General Discussion: 2018 Investor Roundtable

[Mike Smith]

Tesla could be falling short of key Model 3 goal, but who’s counting, analyst says

The analysts said they also had conversations about executive turnover at Tesla, given recent senior-level departures that included Jon McNeill and Eric Branderiz, Tesla’s former sales and service head and chief accountant.

“Based on our conversations with management, we do not believe there is a serious issue driving these exit decisions and we would caution against reading too much into these headlines at this time,” the analysts said. Tesla will need to replace the role of chief operating officer and/or head of services at some point, they said.

 

[RobStark]

Was there a point you were trying to make? 'Cuz it's lost on me.

Not trying to make a point.

The weekend is usually kind of slow on this thread. ( Seems this weekend is not, end of quarter push anxiety coming earlier)

Thought it would be fun to reminisce.

 

[EinSV]

Not trying to make a point.

The weekend is usually kind of slow on this thread. ( Seems this weekend is not, end of quarter push anxiety coming earlier)

Thought it would be fun to reminisce.

Yeah, those were the days. Tesla had a new model out that was getting rave reviews. But they were having trouble ramping up production. And shorts were going crazy because of the sky-high market cap ($3B) for a company that was burning cash, sold a fraction of the cars of GM, Ford, BMW, etc., and would never make any money.

Yeah, those were the days.

 

[Paracelsus]

When Elon first presented the concepts for TE and the Powerwall, he discussed the impact solar + storage could bring to the developing world by bypassing the need for transmission lines. It was one of the first presentations watched by a broad demographic that focused on the benefits of developing a distributed grid with storage in a simplified concept. Now with the benefits of 3-D printing entering the construction industry, we have another great example of what can happen when fantastic technology is in the hands of compassionate people. Imagine the impact this could have if it was coupled with Elon's solar/storage distributed grid concept for a developing world and it could be combined with a Crowdfunding effort....? (The video is only 1 1/2 minutes long and worth watching/sharing)

 

[ValueAnalyst]

Yes, breaking down by day, in late Feb and March we see:

Day, VIN assignments reported
2/27/2018 4
2/28/2018 6
3/1/2018 2
3/2/2018 6
3/3/2018 6
3/4/2018 4
3/5/2018 4
3/6/2018 4
3/7/2018 34
3/8/2018 13
3/9/2018 18
3/10/2018 14
3/11/2018 6
3/12/2018 11
3/13/2018 16
3/14/2018 8
3/15/2018 10
3/16/2018 14

We see a jump starting on 3/7, ~10 days after the Fremont factory M3 production came back online on 2/24. My WAG is that the 1st 10 days cars that came out were the ones that went into production before the shutdown. Then starting on day 11 we start to see the higher production rate starting to come out of the line. Averaging from 3/7-16 is 14.4 VIN/day, so it's almost at 3x of Jan-Feb avg. This could indicate >1500/wk rate, maybe close to 2000/wk.

Thanks for posting this, but there may be too many inherent assumptions in that math. For example, how did you conclude there wasn't a backlog buildup of batteries and parts that Fremont later leveraged for a temporarily high rate of production, which then later dipped back below 1,500/wk?

It'd be great if Tesla can get to (and maybe above?) 2,000/wk by end of March, which to me would indicate Tesla is still on track to 5,000/wk by June, which I believe is earlier than market expectation of Septemberish (my estimate), so SP should move up as these milestones are met.

 

[dc_h]

Burrito isn't an emerging new technology that benefits from wider public knowledge of its benefits, but if you're interested: Are Burritos Healthy?

Actually, I believe there is some correlation to the older Taco Bell food poisoning which may have helped supercharge Chipoltle's early years. After Chipoltle's food poisoning Taco Bell took off again. Some of that is innovation cycles that happened independently, TB had food problems, reinvented image and product line (Doritos Locos) just as Chipoltle started having issues. Tesla appears on the edge of a new innovation cycle, just as Porsche is ramping up on phase one. Porsche setting their customers homes on fire won't help Porsche, some news is just bad, but it shouldn't hurt Tesla. There will be Smegals and Keefs out there saying I told you, EV's are time bombs, but most people in the consumer bell curve will buy based on real price performance issues, and perceived brand image value.
People are not as rational as they think they are and are manipulated by desirable or interesting outcomes, more often than factual science. 3 car fires was enough to endanger Tesla's future. It may have been a design opportunity, but the risk of your car catching on fire was still probably lower in the 2012/2013 Tesla than an ICE car. EV's will need to be safer, just like self drive and drive assist needs to be safer. Not because it is fair or based on rational information, but because it is new. Issues in ICE cars that have become background noise are suddenly front page news for EV's. Background noise for an ICE mfr is front page news for Tesla.
None of this happens because people are rational, but because they are not. We are terrible at understanding risks and anything new will always have greater passion regarding perceived opportunity and perceived risk. Assuming Tesla gets this ramp thing resolved, the perceived risk issue will be fizzling out as EV's become more mainstream and more people know an EV owner.

