Short-Term TSLA Price Movements - 2015

[JRP3]

Exactly. Tweets get the attention of investors and those who follow electric vehicles closely. Tweets don't really expose the product to those who don't already know about it, which is the point of advertising. So while tweets generate press it's not exactly the same as advertising.

 

[vgrinshpun]

I have really tough time following logic of some questioning the official guidance from the company, but not really showing conclusively, why it is not to be trusted. I do that sort of questioning of the information coming from the company all the time. And every time I do, I always readily find information to disprove my own skepticism.

Take the discussion about whether there is or there is not a 50% growth in orders (i.e. reservations) YoY.

So lets dig a little to bring clarity on this question.

The latest update on the wait time that changed deliveries for S85 was on 02/27/2015. The wait time was from 02/27/2015 to May. Assuming first week of May yields a minimum wait time of 11 weeks. Based on the production rate of about 1000 cars/week the total backlog was approximately 11,000 cars.

Going back 1 year, based on several posts in Model S delivery thread (#6352, 6357, 6368), the wait time was about 7 weeks. According to Q1 2014 shareholder letter the production rate at the end of Q1 was 700 cars. So assuming no further increase of the production rate within the wait time, the total backlog was 700 x 7 = 4,900 cars.

So production grew approximately 43% Feb 2014 to Feb 2015. At the same time the backlog also grew, by a whopping 124%. So not only demand is well ahead of the 43% ramp in production rate, it is in fact outpaced ramp in production by huge margin.

There is no question that Company's claim that demand outpaces increasing production is true.

 

[xhawk101]

I have really tough time following logic of some questioning the official guidance from the company, but not really showing conclusively, why it is not to be trusted. I do that sort of questioning of the information coming from the company all the time. And every time I do, I always readily find information to disprove my own skepticism.

Take the discussion about whether there is or there is not a 50% growth in orders (i.e. reservations) YoY.

So lets dig a little to bring clarity on this question.

The latest update on the wait time that changed deliveries for S85 was on 02/27/2015. The wait time was from 02/27/2015 to May. Assuming first week of May yields a minimum wait time of 11 weeks. Based on the production rate of about 1000 cars/week the total backlog was approximately 11,000 cars.

Going back 1 year, based on several posts in Model S delivery thread (#6352, 6357, 6368), the wait time was about 7 weeks. According to Q1 2014 shareholder letter the production rate at the end of Q1 was 700 cars. So assuming no further increase of the production rate within the wait time, the total backlog was 700 x 7 = 4,900 cars.

So production grew approximately 54% Feb 2014 to Feb 2015. At the same time the backlog also grew, by a whopping 124%. So not only demand is well ahead of the 54% ramp in production rate, it is in fact outpaced ramp in production by huge margin.

There is no question that Company's claim that demand outpaces increasing production is true.

Facts speak for themselves. Bet against Elon at your own risk.

 

[FANGO]

Tesla Model S, Nissan LEAF, BMW i3 Top US Electric Car Sales In February | CleanTechnica

February 2015 U.S. sales 2000, February 2014 1800? Where does the 50% growth come from?

1) from expanding into new markets 2) from the rest of the year 3) use more than two data points 4) from new model introduction 5) tesla doesn't release monthly numbers or geographic breakdowns, these are estimates

 

[Papafox]

I have really tough time following logic of some questioning the official guidance from the company, but not really showing conclusively, why it is not to be trusted. I do that sort of questioning of the information coming from the company all the time. And every time I do, I always readily find information to disprove my own skepticism.

Take the discussion about whether there is or there is not a 50% growth in orders (i.e. reservations) YoY.

So lets dig a little to bring clarity on this question.

The latest update on the wait time that changed deliveries for S85 was on 02/27/2015. The wait time was from 02/27/2015 to May. Assuming first week of May yields a minimum wait time of 11 weeks. Based on the production rate of about 1000 cars/week the total backlog was approximately 11,000 cars.

