2017 Investor Roundtable: TSLA Market Action

[Krugerrand]

Disclaimer: I do not know if this is the cause at all, but merely my experience of working on high profile projects...

In my experience on high profile projects, it seems that management can seem to think of the employees as fixed assets that will stay there no matter the level of pressure or hours required. If the project is critical, you need to ensure that the project members get the resources, support, and positive encouragement they need to be successful. If you take them for granted, they may depart at a most inopportune time. I've seen it on projects I've been on, and witnessed it happen to other projects as well.

My speculation is that these people are in high demand, and Tesla is a very demanding company when it comes to their employees. They may need to adopt a more friendly attitude similar to what Apple does, if you've ever talked to anyone who has worked at their campus. That said, I think working for Tesla is a dream job for many, myself included.

Or, Tesla wasn't happy with the progress they did or did not make. Just look around the forum and you'll see several people complaining/unhappy with AP or some other 'computer' issue and how it's been progressing. The departure of these people might in fact be a good thing. It's no secret that working for Tesla/Elon isn't a walk in the park, that's been known for years. If you can't stand the heat, don't walk into the kitchen dressed in a parka thinking you can deal. And it's always 'the end of the world' when some high profile person leaves Tesla. Been watching this happen for the last 5 years+. So far every single person was replaceable and Tesla didn't implode. I yawn at the drama being stirred up whenever somebody leaves Tesla. There are only two people leaving that would truly concern me. I'll give you one guess who they are.

 

[JRP3]

Speaking of early employee cars, will Tesla offer employee discount on the M3? Do they have a history of offering such discount on MS/X? If yes, how would that impact Q3/Q4 margins?

According to Elon no one gets discounts.

 

[Krugerrand]

I'm not very familiar with the early days of MS, could you elaborate why Tesla didn't configure every MS as a top of line model if there was enough demand for them to do so?

They only expected to sell 20,000/yr - if the car was hit. That was their highest, most optimistic estimate. Therefore with such a small production run, they'd need to cater to the customer via offering more options. Plus, you can offer more configurations when you're doing small production runs.

The first people (of which many needed to be convinced to order the car - all the execs at Tesla were personally calling customers) were the most keen, early adopters and ordered optioned out cars - many of these people were quite familiar with the Roadster and what went down with that car. Then once the car got out there and quite suddenly it was serious hit, things changed and Tesla had to simplify their option packages to be able to do bigger batches to meet the demand for the car. So Tesla looked at the ordering information, kept the most popular options and dropped the less popular ones to speed up production and improving batching abilities.

 

[T3slaTulips]

ATH + ATH close

The combo gives confidence, and would confirm even more the upward trend.

Goal 1 of 2 complete.

 

[Starno]

ATH

 

[FredTMC]

So this morning, we have another third-rate "journalist" at one of the "little B" clickbait factories (Benziga, Buzzfeed, Business Insider) making several glaring errors in her article in an attempt to manufacture controversy:

Elon Musk was the reason one of Apple's most famous developers left Tesla after only 6 months



Jim Keller was hired in January 2016, 18 months ago. He is an extremely capable microprocessor hardware and software engineer, and I imagine he has been a steady hand at Tesla since his hire. Chris Lattner was hired 6 months ago, did some good work establishing development processes that were probably helpful, but didn't mesh with Elon, like many execs before him. It's no secret that Elon is a super-demanding boss, and if he wasn't we wouldn't be here talking about Tesla's successes today. But few people go to work for Tesla to have a nice, comfy work-life balance with a fat paycheck and infinite time to produce deliverables. If that's what you need, you need to work elsewhere, and that's totally fine, no hard feelings.

