2017 Investor Roundtable:General Discussion

[Starno]

If you guys want to track Elon's record on what's late or not :
We’re Tracking Every Project Elon Musk Has Dreamed Up.

 

[anticitizen13.7]

Thanks for clarifying. You could easily be right about how the market will value TSLA. But this approach assumes that the market is so short-sighted or conservative that it will consistently assume that 60% growth will shrink to ~10-15% two years out.

I think that's a fair description of what has happened to date, but I don't think that makes sense in the longer term (although you could be right that the market will look at it that way).

General market concerns of "alleged competition" is a part of my reasoning. With the number of companies jumping on the EV bandwagon, it appears at first glance that Tesla will have lots of competition in 2020-2022 that could slow their growth: Audi eTron, Porche Mission E, Volvo electrics, Mercedes Benz, and so forth. I don't think most people (or bots) dig beyond those headlines. Without sufficient battery supplies and a supporting charging network, denting Tesla's growth will be extremely difficult.

Even if a company could rival Tesla's battery supply and charging network in 3-4 years, the automotive market is so large I'm not sure Tesla's growth would slow. Demand for good EVs will probably lag supply for a long time.

But as with any paradigm shift, the mainstream is slow to realize the change.

My hunch is that if Model 3 launches smoothly and quickly and is profitable (3 "ifs") then there is a pretty good chance the market will start pricing in some of the future growth sooner. But if I'm wrong I guess I could be find a way to live with your $1300 SP projection in 2020.

If, by 2020, all of Tesla's competitors launch lower volume EVs that fail to affect Tesla's market share, profitability, and growth, I think there is substantial likelihood that future potential will be priced in much more aggressively than it is today.

At this point I don't have enough sense of how the competition will be faring in 2020 to say what will happen. Audi's battery price claims, reports of Chinese battery factories, and 3rd party DCFC networks are items I keep an eye on. I don't see any rapid shift yet though. The proof is in cars being available for sale.

 

[kbM3]

I've said this before, and I'll say it again: I have zero inside information. None. I don't want inside information; I don't think a good long-term investor needs inside information; and a lot of times, inside information or getting too close to management can actually hurt investment decisions.

My primary weakness in investing has been overestimating how quickly the future will pan out and betting the house on that timeline. This is why I shy away from call options. I learned not to put timeline limits on my predictions the hard way, because in fact, my predictions have eventually come true, just a bit later than the expiration date. Having said that, however, Tesla has been moving a lot quicker than even my projections in the last two years. Of course, this can change, but it's important to note this anomaly for future reference.

My strengths include several degrees/certifications in finance, accounting, economics, and math; awards in physics/math in earlier education at a top school (so, say, I have an aptitude for it, but zero higher education/experience); top percentile placements in multiple standardized tests throughout my life; nearly a decade of experience in accounting/finance/business valuation/M&A (both sell-side and buy-side); nearly a decade of experience in investing (personal and semi-professional for lack of a better term); and a first place award in a global strategy competition. I'm convinced that the last one is the most applicable one to investing, especially in Tesla for various reasons, but very interestingly it's also the one that nearly everyone overlooks.

None of this matters though. If an analyst candidate listed these to me, I'd say, "so what?" because at the end of the day logic is logic; physics is physics; math is math. There's no two ways around this. If what I predict is crap, the future won't pan out any differently because I have a few degrees.

What really matters is this: Collectively, we will make better decisions than any one of us individually, if and only if, we stick to discussing ideas, comprehensively, respectfully and genuinely.

Now, with that in mind, let's carry on:



Of course I do not have any evidence of my timeline. I am not certain of anything ever happening, let alone "by a particular date."

I'm listening to management guidance, and in light of what the company has achieved in the past, management's track record of predicting the future, Tesla's capabilities (talent, resources, and capital), and also very importantly how competition is positioning (and their management, talent, resources, capital etc), I'm making educated guesses around future probabilities.

Specifically on the topic of building out Gigafactories, I don't see why Tesla couldn't achieve its goal of building "10-12 Gigafactories, and maybe 20." Just pointing out to what can possibly go wrong is not reason enough to be unreasonably conservative, which is almost as harmful to investment results as being unreasonably optimistic. If anything, given that competition is still sucking on their thumbs, Tesla may end up building more than 20! I should note here that my projections for 2025 require 12 Gigafactories at 200 GWh average capacity (i.e. I'm assuming some Alien Dreadnought improvements to output per Gigafactory).

I think most here underestimate the snowball effect of cash flow that will become apparent as Gigafactories 3, 4, and 5 start coming online in 2020. Simply think about this: it takes total cost of $5-10B to build one, and each one will likely produce 150+ GWh (1m+ car batteries and some stationary storage) supposedly at 25-30% gross margin so ~$15-20B of annual gross profit. The annual cash flows from Gigafactory 1 will be enough to finance Gigafactories 3, 4, and 5, so what do you think Tesla will do with the cash flow coming from Gigafactories 2, 3, 4, and 5 in years 2020 and beyond? My guess is build 3-5+ more Gigafactories simultaneously from 2020 to 2025.