Going back 1 year, based on several posts in Model S delivery thread (#6352, 6357, 6368), the wait time was about 7 weeks. According to Q1 2014 shareholder letter the production rate at the end of Q1 was 700 cars. So assuming no further increase of the production rate within the wait time, the total backlog was 700 x 7 = 4,900 cars.

So production grew approximately 43% Feb 2014 to Feb 2015. At the same time the backlog also grew, by a whopping 124%. So not only demand is well ahead of the 43% ramp in production rate, it is in fact outpaced ramp in production by huge margin.

There is no question that Company's claim that demand outpaces increasing production is true.

Virginshpun nails it!
To this argument, add Auzie's point that you cannot figure total demand by looking at one location because demand = D1 + D2 + D3 + D4 + D5 + D6, realizing that deliveries need to be allocated between the various locations.

Consider, too, that demand for cars tends to be somewhat seasonal, with summer being a better season than winter. A lively summer takes us into September, when Model X deliveries heat up significantly.

If you are someone who worries about demand, keep an eye on the delivery threads, and I think you will be able to understand that demand is solid and growing. We'll see seasonal growth in deliveries this summer and we'll see tremendous opportunity to satisfy demand come fall, when X production goes big time.

If your concerns are that Tesla is not expanding into new countries at present, a counterpoint to this concern is that the supercharger networks are maturing now. Slow sales in the middle of the U.S. are going to become robust sales in the not too distant future as word of the Tesla benefits gets out and as people in the middle of the country wake up to the value of the supercharger network. The summer of 2015 is the first summer when a robust tour of America is now possible with superchargers. I, for one, plan to be touring the mainland U.S. this summer in my Tesla (I'll have to change my signature to 60kwh and add supercharger capabilities). Can't wait!

 

[mrdoubleb]

agree or disagree. If X is truely amazing, then it'll generate a lot of demand for X, but it'll canniblize S demand at the same time.

You state that like it's a fact. Why do you think the person looking for a performance sedan is the same as the one looking for a performance SUV? Does the X5 cannibalize M5 sales? Well maybe to some extent, as in, if you are out to buy a BMW in that price range you may start thinking about whether you need an SUV or a muscle car. But generally speaking the SUV opens up new markets, new consumers who were looking for a Q7, an X5 or a Cayenne. And if a future S85 buyer opts for an X85, does it even matter? Would still yield the same totals, except, may push ASP a bit higher.

 

[yesla]

Exactly. Tweets get the attention of investors and those who follow electric vehicles closely. Tweets don't really expose the product to those who don't already know about it, which is the point of advertising. So while tweets generate press it's not exactly the same as advertising.

I try to actively ignore paid advertising. While EM's tweets get repeated by news outlets, blogs, comment section of youtube, whatever!
people who are not in the car market will not know the difference between BMW 3 series from a 5 series. People who are in the market can come across the article about tesla vs auto dealers, or review boards, or comment section etc... Marketing >>> advertising.

EM is a genius engineer and businessman. The combination of Nikola Tesla and Thomas Edison. - but probably leaning more towards engineering. presentation is not his forte. But its honest and we can all appreciate honest businesses.

 

[anticitizen13.7]

agree or disagree. If X is truely amazing, then it'll generate a lot of demand for X, but it'll canniblize S demand at the same time. The real challenge is Q3/Q4 which shoould deliver at least 33K cars per guidance, X prodution will be ramping up, what if S demand is not sufficient to saturate the production capacity?

What you're forgetting is that the new production lines that Tesla set up last summer are flexible and will handle both Model X and Model S production. If Model S demand falls due to Model X orders, Tesla can build more Model X.

The primary risk here is how quickly Tesla can ramp up production of Model X. Assuming that Tesla can build both vehicles, I don't think they care whether a customer orders an S or an X. How much did Apple care that iPhone destroyed demand for iPod? They couldn't have cared less.

 

[vgrinshpun]

What you're forgetting is that the new production lines that Tesla set up last summer are flexible and will handle both Model X and Model S production. If Model S demand falls due to Model X orders, Tesla can build more Model X.

