2017 Investor Roundtable: TSLA Market Action

[ValueAnalyst]

TSLA is volatile after hours as it's "SAID CLOSE TO AGREEING ON PLAN FOR CHINA PRODUCTION PLANT -BBG"

TopstepTrader on Twitter

If Tesla announces a plant in China soon, rather than later this year as expected, I would expect it to start coming online by 2020. this could be a significant boost to Tesla's revenue growth for 2020 and beyond.

I'm especially interested in details: Production capacity? Product mix? Level of vertical integration?

 

[ValueAnalyst]

I get the first 4 and Australia could have some benefits with all that sun and storage needs, but could they just be supplied from India it Asia? Is Australia big enough to support a gigafactory v3.0 by the time it's done? Thinking of the biggest bang for capex buck. Australia is interesting because of all the storage needs and solar as well as cars of course, never really thought of it as an option.

They seem very accepting of Tesla and it's products. It's certainly not one of the more likely options, but the excitement in the country helps. We shall see!

 

[Reciprocity]

If Tesla announces a plant in china soon, I would expect it to start coming online by 2020.

I'm especially interested in details: Production capacity? Product mix? Level of vertical integration?

Does having a local factory open the door for some precent of imports? Or does Tesla still need to produce every car they sell there to avoid import taxes?

 

[MitchJi]

If Tesla announces a plant in China soon, rather than later this year as expected, I would expect it to start coming online by 2020. this could be a significant boost to Tesla's revenue growth for 2020 and beyond.

I'm especially interested in details: Production capacity? Product mix? Level of vertical integration?

I believe by 2019.

 

[ValueAnalyst]

I believe by 2019.

Just in time for Model Y?

I'd need to adjust my projections again.

 

[BornToFly]

I'm becoming so confident about the next 6 months, that I actually tried to use margin (something I never do) to buy more LEAPS today. But, all my shares are still loaned out, so I couldn't do anything. I was actually hoping the SP would go down a little more, so some shorts would cover, I would get my shares back, and I could buy. Oh well, if the SP goes up, at least my current portfolio will look even better.

 

[winfield100]

I get the first 4 and Australia could have some benefits with all that sun and storage needs, but could they just be supplied from India it Asia? Is Australia big enough to support a gigafactory v3.0 by the time it's done? Thinking of the biggest bang for capex buck. Australia is interesting because of all the storage needs and solar as well as cars of course, never really thought of it as an option.

you are thinking way too small. Consider, the US has ~200,000 miles of high tension electric wires, mostly in the eastern 1/2 of the continent.
North America covers 9.5 million sq miles but the US is 3.8 million sq miles
, Europe covers 3.9 million square miles,
Asia covers 17 million sq miles is pretty dark mostly.
India covers barely 1.3 million square miles
Europe is already lit up and wired for electricity, as is a lot of the US, India, Eastern China, Japan smaller bits and pieces of Asia and Australia
They are all pretty well wired tho.
Africa covers 11.7 million sq miles. They need electricity
Did they wire the continent for telephones? they skipped ahead to cell phones. NO incredibly expensive infrastructure, wait till you get a swarm of sattelites for cell phone coverage, you won't even need poles for the signal.
Africa will be the next gigafactories (plural) and will have "bazillions" of micro and nano grids. look at Ta'u in Samoa, Kaua'i in Hawaii, Ocracoke island on the east coast of the US, they work are scalable, can you not see it?
look at a view of the earth at night. Who needs electricity,
Who could use, Solar and batteries and EV's?
Earth at Night

So, my vote is Africa gets a gigafactory, they need it most

 

[doctoxics]

I think this year's gigafactory locations will be:

China
India
East Coast US (maybe West Virginia)
Germany or Norway
Australia

These are my educated guesses. No inside info whatsoever.

Model Y will use battery packs from Reno but no room for the rest of production in Fremont. My guess is Sacramento area since on rail/highway corridor between Fremont/Palo Alto and Reno. The Model Y auto factory will need to be underway soon to start production in late 2019.

 

[MP3Mike]

But, all my shares are still loaned out, so I couldn't do anything.

Why not ask for your shares back, forcing someone to cover.

