TMC is an independent, primarily volunteer organization that relies on ad revenue to cover its operating costs. Please consider whitelisting TMC on your ad blocker and becoming a Supporting Member. For more info: Support TMC

Moderators' Choice: Posts of Particular Merit

Discussion in 'TSLA Investor Discussions' started by AudubonB, Dec 31, 2016.

Thread Status:
Not open for further replies.
  1. AudubonB

    AudubonB Mild-mannered Moderator Lord Vetinari*

    Joined:
    Mar 24, 2013
    Messages:
    6,775
    This thread displays posts from the Investor Sector that the Moderators deem worthy of an especial place where they most easily can be located and re-located. Moderators have been collecting such posts over a period of time; to the extent more time appears on the event horizon then perhaps some from the nethermost regions of even as far back as a few weeks might also be culled to make their presence here.

    Moderators alone can move posts here but - as long as the following is not abused - you may contact Mods via PM to suggest an entry. Which might occur. Or not. Or possibly.
     
    • Love x 7
    • Like x 4
  2. KarenRei

    KarenRei ᴉǝɹuǝɹɐʞ

    Joined:
    Jul 18, 2017
    Messages:
    6,094
    Location:
    Iceland
    I'll throw in my two cents.

    Part 1: Why Invest In EVs?

    Overwhelmingly, people are realizing that EVs are the future. Even traditional automakers are acknowledging this, although many try to push out the timeline as far into the future as they can.

    New product launches tend to follow sigmoid functions (so-called "S-curves")

    [​IMG]

    EV growth rates are following the classic S curve that solar is in the middle of running and which wind took before it. In Norway, over half of all new vehicle sales are electric. Here's a graph from just last year that's already well obsolete:

    [​IMG]
    [​IMG]
    EVs are far superior to ICE vehicles in many ways. The battery cost is constant (and rapidly falling, with no signs of stopping any time soon), but adding more power is much cheaper than in ICE vehicles. EVs have low centres of gravity and low polar moments of inertia, giving them excellent driving dynamics. The lack of a large, incompressible engine block in the front means that there's more room that the frame can fold into up front, improving crash safety, while the low centre of gravity resists rollover. Despite the hyperventilating press, fires are nearly an order of magnitude less common in EVs - which should be expected, given that gasoline vehicles literally operate via having a big tank of highly flammable liquid and lines full of the stuff snaking around the car, up to an engine so hot that it can ignite brush. Also, despite the public perception of many people with no EV experience, an EV charged at home is a massive convenience benefit vs. ICEs. I've known people that for varying reasons have had to go back to driving an ICE, and they've gotten re-used to the rumbling and noise, having to "start" the thing, it trying to roll forward, no regen when stopping, etc, etc. But the one thing they almost never seem to be able to shake is the annoyance at being made to have to randomly detour to gas station

    Then of course there's the fact that numerous governments around the world are aggressively pushing for them due to climate and emissions reasons. Dieselgate moved this push into high gear. Many are looking at outright bans for ICEs 10-20 years in the future. The problem for ICEs is that even without this, as EVs take over on the streets, gas stations - which were already on a downtrend - will continue getting rarer, making operating an ICE more and more expensive and inconvenient, while EVs get cheaper and more convenient. It's a viscious cycle that will kill ICEs in many areas even if public opinion or governments wouldn't. Get used to "Last Chance For Gas" signs, ICE drivers.
     
  3. Fact Checking

    Fact Checking Active Member

    Joined:
    Aug 3, 2018
    Messages:
    4,664
    Location:
    Vienna
    True, but:
    • ICE carmakers are in a well established and very competitive mass market with low margins in the 5-10% range and YoY growth rate of maybe 4%, in good years ...
    • Tesla is working with 20-30% margins despite growing 40% YoY,
    • Tesla is growing into a 3+ trillion dollars future EV market as the dominant incumbent,
    • The EV market is structurally protected from ICE competition: according to surveys 90% of EV buyers don't ever buy an ICE car again. It's a one way road.
    • The ICE market is structurally vulnerable to EV competition - for the same reasons.
    • The ICE market has future liabilities and there's probably too much ICE manufacturing capacity as well, which will have to be written off eventually ...
    • Tesla doesn't yet make full use of income streams that ICE incumbents are heavily relying on: captured financing for example (GM Finance provides ~half of GM's profits)
    So:
    • the P/E of ICE carmakers is probably still too high and depends on the belief of current bag holders being able to find new bag holders in the future,
    • and Tesla's cash P/E of 10 is obscenely low even assuming no growth,
    • and assuming a 2x-4x growth premium based on past performance the P/E ratio gets as low as 2.5x-5x.
    In fact I believe Tesla's true Q3 cash flow was not $1.4b but around $1.9b, it was artificially reduced by an accounting artifact that will self-correct in Q4. If we include that factor and annualize the cash flow then the cash P/E ratio goes down to around 7.8x. See this post for details. With all that included we can get a growth-adjusted P/E ratio as low as 2.0 ...

    (I could be wrong though, so not advice.)
     
  4. tinm

    tinm 2013 S85 Owner

    Joined:
    May 3, 2015
    Messages:
    1,996
    Location:
    New Mexico, USA
    I took the liberty of summarizing @shrspeedblade's post.

    Your mileage may vary” is the key to this whole issue, the unreliable customer/company communication issue (henceforth called CCC for brevity). Everyone's mileage is varying. Both in the company and out. Customers are having different ownership experiences. Some of you on TMC may be having consistently blissful, wonderful experiences. It's easy to believe if you personally have had a superb experience, everyone else must be too, and those outlier cranky owners claiming otherwise must be, according to the superb-experience-owners (you know who you are), whiners with some sort of ulterior motive. I believe that is an unfair and inaccurate conclusion. There really is a growing issue out in the Tesla owner community. Out in the market.

    1. Mobile Service Is One Thing . . .
    I can agree with @shrspeedblade on mobile techs. In my personal experience, 5.5 years with my S and 94K miles on, mobile service techs are superb. Every single experience I have ever had with a ranger or mobile tech has been great. They're well-trained, they always go out of their way, beyond the call of duty. They're always professional, friendly. My mileage never varies when a Tesla mobile tech is on site in my driveway. I have high confidence my car is in the best of hands. I've never experienced anything like it with any other car company ever.

    2. . . . The Rest of Tesla Service Is Another
    My mileage varies WILDLY when having almost any other customer interaction with Tesla. Email is Keystone Kops. It's a disaster. Across the whole company. Solar, car, energy: all a mess. Don’t even get me started on telephone communication. Try to get in touch a mobile tech when they're not standing in front of you in your driveway (when you really need to get in touch with him, as in everything else has failed): nigh impossible (kind of as it should be, but...). Try to get a timely email reply from Tesla Service, nigh impossible. Try to get through on the phone to the nearest service center (400 miles away in my case), really difficult. Waiting on hold forever with screeching, distorted, 8kHz sample audio on-hold muzak, exasperating. Try to juggle multiple Tesla offices/teams dealing with an issue: nigh impossible. Communications inconsistency is the one consistent thing I’ve come to expect from Tesla. That's nuts. That doesn't scale well. As many owners are seeing and some owners might still be in denial over.

    3. Why I Kinda Know About This Stuff A Little More Than Most Individual Owners
    I run a statewide Tesla Owners Club. Hundreds of members, more joining all the time (thanks Model 3!). So I hear things. I hear calls for help, especially from new customers feeling stranded, with no way to get through to the company. Yeah, you might say, but you're in a state with no service centers or stores, and the nearest service center is 400 miles away. True. But I also stay in touch with other Founders and Presidents of numerous Tesla Owners Clubs worldwide. We have ways of staying in touch, and boy do we. We compare notes. We trade war stories. We also meet in person, we speak on the phone. This is a problem all over. It may not be in your individual experience, or even in your town, but that doesn't mean it isn't happening in many other places. And we are talking to Tesla about this all the time. They are in the loop.

