Short-Term TSLA Price Movements - 2016

[Fallenone]

One word: cost.

Being real world 200 mile electric provides the convenience of home charging for the base version and makes it ideal any purpose for 90% of the time already. Throwing in AP would significantly differentiate it from the crowd and the margin on AP is super high since the hardware is relatively cheap and all the premium is in the software. Everything else like big windshield, unnecessary large batteries, super high HP and 0-60 (by super high I mean exceeding the top ICE car on the same price) can go to options but not the base version. I think Model 3 might even have regular door handles to make it easier and more reliable for mass production. But given the 0 profile handle seems already been a Tesla thing, they might continue have this in the 3.

If model 3 can't get a gross margin over 10% within a year or two, market won't take it well. Because all those ICE companies are making more than that. One selling point of the Tesla story is they make much higher gross margin.

I understand how people are disagreeing on specifics but I don't understand why everyone thinks that Tesla and Elon are going to shoot for the minimum acceptable car. That's in conflict with their mission statement, and goes against everything they have done in the past. They will be able to make a ton on AWD, P and L variants and bigger packs.

 

[Cobos]

I fear you might very well get disappointed, as I very much doubt SuC and AP will be in the base price. Optional, for sure but not in the 35k version. Pricing probably in line with earlier 2k for lifetime SuC option and a few K$ for the optional tech pack including AP.
I also expect the smallest / base pack size to be less then 70 kWh capacity.

And I do not think that pricing model will stop many buyers.

AP is probably an option in the $35k version but the hw is included. How about a limited SC access in the base model. Like the first x years are free or the first xx kWh/year is included and you add more to your account online. A bit like a dataplan for a cellphone. There is communication between the SC and the car anyway before it starts charging, so billing that to your account should be a hard problem to solve? That way Tesla can also stop taxi drivers from using the free fuel with the cheaper Model 3.

Cobos

 

[MitchJi]

And I do not think that pricing model will stop many buyers.

If you think that they have that as a goal that's fine but then IMO you should also be disagreeing with the posts stating that the reservation numbers will be so high that they will impact the SP.

 

[roblab]

AP is probably an option in the $35k version but the hw is included. How about a limited SC access in the base model. Like the first x years are free or the first xx kWh/year is included and you add more to your account online. A bit like a dataplan for a cellphone. There is communication between the SC and the car anyway before it starts charging, so billing that to your account should be a hard problem to solve? That way Tesla can also stop taxi drivers from using the free fuel with the cheaper Model 3.

Cobos

I figure, since Tesla connects to the car, the car will allow or disallow charging according to firmware from Tesla. It could be that Tesla will let people pay for SC for a year at a time (what, maybe $200), call the car, allow charging, the year is up, charging is not allowed. I think they ought to charge extra for the time and billing and other garbage if they do that.

I can't see the hassle of trying to bill for every charge. And there are people out in the world who feel they can't afford a whole year, and will complain. Listen. For those folk, they have J1772 chargers where you can wait 2-4 hours and get the charge you need and pay $5 an hour, or plug into a 14-50 outlet, and pay the RV park $10.

I think, every time I use it, that SC is cheap. I can hardly believe the service.

Taxi drivers could not charge unless the car allowed it. Sure, plug in. The car won't handshake. Charging doesn't happen. If the SC privilege gets abused, Tesla should have the right to turn it off. For some reason, "poor people" think they have the right to abuse these things. I worry about all the "poor people" (people who think they are poor) buying Model 3, thinking they deserve more for the same dollar.

 

[Hogfighter]

Now short interest has risen from 23 million shares in June to 34 million shares.

That truly is a lot of pressure on the stock price. 34 million shares is quite a departure from the norm of the mid 20's that we've seen, especially since the fundamentals haven't changed considerably (demand, growth, etc.). Eventually there will be a reversion to the norm as short sellers don't regularly hold their short position for years. We really need (1) astounding Model 3 reservation numbers, and (2) good news from the Q2 shareholder letter regarding FCF positive.

 

[MitchJi]

One word: cost.

