Moderators' Choice: Posts of Particular Merit

[Gigapress]

Tesla's automotive fundamentals remain excellent. Do not be distracted by the visible numbers for Q3.

Most importantly, Tesla still really hasn't achieved economies of scale yet. Total gross margin was still 18% but net margin was only 8%, due to opex eating up 40% of the gross profit. Plus, much of that opex was going towards development of Optimus, Dojo, and new businesses like virtual power plants. At 10M+ vehicles per year kind of scale, there should be much more operating leverage. And they're still shipping cars very long distances, on average, which will be greatly mitigated in the future with more factories each serving smaller regions.

There also is consistent variability from foreign exchange because Tesla does not hedge for this. In Q3, it was a $400 million headwind. However, the long-term average effect of forex fluctuations is likely to be roughly 0, so this should be factored out when analyzing a single quarter.

Tesla's global average automotive unit economics are depressed, have been depressed, and will continue to be depressed by the explosive production growth curve, for several reasons. This implies that whenever growth slows down and the automotive business is no longer in startup mode, the latent, underlying economics will show through.

1) For as long as Tesla is expanding quickly, new production lines will constitute a large portion of total production. These factories still haven't reached maturity yet. This was noted on the front page of the Q3 deck: "...production cost at our new factories remained higher than our established factories...". In Q3 this effect was especially pronounced due to Shanghai, the most profitable and efficient plant, being shut down, which removed it from the global production mix, and then beginning low-rate initial production of M3 Highland, which effectively turned it too into a partially new factory with temporarily higher costs per unit.

2) The fleet is young. As Elon has noted on an earnings call a few years ago, historically most OEMs have made most of their profit not on initial sale, but instead on out-of-warranty replacement parts and financing. Tesla, being new and rapidly growing, does not get this benefit (yet). For the average Tesla car, the total lifetime profit for Services & Other has mostly not occurred yet, but savvy investors should consider the net present value of these expected future cash flows instead of fixating on the economics of the initial sales and early years of vehicle life, which is all that is currently showing in the financial reports. Almost all Tesla vehicles in existence are still under warranty, and the current fleet still has lots of $$ for Supercharging, premium connectivity, insurance and FSD still waiting to accrue over time.

3) Tesla's vehicle ASP is continually depressed by competition. Not so much because the competitors are competently competing, but more so because they are willing to sell their EVs for big losses. Tesla's aggressive growth is, at times, outpacing the growth of demand for Tesla cars, and that demand exists in a market where the competitors are essentially compensating for their inadequacy by giving up and hoping their costs will massively improve in the future. The huge losses are subsidized either by investment capital (e.g. Rivian) or ICE profits (legacy OEMs). Obviously, this is a transient market situation which is unsustainable in the long run, and therefore it is not representative of where things are headed in the 2030s and beyond. The competition still has not shown anywhere close to the degree of cost control (and the engineering behind it) that Tesla has shown, and the gap is likely to widen with mature 4680 production and with the Gen 3 platform, based on what was disclosed at Investor Day.

None of this has changed recently. The only major recent change was substantially cutting car prices, which, according to the company, is basically just adjusting for interest increases to keep monthly loan/lease payments approximately equal to where they had been previously. Automotive is a cyclical business that currently is in a recession. So what?

 

[Gigapress]

The tougher credit environment might be hurting demand for Tesla vehicles more than other brands.

Many Tesla customers have been stretching their budgets to afford the purchase. This has been going on for years, and it could explain why Elon has been persistently harping on the importance of affordability so much more than other automaker CEOs have been, and why Tesla has had to cut prices this year more than most other brands have. Normally, most customers buy new cars that are in approximately the same price and market segment as their previous car.

Elon stated on the Q2 2018 earnings call, "people are trading up into a Tesla, so they're choosing to spend more money on a Tesla than their current car, just based on the trade-in values." On that same call, Robin Ren said the top 5 trade-in models were:

1. Toyota Prius
2. BMW 3 Series
3. Honda Accord
4. Honda Civic
5. Nissan Leaf.

In 2019, Bloomberg published the results of a survey of 5000 Model 3 owners. One of the questions was what car they had traded in for their Model 3. (Surveys are questionably useful in general, but this was a basic factual question and the results for the top 5 exactly align with what Tesla had said a year prior.)

Then in the Q1 2021 report, Tesla again showed that the majority of trade-ins were of non-premium brands:

CarMax has observed a similar pattern. They stated earlier this year:

For the Tesla Model 3, our most popular EV at CarMax from September 2022 – February 2023, the most common trade-in was a Honda Civic and the second most common was a Toyota Tacoma.

Full Q2 2018 earnings call commentary on trade-ins:

Zachary Shahan - CleanTechnica

Hello. First of all, thanks for the recent retweet, Elon. I was really impressed with the Model 3 after owning a Model S, so I'm really impressed how much you've developed since the early days. My first question was about Conquest sales, actually. Right before the call we published an article that Camry sales were down 22% year-over-year, Prius sales were down 23% year-over-year and we're very curious how much you're pulling from these other cars, other segments. It sounds like you sort of answered that question at the beginning, but can you give anything in terms of what percentage those top five are in terms of trade-in sales? And how broad you're pulling? I know you pull from pickup trucks, from sports cars. Can you speak a little more about the diversity you're pulling from?

