Long-Term Fundamentals of Tesla Motors (TSLA)

[The Rookie]

Solar sales aren’t expanding, sales of energy and storage are, solar is a small and shrinking part of that.

As for safe stock, well 34Million (over 15% of all shares in the company and Elon and Larry tie up a substantial amount between them) shares have been sold since the combined announcements, and the share price is still droppI guess, so looks like there isn’t universal support for your beliefs.

Also the bonds have dropped again and bond investors are more critical of longer term outlooks than stock investors.

 

[neroden]

Solar sales aren’t expanding, sales of energy and storage are, solar is a small and shrinking part of that.

Factually incorrect according to SEC filings.

Please go away. Disinformation is not appreciated here.

 

[wjhepworth]

Factually incorrect according to SEC filings.

Please go away. Disinformation is not appreciated here.

Rookie, may want to watch a little here. Tesla, as is normal of a complete disrupter, is very difficult for Wall Street to gauge. Wall Street is familiar with GM, Ford etc and not a technology firm that makes cars. They frequently read the tea-leaves wrong. I have made thousands on Wall Street overreactions and errors and plan to continue to do so.

You are almost correct on your statement about solar but not quite. In the 2018 10-k statement Tesla does say that storage is the dominant growth factor but solar is still growing. Feel free to read the 10-k at the following link: (not an advertisement obviously)

tsla-10k_20181231.htm

 

[neroden]

Specifically solar loan & cash sales are growing. Tesla's deliberately killing / winding-down solar leasing which is a cash drain.

 

[adiggs]

Found this on Reuters, talking about the sensor side of self driving technology.
A chaotic market for one sensor stalls self-driving cars | Reuters

My key takeaway from this article is that the Lidar market isn't evolving all that rapidly. Market participants don't see standards arriving soon that would enable the market to shake out, lower prices, drive volume and bring the scale and prices that EVERYBODY except Tesla needs to experience success with this critical component for their self-driving solution.

The year mentioned is 2025, but its sort of in a wished for way. Toyota is quoted as saying that they're ok with the market not coalescing yet.

I read this and I'm thinking to myself that it's possible the rest of the industry has jointly jumped into a dead end and has collectively not yet realized it yet. And the two forcing functions I can think of to help them realize it may not happen for awhile, and both are good for Tesla: 1) time and 2) Tesla puts real self driving into the hands of consumers while everybody else is proving how good their systems are using lidar systems that cost more by themselves than Tesla's self-driving software costs.

 

[smorgasbord]

The entire gasoline car market is dying. Peak ICE car sales were 2017.

That sales dropped in one year, 2018, compared to 2017 is hardly indicative of a peak. Statista has sales down less than 4% for 2018 over 2017 (Global car sales 1990-2018 | Statista

Here's a graph of vehicle sales up through 2017 from OICA (International Organization of Motor Vehicle Manufacturers):

One down year after this run doesn't look like a peak to me.

My investment thesis is basically based around the horrendous hopelessness of every other carmaker.

OK, but there's the current indications from Tesla itself that US demand for Model 3 has fallen off a cliff since the halving of the Federal tax credit. Yeah, I know that Tesla has been producing cars for the overseas market, but at less than 7K US cars delivered in Jan less than 6K cars in Feb, if demand were still high wouldn't people be complaining about not getting their cars and wouldn't Tesla's own site show wait times longer than ("delivered in less than 2 weeks")? Tesla has not only cut prices 3 times, they accelerated the availability of the SR and SR-Plus variants ($35K and $37K) so much so that they had to resort to closing most of their stores. That strikes me as an amputation necessary for the patient to survive, and not a good sign.

I agree that Tesla has funding options available to it, and it's really a shame that they've let the short sellers taunt them into not tapping into those options. Tesla needs to get Model Y out as quickly as possible and I have to believe that more money now would make that happen faster. At this point it looks like Rivian might deliver some pickups before Tesla. I have no idea how good those vehicles will be nor how quickly they scale production, but unlike Tesla they've gone after the hot configurations (pickups & SUVs). In many ways, Tesla has been successful despite Elon's poor choices of vehicle types, but that overcoming that drag appears to be getting harder and harder.