Hardware and software at the cutting edge of consumer use are constantly changing and iterating, and those changes and iterations mean that developers rotate in and out of companies and projects much more rapidly than in slow, plodding companies like legacy automakers. This just does not compute for most of the analyst community covering Tesla, with a few notable exceptions like Ben "baritone" Kallo and Adam "I make up business models for Elon!" Jonas. And it clearly doesn't compute for wannabe journalistic hacks at the "little b" clickbait farms. The bots pick this stuff up and run with it, and so we human fund managers are forced to pay attention to these idiots, but it sure is tiring.

Regardless, I don't think this is very market-moving. Just had to chime in.

/endrant

Great post. Totally agree...

Also, Building an 'industry leading' Autonomous driving feature into Tesla's cars isn't easy. It requires extreme expertise and Mgmt skills of the team

This being said, Tesla WILL master AP into their cars before ANYONE else and none of this AP stuff is critical path to tesla delivering Model3.

Right now advanced 'level 5' autonomous driving for tesla's is just a development project.

 

[austinEV]

ATH

Before you accuse us of not caring anymore, YAY!

 

[D-egg-O]

Speaking of early employee cars, will Tesla offer employee discount on the M3? Do they have a history of offering such discount on MS/X? If yes, how would that impact Q3/Q4 margins?

The only discount I would expect is an employee lease program with no money down and good monthly payment. This is typical of other auto OEMs, but as we all know, Tesla is anything but typical.

 

[ValueAnalyst]

This being said, Tesla WILL master AP into their cars before ANYONE else

Can you please expand on this? Your wording shows extreme confidence.

 

[WarpedOne]

ATH!

-- Is this poetry?

 

[jeewee3000]

Can you please expand on this? Your wording shows extreme confidence.

+1.

I am very bullish regarding TSLA, but one of the aspects I am least certain about is their ability to win the autonomy race. Yes, I have faith in Elon, but Elon is not the only smart guy out there, and there are companies out there that are just as far along in the race. (Waymo is the obvious reference here).

I just hope it's not like Top Gun: "Remember boys, no points for second place."

 

[ValueAnalyst]

+1.

I am very bullish regarding TSLA, but one of the aspects I am least certain about is their ability to win the autonomy race. Yes, I have faith in Elon, but Elon is not the only smart guy out there, and there are companies out there that are just as far along in the race. (Waymo is the obvious reference here).

I just hope it's not like Top Gun: "Remember boys, no points for second place."

I don't think full autonomy will be a sustainable competitive advantage for any company.

I do think that Tesla is ahead of anyone else, but I do not have the same confidence in this as the OP.

So I'm just wondering what is driving his extreme confidence level.

 

[Starno]

Can you please expand on this? Your wording shows extreme confidence.

There are no competitors today, that are where Tesla was in October of 2014 (31 months ago).

Mercedes has a sort of driver assist. But it’s really only good for some minor corrections of a fatigued driver, or for picking up your sunglasses off the floor the last time the brake assist misfired and threw everything forward.

Truly, there’s nothing that performs the way the Tesla Autopilot Version 1 performs. And there are no other purchasable cars that are even years away from being what the Tesla Autopilot Version 2 is today.

One of the main hurdles that 20th century car makers have to overcome is something called “fleet-learning”. Tesla requires all AP users to understand and agree that the data the cars collect, will be uploaded to Tesla without owner information, compiled as a fleet, and that data will be used to improve the systems for all drivers. Updates using fleet data is then pushed back to the cars in periodic software updates.

The legacy and history of 20th century car makers, makes that kind of effort nearly impossible in my opinion. Mercedes drivers would bristle at the thought of their cars uploading data to the mother ship. Tesla owners, by their early-adopter-nature, seem to be largely undeterred. Me personally, for instance, I could not care less that my car uploads my driving data including radar images, camera images, acceleration, deceleration, route, road markings, ultrasonic data etc.

No other car company has that data. No other car company is anywhere near beginning to capture that data. And that data is part of a workable AutoPilot system.

It’s a big problem for 20th century car makers. They are not, today, where Tesla was 31 months ago. In the world of Tech, 31 months is a lifetime or more. It’s going to be an interesting thing, this transition to tech-based companies building cars, rather than car based companies trying to use tech.

