Short-Term TSLA Price Movements - 2016

[jhm]

I read that Employees were going to be able to reserve ahead of the reveal event. If employees get the first vehicles off the line, it'll greatly help the attention to QC initially. Additionally, it could be a PR coup when the first deliveries are for those working the assembly lines for example. While Elon said the higher optioned cars will be prioritized first, they can indeed fit in employee base models in between.

I agree for the reservation priority up until shareholders and employees of vendors. At that point it'll be easier to have a public pool of reservations.

For the record, I am entirely in favor of employees getting first dibs for the reasons above and others. Additionally there are only 15k employees, so the impact on waiting time for every one else is not so great. I think it will be a huge motivational boost to all employees to make the launch a real success.

 

[Curt Renz]

For the record, I am entirely in favor of employees getting first dibs for the reasons above and others. Additionally there are only 15k employees, so the impact on waiting time for every one else is not so great. I think it will be a huge motivational boost to all employees to make the launch a real success.

+1

 

[ibcs]

It's time for the employees to get a benefit too. I think it's an awesome gesture. I've talked to my store manager and he's putting down a deposit. The more the merry!

 

[Ukland Wombat]

@CaptainKirk, I like the idea of pushing employees to the head of the queue. For that gesture they'll make better cars. Isn't that what Henry Ford did?

@jhm, I feel Tesla is expanding into a vacuum even though shorts would have us believe the opposite. There is no credible competition. It's a seller's market. Trying to avoid elitism by trying to satisfy every group and thereby no group all at the same time is like an exercise in socialism. It doesn't work. The answer: charge more for the product. That will put a natural order on things.

 

[everman]

This is sweet. Rising faster than I expected. Looks like we will be going to close that $240 gap if we can break the current downward trendline. Model 3 reveal seem to be the technical event and time that this will be determined.

** By the way, can I reserve with a check? Credit card? Or do I have to bring cash?

PayPal or credit card, one per person.

- source Store reps in Denver

 

[Crowded Mind]

To me, it has become clear that Tesla is taking a very strategic approach to managing quality control during the rollout of Model 3. Originally, I assumed that Tesla was doing in store reservations to take advantage of an opportunity for media coverage. I no longer believe that to be the main intent, when looking at how the prioritization is falling in place. This order of prioritization will create the optimal moat for Tesla's brand when handling the challenges of the Model 3 rollout.

1. Prioritize employees - This ensures familiarity with Tesla and a strong connection and personal stake with the brand, a high-tolerance for issues requiring service, and close proximity to service.
2. Prioritize previous owners - This ensures familiarity with Tesla and a strong connection with the brand, and increases likelihood for a high-tolerance for issues requiring service and close proximity to service.
3. Prioritize in store reservations - This ensures close proximity to service, or a highly enthusiastic customer that is willing to travel significantly for priority. Increased likelihood of strong connection with the brand.
4. Prioritize online reservations - By the time the orders are shipped, Tesla will already be through 3 groups of high-tolerance brand enthusiasts to resolve early production problems.

Elon has said in the past that Tesla doesn't just want to make the best car, but they want to make the best car by an order of magnitude (or something to that effect). I think this is seen in the feature set of the Model X (windshield, air filter, falcon-wings, auto opening doors, individually adjustable second row seats). Clearly they weren't trying to make just the coolest car with the most features, they were trying to exceed that by a longshot. I think for Model 3, they are again going to be targeting an order of magnitude better than the best car in their class and will do that through extreme safety, acceleration (both of which we knew), and reliability. I think this is an early sign of a huge strategic focus on reliability.

As an investor, I am very pleased with the amount of forethought and strategic thinking we are seeing here, 20 months out. And completely unsurprised.

 

[Irishjugg]

I suppose you're talking about EMA? Looks like 200 SMA is still 10+ bucks above where we are now.

Sorry I thought the SMA was at 215. My mistake.

 

[jhm]

@CaptainKirk, I like the idea of pushing employees to the head of the queue. For that gesture they'll make better cars. Isn't that what Henry Ford did?

@jhm, I feel Tesla is expanding into a vacuum even though shorts would have us believe the opposite. There is no credible competition. It's a seller's market. Trying to avoid elitism by trying to satisfy every group and thereby no group all at the same time is like an exercise in socialism. It doesn't work. The answer: charge more for the product. That will put a natural order on things.

Give me a break. I am not calling for any sort of socialism. I am simply saying that those who place their reservation first should be served first. So owners and first time buyers are shown equal respect.

 

[Fallenone]

For the record, I am entirely in favor of employees getting first dibs for the reasons above and others. Additionally there are only 15k employees, so the impact on waiting time for every one else is not so great. I think it will be a huge motivational boost to all employees to make the launch a real success.