EV competition is indeed lame - from being battery production limited to not having 12K superchargers - but the real competition for Tesla remains ICE vehicles. How many people will buy the newly redesigned BMW 3 series instead of a Model 3 Performance? How many will continue to buy Camrys and Accords instead of SR and SR-Plus?

My prediction is that by the end of 2019 Tesla will reverse course on closing stores, with Elon bragging that they finally overcame the Model SR production cost issues and so can once again afford to have stores, which will be needed for solar roof products as well.

 

[replicant]

the real competition for Tesla remains ICE vehicles. How many people will buy the newly redesigned BMW 3 series instead of a Model 3 Performance?

Good question. Looks like people show equal interest in the two models: https://trends.google.com/trends/explore?q=/g/11c3x48pb7,/m/02mtys

 

[goinfraftw]

Good question. Looks like people show equal interest in the two models: https://trends.google.com/trends/explore?q=/g/11c3x48pb7,/m/02mtys

Guess 2018 was just a test? This year should be interesting.

 

[neroden]

That sales dropped in one year, 2018, compared to 2017 is hardly indicative of a peak.

Yes, yes it is.

To be slightly less curt with you: BEV sales continue on their 50% per year growth trajectory. Total car sales are growing... slightly. There's no way for total car sales to grow faster than BEV sales growth again, barring some one-time giant spike in car sales (which seems unlikely).

Admittedly this is a global analysis. Driven largely by China. Peak ICE for the US will probably be later. Peak global ICE has passed already, though.

OK, but there's the current indications from Tesla itself that US demand for Model 3 has fallen off a cliff since the halving of the Federal tax credit.

Have you watched how demand works when tax credits expire in other countries and in states? There's a really normal pattern. Based on the size of the expiring credit, I would have predicted a 1 to 2 month demand pullforward, followed by a 1 to 2 month hangover. Everything is proceeding exactly as predicted.

(Important to note that Tesla *did* work through the backlog of US MR/LR demand before the end of December; this also adds up for anyone who can do math and pay attention.)

wouldn't Tesla's own site show wait times longer than ("delivered in less than 2 weeks")?

That's always inaccurate.

I expect people to start complaining in mid-March that their cars have not arrived.

Tesla has not only cut prices 3 times, they accelerated the availability of the SR and SR-Plus variants ($35K and $37K) so much so that they had to resort to closing most of their stores. That strikes me as an amputation necessary for the patient to survive, and not a good sign.

Well, you're just wrong. :shrug: I guess your view is common, which explains why the stock is mispriced right now.

EV competition is indeed lame - from being battery production limited to not having 12K superchargers - but the real competition for Tesla remains ICE vehicles. How many people will buy the newly redesigned BMW 3 series instead of a Model 3 Performance? How many will continue to buy Camrys and Accords instead of SR and SR-Plus?

ICE vehicles don't compete. Anyone who's driven an EV never wants to go back. There may be some need for word-of-mouth to spread so that people get test drives, but basically nobody will buy a BMW 3 series if they've tried a Tesla. Maybe a few diehard brand loyalists, but not enough to keep BMW's factory open.

Some will buy Camrys and Accords because they're cheaper.

My prediction is that by the end of 2019 Tesla will reverse course on closing stores, with Elon bragging that they finally overcame the Model SR production cost issues and so can once again afford to have stores, which will be needed for solar roof products as well.

Musk *could* do something that stupid, but I hope not. Tesla had far, far, far, far, far too many stores -- a dozen in the Miami area, a dozen in the LA area, etc. One per major metro area is fine, but what Tesla actually had was waste.

 

[smorgasbord]

Yes, yes it is.

To be slightly less curt with you: BEV sales continue on their 50% per year growth trajectory. Total car sales are growing... slightly. There's no way for total car sales to grow faster than BEV sales growth again, barring some one-time giant spike in car sales (which seems unlikely).

Admittedly this is a global analysis. Driven largely by China. Peak ICE for the US will probably be later. Peak global ICE has passed already, though.