    4. This isn't "Growing Pains"
    I’ve said all this for years on TMC. I've never bought the "growing pains" explanation/excuse. I mean sure, there's some of that but I don't believe it's the core driver of all this trouble. As its core this overall problem boils down to two things that need some focused adjustment: management and, believe it or not, innovation.

    On the management front,
    • Throwing more customer service reps at the problem will not fix the CCC problem.
    • Fixing the CCC problem has not yet been shown by Tesla management to be a priority.
    • As a consequence, customer expectations are poorly managed.
    • As a consequence, there's no accountability on Tesla's part.
    • As a consequence, customers get frustrated.
    • For years I have expressed concern in TMC that if this problem wasn't fixed by the time Model 3 scaled, the problem would scale.
    • Well, we're here. It's 2019. Model 3 is scaling. The problems are scaling too. Just like I said they would.
    • When things scale they get more visible. Hence it keeps popping up in various threads in TMC, even in the investor forum (which imho is a perfectly valid place for it to pop up in, oh great mods).
    On the innovation front,
    • We all marvel, and rightly so, at Tesla's innovation in cars, batteries, Gigafactory, OTA, AP, FSD, wheee! What's not to marvel at.
    • We all marvel, and rightly so, at the rate of Tesla's innovation. Leaving the legacy auto biz in the dust.
    • Tesla is the best thing to happen to automobiles like . . . ever.
    • Tesla even innovated beyond the old, fusty, awful franchise auto dealership model. (Thanks Tesla!)
    • But . . . there's one area where Tesla has shown no innovation.
    • That area is CCC.
    • Unfortunately, the experiences of ordering, configuring, financing, waiting for a delivery, dealing with surprises/delays, learning about the car once the delivery truck driver's left, trying to reach one's delivery specialist, and then the long stretch of ownership and service touchpoints, all of that relies on great, reliable CCC to work well.
    • Here we have the most innovative, high technology car in the world.
    • We even have smartphone apps to interact with the car, and control it to a degree.
    • And yet we have in some ways the least innovative CCC that I know of with a car company.
    • We have the greatest platforms in the world: Internet, cloud, smartphones, insanely smart car, Salesforce, CRM technologies. You'd never know it what with the inconsistently managed expectations and lack of accountability that Tesla demonstrates to so many customers. Assuming we could get Tesla's management from Elon on down to prioritize making superb CCC and accountability, then what you would see is a ton of innovation overnight in this very area. This is why it's a management issue and an innovation issue.
    If Tesla is serious about fixing the CCC problem,
    • The Tesla board needs to acknowledge CCC is broken.
    • Elon needs to acknowledge CCC is broken.
    • He needs to make it bluntly clear all the way down the management line, to every employee in the company.
    • It needs to become cultural within Tesla. Obsession with universally delighted customers, whose expectations are always managed well, who trust the company, who marvel at the way even the slightest issue is handled and resolved in a timely manner . . . that has to become something in Tesla's DNA.
    • Sadly, I don't think it is there in the DNA yet. Most likely, many many employees have it in their own DNA. But institutionally, culturally, Tesla hasn't demonstrated it's a company-wide thing yet. We would know. We would see. It would be obvious.
    • Elon's gotta tell the troops: Hey everyone, from now on we innovate on the entire CCC front just as wildly, imaginatively, creatively, and frantically as we do with hardware and software. It's all part of the overall customer experience. It's what will keep us light-years ahead of any competition.
    • The company has to find a way to allocate sufficient staff and sufficient funds to innovate on this CCC front. I suspect, in an effort to achieve profitability and make Wall Street happy, this hasn't been a priority. It is high time it became a priority. A permanent one.
    Do I think Tesla can fix the CCC situation? Yes. I suspect we will see some of it happening in the short term even, but just here and there. But given the company's stated ongoing profitability from here on out, there's no reason why it can't happen. Tesla just has to want it to.

    Tesla, the ball's in your court. If you need any help, gimme a ring, I'd be glad to help.
     
    • Like x 5
    • Love x 1
  5. Fact Checking

    Fact Checking Active Member

    Joined:
    Aug 3, 2018
    Messages:
    4,664
    Location:
    Vienna
    Regarding the "shorts are just like longs, just on the opposite side of the trade" argument: I disagree, because the behavioral patterns and incentives of shorts/bears is fundamentally different from the behavioral patterns of longs/bulls.

    Let's list the various completely fabricated or at minimum bad faith lies the $TSLAQ activist shorts have come up with in the recent past:
    • The fake complaints to the NTSA about Tesla's transmission problems, using fake VINs
    • The "Mechanic's Liens" lie
    • The "empty parking lots prove there's not enough production" lie
    • The "full parking lots prove there's not enough demand" lie
    • The misleading photos from the "Tent", fraudulently claiming that Tesla isn't really producing anything there
    • The misleading photos from the "Tent" suggesting shoddy quality
    • The "Tesla is running out of cash so they are asking suppliers for cash back" lie in August
    • The "Well's Notice" lie
    • The "Tesla is a bigger fire threat than ICE cars" Big Lie
    • The "Tesla doesn't have a sustainable business model and is structurally unprofitable" lie
    • The "Homologation" lie
    • The "negative working capital" lie
    • The bearish investors having the two highest revenue estimates in the First Call analyst consensus lie
    • The "missed deliveries expectations" lie
    • The "Elon is a fraud" lie
    • The "Missing registered VINs" lie
    • The "Service centers are closing" lie
    • The "unsafe working conditions at Tesla's factory" lie
    • The New York Times lies about Elon's interview
    • CBS 60 Minutes lies about what Elon said, with an express intent to pit Elon against the Tesla board and against the SEC
    • The constant, non-stop lies about Tesla by Jim Chanos and Einhorn in business news
    Make no mistake about it: activist Tesla shorts are consciously, intentionally and in full bad faith making up lies and are spreading them, with an intent to hurt Tesla, to hurt Tesla's partners, to hurt Tesla's suppliers, to hurt Tesla's employees, to hurt Tesla's customers and to hurt the rest of the world as well. They are preying on Tesla customers on Twitter strategically and are trying to poison Tesla related discussions and articles. If you search for $TSLA on Twitter you will prominently get misleading short propaganda served. They collude to herd on the stock price, they collude to magnify certain types of news, and they collude to hurt Tesla's demand. Whenever there's a bigger drop in the stock price, they swarm various investor and social media forums and try to rattle investors with FUD.

    On the other hand here's the full list of recent 'Tesla long' conspiracies, delusions and pump and dump schemes:
    • "Last quarter's losses weren't so bad, I still have faith in Tesla!"
    • "Next quarter profits will be high, shorts will be squeeezed!"
    • "FSD will be released soon!"
    That's it! (And to be fair half of the longs disagree about FSD and about the short squeeze to begin with.)

    The vast majority of Tesla longs are totally harmless, totally transparent, generally argue in good faith and their arguments are easy to double check for over-optimism. I have to say Tesla longs are the most incompetent stock pump and dumpers in the world, because they are holding the stock, not dumping it. :D

    Not a bit of bad faith against anyone who argues honestly that I've seen - just hope, wishful thinking and a bit of a bull echo chamber.

    It's fundamentally asymmetrical warfare that Tesla shorts are waging, based on the fact that it's much easier to create fake uncertainty about a company and its products than to create fake certainty.

    Let's keep all this context and track record in mind before we compare shorts to longs with an unfair "bothsiderism": shorts are spreading lies tactically and strategically, and have been doing it for years.

    If you are not outraged about this then you are not paying attention.
     
    • Love x 11
    • Like x 2
  6. jbcarioca

    jbcarioca Active Member

    Joined:
    Feb 3, 2015
    Messages:
    3,972
    I don’t wish to choose your post specifically for my comment since it applies to many posts here and elsewhere, but it is just now that I no longer could tolerate all this without comment.

