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Short-Term TSLA Price Movements - 2016

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#5,841
Electrifying said:
Hmm, if you believe in 5 years TSLA will trade at $1000, what difference does it make? If you don't believe it will be at $1000 within 5 years, you should not buy TSLA. Speaking as someone who bought common stocks at $30, $100, $200, $280, $260, $230, $170. Trading TSLA short term is risky based on my experience losing tens of thousands trading TSLA options within last few years.
Click to expand...

Ah... please don't target $1000. Every rally where people expect that number ended up with a red wedding.
 
#5,842
#5,844
Intl Professor said:
Here's an interesting article showing how flows and eddys, as physics alone, are examples of evolution. Why don't some of you smart guys apply these insights to markets as he has some interesting views of turbulence and eddies.

Rolling stones, turbulence connect evolution to physics
Click to expand...

Very interesting. I think this applies perfectly to the idea of an experience curve in manufacturing. This curve shows how the cost of producing a unit decreases at a consistent rate with the doubling of cumulative number of units produced. For example the cost per kWh of batteries declines, say, 15% as the cumulative production doubles. (Not sure 15% is the right rate for batteries, but it is a pretty typical rate.) The cost of a good is the resistance or friction in production. As the cumulative volume doubles, the whole supply chain and manufacturing process learns and becomes more efficient. Imaging each little segment in the larger process also declining 15% as experience doubles. So if this experience curve applies to subprocesses, it certainly applies to combinations of pricesses. So the flow through the entire supply chain gets more efficient and the cost of goods come down accordingly.

One implication of the experience curve is that if annual production grows at about the same rate, exponential volume growth, then the doubling times come at a regular interval. Thus, according to the experience curve the price declines expontially in time too. The exponential decline in price can also encourage consumption to grow exponentially which feeds back to perpetuate exponential growth in productuon. So this is why technologies tend to diffuse at an exponential rate until some limiting factor constrains growth.

So Musk is a master of experience curve processes. At a high level he sees revenue growing at about 50% per year, with unit sales growing 60% or more. If unit sales grow 60% and revenue 50%, this allows unit prices to fall 6.25% = 1 - 1.5÷1.6 in a year. Growing production 60% per year implies doubling ever 1.47 = log (2) ÷ log(1.6) years. So every doubling brings about a 9.08% reduction in unit costs. So a 9% experience curve is built into the heart of this company. Tesla Energy will likely have a much faster experience curve than Tesla Motors (proper). In any case, the whole supply chain needs to flow at this pace as well.

It is interesting that bears frequently press the idea that if Tesla wasn't demand constrained, it would be growing faster. This underestimates the challenge of growing an entire supply chain along with Tesla's own manufacturing at rates above 50%. The growth in production needs to be balanced with achieving something like a 6% annual reduction in production costs. To try to grow faster can inflate costs in the short run and make doubling times harder to reach. This is fairly abstract, but I do think that Musk has given careful thought to setting a sustainable pace of growth for EVs. It is ambitious to be sure, but also careful not to try to grow too fast. The rate at which Tesla can grow and the rate at which it can reduce costs are linked.

So Tesla is freely flowing and evolving. Steadily declining production costs are the fruit of doubling cumulative production.
 
#5,845
jhm said:
Very interesting. I think this applies perfectly to the idea of an experience curve in manufacturing. This curve shows how the cost of producing a unit decreases at a consistent rate with the doubling of cumulative number of units produced. For example the cost per kWh of batteries declines, say, 15% as the cumulative production doubles. (Not sure 15% is the right rate for batteries, but it is a pretty typical rate.) The cost of a good is the resistance or friction in production. As the cumulative volume doubles, the whole supply chain and manufacturing process learns and becomes more efficient. Imaging each little segment in the larger process also declining 15% as experience doubles. So if this experience curve applies to subprocesses, it certainly applies to combinations of pricesses. So the flow through the entire supply chain gets more efficient and the cost of goods come down accordingly.

One implication of the experience curve is that if annual production grows at about the same rate, exponential volume growth, then the doubling times come at a regular interval. Thus, according to the experience curve the price declines expontially in time too. The exponential decline in price can also encourage consumption to grow exponentially which feeds back to perpetuate exponential growth in productuon. So this is why technologies tend to diffuse at an exponential rate until some limiting factor constrains growth.

