Short-Term TSLA Price Movements - 2016

[3Victoria]

So, we are left with Tesla keeping its cards close to its chest, in order to keep S/X orders flowing. This is not the Model 3 per se, but rather 3-tech. Poor EM gets criticized for being optimistic and aggressive with his timelines, but also criticized for not laying open his hand. Objectively, Tesla has over performed almost all expectations, and yet still is dogged by people complaining they didn't meet some projected optimistic timeline. We can see the analysts have dismal timelines .... I am quite sure Tesla will beat those (hollow).

 

[3Victoria]

Head in display!

Isn't that DIH - Display In Head?

 

[BornToFly]

FF shows a glimpse of their car during a teaser video. They are unveiling next month. This is a frame from the video. I hope it isn't that ugly when the wraps come off. Worse than the Bolt. Why is Tesla the only company capable of making a nice looking car?

 

[3Victoria]

That car is pretty ugly in the brief fly by.

 

[TMSE]

FF shows a glimpse of their car during a teaser video. They are unveiling next month. This is a frame from the video. I hope it isn't that ugly when the wraps come off. Worse than the Bolt. Why is Tesla the only company capable of making a nice looking car?


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Minivan?

 

[esk8mw]

My quote was a mere data point and I picked that one as it was readily available for copy-paste. What it illustrates is a chronic Musk ailment that any follower would know.

Going point by point is too laborious. I will just reiterate what I originally said a few hours ago: An automated assembly line is going to be first of it's kind. Something brand new. Something Musk is figuring out on the fly. How can we have any confidence in Musk timeline when we know how Musk speaks very very well. Especially knowing all we got so far is a hole in the floor??

On the topic of short term price movement: I will be very (positively) surprised if even 1 model-3 gets delivered in '17. But ironically I actually expect Tesla stock price to strongly trend up over next couple of quarters. Q3 ER was discredited because of ZEV revenue and increase in accounts payable. I believe Q4 ER will be equally positive and the street will be forced to reprice the business model to the upside. I am also expecting to see gradual traction on TE and accompanied cashflows. I also believe fully-autonomy gaining credibility... So all in all I'm actually bullish, very bullish, on the price trajectory... I just couldn't care less about Model 3 for 17.

I think someone else already mentioned this, but I don't think the automated line is a gating item for the 3. Production can't scale to its fullest potential until automation gains steam, but I don't see why model 3 production couldn't occur or would be slower than model s production if the line is set up in the same way as the s line (I.e., with a lot of manual labor in final assembly). If anything, I'd think model 3 production would be faster than model s production given its relative simplicity even if Elon didn't plan a bunch of crazy automation techniques to improve the line over time.

In short, you may be right that the automation stuff comes later than expected, but I don't think that makes the 3 late to launch.

 

[Cattledog]

It looks like a Volvo station wagon. Not a compliment (apologies to Volvo wagon owners).

 

[madodel]

FF shows a glimpse of their car during a teaser video. They are unveiling next month. This is a frame from the video. I hope it isn't that ugly when the wraps come off. Worse than the Bolt. Why is Tesla the only company capable of making a nice looking car?


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Looks like a hearse.

 

[RobStark]

Minivan?

Lifted Estate or Wagon.

Like the Toyota Venza or Honda Crosstour.

Very practical. But ugly.

Ugly at Model S pricing is a tough sell.

* I thought all the sedan hating Norwegians would love the added room vs the Model S under the liftback/hatchback?

** Lucid Motors appears to be doing something similar and wants to sell 8k-10k units per year at $125k-$200k with 100 kWh and 130 kWh battery packs.

 

[30seconds]

I think someone else already mentioned this, but I don't think the automated line is a gating item for the 3. Production can't scale to its fullest potential until automation gains steam, but I don't see why model 3 production couldn't occur or would be slower than model s production if the line is set up in the same way as the s line (I.e., with a lot of manual labor in final assembly). If anything, I'd think model 3 production would be faster than model s production given its relative simplicity even if Elon didn't plan a bunch of crazy automation techniques to improve the line over time.

In short, you may be right that the automation stuff comes later than expected, but I don't think that makes the 3 late to launch.

The goal is the machine to build the machine. To me that means that you forego using heavy manual labor to get a few thousands of units out and just buckle down and get the automation right instead. That way you can scale faster.

 

[GoTslaGo]

Head in display!

Isn't that DIH - Display In Head?

I'm inclined to say:

Display Chip in Head .... DC_i_H

PS--

I believe the US "invited" Canada into to Union in 1812, but Canada declined at that time...

Sorry for the silliness, but it is after hours...

 

[dennis]

For the available information we have now, I am doubtful on Model 3 can ship out more than 100k in 2017. I believe they can do 50k in 2017 but without the economy of scale, those Model 3 are not likely to make a lot if any money even with the support of cheap battery from GF, depreciation of huge equipment spread over small size of production is just too taxing (think about the negative gross margin on Model X for the first two quarters and the around 0% gross margin of TE now).

If Tesla uses the Units of Production depreciation method the expense is spread over the number of cars expected to be produced. Therefore there is no hit to profitability from depreciation when the initial volume is less than expected. The Model X problem on the GM side was because the direct labor cost was spread over many fewer units than planned so it was a big hit. Also the lack of any margin contribution from the X in those quarters meant that the increasing R&D and SG&A expenses were not absorbed by Model X gross profits, so it impacted net margins as well.