Anyone want a better understanding of our misunderstanding of risks and reality, Michael Lewis' book the Undoing Project. Great book about how some of our perceptions are not well aligned with reality.

 

[avoigt]

Yeah, those were the days. Tesla had a new model out that was getting rave reviews. But they were having trouble ramping up production. And shorts were going crazy because of the sky-high market cap ($3B) for a company that sold a fraction of the cars of GM, Ford, BMW, etc., was burning cash and would never make any money.

Yeah, those were the days.

We might see us saying this one day about today...

 

[ValueAnalyst]

Yeah, those were the days. Tesla had a new model out that was getting rave reviews. But they were having trouble ramping up production. And shorts were going crazy because of the sky-high market cap ($3B) for a company that sold a fraction of the cars of GM, Ford, BMW, etc., was burning cash and would never make any money.

Yeah, those were the days.

I'd be interested in your compare/contrasting of Oct/Nov 2016, following which SP doubled in six months, vs. today. My list so far:

Compare:
1. Elon's e-mail that Tesla was close to GAAP+ in 3Q16 vs. today's "sustainable operating profits"
2. SCTY accounting scare promoted by bears vs. today's "CAO/VP of Finance left"
3. Model X revenue ramp vs. today's upcoming Model 3 revenue ramp
4. Persistent SP walk-down in Oct/Nov 2016 as NASDAQ/oil was ramping vs. today same
5. Nine-month underperformance to NASDAQ of 40% vs. today's same
6. Fidelity PM's double-down in Oct/Nov 2016 vs. today's T. Rowe double-down
7. Significant short interest as a percentage of shares outstanding at both times

Contrast:
1. 2x market capitalization today vs. then
2. Significantly less reliance on equity dilution today vs. in 2016 due to ability to raise non-dilutive debt

I encourage anyone and everyone to play devil's advocate even if you agree. Don't hold back.

 

[sweter]

When Samsung phones were on Fire, I did not see Apple iPhones caught with their Pants down

In EV world, Tesla is the top respected manufacturer, and Porsche is a niche wanna be.. atleast thats how I see it.

references included January 2018 Plug-In Electric Vehicle Sales Report Card

There’s massive difference between established smartphone industry and emerging niche electric cars industry that has lots of opposition and misunderstandings.

 

[geneclean55]

Thanks for posting this, but there may be too many inherent assumptions in that math. For example, how did you conclude there wasn't a backlog buildup of batteries and parts that Fremont later leveraged for a temporarily high rate of production, which then later dipped back below 1,500/wk?

It'd be great if Tesla can get to (and maybe above?) 2,000/wk by end of March, which to me would indicate Tesla is still on track to 5,000/wk by June, which I believe is earlier than market expectation of Septemberish (my estimate), so SP should move up as these milestones are met.

If they leveraged parts build up for a burst to 1500, then VIN assignments should drop the following week which is why vin assignment for this week was particularly critical. ViN assignment did not drop this week.

 

[elasalle]

There’s massive difference between established smartphone industry and emerging niche electric cars industry that has lots of opposition and misunderstandings.

I'm amused to death with this line of thinking.

Rather than innovating, I think Porshe et al should all take out EV cars that burn every other week (easy to rig something that over heats). This would definitely have an impact on Tesla. Why spend all that money in innovation etc trying to figure it out. If that works, and Tesla flops, everyone can continue with ICE.

 

[Reciprocity]

I'm amused to death with this line of thinking.

Rather than innovating, I think Porshe et al should all take out EV cars that burn every other week (easy to rig something that over heats). This would definitely have an impact on Tesla. Why spend all that money in innovation etc trying to figure it out. If that works, and Tesla flops, everyone can continue with ICE.

Yeah, it's not like they would get caught cheating.. cough, ahem.. diesel gate.. caugh.

 

[Reciprocity]

With roughly 6000 model 3s delivered through the end of February and around 13,500 VINs registered with nhtsa to date. Let's assume they have manufactured around 11,500 based on the highest VINs reported todate. Where the hell are the other 5,500 cars. Assuming VINs are built in some orderly way. We are 2 weeks into the month so maybe 2,500 max delivered, given that only 2,400 where delivered in Feb I think that is being generous. Could there be 3,000 cars in lots and deliver centers and trucks in route? I guess it's but a crazy number but the of thing was that when the factory was down the lots near the factory emptied fast. Deliveries should actually be down in March if the factory was down in Feb. That shouldn't have impacted deliveries much because those cars would have been built previously.

