Short-Term TSLA Price Movements - 2016

[ev-enthusiast]

Death blow is not when you cannot sell any of your vehicles anymore, death blow is when you sell to few of them to cover your expenses.
How many M3 "reservationists" will go and buy a new ice car while waiting on m3? A precious few.
Many would be buying a new ice car but will just hold onto the old one a few years longer. Instant loss of ice sells eating into already quite thin margins of mid-priced cars.

20% lower sells is already a disaster endangering the company future.

I could imagine that leasing rates and amount of downpayment for ICE vehicles will increase as one of the first signs that the risk of a falling resale value of ICE vehicles is increasing. Same will be valid for financing a vehicle.

 

[RobStark]

All of Detroit makes most of their profits on Trucks and truck based SUVs. These have hard core off roading abilities, hard core towing abilities, or the image of having them which urban cowboys love.

The Germans make most of their profits on premium cars and car based crossovers, even VW with subsidiaries Audi and Porsche.

The Japanese make most of their profits from mainstream cars and crossovers with Toyota through Lexus having the most exposure to luxury car and crossover disruption.

2 million global Model 3 reservations between now and Model 3 Job 1 isn't going to kill Detroit or the Japanese. The global auto industry will sell ~180M ICEv in that time period.

BMW has the most exposure. Daimler Benz has half of their business outside of Mercedes Benz with commercial trucks and other ventures.

 

[Johan]

I could imagine that leasing rates and amount of downpayment for ICE vehicles will increase as one of the first signs that the risk of a falling resale value of ICE vehicles is increasing. Same will be valid for financing a vehicle.

... And hence demand will fall due to the perception (a correct one) of paying more for the same thing, or another way to look at it: you get less for every dollar spent on an ICE.

So I agree with Julian, OEMs and their leasing partners will try to push this problem in front of them for some time, by not making leasing more expensive, which in turns sets us up for a form of sub prime bubble.

 

[kenliles]

Competing with ICE for an ICE maker is like having a boxing match with your own face - not a fight that is winnable - not even if you are the most competitive and most undisputed heavyweight champion of the world and if you were you'd only deliver yourself a knock out blow all the faster. Which bit of that is hard to comprehend?

relatedly, I think the auto industry itself (as ICE defines it) is dead:
from a post long long ago

... I think they [ICE makers] are currently and have been defending it [their industry position], that is the issue in and of itself. There is nothing to defend.
Instead, I believe the auto industry is already dead. It's transforming in continuum to a new paradigm -continuity of personal environment between locations at no more cost than being at home or work. Environment, control, and propulsion all electrically based. The paradigm shift eschews the current companies steeped in dead technologies, design and expertise. It's much too late [for ICE makers] and my prediction is the Tesla's, Apple's, Google's and similarly equipped and missioned will consume and integrate what was once an 'automotive industry' - transformed to a personal environment of movement between locations. JMHO

 

[lango]

Despite your platitude regards the stock I had to give this a dislike. You are reciting the Auto Industry view of the situation that stands in absolute defiance of all logic - and you can't even plead ignorance because I have taken the time to spell out the logic long hand.

This: "history of great execution in one of the most competitive industries"

This is an impossible response to what I have written. This is a mantra, not an argument. Tesla escapes competition with ICE by operating a business that is not dependent on engines. Different industry competing to meet the needs of the same customers. ICE makers can't escape competition with ICE can they! Why? Because their own ICE production lines are the freaking competition. Competing with ICE for an ICE maker is like having a boxing match with your own face - not a fight that is winnable - not even if you are the most competitive and most undisputed heavyweight champion of the world and if you were you'd only deliver yourself a knock out blow all the faster. Which bit of that is hard to comprehend? ICE makers can ONLY compete with each other in the EV space and only while EVs are too expensive and too unappealing to harm ICE sales and profits, in five days times Tesla is about to take that fight below the price competition threshold where ICE makers CAN NOT follow. There is no clever twist and no exceptions, no wait and see, no too early to tell - it's OVER, forever.

This: "the ICE business is still growing and BEV costs are high is probably not a good risk reward trade-off"

What do you mean BEV costs are high? We are just about to witness ICE being undercut by a mid-market BEV which is the entire point of the discussion. Unlike the $100K price class that ICE is rapidly conceding, ICE makers must compete for the mid market for survival, can't carry overheads without it, and after the 31st of this month it can't compete under any circumstances. Thereafter they have exactly two choices: Either to commit seppuku by also offering consumers attractive EVs at better value for money than their own ICE vehicles or they can drag out the demise of ICE by price slashing ICE vehicles to maintain market share. They will do the latter, most likely by masking what is effectively price slashing behind leases.

