2017 Investor Roundtable:General Discussion

[Bgarret]

Had to read the byline on this article twice. May be the first positive and easily the best written article by Matthew DeBord.

Tesla has the greatest story in the history of cars — and that should terrify automakers

 

[ValueAnalyst]

I think the Model S is starting to eat into the E Class and 5 Series business. Its the only way to believe 40% market share for large luxury cars is if they are actually selling into lower segments as well as taking market share from that top level segment. As good of a car as the model S is that is a very large chunk of a market that includes roughly 10 models. That means that the average of the other 9 models is 6.66% which is evil. There could be other models, but I would guess they are evil as well.

Electrek shows 40% share in the US:
Tesla’s Model S outsells Mercedes S-Class, Porsche Panamera, and BMW 6/7 Series combined in the US

This is from last Nov. and I have seen updates since, but also estimates how much Model S is getting of the mid sized luxury market:

Tesla's Rapidly Growing Market Share In The U.S. - Tesla Motors (NASDAQ:TSLA) | Seeking Alpha

Two key factors to note:

1. The US luxury sedan market is comprised primarily of Model S, S-Class, and 7-Series, as well as very highly optioned E-Class and 5-Series. Everything else has very small market share, so barely matters. I yesterday spoke with people who recently tested the S-Class and 7-Series, and there is not even a comparison. The Model S is by far the better car, they said. One tester told me the highly optioned E-Class doesn't even have a touch screen option; driver has to use the outdated scroller thing, and I don't think BMW is even planning on changing that anytime soon...

2. The 40% market share is as of 1Q17, which is BEFORE April's $7,500 price cut. I don't think people realize yet what this means. I expect Model S market share to exceed 50% in 2Q17 or 3Q17, and that's BEFORE (i) Model 3 spreading the good word for Tesla, (ii) increased geographical coverage from 2x Superchargers, increased sales/service centers throughout the next 6-12 months.

Even TSLA bulls are underestimating the upcoming demand for Tesla products.

Osborne? Please...

 

[22522]

Can you please provide support for this?

Hi, I just skimmed the article, and it was full of words I did not fully understand. But, yeah, that is how I integrated the information.
When JB said the labor hours were the same at the analyst call, that made a mark, as that information is inconsistent with all the design for assembly focus. So I have kind of been on the lookout for how that would be true.

Here is my logic flaw. I was looking at the car based on size/volume. Tesla did a great job making that efficient with the glass roof and all.

If you look at the car based on labor content, the car looks very different. I can see how the battery pack integration can become the big bar on the Pareto - especially if it is still manual assembly.

Here are a few ghost images from Google's cache. The article is gone, but the comments provide enough context to reconstruct...

The team is working like dogs, and this is next up. The path is likely defined now (although I always like two options if there are any doubts about fundamental process capability/yield), and they are going to pour money on it. The late spend was likely based on resource (talent) availability.

To make high margin products that also take market share is really hard. The method that works is to be very demanding about cost, particularly variable cost, through 95% of the development. Then, when some problems look unsolvable in a robust way at low cost, you get bipolar and spend money in a way that confuses people who don't know what is going on.

The pattern that is happening with the module assembly is recognizably this same pattern. Talent focus and money will solve it, and until then Tesla can double the population of Reno to put them together by hand - maybe with ski bums, now that the snow is gone, or interns. I expect 30% of the working class college age population would be happy to spend their July summer month building Tesla Model 3 modules, until the automation is proven. All the joining techniques should be robust to skill level...

Anyway, I hope this helps. I see why they took the information down as, depending on industry background and competitive structure of industry background, an analyst might not correctly process what is going on.

The pattern is very familiar, as it is the only way to get there with limited resources, but it could rattle about 85% - 93% of the population that is not familiar with this method.

 

[ValueAnalyst]

Supply problems hit production at BMW: Focus

BWM is running into issues with an increasing frequency.

I expect the recent $7,500 Model S price reduction to very significantly eat into net incomes of BMW and Mercedes by the end of the year.

BMW and Mercedes both have ~50% Debt-to-Asset ratios, and their assets (mostly ICE plants, equipment, and inventory) will shortly become worth much much less than valued on the books, if anything. This can easily translate to 80-90% Debt-to-Asset ratios, once assets are adjusted to fair value, by 2019/2020.

It's very possible that Ford (60% Debt-to-Asset ratio and already razor-thin margins), BMW, and Mercedes all file for bankruptcy within the next 18-24 months. It's likely too late for any of these three. Dividend cuts possible by the end of 2017.

GM has a relatively favorable 25% Debt-to-Asset ratio, and they have been making moves on the FSD and all-electric front, so they may be saved, but time will tell.

 

[JRP3]

You can just got read Elon's tweet on the subject - he summed it up better than I ever could.

But, then, it sure was nice to know my thought process was right long with Elon's.

