General Discussion: 2018 Investor Roundtable

[Drumheller]

I thought I recall a statement in an earlier conference call that said 10k / week was no longer a goal for 2018 and was pushed to 2019. I'm surprised to see so much discussion about it as it seems to me that it was stated already earlier this year.

 

[Dwdnjck]

One thing I remember from two conference calls back was that they would need significant investment to ramp from 5000 to 10000 model three. They apparently are delaying these expenditures, while attempting to ramp to 7000 without spending so much money.

 

[ZsoZso]

I thought I recall a statement in an earlier conference call that said 10k / week was no longer a goal for 2018 and was pushed to 2019. I'm surprised to see so much discussion about it as it seems to me that it was stated already earlier this year.

AFAIK, the 10k/week by end of 2018 was the goal at the same time when 5k/week by end of 2017 was also a goal. Since the 5k/week shifted by 6 months, it is fairly logical that the 10k/week also shifts.

 

[neroden]

So, I read the recent Bloomberg article. Slanted very negative but the reporter was honest and did give Tesla's response for everything. Tucked into the article is the statement that Tesla has a *working* fully automated front seat line.

I think this fact has been lost in all the hoopla about automation which didn't work out. Tesla has, in actual fact, automated a bunch of stuff which nobody else has automated. They now have an advantage over the competition.

The same article has a comparison of the number of workers at Fremont to the number of workers at NUMMI; this is dishonest because Fremont does a lot more of the car construction than NUMMI did (nobody added up the subassembly plant employees who supply NUMMI). There's a similarly dishonest comparison of number of human work-hours to do *final assembly* of a Toyota with number to do *full construction* of a Tesla.

 

[neroden]

The main problem with the mid-2019 10k/week target is just the CapEx spends on other projects.

We have to assume that most of the Q3/Q4 profits, should they happen, will be going to the 1.2B in debt payments due before March 2019 and scaling the Model 3 to 10k/week.

This comes at the expense of other projects. Customers are complaining that their powerwalls are getting delayed. There are still only a handful of solar roof customers. The Semi, Model Y are both projects with significant capital requirements (they weren't even mentioned in the Q1 letter). They also need to figure out how to expand spare parts and services, which will also have some CapEx.

It's weird that Tesla isn't raising. They're setting back several of their ambitious projects by not doing so.

Never raise capital on bad terms if you can avoid it.

 

[Mader Levap]

Never raise capital on bad terms if you can avoid it.

I think FirebirdAlpha simply want Tesla to raise capital so he can criticize Tesla for it. Damned if you do, damned if you don't.

 

[RobStark]

Evatran founding CEO out, takes job at Tesla - Richmond BizSense

Evatran is a wireless EV charger company.

 

[2virgule5]

The same article has a comparison of the number of workers at Fremont to the number of workers at NUMMI; this is dishonest because Fremont does a lot more of the car construction than NUMMI did (nobody added up the subassembly plant employees who supply NUMMI). There's a similarly dishonest comparison of number of human work-hours to do *final assembly* of a Toyota with number to do *full construction* of a Tesla.

In fairness to the journalists they’ve added Tesla response too, aligned with yours obviously:

“Today, Tesla has about 10,000 workers at its Fremont plant. GM and Toyota had less than half that and produced more than 400,000 cars at the plant’s peak in 2006. Tesla argues that a larger workforce is justified given that more of the car is manufactured in-house, ...”

 

[Zaxxon]

Interesting podcast from Gali at Hypercharge arguing that Tesla is making a big mistake by choosing to delay investments for 2 quarters in order to show profitability in Q3/Q4.

I don't necessarily agree, as at some point Tesla showing that they can live off their own business is a good thing. But I also don't disagree that by choosing this path, they are pushing out future growth and foregoing a larger cash cushion while we're in a positive market. As someone who wants Tesla making millions of cars per year sooner rather than later, I'd be all for more capital infusion now if it meant they can keep pedal to metal more than they can by pushing another raise to 2019.

 

[tander]

I thought I recall a statement in an earlier conference call that said 10k / week was no longer a goal for 2018 and was pushed to 2019. I'm surprised to see so much discussion about it as it seems to me that it was stated already earlier this year.

One thing I remember from two conference calls back was that they would need significant investment to ramp from 5000 to 10000 model three. They apparently are delaying these expenditures, while attempting to ramp to 7000 without spending so much money.

