2017 Investor Roundtable:General Discussion

[sundaymorning]

justin w said: ↑
I DONT TRUST ELON MUSK RUNNING HIS DIRTY MOUTH. lol

Never trust a guy capable of inventing PayPal, SpaceX & a car company. Too much hype, anyone can do it, especially the CEO at BMW..

 

[sub]

I just want my model 3, no concerns about TSLA. I know this small delay is going to push sales of X/S up even more, I've been hovering over the order button myself. My delivery schedule was only pushed back 1 month like everyone else but I've always assumed March/April (was Dec-Feb now Jan-March). Apparently Elon forgot how important I am.

 

[sundaymorning]

I just want my model 3, no concerns about TSLA. I know this small delay is going to push sales of X/S up even more, I've been hovering over the order button myself. My delivery schedule was only pushed back 1 month like everyone else but I've always assumed March/April (was Dec-Feb now Jan-March). Apparently Elon forgot how important I am.

Before I bought the Tesla I was in the market looking for a luxury car for three years. I just didn’t want to spend money on maintenance, it just doesn’t make any sense.

You pay 90k-$100k for a car that will literally fall apart at 80,000 miles. Starting with the new ignition $1,200-$1,500 fix (80-100k miles), new radiator $700-$1000 (80,000-100,000 miles), control arms (Lexus LS460 cost $4-$5k to replace between 60-120k miles), transmission $4-5k at 120,000-150,000k miles. My friends Mercedes S500 started falling apart at 50,000 miles, the electronics went bad, trunk wouldn’t close $4k fix. The arrays of different senors easy $400 fix at least once or twice a year at 80k-100k miles, not to mention the seemingly unlimited amount of spark plug, oil changes, fluid changes, brakes, and regular maintenance, etc. So I’m pretty much throwing in another 25-30k of maintaince once the car reaches 120k-200k miles. Meanwhile, with the Tesla reaching 100k miles, there’s none of the above to worry about for the exception of battery fluid and brake pads.

There’s plenty of conservative spenders like you, value seekers like me, and smart buyers like us waiting for the right car, this is why I believe in this company. It is literally saving me money for every mile driven. Money that could be used to buy more TSLA. And oh, my insurance went down by $600 a year with the Tesla’s safety rating, that’s going straight into TSLA as well.

 

[Causalien]

It does underscore the reality that the average person on the street, or even the average person buying stock, probably does not have the risk tolerance to hold TSLA through wild price swings. Justin’s posts indicate that he is not comfortable with the level of risk in TSLA, which I would expect from most.

TSLA is down more than 20% from its highs in the 380 range this past summer. This will induce panic in most people. I feel nothing. No fear. Not even bravado. My psychology where it comes to investing is abnormal.

The median human feels the pain of stock price loss 2x as much as satisfaction from gain (the reason most people fall prey to buying high on the upswing and panic selling low in a temporary downturn). The solution to avoid this trap, for most people, is to be smart enough not to play the game in the first place. The average person should not be invested in TSLA. They should be buying index funds, not looking at their balances often, and rebalancing fund allocations at set intervals.

Justin’s advice is useless to investors on this board who have high risk tolerance and can afford to take risks.

His advice may actually be appropriate for average Joe/Jane who would lose badly trading TSLA at the exact wrong times because they can’t tolerate the volatility.

I've been in the market long enough. It's cliche, but to quote that old trader in Jesse livermore's Reminiscence of a stock operator. It was not my trading that made the money. It was my sitting around and doing nothing.

Sure, if I trade aggressively following my own rules. 2~3% per month on options are great. But there's always a risk of a catastrophic trade like 2008. Especially since it's been a decade since we have another catastrophic event. But man. After 2 decades, I can safely say that the positions that I took and just hold outperformed any of my trades.

It's more of a symbiotic relationship though. The trading generate steady income that allows me to enter several highly speculative positions where 1 or 2 turns out great. I did not hold any of the blue chips for example.

 

[AcesDealt]

Yes. I'll help you out here:

You present no actual argument for why Tesla does not have a competitive lead and a high chance of high profits on the stationary battery business.

