Moderators' Choice: Posts of Particular Merit

[StealthP3D]

Top negative arguments when speaking to german peers on tesla are build quality and service -

OK, then, I see Germans read the mainstream media too. How many articles do they write on bad service at legacy Dealerships and state it as if it were a known fact? Why don't the horror stories that happen every day at big tire chain stores, oil change chains, Nissan, Volvo, VW, GM, Ford, et al, make the news? I feel the last place we should be re-propagating media bias is right here on TMC.

Those of you who know me know that I'm an investor that measures investment opportunities on long-term fundamental metrics using risk/reward analysis. That means this is an issue that I think goes right to the heart of an investment in TSLA. I can't just look the other way once it is claimed this threatens the success of Tesla. It needs to be addressed but it pains me to see how people are analyzing it in a woefully inadequate manner. It requires rigorous analysis and that is not what it is getting from the media or, sadly, from the Tesla community. This is a very fundamental topic to an investment in TSLA.

You will also remember in 2019 how the media was endlessly stating as a fact that the competition was coming, and it was going to be fierce. Also, that Tesla had a demand problem and was on the verge of bankruptcy. I was constantly saying there was no demand problem as far as the eye can see. Yet, in 2019, people didn't know what to believe because the media voices were so loud and so adamant that this was a problem. People thought Tesla actually did have a demand problem for their electric cars. It was stated as a fact many times that after the "Tesla fan bois" had bought, demand would fall off a cliff. Alternatively, when the tax credits ended, no one would buy a Tesla. Yet they presented no data to support these claims - it was supposed to be self-evident.

Now that it's obvious those were false claims, now that Tesla is selling every car they can make for as far as the eye can see, they have switched to something harder to debunk - that Tesla has a terrible service network, worse than the ICE service network. It's a nightmare that is threatening to bring Tesla down. Yet, these conclusions are stated as a fact without adequate data, without random sampling and mostly using antidotal evidence of poor Tesla service experiences without supplying data comparing it to the ICE service experience. This matters because consumers have an alternative to Tesla, namely ICE.

Rather than employing the same error of analysis using antidotal examples by saying I have had X number of Tesla service experiences and they all ranged from good to excellent while my ICE service experiences range from fairly good all the way down to infuriatingly terrible, I suggest investors need to use more rigorous, more creative thinking. I think the most obvious thing that points towards a possible error in analysis is the simple fact that Tesla still wins the highest ratings in consumer satisfaction and "likely to re-purchase the same brand" metrics. Any thinking person has to question this when trying to analyze the accuracy of the claim that Tesla's terrible service threatens to bring Tesla down. Why do these two metrics remain at the very top of all auto brands every year?

The "service issue is a problem" needs to be analyzed in a competent manner which means avoiding the temptation of using media reports of antidotal incidents and applying them to the general population of Tesla owners. First principles thinking must be used which means any analysis must use random sampling of comprehensive data in a rigorous way. This data is hard to come by so the FUDsters have a productive method of attack here and I can see that it is effective, even on some loyal, die-hard Tesla owners. But Tesla has the necessary data and they address this very issue on just about every earnings call. Please listen for this on today's call and realize that Tesla is watching and reacting to this data so they can grow the organization in a smart, capital efficient manner.

built quality everyone thinks will be adressed by made in germany this year - but service is still bad, you can watch KnowYouKnow video on details -

No, you can't watch NowYouKnow video for the details because that segment is awfully light on details and facts, it's complete psuedo-science the way they use made up numbers and 'facts', combined with antidotal evidence, to try to prove their point. They honestly are embarrassingly incompetent when it comes to comparing ICE service to Tesla. I get it, they have some bad service centers in Massachusetts. That needs to be fixed. But to interpret the media FUD through that local Massachusetts lens and apply it to Tesla's entire service organization is embarrassingly amateurish. Because they really don't know what the rate of bad service is across Tesla's service network and how it compares to all ICE service experiences, although they act like they do know.

Look, Zach and Jesse are good guys, and they are on Tesla's side, but that doesn't mean they are not making a major blunder of gigantic proportions here. I quit watching them for the most part over a year ago due to my observation that they did not use rigorous analysis of the topics covered, and this is one more glaring example of that. Data matters and it must be used properly to draw valid conclusions from it. Zach and Jesse butchered it.

As an investor one needs to constantly guard against faulty analysis because that almost always leads to poor performance. I recommend a quick glance at this to refresh just some of the issues with the NowYouKnow analysis:

Faulty generalization - Wikipedia

en.wikipedia.org

 

[Sancho]

Please stop trying to correlate daily and weekly moves of the SP to actual fundamentals, product announcements, earnings releases, etc. TSLA is now the largest casino on the planet. An unprecedented amount of options entices vast amounts of speculative behavior on both the long and short sides. Anyone placing a short term bet on TSLA is gambling, period.

But step back just a little, and there really is an investment opportunity underpinning all this gambling. Over the past several years, TSLA SP has been steadily rising as profits rise. Based solely on projected auto sales, the SP should be considerably higher a year from now. If not, the PE ratio will be completely out of whack with profit growth.

On the flip side, please also stop trying to correlate the SP to advances or delays in future products. FSD, Cybertruck, the "25k car", Optimus Bot. None of this matters to the SP, since nobody can put an immediate value on any of it! It's super interesting stuff, but as investors we need to focus on what the profits will be this time next year. When one of these products can be confidently projected to make near term profits, then we can discuss them from an investment perspective.

 

[petit_bateau]

My take on the call aspects FWIW as I've yet to crunch the numbers.

I get the feeling they've learnt to finish the design-for-production stage of the products that are in the launch queue (Semi, CT, Roadster) and the on-ramp (X, structural Y) and reworking the production-engineering of the existing products to cope with chip shortages (3, Y) and taking advantage of opportunities that arise (prismatic LFP) before putting the mass design team onto new auto-products.

That gives Berlin and Fremont time to get ramped with the Y (and the 4680), and for Shanghai to get the next one (or two) GA lines running. I see no reason why those (plus 500k/yr from Fremont) won't be doing 3m/yr of 3/Y in a couple of years, 2024.

That gives time to design-in more margin in both Semi and CT. Low volume Semi delivery/testing-with-customer for a "not-a-launch soft-launch" in 2022 is what I think we will see, with the real launch being 2023 when a production transition takes place from hand-build at Reno-Sparks to a line-build in Austin.

At the moment those new auto-products are (in Elon's head at least) Robotaxi. But as reality intrudes - and it will intrude because large teams of people in China and Europe will speak their minds - then a 2/Z and a van will go into the product mix. They won't necessarily be called that, and the 2 might not be $25k, and the van may have a Robotaxi derivative. But they'll come.

(As an aside - I think Elon's thinking is flawed and I think it is that way because his life-experiences are not representative of a lot of the world (just imho) but he also knows when to listen to others and change his mind. I also think that + a certain US-centricism is what causes the related persistent refusal to understand the question re 'lifetime' etc FSD.).

But those new auto-products won't really go into the large headcount design queue until Semi and CT are entering proper production.

Optimus and FSD and the related Dojo are a different type of design problem than the automotive one, so whilst they may be taking Elon's attention they are not distracting from the main automotive thrust. I like very much 60,000 FSD-beta users now, that shows good scaling in the learning cycle.

Energy is not doing so well, likely deliberately given some of the snippets of info they divulged. We now know that this will migrate to iron, though it was interesting that the term LFP was almost studiously over-obviously avoided which was interesting (so, is it or is it not, to be prismatic LFP ?). But we also know that Tesla is saying it has not been battery constrained in 2021, and won't be battery constrained in 2022 and 2023*. Chips on the other hand were stated as a constraint, right across the board, and both logic and power. This suggests - and was partly confirmed in the call - that wherever there was a choice between energy storage getting a chip, and automotive getting a chip, then auto won. That in my mind was the right call for the time being. The indications are that in late 2022 the storage side will start to accelerate, and 2023 should show a step-change in growth rate. And that in turn has been the pacing constraint on solar as no point doing lossy solar installs unless one can co-sell the Powerwall. So take the time to (continue to) refine the domestic-end S&M processes.

