2017 Investor Roundtable: TSLA Market Action

[Starno]

" The stock market is always boring the summer " they said...

 

[Ugliest1]

Deep pockets are great and all, but there is a major issue if you dont know what to spend it on. The competition flat out does not have the technology and have not been doing any real serious work on it. LG and Samsung are not breaking ground an $5B battery factories for cars either, so they wont be bailed out by them on the Cells. Germany just announced a massive 35GWh factory for batteries for storage first then auto later, it breaks ground just before 2020 and will not be at full capacity until 2028. No matter how much money you have, you cannot buy time and somethings just take time. It takes 6 years to develop a completely new car from nothing, even for the big guys. And no amount of money can speed that up because you just dont have the people, and things like testing takes time as a major component of the test. You can only speed things up so much with massive amounts of money, ask Tesla. They decided to accelerate things a year ago and its cost billions, but Tesla has already bit the bullet and they are coming out the other side of that already. The other manufactures have not started. And they are not even close to starting based on this recent announcement out of Germany. To put this into context, they will start in late 2019 (really 2020) and get to where Gigafactory1 will be in 2018 by 2028.. that is 10 years behind. In that 10 years, Tesla will have 3-5 more combined battery+auto factories strategically throughout the world. I agree that competition is coming, but they are going to be fighting for the low margin scraps as Tesla will dominate the market from the top down. I dont believe Tesla will ever make a $20k car, though in 10 years, maybe VW will make one with 5% GM.

And I would say the biggest problem for those companies is their board and/or shareholder wishes/attitude to not spend all their profits on the $billions it will take in R&D and investment towards BEVs. Even if there's an insightful leader within, they just can't get the approval to start turning the ship.

 

[supratachophobia]

I truly do not understand the "competition is/will catch up!" argument.

It's an accepted fact that Tesla is well ahead of everyone on electric cars and massive battery production, obviously a gating item. Years ahead, at least 5-10. No one (intelligent) disputes this.

It is also an accepted fact that Tesla moves faster and iterates faster than every other automaker. In fact, they are mocked for this approach to building cars by the likes of GM.

If 1 and 2 are true, exactly how in the hell is anyone going to catch Tesla? Until such time as another company comes out moving significantly faster than Tesla - and Tesla doesn't respond by pushing even harder - it can't happen. Even if it did, it would take 10-15 years to catch up because Tesla isn't standing still. If a car is travelling 100 MPH and is 1000 miles ahead of the competition, even if a new car starts chasing at 110MPH, it's going to take a looooong time to overtake the leader. In the meantime, Tesla's giant lead grows bigger every day because they continue to outpace and outwork everyone. Tesla is going 100MPH on electric cars and everyone else is either going 10MPH, fixing a broken axle in the pit crew or left the race to go on a date with fuel cells.

These things are measured in time, not money. Even the most well-funded effort from, say, Apple, would be way behind. A charging network cannot appear quickly. GGFs cannot appear overnight. Massive car factories, tooling, car design, brand cultivation, engineering and software aren't going to arise in a snap, even if the player throws $100 billion at the effort.

I'll say this again because I think it's important. Just as Search is the moat around the Google castle, so is the Supercharger network around the Tesla castle.

A competitor can not truly compete with Tesla if their product is limited to 1 adjacent major city and then a night's stay until they can return home. And yes, I know there is SAE (limited US adoption), and there is Chademo (reasonable adoption, but 60kwh charge limits at the moment for most). Despite most drivers not needing long distance travel, there is still the needed perception that "I could long-distance travel if I wanted to".

Plus, the Supercharger network makes it really easy and convenient (and it's only getting better), to take trips. No other electric car can claim that, and without a rival network or the ability to utilize Tesla's, they never will.

