FSD news in light of Tesla’s demand question

[electronblue]

In light of Tesla’s lower than market estimated production and deliveries for first quarter 2019 some thoughts on what this might mean in terms of the FSD news.

First I think it is super clear by now the FSD discount was a cash raise. Tesla even notes in their letter that they have sufficient cash on hand after the quarter so cash has been an issue. Tesla traded future retrofit obligations to cash on hand.

Second I think it is clear the FSD news event for investors is meant to be a counter offensive against an expected stock price drop on the delivery number news. It will still be interesting news but I think it is clear this is the related motivation.

Third given the meager news on the income front I am guessing we can kiss goodbye any notion of quick retrofits for FSD owners. That is a cost Tesla seems likely to postpone into the future.

Fourth I think Tesla clearly faces a demand issue. They have for a long time in my view but by now it should be evident to everyone. Whether this means they will finally start making some new kind of marketing moves remains to be seen.

Fifth and most subjectively I think it is interesting to think about the monster Tesla has created for their existing customers with all the past demand levers especially in terms of Model S and X demand which was clearly poor.

How does someone with say free Supercharging and a paid for but not yet delivered FSD feel about shelling out for a new Tesla? One gets to repay for the FSD and lose the free Supercharging. If you paid $4,000-$5,000 for FSD and just saw others pay $2,000 for it would you pay another $5,000 now... add to this the constant price cuts eroding the value of the old car...

I don’t about you guys but for me this has lead to the calculation that my best bet is to ride out the existing car until I feel sufficient use value has been gained from it given the above considerations. Every car loses value the moment you buy and constantly from thereon but with Tesla’s unique demand levers and pre-paid options yet to be delivered the math is even more against trading in now for me. The car is good so no worries but it does cause an aberration to my trade-in cycle and is a lost sale for Tesla.

Circling back to that FSD, this same monster could of course also be Tesla’s blessing were they to finally deliver on it. Surprise me with that Level 5 capable hardware unlock for AP2 and all is forgotten.

Anything I missed in terms of what this all means for AP/FSD?

 

[OPRCE]

1. Yup.
2. Yup.
3. Likely this is what the Tweet "You only need HW3 when we have the sw ready for it" was meant to prepare us for, +1 year delay.
4. I think they will continue to sell as many M3 as they can build, no problem but to maintain S/X demand they need to at least up the max charging rate to match on v3 SuC.
5. I will also keep my FUSC car until it falls apart.
6. Am pretty sure the best we'll see on Apr.19th is something that with further refinement may be L3-worthy, nothing like L5.

 

[favo]

1 & 2, agreed.

3 depends on your definition of quick. I am thinking Q4 this year for beginning of retrofits. It remains to be seen how quickly they can ramp up production of the Tesla FSD computer (aka Neural Network chip), but if Samsung (or one of the other big fabs) is making the chips, it shouldn't be an issue. (See Samsung building autonomous chip for Tesla?) I don't have a problem with them waiting until the software that requires HW3 is imminent. (I plunked down $2K recently for FSD.) They should offer the upgrades in order of when you paid. As far as cost to Tesla, it remains to be seen how easy and quick it is to do the retrofit. If combined with another service visit, I would think it wouldn't be too bad, and certainly parts and labor will be well covered by what people have paid.

4. Clearly there isn't (yet) a demand issue for Model 3. I don't know about Model S/X. Might be temporary given that people think a refresh is coming soon. Some will wait for exterior/interior refresh, bigger/better battery, HW3, Supercharger V3, or whatever else they feel is on the horizon. Also, winter is not a prime car buying season. There is lots of upside in Europe and Asia, especially when Shanghai GF comes online (later this year). Time will tell.

5. I am not a luxury car buyer or someone who buys a new car every 2 years (or even 10). Maybe many S/X buyers are, and that may contribute to demand for those models. I guess if I were, I might be bothered by these time frames (but I never would have bought FSD in advance). On the upside, almost all Teslas have gotten better over time, with improved features and even performance specs (at times). This helps offset, somewhat, the inevitable monetary depreciation of all cars. Will a potential used car buyer prefer one that will never get new features or one that might (and already has)?

 

[S4WRXTTCS]

1.) Nope - Wasn't advertised, and there was no mass emails sent out. There was nothing in the way that really indicated to anyone that there even was a sale. We only knew about it because we follow Tesla closely.

2.) It's most definitely meant to drum up investments. Tesla knows they need to update people on their plans for FSD. Apparently there is a lot of valuation in Tesla tied to it's software.

3.) Depends on your definition of quick. I'd estimate sometime in the later half of the year. So anywhere between Aug and Dec. By upgrading cars their also convince more EAP owners to buy FSD.

4.) The only demand issue I see them having is with the Model S/X because they have a hard time competing with the 3 in value terms. Plus they went too long without an update. I expect to see an significant range improvement within the 3-6 months. Something that's going to make it difficult for competitors to match them on the all important spec. This will allow the Model S/X to safely have a significant range advantage over the Model 3. Heck on the TeslaFi a lowly Model 3 is on the top of the range leaderboard. Hopefully in a year or so its dominated by 400+ mile Model S/X's.

5.) I don't think there is any question that Tesla did a number to existing customers, and especially AP2 owners. But, they don't really have anywhere to go aside from simply staying with their existing car. I was expecting more competition, but the competition hasn't really amounted too much so far. As an example the E-tron I figured would have 240+ miles of range, but it only turned out to be 200. So that was a let down. If I was Tesla I'd try to get HW3 to AP2 as quickly as possible (once SW is ready) because they were some of the most loyal customers (plus they have big bank accounts so it should be a win-win).

