2017 Investor Roundtable:General Discussion

[jbcarioca]

Also useless for areas remote from the nearest service center, as you know.

Tesla can't afford to send mobile service rangers 5 hours up and 5 hours down on a regular basis. They're paying for 10 hours of driving for a skilled employee for each repair. I have no idea how much money they're losing servicing my car, but I could estimate it. I know they promptly cancelled the program under which I get this service for free

People do not want to buy a car where even the most simple repairs have an extra $500 overhead for transporting the service techs.

With the Model 3 introduction the economics rapidly change. The greater the installed base the lower the incremental truck/mechanic travel consequence. I'm confident that this will be far cheaper and more customer0friendly than setting up tons of conventional service centers. In addition, just as Ranger used to do, they can arrange local lifts fairly easily. I suspect this could be transformational now, whereas the original Rangers were the only choice they had.

 

[neroden]

I'd be surprised if Tesla didn't significantly increase Supercharger/service center coverage in the next 12 to 24 months.

I was surprised when Tesla didn't significantly increase service center coverage for the past two years.

I will now be pleasantly surprised if they actually get the coverage they need.

My point is, if it was a priority, Tesla could build out a very comprehensive network of both in one year for less than $2 billion.

Obviously not.

But it isn't a priority right now. So what if a potential buyer cancels their purchase or an owner returns their car because they didn't do their research before buying the car?

Ill-will. People assume that Tesla is providing some way to get their car repaired at reasonable cost. It's a reasonable assumption. When they find out that Tesla hasn't, people are reasonably sympathetic to the complaint. And it feeds into a narrative of "Eh, Tesla is only good for people in big cities".

I've been telling people where I live not to buy Teslas for the last year. Because of the service center problem. And you know I love Tesla. But if they keep this up for a couple of years they're going to be throwing away huge markets.

 

[jbcarioca]

Exactly. This is what I am trying to say. Even 90 minutes will be tolerated -- but 5 hours is no good at all. As I say, consider Syracuse, NY, which has much larger population than Eugene and is much further from a service center.

That is why I expect to see lots more Service Centers in places like Syracuse, and permanently based service trucks (I can't call them Rangers anymore, I guess) for smaller concentrations like, say, Elmira/Corning. All over the world there are many comparable situations. If Tesla is correct that the proportion of repairs requiring lifts is steadily decreasing this kind of solution will become very economical and positive.

 

[neroden]

Question1: if there were M3 production delays, would Tesla let us know in advance? Or would we find out after the fact?

Question2: if there were issues where Tesla would likely only deliver 20-40k Model 3s this year but still could reach 5k/week run rate in last week of December, would Tesla tell us of those issues?

Question3: is it possible that Tesla already knows they can't deliver 100k M3 cars in 2017? Thus, they're avoiding delivery guidance for 2017 and focusing on run rate goal by end of year, which likely means last week of December?

Bluntly, it is quite possible to have Model 3 production delays which are not discovered by Tesla until the *week before they intend to start production*. I believe this is why they are refusing to give guidance. I think they'll tell us if there are actual known delays which exceed contingency time, but this threshhold is likely to be crossed at the last minute (maybe the last week in July, we'd find out that the car won't come out until August)

 

[neroden]

That is why I expect to see lots more Service Centers in places like Syracuse, and permanently based service trucks (I can't call them Rangers anymore, I guess) for smaller concentrations like, say, Elmira/Corning. All over the world there are many comparable situations. If Tesla is correct that the proportion of repairs requiring lifts is steadily decreasing this kind of solution will become very economical and positive.

I would love to see this. It would be a perfect solution. (Notice that I don't live in Syracuse, but I figure it's close enough to serve Ithaca.) But I've been expecting this for four years and there's been no progress -- zero.

 

[jbcarioca]

...

I've been telling people where I live not to buy Teslas for the last year. Because of the service center problem. And you know I love Tesla. But if they keep this up for a couple of years they're going to be throwing away huge markets.

I live in huge urban area with one SC 1 1/2 hours away and another 3 hours away, both geographically management but usually overwhelmed with dense traffic. I have only had one situation in which I needed help, that at 12v battery failure. A flatbed showed up at my house with a loaner on it, they took my car away and returned it the following day when we swapped out. In the new world that would be simple service truck stuff since it did not need a lift, and the job itself only took an hour.

