2017 Investor Roundtable:General Discussion

[neroden]

After a tour of gigafactory, Whitney Tilson decides Elon and J.B. are the real deal and would never bet against them again.

Whitney Tilson Was THIS Close To Shorting Tesla .... Again - ValueWalk

Thanks. This contains parts of a slideshow presentation which mere mortals haven't been able to get access to either, which is a little annoying. Tesla should release the slide deck. The whole thing smells like giving out insider information to a selected few, which is weird and not how I expect Tesla to behave, so I figure it's an oversight.

Tidbits: Tesla has secured all LiOH and Nickel needed for 2017. Graphite prices are dropping. Both natural and synthetic graphite are being used in the batteries apparently.

(As for Tilson's negative-nellie friends, none of them have sound arguments; I read through them and they're all arguments I posed myself and figured out that they were wrong. Their main mistake is believing that there will be significant competition within 4 years; only a handful of automakers are seriously trying to go to volume production of electrics by 2020, and so they'rell still be eating the gas-car market, not competing with each other)

 

[CALGARYARSENAL]

Awesome find!

Note: hidden within is the 30-minute Q/A with Musk! I recommend downloading it in case it disappears:
http://www.valuewalk.com/wp-content/uploads/2017/01/TeslaQA.mp3

I'm not just another pretty face boys!

 

[EinSV]

Another quote from the Tilson article that I really liked and believe is true:

• A friend in the know told me that the companies top engineers graduating from the top schools most want to work at are Google, Facebook and Tesla. And if you want to actually MAKE something – as opposed to spending your life trying to get users to spend one extra millisecond on your web page or click on one more spam ad – then it’s Tesla (and, if you’re into rockets, SpaceX) – and who else? I find it hard to believe that any top young engineer (the kind of person who actually WANTS to work 16-hour days) is going to take a job at GM over Tesla (or Lockheed Martin over SpaceX). Why would I want to be short the best, hardest-working engineering talent in the world?

 

[3Victoria]

The other thing that most analysts are missing is that there is an inflection point where EVs take off and ICE tanks. Its positive feedback: less ICE, less gas stations, less ICE ...
More EV, more charging stations, more EVs .... suddenly, everyone is building EVs. The change will be faster than people (analysts) predict.

 

[NOLA_Mike]

I'm not just another pretty face boys!

It's about time...

 

[AcesDealt]

From Tilson's note:

I was dumb enough to be short TSLA from ~$35 to ~$205 from early 2013 to early 2014 and, after that traumatic experience (by far my worst short ever, almost exactly cancelling out my best long ever, NFLX), haven’t had any position in it since.

Tilson had a strange record on Netflix in which he got it wrong substantially twice (shorted then it went up, covered then it went down), but on his third try went long and made a killing (though I think he sold out early). Anyway, it's a good characteristic to be able to change your mind. It's of course a better characteristic to be always right, but that's a bit more rare. Of course I also remember him following up with MagicJack (a home VoIP solution) saying it was his next Netflix, and that's at 5 year lows so anyway draw your own conclusions.

 

[NOLA_Mike]

It's of course a better characteristic to be always right, but that's a bit more rare.

Something I've always pondered is - if you were really that good at picking stocks and companies, stock price entry and exit points, etc. why wouldn't you just use that superior knowledge to trade your own money and make a fortune instead of working for the man publishing your guesses for the general publics' consumption?

It brings to mind the old adage (modified) - Those that can, do. Those that can't, analyze and issue ratings and price targets...

 

[dc_h]

I'm not sure I'm understanding what you are saying. Are you suggesting that Tesla might run multiple press lines of the same part at the same time and therefore need two sets of the dies?

Adding: Or are you suggesting making multiples of the same blocks for dies within the same set?

They will be ready to build stamping press for GF2 and GF3.

 

[neroden]

Quotes from the Q&A (thank you Whitney Tilson):
"You really have to be quite vertically inetgrated. We're going to take this to a level that's, I think, beyond River Rouge. In fact, ideally, I'd like to plop this factory over a mine -- and out comes a car."

 

[Bgarret]

Regarding Model S & X demand this year...

I don't think we will see much growth in demand (or deliveries) for MS/MX in 2017. Demand for these seems pretty saturated to me.