Being real world 200 mile electric provides the convenience of home charging for the base version and makes it ideal any purpose for 90% of the time already. Throwing in AP would significantly differentiate it from the crowd and the margin on AP is super high since the hardware is relatively cheap and all the premium is in the software. Everything else like big windshield, unnecessary large batteries, super high HP and 0-60 (by super high I mean exceeding the top ICE car on the same price) can go to options but not the base version. I think Model 3 might even have regular door handles to make it easier and more reliable for mass production. But given the 0 profile handle seems already been a Tesla thing, they might continue have this in the 3.

If model 3 can't get a gross margin over 10% within a year or two, market won't take it well. Because all those ICE companies are making more than that. One selling point of the Tesla story is they make much higher gross margin.

You sound k like you believe that Tesla can't compete with a Yugo in a 35k car. If you don't think Tesla can get those margins with the features I listed don't worry about it, you will still make money on TSLA.

We really need (1) astounding Model 3 reservation numbers...

And the posts claiming that the M3 will be ok, or good enough are basically giving reasons why that won't happen.

 

[Hogfighter]

I figure, since Tesla connects to the car, the car will allow or disallow charging according to firmware from Tesla. It could be that Tesla will let people pay for SC for a year at a time (what, maybe $200), call the car, allow charging, the year is up, charging is not allowed. I think they ought to charge extra for the time and billing and other garbage if they do that.

I can't see the hassle of trying to bill for every charge. And there are people out in the world who feel they can't afford a whole year, and will complain. Listen. For those folk, they have J1772 chargers where you can wait 2-4 hours and get the charge you need and pay $5 an hour, or plug into a 14-50 outlet, and pay the RV park $10.

I think, every time I use it, that SC is cheap. I can hardly believe the service.

Taxi drivers could not charge unless the car allowed it. Sure, plug in. The car won't handshake. Charging doesn't happen.

I'd rather see Tesla charge an hourly fee for being plugged into a SC when fully charged!!!!!!

 

[BobSk]

I fear you might very well get disappointed, as I very much doubt SuC and AP will be in the base price. Optional, for sure but not in the 35k version. Pricing probably in line with earlier 2k for lifetime SuC option and a few K$ for the optional tech pack including AP.
I also expect the smallest / base pack size to be less then 70 kWh capacity.

And I do not think that pricing model will stop many buyers.

I think that makes sense. Tesla wants and deserves 25~30% gross margin. If the base model 3 is loaded with great features, it will have high demand but Tesla will not make much money. That will hurt the long-term mission. The best approach is to have a decent base model (slightly more than 200 miles range) with basic features, on top of that offer lots of great features as options.

 

[mmd]

For those obsessed with short sellers and short interest:
Please do read up what short interest may or may not imply. I can't post the entire material (copyright issues), but here is the summary from the link.

Most commonly, investors will be shorting with the intent of gaining on a drop in the share's price. Some investors may be shorting against the box to hedge an already held position from losing any value. Brokerage firms in need of shares to sell to their clients will borrow stock from another firm, effectively going short and selling the borrowed shares to their clients. So while it may seem like a very negative sign for a company when its stock has a large short interest, it is generally very difficult to predict the stock's future price movement because the reasoning behind shorts is never completely clear.

Read more: What percentage of a company's float can be shorted? | Investopedia http://www.investopedia.com/ask/answers/05/shortexceed50.asp#ixzz42XSRhtST
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[jhm]

I'd rather see Tesla charge an hourly fee for being plugged into a SC when fully charged!!!!!!

I'd like to see Model 3 move to a simple pay as you go plan based on minutes. You get 1000 SC minutes with the purchase of the car. Thereafter, you buy a block of 500 minutes for $100. In a Model 3, 500 minutes should be enough for 2000 to 4000 miles depending on how much roping off one does. Topping off and parking ties up the infrastructure such that Tesla has to spend more on infrastructure to maintain service levels for all customers. So the marginal cost of using an SC really should go up the more one tops off. Under this block pricing, the cost will be just 2.5 to 5 cents per mile. So this is not meant to be a money maker. It's just enough marginal cost to discourage abuse.

 

[BobSk]

I'd rather see Tesla charge an hourly fee for being plugged into a SC when fully charged!!!!!!