I think that the future plans will reduce pressure on SC's by dealing with non-lift issues elsewhere, will also allow fast local service without a SC expense, and will make us feel better too.

I may be drinking Tesla Kool-Aid, everyone probably knows how much I love it. Still, if they can find enough technicians and train then well, if they can provide parts well enough, this will be a big advance.

Yes, I know: if?

 

[neroden]

The main added cost is in the distributed switching/control for all the lights, etc,

You know, I didn't realize that they hadn't done this already.

but they will save on wiring, battery etc. The wiring in today's cars is just a legacy of an era before we had electronics and software control.

I understand the current cars S/X/3 already have software switching/control of everything. So it is just a matter to move this out to the device that is being controlled.

Yeah. I'm actually surprised that this hasn't been done already -- signal bus and power bus. The catch is that you need a power bus which you can use off-the-shelf lights, speakers, etc. with. I'm not sure what that should be, and it might even be 12 V. But it's crazy to have separate switched power to each LED. And it's easy enough to get speakers with their own DACs now and avoid speaker wire.

 

[neroden]

The bad part is that he has some false scarcity of dock space to deliver material. Too much friction for the return on the logistical investment, just to keep the number of loading docks down. The factory needs to breathe. There should almost be a dedicated dock for each part. Over provision loading docks. The factory should look like an IC.

If I were designing it I'd reduce the number of loading docks by having trains run right through the middle of the factory and unloading (fast side transfer of containers, or rotary dump for raw minerals) on the lower level. But they don't seem to be doing that either.

 

[neroden]

I live in huge urban area with one SC 1 1/2 hours away and another 3 hours away, both geographically management but usually overwhelmed with dense traffic. I have only had one situation in which I needed help, that at 12v battery failure. A flatbed showed up at my house with a loaner on it, they took my car away and returned it the following day when we swapped out. In the new world that would be simple service truck stuff since it did not need a lift, and the job itself only took an hour.

Repeat for those who didn't get it: for a customer in Syracuse this would currently take TEN HOURS of travel for the service truck.

Even "basing a service truck" in a city is a service center, of sorts. You need to buy property, get a license, hire locals, etc.

 

[racer26]

There is no upside for Tesla to be transparent about issues they may potentially see right now going into Model 3 production. So they wouldn't tell us. If anything prevents the ramp, we will find out after the fact.

I fear we will run blind until the VIP tour party end of June. Also around that time, final pricing should leak out from the configurator open to employees.

I'll grant you no upside to being transparent, but the downside to not is SEC violations. Elon can't stand there on an ER call and straight up say that there are no known showstopper issues if that isn't true.

It never ceases to amaze me how quick some people are to question Elon's integrity. If I were him, that would bother me a lot.

 

[Gerardf]

@Gerardf
perhaps compress the above to under 140 characters, tweet to Mr Musk, and ask if hiring in any capacity....
this would/could be a probe to confirm/deny your educated, practical, musings and if true, where roughly on timeline they are..... and if no NDA report back here even a tiny bit
It would not hurt to just ask, and you may get an answer

(I am becoming aware I have been living through a "singularity" a large part of my life, redshift 2.0+ )

I do not really use twitter, feel free to tweet and point to my post.
If it happens to be interesting, I will give them a special deal to use / patent the idea

 

[racer26]

Repeat for those who didn't get it: for a customer in Syracuse this would currently take TEN HOURS of travel for the service truck.

Even "basing a service truck" in a city is a service center, of sorts. You need to buy property, get a license, hire locals, etc.

Amusing: The 4 closest service centers to Syracuse, NY are in Canada, all just a little closer than Westchester. (Side note: seems more like 8 hours RT, not 10, according to google, but I'm unfamiliar with the area)

Still better than Montana or anywhere in AB, SK, or MB, though.

I don't know that they do need to buy property. I would think that for mobile service, they could simply provide the local employee with a vehicle and ship the needed parts to their home, and allow them to park the truck at home. Seems simple enough for low-density areas.