And, for Q4'16 deliveries that just got reported... I'm not convinced that the shortfall was AP2 "late production" related. I think there was substantial demand evaporation "hangover" from Q3 where tesla really pushed demand generation hard with inventory cars and discounts...

Hopefully all this is moot, because Model 3 demand is huge. Remains to be seen when Tesla will start producing it. I'm dismayed by Elon's comments about stamping dies as critical path. I can't imagine why. The sheet metal design and form has been locked for a long time.

Quiet trading day and all of the sudden Fred comes back from vacation and throws a thought-bomb into the thread and gets everyone fired up....well played, sir.

This is somewhat unscientific and anecdotal, but what the hey:

1. Driving between 3 cities in W. Michigan with a total population over 1 million in the metropolitan areas, I am lucky to see another Tesla once/month. And I look. If I had to guess, I would say there are 50-100 in the area, and I know a dozen of the owners. If I see another Tesla at a Supercharger in my travels across the Midwest and on the East Coast, I usually chat them up as I am surrounded by the 60% of people that have not heard of electric cars. Saw 6 Porsche today and innumerable highly optioned SUVs....only saw a Tesla in the window of the shops where I stopped for meetings - #SAD. We are no where near saturating demand outside the West Coast of the United States.

2. Model III will (continue to) Stimulate, not cannibalize, Model S & X demand. Even with a ramp that far exceeds our most Trip Chowdrey-like dreams, the third reveal and initial production will push reservations over a million. Look at the reservation trends for Model S & X and use some of the metrics for exponential expansion of markets for every $5k you drop price, and get ready for a wait that extends easily into late 2019. Many of us "stretched" or went outside our normal spending range for the S, people love instant gratification, get ready for rock solid CPO prices and increased S & X demand for the 50% of the 60% that "discover" electric cars....and want one NOW.

3. My Model S doesn't have AP1, much less AP2. Reading the "outrage" about the AP rollout on different threads is mind boggling to me. AP1 was highest rated semi-autonomous driving suite by multiple rating agencies. Tesla scrapped it and upgraded it, not because of competition, but because they are iterating and competing with themselves. It will be, by far, the best suite out there in 2-3 months until surpassed by - AP 3....by Tesla.

Here are the areas this (roughly) 10 year old company is WAXING the OEMs - or as Charlie Sheen would score it:

Performance: WINNING
Drivetrain: WINNING
Innovation: WINNING
Technology: WINNING
Big Data: WINNING
Owner Satisfaction: WINNING
Cost of Ownership: WINNING
Cool: F'ing WINNING

Advertising: LOSING

We will know Tesla has solved the Alien Dreadnought issue when I see a YouTube Ad (much less a Super Bowl ad). Elon could Tweet an ad and it would go viral to 10s to 100s of millions because of....well, Elon.

Just as the proper answer to Question: Tesla Killer? is Answer: Gigafactory being built? No? - Then I think not.
The answer to Question: Demand plateau or saturation? Answer: Tesla Advertising Yet? No? - Then I think not.

One last thing to consider - Tesla's current referral program ends this weekend. (Feel free to PM me of you need a referral code). What event do these "winners" get invited to? What event do the next referral program get invited to? I see a Model III Reveal III in our future - if I were a betting man or purchased options , I would hazard April/May if they will produce Model III at the beginning of Q3 and June/July if they will produce at the end of Q3. If Reveal III for III is in the fall of 2017, then welcome to Adam Jonas' world - again #SAD.

 

[neroden]

Unfortunately parts of the Q&A recording were not comprehensible to me. I really wish Tesla would release its own recording.

 

[N5329K]

Don't reason by analogy, reason by first principles.

First principles: customers who have a great experience with a product (in the auto world, style, performance, reliability, total owning cost, etc) buy them again. Honda and Toyota have done pretty well by this. Customers (other than early adopters and enthusiasts) who don't have a great experence will look elsewhere.
Robin

 

[tander]

Another quote from the Tilson article that I really liked and believe is true:

• A friend in the know told me that the companies top engineers graduating from the top schools most want to work at are Google, Facebook and Tesla. And if you want to actually MAKE something – as opposed to spending your life trying to get users to spend one extra millisecond on your web page or click on one more spam ad – then it’s Tesla (and, if you’re into rockets, SpaceX) – and who else? I find it hard to believe that any top young engineer (the kind of person who actually WANTS to work 16-hour days) is going to take a job at GM over Tesla (or Lockheed Martin over SpaceX). Why would I want to be short the best, hardest-working engineering talent in the world?