* But come 2023 the 4680 lines need to be cranking as that is where the supplier factory roadmaps run out of capacity. And both Semi and CT will swallow large amounts of battery. So real good to hear that the 4680 is in some sort of production now, though there was a certain coyness and precision selectivity about the words that got used.

They seem to have done a 360 on more factories in the last year. Back up a quarter or two and they were downplaying future factories. Now they are back on the table. My guess is the logistics team is proving the case with facts, and now there is communal headspace to accept the implication. Personally I think they will ultimately try to ramp Shanghai, Berlin, Austin to each be 4m/yr automotive production in the long term. But that will not solve South America or India, and there may be other geographies where the opportunity-condition is sufficient (NE-US/Can, India, etc). So I expect two factories to get the go-ahead end-2022 or early-2023 with aim for 2024 production. My hunch is Brazil is a near-cert, pos starting with elements of CKD on 3/Y and Semi. Where the second site might be I am less sure on, likely it will depend on whether India accepts reality (100% Tesla ownership) and that is a very political matter within India. Or someplace else. But no question, the senior team have now accepted the logic+facts and so those sites will come - and that tells me that in time the same logic+facts will get accepted and the 2/Z and van will also come.

Where Optimus and DoJo and FSD get to and how fast they get there, and the extent to which they do or do not enable Robotaxi is as clear as mud to me. I think they are the right and logical thing to pursue, necessary even. I get the implications (though I disagree with Elon on aspects of Robotaxi). And I'm glad to see Tesla doing it. But I don't rely on near-term value.

Insurance is coming. I regard that as a short-term enabler that potentially unlocks the key to a wider Tesla Finance offering. But again trivial intrinsic value right now.

Service is now paying its own way. That means it will get more respect. That is enough for the time being.

I like the way the HVAC question was handled. Respectfully, with recognition that it was natural, but definitely not high on the Tesla priority yet. And so if someone else wants to go for it then they are more than welcome. This is our common mission after all. That was a very mature answer and it was a collective answer which also said a lot.

I'm puzzled about how they will transition Berlin to a front-cast Y. That is about the only thing I saw that looked like a dead-end, so maybe there are some misunderstood facts. Is Berlin perhaps using pressed fronts from elsewhere to go with 2170s in the ramp stage, then switching across to 4680 and cast fronts when its own battery line comes onstream. Or what ?

 

[Gigapress]

Recap:

1) Backing out the $700M of one-time items, we see that the underlying OpEx has stayed at about $1.5B per quarter for the 5th qtr in a row. Pure operating leverage continues.

2) Gross margins slightly improved despite cost pressures of raw materials, commodities and logistics. Price increases still mostly haven't hit yet, either.

3) HVAC plans fully confirmed.

4) Shanghai and Fremont alone could increase output 50% in 2022. Operated at less than capacity in 2021 solely due to supply chain constraints.

5) Global inventory down to 4 days' worth of sales. Tesla still moving closer to earning title of world's undisputed greatest Just-in-Time manufacturer.

6) Insurance feedback loop causing substantially safer driving behavior while saving money for customers, as hoped.

7) Optimus robot for factory usage confirmed.

8) 4680 structural pack Ys ship to customers in Q1.

9) Elon maintains monomaniacal focus on Tesla AI endeavors as the priority. Despite the fact that this plan is obviously logical from a financial and mission standpoint, it's causing much consternation on Wall Street.

10) Overwhelming order backlog makes production volume increases for 2022 take priority over new models.

On Monday, I'll be taking out more margin debt for LEAPs. How the market has concluded that Tesla is worth 30% less than a month ago is completely beyond my understanding.

"There should no longer be doubt about the viability and profitability of electric vehicles."

Love,
Gigapress

 

[StealthP3D]

Today made no sense.

I cannot for one moment be convinced by ANYONE that this price action was sensible, especially against a macro backdrop which wasn't a disaster.

This was absolutely, 100% against reason. Literally doesn't make ANY logical sense at all. Vulcans would be going nuts right now.

4680s are real and coming soon, record everything, huge outlook. Even a price target hike today. This almost feels like Wall Street is doing something contradictory and coordinated to scare retails out of shares. Maybe there's another big leg up coming?

I remember an earnings call a year or two ago where there was a big non macro-related TSLA drop despite nothing but good news coming out of the call. It was 100% against logic for a few days, then once the hoes in Wall Street repositioned themselves, we were off to the races.

I can only believe that's what is happening here. Is *EVERYONE* really this stupid? I mean really?

Here's what happened:

Yes, traditional money on Wall Street, funds, money managers, etc. think in a very formal, regimented, restricted manner. I call it stupid although they are not really stupid (but that is essentially how it plays out in situations like these). They have to model the most likely earnings looking forward to assign value to the shares today. They cannot model things that don't fit their model. That means any talk of humanoid robots they don't know what to do with. Any talk of FSD, they cannot put in their spreadsheet. How do you model "nutty"? But the worst part is, once Elon said the economy car was not being worked on and the Cybertruck has a somewhat nebulous timeline, they can't model revenues for those things either. And they can't understand that the market has huge ability to absorb far more Model 3's and Model Y's than current sales/production. So they can't model that many of each car model because that would make both of them the best-selling cars, period. Gas or electric Yet EV's are only 6% of global sales. They can't compute this. They think Tesla needs more car models to distribute the volume of sales Tesla is forecasting because that's how the auto industry works.

That means TSLA ownership is only for those who "get it". Meanwhile Tesla will continue to build production capacity which will result in quarter after quarter of record sales. As the new factories ramp into efficient production their margins will be crazy high because they didn't spend a bunch of money spreading their production around more models than necessary. He even told us the 4680 cells are ramping up as we speak, both in-house and at partner factories, and it flew right over the heads of those who sold/decided not to buy. Remember, it's all about the batteries.

I can't say how long it will take for the price to recover, but eventually reality will start to sink in and the price will get bid back up. My feeling is Elon purposefully disenfranchised anyone too idiotic to see what is happening right before their eyes. He really doesn't give a flying frack because he doesn't want to work for people like that (yes, he works for shareholders). He knows he is going to make a lot of people very wealthy and he thinks it's better if it goes to the kind of people he likes rather than those he despises. The beauty of all this is it didn't require anything but pure honesty from Elon. Sure, he might have hammed it up a little bit but essentially, he was giving us the straight scoop on how nutty the profits are going to be and giving the finger to those he doesn't like.

But that's not all. Elon works his magic by taking actions that solve multiple things at once. And a low share price is good for Tesla's next phase of expansion in terms of attracting talent. Elon doesn't give all this much thought because he's a visionary. He just sees the future he wants to create and takes steps that sets big things in motion, that pushes towards the desired outcome. It's not a cold, calculated, if A, then B. This is what vision is and he doesn't fret over the details. He doesn't see this in words in his mind, it happens in cascades of visions. It's the source of his particular form of magic. It's not really magic but the superior results he delivers can make it look like magic to someone who doesn't understand how he can accomplish so much, how things seem to go his way an inordinate amount of the time.

A conventionally thinking CEO judges they did a good job on a conference call if the share price rises during and after the call. Higher share price is good, right? Success! Elon takes a bigger view. He did well on the call if he sets off a chain of events that allows greater success down the road. He needs to get the dominoes lined up. Because he knows true success is not a high share price. True success is hard. It's the success that made that high share price possible and we are still in the early stages. I'm sure there is a lot more depth to his vision than I'm even aware of. He's probably killing 3 or 4 birds with one stone, Part of it might simply be because it's more fun being CEO of Tesla when he can draw out the doubters and naysayers and them give them a good slapping. He's not worried because he knows the share price will eventually take care of itself.

It's not the first time he's done this. Those who like non-volatile stocks or need some handholding on future projections can shop elsewhere, for everyone else, it's a buying opportunity. This is why I focus on the company's execution rather the share price.

