Long-Term Fundamentals of Tesla Motors (TSLA)

[UkNorthampton]

Besides that Honda deal, I just haven't seen any other deal. I suppose it is not public yet??? When you say "Gets stronger & stronger. 2020 will be used as a 'base year' -", do you meanTSLA can claim/realize $500 million or more per quarter?

To the last point, what Tesla can claim:- Pooling arrangements seem to be multi-year deals & might depend on relative sales of OEM ICE vs Tesla EVs. Honda came in later, so no idea what their arrangements with FCA/Tesla are, probably worse. My belief is that unless German automakers get a 'Covid-excuse deferral', this is going faster than expected, so more money will come to Tesla over time. When they can recognise the money depends on deal specifics, cash transferred, accounting, volumes etc. This affects short term financials of Tesla & pool partners.

My point actually related to the longer-term aspects of the EU emissions deal. The emissions criteria in EU get stronger. The greater the reduction in 2020 (eg switch to electric, less ICE sales), the stronger the ratcheting up in following years (as a minimum, many have seen effects of reduced pollution & want to accelerate). I failed to find any decent links on this, but it was a reason why some manufacturers didn't want too many EVs in 2020 & hence why they wanted to save some vehicles for 2021 instead (similar thing at end of 2019, couldn't buy EVs but could from 1 Jan 2020)

Some companies would rather pay the EU than a competitor, even if it's more money.

Some links.

4 Dec 2020 - JATO Dynamic’s analysis of EU CO2 emissions in 2020 - JATO
The European Commission’s legislation states that for each gram that’s over the CO2 target, manufacturers will face a fine of €95 per car registered

*** Pools include BMW (BMW brand, Mini, Rolls-Royce),
Daimler (Mercedes, Smart),
Fiat Chrysler (Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Lancia, Maserati, Ram, Honda, Tesla),
Geely Group (Volvo, Polestar, Lynk & Co, Lotus, LEVC, Geely brand, Ford),
Hyundai-Kia (Hyundai, Kia),
PSA (Citroen, DS, Opel, Peugeot, Vauxhall),
Renault-Nissan-Mitsubishi (Alpine, Dacia, Infiniti, Lada, Mitsubishi, Nissan, Renault), Suzuki (Suzuki brand),
JLR (Jaguar, Land Rover),
Toyota (Lexus, Toyota brand, Mazda),
Volkswagen Group (Audi, Bentley, Cupra, Maxus, MG, Porsche, SAIC, SAIC Maxus, Seat, Skoda, Volkswagen).



Graph from Carmakers face €20 billion in fines for exceeding CO2 targets – Part 2 | Autovista Group

Consider looking at "Key OEM initiatives" towards the bottom. This bit reduces the massive usefulness of EVs in a pool "Super-credit multipliers increase the weighting of cars that emit less than 50g CO2/km in the calculation of a manufacturer’s average CO2 emissions. These low-emission cars will count as two cars in 2020, 1.67 in 2021, and 1.33 in 2022."

"highest-polluting 5% of new cars registered in 2020 are excluded from the 2021 fines calculations"

last one is "Indicative fines for exceeding emissions targets, major carmakers, € billions, 2021 and 2022"

 

[Doggydogworld]

Besides that Honda deal, I just haven't seen any other deal. I suppose it is not public yet??? When you say "Gets stronger & stronger. 2020 will be used as a 'base year' -", do you meanTSLA can claim/realize $500 million or more per quarter?

EU's 95g regulation is complex, but can be very roughly approximated as a couple percent EVs in 2019, 10% in 2020 and 15% in 2021. FCA pooled with Tesla in early 2019 as they were completely unprepared for the big 2020 jump. The Tesla/FCA pooling deal runs through 2022. Payments were front-loaded, but details are scarce. Tesla is not free to go off and do deals with other companies. Other companies can join the pool, as tiny Honda did recently, but again we have no details on payment flow.

FCA is merging with PSA to form Stellantis. PSA is in good 95g shape and will help FCA either directly or via re-badging.

Fleet CO2 is measured each year. There are no "credits" to carry over to the next year if you beat the target. So it's a timing game. EV market share ramped dramatically from 6.5% in early 2020 to (est) 20% in December. The November/December level is not sustainable as companies (e.g. Daimler) did tons of late year deals to precisely hit targets. But momentum from 2020 EV launches (e.g. VW ID3/4, Fiat 500, Peugeot e208/2008) and 2H production ramps (e.g. Kona, Taycan) will carry forward and go a long way toward meeting 2021 targets.