I honestly don't know what you're claiming now. Your original claim was that ICE sales peaked in 2017. We've had only one year of sales since then, which is down about 4%. Sales could just as easily increase this year, making last year not indicative of a peak, but a blip. Time will tell. Fast as EVs are growing now, the overall market for vehicles so far is growing faster.

Have you watched how demand works when tax credits expire in other countries and in states? There's a really normal pattern. Based on the size of the expiring credit, I would have predicted a 1 to 2 month demand pullforward, followed by a 1 to 2 month hangover. Everything is proceeding exactly as predicted.

Maybe you predicted it, but Tesla itself is not acting as if they expected this much of a drop off. Musk has talked about a "pull forward" into 2018 based on the tax credit, but this drop off seems to me to be larger than that (US under 7K/month now). More importantly, cutting prices yet again and then prematurely introducing the SR and SR Plus variants indicate that Tesla, or at least Elon, is worried about demand in the US.

(Important to note that Tesla *did* work through the backlog of US MR/LR demand before the end of December; this also adds up for anyone who can do math and pay attention.)

Right, and this is not in conflict at all what I've been saying. Not only is the backlog for such vehicles gone, the steady state demand for them in the US is unknown, and indications are concerning.

I expect people to start complaining in mid-March that their cars have not arrived.

Well considering the first orders were only promised within 2-4 weeks, people shouldn't complain until mid April at the earliest.

Well, you're just wrong. :shrug: I guess your view is common, which explains why the stock is mispriced right now.

You know, you "just" saying I'm wrong doesn't convince me that I am.

ICE vehicles don't compete. Anyone who's driven an EV never wants to go back. There may be some need for word-of-mouth to spread so that people get test drives, but basically nobody will buy a BMW 3 series if they've tried a Tesla.

Well, thanks to Elon's latest move, there aren't any more test drives. People have to actually buy the vehicle to "test" drive it and then return it if they don't like it. Many people won't bother with that hassle. Good luck selling Teslas in communities that don't today have a lot of Tesla owners.

While I agree that EVs are better, most people don't know that. If Tesla can only sell to people who already believe in EVs, the company is toast. The real competition remains the ICE vehicles that people know and mostly love.

Tesla had far, far, far, far, far too many stores -- a dozen in the Miami area, a dozen in the LA area, etc. One per major metro area is fine, but what Tesla actually had was waste.

Until last month, Elon disagreed with you. That's why they continued to open new stores late last year, and I wouldn't be surprised if they had opened some earlier this year. After all, the SEC documents filed within the last few weeks literally talk about how important Tesla's stores are to its business.

 

[neroden]

I honestly don't know what you're claiming now.

Fast as EVs are growing now, the overall market for vehicles so far is growing faster.

I'm claiming that your claim here is flat-out false. Is that clear enough? The overall market for vehicles is NOT growing faster.

You'll see.

My last prediction for the crossover year when EV sales grew faster in absolute numbers than ICE sales was in the 2019-2020 timeframe. Then the data came out. Turns out ICE sales have been growing slower than expected, so it was 2017. They don't have a chance to catch up. As I say, it's mostly a China effect.

Maybe you predicted it, but Tesla itself is not acting as if they expected this much of a drop off.

I cannot be held responsible for whether Tesla management is capable of making rational predictions. These are the people who claimed they'd have "sleep in your car" drives from LA to NY several years ago -- sometimes they are really, really out of touch. I cannot say how much they predicted since they did not make a public prediction. Nor do I care; I've learned that their misestimations are only occasionally important, and this is not one of those times.

prematurely introducing the SR and SR Plus variants

This is incorrect. They were introduced exactly on schedule, actually, if you had been paying attention. He said in one of the conference calls that he'd be able to put out the SR in late February or early March, he hoped. He did.

Of course, we all applied Elon Time to that, which is why we are acting like it was early!

Right, and this is not in conflict at all what I've been saying. Not only is the backlog for such vehicles gone, the steady state demand for them in the US is unknown,

Yes.

and indications are concerning.

Not to me. I don't see any cause for concern about US demand whatsoever; it's still clearly too large for the supply once Tesla is distributing worldwide.

Well considering the first orders were only promised within 2-4 weeks, people shouldn't complain until mid April at the earliest.

