General Discussion: 2018 Investor Roundtable

[SteveG3]

Here's a very brief clip from the CBS This Morning crew that was apparently not included in this morning's broadcast. Elon discusses how bond rating services cannot properly extrapolate a disruptive company's financial circumstances into the future.

I put the odds at about 3 to 1 that 11 seconds into that video, when Elon rebuts Gayle King's "well Moody's a very respected firm..." framing with, ~"Moody's and S&P do not have a good track record" and then they switch shots of Elon, it is because CBS cut out his finishing his thought by mentioning the credit agencies performance during the housing crisis or something similar (wonder if @Curt Renz, with his TV experience, concurs with the changing of shots likely being a device to edit Elon's words with the fabricated false appearance of Elon's comment not being altered),

Credit rating agencies and the subprime crisis - Wikipedia

to be clear, nothing against Gayle King. I just think that when you work for a massive corporation like what CBS is part of, if you are on national television as an employee of such a massive corporation and you want to continue in that position, you have little choice but to do that framing of Moody's as "very respected... like the old 'When EF Hutton talks commercials'..." not quite as micro-managed/dictated as the video with the Sinclair Broadcast affiliates, but more a dictated framework to stay within than journalism.

 

[Words of HABIT]

GM cutting 1,500 jobs at Ohio plant amid falling demand for small cars
GM cuts 1500 jobs in Ohio. I first heard 400, now it is almost 4X more. Apparently they are ineffective at producing small cars at a profit.

 

[RobStark]

to be clear, nothing against Gayle King.

She thinks conventionally. Inside the NYC-DC bubble.

California-West Coast money is long TSLA.

Boston-NYC-DC money is short TSLA.

As a general rule.

Thinking conventionally, as your peers do, is not evil or make you part of a conspiracy.

It is shortcut thinking we must do on most subjects.

Nobody can do a deep dive on everything.

 

[TradingInvest]

I'm not sure how to take it though. Do you think it's a short term response. Or he completely gave up on Alien Dreadnought speed ?
That would be kinda bad if it's the latter, that would mean a certain part of the moat is now gone.

Don't worry about it. No way Elon will give up Alien Dreadnought. It's fun and that has to be the way to go in the long run, maybe 4~5 years. He will stop talking about it for a while. At this stage with high debt level, they should really try to make things simple, then introduce more tech, improve the line gradually. Elon is very clear about this now.

For the same reason, they should introduce Model Y with minimal variation from Model 3. Then gradually introduce more features both to the cars and to the lines.

They don't need to have a complete Alien Dreadnought in one shot. If part of it is done, they can use it. Right now the robots can't handle soft/rubbery parts. I thought about it, there is nothing really difficult. They just don't have the time to build those specialized robots now.

 

[RobStark]

 

[bambam4171]

For the same reason, they should introduce Model Y with minimal variation from Model 3. Then gradually introduce more features both to the cars and to the lines.

I hope he comes back to his statement that the Y will have Falcon wing doors. Imagine all the issues they had with the X in a mass produced car. Take the 3, make it a bit higher like a higher station wagon or CUV/SUV whatever and be done. Sell that thing by the millions, cash in and take the money to develop the next higher automated version. If they could build up a financial cushion before they implement the next wild idea the company would no longer constantly be on the brim and I guess things like the CPO disaster would no longer happen because they could actually start planning instead of having to react.

 

[ls7corvete]

I’m hoping the comment he made about the mistake being not staging in improvements, means that there will eventually be automation in this area.

I hope that the final assembly line is still 'alien dreadnaught' and they can, for lack of a better term, re-animate/automate the module and part feeding assembly portions later.

 

[WarpedOne]

What is good and optimal for 100/week is not good nor optimal for 1k/w.
Repeat for any pair of x and 10x.

Automation is a product by itself, it needs to be designed, built, tested, tried out, tweaked, etc. It takes time and resources. During ramp those time and resources consumed for automation look misplaced.

It can be faster to teach X new workers to do something new. On the long run a machine will always produce better quality, faster and cheaper - when it finally works as planned. Full automation at 2k/w is not prudent, not even at 5k/w.
At +10k week a product is completed every minute. In serial jobs every worker has max one minute to complete his job.
480 times per day (8h job in at 24/7 schedule) with consistent speed and quality and reliability. One can parallelize the process but this means even more variation in speed and quality. No two workers can maintain same speed and consistency.

Machine on the other hand takes time to start working. Duplicating it only takes space. Delivery of resource and removal of products is yet another machine. One can employ workers but building a machine will enable higher output.

AD is coming, don't bet on a date though...

 

[MattEnth]

Moody's is a respected credit agency. When they downgraded TSLA debt, bond prices fell. You can't point at 2007/2008 and say "well, Moody's is worthless."

Moody's does make errors, but they still command market respect.