Others have presented detailed arguments for why Tesla does have a competitive lead and a high chance of high profits on the stationary battery business -- including J B Straubel. There is evidence that Tesla has the lowest pack-level costs in the business and that nobody else is close to catching up. There is evidence that Tesla is among the fastest deployers. There is evidence that the market is large enough for *all* the competitors to make decent profits for many years before it saturates. There is evidence that Tesla is winning more and larger contracts than the competitors. Now, if you had bothered to counter any of these points, you would have made an argument. But you didn't.

Stationary batteries are a manufacturing widgets low-margin competition. That's China. I'm sorry you don't see that as obvious but generic life experience makes this obvious. My claim is TE is < 10% of market value and as such a distraction when the 90% factor of automotive is in a constant crisis.

I vaguely had a high impression of you before, and I can't see how you don't understand that embracing low margin high-risk operations is a bad idea when at best they are small relative to your main operation. This should really be obvious stuff. And if you think Elon has some kind of master plan superhuman awareness contrast his optimism in Spring 'I am more confident than ever' with his recent comments ' I was in 9th level hell and super depressed'. Prudency is not accepting high risk marginally advantaged operations like Tesla Energy. Even in conception it's bad because centralized solar/wind is far more efficient than putting cells on a roof that faces the wrong direction, and requires face to face sales.

I hope you don't feel supported by generic upvotes, since most people simply can't handle cognitive dissonance. I'm a long, trying to tell you how to nuance your position. I don't think this forum helped anyone avoid the blood. So what use is it? To feel good? Congrats.

 

[AcesDealt]

I wonder seriously, is there a way to measure objectively if this forum helps investor outcomes? Do we even care?

 

[Gtoffo]

Tesla will eventually hit this point too... that measly 4% growth that BMW has is greater than Tesla's annual production... you're comparing an apple to an orchard.

BMW grew revenues y/y this quarter by 0.4% not 4%.

Stock value is based on future expectations and growth rate. You have been around this forum for a while so I'm sure you are aware of that. I'm buying. See ya in 15 months!

 

[Matias]

While I appreciate Elon taking responsibility for the supplier's F up on the battery pack line, I'm surprised* none of the analysts asked what Tesla was going to do to avoid that situation in the future. I'm glad that Tesla has the capacity to take these operations in-house and kick butt and do it better than their supplier, but it would also be nice to know if Tesla was going to take steps to identify their failures in supervision of contractors to avoid this type of situation in the first place. Not the first time they have been burned by suppliers, so not sure there is any evidence of them getting better at it. And their response is the same every time -- take it in-house. Seems like their are not addressing a root cause, which is not properly supervising their contractors.

(*not actually surprised -- the analysts almost always ask worthless questions, and fail to ask relevant ones)

Normally production lines are first assembled and tested in suppliers premises and only after they are working, they are delivered to customer. Tesla chose to do "cold start", where line is directly first build in Tesla's premises. So Tesla chose itself to take the more error prone aproach.

Source: Tesla Responsible For Model 3 "Production Hell" - DailyKanban

 

[RobStark]

You pay 90k-$100k for a car that will literally fall apart at 80,000 miles. Starting with the new ignition $1,200-$1,500 fix (80-100k miles), new radiator $700-$1000 (80,000-100,000 miles), control arms (Lexus LS460 cost $4-$5k to replace between 60-120k miles), transmission $4-5k at 120,000-150,000k miles.

The vast majority of modern ICE cars go 100k miles without a major powertrain failure or major repair.

According to Consumer Reports Lexus LS is consistently in the top 3 most reliable cars sold in America. In me experience Lexus LS goes 500k miles without major repairs.

On the other hand, Mercedes S Class is consistently one of the least reliable cars sold in America. Not with major powertrain problems in the first 3 years of ownership but with minor electric motors and electric parts going bad. After that there is no objective reliablitity data just reputation and anecdotal evidence. And yeah, I know a guy who spent $5k on replacing a radiator on an S Class after ~120k miles.

