Short-Term TSLA Price Movements - 2016

[Krugerrand]

you realize you are using the term "alien dreadnaught" without any sort of sarcastic tone... right?...

Dismiss at your own expense. We've heard the laughter of Model S is vaporware, Tesla will go bankrupt, they'll never make those doors work on the Model X, they lose $42,000 per car, they'll never get the money for Gigafactory, demand has plateaued...

 

[Krugerrand]

interesting timing considering the "alien dreadnaught" conversation above... so which is it?... will Elon automate the manufacturer employee to the point of non-existence?... or will he "make america great again"?

Musk: Tesla's factory will become an 'alien dreadnought'

""By version 3, it won’t look like anything else," he said. "You can’t have people in the production line itself, otherwise you drop to people speed. So there will be no people in production process itself. People will maintain the machines, upgrade them, and deal with anomalies.""

"This idea has been talked about in the auto industry and the wider world of manufacturing for some time. But Musk seems to be aiming for full automation of the Model 3 build process."

The two are not mutually exclusive. That I'd have to explain that to you, means I'm not capable of explaining it in a way you'd understand.

 

[drinkerofkoolaid]

Bahahahaha. I don't much care for most of TCC's reporting, but our friend Spiegel responded in the comments on this post decrying his presentation:

Betting Against Tesla (TSLA) Might Take Spiegel Down to "Zero"

I'm still confused how Spiegel can legally call himself a financial analyst.

Note: Publishing articles on SeekingAlpha does not make you a financial analyst! It makes you a blogger.

It's one thing for Spiegel to say he is basically the sole manager of a "pooled investment fund". (I think he might work with 1 other person). It's another for him to say he's a licensed financial analyst, which he doesn't appear to be according to FINRA.

 

[Hogfighter]

It's a possibility that they could be depreciating the price of inventory/loaners cars faster as they get older/rack up miles and recover the cost partially through increasing the delivery fees. Again I am not saying it must be that. Just saying that the conclusion that 'it must be good demand' is premature.

No company can raise prices on a demand-constrained product and see sales numbers increase. Agreed?

 

[Drax7]

The Sorkin article is very helpful, confirms that somebody else gets it besides us.
Sometimes one has to wonder if we are irrational or the others (shorts) are irrational.

Elon being the most admired/respected silicon valley CEO for 2 years in a row adds further to
his aura.

The "going to zero" mark spiel thesis is not worth the paper its written on
and acknowledged by many.

Tesla increasing market share in the luxury car category at the expense of the established
brands speaks volumes. In a deflationary environment, tesla raises prices with impunity.

German manufacturers acknowledge master plan 1 is the way to go speaks volumes
and further validates Elons foresight. Teslas first mover advantage is increasing further.

New cars inventory number drops very quickly, and new order US delivery extended to March,
should imply demand is there. This gives credence that 4th quarter numbers will be
at the very least met.

 

[AlMc]

But we know that COGS are decreasing as evidenced by information provided at the Q3 ER call and increasing margins.


But this would be counterproductive unless it does not affect demand, because if it is the other targets for exec compensation will be delayed or missed (targets based on sales volume)


This suggested intention will not be realized if increasing the price hurts sales volume. So unless one denies Tesla certain shrewdness this move can't be explained without accepting the premise of no demand problem

So, I am still waiting

You asked for *possible* reasons why a price increase *must* mean there is no demand constraint.

All three reasons I suggested are very basic but plausible explanations. I do not believe the first two. The third, as you quoted is possible. TM very well could have concluded that raising prices by a small, but not insignificant, amount would generate more profit/cash to help paying for future expansion for future growth instead of going back to the markets without harming current demand (whether it be great, good or fair)


Current demand is really unknown by we who frequent TMC. It could be increasing, stable or starting to decrease slightly. Increasing price might let one speculate that there is no problem with demand (and you are probably correct) but it is not an absolute.

I don't feel that there is a demand issue. I am just not as sure as some that the *only* explanation for a price increase *must* be demand strength.

 

[AlMc]

No company can raise prices on a demand-constrained product and see sales numbers increase. Agreed?

If the commodity is very highly desired that would be quite possible.

 

[vgrinshpun]

It's a possibility that they could be depreciating the price of inventory/loaners cars faster as they get older/rack up miles and recover the cost partially through increasing the delivery fees. Again I am not saying it must be that. Just saying that the conclusion that 'it must be good demand' is premature.

