2017 Investor Roundtable: TSLA Market Action

[neroden]

2012: 20-25 kWh cost you $10000 (40->60->85). 2017: 20 kWh cost you $9000 (community guess seems to be 55->75).

That's almost no reduction in consumer cost in 5 years. So, yea, if Tesla can't bring down battery costs, they'd damn well better get crazy good efficiency with the Model 3! A giant chunk of Tesla's touted advantage and thus stock price, and major purpose of the gigafactory, was bringing down battery costs. Where are those battery cost reductions?

In the gross margin. Which has been rising, consistently. Remember, they're targeting a ridiculous 30% gross margin.

I suspect after they hit that *explicitly stated target* and Musk gets his free stock, they might relax a bit about pricing.

 

[RobStark]

I understand why they used states, but it's messed up because they're mixing up different utility company territories. They should at least separate upstate NY (average electric rate 12 cents) from downstate (average over 20 cents).

These aren't utility rates.

They are retail prices at Superchargers for they pay as you go program as opposed to the free for life deal.

 

[tinm]

If you guesstimate based on the very vague graph shown at the event, you'll come up with these numbers:

~500 cars in August
~1500 cars in September
~4500 cars in October
~10000 cars in November
~12500 cars in December (holidays)
~20000 cars in January

We know there were 50 cars made so far, presumably all in July.
More accurate than trying to read the graph is probably the LA Times article, which says
100 cars in August
150 cars in September

The start of the curve is probably slowed down by already-identified problems and the desire to correct these problems before ramping up -- and I suspect the numbers given to the LA Times are conservative. I'd probably expect 100 - 500 in August and 150 - 1500 in September. At that point we'll know how the ramp is going and be better able to predict the third quarter.

I'm puzzled why Tesla tells me that it estimates a delivery of my Model 3 between October and December 2017. We ordered at 7:44pm PT, 3/31/2016, online, from New Mexico. Sure, we own a Model S already. I guess that really counts a lot? Unclear how I could qualify to get a car sooooooo early not being in California. I was expecting March-April 2018 frankly. Not complaining, mind you, but still: October-December? Really? How?

Does Tesla think a lot of people *won't* opt for the $49K premium deal?

 

[GoTslaGo]

I'm puzzled why Tesla tells me that it estimates a delivery of my Model 3 between October and December 2017. We ordered at 7:44pm PT, 3/31/2016, online, from New Mexico. Sure, we own a Model S already. I guess that really counts a lot? Unclear how I could qualify to get a car sooooooo early not being in California. I was expecting March-April 2018 frankly. Not complaining, mind you, but still: October-December? Really? How?

Does Tesla think a lot of people *won't* opt for the $49K premium deal?

I think you're close enough to distribution that you are in the early access crowd. The group before us Tesla owners are the employees who opt to get a long ranged RWD model 3.

Running the numbers, current Tesla employees are around 40000 (33k Tesla, 6k SpaceX). I guessed maybe 50% ordered a model 3. Figured 1/4 will option for the long ranged RWD, so that would be 5k orders to fulfill. These are wild ass guesses. Based on Elon's projected numbers they should hit 5k model 3s around Sept-Oct. This then opens it up for current owners, starting on the west coast.

FWIW, I have the same information in Nevada, but will opt to defer for AWD (I have same info, ordered April 3)

 

[geneclean55]

I don't know about that LA Times article with numbers on the ramp.
Why would Elon put that particular graph up on Friday, and then LA Times have new updated information by Saturday?

 

[austinEV]

I think you're going to be wrong, but only because the industry reviews for Model 3are out and they're all positive. That has a tendency to cause a price jump (I suppose there's some class of traders who follow product reviews; I think there are even some bots which do it). Doesn't stick, though, could be back down by the end of the week.

I am looking at the price action as a pair of events: 1) the reaction to Friday's event and 2) the ER.

My default feeling for Monday will be sell-the-news. My default feeling for the ER is that it is expected to be bad. So there has to be (and might be) some contrarian action that reverses the logic. Maybe we gap up on Monday due to good reviews but that would set us up for a big fall if ER isn't good. Or if we sell on the news on Monday, then we are set up for a relief rally on Thursday once all the bad news is out.