    In social psychology there is an enormous body of research ( I’m quoting none of it intentionally because many of us should do our own research on this subject) about self- reinforcing beliefs that are spread by choosing only other opinions that reinforce ones own opinions. Everyone is subject to that confirmation bias, including newspeople.
    https://www.amazon.com/True-Believer-Thoughts-Movements-Perennial/dp/0060505915/ref=nodl_
    The link is to a 1951 book written by Eric Hoffer, whose biography is the source of legends. Lest we think much has changed, just think.

    Today much of science has suddenly become a matter of faith, not evidence. Politics probably always has been.

    For both TSLA bulls and bears it is much easier to demonize than to understand. We seem predestined to demonize those who disagree simply because understanding them is hard work. Of course it is very easy to dismiss people such as Bob Lutz, mostly because the future is intolerable for heroic figures of the now-distant past. Anybody who without question accepts a given position is almost certainly wrong.

    As mostly longs, including me, it is easy to dismiss very legitimate serious questions and risks. We do ourselves no favors by being myopic.

    Right now we have gigantic global headwinds in everything from China, E.U. to US domestic, to trade wars and political disarray in EVERY major country. We have not seen this much instability almost everywhere for decades.

    In the face of all that we have ultra-right rollback of environmental standards and promotion of discredited power sources such as coal and nuclear while depressing solar and wind power.

    So, facts stand in the way of unqualified Tesla wins in the face of all comers anywhere because Tesla/Elon are our messianic saviors. That is equally ridiculous.

    End of diatribe: we are meant to be investors. That means we should carefully and deliberately evaluate positive and negative points.

    Note : as anybody who knows me knows I am long TSLA and a disciple of Ben Graham updated for 21st century.
     
    • Like x 1
  7. Krugerrand

    Krugerrand Well-Known Member

    Joined:
    Jul 13, 2012
    Messages:
    8,198
    Location:
    California
    Real world experience: A friend with a Prius bought a 3. They just really liked mine (nothing specific - a general feeling/impression) and were getting close to needing a new car. I, of course, told them they’d be a fool not to buy one and we couldn’t be friends any longer if they bought something else. (Yeah, I said it and at least meant that last part a bit - ok, kind of a lot.)

    You’re absolutely right that reliability was a top criteria - so far so good. And then something changed after a few weeks of 3 ownership. They started remarking how little (and big) things about the car gave them (unexpected) joy; hardly ever needing to use the brakes, no key/fob, TACC...

    Recently (like last week) they told me how much they’d (unexpectedly again) begun to enjoy their otherwise often stressful, sometimes mind-numbing mundane and always tiring commute to and from work. How dreading getting in a car to fight traffic for an hour or 4 twice a day had turned into a peaceful, stress *reducing!*, now looking forward to, part of their day.

    Think about that for a second. A non-car person, doesn’t really like to drive and doesn’t really care what they drive because they actually would rather be anywhere else but in a car suddenly starts looking forward to the time they get to spend in their car. Ack!

    That’s what a Tesla does; it changes ones life experience in a positive way. And now they own TSLA too.
     
    • Like x 8
    • Informative x 2
  8. ReflexFunds

    ReflexFunds Member

    Joined:
    Dec 7, 2018
    Messages:
    499
    Location:
    -
    With so much focus on short term profits lately, I thought I'd take a step back to look at the bigger picture. That is: 1) the $3trn EV transition is essential and at this stage almost inevitable, 2) Traditional ICE OEMs incumbents have significant handicaps to leading the race, and 3) Tesla is currently leading and we have many reasons to think it will continue to lead.

    Why EVs will take over
    • EVs are 70%+ cheaper to fuel
    • EVs should be 70%+ cheaper to maintain (due to significantly less moving parts) once EV service networks reach economies of scale.
    • Due to experience curves for key components, EVs upfront price should be less than an equivalent ICE car within 0-5 years, varying by market and segment. (Model 3 is already better value than all $44k+ ICE sedans).
    • EVs should last 2-3x longer than an ICE car in terms of miles (0.5-1 million).
    • EVs depreciation per year should be significantly less than ICE cars due to their longer lifespans, cheaper cost of ownership and fears of ICE car bans.
    • Consumers are not stupid, and when EVs are cheaper, they will buy them.
    • ICE cars kill 4m+ people per year from pollution.
    • ICE cars will lead to 2 billion + people losing their homes from global warming.
    • EVs are significantly safer to drive due to front crumple zone, lower center of gravity (limiting rollovers) and lower combustion risk.
    • Over time, this should drive significantly cheaper insurance vs ICE cars.
    • All self driving cars will be electric because after stripping out driver costs, an EV taxi service will make 2-4x more profit than an ICE taxi service due to lower fuel, maintenance & depreciation.
    • Regulations are supportive of the EV transition, particularly in China, and as the EV transition gains momentum it becomes a much easier political decision to ban ICE cars.
    • EVs are faster to accelerate and brake and are quieter and more fun to drive.
    • Leaving a car to charge overnight at home or during the day at work is significantly more convenient than regular trips to the gas station.
    • Fuel independence from Russia, Africa and the Middle East is a major advantage for national defence for countries such as China and much of Europe.
    • The EV transition will massively accelerate the experience curve for batteries which will make building solar/wind + battery storage cheaper than continuing to operate existing fossil fuel power plants. This will rapidly transition global electricity to renewables and ensure cars are charged by clean sources.

    Why ICE OEMs are handicapped relative to pure EV startups
    • Most car components and most of the production process is outsourced. This reduces share of the value chain and reduces profit per car. It also makes the company much less agile to rapid changes in technology.
    • EVs only share 10%-20% of components and production process with ICEs.
    • EVs will be lower margin products for ICE OEMS for several years. EV product launches will heavily cannibalize a brands equivalent higher margin ICE car creating a large disincentive for high quality EV launches.
    • Sales channel is outsourced to dealerships which is not incentivized to sell EVs. Dealerships make a majority of their profits from maintenance revenue, which is much lower for EVs and requires different expertise.
    • Key IP and barrier to entry has been engine design and lack of funding for car startups. Engines are now redundant and Tesla has proved the investment case for investing in EV disruptors.
    • ICE OEMs have a 50 year+ culture of working towards minimal annual incremental improvements rather than rapid innovation. Not suited to the rapid change needed to follow the EV/battery & motor experience curves.
    • Unionized and inflexible to automation and modernization.
    • Significant historic pension and other liabilities built over 50+ years.
    • Own $trns of legacy ICE assets which they will have to be written down as part of the EV transition.
    • Mostly trying to fit EVs into their old production lines and existing designs, EV companies have flexibility to design from scratch and make full use of the potential safety and ease of manufacturing improvements.
    • Own a short term loan portfolio of ICE leases and auto loans which needs to be refinanced continuously, but the underlying assets will depreciate rapidly with the EV transition
    • Shareholders value short term profits, dividends and share buybacks and are not supportive of short term pain for a long term vision, or investing heavily in the future.
    • Traditional brands are tarnished with a history of killing 4 million + people per year from pollution, in many cases deliberately killing more people than their legal mandate to save costs and R&D.

