2017 Investor Roundtable: TSLA Market Action

[techmaven]

After spending some time trying to convince everyone that reasonable expectations are 15-25k of the Model 3, with 40k being outlandish, I'm going to try to see what the most optimistic ramp could possibly be.

1,000/week in July parts, 3,000 produced
2,000/week in Aug parts, 7,000 produced
4,000/week in Sep parts, 14,000 produced
5,000/week in Oct, 18,000 produced
6,000/week in Nov, 22,000 produced
7,000/week Dec, 26,000 produced

The only way I can make > 90k work is that Tesla is sandbagging the entire line. That instead of hitting 5k a week as the target for 2017, it is hitting 10k a week. They don't want to tell us that. So they give us something already outlandish for many people to swallow, which is 5k a week.

 

[surfside]

Not much time to post but I can clear things up - Baird's note just included a reiteration of getting to a 5k run rate (equivalent to 250k per year) by the end of 2017. Classic case of journalists butchering the original content of a note.

surfside

EDIT to add: not sure if it has been already posted about but they also note the company expects to achieve positive gross margin on the model 3 in 4Q2017 and also expects margins to ramp faster than S and X.

 

[techmaven]

Not much time to post but I can clear things up - Baird's note just included a reiteration of getting to a 5k run rate (equivalent to 250k per year) by the end of 2017. Classic case of journalists butchering the original content of a note.

Ah, that makes much more sense. That's actually likely about 230k a year (46 production weeks).

That's still phenomenal. Getting to 230k + 120k run rate at the end of 2017 means 350k is the low bar for 2018.

 

[Mike Smith]

Geez you guys, I just clicked on the link to the article Vgrinshpun got this 250k number from. He's obviously talking about M3 run rate, being that it's in a section specifically about M3.

2. Model 3 is on Track.

Specifically, management noted that it is on track to produce about 250,000 vehicles by the end of 2017, and are expecting positive gross margins on the Model 3 in Q4. Management also highlighted margins could ramp up faster with the Model S or X.

 

[Dagger]

The Model 3 production ramp remains a focus for investors and Tesla indicated it is on track for annual production capacity of ~250k vehicles by YE:17 and positive gross margin in Q4:17. Tesla indicated it is on track for peak production capacity of ~5,000 vehicles/week and annual production capacity of 250k by YE:17

From this article: Tesla, Inc. (TSLA) The Battery Pack At Roughly Half The Cost Of Competitors

Edit: Corrected link.

 

[ValueAnalyst]

If I'm not correct then expect @ValueAnalyst to appear here and announce that Tesla has made him look conservative once again

Tesla has made me look like a clown, once again.

More information from the today's Ben Kallo's note: Superior Manufacturing, Unique Automation Gives Tesla A Competitive Advantage For The Long Term

I am very skeptical on 250K vehicles produced by the end of 2017, but if I am wrong with this sentiment, the SP will go up faster than Falcon Heavy with no payload. I am dumb founded on how they can plan for more than 100K of M3 in 2017. I will be very happy if they can hit 20K

I'm not.

Take "1,000/week parts in July, 2,000/week in August, 4,000/week in September" guidance, then simply continue the rising trend, push out two weeks for assembly, and voila. You don't even have to double it each month throughout 4Q17; just don't be uber-conservative and assume 5,000/week at the end of 2017, when the management guided "at some point in 2017."

So if we simply assume 5,000/week average in 4Q17, then you're looking at close to 100k Model 3's in 2017, and I assumed ~25k in 3Q17 and ~50k in 4Q17.

If you assume continued, but at a lower rate, monthly growth throughout 4Q17, you're looking at more than 100,000 Model 3's in 2017.

These numbers may be revised up (not by much) if the ramp-up goes smoothly and the Final Reveal event brings in droves of new reservations.

 

[FluxCap]

From this article: Tesla, Inc. (TSLA) The Battery Pack At Roughly Half The Cost Of Competitors

I think you mean this article, and I just found it:

Tesla, Inc. (TSLA) The Battery Pack At Roughly Half The Cost Of Competitors

The Model 3 production ramp remains a focus for investors and Tesla indicated it is on track for annual production capacity of ~250k vehicles by YE:17 and positive gross margin in Q4:17. Tesla indicated it is on track for peak production capacity of ~5,000 vehicles/week and annual production capacity of 250k by YE:17.​

Looks like the Benzinga kid did indeed make a glaring mistake.

 

[ValueAnalyst]

So I've been enjoying learning about short-term stuff for fun, even though I'm a long-term investor.

The current pattern is funky. We've had multiple days in a row of very high volume gaps up in premarket followed by drops back down to "yesterday's price" during the day. This is *really* odd.

My best guess is that it's short-sellers getting margin calls in the evening and hastily buying to cover as soon as possible in premarket, with the distribution of traders reverting to "normal" later in the day. I'm sure there are other possibilities but this is such a weird pattern, and that would seem to explain it.

This also happened right before 2013 short squeeze. Check the graph.

 

[racer26]

The mistake i see many of you making is interpreting 5k/wk "sometime in 2017" and 10k/wk "sometime in 2018" to mean at the very end of the respective windows, and then essentially stopping there.