Elon Musk

Actually, what we have right now is just the top five. So I'm not sure what the allocation is between top five or where it goes beyond top five. We just sort of out of curiosity asked for the top five breakdown. And it's just interesting that people are trading up into a Tesla, so they're choosing to spend more money on a Tesla than their current car, just based on the trade-in values. A Civic is a very inexpensive car compared to particularly the Model 3 today. So that's promising from a market access standpoint.

Robin Ren

Yeah, this is very interesting. So, we looked at what people who are buying Model 3 cars in the United States, what cars they are trading in. What we found is through this year, from January to July, the top five non-Tesla cars people are trading in to get into a Model 3, they are Toyota Prius, BMW 3 Series, Honda Accord, Honda Civic and Nissan Leaf.

Elon Musk

Really surprising.

Robin Ren

Yeah. They are surprising because they are not the traditional premium sedans. They are actually – many of them are mainstream midsized sedans.

Elon Musk

Right. And we're obviously at this point not yet selling our $35,000 car, so this is promising for the future.

Then in the Q3 2023 call, we were informed that the effective retail price of a Model Y, as measured by the monthly loan payment, has remained approximately constant, and the only difference has been that more of the payment is now going towards paying interest instead of paying down the principal. Considering that the actual cost is what matters to the customer, not the Tesla list price, this would indicate that intrinsic demand has not declined.

Tesla has repeatedly told us over the years that their customers are exquisitely sensitive to price (i.e. there is high elasticity of demand), and the past market reactions to price changes have indicated this is so.

Q3 2023 call:

Elon Musk

... So, I just can't emphasize again how important cost is -- it's not an optional thing for most people. It is a necessary thing. We have to make our cars more affordable that people can buy it. And I keep harping on this interest thing, but I mean, it just raises the cost of the car.

I mean, we're looking in internal analysis, which we think is more or less on track that when you look at the cost -- or the price reductions we've made in, say, the Model Y, and you compare that to how much people's monthly payment has risen due to interest rates, the price of the Model Y is almost unchanged.

Vaibhav Taneja -- Chief Financial Officer

If you factor in the change in interest rates.

Elon Musk

Yes. Which is what I'm trying to say. The thing that matters is the monthly -- it's how much money do they have to put down and do they literally have that in their bank account or their check balance and then what is the monthly payment? And it doesn't matter how -- if that monthly payment is principal interest or whatever, it's just a number, and that number has to not cause their bank account to go negative. So, going from near-zero interest rates to kind of the current very high interest rates, the actual monthly payment is basically the same.

It's just a bunch more of it is going to interest. And there are some incremental challenges beyond that, which is the difficulty of getting credit at all has increased. And so, the number of people who simply cannot get credit, period, even if they've got a job and everything is solid, the banks are a little gun shy on handing out credit given that a bunch of them kicked the bucket earlier this year.

This all indicates that Tesla can unlock massive demand simply by progressing on cost reduction and moving into lower price tiers, especially with Gen 3.

 

[unk45]

Perhaps we might also consider that:
1. the Total Available market assumes status quo. What happens if the EV proportion expands the total market. In effect, making the market expand by lowering present fleet age. Similar things have happened in many other markets when technological advances engendered more rapid replacement cycles. Rotary dial vs touch dial phones, internet vs land line, turbojet vs piston aircraft;
2. Served Available Market also presents serious definitional problems. Does New York State count as served when limited to five stores? Does Texas count when prohibited from conventional direct sales? Such calculations always demand very careful definitions;
3. Target Market has the same definitional issues as do the other two.

After having done hundreds of such analyses on behalf of clients in many industries, my view is that these charts are irresistible. Frankly I have used them over and over, despite the problems. They, by their very convenience invariably understate the potential of really new products or overstate the potential for revolutionary solutions. One or the other happens…
In the TSLA investor context we must have clear understand of which category we are facing.
Later today I will show my assessment of Total Available Market for TSLA in presently served categories, Tesla Energy Peaker Replacement and Passenger Cars.
I will exclude Optimus, energy sales, FSD, subscriptions, etc. Not because those are ‘de minimus’ or likely to remain so, but because those do not fit a replacement market typology.
Hint: There is a reason why Elon says TE will probably be larger than cars. That is both obvious and easily quantifiable.
Hint #2: When Tesla invented Superchargers it was explicit recognition that charging infrastructure is THE LIMITING FACTOR in EV adoption. Hence Hint #1 stands as a gigantic impediment to mass conversion to EV.

As the two attached files show, the expectations are for weaker plower plants to grow substantially during the next few years. According to the International Energy Agency there were roughly 1800 GW of peaked plants worldwide in 2019. The growth alone will be in excess of 50GW per year, but the replacements for obsolete plants are likely to be about three times that size.

The peaker plant lead time for a battery storage solution is less than half that of the next fastest turbine installation and much cheaper. Further the battery storage solution can and does act as near-instantaneous grid services solutions to stabilize both frequency and voltage, something no other solution can accomplish. That, in turn, reduces power outages and maintenance requirements for other infrastructure, whether state-of-the-art or decrepit. (For copies documentation just search for Hornsdale Power Reserve, which acts as a Tesla Energy reference.