    Why Tesla is best positioned to lead in the $3trn EV market and $2-3trn stationary storage market.
    • Tesla started the EV revolution, they are still leading the revolution 10 years later, they are the company most incentivised to make it happen, they have a business model tailor made for it and all they need is 5% market share generate $40-$50bn+ EBITDA from car sales alone.
    • Tesla is leading in technology for all key EV components; it has developed the leading battery pack, motor, inverter, cooling system and auto electronics and co-developed the leading battery cells.
    • Tesla has the leading market share for EVs in terms of volume and generates the vast majority of all gross profit in the global EV industry.
    • Tesla has the quickest design to mass production cycle time in the industry by a significant margin. This means that not only does it have the leading R&D in the lab, but it gets this R&D into its products significantly quicker.
    • Tesla has a massive level of vertical integration which will allow it to make higher margins, while selling at lower prices and allowing significant agility to continuously upgrade its technology.
    • Tesla has a culture of rapid iteration and rapid progress perfectly suited to take advantage of the experience curves for EV components.
    • Elon has the best track record for disruption and rapid innovation of anyone in the world.
    • What Musk has already achieved at both Spacex and Tesla is significantly more difficult that what he's got left to do to reach his goals. The breakthroughs to get from 0 to 1% are a lot less visible to the general population than getting from 1% to 100%, but once you are at 1% it gets easier as you have proved technological viability and have momentum on experience curves.
    • Tesla owns its sales channel and is 100% incentivised to sell EVs.
    • Tesla has the most capital to invest in the EV transition (yes, this is true). Tesla does not have to waste its cash flow on ICE R&D, capex and redundancies or dividends or share buybacks. Tesla’s cash flow available for expansion capex is currently running at c.$4bn per year and will grow rapidly with new products. Its shareholders would also be willing to invest more equity to accelerate growth.
    • Tesla and Elon’s reputation mean it has the greatest choice of engineering talent. Over 500k people applied for jobs at Tesla in 2017.
    • Tesla has a vision that its employees, customers and investors believe in and are willing to work towards.
    • Tesla has the most data and the best track record for battery degradation. Many new EV programs are likely to face significant brand damage when they meet degradation or quality issues.
    • Tesla has the leading vehicle safety in the market, both for accident avoidance technology and for lower probability of injury once in an accident.
    • Tesla is debatably the leader in autonomous driving and has by far the largest real world data set to train its AI algorithms. Achieving self-driving could lead to almost unlimited demand for Tesla cars, appreciating second hand car prices and $50-150k profit per car per year to Tesla for every AP2/3 car it has ever sold.
     
    • Love x 5
    • Like x 2
    • Informative x 1
  9. jbcarioca

    jbcarioca Active Member

    Joined:
    Feb 3, 2015
    Messages:
    3,972
    There are extensive data available for US, slightly less for a number of European and Asian countries. There is quite a lot of variability, but here is the data for one US dealership network ( one of the US five largest). This data is accurate, but I cannot state the name of the manufacturer.


    Some background:

    All other things remaining equal ;

    1.The larger the dealership the more complex the structure so some or all of the following activities are excluded from reported dat because they are housed in legally independent corporate entities):

    -parts of Finance and Insurance (F&I), most often extended warranties, dealer financing, dealer leasing, service contracts,

    -body shop revenue (if they have such; about 30% of large dealers do have owned or controlled body shops)

    2. Large dealer groups tend to appear to have lower F&I income than do smaller ones, but;

    -they have a higher percentage of leases, which give much higher GM than do cash or loan sales.

    -they have, typically, better sales demographics than smaller dealers, but;

    -a smaller group of large dealers, mostly not public, emphasize poorer demographics and have much higher sales GM’s but also much higher losses.

    3. Fleet sales concentrate in a small number of dealerships which nominally report negligible profit on sales. They are among the largest dealers by volume, but lowest in terms of GM and other income.

    4. The manufacturer financing for dealerships includes the following:

    -floor planning (may finance entire inventory, new and used. Includes extensive auditing processes);

    -facility finance- includes all capex categories, often subvened by manufacturer, can be loans and/or leases;

    -leasing- consumer, business and fleet- each distinctly different and with different manufacturer involvement;

    -loans- nearly always consumer, but also can be for some businesses.


    Now the numbers, all of which are for a total dealership network, including small and large dealers, all geographic areas. They are common in that they all deal with the manufacturers captive finance company for some purpose. Remember these are mean values, with huge variance and typically two to three large modes correlating with dealership size and location:



    1. New vehicle sales. .06% net margin (i.e. just about break even)

    2. Profit on used vehicle sales. 11.4% (never tell a dealer you don’t have a trade until you’ve agreed a deal);

    3. Warranty repairs. 14.2% (dealers adore recalls );

    4. parts and service 16.0% (wonder why dealers hate BEV’s- no oil changes!);

    5. F&I 24.8% (Never tell a dealer you’re making an all-cash deal until you’re closing an agreed deal);

    -F&I includes average markup like this;

    Loans- 300 basis points (inversely correlated to borrower credit quality, margin roughly 50% higher for used vehicles, subvened markup ~25% higher);

    Leases- 420 basis points (depending on both credit quality [money factor] and residual value and capitalized cost). In both subvened paper is average 40% higher profit);

    Extended warranty- average of 100% markup, often the maximum permitted by lenders;

    Trash and Trinkets (T&T)- includes aftermarket adds like rustcoating, wheels, pinstriping, protective coating etc: usually 200-500% markup, but highly variable


    Obviously F&I is by far the most profitable part of dealership operations. Manufacturers cooperate by selling extended warranties and numerous aftermarket adds with the manufacturer brand. Notably F&I income is much higher for leases (with ‘capitalized cost’ the most often secret sauce), and the higher end dealers make most of their income on leases, extended warranties and officially branded dealer adds.


    Bluntly, Tesla understood all of this and, by owning the distribution network has effectively increased GM by ~30% or so. The only downside is that they now can record sales only on end delivery rather than on shipment to dealers, plus they must fund inventory directly. Because there are so many components much of these costs are never publicly visible.


    All this money flowing though dealers does give much more political power than even cynics imagine. In particular, the nexus of dealer financing operations with local banks, credit unions as well as captives produces more cash flow than does the entire mortgage industry. The symbiosis is really quite remarkable, especially because most participants are not even aware of how all the pieces fit together.


    A quick look at these numbers explains why dealers hate BEV. Mostly BEV buyers are better educated than the average buyer. Better educated buyers are hard to make large F&I profits, and BEV's cannot be convinced to pay for oil changes, spark plug replacements and so much more. However, better education buyers do step up for extended warranties and dealer adds, but even those are harder sales with BEV. There is one major exception to the rule: well educated sophisticated people are prone to make poor lease deals because few understand what capitalized cost, money factor and residual value actually mean, partly because disclosures are carefully placed in very fine print without explanation.



    Those are a few of the basics…
     
    • Informative x 5
    • Like x 3
    • Love x 3
    • Helpful x 2
  10. jbcarioca

    jbcarioca Active Member

    Joined:
    Feb 3, 2015
    Messages:
    3,972
    Actually Mercedes-Benz has been in the lower priced vehicles for decades:
    The new A-Class
    BMW 1-series also is in some markets but not others:
    Connected to perform. Experience the BMW 1 Series with the connectivity of tomorrow.

    Both of these compete directly with similarly positioned vehicles from Japanese and Korean producers.

    As for your slightly confused description of Skoda, Audi and VW brands you did skip Seat. Mostly there are near clones model by model at the lower end for each of the four brands, these days with enough minor changes to make them seem different. Zero question, all four occupy much the same niches with slight positioning differences and modest price differences. As one ascends the price scale Seat drops off, Skoda drops off, VW begins to thin, Audi broadens and Bentley appears with the once famous VW Phaeton/Bentley Continental Twins.

    As for BMW Mini is uniquely positioned in many world markets by being sold alongside BMW brands as a city car/entry choice for rich children, even though it is less so in the NA market.

    It is true that everyone other than the Chinese are having a terrible time making money on really small cars, so joint development and production agreements abound. VAG has been adept at platform sharing for decades so it is quite natural for them to adopt their Chinese-inspired BEV platform as a generic option for any manufacturer wanting to share.

    BMW has much more flexibility than do most other manufacturers because they still are effectively family-controlled. They also are struggling to reconcile their traditional engineering innovation with the high intensity IT-based innovation in BEV's. Most manufacturers all have that problem, but it is heightened for BMW. Frankly similar character explains the quandary right now for Honda and Mazda, both of which really think of themselves as engine companies.