I think that 15k+ number includes a lot of blue collar workers on the assembly line and may not be able to afford a Model 3. So it will be even less employee reservations.

 

[The Blue Owl]

I'm not sure if this has been posted before, but Bloomberg has an article on the Model 3 unveiling. The money quote:

First and foremost: There will be a working prototype on site. Chief Executive Officer Elon Musk previously indicated he might not show the full car, which isn't expected to go on sale until 2017 at the earliest. A drivable version at the event might indicate the company is further along than some investors thought.

I wonder what Andrew Left thinks now about the "news flow".

 

[BornToFly]

Give me a break. I am not calling for any sort of socialism. I am simply saying that those who place their reservation first should be served first. So owners and first time buyers are shown equal respect.

As with the Model X, reservation sequence will allow you to configure early, but not necessarily receive the car early. If they tell you at the time of the configuration that the more highly optioned (and profitable) cars will be built first, and you want the less expensive version, you will have to wait. This is no different from what other car makers do, and is necessary with a business that is trying to make a profit so they don't go bankrupt.

 

[BornToFly]

I'm not sure if this has been posted before, but Bloomberg has an article on the Model 3 unveiling. The money quote:



I wonder what Andrew Left thinks now about the "news flow".

I wish I could be the fly on the wall in a room full of shorts right about now....

 

[jhm]

To me, it has become clear that Tesla is taking a very strategic approach to managing quality control during the rollout of Model 3. Originally, I assumed that Tesla was doing in store reservations to take advantage of an opportunity for media coverage. I no longer believe that to be the main intent, when looking at how the prioritization is falling in place. This order of prioritization will create the optimal moat for Tesla's brand when handling the challenges of the Model 3 rollout.

1. Prioritize employees - This ensures familiarity with Tesla and a strong connection and personal stake with the brand, a high-tolerance for issues requiring service, and close proximity to service.
2. Prioritize previous owners - This ensures familiarity with Tesla and a strong connection with the brand, and increases likelihood for a high-tolerance for issues requiring service and close proximity to service.
3. Prioritize in store reservations - This ensures close proximity to service, or a highly enthusiastic customer that is willing to travel significantly for priority. Increased likelihood of strong connection with the brand.
4. Prioritize online reservations - By the time the orders are shipped, Tesla will already be through 3 groups of high-tolerance brand enthusiasts to resolve early production problems.

Elon has said in the past that Tesla doesn't just want to make the best car, but they want to make the best car by an order of magnitude (or something to that effect). I think this is seen in the feature set of the Model X (windshield, air filter, falcon-wings, auto opening doors, individually adjustable second row seats). Clearly they weren't trying to make just the coolest car with the most features, they were trying to exceed that by a longshot. I think for Model 3, they are again going to be targeting an order of magnitude better than the best car in their class and will do that through extreme safety, acceleration (both of which we knew), and reliability. I think this is an early sign of a huge strategic focus on reliability.

As an investor, I am very pleased with the amount of forethought and strategic thinking we are seeing here, 20 months out. And completely unsurprised.

Your interpretation places great emphasis on working out production glitches before reaching the general market. How many cars do you think Tesla needs to produce before it is ready for prime time?

Employees ~ 10k reservations
Owners ~ 90k reservations
In store ~ 100k
Online ~ 200k

So altogether that as maybe 400k before prime time.

So why should a first time buyer bother to place an online reservation? It looks like they may not get their cars until 2019. Moreover, the tax credit may well be gone by that time as well. At least, priductiin bugs will be eliminated. This does not seem like a compelling value proposition. You may as well save your deposit money and buy your call some time in 2019 or 2020 when the annual volume has reached 400k.

I think an unintended consequence is that Tesla owners will be the last beneficiaries of the tax credits while first-time buyers will largely be deprived of that incentive. Does working the bugs out of production make up for that?

 

[ElectricBoogaloo]

I was talking about being given priority in the reservation queue, not the line for entering the event. So this could be on order of 100k reservation that get filled for current Tesla owners before first time Tesla buyers get anything (excluding employees).

So the issue here is how quickly Tesla expands the customer base. If the first 100k Model 3 go to repeat customers and it takes six months to a year before these are delivered, then this policy is delaying the expansion of the customer base by as many months.

Why does this matter? Word of mouth is a key marketing driver for Tesla. Expanding the customer base with first-time buyers will bring word of mouth into new, previously untaps social networks. Selling Model 3 to existing customers will of course generate some word of mouth but that is a small increment to what already exist. By contrast, selling a Model 3 to a first-time customer will touch more people and generate more incremental word of mouth.

