Model 3 Cashflow

[PKINOC]

I watched a video on Youtube recently but I can't find it and was wondering if anybody else has seen it and your thoughts.

Elon Musk said that a big misconception that people have is that the Model 3 production rampup will require a lot of cash.

He then said, please correct me if I'm wrong, that the Model 3 will be a net cash generator and not a cash consumer as production ramps up.

Did anybody else see/hear this?

Thoughts?

Thanks,
Peter

 

[Uncle Paul]

As he sells the initial cars, he will invest the profits back into the company to continously ramp up production.

Previously he took the profits from the sports car to finance the Model S. Used the profits from the model S to develop the Model X.
Will use the profits from the current production to support the Model 3.

He already has the factory to produce the cars, just needs the volume.

He borrowed tons of money to finance the Giga Factory battery plant, but will pay off those debts with the profits from selling the batteries.

Probably continue to borrow money, based on the potential of the company, and assets.

 

[S3XY]

I think it's pretty safe to say that Elon expects the M≡ to be a cash generator. If it wasn't then Tesla would have almost no chance of surviving.

 

[PKINOC]

I realize the M3 will be a cash generator.

I'm talking about the M3 cash flow funding it's own production rampup.

 

[JeffK]

Elon Musk said that a big misconception that people have is that the Model 3 production rampup will require a lot of cash.

I think you might be misinterpreting his meaning here. Make no mistake the ramp up will require boatloads of cash. The point is that he believes they shouldn't have to ask investors for any more cash. Once they get the initial cars out the door then it'll fund itself as others have mentioned.

 

[PKINOC]

I think you might be misinterpreting his meaning here. Make no mistake the ramp up will require boatloads of cash. The point is that he believes they shouldn't have to ask investors for any more cash. Once they get the initial cars out the door then it'll fund itself as others have mentioned.

Yeah sorry, I meant that people think the rampup will need more cash than it generates.

I'm interpreting what he is saying as the opposite of that.

 

[JeffK]

people think the rampup will need more cash than it generates.

Initially it will, of course. However, that money can come from current revenue.

 

[Red Sage]

There are those ANALysts on Wall $treet that are convinced that Tesla Motors will simply lose more money as they build more cars. So, they have shorted TSLA on the stock market ever since 2010 and continue to do so, as they are certain that Tesla is 'bound to fail' and that is going to happen 'any day now' so they are 'waiting for the other shoe to drop' as they have done for years on end now. All because they simply cannot wait to say, "See? I told you so!" Strangely, they do not feel that way about those manufacturers that build on the order of 10,000,000 units worldwide, or sell around 3,000,000 units in the U.S. each year.

 

[dsvick]

There are those ANALysts on Wall $treet that are convinced that Tesla Motors will simply lose more money as they build more cars. So, they have shorted TSLA on the stock market ever since 2010 and continue to do so, as they are certain that Tesla is 'bound to fail' and that is going to happen 'any day now' so they are 'waiting for the other shoe to drop' as they have done for years on end now.

I don't think many of them have actually been shorting Tesla, if so they'd all be broke and discredited and we wouldn't have to listen to them anymore. Most of them, it appears, in addition to being morons also do not even have the confidence in themselves to put their money where their mouths are.

 

[Booga]

There are those ANALysts on Wall $treet that are convinced that Tesla Motors will simply lose more money as they build more cars. So, they have shorted TSLA on the stock market ever since 2010 and continue to do so, as they are certain that Tesla is 'bound to fail' and that is going to happen 'any day now' so they are 'waiting for the other shoe to drop' as they have done for years on end now. All because they simply cannot wait to say, "See? I told you so!" Strangely, they do not feel that way about those manufacturers that build on the order of 10,000,000 units worldwide, or sell around 3,000,000 units in the U.S. each year.

I'm in a weird camp - I think Tesla will succeed, and I hold 2 Model 3 pre-announcement reservations, so I want them to succeed. I don't necessarily think the stock is priced to perform as well as the underlying business will however. But the shorts are not based on Tesla losing money forever. The shorts are based on the price of the stock. This is not a bet in any way, by most, that the Model 3 will be delayed, that they won't benefit from R&D scale and the massive volume of the Model 3, etc. The bet in most cases is simply the price of the stock.

