General Discussion: 2018 Investor Roundtable

[bdy0627]

“Tesla Is Having Difficulties Paying Their Bills”: Is Wall Street Ready to Punish Elon Musk?

I thought most of the debt was in the hands of Elon and friends and the plan is to have enough cash from sales going foreward to cover this debt. Other than reiterating Quadir’s concerns is there any meat to this piece?

A couple of pertinent quotes from that article:
"Quadir told Bloomberg yesterday that Tesla was “between a rock and a hard place” because it needs more capital—some say as much as $2 billion more before long"
“It’s becoming more and more apparent that Tesla is having difficulties paying their bills,” Quadir said. “I saw a lot of the same with Valeant.”
"Part of what the debt market worries about with Tesla are three looming convertible-debt payments that are coming due in the next 13 months. If the Tesla stock were trading higher than the current price, the debt holders would convert the debt into equity and the problem would disappear. But, for instance, the $920 million convertible-debt maturity due in March will have to be repaid using some of Tesla’s around $2 billion in cash—about half of what it had a year ago—unless the Tesla stock is trading at $360 per share, and that seems increasingly unlikely."

It still seems really strange that no one other than a handful of bullish analysts are pointing to the positive cash flow occurring now and what that means for Tesla paying off these looming debts. I would think it would at least be debated but it's being ignored, almost like the narrative is being manipulated for some reason...$$$$$$$$$$$$$$$$$$$$$$$

 

[shrspeedblade]

I would love to see Tesla & Ford partner with a pick up truck before Tesla comes out with one as I was a Ford F-150 kind of guy before I got my MS. I think Bill Ford is somewhat of an environmentalist and a partnership like that along with access to the SuperCharger network is really something that would jumpstart Ford’s stock.

I agree, Ford needs to do something radical to turn the company around and it would instantly put them at the forefront of the market. With Tesla's battery/motor tech and Ford's know-how and ability to make trucks it could be a mutually beneficial relationship that would put them years ahead of any competition. If Tesla goes it alone I think it adds years to production for other companies to span the gap. They're still ramping 3 with Y and the Semi to follow, not to mention a S/X refresh in the next few years.

Most importantly it is completely in line with Tesla's mission. I wonder how much pain Ford will have to endure before they'd swallow their pride enough to entertain the idea?

 

[brian45011]

It still seems really strange that no one other than a handful of bullish analysts are pointing to the positive cash flow occurring now and what that means for Tesla paying off these looming debts

It helps to run scenarios through spreadsheet models.

 

[RobStark]

I wonder how much pain Ford will have to endure before they'd swallow their pride enough to entertain the idea?

GM/Ford have asked current Silverado/F150 owners if they want or would consider a BEV truck. Almost a (wo)man they say absolutely not.

Ergo, GM/Ford don't even consider this a realistic possibility.

It is going to take Tesla and/or Rivian/Atlis taking Detroit 3 pickup truck market share at a rapid rate for them to consider this.

(Yada) If you asked a horse owner in 1910 what ideal transportation device they would want in the next 10 years they would have answered a faster horse. Yada Yada Yada.

 

[AWDtsla]

GM/Ford have asked current Silverado/F150 owners if they want or would consider a BEV truck. Almost a (wo)man they say absolutely not.

Out of any product, I doubt the demand for a BEV pickup. I hope they to this last, if anything. When they can afford a failure.

 

[ThereAre4Cars]

It would be an interesting strategy to cede the electric pickup business in exchange for some productive assets or funding now. I have no idea how that exchange is pulled off in practice but I don't think that vehicle format is a particularly *strategic* component of the plan, which will migrate more and more every year to being autopilot centric.

 

[30seconds]

Tesla doesn’t need to get to positive cash flow levels high enough to retire the full debt load.

Just enough positive cash flow to roll over the debt at a lower cost or amount while still ramping the business.

Really the “lower amount” part of the last sentence is more of a nice to have than a must have.


Tl;dr. Increasing positive free cash flows while growing a business that doesn’t need additional financing is a very good thing to capital markets.

 

[Intl Professor]

Tesla doesn’t need to get to positive cash flow levels high enough to retire the full debt load.

Just enough positive cash flow to roll over the debt at a lower cost or amount while still ramping the business.

Really the “lower amount” part of the last sentence is more of a nice to have than a must have.


Tl;dr. Increasing positive free cash flows while growing a business that doesn’t need additional financing is a very good thing to capital markets.

Deepak and Elon are very good at this kind of a decision. I don't know what the penalty for the rating of the bonds is and, of course, we are in a higher interest environment in general now. May not make sense to rollover the debt. Just my 0.02.

