General Discussion: 2018 Investor Roundtable

[SteveG3]

[snip]

Musk’s preoccupation with SpaceX in the last six months will have cost TSLA shareholders tens of billions of dollars in lost opportunity, as potential customers buy other cars, crossovers, trucks, non-solar roofs etc., while hundreds of thousands of Model 3 reservations holders will lose out on the $7,500 federal tax credit.

[snip]

Worth noting, Musk's occupation with SpaceX does in fact predate his occupation at Tesla.

Not only was SpaceX founded a year prior to Tesla, but, more significantly, consider the circumstances that led to the change of leadership by which Musk became an employee, CEO, of Tesla. Tesla's first product launch, the Roadster, under its initial CEO, Martin Eberhard, was far more troubled than any subsequent launch. Yes, like the Roadster, the S, X, and 3, have all been late. Uniquely, in the case of the Roadster, however, the product was not only late, but, impossibly over cost and not drivable. By impossibly over cost, at a point the vehicle was meant to be launching, Tesla was reworking basics of sourcing parts so that they could reign in some of the excess cost, and Tesla had to increase the price of the product to people who had already reserved the vehicle. By not working, I mean a vehicle that would not last a year, and IIRC, not last even a few thousand miles (yes the X, in a sense had similar issues, as far as not being deliverable due to issues with the doors... but, the basic drivetrain was worked).

To clean this up, the first CEO, Martin Eberhard was fired. Eberhard was not replaced by Musk, but, by a series of two other CEOs, before Musk determined that things were still headed off course, and he had to step in to save the company despite having another full time job. To be fair, I'm not sure if one of those other two was intended as an interim, so perhaps, it was only two intended CEOs Tesla went through before Musk stepped in fully as CEO to avert the collapse of the company.

What's more, in 2008, in the wake of the mess in cleanup mode with the Roadster program, both SpaceX and Tesla were on the verge of bankruptcy. As Musk tells it, rationally, it seemed that choosing one of the two to pour his remaining resources into was the only choice to avoid both failing. Instead, Musk poured every last dime he had into both companies, going against the odds.

None of this is to say that there's no room for feedback, constructive criticism, etc. (as it happens, when asked what advice he has for young entrepreneurs, one of Musk's two recommendations is to seek the critical feedback of people with your best interest at heart). That said, to my view, it is abundantly clear that Tesla would have failed had Musk not 1) taken double CEO duty at Tesla on top of SpaceX, and for the past decade worked 80-110 hour weeks, 2) risked going entirely broke and losing his prior startup, SpaceX, to try to save Tesla.

Just trying to offer some context as to why what some of us hear as a tone (whether intended or not) of Musk having 'failed' us, 'let us down' etc, for a preoccupation with SpaceX doesn't receive a resounding chorus of agrees.

 

[Waiting4M3]

The two are not the same thing. There are many examples of investors being positive on a company and its stock, while not being satisfied with its management. This is now one of those cases for me. Obviously, this is not sustainable in the longer term, so I will see what changes in the coming months. I hope that Model 3 production gets back on track and the stock performs, but the last nine months have been frustrating.

I heard you and understand your frustration, but I also find repeated venting of ones opinions/feelings unnecessary and dilutes the value of TMC's discussions.

BTW I've deleted my previous reply to you since the same opinions have been repeated by others prior.

 

[SteveG3]

[snip]

Musk’s preoccupation with SpaceX in the last six months will have cost TSLA shareholders tens of billions of dollars in lost opportunity, as potential customers buy other cars, crossovers, trucks, non-solar roofs etc., while hundreds of thousands of Model 3 reservations holders will lose out on the $7,500 federal tax credit.

[snip]

Also wanted to point out,

- The recent announcements about Model 3 delivery dates moving up substantially for Canada, along with some other circumstantial evidence, are suggestive to me that there's a reasonably good chance that Tesla will try to push off crossing the 200,000 delivery threshold to Q3. The net result of that scenario would be as many people qualifying for the EV rebate on a Tesla purchase as would have if Tesla had executed perfectly.

