2017 Investor Roundtable:General Discussion

[ValueAnalyst]

I disagree, and please define meaningful demand. This may be where the confusion lies.

The solar roof is the equivalent to the Roadster. It's version 1 to prove to everyone this works. It might appear expensive, but those with the money and loyalty to Tesla (probably Roadster and initial Model S owners) will purchase it. I don't think anyone here is claiming the solar roof is going main stream any time soon. It's an aspirational product. It helps cement Tesla's brand equity in the solar sector to validate the premium brand status. The need this to survive in the current solar market. It's strategic, and imo a smart strategic move.

Meaningful demand to me is 100,000+ roofs per year. I don't see 100,000 households dishing out $50-60k for a roof.

100,000 roofs would generate ~$5-6B in revenue, and probably not much in gross profit, but the problem is Gigafactory 2 is unlikely to ramp up to supply that many roofs per year until 2019 at the earliest, and by then Tesla will likely have $40-50B run-rate revenue, so ~10%, and that's IF Gigafactory 2 ramps up quickly. I don't see how that's possible with Model 3/Y/Semi and stationary storage in focus.

I agree that Solar Roof is Roadster-stage at this point. That is my exact point. We may have to wait until 2020 for it to become a mass-market solution where Tesla is teaming up with national homebuilders. I think that's the direction Tesla may take, but let's not get carried away with 2017/18/19 projections just yet. $50-60k is way too expensive for that.

 

[Snapdragon III]

You're assuming homebuilders, which I follow very closely, will want to work with Tesla instead of a local provider.

I highly doubt it.

Beazer Homes would be a good candidate for this, since they pride themselves of being energy efficient etc
But I still highly doubt it.

Toll Brothers may be a good candidate too, since they're luxury homebuilder.

But I really highly doubt it.

If Tesla can set up their install customer experience properly, in this case the customer being the builders, I totally disagree with this. The people that get into roofing do not come straight out of the Ivy league, and into the dynamic roofing business. They are a bunch of idiots that don't have a lot of other great options. They are a nightmare to deal with. Especially if there is a problem a couple years down the road. I assume it will be an upgrade option for higher end new homes to begin with, and will probably do very well in the marketplace.

I would imagine the buyer of a new home would be more likely to think they are going to stay there forever, and would be more willing to pay up for a roof that pays off in the longer term. Also, if you are buying a new home, it is just one more line item on the already huge financing of the home.

 

[Bobfitz1]

You're assuming homebuilders, which I follow very closely, will want to work with Tesla instead of a local provider.

I highly doubt it.

Beazer Homes would be a good candidate for this, since they pride themselves of being energy efficient etc.

But I still highly doubt it.

Do any luxury homebuilders you follow make a selling point of using Anderson Windows instead of a local or regional window manufacturer customers have never heard of? Homebuilders will be happy to add Tesla Solar Roof as a new high quality and eco friendly differentiator.
I don't highly doubt this.

 

[EinSV]

Rough estimate of revenue:

Taking Tesla owners as the likely size of "immediate" demand (people who are doing quite well financially and like Tesla in general), assuming its about 120k (total accumulative sales around 150k but there are many families buying more than 1 cars in the past).

ASP per roof ~$60k.

Revenue = $7.2B

It is very hard to estimate the take rate, but using your numbers and assuming Tesla is targeting a 25% gross margin (because they always do), and for back of the envelope purposes assume 12.5% operating margin, results in earnings of $900M.

P/E of 40 for high growth product is market cap of $36B when they can get to that level. Those numbers could be way off but just to start getting a sense of the order of magnitude ....

 

[racer26]

Meaningful demand to me is 100,000+ roofs per year. I don't see 100,000 households dishing out $50-60k for a roof.

100,000 roofs would generate ~$5-6B in revenue, and probably not much in gross profit, but the problem is Gigafactory 2 is unlikely to ramp up to supply that many roofs per year until 2019 at the earliest, and by then Tesla will likely have $40-50B run-rate revenue, so ~10%, and that's IF Gigafactory 2 ramps up quickly. I don't see how that's possible with Model 3/Y/Semi and stationary storage in focus.