    In sum, I really do not think all this drama has to do with market positions. I think it is predominately about engineering preconceptions that are upending everything they ever knew. Over-the-air firmware updates, in my opinion, is the principal challenge for traditional automotive engineering.
    My personal guess is that for ones like BMW and Honda that my be a bridge too far. For ones like Daimler-Benz and VAG, even PSA, they are already getting there, even if it is not yet clear.

    All of this, of course, is just my opinion, not proven fact.
     
    • Love x 4
    • Informative x 3
  11. KarenRei

    KarenRei ᴉǝɹuǝɹɐʞ

    Joined:
    Jul 18, 2017
    Messages:
    6,094
    Location:
    Iceland
    #11 KarenRei, Feb 8, 2019
    Last edited by a moderator: Feb 9, 2019
    I'm not sure that most people realize how awesome this is. Let me begin.

    Tesla has long confirmed that all of its current vehicles, including the Model 3 can take higher than Supercharger charge currents. Additionally, we've known from teardown experts who've gotten the vehicle into Factory Mode that the computer's internal limit for charge currents is 525A. This corresponds to about 180kW or so. Now, given the charge curve, it's probably only capable of that level near the bottom (if at all), followed by a continuous rampdown (no plateau) - but more on that in a second. Model 3 getting 126kW on a 175kW charger is about what you'd expect, since the charger will support voltages higher than Model 3 can use (aka, it's charger-current limited).

    A flood of Model 3s is now starting in Europe. Total European EV numbers are going to surge. The Model 3s can charge as fast or faster on the (smaller number of) 175kW CCS chargers, let alone the few true 350kW CCS chargers, than it can on Supercharger V2. In short, Model 3s are going to clog up CCS charging stations. Particularly the fastest ones. They're going to make lines for everyone else, and it's going to be a long time before the CCS buildout rate can outpace the rate of the Model 3 flood. But the fun part is, the inverse isn't going to happen. Not simply because there's not some imminent CCS vehicle flood, but because - even if Tesla has already added the ability for non-Tesla vehicles to charge at Superchargers (they surely will eventually) - most CCS vehicles do not have the ability to autonegotiate payment. A charger is never required to let a non-paying customer charge, and nor is any particular payment method required.

    Charging is about to become annoying for non-Teslas, without the inverse happening; Model 3s will have their selection of Superchargers or whatever CCS chargers they haven't yet clogged up.

    Now here's where it gets more fun. That whole taper thing.

    First off, a reminder of why tapers occur. Internal resistance rises as cells near fully charged. This increases cell heating. One can ignore pack temperature - many EV manufacturers have been known to do this (Audi for example, on top of minimizing taper only cools the pack from the bottom, leading inevitably to gross differences between cell temperatures on the top and the bottom). But temperature when charging directly correlates to damage and cell lifespan.

    So tapering is good for lifespan, but what about charge rates? Well, it just so happens that Model 3 is an efficiency king:



    Compare it, for example, to an I-Pace (which has similar interior space, despite being a CUV-format vehicle and larger exterior dimensions):

    Compare Side-by-Side

    upload_2019-2-8_18-27-56.png

    Check out that energy consumption difference on highway driving: 123MPGe vs. 72MPGe. An I-Pace would have to charge at a *70% higher power* just to put on as many miles/kilometers per minute charging as the Model 3! So when you see Model 3 tapered to, say, 60kW? That's faster than the maximum speed (miles/kilometers per minute) that the I-Pace can charge at! And while a car like the Audi E-Tron can do 150kW max, it's even thirstier than the I-Pace. Even a little car like the Kona (well smaller interior space than a Model 3) is thirstier than the Model 3:

    Compare Side-by-Side

    upload_2019-2-8_18-31-22.png

    14% thirstier on the highway, to be precise!

    Now, that may be all well and good, but oh yes, it gets better. Note the range on these vehicles. Let's forget for a second that the actual measured combined-cycle range of the Model 3 LR RWD was actually measured at 334mi, but was downrated to 310 miles to match the P3D and AWD. Let's stick with 310mi EPA combined. ;) Note the comparison EPA combined ranges: 258 miles for the Kona. 234 miles for the I-Pace. The E-Tron appears to be coming in at around 200 miles EPA, maybe a touch more. Caught onto what's happening yet? 258 miles is 83% of a 310-mi Model 3's range. 234mi is 75% of a Model 3's range. 200 miles is 64% of a Model 3's range. If the Model 3 were charged as often as those other vehicles, you can ignore the taper over 83% / 75% / 64% of its charge range. So if you charge it as often as you'd have to charge an E-Tron, for example, it maintains its over-120kW (equivalent to well over 200kW for an E-Tron in terms of miles/kilometers per minute) up to 78% of that range. And below that, you can charge even faster. Again, theoretically up to 180kW (although that's yet to be proven in practice - hopefully we'll find out soon!).

    Model 3 is a charging beast. And it's a beast that's also going to wreak havoc for CCS charger availability at non-Tesla locations ;)

    Mod: see also post by @mongo regarding tapering --ggr
     
    • Informative x 5
    • Like x 4
  12. Foghat

    Foghat Active Member

    Joined:
    Apr 21, 2015
    Messages:
    1,063
    Location:
    Brentwood
    It’s funny, now the mainstream argument against Tesla is that they aren’t growing capex so they are not a growth company and so Tesla way over valued and the stock is set to drop, etc...

    Tesla seems to be attacked no matter how the business develops.

    What this is an indicator of is a broad attack, a war posture on the company as a threat to vested interests. It is actually a destroy and take over, since the company is extremely valuable just not under Elon and friends ownership.

    In such an environment, there is actually nothing the “financial news” prints/broadcasts that isn’t directed toward this aim.

    We must thus take note of how this “financial news” monopoly angles its argument to achieve the objective.

    Media talking points:
    “Changing out the board” (which would put anti musk and friends in positions of power to disrupt control and direction)

    “Musk is unfit to serve as ceo or board. He’s crazy, he’s not healthy, he’s unstable, he’s a twitter risk, he smoked pot.” (again, take control away)

    “Can’t pay off debt, must raise capital” (big capital will constrain Tesla further through harsh contractual cost)

    “Can’t grow without outside capital, established ice competition will outpace in Evs. Tesla killers are here.” (again, set up for stock to fall, force poor conditions for Tesla to ask for money from Wall Street)

    “Drastic stock drops means Tesla in trouble” (manipulation of daily trade, to keep retail investors away as well as institutions away who only read mainstream financial news headlines and are scared away)

    “Anyone leaving Tesla means the company is in trouble” ( scare away investors, make stock go down, make capital raises hard to get on favorable conditions)

    “Tesla fires, autopilot fatalities, no demand, unsustainable sales, Tesla peaked sales” (all meant to drop the stock, make it hard to raise capital on favorable conditions, take control away from elon&crew)

    Even positive headlines create clicks on degrading/negative content. (Such as headline saying Tesla has moat around supercharging, but taking about how tesla faces “Tesla killing” competition, executives leaving, and anything Elon has ever said twitter).

    The truth is that most of the core buyers/stock owners have followed Elon since the beginning and know he’s been true to the mission of Tesla from day one.

    We also can research ourselves and see all the content of Elon and Tesla directly.

    The mainstream finacial news cartel doesn’t understand that they are 10 years too late. The base has been established and word of mouth and actual customer satisfaction is beyond the critical mass point. They don’t have the trustability power to slow the momentum now. Even with Tesla stores being illegal in some states, people are willing to drive hours to buy and still make the model 3 the biggest car by revenue in sales and in just 1 full year on the market.

    No matter how many analyst pound their fists on CNBC desks or how many negative headlines continuously scrolling on the Apple stock app, this electric hyperloop will not be stopped.