 

[BioSehnsucht]

I agree, Ford needs to do something radical to turn the company around and it would instantly put them at the forefront of the market. With Tesla's battery/motor tech and Ford's know-how and ability to make trucks it could be a mutually beneficial relationship that would put them years ahead of any competition. If Tesla goes it alone I think it adds years to production for other companies to span the gap. They're still ramping 3 with Y and the Semi to follow, not to mention a S/X refresh in the next few years.

Most importantly it is completely in line with Tesla's mission. I wonder how much pain Ford will have to endure before they'd swallow their pride enough to entertain the idea?

Here's an idea: Tesla designs the truck platform (including common frame and powertrain), with some input from Ford (as they have experience in truck platforms) but ultimate engineering decisions by Tesla (because powertrain integration). Ford builds the "skateboard" sans powertrain. Ford gets to slap a F150 style body or whatever they want on it, buying powertrain from Tesla (this of course assumes enough scale up of GFs to support both Tesla and Ford). Tesla buys some amount of skateboard production from Ford to then put their Tesla style body on. This helps save at least part of a Ford factory, gets their foot in the door on EVs, and also helps the mission of hastening the transition to sustainable transport. Maybe it even financially works in Tesla's favor - depends on many factors such as whether they eventually build and ramp their own skateboard production and stop buying Ford's (which would let Ford build more of their own trucks), cell and module/pack production capacity, who gets paid by whom when, etc.

But it would be interesting. And you could spin some good PR from it, a collaboration of America's two longest running car companies (GM doesn't get that claim on account of bankruptcy, etc) to build better trucks for a better America, yadda yadda.

 

[BioSehnsucht]

GM/Ford have asked current Silverado/F150 owners if they want or would consider a BEV truck. Almost a (wo)man they say absolutely not.

Ergo, GM/Ford don't even consider this a realistic possibility.

It is going to take Tesla and/or Rivian/Atlis taking Detroit 3 pickup truck market share at a rapid rate for them to consider this.

(Yada) If you asked a horse owner in 1910 what ideal transportation device they would want in the next 10 years they would have answered a faster horse. Yada Yada Yada.

You can add Bollinger to that list, they recently announced the Bollinger B2 which is a truck built on the same platform as the Bollinger B1 SUV ("SUT"?), and about the only thing more "manly" looking than the B1 is a Humvee.

 

[RobStark]

You can add Bollinger to that list, they recently announced the Bollinger B2 which is a truck built on the same platform as the Bollinger B1 SUV ("SUT"?), and about the only thing more "manly" looking than the B1 is a Humvee.

I expect all the BEV pickups to start at $45k-$50k.

Bollinger SUT is starting at ~$65k IMO and by Robert's own admission low volume. How high volume can you sell a brand new vehicle without any airbags?

At first Bollinger said they were going to contract out assembly now they want to do it themselves.

Rivian has factory with capacity for 250k units per year and $500M in the bank.

Atlis has a dream of matching Detroit. I admit they are no farther along than Bollinger but the aim is mass market.

Bollinger is cool guy niche market.

 

[bhtooefr]

GM/Ford have asked current Silverado/F150 owners if they want or would consider a BEV truck. Almost a (wo)man they say absolutely not.

Ergo, GM/Ford don't even consider this a realistic possibility.

It is going to take Tesla and/or Rivian/Atlis taking Detroit 3 pickup truck market share at a rapid rate for them to consider this.

(Yada) If you asked a horse owner in 1910 what ideal transportation device they would want in the next 10 years they would have answered a faster horse. Yada Yada Yada.

I wonder how they asked the question.

And, I suspect the overlap between the core pickup buying market, and people that are aware of what a Tesla actually drives like, is not large. I wouldn't be surprised if their perception of a BEV pickup was like this:

 

[avoigt]

GM/Ford have asked current Silverado/F150 owners if they want or would consider a BEV truck. Almost a (wo)man they say absolutely not.

Ergo, GM/Ford don't even consider this a realistic possibility.

It is going to take Tesla and/or Rivian/Atlis taking Detroit 3 pickup truck market share at a rapid rate for them to consider this.

(Yada) If you asked a horse owner in 1910 what ideal transportation device they would want in the next 10 years they would have answered a faster horse. Yada Yada Yada.

There is quite a struggle and side stepping of the incumbent industry happening.

Detroit does do what they did in the past, build SUVs and PickUp trucks in masses and hope that this EV thing is somehow delayed a decade or so until they have an answer to be able to compete. I believe thats pretty much a pipe dream.

European manufacturers instead build more PHEVs now and only a few BEVs with limited capacity. They put their smallest toe in the water.

