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So, Tesla made several big changes to their referral program tonight. Noticeably all changes happened after market close on Friday, perhaps to minimize impact to stock price.

1. The biggest change is the referral program is adding free unlimited supercharging to those who use referral links. Now this could pose a few problems. First, those who recently took delivery of a Model S/X without free supercharging might feel irritated/saddened. Also those who already placed orders and are awaiting their cars (w/o unlimited supercharging) now might want to cancel their orders and place new ones. I think it'd be wise for Tesla to allow all people who have existing orders but haven't taken delivery to add referral codes if they haven't already to add the unlimited supercharging. (Note: if you're one of these folks, feel free to use my referral code ("david7556") and try to get your existing order "upgraded" to unlimited supercharging. Here's my referral link, My Tesla Referral Code (ts.la/david7556). Thanks in advance to those who will use the referral link/code.).

Another challenge with linking unlimited supercharging to the referral program is what happens with those people who order cars without a referral link... they get cars without unlimited supercharging and that's a big hit. It's almost unfair, in the sense that people who don't hear about the referral link/code or have a friend who tells them about it are in a way penalized for it. Sure, you can look at it the other way, people who find out about the referral link are given a reward/benefit. I think though perhaps a better reward would have been to give buyers who use the referral code $1000 discount and give them $500 in supercharging credit. That probably would be enough to incentivize people to use the referral links more, but not make those who didn't know about the referral links feel so irritated.

2. Tesla cut short its current referral program which was supposed to go until June 15th. This is somewhat of a big deal because it shows that Tesla is acknowledging the current program wasn't enough. Also, this leads to speculation that the current order run rate has dropped off significantly enough to warrant some drastic changes, like these changes to the referral program in order to stir orders/demand. This possible drop in orders can be a cause for concern for TSLA investors. Perhaps it could be the Osborne effect from a pending Model 3 release. In other words, people are viewing the Model 3 as "new" technology and are drawn to that, but the Model S/X are being seen as "old" tech or previous generation tech... regardless of whether that's true or not (btw, it's not true), it's the perception that matters. And as excitement builds for the Model 3, people might be taking the "wait and see" approach as to whether or not to buy a Model 3 or Model S/X.

In order to combat this, Tesla has a few options. One, they can just accept it and let orders fall. But this has a negative impact on their revenues, gross profits and earnings. So they likely would like to avoid this outcome. Second, they can try to stir demand in others ways. Updating the referral program is one way. Giving free unlimited supercharging is another way. Perhaps probably the biggest demand driver would be to release an updated Model S look and/or features (ie., battery pack with 2170 batteries and faster charge rate, or HUD). However, those new features probably aren't ready since most of the company's focus is on getting the Model 3 out in time. So, Tesla's hands might be somewhat tied, and it's entirely possible that the updated referral program and the unlimited supercharging are some of the best ideas they can implement at the moment. It's also possible they have some other demand levers (like bringing back the 2 year lease) available and they might release those if needed.

If Tesla is unable to overcome this possible lowered order run rate for the S/X, then it could lead to negative impact with their financial results in Q2, Q3 and even Q4. While Model 3 ramps, Tesla is still largely dependent on the revenue that the S/X brings in. So, if orders fall then that's going to be a big hit to Tesla's revenue and gross profits.

Another way to look at it is if the drop in orders is only minimal, then it won't have a big impact... for example if Tesla can still deliver 22-23k Model S/X per quarter, then there will be an impact to their earnings but it won't be as substantial as if they could only deliver 20k Model S/X per quarter.

I'm optimistic that this new referral program with the extra bonus of free unlimited supercharging will be enough to help rebound order rates for Q2 (which ends in several weeks). Q3 might be challenging though as there will be lots of hype over the Model 3 release and Model S/X buyers (at least some) might be wanting to wait to see what the Model 3 is like before pulling a trigger on a much more expensive Model S/X.

3. Tesla updated their mobile app today as well. The mobile app now shows an icon at the top right corner (like a treasure chest icon) that links to show you the status of how many referrals have come in with your referral link. This is something that was taken out when they updated their app previously but now has been added back in. And it's another gentle encouragement by Tesla for owners to take advantage of the referral program.

