Short-Term TSLA Price Movements - 2016

[Ukland Wombat]

off topic: critical path, risk, capital

I can do qualitative just fine. Expanding the scope of the Gigafactory prototype phase at Tesla's risk and on Tesla's dime would be an unmitigated disaster and gain very little in terms of speed of rollout even in the unlikely event that risk paid off (and was worth permanently impairing Tesla's capital structure for). Musk is a genius, what you are proposing is the opposite. Any other MBA school graduate would have sent Tesla bust already by over-extending by speculating on future demand while departing the critical path just like that. Musk's de-risking the critical path is extraordinary. What you cannot seem to see is that he hits the key risks of the business at the smallest scale possible. Just take SpaceX resusability - how much do you think it costs Musk to crash test a fist stage landing in a core that is fully paid for?

Kindly just accept that when he's proved GF Module one, the money will throw itself at him without Tesla taking on any risks it does not suit him. That is why he is who is is and has got where he's got.

Thanks, Julian, I think you expressed your point very elegantly. Even though I can't confirm your judgement, because I am not qualified to do so, I find your point very reassuring as a shareholder.

 

[lango]

on topic reservationers and capital



Thanks, lango, thanks for correcting and dissecting...appreciate it.

you are absolutely correct, of course, growing by deploying deposit moneys to capex is still organic growth. I was careless in word choice there.

And deposits certainly are a liability...yikes what if there was a mass cancellation of reservations. It would be like a run on a bank!

On the plus side, 'to make the bank look solid', we expect good revenue streams. S and X and energy.

Yes, I take your point that revenue from selling product plus the obvious message that the product will sell for the foreseeable future, are positives to the share price, and thereby raising capital...the most de-risked way of taking the company forward as Julian also pointed out to me moments ago, and as most posters have been discussing for a long time.

Please understand that I am not heavily invested in being right. I don't take offence at being wrong.

I have only floated a 'flash-in-the-pan' idea, for the consideration of investors around the reveal time. And of course it excites me as readers can tell.

The wishful thinking, the idealist in me, would like to see Musk have a freer hand in carrying out his secret master plan, that's all.

To me, that means anything which reduces dependence on Banks and the macro-future of markets is good.

I might have come of as a bit too negative on the Model 3 reveal and reservation... I am far from it! It is just the natural thing to do when facing extreme optimism.

I think we all agree that Tesla's growth will go at a slower speed than it could because of lack of capital. This is very much the case right now too and it has been like that for years. They could raise $5B right now but they don't. The reason they don't is that they think they can raise it with much less dilution later. This will be the case after the Model 3 reveal too, even if the reservations are "of the hook" and the share price is increasing substantially.

So my prediction is that we will not see one very big raise to "be done with it" but instead several and this would happen even if the share price would double because of the reservation numbers.

 

[lango]

@Ukland Wombat

IMO this is getting irritating not just because it's off topic but because you have something profoundly backwards.

Musk isn't taking great risky swings at the world. That is
An impression he leaves on fanboys and one of the effects of his actions. I don't think you are particularly close to channeling his mindset at all. What he is actually doing is continually de-risking Tesla's pole position in a race that was already won by Tesla nearly a decade ago and that race is not Musk vs the world, it is an inevitable technology trend that Tesla is of course accelerating but mostly one that it is simply riding.

Yeah, he has been super effective at managing risk, deploying capital (his own and others) and other resources and find a way to commercialize early and in doing so have been able to stay in front of inevitable tech disruption trends. What you tend to hear though as a casual follower is losses and cash burn and other negatives and not much about the unmatched resource deployment. If this continues at scale which it most likely will then the story will of course be different. This I think will happen in 2016 for Tesla.

 

[Julian Cox]

Two biggest risks to the Tesla business:

1. Dilution of Musk's voting share block.

2. Competition that can corrupt governments.

All third and fourth order risks and beyond are too distant compared to the fist two to even worry about and they are all well within the scope of management control.

Even the first two are strongly mitigated. Musk has an escalating options package to offset dilution and is not obliged to raise dilutive rounds unless he wants to and SpaceX in particular makes Musk a vital member of the US military industrial complex and a key NASA contractor and has in that role already backed down ULA (Boeing & Lockheed Martin) by suing the Air Force and put the RD-180 on the political map and is clearly not to be messed with lightly.

 

[Ukland Wombat]

off topic: growth of company, raising capital

I might have come of as a bit too negative on the Model 3 reveal and reservation... I am far from it! It is just the natural thing to do when facing extreme optimism.

