General Discussion: 2018 Investor Roundtable

[avoigt]

Good to see a bull...

 

[ValueAnalyst]

Emphasis on scalability, safety, and high compute power with low power use. Partnerships with ICE OEM's. Disadvantage: future is all-electric.

"Level 2+" (i.e. HD mapping) in 2018/19
Level 3 (i.e. 10-sec heads up) in 2019+
Level 4 (i.e. sleep in car) in 2020+
Level 5 (i.e. no steering wheel): who knows...

WAG: Tesla will lead Intel/Mobileye by zero to six months.

 

[RiverCard]

How does this securitisation differ from the Warehouse agreement in terms of impact on Tesla?

Insufficient information for a definitive answer, but here are some relevant excerpts from recent SEC filings to advance discussion:

"The 2017 Warehouse Borrower’s obligations under the 2017 Warehouse Agreement are secured by the right to the proceeds of certain lease contracts and leased vehicles. The interest rate under the 2017 Warehouse Agreement is generally based on (i) LIBOR plus a fixed margin, currently resulting in an interest rate of approximately 2.7%, or (ii) the interest rate of short-term commercial paper notes used by certain lenders to maintain their loans. The 2017 Warehouse Borrower is subject to various customary events of default, covenants and limitations. The ability to draw under the 2017 Warehouse Agreement is scheduled to end on August 17, 2018, and the loan maturity date is September 20, 2019, in each case subject to specified acceleration or extension conditions."

"On October 18, 2017, the total committed amount under the Warehouse Agreements was increased from $600.0 million to $1.1 billion."

The amount of the proposed ABS is $546 million. The amount drawn down on the Warehouse Agreement at 9/30/17 was $557 million. ($1.1 B minus $557 = $543 million) Close but not the same, or just a coincidence? So is the proposed ABS a substitute for the un-drawn commitment in the Warehouse Agreement or in addition to it?

Whether the ABS announcement is good, bad or indifferent depends on the relative interest rates, i.e. Warehouse line vs ABS vs money factor in underlying leases--also on which entity bears the lessee default and residual value risks on the underlying leases under the various financial arrangements.

Another un-explained financial issue seems to be the recent offers of 0% and 0.99% financing on vehicle purchases. Where does the difference between market rates and those inducements show up on the financial statement? Also, how do those inducements benefit share holders given the most recent 8 year bond sale was 5.3% and Asset Based Credit line is LIBOR plus 1%?

 

[defc0n]

Good to see a bull...

To be fair, he’s bullish on the company, but not necessarily the stock right now

 

[defc0n]

Volkswagen Apologizes for Testing of Diesel Fumes on Monkeys

Pretty incredible. Unfortunately I think the economics and performance of EVs will be what is necessary to greatly change worldwide public perception moreso than health risks, environmental concerns, and examples like this. The good news is ICE soon has no chance as determined by physics. I’m not much of a social warrior but this made me upset to read.

 

[EnzoXYZ]

Or they could give a consistent experience by activating the brakes when the battery is full and progressively enable regen as the state-of-charge gets in the right range.

Unless you are going down a lot of hills I do dont see how over charge is possible.

 

[AudubonB]

IF - but, alas, only if - the suspension can handle it (for the life of me I kinna ken any other problems, can you?), here ya go:

 

[StapleGun]

I'm sure most of you remember Navigant's recent SDC rankings which hilariously had FCA on the top and Tesla at the bottom. Here is an in-depth rebuttal to that article. A selected excerpt:

While Tesla has certainly lost some speed with breaking off with Mobileye and internal difficulties in the Autopilot team haven’t helped either, recently the company seems to have intensified its efforts. Test drives from the west to the east coast have shown progress, even though under very controlled circumstances. Even that the company is currently lagging, the fact that Tesla has over 100,000 cars on the street equipped with that hardware makes the company a dormant giant in self-driving technology. once the first version of autonomous Autopilot-software turns all those cars into autonomous vehicles, the data gathering efforts and thus improvements on the self-driving capabilities with increase exponentially and quickly surpass the competition. Within a few months Tesla could become the absolute leader in self-driving.

 

[The Blue Owl]

Unless you are going down a lot of hills I do dont see how over charge is possible.

I wasn't referring to over-charging, but to what was said earlier in the thread, which was that regen was disabled at certain times for reasons related to the battery state-of-charge.

 

[JRP3]

If regen current is high enough it can push the cells into over voltage even though the pack is not fully charged. That's why charging tapers down as the pack gets closer to full.

 

[Stretch2727]

Just looking at Elon's pay package. The profitability goal is based on EBIDTA.

The end goal has $175B in Sales $14B in EBIDTA.

Depreciation alone could be between $10-15B a year. 5X-7X where is now.

Interest expense could be another $3-4B a year.

Could it be Testa would still not GAAP profitable at this level of EBIDTA?

Net profit margin could be pretty small?

Obviously cash flow would depend on how much investment for growth is still going on.

Has anyone backed in to cashflow and profitability based on these targets?

GM 2016 EBIDTA is $22B with Sales of $166B.

The market cap goals are good but the EBIDTA goal seems less than I would expect at this level of sales.

Is there something I am missing?

 

[kbM3]

However, I do wonder if Tesla might be coming down with a case of Founder's Syndrome anyway, where some of the brilliant, charismatic leader's personal weaknesses....like encouraging (or mandating) "cool" and complex technological solutions to problems better solved more simply, or by regularly overpromising and under delivering, become a bug, and not a feature.
Robin

Tesla does NOT overpromise and under deliver.

They OVER deliver. Usually late against their projections and way early compared to competitors.

