2017 Investor Roundtable:General Discussion

[Navin]

Tomorrow's leading headline:

Consumer Reports reports - Batteries Being Produced out of Tesla's China Factory - Likely Less Safe and more Expensive than those produced in the US.

 

[Fallenone]

By most accounts, Panasonic do not bring half of their Japanese engineers to the Gigafactory.

GF current production is neither anywhere close to half of Panasonic's total production. Still they are rotating their engineers from Japan to Reno.

 

[Fallenone]

Find their own chinese employees with correct education and experience? And a handfull american supervisors?

That would be a long dragged process then...

 

[MitchJi]

Based on the recent infos I guess we're getting closer to some self driving official news.

I'm fairly confident that the cross country FSD trip will be achieved before end of the year.
Some say that Tesla always miss dates, but it's different, this FSD trip is more like the " Model 3 official launch ", which was actually on date.

Elon did say in August 2017 that they might need to delay the demo:
Elon Musk said Tesla may delay its cross-country road trip in a self-driving car

Tesla CEO Elon Musk said Wednesday the company may push back its big demonstration of its self-driving tech.

Musk said in October that a Tesla will drive itself from Los Angeles to New York before the end of 2017. The demo, however, may occur early next year, Musk said during the company's second-quarter earnings call Wednesday.

"It is certainly possible that I will have egg on my face on that front, but if it’s not at the end of the year it will be very close," Musk said.

A slight delay isn't a huge concern for consumers considering the regulatory environment isn't fully prepared to support self-driving vehicles. The possible change in course, however, does little to assuage concerns about a recent string of executive departures from the company's Autopilot team.

Tesla began producing cars last October with a new suite of hardware to support full self-driving capabilities.

That hardware will also support Tesla's second-generation Autopilot. The company has been slow to roll out the new features, which are due for a release before the end of the year.

Tesla has been working quickly to achieve its internal deadlines for Autopilot and the self-driving demo amid departures that include Chris Lattner, Tesla's vice president of Autopilot software, and Sterling Anderson, director of Autopilot.

Musk said he is confident in the current Autopilot team.

"I think we’ve got the best team in the world by a long shot on that front and we are growing it rapidly with world-class talent," he said.

 

[MitchJi]

The 800lbs gorilla in the room is that having an agreement with Chinese government, first of a kind, to set the factory without JV partners gives Elon, who is brilliant and shrewd negotiator, upper hand in any negotiations with a JV partner, if he sees fit to have such an arrangement.

I think it's clear that Tesla has no desire to have a JV and that they negotiated this deal in order to avoid the necessity of doing that.

As far as limiting IP exposure goes, there are many ways to set a JV, **if needed** to get rid of 25% tariff. One way would be to manufacture batteries and drivetrains at the Nevada GF, and then partner with non-automotive company (Tencent for example) to do car body and final assembly at the factory in China.

That would defeat the purpose of having an agreement to build a factory with no JV required in the free trade zone.

 

[neroden]

“Government regulators examine every deal and try not to set a precedent,” said Bill Russo, chief executive of Automobility, a Shanghai-based consultancy, and a former Chrysler executive. “Whatever deal Tesla gets, others will want it too.”

A plant in Shanghai’s free-trade zone still has clear benefits, Mr. Russo said. It would give Tesla a base from which to export to the region, while offering proximity to the Chinese supply chain, thereby lowering production costs and the sale price of Tesla cars sold there. Today, a Tesla costs roughly 50% more in China than it does in the U.S."

So if the writer's math is right here... a Tesla costs 50% more in China than it does in the US, and 25% is due to the tariff, meaning 25% is due to other stuff like shipping. Cutting out that 25%, so that a Tesla costs only 25% more in China than in the US, is a massive price cut and should drive sales.

 

[MitchJi]

So if the writer's math is right here... a Tesla costs 50% more in China than it does in the US, and 25% is due to the tariff, meaning 25% is due to other stuff like shipping. Cutting out that 25%, so that a Tesla costs only 25% more in China than in the US, is a massive price cut and should drive sales.