The EU did not force them to comply with real world road emission tests and experts predict rightly that they are already today starting to cheat again with testing devices for PHEVs and ICEs that bend the reality into their narrative of emission compliance. By building more PHEVs they will claim to be more clean and compliant and again don't care about 10s to thousands of people who die every year because of toxic air.

Having said that its like they all turn around avoiding to go all in BEVs and leave the market wide open for Tesla.

Ain't see any real competition really.....

 

[bhtooefr]

I don't think this got posted: Oregon claws back $13 million for inflated solar tax credits

Looks like Tesla Energy got fined for SolarCity allegedly overstating costs and receiving more Oregon tax credits than Oregon believes they were entitled to.

 

[lklundin]

I would love to see Tesla & Ford partner with a pick up truck before Tesla comes out with one as I was a Ford F-150 kind of guy before I got my MS. I think Bill Ford is somewhat of an environmentalist and a partnership like that along with access to the SuperCharger network is really something that would jumpstart Ford’s stock.

I don't see how it could benefit Tesla' image to partner with a non-innovative incumbent like Ford.

Instead, Tesla can just choose among relevant surplus staff and production facilities as Ford implodes.

 

[RobStark]

World's largest car market risks historic drop as Chinese buyers waver

 

[1101011]

Here's an idea: Tesla designs the truck platform (including common frame and powertrain), with some input from Ford (as they have experience in truck platforms) but ultimate engineering decisions by Tesla (because powertrain integration). Ford builds the "skateboard" sans powertrain. Ford gets to slap a F150 style body or whatever they want on it, buying powertrain from Tesla...But it would be interesting. And you could spin some good PR from it, a collaboration of America's two longest running car companies (GM doesn't get that claim on account of bankruptcy, etc) to build better trucks for a better America, yadda yadda.

Sorta a modern version of NUMMI.

 

[BioSehnsucht]

I expect all the BEV pickups to start at $45k-$50k.

Bollinger SUT is starting at ~$65k IMO and by Robert's own admission low volume. How high volume can you sell a brand new vehicle without any airbags?

At first Bollinger said they were going to contract out assembly now they want to do it themselves.

Rivian has factory with capacity for 250k units per year and $500M in the bank.

Atlis has a dream of matching Detroit. I admit they are no farther along than Bollinger but the aim is mass market.

Bollinger is cool guy niche market.

Like Tesla, you don't have to ship high volumes to change people's thinking. Of course, volumes help, but even at low volumes something like B1/B2 will start to chip away at the anti-EV prejudice in the minds of (non-fleet - who understand TCO) truck owners. And even if it's not shipping yet, it is at least existing in prototype form that can be seen (even if only by website at the moment).

Of course, to meaningfully affect the world, you need volume, and for that Rivian and Atlis will be probably more important (since Bollinger doesn't seem to intend to go high volume). But I wouldn't rule out the halo effect for BEV trucks that something like B1/B2 can provide.

Rising tides, all boats, yadda yadda.

 

[BioSehnsucht]

Sorta a modern version of NUMMI.

I almost made that comparison, but it would probably not be a physical colocation of production but shipping powertrains one way and skateboards the other, between two separate facilities. So sort of a virtual, geographically separated NUMMI.

 

[MartinAustin]

Here's an idea: Tesla designs the truck platform (including common frame and powertrain), with some input from Ford (as they have experience in truck platforms) but ultimate engineering decisions by Tesla (because powertrain integration). Ford builds the "skateboard" sans powertrain. Ford gets to slap a F150 style body or whatever they want on it, buying powertrain from Tesla (this of course assumes enough scale up of GFs to support both Tesla and Ford). Tesla buys some amount of skateboard production from Ford to then put their Tesla style body on. This helps save at least part of a Ford factory, gets their foot in the door on EVs, and also helps the mission of hastening the transition to sustainable transport. Maybe it even financially works in Tesla's favor - depends on many factors such as whether they eventually build and ramp their own skateboard production and stop buying Ford's (which would let Ford build more of their own trucks), cell and module/pack production capacity, who gets paid by whom when, etc.

But it would be interesting. And you could spin some good PR from it, a collaboration of America's two longest running car companies (GM doesn't get that claim on account of bankruptcy, etc) to build better trucks for a better America, yadda yadda.

Love the idea... Ford needs to do it of course, but they probably won't due to corporate pride.

An announcement of that kind of collaboration would cause both companies' stock to leap.

They also need to make a clean break from chademo/CCS since they're shuttering all their sedan production... and go to Supercharger standard.

Perhaps also... Tesla would elect to avoid getting involved in this way and prefer to let Ford go away on their own.