    And they know it too. Desperation only makes it worse.
     
    • Like x 8
    • Love x 3
    • Informative x 1
  13. Fact Checking

    Fact Checking Active Member

    Joined:
    Aug 3, 2018
    Messages:
    4,664
    Location:
    Vienna
    Also note that significant drop in volume and volatility. Part of it is that the ridiculously high options open interest dropped in half in January, with the worthless expiry of over 80% of the bankwuptcy puts. This reduced any delta hedging related volatility.

    Correct - I think there's several main factors to that price action and overall market sentiment:
    • Many Tesla-long institutional investors playing volatility have deleveraged after successfully profiting from the dip to $250 just ~4 months ago.
    • The Q1 "tiny profit" and revenue warning from Elon dropped the price from ~$350 to $300 and it's unclear whether it's all priced in already. The Q1 tiny profits will necessarily bring a quarter-to-quarter decrease in revenue: current estimates are somewhere between $6.0-$6.5b revenue, measurably down from the $7.2b in Q4. The shortz and carebears are going to have a field day projecting gloom-and-doom for Tesla's growth prospects come Q1 earnings report early May.
    • Tesla investor communications has switched from optimistic hype of a growth startup in the 2016-2017 time-frame, to a fighting-crisis mode of forced-optimistic communications in the first half of 2018, to that of a cautious, conservative, somewhat disinterested communicator of a cash generator company who self-finances its own growth, at the end of 2018. Since there's no more dilutive equity rounds planned, why would Tesla guide for anything but the most conservative baseline figures? This makes it really hard to anchor Tesla guidance for 2019-2020 relative to past guidance, and I'm sure the growth and valuation models of many bullish investors are showing a lower share price target as a result.
    • I think the easiest way to estimate Tesla growth is through their profit margin guidance: they are sticking to the 25% target. I.e. ~20%-25% from every mature product made is pure cash that will be re-invested into the company immediately. That's a nice exponential growth curve defined in plain sight.
    • Somewhat ironically, I think what has kept $TSLA in the $300 range was the gradual exit of about half of the shorts, short interest is down from the peak of ~40m shares to ~20m shares. Short interest is still very high, but that was a quite nice 20 million shares gradual support for Tesla's stock price. Not the violent short squeeze I too expected, but no prices below $200 either and a rather big ride from $250 to $370 just two months ago which I'm sure was short squeeze amplified that has hurt many shorts.
    So I think Tesla is undervalued even by bullish institutional investors currently, just like Amazon and Apple was undervalued during much of its history, until they eventually catapulted to a trillion dollars of market cap that is.

    Firstly, the financial effects of leasing have little to do with 'past experience' - when a car company offers captive financing leasing they provide the capital to make the car (which reduces free cash flow and burdens the balance sheet), and they also distribute the profits from the lease payments and the subsequent used car sale over a period of 2-3 years, which decreases upfront profits. (See @ReflexFunds's posts about this topic.)

    This is what absolutely every other carmaker is doing: no external financial institution is willing to do this without a significant haircut to those profits. It's still very much worth doing it, because half of the new car profits come from financing: GM I think generates a third of their profits through GM Finance ...

    Secondly, that Q1 deliveries are going to show seasonal weaknesses and tax credit reduction after effects was expected from early 2018, I remember @luvb2b modeling it in mid-2018 Q1'19 estimates.

    BTW., here's some new data showing that Model 3 U.S. demand is stronger than expected:

    "Tesla Delivered More Vehicles in January than Reports Suggest"

    "Given what we’ve observed from delivery data in January, Tesla is seeing strong domestic demand for the Model 3. We think that 30k+ US deliveries for Q1 is a reasonable prediction given what we’ve seen so far."
    This is from AlphaHat, who have been correctly estimating Tesla quarterly deliveries for the past 2 years using cell phone GPS data, with a historic accuracy of ~3% and 1% accuracy for Q4 deliveries.

    Here's a car company that sold everything they made for 10+ years, with inventory always below 1 month of production. No "special promotion $3,000 off if you buy this week", no write-downs or fire sale of old inventory worth speaking of. A car company that does no mass advertising whatsoever. A car company that regularly engaged in anti-selling of their own products, because they couldn't make enough of them.

    All the while none of the much hyped Tesla killer competitors are coming even close to competing effectively with Tesla's latest offerings: neither the E-Tron, the I-Pace, or the Taycan - not to mention that all of these will be made in low unit counts in 2019 and 2020 that are worth maybe one month of Tesla production.

    Here's one of the Tesla killers:


    Please check the timestamp of that Wired article, to get a feel for what a real case of missed predictions, missed guidance and failure to ramp up production looks like:
    The Wired article is from 2009 (!) and they promised that the E-Tron might start shipping in 2012 (!!).
    :D

    Meanwhile Tesla is still reaping the benefits of its rapidly growing natural monopoly in the premium and luxury EVs markets.

    So the fretting about short term Tesla demand is somewhat ridiculous.
     
    • Like x 8
    • Informative x 2
    • Love x 1
  14. kbeckley

    kbeckley Member

    Joined:
    Feb 2, 2010
    Messages:
    167
    Location:
    Toronto(ish)
    Musings about the Toronto International Auto Show.

    TL;DR Feel really good about my Tesla investment. Not so good for the planet.

    The Toronto International Auto Show is the largest auto show in Canada by some margin. I go every year to get out of the Tesla bubble (in which I live) to see how the 'future of sustainable transport' project is faring

    If Tesla attends (they have not always) they get a smallish cheap booth in the 'exotics' section tucked in the basement. They had one of each of the three models on display...and that is about it. They are next to McLaren, Lamborghini and the rest. The Tesla booth is always packed which is encouraging. Many owners come down just to say 'hi'. The brand is very strong. Staff were enthusiastic and well engaged.

    As for the rest of the show...
    • Every year I would say that Plug-in hybrids and EVs are moving increasingly from the backs of booths towards the front.
    • You can tell how competitive this market is when you look at the money being spend on the booths. Astonishing. Glitz all over the place. Such effort to try and differentiate and tip the purchasing decision in their favour between quite similar products.
    • EVs or 'green' is still not a focus (basically because they do not have much to sell). Fuel economy is not a focus.
    • The exception was KIA. The focus of their booth was the Niro and over half their cars were either pure EVs or Plug in hybrids.
    • Some brands have no electrification strategy at all that I could detect (certainly none on display) : Lincoln, Genesis, Mazda, Subaru, Infinity. These brands feel like dead men walking to me.
    • I engaged with someone in every booth with the question "Tell me about your electrification strategy". Results were awful with the most common responses: "I don't know" or "we are working on it". Worst was a Subaru booth gremlin who said "We are working to perfect the internal combustion engine". Best was BMW who were able to articulate a vision.
    • Sat in the E-pace (prominent at the front of the booth). Best Non-tesla EV yet...but so far behind IMO. I hope they sell tons of them (they had one available for test drives via the non-profit 'Plug and Drive' group).
    • Toyota featured the hydrogen Mirai prominently. Facepalm. How this company lost its way from the Prius advantage will be the fodder of many future business school studies.
    • 'Driving assist' systems are hyped but no talk of autonomous, even on the horizon.
    • This show reminded me of two important things. EVs are still too expensive - simply out of the range of the mass of buyers. The majority of average buyers are still mostly clueless about EVs.
    • For those of us investors who want Tesla to NOT be an 80% market leader of a 3% market but rather a 20% leader of a 50% EV car market the show was not particularly encouraging. We need to hit the steeper part of the S-curve soon - I am more confident we will do that.
    Tesla's clear advantages:
    • Battery cost and battery chemistry. As long as Tesla holds these 2 simultaneous leaderships they are simply unassailable. How can you complete? Seriously. You either price to lose money or give up performance (or both). This fact alone worries me for growth in the whole EV segment - how does any manufacturer today sit down and think I am going to complete against Tesla yet the core technology I have access to is more expensive and inferior at the outset.
    • Connectivity. No other manufacturer STILL (Model S is 7 nearly years old!) has the same over-the-air updates/flexible UI/download-the-logs system that Tesla has. Baffles me.
    • Autonomous. Others (GM aside) seem to be waiting to purchase a system that someone else develops. That strategy only works if you believe that huge amounts of data are not required to perfect the system. That is a very dangerous (existential threat) bet IMO.
    • Innovation speed. Build into Tesla's very nature - how can you pass them?
    • Supercharge network. This one can be overcome simply with money but until it is...
    Tesla's major disadvantage:
    • I do not think they build cars (drive system apart) with the same cost efficiency at the big players. Does anyone have a $ units of manufacturing labour per car across the various manufacturers infographic? I wonder where Tesla would rank. If Tesla ever gets REALLY good at automotive manufacturing then, well, only the Chinese will be left... As much I disparage the traditional manufacturers SOMEONE has to build 70 million(?) or so vehicles a year.
    Some photos in a follow-on post. Sorry about the length.
     