I may have to disagree with @AlMc . We may ironically be at 335 next Friday since the to events will have offset each other; down-up, or up-down.

Regardless at some point this week I am looking at going in long really hard with a mid 2018 450 target. We might get to 400 this year but I am not going to position heavily for that.

 

[erthquake]

If you guesstimate based on the very vague graph shown at the event, you'll come up with these numbers:

~500 cars in August
~1500 cars in September
~4500 cars in October
~10000 cars in November
~12500 cars in December (holidays)
~20000 cars in January

We know there were 50 cars made so far, presumably all in July.
More accurate than trying to read the graph is probably the LA Times article, which says
100 cars in August
150 cars in September

The start of the curve is probably slowed down by already-identified problems and the desire to correct these problems before ramping up -- and I suspect the numbers given to the LA Times are conservative. I'd probably expect 100 - 500 in August and 150 - 1500 in September. At that point we'll know how the ramp is going and be better able to predict the third quarter.

The LA Times number for September is likely a typo. Musk tweeted the 1500 September number on July 3.

Handover party for first 30 customer Model 3's on the 28th! Production grows exponentially, so Aug should be 100 cars and Sept above 1500.

That, and Russ Mitchell tends to distort numbers in ways unfavorable to Tesla.

 

[hobbes]

In the first hour of trading TSLA is up 2% on tradegate.de and 0.5% in Frankfurt - don´t really understand why it´s so different but trend seems positive. Obviously, if Nasdaq market makers have other plans, this won´t last, but it is an indicator that Friday´s event and following news were received well.

 

[GoTslaGo]

In the first hour of trading TSLA is up 2% on tradegate.de and 0.5% in Frankfurt - don´t really understand why it´s so different but trend seems positive. Obviously, if Nasdaq market makers have other plans, this won´t last, but it is an indicator that Friday´s event and following news were received well.

as of now, bid ask in the range of 290/292 euros (frankfurt). 290=339.3 USD

 

[neroden]

I'm puzzled why Tesla tells me that it estimates a delivery of my Model 3 between October and December 2017. We ordered at 7:44pm PT, 3/31/2016, online, from New Mexico. Sure, we own a Model S already. I guess that really counts a lot? Unclear how I could qualify to get a car sooooooo early not being in California. I was expecting March-April 2018 frankly. Not complaining, mind you, but still: October-December? Really? How?

There were only 115K reservations (including employees!) by 11:15 PM Pacific Time on 3/31. Probably half of those were non-US. You ordered before the event was actually finished, and a lot of people (probably more than half) waited to see the car. You are likely to be within the top 25K US reservations.
Since I'm guessing about 29K Model 3s will be produced this year, your early delivery date makes sense.

This does tell us something though. Employee delivery priority and "Tesla owner" delivery priority are coming first, ahead of "California delivery priority". They will be shipping Model 3 all over the country this year. I guess the "California first" rollout only happens once those with priority get their cars. This kind of makes sense; they do have a national distribution network capable of handling the relatively small number of cars they're delivering this year.

Oh. Also, although employees get priority... I'm a little suspicious that only applies to employees who made their reservations early. I doubt they get to jump the queue by a full year.

 

[GoTslaGo]

Frankfurt last price up to 294.09 Euro, 344.085 usd.

Wonder will this hold for premarket/US open?

 

[Willuknight]

Thoughts of a NZ investor in Tesla and future tesla owner on the model 3 reveal

This is going to be long.

- It’s clear from the reaction of tesla fans around the world and on Reddit, that they wanted more. More sizzle, more features, more discounts, more extras, yet they want these things for $35,000k exactly.

The most expensive car I’ve ever bought was $4000. Before that, it was $1200. I don’t buy expensive cars. Most people I know spend less than $5000 on a car. In my country, mass market is a sub-10k second hand Japanese car.

I never expected the model 3 to be a mass market car, because they’re never going to make the cheapest car. You don’t get the latest, the cheapest and the best. Choose 2. The model 3 will be the best in its category of mid-range semi luxury sedan EVs. Some will consider it the best in the EV and non-ev market combined – I certainly do. If you want the cheapest new EV possible, get a leaf.