On a side note, I think the referral program can be run much better. In the past week, I've emailed the referral program 3 times regarding an issue/question I had but they didn't reply to any of my emails. A frustrating experience to be sure. And for Tesla, they ought to do better.

And as a final tip, if you've recently placed an order for a new Model S/X without using a referral link/code but haven't taken delivery yet, then my suggestion would be to contact your delivery specialist ASAP and tell him that you want to add a referral code (ie., you can give them my referral code, "david7556") to your order. And if they won't do it, keep on trying... ask to talk to a manager and insist on getting a referral code added to your order for the free unlimited supercharging.


referral2.png


IMG_1316.PNG
 
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My Tesla pages says:
  • You have free, unlimited Supercharging, including your current Tesla and any new Model S or Model X you purchase.
I believe this applies to all existing owners, but could be wrong.

It's confusing to me because it appears that some people who purchased cars recently are being shown that they have free unlimited supercharging, but if free unlimited supercharging is given to all new car buyers then why would Tesla make it part of the referral program (vs just make it a standard car feature)? I'm thinking perhaps those who recently purchased a car with a referral link are having their cars automatically added with free unlimited supercharging. But if anybody has more info on this, please share.
 
I've been saying for some time that to prevent collapse of Model S sales Tesla needed to do something to justify the higher price over the Model 3. I think they realized that one way to make a clear distinction is to make supercharging free for life on the S/X and do the pay system they proposed for the Model 3 and other mass produced cars.

Tesla may have seen a sharper than expected drop in sales after the free supercharging was discontinued so they may be going back to it. I expect an announcement that all Model S/X will now have free supercharging for life, even those sold in the last few months. We may never know the exact reason, it might be a combination of making a distinction between the S/X and 3 and sales drop.
 
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I admit to having my 'TSLA alerts' going off a bit here. We have both MS and GS having very low delivery '3' deliveries numbers for 2017, EM indicating possible high valuation level (yes taken out of context perhaps) and now a new (old) demand lever being pulled that is good for the rest of 2017.

Put that all together and one has to at least consider some *possible* issues in the short term TSLA SP.

I am OK long term, but am growing increasingly worried/cautious about the short term (rest of 2017)
 
I admit to having my 'TSLA alerts' going off a bit here. We have both MS and GS having very low delivery '3' deliveries numbers for 2017, EM indicating possible high valuation level (yes taken out of context perhaps) and now a new (old) demand lever being pulled that is good for the rest of 2017.

Put that all together and one has to at least consider some *possible* issues in the short term TSLA SP.

I am OK long term, but am growing increasingly worried/cautious about the short term (rest of 2017)

I think, the M3 ramp is key to short term SP. on one hand we have multiple sources confirm that a lot of M3 are being tested in Ohio, on the other both MS and GS are claiming that the final M3 assembly line isn't ready yet.

Is it possible for those of you going to the VIP tour event in 2 weeks, to probe into M3 ramp readiness, especially the final assembly line? Thanks
 
If Tesla is unable to overcome this possible lowered order run rate for the S/X, then it could lead to negative impact with their financial results in Q2, Q3 and even Q4. While Model 3 ramps, Tesla is still largely dependent on the revenue that the S/X brings in. So, if orders fall then that's going to be a big hit to Tesla's revenue and gross profits.

I do not foresee a substantial decline in deliveries in Q2. The following is from the latest earnings call (just two weeks ago) regarding Model S and Model X deliveries in 2017, directly from the horse's mouth:

"We feel pretty good about achieving the sort of the 100K – roughly 100K total for the year for Model S and Model X, combined"

Elon Reeve Musk - Tesla Motors, Inc.

I don't think it's meaningful. Like we're going to produce 100,000 units approximately. So, all that matters is there going to be demand for 100,000 units? I believe there will be, or there is.

Jonathan McNeill - Tesla Motors, Inc.

And there's certainly sufficient demand for the guidance we've given for the first half.

---------

Regardless, 2Q17 deliveries is not important to TSLA stock price by any stretch of imagination.

Tesla's intrinsic value depends on discounted cash flows in 2018 and beyond as Model 3 and subsequent mass-market models are brought to customers.

