2017 Investor Roundtable: TSLA Market Action

[Richgoogol]

Volume is very low today..

 

[ValueAnalyst]

We will see, I hope so. But to me it's kind of a chicken and the egg issue. Take a look at GF 1 today. It's 30% complete after 3 years. At this rate it will be 3 years before it's finished at which time it could produce enough batteries for 1M cars. If you start 3 more today, they will be able to produce 500,000 cars with each in maybe 5 years? You needed 10B over the next couple of years to build 3 not 10 GFs but won't have access to cash from only 500,000 cars a year for 18 months. I agree that would be very helpful and 500,000 cars per your would bet you roughly 6B a year in gross revenue, but you won't be able to funnel all that info expansion. The problem is not one GF at a time, it's multiple simultaneously which would be very challenging. The next GFs won't be cheaper because they will make cars and batteries and maybe solar. The main issue is that they need to break ground yesterday on the next 2-3 to keep up with demand. I worry a lot about demand crushing supply and causing branding issues. They need to be aggressive and that will cost money. Maybe they can Barrow but not before the time next year as backs will want proof of the 3 that goes well buying reservations. Can Tesla service then, can Tesla keep up with super charger expansion can Tesla maintain the value so leases aren't an issue. Do they need a lot of Warrenty repairs. Lots of questions that bank's will have that you can't answer for 12 months or more. Tesla needs to be more aggressive then that.

You say you worry a lot about demand crushing supply. Can you give me one example where that has happened in history?

 

[RobStark]

I'm not sure if the money has been approved. But as far as I know, the battery factory is alive and kicking. For instance:

Google Translate


It's a first step. They'll take further steps to remain relevant once they start to feel the Tesla squeeze.

I tend to agree that the Chinese won't be able to produce a lot of batteries for export, but it still adds to the global total.

VW has "plans" "on the agenda".

It sounds like the press releases promising specific BEVs the last five years. Nothing concrete.

Daimler facility does not add capacity to the global total.

The Chinese does add to the global total. A lot going to e-bikes,scooters, low speed neighborhood vehicles and the like. I don't see this impacting the global automakers in any significant way.

 

[roguenode]

I've been thinking of adding to my shares. Get in at this $369 level or wait until after Q1 results?

 

[kbM3]

He is here to try out his latest FUD to see what response it gets from people who actually know what is going on with Tesla. Then he can adapt it for promoting his agenda among people who have no clue. If people would stop responding to his ridiculous trolls then they would lose the only reason they have to be here.

Is that really the best strategy? I worry that if we were to do that, newer forum readers might start to take the troll's information as gospel.

 

[winfield100]

**Public service announcement**
Those who did not make it on mmd's ignore list and feel humiliated, cheated and unfulfilled, PM me for a group therapy session.

mmd ignore list???? whazzat? does mmd have an SA handle please? who 'zis mmd??

 

[kbM3]

Ok. Thanks for breaking down your view, and here are my responses:

• Please walk me through how you calculated "8 million cumulative AP2 cars" given that Tesla will have built 6 Gigafactories by 2021, and will likely continue to announce more locations in 2018 and beyond, and build up to 20 Gigafactories "as fast as [they] can" (which I deemed possible by 2025).
• Please elaborate on 10% owner participation, given that participating in Tesla Network will pay for most, if not all, of the car payment, if not more. Why do you think 90% of Tesla Model 3/Y owners will turn down tens of thousands of dollars every year.
• Please elaborate on how you estimated only 5 hours per day given that cars sit idle for 95% of the time.
• Please explain why 200 days vs. 365 days?
• Please explain why you estimated Tesla's gross margin on an app to be only 45%, when Apple Store is estimated to command 90% gross margin.

My assumption of 20 million cars on Tesla Network by 2025 does not necessitate a global fight against regulation. Just California and New York implementing the necessary laws would be enough. This will happen in 2018, let alone by 2025.



The financial benefit of joining the Tesla Network will be far above the total cost of any of the items you listed. I estimate the financial benefit to the owner to be more than $20,000 per year. That should pay for car wash...



UBER does 100+ million rides per day at an average cost of $10 per ride. My assumption of $2 per ride incorporates the increased availability of mobility-as-a-service, but it will be decades before the market is "entirely saturated." The world will need several hundred million autonomous cars.



