General Discussion: 2018 Investor Roundtable

[mongo]

Does everyone understand that the price for a performance M3 is the same as a 2012 Model S 40? Where is the cheaper version? After 6 years it's still not here....and I'm the strongest of longs....just ****ing mix in SR with LR after hitting 5k a week, which is now.

However, the 3 has about twice the pack size and twice the motors, along with AP hardware. SR non PUP will come...

These are the facts:

-Tesla promoted a 35k version in 2016
-Tesla screwed up which pushed everyone back
-Tesla keeps moving the goal post for the SR version (jan-mar, then late spring, then late 18, now possible early 19)

I understand the frustration, but they did also pull 3 production timing way forward due to reservation denand.

Unbundling options however carries a risk. It explodes the number of different configurations which creates difficulties for both manufacturing and logistics. There is a reason they started with a strict configuration schedule. It's not clear to me what changed lately to reduce that risk. Rather I think that knowledge about what people pick made Tesla decide that the rewards of running that risk are high enough (ie, more people will pick options that they wouldn't if they had to take them as a bundle).

At this point, they may be parts contained on some options (like white). If GA4 is P only, handling the two different option groups (white/black) and (P PUP vs PUP) is no so complicated.

 

[Alketi]

2) Re-adjusting prices on the Model 3 is a good thing and likely based on marketing feed back from earlier invites. It optimizes demand for a higher mix. Unbundling options however carries a risk. It explodes the number of different configurations which creates difficulties for both manufacturing and logistics. There is a reason they started with a strict configuration schedule. It's not clear to me what changed lately to reduce that risk. Rather I think that knowledge about what people pick made Tesla decide that the rewards of running that risk are high enough (ie, more people will pick options that they wouldn't if they had to take them as a bundle). Overall the price adjustments will come down to a small price cut. Shorts will say it's because demand is an issue, bulls will say it's because margins are rich. Neither can claim thruth based on public information but nevertheless they will do anyway.

You need to take a step back and look carefully at what was unbundled.

The screenshot is below.

Of these:

-- 18" & 20" wheels were both to be offered previously. The 20" just appeared to be "free". The 18" wheels are the same ones used on other Model 3s. Verdict: No change.

-- Carbon fiber spoiler. This was previously said to be installed at the service center. Verdict: No change.

-- Top speed increase. Software unlock. Verdict: No change.

-- Aluminum pedals. Recall that Elon answered Ryan McCaffrey saying he thought they would be able to offer these. And then later confirmed that they would be able. Of this bundle, this is the only item that requires any change to planned logistics or manufacturing and it was clearly done after some consideration. Verdict: Change

So worrying about unbundling misses the bigger picture that by dropping the Performance entry price by $11K ($6K drop and unbundling another $5K) the Performance Model 3 is now playing head-to-head with the BMW M3, which was exactly how it was meant to be. This car will convert a significant amount of those AWD customers who wanted more performance but felt $78K was out of reach — and the added complexity to get there is constrained to some aluminum pedals.

 

[avoigt]

If the supplier's terms are net 60, and you sell the car built with the parts on the 59th day, is there any financing or capital involved?

Definitely a great thing that they have this terms with suppliers no doubt.

More important and as stated the big challenge is not the tied up capital but the "whip saw effect" and what he causes in production.

... but answering your previous point we all know we are not yet CFP and even in that situation described it has an accounting effect. Sound odd I know!

As a company you work with a so called internal interest rate that does not need to be like the one that comes from the market. You have and do evaluate all parts of production and other based on the internal interest rate regardless if the supplier needs to be paid rather soon or rather late. Sounds strange but this are booking rules that usually apply (unless Tesla is using others than used in the industry which may or may not be the case) apply.

I fully agree of course that its good for Tesla as such that they have negotiated favorable terms with the supplier. But these are two different factors. The one is the real parts the other accounting which you see reflected in the balance sheet. Thats the number the market looks at.

 

[wdolson]

The tweetieworld is going bonkers with Mr Musk’s “300,000 lb” towing capacity response.

I hope it is only the giggledroolers, and not Musk, who are unaware of the strict capacity restrictions amongst “light weight” trucks - ie, what we refer to as pickups. Get beyond certain capacities and you’ve limited your sales to CDLs only.