Like I said - I'm in a weird camp. I support Tesla and can't wait to get my own Model 3. I love EV drivetrains and the instant torque that they offer. But as someone who works in the financial industry, I am mostly challenged by the value of the company. If I had $32 Billion on hand, I don't think I would personally be okay buying the entirety of Tesla if I also had to commit to never being able to sell it again. I may very well be proven wrong, but we've seen many instances in the past where fans of a product/firm get behind a company/idea/etc. and it doesn't always work out well. Emotion is, unfortunately, not the best way to make investment decisions.

 

[PKINOC]

I'm predicting $50-70 Billion in revenues by 2020 and if that happens then several $100 million by 2026 is very doable. And that's just cars and energy storage. No clue about solar...

Now once their factories are close to 100% capacity and running efficiently and the overhead is minimal and assuming a 10% net margin then you are talking a stock that is many many times what it is now.

 

[Red Sage]

If I had $32 Billion on hand, I don't think I would personally be okay buying the entirety of Tesla if I also had to commit to never being able to sell it again.

If I were a gozillionaire, I'd need about $96,000,000 on hand, so I could buy all outstanding shares using $32,000,000 of it; shore up the coffers of Tesla Motors directly with another $32,000,000; and still be sitting pretty with $32,000,000 in my own wallet. I'd be perfectly happy to make the company a closed, private venture again, while giving THE FINGER to Wall $treet (and the SEC). What Tesla is WORTH to me is far more than it might COST to keep Naysayers out of the business at hand.

 

[Red Sage]

If I were a gozillionaire, I'd need about $96,000,000 on hand, so I could buy all outstanding shares using $32,000,000 of it; shore up the coffers of Tesla Motors directly with another $32,000,000; and still be sitting pretty with $32,000,000 in my own wallet. I'd be perfectly happy to make the company a closed, private venture again, while giving THE FINGER to Wall $treet (and the SEC). What Tesla is WORTH to me is far more than it might COST to keep Naysayers out of the business at hand.

Hmmm... That post seems to be missing some zeros...

I'd need about $96,000,000,000 on hand, so I could buy all outstanding shares using $32,000,000,000 of it; shore up the coffers of Tesla Motors directly with another $32,000,000,000; and still be sitting pretty with $32,000,000,000 in my own wallet.​

That's more like it, I think. Yeah.

​

 

[Jayc]

I don't think I would personally be okay buying the entirety of Tesla if I also had to commit to never being able to sell it again.

Look at it this way... If you had money to buy any one of the companies GM, Ford , VW, Toyota, Nissan, Daimler AG or Tesla, which one would you pick to invest?

To me right now, all other companies have gone past their heyday and are now desperately playing catch-up, not only in the EV game but in the very fundamentals of how you create products that sits well with the advancements in technology, cars that people actually desire for.

 

[Booga]

Look at it this way... If you had money to buy any one of the companies GM, Ford , VW, Toyota, Nissan, Daimler AG or Tesla, which one would you pick to invest?

To me right now, all other companies have gone past their heyday and are now desperately playing catch-up, not only in the EV game but in the very fundamentals of how you create products that sits well with the advancements in technology, cars that people actually desire for.

You make a good comparison, but the key component you're missing is the price. The price changes the outcome. At the right price, people including Warren Buffett bought Enron/Worldcom securities and saw 200-300% returns despite the findings of lots of accounting fraud. Investing is not a question about what you think will happen, but whether it's already priced into the security. My argument is simply that TSLA is already priced for a lot to go well. It doesn't mean it won't go higher, but my point is that today, the risks are more to the downside than the upside over the next 20 years.

 

[Red Sage]

My argument is simply that TSLA is already priced for a lot to go well. It doesn't mean it won't go higher, but my point is that today, the risks are more to the downside than the upside over the next 20 years.

I figure that within the next 5-to-10 years TSLA will be equivalent to 1/100th of BRK-A. Most recently TSLA was 1/1,293rd of BRK-A. Truly, if it gets to even 1/500th of BRK-A, there will be a bunch of $h0r+s taking long walks off high balcony ledges around Wall $treet.

 

[RobStark]

There is always execution risk, key people leaving/dying but Tesla is a conglomerate looking to be the market leader or perhaps #2 in several huge industries over the next 15 years.

