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Long-Term Fundamentals of Tesla Motors (TSLA)

Discussion in 'TSLA Investor Discussions' started by Robert.Boston, Feb 24, 2013.

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  1. wdolson

    wdolson Supporting Member

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    As some have pointed out, it looks like you're in South Carolina. The disinterest in EVs there might be a combination of that being truck country and in some parts of the US the political climate is blowing the other way. EVs are very popular in the west coast states as well as most of the more urban areas of the country.

    Outside the US EVs are becoming very popular in Europe where governments are pushing for their adoption on top of growing consumer awareness. China too is encouraging EV ownership and there are a lot of domestic brands, but Tesla is the big cache brand and they will be making Model 3s in China soon.

    Car sales always sees a dip in the first quarter of the year, and this year was going to be worse than usual for Tesla because the $7500 credit ran out December 31 and Tesla also scaled back the referral program. Tesla built a lot of Model 3s in Q1, but many were still in transit overseas at the end of the quarter. Those sales will be credited to this quarter.

    The Model S especially is looking a bit tired compared to the Model 3. There were rumors of an update last fall, but it was delayed because of the Model 3 production problems. It's almost certainly coming sometime this year.

    GM is pushing hard to extend the EV tax credit which might happen. If so the $7500 will be back for a while.

    I don't think this year is going to be stellar for Tesla, but I don't see them on the ropes either.

    Subarus are popular here too. My SO has an Impreza and I did a calculation of how much it costs to drive both cars. My Model S costs about $0.025/mile and here Impreza about $0.10/mile and my car handles better in the snow (an admission that came hard to her). Even though EVs cost more initially, the cost of ownership is significantly cheaper. My SO has probably spent more in regular maintenance on her Impreza than I have in electricity for my Model S over the last 3 years.

    Most people still don't realize that yet, but awareness is growing.
     
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  2. gnuarm

    gnuarm Model X 100 with 72 kW chargers

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    Sorry, a bit too much alphabet soup for me. What is SC? What is Cali? California? Do you have any actual information to share with us?


    Yes, you are seeing increasing numbers of Teslas because they are selling cars... or have been selling cars. That's how it works. They sell cars and people drive them.


    What is SC??? Service Center??? Are you talking about South Carolina? I'm not basing anything I write on what I see on the road and what I see on the road is not limited to South Carolina. I drive between Tennessee, South Carolina, Virginia and Maryland. In fact just the other day I charged in one of the last two spots at the Supercharger in Gaithersburg, MD. In general I try hard to avoid northern Virginia and the DC area in general and the highways through there as they are the most congested in the country.

    I spend time in Frederick, MD where charging is a bear for me. That is a large part of where I talk to people about my car. Most are very interested in the car, just not interested in buying one. It's just too early for most people... far too early.

    I'm a bit worried about people buying cars other than Teslas and finding they just can't take them on trips because the charging is such a PITA. Presently the non-Tesla chargers operate at half the speed of the Tesla charger. While an 8 hour drive in an ICE is a 10 hour drive in a Tesla it will be a 12 hour drive in a Jag or Porsche. When others hear about that it will be very hard to sell EVs to a lot of people.

    Here is a picture of my model X charging at the Supercharger in Frederick...

    Model_X_charging_in_Frederick.jpg
     
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  3. gnuarm

    gnuarm Model X 100 with 72 kW chargers

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    I think the demand for AWD is easy to gauge, look at how much AWD cars are sold. It's not so many, a lot less than what would justify a claim of "most people" wanting them.


    Makes you wonder why they came out with the model 3 as a sedan before the model Y SUV. I don't think it is very important to gauge the used market. Tesla needs to survive and that requires them selling new cars.


    I don't think full self driving will be here anything remotely like soon. I'm expecting maybe in 5 years it will have something that can be test released and likely it will be 10 years to something worthy of actually calling it "self" driving in the sense of not being nanny monitored by a driver. Laws will need to be changed or even created to deal with the many ramifications. Expect WIDE variations between states.


    Yes, I think EVs are the future of cars. At this point I'm not convinced Tesla will be part of that future. I'm also not sure just how soon EVs will be widespread. For anything like a decent market penetration they will need to build up the Supercharger network a LOT. Right now it is rather inconvenient to drive far. Charging needs to be more available where people want to stop and with proper amenities. With ICE you stop where you feel like eating and fill up where you want to fill up because it only takes 10 minutes. With an EV you have to stop where the chargers are and eat within walking distance. This is a HUGE difference.
     
