General Discussion: 2018 Investor Roundtable

[dc_h]

I'm pretty sure Elon doesn't do as much day to day operations as a normal automaker CEO and he already dives in only for emergencies.

One must not forget Elon is also the CEO of a 20 billion dollars company, dividing his time 50/50 between SpaceX and Tesla.

AND, he started 2 other ventures. Though they probably take way less time for now.


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People have the impression he's doing everything because he's basically very transparent as a CEO, and under heavy scrutinization.

I think he's way more involved. Normal CEO doesn't engineer a lline change and fix detailed production flows. He probably leaves other details a normal CEO would be more engaged by, but I think he wastes less time.

 

[anticitizen13.7]

I want to reiterate that my belief from years back was that Model 3 would not reach production until mid-2018. This was based on prior observations of how long it generally takes to engineer a new car, validate the design, and get the manufacturing line up to speed.

The move up to 2017 was a big surprise to me, and I am not surprised that the ramp has been slow, given the inordinately aggressive timeline.

 

[powertoold]

Let's be real here, quality should be a default concern. The fact that Tesla is mentioning it is a bunch of hot air.

I think they've run into new production issues and are covering it up with "quality and efficiency."

 

[SteveG3]

Alex Roy interview currently at the top of the linked news feed below. Tesla part starts about 2:20 into the clip. After spending 50 hours (almost uninterrupted) inside the car,

says Model 3 is a terrific car

Tesla/SuperCharging option is the only game in town, for now, if you want to drive anywhere at reasonable speeds

Tesla Model 3 drives from LA to NYC in record time

 

[AlMc]

Let's be real here, quality should be a default concern. The fact that Tesla is mentioning it is a bunch of hot air.

I think they've run into new production issues and are covering it up with "quality and efficiency."

My read on this is that they pushed out the early Xs to try to meet deadlines that had a ton of QC issues and are very mindful of that with the 3. I don't think they are using it as an excuse to cover up production issues.

Obviously they are acknowledging production issues by pushing back their delivery number goals.

 

[sdtslafan]

I hate to say it......but this is embarrassing. I sure won't be defending Tesla again any time soon. Just embarrassing to be at least 7 months behind.

I think your nearsightedness is resulting in you losing track of the big picture.

Tesla is not 7 months behind. It is a minimum of 6 years ahead of the competition. Please name a competitor with a vehicle in production that can match a model S from 2012.

Competitors will have the same struggles as they try to catch up after decades of complacency.

 

[myusername]

Based on my theory that the market inflicts surprise and maximum pain, I predict SP rises for absolutely no reason tomorrow.

Bulls pull hair out today because of disappointing Model 3 production and AH SP falls. Tomorrow, I predict Bears pull hair out because of disappointing Model 3 production and SP rises anyways.

this is the best long argument I've heard yet.

 

[myusername]

A bear and a bull argument, pretty much what we should have all expected. The S/X deliveries were rip your face off beat the market great. That said, without Model 3 production to back it up, no one cares. What does this mean going forward is the important question, not what is today's market response, or who can spit out the nastier response. Today's numbers were almost exactly what I though 2-3 weeks ago and I thought that would support a bullish story for the year. I also thought 2500 end of Q1 was more realistic, based on the ramping challenges to date. I still thought that was ok, since combined with 25k+ Model S\X and some slowly increasing TE sales and deposit money, they can be pretty close to or at cash flow parity.