Maybe I didn't get the memo but I thought they had reiterated the 10k fairly recently. Maybe it was originally 10k for model 3 then they shifted to 10k for 3+x+s and I didn't catch it? Either way I guess it doesn't really matter that much. I guess slowing the ramp might be sort of a good thing if that helps them avoid dinging margins. 7k a week at 20% margins is probably better than 10k at 5% or whatever. Kind of a bummer though because 8-9k a week puts in the range of best selling car/suv, but I guess they wouldn't make that claim based on weekly or monthly production anyway.

 

[jelloslug]

In fairness to the journalists they’ve added Tesla response too, aligned with yours obviously:

“Today, Tesla has about 10,000 workers at its Fremont plant. GM and Toyota had less than half that and produced more than 400,000 cars at the plant’s peak in 2006. Tesla argues that a larger workforce is justified given that more of the car is manufactured in-house, ...”

Nummi was an assembly only plant. Tesla assembles, stamps sheet metal, winds motors, builds seats, builds battery packs, and does R&D.

 

[RobStark]

Kind of a bummer though because 8-9k a week puts in the range of best selling car/suv, but I guess they wouldn't make that claim based on weekly or monthly production anyway.

Only if the entire production went to the USA.

 

[mongo]

Evatran founding CEO out, takes job at Tesla - Richmond BizSense

Evatran is a wireless EV charger company.

Boring Pod chargers?

 

[dhrivnak]

It would be simple to go from 5k to 10k if you just doubled all of your manufacturing lines. Tesla is trying to determine which lines can be sped up and optimized first and which have to be duplicated in order to minimize CapEx. My recollection is that they think the 2nd 5k may only need 60% of the CapEx it took for the first 5k.

Except that the factory is out of space. There is no room to double what they have. They will likely need to focus on debottlenecking and improving line speed.

 

[sub]

I think FirebirdAlpha simply want Tesla to raise capital so he can criticize Tesla for it. Damned if you do, damned if you don't.

While also implying Tesla isn't raising capital because nobody will give it to them.

 

[Krugerrand]

I still hope he learns to avoid this mistake. For Model Y, I’d like him to say: “Here’s when we plan to start. Here’s the steady state we’re planning to achieve. We’re going to get there as soon as possible.” No public timelines, no public projections, just updates once milestones are achieved.

Of course, I invest with the assumption that he’ll keep laying out timelines.

If he said that, the media and shorts would spin it to be negative. It’s a huge rock and hard place. So I think he should say whatever he feels like.

 

[Opus BC fan]

Interesting podcast from Gali at Hypercharge arguing that Tesla is making a big mistake by choosing to delay investments for 2 quarters in order to show profitability in Q3/Q4.

I don't necessarily agree, as at some point Tesla showing that they can live off their own business is a good thing. But I also don't disagree that by choosing this path, they are pushing out future growth and foregoing a larger cash cushion while we're in a positive market. As someone who wants Tesla making millions of cars per year sooner rather than later, I'd be all for more capital infusion now if it meant they can keep pedal to metal more than they can by pushing another raise to 2019.

That expansion delay would be an excellent reason to fund FUD and coordinate attacks (if I were an ICE manufacturer or oil company). Any delays favor the status quo.

 

[22522]

Evatran founding CEO out, takes job at Tesla - Richmond BizSense

Evatran is a wireless EV charger company.

She knows a lot. They were before the SAE standard, which may have had a political member or two... Remind me not to buy a BMW.

 

[generalenthu]

Interesting podcast from Gali at Hypercharge arguing that Tesla is making a big mistake by choosing to delay investments for 2 quarters in order to show profitability in Q3/Q4.

I don't necessarily agree, as at some point Tesla showing that they can live off their own business is a good thing. But I also don't disagree that by choosing this path, they are pushing out future growth and foregoing a larger cash cushion while we're in a positive market. As someone who wants Tesla making millions of cars per year sooner rather than later, I'd be all for more capital infusion now if it meant they can keep pedal to metal more than they can by pushing another raise to 2019.

Gali is unfortunately misinformed and is spewing nonsense. See my reply to him below. Feel free to like / RT.

Generalenthu on Twitter

 

[Esme Es Mejor]

by choosing this path, they are pushing out future growth and foregoing a larger cash cushion while we're in a positive market. As someone who wants Tesla making millions of cars per year sooner rather than later, I'd be all for more capital infusion now if it meant they can keep pedal to metal more than they can by pushing another raise to 2019.

Slowing down now may actually be key to building millions of cars faster. If 3 quarters of profits & being added to the S&P 500 cause a significant bump for their market cap (say, $80-100B), it becomes much easier to buy one of the legacy automakers.

Purchasing a legacy automaker would get Tesla massive production capacity & a substantial amount of cash (more than $10 billion in most cases). ICE production lines could be converted to EV production lines as fast as Tesla can build out battery capacity.