 

[The Accountant]

I can't say how long it will take for the price to recover, but eventually reality will start to sink in and the price will get bid back up. My feeling is Elon purposefully disenfranchised anyone too idiotic to see what is happening right before their eyes. He really doesn't give a flying frack because he doesn't want to work for people like that (yes, he works for shareholders). He knows he is going to make a lot of people very wealthy and he thinks it's better if it goes to the kind of people he likes rather than those he despises. The beauty of all this is it didn't require anything but pure honesty from Elon. Sure, he might have hammed it up a little bit but essentially, he was giving us the straight scoop on how nutty the profits are going to be and giving the finger to those he doesn't like.

Confession
I'll use a paragraph of your very good post to make a confession.

When the Cybertruck was revealed in Nov 2019, I was sick to my stomach watching it. I was angry at Elon for messing with my investment dollars.
The next day when the stock dropped 6%, my anger grew.
But then something changed. As I started to read and listen to different perspectives, I began to see what Elon saw all along. The Cybertruck was a game-changer . . . .and this is why I had originally invested in Tesla . . .not a "me too" company, but a Disruptor. Others started to see this too and the stock recovered (and of course has continued higher).

Now to the earnings call Wednesday. This was suppose to be a blow out quarter. I was hoping the earnings call would go the way of Nadella's Microsoft call where the stock rose during the call. . . .and then we got humanoid bots, you don't understand the value of FSD, no new products this year, etc.
I was once again angry at Elon. And when the stock dropped the next day by 12%, my anger grew.

Now that I have read and listened to other perspectives, just like with the Cybertruck reveal, my anger has gone away and I am now more bullish then ever.

Optimus: My CEO Still Has the Innovation Mojo
I learned from the call that an Optimus product launch may be sooner than I had thought. In my financial models I would have put the the launch of an AI product (other than FSD) in years 8-10. The emphasis on Optimus during the call demonstrated to me Elon's commitment to this and I now believe that a product will be revealed closer to the 4-5 year portion of my model than the 8-10 years. This is a new revenue stream with a lower reliance on battery supply than the Auto and Energy business. Now I can finally see how revenues can continue to grow 50% or higher out in years 5,6, 7.

A Focus on Execution
Extraordinary 2022 Financial Results are a certainty. Elon and Zach revealed that Shanghai and Fremont can provide 50% growth. That's 1.4m cars.
With Berlin/Austin, we can get to 1.65m . .that's 76% growth. And with no distraction from Cybertruck/Semi, the Austin ramp will surprise the most bullish investors. I had $14 non-GAAP EPS for 2022 but we can perhaps see $16 in 2022 (vs $6.78 in 2021)

FSD - Elon Wouldn't Shut Up About It
There was something different about this. This was not just Elon over-promising as in the past; we heard Elon frustrated that analysts did not understand the breakthrough and value arriving. Elon has more information on FSD than we; he sees what we can't. My gut tells me that some autonomy skeptics will start to believe in autonomy this year.

I'm feeling better today - the stock will recover and move higher . . . be patient.

 

[SN_8]

OT: Can anyone comment on whether this is a legit and productive charity? If so, wouldn't mind tossing my hat into the ring.

Vendor - Win your own custom Tesla and fund the fight for climate action!

By: Climate XChange Research and Education Tesla reported record annual profit for 2021, further solidifying their status as an industry leader. This comes on the heels of record-breaking Q3 earnings, which outperformed revenue and delivery estimates. The automaker continues to thrive...

teslamotorsclub.com

 

[ChefBoyardee]

Some thoughts on earnings & Tesla's future:

Conference call:

Initially, the focus on Optimus and FSD made me uneasy because it sounded like Elon was putting a lot of eggs in one basket with his reply to the analyst regarding FSD unlocking demand. But after thinking about it, it seems more likely that Elon sees the EV business's success as unstoppable now, so he shifted his focus to the next "master plan", as a visionary leader should. He's working on adding multiple new S curves that will start showing results before the EV S curve starts decelerating. And we all know how singularly focused he gets when he's working on something, which comes through in his narrative during the call. What people don't understand is Tesla is much more than Elon now, and even if Elon is focused on the far future, there are tons of super talented employees and execs that are focused on growing the EV business.

Regarding demand / no new models in 2022, I don't think that is actually about relying on FSD to create demand. Likely, they're seeing the EV adoption trend being much stronger than they anticipated, meaning Model 3 and Y can continue to be supply constrained until at least 2024. I'm sure they've timed it so Cybertruck lands at the right time to continue the >50% growth, and are refining the design of the truck and production lines now to make sure production goes smoothly when they need it.

The next few years: EV

• I see the delay of new models as very bullish. 2022 is going to be extremely smooth sailing with increasing margins and lower risk. They're emphasizing a high-margin product that they already know how to build and will focus their efforts on making production even more efficient and cost-effective.
• The price increases from last year are starting to take effect, at a time when supply issues & cost of materials should start to improve. We'll see increased revenue and potentially lower costs this year.
• The chip shortage seems to be easing. This should allow Tesla to produce more with the same footprint, leading to higher production and better margins.
• Batteries are no longer a constraint. This should allow them to ramp the energy business.
• 4680's are starting to go into vehicles. As this ramps, margins should improve
• Analysts started to understand Tesla last year as production ramped, they became profitable, and there was a solid roadmap of new vehicles. This all clicks with a typical auto analyst. This year, I think we'll again be in a situation where analysts greatly underestimate Tesla, since they're creating a new path forward with fewer models and riding the non-intuitive EV adoption S Curve. This has never been done, so each quarter, analysts will be shocked at how they're pulling it off.

2025 - 2030: FSD

• Cybertruck and Semi will have launched, potentially also a smaller hatchback or something, and rather than continue to launch new models, I think Tesla will use this period of time to further ramp up their strategy of 1 product in every segment. Think iPhone lineup, not android.
• FSD will launch but will have gradual adoption as regulations change, people warm up to it, and the software gets better. I'm guessing 2025 for a first launch and 2030 for wide adoption & Robotaxis.
• Production and cost of goods will be refined to the point where Tesla has insane margins and production rate
• Energy will be a huge focus.
• Optimus will start being used at Tesla factories to help with growth (less hiring needed) and reduce costs even further
• Legacy auto shrinks, spins off their EV businesses, or goes bankrupt. The major players are Tesla, China, and a few others

2030 - 2050: Optimus

• Auto industry becomes unrecognizable with Robotaxis dominating the space. Competition arrives but Tesla maintains the lead
• Tesla's EV business becomes more of a recurring revenue & services model
• Tesla is by far the largest company by market cap
• Optimus becomes the major story for Tesla, providing the next leg of growth. It starts as a factory bot for other companies to rent and eventually enters the consumer space
• FSD and Optimus kept Elon working at Tesla for longer than EV alone could, and now he finally retires once Optimus's success is solidified

2050+: Who cares, we're all old and rich

• It doesn't matter that Tesla investors are all millionaires & billionaires because money becomes less important as society changes from a work-to-survive model to work-for-fun now that robots handle the majority of basic jobs

Obviously, nobody can predict that far in the future, but my main takeaway is rather than 2030 being the target and the TAM being auto & energy, we're really looking at a 30+ year growth story with absolutely ridiculous potential. Excuse me while I search my couch.

 

[ZeApelido]

Nobody supports the idea that humanoid robots are around the corner. NOBODY. I am not arguing on the NN side of things. I am sure on the synthesis of mechanical & NN side of things. The thing that makes a human so neat just from a science pov. So lets look at it from an investor POV. Could you put any value today?

The goal of the society that promotes humanoid robotics is to be there by 2040 and to have robots play world class soccer by 2050. Literally not a single researcher on the planet thinks it will be there by 202X. None. It's not that I had to do much searching to confirm that since I last looked at it all things have continued at the same pace they had been, which is good solid progress, year by year with thousands of researchers across the world contributing. Korea to Japan to Germany to USA. I do not see Tesla having any special competency and as an investor Eyes Wide Open. A lot of people have been working on this for decades. The fundamental science and research is not held by tesla, it was not discovered by tesla and Tesla won't own any specific competency there.