 

[neroden]

Insufficient information for a definitive answer, but here are some relevant excerpts from recent SEC filings to advance discussion:

"The 2017 Warehouse Borrower’s obligations under the 2017 Warehouse Agreement are secured by the right to the proceeds of certain lease contracts and leased vehicles. The interest rate under the 2017 Warehouse Agreement is generally based on (i) LIBOR plus a fixed margin, currently resulting in an interest rate of approximately 2.7%, or (ii) the interest rate of short-term commercial paper notes used by certain lenders to maintain their loans. The 2017 Warehouse Borrower is subject to various customary events of default, covenants and limitations. The ability to draw under the 2017 Warehouse Agreement is scheduled to end on August 17, 2018, and the loan maturity date is September 20, 2019, in each case subject to specified acceleration or extension conditions."

"On October 18, 2017, the total committed amount under the Warehouse Agreements was increased from $600.0 million to $1.1 billion."

The amount of the proposed ABS is $546 million. The amount drawn down on the Warehouse Agreement at 9/30/17 was $557 million. ($1.1 B minus $557 = $543 million) Close but not the same, or just a coincidence? So is the proposed ABS a substitute for the un-drawn commitment in the Warehouse Agreement or in addition to it?

Whether the ABS announcement is good, bad or indifferent depends on the relative interest rates, i.e. Warehouse line vs ABS vs money factor in underlying leases--also on which entity bears the lessee default and residual value risks on the underlying leases under the various financial arrangements.

Another un-explained financial issue seems to be the recent offers of 0% and 0.99% financing on vehicle purchases. Where does the difference between market rates and those inducements show up on the financial statement? Also, how do those inducements benefit share holders given the most recent 8 year bond sale was 5.3% and Asset Based Credit line is LIBOR plus 1%?

If I were to guess, I'd guess that Tesla is removing a bunch of leases from the floating-rate short-term lease financing (Warehouse Agreement) and putting them in a maturity-matched longer-term deal (the upcoming ABS). The Warehouse Agreement will be retained as a liquidity source for new leases, but I expect they'll be trying to package them up and sell them off as maturity-matched ABS as fast as they can. The default risk exposure is worth looking into, as is the difference in interest rates; we'll find all that out after a while.

 

[Todd Burch]

I'd say a lot more complicated, bound only by the laws of physics. Unexpected possible events are endless in driving, no deer are jumping across a game board during play.

Exactly. A game of chess has exactly zero random events. Driving has tons. Many orders of magnitude more complex (probably 5 or 6 zeros).

 

[tander]

Volkswagen Apologizes for Testing of Diesel Fumes on Monkeys

Pretty incredible. Unfortunately I think the economics and performance of EVs will be what is necessary to greatly change worldwide public perception moreso than health risks, environmental concerns, and examples like this. The good news is ICE soon has no chance as determined by physics. I’m not much of a social warrior but this made me upset to read.

Kind of reminds me of that movie/book Thank you for smoking.

 

[Todd Burch]

Elon’s Boring Flamethrower: bad judgment and irresponsible. Wish he’d stay focused.

You really think he spent a lot of time on this? Sheesh. Probably Put 2 Boring Company engineers on it. He already spends 100 hrs a week working, and you want him to focus even more? And I thought Elon was demanding!

 

[N5329K]

Tesla does NOT overpromise and under deliver.

They OVER deliver. Usually late against their projections and way early compared to competitors.

Their aggressive projections mean, nearly always, that the product arrives late to very late. "Tesla Time" has become a running joke and not just among the usual anti-Tesla suspects. To my way of thinking, that's over promising and under delivering. Someone once said that success means delivering what you say you're going to deliver, when you say you're going to deliver it, and for the price you said it would cost. By those criteria, Tesla has been less than successful. I would say that by being a new American car company and surviving at all, Tesla has been a surprising success.
The product itself is usually OK (not autopilot, of course) and is far earlier and better than anything offered by companies that style themselves as "competitors". In that way they do over deliver.
Anyway, growing up is hard to do. Changing the world is harder. Tesla has its work cut out.
Robin

 

[schonelucht]

Another un-explained financial issue seems to be the recent offers of 0% and 0.99% financing on vehicle purchases. Where does the difference between market rates and those inducements show up on the financial statement? Also, how do those inducements benefit share holders given the most recent 8 year bond sale was 5.3% and Asset Based Credit line is LIBOR plus 1%?

At least in Europe some suspect the low interest rate is absorbed through Tesla not adjusting prices downwards for the stronger Euro. For example, a 75D no options costs $74 000 in the US but the same car in Belgium, also without tax is 71 000 EUR or over $88 000! Previously Tesla was quite good in matching the European and American prices but the difference has steadily grown. I believe the same is true for Norwegian kroner.

 

[Bet TSLA]

Exactly. A game of chess has exactly zero random events. Driving has tons. Many orders of magnitude more complex (probably 5 or 6 zeros).

It's not the number of distinguishable events that matters, it's how many rules you have to write. If you always fall through to "Don't hit anything, and slow quickly to a stop." then you've covered almost all of those "5 or 6 zeros" situations, from "something heavy just landed on my roof" to "an elephant is standing on the road" to "a high wind is pushing the car to the left and it's getting worse". These might have better solutions, but they would be extremely rare for most drivers and a default simple response will probably work safely enough for quite a while.

 

[jhm]

One thing that is starting to bother me about Elon's new compensation plan is that there is no real check against dilution. Market cap, revenue, and adjusted EBITDA all can be boosted by issuing more stock. Growth by acquisition can easily supply added earnings.

I am not saying that this is how I expect Musk will grow Tesla, but it is simply a weakness of the incentive plan could work against shareholder interest. Things would be materially different had the $650B market cap goal been formulated as a share price, perhaps $3250/share = $650B ÷ 200 share. Such a goal would create a disincentive to excessive dilution and better align Musk's compensation with actual shareholder value which always denominated in shares, not market cap.