 

[Reciprocity]

you are thinking way too small. Consider, the US has ~200,000 miles of high tension electric wires, mostly in the eastern 1/2 of the continent.
North America covers 9.5 million sq miles but the US is 3.8 million sq miles
, Europe covers 3.9 million square miles,
Asia covers 17 million sq miles is pretty dark mostly.
India covers barely 1.3 million square miles
Europe is already lit up and wired for electricity, as is a lot of the US, India, Eastern China, Japan smaller bits and pieces of Asia and Australia
They are all pretty well wired tho.
Africa covers 11.7 million sq miles. They need electricity
Did they wire the continent for telephones? they skipped ahead to cell phones. NO incredibly expensive infrastructure, wait till you get a swarm of sattelites for cell phone coverage, you won't even need poles for the signal.
Africa will be the next gigafactories (plural) and will have "bazillions" of micro and nano grids. look at Ta'u in Samoa, Kaua'i in Hawaii, Ocracoke island on the east coast of the US, they work are scalable, can you not see it?
look at a view of the earth at night. Who needs electricity,
Who could use, Solar and batteries and EV's?
Earth at Night

So, my vote is Africa gets a gigafactory, they need it most

Great analysis but Africa is pretty poor and Tesla products are premium. Certainly get your point, but Tesla isn't a charity. Part of the reason it's so dark is because it's so poor. Gigafactories will bring prices down but they would need to come down far enough for Tesla to build those micro grids and charge for electricity at a rate that would be both profitable and cheap enough to afford. Just don't see the bang for the buck.

 

[Snapdragon III]

Model Y will use battery packs from Reno but no room for the rest of production in Fremont. My guess is Sacramento area since on rail/highway corridor between Fremont/Palo Alto and Reno. The Model Y auto factory will need to be underway soon to start production in late 2019.

I like this theory. It seems to be that they would have more to gain by keeping the three US factories close for now so that engineers could easily travel between them, and materials could be moved between them easily. Keeping all the staff in the same time zone seems like it would make communications so much easier too.

 

[FredTMC]

Does having a local factory open the door for some precent of imports? Or does Tesla still need to produce every car they sell there to avoid import taxes?

Excellent questions. Hope so

Maybe while the building the factory out they could send cars partially complete and then add the batteries and powertrain similar to Tilburg
Thus qualifying sooner for waiver of the 25% tariff. It's the right thing for China to do. Tencent would approve.

Nice SP move today AH. $380+ possible this week

 

[22522]

Agreed. What is your estimate of the "a lot" of M3s that will be delivered in 2H17?

You raise, and communicate well, a lot of good points. I am going to take some liberties and reply to your question as if, "What do you think should happen?"

As you may know, I think Elon sets the bar too low, and needs some help with appropriate goal setting.

1. Price elasticity is huge where the Model 3 lands.
2. The reference price for the line is after incentive, or $27,500. In other words the expiration of the incentive has the same effect on demand as a 27% price increase. A 27% price increase is not good for demand in the price elastic part of the market!
3. The number of preorders was great for getting A teams from A suppliers with A price leverage, but has little to do with how many cars you want to deliver with the full incentive. In other words, don't use that backlog number as a finish line. You really want walk-in orders, after the preorders are completely satisfied, to be receive the full incentive. [In mountain bike racing this would be something like a hole shot and gapping people by driving well past the crest of the hill - combined]. The preorder count is a false threshold that you want to blow through.

Your points about model confusion are best addressed immediately. There are about 300 stores worldwide. As soon as the cars show well every store should get 3 to drive demand. So that is 1000.

Rolling starts rock. Any chance you get to create a rolling start, you want to take it. Since this year is uncertain, it makes sense to target the first two quarters of next year for the full incentive. I would try to hit 2018 at a delivery rate of 12,500 a week. So at 25 weeks, that is 312K deliveries for the US market. I would try to satisfy all the other RWD preorders before the start of this window. Let's say ~100,000.

So 118,000 this year is a lot, and in the best interest of Tesla and her customers.

I don't like the 312K 6 month number. It is too small in that demand at the incentivized price will exceed that. The average production rate over those months needs to be 415,000/25 or 16,600 per week.