So, my phd was in dynamic modeling of humanoids (more for trying to mimic humans than making robots) so I have some experience and opinions for why Tesla is well suited here:

1. The historical fundamental research will not matter much.

The history is based on developing the "equations of motion" that prescribe the state of a robot which is very complicated math. Basically a whole lot of equations / matrix math that tells you what joint torques to apply to keep the robot balanced given any state of positioning and velocity of movement. Except they are very hard to get working well because the real world is different from the simulated world and it is very hard to model correct the interaction forces with the ground and other objects.

Enter neural nets. Much like classic computer vision techniques fell aside to deep learning CV, much of the classical control of robots will give in to deep learning. And all those ressearchers will not be happy about that.

There are two many variabilities and complexities in actually robot dynamics vs what classical modeling can do, and way toward superior robust performance of control logic is going to be through statistical learning.

Guess which companies are going to have the resources for provide the best chance for advancement in statistical learning for robots? The big tech companies, Tesla, Facebook, Google.


2. Hardware advantage

The cost advantage Tesla will create is obvious vs any robotics startup or any other tech company. What about sensors and performance? Well batteries and computer brain - advantage Tesla. Engineering to minimize latency between limb sensors and 'brain' - advantage Tesla. Does someone have some novel pressure / tactile sensor that is superior and game changer? Tesla just buys them.

3. Data

Kind of similar to FSD though not as much, superior robotic performance will happen when there is a fleet of child robots are deployed in some capacity, fail, and have that data transmitted back to a server for enhance learning. Update firmware until they become teenagers, etc... This sort of robotic learning at a fleet level isn't done yet, because no one had the capabiilty to do all the pieces. Ahem.


The hubris of the robotics community will not stop Tesla from succeeding. They have all the pieces.

Instead of asking the inverse, I would ask "Where does Tesla not have an advantage in modern day robotics"?

 

[Sancho]

Every time the SP goes down a bunch, the conspiracy theories start flying here. Can we agree on one thing: anyone threatened by Tesla (Big Oil, Legacy Auto, etc) is not going to attack Tesla via its SP. That would be very expensive, and for absolutely no benefit. Tesla is self-funding its operations now and into the future, it's not going to the markets to raise money. It doesn't do that many acquisitions-for-stock. Tesla's success or failure at this point has nothing to do with whether the SP at the end of the year is 2000 or 500!

The mainstream media may have ownership and advertising conflicts that could distort its coverage, but the far simpler explanation for its negative coverage is that it thrives on eyeballs, and stories about recalls and crashes and fires attract eyeballs.

Who is left to be manipulating the markets: traders! Retail and institutional, big and small. Short and long. Do they conspire? Not in the sense of getting together in a back room, but traders certainly have a herd mentality, and many are looking at the exact same price movements and TA to make their own moves. Short traders will take any opportunity to drive the SP down, and they live for the days when there is enough fear in the market (or fear about Tesla) that their momentary push down of the SP causes a calvacade of selling. On days when that isn't working, they will do everything they can to cap moves higher. Meanwhile. long traders are doing the opposite, making trades to set floors and looking for opportunities to trigger a steep march.

TSLA, with an enormous global investor interest both for common equity and options, and a high growth stock with a high PE, is the wet dream of traders.

Do most of these traders care about Tesla, the company? Not one iota! For all they care, Tesla could be in the toilet paper business! Most short traders aren't trying to hurt the company, just the SP!

How about TMC posters? I'd divide us into three camps. A minority of us are primarily traders. (Good luck to you, but you really should be doing something more useful to society than trading.) The largest group of us are the folks who mostly invest long term, but we can't resist the occasional short term trade. I fall in this category, and I'd really appreciate professional therapy to stop myself from doing any short term trading, because it seldom ends well, and is bad for my digestive system. And then there are the folks here who just invest for the long term. God bless their resistance to temptation. None of these trader shenanigans makes the slightest difference to them. But even for this blessed group, it's hard not to feel bad when the paper value of your account goes into the toilet, and you may even get angry and start looking for villains to blame.

And so, another 16,000 pages of this thread will continue to demonize "them", when in fact, the problem is us. Stop trading, Stop worrying. Be more like Elon: do something productive, and invest in the future of innovation.

 

[petit_bateau]

This is a rerun of last year when I analysed the 2020 and 2019 EV numbers, most of which was in this post although I also did some further battery analysis in another post. Anyway here is this year’s offering as an analysis of the 2021 numbers.

(for last year, see at Moderators' Choice: Posts of Particular Merit)

My methodology this year has been much the same. The sources are similar – the public versions of EV Sales, Adamas, plus lots of Google, etc. I now have about 80 line items I’m tracking, much more than in any single one of those public sources.

Accuracy is always debatable in exercises of this nature, if only because some manufacturers are remarkably reluctant to disclose their sales with Stellantis being the worst offender (who knew they made EVs ?) but Nissan/Renault/Mitsubishi and Porsche also being in the naughty corner. This clearly bedevils the efforts of EV Sales and Adamas as much as for my effort. Also be wary of any year-to-year comparisons regarding Stellantis (PSA+FCA) as my database switches abruptly from Peugot to Stellantis, undeservedly flattering their performance.

By way of accuracy comparison I calculate battery deployment of 270.8 GWh whereas Adamas calculates 286.2 GWh, so my total is 5.4% short of Adamas’ total. Similarly I calculate a total Tesla vehicle sales revenue of $46.0bn whereas Tesla reported a total sales revenue of $47.2bn, so my total is short by 2.6%. That seems a reasonable error bar for my purposes.

The per-model line items are crunched into three tables by manufacturer group. This is the one for BEV+PHEV and I have a similar table for BEV-only and PHEV-only.

The Covid-19 pandemic may have curtailed global light vehicle production, but it has not held back rapidly increasing electric vehicle manufacturing. In all BEV + PHEV are now 8% of world light vehicle production, with the growth rate at over 100% per year !

We should expect a post-Covid rebound in vehicle sales that will help ICE. But I think 2023/2024 may prove to be the highest that ICE will rebound to, and that by 2025 swinging cuts will take place in ICE sales. In retrospect peak-ICE was probably 2017 with 95m ICE out of 97m light vehicle sales.

Breaking this down into manageable chunks we get the following picture. The massive apparent growth in Stellantis is not real as it was represented by Peugot only in previous years.

The tier from 6-10 are BMW, Hyundai/Kia, Renault/Nissan/Mitsubishi, Mercedes, and Volvo.



Amazing as it may seem Tesla are very slightly slipping behind the general market growth. If one takes the information in these three tables :

And plots it into these three stacked column charts, then one can see that on each observable metric Tesla have slowly given ground. What these do not show of course is the profitability picture for the other manufacturers, which may be a different picture. Also we do not know what will happen in the years ahead.

The growth in BEV numbers is generally skewed towards the cheaper end of the market, whist the growth in PHEV numbers is generally skewed towards the more expensive end of the market. These stacked column charts tentatively suggest that PHEV may have reached a maximum share of the market in 2020.

Certainly the battery size in a typical BEV is growing as the mid-range offerings get filled in. With the 3/Y Tesla has moved into the upper end of the mid-market, and the lower-cost manufacturers are pushing upwards slightly from the bottom end. The more difficult task is for the legacy premium brands who are increasingly having to position their PHEV offerings against (primarily) Tesla’s BEV offering, and being squeezed by regulators forcing larger batteries onto them.

In the top 5 the legacy volume manufacturer who is making that transition successfully at present is VAG which is growing on par with Tesla. In the Chinese manufacturers the breadth of BYD’s offering is working, and the SAIC performance is driven largely by the Wuling HongGuang Mini EV that it would be unwise to sneer at. Stellantis are very coy with their numbers, indicating that things are not going as well as one might hope.