For some reason, people are projecting linearly ("if it took Tesla seven years to build Gigafactory 1, then it will take 70 years to build 10"). Instead, one should look at the specific reasons why it took Tesla seven years to build the first Gigafactory (i.e. capital constraint evidenced by multiple equity secondaries which are punitive, the inexperience of having built any previously, uncertainty of future demand, using second and third-tier suppliers, and so on) and see if those factors are still applicable in the future. None of the factors I listed are applicable in the future. So it's unreasonably conservative to assume subsequent Gigafactories will take just as much time/capital to build as the first one, unless if one assumes the second round of Gigafactories will be multiple times more complex (and output multiple times more) as the first one.

Well now.
That pretty much rules out the "You are a 16-year-old girl" hypothesis

 

[Intl Professor]

I actually kind of don't think there will be a downturn that soon.

We're having a solar energy / wind energy / stationary battery / electric car / heat pump boom and it's just getting going. Maybe I should just call it the "renewable energy" boom or the "repower the world" boom. I don't think we can get a world recession until that slows down, and it's accelerating.

It WILL slow down as we start to reach saturation, and that's probably when the recession hits. So... sort of a good news / bad news situation? Right around the time we stop burning fossil fuels, which is great, the economic growth from repowering the world will start to drop, and then we'll get a recession. (Unless there's another tech shift at just the right time to drive a new boom, which is unlikely; or government policy to fix the structural problems of inequality and the massive distrust of banks, which I hope for but also seems unlikely.)

I suspect you're right. The transformation is accelerating in developed economies but it some ways the possibilities for rapid expansion (say in distributed solar generation) in emerging markets will likely fuel continued expansion (but you've probably already factored this into your considerations already). I'm thinking mostly about the potential in Africa--leapfrogging need for power grids, for example.

 

[MitchJi]

If you had built a fully integrated DCF, you'd see the reasoning behind my timeline. You'd have also seen the "Gigafactories 3,4 and possibly 5" announcement coming also. Did you in your wildest imagination think they'd be building 3-4 simultaneously starting later this year? I guess not.

"When they looked at Tesla, they always asked 'what can go wrong? What can go wrong?' Then in April 2013, they started asking 'what can go right?'"

I'm paraphrasing, but if anyone can identify who said that BRILLIANT quote, I would truly be impressed

I think that Andrea James said that.

 

[Jeeps17]

So... basically, in the 4 years since I bought my P85 for $105,000 or so...

The S75D matches it in 0-60 performance, is within 6 miles of range, adds all wheel drive, efficiency improved from 89 to 103 MPGe, has parking sensors, folding mirrors, bioweapon defense air filtration, center console, LED headlights, active driving safety features like AEB, enhanced autopilot, heated steering wheel, new improved driver seats, bigger headrest rear seats, glass roof, and slipstream wheels for $90k, or $20k less (optioned similarly otherwise and includes $5k in inflation).

But a much smaller frunk ...

I am in the exact same situation as you, still enjoy my RWD P85 to bits.

... and bought an X90D to lug the growing kids around (best of both worlds, minus today's upgrades and the 100 kWh battery).

 

[ValueAnalyst]

I think that Andrea James said that.

Ding ding ding!

 

[GoTslaGo]

I expect an economic downturn around 2020-2021. I hope Tesla will have a relatively low debt level, and very solid cashflow by then.

That's interesting. This fits with the Benner-Fibonacci Cycle Chart. Except, what screws the prediction up on the chart is the 2008-2009 deep recession (arguably depression), which pulled the deep recession/depression portion of the chart forward by 13 years (supposed to be 18 years after the previous point, predicted to be 2003). So not sure how this fits the picture anymore. But originally 2021 is where the next point in the chart lands.

 

[aronth5]

Anyone else think the timing of these announcements is a bit suspicious - as if they needed to get these out there because they will release the Model III configurator tomorrow - either publicly or Semi-private (employees) and wanted to make the comparisons (especially with 75s) more stark.?

How do you know they will release the configurator to anyone tomorrow? Source.
A more likely scenario is a timeline later in July when this will happen.

 

[Waiting4M3]

That's interesting. This fits with the Benner-Fibonacci Cycle Chart. Except, what screws the prediction up on the chart is the 2008-2009 deep recession (arguably depression), which pulled the deep recession/depression portion of the chart forward by 13 years (supposed to be 18 years after the previous point, predicted to be 2003). So not sure how this fits the picture anymore. But originally 2021 is where the next point in the chart lands.