That goes to show why your employees are always the biggest asset of any company. I heard a quote from Musk a while ago saying that one of his main concerns was hiring good people, as long as he can do that being a Tsla investor should do well.

 

[TNEVol]

A used 2007 Nissan Altima was what I drove until spending $107,000 on my P85. The important point is I was not in the "luxury market". I would not have considered a BMW or Merc. While I could afford them, I bought reliable lease turn-ins.

 

[AcesDealt]

Something I've always pondered is - if you were really that good at picking stocks and companies, stock price entry and exit points, etc. why wouldn't you just use that superior knowledge to trade your own money and make a fortune instead of working for the man publishing your guesses for the general publics' consumption?

It brings to mind the old adage (modified) - Those that can, do. Those that can't, analyze and issue ratings and price targets...

One could theoretically say 'do both', but I think in practice putting yourself in Tilson's position opens yourself up to a lot of unwanted cognitive biases that will reduce your performance.

Tidbits: Tesla has secured all LiOH and Nickel needed for 2017. Graphite prices are dropping. Both natural and synthetic graphite are being used in the batteries apparently.

Cobalt is definitely the bottleneck raw material, and it's price has already gone up substantially this year. Holy smokes I just looked and it's gone from the 13.5$ it was last month to 15$\lb. It was a SA article by John Peterson (yes I'm aware of his reputation) that alerted me but it seemed valid enough to find a rebuttal and after a long dive into batteries and cobalt mining, I do think it bears monitoring. The real black swan is if there are political issues in the Congo where half of the world's supply comes from, but also a lot of the cobalt sources and refining are getting locked up by China, and most North American resources are paltry. If I had one question to ask Elon, I might make it related to where his confidence comes about managing supply as they achieve 1M+ vehicles. Even Straubel said Cobalt keeps him up at night, or similar, at some point. AFAIK Panasonic can manage to GF1 levels. I think they are sourcing in Asia somewhere, with a mostly Japanese supply line at this point. To be clear, I'm not concerned about Cobalt price going up a bit, but if it goes rather parabolic that might be an issue. The fact that the most concerning element was not on the list of pictures actually raises my concern a little.

 

[sundaymorning]

Mercedes sells ~200k units per year of the Mercedes S Class( almost half in China) with an ASP approaching $120k.

And in China the S Class sells for $179k-$289k a piece. Perhaps Tesla should make a bigger luxury sedan than the MS to compete with Bentley.

 

[Krugerrand]

Yes.

*As a special case*, if Tesla plans to open a European factory, and a second American factory, and an Asian factory... they might need at least 4 sets of every die -- one per factory. If there's a part where there are a large number used in each car, they might need to run it on multiple press lines at the same time just to keep up (though I'm not sure if there are any of those). And dies wear out after a while and they'll need replacement dies every few years (possibly sooner).

Um...no.

In the first place, a single die can cost hundreds of thousands of dollars, so an entire set...maths. Having a second die set hanging around waiting for another factory years down the road - bad way to spend money. And no, you don't keep another set around in case something breaks on the first set. You would have spare parts on hand, like extra punches, which wear out or break.

The dies for Model 3 will be 'high volume' dies. They will not wear out in a few years. The cutting surfaces and punches will wear out, break, get chipped, whathaveyou and will need replacing, sharpening or repairing but the die itself as a whole will last years and years and years and years and years. As well, Tesla will have a PM (preventative maintenance) system in place to proactively keep the dies in tip top shape and they'll do regular maintenance as needed. That's standard practice.

 

[Krugerrand]

They will be ready to build stamping press for GF2 and GF3.

There are press lines in GF1?

 

[RobStark]

Panasonic sources from the Philippines through Sumitomo Metal Mining.

Seems are buddies in Australia and Canada have enough.

And possibly new friends in Cuba have some too.

 

[RobStark]

And in China the S Class sells for $179k-$289k a piece. Perhaps Tesla should make a bigger luxury sedan than the MS to compete with Bentley.

I don't think Mercedes reports taxes/tariffs as part of their ASP.

I know MB manufactures in China but not the S Class.

Tesla is in this game to transition the world to sustainable transport and could not start in the mass market on a limited funds. I don't think they have a desire to dominate the plutocrat market.