And the remaining 25% might be less than the hit they would take by sharing the profits.

 

[Runarbt]

That would be a long dragged process then...

If u dont hire locally, how are you supposed to save anything?

American workers in shanghai, how is this supposed to save anything. And do you think they have enough employees now to staff an entire new factory in shanghai? Then they are seriously wasting money atm. ;-)

 

[neroden]

In short this should have involved our military from day 2 for more stabilization. If we can drop tanks into a war zone, we should be able to drop food/water / generators /fuel / and trailers with solar panels/ poperpacks / micro cell towers and charging stations to provide basics and some communication.

FEMA needs to rethink their disaster plan.

Unfortunately, our current President didn't bother to fully staff FEMA and didn't bother to ask the military to do anything until a week after the storm hit (rather than, as would have been appropriate, *before* the storm hit). :-( Reminds me of "Heckuva job, Brownie"

 

[elasalle]

Elon did say in August 2017 that they might need to delay the demo:
Elon Musk said Tesla may delay its cross-country road trip in a self-driving car

Tesla CEO Elon Musk said Wednesday the company may push back its big demonstration of its self-driving tech.

Musk said in October that a Tesla will drive itself from Los Angeles to New York before the end of 2017. The demo, however, may occur early next year, Musk said during the company's second-quarter earnings call Wednesday.

"It is certainly possible that I will have egg on my face on that front, but if it’s not at the end of the year it will be very close," Musk said.

A slight delay isn't a huge concern for consumers considering the regulatory environment isn't fully prepared to support self-driving vehicles. The possible change in course, however, does little to assuage concerns about a recent string of executive departures from the company's Autopilot team.

Tesla began producing cars last October with a new suite of hardware to support full self-driving capabilities.

That hardware will also support Tesla's second-generation Autopilot. The company has been slow to roll out the new features, which are due for a release before the end of the year.

Tesla has been working quickly to achieve its internal deadlines for Autopilot and the self-driving demo amid departures that include Chris Lattner, Tesla's vice president of Autopilot software, and Sterling Anderson, director of Autopilot.

Musk said he is confident in the current Autopilot team.

"I think we’ve got the best team in the world by a long shot on that front and we are growing it rapidly with world-class talent," he said.

EM did say that Cross-country by EOY might not be possible and that it was likely he would have Egg On His Face

 

[elasalle]

1. Model 3 Delivery Event in July was ahead of the "Deliveries Start At The End of [2017]" put up on a big screen in March of 2016
2. Tesla is tracking months ahead of its Supercharger coverage guidance that it provided during the Model 3 reveal event
   
3. Tesla is years ahead of its original "35 GWh by 2020" guidance for Gigafactory 1

I can come up with more examples, but I think it's fair to say that (as I included in a recent articles):

Elon Musk & Team always shoot for the moon, and sometimes hit, but sometimes miss, but they always land among stars. No. They land on Mars. No. They travel to another universe through a black hole, which has never been attempted, then come back in one piece, before their competitors even get out of bed. On the wrong side, if I may add.

We’re Tracking Every Project Elon Musk Has Dreamed Up. this one tracks all projects and shows the ones that were on time as well.
~ cheers.

 

[Fallenone]

So if the writer's math is right here... a Tesla costs 50% more in China than it does in the US, and 25% is due to the tariff, meaning 25% is due to other stuff like shipping. Cutting out that 25%, so that a Tesla costs only 25% more in China than in the US, is a massive price cut and should drive sales.

I think the authors were not clearly differentiating Tesla's cost vs customer's cost. A Tesla in China currently costs the customer about 50% more compared to US. This includes 25% tariff, 17% VAT, and more shipping fee and docs. Of course it's not exactly 50% more if you take into account the sales tax, shipping, docs in US as well.

