Papafox's Daily TSLA Trading Charts

[Papafox]

@MP3Mike and @Antares Nebula , thank you both for the quick responses with links. I'm going to spend time looking into the battery cell issue and report back.

In even bigger news, Tesla is changing how it sells Model 3. It looks like SR will become a software-limited SR+, leasing is here (but no purchase option), and prices of all cars rise as autopilot is included but not as much as the previous cost of autopilot. There's a lot to digest and the market sometimes is unhappy with lots a quick moves by Tesla, so let's be careful and see what happens tomorrow.
Link to Tesla announcement

 

[Papafox]

There's a lot to wrap your mind around here, folks.
Regarding production issues vs. shortages of Panasonic cells, we may well have seen both issues involved in Q1.

Production bottlenecks: As Neroden pointed out in the main thread, it takes time to switch between European and North American Models (tail lights, charging, etc.), and with many variations of the Model 3, switching between variations was also a challenge.
* Tesla's decision tonight to reduce the variations of Model 3 going forward is likely an acknowledgement of this issue.

Battery cell shortages:
* Panasonic has had difficulties in the past holding onto a sufficient number of employees at GF1 because there are lots of choices of employers in the Reno area, housing is in short supply and expensive, and it's a reasonably long drive from Reno or Sparks to the GF but a short drive to other potential employers.
* If we were seeing an abundance of Tesla Energy products, it would indicate that some of that TE production could be switched over to automotive if it was needed, but many TE battery products are still hard to obtain. Thus, there's likely not many excess cells out there.
* The LR RWD M3 has been taken off the design studio but is still theoretically available for order. If you were trying to produce the most vehicles with a fixed number of cells available, this is the vehicle you would want to de-emphasize or eliminate because it uses the same number of cells as AWD or performance but has lower margins.
* If you were forced to produce fewer LR M3s in order to produce a suitable number of M3s during the quarter because of cell constraints, you would want your SR+ vehicles to be as high margin as possible (required autopilot) and your SR to be de-emphasized or eliminated.
* If cells were limited, you would consider opening up Europe to SR+, which apparently happened this evening.
* Tesla's quote in the Verge article referenced in previous posts says that the company has been able to put to use all the cells that Panasonic creates.

Consider yourself in Elon's shoes and on April 24 you're going to have to answer questions posed by the analysts about a quarter that was a real stinker. You would likely prefer to say this is what went wrong and this is what we have already changed to address the problems. Don't be surprised to see the changes we saw tonight offered as important solutions to Q1 shortcomings in addition to the supplier issues for the European M3s that we've already talked about.

 

[farzyness]

There's a lot to wrap your mind around here, folks.
Regarding production issues vs. shortages of Panasonic cells, we may well have seen both issues involved in Q1.

Production bottlenecks: As Neroden pointed out in the main thread, it takes time to switch between European and North American Models (tail lights, charging, etc.), and with many variations of the Model 3, switching between variations was also a challenge.
* Tesla's decision tonight to reduce the variations of Model 3 going forward is likely an acknowledgement of this issue.

Battery cell shortages:
* Panasonic has had difficulties in the past holding onto a sufficient number of employees at GF1 because there are lots of choices of employers in the Reno area, housing is in short supply and expensive, and it's a reasonably long drive from Reno or Sparks to the GF but a short drive to other potential employers.
* If we were seeing an abundance of Tesla Energy products, it would indicate that some of that TE production could be switched over to automotive if it was needed, but many TE battery products are still hard to obtain. Thus, there's likely not many excess cells out there.
* The LR RWD M3 has been taken off the design studio but is still theoretically available for order. If you were trying to produce the most vehicles with a fixed number of cells available, this is the vehicle you would want to de-emphasize or eliminate because it uses the same number of cells as AWD or performance but has lower margins.
* If you were forced to produce fewer LR M3s in order to produce a suitable number of M3s during the quarter because of cell constraints, you would want your SR+ vehicles to be as high margin as possible (required autopilot) and your SR to be de-emphasized or eliminated.
* If cells were limited, you would consider opening up Europe to SR+, which apparently happened this evening.
* Tesla's quote in the Verge article referenced in previous posts says that the company has been able to put to use all the cells that Panasonic creates.

