2017 Investor Roundtable:General Discussion

[dhrivnak]

Can someone please argue against my 30% long-term market share in a 5 million unit global TAM estimate for Model 3?

Key components:

1. 1 million unit U.S. TAM times 5 = Global TAM for ICE cars with MSRP between $25k and $50k
2. Model S achieved 30% U.S. market share in four years, Model X did the same in 2 years, Model 3 will do it in 1 year.
3. 30% of Global TAM will require additional Gigafactories, so 2020/21;
4. Shift from cars to crossovers/SUV in 2014/15/16 were driven by lower oil prices, which are now increasing, so tide is turning; and
5. Used car market, which is 3x of new car market, will lose some value-driven 1-2-year-old used car buyers to Model 3.

It is the production of 1,000,000 Tesla cars that concern me. That is a tall order and far above any guidance Tesla has given. It will take years to build a new car plant the size of Fremont a plant that has yet to break ground on.

 

[myusername]

Thanks for this list. Note that I tend to be optimistic on timelines, but the following are where I differ:

1. Cash flow positive as of 4Q17;
2. $30B revenue in 2018 assuming 10,000/week Model 3's at exit-18;
3. Model Y could be revealed earlier since Model 3 demand is way beyond possible supply (i.e. Osborne is not a big concern), and it would make sense to halt ICE crossover sales ASAP;
4. Tesla will internally fund its growth going forward;
5. Subsequent Gigafactory groundbreaking in 2018 and online in 2020/21;
6. Model S/X redesign can't wait until Fall since Model 3 is already entering volume production (i.e. Osborne is a concern)
7. I'd be surprised if a short squeeze didn't take SP above the level you mentioned.

for both VA and @graphix25 ... where the hell is $25B to $30B coming from? remember 100k for 2017 VA? we can pull it up again, but that was roughly 7 months ago. 100k M3 predicted for 2017.

now let's see what you're predicting...

100,000 MX/MX * $100,000 = $10,000,000,000
500,000 M3 * $42,000 = $21,000,000,000

that's $31B. or did I miss the explosive growth of some other revenue stream?

so, just to be clear, VA is now predicting 400k to 500k M3 and 100k+ MX/MS for 2018... or 500k to 600k vehicles for 2018.

 

[ccorda]

Can someone please argue against my 30% long-term market share in a 5 million unit global TAM estimate for Model 3?

Key components:

1. 1 million unit U.S. TAM times 5 = Global TAM for ICE cars with MSRP between $25k and $50k

If you're talking luxury market, you need adjust criteria up to 35k+. If you include 25k - 35k, then that's Camry, Accord, etc. territory, and 30% market share of a much bigger market is wildly optimistic. US sales 2016 Mid-sized segment - carsalesbase.com

 

[ValueAnalyst]

If you're talking luxury market, you need adjust criteria up to 35k+. If you include 25k - 35k, then that's Camry, Accord, etc. territory, and 30% market share of a much bigger market is wildly optimistic. US sales 2016 Mid-sized segment - carsalesbase.com

Thank you, and I'm glad you brought up Camry.

Please check this out: Model 3 Could Change The World: A Cost Of Ownership Study | Loup Ventures

Gene Munster, a well-respected analyst who was right on with iPhone from the beginning, is a good one to follow.

 

[myusername]

for the record, here's what I think will happen in 2018:

AVG M3/wk for the year: 2000

104,000 M3 * 42,000 = $4.68B
90,000 MS/MX * 90,000 = $8.10B

with services revenue and such, total 2018 revs $15B max.

and zero contributions from TE.

they will attempt two cash raises in 2018... the first in Q1 just after Q4 ER for a typical $1.xB. the second attempt again in Q3. pretty much the same setup as the last 2 years.

but they may not be capable of getting the 2nd attempt.

sound like extremist fiction?... didn't "a few hundred" or "around 1k" M3 for 2017 a year ago sound extremist also? remember the enormous expectations for 2017 in 2016? now loading up again for 2018. problem is, the can is not able to be kicked further than the M3.

 

[ValueAnalyst]

It is the production of 1,000,000 Tesla cars that concern me. That is a tall order and far above any guidance Tesla has given. It will take years to build a new car plant the size of Fremont a plant that has yet to break ground on.

Note that Tesla revised its production plan from 500,000 in 2020 to 500,000 in 2018 in May 2016, so two-year notice to suppliers.

I think Tesla may soon do that again, for 2020, which would be another two-year notice to suppliers, based on Semi/Roadster demand.

The most important upcoming announcement, most impactful on intrinsic value, will be subsequent Gigafactory capacity and timelines.

 

[myusername]

Note that Tesla revised its production plan from 500,000 in 2020 to 500,000 in 2018 in May 2016, so two-year notice to suppliers.