But I specifically talked and made comparison between pre-ordering car vs. buying it from the "inventory" (no demo miles). How is a possibility of something happening with "demo" fleet sales is relevant to what actually happened to the "inventory" sales?

Once again Tesla just made exact same car from "inventory" $800 more expensive than pre-ordered car. This is $800 premium for essentially expedited delivery. It would be stupid for Tesla to do this unless they see that demand is somewhat ahead of what they are able to produce. One has also to note that selling pre-built inventory cars is advantageous for Tesla (even without increased delivery charge), as it allows to partially streamline production to standard builds, reducing the COGS, as well as allows for a buffer that at least partially decouples sales from the factory shutdowns. Raising price and risking reduced demand for "inventory" sales would be counterproductive. The only reasonable conclusion under these circumstances is that Tesla does not see demand problem

So, sorry, but I still do not see any reasonable rebuttal of how this price increase could be explained unless it is assumed that Tesla does not see a demand problem.

 

[drinkerofkoolaid]

I really hope someone picks up this quote by me.

"Mark B. Spiegel is as much of a financial analyst as Miss Cleo was an authorized psychic."

 

[JRP3]

If the commodity is very highly desired that would be quite possible.

If it's highly desired that means it's not demand constrained.

 

[techmaven]

2) Why is anyone questioning Tesla's accounting without questioning GM's excessive flooding of its channel (dealers) and dumping cheap vehicles in external markets to inflate its sales figures?

Channel Stuffing The Economy: There Has Never Been More Cars "On The Sidelines" | Zero Hedge

to be clear, at least a portion of that article is BS.

FALSE: Where the World's Unsold Cars Go to Die

 

[Hogfighter]

If the commodity is very highly desired that would be quite possible.

'Very highly desired products' implies no demand constraints.

 

[dennis]

interesting timing considering the "alien dreadnaught" conversation above... so which is it?... will Elon automate the manufacturer employee to the point of non-existence?... or will he "make america great again"?

Musk: Tesla's factory will become an 'alien dreadnought'

""By version 3, it won’t look like anything else," he said. "You can’t have people in the production line itself, otherwise you drop to people speed. So there will be no people in production process itself. People will maintain the machines, upgrade them, and deal with anomalies.""

"This idea has been talked about in the auto industry and the wider world of manufacturing for some time. But Musk seems to be aiming for full automation of the Model 3 build process."

Musk will continue to create American jobs while eliminating the $17/hr repetitive task jobs of the assembly line.

 

[drinkerofkoolaid]

to be clear, at least a portion of that article is BS.

FALSE: Where the World's Unsold Cars Go to Die

Correct. However there is no questioning that GM sells (at times below cost) repurposed inventory in external markets . Also, GM certainly "floods" its dealership network and sells vehicles to dealers far below cost when necessary to inflate "sales figures".

Stuffing the auto channel

One of the biggest problems with GM. GM and many others don't always have a choice when it comes to how many and what types of vehicles to produce or what suppliers to use because of legacy agreements.

It's not Tesla's fault other Automobile Manufacturers have bloatware up to kazoo, and legacy obligations that make it difficult to shift gears.

 

[vgrinshpun]

You asked for *possible* reasons why a price increase *must* mean there is no demand constraint.

All three reasons I suggested are very basic but plausible explanations. I do not believe the first two. The third, as you quoted is possible. TM very well could have concluded that raising prices by a small, but not insignificant, amount would generate more profit/cash to help paying for future expansion for future growth instead of going back to the markets without harming current demand (whether it be great, good or fair).

Sorry, but we have to acknowledge our disagreement here. I do not see the reasons you suggested as plausible at all, and explained why.

BTW, even if one assumes that 20% of all sales are from "inventory" and "demo" fleet, a $500 increase could mean a $10M "windfall" based on 100K yearly car sales. These mouse nuts could hardly pay for anything, leave alone preventing capital raise.

I am just not as sure as some that the *only* explanation for a price increase *must* be demand strength.

That was not my point. My point is that such increase in delivery charge for "inventory" cars is an indication that demand is not a problem. This increase is obviously beneficial to the bottom line, but only if it does not lead to reduction in sales.

 

[GBleck]

I'm still confused how Spiegel can legally call himself a financial analyst.

Note: Publishing articles on SeekingAlpha does not make you a financial analyst! It makes you a blogger.