Consider yourself in Elon's shoes and on April 24 you're going to have to answer questions posed by the analysts about a quarter that was a real stinker. You would likely prefer to say this is what went wrong and this is what we have already changed to address the problems. Don't be surprised to see the changes we saw tonight offered as important solutions to Q1 shortcomings in addition to the supplier issues for the European M3s that we've already talked about.

Great points here Papa - thanks again for the brilliant insight.

 

[mikevbf]

* The LR RWD M3 has been taken off the design studio but is still theoretically available for order. If you were trying to produce the most vehicles with a fixed number of cells available, this is the vehicle you would want to de-emphasize or eliminate because it uses the same number of cells as AWD or performance but has lower margins.
* If you were forced to produce fewer LR M3s in order to produce a suitable number of M3s during the quarter because of cell constraints, you would want your SR+ vehicles to be as high margin as possible (required autopilot) and your SR to be de-emphasized or eliminated.

The Tesla blog entry says they took the SR offline to "minimize complexity" which would be a good reason to take off the long range RWD as well. If Tesla were battery constrained, why would they offer a software limited SR where they have to put just as much cells as they would in the SR+ with the risk that they may never get any return for those extra cells? It would make much more sense to truly have less cells like they did with the midrange if they were truly battery constrained. However, if what Tesla most needed to do was minimize manufacturing complexity, then a software limited SR+ makes complete sense.

From the Tesla Blog:
"Given the popularity of the Standard Plus relative to the Standard, we have made the decision to simplify our production operations to better optimize cost, minimize complexity and streamline operations. As a result, Model 3 Standard will now be a software-limited version of the Standard Plus, and we are taking it off the online ordering menu, which just means that to get it, customers will need to call us or visit any one of the several hundred Tesla stores. Deliveries of Model 3 Standard will begin this weekend.

Its range will be limited by 10%, and several features will be disabled via software (including our onboard music streaming service, navigation with live traffic visualization, and heated seats). Similar to other software-limited vehicles produced in the past, Standard customers will have the option to upgrade to a Standard Plus at any time."

 

[neroden]

Good point, Mike. I think they're engaging in extreme measures (slashing variants) to reduce downtime at Fremont, and we may see more removal of variants. Production hell remains the problem. Since Tesla seems to have practically eliminated leaks from Fremont, we have no clear idea what the production problems actually amount to, and I hope someone asks on the conference call.

 

[bdy0627]

The Tesla blog entry says they took the SR offline to "minimize complexity" which would be a good reason to take off the long range RWD as well. If Tesla were battery constrained, why would they offer a software limited SR where they have to put just as much cells as they would in the SR+ with the risk that they may never get any return for those extra cells? It would make much more sense to truly have less cells like they did with the midrange if they were truly battery constrained. However, if what Tesla most needed to do was minimize manufacturing complexity, then a software limited SR+ makes complete sense.

From the Tesla Blog:
"Given the popularity of the Standard Plus relative to the Standard, we have made the decision to simplify our production operations to better optimize cost, minimize complexity and streamline operations. As a result, Model 3 Standard will now be a software-limited version of the Standard Plus, and we are taking it off the online ordering menu, which just means that to get it, customers will need to call us or visit any one of the several hundred Tesla stores. Deliveries of Model 3 Standard will begin this weekend.

Its range will be limited by 10%, and several features will be disabled via software (including our onboard music streaming service, navigation with live traffic visualization, and heated seats). Similar to other software-limited vehicles produced in the past, Standard customers will have the option to upgrade to a Standard Plus at any time."

That's true unless SR sales are going to be quite limited, as Tesla suggested. They are willing to accept the margin tradeoff for the production efficiency of having 3 instead of 4 batches of trim right now. They have indicated they are currently looking at a very small percentage of SR sales compared with the other 3 major trims. They specifically said SR+ was favored over SR by 6 to 1. That very well may not be the ratio down the road, but it's where Tesla is comfortable with the mix right now. Let's say 42% of their trim mix is SR+, so SR is 7%. If they sell 65,000 model 3s in Q2, that would include 27,300 SR+ and 4,550 SR. Even if margins take a little hit with a software limited SR+, it's less than 5,000 vehicles for the quarter. Sure, they could make a few hundred? more SR if they reduced the cells in the pack for that trim, but the cost to do that in terms of batch production efficiency is not worth it right now. Plus, some of the SR owners may convert to SR+ at some point. Given the apparent difficulties they have had with batch production thus far, this is a tradeoff Tesla is comfortable with right now to drive overall production efficiency. My guess is that this will likely change again over the next 6 months as they fine tune the process, particularly when the SR trim becomes a larger percentage of overall model 3 sales with substantially increased production. That's almost certainly bound to happen but there is no need for it to happen right now.