What I want to see is more VINs registered soon, at least 3000. And a lot more people being assigned vins, then I will be better about where the ramp is.

 

[ValueAnalyst]

With roughly 6000 model 3s delivered through the end of February and around 13,500 VINs registered with nhtsa to date. Let's assume they have manufactured around 11,500 based on the highest VINs reported todate. Where the hell are the other 5,500 cars. Assuming VINs are built in some orderly way. We are 2 weeks into the month so maybe 2,500 max delivered, given that only 2,400 where delivered in Feb I think that is being generous. Could there be 3,000 cars in lots and deliver centers and trucks in route? I guess it's but a crazy number but the of thing was that when the factory was down the lots near the factory emptied fast. Deliveries should actually be down in March if the factory was down in Feb. That shouldn't have impacted deliveries much because those cars would have been built previously.

What I want to see is more VINs registered soon, at least 3000. And a lot more people being assigned vins, then I will be better about where the ramp is.

Some say the discrepancy you pointed out is explained by backlog in quality control. Thoughts?

I do not think the next batch of NHTSA will be near 3,000, because we'd be seeing a flurry of invites already.

 

[Starno]

Some say the discrepancy you pointed out is explained by backlog in quality control. Thoughts?

I do not think the next batch of NHTSA will be near 3,000, because we'd be seeing a flurry of invites already.

When was the last invite batch, sunday or monday ?

 

[Starno]

I'm actually excited about the new Autopilot update. This year is going to be VERY interesting on that front.

I can see major updates every 3-4 months.

I'm 70% confident that we'll get the cross country trip before October.

 

[ValueAnalyst]

When was the last invite batch, sunday or monday ?

Not sure, but I don't think daily tracking of this data to that extent is extremely informative. Best to focus on the longer term.

 

[Esme Es Mejor]

Contrast:
1. 2x market capitalization today vs. then.

The ratio of market cap to previous 4 quarters of revenue (price/sales, basically) is currently 4.62. On December 2, 2016 (the lowest market cap I could find in that time frame), the market cap to revenue was 4.74. So, relative to revenue, TSLA is actually cheaper now than it was at the depths of Nov/Dec 2016. At ~$330, the SP would be exactly in line.

Edit: TLDR— revenue has increased faster than market cap since Nov 2016.

 

[schonelucht]

I looked at the rate of reported VIN assignment date by month from the Model 3 Invites google doc:

The current rate of VIN assignments is a direct result of the huge batch of invites Feb 22nd. The curious thing is that the rate of increase in the VIN number isn't going up. It may simply be that the VIN assignments these weeks are merely catching up with VIN assignments two week prior which were weak.

Thanks for posting this, but there may be too many inherent assumptions in that math. For example, how did you conclude there wasn't a backlog buildup of batteries and parts that Fremont later leveraged for a temporarily high rate of production, which then later dipped back below 1,500/wk?

Yes, that's the big question we can't answer with any certainty.

When was the last invite batch, sunday or monday ?

The last big invite batch was Feb 28th. It's the biggest counterpoint against the clearly larger number of VIN assignments.

Another curious trend is the widening of the band from which VINs are sourced. This may simply be the effect of delivering all over the country. But VIN assignment seems to happen before transport and not after transport. Another reason could be the effects of many model 3 (parts) needing rework/remanufacturing (I don't care enough to parse the terms here).

We are due for an NHTSA registration tomorrow. I am hoping that gives us a bit more information in terms of the ramp.

At this point I have no hope for Tesla to be at a sustainable rate that is anywhere near 2000/week, let alone 2500. The best investors can hope is that Tesla can pull up enough spin on the Model 3 production in the last days of the quarter to help sentiment (for example, mentioning that the Grohmann line is starting initial trial runs in the Gigafactory). There is maybe also a surprise possible on the S/X numbers. There has been a lot of 'bad' news out already of plumetting S/X numbers in Europe and insiderev guesses in the states. A strong March may surprise some investors. If Tesla really delivers 1600 cars in Norway in a single day event as is rumoured, that would certainly help a lot.

 

[jasonb]

I think the lines are drawn so sharply at this point that there isn’t much movement between bull and bear camps at the retail level. Bears are surely louder but bulls know what’s going on.

heh, im looking forward to day when tsla price action does what I think it will and I can tweet suicide watch @ montana skeptic.