So, now that even the traditional peaker plant /utility/grid services providers are moving into this field.
How much can Tesla penetrate this business? Bluntly the answer is how much can Tesla supply? Tesla is expanding Lathrop and negotiating for other factories and battery supplies to build more Megapacks and increase the capacity of present ones. The recent quarterly reports show a >20% margin, quite remarkable.

I expect this business to grow by an average of 40% PA with stable >20% margins for the next several years, with Tesla market share never exceeding 20%. Why? Simply, the traditional solutions are becoming more expensive, less reliable and far less effective than are battery storage facilities. More importantly, hydroelectric is becoming less stable due to climate change (search for Itaipu and Three Gorges for two dramatic cases in point) natural gas supplies are becoming more volatile, and energy demands become more unstable due to growth in air conditioning and other factors. Those all suggest that weaker requirements will grow even faster than the forecasts.

Since InsideEVs has made a handy little chart it's easy to see what happens when Tesla makes a deal with CATL for battery supply. Now just imagine what will happen as all those battery plants come into production and it's easy to imagine that Elon is quite correct it seeing a BESS (Battery Energy Storage System) future growth that is nearly limitless, even aided by the many other entrants.

Just for context, the competitors are less the traditional utility system providers than they are Chinese entrants, aided by State Grid, CATL and others which have been responsible for building and operating the only major national grid that is truly modern. Such are the benefits of coming from no grid at all to a completely new one.

State Grid Corporation of China - Wikipedia

en.wikipedia.org

Perhaps oddly, Tesla probably benefits from success in dealing with China and Chinese companies when thinking of near-global grid support needs.

 

[AudubonB]

Are you saying Elon is a racist, or just that his tweets are vague enough to be interpreted as racist? And that's why the stock price has been going down?

@EverettRuess
He is a racist and a anti semite
=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+


And THE ABOVE despicable, juvenile, knuckle-dragging post is a terribly appropriate example as to why we have boundaries in this thread.

I created this thread to have a Roundtable DISCUSSION: a venue wherein intelligent, reasonable, thinking, experienced, investment-minded mature adults could present and share their insights and learn from each other.

I created this thread as an alternative to the speed-of-electrons platforms the internet provides where participants do not listen to each other but digitally blurt out verbal diarrhea; who play jejune one-upmanship; who jump on a prior such post and use it to advance their own half- or even wholly-unbaked mental synapses and consider that a "thought" - somehow something worthy of being presented to others.

And the prior sentence is exactly my since-Twitter’s-creation description of what Twitter was made for: NOT a discussion center, but a posterboard for emplacing self-centered momentary thoughtlessnesses. Of all the cornucopia - may the gods of languages forgive me for the desecration of that superb word - of media present today, it is Twitter that encapsulates all that is horrific, all that is wrong, all that is destructive of the internet, and thus is the most conspicuous platform which I have excommunicated from here.

I sorely understand why there is frustration at some of the boundaries I have placed on this thread. I agonizingly long to discuss within this thread certain realities present in the all-encompassing universe that is the investment world. Of all the countless hours over the past decade+ I have spent massaging this very special investment community, a staggering amount of them have been spent in my attempts to reconcile unbridled discussions against the more unattractive realities of the Human Condition. There is, so sadly, no happy answer. Chafe against the rules of this thread; discuss with me ways you think more accommodation could occur but if you cannot yourself abide by those rules? The alternative sites are many.

edited to clarify what are not this Moderator’s words

 

[unk45]

You don't think a 7.5% increase in "unfavorable" rating is signficant?

Or a 5% decrease in "favorable" rating?

Going from 30% to 25% favorable rating is a 17% drop in the number of people who like your brand.

For some unfathomable reason many people have unquestioned faith in the accuracy and methodology of brand ratings, and even more when viewing metrics such as 'intention to buy'. Along with the vaunted 'unaided recall' core metric these all have several major problems.
-first, selection bias. During the last two decades every polling category from political voting intentions to favorability ratings and intentions has suffered large declines in correlation to actual observed behavior. More and more people decline to respond to surveys and those who do are increasingly likely to represent outliers.
-second, survey design flaws. As more surveys are conducted by people who have no background or qualifications in survey design and control, sampling errors grow even more than they already have due to selection bias because there is so little effort to design surveys to limit the errors.

Favorability ratings are immensely popular for the same reasons that political polls are so popular. Quoting some poll always is tittilating. Often they really have minimal value.

In our present TMC investor dilemmas many of us are compelled to evaluate personal behavior of a given CEO because if we listen to neighbors and ask if they've changed their view due to an obnoxious post somewhere, surprise!, they've often say they have done that. Such events are the third bane of survey research, Confirmation Bias. Here on TMC the purveyors of confirmation bias often become banished to ply their rumors elsewhere.

I decided to post this three part description because we are at great risk in this thread of losing sight of actual facts. In the present day ephemeral 24 hour news cycle we seek stimulation continuously. After the 24 hour continuous steaming news was invited by Ted Turner the world has devolved towards continuous exacerbation of controversy. We have, in this thread, fallen victim to that habit. Otherwise intelligent people are preoccupied with the latest tweet, even those that have a half-life of a few minutes.