The primary risk here is how quickly Tesla can ramp up production of Model X. Assuming that Tesla can build both vehicles, I don't think they care whether a customer orders an S or an X. How much did Apple care that iPhone destroyed demand for iPod? They couldn't have cared less.

Just to illustrate this point, the table below shows Wikipedia data on BMW X5 and 5-Series sales. As could be seen total production of X5 and 5 Series steadily grew after introduction of X5, with total significantly exceeding pre-X5 production of the Series 5.

 

[SteveG3]

re this discussion of demand. The last detailed description of Model S demand I'm aware of from Tesla was on the earnings call from November 2014. Unless Model S demand has dropped dramatically from November, Tesla will be fine delivering 50K Model S, 5K Model X. Read the transcript... if you think there is a demand question, it means Tesla has seen demand fall substantially in the past few months, that is, 50% delivery growth this year was based on a conservative gauge of the order rate at the end of 2014 (allowing a buffer for it to fall quite a bit and still be 50K strong) NOT finding a 50% increase somewhere in 2015 to get to 50K as some posters here seem to mistakenly think.

Dan Galves- Credit SuisseJust wondering if you can give us any additional color on how you've gotten confident in 50,000 Model S deliveries in 2015?

Elon Musk Actually, I don't think 50,000 is going to be super hard because if you look at sort of how we're exiting the year in production and demand, I think 50,000 seems like a pretty solid number. We don't want to overreach, but I think 50,000 is pretty achievable number. That's more or less a modest extrapolation for where we will be at the end of this quarter.

Dan Galves - Credit SuisseCan you give us any kind of hard numbers on what you've seen in terms of order flow either geographically or just -- it sounds like since the product announcements, there's been an uptick. Is there any kind of numbers that you can provide on that in terms of percentage increase quarter-over-quarter or something like that?

Elon Musk I think what we've seen is -- it's difficult to extrapolate too much based on the announcement of the dual motor and auto pilot. There's some amount of people that were waiting for an all-wheel drive car and that kind of thing, so that's why we're being sort of conservative. If you just extrapolated the demand since the announcement, it would be like 70,000 cars a year, but that's in terms of demand. But I think that would probably be unwise to state that as a steady state prediction.So we're like more considering around 50,000, but it's 50,000 with high confidence just over half of those are North America and Europe and Asia are the remaining half.

Dan Galves - Credit SuisseJust a follow-up, the leasing program with your partners is it too early to get any sense of kind of how that's being received by the consumers or any estimates on kind of how much you see a leasing program like that in the addressable market for the car?

Elon Musk I really tried to make the point in this shareholder letter that it's not a question of demand. Articles and of course out there are questioning demand. In the last quarter call, I really tried to emphasize it is not a question of demand because that sort of 70,000 order number, that's net orders, net of cancellations, that's with no advertising, no endorsements. So we don't pay anyone to pretend that they like our product. If you see our car in a movie, we didn't pay for it to be there. It's just there. We have a fairly small number of stores. In a lot of places, we don't even have service centers.

http://seekingalpha.com/article/2647055-tesla-motors-tsla-ceo-elon-musk-on-q3-2014-results-earnings-call-transcript

 

[sub]

Bear thesis: Elon is a liar. I don't see Elon wanting to spend a good portion of his life in prison, I think he has to many good things going. Just my opinion.

 

[Gerasimental]

I think Tesla will try very hard to release 7.0 just before the Model X.

I imagine along with Model X. As we know, many features of Model X will be integrated into Model S as well, so releasing 7.0 before Model X release would give away many of MX's features.

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Agree with you both. I'm also expecting a modest increase as we start to get closer to the May ER, so these next couple weeks may be the last chance to get it under $200.

Really don't like the spring analogy as it assumes the equilibrium position of the spring is above its current position and is therefore a circular argument. I still think it's true in this case.

