Short-Term TSLA Price Movements - 2016

[dakh]

Supercharging network is a bit of a weird deal. Gas stations are driven by market forces in each locality. Superchargers are not.

What exactly are you buying for a fixed supercharging fee is a bit of a strange beast. For example (not saying that's gonna happen), if Model 3 has supercharging option but there's no build up of supercharging network than the value of the option for existing Model S owners is diminished (higher probability of having to stand in line).

I think the current implementation is very simplistic and will have to evolve somehow to put the right checks and balances in place. Simply adding SC for life to a car is a big unknown to both customer and company. This might be good for early adopters but I am having a hard time with the uncertainty of what such a setup would materially mean 10 years down the road.

 

[eloder]

Be ok, needs to include? Agree, compelling no.

JB recently said that people will be surprised by the features that they will be able to include in the M3.

Large windshield, AP and super charger access seem pretty likely candidates and IMO adding in a 70 kWh base pack would make a compelling package unless the car is a dog.

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.

Software-heavy features, there's really no limit. The touchscreen, AP hardware, some level of supercharging, touch-activated doors, autopilot--these cost Tesla extremely little to put but put them miles ahead of the competition.

I highly doubt the windshield or FWD make it onto a Model 3. I don't think many mass-market consumers will appreciate a windshield that may result in some crazy insurance rates or will be a pain to replace/repair.

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.

Probably getting too off topic, but I imagine that long-distance supercharging (i.e., free SC access >50 miles from home, ~2-3 SC access/month locally) will be free on a M3, with separate plans available for unlimited local SC usage. Need a solution for apartment dwellers, but also need a solution to ensure the SC network is actually usable.

 

[sunhelm]

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.

I agree with you on this. AP will be an additional cost option. However, since AP is such a compelling feature, and since highly optioned cars will be rolled out first, by the time non-AP optioned cars are available for order, the user experience of driving with AP will be so convincing that this would be the minority. It's even true now for Model S where Wheeler mentioned a lot of current customers trading up their cars to AP.

I think this is also anticipated by Elon and all so they can stand behind the 35K base (which would be at razor thin margins) but the must have features/convenience of AP will win out and this is where they can charge reasonably higher margins. This is one of their strong value propositions that no other mass market car can offer. So they will exact a premium on this to meet their margins for the 3.

 

[Fallenone]

I have no problem with monetizing superchargers too. A one time fee activation as an option like they used to have with S60 sounds very reasonable.

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.

- - - Updated - - -

Exactly. I think most M3 buyers would pay for AP as an option. And also if AP is included in base, is that fair to S and X buyers? Some years down the road, AP might become a staple, but not in 2017 IMO.

I agree with you on this. AP will be an additional cost option. However, since AP is such a compelling feature, and since highly optioned cars will be rolled out first, by the time non-AP optioned cars are available for order, the user experience of driving with AP will be so convincing that this would be the minority. It's even true now for Model S where Wheeler mentioned a lot of current customers trading up their cars to AP.

I think this is also anticipated by Elon and all so they can stand behind the 35K base (which would be at razor thin margins) but the must have features/convenience of AP will win out and this is where they can charge reasonably higher margins. This is one of their strong value propositions that no other mass market car can offer. So they will exact a premium on this to meet their margins for the 3.

 

[JRP3]

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.

No, I think the difference is many of us believe there is a much higher demand for a more basic but still compelling long range EV from Tesla, at least as the base model. This will also encourage other people to option up the base model, increasing profit margins, while still allowing Tesla to keep to their $35K price target for those moving up market from $20-$25K vehicles who would be more than happy with the base package.

 

[blakegallagher]

A friend who works at tesla thinks they will keep the amount price at 35k for a long time but I doubt it. Put me in the camp that believes demand will be strong enough that simple supply/demand will dictate they raise prices (which will help pay for the next variation of car which will eventually lead to model 4 ie cheaper car. )

 

[Zhelko Dimic]

We're talking about a board game. It's not that serious. There hasn't even been any physical threats yet.