What In The World Is Tesla Doing? Bizarre Manufacturing Processes Produce Massive Cash Burn

Tesla does not have the capital to build the Model Y AND the Roadster AND the Semi. They've currently promised all three. Even if you believe Musk's "cash flow positive" statement (which you shouldn't), it's still insufficient.

I'm personally stunned by the TSLA stock price; it seems like they're in full crisis mode now. Between continued Model 3 quality issues, a borked production process, multiple impossible promises, autopilot problems, possible SEC violations, and continuing cash burned, Tesla is in trouble.

 

[Causalien]

Chinese government spies can't infiltrate Fremont?

Westerners are incorruptible?

There are plenty of Westerners working in China. With private schools with indoor filtered air conditioning and vehicles with bioweapons defense model.

True. There's a chance that China has already infiltrated Fremont and obtained what they needed. Seeing as they managed to get stealth tech out of nowhere. I made the wrong assumption that the CIA is really good at deterring Chinese spies.

 

[bambam4171]

...

Sorry but your post sounds very much double standard to me. If one makes errors it commands respect. If the other does it he is in deep trouble?

 

[Cobos]

Moody's is a respected credit agency. When they downgraded TSLA debt, bond prices fell. You can't point at 2007/2008 and say "well, Moody's is worthless."

Moody's does make errors, but they still command market respect.

What In The World Is Tesla Doing? Bizarre Manufacturing Processes Produce Massive Cash Burn

I really can't understand how Moodys still command respect. It's not like they slightly missed on the subprime securities worthyness. They rated highly speculative junk bonds as AAA. That would be like Tesla promises that the Model Y is actually a joint SpaceX-Tesla product that can also take you to Mars. And when people complain that their rocket-car hybrid doesn't even hover they say "oopsy, it's actually just a car". And I'm pretty sure Musk hasn't promised anything like that for the Model Y.

Cobos

 

[Sancho]

The bad news: Elon got ahead of himself on automation of the factory, which caused a delay in Model 3 ramp and expense. This is part of a pattern of Musk overreaching technically (Model X complexity, original decision for Model Y manufacturing to be more updated, now reversed to be same as Model 3).

The good news: these mistakes are fixable, and Musk works relentlessly to fix them. The Model 3 ramp problems must be close to fixed already if Musk can predict cash flow and profitability just one quarter ahead.

The better news: Tesla is lead by someone who fearlesslessly intends to innovate every aspect of automotive and energy design, manufacture and sale. Expect lots more mistakes, but he now has a track record of recovering from mistakes. Tesla will soon have economic stability and size that will buffer these mistakes even more.

Once we discard our naive notions of Musk the invincible genius who will upend many industries in a single leap, we are still left with a man and company that has already achieved greatness, and is likely to continue to achieve on a much greater scale.

Kudos to all innovators. Even more kudos to those innovators who can survive their mistakes.

 

[WarpedOne]

Without automation Tesla would reach 2k/w in November '17.
It would also stay at 2k/w for the rest of the Model 3 production.

Musk is stressed because all the problems he has to solve now do not yield immediate benefit, they will become useful when he will try to push from 5k to 6k. There is always an option to solve the current robot problem with adding people.
But those people will be the problem a month later. And more people will not be a possible solution.

 

[avoigt]

About the CBS interview:

First of all I am delighted to see an interview and videos with a positive minded sentiment not falling into the negative narrative that we all see that often. Congratulations to Elon that he obviously understood that positive PR is a requirement to achieve his goals. The lady is balanced and impressed about him and the factory as well as its obvious that Elon is very proud to show his factory. Furthermore the more details are shown and explained the less likely it is that FUD does stick with media and people and is repeated as truth.

I listened to the videos a couple of times and there is a ton of information in it. This is not only what has been said and shown but body language and mimics tell a strong story too that is worth talking about.

Just some findings:

The production line is highly automated and full to that extend that a human cannot even enter the room. To protect workers its standard procedure to build fences around robots. The over automation he referred to may be linked either to certain parts of the production and/or maybe even to the conveyer belt complexity he referred to. In short, this line is highly automated and can run on a much higher speed for sure once bottle necks are eliminated. The use of workers may be helpful in some parts of the production where for instance a decision process is required ands we have seen some of those processes and workers as well. No reason for me to believe that he steps back from AD but they adjust just from fully crazy automation to just crazy automation with no compromise on output. All what they said as I hear it is that at some parts humans at least at this time of the ramp can be superior over robots.

I liked particular how good Elon feels in his factory. Its like he loves to walk around see the machine and what has been accomplished so far , quite remarkable for a person with that pressure from the street. It reminds me of an interview with Boris Becker at the Center Court in Wimbledon where he said "this is my living room". People who feel that good often achieve unknown levels of performance. There is a lot of confidence in his words, gestures and responses. Given that he defines his role where his strength are for instance in the issue solving capability overseeing a complex and long production line and not as an investor or entrepreneur the weight of his words that they will be CF+ in Q3 and Q4 is stronger than just from an investor without deeper insights and understanding of technical issues. He does see the path out of the production hell much better than before and therefore we should take his Tweet seriously and to be much more than and anger Tweet about FUD news.