I think we all agree that Tesla's growth will go at a slower speed than it could because of lack of capital. This is very much the case right now too and it has been like that for years. They could raise $5B right now but they don't. The reason they don't is that they think they can raise it with much less dilution later. This will be the case after the Model 3 reveal too, even if the reservations are "of the hook" and the share price is increasing substantially.

So my prediction is that we will not see one very big raise to "be done with it" but instead several and this would happen even if the share price would double because of the reservation numbers.

I agree on your point about growth being slower than it could have been for a year or more and still now.
We only have to look to the obvious throttling back of the rate of supercharger expansion as a pointer to that fact.
You and Julian have both 'cautioned me on caution' as to the least risky path through 2016 and beyond.

I have taken that onboard.

Moreover, paraphrasing Julian (across several of his posts)

Don't make a grab for capital now
Wait for good margin/revenue/cash flow figures and then the market will "throw money" a TM.
In the end it won't make much difference to speed of GF roll out and will be less risky because Phase one is proven.

I have, in my simplicity, under-appreciated the risks posed by different pathways to growth, thanks for your comments to point that out.

I will most likely have to stay frustrated with the near-term pace of growth of TM, if the reaction to my excitement at seeing a possible alternative is anything to go by.

 

[jhm]

Not really arguing against anything and you are not the opponent even if I was, instead trying to illuminate something: That is that the mechanism of displacement is counter-intuitive. Not incremental, it's stratiform. I think you would find it useful.

Ok, thanks for clarifying. Know that, as an econometrician, I put a premium on quantifiable concepts, especially ones that can be used to build out measurable scenarios. So be careful not to be dismissive of displacement as it is the primary tool that we have as a way to quantify the interaction between EVS, renewables and oil. The interesting question may be to place meaningful mile markers on development. For me, the key marker is peak oil demand, after which oil enters structural decline. At the present moment, IEA and other forecasters are saying that oil consumption should increase 1.2 mbpd each year through the end of the decade. The primary threat to this not EVs and other plug-in vehicle, but energy efficiency, wind, and solar. It is plausible that oil demand will peak as early as 2020, or before EVs have displaced 1 mbpd. But about 68% of oil is consumed by transportation, and so EVs are critical for addressing renewable energy to this market. So I point this out to give you a sense of where I am coming from. The global economy is threatened by massive over investment in fossil fuels. Energy is just not worth what it used to be. This is why we are in a simultaneous glut of coal, gas and now oil. It is really critical that economic thinkers and planners look seriously at displacement of all fossil fuels. Failure to do so will lead to trillions of dollars of malinvestment and the present glut may persist for decades.

The risk of dismissing displacement as a useful concept is that it reinforces the intellectual denial of renewables and EVs. The "received wisdom" is that these things are too small to impact investments, and that received wisdom will wreck the economy. The oil future market expects oil will be worth $51/b in 2024, and the oil investors want to believe that it will be worth $100 or more. This seriously underestimates the threat from renewables and batteries. The price of oil today totally depend on expectations ten years out, and in that timeframe displacement matters quite alot. The criticism that EVs will not be in great enough numbers by 2020 to impact oil market is naive about the role of longterm expectations driving current investments. By the end of the year, about 3.24 billion barrels of oil will be stored in inventory. If the futures price for 2024 oil were to fall to $40, we could easily see oil spot prices fall to $20. The spot price has to be low enough and futures expectations high enough to induce investors to store oil. So price expectations ten years out are the only thing propping up the price of oil today. These expectations are largely formed in denial of renewables and EVs.

Good luck with the article. I'd be happy to review it before publication.

 

[lango]

off topic: growth of company, raising capital



I agree on your point about growth being slower than it could have been for a year or more and still now.
We only have to look to the obvious throttling back of the rate of supercharger expansion as a pointer to that fact.
You and Julian have both 'cautioned me on caution' as to the least risky path through 2016 and beyond.

I have taken that onboard.

Moreover, paraphrasing Julian (across several of his posts)

Don't make a grab for capital now
Wait for good margin/revenue/cash flow figures and then the market will "throw money" a TM.
In the end it won't make much difference to speed of GF roll out and will be less risky because Phase one is proven.

I have, in my simplicity, under-appreciated the risks posed by different pathways to growth, thanks for your comments to point that out.

I will most likely have to stay frustrated with the near-term pace of growth of TM, if the reaction to my excitement at seeing a possible alternative is anything to go by.

We are growing over 50% a year, nothing to be frustrated about!

Soon there will be three major products instead of one, and five products in total in 2018. The 50% a year will continue with very high probability up to at least 2020.