For me personally I don't have many grips. Through luck of timing I missed most of the early issues with the Model S when I bought my 70D back in 2015, and I missed most of the early issues with the Model 3 when I bought my P3D+ back in Sep. I did get a $5K refund for giving up free supercharging thanks to a guy named Fred. So that takes a bit of sting out of any recent price drops. I also took advantage of the full $7500 tax credit. Plus my car is now 5% more powerful, and there is another pending update that's going to make it faster for longer. So I'm finding it hard not to be a happy camper. Although the 2018.8.3 update was a mess. Luckily that only lasted a week. That would have made me hate my car.

The biggest surprise to be has to been the reception to Sentry Mode. I'm pretty convinced that along will sell cars. It's funny because it's really nothing more than a multi-camera dash cam, but people are obsessed with it. You'd think things like track mode, 0-60 performance, the 5% upgrade would be the big ticket items that people would be excited by. But, Sentry mode strangely seems to make a person pause more. As in a "that's kinda cool. I wish my car had that" way.

 

[S4WRXTTCS]

6. Am pretty sure the best we'll see on Apr.19th is something that with further refinement may be L3-worthy, nothing like L5.

Just an FYI

They switched it from April 19th to April 22nd.

Supposedly so more investors could make it.

They're supposed to release information on the Tesla Network which apparently is still a thing. Not something I'm into as I'd prefer reading about refinements, and things closer to release.

I'm looking forwards to watching the test drives though. That should be pretty cool at least from a preview standpoint, and that they can't fake a test drive other than trying to limit to a very small area.

 

[electronblue]

1.) Nope - Wasn't advertised, and there was no mass emails sent out. There was nothing in the way that really indicated to anyone that there even was a sale. We only knew about it because we follow Tesla closely.

I disagree completely. Musk tweeted it more than once, that is a larger advertisement that money often buys. Also, Tesla blogged it. Had they done it in complete silence that would have been another thing but they did not. Tesla marketed it and probably amassed a significant amout of cash with it...

3.) Depends on your definition of quick. I'd estimate sometime in the later half of the year. So anywhere between Aug and Dec. By upgrading cars their also convince more EAP owners to buy FSD.

My definition of quick in this instance depends on Tesla’s ability to get their cash on good footing. Aug-Dec is possible if all goes well but it is also possible they would delay it with some excuse if the woes continue. Like pre-selling and handing out free Roadsters, these moves have been in my view attempts to generate cash today and worry about the cost in a future where they hope to be awash with cash (and they may well get there if things go well). So a bit of a pyramid scheme really in the risk sense for the buyer. The upside is that risk isn’t necessarily realized if things go well of course.

4.) The only demand issue I see them having is with the Model S/X because they have a hard time competing with the 3 in value terms. Plus they went too long without an update. I expect to see an significant range improvement within the 3-6 months. Something that's going to make it difficult for competitors to match them on the all important spec. This will allow the Model S/X to safely have a significant range advantage over the Model 3. Heck on the TeslaFi a lowly Model 3 is on the top of the range leaderboard. Hopefully in a year or so its dominated by 400+ mile Model S/X's.

I agree Model S/X have become obsolete compared to Model 3 and that is one reason. I am not convinced Tesla isn’t facing another demand ceiling though. If Model 3 had no demand issues why all the model changes and demand levers there? The sentiment that they really should start to advertise and offer traditional sales campaigns has been growing stronger recently and looking at the demand lever shenanigans Tesla went through in Q1 to avoid doing either was just painful to watch.

Of course Model 3 still has untapped demand but I am referring to demand here of course in relation to Tesla’s sales growth expectations (”will enough people buy it without traditional marketing”), not as an absolute thing (”nobody wants it”).

5.) I don't think there is any question that Tesla did a number to existing customers, and especially AP2 owners. But, they don't really have anywhere to go aside from simply staying with their existing car. I was expecting more competition, but the competition hasn't really amounted too much so far. As an example the E-tron I figured would have 240+ miles of range, but it only turned out to be 200. So that was a let down. If I was Tesla I'd try to get HW3 to AP2 as quickly as possible (once SW is ready) because they were some of the most loyal customers (plus they have big bank accounts so it should be a win-win).

Personally I would have no qualms about buying one of the BEV SUVs from the premium brands as far as the cars go. They are useful options and more will appear this year. Staying with the current car though is inviting for the reasons I outlined: so much of its promised and unrealized value has yet to arrive. That is new territory as far as keeping a car goes (features-wise). Unfortunately that same reason stands tall as a reason to not buy another Tesla. Not only would I be giving up on that unrealized value, I would be rewarding the company that caused it with another purchase. I’m not saying it can’t happen, I’m just outlining why it does not seem so inviting either. All options — except just staying put — seem less appealing. This is not really a cycle car manufacturers want...

The biggest surprise to be has to been the reception to Sentry Mode. I'm pretty convinced that along will sell cars. It's funny because it's really nothing more than a multi-camera dash cam, but people are obsessed with it. You'd think things like track mode, 0-60 performance, the 5% upgrade would be the big ticket items that people would be excited by. But, Sentry mode strangely seems to make a person pause more. As in a "that's kinda cool. I wish my car had that" way.

Said many AP2 owners who got none of that and my point is complete.

Indeed one does not have to watch further than at the amount of software updates and roll-out priority Model 3 gets to see how out of date and out of priority Model S/X in general really are. And let’s not even talk about Version 9...