    • Helpful x 2
    • Informative x 1
    • Like x 1
    • Love x 1
  15. kbeckley

    kbeckley Member

    Joined:
    Feb 2, 2010
    Messages:
    167
    Location:
    Toronto(ish)
    Some photos from Toronto International Auto Show
    Tesla Booth:
    IMG_20190222_202214.jpg
    Toyota Murai (facepalm)
    IMG_20190222_211809.jpg
    Kia Niro
    IMG_20190222_214713.jpg
    Jaguar I Pace
    IMG_20190222_212101.jpg
     
    • Informative x 5
    • Like x 4
    • Love x 1
  16. Singer3000

    Singer3000 Member

    Joined:
    Apr 26, 2018
    Messages:
    395
    Location:
    Singapore
    Thought I'd share some pretty pictures that hopefully say something about Tesla's improved cash control. Caveat emptor, I am just a person on the internet and I may have made transcription errors along the way.

    upload_2019-2-25_15-25-30.png
    At the highest level, you see in Q4 the best showing yet, for what I term Adjusted Free Cashflow. I've added back the effects of collateralised lease borrowing as this is how management think about the business. For Q4 I've also moved the Shanghai land payment from operating cashflow back to capex to correct for the misleading effects of the lease accounting. And I've also reclassified "principal payments on capital leases" as capex rather than debt payments, just to make the Free Cashflow number more conservative still.

    Your yellow bar is essentially driven by gross margins and operating leverage. And this shows just how transformational Q3 and Q4 were.

    The purple Capex bar will be one to watch as the quarters pass, given the optimism that Giga 3 capex will be less than half of Giga1/Freemont was for the same production capacity.


    Zooming in on the blue bar...
    upload_2019-2-25_15-15-13.png

    ...we turn to what bankers like to call the Cash Conversion Cycle, which is a subset (but the most important subset) of working capital effects, important because it tells you how much cash you need to find to scale sales: how many days to turn stock, get paid and to pay suppliers. The component parts of the cycle are on the left scale, with the total cycle on the right hand scale with a tighter zoom.

    Back in the early days of 2012, there was guidance that the Model S would have a negative working capital cycle (i.e. growth would have a beneficial effect on working capital requirements) and for a short time this was true. For whatever reason this didn't hold as production scaled and the cash requirement went totally bananas when the Model X rolled into town. The same promise was made for Model 3 on a number of investor calls and that looks like it was a good promise. We'll probably see a slight uptick in the CCC in Q1 2019 with European / Chinese cars on ships but nothing too major. Just my own wild guess but I think Gigafactory 3 production will have a superior CCC than Fremont Model 3 production.

    Zooming in once more to break out inventory only (the scale is back to US$k just to keep you on your toes). Total deliveries uses the right-hand scale.
    upload_2019-2-25_15-21-42.png

    What's good news here is that Tesla has been able to scale production substantially while only slightly increasing the amount of raw material / WIP it has to finance (red and blue), as lessons are learnt on the factory floor. To those worried about service parts (yellow) being a major cash drain, you'll see what an insignificant subset of a subset this really is.

    The two green bars are what is most relevant here and both these are going to get bigger in future quarters. Firstly, as mentioned because there will now unavoidably be goods in transit to international markets. Secondly because Tesla is now adopting a policy of keeping finished stock on hand to snaffle sales to impulse buyers. Thirdly, you'll also start to see more leased Model X coming back on balance sheet as Used For Sale. That all sounds like a big deal when you're this far zoomed in but go back to the overall Free Cashflow chart and you get the right perspective.

    So all in all, when you take out the GAAP noise and look at the detail of the cashflows, you realise the scale of Tesla's achievement and the solid foundation laid for self-sustaining future growth. Zach Kirkhorn does not have an easy job by all means but compared to the Cashflow Everest of 2015-2016, he definitely has a downhill jog.
     
    • Informative x 7
    • Helpful x 2
    • Love x 1
  17. davecolene0606

    Joined:
    Apr 14, 2013
    Messages:
    621
    Location:
    Fort Pierce, FL
    Glad to see the 8k this morning with the clarification. Everyone has been going nuts since the original announcement which to me seemed to say that not so much that every store was physically closing, rather, that Tesla was returning to its original sales model which was George’s vision of info centers with online purchase.

    When we bought our Signature in 2012 and MS60 in 2013, both transactions were entirely completed online including doc signing via docusign. All of the folks in the stores were from Apple or other fields entirely, none had any experience in auto dealerships other than the actual technicians. When the Boca Raton FL, store opened, there was an event for owners at the time to get feedback about the store and as a bit of a perk. I remember having a conversation with the region manager re a referral program. The discussion kept circling back to how to structure it so it wouldn’t be gamed and become meaningless.

    We have seen “referrals” turn into sort of a wink wink nod nod automatic discount program rather than rewarding owners who actually took the time to demo/educate folks about Tesla resulting in another happy owner. This website banned referral codes on your ID stuff for just that reason. We see examples of folks getting to referral reward levels not as a result of 100’s of in person contacts, but by offering up there codes in mass media to as many eyes as they can garner as well as through getting into the system via hooking with internal personnel. This was not the intention of the program but what it was morphing into. Tesla stopped it.

    Again, what we have seen happen is a more traditional “dealer” model complete with commissions and imperfect “incentive” programs (read referrals and volume bonuses) which were easily gamed by participants. The first time I saw Tesla begin to hire guys from the local BMW/Mercedes dealerships into sales and service, I really began to worry as they started bringing “dealer speak” into Tesla. This IMHO was starting to bring the sleaze factor of the auto dealer sales model into Tesla. Additionally, it was rewarding rule manipulation that adds unnecessary costs the SG&A. Elon has always disliked traditional sales techniques as he feels (and I agree) the a product should be in demand because of itself, not because some PR guy who took psych101 and learned how to mind f people said to “buy this great widget cuz it’ll make you great”.

    Tesla began with the model of opening outlets to answer questions about a product that sold itself, period. As I said, it had begun to morph dangerously close to car dealer world. I think this clarification was again demonstrative of a willingness to be nimble, flexible and responsive to inputs from data and feedback. To be sure, it is NOT what a traditional company would do and it ruffles the feathers of the complacent and rewards those who can adapt and think outside the box. This is why Tesla has gotten where it has gotten!

    This is a positive in that when one is making up a new way of doing things, one must be able to adapt very quickly to keep the things that are working and to jettison the one that are not all while preventing “conventional creep” from working its way into the model.

    Glad to see the retrenching of the original Tesla sales model and the turn away from “dealer hell world”

    Fire Away!
     