 

[mikevbf]

That's true unless SR sales are going to be quite limited, as Tesla suggested. They are willing to accept the margin tradeoff for the production efficiency of having 3 instead of 4 batches of trim right now. They have indicated they are currently looking at a very small percentage of SR sales compared with the other 3 major trims. They specifically said SR+ was favored over SR by 6 to 1. That very well may not be the ratio down the road, but it's where Tesla is comfortable with the mix right now. Let's say 42% of their trim mix is SR+, so SR is 7%. If they sell 65,000 model 3s in Q2, that would include 27,300 SR+ and 4,550 SR. Even if margins take a little hit with a software limited SR+, it's less than 5,000 vehicles for the quarter. Sure, they could make a few hundred? more SR if they reduced the cells in the pack for that trim, but the cost to do that in terms of batch production efficiency is not worth it right now. Plus, some of the SR owners may convert to SR+ at some point. Given the apparent difficulties they have had with batch production thus far, this is a tradeoff Tesla is comfortable with right now to drive overall production efficiency. My guess is that this will likely change again over the next 6 months as they fine tune the process, particularly when the SR trim becomes a larger percentage of overall model 3 sales with substantially increased production. That's almost certainly bound to happen but there is no need for it to happen right now.

Well reasoned. My point still is this is not the move of company that is having trouble with access to batteries; it's a move of a company seeking greater manufacturing efficiency. Bottom line, I am more willing to take Tesla for their word in the blog post than attempt to read the tea leaves as regards Tesla's access to batteries.

 

[Papafox]

Well reasoned. My point still is this is not the move of company that is having trouble with access to batteries; it's a move of a company seeking greater manufacturing efficiency. Bottom line, I am more willing to take Tesla for their word in the blog post than attempt to read the tea leaves as regards Tesla's access to batteries.

@mikevbf , my thinking was similar to yours until @MP3Mike and @Antares Nebula sent me The Verge article yesterday that quotes Tesla as saying on Thursday, The supply of batteries made by Panasonic is still the “fundamental constraint” on the production of Tesla products. This statement can be read two ways, ie. a lack of cells constrained Model 3 production last quarter or it could simply mean that Tesla could not produced the desired automotive and TE products, had to choose between them with available cell supply, and therefore demand for Tesla products is not causing Panasonic to produce fewer than desired cells. There's also a middle ground explanation (since cells need to be aged for a while before they are put into the vehicles). The supply of cells may have been lower than desired at some point in the quarter and it exacerbated problems stemming from a parts shortage for European Teslas in January and disruptions to the manufacturing process when switching between variants of M3. Something as simple as an employee shortage at Panasonic could have led to a dip in production. We don't know the reality for sure and this coming ER conference call is so critical in spelling out what the bottlenecks are and what the solutions are. My guess is that the solutions are spelled out in recent M3 variant changes made by Tesla as well as describing steps underway to increase cell production.

Elon is not likely to bring up the topic of demand, but he may mention that two-thirds of competitor luxury sedans are leased and Tesla can no longer turn its back on such a large segment of the market. He would thereby be mentioning the demand response from the move without mentioning whether that move had been necessary in the first place.

 

[mikevbf]

"The supply of batteries made by Panasonic is still the “fundamental constraint” on the production of Tesla products, the company said Thursday."

Lacking context of the above quote makes it very difficult to interpret especially given the provocative tone of the article. If I were to venture a guess the constraint referred less to last quarters performance and more as a future looking statement for the whole year and years to come especially in regards to energy products This interpretation makes more sense when you look back at the Q4 update letter and Q4 conference call.
First, the Q4 update letter:
With a better supply of cells and new manufacturing equipment, we are aiming to more than double energy storage deployments to over 2 GWh in 2019.
Notice this is a prediction for the entire year. It is also worth noting doubling part. Then look what Elon said in context during the conference call:
I mean, our internal projections for stationary storage are closer to 3 gigawatt hours. But some of it is kind of lumpy and may not be completed this year. We would have done more in stationary storage last year except we were cell-starved for vehicle production. So we had to convert a bunch of stationary storage lines, battery lines, to vehicle battery lines.
Notice the "cell starved" quote is about past issues. And "internal projections" is actually even more ambitious than the letter tripling the capacity of last year's energy production. When you have this context, it is reasonable to interpret "fundamental constraint" having to do with energy products because with more cells it seems the sky is the limit in terms of demand. Just adding another viewpoint.

