General Discussion: 2018 Investor Roundtable

[neroden]

Perhaps they went with decentralized authority, so that service center managers can get things done directly (within some corporate guidance)?

Likely oversimplified view:
What benefit does Fremont based management of SvC provide? They don't work on the cars. Number and, location of centers needs to be handled, but that in infrastructure. Jon was a great POC for problems, but that was jumping to the VP because the people on the ground were not getting it done (for whatever reason).

I like your analysis, but I think the guy on the top of service has to handle the following things:
(1) Making sure that service centers get what they need from Fremont. I've had complaints about inability to get parts, or even inability to get labor...
(2). .. and *especially* inability to get the attention of the software team, who seems to pay no attention whatsoever to customer complaints.
(3) Figuring out where to build out service centers, as you say. They're doing a mediocre-to-poor job of this in my opinion. They've needed a center in Syracuse, NY since day one, but apparently there's nobody in charge who can read a freaking map of cities and Interstates and figure out the correct location to serve upstate NY from.

None of the existing service execs were handling any of this competently, so I gues they're no loss, but someone ought to be handling it.

 

[ZachF]

Tesla made over $2 billion in China last year, doubled sales and expanded retail/charging presence | Feb. 23rd 2018
Source electrek

It's the world's largest vehicle market by far, though by value the picture is less skewed, I think. If you mean to compete gobally, being present and successful probably helps.

China is the largest by numbers (29m vs 17m in the US), but I wouldn't be surprised if the US market is still larger in dollar terms.

Together China and the US are about half of the world's auto market.

 

[neroden]

So do I understand this correctly? If the stock is above $359.87 the bonds due in March are a non-issue and we even get minimal dilution? But if the stock is below $360 then Tesla needs almost $1 billion in cash to pay them off?

Pretty much.

Four small caveats:
(1) It's $920 million.
(2) Tesla has to decide before December 1 (for those who convert after December 1) what proportion to pay in cash and what proportion to pay in stock. Many of us are assuming all-stock, but it's not certain. If things are looking really good on December 1 they may decide to pay part of it off in cash to reduce dilution. If Tesla doesn't make a statement, they have to pay the $920 million off and then pay any excess in stock.
(3) Conversion can only be done after December 1, unless certain unlikely things happen: if the stock closing price is over $467.83 for 20 out of the last 30 trading days of August and September, conversion can be done starting October 1; or if the bonds are trading below 98% of the converted stock value.
(4) Conversion prior to February 15, 2019 forgoes the last interest payment. So don't expect conversions until February 16th unless the stock is over $360.32.

The crucial question is the stock price come February 27th, which is the last day when noteholders can convert. Some will probably decide to convert earlier though.

 

[Yggdrasill]

Wrong!

The competition is bmw m3, Audi A4, Mercedes c series and Infiniti Q50, and then Camry and Prius.

I did say *electric* competitors. The non-electric ones can’t actually compete.

 

[Dwdnjck]

I did say *electric* competitors. The non-electric ones can’t actually compete.

No. It’s the electric ones that don’t compete. For example: the local Jaguar dealer will place the I- pace next to the E-pace which sells for $25000 less and is bigger, and ask the question, How much gas can you buy for $25000?

 

[kbM3]

No. It’s the electric ones that don’t compete. For example: the local Jaguar dealer will place the I- pace next to the E-pace which sells for $25000 less and is bigger, and ask the question, How much gas can you buy for $25000?

The IPace has been getting wonderful reviews. It makes me a little nervous.

I know it has no direct competition from Tesla, and the Supercharging network, but it has its own advantages, and I've read comments by quite a few people (especially Europeans) that are getting it instead of the Tesla they would have otherwise purchased.

It gives me concern that the luxury automakers will be able to steal market from Tesla's last gen (S&X), but at least as far as I'm aware, there's nothing even on the horizon to compete against the 3.

 

[skitown]

I don't think this ban should be underestimated. Should have a very chilling effect indeed....

Milan’s New Diesel Ban To Cause Ripple Effect | CleanTechnica

 

[dandurston]

So do I understand this correctly? If the stock is above $359.87 the bonds due in March are a non-issue and we even get minimal dilution? But if the stock is below $360 then Tesla needs almost $1 billion in cash to pay them off?

I don't think this is a big deal.

If the stock is above $360, there is basically an automatic capital raise in the sense that new shares are issued to pay off this debt.

If the stock is below $360, Tesla could still do an elective capital raise to pay off that debt. The only difference would be that they'd need to find willing buyers for that new stock instead of having captive ones, and the dilution would be slightly more since the shares are worth less. I don't think either of those is much of a worry. Tesla could easily sell a billion in stock, and the dilution difference for say $340 vs $360 is trivial.