Getting into the details for the year you can target 100,000 S\X for 9 billion in revenue. Q1 might be below 25,000, since they need to build stock and possibly divert production and sales resources. Delivering 100's of cars a day at Marina Del Rey appears to be very organized, but something not built to scale nationally yet. Model 3 production seems to be on track, but low enough for some to tell us the sky is falling. Assuming they are on track to produce this new lower number, they are probably entering the first week of January below 1000 a week. The mad rush over the holiday was likely herculean, but it does not seem like the Model X, where you had substantial issues that took another 6 months to work out. So, assuming production this week is about 750 and the last week of the quarter is 2500 that produces about 21,000 cars. Assume that leaves 4000 enroute, that is 17,000 Model 3's delivered and perhaps only 22,000 S/X delivered. That is not a great number, but reasonable numbers based on Tesla's statement and normal channel filling requirements. At this rate, Q1 is not awesome, but hopefully a burn of less than 300 million, not counting Roadster and other deposits. Based on Q4 deposits, I don't think cash flow is nearly as bad as many bears would say.Total revenue would be about 2b plus 1b, plus 500m for TE, or 3.5 billion for Q1 and about 300 million cash burn.

Going into Q2, S/X stock should be restored and staffing to increase production should be normalized, so production should be over 25,000 and deliveries should be at least 25,000. If production is on target and ends Q2 at 5000 Model 3's per week, production should be about 48,500 and deliveries about 44,000. At that rate cash flow is 2.2 billion (SX) and 2.6 billion, plus TE, so between 5 and 6 billion.
Going into Q3 and assuming capacity continues to grow, ending about 6300, production scales to 70,000 and deliveries about 62 to 65,000. S/X sales stay at 25,000. Perhaps Tesla could sell more S/X, but resources to increase production are probably still limited. At that rate, sales are again 2.2 billion for S/X and about 3.8 billion for the 3, or 6 billion plus TE, or approaching 7 billion Q3 revenue.
For Q4, assume no 10k per week, but more conservative 7500, that is about 90,000 3s for the quarter and again I stay with 25,000 for S/X. Again with 2.2 billion S/X rev and now 4.5+ billion for the 3, or 6.7billion plus TE, which should total close to 8 billion.

If Tesla can approximate these numbers, that is 23 billion in revenue for 2018. Cash flow in Q1 is probably marginally negative, Q2 is about even and the second half should be generate close to 3 billion in cash flow. I'm assuming normal Tesla investments in charging and distribution centers, etc. Based on Model 3, I would not expect any new Semi line install to start before Q1 or Q2 of 2019 and with 90 days payment schedule, they won't be paying for those systems until Q3 or 4 2019. By then, the Semi will be generating some cash flow and the Model 3+SX will be generating almost 3 billion free cash flow per quarter. This implies cash available for the Semi, and an as yet unidentifid plant that might build Model 3 and Model Y cars with an integrated battery factory. This will be a much bigger investment than needed for the Semi or Roadster, so is not likely before the end of 2019. I'd love for that to be sooner, but don't really see that this can be moved up much. I think the Roadster was a smart way to create Model Y like revenue, without nearly as much up front investment, making the eventual Model 3 plant much more affordable without a new round of financing.

The bottom line there is much for the bears to beat their chests over for now, but I think the long term story remains the same. I do think delays do affect future production numbers, so MU and other naysayers have a point, no denying. Long term there is still no strong attack against Tesla's home turf, so Tesla continues to compete against the 100 million car market, but only a small percent of the 100 million car market competes against Tesla. Perhaps a 100 PowerPoints are aimed at the heart of Tesla and a pack of Bolts,i3's, Porsche's and Jag's will attack like wolves to kill the leader of the pack, but I think the market to date only highlights Tesla's technical and design advantages and begins to educate a bigger market about the long term direction of the auto market towards EV, which is to Tesla's advantage.