I agree that Solar Roof is Roadster-stage at this point. That is my exact point. We may have to wait until 2020 for it to become a mass-market solution where Tesla is teaming up with national homebuilders. I think that's the direction Tesla may take, but let's not get carried away with 2017/18/19 projections just yet. $50-60k is way too expensive for that.

For the US market anyway: its not really 50-60k. Its 50-60k less the $15k or so you get back in the form of the tax credit.

Asphalt shingle is around 15k for a roof that size. Which you'll have to do twice over the 30 year solar lifespan. Starts to look pretty fair even before the electricity cost.

 

[ValueAnalyst]

For the US market anyway: its not really 50-60k. Its 50-60k less the $15k or so you get back in the form of the tax credit.

Asphalt shingle is around 15k for a roof that size. Which you'll have to do twice over the 30 year solar lifespan. Starts to look pretty fair even before the electricity cost.

I agree with you. I'm sure many smart households will put down the deposit.

But most people just don't think that way.

Elon previously said "electricity is just a bonus" but that's not how it's looking with $50-60k prices.

 

[D-egg-O]

Meaningful demand to me is 100,000+ roofs per year. I don't see 100,000 households dishing out $50-60k for a roof.

100,000 roofs would generate ~$5-6B in revenue, and probably not much in gross profit, but the problem is Gigafactory 2 is unlikely to ramp up to supply that many roofs per year until 2019 at the earliest, and by then Tesla will likely have $40-50B run-rate revenue, so ~10%, and that's IF Gigafactory 2 ramps up quickly. I don't see how that's possible with Model 3/Y/Semi and stationary storage in focus.

I agree that Solar Roof is Roadster-stage at this point. That is my exact point. We may have to wait until 2020 for it to become a mass-market solution where Tesla is teaming up with national homebuilders. I think that's the direction Tesla may take, but let's not get carried away with 2017/18/19 projections just yet. $50-60k is way too expensive for that.

My guess is, given the level of interest after the solar roof reveal last year, Tesla determined they could satisfy initial demand by producing the solar tiles in the Fremont factory, per the Q1 shareholder letter. Your guess is as good as mine as to what that number is. I am very interested in reading an update on this in the next shareholder letter.

 

[winfield100]

For the US market anyway: its not really 50-60k. Its 50-60k less the $15k or so you get back in the form of the tax credit.

Asphalt shingle is around 15k for a roof that size. Which you'll have to do twice over the 30 year solar lifespan. Starts to look pretty fair even before the electricity cost.

Asphalt roofs are done at zero years, 15 or so years and 30 or so years
That's 3 roofs not 2 roofs.

 

[ValueAnalyst]

Sorry to rain on everyone's parade here; I'm just trying to be super objective and realistic.

Solar Roof is a great product, and eventually it is the future, just unlikely to become a significant revenue/profit generator until 2019/20.

I'm still very bullish on TSLA, driven by my optimism for the Model 3 demand/ramp-up and the stationary storage "super-exponential" growth.

I continue to expect a meaningful rise in SP in 2017/18 and potentially a short squeeze in the coming weeks/months.

 

[Mike Smith]

Asphalt roofs are done at zero years, 15 or so years and 30 or so years
That's 3 roofs not 2 roofs.

It's not just the cost, it's a huge annoyance having to get your roof changed repeatedly.

 

[Snapdragon III]

I agree with you. I'm sure many smart households will put down the deposit.

But most people just don't think that way.

My general theory for investing is that it is best to concentrate on the people in the top 10% of wealth, since they are the ones with all the money to spend. The companies that dominate in the market for the top 10% are, for the most part, way better investments, than those going after low margin value customers. Of coarse there are many exceptions to this, but in general, I find it a helpful thing to keep in mind when thinking about investments.

In the case of the solar roof, I think it will be compelling to enough to the top 10% that demand will not be the limiting factor for years to come.

 

[Jonathan Hewitt]

It's not just the cost, it's a huge annoyance having to get your roof changed repeatedly.

