Short-Term TSLA Price Movements - 2016

[TMSE]

Maybe I just have done a lot of maintenance and service. Is that condescending? I did not think you are a non owner, but many not-yet owners worry on these forums that we won't have enough service centers. I am saying, we won't need them. Is that arrogant? Having driven EVs for the last dozen years, I know there is hardly any maintenance or service required, and I know that many many drivers don't know how their cars work. I am really trying to put a reality check in here. It's experience, 60 years of it. That's not being arrogant. It's trying to get people to stop spending their money where they don't need to. It's trying to get people to learn about their cars instead of letting the folks at the shop "fix" their car and they not knowing what it is that got fixed.

True, I know nothing about you, other than you are telling me that Tesla will make a ton of money off of people in their service centers, and all I said was, not me, and not a lot of other people, either.

You missed my point. You missed the theme and purpose of this thread: "Short Term Price Movements TSLA"

I agree EVs require less maintenance in general. Tesla barely needs to do any maintenance, but most customers buy prepaid maintenance service: Service plans

That revenue stream is recurring and could last entire lifetime of the car. It is a win-win for both Tesla and customers. Customers pay far less in maintenance compared to ICE and Tesla having much higher service margin compared to ICE due to little actual maintenance required. Right now the margin is low (2 to 4%) because they are growing. When they reach maturity, may be in 10 years, service revenue will have huge margins.

 

[SBenson]

Now that I correctly understand Musk timeline. Yes, it is shocking no body is even talking about it.

This is really, really, REALLY BIG F'ING DEAL!!!!

Do a google search on "iPhone assembly process" and watch the latest videos. It's pathetic. The most glamorous electronic device this day, a tiny device (relative to a car) has so much manual intervention that it is really shocking.

Musk is saying that an entire car will be built by machines with no human touching it (only touching the machine that makes the car). This is light years ahead.

People, this is some truly mind blowing stuff. This is the stuff which is fundamentally, un-doable. You know, sort of like reusable rockets. IF Musk really pulls this off, man, we are really not appreciating what we are holding here.

Quite honestly I'm out of words here. Does anyone feel anything about this??

 

[Yggdrasill]

People, this is some truly mind blowing stuff. This is the stuff which is fundamentally, un-doable. You know, sort of like reusable rockets. IF Musk really pulls this off, man, we are really not appreciating what we are holding here.

Quite honestly I'm out of words here. Does anyone feel anything about this??

I feel great about it. Like i said a few posts ago, it's been long since I've been this bullish. (Though I don't look at the immediate short term very much.)

 

[MitchJi]

I had to go back and re-read the transcript. yes, you are right, version 1 no people on the line. He seems to have implied 2017 (1 year after version 0.5). I will double it and take it as 2018.

Here is the relevant snippet if anyone else is interested:

Elon Reeve Musk - Chairman, Product Architect and CEO

The Model 3 – the internal name for designing the machine makes the machine is the – we call it the alien dreadnought. At the point at which the factory looks like an alien dreadnought, then you know you've won. It's like, what the hell is that? So we've got alien dreadnought version 0.5 will be Model 3. It will take us another year get to version 1 and probably a major version every two years thereafter. By version 3, it won't look like anything else. It might look like a giant chip pick-and-place machine or a super high-speed bottling or canning plant, and you really can't have people in the production line itself. Otherwise you'll automatically drop to people speed. There's still a lot of people at the factory, but what they're doing is maintaining the machines, upgrading them, dealing with anomalies. But in the production process itself there essentially would be no people.

Rod Lache - Deutsche Bank Securities, Inc.

Yes.

Elon Reeve Musk - Chairman, Product Architect and CEO

With version 1, not version 0.5. But I don't want people to think, oh, Tesla's going to have a factory without people. It's going be a huge number of people, but they will be maintaining machines and upgrading the machines and dealing with anomalies. And the output per person will be extraordinarily high.

Thanks for posting the actual quotes!

I was going to correct the misstatements about this. I got excited when I heard it. I think it's Important to understand. I also think it's exciting they are planning to upgrade the original line to a V3 line. I initially assumed that they would need to do that on new lines.