On the other hand, building costs for Tesla might be slightly lower. For labor costs. Parts may be more expensive since they say they have 70% or something parts sourced from NA. But that could change.

 

[3Victoria]

I think the authors were not clearly differentiating Tesla's cost vs customer's cost. A Tesla in China currently costs the customer about 50% more compared to US. This includes 25% tariff, 17% VAT, and more shipping fee and docs. Of course it's not exactly 50% more if you take into account the sales tax, shipping, docs in US as well.

On the other hand, building costs for Tesla might be slightly lower. For labor costs. Parts may be more expensive since they say they have 70% or something parts sourced from NA. But that could change.

I think we can expect parts to be sourced locally to a China free-trade GF. We can also expect a high degree of automation, so workers limited to supervision, maintenance and repair. Prices to China should improve.

 

[GoTslaGo]

I think the authors were not clearly differentiating Tesla's cost vs customer's cost. A Tesla in China currently costs the customer about 50% more compared to US. This includes 25% tariff, 17% VAT, and more shipping fee and docs. Of course it's not exactly 50% more if you take into account the sales tax, shipping, docs in US as well.

On the other hand, building costs for Tesla might be slightly lower. For labor costs. Parts may be more expensive since they say they have 70% or something parts sourced from NA. But that could change.

That being said, if a Tesla costs “only” 25% more vs. 50% now... and as I believe @Richgoogol had pointed out, they do not have a 50% battery degradation in 1 year, wouldn’t a savvy customer say this is a better deal?

In that case I am certain Teslas will sell like hot cakes since I was told by my uncle the batteries built by BYD are really subpar. One of his colleagues bought one a year ago, the battery has depreciated by 50% already. I’m heading over to Beijing at the moment. Will report here if I find anything interesting.

Ok, there’s the factor of absolute costs, but for those who can afford a Tesla with “only” a 25% mark-up, AND get a dependable battery it would be a better value proposition than a cheaper BYD with 50% degradation in a year.

 

[kbM3]

I'm wondering if Tesla will want to do a " secret " cross country FSD trip before doing it publicly. So if there's something going wrong they don't get clashed.

If it were me, I would do 10 trips to get a high confidence level.

 

[pGo]

There is a lot more to accessing china EV market than just auto manufacturing. Rules are ridiculous and here is a tidbit.

“The Chinese government has a list of approved battery makers and if you don’t choose one of those you will not be allowed to apply for subsidies in the Chinese market.
Even more than the subsidies or barriers to foreign operators, the greatest advantage for Chinese battery manufacturers over rivals such as Tesla is access to raw materials. Chinese companies have been making inroads over the past year into the lithium-ion supply chain, buying up mining assets from cobalt to lithium to help cut costs.
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Beijing released draft guidelines at the end of 2016 stipulating that battery manufacturers would need to have at least 8 GWh of production capacity in order to qualify for subsidies. As a signal to the market, the government is planning to back the development of only those battery companies with annual production capacities of 40 GWh or more.
EV Batteries: A $240 Billion Industry In The Making That China Wants To Take Charge Of

It looks like Tesla will first build a battery factory to be ready to have any chance of getting government subsidies. If you read that FT article, and a few others in this space, China is going well ahead of bringing total supply chain in control to build gigantic battery manufacturing facilities just like they did with solar.

Should be interesting to hear Elon's view on how they are going to approach China.

 

[Reciprocity]

I think the authors were not clearly differentiating Tesla's cost vs customer's cost. A Tesla in China currently costs the customer about 50% more compared to US. This includes 25% tariff, 17% VAT, and more shipping fee and docs. Of course it's not exactly 50% more if you take into account the sales tax, shipping, docs in US as well.

On the other hand, building costs for Tesla might be slightly lower. For labor costs. Parts may be more expensive since they say they have 70% or something parts sourced from NA. But that could change.