Not to mention that TSLA would have to be, oh, around $9999/sh in order for mere mortals to be able to afford the insurance.

BUT - in the same fashion that Charles Atlas could swim around Manhattan Island towing a barge, and a Model X could pull a Boeing 7X7 (or was it an A3X0?), and I can push a building...given the right ice conditions....that 3E5 number can be worth no more than the electrons wasted typing it.

How long after the Tesla pickup hits the streets to where we see YouTube videos of Tesla pickups towing large trailers blowing away supercars in drag races?

 

[mongo]

Definitely a great thing that they have this terms with suppliers no doubt.

More important and as stated the big challenge is not the tied up capital but the "whip saw effect" and what he causes in production.

... but answering your previous point we all know we are not yet CFP and even in that situation described it has an accounting effect. Sound odd I know!

As a company you work with a so called internal interest rate that does not need to be like the one that comes from the market. You have and do evaluate all parts of production and other based on the internal interest rate regardless if the supplier needs to be paid rather soon or rather late. Sounds strange but this are booking rules that usually apply (unless Tesla is using others than used in the industry which may or may not be the case) apply.

I fully agree of course that its good for Tesla as such that they have negotiated favorable terms with the supplier. But these are two different factors. The one is the real parts the other accounting which you see reflected in the balance sheet. Thats the number the market looks at.

Are you referring to the quick ratio which includes the accounts payable for the inventory on the expense side, but not the inventory itself on the asset side?
I'm trying to nail down whether there is a real cost difference to Tesla to having parts on the shelf for say 10 vs 20 days. In my mind it's like paying for something on my credit card at the beginning of a statement period. As long as I pay the balance before the bill is due, I get almost 2 months free financing.

I was working at a teir 1 through the 2008 recession, so I understand whip saw (also deal with it setting up embedded control loops). I'm guessing Tesla has lots more parts inventory than they want currently. Even more reason to get production going as fast as possible for whatever versions they are able to build. The excess buffer will hopefully allow a cleaner ramp rate going forward for the suppliers.

 

[schonelucht]

You need to take a step back and look carefully at what was unbundled.

Thanks, good to know. I don't have first hand knowledge of the configurator and assumed everything was now unbundled. Is premium interior still a requirement for ordering?

 

[avoigt]

Are you referring to the quick ratio which includes the accounts payable for the inventory on the expense side, but not the inventory itself on the asset side?
I'm trying to nail down whether there is a real cost difference to Tesla to having parts on the shelf for say 10 vs 20 days. In my mind it's like paying for something on my credit card at the beginning of a statement period. As long as I pay the balance before the bill is due, I get almost 2 months free financing.

I was working at a teir 1 through the 2008 recession, so I understand whip saw (also deal with it setting up embedded control loops). I'm guessing Tesla has lots more parts inventory than they want currently. Even more reason to get production going as fast as possible for whatever versions they are able to build. The excess buffer will hopefully allow a cleaner ramp rate going forward for the suppliers.

Quick answer: agree to the second point!

The first one is different. I talk about accounting rules.

 

[LordAstinus]

Vetting Tesla's Latest Production Facility - Tesla, Inc. (NASDAQ:TSLA) | Seeking Alpha

 

[lklundin]

300,000lb towing capacity!! Who needs the semi?!

Elon Musk on Twitter

Since the towing capacity to a large extent comes from the instant torque, I strongly feel that Tesla should commit to offering tow-bars on all their vehicles. A total weight limited to e.g. 3.5t usable only for shorter distances would still make a large difference.

 

[CorneliusXX]

One reason for Elon Musk lamenting that Tesla had to go public is that they have less freedom. Correct me if I am wrong, but I believe Tesla is legally bound to act in the best interest of their shareholders. Which means to sell the most profitable M3 version for at least long enough to bring them out of the woods. And if you try to look beyond your own personal interest in the 35 k$ version, I expect you will see the sense in this.

There is a lot of latitude in "acting in the best interests of shareholders". It really is closer to "actively working against the best interests of shareholders" that will get you into trouble.

As an example, Elon could state that he believes selling to his core clients (day one reservation holders) regardless of price is the best strategy in the long run and this would be very difficult to disprove.

 

[lklundin]

As an example, Elon could state that he believes selling to his core clients (day one reservation holders) regardless of price is the best strategy in the long run and this would be very difficult to disprove.