Well, what I am talking about is when and how the ICE manufacturers should enter the BEV space. Since it has to be in full force there is a significant risk they will go bust when they do so, either way their stock and profit will go down. But if they never do it they are destined to go under as well but slower. The path for Tesla is clear but the optimal course of action is not clear for ICE.

If I understand you correctly you are saying you have a mathematical proof or that there exist a mathematical proof that all ICE companies are destined for bankruptcy and no matter what actions are taken there is no escape because the current investment and overhead are too great for a successful transition to be made. I don't think that is the case, just that it will be really hard to do it. It is not all that interesting anyway from a investor point of view so I think it is better to stop that discussion. The market is underestimating the risk for ICE to make a successful transition in a big way and overestimating the risk for Tesla also in a big way and that is the important part from an investment point of view. I am not going to lock myself into a destined outcome for all (currently ICE based) Tesla competitors.

As for timing for ICE doing the transition, I think it would have been too early for legacy ICE during the model S era, 2012-2015. This comes from a risk-reward tradeoff for them. If I was a BMW and VW shareholder I would not want them to go full on with BEV during those years. Right now post Model 3 reveal would be the ideal time I think for some of them, mainly the prestige brands like BMW, Mercedes, Lexus etc that have the most to lose. This will not happen and they will wait at-least 5 years and most likely even more missing the best window with a big margin.

I don't think BEV and ICE are two completely separate businesses, but the case can be made I guess as the engine and drive-train are so central. There is still the brand and the customer base and supplier contracts that is not related to the drive-train and those things will not go away. There is also the government backing which has been a large factor for example for the Chinese and Korean auto manufacturers expansion. And the customer base prefer national companies and have an irrational brand loyalty.

 

[Julian Cox]

How about neither? No one is getting a Model 3 for at least 20 months and even after launch the volume will be minimal compared to the global auto industry. GM can introduce the Bolt and keep ramping up capacity and number of models over the next 3-5 years. No need to undercut price compared to similar ICE design, they will be able to charge a premium because there is little to no EV manufacturing capacity compared to the demand.

I think that the Model 3 will be a much better car than the 3-series or A4 or C-class or CTS, but the "small luxury" class in the US is over 600,000 units a year. Even at 50% of the proposed 500,000 unit output Tesla can only affect about 35% of the US volume. Great for Tesla for sure, but hardly the death blow to the entire auto industry.

Not a death blow. Struggling to come up with a more accurate analogy.

Imagine you are a housing contractor just about done constructing a wooden house with the only imperative in the contract that you must call the client once every three months to report the floor area constructed. You have plenty of wood and and the ability to light fires but no way of putting them out. At one end of the house there is a room with a cute little fireplace feature called the EV market and flickering away in there are things like the BMW i3, the Bolt, the eGolf and a lot of dry Leafs. That room is not very tasteful and adds next to nothing to the floor area so you spend most of your time building a hunky SUV annex at the opposite end of the plot. Unfortunately in the cute feature room there is a Model S and a Model X that has escaped from the cute fireplace and is smouldering in a structural beam.

Model 3 is like the first visible flames of a fire that has been Model S and Model X -ing in that beam.

So now what. Now here is a fire that will obviously grow and take the whole house and it is only a matter of tine before the client is going to notice the floor area is shrinking!

The suggestion to build large quantities of EVs to combat this little fire - fighting fire with fire if you like - is analogous to setting fire to the curtains throughout the rest of the house. You might manage to starve the fire of a little fuel but this is obviously not going to improve the overall situation. It's also a complete waste of time to try to pack more logs in the little fireplace assuming you can even reach the fireplace through the flames in that wing. Nobody needs to go near that fireplace to get warm because now it's positively toasty on the upper floors everywhere from the Sedan room to the SUV room and the mezzanine is warming up too and this will probably spread to the truck room before too long and ultimately the whole ground floor.

So if setting light to the curtains won't help (and the fireplace is irrelevant), what's plan B?