If we are to be useful to each other we need to work hard to 'sort the wheat from the chaff'. We need to learn what data is real, what is imaginary and what is real but irrelevant. Gratuitous political commentary, personal revulsion or admiration of a given CEO is really not very helpful.

Actual business decisions and actual facts are always helpful. Actual buyer and driver performance is also relevant, as is everything financially demonstrated.

History is plentifully supplied with highly accomplished people who were deeply flawed. After all, as people become more and more successful their flaws become more visible. In my own life I have been lucky enough to meet and deal with a large number of highly accomplished people. I have tried to recall one such person who displayed conventionally conforming behavior. I cannot find one. We all here are involved deeply with one such individual.

Please stop trying to find relevance in odd behavior that is not directly tied to performance of our investments in TSLA. Please stop quoting ill-designed surveys, polls and anecdotes all of which exacerbate perceived risks.

We have many real risks, real opportunities and factual issues. Those are hard work to find, understand and explain. For me personally, I benefit enormously when someone corrects me when I make a factual error. Several people regularly do that; I owe them a debt of gratitude because that helps me learn. I hope we can enhance the exchange of solid information exchange, from which we can learn. That is why I've been here since 2014.

 

[unk45]

Having a Retail operation in Chile is beneficial for Tesla from the taxation and foreign exchange points-of-view. Since Tesla doesn't hedge foreign currency flows, their ideal strategy is broadly to balance inflows and outflows of cash from any particular region. That means having both imports and exports. Paging @unk45

Hmm, now I wonder what commodity Tesla might want to import from the home country of the Atacama dessert... drink that salty Kooli-ade, hombre!

¡Arriba, abajo, al centro, y pa' dentro, salud!

Since you ask…Chile has several points in it’s favor. Before those, it is a small market, but does not itself produce vehicles. The Banco Itaú economic report is succinct and relevant:

https://www.itau.com.br/itaubba-pt/analises-economicas/latam/chile-activity-301123

Chile also has a very high GINI coefficient of 44.9, partly explaining how there is a robust but small market for high-end consumer products.

Chile also has the world’s largest copper reserves:

Chile Copper Mining Market by Reserves and Production, Assets and Projects, Fiscal Regime Including Taxes and Royalties, Key Players and Forecast to 2030

Hmmm, does Tesla need copper?
Then there are other metals:

Mine production in Chile 2021, by metalMine production of selected metals in Chile in 2021 (in 1,000 metric tons)Iron11,200Copper5,588Molybdenum49.40Zinc27.90Silver1.38Lead0.40Gold0.03
source: US Geologic Survey extracted by Statistica

On top of those factors is the huge Santiago electric bus fleet mentioned here in the past, coupled with high receptivity for anything that reduces necessity for fossil fuel imports. That is closely related to a close commercial relationship between Brazilian business and Chilean business. (Perhaps the most famous example was the effective takeover of TAM airline in Brazil by the Chilean family owners of LAN. The two families had long been close, so the accidental death of TAM’s CEO led to a friendly takeover that produced LATAM.) Further, the auto industry of Brazil has increasingly close ties with that of Brazil, although the actual import data reflects a different story:

https://oec.world/en/profile/bilateral-product/cars/reporter/chl

From an overall policy perspective Chile has huge foreign exchange demand for petroleum and autos, while exports are now dominated by copper and other mining products, with the odd Atacama foray for astronomy (high driest place on earth!).
The single most salient fact about Chile is this:

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwiW046WrYeDAxUEO7kGHfYpDDkQFnoECC0QAQ&url=https%3A%2F%2Fwww.cruxinvestor.com%2Fposts%2Fthe-promise-and-peril-of-lithium-brine-mining-in-chile&usg=AOvVaw0zTJnm2pGarpCTQoDd6pDl&opi=89978449

As the article presents, Chile has the world’s largest lithium deposits is the world’s driest places, very high and very, very difficult to access.
What company is most adept at solving insoluble (ok, couldn’t resist, insolvable) problems?

Overall, it seems to me that Chile is an excellent market for Tesla Energy and an excellent small market for automotive products, not to exclude the raw materials potential. Don’t forget that the Chilean Human Resources are exceedingly familiar with the rest of Mercosur and know just how to navigate in Brasilia, often, I’ m observing, more adeptly than are most Brazilians. [that last sentence requires a book-length explanation, but Elon’s cousin, and/or others nearby, probably has already explained all that].

Were I a Tesla influencer I would have recommended the course they’re on. Once they’re established in Chile, Brazil is easier and when Argentina begins to recover, as eventually it will, Tesla will be ready.

In sum, Chile is easy to enter and provides entry to the Southern Cone/ Mercosur

 

[cliff harris]

I was a broker from 1988 to 2007. I ran portfolios of small aggressive growth companies, you know, like the ones that are easily manipulated by media and (naked) short sellers. Reuter was always, even in the early 90's, the go-to medium for the Fud and downright lies that these criminals use in their efforts to devalue companies for profit. They have actually been very successful in thwarting hopeful start-ups, putting many out of business.

Edit: The "naked" component really didn't start until the Madoff Exemption came into existence in 2001-ish.