And yet... they're already complaining! Go over to the Model 3 forum!

Well, thanks to Elon's latest move, there aren't any more test drives.

I'm getting seriously conflicting information on that. Let's see what happens. If they've truly killed all test drives worldwide, that would indeed be a mistake.

Until last month, Elon disagreed with you. That's why they continued to open new stores late last year, and I wouldn't be surprised if they had opened some earlier this year.

Yeah, they did. I thought that was pretty dumb. And I didn't realize how spectacularly expensive they were, so it was even dumber than I thought. If I'd realized how expensive the stores were (6 to *12* employees per store? Premium locations? 12 stores in one metro area?) were I probably would have been more worried about it. Oversight on my part.

 

[mspohr]

I honestly don't know what you're claiming now. Your original claim was that ICE sales peaked in 2017. We've had only one year of sales since then, which is down about 4%. Sales could just as easily increase this year, making last year not indicative of a peak, but a blip. Time will tell. Fast as EVs are growing now, the overall market for vehicles so far is growing faster.


While I agree that EVs are better, most people don't know that. If Tesla can only sell to people who already believe in EVs, the company is toast. The real competition remains the ICE vehicles that people know and mostly love.

Peak ICE Car has been widely reported:
Bloomberg - Are you a robot?
https://www.detroitnews.com/story/b...ak-auto-drives-cuts-opportunities/3019087002/
Electric Vehicles: Are carmaking giants misjudging their strategy?
Have we reached Peak Car?
https://jalopnik.com/peak-car-is-real-1829599047
Could demand for new cars in China be peaking?

Many people know about EVs and plan to buy one:
34% of Americans Expect to Buy an Electric Vehicle in Next 10 Years | CleanTechnica

 

[JRP3]

Well, thanks to Elon's latest move, there aren't any more test drives.

I don't believe that is accurate. All stores are not closed and service centers could also offer test drives.

 

[smorgasbord]

I cannot be held responsible for whether Tesla management is capable of making rational predictions.

Oh, so now you know what demand is better than Elon. Got it.

This is incorrect. They were introduced exactly on schedule, actually, if you had been paying attention. He said in one of the conference calls that he'd be able to put out the SR in late February or early March, he hoped.

No, you're the one who is incorrect here, and documentably so. From the 2018 Q4 conference call (https://seekingalpha.com/article/42...-results-earnings-call-transcript?part=single )just last month (Feb):
Elon Musk:

...we expect to introduce the standard range Model 3 sometime - probably the middle of this year is a rough, rough guess.

Of course, Elon also said in that call that Gross Margin on the Model 3 will reach 25% in 2019. But, if that were now achieved, or even close, then Tesla wouldn't need to be cutting stores to save costs. As Elon said in the March Analyst Call (Tesla Call Transcript (2.28.19).pdf ):

It was it's excruciatingly difficult to make this car for $35,000 and still be financially sustainable hence the unfortunate need to reduce headcount.

Elon's words are really strong evidence that my original claim on Model 3 demand faltering - at least as observed by Elon and Tesla management - is true. Tesla accelerated the introduction of the SR and SR Plus by several months, both as proved by Elon's statements and by the fact that they had to reduce headcount and close stores in order to do so profitably. They were waiting on SR rollout until they could get the cost of the vehicle down. That cost cutting obviously hasn't happened as far as they wanted, but instead of waiting until they could get the costs down (the original plan) they decided to do a premature rollout and compensate financially by closing stores and laying people off. If Tesla thought US sales were going to recover, or that international sales would pick up the slack, why would they take such drastic steps to roll out Model 3 prematurely?

Think about it, folks. If Tesla stores were such a non-necessity, why would Tesla turn on a dime and go from creating new stores one quarter to closing almost all the next quarter? If this was a considered plan, then Tesla could/would/should have said as much just 5 weeks ago on the Q4 conference call. They not only didn't say that, they bragged about the new store openings just last quarter. If the plan was to introduce Model 3 in March, then why didn't they say so in Feb? And, how does achieving a 25% Gross Margin on SR Model 3 jive with the "need to reduce headcount" in order to have the rollout? It doesn't.