A lot of people are angry that the $35k model isn’t available. They expect they can get a model S at half the price with extra options without the price tag. They are overlooking the history of Tesla. Elon Musk has been very good at pricing his cars to allow for purchase premiums. If you want the best, you pay more. If you don’t, you pay less. Every single product launch of Tesla has included a high-specced car for the first buyers. It’s common for other automakers to do this tactic as well.

Tesla’s entire master plan is based on this. Make a premium sport car for lots of money. Use the money from that to make a slightly cheaper premium sedan. Use the money from that to make a cheaper semi-premium sedan. Use the money from options to protect the profit margin and allow you to offer the car at cheaper price. Given you have a product that is in extreme demand and you’re desperately needing to raise money for R&D and Expansion, leaving money on the table by not selling the most expensive versions first would be very very stupid.

As an investor, I’m very encouraged by several points.
1) That the Model 3 will have one of the best ranges in EVs. 500km is amazing. Even 300km is pretty dam good for the entry level model. For most people, that will be enough, and for those that it isn’t, you have the super charger network.

2) That Mr Musk has prioritized the expensive models to ensure fast capital raise, and has protected the profit margins to allow Tesla to flourish and continue growth. A lot of Tesla owners and fans love this company. Tesla have always acknowledged with their Roadster and S, that the buyers are helping fund this company. Without Tesla, the EV space wouldn’t be exploding, we’d still be in the age of “EVs aren’t practical. As an early adopter, you expect to pay a price premium, and you do it because you believe in the product and you want to support the company.

3) That the Model 3 is priced at a point where it’s not going to impact the S or the X. Tesla have done well to separate out their cars so that they are at different market segments. No one that’s looking at a $35,000 car will be looking to purchase a $75,000 car, and there’s enough in there to give value and differentials to the different models and price points.

4) That the Model 3 was launched in July when only last year, July 1 was heralded as an internal only drop dead date for production intended to take action on suppliers only. It was supposed to be “an impossible deadline” meant only to “hold [supplier’s] feet to the floor”. The answer to “Will we actually start production on July 1?” Was “of course not.” The fact that they’ve managed to achieve the impossible and not only start production but do deliveries in July is an accomplishment to be proud of.

However, I still think the stock price is going to go down on Monday due to stockholder reaction to negative opinions, and the lack of substance of the event (more on that later). This doesn’t bother me. A dip in the price only means better buying opportunities and now having seen the car even more in depth than before, I remain convinced that this car represents an amazing product, whether at $35,000 or $49,000. This is going to be the petrol killer, and once the current preorders receive their cars, we’re going to have an explosion in demand from word of mouth sales. We may see a dip in TSLA in the next few days, but long term I’m even more bullish than before. Tesla will cement the 3 as one of the most popular cars going forward, and this car and other cars like it will drive forward the EV revolution and infrastructure investment we need, if we are to reduce fossil fuel usage, bring down energy usage, reduce our carbon usage, reduce accident rates and stop polluting into our air.

Once people try EVs, no one’s going to want to buy a car that is dirty, noisy and smelly, can’t charge it at home, have to go somewhere out of your way and pay a lot more money for gas, has slow and sluggish controls, can’t update over the air, needs expensive servicing to keep the engine from breaking and is bad for the environment.

Let’s talk about the model 3 launch. For the past year / 6 months, the hype train has been building. Part of this has been on the fandom, but a good measure has been driven by Elon Musk. With all the announcement of the pre announcement of the announcement type posts, the bars were raised high.

Elon is a nerd turned rockstar. He loves the attention, but his delivery is flat and his showmanship is pretty damm terrible. I’ve seen almost every video available, and I think that his interview style is very appealing. It feels like you’re just sitting down with a mate and getting a very honest and open window into how Elon actually feels about something. However when it comes to the big events, he’s flat. I think Tesla absolutely should find a better front guy to do a lot of the intro / MC / transition for their events/announcements. I think that Elon would be against this, as based on his bibliography and history, I suspect he likes the attention and wouldn’t want someone else stealing what he sees as his limelight. This is a shame as it holds back the appeal of Tesla’s events. Having said this, Mr Musk is the guy that was the driving force in getting us to the point we are with EVs. He deserves a lot of credit, and if that’s the form of credit he wants, it’s hard to argue with it.