Around about the same time as that, I worked for a UK company called datastream/ICV. Our competitors were reuters and bloomberg. AFAIK at the time, reuters were basically a financial data services company, even back then. In other words they were very *in* with people working on trading floors.
A few years of that, and extensive research since has taught me that there is a HUGE industry that is deciated to one goal:
Make
People
Trade
Big companies make billions from getting people to buy, then to sell, then buy, then sell. Trade baby! Trade! They make money on the orders regardless which direction it goes. To enable this ludicrously profitable setup you need agitprop clickbait (business insider, cnbc, seeking alpha), a complicit mainstream media (cnn, wall st journal), a host of brokers that offer discounts for frequent trading, and 'live news feed' style services like reuters who will give you second-by-second updates that you should trade on RIGHT NOW, before you even finish the headline.

If Tesla were struggling financially, these same people would run enthusiastic clickbait to drive them up, like they do with Lucid, Rivian, so people would buy stock. They pimp the losers and trash the winners, all part of the constant cycle to get dumb money to keep paying those trading fees...

Yes I am cynical, but also I speak from experience. Buy and HOLD. Consider making a trade every six months at most. Its working well for me YMMV

 

[unk45]

Oh my goodness!

How many more of SpaceX, Boring, etc. employees are going to contribute to Tesla's success?

Something must be done to halt the sharing of unique and valuable resources between the Musk companies. If they continue like this they will be the only companies left on the planet!

/S​

As I recall, it is a policy with these companies that employees are encouraged to move between them if they want to. That is one of the ADVANTAGES of taking a job with a Musk company.

Heck, even those former Tesla employees offer opportunities, like J.B. and the the recycling business, which will benefit Tesla in the long run.

Clearly, some people are considerably more short-sighted than is Elon.
...and they keep posting just to remind us who they are.

Remember too that people like JB are not quite gone anyway:

https://www.autonews.com/executives/tesla-co-founder-former-tech-chief-straubel-returns-board#:~:text=Tesla%20Inc.,its%20proxy%20statement%20filed%20Thursday.

Such events are not rare, but that one surprised many people, even seemed to astonish Automotive News.
As several people have already noted, the inter company pollination that happens with everything Elon is an amazing and vanishingly rare advantage.

Those of us who criticize Elon's mercurial behavior tend to not recognize the mirror side of that is an equally misunderstood technological talent that attracts highly talented people. The list of those began long ago with zip2 "..acquired by Compaq for $307 million in 1999" Wiki. Every Musk company has accomplished innovation that others had not seen.

That does not imply that everything is perfect. It does imply that there not much more surprise coming. For just Tesla we have Optimus, smaller vehicles, lithium refining, Cybertruck, FSD, new battery technology including continuous refining of 4680, new factories, Semi and much more we cannot yet see.

Our core problem is much like those of conventional securities analysts; we, like nearly all humans, see evolution but rarely revolution. Tesla has almost singele-handedly driven automotive industry revolution in powertrain and control technology, manufacturing, design and distribution. Very few even imagine the total impact of those.

So, on the first week of 2024 I'll point out that nearly all the TMC forecasters are seeing only a static view of capacity and potential, so imagining that TSLA will have a mediocre 2024, and improvement in 2025. Perhaps. They're all assuming continuity. None are seeing discontinuity.

The preceding paragraph is, I think, true. Next:

Among those who do understand disconuity there is another equally serious problem. All the public figures who think they understand TSLA further make specific forecasts for products and features that do not exist. It is not possible to do that in any remotely plausible way. As a rustle there are 'pie in the sky' forecasts. In short they're forecasting 'hopium'. A share valuation practice such as that is Ludicrous as best, Plaid at worst. (Sorry for the bad terminology. note: that terminology refers to two developments that happened only because of applying SpaceX technology to TSLA products.

All the above keeps me HODL TSLA but without any very useful way to make any specific values beyond a few months. We simply do not know what comes next, we imagine it, it may be 'announced' but there is not logical way to forecast when 'hopium' becomes a real product.

Having followed Elon since Zip2, I understand he is the 'spark' that ignites the 'explosives'. He's now aging and still pursuing the same dreams and visions he's had. He's, since the beginning, not been 100% correct
But his success rate has been since zip2, unprecedented. Now is different than ever before. Now he has amazing deep talent based in every Musk company. Every one cross-pollinates, producing things like Octovalve, Autobidder, GigaPress, paint shops and structural battery packs that are invisible to the beneficiaries. Each of those require help from outsiders too, who clamor to be TSLA, SpaceX etc suppliers because that will assure their own technological prowess will improve.

There is a reason why CEO's of BYD, CATL, IDRA/LK etc strive mightily to be TSLA suppliers when many do not. In short, those, coincidently more Chinese than not, are determined to improve by learning from the best. Both Diess and Farley have recognized that and have tried to adopt a collaborative posture. One lost his job over that, the other hasn't succeeded. Tesla, though, has never stopped cooperating with anybody who will help advance the mission. That recently had numerous partnerships with property developers, public utilities and some governments. OMG, now that includes nearly all the major global auto manufacturers doing business in North America. That is NACS.

Now, when considering the last paragraph we reach an area where actual numerical results ahem already been evident. Tesla Energy. It's hard to understand why exactly zero TSLA specialist forecasters are including Tesla Energy. Everyone is preoccupied with car production and sales. Why? Because public data is readily available so examining the past is trivially easy, for almost every global car market. ~$3000 per year and all one needs to do is copy and past. You also get original sources so you quote from them and pretend to have done original work. Clever way to make money on clicks! FWIW, I pay for that data too, and can usually see where people get their data, but I'm not after clicks.