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  4. gnuarm

    gnuarm Model X 100 with 72 kW chargers

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    I have a car, so I get around. No, they don't sell many Teslas in South Carolina because they have no dealers and no service centers.


    Car sales drop in the winter, but Tesla had a great December only to fall flat on their face in January and the rest of Q1. This isn't winter... it is Tesla pushing to ship everything they could in Q4 satisfying much of the pent up demand. Now they are looking at the level of demand they will be seeing going forward.

    I don't know what happened to model S and X sales, the dropped through the floor. I'm hoping they limited the S and X sales for some reason rather than being demand driven.


    The tax credit was reduced, not eliminated.


    That all depends on the numbers. They may have a very, very bad Q1 to report. If Q2 is similar they will potentially burn all their cash this year.


    I'm thinking your numbers are only for fuel. Here the US Government allows around $0.50 a mile for cost of ownership. Hard to imagine it would only be $0.025 per mile.
     
  5. wdolson

    wdolson Supporting Member

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    Historically Tesla has tended to have a strong 4th quarter. There was some satisfying existing demand, but now there is a large number of Model 3s in neighborhoods all around the US and a lot of people who hadn't seriously considered Tesla are looking at their neighbor's new car.

    There are a lot of indications the economy is slowing down, so that's suppressing car sales in general. I'm not surprised Model S/X sales crashed at the end of the year. Most people who can afford one of those cars also wanted to get the full tax credit.


    sorry, I was unclear.

    They will likely have a large number of foreign sales in Q2, so I expect it will be OK but not stellar.

    With an ICE you have oil changes, radiator service, belts, hoses, transmission service as well as gas. With an EV you have tires which tend to wear more due to weight and regen braking, and the radiators need service eventually, but the cooling system doesn't have to deal with the extremes of an ICE so the fluid doesn't wear out as fast.

    The world's fleet of EVs haven't been out there long enough to know how they are going to hold up 10+ years down the line, but there is significantly less to wear out on an EV. There is a lot of concern about the batteries going, but with a good battery management system, they hold up much better than li-ion batteries in other applications where they are not as well managed.

    Most people aren't going to see $0.025/mi for electricity either. I happen to live in the cheapest electricity region in the US, but a fair number of people are getting solar setups these days. Even at $0.05/mi that's cheaper to drive a large EV over a compact hatchback. Compare the Model S efficiency to other cars the same size and the difference is even bigger.

    Julian Cox ran the numbers a couple of years ago for the cost of ownership of an $18K Toyota Corolla vs a $35K Model 3. The total cost of ownership was much cheaper for the Model 3.
     
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  6. gnuarm

    gnuarm Model X 100 with 72 kW chargers

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    Yes and they are asking questions... about charging, the weak link of EVs. From everything I have seen Tesla competitors will have a hard sell trying to get people to buy cars they will have a hard time taking on trips.


    Yes, there are several factors slowing Tesla sales, but I don't get the S/X sales dropping to half. That has got to be some sort of decision on Tesla's part. While losing $3,750 on a $35,000 car is not insignificant, on a $100,000 car it is much less significant. It's hard to believe solid sales of 10,000 a quarter of each of those two models would drop to 5,000 just because the subsidy dropped to half.


    I don't know. Indicators are that Tesla doesn't compete as well in Europe where they have better charging infrastructure for non-Tesla cars than here. In particular Norway is an EV bastion and Tesla has a much smaller market share if I remember correctly. But we will see.


    In the 45+ years I've been driving I don't think I've ever replace antifreeze unless it was lost. With Tesla ending the recommended annual checkup, I don't expect to need any service other than my rear doors for years. That is not promoted much... well, Tesla doesn't seem to promote their cars in general, so I guess that makes sense.


    Tesla has done lots and lots of testing and it looks very good for holding up at least as well as ICE autos. The nice part is that while ICE tend to break, batteries tend to wear gradually. They consider then "bad" when down to 80% of original capacity, but that doesn't mean you can't use them still.


    Solar electricity isn't free. You should amortize the cost of the setup across the kWh generated to get the per kWh cost. But the cost of ownership includes every cost, insurance, repairs and the car itself. There is no way I can amortize the cost of my car and claim I'm saving money, but an X is not a 3 or a Y.


