Short-Term TSLA Price Movements - 2016

[racer26]

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.

Exactly. Increasing net price to the customer (whether in the form of fees or base price) will cause a corresponding decrease in demand in price-elastic products like cars.

The only way such an increase can be beneficial to the bottom line is if demand is outstripping production capacity by a large enough amount that the reduced demand still remains over 100% of production, or if by reducing demand you can run the factory more efficiently (the efficiency curve has a peak at something lower than factory running full tilt).

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.

You are (mostly) correct. Group 1 buyers are mostly price-insensitive. The Group 2 buyers are mostly sensitive to final price inclusive of all fees etc, but you are correct that some subset of them will be enticed by a lower headline price and higher fees.

That is of course irrelevant provided that increasing price (and thereby reducing demand) is done only in a magnitude that retains demand larger than production capacity. It doesn't matter if you won't sell a car to Bob at $78k but you would at $77k, so long as you're selling everything you can produce as fast as you can produce it - in fact, its more optimal to tailor demand to be exactly 100% of production.

 

[Kenriko]

Will Tesla Burn Through Its Remaining Cash?

Will Tesla Burn Through Its Remaining Cash

Peter Cohan ,

CONTRIBUTOR

I write about tech stocks and the startup economy.

Opinions expressed by Forbes Contributors are their own.

A $9 million hedge fund concluded that Tesla Motors -- in which I have no financial interest -- will burn through its cash. The key assumption underlying that conclusion is that if charges $35,000 for its Model 3, Tesla will lose so much money that its cash will go up in flames.

<Snip>



Specifically, is it willing to risk losing customers by raising prices enough to actually make a profit on its vehicles? Or can it cut costs enough to make a profit at its current low prices?

The source of this idea is Mark Spiegel, founder of $9 million (assets under management) hedge fund Stanphyl Capital Partners who suggests that setting the Model 3's price at $35,000 could present cash flow troubles for Tesla. Spiegel presented his ideas last week to the Robin Hood Investors Conference. He argues that Tesla is worth "zero" for three reasone.
<Snip>

Very few people buy the base model. Add 8k on for autopilot + a few options and ASP will be in the high 40s.

 

[Green Pete]

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.

I have to admit, I think renaming this thread general discussion about Teslas and starting a new thread called short term investing makes more sense as I don't think I've ever seen a single post that makes much short term reference, Not to mention I think it's pretty much a collective consensus that Teslas short term trading patterns are erratic and often counter intuitive so a discussion forum specifically for that purpose is pretty much useless. Whereas this forum tends to still be filled with interesting conversations.

It doesn't help that this forum is the where you end up if you click the top of the list in the tree of forums twice. I think this is just where a lot of people end up the first time they come here and based on the high amount of posts per day tend to stay here.

Just my two cents.

 

[techmaven]

Short term stock price seems to be batted around lately by the existential questions about Tesla. And therefore, the discussion about the various existential questions, especially the narratives used by various TSLA bears is very relevant to the short term price action. It is the TSLA world today, for better or for worse.

 

[AlMc]

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

'Very highly desired products' implies no demand constraints.

You are both obviously correct.
My bad.

I will get off the demand debate as others have suggested but will agree with @vgrinspun to disagree that demand constraint is *only* plausible reason to explain increase in price

 

[vgrinshpun]

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.

Well, the AP1 is a limited set of cars that no longer is produced. AP2 cars continue production and are constantly replenishing sold "inventory" and "demo" fleet cars. The numbers in your example will never work the way you need them to work in order to make your point.

 

[vgrinshpun]

Former North American Sales Manager for Tesla Energy jumped ship to Sonnen.

 

[Skryll]

Very few people buy the base model. Add 8k on for autopilot + a few options and ASP will be in the high 40s.

Model 3 profitability depends on both cost of production, with the gigafactory and not buying LG batteries the cost for the battery portion should be a lot more favorable than on the Bolt, and on the mix of bare bones to highly optioned out.

You and me both would not take the bare base model and forego all the cool stuff, but I am certain that some will simply because of their budget. The question is, how many.

A friend of mine replaced his Prius with a Tesla Model S60 bare bones, not even paid for autopilot, and says its the best car he ever had, and he wants to buy it after the lease is up. He stretched his budget significantly to even get to the S60 bare bones. I am sure lots of people do the same to get to the base model 3 that would not even consider the S60.