We're obviously living in an alternative reality

 

[colettimj]

Thanks. This is really helpful. To my mind it reinforces the idea that billing should be by the minute rather than hour. Most of your revenue must come at the peaks, and that is also when the mph will be slowest.

You forgot some!!!
rear doors in the S open wider than they original used to
brakes went from hydraulic to electromechanical when the D was introduced
top speed was increased from 130mph to 155mph
facelift on the nose
vegan seats if you want it
two generations of improved seats
software improvements like the trip graph, supercharger info
LTE internet instead of 3G
TPMS on each wheel

On the downside -
less interior configurations, notably no more grey leather
less exterior colours
smaller frunk space
no more body colour roof, you have to accept the sun will shine on you
no more WMA playback off USB (booo!)
a lot of control buttons missing from the screen in the interests of "neatness" (booo!)
max AC charging rate has fallen from 80A to 72A

And 4 years is long enough for inflation to make a big difference. Your $105,000 in 2013 is $113,000 today. Or... the current 75D price of $74,500 was only $69,011 in 2013!!! Which is around what the S60 cost at the time I think. (The Inflation Calculator)

I always do the inflation adjustment when speccing out my current car purchase on the configurator. (S100D) It helps me understand that the car is actually getting cheaper over time, even if it looks as if the price is going up.

My 2013 P85 was $102,000 including an HPWC. New car (S100D, silver, white interior, premium upgrades) is $105,300 today, which is $97,500 in 2013 dollars - in other words I'd be getting a helluva lot more car than my P85, for less money than I spent on it at the time.

Tesla's competition is themselves. The car that obsoletes (maybe supersedes is a better word) my Model 3 will be the Model 3 that comes out in three or four years.

 

[MXWing]

Well now.
That pretty much rules out the "You are a 16-year-old girl" hypothesis

Never thought VA was a 16 year old girl but I will guess VA is a woman however. Doubt VA will confirm or deny however.

Nothing negative -at all- express or implied.

Could be right, could be wrong. I've been accurate however at reading the SA Bears with very little info to work with.

I believe they are generally paid bashers / incentivized to see Tesla hurt but have no significant short positions / skin in the game themselves. They have no experience managing OPM, don't have much capital themselves and tend to regurgitate each other's arguments. Yet takes the most extreme bearish corner cases , show extreme negative bias and make no attempt at objective analysis. Truly pathetic. Easy to recognize they all come fell the top of the same stupid tree and hit every branch on the way down.

No one who looks deeply into Tesla would hold a long term short. Risk/reward just doesn't make sense.

 

[RobStark]

The car that obsoletes (maybe supersedes is a better word) my Model 3 will be the Model 3 that comes out in three or four years.

More likely 1-2 years.

 

[racer26]

My jaw dropped at this as well when I watched the video.

This equates 370+ miles of range for Model X, and is significantly more than the currently advertised 295 miles.

Those 'greatest drive' videos are promoting an event Tesla is holding in Europe. Probably, the videos are citing the NEDC rated range of Model X, rather than the US EPA rated range we're all used to.

 

[Starno]

So tomorrow 2pm west coast time we will have the news or?

 

[ValueAnalyst]

Those 'greatest drive' videos are promoting an event Tesla is holding in Europe. Probably, the videos are citing the NEDC rated range of Model X, rather than the US EPA rated range we're all used to.

Isn't that difference more than the NEDC/EPA differences though? Anyway..

 

[ValueAnalyst]

Never thought VA was a 16 year old girl but I will guess VA is a woman however. Doubt VA will confirm or deny however.

Nothing negative -at all- express or implied.

Could be right, could be wrong. I've been accurate however at reading the SA Bears with very little info to work with.

I believe they are generally paid bashers / incentivized to see Tesla hurt but have no significant short positions / skin in the game themselves. They have no experience managing OPM, don't have much capital themselves and tend to regurgitate each other's arguments. Yet takes the most extreme bearish corner cases , show extreme negative bias and make no attempt at objective analysis. Truly pathetic. Easy to recognize they all come fell the top of the same stupid tree and hit every branch on the way down.

No one who looks deeply into Tesla would hold a long term short. Risk/reward just doesn't make sense.

I think your analysis is correct.

And, yes/no I can neither confirm nor deny that I'm a woman. But it does make me glad that you can't tell

 

[ValueAnalyst]

So, I was just watching the last episode of Dark Matter when they were going to Bellerephon 6. Then I noticed this building and it's striking resemblance to the gigafactory. There are exactly the same amount of squares, and the clincher is the walls and ridges on the left side of the picture. I feel pretty comfortable with my stocks in Tesla, when I see them expanding to other planets in the galaxy

Bellerephon 6 'gigafactory'
View attachment 233561
The real gigafactory:
View attachment 233562

What was the ending?!?!

 

[JRP3]

What was the ending?!?!

Hey, no spoilers!

 

[GoTslaGo]

We're obviously living in an alternative reality

Elon was right!