It's one thing for Spiegel to say he is basically the sole manager of a "pooled investment fund". (I think he might work with 1 other person). It's another for him to say he's a licensed financial analyst, which he doesn't appear to be according to FINRA.

I'm not sure but as long as he isn't using chartered financial analyst he is ok. Chartered financial analyst is a real job with credentials.

 

[schonelucht]

Once again Tesla just made exact same car from "inventory" $800 more expensive than pre-ordered car.

There are two people who buy inventory.

Those that want a car, and they want it now. For them cost is a secondary issue and Tesla may have run the marketing numbers and seen that going to a uniform delivery fee of 2k loses them no or a marginal number of sales, offset by the increase in demand from group two :

those that are looking for 'a good deal'. Again Tesla may have run the numbers and may have decided that offering this group an APv1 car with a $3k discount on the headline price + $2k delivery fee generates more demand than offering the exact same car with a $2k discount on the headline price + $1k delivery fee. Monetary it makes no difference either way but the psychology of buyers is such that stuffing/hiding costs into fees works.

 

[drinkerofkoolaid]

I'll just leave this here. This graph shows all you need to know about how Tesla Powerwall compares to other storage products.

Graph of the Day – Tesla Powerwall 2 way ahead of competition on price

 

[techmaven]

Spiegel is a symptom, nothing more. There are plenty of people that lend their voices to attack TSLA, Tesla, and Musk. Our long time critic that really, really cratered, John Petersen, popped up on SeekingAlpha on Saturday decrying green energy subsidies for Tesla. I presume his green energy endeavors didn't get enough and he's looking for a few clicks. Anyways, reality has a way of intruding into all of our fantasies.

Clearly, Tesla has many targets on its back. And as it becomes more and more of a threat, there are plenty more people looking to attack it. From a purely financial point of view, Musk has not done a particularly good job of communicating his intentions with the SCTY merger. I trust him. Many of us do. We can see many parts of his vision. But overall, the market is definitely queasy right now, and TSLA looks like a pig to be slaughtered to many that don't bother to look close enough. And the truth is, most people, including professional investors don't bother to look close enough. I would have thought they would conduct more research. But now, after many years of listening to various pundits, analysts, and experts, it becomes more clear that companies forge their own paths and break precedent like Musk's companies often do become increasingly difficult for the punditry to comprehend and analyze.

My fear for the next earnings call is the inability for the analysts to make heads or tails of it. You can hear it in the last call where the auto analysts are at their breaking point in trying to deal with TSLA. What will the combined company report? I'm still not quite sure I understand the latest SCTY report and the GAAP positive earnings. Tesla is operationally cash flow positive in 2016, and yet, I don't really see quality analysis that takes into account deferred revenue as well as expected cash expenditure through the Model 3 release. We frustratingly don't have a good picture on Tesla Energy. All of this is coming to a head in the next 2-4 quarters and there's plenty of room for both sides at the moment. But reality will intrude and wipe away the fantasies, but we will have new fantasies to occupy us coming up.

Tesla Gigafactory 1 start up of cell production is probably on the importance level of launching the Model S. We are supposed to be within 1 month of this, and yet... do we really understand what is about to happen? Further, Tesla is about to start shipping AP2 code, flipping on various features. We really don't know what is coming in the next month, and the month afterwards. It seems to be a particularly bad time to bet against Tesla. I can understand staying on the sidelines, but going against TSLA with what is coming? And in the context of delivery wait times increasing, $690 million in customer deposits, PowerWall 2 starting to ship... well, we don't really need to counter program against the bear narrative as the potential becomes reality.

 

[dennis]

There are two people who buy inventory.

Those that want a car, and they want it now. For them cost is a secondary issue and Tesla may have run the marketing numbers and seen that going to a uniform delivery fee of 2k loses them no or a marginal number of sales, offset by the increase in demand from group two :

those that are looking for 'a good deal'. Again Tesla may have run the numbers and may have decided that offering this group an APv1 car with a $3k discount on the headline price + $2k delivery fee generates more demand than offering the exact same car with a $2k discount on the headline price + $1k delivery fee. Monetary it makes no difference either way but the psychology of buyers is such that stuffing/hiding costs into fees works.

Public Service Announcement:

I really enjoy all the discussions about demand. Others here, not so much. That's why there is a thread for that. Please use it.