All the evidence points to Tesla needing to take drastic steps to increase demand for their vehicles (I'm including the across the board price cuts here, too). Maybe Neroden isn't worried, but Tesla sure seems to be.

 

[anthonyj]

Oh, so now you know what demand is better than Elon. Got it.



No, you're the one who is incorrect here, and documentably so. From the 2018 Q4 conference call (https://seekingalpha.com/article/42...-results-earnings-call-transcript?part=single )just last month (Feb):
Elon Musk:

Of course, Elon also said in that call that Gross Margin on the Model 3 will reach 25% in 2019. But, if that were now achieved, or even close, then Tesla wouldn't need to be cutting stores to save costs. As Elon said in the March Analyst Call (Tesla Call Transcript (2.28.19).pdf ):


Elon's words are really strong evidence that my original claim on Model 3 demand faltering - at least as observed by Elon and Tesla management - is true. Tesla accelerated the introduction of the SR and SR Plus by several months, both as proved by Elon's statements and by the fact that they had to reduce headcount and close stores in order to do so profitably. They were waiting on SR rollout until they could get the cost of the vehicle down. That cost cutting obviously hasn't happened as far as they wanted, but instead of waiting until they could get the costs down (the original plan) they decided to do a premature rollout and compensate financially by closing stores and laying people off. If Tesla thought US sales were going to recover, or that international sales would pick up the slack, why would they take such drastic steps to roll out Model 3 prematurely?

Think about it, folks. If Tesla stores were such a non-necessity, why would Tesla turn on a dime and go from creating new stores one quarter to closing almost all the next quarter? If this was a considered plan, then Tesla could/would/should have said as much just 5 weeks ago on the Q4 conference call. They not only didn't say that, they bragged about the new store openings just last quarter. If the plan was to introduce Model 3 in March, then why didn't they say so in Feb? And, how does achieving a 25% Gross Margin on SR Model 3 jive with the "need to reduce headcount" in order to have the rollout? It doesn't.

All the evidence points to Tesla needing to take drastic steps to increase demand for their vehicles (I'm including the across the board price cuts here, too). Maybe Neroden isn't worried, but Tesla sure seems to be.

Tax credit expiry forced a lot of customers to buy in December. There was also a ton of pent up demand from the past 3 years. I don’t see how Tesla can continue selling 20k+ a month of a small car without breaking into the real “average consumer”.

Too many people don’t even know what a Tesla is or what it can do. Many people think they are $100k+, drive 100mi, don’t know about Superchargers, maintenance free, etc. Tesla needs to educate, and if they are actually getting rid of test drives, that’s bad. Tesla will end up pulling through, but they are giving me short term doubts

 

[neroden]

Oh, so now you know what demand is better than Elon. Got it.

Honestly? Musk failed to predict the dropoff in demand after Hong Kong removed all incentives and DOUBLED the price of the cars.

So yeah, on this, I know it better.

I used the Hong Kong numbers to project other dropoffs.

Tesla might have gotten better at this over time, but I wouldn't expect them to have, given their demonstrably sloppy data handling. They would probably love it if incentives would just stay consistent everywhere. They rush cars before every incentive expiration, but they don't seem to have a real model for what happens after the expiration.

No, you're the one who is incorrect here, and documentably so. From the 2018 Q4 conference call (https://seekingalpha.com/article/42...-results-earnings-call-transcript?part=single )just last month (Feb):
Elon Musk:

I wonder which conf. call I was thinking of where he said late Feb - early Mar? I think it was q3. I'm not going to check.

It doesn't matter really. It was clear all along that they were going to make the base model 3 as soon as they could (reservation holders were breathing down their neck). They did so when they were able to. It's a good sign for production that they were able to. (Although I think essentially none have been delivered yet -- one person claims to have gotten an SR but people think he's lying.)

 

[neroden]

Elon's words are really strong evidence that my original claim on Model 3 demand faltering - at least as observed by Elon and Tesla management - is true. Tesla accelerated the introduction of the SR and SR Plus by several months, both as proved by Elon's statements and by the fact that they had to reduce headcount and close stores in order to do so profitably.

