General Discussion: 2018 Investor Roundtable

[Rarity]

Outstanding post, thank you. Amazon or early Ford are the best comps for Tesla; huge CAGR, huge TAM, capital intensive, clear leadership.

The problem is that neither early Ford nor Amazon have experienced the extreme top-line growth rate that Tesla is experiencing right now.

It's important for folks to realize just how fast Tesla is growing its top line. I don't know of any real comparables. Nobody knows how to value this and so they talk about other, inferior figures of merit.

 

[RobStark]

If ICE investors want dividends, they can sell. That’s what an acquisition premium is for. They can use the money to buy Daimler, which has a higher dividend.

Just as easily ICE investors can tell BEV investors to sell if they want to save the world, that private companies exist to make profits for shareholders. Ford shareholders can sell F and buy Daimler stock right now if they so desire. So can GM shareholders.

BEV investors would not necessarily control this new company much less Elon.

Elon would control ~10% of this new company. Maybe Fidelity or some other large institution doesn't back Elon in a future shareholder fight.

 

[RobStark]

Maybe Tesla should buy Ford’s car factories for expansion since they have given up this market segment in North America.

Ford isn't idling any factories.

Where they made sedans they will now make crossovers and trucks.

 

[bhzmark]

watch for about a minute from about 34:45 (they’ve been talking about Chamath’s suggestion to buy Tesla’s convertible notes... leading into the on air moment you guys were talking about)

Brilliant. Who is that woman trying to cut him off while he is telling the truth about chanos?

 

[mongo]

Current OEMs have nothing Tesla wants, instead they have:

• Union contracts
• Dealership contracts
• Pension/ retirement obligations
• ICE/ transmission engineering expertise
• Supplier contracts
• Debt
• Release engineers (basically supplier minders)
• ICE vehicle lines
• Management
  
• Office space

At most, Tesla needs an empty building in the right spot for their next GF. If they purchased an OEM they would end up laying off ~90% of the engineering staff followed by 50% of manufacturing once they converted the lines. Good luck with that on the PR front.

If Elon wants some crazy street cred, buying the abandoned Packard plant, hauling it off or turning it into bricks (after checking for lead and asbestos), and putting up a factory there would do it... Still not as cost effective as building in say... Durand, MI...

(Some dramatic / literary license taken with the factoids)

 

[SPadival]

• ICE/ transmission engineering expertise

AKA stranded assets. As Chanos would say about Tesla, all this invested capital on ICE is going to zero.

 

[Boomer19]

Brilliant. Who is that woman trying to cut him off while he is telling the truth about chanos?

becky quick and joe kiernan
to thier left is andrew ross sorkin and then chamath speaking

worth watching whole video, pretty good

 

[WarpedOne]

At most, Tesla needs an empty building in the right spot for their next GF.

Tent.

 

[RubberToe]

The problem is that neither early Ford nor Amazon have experienced the extreme top-line growth rate that Tesla is experiencing right now.

It's important for folks to realize just how fast Tesla is growing its top line. I don't know of any real comparables. Nobody knows how to value this and so they talk about other, inferior figures of merit.

In the recent Fortune 500 Tesla moved up from 383 in 2016 to 260 in 2017. They had a box in the upper corner of one page stating it was the biggest jump of any company that year. I don't have the issue laying around anymore, but it may have been the biggest jump ever. 2018 revenue is going to be another big jump up the list.

RT

 

[electracity]

tsla could consider sell $10B 10 year convertible notes at 3% interest with conversion price $2000. That would be maximum 5m shares and less than 3% dilution. But after that, no more capital infusion forever.

$10B can be used for building three new GF at US, China and europe at same time. The US one could be at a right-to-work state on rusty belt. The yearly production rate for M3+MY+semi at end of 2020 could be 3 million plus 20* current size of tesla energy.

Imagine this growth rate.

No, they can't raise $10B. Why do you think that Tesla today is not in pre-production in China and Europe?

Part of the problem Tesla has currently is the overpriced stock. Capital markets likely don't like the conversion rate Tesla would offer on new convertible bonds.

 

[RobStark]

In the recent Fortune 500 Tesla moved up from 383 in 2016 to 260 in 2017. They had a box in the upper corner of one page stating it was the biggest jump of any company that year. I don't have the issue laying around anymore, but it may have been the biggest jump ever. 2018 revenue is going to be another big jump up the list.

RT

Fortune 500 Listing
Tesla

 

[electracity]

Of course not. Regardless of the current market cap, hardly anyone (percentagewise) would be satisfied with selling it for such a low amount or even double that amount. And you can bet Elon wouldn't sell for any amount

If the valuation of Tesla at $60B was deep then there would be a large appetite for conversion bonds representing a SP of $300+. Issuing more equity directly would also be easy.

If you want to claim that Tesla is worth $60B or $120B you need to explain why Tesla isn't starting production in China and Europe today.

 

[mongo]

If you want to claim that Tesla is worth $60B or $120B you need to explain why Tesla isn't starting production in China and Europe today.

Because duplicating manufacturing lines they are still working on is a dumb idea.

