General Discussion: 2018 Investor Roundtable

[Reciprocity]

Good points although IMO, BMW more likely would be bought by one of the Chinese BEV companies. Then they could take advantage of the BMW brand, just like Geely does now with Volvo and Tata does with Jaguar/Land Rover. Few consumers think of Volvo, Jaguar and Land Rover as owned by companies based in China and India. Geely already tried to buy 10% of MB but was rejected by the MB Board -- I think we'll see more of this.

Is Volvo a German auto? Did I miss a war in the past decade. Of course I jest, but I just feel like BMW and Daimler are German and would remain so, no matter what. VW is just the biggest of the bunch so I am assuming, with government help, that they would all consolidate. To save jobs, to save pensions, national pride. I mean the reasons are numerous. In the real world, those companies are left to fail and someone comes in picks through the carcas for useful stuff.

 

[Drax7]

Germany car industry is too big to fail, will be protected by german government.

 

[ValueAnalyst]

I'm aware this is common practice, I just don't get how adding together a bunch of guestimates to come to an innacruare conclusion is beneficial? I ask this out of curiousity. if I can't be very confident the number is correct it's meaningless.

Where does everyone else stand on this?

I actually think the estimate of $55,000 ASP including EAP/FSD will come close to the actual figure, which will never be released.

This analysis helped me understand where UBS' report falls short and project when Model 3 program will break even per GAAP (1Q18), when it will generate enough gross profits to turn Tesla GAAP profitable (2Q/3Q18), and when it will reach 22%+ gross margin (4Q18). This is useful information for my purposes of estimating the long-term intrinsic value of Tesla as well as price action in the upcoming year.

 

[EinSV]

Is Volvo a German auto? Did I miss a war in the past decade. Of course I jest, but I just feel like BMW and Daimler are German and would remain so, no matter what. VW is just the biggest of the bunch so I am assuming, with government help, that they would all consolidate. To save jobs, to save pensions, national pride. I mean the reasons are numerous. In the real world, those companies are left to fail and someone comes in picks through the carcas for useful stuff.

That's a definite possibility. However, the impact of EVs on the entire German car industry could make it difficult to drum up the massive amount of resources needed to hold it all together. If that's the case, then outside investment (and ownership) that saves jobs can become preferable to the alternative of bankruptcy. The German government may not be able to keep all of the current auto companies under German control -- they may have to do some triage.

 

[Reciprocity]

That's a definite possibility. However, the impact of EVs on the entire German car industry could make it difficult to drum up the massive amount of resources needed to hold it all together. If that's the case, then outside investment (and ownership) that saves jobs can become preferable to the alternative of bankruptcy.

Hence, the governments role. They can drum up unlimited resources. To be clear, im talking about a bailout. Much like when GM was bailed out in the US, only a bit more extreme.

 

[EinSV]

Hence, the governments role. They can drum up unlimited resources. To be clear, im talking about a bailout. Much like when GM was bailed out in the US, only a bit more extreme.

When I was growing up in Detroit, it was unfathomable that Chrysler would not be a U.S.-based car company. Yet here we are and the Chrysler and Dodge brands are owned by an Italian company. Things change.

 

[schonelucht]

I think the cheapest version that can be bought through 1Q18 is LR PUP, so $50,000 min. This is without EAP/FSD, whereas my $55k ASP estimate includes them.

On the other hand, I expect the SR to be available quite soon (early 2018). If not, then I agree my numbers may be underestimating.

IIRC $100/kWh was for 2020 when capacity was estimated to be 35 GWh, which is now 2018 target.

If you read my link, you will see the 2020 target for $100/kWh was given after Tesla already brought its estimate for 500k/year runrate forward to 2018. In fact, it quite explicitly says

Musk said the factory could ultimately support 1.5 million electric vehicles a year and he was confident the partners could eventually lower battery costs to $100 per kilowatt-hour by 2020.

So the $100/kWh is for when the gigafactory is running at 1.5million/year, not 500k units (the famous triple capacity from the original estimates)

2. My take rate for PUP is 50% for both LR/SR, take rate for AWD is the same, P is assumed at 10%.
3. My numbers include EAP/FSD take rate of 80% both as FSD-exclusive features roll out throughout 2018. Excluding EAP/FSD, the numbers would be: $16,000 and $46,000, so 35%, but this is contribution margin. Subtract fixed cost allocation for depreciation of $4B capital investment spread across 5,000/week rate, which takes it pretty close to 25% gross margin.