    When I run the numbers for my ICE truck, it was about the same for gas as the cost of the vehicle. 200+ kmiles at $22,000, ~$2.50 per gal and 20 mpg. Around $0.10 per mile for each. At $35,000 (which is the super economy version) that over 50% more for the vehicle so the fuel cost of around $0.05 a mile makes it a wash without considering the rest. I'm told insurance is high because of the repair cost as well as the frequency of accidents. Not sure where I heard that, possibly my insurance agent. I'm going to get a quote from another company or two to compare.
     
  7. Doggydogworld

    Doggydogworld Member

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    US S/X declined less than 25% in Q1 vs. prior year, roughly 9800 to 7500. Rest of world declined from 13k to 4.6k. The Netherlands went to almost zero, of course, but 50-75% declines across Europe were pretty common. Discontinued 75D doesn't really explain it - they still sold a lot of those out of inventory. S/X was also pretty low in China despite the open tariff window.

    My 2011 Toyota van just crossed 100k miles. 10 oil changes, one new set of tires and some air filters (engine and cabin). No "radiator service, belts, hoses, transmission service". Still on original brake pads. I'll consider a Model 3 for my next car, but saving money vs. something like a Camry Hybrid is not part of the equation.

    The few documented battery failures, e.g. Bjorn and Tesloop, have been very sudden.
     
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  8. wdolson

    wdolson Supporting Member

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    I get questions about that too. First off the refueling situation for day to day driving is far better if you have a way to charge at home. Every time you leave the house you have 90% of a full "tank". My SO is always in a panic when she is in a rush and realizes her ICE is low on fuel. I never worry about that. Even when I've forgotten to plug in the car a few times I may be annoyed with myself next time I set off somewhere, but I still have 70% of a charge to go 40 miles.

    But on the road I talk about when I had an ICE, my instinct was to just get in the car and drive without stopping except as short as possible for fuel (human and car) and restroom breaks.

    I got there in the shortest possible time, but my body was wrecked in the process. Last time I drove 700 miles in an ICE in one day my back hurt for weeks and I could barely walk the next day. By having to stop every 250 miles or so for supercharging, it forces me to get out and walk around.

    On my one long road trip I did 600 miles in one day with supercharging. It took me longer than expected because California was having a lot of supercharger problems and I got some slow superchargers, but when I got to my hotel for the night, I was surprised that while i felt tired, I didn't hurt. The 700 mile trip we had two drivers and I was a mess. On my Tesla trip I had to drive alone and did over 2000 miles in 5 days and when I got home I wasn't even tired (the last day was about 300 miles).

    For someone who is on the road all the time, maybe an EV is not for them, but for the typical person who only road trips once or twice a year, it does take longer, but you get there feeling less worn out. The forced breaks are actually good for you. On one leg of the trip I was feeling pretty tired by late afternoon, so I napped while the car was supercharging and was able to get to my destination more safely.

    Destination chargers at hotels are more common now too. I was able to work in a destination charger on my 2016 trip and that meant I could go over 3 hours in the morning without having to stop for charging.

    The dropping of the tax incentive combined with the free supercharging going away spurred many who might have bought a Model S or X this year to buy early. The early year sales slump was bigger this year because of it. Tesla has dropped the price so a new Model S or X costs significantly less than it did, even with the incentive. I compared the current Model S equipped as close as possible to my 2016 and the price is about $12K less. Mine had free supercharging for life and the tax incentive, but the new ones have AP 2.5 and 100 KWH battery.

    But most people aren't aware that the price is lower in part because the entry price is higher. When I bought the cheapest Model S was around $65K.

    I am concerned about the Model S/X volumes. They need to be watched over this year, but I think the refresh is coming and there might be an Osborne effect due to the rumors. People are holding off buying waiting to see what the refresh looks like.

    Tesla doesn't compete well in all European countries, but last year they had around a 6% share in Norway and according to reports sales of Model 3s there have been huge so far this year. They sold 8614 Model S and X on Norway and 8604 in the Netherlands. Other European countries were a sharp drop from there. A lot of European countries have huge taxes on cars. About 2 years ago in Denmark there was a big rush for Model S before a tax holiday on electric cars expired and the price more than doubled.

    Generally American cars have never sold well in Europe. The only American cars other than Tesla sold in Europe today are some exotics like Corvettes. Ford sells a lot of cars in Europe, but I believe most are made there for that market.

    With fewer long range trips, there isn't as big a demand for long range EVs in Europe as there is in the US and Canada. Europe also has a better intercity rail network than the US has, so there are other options than driving.