But no one is forcing customers to buy the least reliable cars in class like a Chrysler 200,300 or an S Class. Making gross exagerations on ICEv cost of ownership doesn't convert ICEv owners. They know how much things cost. You can buy a Corolla or LS 460 if you want a reliable ICEv.

 

[jbcarioca]

The vast majority of modern ICE cars go 100k miles without a major powertrain failure or major repair....

Even the least reliable ICE can typically get the 100,000 miles. A Rio de Janeiro taxi driver I know has a Fiat Siena that just passed 200,000 km with not even a clutch replacement. Just oil/filter changes and lots of tires. That car he plans to keep for another 150,000 km. This is his third Fiat since I have known him. If a Fiat can do it they almost all can!

He sensiblynwants a BEV next time, if we get them by then.

 

[RobStark]

Even the least reliable ICE can typically get the 100,000 miles. A Rio de Janeiro taxi driver I know has a Fiat Siena that just passed 200,000 km with not even a clutch replacement. Just oil/filter changes and lots of tires. That car he plans to keep for another 150,000 km. This is his third Fiat since I have known him. If a Fiat can do it they almost all can!

He sensiblynwants a BEV next time, if we get them by then.

There are plenty of horror stories about Chrysler Hemi cars going kaput at 60k-80k miles.

Vehicles for Honda and FCA with the new ZF 9 Speed transmission are having lots of problems.

There are a few more.

That is why I said "vast majority."

Petrolheads can point to early LEAFs, early Model S with motor noise/replacements, Model S door handle replacements etc.

 

[jbcarioca]

There are plenty of horror stories about Chrysler Hemi cars going kaput at 60k-80k miles.

Vehicles for Honda and FCA with the new ZF 9 Speed transmission are having lots of problems.

There are a few more.

That is why I said "vast majority."

Petrolheads can point to early LEAFs, early Model S with motor noise/replacements, Model S door handle replacements etc.

Certainly there are clear instances of premature failure and famously unreliable models. Usually frequency of repair or warranty cost data or both is readily available. Sadly, the most formerly reliable sources for ‘things gone wrong” has been highjacked all too often by trivialities, typically things such as cupholders and seat adjustments. A quick look at Consumer Reports and True Delta does give an idea.

The ZF 9 brings to mind the first generation BMW 740-750 with an impossibly complex I-Drive, The first Porsche AWD 964 and the Jeeps produced in that obsolete plant. The last one was especially odd given that the seemingly identical Jeeps produced by Magna Steyr in Austria were paragons of reliability.

That too reminds me of the ancient pre-Tesla situation at Fremont when Nummi produced identical vehicles badged as Chevrolet and Toyota, but warranty costs for the Chevy were double those of Toyota and reliability reports showed the Chevy much worse than the Toyota. Somewhere I have those old records, from pre-digital days.

That certainly accounts for some of the premium pricing in PxxD vs xxD Tesla. The high performance versions always are less reliable. I wonder why?
Some of the Hemi reports might have been that, probably some design/materials/assembly deficiency too.

 

[sandpiper]

Normally production lines are first assembled and tested in suppliers premises and only after they are working, they are delivered to customer. Tesla chose to do "cold start", where line is directly first build in Tesla's premises. So Tesla chose itself to take the more error prone aproach.

Source: Tesla Responsible For Model 3 "Production Hell" - DailyKanban

This makes a TON of sense to me. The timelines that Tesla was working with really couldn't allow for anything else. And I know from personal experience that shipping untested systems is a recipe for an incredibly expensive disaster.

They'll get through this, but it will be both costly and time consuming.

 

[brian45011]

Fair points, make sense. What progress are you looking for that would change your sentiment? M3 ramp? By how much?

A start would be if Tesla could reverse the trend of ever increasing bottom line losses so that they start getting smaller rather than larger. The losses for the most recent year have been:

4Q16 $121.3 million
1Q17 $330.3 million
2Q17 $336.9 million
3Q16 $619.4 million

I suspect the trend will continue for at least another quarter since the SH letter's Outlook section stated:

"Due to a higher mix of temporarily lower margin Model 3 deliveries in Q4 compared to Q3, we expect non-GAAP automotive gross margin to temporarily decline slightly in Q4 to about 15% and then recover starting in Q1."