- As to "costing TSLA shareholders tens of billions of dollars..." if that were the case I could easily see why you would be quite upset. Look at the actual numbers though. Even if Tesla had had a perfect launch, which virtually this entire board here at TMC was warning any newbies would not happen (and Musk himself gave repeated indications would not happen)... even if it were a perfect launch, Tesla would has fallen short by about 150,000 3s delivered last year, and probably about 200,000 this year. So, 350,000 Model 3s. Let's say Tesla would have made 10% net profits, or $5K on each Model 3 (assuming a $50K ASP). That's $1.75 billion less in earnings vs. a perfect execution on Tesla's part in a perfect world of suppliers, which, anyone here at TMC was strongly and repeatedly advised would not happen.

My sense of what TMC as a whole thought was realistic for that this launch was about 50K 2017 deliveries, 350K 2018 deliveries. So, we will probably fall about 220K shy of that, or about $1.1 billion.

$1.1 billion is nothing to sneeze at, and I do hope Tesla is looking very intently on where they can improve internally what is within their reach to change to make a repeat of this less probable.

That said, I think it's worth telling one's nerves and blood pressure, 1) $1.1 billion is nowhere near "tens of billions" lost, 2) this all was within the context of moving the timetable of moving up hitting a 500K per year run rate up by 2 years. Looks like Tesla will get halfway there, hitting the run rate at some point in 2019... so their imperfect execution of the change in plan, called for against a wave of criticism by one Elon Musk, still is all but certainly a net gain for TSLA shareholders

 

[Starno]

You don’t understand the severity of the situation. Not only has Tesla lost out on several billions of dollars of Model 3 revenue (remember the “100,000 to 200,000 units in 2H17?”), but the two-quarter delay also pushes back ALL of Tesla’s upcoming products: Semi, Y, Solar Roof, Powerwall, Powerpack, new Gigafactories, and other. Did you catch the part about Solar Roof in the letter? Musk’s preoccupation with SpaceX in the last six months will have cost TSLA shareholders tens of billions of dollars in lost opportunity, as potential customers buy other cars, crossovers, trucks, non-solar roofs etc., while hundreds of thousands of Model 3 reservations holders will lose out on the $7,500 federal tax credit.

Any other CEO would have been fired over this, but we are about to award him with a handsome comp plan...

SpaceX contributes a lot to the image of Elon Musk, which transpire to Tesla. That's billions of dollars worth in marketing.

And in terms of engineering, in the next 20 years, the crossover is going to make both companies earn dozens of billions of dollars.

 

[ValueAnalyst]

Also wanted to point out,

- The recent announcements about Model 3 delivery dates moving up substantially for Canada, along with some other circumstantial evidence, are suggestive to me that there's a reasonably good chance that Tesla will try to push off crossing the 200,000 delivery threshold to Q3. The net result of that scenario would be as many people qualifying for the EV rebate on a Tesla purchase as would have if Tesla had executed perfectly.

- As to "costing TSLA shareholders tens of billions of dollars..." if that were the case I could easily see why you would be quite upset. Look at the actual numbers though. Even if Tesla had had a perfect launch, which virtually this entire board here at TMC was warning any newbies would not happen (and Musk himself gave repeated indications would not happen)... even if it were a perfect launch, Tesla would has fallen short by about 150,000 3s delivered last year, and probably about 200,000 this year. So, 350,000 Model 3s. Let's say Tesla would have made 10% net profits, or $5K on each Model 3 (assuming a $50K ASP). That's $1.75 billion less in earnings vs. a perfect execution on Tesla's part in a perfect world of suppliers, which, anyone here at TMC was strongly and repeatedly advised would not happen.

My sense of what TMC as a whole thought was realistic for that this launch was about 50K 2017 deliveries, 350K 2018 deliveries. So, we will probably fall about 220K shy of that, or about $1.1 billion.