The biggest problem will be delivery of material to the automated line. Elon talked about poor volumetric efficiency with the existing plant. For robots, it is way better if they don't have to orient a part when they pick it up. Feeding and orienting will eat your lunch if not careful. You want to preserve the orientation from the processes at the feeding factories rather than play 52 card pickup every time something goes in a truck. The key will be getting containers close enough to the robots to apply a "touch it once" policy inside the factory. That maybe says the main floor is for trucking and the robots pull the parts out of the tops of the containers? I don't know.

I don't know if this is possible, but I don't know it isn't. I would try to figure out how to do that. I think there is some loading dock work, as I want the skinless container right by the robot that uses the parts.

 

[BornToFly]

Why not ask for your shares back, forcing someone to cover.

Because it is nice, (essentially) risk free, income. Even with the low interest rate, and only having shares lent out on maybe 1/2 the month, I'm still making $750-$1000 a month. I can make more using margin, but I can also make a bad investment and lose it. I don't know, I'm tempted now that I think the SP will be going up for a while. Loaning shares was nice when the SP was flat for a long time.

 

[Reciprocity]

Excellent questions. Hope so

Maybe while the building the factory out they could send cars partially complete and then add the batteries and powertrain similar to Tilburg
Thus qualifying sooner for waiver of the 25% tariff. It's the right thing for China to do. Tencent would approve.

Nice SP move today AH. $380+ possible this week

Seems like a similar strategy for India based on recent tweets from Elon. Maybe Elon is having India and China compete for GF3, even though he will end up going with both anyway. Elon was clearly annoyed with the role in India that no more then 30% of the parts could come from outside India. And most recently, IIRC Elon wanted to be able to start selling right away in India while the plant was being built.

 

[elasalle]

Excellent questions. Hope so

Maybe while the building the factory out they could send cars partially complete and then add the batteries and powertrain similar to Tilburg
Thus qualifying sooner for waiver of the 25% tariff. It's the right thing for China to do. Tencent would approve.

Nice SP move today AH. $380+ possible this week

Agreed.
I think first goal would be to get the waiver for the 25% tariffs.

This might definitely be a catalyst for a short squeeze.

Feeling lucky to have bought some Jan19/Jan18 500 Calendar spreads today when SP was around 369.

 

[dennis]

You raise, and communicate well, a lot of good points. I am going to take some liberties and reply to your question as if, "What do you think should happen?"

As you may know, I think Elon sets the bar too low, and needs some help with appropriate goal setting.

1. Price elasticity is huge where the Model 3 lands.
2. The reference price for the line is after incentive, or $27,500. In other words the expiration of the incentive has the same effect on demand as a 27% price increase. A 27% price increase is not good for demand in the price elastic part of the market!
3. The number of preorders was great for getting A teams from A suppliers with A price leverage, but has little to do with how many cars you want to deliver with the full incentive. In other words, don't use that backlog number as a finish line. You really want walk-in orders, after the preorders are completely satisfied, to be receive the full incentive. [In mountain bike racing this would be something like a hole shot and gapping people by driving well past the crest of the hill - combined]. The preorder count is a false threshold that you want to blow through.

Your points about model confusion are best addressed immediately. There are about 300 stores worldwide. As soon as the cars show well every store should get 3 to drive demand. So that is 1000.

Rolling starts rock. Any chance you get to create a rolling start, you want to take it. Since this year is uncertain, it makes sense to target the first two quarters of next year for the full incentive. I would try to hit 2018 at a delivery rate of 12,500 a week. So at 25 weeks, that is 312K deliveries for the US market. I would try to satisfy all the other RWD preorders before the start of this window. Let's say ~100,000.

So 118,000 this year is a lot, and in the best interest of Tesla and her customers.

I don't like the 312K 6 month number. It is too small in that demand at the incentivized price will exceed that. The average production rate over those months needs to be 415,000/25 or 16,600 per week.

The biggest problem will be delivery of material to the automated line. Elon talked about poor volumetric efficiency with the existing plant. For robots, it is way better if they don't have to orient a part when they pick it up. Feeding and orienting will eat your lunch if not careful. You want to preserve the orientation from the processes at the feeding factories rather than play 52 card pickup every time something goes in a truck. The key will be getting containers close enough to the robots to apply a "touch it once" policy inside the factory. That maybe says the main floor is for trucking and the robots pull the parts out of the tops of the containers? I don't know.