 

[X Fan]

Deep pockets are great and all, but there is a major issue if you dont know what to spend it on. The competition flat out does not have the technology and have not been doing any real serious work on it. LG and Samsung are not breaking ground an $5B battery factories for cars either, so they wont be bailed out by them on the Cells. Germany just announced a massive 35GWh factory for batteries for storage first then auto later, it breaks ground just before 2020 and will not be at full capacity until 2028. No matter how much money you have, you cannot buy time and somethings just take time. It takes 6 years to develop a completely new car from nothing, even for the big guys. And no amount of money can speed that up because you just dont have the people, and things like testing takes time as a major component of the test. You can only speed things up so much with massive amounts of money, ask Tesla. They decided to accelerate things a year ago and its cost billions, but Tesla has already bit the bullet and they are coming out the other side of that already. The other manufactures have not started. And they are not even close to starting based on this recent announcement out of Germany. To put this into context, they will start in late 2019 (really 2020) and get to where Gigafactory1 will be in 2018 by 2028.. that is 10 years behind. In that 10 years, Tesla will have 3-5 more combined battery+auto factories strategically throughout the world. I agree that competition is coming, but they are going to be fighting for the low margin scraps as Tesla will dominate the market from the top down. I dont believe Tesla will ever make a $20k car, though in 10 years, maybe VW will make one with 5% GM.

+1
Question is how much of German auto industry will be left? Also, under your scenario, I would expect only one of Ford/GM/Chrysler left.

 

[Ugliest1]

Good morning everyone. Did y'all sleep like a baby?

I'm interested in learning people's "I would definitely sell majority of my stake at this price." by year-end 2017 and year-end 2018.

If you'd like to share, please also provide your math/reasoning behind your price targets.

I don't have a specific price I'll sell at from an investment perspective, but the price goal that will solidify our overall finances is somewhere around $450. We are already retired and for peace of mind we do need to get off the roller coaster. We bought the car and stock in 2013/2014 to support Tesla in their mission statement (and of course we got the better-than-expected benefit of driving a car that brings back loads of fun and road trips). It looks like the mission is carrying on well (although the other manufacturers are STILL slow on the uptake...) and we're very happy about that.

 

[cheshire cat]

" The stock market is always boring the summer " they said...

"sell in May go away, come back on St Ledger day"

 

[Reciprocity]

And I would say the biggest problem for those companies is their board and/or shareholder wishes/attitude to not spend all their profits on the $billions it will take in R&D and investment towards BEVs. Even if there's an insightful leader within, they just can't get the approval to start turning the ship.

I was really onlly focusing on the physical issues, but definitely the mental issues are there as well. It will be very hard for these companies to deal with legacy employee issues. For example in Germany, its almost impossible to fire anyone. I mean any one you employ, is your employee as long as you have a company So all your engine people cannot be let go unless the company fails. The only other way is to pay them to leave the company. So any new battery or EV people would have to be added on top of the existing ICE burden, it cannot displace it. Even if they could displace it, they cannot displace it all because they are reliant on ICE profits to fund any BEV development.

Many legacy companies have a lot tied up in the old way of doing things and many cannot change even if they wanted to. So many forces keeping them from changing, like Unions and legacy pension debts for example. This is a huge advantage that Tesla has with no Unions and stock options instead of pensions.

 

[Alketi]

I truly do not understand the "competition is/will catch up!" argument.

Exactly. By the time they "catch up" it won't matter.

Vehicles have a 3+ year lag from design to production. There is NOTHING on the horizon that will match the Model 3 in price / availability / looks / performance / features / charging, and this is not even considering the brand cache/mindshare that Tesla has created.

The Model 3 is pulling in more reservations in one day than the Chevy can ship Bolt's in one month, and that's with an implied 1+ year wait time while the Bolt is available today.

The fact that Elon has been more wisely counciled to accelerate the Model Y is proof that Tesla is blown away by the demand and realizes there's nothing else in the market to fill it.

Volkswagen and the other German carmakers are still meeting to discuss their diesel strategy, amid further scandals. VWs internal managers are fighting their EV direction. Their 2019 EV is slated mostly for Europe.

The Jaguar iPace is projecting volumes of 10-20K and has been completely outsourced to Magna Steyr. It's nicely designed, but will show up perhaps in CA and a few other select locations.

etc. etc.

I expect when the Model 3 ships successfully in large volumes and if ICE sedans continue their decline that the industry will be scared enough to act, solely out of self-preservation. That means the wholesale shift to EVs will begin in the early 2020s, with a scramble for battery factories and charging stations starting as soon as 2018/2019.

If any of this is crazy, someone please tell me.

 

[winfield100]

I wonder if there's a correlation between TMC users' tenure in the forum vs. how high their price target is.