$1.1 billion is nothing to sneeze at, and I do hope Tesla is looking very intently on where they can improve internally what is within their reach to change to make a repeat of this less probable.

That said, I think it's worth telling one's nerves and blood pressure, 1) $1.1 billion is nowhere near "tens of billions" lost, 2) this all was within the context of moving the timetable of moving up hitting a 500K per year run rate up by 2 years. Looks like Tesla will get halfway there, hitting the run rate at some point in 2019... so their imperfect execution of the change in plan, called for against a wave of criticism by one Elon Musk, still is all but certainly a net gain for TSLA shareholders

I was referring to revenue, and the calc should include the other plans that are now all pushed back by two quarters.

 

[The Blue Owl]

Record Year At BMW With 2.08M Deliveries In 2017

"BMW alone delivered 2,088,283 vehicles, up 4.2 percent compared to 2016"

or a growth of 87.7k cars... another way to put that is, BMW ***GREW*** by just 15k fewer cars than Tesla produced entirely for the year 2017.

now... to the point...

BMW Group U.S. Reports January 2018 Sales

12,000 passenger cars vs 7,000 SUVs for US Jan sales for a total of 19,000 cars/trucks... 3 series sold 4,500... which means 23% of US sales were 3-series. extrapolating that to global sales (because for some reason it's difficult to find 3-series broken out globally)...

In 2007, Nokia's global share of smartphones was 51%. Research in Motion's revenue from Blackberry sales in 2007 was $3B. In 2008, it doubled to $6B. It almost doubled again in 2009 to $11B, peaking in 2011 at almost $20B.

On the other hand, over the 5 years starting with 2007, iPhone global unit shipments grew 90 times, while both Nokia and Blackberry were on their way to being obliterated. Today, people are surprised to hear Blackberry is still a going concern and Nokia's mobile phone business is Microsoft's (and it still doesn't matter.)

I'm pretty sure BMW learned a thing or two from history. I assure you they are not underestimating Tesla the way you and the other 'analysts' of your persuasion do. They fully understand what is going on and they are frantically reorienting their company to save their lives. But not all auto manufacturers get it, and even for some that do, it's already too late.

Ever wondered why every now and then two ships miles away from each other in the open ocean, each moving slower than cars, commanded by highly trained people with extensive commercial and military experience, still end up colliding? Because it doesn't matter where the ships are NOW, or for the next mile; these things don't turn on a dime.

You have to predict where the puck is going to be, or else it's gonna hit you in the face.

(For those wondering why I am talking to myself, I'm responding to @myusername. Which is practically the same thing.)

 

[N5329K]

Whatever EM's preoccupation with rockets might have cost Tesla's bottom line (full disclosure: the delay in Model 3 production caused me to cancel my reservation), launching that Roadster probably more than made up for. Those images will be as iconic as any in the history of space exploration.
Robin

 

[SteveG3]

I was referring to revenue, and the calc should include the other plans that are now all pushed back by two quarters.

that may be, but, 1) you did not indicate that, 2) what can be paid out to shareholders is retained earnings, not revenues, so to say we have been cost as shareholders, earnings makes far far more sense to me, and is how I'd imagine anyone with some financial aptitude would read your comment.

surely attention has gone to dealing with ramp bottlenecks that has not gone elsewhere, and the cost of that is helpful to note. that said, I think it's a rather large overstatement to say all other programs have been pushed back 6 months.

what's more, Tesla is only about 3 months behind what, virtually this entire board was emphatically and repeatedly telling to anyone who would listen, what the actual ramp would be (something Musk was also repeatedly giving indications of to shareholders himself).

of course, all of this again is within the context of Tesla looking to be about 1 year late on being 2 years early via a plan to get to a 500K run rate in 2018 rather than 2020. This plan was met with intense criticism in the media when it was announced, but it's all but certain to me that in time, that plan as a whole (i.e., with imperfect executions) will prove to have helped the mission of Tesla, and increased earnings for shareholders.