 

[petit_bateau]

Using the latest numbers from EV Sales: World I did some end-Nov global tables. These are very draft so if you see significant errors please let me know.

 

[CorneliusXX]

Using the latest numbers from EV Sales: World I did some end-Nov global tables. These are very draft so if you see significant errors please let me know.

In last month's table for the BEV-only vehicles table the totals and the percentages for Other-PHEV were zeroed out.

 

[petit_bateau]

In last month's table for the BEV-only vehicles table the totals and the percentages for Other-PHEV were zeroed out.

Yes, thank you for saying. I am afraid I made a few errors at the time of the end-Oct, of which you spotted one of them. I didn't bother reposting as it didn't materially affect the situation imho. I corrected them in my own templates and you see the updated version here.

I can see that EV sales does some follow-up corrections in his dataset, which I have also taken into account when generating my end-Nov. Does anyone know whether he (Jose Pontes) sells his dataset, or is it for personal/interest use only. I'd certainly be keen to extend it and analyse it further.

 

[tmp131]

EU's 95g regulation is complex, but can be very roughly approximated as a couple percent EVs in 2019, 10% in 2020 and 15% in 2021. FCA pooled with Tesla in early 2019 as they were completely unprepared for the big 2020 jump. The Tesla/FCA pooling deal runs through 2022. Payments were front-loaded, but details are scarce. Tesla is not free to go off and do deals with other companies. Other companies can join the pool, as tiny Honda did recently, but again we have no details on payment flow.

FCA is merging with PSA to form Stellantis. PSA is in good 95g shape and will help FCA either directly or via re-badging.

Fleet CO2 is measured each year. There are no "credits" to carry over to the next year if you beat the target. So it's a timing game. EV market share ramped dramatically from 6.5% in early 2020 to (est) 20% in December. The November/December level is not sustainable as companies (e.g. Daimler) did tons of late year deals to precisely hit targets. But momentum from 2020 EV launches (e.g. VW ID3/4, Fiat 500, Peugeot e208/2008) and 2H production ramps (e.g. Kona, Taycan) will carry forward and go a long way toward meeting 2021 targets.

I didn't realize that Tesla can't just sell regulatory credits to whomever. When I look at the pools as far as EU is concern: the "Pools" look fairly set. I don't see any big manufacturer that would join Tesla's Pool. Honda is fairly small: they don't sell much in the EU, and I think the deal was "up to $100 million." The big players in the EU: ie. VAG, Renault-Nissan-Mitsubishi, BMW, Mercedes, PSA, etc. are unlikely to join the pool. I was just hoping Tesla can increase their revenue with these regulatory credits year after year with increasing amount ie. instead of ~ $400 million/quarter, they can get $500 million/quarter.

 

[tmp131]

To the last point, what Tesla can claim:- Pooling arrangements seem to be multi-year deals & might depend on relative sales of OEM ICE vs Tesla EVs. Honda came in later, so no idea what their arrangements with FCA/Tesla are, probably worse. My belief is that unless German automakers get a 'Covid-excuse deferral', this is going faster than expected, so more money will come to Tesla over time. When they can recognise the money depends on deal specifics, cash transferred, accounting, volumes etc. This affects short term financials of Tesla & pool partners.

My point actually related to the longer-term aspects of the EU emissions deal. The emissions criteria in EU get stronger. The greater the reduction in 2020 (eg switch to electric, less ICE sales), the stronger the ratcheting up in following years (as a minimum, many have seen effects of reduced pollution & want to accelerate). I failed to find any decent links on this, but it was a reason why some manufacturers didn't want too many EVs in 2020 & hence why they wanted to save some vehicles for 2021 instead (similar thing at end of 2019, couldn't buy EVs but could from 1 Jan 2020)

Some companies would rather pay the EU than a competitor, even if it's more money.

Some links.