Focusing on quarterly deliveries in 2Q17 is futile, and should be left to the myopic shorts.

----------

An important consideration is that Model 3 is essentially sold out through 2018. New customers who reserve a Model 3 will not be able to get their cars until 2019! This is very significant, and will support demand for Model S and Model X for the foreseeable future as customers realize that if they want immediate access to FSD, their only option is purchasing a Model S or Model X.
 
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the demand issue is really starting to concern me. I feel like they need a refresh on the S but they are so busy/focused on the 3 that I doubt they have the resources to do that.

I don't know what they would really do with an S refresh at this point. The S looks like a lot of other modern larger sedans, which is a selling point. For those of us who don't want to scream to the world we're driving a car worth over $70K ar anything special, it's perfect. Those who know Teslas spot the car and they will come up and ask questions, but the general public don't know and don't care.

I think, the M3 ramp is key to short term SP. on one hand we have multiple sources confirm that a lot of M3 are being tested in Ohio, on the other both MS and GS are claiming that the final M3 assembly line isn't ready yet.

Is it possible for those of you going to the VIP tour event in 2 weeks, to probe into M3 ramp readiness, especially the final assembly line? Thanks

They have never said mass production would start before this fall. The fact they are starting limited production in July is a very good sign. Elon had said last year that they are telling all their suppliers production starts July 1, 2017, but he never expected to do that because as he said, someone always screws up and messes up the plan. The fact that all the suppliers got their act together enough that the bottleneck is the readiness of the factory is a very good thing. There will always be bottlenecks in any process, having the primary bottleneck be because everything else is ahead of schedule is almost unheard of in engineering.

I do not foresee a substantial decline in deliveries in Q2. The following is from the latest earnings call (just two weeks ago) regarding Model S and Model X deliveries in 2017, directly from the horse's mouth:

"We feel pretty good about achieving the sort of the 100K – roughly 100K total for the year for Model S and Model X, combined"

Elon Reeve Musk - Tesla Motors, Inc.

I don't think it's meaningful. Like we're going to produce 100,000 units approximately. So, all that matters is there going to be demand for 100,000 units? I believe there will be, or there is.

Jonathan McNeill - Tesla Motors, Inc.

And there's certainly sufficient demand for the guidance we've given for the first half.


Tesla has been pushing into new markets in the last couple of years. South Korea and Mexico are two of the current emerging markets for them. If they can't push enough product in the US, they can almost certainly sell enough in their new markets.

An important consideration is that Model 3 is essentially sold out through 2018. New customers who reserve a Model 3 will not be able to get their cars until 2019! This is very significant, and will support demand for Model S and Model X for the foreseeable future as customers realize that if they want immediate access to FSD, their only option is purchasing a Model S or Model X.

That's significant. Some car makers see a special car like the Ford GT or the Dodge Viper sold out for a year in advance, but those are limited production cars that contribute little to the bottom line. The Model 3 is Tesla's Camry or Fusion. If any other car maker had their best selling car sold out a year in advance, the car industry would be beside itself going on about how fortunate that company was.

I do think Tesla might look at a price decrease on the S/X or possibly just the S once the Model 3 is in production. Right now they need the hefty profit margins on the S and X to keep the company afloat, but as the Model 3 reaches full production, the contribution of the S and X profits to the whole will become a smallish percentage of the company's revenue. There will probably be some people somewhat bent out of shape by the creature comforts of the Model 3, which will be much more humble than the S. They probably couldn't afford an S which is why they are in line for a Model 3, but if Tesla were to drop the price of the S by $10K, they would still be making a profit on them, but there would be people who would move up from a M3 to a MS.

The biggest limiting factor to Model S sales today is the price. There are lots of people who would buy one if it was cheaper.

When they switch over the Model S/X line to using 2170 cells (probably not until 2018 at the earliest), their pack price will go down. That may be the time to do a price cut. Even if they lower their profit margin a little, they would make up part of it from the reduction in battery cost. It would definitely spur Model S sales.
 