 

[austinEV]

Bear thesis: Elon is a liar. I don't see Elon wanting to spend a good portion of his life in prison, I think he has to many good things going. Just my opinion.

Ok, it isn't that extreme. I don't agree demand is an issue, but here is why the laser focus on demand from the majority who have not drunk the koolaid: The grand, master plan of TM requires selling $100k cars for 2015, 2016, and at least a good chunk of 2017. At that point, model 3 is online and if demand for the high end cars softened they could switch production to more model 3's. If you are a skeptic, you think there is only so much market for $100k cars (or $80k, you know what i mean). If, hypothetically, in the end of 2015, CA and norway were saturated, demand never picked up in china, middle america, germany, sales would stop growing or worse decrease. That would mean the grand, master plan was in jeopardy since TM would have outgrown their income and cash burn would become a serious concern.

In that hypothetical case, I doubt they would have guided for stagnating sales. TM doesn't REALLY know what the demand is in 12 months, they have backwards looking data too. So if they missed 55k in 2015 it would come out as a Q4 earnings call woopsy-daisy. By then the stock would take a 25% overnight hit. THAT is why people are so interested in reading the tea leaves.

If you are a skeptic, you don't think sales will bridge to the model 3. If you are a skeptic, you don't think TM will give the bad news in small manageable chunks that preserves share value.

I think that's it. You can debate the merits of this argument, but it is a point of view. And Elon doesn't have to be a liar for this to play out. Their sales can fall short of projections, just like every other business in the world.

Having said that, Tesla products are great and create their own markets. Just like pre-iPhone no one in their right mind would spend over $100 for a cell phone, Apple taught us its worth paying hundreds for an excellent new product category. People stretch to get Model S/X.

Plus, the inasmuch as the Model S has sold well for 2 years, the Model X will unlock a similar sized new market, making the "bridge" not so risky. In fact, I argue, this is the whole POINT of the model X. To de-risk the scenario where they saturate their markets.

I mean, if they had zero plans on making an SUV, wouldn't EVERYONE be much more nervous about demand?

 

[MikeC]

If questioning demand is the best bear argument right now, I'm feeling pretty confident.

I think some people are underestimating turnover. What other car are you going to get when your Model S gets totaled or handed down? Some cars are almost three years old at this point and I bet the vast majority are going to get replaced with an S or an X.

 

[austinEV]

If questioning demand is the best bear argument right now, I'm feeling pretty confident.

I think some people are underestimating turnover. What other car are you going to get when your Model S gets totaled or handed down? Some cars are almost three years old at this point and I bet the vast majority are going to get replaced with an S or an X.

That is a good point. By 2016, there will be thousands of potential customers for model S/X from among the ranks for current owners. Heck, I have felt the pull of a new dual myself.

 

[SteveG3]

Ok, it isn't that extreme. I don't agree demand is an issue, but here is why the laser focus on demand from the majority who have not drunk the koolaid: The grand, master plan of TM requires selling $100k cars for 2015, 2016, and at least a good chunk of 2017. At that point, model 3 is online and if demand for the high end cars softened they could switch production to more model 3's. If you are a skeptic, you think there is only so much market for $100k cars (or $80k, you know what i mean). If, hypothetically, in the end of 2015, CA and norway were saturated, demand never picked up in china, middle america, germany, sales would stop growing or worse decrease. That would mean the grand, master plan was in jeopardy since TM would have outgrown their income and cash burn would become a serious concern.

In that hypothetical case, I doubt they would have guided for stagnating sales. TM doesn't REALLY know what the demand is in 12 months, they have backwards looking data too. So if they missed 55k in 2015 it would come out as a Q4 earnings call woopsy-daisy. By then the stock would take a 25% overnight hit. THAT is why people are so interested in reading the tea leaves.

If you are a skeptic, you don't think sales will bridge to the model 3. If you are a skeptic, you don't think TM will give the bad news in small manageable chunks that preserves share value.