4 Dec 2020 - JATO Dynamic’s analysis of EU CO2 emissions in 2020 - JATO
The European Commission’s legislation states that for each gram that’s over the CO2 target, manufacturers will face a fine of €95 per car registered

*** Pools include BMW (BMW brand, Mini, Rolls-Royce),
Daimler (Mercedes, Smart),
Fiat Chrysler (Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Lancia, Maserati, Ram, Honda, Tesla),
Geely Group (Volvo, Polestar, Lynk & Co, Lotus, LEVC, Geely brand, Ford),
Hyundai-Kia (Hyundai, Kia),
PSA (Citroen, DS, Opel, Peugeot, Vauxhall),
Renault-Nissan-Mitsubishi (Alpine, Dacia, Infiniti, Lada, Mitsubishi, Nissan, Renault), Suzuki (Suzuki brand),
JLR (Jaguar, Land Rover),
Toyota (Lexus, Toyota brand, Mazda),
Volkswagen Group (Audi, Bentley, Cupra, Maxus, MG, Porsche, SAIC, SAIC Maxus, Seat, Skoda, Volkswagen).



Graph from Carmakers face €20 billion in fines for exceeding CO2 targets – Part 2 | Autovista Group

Consider looking at "Key OEM initiatives" towards the bottom. This bit reduces the massive usefulness of EVs in a pool "Super-credit multipliers increase the weighting of cars that emit less than 50g CO2/km in the calculation of a manufacturer’s average CO2 emissions. These low-emission cars will count as two cars in 2020, 1.67 in 2021, and 1.33 in 2022."

"highest-polluting 5% of new cars registered in 2020 are excluded from the 2021 fines calculations"

last one is "Indicative fines for exceeding emissions targets, major carmakers, € billions, 2021 and 2022"

Thank you for the info.

 

[kanweg]

Yesterday S&P +0.04%. It would have been a red day if not for Tesla +4.72%

 

[Doggydogworld]

I was just hoping Tesla can increase their revenue with these regulatory credits year after year with increasing amount ie. instead of ~ $400 million/quarter, they can get $500 million/quarter.

Chinese NEV credit price is increasing, and Tesla generates plenty of those. US credit value may pick up with Dems in control. The EU bonanza is over, IMHO, but individual city/country efforts to ban ICE will create a more even playing field for Tesla to sell cars even if they don't lead to credit revenue.

Does anyone know whether he (Jose Pontes) sells his dataset, or is it for personal/interest use only. I'd certainly be keen to extend it and analyse it further.

At the bottom of each page he has an "ad" for his commercial site where you can buy access to his full database.

 

[tmp131]

Chinese NEV credit price is increasing, and Tesla generates plenty of those. US credit value may pick up with Dems in control. The EU bonanza is over, IMHO, but individual city/country efforts to ban ICE will create a more even playing field for Tesla to sell cars even if they don't lead to credit revenue.

how much do you think Tesla can get in 2021 as far as regulatory credits goes? $0.3 billion, $0.5 billion, $1 billion???

 

[Doggydogworld]

how much do you think Tesla can get in 2021 as far as regulatory credits goes? $0.3 billion, $0.5 billion, $1 billion???

Tesla makes it almost impossible to even make an informed guess. I can't even figure out if they count per car subsidies paid directly from the gov't (e.g. China, some US states) as regulatory credit revenue. The China subsidy alone is ~3k per SR+, so maybe 300-350m last year? 500m+ this year once they introduce Y-SR? But does it count as reg credit? Nobody knows. IR departments at normal companies answer these kind of questions, but Tesla is disrupting investor relations

Tesla should earn 1-2m NEV credits in China this year. Those are supposedly increasing to ~$500 each, though that makes no sense to me. So maybe another 500m++? Here in the US the ZEV market is dead but GHG produces some cash. Maybe 200m? I don't see the FCA deal helping much in 2021, maybe ~400m. Throw it all together and depending on Tesla's mysterious accounting I could see anywhere from $600-1600 million. Maybe guess 200m/quarter and wait for another Zach non-answer the next time an analyst asks....

 

[tmp131]

Tesla makes it almost impossible to even make an informed guess. I can't even figure out if they count per car subsidies paid directly from the gov't (e.g. China, some US states) as regulatory credit revenue. The China subsidy alone is ~3k per SR+, so maybe 300-350m last year? 500m+ this year once they introduce Y-SR? But does it count as reg credit? Nobody knows. IR departments at normal companies answer these kind of questions, but Tesla is disrupting investor relations

Tesla should earn 1-2m NEV credits in China this year. Those are supposedly increasing to ~$500 each, though that makes no sense to me. So maybe another 500m++? Here in the US the ZEV market is dead but GHG produces some cash. Maybe 200m? I don't see the FCA deal helping much in 2021, maybe ~400m. Throw it all together and depending on Tesla's mysterious accounting I could see anywhere from $600-1600 million. Maybe guess 200m/quarter and wait for another Zach non-answer the next time an analyst asks....