Funny, I don't remember seeing any tweets from Elon saying they should spend time and money re-designing the Model X to have conventional doors. In fact I'm quite sure your thought process on the topic would be exactly the opposite of Elon's. Interesting how your interpretation could be so divorced from reality.

 

[MP3Mike]

I expect the recent $7,500 Model S price reduction

You keep mentioning a recent $7,500 price reduction which insinuates that you can get a Model S cheaper now which is not the case. I thought there was a $1,500 price increase from the base price as well as making the all-glass roof and 75kWh battery standard. (So yes a 75kWh all-glass S in now cheaper, but the base Model S is more expensive.)

Did I miss an actual price drop?

 

[MP3Mike]

Supply problems hit production at BMW: Focus

BWM is running into issues with an increasing frequency.

I wonder what the chances are that Tesla is a factor to this problem? (Is the supplier re-tooling to be able to supply a sufficient volume of parts for the Model 3?)

 

[ValueAnalyst]

You keep mentioning a recent $7,500 price reduction which insinuates that you can get a Model S cheaper now which is not the case. I thought there was a $1,500 price increase from the base price as well as making the all-glass roof and 75kWh battery standard. (So yes a 75kWh all-glass S in now cheaper, but the base Model S is more expensive.)

Did I miss an actual price drop?

This is still an effective price reduction when potential buyers compare the value they get from model s to competition.

kills enough demand for 7-series and s-class to substantially reduce the base for fixed asset allocation for those production lines, compressing ebit margins.

 

[kenliles]

Static fire test of Falcon 9 complete—targeting June 1 launch from historic Pad 39A for Dragon’s next resupply mission to the @Space_Station SpaceX on Twitter

 

[MP3Mike]

This is still an effective price reduction when potential buyers compare the value they get from model s to competition.

I disagree. Fewer people can afford a Model S now, so it can not be called a price reduction. It is a feature/specification increase that may increase the perceived value.

 

[landis]

When JB said the labor hours were the same at the analyst call, that made a mark, as that information is inconsistent with all the design for assembly focus.

You should go back and listen again.
What I heard was that the same labor hours that produce 2K SX per week produce 10K 3 per week.
So per car that is 5 to 1 improvement, though they are doubling the workforce.

 

[22522]

You should go back and listen again.
What I heard was that the same labor hours that produce 2K SX per week produce 10K 3 per week.
So per car that is 5 to 1 improvement, though they are doubling the workforce.

I heard that. From robot leverage.

But the opening for the model Y discussion was that the standard accounting labor hours were the same.

The only reason to use the word "same" is without a factor of 5. Maybe I need to listen again...

 

[Mike Smith]

Woz: Tesla, not Apple, will have the next tech moonshot

 

[kenliles]

Woz: Tesla, not Apple, will have the next tech moonshot

Sorry Woz,
you're WAY too late for that to be...
well...
Anything

 

[Reciprocity]

Sorry Woz,
you're WAY too late for that to be...
well...
Anything

Woz changes his mind more then I change my underwear. I still love the chubby nerd, he means well.

 

[Buddyroe]

Funny, I don't remember seeing any tweets from Elon saying they should spend time and money re-designing the Model X to have conventional doors. In fact I'm quite sure your thought process on the topic would be exactly the opposite of Elon's. Interesting how your interpretation could be so divorced from reality.

Let's examine reality. Musk basically said in his tweet that Tesla should have made the X simple to start with and more complex afterward. What was the most complex feature of the car (probably the most complex feature of ANY car ever built)? Duh - the falcon wing doors. So, I think most logical people would deduce that Musk was saying he would NOT have started the car with the FWDs and that he was an IDIOT for doing that.

That's reality my friend - married to me for life!

 

[RobStark]

 

[kenliles]

I still love the chubby nerd, he means well.

Me too, always have.
He's made great contributions, puts himself out there, expresses his own opinions, charts his own life-path. Gotta love it

p.s.
Woz- you're way too late to the Tesla party, but welcome any time
There, I feel better -
thanks Rep

 

[Ugliest1]

Let's examine reality. Musk basically said in his tweet that Tesla should have made the X simple to start with and more complex afterward. What was the most complex feature of the car (probably the most complex feature of ANY car ever built)? Duh - the falcon wing doors. So, I think most logical people would deduce that Musk was saying he would NOT have started the car with the FWDs and that he was an IDIOT for doing that.

That's reality my friend - married to me for life!

Except, Musk did not go on and on that the doors should be RE-designed to what everyone else had -- he just acknowledged the mistake and the hubris behind it. And in my logical reality, that's a whole different kettle of fish than what you were saying. I didn't have a problem with you stating that once, although I disagreed. But I was getting really tired of it by the 100th time.

 

[SPadival]

Elon down under again.. a little closer this time - In Sydney.

Amber Heard's Beau Elon Musk Is a Perfect Gentleman on Date Night

Btw, Sydney is actually lot warmer than Melbourne this week. So come over here, Elon.. to show some real chivalry in cold Melbourne.