2017 Investor Roundtable: TSLA Market Action

[D-egg-O]

These two data points, do not confirm, but support my view that Model 3 production ramp is about two to three weeks behind "tweet schedule," and they are also in-line with Elon's prediction that "December will be a big month."

If my hypothesis is correct, I would expect additional VINs to emerge by Friday, further acceleration (i.e. dozens) in the last week of October, VIN 1134 to be delivered by mid-November, Tesla to be producing 1,000 Model 3's per week by end-November, and 13,000+ deliveries in December, for a total of 15,000 deliveries in 4Q17.

This hypothesis is the primary reason why I expect TSLA to start rising by the end of October and into year-end.

It's still too nebulous. They could fix the bottlenecks, and in a matter of days catch up to their initial ramp up target. Elon stated the uncertainty of predicting the ramp up in the earnings call, but they shot themselves in the foot short term by stating their ambitious target of "just above 1500 vehicles produced by end of Q3" in the letter. To more effectively communicate such an ambitious and uncertain targets, I would've liked them to reworded it to 700 +/- 700. This would have emphasized the uncertainty Elon communicated in the call. It's moot at this point. Long term, doesn't matter, but it's the market action thread, so it's relevant.

 

[winfield100]

I got a plan
I know the direction
The lay of the land

I certainly hope your plan,
and lay of the land
Includes All of Tesla
since there may be something else'la
The powerwall, and PV folks
suggested, and it'z no joke
130 milez south of tampa
and nothing much will hamper
In the land of the newly wed and nearly dead
installs may begin whilst it still 17.
so tesla energy,
should be
in your plan, if you can
{discontinuity}
"gully foyle is my name
"terra is my nation
"deep space my dwelling space
"the stars, my destination
(YEE HAW!)

{{{IE i may be able to get a PV array and power wall in just a few months in an area of Florida TE isn't in yet}}}

 

[Starno]

Doesn’t make sense. If VIN 1134 is delivered by mid-November that means things are AT LEAST 6 weeks behind schedule not 2-3 weeks. Because according to Elon’s prior tweeted schedule you linked to, VIN 1134 should have been delivered by end of Sept.

It can be 6 weeks behind schedule at some point in time, and right or just behind schedule at an other point in time though.
The ramp isn't a linear process.

 

[DaveT]

It can be 6 weeks behind schedule at some point in time, and right or just behind schedule at an other point in time though.
The ramp isn't a linear process.

Or it could be 6 weeks behind schedule at some point and then at another point 12 week behind schedule.

 

[RABaby]

I certainly hope your plan,
and lay of the land
Includes All of Tesla
since there may be something else'la
The powerwall, and PV folks
suggested, and it'z no joke
130 milez south of tampa
and nothing much will hamper
In the land of the newly wed and nearly dead
installs may begin whilst it still 17.
so tesla energy,
should be
in your plan, if you can
{discontinuity}
"gully foyle is my name
"terra is my nation
"deep space my dwelling space
"the stars, my destination
(YEE HAW!)

{{{IE i may be able to get a PV array and power wall in just a few months in an area of Florida TE isn't in yet}}}

not everyone can sing

 

[Lessmog]

not everyone can sing

Read it as a wrap?

 

[RABaby]

Read it as a wrap?

Read it as a wrap?

as a car wrap -
or crap rap?
To each their own
I do neither
I'm old fashioned traditionalist

 

[Lessmog]

as a car wrap -
or crap rap?
To each their own
I do neither
I'm old fashioned traditionalist

Wax eloquent. And SHINE.

 

[Starno]

Or it could be 6 weeks behind schedule at some point and then at another point 12 week behind schedule.

It could. It depends how they resolve the bottlenecks issues. If Elon doesn't lie, and they know how they'll resolve the issues in a short amount of time, the delay shouldn't be prolonged.
However they could discover new bottlenecks along the way, in this case, yes it would lengthen the delay.