Sorry - but "conservative" is an underestimation. By 2025, it is likely that Tesla will have more than 10 Gigafactories, so you're assuming less than 200,000 annual production per Gigafactory, when Tesla has already guided "more than 1 million" for Gigafactory 1.

Can you explain the need for several hundred million autonomous cars.
It seems like each autonomous tesla will obviate the need for at least five other cars. Will the additional miles driven in the future offset this?

 

[Yggdrasill]

Can you please explain why you assume 2 rides max per person per day? Why would anyone take public transportation or even walk more than a few minutes if personal point a to point b rides cost $2? How many times have you been in and out of your car today? Now imagine if someone was driving you for free.

Once. I dropped the Model X off at the paint protection place (and then they had a shuttle back into town). Most days I don't use my car, I walk to and from work. And we do grocery shopping maybe twice a week.

My wife doesn't have a drivers license, so she takes some public transportation (and I drive her places fairly often), but if self-driving becomes a reality, she wouldn't be using the Tesla Network, she'd be using our Model X. I expect to continue owning a car for the overseeable future, and it won't be added to the Tesla Network. Maybe it will become a pure luxury, but it is a luxury most people can afford, and will continue to desire.

I think most trips will still be performed with personal cars, even 50 years from now. And ride services will only fill part of the transportation needs. A lot of the rest will be filled by subway/bus/train/airplane/hyperloop.

At 4 rides a day, all of a sudden 600 million rides service 150 million people, which is reasonable by 2025, considering billions of people live in major cities.

I think 4 rides per day way too high. If a mere 50% of the population only use the Tesla Network occasionally or never, that means the rest of the population would need to do 8 rides per day.

 

[madodel]

Is that really the best strategy? I worry that if we were to do that, newer forum readers might start to take the troll's information as gospel.

Yes. No one should be guiding off of what some anonymous person says on a forum. That is what high paid yet clueless financial analysts and financial journalists are for.

Can we please discuss why TSLA is down another $9 a share so far today and not why we should or should not feed the trolls.

Or do we just accept that the market in general is down so Tesla suffers? I see a fair amount of trash articles saying Europe has decreed AP as unsafe. Is that adding to the buying opportunity?

 

[Jayjs20]

Maybe a little of both. The market is down more than it was yesterday and every major tech stock is also down.

 

[kbM3]

I see you even lie about your ignore list. In the same post where you list @kbM3 in that list you quote one of his posts.

Maybe I just got ignored when I pointed out how sad his/her life must be.

 

[kbM3]

I agree there will be more vertical integration. The next vehicle-Gigafactories may not be any smaller physically than the Gigafactory One, but they will include both battery and car production, thus total output of finished vehicles will be lower than the Gigafactory One plus Fremont. (Note that the Gigafactory One and the Fremont factory are the largest and third largest buildings in the world by footprint.)

It's not about capital. You reach a point where throwing more money at a challenge only drops the capital efficiency and you don't get any closer to defeating the challenge. Building six of the largest factories in the world at the same time is plenty. They shouldn't start building ten more until the first few factories are running smoothly. And Tesla is unlikely to reach that point before 2025. Biting off more than one can chew is a good way to choke.

VAG is bilding a battery factory. Daimler too. LG Chem is also building more factories, as well as the Chinese.

I don't think any of them will rival Tesla any time soon on the BEV side, but combined, I think they will add quite meaningful amounts of BEVs to the market, well before 2025. If there are 10 million BEVs produced in 2025, and Tesla produces 2 million of those, I think Musk can get out his "mission accomplished"-banner on his aircraft carrier (repurposed to Space-X landing site for the BFR, of course.)

Sorry, I see I made a calculation error, 600 million rides turned into 1.2 billion. Still, what average of rides per person per day do you think is reasonable for a mixed urban/rural population? I'm thinking something like 1 ride per person per day, max 2. That means 600 mill rides would serve a population of 300-600 million people. Basically the entire US and most of Europe. That's quite a market share to achieve in 8 years, considering the challenges. For one thing, hundreds of thousands of cab drivers will be fighting against obsolescence, and one can assume regulators won't be wholly unsympathetic to their predicament. And the Tesla Network is still only a theoretical application of the yet-to-be-developed technology of full self driving.

