2017 Investor Roundtable: TSLA Market Action

[jbcarioca]

Why do you imagine there will be "a flood" of people trading in their S or X for Model 3s?? How frequently do people driving high end performance/luxury cars trade them in for smaller and slower cars? Even before full autonomous hardware was added to all S/X cars, both vehicles were already safest cars on the market. Pre fall 2016 owners who want the max possible safety will be more likely to trade in for new S/X than a Model 3. They'll get a HUD display to boot!

As it happens quite a lot of people take larger cars for smaller ones, not necessarily cheaper ones, Years ago I recall the most common car traded in for a BMW M3 was a BMW 5-Series. In the current case I think there are a fair number of Tesla S owners who'd prefer a smaller car and have Model 3 order because it is to be smaller. Some of them ('us' since I'm one, intend to trade a P85D, and in a perfect world wold replicate the performance I now have in the Model S. Price is not a factor in that calculus. How many of those people are there? I doubt that anybody know, but it certainly could have a significant increase in CPO's. The last time that happened to Tesla it was the Model s P85 owners trading for P85D. For some months the landers were all P85's and CPO deals were cheap. I'll wager that the impact on new Model S sales will be negligible, but the influx of attractively priced Model S will bring many owners who want a larger car but cannot afford a new S or X. That is what the CPO does, increase the buyer pool.

Despite the uncertainty I suspect the sales of X will be unaffected, but S volume will be lower, with average sale price rising by at least 40%, as many of the former buyers of new S60 and a fair number of S75 will opt for Model 3 instead. Much depends on how well-equipped Model 3 variants will be. There are many of us who'll keep our S's and wait until a PxxD will be available. If Model 3 at launch has nice options then the deferrals might be fewer.

These question probably are keeping some people awake nights.

Either way the TSLA price impact will probably be very positive because overall sales and profits will rapidly rise.

 

[Bobbyducati]

my (worthless) guess would be we see a few more days similar to this until some new news comes out.

 

[Skryll]

Why do you imagine there will be "a flood" of people trading in their S or X for Model 3s?? How frequently do people driving high end performance/luxury cars trade them in for smaller and slower cars? Even before full autonomous hardware was added to all S/X cars, both vehicles were already safest cars on the market. Pre fall 2016 owners who want the max possible safety will be more likely to trade in for new S/X than a Model 3. They'll get a HUD display to boot!

This is not a normal 'people who drive high end peformance cars trading down' situation.

This is people that significantly stretched their budget and took on huge car-loans to be able to drive a long range electric car that looks sexy. I can easily see that some of them want to get out of the big car loan, hoping to trade in their model S for a model 3 with either more features than they could afford last time they bought, or with cash left over or reduced debt.

Note that tesla discontinued their guaranteed buy back price guarantee they used to have.

The way I envision this to play out is: Families like us that have one tesla and one inferior electric car (relatively speaking to tesla) will sell or trade in their VW e-Golf / BMW i3 / Spark / Leaf, maybe even some Bolt owners will defect. Single owners that have a Model S may trade down unless they are comfortable with the price braket its in, and may buy a Model S/X after the next refresh instead.

So lesser range EV's will flood the used car market, and so will some Model S, especially older ones. But counter acting that will be a pent-up demand for used Model S from people that can't afford the new Model S and did not get a reservation for Model 3 yet. They just can't get a hold of a Model 3 for the next two to three years, who knows how many reservations tesla holds by now, I am only certain it is above 400,000, it could be 500,000 or more by now.

The media buzz and people driving teslas in neighborhoods that have not seen them yet because they are more remote will drive demand for teslas up.

The demand for new Model S bare bones will go down. Good friend of mine traded in his Prius for a Model S60 and did not even activate autopilot in order to keep the monthly cost manageable. When his lease runs out I know he will go for Model 3 if he can get a hold of one.

I am also wondering how many of early Model 3 will be resold at a higher price because of the demand overhang, maybe some of the reservations are individuals looking to sell it.

I wonder when the other car manufacturers will come out with significantly improved electric cars in production, there are lots of announcements, but the Bolt is the only one available so far that is even somewhat close to it in range, but still has old school DC fast chargers limited to 50-60kW. Hyundai and Kia are the only ones (?) that can do 100kW charging so far.

 

[neroden]

Yeah, I think the trade-ins will just mean a temporary flood of CPO Model S. Which is fine. With the long wait time for Model 3, I think those will sell right out and it'll be back to normal.

The used short-range EVs really will flood that market... but they have limited resale ability due to the great difficulty in moving them from one location to another.

 

[Reciprocity]

Yeah, I think the trade-ins will just mean a temporary flood of CPO Model S. Which is fine. With the long wait time for Model 3, I think those will sell right out and it'll be back to normal.

That is a very positive view and I hope that's the case. I was not concerned until Tesla made the blog post today. It could just be them setting expectations for the 3 as an inferior car to the MS/MX which should be obviously when the car is half the price. But it just seemed odd to put out something so negative and after Elon also tweeted about it. When you put that much effort into something its because they believe there is a real issue there. They are not saying exactly what that issue is and it could be as simple as setting proper expectations.

 

[Skryll]

Pretty sure the issue is osborne effect, people holding off on Model S purchase because of Model 3, in particular if they get the impression that Model 3 has newer and better sensors for autonomous driving and a spaceship like cockpit. I am pretty certain there will be a decline in Model S demand short term but compensated for by pentup demand from more people seeing electric driving as feasible and desireable that dont hold a Model 3 reservation yet.