 

[DurandalAI]

Tesla WILL win. Because autonomous is intimately linked to AI which is based on datas. Tesla has the largest AP fleet of cars, so they collect the most data. No other competitors has that.

I'm having this argument with some guy on Electrek, where the guy is arguing that BMW has a "gigantic fleet" of vehicles collecting data. A few dozen? I agree that having the larger data sets, if used correctly, will provide Tesla with a lead, but I think in a couple of years the other companies will have data sets that approach the same size as they start collecting more through coalitions with automakers.

One thing I must force myself to keep in mind, is even if Tesla is collecting a lot of data, the questions are:
Are they collecting the right data?
Are they making full use of that data?

I would hope the answer to both of those questions is yes, but we have no way of being certain.

 

[FredTMC]

Can you please expand on this? Your wording shows extreme confidence.

It's my BELIEF

And let's face it, they have the best 'super cruise' currently deployed and it's in a bigger fleet than anyone else (spatial mapping and big data). Hardware on cars being delivered today is all in place, so it's only a matter of software and time

 

[Starno]

I'm having this argument with some guy on Electrek, where the guy is arguing that BMW has a "gigantic fleet" of vehicles collecting data. A few dozen? I agree that having the larger data sets, if used correctly, will provide Tesla with a lead, but I think in a couple of years the other companies will have data sets that approach the same size as they start collecting more through coalitions with automakers.

One thing I must force myself to keep in mind, is even if Tesla is collecting a lot of data, the questions are:
Are they collecting the right data?
Are they making full use of that data?

I would hope the answer to both of those questions is yes, but we have no way of being certain.

Yes but in a couple of years it will be too late.

 

[austinEV]

I'm having this argument with some guy on Electrek, where the guy is arguing that BMW has a "gigantic fleet" of vehicles collecting data. A few dozen? I agree that having the larger data sets, if used correctly, will provide Tesla with a lead, but I think in a couple of years the other companies will have data sets that approach the same size as they start collecting more through coalitions with automakers.

One thing I must force myself to keep in mind, is even if Tesla is collecting a lot of data, the questions are:
Are they collecting the right data?
Are they making full use of that data?

I would hope the answer to both of those questions is yes, but we have no way of being certain.

Yeah I am skeptical that Tesla has autonomy magic. I am sure their CEO is putting the most pressure on them however, and that counts for something. Tesla doesn't really need to necessarily be the tops forever. Its not really a critical thing. There ARE points for second place. If BMW gets to 99.99 while Tesla is only 99.9 and then Tesla gets their a year later, that is not an existential crisis, IMO.

I also wonder about the "fleet learning data" that is such a religion around here. I certainly hope and pray they have some great tech that allows ghost data to form autonomy... it's theoretically possible. It just sounds like a seriously hard problem.

 

[D-egg-O]

Hardware on cars being delivered today is all in place, so it's only a matter of software and time

This is KEY. Everyone else working on autonomous driving technology is so focused on the software right now. And the hardware options are ugly/terribly integrated. Once these other companies solve the software problem, they then have to validate it on new hardware nicely integrated into the cars. No one else has this, and it's not a "check box" activity.

 

[Reciprocity]

I don't think full autonomy will be a sustainable competitive advantage for any company.

I do think that Tesla is ahead of anyone else, but I do not have the same confidence in this as the OP.

So I'm just wondering what is driving his extreme confidence level.

Tesla advantage will not just be Autonomy but Autonomy + EV + Charging Network/Solar. No company can match that combo for a very long time. ICE Autonomy is like tits on a bull, pointless. The cost per mile will just be to high when compared to EV + Solar powered charging. The more miles you drive the more costly the ICE vehicles will be, unless they invent one that doesn't require so much maintenance. Here is a simple example, if you have a Telsa model 3 with a new Jeff Dahn battery, you can go 600,000 miles in 10 years. If you tried to do that in an ice vehicle you would pay as much for maintenance as the entire cost for the car and at the end, the car would be in shambles. The model 3 could still go 400,000 more miles as a 3rd world or emerging markets taxi cab.