Thanks for the clarification. I suppose we will see what will be said in the earnings call next week.

 

[petit_bateau]

In the Q4 2020 earnings call, at about 1:00 in during the Q&A regarding a van, Musk is explaining that it is all about cell supply and says something along the lines of "we will be making the Semi at the end of 2021 when the 4680 is at scale". Elsewhen they say that Kato Rd is making 4680s, is hitting the targets, and they are now ordering up the mfg eqpt for Berlin & Austin. We can see that the refreshed S/X are not using 4680 during 2021, and that the 4680 will not be shipping inside the S/X until the Plaid+ in 2022. This suggests to me that a) they are producing 4680 in lower volumes now (but not at full scale); that the solvent-free process is functioning (or else they could not order the mfg eqpt, and indeed would be slowing down Berlin & Austin which they are not); that they are storing/shipping/dedicating Kato Rd 4680 to go to Berlin for initial Berlin production of Y; that Berlin will be in self-supply mode of 4680 by late 2021 (as that is what enables Kato to then supply the Semi); and that we will see the Semi produced in 2021 (phew); that a lot of the battery expansion technical derisking is completed (so scale, fast, yay !).

We also know that the design team is working on the next product, and one suspects this will be the 2, and maybe there is a van in there somewhere, perhaps even in some way related, but that is a SWAG of my own. I guess 2022 sees the first 2 line built in the missing bit of the central area of the Shangai site.

 

[MABMAB]

On long term fundamentals:
1. Tesla is showing the world that they can make electric cars that are desirable.
2. Battery capacity is currently limited.
3. Tesla has a plan to increased capacity in house while buying everything others can produce.
4. Near term growth likely possible if/as other suppliers increase production.

5. LONG TERM depends upon cheaper better in house batteries. If one believes that Tesla can do this, one should hold. If one can't sleep at night worried about such things, one should cut back or sell out.

I am of the opinion that it is not a question of if but when Tesla does this so I am not selling out.

 

[mspohr]

In the Q4 2020 earnings call, at about 1:00 in during the Q&A regarding a van, Musk is explaining that it is all about cell supply and says something along the lines of "we will be making the Semi at the end of 2021 when the 4680 is at scale". Elsewhen they say that Kato Rd is making 4680s, is hitting the targets, and they are now ordering up the mfg eqpt for Berlin & Austin. We can see that the refreshed S/X are not using 4680 during 2021, and that the 4680 will not be shipping inside the S/X until the Plaid+ in 2022. This suggests to me that a) they are producing 4680 in lower volumes now (but not at full scale); that the solvent-free process is functioning (or else they could not order the mfg eqpt, and indeed would be slowing down Berlin & Austin which they are not); that they are storing/shipping/dedicating Kato Rd 4680 to go to Berlin for initial Berlin production of Y; that Berlin will be in self-supply mode of 4680 by late 2021 (as that is what enables Kato to then supply the Semi); and that we will see the Semi produced in 2021 (phew); that a lot of the battery expansion technical derisking is completed (so scale, fast, yay !).

We also know that the design team is working on the next product, and one suspects this will be the 2, and maybe there is a van in there somewhere, perhaps even in some way related, but that is a SWAG of my own. I guess 2022 sees the first 2 line built in the missing bit of the central area of the Shangai site.

Tesla is still battery constrained. Always have been. Always will be in spite of rapid expansion and now the promise to buy every battery anyone can deliver

 

[ReddyLeaf]

In the Q4 2020 earnings call, at about 1:00 in during the Q&A regarding a van, Musk is explaining that it is all about cell supply and says something along the lines of "we will be making the Semi at the end of 2021 when the 4680 is at scale". Elsewhen they say that Kato Rd is making 4680s, is hitting the targets, and they are now ordering up the mfg eqpt for Berlin & Austin. We can see that the refreshed S/X are not using 4680 during 2021, and that the 4680 will not be shipping inside the S/X until the Plaid+ in 2022. This suggests to me that a) they are producing 4680 in lower volumes now (but not at full scale); that the solvent-free process is functioning (or else they could not order the mfg eqpt, and indeed would be slowing down Berlin & Austin which they are not); that they are storing/shipping/dedicating Kato Rd 4680 to go to Berlin for initial Berlin production of Y; that Berlin will be in self-supply mode of 4680 by late 2021 (as that is what enables Kato to then supply the Semi); and that we will see the Semi produced in 2021 (phew); that a lot of the battery expansion technical derisking is completed (so scale, fast, yay !).