The other key feature of Tesla presentations is that Elon Musk is an engineer. He likes to talk about stuff that people might not really care about. I think some of the content is interesting and worthy of being bought to the attention of the public. Some of it isn’t and should be kept to the technical manuals / technical press release. Mr Musk’s presentation skills makes this even worse.

One of the other problems with the Model 3 reveal is the purpose of the car. Tesla literally can’t bring any ‘big wow’s to the stage with the model 3, because the 3 isn’t their flagship car. If you have any feature like a HUD on the cheapest car you’ve ever made, people who bought your flagship car are going to be pissed. People who reserved the model 3 in some ways felt like they’re getting a half price smaller model S, when in fact they are very different cars in very different markets. Really what we have here is the opposite of the Osbourne effect. When your previous successes overshadow your current efforts. Prior to the S, the model 3 would be the most amazing car in the world, but compared to a car twice the price, it comes off slightly weaker.

Another point to bear in mind is disposable income and attitude. If you’re someone buying a $100,000 car, you’re not really going to be that bothered by the idea of paying 20% more for longer range. If you have enough money to spend on a luxury car, you’re used to paying for luxury and you’re used to the idea that extra things cost more. For people at the other end of the market, who are stretching to afford even $35k, paying an additional 25% is not only a greater percentage, but it’s also a bigger stretch for someone at this end of the market. Additionally, these might be customers who don’t see the value in the additional options and aren’t used to paying big money for convenience features.

Right from the beginning, different price points and ranges should have been hinted or talked about, to set people’s expectations for how much certain features would cost. Just doing this simple step would have avoided much of the backlash as people’s idealized high expectations could have been focused around what the car offers and not the value they expected to receive ($70,000 car for $35,000).

During the launch event, they could have spent more time on the car. They could have shown a drive in their web cast, or given a guided tour of the different features. They could have done interviews with the new owners, both before and after receiving their car. However, compared to their past launches, what they showed in their webcast is consistent. By including additional content with more polished speakers, they would have delivered a better launch event. However, that’s not necessarily a good idea. Tesla have already sold out of more than the first year of production. There is literally zero benefit to hyping the car this early. No one who reserves now will get their car for over a year and there’s only so much deposit money that is useful – beyond that it’s only pressure at best and a distraction at worst. That leads on to suggest that Mr Musk shouldn’t have been hyping this event so much. Sometimes less is more.

I guess the thing to remember is that this launch and the model 3 represents the cumulative efforts of 10 years of work, and the completion of the Tesla master plan. I think that deserves some celebration.

Summary – The Model 3 launch event was predictable in content and pricing based on past launch events and information available from other sources. Limiting pricing information back fired to some extent due to customers soaring expectations and now tesla are going to be facing negative comments in the public arena for the short term.

For the long term, Tesla have made an amazing car, that’s going to drive forward the electric revolution. The fundamentals are the same and demonstrate a healthy profit margin necessary for a young growing company and Tesla have successfully widened their range of cars to appeal to different purchase brackets which should prevent any Osbourne effect. The pricing and options are geared to the limited availability of a greatly desired product, while delivering the core promise of the $35,000 car. Apart from overhype, the Model 3 represents the way of the future and people will flow to embrace it.

 

[neroden]

Premarket quotes starting to show up at $343, consistent with Frankfurt. I think we're going to open around there.

(I still expect earnings, Wednesday evening, to be a hit to the stock price.)

 

[ValueAnalyst]

I am looking at the price action as a pair of events: 1) the reaction to Friday's event and 2) the ER.

My default feeling for Monday will be sell-the-news. My default feeling for the ER is that it is expected to be bad. So there has to be (and might be) some contrarian action that reverses the logic. Maybe we gap up on Monday due to good reviews but that would set us up for a big fall if ER isn't good. Or if we sell on the news on Monday, then we are set up for a relief rally on Thursday once all the bad news is out.

I may have to disagree with @AlMc . We may ironically be at 335 next Friday since the to events will have offset each other; down-up, or up-down.

Regardless at some point this week I am looking at going in long really hard with a mid 2018 450 target. We might get to 400 this year but I am not going to position heavily for that.

