Long-Term Fundamentals of Tesla Motors (TSLA)

[RobStark]

Sorry but reading this gave me pain.
Every single sentence is basically ridiculous.

Jonas is talking about shared fleets, not shared personal cars.
Millennia's just don't care about car ownership, in fact its just considered a huge hassle and big cost point.

Talk about grotesque over generalizations.

My nephew is a millennial. And he owns a Honda Accord.

True he does not aspire to Lexus nor Mercedes.

But he does want a Honda Pilot. He likes going to weekend music festivals and camping out. His girl friend owns a Ford Focus.

What people tell pollsters/researchers they are going to do and what they actually do is not necessarily the same.

What a 20 year old says he wants in his 40s is not necessarily his lifestyle when he reaches 45.

I know a half a dozen college buddies who were never going to get married and were going to live in cool guy lofts downtown all their lives.

And now are happily married in the suburbs with 2.5 children, a Lexus sedan and a Tahoe SUV.

 

[Krugerrand]

Ain't that the truth, RobStark!

 

[FANGO]

The plural of anecdote is not data. You know two kids with cars, that doesn't mean much. Of course some kids will want cars. And some won't. And all the numbers suggest that the latter percentage is increasing.

 

[Auzie]

I think in the future people will simply have many more options available to choose from, regarding not just car ownership but regarding many other life choices that were rather singular in the past.

If the social trend is moving from a narrow or mono choice to multiple choices then such trend suggests that the number of people choosing one option out of the many is likely to go down.

Such trends are apparent in people choosing not to marry or have children in societies in which such choice is more economically and socially affordable and acceptable than in the past.

A choice not to have children is more prevalent in societies with more lifestyle options available to people. In a similar way, changing cultural values and more alternative transport options are likely leading towards more people opting out of car ownership.

 

[TD1]

I think in the future people will simply have many more options available to choose from, regarding not just car ownership but regarding many other life choices that were rather singular in the past.

If the social trend is moving from a narrow or mono choice to multiple choices then such trend suggests that the number of people choosing one option out of the many is likely to go down.

Such trends are apparent in people choosing not to marry or have children in societies in which such choice is more economically and socially affordable and acceptable than in the past.

A choice not to have children is more prevalent in societies with more lifestyle options available to people. In a similar way, changing cultural values and more alternative transport options are likely leading towards more people opting out of car ownership.

very well said

a counter anecdote:
Im 27 myself and would consider myself among the millennials.
And most of my friends are quite successful, and could if they wanted own a 50k$ car or better.
Yet most of them don't have cars, and if then its a basis model VW or Audi.
(im from Europe)

They really like to spend money on apartments, holidays and restaurants.

Owning an expensive car is even considered stupid/douchy.
Model S is an exception thought.

 

[daniel Ox9EFD]

Human behavior does not fundamentally change from generation to generation. What is different is that people have less money to spend.
If you can't afford a car without giving up an unreasonable chunk of the paycheck, well, the bus and occasional taxi will do.

People who can afford a car will continue to buy cars. People who can't/won't buy a car anyway could also 'rent' a car for a day/ get a nicer, cheaper 'taxi' experience.

 

[Krugerrand]

The plural of anecdote is not data. You know two kids with cars, that doesn't mean much. Of course some kids will want cars. And some won't. And all the numbers suggest that the latter percentage is increasing.

True, except people don't ever really change. A walk through history shows that. RobStark made an excellent point, that what people think and decide as young adults is often quite different than what they do when they've experienced more life, matured, and had to really live. What's important in life changes as we age. That's not to say that there aren't generational trends, but recognize that the car industry is growing despite what a specific generation may feel about them. With this (hopefully) new electric age being ushered in, people are going to change their minds, yet again, about cars - as is already showing evidence.

 

[ScepticMatt]

Panasonic recently released their 2019 forecast, doubling automotive sales to americas/EU,
and have already booked orders worth ~$12.2B for 2019

(1 Trillion yen ~ $8.3B)

 

[Auzie]

Panasonic recently released their 2019 forecast, doubling automotive sales to americas/EU,
and have already booked orders worth ~$12.2B for 2019

(1 Trillion yen ~ $8.3B)

That is interesting, thanks for posting.

Do these projections include Gigafactory output?