It's also important to keep in mind that a capital raise isn't really a bad thing. Imagine that right now you own 1% of TSLA. Then you own 1% of a $60 billion market cap company that owes this billion in debt. After the capitol raise you might only own 0.98% of TSLA, but a billion in debt is gone so the market cap should rise by a billion. You own a slightly smaller proportion of a larger pie. Either way your amount of pie is the same.

Tesla has always been surrounded with hysteria about needing capitol raises, which are portrayed as a horrible thing. But capitol raises are neither a bad thing nor hard for Tesla to do. Everyone wants to invest and until something changes big time, Tesla will be able to raise any funds they need.

 

[22522]

I don't think this ban should be underestimated. Should have a very chilling effect indeed....

Milan’s New Diesel Ban To Cause Ripple Effect | CleanTechnica

This is great news! Have not been to that beautiful city since '77, but soot was my only objection. Good to hear they are solving that!

 

[trailhound]

The IPace has been getting wonderful reviews. It makes me a little nervous.

I know it has no direct competition from Tesla, and the Supercharging network, but it has its own advantages, and I've read comments by quite a few people (especially Europeans) that are getting it instead of the Tesla they would have otherwise purchased.

It gives me concern that the luxury automakers will be able to steal market from Tesla's last gen (S&X), but at least as far as I'm aware, there's nothing even on the horizon to compete against the 3.

ICE cars are the competition - as more BEVs come on the market the market will grow. It is easy to think that each BEV sold by another manufacturer will be one less that Tesla gets to sell but in reality it will probably be one less ICE sold. And right now Tesla is supply constrained so every car is going to sell. Since Tesla doesn't sell any ICE cars-who will feel the pain the most? I think the European car makers but we will know shortly- 1-4 years.

I think there will be a favorable feedback loop as more people ride/drive/buy BEVs.

 

[22522]

This is investor relevant because it is from the Financial times:
Subscribe to read | Financial Times

The end with Lutz. Two out of his last 4 statements are false based on first hand knowledge (I have owned both Mercedes and BMW vehicles). This leads me to believe the statements I have no first hand knowledge about are also false. Let's see what this implies:


Subscribe to read | Financial Times

“He doesn’t have any unique technology — none,” says Mr Lutz, who predicts a much tougher future for Tesla. He says luxury marques such as BMW and Mercedes, with better reputations for quality, will come to dominate a market that Tesla has so far largely had to itself. That will provide the sternest test to Mr Musk’s dream of profitability.

#1 Tesla battery technology is better and also unique resulting in a huge cost and delivery advantage. So statement #1 is false.

#2 He predicts a much tougher future.

#3 Luxury marques with better reputations for quality... I don't think that is true.

#4 Will come to dominate and provide a stern test to dreams of profitability.

So if #2 and #4 are as false as #1 and #3, this means:

A. The future gets easier (rather than tougher) as customers recognize that Tesla delivers a better car and a better value than Mercedes and BMW.

B. Tesla dominates and destroys Mercedes and BMW profitability.

I don't like being lied to. But knowing where you are being lied to can guide future behaviors.

Very useful financial times article.

 

[neroden]

The IPace has been getting wonderful reviews. It makes me a little nervous.

I know it has no direct competition from Tesla, and the Supercharging network, but it has its own advantages, and I've read comments by quite a few people (especially Europeans) that are getting it instead of the Tesla they would have otherwise purchased.

It gives me concern that the luxury automakers will be able to steal market from Tesla's last gen (S&X), but at least as far as I'm aware, there's nothing even on the horizon to compete against the 3.

It's great, but how many are they producing per year? 20K? 30K? 10K? The first year's production is already sold out, but they haven't said how many that is. How fast can they ramp up?

There are still quite a lot of ICE cars being sold in the Model S / I-Pace price bracket. Seems to me those will be displaced; Jaguar could sell as many I-Paces as Tesla is selling S&X without wiping out ICE cars in that price bracket. And Jaguar doesn't appear to be planning to make that many, at least not quickly.

 

[neroden]

I don't think this is a big deal.

If the stock is above $360, there is basically an automatic capital raise in the sense that new shares are issued to pay off this debt.

If the stock is below $360, Tesla could still do an elective capital raise to pay off that debt. The only difference would be that they'd need to find willing buyers for that new stock instead of having captive ones, and the dilution would be slightly more since the shares are worth less. I don't think either of those is much of a worry. Tesla could easily sell a billion in stock, and the dilution difference for say $340 vs $360 is trivial.