I think that's it. You can debate the merits of this argument, but it is a point of view. And Elon doesn't have to be a liar for this to play out. Their sales can fall short of projections, just like every other business in the world.

Having said that, Tesla products are great and create their own markets. Just like pre-iPhone no one in their right mind would spend over $100 for a cell phone, Apple taught us its worth paying hundreds for an excellent new product category. People stretch to get Model S/X.

Plus, the inasmuch as the Model S has sold well for 2 years, the Model X will unlock a similar sized new market, making the "bridge" not so risky. In fact, I argue, this is the whole POINT of the model X. To de-risk the scenario where they saturate their markets.

I mean, if they had zero plans on making an SUV, wouldn't EVERYONE be much more nervous about demand?

Austin, I think it's worth remembering that in until the Spring of 2013, Tesla had repeatedly expressed the aspiration to reach 20K in global Model S demand, and 30K in global demand when X sales ramped up. So, the Gen III car was the goal of a plan that anticipated 30K in S/X sales per year. Clearly, Tesla sales are crushing that. Granted, Tesla was not figuring on building a $4-5 billion battery factory to do that, however, Tesla is looking to get all but $2 billion of that from other partners, and Tesla raised that $2 billion in a secondary. There are some other nuances to this (Tesla's more aggressive SuperCharger, service center buildup, almost certainly more than offset an extra 2 years of S/X sales now available to fund Gen III in 2017 rather than 2015), but the point is Tesla is not on even close to the bleeding edge of finding enough demand for S/X to fund the Model 3.

I'm sure it was meant in fun, and you are not the only person to do this, but I don't see why so often people concede the "Kool Aide" drinking notion to bears. I find bears more irrational re Tesla than bulls by a tremendous margin, yet somehow bears seem to get a free pass on their irrationality, and (often the very same bears) a free pass to paint bulls as irrational.

 

[vgrinshpun]

Let's also not loose a sight of the fact that the whole bru ha ha with not meeting guidelines could be traced to a single fact that Elon and TM grossly **underestimated** demand when they decided to build factory capacity to match projected demand of 20K MS and 20K MX. The company expansion plans back then were tailored to the income that could be brought by this 40K cars/year sales.

The company now scrambles, while running current production and coming up with new highly innovative updates to the existing cars, to bring the production capacity to a maximum capacity of 200,000 MS/MX per year (3 shift operation, 6 days a week).

So I agree with austinEV that laser focus on demand is totally justified, but all of the data we have right now point out that it will not be a problem. We just need to be watching it, without hyperventilating when somebody points out potentially bad news - great majority of these "bad news" are dis-proven pretty quickly. This however, does not mean that we as investors should be dismissive to the "bad new" without checking into them...

 

[SteveG3]

Bear thesis: Elon is a liar. I don't see Elon wanting to spend a good portion of his life in prison, I think he has to many good things going. Just my opinion.

I do think this is true a large proportion of the time. There are some issues where an "I'll believe it when I see it" attitude is understandable (i.e., Chinese market situation being put back on track, and ultimately being ~20-35% of sales), but most often, reading bearish Tesla articles and comments in Tesla articles seems as if I were watching a (nonexistent) Star Trek episode where Harcourt Fenton Mudd emphatically berates Mr. Spock as being a boastful huckster.

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vgrin, did beat ya to it and it was only 30K combined S/X expectation (at least as far as public guidance).

 

[jhm]

Perhaps it is time for a thread devoted to demand doubts. "Hold my hand, Elon; I'm just not sure all the demand is there."

 

[vgrinshpun]

BTW, Elon is traveling to China this week AND China delivery wait time was just updated from May to June.
Coincidence??

China Market situation and outlook - Page 111

Website wait times for delivery change - Page 24

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vgrin, did beat ya to it and it was only 30K combined S/X expectation (at least as far as public guidance).

Agree with you on public guidance, but I was talking about the production capacity. The original setup could handle 800 cars/80 hour week. So with two shift operation TM was circumstantially aiming at 40K MS and MX