2017 Investor Roundtable:General Discussion

[ItsNotAboutTheMoney]

Here is my two cents.
Zero impact on Tesla sales but:
- quite a few first time buyers who've reserved Model 3 will cancel reservations, to be replaced by other people,

In my case it would be to defer to 2019 or later rather than cancel. The $5k PUP tax (to get heated mirrors) makes that $7.5k tax credit more important.

But overall, I think that Tesla will be OK. They'll still be able to sell plenty to start, and plenty in other markets.

 

[GregRF]

1 quarter lead time on industrial equipment seems common. If Tesla placed order to the automation supplier at the end of May, then the supplier delivered at the end of Aug, and Tesla found the problem in Sep. In the mean while Tesla hand-built some packs that were used in ~100 M3 built in Jul/Aug. All these seem to be consistent.

3 month lead time on industrial equipment is common for established products. But for custom industrial equipment is more like 6 months when you have engineering/design on the front end and testing/ Q/A on the back end. With that in mind it isn't surprising that they just found these issues lately on equipment that was probably very rushed and not fully tested.

 

[wsucougz]

Coupled with the near-term uncertainty, any correction in the overall market could make for some legendary buying opportunities in the next 3-6 months. The nasdaq chart looks pretty ambitious.

As for the moonshot division, I found this statement pretty interesting:

"We plan to continue building Tesla AI until it is one of the best teams in the world, not just in automotive, where Tesla is already the leader, but across all industries. This applies to both software and hardware."

 

[Krugerrand]

[QUOTE="sundaymorning, post: 2390151, member: 15298"
As far as the bottleneck is concerned, it appears that Elon understands where the issue is, which contractor dropped the ball, and lines 1&2 are being worked on by Tesla’s best engineers at the GF.

I'm confident that the bottleneck(s) will be resolved over the next few months and Tesla will go on in 2018 to produce a great many M3s, if not the 350K which earlier predictions of 500K total cars in 2018 would require.
However, I was dismayed by the dog ate my homework excuse by Elon that a critical contractor dropped the ball.[/QUOTE]

You missed the part where Elon took the blame, eh?

You’ll probably miss the part later on where Tesla ended up doing a better job than the supplier ever could, so big silver lining.

Yeah, they didn’t babysit the supplier. It happened, it’s over, everybody learns and moves on. We take a few lumps now, we don’t die or anything. Whatever. Next.

 

[jbcarioca]

In my case it would be to defer to 2019 or later rather than cancel. The $5k PUP tax (to get heated mirrors) makes that $7.5k tax credit more important.

But overall, I think that Tesla will be OK. They'll still be able to sell plenty to start, and plenty in other markets.

I did not think about deferrals. Good point. Probably even more of a non-story for Tesla overall, but a bigger factor for a large number of buyers. Is that logical?

 

[bonaire]

Coupled with the near-term uncertainty, any correction in the overall market could make for some legendary buying opportunities in the next 3-6 months. The nasdaq chart looks pretty ambitious.

As for the moonshot division, I found this statement pretty interesting:

"We plan to continue building Tesla AI until it is one of the best teams in the world, not just in automotive, where Tesla is already the leader, but across all industries. This applies to both software and hardware."

This would become a HeisenbergTeam. The ability to judge their quality actually changes their quality. How do you rate a team "across all industries"?

 

[jbcarioca]

You missed the part where Elon took the blame, eh?

You’ll probably miss the part later on where Tesla ended up doing a better job than the supplier ever could, so big silver lining.

Yeah, they didn’t babysit the supplier. It happened, it’s over, everybody learns and moves on. We take a few lumps now, we don’t die or anything. Whatever. Next.[/QUOTE]
How many auto manufacturers can move production of critical parts in-house the way Tesla does? Most of them just look for other suppliers.

 

[EinSV]

Thanks but more specifically I was more worried about mental health of people who believed in 10K/wk 2018 exit run rate. Apparently there are still quite a lot of folks who need check ups

I appreciate the concern. It may alleviate your worries a bit for you to know that since Tesla did not reaffirm the 500K Model 3 run rate by EOY 2018 target during the call yesterday at least one person who believed that no longer does.