 

[aubreymcfato]

SpaceX contributes a lot to the image of Elon Musk, which transpire to Tesla. That's billions of dollars worth in marketing.

And in terms of engineering, in the next 20 years, the crossover is going to make both companies earn dozens of billions of dollars.

As another user (forgot his/her nickname) has said, repeatedly, SpaceX will soon launch the first 2 test satellites of a possible super-space-internet-network that will possibly generate billions and be the data network of the whole Tesla fleet.
Read this: The SpaceX (and Tesla) masterplan (Part 1) – Gavin Sheridan – Medium

 

[Curt Renz]

Space.com - today: Elon Musk's Roadster Launch Sparks Sales of Hot Wheels Toy Tesla

 

[TheDoktor]

Correction - https://www.sec.gov/Archives/edgar/data/1293451/000095010317002811/dp74362_sc13g.htm - March 24, 2017.
Huang River Investment Limited - 8,167,544 shares. Increased to 8,337,594 shares.
Tencent Holdings Limited - 8,167,544. Increased to 8,347,094 shares.
New investment THL E Limited holds 9,500 shares. All from Lau Chi Ping Martin President of Tencent.

From this filing, item 5, page 6: “If this statement is being filed to report the fact that as of the date hereof the reporting person has ceased to be the beneficial owner of more than five percent of the class of securities, check the following. ☒”

And the box is checked. No need to speculate about what it means. Just need to read to the end.

Nota bene: 13Fs are filed by the entity required to file, and are not to be found on the page of the company they invest in. (A Comment was posted above asking about this)

 

[kbM3]

It never showed up on either Yahoo or NASDAQ, so this is not a change. Again, maybe because they are a non-US owner, and this is not a 13F filing, which is what those two websites may be pulling... I don't know. Not sure if it matters too much as for every buyer, there's a seller.

I feel like you do not understand the magnitude of what Tesla is in the process of attempting. They are trying to completely reinvent heavy manufacturing. The only failures are against Elon’s very nearly impossible deadlines. There is no way any other person on the planet could pull off what Elon is pulling off.

Also wanted to point out,

- The recent announcements about Model 3 delivery dates moving up substantially for Canada, along with some other circumstantial evidence, are suggestive to me that there's a reasonably good chance that Tesla will try to push off crossing the 200,000 delivery threshold to Q3. The net result of that scenario would be as many people qualifying for the EV rebate on a Tesla purchase as would have if Tesla had executed perfectly.

- As to "costing TSLA shareholders tens of billions of dollars..." if that were the case I could easily see why you would be quite upset. Look at the actual numbers though. Even if Tesla had had a perfect launch, which virtually this entire board here at TMC was warning any newbies would not happen (and Musk himself gave repeated indications would not happen)... even if it were a perfect launch, Tesla would has fallen short by about 150,000 3s delivered last year, and probably about 200,000 this year. So, 350,000 Model 3s. Let's say Tesla would have made 10% net profits, or $5K on each Model 3 (assuming a $50K ASP). That's $1.75 billion less in earnings vs. a perfect execution on Tesla's part in a perfect world of suppliers, which, anyone here at TMC was strongly and repeatedly advised would not happen.

My sense of what TMC as a whole thought was realistic for that this launch was about 50K 2017 deliveries, 350K 2018 deliveries. So, we will probably fall about 220K shy of that, or about $1.1 billion.

$1.1 billion is nothing to sneeze at, and I do hope Tesla is looking very intently on where they can improve internally what is within their reach to change to make a repeat of this less probable.

That said, I think it's worth telling one's nerves and blood pressure, 1) $1.1 billion is nowhere near "tens of billions" lost, 2) this all was within the context of moving the timetable of moving up hitting a 500K per year run rate up by 2 years. Looks like Tesla will get halfway there, hitting the run rate at some point in 2019... so their imperfect execution of the change in plan, called for against a wave of criticism by one Elon Musk, still is all but certainly a net gain for TSLA shareholders

Pushing 200k to Q3 doesn’t square with revised delivery dates. I’m an online non-owner with a Q2 delivery estimate. That would indicate Tesla plans to satisfy every line waiting person in Q2 and this would definitely put them over the limit.