So Musk is a master of experience curve processes. At a high level he sees revenue growing at about 50% per year, with unit sales growing 60% or more. If unit sales grow 60% and revenue 50%, this allows unit prices to fall 6.25% = 1 - 1.5÷1.6 in a year. Growing production 60% per year implies doubling ever 1.47 = log (2) ÷ log(1.6) years. So every doubling brings about a 9.08% reduction in unit costs. So a 9% experience curve is built into the heart of this company. Tesla Energy will likely have a much faster experience curve than Tesla Motors (proper). In any case, the whole supply chain needs to flow at this pace as well.

It is interesting that bears frequently press the idea that if Tesla wasn't demand constrained, it would be growing faster. This underestimates the challenge of growing an entire supply chain along with Tesla's own manufacturing at rates above 50%. The growth in production needs to be balanced with achieving something like a 6% annual reduction in production costs. To try to grow faster can inflate costs in the short run and make doubling times harder to reach. This is fairly abstract, but I do think that Musk has given careful thought to setting a sustainable pace of growth for EVs. It is ambitious to be sure, but also careful not to try to grow too fast. The rate at which Tesla can grow and the rate at which it can reduce costs are linked.

So Tesla is freely flowing and evolving. Steadily declining production costs are the fruit of doubling cumulative production.
Click to expand...

That's an interesting way of looking at it and would line up nicely with their goals. I would suggest that they are production/demand constrained to the point at which they want to be. As they need to flex muscles to grow demand more they take actions to allow that to happen... E.g. open a new store, release a new feature, expand to a new country, referral program, supercharger expansion, etc... If they open a new store did they do it because they need the demand? Are they building for future demand? Is it just because they wanted those people to be able to experience their product? Maybe a little of all three. The product sells itself so standing up a store could be so people get exposure where there is none or it is limited and then demand goes up.

I think when we say production constrained, we are generally meaning it to say that of all the methods they are pushing to sell product it is generating more sales than they have product. It is in their best interest to balance this.

You need enough demand to tap in "at will" for when you have situations like Q4. Strange how version 7 came out right when they needed more sales... Coincidence? But at the same stretch you don't want to over generate needless demand. This makes people want your product, but then get frustrated that they can't get one and they get mad and go somewhere else. That is the worst situation because these are sales you are littlerally throwing away that one way or another you paid for "advertising" to draw them in. You don't want this.

So in the endless debate about demand vs production constrained and tapping customers "at will" one needs to look at their current customer exposure and how costly it is for them to draw in more customers. While a store is considered operations, it is your first level advertising and they are not free. Autopilot is considered R&D and manufacturing costs, but it is also a form of advertising and it costs not just money but development time. So clearly they can't release more than 1 "autopilot" wow moment but on around a yearly cycle (the last one was the D event). So what is the cost per customer to draw in an untapped market. If this remains low then you could feasibly say they are production constrained because the cost to get new customers is so low you just throw a pile of cash at the problem and it goes away. When that problem hits a certain cost threshold (I have no clue how to estimate that) then it becomes unprofitable for Tesla to pursue additional customers and they become demand constrained... As in they can't just throw money at the issue. As it relates to the Model S this is ultimately the number of people that can afford a 70k-150k car and are in the market for a new car of this type (large passenger sedan).
 
Last edited:
#5,847
VIN 4xx completed production, VIN 7xx entering production. Sounds like where we all wanted to be in December, but getting on track. This seems to imply around 300 a week, with fewer issues and tracking higher. As process improves and less time is spent in inspection, they should hit 500 a week in March. After the doom and gloom of January, this is better than I was expecting. If they hit April approaching 600 or more, they can be on track for 1600 vehicles a week, or 20,800 for Q2. A good model 3 reveal with a big order turnout and over 20,000 cars in Q2 will destroy the short thesis again until late 2017 model 3 ramp.


stealthology said:
You keep flip flopping ;)

Or are you still long?

The calm before the storm.. Anyone think there's a pretty high probability that if the line is currently stopped or just about stopped, that they are making tooling improvements etc. before they unleash the floodgates?
Click to expand...
 