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It's confusing to me because it appears that some people who purchased cars recently are being shown that they have free unlimited supercharging, but if free unlimited supercharging is given to all new car buyers then why would Tesla make it part of the referral program (vs just make it a standard car feature)? I'm thinking perhaps those who recently purchased a car with a referral link are having their cars automatically added with free unlimited supercharging. But if anybody has more info on this, please share.
I don't have any special info but as far as I understand from Tesla's website,

<table>
<tr><TD>Existing Unlimited SC</TD><TD>Existing paid SC</TD><TD>Future cars with referral</TD><TD>Future cars without referral</TD></tr>
<Tr><TD>Unlimited SC/Unlimited SC</TD><TD>Unlimited SC/??</TD><TD>Unlimited SC/Paid SC</TD><TD>Paid SC/Paid SC</TD></tr>
</Table>
# current owner/next owner
 
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I've been saying for some time that to prevent collapse of Model S sales Tesla needed to do something to justify the higher price over the Model 3. I think they realized that one way to make a clear distinction is to make supercharging free for life on the S/X and do the pay system they proposed for the Model 3 and other mass produced cars.

Tesla may have seen a sharper than expected drop in sales after the free supercharging was discontinued so they may be going back to it. I expect an announcement that all Model S/X will now have free supercharging for life, even those sold in the last few months. We may never know the exact reason, it might be a combination of making a distinction between the S/X and 3 and sales drop.
100% agree, supercharging should be free for life for their premium products (as of now Model S/X, future Roadster) to differentiate from the Model 3/Y.
 
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Another challenge with linking unlimited supercharging to the referral program is what happens with those people who order cars without a referral link... they get cars without unlimited supercharging and that's a big hit. It's almost unfair, in the sense that people who don't hear about the referral link/code or have a friend who tells them about it are in a way penalized for it. Sure, you can look at it the other way, people who find out about the referral link are given a reward/benefit. I think though perhaps a better reward would have been to give buyers who use the referral code $1000 discount and give them $500 in supercharging credit. That probably would be enough to incentivize people to use the referral links more, but not make those who didn't know about the referral links feel so irritated.

Don't worry, sales people help you with that. They are coy, but they get it handled.
 
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An important consideration is that Model 3 is essentially sold out through 2018. New customers who reserve a Model 3 will not be able to get their cars until 2019! This is very significant said:
I think this is a good point. Orders may well be dropping now as we all want to see what the Model 3 looks like and how it performs. However, reality will sink in for people at some point that they can't get it for about 2 years. That may actually drive demand for Model S. I'm thinking this is a short term drop in demand on the order of 3 to 6 months. The more people get exposed to Tesla via Model 3, demand for Model S may very well increase substantially. The question for investors is what does this short term drop in demand do to the share price over the next few months. Increase volatility? Sure. Change the trajectory of the share price? Probably not much. The Model 3 effect is already taking over and will continue to be the primary driver of the share price for the rest of this year.

Having said that, my TSLA alarm is going off a little bit too with some things pointing to a delayed start to Model 3 production. That will definitely affect the share price. How on Earth do MS and GS project what they have regarding Model 3 production without having substantial reasons beyond manipulating the share price? It's hard to fathom that they don't have some solid info behind their projections. They will look really stupid in a few months if wrong on this and that should be a strong incentive to try to be right, even if the goal is to manipulate the share price. In support of their projections, we aren't seeing many Model 3 in the wild now just 6 weeks before employee production starts. On the other hand, EM has been very clear multiple times that they are on track for solid Model 3 production starting in July and ramping quickly through the end of 2017. Who is wrong and why?
 
My email to Tesla Investor Relations:

I noticed this article about a meeting you and Deepak had with RBC Markets:
Meeting With Tesla Inc's (TSLA) CFO

I was surprised to read that the article says that Tesla shared this info:
"Model 3 will initially be tough given lack of absorption (no surprise but sounds like they may help quantify inefficiencies as they occur) but at sustainable level of 5k/week target could be around 20%, and mid-to-high 20s at the 10k/week target.”

The reason I’m surprised is because I don’t recall Tesla ever sharing such detailed guidance regarding gross margins for the Model 3 at various production rates. And I feel that this release of information to RBC Markets is a disservice to other investors like myself and tens of thousands of other retail investors since we don’t have the same access as large fund investors.