2- I have a lower take rate for both PUP and LR. Makes sense our numbers diverge there. We' ll see!
3- I thought most of that capital investment is depreciated on a per unit produced basis. May be wrong here. Open to corrections. But yes, that would explain differences.

 

[Buddyroe]

OK. Why are we up so much today? Is it because technology is up? Or is it particular to Tesla? Or does anyone even have a clue (cause I don't)?

I see that along with TSLA, NVDA, AMZN, and GOOG are all up big today also.

 

[Reciprocity]

When I was growing up in Detroit, it was unfathomable that Chrysler would not be a U.S.-based car company. Yet here we are and the Chrysler and Dodge brands are owned by an Italian company. Things change.

US is not Germany. We have a very rich history of letting companies fail and GM + Chrysler should have been left to fail. I believe the government had a hand in the Chrysler deal as well. Now maybe it was smart for the government to step in and help, but we will never know now. I am a fan of what Chrysler has been able to do. Their cars are not horrible and the Pacifica PHEV is pretty cool. If the battery was twice as big, I would be all over it. Could get there in a few years.

 

[ValueAnalyst]

On the other hand, I expect the SR to be available quite soon (early 2018). If not, then I agree my numbers may be underestimating.

I don't see how SR becomes available before mid-18 with the ramp being slashed by a factor of four (optimistically) for the first six months.

If you read my link, you will see the 2020 target for $100/kWh was given after Tesla already brought its estimate for 500k/year runrate forward to 2018. In fact, it quite explicitly says

So the $100/kWh is for when the gigafactory is running at 1.5million/year, not 500k units (the famous triple capacity from the original estimates)

I read your link, which was a Business Insider article, which cited a Reuters article. Neither are acceptable sources as far as I'm concerned.

The way I remember it: $100/kWh was provided in earlier days of GF1, which assumed 35/50 GWh (cell/pack-level) for 2020, which is now targeted for 2018, so it'd make sense for Tesla to get down to that level by exit-18. This will probably depend on the uptime of the GF1 production lines, which as we know, has been shaky lately, but I think (hope) Tesla will figure it out by late 2018.

2- I have a lower take rate for both PUP and LR. Makes sense our numbers diverge there. We' ll see!
3- I thought most of that capital investment is depreciated on a per unit produced basis. May be wrong here. Open to corrections. But yes, that would explain differences.

Agree to disagree on PUP/LR take rate. I think LR's appeal to consumers is under-appreciated, as people forget one of the primary reasons why Model S succeeded in the first place was its superior range on one charge. People will pay up for LR even at $9k premium imho. We'll see about PUP, you may be right on that one with my 50% being too optimistic.

On depreciation: I thought so too, until someone at TMC reminded that was only for tooling, but most of PP&E is straight-line.

 

[Drax7]

What are the short trolls thinking up next?
Their absence today speaks volumes.

 

[HG Wells]

I don't see how SR becomes available before mid-18 with the ramp being slashed by four for the first six months.

Depends on if its battery or car limiting production.
If they can make more SR than LR they will switch to SR soon.

 

[Bobfitz1]

Here's something interesting which seems a bit beyond vaporware. Apologies if already posted.
CES 2018: Byton's Electric SUV Is the Car of the Future

Interesting article. The part about controlling functions with hand motions and voice commands makes me wonder how soon before Tesla introduces voice control of most functions that in the M3 and MY will require fiddling with the touch screen. It seems nuts that a powerful software company like Tesla (that's making great progress on self driving) can't easily do voice command as well as Amazon and Googles home voice recognition devices. I've read there is some early voice command with M3, but it sounded like it was small in comparison to all the functions that cannot yet be voice controlled.

 

[Curt Renz]

Benzinga - this morning: Baird: Albermarle (NYSE:ALB) Is The Best Lithium Cycle Play

Baird sees the following as catalysts that could drive Albermarle shares higher:

• Upcoming auto shows displaying new EVs.
• Potential auto OEM announcements regarding electrification.
• The ongoing ramp of Tesla Inc TSLA 5.34% Model 3.

 

[ValueAnalyst]

Can anyone please provide a supporting source/link for or against the following two assumptions:

50% for PUP
10% for Performance

 

[DragonWatch]

Germany car industry is too big to fail, will be protected by german government.