 

[Bobfitz1]

All of GM’s plants are under UAW contract, right? That’s the big drawback I’ve seen to acquiring either Fiat Chrysler or Ford. I don’t consider that a dealbreaker, considering all the cash and capacity Tesla would acquire, but it’s a negative.

I was thinking of Honda, actually. I believe their Ohio, Indiana, and Alabama plants are all non-union, but I’m not 100%. And during the last recession, unlike most automakers, they stayed profitable. Their profits took a beating, for sure, but they didn’t lose money.

Since the tensioned enclosures used now in Fremont seem to go up very fast and can be heated, cooled, moved, etc.
Why not use some number of them to assemble a new plant that is not too far from GF1. I.e. no farther than Fremont is from GF1.
If the tensioned structures don't suit some of the factory needs, those portions could be conventional structures.

 

[aubreymcfato]

Maybe I'm dumb, but I really can't see ICEs cars become totally self-driving: you want a computer to do that, meaning an EV.

Re Amazon:
I like the analogy with Amazon up to a point: I actually think that at the end of the day Amazon is detrimental to the world, while Tesla is not. Amazon wants to become a monopsony, buy everything and resell it itself. The control over its employees is absolute (down to seconds) and I don't think they are granted stock options. Bezos wants to disrupt/destroy every business around him, and be the absolute dictator.
Even Elon says that Jeff "really want to become King Bezos", and "it's not the most fun person to be with"...

I agree with Tesla not having unions as long as this is better for both the company and the employees, and I decided to trust Elon when he said that this is so (also, he promised a more secure working environment, and allegedly this is working).
I understand that as an European I have a different perspective that most Americans, but labor unions really improved life of millions (up until they didn't anymore, and became another corruption/burocracy layer).
I think Tesla mission is important for everyone, and this gives them some slack in pretending more from employees. I also think that this mission gives them a lot of purpose, which is good: Tesla is a collective enterprise, and Elon is often full of pride and praise of his teams.

 

[Doit]

...

“From a bond perspective, we find the credit extremely weak and deteriorating,” he wrote in what would be the first of several scathing reports on Amazon over the next eight months. Suria said that investors should avoid Amazon debt at all costs and that the company had shown an “exceedingly high degree of ineptitude” in areas like distribution. The haymaker was this: “We believe that the company will run out of cash within the next four quarters, unless it manages to pull another financing rabbit out of its rather magical hat.”`

`For the next eight months, Ravi Suria continued to pummel Amazon with negative reports…those who felt the coming wave of changes threatened their businesses, their sense of the natural order, even their identities, were likely to embrace the sentiments of Suria and like-minded analysts and believe that Amazon.com was nothing more than a crazy dream built on an irrationally exuberant stock market.

Gem, by somebody from the highly reputable financial institute [no sarcasm intended] Lehman Brothers

 

[Esme Es Mejor]

Earnings have been growing 50%/year?

Earnings are growing at an infinite rate this quarter.

 

[TradingInvest]

In my view, people who worry about Model 3's demand don't understand the true advantages of the car. The analyst downgraded TSLA today either don't understand it, or is trying to manipulate the stock, could be both.

Gasoline prices in EU countries are much higher than in U.S. Using the data gathered in April, EU price was generally around $6~$7 per gallon. China is 47% higher than in U.S., although China has one of the lowest price in the world. You can see how cheap gasoline is in the U.S.

While my Model 3 can save me $10k on gasoline in 10 years. People in other countries could save even more, depends on driving milage. A Model 3 as a Taxi/DiDi in China can save $15k on gasoline per year. That's $45k savings in 3 years. Tesloop already showed EVs do save a lot each year. Except Taxi/DiDi require a lot more cars than Tesloop.

Given this background, why would Tesla have trouble to sell 0.25 million EVs when the world total vehicle demand is 80 million? I don't think these bearish analysts realize the Model 3 is competing with gasoline/diesel vehicles. They still think EV is just a niche market. The demand for Tesla's cars will soon reach millions a year. I don't see any path for this to NOT happen.

 

[TradingInvest]

I don't use the past to predict future. I look at what exactly happened and try to predict what will happen based on the details. Relying on spreadsheet data is not a good way to predict the future.

Most shorts don't understand why there were big losses and they won't understand why profit is coming. Tesla is rapidly becoming the most capable car manufacture in the world. Take a look how they produce the car seats. They are producing thousands of seats per day in their own factory, through automated production lines. These seats are heated, 12 way power adjustable. It's not easy to automate the production, but once they are done, they are so efficient. Pretty soon people will realize all the spending was well worth it. Duplicating this kind of lines will cost much less than the first time. My rough estimate is the second line will cost 1/3 money and time compared to the first line. All the R&D is already done. I just keep accumulating cash and keep adding shares whenever I want.

 

[Curt Renz]

CNBC continues to react to the CEO of non-advertising Tesla criticizing the media: Tesla CEO Elon Musk versus the media: The top five moments

They may be baiting Elon to sit with them for an interview. He'd likely attract far more eyeballs than Chanos has.