I had some of my architectural shingles blow of this year and had to have a roofer come and fix my roof. Only a 2 year old roof so it's not like it's old or anything. I have no idea who did the work (subcontracted) so not like I could have the people who did it come back out and fix it. So with the Tesla roof you know who to go to for warranty work (unless TSLA goes BK, you know the shorts are going to go that route lol) and shouldn't have problems like shingles blowing off, either.

 

[luvb2b]

it's amazing how big these numbers get with all things tesla... just amazing. thanks for sharing.

Rough estimate of revenue:

Taking Tesla owners as the likely size of "immediate" demand (people who are doing quite well financially and like Tesla in general), assuming its about 120k (total accumulative sales around 150k but there are many families buying more than 1 cars in the past).

ASP per roof ~$60k.

Revenue = $7.2B

 

[The Blue Owl]

It looks like Ford shareholders are starting to lose patience over Ford's capex priorities. They dislike that too much is poured into new tech like electrification and mobility, and too little in Ford's traditional cash cows.

The innovator's dilemma is starting to unsheathe its claws around Ford's neck. So much for the "established car giants can overwhelm Tesla with their scale any time they want, they just don't want to" bear talking point.

Quote from the article:

The message: The core business that generates automotive revenue and profit shows little prospect for meaningful growth. And the growth business of electrification, mobility and autonomy is contributing scant revenue and even less profitability.

That’s the dilemma facing Fields, named in 2014 to replace legendary CEO Alan Mulally. The multidimensional mobility space is considered the next new-new thing in the auto industry, the most revolutionary change since founder Henry Ford created the moving assembly line. But its growth prospects are uncertain and not likely to be realized in the short term.​

Pressure mounts on Ford, CEO Fields

 

[SunCatcher]

According to Tesla, installations start in June. Next month! It will be very interesting when these appear on the scene, and then someone records the installation in progress, so that we may see how these things work. Essentially, how are they wired together, and how do they relay PV juice to the inverter and home? We're all scratching our heads about this right now. It will be revealed to us soon enough. Well... not soon enough for me. I'm just so curious about this technology. Our roofs! Making the power we need from the sun! And from the protective coverings making up the roofs of our homes, not some clunky panels installed on top of the roof. This is astounding!

This is an example of Elon Musk & Co. working true to "First Principles" if there ever was one.

 

[RobStark]

Meaningful demand to me is 100,000+ roofs per year. I don't see 100,000 households dishing out $50-60k for a roof.

About 1,000,000 households in the US do that each and every year.

So Tesla needs ~10% of that market to achieve "meaningful demand."

20%-25% of American households don't go to the local Home Depot/Lowes and buy cheap asphalt shingles to re-roof their homes.

In the premium roof segment Tesla is a no brainer.

 

[Gerasimental]

it's amazing how big these numbers get with all things tesla... just amazing. thanks for sharing.

How often does the afterage household buy a new roof though? Every 10 years? Probably less... So that's $0.72bn per year.

 

[electracity]

Exactly. I agree with this 110%.

Gigafactory 2 will need to reach full 1GW/year production to drive the necessary economies of scale.

So 2019/20 timeframe for Solar Roof to generate any meaningful revenue for Tesla.

Until then, it's a niche product.

They don't need many builders on board. It's a big world. If the interconnect scheme isn't completely stupid they will sell all they can make for a few years.

Tesla priced these roofs to make money from day one, unlike most of Musk's products. There is not much to object to here. Buffalo would have been a financial disaster building conventional solar panels.

 

[ValueAnalyst]

About 1,000,000 households in the US do that each and every year.

So Tesla needs ~10% of that market to achieve "meaningful demand."

20%-25% of American households don't go to the local Home Depot/Lowes and buy cheap asphalt shingles to re-roof their homes.

In the premium roof segment Tesla is a no brainer.

There is no way 1,000,000 American households each year spend $50-60k on a roof. You must be talking about overall new roof demand, but the vast majority of roofs cost much less.

How quickly do you expect Gigafactory 2 to ramp up to 100,000 roofs per year?

My estimate 2019 at the earliest, 2020 more likely.

 

[ValueAnalyst]

Any estimates on how many households will put down a deposit within the coming week?

I'll throw out the first number: 25,000.