 

[BBone]

There's a lot to wrap your mind around here, folks.
Regarding production issues vs. shortages of Panasonic cells, we may well have seen both issues involved in Q1.

Production bottlenecks: As Neroden pointed out in the main thread, it takes time to switch between European and North American Models (tail lights, charging, etc.), and with many variations of the Model 3, switching between variations was also a challenge.
* Tesla's decision tonight to reduce the variations of Model 3 going forward is likely an acknowledgement of this issue.

Battery cell shortages:
* Panasonic has had difficulties in the past holding onto a sufficient number of employees at GF1 because there are lots of choices of employers in the Reno area, housing is in short supply and expensive, and it's a reasonably long drive from Reno or Sparks to the GF but a short drive to other potential employers.
* If we were seeing an abundance of Tesla Energy products, it would indicate that some of that TE production could be switched over to automotive if it was needed, but many TE battery products are still hard to obtain. Thus, there's likely not many excess cells out there.
* The LR RWD M3 has been taken off the design studio but is still theoretically available for order. If you were trying to produce the most vehicles with a fixed number of cells available, this is the vehicle you would want to de-emphasize or eliminate because it uses the same number of cells as AWD or performance but has lower margins.
* If you were forced to produce fewer LR M3s in order to produce a suitable number of M3s during the quarter because of cell constraints, you would want your SR+ vehicles to be as high margin as possible (required autopilot) and your SR to be de-emphasized or eliminated.
* If cells were limited, you would consider opening up Europe to SR+, which apparently happened this evening.
* Tesla's quote in the Verge article referenced in previous posts says that the company has been able to put to use all the cells that Panasonic creates.

Consider yourself in Elon's shoes and on April 24 you're going to have to answer questions posed by the analysts about a quarter that was a real stinker. You would likely prefer to say this is what went wrong and this is what we have already changed to address the problems. Don't be surprised to see the changes we saw tonight offered as important solutions to Q1 shortcomings in addition to the supplier issues for the European M3s that we've already talked about.

I think you've made some very acute observations here Papafox. If you're not an analyst you surely could have been an excellent one on the Street (I was there briefly on the IB/M&A side)! I particularly liked your insights on the battery constraints being a rationale for opening up SR+ to Euro [I think logic applies to SR+ to China as well]. "* If you were forced to produce fewer LR M3s in order to produce a suitable number of M3s during the quarter because of cell constraints, you would want your SR+ vehicles to be as high margin as possible (required autopilot) and your SR to be de-emphasized or eliminated. * If cells were limited, you would consider opening up Europe to SR+, which apparently happened this evening. "

Again in Elon's shoes what is your goal? More margin less revenue? Less margin as a % but more profit (or fewer losses) overall? I am thinking that possibly some of the changes for pricing, Euro/China SR/SR+, SR offline, may all deal with some of these - for example as you alluded to even if the SR+ may have a smaller price tag and possibly a smaller margin %, they also use a lot fewer batteries than the top end LR models. So if your battery supply is constrained you can make more cars that way. Even with a thinner margin % with SR+ that may translate to more profit overall if they can make up more volume SR+ versus LR for the same supply of batteries. Anyways this is just guessing but there is a logic.

 

[Papafox]

In many ways, today was a good setup for manipulations. Yesterday evening's news about leasing and changes to the Model 3 lineup were still being digested by investors, but small investors apparently approved because of the gains in pre-market trading and enthusiastic buying soon after market open. Because of the ambiguous bear vs bull messages of such a big change, an early run up followed by a dip in the NASDAQ at 10:30am was a perfect opportunity for shorts to add some steroids to the NASDAQ dip and drive TSLA down into the red. Bulls returned, and I see TSLA crossed the red/green line 11 times today as some determined shorts (in my mind) kept a game of Whack-the-Mole going until close. After all, it is easier to keep a stock price level than it is to push it down. Those shorts who sold into new positions toward the top of the 10:30am peak could cover during most of the afternoon at a nice gain. Consequently, there was no need to cover during the final minute of trading, when only 43K shares traded hands.