A lot of investors think the same way as you laid out, but I believe your last sentence will drive SP this week, rather than your first three paragraphs.

SP may get hit around earnings as bears will exploit the EPS to no end, but I expect the dip to be short-lived in long-term investing terms.

 

[vgrinshpun]

I am looking at the price action as a pair of events: 1) the reaction to Friday's event and 2) the ER.

My default feeling for Monday will be sell-the-news. My default feeling for the ER is that it is expected to be bad. So there has to be (and might be) some contrarian action that reverses the logic. Maybe we gap up on Monday due to good reviews but that would set us up for a big fall if ER isn't good. Or if we sell on the news on Monday, then we are set up for a relief rally on Thursday once all the bad news is out.

I may have to disagree with @AlMc . We may ironically be at 335 next Friday since the to events will have offset each other; down-up, or up-down.

Regardless at some point this week I am looking at going in long really hard with a mid 2018 450 target. We might get to 400 this year but I am not going to position heavily for that.

I know as much (or as little, depending on the perspective) as anybody else, but there might be another narrative about to be adopted by the Market.

The Q2 loss might have been priced in based on deliveries on the lower edge of guidance and obvious increase in expenses ahead of M3 ramp up.

Although it seems that the launch event was geared toward the employees, as a morale booster before the long and arduous six month ahead, and Elon went out of his way not to hype the M3 (lack of run down on specs, highlighting achievements, etc.), the product brilliance just stood out for everybody to see, and, essentially demonstrated ***what*** the cash is being "burned" on. Once it becomes increasingly clear (and I think the process might already started) that money are being spent wisely, the proof being in the revolutionary product (M3), may be we can see steady SP gains throughout the week.

Pure speculation on my part, but I would not be surprised if SP will defy a lot of expectations. I do not **expect** this, though. (How is that for a disclaimer? )

 

[Tslynk67]

Hmmm, my December 17 520 call went from -26% to +10%

 

[SwTslaGrl]

 

[jbcarioca]

Looking at my Model 3 reservations for RWD LR:
Florida-last quarter 2017
Brazil: first quarter 2018!

I have no idea what basis they used, but if my reservations are indicative we may have confirmed speculations from @neroden among others. Current Tesla ownership clearly has an influence that seems to negate geographic priorities in the US.

If the Brazil plans are accurately stated in my reservation we will see Tesla aggressively enter new markets that were open for preorders on launch day.

If they are able to enter new markets so soon I suspect they'll enter RHD markets before they'd been anticipated to do so.

Further Elon suggests AWD and Performance will be at the shorter end of earlier advice IIRC.

If all that actually happens I predict the stock will have a major breakout as NA-wide deliveries multiply, new markets are entered and new versions released.
By saying "six months of production hell" I suspect Elon is trying to dampen enthusiasm and engender a little bit of 'glitch' tolerance. Somehow it seems things are actually going a trifle better than expected.

I hope I'm not being Pollyanna-ish.

 

[myusername]

Looking at my Model 3 reservations for RWD LR:
Florida-last quarter 2017
Brazil: first quarter 2018!

I have no idea what basis they used, but if my reservations are indicative we may have confirmed speculations from @neroden among others. Current Tesla ownership clearly has an influence that seems to negate geographic priorities in the US.

If the Brazil plans are accurately stated in my reservation we will see Tesla aggressively enter new markets that were open for preorders on launch day.

If they are able to enter new markets so soon I suspect they'll enter RHD markets before they'd been anticipated to do so.

Further Elon suggests AWD and Performance will be at the shorter end of earlier advice IIRC.

If all that actually happens I predict the stock will have a major breakout as NA-wide deliveries multiply, new markets are entered and new versions released.
By saying "six months of production hell" I suspect Elon is trying to dampen enthusiasm and engender a little bit of 'glitch' tolerance. Somehow it seems things are actually going a trifle better than expected.

I hope I'm not being Pollyanna-ish.

he said 6 to 9 months... and then later said 6 months but then corrected himself and said 6 to 9 months again. it seems that was specific.

 

[Tslynk67]

And there's those idiots from GS making noise again... Tesla Full Year EPS Target Cut at Goldman Sachs