I believe Tesla really does need to build out this customer base to take the Model 3 mainstream, and this takes time to build. So I believe a mix of first-time and repeat customers in the first six months of production would best serve Tesla's marketing needs. Without that Tesla may need to use advertising to boost awareness into the mass market.

I think its a fantastic idea to sell to existing/repeat customers. When the roll-out comes, the inevitable quirks and gimmicks wont be as hazardous as it would to the new adopters in the market. Existing customers should be aware of the responsibilities of owning a premium EV and can help ease the roll-out.

 

[Drax7]

Give supreme priority to young blonde women,
the rest can wait or eat cake.

 

[bh1783]

What

Your interpretation places great emphasis on working out production glitches before reaching the general market. How many cars do you think Tesla needs to produce before it is ready for prime time?

Employees ~ 10k reservations
Owners ~ 90k reservations
In store ~ 100k
Online ~ 200k

So altogether that as maybe 400k before prime time.

So why should a first time buyer bother to place an online reservation? It looks like they may not get their cars until 2019. Moreover, the tax credit may well be gone by that time as well. At least, priductiin bugs will be eliminated. This does not seem like a compelling value proposition. You may as well save your deposit money and buy your call some time in 2019 or 2020 when the annual volume has reached 400k.

I think an unintended consequence is that Tesla owners will be the last beneficiaries of the tax credits while first-time buyers will largely be deprived of that incentive. Does working the bugs out of production make up for that?

That's how most businesses work. Reward your best and most loyal customers. This is how airlines operate. First class gets priority for boarding and service. Frequent flyers get all the incentives and upgrades over regular customers.

 

[SBenson]

Your interpretation places great emphasis on working out production glitches before reaching the general market. How many cars do you think Tesla needs to produce before it is ready for prime time?

Employees ~ 10k reservations
Owners ~ 90k reservations
In store ~ 100k
Online ~ 200k

So altogether that as maybe 400k before prime time.

So why should a first time buyer bother to place an online reservation? It looks like they may not get their cars until 2019. Moreover, the tax credit may well be gone by that time as well. At least, priductiin bugs will be eliminated. This does not seem like a compelling value proposition. You may as well save your deposit money and buy your call some time in 2019 or 2020 when the annual volume has reached 400k.

I think an unintended consequence is that Tesla owners will be the last beneficiaries of the tax credits while first-time buyers will largely be deprived of that incentive. Does working the bugs out of production make up for that?

Can Employees and Owners place reservations on behalf of others? Especially close family members like spouse, sons/daughters, parents. How about siblings? Is there a line drawn somewhere?

If it's not strictly limited to 1 per person, I suspect the first two lines can add up to lot more reservations.

 

[jhm]

As with the Model X, reservation sequence will allow you to configure early, but not necessarily receive the car early. If they tell you at the time of the configuration that the more highly optioned (and profitable) cars will be built first, and you want the less expensive version, you will have to wait. This is no different from what other car makers do, and is necessary with a business that is trying to make a profit so they don't go bankrupt.

Sure there are operational and profit based reasons for such distinctions. But what is profit advantage of making first-time buyers wait longer than owners? Both are putting up the same money for the same configuration. Indeed, I believe that the first-time buyer is actually creating more value for Tesla. They do not have a Tesla to trade in and dilute the resale value of a Model S or X. And they have whole new social networks in which to be sharing positive word of mouth. First-time buyer's also have greater opportunities for selling a second vehicle. Just compare on couple with two Model S to another couple with two non-Tesla vehicles. So selling a Model 3 to the first couple is a down sell, but to the second couple you can sell two cars, one now and a second in a couple of years.

I really do believe that conquest sales create more value for Tesla than loyalty sales. Why am I the only one who sees this?

 

[Ukland Wombat]

So why should a first time buyer bother to place an online reservation? It looks like they may not get their cars until 2019. Moreover, the tax credit may well be gone by that time as well. At least, priductiin bugs will be eliminated. This does not seem like a compelling value proposition.

Great point. As a potential first time buyer in the UK, I thought I'd be waiting until 2020. So I have decided not to reserve online. The $1,000 deposit not spent will probably return good gains in TSLA, and all I lose is the pride of owning a desirable and scarce product a little sooner.

 

[jhm]

What


That's how most businesses work. Reward your best and most loyal customers. This is how airlines operate. First class gets priority for boarding and service. Frequent flyers get all the incentives and upgrades over regular customers.

Unlike airlines, Tesla already has an extremely loyal customer base. Where they need to grow is in expanding their customer base. Conquest sales are worth more than loyalty sales.