The line has a design capacity around 10k/wk. They're going to continue accelerating the line more or less continuously until they reach that rate. the profile of the ramp will be an S curve. The 5k/wk mark is right around the maximum slope of the curve - there won't be very much time spent at that rate - we will pass from 4k/wk to 6k/wk relatively quickly - faster than the jump from 2k/wk to 4k/wk AND the jump from 6k/wk to 8k/wk.

 

[SBenson]

View attachment 231987

Based on patterns in the table, I was expecting a very strong rally. So I over-leveraged myself substantially. As a rally has not been forming for more than a week now, I gave up hope and closed out the leverage. (maybe the stock will spike up now. lol)

Maybe the table offers some insights as to what's going-on on the dark side but I no longer believe it has any predictive power.

 

[Mike Smith]

Based on patterns in the table, I was expecting a very strong rally. So I over-leveraged myself substantially. As a rally has not been forming for more than a week now, I gave up hope and closed out the leverage. (maybe the stock will spike up now. lol)

Maybe the table offers some insights as to what's going-on on the dark side but I no longer believe it has any predictive power.

SBenson - Perhaps you've already explained this and I've missed it, but is there a reason the historical numbers in your table don't match the numbers provided by Nasdaq? For instance you have May 31 as 29.879M whereas Nasdaq says 30.96M.

Tesla, Inc. (TSLA) Short Interest

 

[SBenson]

SBenson - Perhaps you've already explained this and I've missed it, but is there a reason the historical numbers in your table don't match the numbers provided by Nasdaq? For instance you have May 31 as 29.879M whereas Nasdaq says 30.96M.

Tesla, Inc. (TSLA) Short Interest

These are estimates provided by an agency. They estimate it based on the information they collect from brokerages and institutions. The data doesn't match spot on but trends generally match. Also, the agency's data is based on trades but exchange information is based on settlement.

 

[dc_h]

I "proclaimed" about 6 months ago here that oil's natural resting place for a while is between $40 and $45... based on shale efficiency improvements. it might just dangle around here for a while and slow creep down.

I think you are on target. I had been seeing 52-48 being a basic holding pattern, now we are in a new lower price channel.

All could change on an event, but barring an exogenous event, like Venezuela shutting down due to bankruptcy or revolt, I don't see how it gets above 45. If we stay here for 6 months and the supply demand doesn't respond to pricing, I would expect $35 by January 2018.
Oil supply and demand has been less price elastic on the downside than most expected. In the past demand would have grown more quickly with pricing down and supply would contract.

 

[MitchJi]

These numbers may be revised up (not by much) if the ramp-up goes smoothly and the Final Reveal event brings in droves of new reservations

You seem to be misunderstanding the concept of production constrained.

 

[Dagger]

These numbers may be revised up (not by much) if the ramp-up goes smoothly and the Final Reveal event brings in droves of new reservations.

You seem to be misunderstanding the concept of production constrained.

The more reservations there is the longer wait time at current ramp of production. The longer people have to wait, the less will put in a reservation. This could cause them increase production faster to keep up with the demand. After all, don't want to lose possible customers.

I mean, if after the reveal, model 3 get raving reviews, and reservations keep ticking in, turning into 2 million reservations in 6 months...I think Tesla would have to consider increasing the ramp even faster.

 

[ValueAnalyst]

You seem to be misunderstanding the concept of production constrained.

Depending on how much demand exceeds supply, Tesla can increase supply (albeit at a higher cost than otherwise), as they have done in the past with 2020 to 2018 shift for 500k/year goal. It's not like Tesla couldn't produce 500k/year until 2020. They can, and I expect them to, revise 2020 production level up again, whether through more/faster lines or by building additional Gigafactories faster etc.

 

[ValueAnalyst]

The more reservations there is the longer wait time at current ramp of production. The longer people have to wait, the less will put in a reservation. This could cause them increase production faster to keep up with the demand. After all, don't want to lose possible customers.

I mean, if after the reveal, model 3 get raving reviews, and reservations keep ticking in, turning into 2 million reservations in 6 months...I think Tesla would have to consider increasing the ramp even faster.

Exactly. As the waiting list grows, the opportunity cost of not ramping production up faster also grows, incrementally pushing it above the higher cost of quicker ramp-up in the next three years.

 

[Krugerrand]

The more reservations there is the longer wait time at current ramp of production. The longer people have to wait, the less will put in a reservation. This could cause them increase production faster to keep up with the demand. After all, don't want to lose possible customers.

No. Tesla will go as fast as they can because that's what they've always done. They will produce Model 3's as fast as they can for as long as they have to until it becomes apparent what the 'consistent' level and rate of demand is for the Model 3.

 

[MitchJi]

No. Tesla will go as fast as they can because that's what they've always done. They will produce Model 3's as fast as they can for as long as they have to until it becomes apparent what the 'consistent' level and rate of demand is for the Model 3.

Exactly.

It's called production constrained.

 

[Irishjugg]

More information from the today's Ben Kallo's note: Superior Manufacturing, Unique Automation Gives Tesla A Competitive Advantage For The Long Term







I am very skeptical on 250K vehicles produced by the end of 2017, but if I am wrong with this sentiment, the SP will go up faster than Falcon Heavy with no payload. I am dumb founded on how they can plan for more than 100K of M3 in 2017. I will be very happy if they can hit 20K

I think this means 250k cumulative vehicles?

How many are we at currently, 150k or so right? So this would imply about 20k model 3? I agree, 170k of them this year is really unlikely (assuming 80k S and X this year).