I will hold-off on resetting expectations on 2018 to see what they have to say about updated plans after they reach 5K/week, including any possible interplay with Model Y production plans.

 

[MartinAustin]

No doubt would be huge boon for Tesla if tax credit went away. Probably bad for short term stock price, though.

It'll have a bigger adverse effect on other manufacturers.

Chevy Bolt has sold about 17,600 cars in the USA. Not sure about numbers for the Opel Ampera-E. This means it has about 225,000 more Chevy Bolts that will lose the $7,500 tax credit. They will jump up in price from $30,000 base price to $37,500 base price - a jump of 25%. (jump will shrink if you buy car with options)

Tesla has sold about 146,000 case in the USA. This means it has about 95,000 more cars to sell that will lose the $7,500 tax credit. Model S base price will jump up 11%, Model X base price will jump up 10% and Model 3 will jump up 27% although they are not selling the base model at present. Model 3LR will jump up 21%. All percentages are less if you're buying the car with even more options.

This is just the pricing change for BEVs.

If you're primarily a combustion-engined car manufacturer, and you no longer get ZEV credits when you build a BEV, that means your combustion engined cars will have to go up in price, or your CAFE will have to go up. I'm not sure about the particulars of the rule, perhaps someone else can expand on this. Bottom line - I believe that manufacturers who like things the way they are now (i.e. all of them) will lobby to retain the tax credit, because it makes selling their combustion cars easier.

EDIT: Fiat-Chrysler being the poster child of manufacturers who use this mechanism as a way to pump out more gas guzzlers.

 

[anticitizen13.7]

You are a funny guy. If Tesla did not have this problem crop up, it is entirely possible they could have met the 500K in 2018 production. We will never know.

But you and you your merry band of Twitter naysayers accusing Tesla of fraud and market manipulation at every turn gets a little old.

Incidentally, I am really stunned by the number of Keef W. tweets that you retweet. I think that (and the rest of your @bonairevolt Twitter feed) reveals quite a bit about your so-called "standards" regarding using the media to manipulate sentiment about a company.

Yikes, this is definitely something everyone should check out.

These speak for themselves: Bonaire on Twitter

Bonaire on Twitter

Short bets made:

Bonaire on Twitter

Plus retweets of Keef and Montana, haha.

 

[kbM3]

I don't believe the Model 3 news changes the fundamental direction of the company, but there is a good chance that it will have a destabilizing effect until the ramp is improving visibly, which I doubt will happen until some time in 2018. And the effects may still linger until Tesla hits 20-25% margins on the Model 3 program, which hopefully it will be able to report by late 2018 or early 2019.

Also, as with the Model X delays, the confidence hit is likely to have ripple effects on other parts of the business -- including confidence in Tesla's ability to ramp the Semi, Solar Roof, Y, FSD, Powerpack/Powerwall, Pickup, etc. It could also aggravate the market's reactions to any early quality problems the Model 3 experiences, which are almost inevitable with a new model. On the other hand, the ramp delay may have a silver lining in terms of allowing Tesla time to address quality issues experienced by employee-owned vehicles before the Model 3 hits high volume production. Finally, it may cause Tesla to slow down major capital outlays on other GFs, which could impact the speed at which Tesla grows, although it will still be expanding at a mind-boggling pace for the foreseeable future.

It was a relief to learn that Powerwall/Powerpack production is not impacted by the pack production issues experienced by the Model 3. Perhaps good news on TE from Puerto Rico, Australia and elsewhere along with the Semi reveal will buffer the effects of the Model 3 news to some extent. But since most investors don't seem to react much to TE news or product announcements it may not have that much of an effect.

The same is true with the Solar Roof ramp beginning next year -- very good news IMO for long-term investors but may get ignored by the market in the short term.

Visible improvements in AP2 are a good sign, but Elon's comments predicting AP2 achieving only human-level FSD performance will probably not be well received (even with the promises of swapping processors if needed for past FSD purchasers). It will be interesting to see what Tesla has up its sleeve in terms of FSD development, but again I think the market will be skeptical until it sees real-world performance.