Why is Jesse banned?
Moderator, if it's because of this comment, it feels like overreaction. In any case, I'd like to see Jesse back ASAP. There are many smart people on this board, but in terms of daily price movement and dynamics of the market, I feel he's unmatched and most reliable contributor. I'm just back to 58% of my portfolio, and I don't want to go back to 23%, that was painful. Really. Please let him back here, please? Options that comprise nice chunk of my portfolio dropped _today_ from $9 to $6.5. I'd like to know what levels to observe...

 

[sundaymorning]

Why is Jesse banned?
Moderator, if it's because of this comment, it feels like overreaction. In any case, I'd like to see Jesse back ASAP. There are many smart people on this board, but in terms of daily price movement and dynamics of the market, I feel he's unmatched and most reliable contributor. I'm just back to 58% of my portfolio, and I don't want to go back to 23%, that was painful. Really. Please let him back here, please? Options that comprise nice chunk of my portfolio dropped _today_ from $9 to $6.5. I'd like to know what levels to observe...

Dont worry it'll likely bounce tomorrow, oil is up 2%. If you rely on other people for your investment strategy, chances are, you'll go negative. The market moves up and down without any logic sometimes. People here spill out fancy terminologies and graphs, but in the end, no one really knows what tomorrow will bring. Otherwise, they wouldn't be here. If you believe Jesse will save your portfolio, you can PM him directly. I enjoy reading Jesse's posts, but no one influences my strategy anymore. Buy long and you won't have to worry.

 

[Papafox]

I too look forward to seeing both Jesse and Julian posting here. They provide a needed balance of ideas when they're not going after each other. Nonetheless, I understand a moderator's concern. Jesse is willing to pour salt on the wound and Julian has overreacted in the past. Here's hoping both of these intelligent individuals settle down to sharing their views without feeling the need to go after each other.

Consider these accomplishments:
While TSLA was still above 200, Jesse spoke of caution and the a concern about the macro environment before the plunge to 141. This was extremely valuable info.
While TSLA was down in the cellar, Julian spoke of a major resurgence in stock price, beginning in mid-February. He outlined the flaws in the short thesis and helped many forum members to keep from bailing as share prices plunged and later recovered. This was extremely valuable info.

Nobody on this forum is doing what each of these individuals is doing.

 

[Tenable]

I too look forward to seeing both Jesse and Julian posting here. They provide a needed balance of ideas when they're not going after each other. Nonetheless, I understand a moderator's concern. Jesse is willing to pour salt on the wound and Julian has overreacted in the past. Here's hoping both of these intelligent individuals settle down to sharing their views without feeling the need to go after each other.

Consider these accomplishments:
While TSLA was still above 200, Jesse spoke of caution and the a concern about the macro environment before the plunge to 141. This was extremely valuable info.
While TSLA was down in the cellar, Julian spoke of a major resurgence in stock price, beginning in mid-February. This was extremely valuable info.

Nobody on this forum is doing what each of these individuals is doing.

Agreed!

 

[Zhelko Dimic]

Dont worry it'll likely bounce tomorrow, oil is up 2%. If you rely on other people for your investment strategy, chances are, you'll go negative. The market moves up and down without any logic sometimes. People here spill out fancy terminologies and graphs, but in the end, no one really knows what tomorrow will bring. Otherwise, they wouldn't be here. If you believe Jesse will save your portfolio, you can PM him directly. I enjoy reading Jesse's posts, but no one influences my strategy anymore. Buy long and you won't have to worry.

I've never listened to anybody, and that's why I found myself at 23% at some point. I deeply regret not listening to Jesse around $200

- - - Updated - - -

While TSLA was still above 200, Jesse spoke of caution and the a concern about the macro environment before the plunge to 141. This was extremely valuable info.
While TSLA was down in the cellar, Julian spoke of a major resurgence in stock price, beginning in mid-February. He outlined the flaws in the short thesis and helped many forum members to keep from bailing as share prices plunged and later recovered. This was extremely valuable info.