I find it quite strange that anyone would use the word 'comfort' as an impact word in their business strategy, talk about different cultures and different aspirations :biggrin:

 

[austinEV]

That is interesting, thanks for posting.

Do these projections include Gigafactory output?

I find it quite strange that anyone would use the word 'comfort' as an impact word in their business strategy, talk about different cultures and different aspirations :biggrin:

Along those lines, it strikes me how red is the positive growth color. in the US this chart would be green all over the place. Actually took me a moment to figure out what the chart meant.

 

[ScepticMatt]

Do these projections include Gigafactory output?

I think so, but it isn't mentioned in their slide notes or the Q&A. It seems to be mostly about infotainment systems though.
(the translator really lost her voice at the end)

Vision / Strategy - IR Information - About Us - Panasonic

From notes [Page 12]

In automotive business, we have already confirmed receiving 70% of orders towards 2.1 trillion yen sales target in FY2019. Adding promising orders and discontinuous measures, we intend to achieve 2.1 trillion yen sales.

We will accelerate receiving orders in all areas: comfort, safety and environment.

We are going to spend some money on R&D for a next few years to receive more orders, and we believe this will be rewarding and our automotive business will become a driver for a corporate-wide growth.

From Q&A:

[5:00] (On R&D capex) With automotive, mainly we're focusing on infotainment R&D. Of course in addition there are batteries and other areas that require R&D efforts. But these portions have lots of commonalities in terms of R&D efforts so it's not project-specific. So infotainment in that sense would be an area where more business would mean more R&D. 60 Billion is the current size we have in mind.

[10:45] Q: Slide 7, you mentioned 6 businesses and the improvement of the profitability. Could you give us the order of those businesses in terms of the level of probability of achieving the target, or the size of the profit in either way? Could you give us a ranking?

A: Let me give you the rough picture. Out of those six, the highest sales are infotainment and the rechargeable batteries. That would be the order. Next, In terms of profitability highest is lighting, rechargeable batteries and almost 5% is housing and PanaHome.

[23:30] There are some growing businesses or growing produces and in some of the cases market is becoming smaller and competitiveness is being lower. So depending on the situation sometimes the sales are higher or lower. So for example devices, automotive - the shift in automotive is proceeding very quickly. However, for the sales in automotive to grow it will take some time.

 

[Perfectlogic]

Didn't know Panasonic had such a large revenue from car batteries already, apparently they generated $10B of sales in FY15, less than 1/10th of these sales must have gone to Tesla, where did the rest go? Are they a large producer of the small car batteries you can find in every car?

 

[austinEV]

Speaking of batteries, there is a gem of a video Tesla investors should watch. Here is the TMC discussion of it:

Why do Li-ion Batteries die? And how to improve the situation?

it is a college professor discussing different types of cell chemistry and what makes them degrade and fail. He does a good job of relating everything to Tesla too so you can keep score. It made me understand a lot better what TM is doing right on the battery chemistry front.

 

[Hogfighter]

I'm always on the lookout for a rational bear argument against Tesla, so I enjoy listening to discussions such as this:

http://finance.yahoo.com/video/call-day-tesla-211600796.html

The arguments on the bear side in this video are current valuation, China concerns, profit margin erosion, and competition. So here's my 2 cents on these 4 points:

1) Current valuation certainly can be debated on either side, as can any growth stock. A market cap of 4x 2015 sales is quite reasonable for a company growing at 50% per year, however.

2) China does not concern me....TSLA doesn't need China in the near-term; and as Elon stated, I'm sure that the Chinese are eventually going to want the best car in the world.

3) Regarding profit margin erosion, although the Model X will cut into the margins in the short-term, TSLA's stated goal is to maintain at least 25% gross margins.

4) Competition....really?? Where? By the time any serious competition comes to market, TSLA will be completely dominant.

 

[FANGO]

Competition is also not a negative. Tesla already built a great car and brand, so that is not a concern. The concern is to spur consumers into action and get them to stop buying the ******** they are buying. It's not like tesla needs to make a better car to beat what's out there, what they need to overcome is reticence and lack of information. Who can help get information out there and make people stop thinking electric cars are aberrant? Teslas "competitors".