I think Tesla may soon do that again, for 2020, which would be another two-year notice to suppliers, based on Semi/Roadster demand.

The most important upcoming announcement, most impactful on intrinsic value, will be subsequent Gigafactory capacity and timelines.

"I think Tesla may soon do that again, for 2020, which would be another two-year notice to suppliers, based on Semi/Roadster demand."

they already did this! on the same CC in 2016:

2017: 100k to 200k
2018: 500k
2020: 1m

this already happened. what are you talking about?

 

[Zaxxon]

Also note that there's a zero percent chance they hit 500k produced cars in 2018. 100k S/X leaves 400k 3, a rate of 8k/week for 50 weeks for 3 alone. Since they don't plan on 5k till March and 10k till late in the year, we can extrapolate that 500k is a non-starter unless they wildly exceed current guidance.

How often has Tesla wildly exceeded production guidance vs barely hitting or missing?

So sure, they could do it again, but let's base our theses on Tesla's actual accomplishments, not prior guidance that has proven to have been overly optimistic.

 

[Chickenlittle]

Also note that there's a zero percent chance they hit 500k produced cars in 2018. 100k S/X leaves 400k 3, a rate of 8k/week for 50 weeks for 3 alone. Since they don't plan on 5k till March and 10k till late in the year, we can extrapolate that 500k is a non-starter unless they wildly exceed current guidance.

How often has Tesla wildly exceeded production guidance vs barely hitting or missing?

So sure, they could do it again, but let's base our theses on Tesla's actual accomplishments, not prior guidance that has proven to have been overly optimistic.

Your analysis assumes no growth in model s or model x sales. Can you give us a SINGLE year that has occurred?

 

[ValueAnalyst]

Also note that there's a zero percent chance they hit 500k produced cars in 2018. 100k S/X leaves 400k 3, a rate of 8k/week for 50 weeks for 3 alone. Since they don't plan on 5k till March and 10k till late in the year, we can extrapolate that 500k is a non-starter unless they wildly exceed current guidance.

How often has Tesla wildly exceeded production guidance vs barely hitting or missing?

So sure, they could do it again, but let's base our theses on Tesla's actual accomplishments, not prior guidance that has proven to have been overly optimistic.

Can you please provide source/support for the bolded part?

 

[2virgule5]

for the record, here's what I think will happen in 2018:

AVG M3/wk for the year: 2000

104,000 M3 * 42,000 = $4.68B
90,000 MS/MX * 90,000 = $8.10B

with services revenue and such, total 2018 revs $15B max.

and zero contributions from TE.

they will attempt two cash raises in 2018... the first in Q1 just after Q4 ER for a typical $1.xB. the second attempt again in Q3. pretty much the same setup as the last 2 years.

but they may not be capable of getting the 2nd attempt.

sound like extremist fiction?... didn't "a few hundred" or "around 1k" M3 for 2017 a year ago sound extremist also? remember the enormous expectations for 2017 in 2016? now loading up again for 2018. problem is, the can is not able to be kicked further than the M3.

What is the rationale for 90k MS/MX next year while this year is above 100k? There is no competition on this segment from anyone in 2018.
M3 average run rate will be twice what you predict, so even with TE at zero that's $20B.

 

[ValueAnalyst]

for both VA and @graphix25 ... where the hell is $25B to $30B coming from? remember 100k for 2017 VA? we can pull it up again, but that was roughly 7 months ago. 100k M3 predicted for 2017.

now let's see what you're predicting...

100,000 MX/MX * $100,000 = $10,000,000,000
500,000 M3 * $42,000 = $21,000,000,000

that's $31B. or did I miss the explosive growth of some other revenue stream?

so, just to be clear, VA is now predicting 400k to 500k M3 and 100k+ MX/MS for 2018... or 500k to 600k vehicles for 2018.

Before you continue with putting words in my mouth, the following are my assumptions:

1. Model S: 55k units at $95k ASP = $5B
2. Model X: 60k units at $100k ASP = $6B
3. Model 3: 315k units at $55k ASP = $17B
   
4. Powerpack: 2 GWh at $500/kWh = $1B
5. Solar Roof and Powerwall = $1B
6. Used vehicle & Service = $5B, but zero gross profit on this due to disruptive strategy, so not included.

Total $30B Revenue in 2018.

 

[Zaxxon]

Re: support. Both came from Q3 transcript.

On 100k S+X being maintained: "[W]e expect to continue making production efficiency improvements on the S and X line and be able to take that from 1,800 units a week to 2,000 units a week in probably over the next year. And still be on two shifts, which is labor hours are reducing per vehicle and that gets us to our sort of roughly 100,000 units a year week cadence and we can work on supply chain efficiencies and the like."