I don't know if this is possible, but I don't know it isn't. I would try to figure out how to do that. I think there is some loading dock work, as I want the skinless container right by the robot that uses the parts.

All well and good, but the Model 3 production line is designed for 500K/year or may a bit more, not 830K/year. Elon obliquely confirmed limits in that range when he said that to get to 1M cars/year in 2020 they would need the addition of the Model Y. By point of comparison the Model S/X line is limited to 100K-125K/year.

 

[tander]

Seems like a similar strategy for India based on recent tweets from Elon. Maybe Elon is having India and China compete for GF3, even though he will end up going with both anyway. Elon was clearly annoyed with the role in India that no more then 30% of the parts could come from outside India. And most recently, IIRC Elon wanted to be able to start selling right away in India while the plant was being built.

Hadn't even occurred to me they were doing that, I'm still impressed they were able to do it on the state level. Makes me wonder if they'll be doing a factory on Mars in ten or twenty years.

 

[22522]

All well and good, but the Model 3 production line is designed for 500K/year or may a bit more, not 830K/year. Elon obliquely confirmed limits in that range when he said that to get to 1M cars/year in 2020 they would need the addition of the Model Y. By point of comparison the Model S/X line is limited to 100K-125K/year.

Yes, maybe more can be made this year and inventoried if fewer are shipped worldwide?

 

[brian45011]

As you may know, I think Elon sets the bar too low, and needs some help with appropriate goal setting.

1. Price elasticity is huge where the Model 3 lands.
2. The reference price for the line is after incentive, or $27,500. In other words the expiration of the incentive has the same effect on demand as a 27% price increase. A 27% price increase is not good for demand in the price elastic part of the market!
3. The number of preorders was great for getting A teams from A suppliers with A price leverage, but has little to do with how many cars you want to deliver with the full incentive. In other words, don't use that backlog number as a finish line. You really want walk-in orders, after the preorders are completely satisfied, to be receive the full incentive. [In mountain bike racing this would be something like a hole shot and gapping people by driving well past the crest of the hill - combined]. The preorder count is a false threshold that you want to blow through.

Your points about model confusion are best addressed immediately. There are about 300 stores worldwide. As soon as the cars show well every store should get 3 to drive demand. So that is 1000.

Rolling starts rock. Any chance you get to create a rolling start, you want to take it. Since this year is uncertain, it makes sense to target the first two quarters of next year for the full incentive. I would try to hit 2018 at a delivery rate of 12,500 a week. So at 25 weeks, that is 312K deliveries for the US market. I would try to satisfy all the other RWD preorders before the start of this window. Let's say ~100,000.

So 118,000 this year is a lot, and in the best interest of Tesla and her customers.

I don't like the 312K 6 month number. It is too small in that demand at the incentivized price will exceed that. The average production rate over those months needs to be 415,000/25 or 16,600 per week.

The biggest problem will be delivery of material to the automated line. Elon talked about poor volumetric efficiency with the existing plant. For robots, it is way better if they don't have to orient a part when they pick it up. Feeding and orienting will eat your lunch if not careful. You want to preserve the orientation from the processes at the feeding factories rather than play 52 card pickup every time something goes in a truck. The key will be getting containers close enough to the robots to apply a "touch it once" policy inside the factory. That maybe says the main floor is for trucking and the robots pull the parts out of the tops of the containers? I don't know.

I don't know if this is possible, but I don't know it isn't. I would try to figure out how to do that. I think there is some loading dock work, as I want the skinless container right by the robot that uses the parts.

Thanks for sharing your views.

@dennis already responded with the essence, also:: " .. preparations at our production facilities are on track to support the ramp of Model 3 production to 5,000 vehicles per week at some point in 2017, and to 10,000 vehicles per week at some point in 2018."

Ramping from nil to 5,000/week in six months is an ambitious goal, particularly on never-before-deployed production equipment. I suspect Tesla will not have to divert many M3s to foreign markets in order to avoid delivering the 200,000th eligible vehicle to a USA customer in 4Q17.