 

[tander]

I'm not saying they shouldn't have built the X - just that they should have built it with regular doors and no HEPA filter. And as you JUST stated, Tesla lost your purchase due to what? The damn doors! But, I appreciate that you admitted that. Most people continue to defend those things and the hundreds of millions they have cost Tesla (along with goodwill).

Yeah it would be cool if they had a regular door option, but the doors weren't the only thing that lost the sale for me, it was more should I invest in Tsla or buy one and I stuck with the former, although I think hepa filters should be standard on every car just for health reasons. As an investor I'm pretty happy with the x, it bought the company a lot of time and free advertising, and as I understand it it's pretty much much perfect for the Chinese market. In the shortish term it looks like a big mistake, in the longer it looks like necessary stepping stone, hard to initially do but will pay back and then some eventually(hopefully).

 

[winfield100]

I do not really use twitter, feel free to tweet and point to my post.
If it happens to be interesting, I will give them a special deal to use / patent the idea

Sigh, I don't use twitter either, things like that tend to suck your brains out through your eyeballs

 

[dw4ngg]

Add $1000 to your revenue (or unearned revenue) estimates for Tesla in 2Q....

 

[neroden]

Amusing: The 4 closest service centers to Syracuse, NY are in Canada, all just a little closer than Westchester.

Yeah, but Tesla doesn't want Americans servicing their cars in Canada (seriously), and it's a pain to cross the lake.

(Side note: seems more like 8 hours RT, not 10, according to google, but I'm unfamiliar with the area)

Traffic adds the extra hour. :-(

Still better than Montana or anywhere in AB, SK, or MB, though.

Population of Alberta: 4 million. Yeah, they need a Calgary or Edmonton SC.
Population of Saskatchewan: 1.13 million. Yeah, they need a Saskatoon SC *eventually*
Population of Manitoba: 1.28 million. Yeah, they need a Winnipeg SC *eventually*.
Population of upstate NY outside Westchester is higher than all three.

I don't know that they do need to buy property. I would think that for mobile service, they could simply provide the local employee with a vehicle and ship the needed parts to their home, and allow them to park the truck at home. Seems simple enough for low-density areas.

Anywhere which is serving 4 million people is not low enough density for that. Even if only half of them have cars (unlikely in a low density area) and even if Tesla only has 5% of the market, this is 100,000 customers, each of whom will need to be seen at least once a year for annual service, or 273 customers per day.

Even if Tesla has 0.625% of the market (which is 500K / 80 million world car sales), this is 34 customers per day. Assuming 7-day-a-week operations.

It's worth actually looking at the numbers here. A service center in places like Syracuse (or Calgary) is absolutely required if Tesla plans to sell cars in these areas in the long term, which I assume they do. These are NOT low-density areas. Wyoming is a low-density area.

 

[JRP3]

each of whom will need to be seen at least once a year for annual service

I do hope they do away with annual service in the Model 3 since it really shouldn't need anything. I have ICE's which don't need annual service, and my home EV conversion doesn't need annual service. (Excluding state mandated inspection of course, which would not need to be done by Tesla service centers.)

 

[ValueAnalyst]

Interesting note:

Warren Buffett just identified autonomous driving as a significant threat to both Geico (insurance) and BNSF (railroad business).

Warren Buffett and Elon Musk face each other in at least three major industries: insurance, transportation of goods, and utilities.

This will be extremely interesting to watch.

 

[ValueAnalyst]

Another note from the annual meeting:

Both Warren Buffett and Charlie Munger identified Google and Amazon as businesses, about which they knew enough to invest, but missed the investment opportunity.

I had identified Warren Buffett as a potential investor in Apple before he bought into the stock, even though he was very unlikely to invest in a tech company.

I have also recently predicted Warren Buffett would be buying into Tesla soon. Given my previous post above, WB's previous comments around SolarCity being subsidized by his utility's customers as well as EM's goals aligning in direct competition with WB's businesses in insurance, transportation of goods, and utilities, I am not as confident in this prediction as I was in him buying into AAPL.

 

[JRP3]

Warren Buffett just identified autonomous driving as a significant threat to both Geico (insurance)

This I don't understand. Safer "drivers" and vehicles should benefit insurance companies by reducing payouts.