 

[brian45011]

The dumbest of a dumb post.


South Korea is a wealthy country and the 5th biggest luxury car market in the world.

Tesla is not in Malaysia.

But is in Taiwan. 3 Stores. Portugal One Store. UAE one store. Tesla doesn't do paid marketing campaigns. These are wealthy countries that will bring very good ROI.

Mexico. 85% of luxury cars are purchased by three cities; Mexico City,Guadalajara, and Monterrey. Tesla only needs 3 Mexico City stores although it currently only has one, plus another in Monterrey and Guadalajara. Tesla Mexico also intends to open a store in Cancun were Mexico's elite spend their summers. Kinda like the Hamptons.

Mexican supercharger Network will also serve Americans on vacation. As Portuguese Supercharger Network serves wealthy Northern Europeans on vacation. Those Superchargers would be needed even if Tesla did not sell locally. Having local Tesla service centers also brings peace of mind when on vacation.

How many cars has Tesla delivered in South Korea, Taiwan, Portugal, UAE, and Mexico? What have been the costs to operate in each respective country those stores, service centers, and superchargers and the expense of obtaining regulatory approvals to import and sell vehicles in those jurisdictions? How do those "very good ROIs" in those respective countries compare to Tesla's returns in the Californian and Norwegian markets?

Peace of Mind while vacationing in Mexico by tooling around in a $100+k "yank tank" is essential.

 

[Matias]

This makes a TON of sense to me. The timelines that Tesla was working with really couldn't allow for anything else. And I know from personal experience that shipping untested systems is a recipe for an incredibly expensive disaster.

They'll get through this, but it will be both costly and time consuming.

It also leads to writing spaghetti code at 2 am Sunday morning

 

[jbcarioca]

How many cars has Tesla delivered in South Korea, Taiwan, Portugal, UAE, and Mexico? What have been the costs to operate in each respective country those stores, service centers, and superchargers and the expense of obtaining regulatory approvals to import and sell vehicles in those jurisdictions? How do those "very good ROIs" in those respective countries compare to Tesla's returns in the Californian and Norwegian markets?

Peace of Mind while vacationing in Mexico by tooling around in a $100+k "yank tank" is essential.

You may be missing the important points. @RobStark may have been somewhat dismissive but deservedly so IMHO.
Tesla has recently entered South Korea and Taiwan. Portugal is a prime destination for retirees from the Uk and other European countries and is a prime expatriate destination for wealthy Brazilians. Portugal Superchargers are needed fro all those wealthy vacationers (see also Croatia, Slovenia, Poland, etc). The UAE has been since the mid-1960's one of the per capita highest consumers of luxury cars and has zero import restrictions. Mexico was explained already.

It is quite necessary to ignore basic facts to conclude that operating in these countries will reduce margins and be less productive than elsewhere. Loose criticism is not helpful. Please do your homework, then come back with facts, if you think you can find some to support your case. Failing to do that makes me conclude you're just spreading pointless FUD.

I'm surprised you did not attack Jordan or Russia. Of course you'd need to look up facts to understand those two as well.

 

[bdy0627]

It's surprising to me how many new members we now have here along with an explosion of chatter and new threads in the last few weeks. Hopefully the quality of discussions doesn't suffer. I'm no longer feeling like one of the newer ones here.

 

[sandpiper]

It also leads to writing spaghetti code at 2 am Sunday morning

Yep... and once things start running, they can't shut down to clean up the mess. And so remains a mess forever after.

 

[myusername]

BMW grew revenues y/y this quarter by 0.4% not 4%.

Stock value is based on future expectations and growth rate. You have been around this forum for a while so I'm sure you are aware of that. I'm buying. See ya in 15 months!

there is a reasonable amount of preemptive buying of growth... my opinion is that TSLA is nowhere near reason... here's a guy that sums it up well...

Tesla's Stock Trades at a 'Stupid Multiple' Says This Shark Tank Star