We can all have this discussion next new years and I'm sure the lines will still be drawn about the same. Stupid Tesla and crooked Elon can't build over 500k cars, Elon is a liar and fraud and so on and on. Personally I'm not familiar with any historical frauds and cheats that slept on their factory floor or ever gambled their own money before their investors. He does at times resemble Howard Hughes with great gambles and a willingness to give all of himself to win the bet, and that certainly attracted detractors for HH. So, while I wish the numbers were better, I don't think anyone should have expected more for Q4. Q1 is lower than many here hoped, but seemingly on track with a more controlled rollout.
Longer term, I'd like to see Peter Hochholdinger perhaps step up and take a bigger lead role on the manufacturing side. I'm sure he is more conservative about timelines than Elon. Going forward as Tesla grows into 2018's 20+ billion industrial adolescent, I think Elon needs to let go of more day to day operations and only dive in for emergencies. Finding time to focus on visionary engineering, as well as the more mundane international purchasing agreements (lithium in Chile) or plants in China will require more and more time. I'm looking forward to looking back on 2018 as Tesla's first year as a near adult in the auto market. Still growing like a teenager, but getting more stable, stronger and faster going into 2019.

did I read this wrong or did you really add in $500m TE in Q1 and $1.3B TE in Q2?

 

[Mkorpal]

Eh, we are so far ahead of what was originally planned. They were never supposed to produce a single Model 3 last year.

 

[Ulmo]

I'm reading Tesla Q4 2017 Vehicle Production and Deliveries letter. Here's some things I thought about it:

Just Cars:

They omitted Tesla PowerPack, Tesla PowerWall, Tesla Roof, and Tesla Solar deliveries and produced. Also, they included this text:

Our delivery count should be viewed as slightly conservative, as we only count a car as delivered if it is transferred to the customer and all paperwork is correct. Final numbers could vary by up to 0.5%. Tesla vehicle deliveries represent only one measure of the company's financial performance and should not be relied on as an indicator of quarterly financial results, which depend on a variety of factors, including the cost of sales, foreign exchange movements and mix of directly leased vehicles.

That text is very outdated, since it also does not include any Tesla Energy products.

Model 3 Ramp Planning:

Here's the what's going on with their Model 3 ramp planning paragraph:

As we continue to focus on quality and efficiency rather than simply pushing for the highest possible volume in the shortest period of time, we expect to have a slightly more gradual ramp through Q1, likely ending the quarter at a weekly rate of about 2,500 Model 3 vehicles. We intend to achieve the 5,000 per week milestone by the end of Q2.

To me "focus on ... efficiency" means that they are fine tuning the factory so that production will require minimum manual intervention. The fact they said they will "focus on quality and efficiency" rather than just efficiency means to me that they will make the factory make the cars right fast the first time with as little manual work as possible.

Model 3 Current Production Speed:

During Q4 ... in the last few days, we hit a production rate on each of our manufacturing lines that extrapolates to over 1,000 Model 3's per week.

Q1, likely ending the quarter at a weekly rate of about 2,500 Model 3 vehicles.

It's not going to be linear growth, but using that as a rough way to calculate anyway, the average of those two is 1,750/week and there are 90 days in Q1, so that's 22,500 Model 3's for Q1, or 136 Model 3's per day, or one Model 3 every 10 minutes 35 seconds.

Maybe for Model 3's produced this means around 5,200 in January, 7,300 in February, and 10,000 in March.

That's production of cars worth delivery revenue of about $1,080,000,000 for Q1 for Model 3, using the Tesla.Com Design Page:

Quickly after that, revenue will drop to $35,000 each for the cheap variety, but because the ramp up will still be happening, it should be about production of cars worth delivery revenue of about $1,687,455,000 if 48,213 Model 3's are made in Q2.

Those should count towards the in-transit collateralized loans they can pull off of.

 

[Drumheller]

Model 3 quality: I've been following YouYouXue's road trip on Facebook. He has encountered several issues with the Model 3. Tesla has been very responsive to them, but it disappointed me to see how many issues he has encountered. If you want to read through his posts: Tesla Model 3 Road Trip

Model S refresh: I don't think a refresh will happen until after the $7500 credit phases down to $3750. $7500 is an incentive for some people to consider going with a Model S or Model X, instead of waiting on a Model 3, especially if they're far enough down the list that they may not receive the full $7500 credit. So, Tesla doesn't need to slow down the Model S line, and possibly introduce new issues, with an update at this time. Better to keep the S and X rolling smoothly while ramping the 3. Once the credit is down to $3750, and the 3 output is running smoothly, then would be a good time to refresh the S to boost demand for it again.