#5,849
Electrifying said:
Hmm, if you believe in 5 years TSLA will trade at $1000, what difference does it make? If you don't believe it will be at $1000 within 5 years, you should not buy TSLA. Speaking as someone who bought common stocks at $30, $100, $200, $280, $260, $230, $170. Trading TSLA short term is risky based on my experience losing tens of thousands trading TSLA options within last few years.
Click to expand...

i just had to reply and say that you and I have almost identical purchase histories... That's just creepy ... And cool!!
 
#5,850
Very interesting calculations. I made some extrapolation on your calculations and would appreciate if you can check them out.

Still assuming 50% revenue growth per year and making it a constant. Making volume growth a variable. ASP falls as a function same as yours. Not sure how you arrived with 9.08% reduction in unit cost per double volume but I kept it and then transformed it into per annum. Then I calculated the gross profit per unit per annum. Multiplying this number with the volume I get the gross profit. So with a 9% experience curve, 60% volume growth is the balancing point. Less growth in volume increases the total gross profit but if falls below 50%, ASP has to be constantly growing which is not realistic unless they introduce new product with higher ASP to begin with. Growth beyond 60% will actually decrease gross profit and limit the company's ability for future expansion and investments. I wonder if you got the 9% with a similar method?

If we assume a 15% learning curve, the optimal point of growth in terms of unit sale would be 69%.

jhm said:
Very interesting. I think this applies perfectly to the idea of an experience curve in manufacturing. This curve shows how the cost of producing a unit decreases at a consistent rate with the doubling of cumulative number of units produced. For example the cost per kWh of batteries declines, say, 15% as the cumulative production doubles. (Not sure 15% is the right rate for batteries, but it is a pretty typical rate.) The cost of a good is the resistance or friction in production. As the cumulative volume doubles, the whole supply chain and manufacturing process learns and becomes more efficient. Imaging each little segment in the larger process also declining 15% as experience doubles. So if this experience curve applies to subprocesses, it certainly applies to combinations of pricesses. So the flow through the entire supply chain gets more efficient and the cost of goods come down accordingly.

One implication of the experience curve is that if annual production grows at about the same rate, exponential volume growth, then the doubling times come at a regular interval. Thus, according to the experience curve the price declines expontially in time too. The exponential decline in price can also encourage consumption to grow exponentially which feeds back to perpetuate exponential growth in productuon. So this is why technologies tend to diffuse at an exponential rate until some limiting factor constrains growth.

So Musk is a master of experience curve processes. At a high level he sees revenue growing at about 50% per year, with unit sales growing 60% or more. If unit sales grow 60% and revenue 50%, this allows unit prices to fall 6.25% = 1 - 1.5÷1.6 in a year. Growing production 60% per year implies doubling ever 1.47 = log (2) ÷ log(1.6) years. So every doubling brings about a 9.08% reduction in unit costs. So a 9% experience curve is built into the heart of this company. Tesla Energy will likely have a much faster experience curve than Tesla Motors (proper). In any case, the whole supply chain needs to flow at this pace as well.

It is interesting that bears frequently press the idea that if Tesla wasn't demand constrained, it would be growing faster. This underestimates the challenge of growing an entire supply chain along with Tesla's own manufacturing at rates above 50%. The growth in production needs to be balanced with achieving something like a 6% annual reduction in production costs. To try to grow faster can inflate costs in the short run and make doubling times harder to reach. This is fairly abstract, but I do think that Musk has given careful thought to setting a sustainable pace of growth for EVs. It is ambitious to be sure, but also careful not to try to grow too fast. The rate at which Tesla can grow and the rate at which it can reduce costs are linked.

So Tesla is freely flowing and evolving. Steadily declining production costs are the fruit of doubling cumulative production.
Click to expand...
 
#5,851
Another production P90D X delivered over last weekend. VIN 2xx. The delivery report is still sporadic, doesn't sound like volume delivery of X.
http://www.teslamotorsclub.com/show...duction-P90D?p=1375454&viewfull=1#post1375454

But it looks a lot of signature X hasn't been delivered yet :confused:
http://www.teslamotorsclub.com/show...del-X-owners-NOT-receive-their-car-yet/page15

I think the material good X news should come after all signature X being delivered. Even TSLA rally $14 today and potentially more tomorrow, but without good X news, it'll most likely to fade out and provide opportunity to accumulate.
 