I missed it the first time I listened to the call. I recommend everyone listen to the CC's and other important talks at least twice. There is always something important and it's obvious that I'm not the only person who needs to hear it twice to get all of the important information from them. Another recent example as the SCTY calls. A big percent of the complaints were by people who were obviously unfamiliar with important items covered on the calls. Another example was the speculation about the MY being introduced and produced at the same time as the M3. He clearly said no large CAPEX expenditures until the after the M3 has ramped.

The one potential we have is information arbitrage. If we don't even know the important information from the earnings calls how do we expect that to work?

 

[TMSE]

Now that I correctly understand Musk timeline. Yes, it is shocking no body is even talking about it.

This is really, really, REALLY BIG F'ING DEAL!!!!

Do a google search on "iPhone assembly process" and watch the latest videos. It's pathetic. The most glamorous electronic device this day, a tiny device (relative to a car) has so much manual intervention that it is really shocking.

Musk is saying that an entire car will be built by machines with no human touching it (only touching the machine that makes the car). This is light years ahead.

And...Tesla will do it with less CapEX and fewer new buildings.

 

[MitchJi]

People, this is some truly mind blowing stuff. This is the stuff which is fundamentally, un-doable. You know, sort of like reusable rockets. IF Musk really pulls this off, man, we are really not appreciating what we are holding here.

Quite honestly I'm out of words here. Does anyone feel anything about this??

Exactly! Huge mind blowing stuff!

Also listen to what he says about the forthcoming versions of TE products!

 

[neroden]

I had to go back and re-read the transcript. yes, you are right, version 1 no people on the line. He seems to have implied 2017 (1 year after version 0.5). I will double it and take it as 2018.

Here is the relevant snippet if anyone else is interested:

Elon Reeve Musk - Chairman, Product Architect and CEO

The Model 3 – the internal name for designing the machine makes the machine is the – we call it the alien dreadnought. At the point at which the factory looks like an alien dreadnought, then you know you've won. It's like, what the hell is that? So we've got alien dreadnought version 0.5 will be Model 3. It will take us another year get to version 1 and probably a major version every two years thereafter. By version 3, it won't look like anything else. It might look like a giant chip pick-and-place machine or a super high-speed bottling or canning plant, and you really can't have people in the production line itself. Otherwise you'll automatically drop to people speed. There's still a lot of people at the factory, but what they're doing is maintaining the machines, upgrading them, dealing with anomalies. But in the production process itself there essentially would be no people.

Rod Lache - Deutsche Bank Securities, Inc.

Yes.

Elon Reeve Musk - Chairman, Product Architect and CEO

With version 1, not version 0.5. But I don't want people to think, oh, Tesla's going to have a factory without people. It's going be a huge number of people, but they will be maintaining machines and upgrading the machines and dealing with anomalies. And the output per person will be extraordinarily high.

I can already see how to do this for the battery factory. For the car factory, stamping's done, body-in-white is done, paint is done. There are some unsolved technical problems for the car factory, *specifically* regarding final assembly. Running floppy wires through conduits and chases is a difficult job for robots, and running them from the main body to the door is worse. Plugging the wires in is hard enough, but it's solved.

Sewing is another intractable problem which nobody knows how to do in a fully automated fashion (if we knew, there wouldn't be sweatshops) but it only applies to the seat leather.

I said many months ago that if Elon has come up with an innovative way to avoid the hand-work required to do the wire runs reliably, he'll have made a major development in factory automation. Honestly? He might not figure out how to make robots handle floppy wires accurately and reliably at high speed (the wires flail around and don't want to go where you want to put them, which is hard for the robots). The alternative is to minimize the use of soft wires in favor of rigid wires, and come up with something clever for the interface between the body and the door so that you don't have to run floppy wires through there; this might actually be easier.

 

[neroden]

NASDAQ | SEC Filing

Tesla sec filing today's

"Given the size and complexity of this undertaking, the cost of building and operating the Gigafactory could exceed our current expectations and the Gigafactory may take longer to bring online than we anticipate."

Oh boy.

That's just standard keep-away-the-lawsuits-talk. "We may be late and things may cost more than we think" is listed as a risk factor in every single report ever published by any company.