Yup, Jesse speaking of macro around $200 was priceless
Honestly, I don't need Julian to lay down same arguments again and again. And I didn't need him to tell me at $150 to not be scared, it was quite clear majority of the damage was done.
I entered with new money around $150, and here are my TSLA positions since, but that's only new money, old one is still hurting bad

 

[Gerardf]

I see 208,79 Share-Price pre-market

Main European markets up 1,7% to almost 3 %

 

[Drax7]

Dont worry it'll likely bounce tomorrow, oil is up 2%. If you rely on other people for your investment strategy, chances are, you'll go negative. The market moves up and down without any logic sometimes. People here spill out fancy terminologies and graphs, but in the end, no one really knows what tomorrow will bring. Otherwise, they wouldn't be here. If you believe Jesse will save your portfolio, you can PM him directly. I enjoy reading Jesse's posts, but no one influences my strategy anymore. Buy long and you won't have to worry.

Very well said.

 

[hobbes]

I see 208,79 Share-Price pre-market

Main European markets up 1,7% to almost 3 %

Hm. MaxPain still at $202,5 (Max Pain | Maximum-Pain.com). Will we have enough volume to break that?

 

[jhm]

Oil is creeping up to the ridiculous price of $38.5/b. Watch out when it goes above $40/b. IMHO, $40 is unsustainably high given inventory levels. So irrational confidence in oil prices will lead to the next leg down, and Tesla will get punished for the sins of oil traders.

One worry that I have about the stock market becoming so sensitive to movements in oil is that it sets up a situation for market manipulation. Suppose you are a player with influence on the oil make. Hypothetically, suppose you are a certain Russian head. You know that a few diplomatic words about cooperation can give oil traders hope, and a few sharp words can abruptly dash that hope sending oil prices and the whole stock market into the toilet. You can create volatility and easily trade against it. A stock like Tesla is a wonderful vehicle for monetizing that market influence.

So the price of oil in my view is pretty much range bound from about $30 to $40, but it is incrediy volatile. The question for oil traders is how to monetize that volatility. All assets with high sensitivity to oil are prime targets.

 

[ibcs]

As we approach March 31st, how many short term investors are considering putting down a deposit on Model 3 to help the stock price? $1000 could easily be recouped with a strong turnout.

 

[dc_h]

Thanks jhm. Frustrating seeing that Tesla is not correlating to oil, but TSLA is bound pretty tightly by oil. I assume trading algorithms are updated when some variance is perceived, but that could take an irrational market a long time to see the opportunity. Any algo experts want to weigh in on how long it will take program traders to stop trading Tesla in a basket with oil?
My assumption is that there is no person yelling sell TSLA every time oil goes down, or buy Mortimer every time oil is rising, but that there are computer models moving the stock, so that some macro multiple drives the stock until Tesla does something outside of market expectations, such as deliver as many cars as they said they would, or be FCF or have a real Model 3 prototype and get a lot of reservations.

Sort of implies we are hostage to oil until March 31st--with possible exception of bullish Model X deliveries.

Oil is creeping up to the ridiculous price of $38.5/b. Watch out when it goes above $40/b. IMHO, $40 is unsustainably high given inventory levels. So irrational confidence in oil prices will lead to the next leg down, and Tesla will get punished for the sins of oil traders.

One worry that I have about the stock market becoming so sensitive to movements in oil is that it sets up a situation for market manipulation. Suppose you are a player with influence on the oil make. Hypothetically, suppose you are a certain Russian head. You know that a few diplomatic words about cooperation can give oil traders hope, and a few sharp words can abruptly dash that hope sending oil prices and the whole stock market into the toilet. You can create volatility and easily trade against it. A stock like Tesla is a wonderful vehicle for monetizing that market influence.

So the price of oil in my view is pretty much range bound from about $30 to $40, but it is incrediy volatile. The question for oil traders is how to monetize that volatility. All assets with high sensitivity to oil are prime targets.

 

[Dwdnjck]

I drove around the San Diego service center and counted 15 X's, fresh off the truck.

 

[Lump]

Extremely disappointed with the decision to ban Jessie.

 

[Krugerrand]

Extremely disappointed with the decision to ban Jessie.

It's really simply, he needs to play by the forum rules regardless of what he or you or anyone else thinks about them. If he can't play nice, he's going to get banned. Can we move on?