $500-$700, finishes 2020 between $1,000-$1,350. I retire 2021.

I agree with all of the predictions, but expect higher per share price in 2020.

 

[RobStark]

I disagree with the thinking that it will take 20 years to turn over the existing fleet of cars.

Because Tesla's cars are so much better than existing options, I expect Model 3 and Model Y to significantly accelerate the replacement cycle in the coming decade.

I expect 70-80% of the existing fleet to have been replaced by fully autonomous all-electric cars by 2030.

Unlikely. In India unlikely x 10.

It has made rational sense to provide enough electricity to prevent brownouts for over 6 decades but still there are brownouts on a regular and massive lost productivity.

 

[RobStark]

what will be the cost of fuel? The easy oil has already been extracted

Look at the shorting oil hedging Tesla thread.

Demand is likely to remain flat then slowly decline.

Keeping oil prices stable or falling. Despite already extracting the lowest cost oil as technology also improves. Natural gas also displacing oil as key feedstocks.

Price of gasoline is likely more and more a result of political decisions not supply and demand for oil. Low in low tax states and higher in high tax states.

With the exception of temporary price increase resulting from war involving a key petro state or the collapse of a regime in a key petro state oil prices are likely to remain below $60 forever.

 

[ValueAnalyst]

long time lurker and investor here,

I came across this article , decided it was time to make a account and give back some info instead of absorbing all the time

Pension Fund invests into Solarcity ~ 200Million

This is very positive for Tesla and reduces the likelihood of any further equity raises.

 

[mmd]

Insideevs out with its estimate for April.
Model S 1125 (up from 900 in Jan). 60% is S60.
Model X 715 (down from 750 in Jan)
BTW, I predict free super charger will come back again, may be for the higher trims, to spur demand.

April 2017 Plug-In Electric Vehicle Sales Report Card

The focus for Tesla deliveries, at least when it came to the US, was definitely on the Model S in April.

And not just any trim level of the Model S, but the 60 kWh edition (the 60 Teslas are really 75 kWh battery-powered cars, but software retarded to 60 kWh), which was officially discontinued on April 17th.

For the month we noticed, perhaps not surprisingly a huge weighting to the former base offering of the car – taking priority from not only other Model S offerings, but Model X production in the first half of April.

For the month we estimate 1,125 Model S sedans were delivered, which is about 40% more than a year ago (as the first month of a new quarter is generally always the lightest for US deliveries).

But as noted, the mix was very 60 kWh trim level heavy, of the confirmed data we were able to run down on Tesla’s deliveries in the US, about 60% of the deliveries were the outgoing model.

Also, no sooner had the 60 kwh car been discontinued, that Tesla offered existing 60 owners (on the same day – April 17th) the ability to upgrade to 75 kWh for just $2,000 dollars, while at the same time slashing the price of the 75 kWh offering by $5,000; one assumes the price reduction was to keep the price point under 70k ($69,500), and enable the delivery volume of the Model S 75 to stay on par with that of the former 60.

 

[ValueAnalyst]

This is what disruption looks like.

Auto roundup: Letdown in Detroit, new high out of Palo Alto - Fiat Chrysler Automobiles NV (NYSE:FCAU) | Seeking Alpha

 

[schonelucht]

Sounds like a "Cash Equity" transaction (monetizetion). One announcement quoting Jeroen Wolfs, senior investment manager PGGM Infrastructure. states:

"The solar panels are already on the roofs, they generate income and cash, "and, we are paid," says Wolf. The investment PGGM expects a market comformtable efficiency. For infrastructure is that in about 8% to 9%." Cookiewall | Het Financieele Dagblad​

Is that the expected ROI?

Yes. Translation is a bit wonky. Basically PGGM expects returns that are in line with regular market returns on infrastructure projects stated as being somewhere around 8 to 9%.

Also, does anyone know if the Tax Equity ownerships of the underlying systems in the VIEs have to revert back to the SCTY subsidiary before a Cash Equity SPE can be formed?

Or maybe PGGM takes over the interest in a specific VIE from a different investor? I guess we should see it in Q2 financials.

 

[neroden]

long time lurker and investor here,

I came across this article , decided it was time to make a account and give back some info instead of absorbing all the time

Pension Fund invests into Solarcity ~ 200Million

Thank you. Another "monetization of future income streams" deal.

I've always had some head-scratching about what effect these have on earnings reports (it depends what the previous carrying value was, which can be *really weird* given the HLBV accounting). But one thing is very clear: this is $200 million in cash flow.

 

[neroden]

I can tell you that in many areas of the rural USA, people do not have the money to simply toss away working ICE cars and replace them with new BEVs.