Having lived there for nine years and observing from distant sidelines, I would agree with you. However, corruption in management has unforgettable and unforgiving consequences. Those consequences can erode the foundations of the original success.

I am not predicting anything, I am just saying that lying to your customers about emissions by senior management may come back to bite them, and bite hard. You are right in thinking the stock price since ground zero has recovered, but not all stock holders own the car represented. The environmental view by the customers will tip the scales when buying a Porsche vs a cherry red Roadster. Besides who does not want to say a copy of their car is enroute to Mars ~ I mean, really. Also, while made in America means little today, again who does not want to claim their car was made in America?

My experience with three new VWs since 1968 have turned me away from ever buying another German made car. The emissions scandal was, as the old saying goes, icing on the cake.

Edit ~ I did not learn the language, German, because my brain does not work that way. My wife on the other hand spoke fluently four different languages when we met, and kept my butt out of the fire on many an occasion over the years. FYI ~ I was weaned on German beer, and could easily order all I could drink using both the German language and hand signals. When stationed stateside I refused to drink America beer, until microbrews began filling the gap. I just have had a hard time getting the idea of Rocky Mountain goat pee out of my head

 

[ValueAnalyst]

Here's something interesting which seems a bit beyond vaporware. Apologies if already posted.

CES 2018: Byton's Electric SUV Is the Car of the Future

Edit: Ugly and cell phone health benefits seem just a marketing gimmick which doesn't match Tesla's approach.

Interesting article. The part about controlling functions with hand motions and voice commands makes me wonder how soon before Tesla introduces voice control of most functions that in the M3 and MY will require fiddling with the touch screen. It seems nuts that a powerful software company like Tesla (that's making great progress on self driving) can't easily do voice command as well as Amazon and Googles home voice recognition devices. I've read there is some early voice command with M3, but it sounded like it was small in comparison to all the functions that cannot yet be voice controlled.

I think Model Y's price will open eyes. I would expect the same $35,000 base, but cheaper options, and maybe even EAP/FSD included.

So Model Y at low $40k's ASP by 2020/21 vs. Byton's electric SUV may not even be competition.

 

[EinSV]

US is not Germany. We have a very rich history of letting companies fail and GM + Chrysler should have been left to fail. I believe the government had a hand in the Chrysler deal as well. Now maybe it was smart for the government to step in and help, but we will never know now. I am a fan of what Chrysler has been able to do. Their cars are not horrible and the Pacifica PHEV is pretty cool. If the battery was twice as big, I would be all over it. Could get there in a few years.

It is true that the US is not Germany, but when things start going south in a hurry the previously unimaginable can become necessary. IMO, the entire car industry is about to go through a period of mass upheaval where all bets are off. We shall see how it unfolds ....

 

[Reciprocity]

That restaurant idea though.. I mean. It has some hidden value. Tesla has 1000 supercharger locations worldwide and growing quickly. Some type of food/drink and convenience store items at the minimum and higher end coffee shop and food and entertainment at the bigger stations, where there is a captive audience. Hell, Tesla could stream movies into car, like box office movies (maybe the reason for switching to horizontal screen?) Could also have information about Solar and Storage and pretty much anything else Tesla is doing. No clue how to value it, and a partner/rev share would be best. But there are some opportunities. Maybe its a bad idea because charging is going to get faster, but no matter what, the convenience factor alone of having items for sale would be useful even if you can charge in 15 minutes..

 

[madodel]

It's probably backed by Chinese investors. Those sort of "healthy living / lifestyle" type marketing feels very targeted at middle / rich class Chinese. Lots of "smart" "healthy" gimmicky tech products coming out of there lately, they apparently do well in China (or so I assume, since they seem to keep coming out of the woodwork) but... it's not a style of marketing / features that would sell well here, unless their buyers just want an EV and all other reasonable featured production is tapped out still (i.e. Model 3 demand greater than supply, and if this Byton lives up to it's range and charging hype might be seen by some as a better option than a Bolt). The technical features touted (fast charging, range, level 3 highway autonomy) would be overshadowed for most in the US by the various design choices.

Not sure if it has already been posted but BBC has an article on the Byton that says it is being financially backed by the Chinese. They only allowed the author to drive in their warehouse, and stated metrics are all pretty much subTesla at this point. Looks like they are pinning it to being close enough to Tesla standards to be competitive.