Not coincidently public utility data si widely available as is peaker plant data. Further the costs of alternatives is easy to find. Some fo that has been already on TMC in Tesla Energy related threads.

SO short conclusions, without quoting any data myself:
Renewable energy, wind and solar, are Globally the cheapest way to install new capacity;
Battery storage is the cheapest, fastest and easiest way to install peaker capacity;
Both renewables and battery storage are the majority of new capacity happening now in most major countries;
There is too far little supply of wind, solar and battery production capacity to meet the demand;
Tesla Energy need only have a <10% share of new peaker plants alone to dwarf automotive most optimistic goals in aggregate, for all manufacturers;
Tesla already has energy supplier licenses in EU, UK, Texas and numerous other locations around the world, while all the analysts ignore it. Even when consumers report a direct experience everyone notes and ignores.

Those are why Elon says as much, although he's unusually cryptic about it, partly because both institutional and retail shareholders are ignoring the business.

If I had the resources today that I did decades ago, when I did things like this for my living, I'd put a team on this subject above all others.
FWIW, that is why Tesla is building MegaPack capacity as quickly as they can, even though all the analysts, including ours, simply ignore the subject apart from a throwaway Lathrop comment from time to time. That is why all those contracts with developers, openly disclosed and ignored.
Even when one of our own buys a place in Babcock Ranch we all say, great! and then ignore the implications.

Sorry for my rant. I hope it helps spawn some interest from people who can do the work to help see the future more clearly.

 

[RubberToe]

First, thank you for the gracious and kind words- and also the same regarding yourself.



I always try to!




This is why I prefer engineering- not marketing. Where one cares about what can actually be done, not what we want to sound like can be done


The S&P estimate you cite breaks it down by region... interestingly their estimate puts (by far) the largest % growth for 2024 in...the US. Which just practically killed federal EV subsidies with the sourcing changes. They predict a 66.4% YoY increase 23->24... AFAIK '23 estimates are around 1.3M sold in the US, meaning they're calling for about 860,000 more EVs to be sold in 2024 in the US alone.

From whom?

With most legacy pulling BACK on scaling production for 2024 (and GM outright killing the only model it sells that anyone really buys), and even the most optimistic such as yourself calling for Tesla to only increase by about 700k worldwide where are those 860k additional BEVs in the US alone coming from?

Look worldwide though- 9.6M this year- 13.3M next year. That's 3.7 million more EVs that someone needs to make. Again assuming your optimistic 700k for Tesla is right, where do the other 3 million come from? BYD was only 1.6M BEVs this year. Even with 50% YoY growth that only gets you 800k of the 3M you need.


So it's not that I think Tesla is going to lose market share-- it's that I find the idea companies who are NOT Tesla are going to magically make 3 million extra EVs next year to be...unlikely?

And once you accept the 13.3M isn't realistic based on the stated near-term intent of nearly every player who isn't Tesla or BYD, you easily reach the set of math where Tesla doesn't lose market share even when they "only" produce a more realistic 2-2.1M for 2024.

Instead I expect EV sales growth to be lower than S&P seems to suggest-- largely because we're finally reaching the point where it's obvious only a very few companies are serious about increasing the supply of them- and even they have certain constraints around pricing and battery sourcing.



BTW for a contrasting prediction on growth-

Ford halves 2024 electric F-150 production plans on slowing demand

Ford is cutting 2024 production goals in half for its F-150 Lightning EV pickup truck on slowing demand for battery-powered models. Read on.

financialpost.com

They cite UBS predicting 2024 US BEV growth at only 11% (and I'd expect most of that to be Tesla- but that won't get you remotely near 700k extra sales)

Here we go:

China Giga-Factory is now running at 1M vehicles per year. The first million cars took 2.5 years to produce, the next million took one year. Presumably they are not sitting on their collective laurels and will be improving on that:

Tesla highlights Giga Shanghai automation and production cycle time

At Tesla's Gigafactory in Shanghai, China, the use of automation has helped the automaker reach impressive production cycle times, as...

www.teslarati.com

Joe Tegtmeyer reports: Model Y production ramp is starting to hit another gear and within this quarter should roughly double production capability. This would be a run rate of roughly 10K per week from last spring’s record 5K per week peak. This is related to the line upgrades in September and added production and assembly capabilities added over the past 6 months. Cybertruck production is expected to ramp faster than the original Model Y ramp at Giga Texas. This is experience, Giga Texas at a more mature state overall, and is related to ongoing efforts to increase the speed of the line from what it is now ~25% to closer to 100% by the start of 2nd Qtr.

Giga Texas & Joe's Last Chance Garage Videos | Patreon

creating Videos of Giga Texas Construction and Joe's Last Chance

www.patreon.com

Model 3 Highland sighted at Fremont, with U.S. production underway and release imminent:

Tesla has a small fleet of updated Model 3s at Fremont Factory

Tesla has a small fleet of the updated "Highland" Model 3 at the Fremont Factory, according to a recent flyover of the plant by a notable drone operator.

www.teslarati.com

There was 57% growth in Europe in 2023. I don't know what the German word for Laurels is, but if I had to guess, I'd think maybe there wasn't one, because that crew in Grunheide isn't going to be resting on them in 2024. Watch what happens when the weather there gets above freezing!

Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

Because "secured" is a term of art in SEC land, implying various conditions have been met (like a signed contract). Elon was likely unaware of those technicalities when he posted, using "secured" as an ordinary English word. In any case, he could have easily gotten the money from several...

teslamotorsclub.com

Always skate to the where the puck is going to be, not where it is now, especially when Tesla is shooting the puck...

Enjoy, I'll check back with you in one year on that 2.5M production number that you don't think Tesla is going to make.

RT

 

[Artful Dodger]

There's been a lot of talk here recently about the negative PR campaign targeting Elon Musk and Tesla. I think this is largely a misnomer simply because Elon is doing fine, and Telsa is the first across the start line in this regatta for world-wide EV dominance.

No, the actual target of this PR trolling campaign is Retail investors with the goal of separating them from their TSLA catch. We saw just such an example today from the mercurial "Tesla Economist" (and quintessential emotional retail investor) :

Woahbuoy, where to start? Every SINGLE buoy he claims as evidence is INCORRECT:

• Gen 3 was NOT pushed back since Tesla never announced a start date. Who'd you get that from? And was he wearing a pink bunny suit?
• Tesla Energy ramp is exactly on schedule, where'd you get 'failed'? (The DRUGS you need are available in sickbay, not just on the docks)
• 4680s ARE ramping. 4 lines operational at Giga Texas by mid-year, 8 lines by E0Y. Or did you mean overnight, tonight only, 'cuz that's when your margin call is due?
• "FSD solved this year" is NOT the condition necessary for the Market to place value on it, progress is. Yet your value is zero because it won't save you from your Options blunder?
• Margins, price cuts, COGS on an early ramp product like CT are just handwaving, Tesla is profitable and growing more so, while growing the business. That's PROGRESS.

Recall, it was just a year ago on December 27, 2022 when Tesla Economist was margin called on certain speculative options contracts he purchased, losing over $10M of his own money (and a few more Million$ for family members). This.guy.does.not.learn. At least, wait for the Earnings call on Jan 24 and Elon's Company talk after the release of the 10-K before spouting your jibberish. Whinging about informtion that is not available right now is yet another indicator of his emotional affective disorder when it comes to investment decisions.

Folks, Options Market Makers know your positions because brokers share information below deck. Collectively, they know who is vulnerable, and when to strike. Don't play their game. You may be the lucky 1-in-100 retail options traders who makes money short-term, but if you do please don't encourage the other 99% to bet-and-lose just so you can continue your personal winning streak. Consider that your turn to lose is coming, and that your luck is going to run out (statistically). You are running between the raindrops when you speculate in Options.

I don't play options (never have). There may be some good reason to purchase put contracts to secure the capital you need to withdraw over the next year or two, but otherwise puts are mainly used by Options MMs to create synthetic short shares. The house always wins, and Options MMs run a crooked game: They can see all your cards. (they know your entire position, they know your cash balance, they know your margin limits, and can change that limit whenever it suits them). It's dead reckoning for them to harvest the maximum no. of retail investors in the same bottom-trawling net)

A Better Strategy? Buy-right'n'Hold-tight. Four years ago, I did a projection for TSLA's share price going forward through 2030 based on Tesla guidance of 50% CAGR. The predicted SP for Dec 31, 2023 was $238.49 (that's not a misprint). At the time Tesla's 10-yr historic CAGR was 57.1% (my bull-case scenario). If I didn't watch mainstream Tesla news and did nothing but check the SP once per year, I'd be thrilled with the results:

Instead, negative PR campaigns target emotional investors like Tesla Economist, urging them to sell the best equity investment of the century because he doesn't have enough info... Twice. Got news for you, Tesla Economist: you do have enough info; but you engage in self-denial about your approach to investing. A sure way to be taken in by the sharks.

Investor: Know Thy Self.

P.S. Below 40 degrees, there is no Law. Below 50 degrees, there is no God.

 

[scaesare]

I am honestly surprised that people are expecting, or wanting, a traditional company & CEO after all this time...

For a "car comapny" Elon has thought differently about:

- What makes an electric car desirable (style performance)
- How to design, build, and market that electric car (pack design, motor/inverter/compute)
- What autonomous driving brings to the table (not needed for a car, but first mover $advantage$ to perfecting is huge)
- The value of massive vertical integration (controls costs, reduces risk, controls capability)
- Radical new approaches to manufacturing (gigacasting. steel bending, etc..)
- The value of agile process and continual improvement (not stuck in model yrs)
- The best way to part ways from traditional auto-driving companies and forge new ground (bye bye mobile eye and NVIDIA)
- The value fully instrumented computer-integrated vehicles brings to the table (massive data collection for improvement/training)
- The value of fully connected and remotely updatable vehicles (no need for dealers visits for fixes/recalls... regular new features)
- The value of integrated software platforms (you control it all, not beholden to OEMs that don't interoperate well)
- The vaule of software expertise (can update/fix in hours, seamless operations)
- The value of energy storage (commercial/utility scale, home, superchargers)
- The value of utility platforms (auto bidder, provide utility scale value)
- How to build next gen cells (form factor, volumetric efficiency, tabless for heat reduction)
- The value of next-gen cell manufaturing (dry electrode reduces footprint, energy usage)
- The value of solar generation (signifacnt player in growing industry, radical new residential approach)
- The value of in-house metallurgy expertise (allows megacasting)
- The value of rapidly building out a massive charging network (they own it, ease of use, best-in class, generates income)
- The value of allowing open/free access to intellectual property (NACS being a standard cements them as primary mover)
- The value of rapid development pace (a non-moat differantiator)
- The value of AGI (applicable to far beyond car: optimus, AI)
- Unique approaches to accomplishing AGI (training sets, neural networks)
-The value of a humanoid robot (potentially massive for commercial use, valuable even if used primarily internally)
- The need for custom actuator design expertise (robotic capability/integration not otherwise possible)
- The need/value for custom silicon/ASICs (compact, power efficient, major compute power)
- The value of massive compute for training (large traditional AI cluster, DOJO)
- The value of design your own custom compute hardware (DOJO compute customHW design)
- ... (and no doubt many more...)


Are all fully baked yet? No. But does anybody think you'd have gotten a fraction of these without Elon? This isn't a car company. Heck, it's not like any company. It's a shell for Elon's grandiose vision for making the world a better place. Along with his other companies. He's outright said that if you want the typical company (stock) performance, sell. Now. I agree.

I want him driving at all costs. I bought several years ago (wish I bought stock instead of the car in 2013, but I got in about 5 yrs later). I could not care less about whatever has folks all up in arms. Just execute... on the long haul scale.

Everything else, including many posts here, is just short term noise.

 

[The Accountant]

Reviewed the numbers . . . listened to the call . . .read comments on this forum . . . digested the situation.
My inner voice right now:

1. Stock was at $100 a year ago and I survived.
2. Tesla took price cuts in 2023 and spent $9B on CAPEX and still generated $4.4B in Free Cash Flow (Cash is now at $29B)
3. In 2024, Tesla can still take some price cuts, spend $10B-$12B in CAPEX and still land at about $30B+ cash on hand.
4. The Balance Sheet is pristine . . .$29B in cash and 44m (not B) in recourse debt.
5. There is enough cash to execute the Strategy (actually more than enough). Enough cash for Gen3, Optimus, FSD, Mexico, Megapack factories, 4680, etc.
6. With the exception of BYD, the competition is falling further behind and in some cases have waved the white flag.
7. Things are good; patience is my friend.

 

[Krugerrand]

I believe a lot of long term holders will be throwing in the towel today, finally.

I believe that you have no idea what you’re talking about. But hey, define ‘a lot’ for us. What percentage of long term holders are throwing in the towel today?


Let me make a short list of what this long term holder has held through. Excuse any incorrect order of events. It’s been 12 years so my memory isn’t always on its game.

• Model S was vaporware
• 3 top executives left/got fired
• The first Model S caught on fire
• Broder ran out of charge 5 yards from a SuperCharger and announced it to the world
• 83,000 more disasters
• 20B was the ‘estimated’ cost for a battery factory - oh, the jokers!
• Brexit 50% haircut event - how much did your options make you those two days?
• Brexit 100% hair replacement event - how much you make on the way back up just a week later?
• More C-suites out the door like Blankenship, Jerome, Field, eventually JB
• That one Q1, you know the one I’m talking about because you made fistfuls of dough
• All the county meetings, the courtroom dealings surrounding opening showrooms in various states that didn’t go so well - those were the days, huh? Tesla couldn’t even participate in the big Michigan car show back then. Against the law. Imagine that money making opportunity. Oh, wait. You were there. Good play.
• Solar City, woohoo! A lot of us banked money on that event
• Production Hell and the 9 circles, the latter seeming to be perpetual
• Investor Day 1 - that landed on deaf ears just as you knew it would
• 83,000 more critics, criticisms, and disasters - isn’t Tesla bankrupt yet?
• Layoffs - was it twice or thrice?
• They’ll need a Chinese partner for that Shanghai plant, I promise you.
• The entire Covid fiasco in BOTH directions. Why aren’t you the richest man in the world by this point? Why didn’t you put all your wealth on the line in both directions instead of playing with the money in your piggybank? I mean, remember that one day where the SP dropped - help me out @Artful Dodger - was it 30%? $900-$600? or something.
• 83,000 other opportunities
• X and the subsequent dive to, what was is it? $104
• The ride back to almost $300 - how many millions did you clear on that options elevator ride?
• CT production begins and what a flop that vehicle is
• Another 83,000 opportunities in the happening

After all those events, literally hundreds I didn’t mention specifically, Tesla has been guided, structured, and positioned to withstand whatever barrage of bull the crooks and liars of the world have and will continue to throw at it. It has withstood all the macro economical upheaval, and will continue to withstand future macro economical upheaval.

Anyone who can’t see that, doesn’t understand the financials, or is subject to the opinions and whims of the crooks and liars is free to cash out.

This long term holder, however, will not be manipulated by the bandits. I will not believe the liars. I will not be pulled into the social media, political et al cesspool. And I will continue to hold my TSLA shares until such times as I require cash to live my life. So as you’re calculating the number of long term holders throwing the towel today, be sure to stroke my name off the list.