Given Tesla's record of missing deadlines, they might be late. Given Musk's record of optimism, it might also cost more than he thinks, but since he thinks he'll be producing batteries at $100/kwh, does anyone care if it's really $110/kwh? I don't.

 

[Mike Smith]

He basically told us this months ago when he said production was going to be five times as fast. This couldn't be done if humans remain on the line. A question I have: will each iteration necessarily be started at a brand new factory? In other words will alien dreadnaught 2 becomae alien dreadnaught 3 over two years of incremental improvements at an existing factory, or does this timeline require the blank slate of a new factory?

 

[esk8mw]

LOL at the longs selling and shorts shorting after hours based on risk factors disclosures in a 10Q. I've never seen anything like it before. As someone who actually drafts these disclosures it is truly hilarious to me that anyone would trade on this.

 

[brian45011]

LOL at the longs selling and shorts shorting after hours based on risk factors disclosures in a 10Q. I've never seen anything like it before. As someone who actually drafts these disclosures it is truly hilarious to me that anyone would trade on this.

:
"(Reuters) - Tesla Motors Inc(TSLA) said on Friday it must repay the principle on $411 million of 2018 convertible notes and expects to do so in the third quarter, adding to the cash pressure on the electric vehicle company.

"During the third quarter, we will be using substantial amounts of cash in connection with conversions of our 2018 Notes and we could pursue other actions to reduce our outstanding balance of convertible notes, which could require further outlays of cash," Tesla wrote in its quarterly filing with the U.S. Securities and Exchange Commission."

Given the volume weighted average pricing for the conversion, this might explain the recent resilience of the share price to less than favorable news.

 

[Cosmacelf]

Their cash needs are even worse than that:

In Tesla Motors' just-filed 10-Q, it says the cost to build the Gigafactory might exceed operations and it could take longer to get running. It says it expects to spend about $520M during 2016. In the six months ended June 30, it says it used cash of $117.4M toward building the Gigafactory. Tesla also notes that "during the quarter ended June 30, 2016, we reached our funding limit with a banking partner where we received cash for the full price of the vehicles, which could adversely impact our liquidity and cash position. "The company says in the filing that it anticipates adding new partners in coming months. "When market conditions are favorable, we may evaluate alternatives to pursue liquidity options to fund capital intensive initiatives.”

 

[brian45011]

Their cash needs are even worse than that:

In Tesla Motors' just-filed 10-Q, it says the cost to build the Gigafactory might exceed operations and it could take longer to get running. It says it expects to spend about $520M during 2016. In the six months ended June 30, it says it used cash of $117.4M toward building the Gigafactory. Tesla also notes that "during the quarter ended June 30, 2016, we reached our funding limit with a banking partner where we received cash for the full price of the vehicles, which could adversely impact our liquidity and cash position. "The company says in the filing that it anticipates adding new partners in coming months. "When market conditions are favorable, we may evaluate alternatives to pursue liquidity options to fund capital intensive initiatives.”

also, " We may also seek to refinance or restructure our existing debt, including our convertible senior notes, through exchanges, repurchases, redemptions and conversions. During the third quarter, we will be using substantial amounts of cash in connection with conversions of our 2018 Notes and we could pursue other actions to reduce our outstanding balance of convertible notes, which could require further outlays of cash. Our inability to raise additional funds or to refinance or restructure our existing debt could have an adverse effect on our business."

 

[hockeythug]

Yawn. Are all these hypothetical legal disclosures going to be used for fear mongering every quarterly earnings reports?

Guess the company that puts this in their risk disclosure:

There can be no assurance the Company will be able to continue to provide products and services that compete effectively.

 

[neroden]

He basically told us this months ago when he said production was going to be five times as fast. This couldn't be done if humans remain on the line. A question I have: will each iteration necessarily be started at a brand new factory? In other words will alien dreadnaught 2 becomae alien dreadnaught 3 over two years of incremental improvements at an existing factory, or does this timeline require the blank slate of a new factory?