 

[dennis]

I love that @Fallenone is explicit in saying what he considers on time. Delivering a few hunderd model 3's in the second half of 2017 is technically still 'on time' but that is simply not enough. My personal threshold for on time : more Model 3 deliveries than Model S or X in Q4.

Here is also the timeline I am watching for in 2017.
* December 2016 : full details on the new supercharging pricing structure for Model 3 (and new S/X as well if different)
* Last day of 2016 : AP2.0 activates and is at parity with AP1.0, minor regressions
* January 2017 : explicit confirmation that Gigafactory is producing new cells at substantial levels (run rate >1GWh per jaar)
* February 2017 : FY2016 report showing Q4 capex on factory build out as guided in their last quarterly report
* Q1 2017 : occasional sightings of a Model 3 driving in regular traffic
* March 2017 : full reveal event for the Model 3. Showing cars that are exactly what production is going to be, of course fully driveable
* Last day of Q1 2017 : AP2.0 is now at full parity with AP1.0, no regressions at all
* April 2017 : first products ship to customers with gigafactory produced cells
* Q2 2017 : frequent sightings of a Model 3 driving in regular traffic/supercharging
* Last day of Q2 2017 : AP2.0 is now substantially better than AP1.0
* June 2017 : Model 3 configurator open for first group (employees&Model S/X owners) includes pricing etc
* August 2017 : first deliveries to employees
* October 2017 : first deliveries to non-employees
* December 2017 : A Model X drives itself over a substantial distance in real traffic with a driver only present because of regulation. Drive event is live streamed to show it isn't scripted (ok that is a dream, I'll accept a sped up video with honky tonk music after the fact)
* Q4 2017 : > 30k deliveries of Model 3

If they hit that last goal, they are on time. Otherwise they are not. The points before I think are reasonable checkpoints they can't afford to miss by too much without making the end goal impossible.

@schonelucht I didn't know you were privy to the Tesla 2017 Executive Bonus Plan metrics!

 

[dennis]

I thought the timeline you present here is leaving too little leeway and risky until I see the last item and makes sense. But I don't think 30k in 2017 would be good enough for the Street.

How can you say that when Adam Jonas of MS and other analysts have NO Model 3 revenue in the plan for 2017, and limited M3 revenue for 2018? If Tesla delivers 30K units/$1.3B M3 revenue in 4Q17 those analysts will be forced to raise their revenue estimates and price targets.

 

[Turing]

This is kind of getting bizzare. Everybody is talking about the car while Musk is talking about the factory. The brand new thing is a brand new kind of factory line. (not a brand new car)

How do you know the factory line will be ready on time?

Are the robots there yet? Tested and verified? How much time do they need vs have?

They are making a simpler version of the model s with around half as many parts with all the key components being done in house and already production tested with S/X, they acquired Grohman Engineering to help improve automation, they finally designed a car for ease of manufacturing. I'd say the biggest concern is still supplier induced delays...

 

[Alketi]

A

How can you say that when Adam Jonas of MS and other analysts have NO Model 3 revenue in the plan for 2017, and limited M3 revenue for 2018? If Tesla delivers 30K units/$1.3B M3 revenue in 4Q17 those analysts will be forced to raise their revenue estimates and price targets.

Adam Jonas's Model 3 shipment predictions:

2017: 0
2018: 5K
2019: 60K
2020: 130K

If Tesla ships Model 3 in Q3/Q4 2017, even only achieving a few thousand to 30K, it's an instant upgrade. Almost no one on Wall Street believes that Tesla will ship Model 3 on time or at a profit.

 

[dennis]

The dev costs should be depreciated across the entire production of cars, not the first one, nor the first 30k.

I think we need to clarify a few things relative to Model 3 GM in the early going:

- the development costs for M3 are being expensed on the R&D line as they are incurred. This is the way tech companies do it, but counter to what Big Auto does, where they capitalize the R&D as it is incurred and then expense it as part of COGS as each unit is delivered.
- the D&A of the production equipment capex is most likely expensed as part of COGS on a per unit basis, rather than a per period (quarterly) basis. So early units where there is a slower ramp are not penalized with a higher % of the D&A expense
- Materials cost could be higher on a per unit basis because of initial volume from suppliers being lower than the subsequent volume once they achieve the ramp. But the suppliers are keenly aware of the 373K deposits so I believe Tesla has some leverage in getting the initial material prices close to the higher volume prices
- Direct labor costs will be higher because the unit volume per time will be less initially and thus the total direct labor costs will be spread over fewer units. This is what killed the Model X margins until 3Q16

My conclusion is that initial Model 3 GM, while being less than the target GM, will primarily be affected by how quickly Tesla can ramp up the volume and thus reduce the direct labor cost per unit. But I don't expect negative or zero GM once they get past the initial batch of deliveries to employees.

 

[Turing]

Interesting talk from George Hotz on the self driving tech. He talks about the industry leaders (including tesla) around the 18:00 mark.

 

[schonelucht]

Sorry, by dev costs I meant design and build costs ... All of them should be applied to the total production run, not an arbitrary slice of it.

That's not how Tesla accounts. They depreciate straight line.

 

[GoTslaGo]

Interesting talk from George Hotz on the self driving tech. He talks about the industry leaders (including tesla) around the 18:00 mark.

Interesting comment at the end by Mr. Hotz about how legacy automotive CEO's time frames on integrating self-driving into cars is wrapped around their typical 5 year product cycle. Which he points out is way too slow for these types of software development.