The mid tier of positions 6-10 (i.e. BMW, Hyundai/Kia, Renault/Nissan/Mitsubishi, Mercedes, and Volvo) are all making credible progress but are losing ground on those in the top five, and also when compared to the hordes in 11+ . The notable exception is Nissan/Renault/Mitsubishi who are not transitioning anywhere near as fast as is required. Last year VAG emptied the market of cells to the detriment of the bottom end (11+) who lost 3.5GWh of cells, but this year they have really taken those cells back, and some more, to the tune of 42 GWh that have pretty much all gone in BEVs rather than PHEVs. Does anyone make any attempt to compete with a cheap PHEV against the low-end BEVs – I think not ?

Toyota, Ford, GM, Honda are all showing very few signs of getting it, at least if one goes by the observable metrics.

Tesla remains in a class of its own when compared to the three closest competitors of VAG, SAIC, and BYD, however each is competing very strongly in its own way and in time all four will inevitably address the same segments. Tesla cannot afford to be complacent. BMW, Volvo, and Hyundai/Kia are all three seeking to be Tesla-equivalent brand positions, though personally I don’t think they have the scale to be profitable in that objective.

Now, let’s see how quickly Tesla can get Austin and Berlin ramping, and bring on those further lines in Shanghai. It would be nice if Tesla could become the pacesetter again.

PS. By the way, I also do a daily energy news cuttings post at Energy Sector News - all welcome.

 

[petit_bateau]

This is a rerun of last year when I analysed the 2020 and 2019 EV numbers, most of which was in this post although I also did some further battery analysis in another post. Anyway here is this year’s offering as an analysis of the 2021 numbers.

(for last year, see at Moderators' Choice: Posts of Particular Merit)

My methodology this year has been much the same. The sources are similar – the public versions of EV Sales, Adamas, plus lots of Google, etc. I now have about 80 line items I’m tracking, much more than in any single one of those public sources.

PS. By the way, I also do a daily energy news cuttings post at Energy Sector News - all welcome.

Following on from yesterday, and just as with last year here is the further battery analysis. I can't find last year's post so I'll put up that chart below as well. Something to note is that the Adamas figures for EV battery utilisation are for BEV + PHEV + HEV, and so one must subtract out the cell utilisation in the HEV category. That is one of the reasons my numbers are slightly different than the Adamas numbers.

In 2021 my estimation is that 269.3 GWh went into BEV + PHEV, by comparison with 113.2 GWh in 2020. A 138% growth, not shabby. Since the number of vehicles grew by 108% the average battery pack size in a vehicle is increasing. This is most notable in the mid-range.

and last year the split was approximately as follows:

I seem to recollect that last year I did these Navajo blanket charts from the other perspective, i.e. that of the battery manufacturer. I'll have a dig around and see if I can find that again, no promises.

 

[adiggs]

I like reading about folks here who think that Tesla's brand is immune to how the wider population perceives Elon. I suspect that it is true that the majority of people don't engage in the noise of social media. But I worry.

I personally find I have to more and more couch my (endless) Tesla promotion as 'Yes Elon is unhinged at times but the cars are great.' I hate that. If you listen to any long form interview with him his humanity comes through in spades but on twitter...oh boy. As a shareholder and Canadian I would prefer he not comment on our politics (even if I agreed with it). I would be shocked if he had the bandwidth to understand the nuance of what was happening up here so he could tweet an informed thought. Today's tweet was absurd.

My current thesis (which affects my investment thesis) is, he does pay significant attention to the FUD and people trying to bring him down. And he reacts. I worry those reactions are not helping his his causes. Reading just a little of Twiiter comments will derange anyone. As we have all said you get the whole package of Elon but the Elon of 2015 is not the Elon of 2022 and I think the negativity is getting to him. We shall see. I actually think this is not off topic.

Here's an idea that might help.

When I'm talking to people and they're telling me all the way that they can't invest in Tesla because Elon (does this, does that, unhinged, ...), I tell them that Elon is a package deal. You can't break it up. He is what he is, and that includes Tweets that will make you cringe, and apparent foot in mouth disease that he can't shake.

You also get somebody with a funny sense of time - he makes short term predictions that almost never come true, that lead to long term capabilities that are unthinkable and generally considered undoable. I call it Elon Time.

And he does the undoable over, and over, and over again. He is (my humble opinion) the human being on the planet doing the most for climate change. I grant others may arise in conversation and might even push him down to top 10. The point is he's moving the needle on climate change to the degree that anyone is, rather than talking about it and telling people what they ought to do.


I like the package and I invest in it, knowing that I'll get some bogus short term predictions, as well saying stuff that'll piss a lot of people off aka foot-in-mouth-disease. If you don't like the package then don't invest in Elon.

You might evaluate Tesla as a business on its own, apply an Elon discount (rather than the bonus I apply), and see if that company is worth investing in. It could happen.

 

[The Accountant]

Most On Wall Street Can't Comprehend What Tesla Has Managed To Pull Off

I posted these graphs several weeks ago demonstrating Tesla's impressive 5 year Operating Margin % Growth.

As I delved into the GM and Ford 10Ks, I realized that the Tesla story was much more impressive than my graphs had conveyed.
GM & Ford's Operating Margin gains have come mainly from their financing arms (see boxes in yellow).
When you isolate the Auto Operating Margins, GM's margins over the past 3 years have been flat in the 3%-4% range while Ford has not made money on its auto business.

Meanwhile, Tesla OpInc Margin in 2021 was 13% for Auto. The number is likely higher than 13% as I did not allocate any SG&A costs to Energy.
Note: The Services revenues and costs are included in Auto.

Some additional facts & thoughts to compliment these findings:

• Tesla achieved the 13% margin in 2021 with slightly under 1m deliveries while GM delivered 6m and Ford 4m.
• Having higher OpInc margins with fewer deliveries indicates that Tesla's business is less complex, more streamlined with a lean operating structure.
• The 13% for Tesla in 2021 was for the full year. Tesla achieved Auto Operating Margins of 16.5% in both Q3 and Q4. I expect to see at least 18% for Tesla in 2022.
• These operating margins help to understand the decision to focus on Model 3/Y for 2022 and delay the Semi and CT . . .don't screw up the money printing machine !!
• Model 3 & Y 2021 price increases surfacing in 2022 with continued cost reductions will further improve margins despite the Berlin/Austin ramps.
• GM/Ford and other OEMs will see increasing Operating Margin pressures as they pivot from ICE to EV and when their Financing Margins come back down.
• When supply issues subside, I expect Tesla Energy to return to Operating Income profitability . . .I expect it to be this year.

 

[Discoducky]

Hey thanks, actually I'm curious how Elon runs his not closely held projects. For closely held projects, it's clear he's super involved in directly leading the project and making design/engineering decisions and problem-solving. But how about all the other areas of the company?

Here's a bit of info to hopefully help craft questions...

From my experience working with him, he is still very involved, but more of an engineering manager level giving guidance rather than discrete direction, but it is the same principles being applied. I got to see this first hand with the engineering builds of Model X where he was very involved in AP, obviously, pretty much everyday, but for other things like body controls, seats, software UI, etc it was more of a strong weekly guidance. As an example when the seats started to become an issue he dove in basically took over for a few months (ugh, I was in the room when an engineer was fired...sucked), but he took a step back from AP during that time as he simply didn't have enough time and I was hitting my targets. Another example was when Model X was running heavy and needed to loose about ~40lbs to hit range targets, he again dove in and took over hearing daily about how every single part could potentially be re-engineered to loose weight.

Another example you might be interested in that even when for closely held projects, he doesn't dive into every last detail, except when he doesn't grasp the lowest level of detail and it interests him for some reason. He sat in on a code review for critical safety of pedal monitor as he couldn't understand why the coding was taking so long. It went well and he was gracious to my engineer who handled it amazingly well.

 

[jbcarioca]

The Harley-Davidson plan (as announced) is not encompassed by my understanding of the word "spin-off". It's completely different thing. The new company will still be owned 74% by H-D and HOG shareholders get no separate stake in the EV division. Essentially, H-D is capitalizing their EV division by selling some of it off. Shareholders actually end up with less interest in the EV portion of the business than they do now. But that's considered fair because the division has more cash with which to use for R&D. It's considered that shareholders have traded some of the EV division for cash and the SPAC shareholders have taken over that interest. That's how the deal is described in a nutshell in the press release.