In 13 years, many ICE cars sold new today will still be in good working order. They will persist in the used market for a very long time.

I've been spending a lot of time trying to figure out the exact timing on this transition.

(Honestly, this must just be a hobby, because it can't possibly change my investment decisions. But I seem to waste time on it anyway.)

Anyway, the key wild card here is gas station closure. If the gas stations were still going to be around in 13 years, you'd be right. But if the gas stations have closed in those rural areas.... then people are going to be *desperate* to get electric cars. Most will replace the gas cars rather than driving 200 miles to buy cans full of gasoline and store them in the barn. We may see an uptick in electric conversions; we will certainly see strong resale value for used electric cars.

I can't figure out exactly when the gas station closures hit the critical mass where the last gas station in a rural area closes. This is a tricky one. If you want to discuss this further, the "Shorting Oil" thread is probably the correct place.

 

[neroden]

Also, does anyone know if the Tax Equity ownerships of the underlying systems in the VIEs have to revert back to the SCTY subsidiary before a Cash Equity SPE can be formed?

They do not have to. It gets *complicated*... but they do not have to.

A simple structure (some are more complicated):
Entity 1 owns panels
Entity 2 owns "SCTY interest" in entity 1
Entity 3 owns entity 2
SCTY owns entity 3
Entity 4 owns "Tax Equity investor" interest in entity 1
Tax Equity Investor owns entity 4

We form Entity 5, owned by "Cash Equity Investor".
Entity 5 purchases part of entity 2 from entity 3.

Basically the cash equity investor is purchasing some of the rights retained by SolarCity after the tax equity investor gets their share.

 

[Snapdragon III]

I've been spending a lot of time trying to figure out the exact timing on this transition.

(Honestly, this must just be a hobby, because it can't possibly change my investment decisions. But I seem to waste time on it anyway.)

Anyway, the key wild card here is gas station closure. If the gas stations were still going to be around in 13 years, you'd be right. But if the gas stations have closed in those rural areas.... then people are going to be *desperate* to get electric cars. Most will replace the gas cars rather than driving 200 miles to buy cans full of gasoline and store them in the barn. We may see an uptick in electric conversions; we will certainly see strong resale value for used electric cars.

I can't figure out exactly when the gas station closures hit the critical mass where the last gas station in a rural area closes. This is a tricky one. If you want to discuss this further, the "Shorting Oil" thread is probably the correct place.

I totally disagree that a lack of gas stations will be the thing that kills ICE cars. There are tons of remote places now that you wouldn't think would support a gas station, but they just mark it up, and manage to get by. My guess is that as electric cars become more popular, you will see lots of stations close down, and maybe get down to 1 station per small town, or freeway exit, instead of 3. They will charge more, to make up for lower volumes, but it will be available. The only thing I see completely killing gas stations is when the tanks rot out and need replacing, it may not be worth doing, but that will take more than 13 years. Many chains of stations may go bankrupt, and be bought for pennies on the dollar, and operated by private equity groups or something looking for a cigar butt investment, but again, the gas will be available.

 

[Ovulation]

Interview with Adam Jonas at 16:42

He is still obsessed with self driving and ignores that the low value of other automakers has something to do with their very low margins, if Tesla is able to pull of the margins that Musk predicts, we don't need ridiculous high car sales or some self driving network.

He is still skeptical that Tesla is able to hit the production targets.
--------------------------------------
In the segment before they talked about voice (Alexa and so on), probably something Tesla should spend some R&D money, voice control with a HUD (argumented reality) could redefine how we interact with a car, and could make the interior so different to other cars that Teslas won't no longer be compared to BMW or Volovos and fall flat.

 

[Snapdragon III]

It would be ironic if sometime in the future, gas became hard to get in rural areas, and someone started a mobile gasoline delivery service to your house or farm using Tesla electric semi's.

 

[neroden]

Giving Musk the benefit of the doubt here, I believe he is saying that he needs two tunnels of radius 12ft, not just one. Only one tunnel would not accommodate two-way traffic.

I dug up some numbers and discovered that the standard radius for a single-track London Underground Tube tunnel is 11.5 ft.

Which means: with a pair of tunnels this size, you could either accomodate a few cars, or an entire London Underground Line.

Physics first principles: which of these is more efficient? Which moves more people? Which removes more surface congestion? Which is faster?

Musk has a nasty blind spot about trains and I hope he gets over it.

 

[WarpedOne]

If trains were sich a good idea., why are they failing practically everywhere they have them? Because one still need to walk to the station and from the station. And waot for the train to arrive when it chooses so, not when je needs it.

Sorry but you are just abother Bob Lutz.
Society has tried builin trains. They totally failed for mass transit.