Global market leader in Battery Energy Storage.
US leader in solar panel manufacturing and installation.
Global Leader in autonomous electric mobility/carsharing services.
Most profitable global automotive company.

So if Toyota is worth ~$177B and Uber is worth ~$68B Tesla is a freaking bargain at ~$31B.

 

[jbcarioca]

I figure that within the next 5-to-10 years TSLA will be equivalent to 1/100th of BRK-A. Most recently TSLA was 1/1,293rd of BRK-A. Truly, if it gets to even 1/500th of BRK-A, there will be a bunch of $h0r+s taking long walks off high balcony ledges around Wall $treet./QUOTE]

There is always execution risk, key people leaving/dying but Tesla is a conglomerate looking to be the market leader or perhaps #2 in several huge industries over the next 15 years.

Global market leader in Battery Energy Storage.
US leader in solar panel manufacturing and installation.
Global Leader in autonomous electric mobility/carsharing services.
Most profitable global automotive company.

So if Toyota is worth ~$177B and Uber is worth ~$68B Tesla is a freaking bargain at ~$31B.

I will not opine on specific price targets, but on relative expectations of Tesla vs diversified auto companies. Daimler-Benz, VW, Ford and GM all have substantial non-automotive businesses. Hyundai, Toyota, Nissan, Mitsubishi and Samsung are parts of chaebol/keiretsu that are much more diverse than anything in Europe or NA.

Tesla is much like an early-stage keiretsu since it includes Tesla/Solar City and SpaceX. Thus Tesla now deploys technology developed in one industry to the advantage of another (e.g. SpaceX proprietary inconel producing Ludicrous).

Just as Wall Street has a horrible problem correctly evaluating technology transfer it also has problems valuing anything other than traditional entities. Conglomerates, for example, are difficult for them even if all the businesses are themselves conventional. That inability causes gross errors of estimate both on buy and sell side, so, for example, evolving tech companies are notoriously volatile. I'm old enough to remember the "nifty 50" even though Kodak and Polaroid are dead and Xerox is not exactly thriving.

FWIW, I am long Tesla, have been since the day after I attended the NTSB hearings in 2013 (April 13, 2014 $49.00 I paid). I do not check daily prices nor do I worry much about dilution. Frankly I suspect they'll need to raise capital in 2017 to support Solar City/Tesla growth in utility-level systems, which will always have front-ended expense and a slow payment cycle. I doubt if the Model 3 itself will cost too much incrementally but the doubling of Fremont capacity and redoubling of the gigafactory will certainly make new demands for capital. Some will be debt, some will be Panasonic, some will be other partners, but some will be Tesla too. So what?

The Tesla of 2018 will be vastly different than the one today due to gigafactory, Model 3 and very large solar installations. We'll probably be ready for growth in other areas too, but some of that might be a trifle slower because of US Federal impediments induced by the fossil fuel interests. That one, IMHO, is vastly overblown as a risk to Tesla, maybe more material to Tesla wanna-be competitors in both categories.

Red Sage might just be correct about some people "...taking long walks off high balcony ledges around Wall $treet." However, the lives of active traders are always high risk, and those of "the shorts" even more prone to get it in theirs.

 

[tsla007]

Issue is if there aren't option risk takers then the stock would slowly decline as investors are around for profits. Tesla's profits are very very small. It's the opportunity to make millions though in the long run. I understand those that are puts now. Model 3 isn't out yet-if delayed - stock will tank about 40 or more points. A lot is riding on timely and perfect execution. As for me, I'm sitting on cash on the sidelines. I'll wait for unveil 2 before I put money where my mouth is right now. 17m cash you just don't take risks with it with current Trump and unknown future. I'm not a put caller either. I want tesla to be the #1 world company of autos. The image ever other EV will look to beat, look to outclass, and out range, but with the gf on teslas property good luck trying to beat them price wise with range.
Good luck to all in the market. As for Tesla, please bring me a 3!!!! Until then---S is it.

 

[PKINOC]

I wonder if TSLA would ever consider selling it's self-driving technology for a per car fee once they've perfected it.

Say out of the 70+ million cars sold every year 10 million have TSLA technology for $1-2K royalty per car.

That's $10-20 billion right to the bottom line!