If, 31 years ago i had bought AAPL as i was told to do, my 100 shares right now would be $8,717/share. Does that indirectly answer your question? (my relatives have lived to 109 years old, so that's 41 more years....

 

[MartinAustin]

I truly do not understand the "competition is/will catch up!" argument.

It's an accepted fact that Tesla is well ahead of everyone on electric cars and massive battery production, obviously a gating item. Years ahead, at least 5-10. No one (intelligent) disputes this.

It is also an accepted fact that Tesla moves faster and iterates faster than every other automaker. In fact, they are mocked for this approach to building cars by the likes of GM.

If 1 and 2 are true, exactly how in the hell is anyone going to catch Tesla? Until such time as another company comes out moving significantly faster than Tesla - and Tesla doesn't respond by pushing even harder - it can't happen. Even if it did, it would take 10-15 years to catch up because Tesla isn't standing still. If a car is travelling 100 MPH and is 1000 miles ahead of the competition, even if a new car starts chasing at 110MPH, it's going to take a looooong time to overtake the leader. In the meantime, Tesla's giant lead grows bigger every day because they continue to outpace and outwork everyone. Tesla is going 100MPH on electric cars and everyone else is either going 10MPH, fixing a broken axle in the pit crew or left the race to go on a date with fuel cells.

These things are measured in time, not money. Even the most well-funded effort from, say, Apple, would be way behind. A charging network cannot appear quickly. GGFs cannot appear overnight. Massive car factories, tooling, car design, brand cultivation, engineering and software aren't going to arise in a snap, even if the player throws $100 billion at the effort.

Also, in the USA at least, the conventional way to sell cars is through 3rd-party companies that make fat profits on maintenance work. (dealerships) When these dealerships see how little servicing work is involved on BEVs (brakes, motor and battery need next to nothing compared to ICE brakes, engine, transmission & exhaust), they will not know what to do to survive. And during the transition period, they will have millions of used ICE cars on their lots. Dealerships are currently doing NOTHING to accelerate the transition to sustainable transport, because sustainable transport is not what they want to be involved in, by its very nature. They prefer fossil-fuel-powered transport that wears out, so they can maintain it.

 

[vgrinshpun]

I truly do not understand the "competition is/will catch up!" argument.

It's an accepted fact that Tesla is well ahead of everyone on electric cars and massive battery production, obviously a gating item. Years ahead, at least 5-10. No one (intelligent) disputes this.

It is also an accepted fact that Tesla moves faster and iterates faster than every other automaker. In fact, they are mocked for this approach to building cars by the likes of GM.

If 1 and 2 are true, exactly how in the hell is anyone going to catch Tesla? Until such time as another company comes out moving significantly faster than Tesla - and Tesla doesn't respond by pushing even harder - it can't happen. Even if it did, it would take 10-15 years to catch up because Tesla isn't standing still. If a car is travelling 100 MPH and is 1000 miles ahead of the competition, even if a new car starts chasing at 110MPH, it's going to take a looooong time to overtake the leader. In the meantime, Tesla's giant lead grows bigger every day because they continue to outpace and outwork everyone. Tesla is going 100MPH on electric cars and everyone else is either going 10MPH, fixing a broken axle in the pit crew or left the race to go on a date with fuel cells.

These things are measured in time, not money. Even the most well-funded effort from, say, Apple, would be way behind. A charging network cannot appear quickly. GGFs cannot appear overnight. Massive car factories, tooling, car design, brand cultivation, engineering and software aren't going to arise in a snap, even if the player throws $100 billion at the effort.

Exactly!

Those who talk about competition also like to bring up risks that Tesla is taking. Well, sure like hell they do, because they are purpose driven company and fully accept elevated risk to advance the purpose. But if some OEM would attempt to close this 5-10 year gap, they will have to accept even higher risk in order to catch up.

However, note that absolutely all OEMs are approaching this by forming partnerships and alliances left and right. I hope nobody reading this needs a lecture on how these partnerships and alliances work - shared costs and responsibilities means that nobody **owns** the common business, nobody is really in charge. How in the world they supposed to catch up with a company where the visionary is unequivocally in charge?