.

FWIW close analogies are possibly beginning to be popular. Geely now have done that with Volvo and are now doing it with Polestar. Both are explicitly to raise money to advance the transition to pure EV production. Considering the huge capex needed to accomplish that this is a logical step for them, in my opinion.

Tesla is unique as the only OEM to have both huge free cash flow and an entirely EV+renewables business model. Despite a massive growth rate they need no capital injections. Over and over we discuss this amazing reality. Understandably the broader world cannot imagine how this can happen. The relentless pursuit of reduced: 1) production cost, 2) distribution cost, 3) service and warranty cost simply is not conceivable to most legacy OEM manufacturers and their support structure. Above all, apart from Ferrari nobody else has a cash conversion cycle that resembles magic.

So, the legacy makers with some brains are quite aware that they really cannot pull of this transition with business as usual, although they still try. In a bizarre was it is reminiscent of a slightly paraphrased quotation ascribed to the late H. Milk "We know we cannot do it, but that does not keep us from trying". It is exactly that which makes the more thoughtful people try to separate EVs from their other businesses.

That it is Geely, Harley Davidson that can do that is part of the virtue of smaller size and close control.
Little by little other niche solutions are happening, notably the unusual ceding of Bugatti with Rimac;

Rimac CEO on Porsche-Bugatti Deal: ‘I Am Not Somebody to Play It Safe’

At the brink of massive responsibility, Mate Rimac talks taking risks and coming from behind.

www.bloomberg.com

So, yes, "completely different thing". 2022 will continue to be a very interesting year.

 

[aznt1217]

Been a hot minute since I've been on this thread. Let's think about the fundamental story of Tesla:

Tesla Specific (short term)
- Achieving 50% growth this year is possible without Austin or Berlin
- Austin and Berlin are soon to be "officially" online, while Shanghai is increasing capacity (all incremental growth)
- The Chip shortage backdrop and supply chain issues will resolve this year (probably late Q2/early Q3) while Tesla already navigated and got more efficient with the issues last year. This implies that when the environment normalizes Tesla is positioned to do business more efficiently
- Similar story above applies to Tesla Energy while still not a "meaningful" part of the business I believe this will be a trojan horse and be the next phase of growth. There is something to be said about having your residence powered 100% off the sun and having backup that requires little to no maintenance. Once this lever is pulled when supply catches up with demand, Tesla Energy will grow a ton

Tesla Specific (medium to long)
- Product roadmap - there's a lot of BS about how the 25k car project is shelved. Nothing could be further from the truth. The Tesla design team in Shanghai is hiring like gangbusters specifically for this design. Why Shanghai you may wonder? Well most of the luxury car manufacturers have design teams in Shanghai and compact cars are incredibly popular in Asia so... who better to design in than the ones who use it most. The only other variables outside of design to make this thing profitable is powertrain and cell capacity. By the time this thing is ready (2 years hopefully), it'll be made profitably and there will be enough cell capacity to support the demand
- Cybertruck - it's coming whether you like it or not and it will coincide with the timing of the other manfacturers to have a meaningful impact. Right now the only one worth their weight is Rivian in terms of production ramp. In addition, I'm fairly certain there's so many orders the first year or year and a half of production is probably sold through. Cash in the bank
- Halo Car - Roadster 2023 will be important to reinvigorate the brand and take the crown again from whoever is king next year (chances are a RiMac Nevera), more of a flex but also free advertising without paying for it
- Tesla Energy - I think the deployments will really continue to grow and all the associated technology with it will lead to an influx of high margin sales. Battery + Solar Panels/Roof. If Tesla indeed decides to scale up their Heat Pumps in their vehicles to home. You have a one stop shop for Home Energy and HVAC needs. On top of this Autobidder is really promising software in commercial applications
- Tesla Fleet/Semi - Fleet sales are going to be increasingly important. This helps Tesla in advertising and conversion of "visiting customers" to real customers. Hertz is just the beginning
- Volume growth - Installed capacity and more gigafactories will ultimately get Tesla to the 30m cars a year mark by the end of the decade. Each Gigafactory rollout has been physically faster. The only roadblocks are regulatory
- FSD/AI/Tesla bot - This is longish term but man when it comes it's going to be a doozy. Tesla has all the pieces but just needs time to improve and get everything together

So why am I reiterating the above. Well it's because if you look at the overall markets you'd think the world is burning and you see some of your major Tesla bulls becoming super deflated
- Russia invading and trying to take Crimea (they've attempted this in 2014), money talks all else walks. They can only keep this up for so long and Russia's main ally in China isn't stupid enough to enter WW3
- Rates are rising. Pretty sure this is priced in and the Fed continues to monitor data if there's a drastic rise to stave off inflation it will stay for a long while. If there's a "step up" rate which chances are what would happen it's not the end of the world

The above are the 2 main variables that are affecting TSLA. It's giving cold feet to institutional investors paired with lack of a bulleted clear plan from Tesla on product road map/achieving volume growth (IMO rightfully so because they should be able to see it) is causing this massive compression in price. On the retail side we're seeing absolute near 2013/14 levels of FUD but the goal posts have moved from demand to supply to FSD/false promises. Meanwhile Tesla is a cash cow with the capability of hypergrowth. This is like AAPL when the iPhone came out. Everybody was focused on the hardware while for much of the decade Apple built the eco system of multiple cash cows using the iPhone as a gateway drug. At the end of the day is Tesla worth 1T at the bare minimum. IMO absolutely but right now there's too much FUD to see it.

Anyway not financial advice and disclosure : I'm 110% into TSLA with my recent margin positions bleeding. Invest knowing your risk tolerance. I hope this post helps. I'm not worried in the short run and I do agree with Gary Black on Twitter where TSLA can hit valuations without FSD and just on pure growth alone in the EV Market which will organically grow significantly and Tesla is positioned Geographically and capacity wise to take advantage of it.

 

[Gigapress]

Rising Rates: An Advantage for Tesla​

Why The Noose is Tightening around Competition

Reasons:​

1. Ultra-Low Inventory
2. Crazy Cheap & Fast Factory Construction
3. R&D Frugality
4. Trillion-Dollar Market Cap

The fundamental business model for a manufacturing company is one of high capital costs, low variable costs, and mass production. The success of this business model heavily depends on high production volume, reasonably strong gross margins, and acceptable cost of capital. So what happens when a manufacturing market that--except for a single dominant firm--already faces declining production volume, declining gross margins (prior to COVID restricting supply temporarily and driving prices higher), onerous debt loads, and massive investment needs looming, suddenly faces higher interest rates too?

"You never know who's swimming naked until the tide goes out." - Warren Buffett


-------------------------------------------------------------------------------------------------------------
This is not financial advice and I'm not a professional financial advisor, but it is my real opinion.

1. Ultra-Low Inventory​

Spoiler

See my prior post for more details on Tesla's incredible inventory situation. Here, I want to highlight the parts relevant to interest rates: speed and deleting the warehouse from the factory design.

Speed of Inventory Turnover
Velocity of the value conversion from supply chain purchasing to final sale makes Tesla disproportionally less vulnerable to interest rate increases than competitors because they turn over cash more quickly. Read here on why Cash Conversion Cycle matters.

In one extreme, if Tesla's cost of capital were at 0% annual interest, then carrying excess inventory would not have any opportunity cost of capital. Basically, they would not have any interest cost from lag time between paying for supplies and earning revenue from the customer at final sale time. This is similar to how a retail store has to pay to purchase each item in their stock well before a customer actually pays for it. The retail industry pays close attention to their average cash conversion cycle time because in their industry it's crucial because they are primarily inventory management specialists.