 

[ValueAnalyst]

It's still too nebulous. They could fix the bottlenecks, and in a matter of days catch up to their initial ramp up target. Elon stated the uncertainty of predicting the ramp up in the earnings call, but they shot themselves in the foot short term by stating their ambitious target of "just above 1500 vehicles produced by end of Q3" in the letter. To more effectively communicate such an ambitious and uncertain targets, I would've liked them to reworded it to 700 +/- 700. This would have emphasized the uncertainty Elon communicated in the call. It's moot at this point. Long term, doesn't matter, but the market action thread, so it relevant.

I think it’s optimistic to think they’re only 4-6 weeks behind at this point. Elon’s tweeted production goals were probably aspirational and then they encountered additional unexpected bottlenecks. I wouldn’t be surprised if Tesla is 2-3 months behind Elon’s initial aspirational goals, with 5k/week production to be achieved by end of Q1 2018.

Agree that it appears Tesla is about 8+ weeks behind. Jonas did predict 2K deliveries in 2017. I do believe there will be more than that. My own thought is about 6-7K deliveries and <10K produced.

For my general predictions to be wrong we need to see substantial evidence of production/deliveries in the next two weeks.

I do not see any indication at this time that Model 3 production is 8+ weeks delayed. The facts that Model X was extremely delayed or that Elon majority of the time proves optimistic are not indications, but an example of reasoning by anology.

Indications in support of a view that Model 3 production is only slightly delayed:

• Tesla has not yet changed the delivery estimates on its website as of today;
• Latest management guidance we have is, "Dec will be a big month" and "Late Oct possible, but not certain" for start of non-employee deliveries, and this is as of October 6, so very recent;
• Tesla Semi event was moved by only two weeks;
• Elon would not be posting production line videos if there was an 8+ week delay, because it could be construed as misleading; and
• Tesla explained that recent firings were based on annual performance reviews, so this is not an indication of further than feared delays.

I'm reading the responses, and maybe I'm missing something, but I have not yet seen a material indication in support of delay estimates as high as 8+ weeks.

In response to the earlier question around how SP would be affected if Model 3 production was in fact delayed by two months, I do not see SP dropping as it did in February of 2016, unless Model S and Model X are significantly Osborned, which I do not expect.

 

[kenliles]

AMA on r/spacex.

Read bottom up

I am Elon Musk, ask me anything about BFR! • r/space

 

[MitchJi]

I agree with your assessment of how far behind they appear to be. After falling down a rabbit hole of reading thousands of old TMC posts from the last 3 years this weekend, I am less optimistic that there will be a miracle. There were a lot of dashed hopes on TMC over the last few years!

A classic example of thinking by analogy. Completely ignoring the facts that the M3 is easier to build and that Tesla and Elon have a lot more experience ramping production lines than they had in the past. You could be correct but IMO the reasoning is flawed.

8 weeks, 12 weeks. A delay at this point doesn't much matter. First of all, it's pretty much expected with Elon and second, you can make up 8 weeks of ramp up production in a single week next year. IMO, the market will be looking at two things: profitability on the 3 and what the ultimate demand level is. News on that front will have a more material and lasting impact on the stock than teething problems during the initial ramp up.

In the short term I think that the market will overreact to any substantial delays in M3 production. "It's another MX debacle!". (No it's not).

I have zero worries about profitability! Elon said (paraphrasing) that Tesla will definitely get to 10k per week with 20-25% profits. In addition he also talked about producing and delivering cars quickly enough that they will receive payments before they need to pay the suppliers. I'm not sure how that looks on the books but I'm pretty sure that the market isn't expecting that and if that happens it will boost the SP.

Demand isn't a problem and I don't believe that it will be perceived as a problem.

 

[MitchJi]

In response to the earlier question around how SP would be affected if Model 3 production was in fact delayed by two months, I do not see SP dropping as it did in February of 2016, unless Model S and Model X are significantly Osborned, which I do n

It depends on how the news comes out and how it's perceived .

I believe that if the end of December numbers are less than 2k which I think is unlikely that we could easily see the SP drop to about $300, (which if I'm still in cash I'd love !).

It depends on the facts and comments around the numbers.

 

[Intl Professor]

Filling demand is the problem.

 

[DaveT]

If I have a friend and he's always late (like 95% of the time) and it's been like that for years, and then the next time I meet with him I expect him to be late... sure, that might be reasoning by analogy... or it might be reasoning based off of historical evidence... whatever you call it it's reasonable for me to expect him to be late.