 

[neroden]

I totally disagree that a lack of gas stations will be the thing that kills ICE cars. There are tons of remote places now that you wouldn't think would support a gas station, but they just mark it up, and manage to get by. My guess is that as electric cars become more popular, you will see lots of stations close down, and maybe get down to 1 station per small town, or freeway exit, instead of 3. They will charge more, to make up for lower volumes, but it will be available.

Their margins on gasoline are already nonexistent. It's a loss leader to bring people into the convenience stores. At some point there stop being enough customers coming for gas to make it worth doing. The fixed costs are *high*, with tank inspection and maintenance and so on, which gets to what you said...

The only thing I see completely killing gas stations is when the tanks rot out and need replacing, it may not be worth doing, but that will take more than 13 years.

That happens much quicker than you think. After a quick Googling, I find that underground oil storage tanks last 10 to 15 years. They will literally all have to be replaced or repaired within 20 years, no exceptions. The fact is very few new ones have been built recently, so most of them are already several years old.

US gas station count seems to have stabilized for the last few years at a bit under 105,000. I wonder when it will start dropping again.

 

[neroden]

If trains were sich a good idea., why are they failing practically everywhere they have them?

They're succeeding practically everywhere they exist.

Because one still need to walk to the station and from the station.

And in a big city, with a car you have to walk from the parking space to your destination...

And waot for the train to arrive when it chooses so, not when je needs it.

...and in a big city, with a car you have to wait in traffic, to get through when the other drivers choose to let you thorough, not when you need to be there.

You probably live in a rural area. You're just wrong about how things work in big cities.

Don't get me wrong, there are lots of rural areas and spread out suburbs and uncongested small towns; cars are great for them. I even live in one. But it makes no sense to try to depend on cars in a dense big city.

 

[neroden]

I remember some kind person asked me for examples of Musk pushing bad, half-baked ideas which he later reverted on. I had one off the top of my head but here's another.

Tesla originally proposed unlimited free (prepaid) Ranger service, thinking that this would substitute for service centers. After discovering the cost of transporting the service person to Nova Scotia from Montreal, they completely backed off on this, attempted to renege on contracts (!!! -- though they eventually "grandfathered" the people who'd already bought it) and finally stopped offering the deal.

Some (not very many) of Musk's ideas are truly uneconomical. I could have told him what was wrong with that one... but he wasn't listening to me at the time.

As a side note, it really *says something* that serious TSLA bulls (like me or several of you here) can make much better bear cases for weaknesses of TSLA or of Musk than any of the actual TSLA bears. It's very rare to find a company where you can go "well, they seem to be screwing up A, B, and C, but they're still going to make huge profits *even if they continue to screw those up".

 

[Curt Renz]

I've been spending a lot of time trying to figure out the exact timing on this transition.

(Honestly, this must just be a hobby, because it can't possibly change my investment decisions. But I seem to waste time on it anyway.)

Anyway, the key wild card here is gas station closure. If the gas stations were still going to be around in 13 years, you'd be right. But if the gas stations have closed in those rural areas.... then people are going to be *desperate* to get electric cars. Most will replace the gas cars rather than driving 200 miles to buy cans full of gasoline and store them in the barn. We may see an uptick in electric conversions; we will certainly see strong resale value for used electric cars.

I can't figure out exactly when the gas station closures hit the critical mass where the last gas station in a rural area closes. This is a tricky one. If you want to discuss this further, the "Shorting Oil" thread is probably the correct place.

I wrote the fake subtitles for this over three years ago.

 

[Snapdragon III]

Their margins on gasoline are already nonexistent. It's a loss leader to bring people into the convenience stores. At some point there stop being enough customers coming for gas to make it worth doing. The fixed costs are *high*, with tank inspection and maintenance and so on, which gets to what you said...


That happens much quicker than you think. After a quick Googling, I find that underground oil storage tanks last 10 to 15 years. They will literally all have to be replaced or repaired within 20 years, no exceptions. The fact is very few new ones have been built recently, so most of them are already several years old.

US gas station count seems to have stabilized for the last few years at a bit under 105,000. I wonder when it will start dropping again.

I might have come off as overly critical of your view. I agree that a lot of gas stations will disappear and gas will get more expensive, and harder to come by. I just think it will be a symptom of ICE's lack of competitiveness in the market, not a major driving force for that lack of competitiveness. To take it to an extreme, and silly analogy, I am sure that there are less places selling horse feed in the US since the invention of the automobile, but I don't think lack of feed availability is a major reason keeping people from owning horses even today. The technology of the car is so much better, that people wouldn't want to use horses for transportation even if the feed was free, and everywhere. I think it will go the same way with electric cars.