 

[SteveG3]

Pushing 200k to Q3 doesn’t square with revised delivery dates. I’m an online non-owner with a Q2 delivery estimate. That would indicate Tesla plans to satisfy every line waiting person in Q2 and this would definitely put them over the limit.

It is interesting to look at who is being invited, maybe we can figure something out here. Last I'd seen no non-owners had been invited... when were you invited? Could you share what exactly is indicated for your delivery estimate? Did you reserve on that first day?

 

[dmckinstry]

It is interesting to look at who is being invited, maybe we can figure something out here. Last I'd seen no non-owners had been invited... when were you invited? Could you share what exactly is indicated for your delivery estimate? Did you reserve on that first day?

Bear in mind not all invited will immediately place the final order. I won't, but will delay for financial reasons. I'm retired and won't complete the order until I have the cash. I'm pretty sure more than a few others will do the same.

 

[SteveG3]

Bear in mind not all invited will immediately place the final order. I won't, but will delay for financial reasons. I'm retired and won't complete the order until I have the cash. I'm pretty sure more than a few others will do the same.

oh yeah, in fact, that's part of why I think kbM3's order status may well be consistent with the possibility that 200K might not happen until Q3.

 

[Reciprocity]

I was referring to revenue, and the calc should include the other plans that are now all pushed back by two quarters.

Did you ever stop to think about the issues that might have come up that we know nothing about because they where resolved? I think the thing that is missing from your assertions is context. In the magical world of Tesla its possible to pull production forward by 18 months. In the real world its impossible. So what your seeing is an issue that was missed while you are not seeing 100's of issues that were not missed. I think Elon explained it very well. Battery packs was not what they expected to be the problem because it was something they had a lot of experience with. They where installing upwards of 1000 Kuka robots and a mostly automated production line. And what did we hear on the call? Pack production seems to be solved, just waiting for equipment, that is confirmed to work, to be delivered from Germany. This first line will help ramp max capacity for the pack production from 2500/w to 5000/w starting sometime in March, which would actually put them ahead of the revised schedule. The other issue that they have not solved yet? A completely new parts conveyance system that must be integrated into Tesla's production process. Its not a plug and play solution, it must be integrated and tuned and shaken out. I left the call felling pretty good. Conveyor systems are not so overly complicated that I felt like there would be major issues. Certainly at 10k cars per week, the system might not work, I have no idea, so it could be a bigger problem then I think. If parts are moving through the plant at 40mph, stuff could start flying all over the place. But I left the call thinking things where on track for the 2500/5000 timelines. My guess is that they got confirmation from the company they contracted to build the system, I dont think Tesla invented their own though I know they are working on the software which is not out the norm for such an integrated solution.

I get that you are pissed, I know a lot of people are and with good reason in many cases. But I cannot put this blame on Elon though I am of the mind the crap rolls down hill, but the responsibility rolls up hill. At the end of the day, the guys at the top should pay for failures, I just disagree with how you measure success and failure. Doing the impossible is really hard.

 

[Waiting4M3]

It is interesting to look at who is being invited, maybe we can figure something out here. Last I'd seen no non-owners had been invited... when were you invited? Could you share what exactly is indicated for your delivery estimate? Did you reserve on that first day?

I think you misunderstood. I'm same as kbM3, non-owner, in CA, SF Bay Area, reservation made online on 1st day ~1/2hr before the unveil started. My estimate shows Apr-Jun, which is Q2. As far as I know by the time I ordered there are already >100K of orders, and majority of those are non-owners, I would imagine. Lets wildly guess if 1/2 of those are US orders, so maybe ~50K reservations in similar situations as kbM3 and I. I think what kbM3 is trying to say is if Tesla is ready to fulfill kbM3's and my orders, along with those 50K people, and promise delivery between Apr-Jun which is Q2, then there is almost no way Tesla won't exceed 200K in Q2.