Consider every day of trading to be a story and the plot the shorts wished to write today was that Tesla had another day of negative trading (even if it was only 72 cents).

I think analysts and investors will need to digest the news over the weekend. Don't be surprised to see a buying spree in the first hour of Monday's market trading, subject to macros, but there's no guarantee it will last.

Macros were up today with the Dow up over 1% and the NASDAQ up 0.46%

In other news, carsonight was providing information on GF1 current cell capacity. He's suggesting that it's 27 GWh when everything is running full speed. As 400k cells/day machines replace 300k cells/day machines, capacity will increase by 10x100k=1000k/day. That's .365 billion cells/year and with each cell holding 18Whs, that's an increase of .365Bx18=6.57GWh/yr increase. Thus 27+6.57= 33.57GWh/yr. when the slower lines are brought up to speed (pretty close to expected 35GWh capacity).

Now, here's an interesting exercise. Take the current 27GWh capacity and divide by 78KWh (the size of LR M3s). You end up with the approximate number of LR M3s that could be built in a year at current capacity. It comes to 346,000 vehicles. Of course more vehicles can be made with that amount of cell production if SRs and SR+s are shipping in volume and overcompensating for 100KWh batteries in Models S and X, and of course Panasonic will be upgrading some or all cell machines during the year. Interestingly, when Adam Jonas of Morgan Stanley downgraded TSLA to $240 recently, he listed his best guess of 2019 Tesla vehicle deliveries as 344,000, just 2K vehicles different from the 27GWh/78KWh/vehicle number. In contrast, Tesla still maintains a 360K-400K target.

Tesla's automation day on April 24 will serve the purpose of showing off the state of Tesla's best hardware when coupled with the best yet-to-be-released software, I suspect. Encouraging analysts to give Tesla monetary recognition for their position in the race to autonomous driving and autonomous rideshare capabilities. One possible additional benefit of making their rideshare plans seem closer to reality would be to attract investors who would be interested in buying large numbers of Model 3s to lease, receiving the tax credits for them, collecting the lease payments, then selling the vehicles back to Tesla at a predetermined value in 3 years. In his interview on AI and autopilot with an MIT researcher, Elon emphasized that Model 3 will be the only vehicle that might actually appreciate in value. I see that statement as an advertisement to pull in moneymen to buy the Model 3s for the leases and allow Tesla to register a sale instead of a lease. We'll see.

Finally, consider that we may hear good news from the SEC vs. Elon case next week. We have an amendment to the U.S. Federal Tax Credit on EV purchases being introduced that would greatly help Tesla sell lots of cars for one year, and the FCA deal in Europe could bring in billions over the coming years. We know the POTUS is no friend to EV manufacturers, but he might tolerate a change to the law that keeps the U.S. from excluding GM and Tesla customers from the credits while rewarding those who buy from foreign companies. There's lots that looks promising on the horizon. Now, let's see about proving there's demand, production capability, and logistics for delivering large numbers of Teslas in Q2 and going forward so that we can get this stock price heading noticeably higher. Have a good weekend.

Conditions:
* Dow up 269 (1.03%)
* NASDAQ up 37 (0.46%)
* TSLA 267.70, down 0.72 (0.27%)
* TSLA volume 6.7M shares
* Oil 63.89
* Percent of TSLA selling tagged to shorts: 36%

 

[AudubonB]

I'm in no small measure reluctant to comment because most of the posts surrounding this specific topic don't belong in this thread. Regardless, as this addresses a post made by this thread's OP, I do.

There's a lot to wrap your mind around here, folks.
Regarding production issues vs. shortages of Panasonic cells, we may well have seen both issues involved in Q1.
...
Battery cell shortages:
* Panasonic has had difficulties in the past holding onto a sufficient number of employees at GF1 because there are lots of choices of employers in the Reno area, housing is in short supply and expensive, and it's a reasonably long drive from Reno or Sparks to the GF but a short drive to other potential employers.
* If we were seeing an abundance of Tesla Energy products, it would indicate that some of that TE production could be switched over to automotive if it was needed, but many TE battery products are still hard to obtain. Thus, there's likely not many excess cells out there.
* The LR RWD M3 has been taken off the design studio but is still theoretically available for order. If you were trying to produce the most vehicles with a fixed number of cells available, this is the vehicle you would want to de-emphasize or eliminate because it uses the same number of cells as AWD or performance but has lower margins.
* If you were forced to produce fewer LR M3s in order to produce a suitable number of M3s during the quarter because of cell constraints, you would want your SR+ vehicles to be as high margin as possible (required autopilot) and your SR to be de-emphasized or eliminated.
* If cells were limited, you would consider opening up Europe to SR+, which apparently happened this evening.
* Tesla's quote in the Verge article referenced in previous posts says that the company has been able to put to use all the cells that Panasonic creates.