These alliances also mean that there is no true engineering oprimization, just assembly of black boxes. Well if battery technology just approaching the level at which EV and ICE parity is possible, optimization is everything: one needs every possible bit of it. This absolutely is not possible to achieve just aggregating black boxes. Once again Tesla is simply untouchable in this regard.

 

[D-egg-O]

this is not even considering the brand cache/mindshare that Tesla has created.

This is so underrated, it's not even funny. Coca-Cola, the most valuable brand in the world, and who's business relies so heavily on its brand is valued at ~200B. I've yet to see a flood of fan made high quality Coke commercials. This is even before project Loveday.

 

[ev-enthusiast]

IMO all the little details in the earnings report and earnings call suggest that the near term outlook (a few weeks to months) got a bit more rosy.

 

[Richgoogol]

I see what's going on.. all the day traders and shorts saved there fire power until 3:30 to attack TSLA altogether...some strong fire power though

 

[ev-enthusiast]

NASDAQ dipped?
Any news?

 

[kenliles]

NASDAQ dipped?
Any news?

Dow turns negative after report Mueller's Russia probe is intensifying

 

[TradingInvest]

I don't have a specific price I'll sell at from an investment perspective, but the price goal that will solidify our overall finances is somewhere around $450. We are already retired and for peace of mind we do need to get off the roller coaster. We bought the car and stock in 2013/2014 to support Tesla in their mission statement (and of course we got the better-than-expected benefit of driving a car that brings back loads of fun and road trips). It looks like the mission is carrying on well (although the other manufacturers are STILL slow on the uptake...) and we're very happy about that.

If it confirms that Tesla's master plan 2 is working as planned, the stock should go significantly higher in the next few years. In that case selling slowly is better than selling all of them at a predefined target. So far Tesla is showing we are on the right track.

 

[FredTMC]

What a difference a day makes.

Best ER in years and best "behavior" of Elon on the call

I'm shocked and thrilled with the ER

Congrats to all the Longs

 

[mmd]

I truly do not understand the "competition is/will catch up!" argument.

It's an accepted fact that Tesla is well ahead of everyone on electric cars and massive battery production, obviously a gating item. Years ahead, at least 5-10. No one (intelligent) disputes this.

It is also an accepted fact that Tesla moves faster and iterates faster than every other automaker. In fact, they are mocked for this approach to building cars by the likes of GM.

Um, No. Chevy Bolt beat out Model 3 by a year. Chevy delivered 576 cars in first month of Dec 2016 to REAL end customers, not just to CEO and top execs and employees. That was already AFTER having won the COY and few other awards. For Model 3, until Tesla delivers to independent end customers, it is hard to distinguish between production and engineering validation cars.
Now the Bolt is priming for nationwide launch after winning ~40 awards.

With nearly 40 independent awards and after millions of miles driven, it's clear that people are loving the groundbreaking Bolt EV. Owner Maria Mraz of San Francisco says, "Everyone who rides in it just loves it. It's very modern feeling and so easy to drive." The all-electric Bolt EV is arriving at certified dealerships nationwide.

"massive battery production": I've been asking for a while. Please quote me the GF output in quantitative terms. I'm not impressed by mere superlatives like "faster than machine gun", "massive", "blah blah", etc.

"Tesla moves faster": Yes, when Tesla releases products before it's finished testing and validation, it has got no choice. This is also a cause of heartburn, with massive confusion among customers and Tesla's own delivery and service staff. I think, parts management also becomes a lot harder with these myriad unnecessary changes that could be avoided with proper testing & validation that other car makers do before they release their cars to customers. This forum is full of complaints from people driving with old parts/seats , only to be replaced by the stuff they ordered after many months. When selling or buying an used Tesla, it is hard to figure out what one is getting because of the myriad little changes and options. This constant change of parts and pricing/options has its fair amount of downsides.
GM just posted $2.4B in profits in a shrinking US auto market. When Tesla's approach produces a fraction of that profit, I guess we could find some legitimacy in Tesla's method.

But I guess I am getting in your way of spinning this into a big positive

 

[geneclean55]

"massive battery production": I've been asking for a while. Please quote me the GF output in quantitatibe terms. I'm not impressed by mere superlatives like "faster than machine gun", "massive", "blah b;ah", etc.

Thats going to be tricky. Let me get back to you on that.