There is not much they can do to match really high reservation numbers for Model 3. They still need a car factory and those takes years to plan and build. This is unfortunate but not much can be done about it. The ICE business will do ok the coming years too so the chance of them buying a cheap factory like they did with NUMMI is low.

 

[JRP3]

For some actual short term news, maoing posted in the China thread some good info:

"Tesla first quarter deliveries of China reached an unprecedented high." Zhu Xiaotong said in the past thirty days China sales rose 400%. The last three days of March, in Beijing, Shanghai, Guangzhou, Shenzhen, the center of each experience has focused on the delivery of hundreds of cars waiting.

Google Translate

 

[tinm]

Meanwhile, from the brilliant mind of a Harvard Law professor (those folks always reliable in their assessment of Tesla Motors' telecommunications technical requirements), comes this gem of an article:

The Tesla Dividend: Better Internet Access — Backchannel

 

[geneclean55]

Looks like China sales are soaring this quarter. Maybe some pleasant news come the q12016 delivery report

 

[Ukland Wombat]

off topic: pace of growth

We are growing over 50% a year, nothing to be frustrated about!

Soon there will be three major products instead of one, and five products in total in 2018. The 50% a year will continue with very high probability up to at least 2020.

There is not much they can do to match really high reservation numbers for Model 3. They still need a car factory and those takes years to plan and build. This is unfortunate but not much can be done about it. The ICE business will do ok the coming years too so the chance of them buying a cheap factory like the did with NUMMI is low.

Yeah, 50% is spectacular. Just want more...without more risk if possible.

What has nagged on my mind for a long time now is hearing Musk say think of Gigafactories as a product in a CC, and hearing JB trumpet the idea that we should all be thinking much bigger about storage. Both comments, I think, between one and two years ago?

Well, I obeyed! I did just that.

Then we had a few little things go wrong, especially X developments, FWDs causing costs to go up and revenue to be delayed.

So I deduced, perhaps very mistakenly, that in relation to GFs as products, the pathway to that realisation would have been announced or started long before now, had TSLA not slumped.

Also, the likelihood that M3 will be tremendously good value in its class, will likely lead to a massive demand that cannot be met, leaving cash on the table, and almost worse...every potential sale unfulfilled going to ICE.

I connected the dots and guessed that the company will use the reveal to suddenly change its rate of growth from 1st gear to 3rd gear, so to speak, by using every tool at its disposal. Most think I'm wrong.

And I'm happy to be wrong. The comments I have drawn have been instructive (especially on risks). And to me it makes no difference because I'm long common stock only, no options.

 

[anticitizen13.7]

There are more signs that Model X production has really stepped up over the past few weeks: How many people are taking delivery of their Model X in March?

Including today, there are 5 more days open for delivery before the quarter closes. I don't have a good handle on how many Model X are going to be delivered, but the acceleration trend should be very positive.

 

[Krugerrand]

Looks like China sales are soaring this quarter. Maybe some pleasant news come the q12016 delivery report

What was the/was there an exact figure for China deliveries Q42015?

 

[FredTMC]

There are more signs that Model X production has really stepped up over the past few weeks: How many people are taking delivery of their Model X in March?

Including today, there are 5 more days open for delivery before the quarter closes. I don't have a good handle on how many Model X are going to be delivered, but the acceleration trend should be very positive.

A guy brought his 2-day old delivered MX to "cars and coffee" at Aliso Viejo CA today. Nice. P90D

 

[Krugerrand]

Yeah, 50% is spectacular. Just want more...without more risk if possible.

What has nagged on my mind for a long time now is hearing Musk say think of Gigafactories as a product in a CC, and hearing JB trumpet the idea that we should all be thinking much bigger about storage. Both comments, I think, between one and two years ago?

<snip>

Chillax, they got this.

It's really easy to get overwhelmed by the vastness of the challenge/s and the possible results, and then over react at every little blip that looks like an insurmountable obstacle in the moment: eg., Model X ramp.