Consider yourself in Elon's shoes and on April 24 you're going to have to answer questions posed by the analysts about a quarter that was a real stinker. You would likely prefer to say this is what went wrong and this is what we have already changed to address the problems. Don't be surprised to see the changes we saw tonight offered as important solutions to Q1 shortcomings in addition to the supplier issues for the European M3s that we've already talked about.

When I visited the Gigafactory in January, 2017, I stayed several nights in Reno. That makes my experience a little over two years old, but at that time the city appeared moderately to significantly economically depressed, a view corroborated by local expert opinion (aka hotel bartenders and servers....). To the extent that Panasonic has difficulty with its workforce, I am of the opinion that such would be a combination of, on the supply side, the quality of the labor pool, and on the demand side, a corporate culture likely not synchronous with the local environment. I do agree with your housing and distance observations.

Important addendum on edit: I am not saying a difficulty with the workforce exists. I leave that observation to others to assess, correctly or not.

 

[Papafox]

I'm in no small measure reluctant to comment because most of the posts surrounding this specific topic don't belong in this thread. Regardless, as this addresses a post made by this thread's OP, I do.

When I visited the Gigafactory in January, 2017, I stayed several nights in Reno. That makes my experience a little over two years old, but at that time the city appeared moderately to significantly economically depressed, a view corroborated by local expert opinion (aka hotel bartenders and servers....). To the extent that Panasonic has difficulty with its workforce, I am of the opinion that it is would be a combination of, on the supply side, the quality of the labor pool, and on the demand side, a corporate culture likely not synchronous with the local environment. I do agree with your housing and distance observations.

Important addendum on edit: I am not saying a difficulty with the workforce exists. I leave that observation to others to assess, correctly or not.

I have to confess to a home-court advantage on this one, since I grew up in Reno, have many of my relatives living there, and spent many months there last year. In Reno, there's something termed "the Tesla effect", which refers to when Tesla announced it was coming to Reno, lots of other big companies came as well, which puts huge demands on housing and puts constraints on available employees.
The Tesla effect measured by available space in the Tahoe-Reno Industrial Center
The Tesla effect upon housing
I think the reason why the city looked run down during your visit was that the downtown is in a slump because of gambling competition from other states. The people you spoke with depend upon the old tourism economy, not the new industrial park economy. Las Vegas has weathered the competition well because it is one of a kind, but Reno has not and several casinos have closed their doors. Fortunately for job-seekers, the growth from the "Tesla effect" in other industries has much more than compensated for the loss of gaming. Compounding the "Tesla effect" in housing has been a mass migration of retirees from California who moved to Reno to still enjoy easy access to California but escape the income tax. That migration is ongoing and has resulted in Washoe County voting for Democratic candidates rather than Republicans (as it did in the past), and the switch in political views in Reno has tipped the scales so that Nevada as a state now primarily votes Democrats into office.

Correction on my previous post: Tesla's day to show off autonomous driving to analysts will be April 22, not April 24.

 

[AudubonB]

Home court advantage gives you game, set & match. YES: that was very specifically the blighted downtown area to which I was referring.

 

[Fact Checking]

If Tesla were battery constrained, why would they offer a software limited SR where they have to put just as much cells as they would in the SR+ with the risk that they may never get any return for those extra cells?