We also know that the design team is working on the next product, and one suspects this will be the 2, and maybe there is a van in there somewhere, perhaps even in some way related, but that is a SWAG of my own. I guess 2022 sees the first 2 line built in the missing bit of the central area of the Shangai site.

Good thoughts. I wonder if some of those Kato 4680s are being put into a couple more test mule semis. Tesla could use them for shipping parts between GF1 and Fremont, thereby gaining more operational data, especially in winter mountains.

 

[AudubonB]

...My point actually related to the longer-term aspects of the EU emissions deal. The emissions criteria in EU get stronger. The greater the reduction in 2020 (eg switch to electric, less ICE sales), the stronger the ratcheting up in following years... it was a reason why some manufacturers didn't want too many EVs in 2020 & hence why they wanted to save some vehicles for 2021 instead (similar thing at end of 2019, couldn't buy EVs but could from 1 Jan 2020)

Some companies would rather pay the EU than a competitor, even if it's more money...

Is there any evidence of this? If it does exist, is there a way within EU rules and regulations that it is legal? It would seem to me that an otherwise disinterested shareholder in such a company has an extremely strong case of having been harmed by such action as inequal payments; that doing so is the end result of a company not having acted with obvious foresight to taking the steps needed to avoid having to pay anything to a competitor, let alone less to such competitor, who also is playing by the rules the EU had set forth, than to the EU.

Am I missing something here?

 

[petit_bateau]

Is there any evidence of this? If it does exist, is there a way within EU rules and regulations that it is legal? It would seem to me that an otherwise disinterested shareholder in such a company has an extremely strong case of having been harmed by such action as inequal payments; that doing so is the end result of a company not having acted with obvious foresight to taking the steps needed to avoid having to pay anything to a competitor, let alone less to such competitor, who also is playing by the rules the EU had set forth, than to the EU.

Am I missing something here?

Just as in the USA, it is the case also in the EU and the UK, that being stupid is not a crime. So if (say) Ford wish to not sell many BEVs, not invest in BEVs, and generally fiddle whilst Rome burns, and provided Ford does so independently and freely that would neither be a crime in the EU or the USA.

I rather suspect that any judge in either jurisdiction, who was asked to rule on a class action lawsuit brought by aggrieved shareholders of such a company, would just respond, "why didn't you sell your shares".

 

[mspohr]

Just as in the USA, it is the case also in the EU and the UK, that being stupid is not a crime. So if (say) Ford wish to not sell many BEVs, not invest in BEVs, and generally fiddle whilst Rome burns, and provided Ford does so independently and freely that would neither be a crime in the EU or the USA.

I rather suspect that any judge in either jurisdiction, who was asked to rule on a class action lawsuit brought by aggrieved shareholders of such a company, would just respond, "why didn't you sell your shares".

Being stupid isn't a crime but doing stupid things can be a crime. Companies get sued all the time for doing stupid things and it's not a defense to just say sell the stock.

 

[tmp131]

Dan Levy from Credit Suisse ask about regulatory credits: he thinks it is $2 billion in 2020? I can't find that from the transcript below. I am unsure if that will be true. The FCA deal was estimated at $2.2 billion (from the link below) TOTAL. From the earnings call, Zack didn't give a number. But if the $2 billion is correct, then it is will be a big boost to Tesla.
link: Tesla emissions-credit revenue poised to boom again in 2021

Earnings call Zack response (or non-response): Tesla (TSLA) Q4 2020 Earnings Call Transcript | The Motley Fool

"Sure. On the regulatory and credit sales side, this isn't always an area that's extremely difficult for us to forecast. 2020 regulatory credit sales ended up being higher than our expectations. And it's difficult to give guidance on that.

I mean what I said before is that in the long-term, regulatory credit sales will not be a material part of the business, and we don't plan the business around that. It's possible that for a handful of additional quarters, it remains strong. It's also possible that it's not. Most of our regulatory credit revenue from Q4 was not lined up prior to the beginning of the quarter.

And these were discrete deals that were struck over the course of the quarter. So I wish I could give you more on this, Dan, but it's a space that's extraordinarily difficult for us to forecast. On the second side, with respect to capital, a couple of things that we're thinking through there. So as I mentioned in my opening remarks, debt reduction is an important thing that we're focused on now."

-the only deal they struck in Q4 that I know of was the Honda deal .