In this discussion I am aware of my own potential bias due to my personal interest in the M3. But as a day 1 (or is it 2?) reservation holder, I can't disagree.

 

[Johann Koeber]

Meanwhile in other news...

German carmakers have to park a lot of cars that cannot be sold at this time because they do not comply. VW is using the Berlin Airport (under construction) BER as a giant parking lot.

Pannenflughafen BER wird VW-Parkplatz

 

[wnorris]

1) The pickup truck is a distraction. Not sure why Elon felt the need to bring it up now. Such a product is years away (and behind a line of at least three other vehicles, all delayed already from our more rosy timelines not even 6 months ago). If it isn't an effort to prop up the stock then it looks suspiciously timed like one.

Some thoughts on this as I was pleasantly surprised to see the Twitter pick-up exchange.

Elon is deeply involved in product design for Tesla. Reaching out to his followers does a couple things:

1) It brings his followers (potential future customers) into the product design discussion. Whether he uses an idea pulled from a Twitter comment in the final design is unlikely, but it generates excitement through participation. What other car company does this?

2) It shifts some of the narrative from the minutiae surrounding Model 3. I noted in another thread that very soon the narrative will shift from Model 3 on to other issues. This is a good start toward that.

3) It needed to be done especially since there is talk about a China and Germany GF. Tesla should be determining a product manufacturing mix for these facilities now if they have not already done so.

These are quick thoughts, but I am sure a 4) could be to generate buying support for the stock. I hesitate to say that as the pick-up design has to be done soon anyway. My 'T' colored glasses could be clouding my view on this though.

 

[LordAstinus]

The shorts moving the goalposts... TMC member @K_Dizzle contribution liked by Elon himself. Good stuff!

Elon Needs Our Help

 

[Mich]

Somehow there is a reason why there are multiple threads in this forum. If someone decides not to read all threads there might be a reason for it, if everyone crosspost every post the system doesn't make sense any more...

 

[Crowded Mind]

Thanks, good to know. I don't have first hand knowledge of the configurator and assumed everything was now unbundled. Is premium interior still a requirement for ordering?

Yes, no updates on standard interior.

 

[SPadival]

Where is Trip Chowdary when we need him (.. no .. not really).

Loup keeps vigil outside Fremont factory.

Observations from Fremont on Model 3 Production | Loup Ventures

 

[mongo]

Quick answer: agree to the second point!

The first one is different. I talk about accounting rules.

Thanks!

Where is Trip Chowdary when we need him (.. no .. not really).

Loup keeps vigil outside Fremont factory.

Observations from Fremont on Model 3 Production | Loup Ventures

They seem to have some wrong assumptions (so the count may be higher than their report)...
Open vs closed carriers
Cars per carrier
Which plant exits are used

 

[Stretch2727]

Looks like Tesla is confirming (maybe inadvertently) the tax credit through the 4th quarter. Config page shows the tax credit savings for the RWD/AWD/P order with deliveries in 3-5 months so this must mean the full tax credit will be in place through the 4th qtr as expected?

 

[avoigt]

Where is Trip Chowdary when we need him (.. no .. not really).

Loup keeps vigil outside Fremont factory.

Observations from Fremont on Model 3 Production | Loup Ventures

Thanks!



They seem to have some wrong assumptions (so the count may be higher than their report)...
Open vs closed carriers
Cars per carrier
Which plant exits are used

out 5K #TeslaModel3 per week. @Teslarati

10:23 PM - 26 Jun 2018

Raj Mathai‏Verified account @rajmathai
The future of #Tesla hinges on this gigantic tent. Overflow production line added in back lot of @tesla HQ. @elonmusk wants to pump out 5K #TeslaModel3 per week. @Teslarati


Elon Musk‏V
Replying to @rajmathai @Tesla @Teslarati

"No standard automotive solution could be built in time, so we created a new solution. It is working & has slightly higher quality than the more traditional general assembly line. Perhaps most surprising is that the total cost of production in the Sprung tent is lower."

It is working, higher quality, lower costs...... His tone does not sound like they will miss the numbers. It is working could be seen as a confirmation that the new GA is doing what it supposed to which is bringing them sustainably above the 5k/w level.