Because:

• I believe the $35,000 SR will go away in a few months, after reservation holders had a fair chance to order.
• The 55 kWh SR+ is what was the $35,000 Model 3 in 2016, significantly upgraded and inflation adjusted.
• There was never any 50 kWh pack - it was always 55 kWh, and the economics of removing cells are poor. MR and SR- are stopgap measures.
• U.S. median new car prices and median free disposable income levels are going up faster than inflation, and the $39,500 SR+ is sitting in the same pricing sweet spot a $35,000 car would have been in 2016: able to capture 60-70% of the total automotive market by revenue. The $35,000 figure from 2016 was a self defined, voluntary target with no meaning in 2019 other than some moral and PR obligation to reservation holders.
• In the 2019-2024 time frame $40,000 is the new $35,000.
• If the LR AWD production rate is 5k/week then the SR+ production rate is 7.1k/week. With a 50 kWh SR- rate is 7.8k/week - which with a 50% mix is only 350 units more per week - but the SR+ margins are much better.
• The cheaper interior of the SR- probably slows down Fremont production a bit, because it's different. I.e. not only are margins worse, the production rate is lower than only making the SR+ interior.

I.e. SR+ with healthier margins is IMO the right approach, even if they are cell constrained.

 

[mikevbf]

I was wrong @Papafox, @Fact Checking checking and others were right. What a surprise :
Tesla Gigafactory 1 battery cell production is still limited to about 23 GWh, says Elon Musk

 

[Tobyw]

There's a lot to wrap your mind around here, folks.
Regarding production issues vs. shortages of Panasonic cells, we may well have seen both issues involved in Q1.

Production bottlenecks: As Neroden pointed out in the main thread, it takes time to switch between European and North American Models (tail lights, charging, etc.), and with many variations of the Model 3, switching between variations was also a challenge.
* Tesla's decision tonight to reduce the variations of Model 3 going forward is likely an acknowledgement of this issue.

Battery cell shortages:
* Panasonic has had difficulties in the past holding onto a sufficient number of employees at GF1 because there are lots of choices of employers in the Reno area, housing is in short supply and expensive, and it's a reasonably long drive from Reno or Sparks to the GF but a short drive to other potential employers.
* If we were seeing an abundance of Tesla Energy products, it would indicate that some of that TE production could be switched over to automotive if it was needed, but many TE battery products are still hard to obtain. Thus, there's likely not many excess cells out there.
* The LR RWD M3 has been taken off the design studio but is still theoretically available for order. If you were trying to produce the most vehicles with a fixed number of cells available, this is the vehicle you would want to de-emphasize or eliminate because it uses the same number of cells as AWD or performance but has lower margins.
* If you were forced to produce fewer LR M3s in order to produce a suitable number of M3s during the quarter because of cell constraints, you would want your SR+ vehicles to be as high margin as possible (required autopilot) and your SR to be de-emphasized or eliminated.
* If cells were limited, you would consider opening up Europe to SR+, which apparently happened this evening.
* Tesla's quote in the Verge article referenced in previous posts says that the company has been able to put to use all the cells that Panasonic creates.

Consider yourself in Elon's shoes and on April 24 you're going to have to answer questions posed by the analysts about a quarter that was a real stinker. You would likely prefer to say this is what went wrong and this is what we have already changed to address the problems. Don't be surprised to see the changes we saw tonight offered as important solutions to Q1 shortcomings in addition to the supplier issues for the European M3s that we've already talked about.

Elon might consider building some rooms or even bunks in the vacant spaces and floors of GF1, trailers outside might get too hot.

 

[anthonyj]

Does anyone have a theory on the erratic pricing decisions by Tesla lately?

Sales tactic

 

[Papafox]

Today's trading was an important event in the Teslasphere, as it encompassed important revelations from this weekend and gave a demonstration of how shorts wished to distort that message. Over the weekend, Elon responded to Panasonic's statements that suggested cell production at GF1 had reached the planned 35GWh mark but demand for Model 3 was holding back production. Elon through Tweets initially said that output was more like 24GWh pace for the year but then Tweeted There is 35 GWh/yr “theoretical capacity”, but actual max output is ~2/3. It was physically impossible to make more Model 3’s in Q1 due to cell constraints. There is little wiggle room for interpretations from Elon's Tweet. Moreover, he said that Tesla would produce 500K vehicles in the next 12 months. My question about why Tesla's M3 production was about 10K less than expected got answered. Granted, other issues such as a short-term North American dip in demand and a European parts shortage (both in January) could indeed have been real, but the fear that Tesla was reducing Q1 production because of a lack of worldwide demand for Model 3 was effectively vanquished.