The battery isn't anywhere near the top of my list of concerns. Seats is probably highest on my list.

Rating customers is problematic when there isn't a driver. You get the car back after ten rides, with a cup of coffee spilled across the the back seat and the trunk full of garbage - how do you determine who did what damage? Maybe the customers could report that the car was dirty, but if there were three rides before that, how do you determine who did the damage? Maybe the guy before the ride that reported that the car was dirty sat in the front seat and didn't use the trunk, so he didn't notice the issues.

In my view, the only way to avoid damage is camera surveillance of the interior, but this is not something the S/X are supplied with today, and there are no indications the 3 will have it. This is in itself also a regulatory challenge in many markets.

I agree the future looks bright. But I also think we should try to avoid TMC becoming an echo chamber.

I agree with you about how difficult it is to expand quickly and such a capital intensive business. The thing that really gets me excited about Tesla though, is how they are looking at future factories as products. The alien dreadnaughts. Even Elon himself has said in the long run that will be their biggest advantage over the traditional manufacturers.

 

[FredTMC]

Can you please explain why you assume 2 rides max per person per day? Why would anyone take public transportation or even walk more than a few minutes if personal point a to point b rides cost $2? How many times have you been in and out of your car today? Now imagine if someone was driving you for free.

At 4 rides a day, all of a sudden 600 million rides service 150 million people, which is reasonable by 2025, considering billions of people live in major cities.

On the issue of a customer damaging the car during a ride on he tesla network,
The owner simply needs a camera.

 

[Jayjs20]

Sucks, but I just sold half my shares at 367, so I'm down to around 140%. Can't sell the rest for tax reasons. At least I made some profit off of those sold.

Edit: And up we go. This brings back memories.

 

[FredTMC]

It's funny to me how little value is placed on TSLA due to Spacex's wild success

Spacex is crushing the competition even before reused boosters are factored in.

Spacex is quickly becoming stunningly successful and dramatically bolstering Elon's net worth. Last I saw, it's $17B. It's clear to me he's gonna be the richest guy on the planet.

TSLA has Spacex and Elon as a backstop against any funding concerns

 

[jhm]

My calculation involves cumulative number of cars Tesla will produce by 2025. You're talking about new production each year. Your number is actually (slightly) more optimistic than mine!

You had mentioned "growing 10-20+ million cars per year." That is what I was challenging.

Please explain to me how Tesla will only command 30% market share when Tesla is planning "8-12 Gigafactories, maybe 20" when no other company has announced plans for their first one yet. In fact, if you do the GWh calculation and add everyone else up, it's more likely that Tesla's market share of new EV cars throughout the next several years will be more than 70%, but nevertheless, my formula assumes less than 20% new car market share by 2025.

My basic view is that China will take a third and Tesla a third. That leaves another third to be contested by the rest of the world.

I certainly believe that battery supply is where the race is. But I think China can blow this out pretty fast if the Chinese government pushes it. Tesla will still be able to hold their own.

At any rate, I do appreciate your effort to work through a DCF. It can expose all sorts of issues. And it is certainly true that something like Network at least gives Tesla options that can help mitigate other contingencies. For example, I'm not too worried if Powerpack sales do not take off soon, so long as Model 3 sales do. I think TA is a better use of battery production capacity than TE. So it is fine for TA growth to dominate. If the growth of TA were to slow with respect to GF capacity, then TE could quickly offload the surplus capacity. Musk is highly adaptive and opportunistic, so having lots of options in the works allows Tesla to seize the best opportunities as they arise. I'm not sure how one accounts for such contingencies in a DCF, but total revenue is probably more robust than any particular product line.

 

[Richgoogol]

I thought I set a limit order this morning @ 368.1 and I kept on checking while it was @ 366, thinking to myself why my order did not get executed. I double checked just now, it was set @ 268.1 instead....bought more @ 366.7 just now

 

[Jayjs20]

And back in at 366.45

Should have waited a few more minutes.

 

[dhrivnak]

I just left the Charlotte store and they are moving cars. 18 months ago they had one Model s. Today they had over 210 to be sold or waiting on delivery. From their view it should be a strong quarter finish

 

[elasalle]

Added a few more to the pot.

Quarterly numbers (likely by this Sun as in past 2)
Model 3 release candidate press release, production kick off
Sept Semi
bonus TE news