Arguably they were making excuses for the store reduction.

They were waiting on SR rollout until they could get the cost of the vehicle down. That cost cutting obviously hasn't happened as far as they wanted, but instead of waiting until they could get the costs down (the original plan) they decided to do a premature rollout and compensate financially by closing stores and laying people off.

With the exception of the bogus word "premature", sure, that's what they did. They decided to cut SG&A instead of cutting COGS. A smart decision and a good change of direction which was arguably overdue.

If Tesla thought US sales were going to recover, or that international sales would pick up the slack, why would they take such drastic steps to roll out Model 3 prematurely?

I repeat, it's not "premature". To the reservation holders, it's late. I have no idea what Tesla management thinks about demand: they have a record of underestimating demand by factors fo 2, so maybe they are freaking out.

Think about it, folks. If Tesla stores were such a non-necessity, why would Tesla turn on a dime and go from creating new stores one quarter to closing almost all the next quarter?

This is essentially a dispute over whether Tesla were being dumbasses before or whether they are being dumbasses now. You vote now, I vote before.

If this was a considered plan, then Tesla could/would/should have said as much just 5 weeks ago on the Q4 conference call. They not only didn't say that, they bragged about the new store openings just last quarter. If the plan was to introduce Model 3 in March, then why didn't they say so in Feb?

So they didn't have to announce delays when something came up (like they did for, well, practically everything else they have ever rolled out)

And, how does achieving a 25% Gross Margin on SR Model 3 jive with the "need to reduce headcount" in order to have the rollout? It doesn't.

We all knew they weren't achieving that gross margin right away.

All the evidence points to Tesla needing to take drastic steps to increase demand for their vehicles (I'm including the across the board price cuts here, too). Maybe Neroden isn't worried, but Tesla sure seems to be.

I absolutely disagree with your claims about where the evidence points. You are just wrong here. Tesla did not "need" to take "drastic steps", and in fact did not take drastic steps.

The evidence does point to slapdash and haphazard management -- on that I will agree. But they've been like that continuously since day one.

 

[smorgasbord]

Arguably they were making excuses for the store reduction.

Really? Your argument now is that Tesla made a decision to close stores and to justify it is giving the excuse that shipping Model 3 SR ahead of schedule is not profitable?

Jeez.

You are just wrong here.

Again, you'll have to excuse me not believing that "just" because you said so.

Tesla did not "need" to take "drastic steps", and in fact did not take drastic steps.

Yeah, it's not like Tesla completely changed their previously disruptive retail and successful (part of their "moat" according to many here) strategy 180 degrees within a matter of weeks, nor laid off a bunch of people just to be able to afford shipping a car they were most previously planning on shipping 4-6 months later.

Got it, that's not drastic. Thanks.

 

[dc_h]

Tax credit expiry forced a lot of customers to buy in December. There was also a ton of pent up demand from the past 3 years. I don’t see how Tesla can continue selling 20k+ a month of a small car without breaking into the real “average consumer”.

Too many people don’t even know what a Tesla is or what it can do. Many people think they are $100k+, drive 100mi, don’t know about Superchargers, maintenance free, etc. Tesla needs to educate, and if they are actually getting rid of test drives, that’s bad. Tesla will end up pulling through, but they are giving me short term doubts

I think they should cut back on stores, but keep at least one store in every major market. They should also open up a Carvana style vending machine for test drives. $50 or $100 for a drive, insert your Visa and drivers license and request the car. Have a web site to register and schedule the drive and watch the video instructions on EV driving. The fee is refundable on purchase. This clears out a-holes going to stores to mess with the sales people and feign outrage at evil Elon and would be a cheap way to scale up a test driving system. Sell the cars every 6 months to keep them fresh. You could even outsource the test drive to Enterprise and have them drop off a car at your house. Label the test drive as a rental and screw you Michigan, Texas, New Mexico, etc.

 

[jerry33]

You could even outsource the test drive to Enterprise

That sounds awful. Renting a car with no on to explain how it is supposed to work and where there is questionable maintenance (even something as simple as tire pressure). And there has never been an issue getting test drives in Texas. You just have to register for them.