In the real world where interest is greater than zero, inventory does carry this cost in direct proportion to the price of buying the inventory. Thus Tesla, by carrying drastically less inventory across the whole value chain than competitors carry, economically gains a competitive advantage from an interest rate increase. Plus, as Elon has mentioned on multiple investor conference calls, the faster Tesla grows volume the better their capital efficiency, because typically they have contracts with suppliers providing 90-days to pay for orders. Explosive growth basically means that interest rates are even less relevant to inventory carrying costs for Tesla.

How big is this advantage? Bear in mind, this value chain analysis includes dealership inventory because Tesla handles its own distribution and marketing. and this is a big portion of the overall economics. According to the 2021 mid-year report of the National Automotive Dealer's Association (NADA) , in the USA alone dealership new car inventory was 1.4 million vehicles, or roughly $56 billion worth at $40k average selling price with their typical 0% margin on the primary sale. The NADA data shows this is 28 days of inventory. And this is actually a record low; normally they carry triple this amount. For them, this decline in inventory is severely hurting their customer satisfaction due to often not having in stock what a given customer wants. Plus, people feel like they're being unjustly price gouged. In contrast, according to the Q4 report, Tesla has only 4 days worth of sales in inventory these days. Tesla wins by 7 times! But wait! That's counting all of Tesla's inventory including cars in transit to the customers, while the 28 days of sales is just for dealership inventory. So really, on inventory carried relative to their sales volume, Tesla is probably winning by a full order of magnitude.

From an economic theory standpoint, in an efficient market it doesn't matter whether the inventory sits on the balance sheet of Ford or their independent dealers, because this cost and risk is already accounted for in negotiation of terms and prices between the two parties and the ownership rights are mostly just nominal without any real influence on the final outcome. The real world isn't this idealized but it's close enough to being true for this rough analysis.

Bottom Line: Tesla's direct-to-consumer online ordering sales system approach shines more when interest rates rise.

The Best Warehouse is No Warehouse
As discussed in my inventory post linked above, Tesla's amazing inventory management also mitigates the harm of rate raises because it means their business model eliminates the typical capital costs of a factory warehouse and its associated land and equipment.

It's one less thing they need to spend money on up front that isn't directly part of the cost of producing a car.

2. Crazy Cheap & Fast Factory Construction

Spoiler

As all of us here know, Tesla has proven capable of building massive, cutting-edge, efficient factories for just a few billion dollars apiece for each million units' worth of annual production capacity. And they do it so quickly that it takes less than two years for the investment to start paying big dividends.

Combining these two factors yields incredible financial returns. Ron Baron, billionaire TSLA investor, estimated a couple years ago based on Baron Capital's research that the first-phase construction of Giga Shanghai was so cheap that it gave an effective 250% annual ROI (not a typo: 250%). Who even cares about interest rates at that point? Subtracting a couple percentage points from a 250% annual return is absolutely negligible. When your business shows such ludicrous profitability on core operations, you're too busy swimming in your profits and trying to scale faster to give a crap about the vicissitudes of the larger finance world.

In contrast, consider the impact this has on the financially endangered Lagacy Auto companies. They need to make enormous investments in retooling for EVs with economics that were already challenging back when borrowing rates were still at rock bottom; they were already going to be straining to get a decent return on these investments. The problem is, they all scoffed at EVs for so long and took so long to get started that now they have to sloppily rush into it having no idea what they're doing. Projects like Ford's planned new Blue Oval EV complex or Volkswagen's overhaul of their Wolfsburg plant are much more exquisitely sensitive to the cost of capital than anything in Tesla's car division. Suppose for the sake of argument that they were originally expecting an 8% annual ROI. If their capital costs then increase by 3%, then their actual ROI would drop to 8 - 3 = 5% per year equivalent. That's huge. Over 20 years, 5% annual returns gives a 170% ROI, whereas 8% gives a 370% ROI. That's just one scenario but it serves to demonstrate how much a tightening global money supply can crush the economic performance of weak investments while ultra-strong investments don't even flinch.

3. R&D Frugality

Spoiler

Tesla has ridiculously efficient research and development operations. Sandy Munro once said that Tesla has "Navy SEAL engineers". They are elite, they are motivated and they work like dogs to move mountains with small teams. They only spent $2.6 billion in R&D in all of 2021.

Let that sink in. All the technological advancement of this entire enterprise last year cost a grand total of $2.6 billion. That tiny budget supports a diverse and outrageously audacious technology development portfolio including, but far from limited to:

• Autonomous driving
• Dojo
• FSD computer V4
• Manufacturing continuous improvement (thousands of little optimizations)
• Megapacks
• HVAC (vehicles and buildings)
• Lean construction
• Autobidder
• Solar roof
• Active safety vehicle crash safety software based on simulations, data from massive fleet learning, and OTA updates
• 4680 batteries
• Gigacasting (partnered with IDRA)
• Cybertruck
• Semi
• Superchargers
• Motors
• Mining
• Recycling

How the f#$% is this even real? There aren't enough superlatives to describe this. Tesla doesn't even crack the top 50 in the global R&D spending ranking, yet they are the most spectacularly productive technology lab in the whole world. Once I found an early Tesla business strategy executive slide deck from circa-2006 that said "Second place should need a telescope to see us." Well, they did it.

This also illustrates how much they truly have integrated innovation and continuous improvement into operations instead of outsourcing it all to external support groups. It also illustrates the advantage of being able to essentially pool resources with SpaceX.

Bringing this back to interest rates, we can see that just like with gigafactory construction, Tesla's return on investment on R&D spending is so spectacular that rising rates won't make any dent in the returns. Meanwhile, companies like VW Group that spend $15 billion per year for barely any results will see their R&D ROI wither on the vine, unless they step up their game fast enough.

4. Trillion-dollar Market Cap

Spoiler

A higher market valuation of TSLA equity opens up multiple avenues for cheaper cash acquisition if needed. Notably, they can do an equity offering with less dilution for existing shareholders. You know what's even better? If I remember correctly, in the past Tesla's announcement of an equity sale has actually resulted in an increase in the stock price, implying a cost of capital so low it's sometimes negative.

No other competitor has this. If they need cash, they have to sell equity at a low price to unenthusiastic investors or bite the cost of loans/bonds at higher interest rates than last year.

 

[jbcarioca]

Well, no, we can't. That's because we don't know the extent to which Market Makers have hedged their positions at any strike price, or at what level of loss they are willing to step in. It's further made difficult because we don't have realtime data for Open Interest (always at least 1 day stale), and we NEVER get final Open Interest data for the actual day of contract expiry (can't model w/o data).

Then, even if you could, MMs are only 1 of at least 6 different groups playing tug-of-war with the SP.

TL;dr. No we can't settle this debate, and the rules are written by the owners of this casino.

HODL.

Just for a tiny clarification: "...the rules are written by the owners of this casino" is not exactly correct. Casinos are regulated in nearly every jurisdiction, nearly all have minimum payout rules for applicable games and maximum takes for others. The securities rules, in the US, are written by the participants and are deeply obscured and undisclosed, mostly. Thus the securities game is far riskier than casino poker, say, o even slot machines. In the securities game the actual fees are NEVER disclosed to retail purchasers. In casinos they always are disclosed.

FWIW, by bizarre coincidence one of my colleagues worked with me on the operating system integration of a huge Wall Street firm forced takeover in the 2008 affair. He subsequently led an operating system update for a major US Casino operator. From my discussions with him it was obvious that casino systems were clear, fairly simple, fully disclosed and reported to regulators through exacting audits by multiple parties. By contrast the major securities firms have no reporting required in multiple areas, and long time delays in others. There are always substantial areas undisclosed which include multiple fees and operating payments.
It is only through my associate's dual experiences that the scope of all this became clear. Clear because the securities version is deeply opaque. Further, the term 'owners' itself is a bit too specific, since even that has some significant ambiguities. The wiki explains DTCC without explaining anything, NOT an accident:
Depository Trust & Clearing Corporation - Wikipedia. Among the cleverest non-informational information is found here:

Compliance at DTCC

DTCC is firmly committed to preserving the safety and soundness of its operations and protecting its reputation in the global financial community.

www.dtcc.com

To be clear: my personal experience dated from the 1973 establishment of DTC, which obviated the courier industry. Multilateral meeting was the largest challenge then so the NSSC in 1976. It was those two and their implementation that ended out facilitating much of the nefarious activity because almost every State regulation was eliminated when these two central organizations were created. They now gradually has grown to encompass most global securities trading. In turn two products: Global Custody and Global Master Trust acted to further insulate securities transactions from much significant regulatory oversight. I worked very naively on both of those, at one time visiting more than 100 countries within a four month period to help establish comprehensive coverage.