It's also important to keep in mind that a capital raise isn't really a bad thing. Imagine that right now you own 1% of TSLA. Then you own 1% of a $60 billion market cap company that owes this billion in debt. After the capitol raise you might only own 0.98% of TSLA, but a billion in debt is gone so the market cap should rise by a billion. You own a slightly smaller proportion of a larger pie. Either way your amount of pie is the same.

Tesla has always been surrounded with hysteria about needing capitol raises, which are portrayed as a horrible thing. But capitol raises are neither a bad thing nor hard for Tesla to do. Everyone wants to invest and until something changes big time, Tesla will be able to raise any funds they need.

Quite right, but an elective stock issuance is slow. :-( If they need to do it by March 1, they probably need to set it in motion in December or earlier... even if they choose to do a private placement, or a rights issue, or an "at the market offering" (issue new shares of treasury stock and sell them straight into the market), rather than doing an underwritten roadshow.

Edit: nope, I just did my research: an at-the-market offering by a well-known seasoned issuer can be done essentially instantly. Interesting.

 

[kbM3]

ICE cars are the competition - as more BEVs come on the market the market will grow. It is easy to think that each BEV sold by another manufacturer will be one less that Tesla gets to sell but in reality it will probably be one less ICE sold. And right now Tesla is supply constrained so every car is going to sell. Since Tesla doesn't sell any ICE cars-who will feel the pain the most? I think the European car makers but we will know shortly- 1-4 years.

I think there will be a favorable feedback loop as more people ride/drive/buy BEVs.

All that may be true, but I was happier when EV competition was further behind.

 

[kbM3]

Model 3 deliveries are back up to 500/day according to Troy’s spreadsheet.
https://docs.google.com/spreadsheet...xGp6xUL5j8DqkMPY0K9TfOCDz83A_7HGcQCl/pubhtml#

 

[Krugerrand]

So I don't normally worry about executive departures, because it just means Tesla has hired someone else to do that job.

But... Fred at Electrek lists a *lot* of Service executives who have left or been fired in recent years, and the thing is, I can't seem to find a Tesla Service executive who's still *there*. Who's running Service? It does no good to have no leader of the department -- Musk certainly isn't handling it himself, he's got too much else going on.

Tesla’s VP of worldwide service leaves the automaker

If someone can figure out who's the head of service now, it would be helpful.

I thought I read somewhere it was whoever was heading China Service is now Worldwide. Can’t recall where I read that.

 

[EinSV]

All that may be true, but I was happier when EV competition was further behind.

The iPace is roughly the same size and has the same acceleration as the LR AWD Model 3, but is ~$20K more expensive, has much less range, no Supercharging network, etc.

I think it will demonstrate how far Tesla is ahead of the competition and attract some more conservative buyers to EVs. It’s all good.

 

[Boomer19]

Pretty much.

Four small caveats:
(1) It's $920 million.
(2) Tesla has to decide before December 1 (for those who convert after December 1) what proportion to pay in cash and what proportion to pay in stock. Many of us are assuming all-stock, but it's not certain. If things are looking really good on December 1 they may decide to pay part of it off in cash to reduce dilution. If Tesla doesn't make a statement, they have to pay the $920 million off and then pay any excess in stock.
(3) Conversion can only be done after December 1, unless certain unlikely things happen: if the stock closing price is over $467.83 for 20 out of the last 30 trading days of August and September, conversion can be done starting October 1; or if the bonds are trading below 98% of the converted stock value.
(4) Conversion prior to February 15, 2019 forgoes the last interest payment. So don't expect conversions until February 16th unless the stock is over $360.32.

The crucial question is the stock price come February 27th, which is the last day when noteholders can convert. Some will probably decide to convert earlier though.

wasn’t there just 06-01-2018 bonds that matured? were they convertibles? did they pay cash/stock?

 

[Remus]

The IPace has been getting wonderful reviews. It makes me a little nervous.

I know it has no direct competition from Tesla, and the Supercharging network, but it has its own advantages, and I've read comments by quite a few people (especially Europeans) that are getting it instead of the Tesla they would have otherwise purchased.

It gives me concern that the luxury automakers will be able to steal market from Tesla's last gen (S&X), but at least as far as I'm aware, there's nothing even on the horizon to compete against the 3.

It will impact short term stock price.

But, I don't think Tesla need total domination to be successful. A little competition for keeping the engineers on their toes is a good thing.

And it looks like model y will likely under cut with lower price, similar size, better range and everything.

And they didn't say how many they plan to produce at what margin.

And they will also have the similar problem of fire caused by high speed accidents, among others.

 

[Yuri_G]

This car guy that purchases used exotics for cheap popped up on my YouTube feed after buying a 2012 Model S with 100k+ miles. How the car behaves probably isn't surprising to most of us, but it should shed some light on quality EVs for some gearheads.