Answer: Given that you have plenty of wood, build as fast as you can to add floor area to any room that is not currently in fire - and frantically try to call the fire department (lobby the government) for help - and hope to goodness you can keep reporting at least the same floor area every three months and that the client does not catch on to your cries for help and start asking awkward questions about wtf is going on with this project and why the floor area does not mean what it used to.

 

[Krugerrand]

Not a death blow. Struggling to come up with a more accurate analogy.

Answer (also known as Plan C): I'd be packing my belongings before they caught on fire and moving to a new sandbox.

 

[Johan]

Did anyone else pick up some cheap short term plays during amateur hour?

 

[ibcs]

Did anyone else pick up some cheap short term plays during amateur hour?

Actually, picked up shares and sold with a $2.6 dollar swing from 9:44 Am and sold at 10:26 Am. Easy $500.

 

[techmaven]

Did anyone else pick up some cheap short term plays during amateur hour?

Didn't find anything to be particularly cheap. Since this week is Spring Break vacation for a slew of people, we might have some wild gyrations on low volume. I'm hoping to unload some short term calls that are deep in the money at some point as well as pick up something cheap for further out... but it is all expensive right now. I might want to pick up a few cheap short term protective puts at some frothy top around when I sell the calls.

 

[Ukland Wombat]

off topic: future for ICE OEMs..cataclysmic change in next few months, or not?

Not a death blow. Struggling to come up with a more accurate analogy.

Imagine you are a housing contractor just about done constructing a wooden house with the only imperative in the contract that you must call the client once every three months to report the floor area constructed. You have plenty of wood and and the ability to light fires but no way of putting them out. At one end of the house there is a room with a cute little fireplace feature called the EV market and flickering away in there are things like the BMW i3, the Bolt, the eGolf and a lot of dry Leafs. That room is not very tasteful and adds next to nothing to the floor area so you spend most of your time building a hunky SUV annex at the opposite end of the plot. Unfortunately in the cute feature room there is a Model S and a Model X that has escaped from the cute fireplace and is smouldering in a structural beam.

Model 3 is like the first visible flames of a fire that has been Model S and Model X -ing in that beam.

So now what. Now here is a fire that will obviously grow and take the whole house and it is only a matter of tine before the client is going to notice the floor area is shrinking!

The suggestion to build large quantities of EVs to combat this little fire - fighting fire with fire if you like - is analogous to setting fire to the curtains throughout the rest of the house. You might manage to starve the fire of a little fuel but this is obviously not going to improve the overall situation. It's also a complete waste of time to try to pack more logs in the little fireplace assuming you can even reach the fireplace through the flames in that wing. Nobody needs to go near that fireplace to get warm because now it's positively toasty on the upper floors everywhere from the Sedan room to the SUV room and the mezzanine is warming up too and this will probably spread to the truck room before too long and ultimately the whole ground floor.

So if setting light to the curtains won't help (and the fireplace is irrelevant), what's plan B?

Answer: Given that you have plenty of wood, build as fast as you can to add floor area to any room that is not currently in fire - and frantically try to call the fire department (lobby the government) for help - and hope to goodness you can keep reporting at least the same floor area every three months and that the client does not catch on to your cries for help and start asking awkward questions about wtf is going on with this project and why the floor area does not mean what it used to.

Thanks for such a visual analogy Julian! I'm always very interested to hear more on this from both you and lango (and anyone else of course).

IMO, M3 will be the tip of the EV juggernaut. M3 reservations numbers from all over the world may be the undeniable evidence needed to stop the public denial emanating in all the mealy-mouthed language we have heard from ICE OEM boardrooms. If that happens quickly (how can it not?) then I expect cataclysmic change in boardroom language and government language. And that all within the next few months. If so, I think there will also be a cataclysmic movement of capital. But don't ask me to elaborate further...I haven't a clue. In fact I'm looking to you and lango to elaborate.

 

[Julian Cox]

Answer (also known as Plan C): I'd be packing my belongings before they caught on fire and moving to a new sandbox.

C is the correct answer and the only solution but in most cases it is way too late to save the main house from collapsing and watching someone else walk off with the salvage contract.

BTW it makes me laugh to see the Bears going on about Tesla's apparent lack of patent protection.

To carry the same analogy Musk has magnanimously offered free cans of Kerosene for the curtains and repeatedly offered the encouragement to set them on fire.