 

[Hogfighter]

Competition, when it finally comes from traditional auto makers, will be a tough sell. As Tesla has pointed out many times, it takes an average of 3-4 hours of discussion, education, etc. with a potential buyer to sell a Tesla. When Audi, BMW, etc. finally do produce a compelling, long-range EV, they must sell them through their traditional dealerships....again, a tough sell.

Furthermore, unless Tesla agrees to allow those autos to share in the supercharger network, demand will be miniscule compared to the EVs that Tesla has been producing for years.

 

[Krugerrand]

Competition, when it finally comes from traditional auto makers, will be a tough sell. As Tesla has pointed out many times, it takes an average of 3-4 hours of discussion, education, etc. with a potential buyer to sell a Tesla. When Audi, BMW, etc. finally do produce a compelling, long-range EV, they must sell them through their traditional dealerships....again, a tough sell.

Furthermore, unless Tesla agrees to allow those autos to share in the supercharger network, demand will be miniscule compared to the EVs that Tesla has been producing for years.

For the most part Tesla can be ignored in the moment (they have such a small market share), but a few of them (like Porsche) have got to feel the noose tightening (as Tesla continues to grab more and more of that high end market share).

It's possible that Tesla and its Model 3 will do the vast majority of the education, such that IF GM/Nissan/fill in the blank do manage to bring that affordable 200+ mile BEV to market, their dealerships won't have to spend much more than a few minutes answering basic questions: How far does it go on a charge? How fast can I charge it? Do you have OTA updates? What's your battery warranty? And they might not even have to spend that much time. A lot of people go to dealerships already armed with a bunch of information and knowing what they want so as to avoid as much of the dealership experience as possible. There will also be the SuperBowl ads and such that the other OEMs can use for education.

I'm not really sure at what point pressure from Tesla forces a radical flip by OEMs or the snowball down a mountain to the end. It's not here yet, but there's got to be some uneasy feelings taking hold. Personally, I'm hoping for a spectacular implosion of several, followed by the emergence of a few new from unexpected sources. Change can be painful, especially when you fight against it and seem determined to stay in one place.

 

[austinEV]

...There will also be the SuperBowl ads and such that the other OEMs can use for education...

I now wish that TM would start a modest TV ad campaign. Real modest scale, very tasteful. It would drive up wait times a bit yes, but I think at this point that is what Mr. Market (and I) want. All of the risk in the stock is connected to the fear that the bottom will fall out before the model III. Also, TM needs to position themselves in the general public as THE EV supplier. A lot of people think that now, but for the vast majority of even Americans have never heard of them and don't understand the mission. It would be a disaster if in 1-2 years GM had a superbowl ad and campaign talking about some dumb compliance car that cemented the idea that EV's are terrible.

 

[dalalsid]

I now wish that TM would start a modest TV ad campaign. Real modest scale, very tasteful. It would drive up wait times a bit yes, but I think at this point that is what Mr. Market (and I) want. All of the risk in the stock is connected to the fear that the bottom will fall out before the model III. Also, TM needs to position themselves in the general public as THE EV supplier. A lot of people think that now, but for the vast majority of even Americans have never heard of them and don't understand the mission. It would be a disaster if in 1-2 years GM had a superbowl ad and campaign talking about some dumb compliance car that cemented the idea that EV's are terrible.

That would instantly crater the stock because every tv channel, newspaper, blog, site, media outlet would come out screaming that demand is flagging and Tesla now needs to advertise. There is only one scenario in which I think Tesla should advertise now - if they can make 100k Model Ss per year - announce that and then start the ad campaign.

 

[austinEV]

That would instantly crater the stock because every tv channel, newspaper, blog, site, media outlet would come out screaming that demand is flagging and Tesla now needs to advertise. There is only one scenario in which I think Tesla should advertise now - if they can make 100k Model Ss per year - announce that and then start the ad campaign.

I hear that. But if you presume they will need to work on demand at some point in the next 3 years, which I think is a reasonable assumption, do they dare wait until the very week they NEED to work on demand? Is that not too late? That is why start slow with an introduction campaign.

You can head off the "Tesla is desperate" story line by just laying out the strategy ahead of time. Say they want to gradually work on the campaign, so they are doing the prudent thing and feathering in to build brand awareness.