 

[myusername]

I think your nearsightedness is resulting in you losing track of the big picture.

Tesla is not 7 months behind. It is a minimum of 6 years ahead of the competition. Please name a competitor with a vehicle in production that can match a model S from 2012.

Competitors will have the same struggles as they try to catch up after decades of complacency.

RAV4!

Toyota Lifts Profit Forecast on Surging RAV4 Sales

"Asia’s biggest automaker saved 100 billion yen ($879 million) in the half year ended September through measures including the continued roll out of a new manufacturing process. That’s more than $3,300 dollars every minute in those six months.
...
The money saved will help bolster spending on research and development to a record 1.06 trillion yen this year"

oh... you were talking about a car. I thought you were talking about a business.

 

[Zaxxon]

That statement worried me that they are seeing quality issues now.

I need cheering up!

My read on this is that they pushed out the early Xs to try to meet deadlines that had a ton of QC issues and are very mindful of that with the 3. I don't think they are using it as an excuse to cover up production issues.

Obviously they are acknowledging production issues by pushing back their delivery number goals.

This. I clearly remember the early X days, and the 3 is night and day. Believe me, if the 3 were experiencing anything on the level the X did, we'd be hearing about it from more than You You.

 

[Curt Renz]

 

[anticitizen13.7]

this is the best long argument I've heard yet.

I feel that people get too worked up over numbers here and there. However, I have a lot less $ at risk than the majority of people on this board, so perhaps I have the luxury of just not caring very much. At this point its entertainment for me.

My PT is still $365 in the 1-year time frame.

I also don't actively trade TSLA or any other stock. For acquisition of new assets, I moved on long ago, to far riskier companies in industries/technologies with much foggier prospects than Tesla. The SP movements on those are hilarious.

 

[myusername]

I hope we Will actually do this. And that @myusername will admit he was wrong if Tesla hits 4000/week and not hide behind the fact it’s not quite 5000. But also that all the bulls will admit they were wrong if it does turn out to be 2000/week and not hide behind Whatever wishful thinking is then du jour.

can we just rejoice this once again please... have a look at the bolded statement. that was posted 24 hours ago. I'd just like to hammer the point that I - a short - was right... and then when longs found out they were wrong... they spent 3 pages talking about how it's all ok, TE will ramp, still on target for $250k M3 in 2018... etc.

just to be clear... this is exactly the scenario that has played out for 3 years... you're witnessing it right now.

 

[aveenozippy]

RAV4!

Toyota Lifts Profit Forecast on Surging RAV4 Sales

"Asia’s biggest automaker saved 100 billion yen ($879 million) in the half year ended September through measures including the continued roll out of a new manufacturing process. That’s more than $3,300 dollars every minute in those six months.
...
The money saved will help bolster spending on research and development to a record 1.06 trillion yen this year"

oh... you were talking about a car. I thought you were talking about a business.

Big news for General Motors in Asia. Car sales are doing great in Asia

GM's China December vehicle sales up 13.1 percent year-on-year

 

[Causalien]

The less accurate 8 ball says a drop of less than 3%.
So somehow some people already knw the bad numbers and baked this in.

 

[BornToFly]

Nice interview. The only thing I wish these people would do is remind people that charging is done at home, and a network is only needed for travel, so it will never need to be as big at the current gasoline fuel station network.

 

[Ratanpara]

It is disappointing to hear push back in production but Tesla is kind of in fortunate position, If this were to happen to widely available product, customer would flock to competitors, but I don’t see any EV coming from competition in volume production any time soon, as far as stock price, I am surprised it didn’t go down as much in after hours trading.

Long TSLA since 2014
Model 3 in reservation