The problem that replaces the demand gloom and doom is the Panasonic shortfall of cells, and Tesla's recent actions of de-emphasizing SR and LR RWD while taking steps to increase the GM of SR+ suggests that Tesla will deliver a mix of M3s in Q2 that averages fewer cells and thus takes maximum advantage of cells provided by Panasonic. The second problem is far less serious than a significant demand issue, however.

Thus, TMC member attitudes were generally positive come Sunday night, but Elon's Tweetfest caused some concerns about pushing the SEC too far with his Tweets, and that could be considered a negative. How would the trading action pan out on Monday?

Small investors in pre-market trading were tentative, with small rises and small falls in the stock price. A moment of green right at opening was met with a ferocious dip that produced icicles and had all the markings of a short-seller manipulation. Notice, for example, that the NASDAQ chart showed 15 minutes of somewhat positive trading before beginning its dip, but TSLA began its dip immediately. With the help of the NASDAQ dip (see below), TSLA went below 260 before recovering. Short-selling added steroids to the TSLA dip, and then as both TSLA and the NASDAQ started to recover, notice the many downward slopes that were imposed upon TSLA before the stock broke free of the descent each time? These were attempts by shorts to make TSLA's dip become "sticky" but the buying pressure was too great and if not for a 3:10pm plateauing of the NASDAQ (followed by a small dip) and some not so subtle short-selling, TSLA might have actually closed green.

Other important pieces of news today:
* Tesla has started delivering SR Model 3s to customers, thus satisfying the pledge that it would offer a $35,000 Model 3 (how many and for how long, nobody knows).
* T Rowe Price, at one time the biggest holder of TSLA stock, apparently sold the vast majority of its holdings between Q3 18 and Q1 19. This selling would, of course, have a negative effect on the stock price, but it is apparently completed now.

On a personal note, with the demand vs. other causes question answered regarding why Tesla hadn't produced more M3s in Q1, I did some buying today of stock and Jan21 DITM leaps, setting my personal investment strategy on a two year timetable and believing that this buy-in price will serve me well over the coming two years. It's entirely possible to see a sizable dip next week if the Automation Investor Day and Q1 ER/CC lack pleasant surprises, but I'm willing to hold through such a dip because I think if we receive positive guidance for Q2 and forward, the dip would be manageable. The high level of short-seller manipulations and its inability to keep the SP from recovering is a bullish sign to me. I believe that the defeat of significant efforts by the shorts to hold the SP down is one sign that the bottom may be close.

Both the Dow and the NASDAQ closed down 0.10% after some turbulent trading. TSLA trading was correlated with NASDAQ trading today, but with important differences

Shorts were tagged with 63% of TSLA selling today, suggesting LOTS of manipulations

Notice from this Dusaniwsky post that short interest has not been growing in the last week. Instead, I think the 63% of selling by shorts today indicates the kind of manipulations performed when shorts sell at critical times, slowly cover, then rinse and repeat multiple times in a day in order to affect the perception by investors and encourage fear.

Looking at the tech chart, you can see that during today's dip on steroids the lower bb worked its magic as support and the SP sprang back nicely.

Conditions:
* Dow down 28 (0.10%)
* NASDAQ down 8 (0.10%)
* TSLA 266.38, down 1.32 (0.49%)
* TSLA volume 10.0M shares
* Oil 63.46
* Percent of TSLA selling tagged to shorts: 63%

 

[troym]

On the disappointing M3 production numbers, is it possible that it was both low global demand and battery constraints (as well as international delivery issues)? As in, lower than expected demand + European parts shortage + international delivery delays, led them to revise down expected deliveries intra-quarter. To avoid building inventory, they focused their attention elsewhere and didn't attempt to improve efficiency in existing battery production lines. 62 950 M3 produced Q1 and 61 394 in Q4. If battery constraints were truly the bottleneck and they were doing their best to to solve this problem, is a 2.5% improvement realistic (especially if those gains > adding new lines)? I worry it may be true that battery output was the limiting factor, but only because that's an easier narrative to swallow than the other challenges they faced/are facing.

As for the DITM leaps, what strike and why?

(On a side note, I'm new to the forum and this is my first post. In searching for trading discussions, I quickly came across your contributions. Your insights are most appreciated, Papafox.)

Mod: a perfect example of a post that should have been in the main thread, not here. Being new, you are forgiven, but the moderators won't tolerate this much longer. --ggr.