Elon confirmed the batterie assembly was and is still the bottle neck. IOW although we all have seen the increase above 2k/w the car output is still determined by the speed of Batterie output. The car assembly line in the factory though seem to do fine at this speed level. It does sound though as the Groman line is not yet active. An his words about automation and humans can be also interpreted as that the semi automated line was easier to get up and running versus there previous internal attempt for full automation that now is about to be replaced by the Gromann line. This is speculation though but I do expect a much more steep output curve once Gromann is up an running.

The precision of production and the car has been talked about more than one time and the goal to make the Model 3 the most precise car in the industry should be a wake up call for all people who criticize quality issues as well. Given that there has not been any pre production to shorten the ramp the amount of issues like panel gaps is much lower than expected from me and will outpace the industry soon if the continue to fine tune and adjust. We likely will see less negative reports about quality issues which does not mean that service issues after delivery may disappear.

All in all I applaud that they did this set of videos and hope we will see more of those as it helps everybody to understand where they are. Elon is a very smart person and when he talked his mind tends to jump and responses may not always be fully understood. We have seen that before and for an interviewer it is easy to misread what he said and put a sentence out that was not at all what he was trying to say. CBS did a good job to hinder Elon to harm himself. We need more of those.

 

[Jonathan Hewitt]

They ran out of spots to park the Model 3s and are parking them in the aisles now.

Prepare for a shift in argument from the shorts of "Tesla can't make Model 3s" to "Tesla can't deliver all the Model 3s they make."

Found a LOT of Model 3's in a Tesla lot - Pictures inside

Oh my, it's worse than we thought guys. The Model 3s spilled over to this other lot and go around the
whole building. It's just not possible to deliver this many cars. Imagine what would happen if it was possible to get to 5,000 per week? The shorts still say we don't have to worry about that, but imagine if they could! Prepare for bankwuptcy! Who would have known the ability to deliver cars was going to be Tesla's undoing.

Taken from this post: Found a LOT of Model 3's in a Tesla lot - Pictures inside

 

[22522]

Oh my, it's worse than we thought guys. The Model 3s spilled over to this other lot and go around the
whole building. It's just not possible to delivery this many cars. Imagine what would happen if it was possible to get to 5,000 per week? The shorts still say we don't have to worry about that, but imagine if they could! Prepare for bankwuptcy! Who would have known ability to deliver cars was going to be Teslas undoing.

Taken from this post: Found a LOT of Model 3's in a Tesla lot - Pictures inside

Seems like they are trying to limp to 200K and the Canadians want four wheel drive.

 

[Krugerrand]

I love his eye roll. Seriously though I’m sure most people who are tech heads like him, or myself, have all physically or mentally rolled our eyes at the people who have told us “that’s not possible” because they’re stuck in some old way of thinking. I fight this on a daily basis, fighting what “can’t” be done just because someone doesn’t have the imagination or resourcefulness to want to make it happen. It drives me absolutely crazy.

I’ve dealt with that for decades in my industry and the eyeroll becomes so automatic you sometimes don’t even know you’re doing it. But for me I’m way past caring enough what others think to be driven crazy. Instead, telling me that it can’t be done/you can’t do it simply hyper focuses me because I live for the day I get to say, ‘I told you so.’ Yes, I’m petty that way. Elon seems to be someone who gets hyper focused but without the pettiness afterwards. He is a better human than me.

 

[JRP3]

She thinks conventionally. Inside the NYC-DC bubble.

She's also Oprah's best friend,(who owns a Tesla), and is likely more liberal and pro Tesla.

California-West Coast money is long TSLA.

Boston-NYC-DC money is short TSLA.

Interesting statement, contrary to what I would have guessed.

 

[Krugerrand]

She thinks conventionally. Inside the NYC-DC bubble.

California-West Coast money is long TSLA.

Boston-NYC-DC money is short TSLA.

As a general rule.

Thinking conventionally, as your peers do, is not evil or make you part of a conspiracy.

It is shortcut thinking we must do on most subjects.

Nobody can do a deep dive on everything.

No, it’s not evil but it is lazy and a cop out.

A person could simply not blindly follow their peers (because not enough time to deep dive on everything) and instead simply not express an opinion one way or another on said topic they haven’t dived a bit on.

Many times I’ve been asked questions about topics in my industry that I haven’t deep dived and my standard answer is, ‘I don’t have an opinion on that. The general consensus is blah, blah, blah, but if you’re really interested in knowing check out these (resources). They’ll help you or at least point you in the right direction and then you’ll have right and proper information with which to get your question answered/form your own opinion.’