It can certainly be done at an existing factory if they've designed the transport between production stages correctly for it. It looks like they may have. The trend recently has been towards zero inventory and just-in-time everything, but Tesla's been rather cagier and there seems to be room for parts inventory accumulation between stages at the Gigafactory.

If you think about it, the trouble is always that you're changing *one part* of the production process while retaining the rest. In order to adopt a new process, you have to be able to plug the new process into the overall production stream in parallel with the old one, which means that the interfaces between different sections of the production process have to be highly adaptable and also extremely fast. Allowing inventory rooms in between stages makes it much more possible to do this.

Think of it this way: "block W" at the Gigafactory, perhaps (I picked an arbitrary name), inserts cells into packs. They have a new method of doing this, which they set up at formerly-empty "block X". They then have to reroute the incoming cells to block X instead of block W and reroute the outgoing packs to their destination from block X instead of block W, so the inter-block transportation has to be efficient and adaptable, and a parts inventory stage helps a lot. When this is all working, they can tear out "block W" and they have a blank space for their next incremental upgrade of some other part of the process.

 

[MitchJi]

I got excited when I heard it. I think it's Important to understand. I also think it's exciting they are planning to upgrade the original line to a V3 line. I initially assumed that they would need to do that on new lines.

He basically told us this months ago when he said production was going to be five times as fast. This couldn't be done if humans remain on the line. A question I have: will each iteration necessarily be started at a brand new factory? In other words will alien dreadnaught 2 becomae alien dreadnaught 3 over two years of incremental improvements at an existing factory, or does this timeline require the blank slate of a new factory?

I think he said 5 to 10 times as fast!

Existing factory.

 

[MikeC]

Their cash needs are even worse than that:

In Tesla Motors' just-filed 10-Q, it says the cost to build the Gigafactory might exceed operations and it could take longer to get running. It says it expects to spend about $520M during 2016. In the six months ended June 30, it says it used cash of $117.4M toward building the Gigafactory. Tesla also notes that "during the quarter ended June 30, 2016, we reached our funding limit with a banking partner where we received cash for the full price of the vehicles, which could adversely impact our liquidity and cash position. "The company says in the filing that it anticipates adding new partners in coming months. "When market conditions are favorable, we may evaluate alternatives to pursue liquidity options to fund capital intensive initiatives.”

Didn't Tesla just report that they have $3+ billion right now?

I guess writing up boilerplate legal disclaimers into FUD articles does work on some people or they wouldn't keep doing it.

 

[brian45011]

Yawn. Are all these hypothetical legal disclosures going used for fear mongering every quarterly earnings reports?

I apologize. I did not consider the disclosure of the $411 million of the $660 million principal value in 2018 notes to be routine boiler-plate CYA. The notes have been eligible for conversion since Oct 1, 2013 yet no holder has given a notice of conversion; the notes do not mature until late May 2018. The note's prospectus said the principal will be repaid in cash, and the value over the conversion ratio may be settled with shares or cash or some combination (as Tesla decides). The conversion value up to about $185/share has been hedged. At today's closing price, if all the value above the share price were settled using shares, it would add about 645,000 additional shares to the shares outstanding.

IMO, the early conversion was likely made by large institution(s). It could be ominous or it could mean nothing, but since you consider talking about it FUD, I'll refrain from posting further.

 

[TMSE]

I apologize. I did not consider the disclosure of the $411 million of the $660 million principal value in 2018 notes to be routine boiler-plate CYA. The notes have been eligible for conversion since Oct 1, 2013 yet no holder has given a notice of conversion; the notes do not mature until late May 2018. The note's prospectus said the principal will be repaid in cash, and the value over the conversion ratio may be settled with shares or cash or some combination (as Tesla decides). The conversion value up to about $185/share has been hedged. At today's closing price, if all the value above the share price were settled using shares, it would add about 645,000 additional shares to the shares outstanding.

IMO, the early conversion was likely made by large institution(s). It could be ominous or it could mean nothing, but since you consider talking about it FUD, I'll refrain from postingrf further.

Brian,
Please do share. I find your postings valuable.

 

[SBenson]

This convertible stuff and the lease stuff is NOT coming off of the Risks section. It is coming from the Management Discussion section. This is not typical CYA stuff it looks like.