People claim M3 is easier to build and Tesla has learned from their hubris, etc... but one thing that probably hasn't changed is Elon pushing unrealistic timelines on his teams because he knows it motivates them to work their butt off like crazy. Elon might think the timeline goals are realistic if everything and everyone aligns themselves with the stars... meaning with first principles the timelines could be met. But there's always reality and unexpected issues. Other companies create timelines that include extra time for those unexpected issues, but Elon doesn't and again I think it's intentional. Super aggressive timelines motivates his teams to work harder than most think possible. And most of the time the timelines don't get met, but Elon gets the most out of his employees. And in the end, he's able to accomplish more than other companies this way.

 

[DaveT]

I think Tesla could be more than 8 weeks behind schedule. This ramp is not like the Model S/X ramps, as there appears to be far more automation involved. There could be aspects of this Tesla is going through for the first time.

I think automation is harder to ramp than human labor. Once it's running, things will be good, but I have a nagging feeling it could take longer than is being discussed.

I think this is a valid and perceptive point. Tesla is under pressure to deliver the Model 3 at much lower costs than the S/X, thus they need to take advantage of a lot more automation than in the S/X. The result is that the systems behind the automation can be quite complex, and Tesla could have underestimated that complexity (and delays from unexpected issues).

 

[Starno]

I think this is a valid and perceptive point. Tesla is under pressure to deliver the Model 3 at much lower costs than the S/X, thus they need to take advantage of a lot more automation than in the S/X. The result is that the systems behind the automation can be quite complex, and Tesla could have underestimated that complexity (and delays from unexpected issues).

This would be a kinda rookie mistake though. And kinda cliché as well.

I thought about this right after the M3 was announced, I'm sure they thought about it as well...

 

[DaveT]

But one thing that probably hasn't changed is Elon pushing unrealistic timelines on his teams because he knows it motivates them to work their butt off like crazy. Elon might think the timeline goals are realistic if everything and everyone aligns themselves with the stars... meaning with first principles the timelines could be met. But there's always reality and unexpected issues. Other companies create timelines that include extra time for those unexpected issues, but Elon doesn't and again I think it's intentional. Super aggressive timelines motivates his teams to work harder than most think possible. And most of the time the timelines don't get met, but Elon gets the most out of his employees. And in the end, he's able to accomplish more than other companies this way.

Another thought on Elon pushing unrealistic timelines to get the most out of his employees. I don't think this will change anytime soon. Elon has perfected it and it's worked very well for him. He doesn't care about the stock price as much as he cares about how much productivity/efficiency/innovation he can get out of employees... or in other words, he's focused on Tesla innovating as fast as they can and he's used this technique/approach (pushing unrealistic timelines to push employees) over and over, and in the bigger picture it serves his ultimate goals very well. This is why the S, X, powerwall 1, powerwall 2, solar roof, etc. were all delayed, and why the Semi ramp, Y ramp, whatever next product ramp will also be delayed. It's best to just accept this as how it is. Don't get caught up in trying to defend Elon's timelines, because you're be wrong most of the time. And don't get caught up calling Elon a liar, because he isn't. He truly thinks his timelines as possible to meet if everything and everyone does everything correctly, but he also knows that most of the time it doesn't work like this. And he's ok with things being a bit late, because at least he knows his team worked their butts off trying.

 

[geneclean55]

What if you had a bunch of friends who were usually late, then you decided to replace those friends with new ones (Tesla Grohmann, tier 1 suppliers etc) who were less late and more reliable.

 

[DaveT]

This would be a kinda rookie mistake though. And kinda cliché as well.

I thought about this right after the M3 was announced, I'm sure they thought about it as well...

Well, you can call it whatever you want. The reality is mistakes were made somewhere to cause these delays. Tesla is NOT a rookie company. But this IS their first attempt at a real mass market car, and the systems are going to be very different than their previous ones. There's a lot that goes into it, and for Tesla to underestimate a few aspects is to be expected. It's not because they're rookie, it's because making a new mass market car is exceedingly complex to get it right on a super tight schedule/deadline.