So IMO the bottom line is Tesla's long term prospects still look as bright as ever. Two or three years from now the Model 3 ramp issues may just be a dim memory. But we could be in for some rough sledding over the next 6-12 months.

On a side note, @SBenson you were absolutely right that 500K in 2018 was a pipe dream. Whether I was insane or not for believing that was achievable is a judgment I will leave to mental health professionals.

IIRC he previously stated the HW should be able to reach 2x human level safety, so a bit of a walk back. The problem seems so unimaginably difficult, even 1x would be a staggering accomplishment.

 

[Intl Professor]

I don't think we have to worry yet. I can't imagine the current tax proposal passing the senate. The incentive will probably go away if/when the new tax bill passes, one day, but by then it may already be gone for Tesla anyway.

Most thought this would be easier than the health care bill. I'm not so sure. The mistake an opposition party makes without substantial backup study is to then be tasked to govern. We do not have a governing government. As Krugman has pointed out for decades, Ryan's magic asterisks are telling as push comes to law. Because they are now restrained a bit by their rhetoric about ballooning deficits in the last administration, and are getting around to financing tax cuts, the meat of beneficiaries reacts to each slice. It's called death by a thousand cuts, to coin a phrase. There were only a few cuts in the Health Care Bill, the first and most important, for the rich. That then feeds into the current debate. Watch for further attempts to gut Obamacare, exciting another crowd in opposition.

The most we can expect is a simple across the board corporate tax rate, perhaps indefinite. And that prediction ignores the timing of it. Because our government is trying to do this before 2018 rolls around with electioneering, that prediction becomes problematical and delay more of an obstacle.

Oh, by the way, there is the twitter factor too. I assume Trump's twitter finger will not further complicate matters for the Republicans in Congress.

However, a leading indicator is to be found in Trump's effort to make our judicial system more a mockery by providing a terrorist's defense with an unfair trial procedure. He's already deserving the death penalty the prez says, or should be the first U.S. citizen sent to Guantanamo where adjudication is much faster. By the way, the military's three star general in charge of defense counsels at our Cuban prison is a prisoner there for 21 days, sentenced by a judge who assumed authority he did not have. All of GTmo's current turmoil is over three private defense attorneys with death penalty expertise, who withdrew because for some reason they could not have direct communication with their clients, or some such. The defendant has been in custody more than ten years. Why does our twitter King make our judicial system more of a joke?

I have thought and taught, for decades, we are a plutocracy. I cannot say so today. It is a mockerocracy or, hipocracy (spelling intended). But I mimic Goldwater, extremism in the pursuit of truth is not a vice. It is just uncivil to say so in all cases, but democracy and the rule of law is at stake here. Rule one of terrorism 101 is to upset order by creating disorder. Rule two, that will lead to the government creating more disorder in the name of order. Rule three, hope for a cascading effect understood by the mathematics of catastrophe theory. As Ortega y Gasset has said, revolutionaries do not create revolutions, regimes fall. Putin knows this well. Trump is the order/disorder president, emphasizing order over law.

I could go on, for at least 50 minutes, but I regress.

Edit (11-4): The imprisoned general was released after 1 and 1/2 days on order from mainland.

 

[NicoV]

Visible improvements in AP2 are a good sign, but Elon's comments predicting AP2 achieving only human-level FSD performance will probably not be well received (even with the promises of swapping processors if needed for past FSD purchasers). It will be interesting to see what Tesla has up its sleeve in terms of FSD development, but again I think the market will be skeptical until it sees real-world performance.

I wouldn’t be surprised if swapping the NVidia board with a board with Jim Kellers chip was always the plan: when AP2 was released, it was explicitly stated that the board was easily replacable. Now we hear 1) should the old board not be sufficient it will be replaced for free 2) it was very challenging to get their vision algorithms to work within the allocated power envolope. 3) Previously IIRC Elon also mentioned that a custom chip would be much more power efficient than a GPU. Putting the dots together...