    • Love x 4
    • Like x 2
  18. adiggs

    adiggs Active Member

    Joined:
    Sep 25, 2012
    Messages:
    2,303
    Location:
    Portland, OR
    I agree with the interpretation by the market.

    This very long term investor (me) has a different interpretation. I see a decision making strategy that I think more appropriate to a company in hyper growth mode, where time spent in analysis is time lost for hyper growth. It's a rare condition to exist and be in, and I can't think of another CEO besides Elon that I would want to have in charge of a company in hyper growth mode than Elon - maybe Reed Hastings.

    In hyper growth, there is strong value in taking these "small" / short term decisions fast and furious, course correcting as you go, rather than studying them deeply. The value in hyper growth of making the decisions fast exceeds the cost of making decisions using the typical boundary conditions (study them carefully - make decisions that will stand for months or quarters, years are preferable, that sort of thing), and then use the market of reaction and learning to learn from the decisions to make more decisions and course correct fast.


    My own reaction when I saw the original decision was somewhat dubious if I took it as stated on its face - it seems hard to sell cars consistently without the ability for people to sit in cars, get test drives, and so forth. And then I saw an initial list of stores closing and it looked immediately like the list of closing was a lot less aggressive than originally stated (I was expecting the Washington Square Mall store in the Portland, OR area to close, as we have 2 stores in the area now - I was wrong; both are staying open, at least for now).

    The end result that we've oscillated to makes a LOT of sense to me. One of the bits that I don't know is true, but I've read and makes sense to me, is that the overall sales 'channel' within Tesla has been drifting away from the original view of the stores as the "education channel", and more and more into a traditional car sales channel, complete with spiffs, incentives, and sales quotas. The #1 thing that I hope has been accomplished in all of this is for all of that stuff to be ended, and the whole channel / galleries / stores are reset back to the education channel.

    If that means taking the people in the stores out of the sales loop completely, then do it. No commissions, no quotas, no incentives - either individually or stores - do all of the sales online. Then the people in the stores can just be pure ambassadors for the brand and EVs. For many of us, that was a big attraction to the brand in the first place, and it works synergistically with the product, really well.


    Anyway, my original reaction when I saw the announcement, and it's been reinforced by the followup announcement and adjustment, is that I wouldn't want to be in direct competition with Tesla. The company does in days what takes other companies quarters or more to do. The pace, not just of technology innovation, is blistering.

    As an investor, if you care about the short term stock price (short term being "the next 3-6 months"), then this probably isn't the company for you.

    But if you've got a long term view (for me, that's 5+ years), who doesn't want to be invested in the company that is routinely doing in days what others do in quarters? If the translation is 1 week Tesla time = 1 quarter Everybody else time, then Tesla is going to live and do roughly 13 years of Everybody else time in 2019. While the rest of the industry is laboriously doing 5 years of R&D and bringing products to market over the next 5 years, Tesla is going to be doing 65 years of equivalent work (on my completely made up scale).

    I'd MUCH rather own a chunk of the entity moving at that pace, even if we're in a window where the impact of the blur of speed isn't yet completely 100% clear just yet. (It seems obvious to me, but I grant that it's not obvious to everybody)
     
    • Like x 9
  19. jbcarioca

    jbcarioca Active Member

    Joined:
    Feb 3, 2015
    Messages:
    3,972
    Yes. In addition, even when highly analytic people (including Nobel Prize winners) do carefully model the probability of outcomes they often then ignore the boundary conditions of their models, fomenting disaster in a very sophisticated way. Prime example Long Term Asset Management
    Long-Term Capital Management (LTCM)

    Elon has made this error several times, including the PayPal case. Unlike those others, when Elon realizes his error he quickly corrects himself and admits the error. Despite the justified criticism of his impulsiveness, he learns from his own mistakes. That is very rare, and perhaps is crucial to his continuing astonishing success.

    The downside: it takes a very strong and well-prepared person to argue Elon out of a bad impulse. Ms. Shotwell has spoken to that issue. In some areas Elon seems to have largely avoided big errors. IMHO these have had strong, confident and competent people to prove the cases. Pretty clearly these include JB and Jerome.

    There have not been equal qualities in evidence in customer service, parts distribution, sales and, probably, legal. Of course several of the most critical components needing improvement are those traditionally least susceptible to highly analytic proofs.

    “Traditionally” is the crucial point. Predictive analytics in behavioral science and ‘the transportation problem’ have been advancing even more quickly than has been widely perceived. Frankly, these logistics and behavioral issues are vastly less sexy than are vehicle autonomy, interplanetary navigation and a few other topics. Tesla has had great difficulty applying these techniques to seemingly mundane customer service, production and distribution problems.

    Were Elon capable of playing nicely with Jeff Bezos he might find out how to solve these problems. Amazon is case study number one fir how to make the most boring topics both exciting and soluble. Frankly, I think a strong dose of Amazon-think would rapidly cure the vast majority of serious Tesla problems. Then Elon could concentrate on the areas in which he is so wildly successful; solving seemingly-impossible problems. Amazon-think would let him escape the prison of mundane problems, the ones he cannot ‘outsmart’.
     
    • Like x 3
  20. mrdoubleb

    mrdoubleb Active Member

    Joined:
    Jul 2, 2013
    Messages:
    2,153
    Location:
    Budapest, Hungary
    Here is a reminder of where the competition is today, as you don't really see this broadly reported in the media:
    • All of Hyundai/Kia EVs like the Kona, e-Nero, Ioniq seem to be severely production limited due to battery supply issues. According to this source, things are not going to improve on the Kia side for another 12-18 months and sister models on the Hyundai sideseem to have the same issues.
    • Nissan's Leaf struggled with an equivalent of only 3 weeks worth of Model 3 production in the US in 2019 and for whatever reason, in the one region where it is successful (Europe) Nissan only assigned a quota of 5000 62kWh Leafs for 2019. That's like 1 week of M3 production.
    • The Volt has been cancelled, while the Bolt, once intended as a "Model 3 killer" by GM has seen sales decline by almost 25% last year in the US. And since Opel was sold, it is practically unavailable in Europe.
    • E-tron is in a 6 month+ delay, its power consumption is about 23% higher than the Model X and the only saving grace, 150kW charging has just been negated by v3 Supercharging and 12,000 v2 chargers getting a 145kW boost OTA.
    • I-Pace has seen sales drop significantly in Q1 and the rumor is they have production issues. It also took them about 11-12 months since launch to come up with the SW update to unlock the 100kW chargingthat was advertised from the beginning, which underlines Tesla's SW update advantage.
    • VW ID has been delayed by a quarter and will start with pricier versions as well (like Tesla), so no $25k version at start.
    • Everything sexy about the Porsched Taycan has been toned downsince we saw the prototype and it remains to be seen if it really does have 350kW charging. Currently I've only seen ~250 in the only video(Auto Motor & Sport) where it was seen charging.
    • Ford has nothing, Toyota has nothing, Honda has 1 prototype, Fiat has the limited quantity 500e
    • Mercedes EQC is delayed by 6 months. They've tried to spin it saying they will deliver to VIPs first, but rumor is they will not be able to produce significant quantities until November 2019 (vs. Summer 2019 promised before)
    • Polestar 2 is a year away
    Anything I missed?

    (Last edited by Mrdoubleb 18 Mar 2019).
     
    • Love x 7
    • Like x 4
    • Helpful x 2
    • Informative x 1
Thread Status:
Not open for further replies.

Share This Page

  • About Us

    Formed in 2006, Tesla Motors Club (TMC) was the first independent online Tesla community. Today it remains the largest and most dynamic community of Tesla enthusiasts. Learn more.
  • Do you value your experience at TMC? Consider becoming a Supporting Member of Tesla Motors Club. As a thank you for your contribution, you'll get nearly no ads in the Community and Groups sections. Additional perks are available depending on the level of contribution. Please visit the Account Upgrades page for more details.


    SUPPORT TMC