 

[Julian Cox]

Ok, thanks for clarifying. Know that, as an econometrician, I put a premium on quantifiable concepts, especially ones that can be used to build out measurable scenarios. So be careful not to be dismissive of displacement as it is the primary tool that we have as a way to quantify the interaction between EVS, renewables and oil. The interesting question may be to place meaningful mile markers on development. For me, the key marker is peak oil demand, after which oil enters structural decline. At the present moment, IEA and other forecasters are saying that oil consumption should increase 1.2 mbpd each year through the end of the decade. The primary threat to this not EVs and other plug-in vehicle, but energy efficiency, wind, and solar. It is plausible that oil demand will peak as early as 2020, or before EVs have displaced 1 mbpd. But about 68% of oil is consumed by transportation, and so EVs are critical for addressing renewable energy to this market. So I point this out to give you a sense of where I am coming from. The global economy is threatened by massive over investment in fossil fuels. Energy is just not worth what it used to be. This is why we are in a simultaneous glut of coal, gas and now oil. It is really critical that economic thinkers and planners look seriously at displacement of all fossil fuels. Failure to do so will lead to trillions of dollars of malinvestment and the present glut may persist for decades.

The risk of dismissing displacement as a useful concept is that it reinforces the intellectual denial of renewables and EVs. The "received wisdom" is that these things are too small to impact investments, and that received wisdom will wreck the economy. The oil future market expects oil will be worth $51/b in 2024, and the oil investors want to believe that it will be worth $100 or more. This seriously underestimates the threat from renewables and batteries. The price of oil today totally depend on expectations ten years out, and in that timeframe displacement matters quite alot. The criticism that EVs will not be in great enough numbers by 2020 to impact oil market is naive about the role of longterm expectations driving current investments. By the end of the year, about 3.24 billion barrels of oil will be stored in inventory. If the futures price for 2024 oil were to fall to $40, we could easily see oil spot prices fall to $20. The spot price has to be low enough and futures expectations high enough to induce investors to store oil. So price expectations ten years out are the only thing propping up the price of oil today. These expectations are largely formed in denial of renewables and EVs.

Good luck with the article. I'd be happy to review it before publication.

Need to go back to basics and ask who are you trying to persuade of what and why?

Define Global Economy. I mean in all honesty are you trying to warn someone not to collapse it and what if the term itself is conflated with the economy of the Petrodollar?

Why is one particular tool of persuasion more interesting than another - and what would happen if they were not persuaded and would anything besides bankruptcy of their employer persuade them to stop doing what they are paid to do anyway?

 

[dakh]

Meanwhile, from the brilliant mind of a Harvard Law professor (those folks always reliable in their assessment of Tesla Motors' telecommunications technical requirements), comes this gem of an article:

The Tesla Dividend: Better Internet Access — Backchannel

Woa what a pile of nonsense indeed.

 

[geneclean55]

What was the/was there an exact figure for China deliveries Q42015?

From the following quote
"Tesla first quarter deliveries of China reached an unprecedented high." Zhu Xiaotong said in the past thirty days China sales rose 400%.

I can't tell if deliveries are unprecedented compared to previous first quarters or all quarters. Also, is the 400% increase compared to a prior quiet sales period? In any event they are back to 10,000 deliveries planned for the year and planning to deliver several hundred cars in each of four locations this week. Maybe 1-2k deliveries this quarter? They delivered 800 in q12015. Also, in the broader Chinese auto market SUV sales are off the chain.

 

[dc_h]

An orderly withdrawal of investment from oil is critical for the larger financial market. Think of the recent macro turmoil. Recent macro was driven by modest energy efficiency gains. Slowly drawing down assets, think Norway, will protect the financial markets we all depend on. Look at the Saudis now, already drawing down 50 years of savings and looking at bankruptcy by 2020. Disorderly transitions on a global scale usually involve upheaval and often war. What would Russia do as it starts drowning in debt. What happens in the Middle East as its financial and energy clout dissipates. These are changes fraught with global risks that can hurt Teslas markets. The financial and political impact of EVs are huge and unknown. The sooner this uncertainty is priced into the market, the more risk can be mitigated. Maybe not a short term post, but something that needs more understanding.

 

[Vitold]

It's simply wrong to think that if demand for 19 gallons of gasoline where to evaporate, that demand for the rest of the barrel would disappear with it. What happens is that the price of gasoline comes down enough that a whole barrel is produced. It is actually a trivial shift in volume to adjust for. Seasonal variation in demand for petroleum products induce much bigger adjuatments. So when the world needs 42 gallons less gasoline it processes one less barrel of crude and lets the market place dive up the products. This is really trivial. Just watch the daily prices for gasoline and heating oil. They vary constantly balancing out the relative demand for both products.

At first, when there's no demand for 68% of the barrel's lighter fractions, that barrel of crude oil will not be processed. Instead refinery will stop (or lessen) cracking heavier fractions into lighter.

It's not in market's interest to produce cheap fuel if they don't have to. I wrote- at first- because it only works up to a point by which your explanation applies.