On 10k 3 late in 2018:

Deepak Ahuja - Tesla, Inc.

Just to be clear, we are trying to get as fast as we can to 5,000, and then we will work as fast as we can to get to 10,000.

Antonio M. Sacconaghi - Sanford C. Bernstein & Co. LLC

Yes.

Jeffrey B. Straubel - Tesla, Inc.

Yeah, I don't think we were saying we wouldn't do it. We were just saying we would think through it and make the strategic trade-offs, in terms of timing. But we'd think through it.

Deepak Ahuja - Tesla, Inc.

(53:40)

Elon Reeve Musk - Tesla, Inc.

I mean sort of like (53:42) interpretations of time scales. For us, it's like, well, should we have the growth to 10,000, be – take 9 months, 12 months or 15 months?

-----

9 mo from the current goal of March would be Dec, 2018.

I do appreciate being called to support my prior post. And I probably shouldn't have said zero percent chance. There's always the possibility that everything goes swimmingly. But that's not the expected case, by me or by Elon Musk. I think expecting 500k in 2018 is expecting everything to go perfectly despite all prior evidence and guidance.

 

[ValueAnalyst]

Re: support. Both came from Q3 transcript.

On 100k S+X being maintained: "[W]e expect to continue making production efficiency improvements on the S and X line and be able to take that from 1,800 units a week to 2,000 units a week in probably over the next year. And still be on two shifts, which is labor hours are reducing per vehicle and that gets us to our sort of roughly 100,000 units a year week cadence and we can work on supply chain efficiencies and the like."

On 10k 3 late in 2018:

Deepak Ahuja - Tesla, Inc.

Just to be clear, we are trying to get as fast as we can to 5,000, and then we will work as fast as we can to get to 10,000.

Antonio M. Sacconaghi - Sanford C. Bernstein & Co. LLC

Yes.

Jeffrey B. Straubel - Tesla, Inc.

Yeah, I don't think we were saying we wouldn't do it. We were just saying we would think through it and make the strategic trade-offs, in terms of timing. But we'd think through it.

Deepak Ahuja - Tesla, Inc.

(53:40)

Elon Reeve Musk - Tesla, Inc.

I mean sort of like (53:42) interpretations of time scales. For us, it's like, well, should we have the growth to 10,000, be – take 9 months, 12 months or 15 months?

-----

9 mo from the current goal of March would be Dec, 2018.

I do appreciate being called to support my prior post. And I probably shouldn't have said zero percent chance. There's always the possibility that everything goes swimmingly. But that's not the expected case, by me or by Elon Musk. I think expecting 500k in 2018 is expecting everything to go perfectly despite all prior evidence and guidance.

Thank you. Let's see if EM & Team provide a more specific guidance in the next investor letter. For now, I remain at 430k S/X/3 deliveries in 2018.

 

[KLC13]

What is the rationale for 90k MS/MX next year while this year is above 100k? There is no competition on this segment from anyone in 2018.
M3 average run rate will be twice what you predict, so even with TE at zero that's $20B.

Regarding competition, its funny how shorts keep touting Daimler as major competition in the EV space but Benz prefers to stick with Hydrogen and Hybrids

India's Plan For All-Electric Cars By 2030 Not Viable: Mercedes Chief

 

[Zaxxon]

Thank you. Let's see if EM & Team provide a more specific guidance in the next investor letter. For now, I'm at 430k S/X/3 deliveries in 2018.

That seems a lot more reasonable to me. If I had to guess I'd say 350k-400k. And to be clear, I'd love to be wrong and see 500k.

 

[ValueAnalyst]

As we kindly receive Christmas Eve visits by our friends on the bear side, I'd like to remind everyone:

"I don't understand what he's talking about," Palihapitiya said. "There's nothing fraudulent about this guy. There's nothing fraudulent about the technology. This is just like people wanting to dance on failure, and I just don't get it."

 

[dc_h]

That seems a lot more reasonable to me. If I had to guess I'd say 350k-400k. And to be clear, I'd love to be wrong and see 500k.

350,000 total would be a big win. Tesla can be cash flow positive and that will kill the short narrative. Over 20,000 model 3 in q1 would likely be cash flow positive assuming X+S = 25,000.

 

[mongo]

350,000 total would be a big win. Tesla can be cash flow positive and that will kill the short narrative. Over 20,000 model 3 in q1 would likely be cash flow positive assuming X+S = 25,000.

I'd be happy with a 3x YoY growth rate!

 

[Yuri_G]

Just from watching Tesla for 5 years now, I think a realistic goal for them would be doubling this year's deliveries in 2018. 100k Model S/X and 100k Model 3. Model 3 should be easier to scale, but I'm skeptical until they actually surpass S/X production and deliveries.