    In California with the hot summers we changed out the radiator fluid every couple of years. The glycol would really be broken down by that point. Here in western Washington, you can usually get away with less frequent changes, but in eastern Washington where winters can be as brutal as Minnesota people at least have it checked every fall. You don't want the fluid to freeze in the engine.

    True. Electricity is so cheap here few people have solar because the amortization period is 10-20 years. It's taken off in places like Arizona because people are seeing their $500/month summer electricity bills go to $10 and the system pays for itself in only a few years.

    Insurance on Teslas can be all over the map. I shopped around and found insurance for my Model S that was the same as my old Buick. I added comprehensive and collision that I didn't have on the Buick (a waste on a 24 year old car), so I'm paying more overall, but equivalent coverage is the same. Currently I'm with Safeco.

    Washington does charge a $150/yr surcharge on car registration, but gas here has rarely been less than $3/gal for years, usually around $3.50, though I think it's crept down closer to $3 lately. Washington has a fairly high gas tax.

    With the trade war going on, the Chinese are avoiding all things American. I work for a company that makes test equipment for the integrated circuit industry. About half their business was sales to China and that has just about dried up even though their equipment is not on any tariff list.


    Modern ICE do need less service than older ones. My 1992 Buick had oil changes every 3000 miles, and all those services a few times by 100K miles. I let the radiator hoses go too long and one of the lower ones blew out. Fortunately it was in a parking lot, but we were moving. It was also late on a Friday afternoon, but fortunately I found a shop open on Saturday it could be towed to and the car was back on the road by noon the next day.

    Here is the Julian Cox analysis:
    Why Tesla Model 3 Will Upend The Global Auto Industry (Cleantech Revolution Tour Video) | CleanTechnica

    Unfortunately he's almost as bad a public speaker as Elon.

    Most of the failures were in early Model Ss and most were something other than the main pack. I have seen stories here of people having a few cells go bad in the main pack, but that usually results in the battery capacity dropping suddenly.[/QUOTE]
     
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  9. JROB415

    JROB415 Member

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    Any Real Estate investors out there? I'm curious if anyone has thoughts on investing in Tesla occupied properties?

    My family is coming into a sizable amount of capital and looking to diversify into some real estate, specifically net leased properties. I've noticed a few Tesla service centers on the market with in place leases ranging from 2-years to 10-years remaining. The yields seem particularly attractive for some of these deals and I'm attracted to the residual value of the building should Tesla vacate. Also, with all of the stock volatility seems like it could be a good time to negotiate with some of these owners. Really curious to hear peoples thoughts.... Thanks!

    Here are a few links to some properties I have found on the market:
    B+E

    www.crexi.com - The Commercial Real Estate Exchange

    www.crexi.com - The Commercial Real Estate Exchange
     
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  10. electracity

    electracity Active Member

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    Retail is overbuilt in many areas that Tesla has entered. I would not assume residual value provides substantial protection outside of markets where you have personal knowledge.

    I also don't find real estate particularly attractive later in the business cycle.
     
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  11. Navin

    Navin Member

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    Could be a good deal but I would underwrite the downside risk of Tesla not renewing the lease and you having a vacant building configured for a car dealership - look at the Schaumburg facility for example - if you own such a property without a tenant - you are going to have to pay the carry on the property (property taxes, insurance, mortgage debt, etc_ till you release or sell it. Since traditional auto dealerships are being disrupted - I wouldn't be too confident that you will have a line of companies with solid credit standing in line to take down the property. You may then have to redevelop the property into another use (tear down and build something else).. For the relatively low cap rate - you are better off just buying some sort corp bond (like Tesla) at a higher yield and more flexibility on liquidating your position if needed..

    Short answer - wouldn't be a player here ..
     
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  12. acoste

    acoste Member

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    Updates after all this noise.
    I posted the average of estimates from all analysts 3 months ago: Long-Term Fundamentals of Tesla Motors (TSLA)

    Here is an update.

    This is what FastGraphs shows right now for the average of analysts' estimates for EPS and operating cash flow.