 

[SteveG3]

I think you misunderstood. I'm same as kbM3, non-owner, in CA, SF Bay Area, reservation made online on 1st day ~1/2hr before the unveil started. My estimate shows Apr-Jun, which is Q2. As far as I know by the time I ordered there are already >100K of orders, and majority of those are non-owners, I would imagine. Lets wildly guess if 1/2 of those are US orders, so maybe ~50K reservations in similar situations as kbM3 and I. I think what kbM3 is trying to say is if Tesla is ready to fulfill kbM3's and my orders, along with those 50K people, and promise delivery between Apr-Jun which is Q2, then there is almost no way Tesla won't exceed 200K in Q2.

okay, some more details... the scenario I think Tesla might be going for, would be if they reach about 55K Model 3s produced in the first 6 months of the year. if they are going for this strategy, I think about 25K-30K 3s would go to Canada, as much as 5K would be produced for US orders, but not yet delivered, and about 25K would be delivered in the US by the end of Q2. I think that is consistent with a large number, possibly all, day 1 US reservation holders being invited to configure. Remember, as dmckinstry mentioned, not all invited will configure at earliest availability, or at all. Among other reasons for delaying and canceling, is the version of the vehicle that some wish to order not being available to them when they receive the invitation.

I'm wondering what you currently see as to just which drivetrains are available to you within that April-June window... does it show dual motor available to you in that timeframe, and, if so, does it show dual motor for the SR and the LR?

 

[Waiting4M3]

okay, some more details... the scenario I think Tesla might be going for, would be if they reach about 55K Model 3s produced in the first 6 months of the year. if they are going for this strategy, I think about 25K-30K 3s would go to Canada, as much as 5K would be produced for US orders, but not yet delivered, and about 25K would be delivered in the US by the end of Q2. I think that is consistent with a large number, possibly all, day 1 US reservation holders being invited to configure. Remember, as dmckinstry mentioned, not all invited will configure at earliest availability, or at all.

I'm wondering what you currently see as to just which drivetrains are available to you within that April-June window... does it show dual motor available to you in that timeframe, and, if so, does it show dual motor for the SR and the LR?

Only the 1st production (LR+PUP) shows Apr-Jun, for SR and AWD both show late 2018.

I still find it unlikely to stay under 200K in Q2 even if only 25K M3 are delivered in the US in Q1/Q2. I could be remembering wrong but my understanding is that Tesla is already close to 160K-170K US deliveries by the end of 2017. They're probably going to also deliver ~20K MS+MX in Q1/Q2 in the US, which would put them close to 180-190K without the M3 by the end of Q2.

I also pause at the idea that they could delivery 25-30K to Canada by the end of Q2. There has been no showroom activity, no trial-run and training on how to deliver/service the M3 in Canada that we know of. How likely that Tesla could just open the flood gate and jam 25K M3s into Canada in the next 4 months?

 

[Dynastar]

I think you misunderstood. I'm same as kbM3, non-owner, in CA, SF Bay Area, reservation made online on 1st day ~1/2hr before the unveil started. My estimate shows Apr-Jun, which is Q2. As far as I know by the time I ordered there are already >100K of orders, and majority of those are non-owners, I would imagine. Lets wildly guess if 1/2 of those are US orders, so maybe ~50K reservations in similar situations as kbM3 and I. I think what kbM3 is trying to say is if Tesla is ready to fulfill kbM3's and my orders, along with those 50K people, and promise delivery between Apr-Jun which is Q2, then there is almost no way Tesla won't exceed 200K in Q2.

I assume the estimate you are referring to is for first production. Only a fraction of reservation holders are going to take first production, and I'm sure Tesla is well aware of those rough numbers.