I like this idea. It will help even if it's a small fee.

 

[hobbes]

IIRC Elon said a while ago supercharging included also for future cars (with regard to the 3)? Or is this outdated?

Did some searching and he did say something to that effect in Munich in Jan 2014:

Got something from 2 years ago: Elon Musk Confirms Free Supercharging for Tesla Gen 3 (Model E) - Inside EVs

Discussion on TMC here (among other places):

Elon did not announce that all future cars would have free SuperCharging. He said "the general principal of having free long distance travel, we want to try to keep that consistent for all future vehicles"

So, again, I think it is most likely going to happen, but he did not promise or announce this. Given the scrutiny Tesla receives from its critics, I think this is more than a technicality that he expressed aspiration but not a promise.

There is a youtube video but strangely can´t find the quote there.

My take: They won´t go through the trouble of individual billing. I think the SC network is still one of the main advantages for Tesla over the competition and they´ll throw in free SC access, but that´s a 50/50 guess.

 

[Fallenone]

Let's just do some calculations.

The average drive train cost for ICE is around $7.5k (Electric Cars To Cost Same As ICE Within A Decade) and this is the average including SUV and trucks so I guess the drive train for a BMW 3, which is considered as an entry level luxury car that Model 3 is being widely compared to, is about that much too because it should be better than an average sedan. The BMW 3 series MSRP starts from about $33k. BMW's gross margin is about 20% and I think the low end of its product like the BMW 3 would be about 15%. That makes the cost of the total car $28.7k. Minus $7.5k for the drive train they have about $21k for the rest of the car.

Even if Tesla reaches your own optimistic estimate (25% GM on TE) of $100/kWh pack cost by end of 2017, a 70 kWh pack will cost over $7000. Adding the inverter and motor (a single one) and other components of the drive unit will easily bring the cost of the part of the car that is equivalent to ICE's drive train to $10k. If we assume 10% gross margin, the cost is $31.8k. So now Tesla is left with about the same money for the rest of the car. Even with no special Tesla features, in 2017 their production is not on the same level with BMW so suppliers are not likely to give them cheaper prices on the same parts such as chairs, air-conditioner, etc. Their experience in mass market manufacturing is also a lot less than those ICE companies so they are not likely to be more efficient in making the cars as BMW does in 2017. As almost any new products, the first year or two are usually met with the most issues in the product that needs to be fixed by the manufacturer so there's additional cost here. Given these two disadvantages that are very likely to be true in the early years of Model 3, how can one expect they can add in more features in the base version and still make money? Lastly, I think 2017 battery cost being $100/kWh is too optimistic.

In fact, I would expect them selling the base version without all the Tesla-ish features of a 50 kWh battery pack in 2017 almost at cost. That's why they said they will prioritize delivering more loaded ones. And that's why I think AP will be an option not included in the base.

On the other hand I wish to be clear. I have full confidence battery cost will fall below $100 kWh. Model 3 base version (with 70 kWh and AP) gross margin will achieve higher than 15%. But just not in 2017 or 2018.

You sound k like you believe that Tesla can't compete with a Yugo in a 35k car. If you don't think Tesla can get those margins with the features I listed don't worry about it, you will still make money on TSLA.

And the posts claiming that the M3 will be ok, or good enough are basically giving reasons why that won't happen.

 

[BobSk]

I'd rather see Tesla charge an hourly fee for being plugged into a SC when fully charged!!!!!!

I like the idea, but I don't think Elon will do it (hourly fee after the car is fully charged). He wants things to be simple and convenient. That fee will be considered annoying.

 

[hobbes]

And I do not think that pricing model will stop many buyers.

Have to disagree. It is a big difference psychologically if you don´t feel like you´re paying when you´re charging (even though you obviously payed in advance).

- - - Updated - - -

I'd rather see Tesla charge an hourly fee for being plugged into a SC when fully charged!!!!!!

Or: start discharging the car again after a short while :scared:! Unlocking the cable and using summon extensions to move the car out of the way might also do the trick.

 

[austinEV]

....
Or: start discharging the car again after a short while :scared:! ....