 

[AlMc]

Yeah, I think the trade-ins will just mean a temporary flood of CPO Model S. Which is fine. With the long wait time for Model 3, I think those will sell right out and it'll be back to normal.

The used short-range EVs really will flood that market... but they have limited resale ability due to the great difficulty in moving them from one location to another.

That is a very positive view and I hope that's the case. I was not concerned until Tesla made the blog post today. It could just be them setting expectations for the 3 as an inferior car to the MS/MX which should be obviously when the car is half the price. But it just seemed odd to put out something so negative and after Elon also tweeted about it. When you put that much effort into something its because they believe there is a real issue there. They are not saying exactly what that issue is and it could be as simple as setting proper expectations.

Another consideration: Many of the Ss you are discussing have free supercharging for life. This will have many keeping their Ss or potentially having better resale value when it comes to the 'trade' of an S for a 3

 

[geneclean55]

Could be down to the removal of S60 from line-up but looking over at the google spreadsheets I am currently seeing VIN issuance of 1300 MS per week. When you add in the increasing MX sales that Tesla just reported, I would expect 2300-2400 cars are being produced weekly at the factory which isn't suggestive of a strong osborne effect taking hold.

 

[elasalle]

Could be down to the removal of S60 from line-up but looking over at the google spreadsheets I am currently seeing VIN issuance of 1300 MS per week. When you add in the increasing MX sales that Tesla just reported, I would expect 2300-2400 cars are being produced weekly at the factory which isn't suggestive of a strong osborne effect taking hold.

we need to factor in the new markets .. just in recent news. S.Korea, New Zealand, UAE, Jordan, Spain(i think) ... also looking to open shop in Russia. Add to that the spike in China sales and we have a large population.
Plus, as Model 3 rolls out it will be first in US, which means other countries will have choice limited to S/X for some time.

 

[geneclean55]

we need to factor in the new markets .. just in recent news. S.Korea, New Zealand, UAE, Jordan, Spain(i think) ... also looking to open shop in Russia. Add to that the spike in China sales and we have a large population.
Plus, as Model 3 rolls out it will be first in US, which means other countries will have choice limited to S/X for some time.

Also, as the year progresses people will be making purchases due to the expiring EV Federal tax break.

 

[Starno]

Alright tomorrow :

I say it will go towards 300, but close before it reach : 298.

And I say, it won't reach 300 again before next week.

Damnnn son, I'm a beast ... haha jk


So I think tomorrow will depend of macro : if nasdaq gets down, Tesla won't close at or over 300 even though it might cross it during the day.
If however Nasdaq progress, even just a bit, I'd say there are good chances we close over 300.

 

[TrendTrader007]

Actually, I think this is a difference between:

(a) being short term vs. being long term. If you're investing for the long-term based on a valuation thesis, there's no risk to buying on a short-term dip (except if you're leveraged; see below). If it goes lower, whatever. (A *long term* dip of multiple years due to mismanagement is another matter though -- I could discuss those.) If you're investing for the short term, however, there's a much bigger risk to "catching a falling knife".

There's another way to put this: Momentum trading works over the short term, but stinks over the long term. Value/growth investing works over the long term, but not necessarily over the short term (though it can pay off in the short term sometimes).

(b) being on leverage and not being on leverage. Buying into a falling market with no leverage is not very risky at all! At most, you can lose your initial investment, and you've minimized that. (And you can wait for the stock to recover). Buying into a falling market with leverage, by contrast, is highly risky, because, wait for it, "the market can remain irrational longer than you can remain solvent", and you can end up with debt larger than the mark-to-market value. And be forced to close out positions when you didn't want to.

When I loaded up on TSLA in September, October and November, if it had gone even lower, I would have bought even more. But I would have stopped before I had to borrow money.

So we're both right, 007 -- we're just using different investment strategies. What is suitable for one is not suitable for the other.

Makes total sense thanks!

 

[Starno]

I'm more of a very very long term investor :

My goal is to buy and sell only if the company is worth 20-30x the price I bought. Warren Buffett way.

If I invest 100 000 dollars and grow it at a 30% rate for 40 years. I will end up with 3,6 billion dollars of net worth. Boom.

100 000 dollars and no capital raise. So imagine with capital raise. I can end up being worth 50 billion dollars with less than 2 million dollar total life time invested.

 

[T3slaTulips]

Nice. After Hours ended up another 24 cents for $298.94.

 

[kenliles]

US strike on Syria tonight- about 60 cruise missles - single target airfield
Interesting to see market reaction tomorrow

 

[Bobbyducati]

US strike on Syria tonight- about 60 cruise missles - single target airfield
Interesting to see market reaction tomorrow

yeah. will be interesting. not optimistic.

 

[CALGARYARSENAL]

This will test the meddle of weak hands. Syria crossed the line. I hope this is just the beginning. I want to see Assad hang while his model wife looks on.

 

[geneclean55]

Never easy to predict. Futures down (not by a great deal to be honest) but oil surged on the news. TSLA has been known to track oil in the past.

 

[Lump]

Chucky even approves

Chuck Schumer: Missile launch 'the right thing to do'

 

[KLC13]

Yeah, I think the trade-ins will just mean a temporary flood of CPO Model S. Which is fine. With the long wait time for Model 3, I think those will sell right out and it'll be back to normal.

The used short-range EVs really will flood that market... but they have limited resale ability due to the great difficulty in moving them from one location to another.

Agreed. As a Model 3 reservation holder, if I see a used MS at a reduced price with those additional trade-ins, I will probably go for MS and forego my M3 reservation.