 

[Alketi]

A couple of things to keep in mind regarding Model 3 costs/profits as well as S/X:

1. Tesla can ship whatever Model 3 configurations are needed to ensure a profit. Even in the advent of the disaster scenario, where, let's say that initial Model 3 initially costs more than $40K to manufacture, Tesla can control their shipments to only deliver the most-highly optioned cars for as long as they want. [They'll do some of this anyway]

2. Something I've seen overlooked almost everywhere -- the S/X will, at Tesla's choosing, also get the 2170 cells -- increasing margins by both the cost and density improvements. This is never mentioned by Bears in their "Model 3 can never be sold for $35K argument" but is a by-product of the Gigafactory's existence.

 

[ggr]

Will Tesla Burn Through Its Remaining Cash?

Will Tesla Burn Through Its Remaining Cash

Peter Cohan ,

CONTRIBUTOR

I write about tech stocks and the startup economy.

Opinions expressed by Forbes Contributors are their own.

A $9 million hedge fund concluded that Tesla Motors -- in which I have no financial interest -- will burn through its cash. The key assumption underlying that conclusion is that if charges $35,000 for its Model 3, Tesla will lose so much money that its cash will go up in flames.

<Snip>



Specifically, is it willing to risk losing customers by raising prices enough to actually make a profit on its vehicles? Or can it cut costs enough to make a profit at its current low prices?

The source of this idea is Mark Spiegel, founder of $9 million (assets under management) hedge fund Stanphyl Capital Partners who suggests that setting the Model 3's price at $35,000 could present cash flow troubles for Tesla. Spiegel presented his ideas last week to the Robin Hood Investors Conference. He argues that Tesla is worth "zero" for three reasone.
<Snip>

The answer to any headline phrased as a question is "No."

 

[Jonathan Hewitt]

The answer to any headline phrased as a question is "No."

Here's the reference for everyone. I share it on stocktwits often.
Betteridge's law of headlines - Wikipedia

 

[ggies07]

For those that want to watch:

Will we reach Peak Car Ownership by 2020?

LIVE from Boulder, Colorado - RMI Mobility Transformation managers Jonathan Walker and EJ Klock McCook further explore the market opportunity of electric automated mobility services in the US.

Have questions about what the future of autonomous vehicles means for you? Comment below and Jon will answer in the Q&A!

Rocky Mountain Institute (RMI) | Facebook

https://www.facebook.com/video.php?v=10154834492416742

 

[1kEE]

SP is surprisingly flat for a change.... anyone reading any meaning into this?

 

[kbeckley]

Any good speculation on why no 100D yet? It seems like perhaps tesla doesn't see the need to pull that demand lever just yet, so are keeping the P100D as the go to option for high end clients? 100D could be a big demand lever, pushing MX into 300mi range, MS into what 340-350mi range? That's a pretty big deal imo.

We are waiting for the 100D to show up to order and X. I can imagine it will be popular.

 

[Papafox]

SP is surprisingly flat for a change.... anyone reading any meaning into this?

You mean surprisingly flat after a push down earlier in the day? I would say that shorts cannot succeed in pushing it down further with the current volume because there are too many buyers at this price point. Take a look at the daily trading chart's many downward jabs that don't stick. Shorts will keep trying and may succeed in pulling the SP down a bit more later in the afternoon when volume is lighter. Can anyone please supply IB short activity for the day? Thx.

 

[winfield100]

For those that want to watch:

Will we reach Peak Car Ownership by 2020?

LIVE from Boulder, Colorado - RMI Mobility Transformation managers Jonathan Walker and EJ Klock McCook further explore the market opportunity of electric automated mobility services in the US.

Have questions about what the future of autonomous vehicles means for you? Comment below and Jon will answer in the Q&A!

Rocky Mountain Institute (RMI) | Facebook

https://www.facebook.com/video.php?v=10154834492416742

OMG, they answered my question. "why buy a vehicle when I can summon one"

 

[Quassinoid]

SP is surprisingly flat for a change.... anyone reading any meaning into this?

I feel the gravity beneath my feet is slightly altered - I wouldn't exactly call -2% flat.

 

[Green Pete]

OMG, they answered my question. "why buy a vehicle when I can summon one"

What was the answer. Happy for you and all. But the answer seems a tad more relevant than your 4 minutes of fame.

 

[winfield100]

What was the answer. Happy for you and all. But the answer seems a tad more relevant than your 4 minutes of fame.

30 seconds, and there were not many watchers either, eh.
peak car coming sooner than expected seemed to be answer tho, and a pitch for donations to RMI and note that would have more talks. (was startled/weirded out to get answer)

 

[schonelucht]

Well, the AP1 is a limited set of cars that no longer is produced. AP2 cars continue production and are constantly replenishing sold "inventory" and "demo" fleet cars. The numbers in your example will never work the way you need them to work in order to make your point.

That's what I mean. You are dismissing the possibility without any real argument. AP1 is just the current refresh cycle. There will be a cycle after this one too, and one after that one too. For all of which the reasoning could hold.