Even if fuel costs come down, which they wont come down enough to make a difference no matter how much supply there because the are some inherent costs and waste that goes into making gas and as demand wanes, the overhead related to making gas will go up, even if they are making gas with Wind and Solar. For example, what happens when Tesla semis dominate the market where diesel engines used to dominate? When you make gas, diesel is a by product and thus brings the cost for gas down. The glut of diesel could be so great that it will just be disposed because it will be to expensive to transport. This could easily happen in the next 5-10 years. How much does it cost to transport electrons from your roof to your fridge and how much does it cost to transport Gas to your gas station vs from your solar system or a solar based supercharger to your car. Even today, the cost on my electric bill is dominated by transportation of the electrons to my house, its easily 60% of the total bill.

As big as Autonomy will be for EVs, I think EVs will dot he same thing to solar. Once you shift $400-500 in gas and maintenance fees to $150-250 in electricity, solar becomes almost insane not to do. This is why the solar roof is revolutionary and not just evolutionary, because are some places you just wont put panels and now half of those issues melt away. One use case I keep thinking about is my old Condo complex in Orange Count, CA. There is no way they would put solar on those roofs, but they would put solar tiles. And you might think, but no way the association would approve that, but in reality its the associate that is made up by owners that would push for something like that when their electric bills skyrocket because of the EV they need to charge or if they are supply chargers in the shared parking lots and those get more and more expensive to provide without solar. Either way, it becomes a simple math problem where the results are simple. Model 3 and Model Y will force some of these decisions when they start to dominate the market or even when other manufactures start to gain some traction, though way behind Tesla. Are you going to be able to buy Bolt Solar and Battery storage? Nissan Solar and Battery Storage? Maybe the later if you want old batteries.

Big picture: EV + Autonomy will push people away from ICE in a big way and will also push them towards Solar in an almost bigger way.

The only issue that I see with solar is the incentives are very good today, but those will be dialed back in next 4-5 years. The efficiency and or/value of the cells must become 30% better in that time. I dont see that as impossible by any means, but the math needs to work. In some places, it wont matter because the dynamic is so good for solar, but in places like Chicago where I live, you need a lot more panels to get the same bang for your buck. A carbon tax would also do the job. It would be great if they replaced every energy incentive with an revenue neutral carbon tax. By placing the tax on the thing you want to discourage, you would be shocked how quickly businesses and people react and by making it revenue neutral the friction and negative impacts should be very low.

 

[Waiting4M3]

They only expected to sell 20,000/yr - if the car was hit. That was their highest, most optimistic estimate. Therefore with such a small production run, they'd need to cater to the customer via offering more options. Plus, you can offer more configurations when you're doing small production runs.

The first people (of which many needed to be convinced to order the car - all the execs at Tesla were personally calling customers) were the most keen, early adopters and ordered optioned out cars - many of these people were quite familiar with the Roadster and what went down with that car. Then once the car got out there and quite suddenly it was serious hit, things changed and Tesla had to simplify their option packages to be able to do bigger batches to meet the demand for the car. So Tesla looked at the ordering information, kept the most popular options and dropped the less popular ones to speed up production and improving batching abilities.

I think the M3 launch is closer to the 2nd phase of MS launch where they expand the sales to past just the insiders and early adopters, and they need to slim down the options to speed up production ramp. What is not clear to me is whether they will produce just one pack size or do 2, and if they do just 1 pack size, whether it will be the large or smaller one. My guess they will do the large pack size 1st, and sell it as a large pack size, but opinion seems to vary a lot on this. I'm looking for evidence from early MS days for any sign that Tesla would go with the small pack 1st, or do a large pack but software limit it and sell it as a base model, so far I haven't seen any past evidence that Tesla would do this.