Note that swapping all deployed nvidia cards would solve the issue of having to develop the vision software to fit in a wide power and/or power envelope.

 

[Intl Professor]

Yes, it may as well say Tesla Drops After... 1492

How is that spelled upside down?

 

[avoigt]

I wouldn’t be surprised if swapping the NVidia board with a board with Jim Kellers chip was always the plan: when AP2 was released, it was explicitly stated that the board was easily replacable. Now we hear 1) should the old board not be sufficient it will be replaced for free 2) it was very challenging to get their vision algorithms to work within the allocated power envolope. 3) Previously IIRC Elon also mentioned that a custom chip would be much more power efficient than a GPU. Putting the dots together...

Note that swapping all deployed nvidia cards would solve the issue of having to develop the vision software to fit in a wide power and/or power envelope.

Agreed, It certainly was not the plan to stick with a set of HW forever as it was never the plan to stick with a set of SW. This is ongoing development and for good reasons its easy to change the HW if required. I believe its just a question when they use new better hardware and not if...

 

[3Victoria]

Note, they will likely only have to change the HW for those purchasing FSD.

 

[jelloslug]

It'll have a bigger adverse effect on other manufacturers.

Chevy Bolt has sold about 17,600 cars in the USA. Not sure about numbers for the Opel Ampera-E. This means it has about 225,000 more Chevy Bolts that will lose the $7,500 tax credit. They will jump up in price from $30,000 base price to $37,500 base price - a jump of 25%. (jump will shrink if you buy car with options)

Tesla has sold about 146,000 case in the USA. This means it has about 95,000 more cars to sell that will lose the $7,500 tax credit. Model S base price will jump up 11%, Model X base price will jump up 10% and Model 3 will jump up 27% although they are not selling the base model at present. Model 3LR will jump up 21%. All percentages are less if you're buying the car with even more options.

This is just the pricing change for BEVs.

If you're primarily a combustion-engined car manufacturer, and you no longer get ZEV credits when you build a BEV, that means your combustion engined cars will have to go up in price, or your CAFE will have to go up. I'm not sure about the particulars of the rule, perhaps someone else can expand on this. Bottom line - I believe that manufacturers who like things the way they are now (i.e. all of them) will lobby to retain the tax credit, because it makes selling their combustion cars easier.

EDIT: Fiat-Chrysler being the poster child of manufacturers who use this mechanism as a way to pump out more gas guzzlers.

The Volt, the ELR, and the Spark EV all counted toward the total number of cars for GM. They are as far along (if not farther) than Tesla in the race to the 200,000 car mark.

 

[JRP3]

C'mon guys, patting yourself on the back all you want, but calling other people crazy, can we be a little more civil than that?

If the straight jacket fits...

 

[JRP3]

Indeed. People should check out the "quality" of bonaire's twitter feed and judge all his comments accordingly.

Bonaire, which part of my post did you disagree with, that we should look at your twitter feed or that you should be judged on them?

 

[Buddyroe]

Wow! Where are all the regular posters who post habitually, even all weekend long - all about the great things Tesla is about to achieve and quick to hit "disagree" if anyone posts anything that's even the slightest bit negative (ie, realistic)?

The usual suspects sure are mighty quiet today. I have a feeling they are licking their wounds right now.

I too have seen a huge loss today - but unlike those who can only see the flowers, I had already seen the weeds and knew their would be some bad bumps in the road, maybe even catastrophic ones. It's always best to take a dose of reality every now and then, and don't hype yourself up to the point of blind hysteria. but, everything's gonna be fine. There will be good days again. We're just in a rough patch right now.

And hopefully Elon will hire an adviser or a team of advisers to help him with his ridiculous time frames predictions and estimates he provides. Heck, sell that $20 million dollar house and use it to hire some PR folks. He is yet to be on time with anything. AP2 is unbelievably bad and WAY behind schedule. The M3 is now way behind schedule (and yes, I know he moved up the damn schedule himself - WHY DID HE DO THAT!!??!!).