Brilliant. We have been wondering when they would install batteries at supercharging stations. Well there they are, parked right in the stalls overstaying their welcome. Want a 200kW ultracharge? Take it from a malingering lollygagger for an extra $5.

 

[Fallenone]

In fact, with AP at its current stage (summon ability at low speed without anyone in the car) and the snake-robot charger they are developing, I won't be surprised if in the near future the Supercharger stations do a combination of these two to let the cars that are charged to 80% disconnected, drive itself to a parking spot nearby, send a notification to the owner, a car waiting in line comes up, connect, and charge. Repeat. All these done with the owners away if they want to.

I like the idea, but I don't think Elon will do it (hourly fee after the car is fully charged). He wants things to be simple and convenient. That fee will be considered annoying.

 

[dc_h]

I don't see an issue with monetizing charging. Having the option for pay by drink or lifetime $2500 fee seems like a good option. A lot of 3's are going to be city cars, but the owner might want to get on the road once or twice a year. $2500 is more important to a $40,000 car buyer than to a 100,000 car buyer. Apple pay and Android payment systems are automated and simple. The car is a big computer on wheels already that can be leveraged for more than AP.

In fact, with AP at its current stage (summon ability at low speed without anyone in the car) and the snake-robot charger they are developing, I won't be surprised if in the near future the Supercharger stations do a combination of these two to let the cars that are charged to 80% disconnected, drive itself to a parking spot nearby, send a notification to the owner, a car waiting in line comes up, connect, and charge. Repeat. All these done with the owners away if they want to.

 

[Papafox]

I don't see an issue with monetizing charging. Having the option for pay by drink or lifetime $2500 fee seems like a good option. A lot of 3's are going to be city cars, but the owner might want to get on the road once or twice a year. $2500 is more important to a $40,000 car buyer than to a 100,000 car buyer. Apple pay and Android payment systems are automated and simple. The car is a big computer on wheels already that can be leveraged for more than AP.

In the past, Elon has stated that any car company that wants to partner on the supercharger network needs to adapt Tesla's pay once, use forever model. For this reason, I expect Tesla to maintain the model, but perhaps put in restrictions against regularly using the same supercharger for local charging. When Steve Jurvetson spoke at TMC connect a few years ago, he said that the cost of supercharger electricity per car was typically quite low and that the initial payment for supercharger access would cover the cost of electricity for that car over the years.

Nonetheless, if Tesla was to offer a choice of unlimited/pay once use or pay-as-you-go, this approach would create problems because the pay-once model assumes that many of the participants will be people who seldom do long-distance driving in their Teslas and the people who allow this payment method to work would opt out of the pay-once method. The pay-once system would likely no longer work well because it would be skewed heavily towards those who drive long-distance often.

 

[dc_h]

I think the one time pay has helped fund the global SC network. I don't think Tesla will need to rely on that by the time the Model 3 is out. This would also allow make the SC network part of Tesla Energy and monetize the system. The up front payment was critical to building the global system, it needed\needs to be that way for the Model S/X world, but I don't think it will make sense when electric cars are much more common and the base network is built. The 2500 up front has probably discouraged other manufacturers from joining the network, which is probably the way Elon would like it for now. Once the model 3 is out, then he is going to want to pull the industry along. I think Elon has enough history with payments systems to make him pretty confident about embedding a payments system into the charging network.

In the past, Elon has stated that any car company that wants to partner on the supercharger network needs to adapt Tesla's pay once, use forever model. For this reason, I expect Tesla to maintain the model, but perhaps put in restrictions against regularly using the same supercharger for local charging. When Steve Jurvetson spoke at TMC connect a few years ago, he said that the cost of supercharger electricity per car was typically quite low and that the initial payment for supercharger access would cover the cost of electricity for that car over the years.

Nonetheless, if Tesla was to offer a choice of unlimited/pay once use or pay-as-you-go, this approach would create problems because the pay-once model assumes that many of the participants will be people who seldom do long-distance driving in their Teslas and the people who allow this payment method to work would opt out of the pay-once method. The pay-once system would likely no longer work well because it would be skewed heavily towards those who drive long-distance often.