Nearly everyone I ever encountered was very well informed operationally and totally ignorant of the implications. That applied to me. Bluntly, I finally connected the dots in 2008, when I worked on a number of the major deals. I felt angered and ashamed because it was so entirely obvious that very, very few people had any idea what the were doing. As I have said repeatedly that included Nobel Prize winners.

People who play in the securities market on buy and hold unless a major defect happens to the issuer of the securities usually do well.
Mutual funds, derivatives regardless of type, or dealing with non-member brokers nearly always lose, often after a short period of huge gains. Common stocks that have high volatility are guaranteed to harm anyone who does not buy and hold. The system has been carefully designed to strip active traders from their wealth as soon as possible. Mutual funds are designed to do that with a slightly higher degree of finesse.

Diversification is a good thing, but I only works when the investor knows exactly what each portfolio item represents. Warren Buffet, vilified by some because he avoided technology because he did not understand it, has had a wise and durable policy never to buy something he did not understand. That is always wise.

Buying TSLA for many, perhaps most, of us I very prudent because we all know the company, its' warts and risks. In my own portfolio I do have multiple investments. Every one I watch closely. One major one I sold last year when top management changed. If material negative events happen to TSLA I would sell also. As always the major problem is to know what is material and what is a transitory setback. Sound investment si hard work. Ben Graham was really correct. The fact is that the knowledge one needs to do value investing today is different than it was for him. Today information access makes value investing much harder work because it is so much easier to find both value and anti-value and so much more difficult to understand which is which.

In our parochial terms:
Tesla vs Fisker, Workhorse or Rivian. CATL vs LG, Panasonic, Northvolt or SK. How about BYD? There are so many others, but most of our time and effort is spent on legacy ICE, nearly all of which will gradually or quickly diminish in relevance. So , short the sure losers? No, not a chance for me, anyway. Those legacy ones have deep and lucrative ties to the same people who 'own' the securities industry. Thus, they'll worker continuing government bailouts with soft landings because that si what they always, always do. They aren't about to lose their profits. They will let the stopped shells fail, or those who don't play by their 'rules'.
For reference look at Lehman Brothers; Bear, Stearns; AIG, LTCM. Those were all highly profitable, highly visible and too arrogant to the wrong people so that were annihilated. That pattern repeats with every crisis. They'll not be too upset to see Stellantis go, although Italy and France may win the day for them. Ford and GM will have the Bank of America, Wachovia, or Merrill Lynch solution in one version or another.

As investors we really need to avoid becoming collateral damage. Never, ever engage in leveraged transactions in a rising interest rate environment. NEVER.

OK, my disclosure: That's what I do. It is not advice because I have no license to offer advice. To be explicit: I now have exactly zero debt. Thus, I resemble pretty much the Tesla posture, maintain positive cash flow, as positive as possible. Take no new debt that is not easily paid by current assets. Each or my personal equity investments has a similar policy.

 

[heltok]

Regarding Andrej, he is awesome and a magnet for talent. But he is not the head of autopilot/Autonomy, that’s Ashok:

1:05:00

I’ll bump my old post:

https://www.linkedin.com/in/eashokkumar
Leading the autonomy software team for the Tesla Autopilot.

My team's main focus areas are:
- Creation of large scale automatic ground truth pipelines to train neural networks with massive amounts of diverse, high-quality data. Use this fleet-learning approach to replace potentially brittle run-time algorithms with robust learned models.
- Developing an accurate and detailed geometric and semantic understanding of the world using the best of both machine-learned and engineered models.
- Building robust, causal, predictive models for other agents in both geometry and semantic state spaces.
- Decision making, motion planning, and control modules using state-of-the-art AI techniques including methods for high-dimensional search, trajectory optimization, reinforcement learning, model-predictive control, etc.

Another important leader:

https://twitter.com/x/status/1413894389299023874

https://www.linkedin.com/in/milankovac/en
Both a manager and a technical contributor, I've brought up Tesla's successive Autopilot HW2 and HW3 generations of computers and software stacks, integrated them across all Tesla vehicle types and pushed them all the way to mass-production. I've been regularly shipping software updates to hundreds of thousands of vehicles across the world, including compute optimizations, new features, and system stability fixes.

I've been scaling Tesla Autopilot's software- and hardware-in-the-loop continuous integration infrastructure, and developed productivity tools to accelerate our R&D team's development cycles towards full-autonomy.

I currently report directly to Tesla CEO.

In particular, I currently lead:
- Overall System Software & middleware (C/C++ middleware, IPC, process scheduling, Logging, Watchdog, ...)
- Computer Vision system software (GPU kernels for post-processing, Neural Network integration, C++ Compute Graph Framework for efficient compute scheduling across multiple devices)
- Camera software stack (across all Tesla vehicle types)
- Platform Software (Linux kernel/drivers, security, power, board bring-up)
- Continuous Integration infrastructure (automated & on-demand support of regression tests, performance tests, Simulation tests, with scheduling on either x86 emulation, as well as on true hardware-in-the-loop setups)
- Build System (including remote-caching)
- Performance & optimization (responsible for the Autopilot framerate across all platforms)
- Telemetry (on-vehicle data capture software, and back-end ingestion services)
- Machine Learning infrastructure (training stabilization & scalability, workflow automation)
- Tools (sensor clips visualization, data plotting for logs analysis or live debugging)

(Just copypasted what was written a while ago, might have changed since, maybe the change is of interest)

So basically:
Andrej: Train neural networks
Ashok: Generate dataset for neural networks and do control
Milan: Software 1.0 surrounding software 2.0 to deploy on HW3 and DOJO

EDIT: adding this piece from TheInformation in 2019:

• Guangzhi Cao, who previously worked on iPhone cameras at Apple, develops software to process image data that comes from cameras on Tesla’s cars.
• Frank Havlak is one of the clear leaders of Autopilot. He is in charge of controls, which make sure the vehicle’s steering, braking and acceleration respond correctly to the Autopilot software decisions.
• Ashok Elluswamy, who was trained in robotics and learned about computer vision on the job at Tesla and is now effectively the senior most neural network researcher under Mr. Karpathy. Mr. Elluswamy helped develop the automatic lane change feature for the original launch of Autopilot.
• Mark McClelland works on the path planner, which determines the path the vehicle will travel based on what the Autopilot perception system “sees” on the road. He has been hard at work preparing for the recent update that allows a driver to type an address and let Autopilot take over the driving to follow the navigation instructions when the vehicle is on a highway.
• CJ Moore runs the “integration” team, which acts as the liaison between Autopilot and the rest of Tesla. He makes sure, for instance, that Tesla’s user-interface team, which designs the digital displays of information in the Tesla vehicles, including those about Autopilot, gets the correct measurements from the Autopilot system in real time. He also is responsible for quality control to identify and assign fixes to bugs discovered by the company’s test-track drivers and, later, by “alpha testers,” or real customers who get early access to Autopilot software before updates are pushed to all customers. And those discovered by Mr. Musk, of course.
• Zeljko Popovic, who works for Mr. Bowers, was a liaison between Tesla and Mobileye early in the life of Autlopilot, said a person briefed about it. He recently had been running a team that helped bring together data from cameras, radars and ultrasonics, known as sensor fusion, so that Tesla’s Autopilot software algorithms could use that data and decide how the car should drive.
• Drew Steedly is responsible for “geometric vision and perception.” That means he tries to make sure the sensors are calibrated correctly and provide useful data. Mr. Steedly is based in Seattle, and while the employee list does not reflect it, he appears to be overseeing Mr. Popovic’s work, according to a colleague.