 

[austinEV]

Wow Julian that is complicated analogy. Just other analogies of actual incumbants that could not adjust work:

Blockbuster: You are a multi-billion dollar company that rents physical tapes and disks out of retail locations. Your company's value resides in your physical assets and future earnings renting those movies. You make money, but not so much you can just rebuild yourself. Along comes a company that mails disks and streams old movies over the internet. All of Netflix' profits go back into building out their library and distribution centers. Blockbuster cannot invest as much or as fast so there is no value proposition in their Netflix-like offerings. Eventually Netflix crosses the chasm, goes mainstream and Blockbuster is doomed.

I would argue Blockbuster never really messed up. They tried (if I recall) to do disks in the mail and streaming(? Not an expert) they just could not torch their whole business and rebuild it as a Netflix killer. There was never a time they had that option. Senior management needed to focus on *this* quarter. By the time it was clear that they HAD to defeat Netflix they lacked the resources to do so.

 

[lango]

ICE has already made their bets, they are going with hybrids and ICE for the next platforms, and will continue with BEV as mostly an experimental thing, eg. making sure it won't cannibalize their ICE sales at all and in doing so they are also unable to compete with any of Tesla's 3-4 models. There will be no "Tesla Killers". I don't think you will see a panic or much change in capital because of Model 3 from ICE even though it should. The lead times for new platforms are quite long. This is another thing Tesla actually is faster with despite much smaller R&D budgets.

Capital investment change triggered from Model 3 reveal will come from Tesla and battery manufacturers and maybe some future outsource companies that are involved with electric drive-trains. Also potential new EV startups like for example long range network charging startups and companies like Faraday and Apple, but not from ICE except some of them will decide to expand their future EV platforms that will come after the current ones. But the next EV platforms I think will still have too little push behind them,

 

[AlMc]

Did anyone else pick up some cheap short term plays during amateur hour?

I added a few more 'lotto' tickets: April15 $280s.

As others have said, IVs starting to get a bit frothy.

 

[austinEV]

I added a few more 'lotto' tickets: April15 $280s.

As others have said, IVs starting to get a bit frothy.

Just those lotto ticket options. The boring ones are positively cheap. Jan17 180's at $60 (just $10 of time value).

Edit: Wow, really 280 april 15? I sincerely hope those go green.

 

[AlMc]

Just those lotto ticket options. The boring ones are positively cheap. Jan17 180's at $60 (just $10 of time value).

Edit: Wow, really 280 april 15? I sincerely hope those go green.

Me too! .............Cost was minimal. I am standing 'pat' on my stock/Leap positions through at least the reveal. I am not afraid to change strategies if we get a 5-10% move up prior to the reveal.

I still am sitting on more 'TSLA cash' than usual. That could certainly be a big mistake, but analysis paralysis has set in on what to do with that money.

Disclaimer: 90% of my TSLA money is in a retirement account so I do not worry about tax consequences.

 

[Ukland Wombat]

off topic: future of ICE OEMs...cataclysmic movement of capital, or not?

ICE has already made their bets, they are going with hybrids and ICE for the next platforms, and will continue with BEV as mostly an experimental thing, eg. making sure it won't hurt their ICE sales at all and in doing so they are also unable to compete with any of Tesla's 3-4 models. There will be no "Tesla Killers". I don't think you will see a panic or much change in capital because of Model 3 from ICE even though it should. The lead times for new platforms are quite long. This is another thing Tesla actually is faster with despite much smaller R&D budgets.

Capital investment change triggered from Model 3 reveal will come from Tesla and battery manufacturers and maybe some future outsource companies that is involved with electric drive-trains. Also potential new EV startups like for example long range charging startups and companies like Faraday and Apple, but not from ICE except some of them will decide to expand their future EV platforms that will come after the current ones. But the next EV platforms I think will still have too little push behind them,

Thanks for your thoughts lango.

But I'm betting that the denial is forced to stop by the massive public evidence staring boardrooms and governments in the face. And BTW, in the light of an M3, hybrids are really an integral part of that denial...a mealy-mouthed (mealy-engined?) compromise.

Any change of language will precipitate a movement of capital....a very big movement IMO...
but hey, what would a wombat know?

 

[Hogfighter]

Please everyone, it's been requested before. TSLA short term price movement comments only. All other discussions, albeit worthwhile, should be performed on a new thread. Thank you.

 

[austinEV]

nice, up 2.5% without the markets and with an oil headwind.