    There are numerous changes on adjusted EPS compared to February.
    No more profit is expected for 12/31/19.

    adjEPS for
    2020 changed from 9.75 to 6.41
    2021 changed from 17.28 to 12.53
    2022 changed from 28.33 to 21.13
    Due to the big drop in estimated earnings growth the expected share price for 12/31/2020 is $103.2

    Capture.PNG

    However as mentioned previously this is a growing company and it reinvests most of its revenue instead of counting it as earnings so the share price / operating cash flow is a better indicator. Based on that the share price on 12/31/2020 will be $770.1 assuming P/OCF = 30 (changed from 25.4).
    $770 is hardly any change from the value from February! This is due to the steeper curve (lowered near term, lifted values for 2-3 years out)

    OCF for
    2019 changed from 20.72 to 16.05
    2020 changed from 30.37 to 25.67
    2021 changed from 35.31 to 36.80
    and there is a new value for 2022 with 42% growth expected.


    Capture1.PNG

    expected P/E growth at 16.1% is more reasonable than the previous value.
    estimated P/OCF growth of 30 is on the high side, it is valid for a company with bright future growth.
     
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  13. dqd88

    dqd88 Member

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    Quick simple question - what do you estimate is the breakeven point for units sold? (let's assume an avg mix of models)
     
  14. mspohr

    mspohr Well-Known Member

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    Quick simple answer (from a neophyte). As long as they continue to have a positive margin on each unit, they just need to cover their overhead. Math should be simple.
     
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  15. wdolson

    wdolson Supporting Member

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    As they keep lowering prices, the break even point gets pushed further out because the profit per car is smaller, but the life of the car in the market might be better at a lower price point.

    In different, but related news a leaked memo indicates Tesla is having a good quarter:
    Leaked Email Reveals Possible Record Tesla Deliveries In Q2 2019
     
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  16. dqd88

    dqd88 Member

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    My friend in Ohio just bought a Tesla X. Used. $70k. Had been in an accident. That's a lot of money for a car that's been in an accident if you ask me. Anywho, Teslas are very popular in urban areas, namely areas where bmw/merc sell well. Tesla is the new premium option as it is clear from declines in bmw/merc/et al that Tesla is eating into their market share.
    There just aren't many options in the premium segments. If you bump Tesla up next to the incumbents it is clear that Tesla is the way to go.
     
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  17. JROB415

    JROB415 Member

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    Thanks for the feedback all great points. One thing I have been curious about is the tenant improvements required to run a Tesla service center. As Tesla and other electric car makers continue to grow, are there any improvements such as highly specialized electrical capacity or specialized equipment/service docks that may make these facilities attractive to other companies? (Rivian, Fisker, Lucid, etc...) Seems to me like there could be a play to re-tenant with those types of concepts?
     
  18. gnuarm

    gnuarm Model X 100 with 72 kW chargers

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    Don't know about tech, but if you were Rivian, would you want to open your salesrooms in old Tesla cast off locations??? I'm just sayin'...
     
  19. wdolson

    wdolson Supporting Member

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    In this real estate environment, I wouldn't be buying any commercial real estate right now. At least here in the Portland area we're near the top of the market right now. I've been going around on this with a partner in a building I'm invested in. He has a law practice in the building which has expanded and he's chomping at the bit to sell and find a larger building, but the office is a converted house on a major street and has a garage sitting there unused. My SO and I are pushing to convert the garage which can be done cheaply and wait for the real estate market to soften. He'd be paying nose bleed prices for anything today.

    As for old Tesla facilities, rather than other car makers going in, which is problematic, there is a growing need for electric car mechanics, especially in places with high densities of electric cars. The old Tesla facilities are probably too big for mechanics shops today, but in a few years when electrics are more common, a good sized mechanic's shop might be able to fill out an old Tesla facility. I think that's going to take a fairly coordinated effort between the mechanic running the shop and the owner of the building if not the same entity. That sounds like more than you want to get involved in.

    Now facilities with upgraded power installations could be used for other things. There are some industries that require lots of electricity. Any kind of computer server center would need lots of power for example. Another thing you could do is install some high power CCS chargers that use the extra power available and lease out the building for some other use.

    I expect the economy is going to take a big downturn in the next year. The current business cycle has been unusually long and we're overdue for a recession. There have also been some dumb economic decisions in Washington DC lately, any one of which could tank the economy. As far as real estate goes, I would sit on the sideline right now and wait for the recession to hit, then get serious about buying. When the economy is going south, cash buyers can score some great deals with people who need to shift property fast.
     
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  20. gnuarm

    gnuarm Model X 100 with 72 kW chargers

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    I would be willing to bet that a Tesla service center barely registers on the electric company's radar. There are tons of businesses that use more power per square foot than a Tesla dealership. I don't expect a Tesla service center has an electric supply greater than any other car center.
     
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