Is there any way you can make the playing field level and fair by audio recording all the private meetings you and Deepak have with investors and then publicly releasing those recordings? I also think the callbacks after earnings calls should be audio recorded and released as well.

Please let me know if this would be possible.
 
Let us know if they reply.

I think that it would be extremely useful to get more information about alien dreadnaught production technology. Maybe you can try to get either Peter Hochholdinger or Andrea James to participate in a Google hangout?

I'd love to know if they plan to use that to improve MS-MX production, and how far they plan to take that with the M3. On the last ER they said that M3 production is planned to get them to about the same speed as the fastest conventional car plant which Elon said is about one car per twenty five seconds. But they also said that they are planning to produce one million cars per year at Fremont. Do those numbers match?

I don't think that submitting questions from the forum is viable. The one time we tried that I didn't think that the questions we asked were that much better than the shareholders questions. Someone asked about the lack of dealers due to dealer laws in a south western state! As if Tesla was not aware of the problem or were not doing everything that they possibly could to resolve the problem.
 
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At this point of time, the only thing that matters for investors like myself is how good the Model 3 will be. So much is hanging on this question. If the Model 3 is stellar and beyond expectations, then this will drive demand for many years to come and will likely be the driving force for Tesla rapid expansion into the 2020s... and a possible march to becoming one of the world's most valuable companies.

If you're a serious TSLA investor, I think it's crucial to find a way to test drive the Model 3 as soon as possible.

Back in 2012, I started buying TSLA after several months of research but it wasn't until I test drove the car later in 2012 that I had the confidence that the Model S was going to revolutionize the auto industry. It helped that I was into cars and I had driven a lot of performance cars prior. So, when I test drove the Model S I knew immediately that the Model S performed better than almost all its competitors. In 2012, it was difficult to get a test drive even after they started production, so I remember emailing Elon Musk at that time and complaining to him that my local store didn't have test cars and I couldn't test drive the Model S. This was back when Elon was actually reading the emails that went to his email account. A few days later, I get a call from a regional manager. He tells me that he wants to get me a test drive as soon as possible, and he made it happen.

Fast forward to 2017. I'm not content to wait until Nov or December to test drive the Model 3. I've been waiting too long as an investor (since 2012) to see this moment happen. And as a TSLA investor I need to know how good the Model 3 will be. I did get a test ride at the Model 3 reveal last year, but it was short and it's not the same as driving the car. But I do admit, from my test ride it did appear that the Model 3 will be stellar. But I need to drive the car and spend several good hours with it.

So, rather than fretting over the stock price, my attention is elsewhere. I could care less if TSLA is 250, 300, 350, or 400 at the moment. What I care about is getting a Model 3 test drive, and getting it fast.

When test driving the car, I think it's important to have driven the Model 3 competitors (like the BMW 3 series, Lexus IS, Audi A4, Mercedes C, Cadillac ATS, etc) in the compact luxury sports sedan market. That way, when you drive the Model 3 you'll instantly know how to compare it to it's competitors. Luckily I've driven the BMW 3 series a lot and owned a Lexus IS for several years as well, and I driven a lot of the competitors cars, so I'll know how to judge the Model 3 when I drive it. If you haven't driven a lot of the Model 3 competitors, my suggestion is take a couple weekends and do some test drives. Or even better, try renting the BMW 3 series for a week or so. That'll give a decent comparison to what Tesla is aiming to surpass.

I'm hopeful that the Model 3 will deliver. Actually, I'm fairly confident it will. However, I need to experience it myself to confirm it.

Here's to hoping I can find a way to test drive a Model 3 sometime in August. If you have any tips, PM me.
 
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I think the Model 3 is not going to be stellar and is not going to be beyond expectations... and I think that's going to be fine.

I think it's going to be
(a) clearly much better than the gasmobile "competition"
(b) clearly better than the electric "competition" which exists so far
(c) much higher-production than the 2019/2020 electric "competition"
(d) much higher margin than any of the electric "competition"

That is sufficient for a few years. I will reevaluate the company in 2019 by looking at the state of the competition then, but it is likely to be a wildly different company selling semis by then!
 
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