Last edited:
#5,852
everman said:
On my phone but here is an interesting article linked to by the VP of the Gigafactory regarding profitability achieved in Q1.

http://www.forbes.com/sites/jeffmcm...ts-first-quarter-elon-musk-says/#17d8c2016ab4
Click to expand...

Thanks. Good to know GF is ready...

Found another very good article there by the same author on the advantage of EVs over ICE cars and future mobility:
[URL="http://www.forbes.com/sites/jeffmcmahon/2016/02/18/electric-vehicles-will-triumph-because-theyre-better-gm-veteran-says/?utm_campaign=yahootix&partner=yahootix#40e4bff53048"]Electric Vehicles Will Triumph Because They're Better, GM Veteran Says[/URL]
 
#5,855
jhm said:
...

So Musk is a master of experience curve processes. At a high level he sees revenue growing at about 50% per year, with unit sales growing 60% or more. If unit sales grow 60% and revenue 50%, this allows unit prices to fall 6.25% = 1 - 1.5÷1.6 in a year. Growing production 60% per year implies doubling ever 1.47 = log (2) ÷ log(1.6) years. So every doubling brings about a 9.08% reduction in unit costs. So a 9% experience curve is built into the heart of this company. Tesla Energy will likely have a much faster experience curve than Tesla Motors (proper). In any case, the whole supply chain needs to flow at this pace as well.

...

So Tesla is freely flowing and evolving. Steadily declining production costs are the fruit of doubling cumulative production.
Click to expand...

Moore's Law strikes again! 1.47 years is pretty close to 18 months. Interesting!
 
#5,858
chickensevil said:
That's an interesting way of looking at it and would line up nicely with their goals. I would suggest that they are production/demand constrained to the point at which they want to be. As they need to flex muscles to grow demand more they take actions to allow that to happen... E.g. open a new store, release a new feature, expand to a new country, referral program, supercharger expansion, etc... If they open a new store did they do it because they need the demand? Are they building for future demand? Is it just because they wanted those people to be able to experience their product? Maybe a little of all three. The product sells itself so standing up a store could be so people get exposure where there is none or it is limited and then demand goes up.

I think when we say production constrained, we are generally meaning it to say that of all the methods they are pushing to sell product it is generating more sales than they have product. It is in their best interest to balance this.

You need enough demand to tap in "at will" for when you have situations like Q4. Strange how version 7 came out right when they needed more sales... Coincidence? But at the same stretch you don't want to over generate needless demand. This makes people want your product, but then get frustrated that they can't get one and they get mad and go somewhere else. That is the worst situation because these are sales you are littlerally throwing away that one way or another you paid for "advertising" to draw them in. You don't want this.

So in the endless debate about demand vs production constrained and tapping customers "at will" one needs to look at their current customer exposure and how costly it is for them to draw in more customers. While a store is considered operations, it is your first level advertising and they are not free. Autopilot is considered R&D and manufacturing costs, but it is also a form of advertising and it costs not just money but development time. So clearly they can't release more than 1 "autopilot" wow moment but on around a yearly cycle (the last one was the D event). So what is the cost per customer to draw in an untapped market. If this remains low then you could feasibly say they are production constrained because the cost to get new customers is so low you just throw a pile of cash at the problem and it goes away. When that problem hits a certain cost threshold (I have no clue how to estimate that) then it becomes unprofitable for Tesla to pursue additional customers and they become demand constrained... As in they can't just throw money at the issue. As it relates to the Model S this is ultimately the number of people that can afford a 70k-150k car and are in the market for a new car of this type (large passenger sedan).
Click to expand...

All aspects of the enterprise must grow in a balanced way. Supply chain and customer base are just opposite ends of the same process. Demand must be carefully cultivated just as the supply chain is carefully cultivated. You may think of customers as revenue suppliers. So it is all one long production flow. From this perspective it is simply bottleneck which are problematic. Should finding willing customers become so difficult as to require other parts of the process flow to slow down, this is being demand constrained. It's a bottleneck of sales. So far I have not seen it. There is a little ebb and flow always, but that is just normal flow. The evolutionary theory we are talking about says that this flow will deepen and become more efficient over time.
 
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