Tesla sources parts from NA because that's where the cars are made and it shortens the supply chain. Parts that are custom to the model 3 could be vertically integrated but many parts could be sourced closer to where the cars are made. Can Tesla get comparable quality parts in China?

Before we can say anything about the 25% issue we need to know if it's even a thing. What insentives for EVs do they have in China for consumers? To me 25% of profit is not bad, it's the sharing it IP that is problematic. Tesla won't have much in terms of profit from that specific business for years so it really seems more like it's about the IP. Why do we assume they must partner with a car company when they could just partner with a tech, energy or utility company. Could see some very good reasons to want to partner with someone that is not directly a competitor but someone who can help them access the Chinese market more easily. Like a company with high quality retail locations or a utility that can add powerwalls to homes with solar or a solar company.

They keep taking about free trade zones in every article I have read. A 25% tariff makes me think they don't know what "free trade" means. Progress seems positive though and I could see them announce an India, Europe and East coast manufacturing to go with China.

The other question is what products besides 3 and Y do they make.. Solar roof? PW2 and PP2? Semi? S/X? I doubt S/X as it seems they could build enough in Fremont for the world. Does having local manufacturing help with imported S/X? Do they have to do a tilburg like setup and source the packs from China to qualify? A lot of questions, it will be interesting once we have a real announcement.

 

[Reciprocity]

1. Model 3 Delivery Event in July was ahead of the "Deliveries Start At The End of [2017]" put up on a big screen in March of 2016
2. Tesla is tracking months ahead of its Supercharger coverage guidance that it provided during the Model 3 reveal event
   
3. Tesla is years ahead of its original "35 GWh by 2020" guidance for Gigafactory 1

I can come up with more examples, but I think it's fair to say that (as I included in a recent articles):

Elon Musk & Team always shoot for the moon, and sometimes hit, but sometimes miss, but they always land among stars. No. They land on Mars. No. They travel to another universe through a black hole, which has never been attempted, then come back in one piece, before their competitors even get out of bed. On the wrong side, if I may add.

I was not criticizing Elon for calling his shot, just pointing out that none of his predictions for FSD or EAP have come to pass much less on time. I might have been to general with comments, I was speaking mostly of the features required for the cross country demo. I am totally fine with the way Elon manages his company and sets the bar rediculusly high. I just focus on the results and not on the talk and I like the results so I'm fine with tuning my Elon filter as goals are met.

I think they need at a minimum high def 3d maps, which wouldn't be terribly difficult if they had a set route, but since they don't, they need a lot more areas mapped. Maps are required for navigating exits and any kind of intersection where you need to be able to stop. You could do it with vision but it would much harder then just knowing exactly where the exit is instead of being able to identify it based on imagery and inaccurate gps. One thing just occurred to me, the weather will be an issue as Dec-Feb time frame will have a greater chance for snow, which is another reason you need high def 3d maps so you know where the Lanes are when the road is covered with snow.

Time will tell and I'm assuming they are testing this already and probably have for months if Elon really intends to accomplish this goal in the next 2-4 months. Remember that for atleast a year they have had atleast enough some to make that video. I know it was not the most impressive video but it gives you an idea of where they were at 1 year ago. AP2 already did freeways well, so freeway interchanges and some local streets... Just time it so you leave the West coast at 3am and arrive in the easy coast at 3am..

 

[Fallenone]

That being said, if a Tesla costs “only” 25% more vs. 50% now

This would require the tariff being waived. 17% of VAT is applicable even to wholey Chinese manufacturer. Think of it as a sales tax in US, just much higher. The shipping cost could be lowered by 2k USD and that's it.

 

[Fallenone]

If u dont hire locally, how are you supposed to save anything?

American workers in shanghai, how is this supposed to save anything. And do you think they have enough employees now to staff an entire new factory in shanghai? Then they are seriously wasting money atm. ;-)

That's why I think partnering with a Chinese company with manufacturing capability would be better. You only need to deal with their engineers but not the associates. It doesn't have to be a car manufacturer.