Short-Term TSLA Price Movements - 2016

[sundaymorning]

I'm not sure if this has been mentioned, but automotive stocks traded down across the board today. This is likely attributed to Tesla's massive success in its M3 sales. The fact that Tesla stocks traded up, breaking its usual trend of post-reveal pullback indicates to me that investors/institutions are starting to take into account that with Tesla's increase in market share, would likely mean a decrease in sales for other automotive manufactures. I wonder how much money moving out of traditional automotive stocks went into Tesla today?

 

[Fallenone]

So suppose they raise it all at once. At this point, Tesla has $200 million on hand in reservation payments, and has $6.8 billion of likely orders (assuming everyone orders the base model) which they can use as collateral for a loan from Wall Street. They can probably get most of this in a loan with a good interest rate if they want to.

They don't need to raise 6b at once. Despite the fact they are losing money almost every quarter so far, things are very likely to turn around now with the help of Model X. They guided 1.5b in capex this year while accumulating cash. If they keep up the work like this, 4 years from now to 2020 they don't need to raise a dime. However, I think it is still the best interest for the company and shareholders to raise maybe 2b so they can start on some expansion earlier. Given this astounding demand, I don't think they need collateral to accomplish this. Do a secondary and watch the stock price take off.

 

[Fallenone]

There are a few buyers who are eager to acquire Tesla. However selling Tesla is not in the secret master plan. This company will remain independent and become the largest company in the world.

Tesla running its own course can lead to the birth of a 1T company. Bought out by someone, 100b at best. As a shareholder I don't want it be bought out.

 

[Fallenone]

GF1 should be on track to support US production in 2017, so Panasonic production has to go somewhere. Fremont is not likely to be over 100 or 200,000 model 3s in 2018. China can support local production. Demand will be immense with ICE driving restrictions. This could also drive demand for S and X production in China. Top status X and S and setting the bar with the 3 as the best aspirational car on the market. Well paid professionals will love every day driving, vs every other day ICE access. 300,000 seems very reasonable in China and Hong Kong. Moving final assembly and painting of S and X would also increase capacity, reduce wait ties, lower tariffs and costs. It also gets us on track for 1mm tesla's a year by 2020. That could reset stock targets to 500 next year.

I recommend not have your expectation for the factory in China too high. There's a ton of holes Tesla needs to hop through to get through the paperwork before they can even start building. Local rival companies like BYD will most likely throw obstacles all along the way. The Chinese government is unlikely to be favorable given the quite discriminating treatment to Tesla in terms of incentives.

 

[sundaymorning]

I recommend not have your expectation for the factory in China too high. There's a ton of holes Tesla needs to hop through to get through the paperwork before they can even start building. Local rival companies like BYD will most likely throw obstacles all along the way. The Chinese government is unlikely to be favorable given the quite discriminating treatment to Tesla in terms of incentives.

Don't you think the car dealers, oil companies are throwing obstacles for Tesla here? If anything obstacles are much more intense in the US. The Chinese are not innovators, they cannot create high demand manufacturing jobs like western companies, they need Tesla more than Tesla needs them. A population of 10% unemployment would equate to 140,000,000 people in China. With Tesla waiving a gigafactory, you do everything in your power to invite them in. Why do you think litigation over the "Tesla" brand name went away under the radar in China? Likely someone high above got involved bc Elon promised a factory one day..

As much as the Governor of Texas hated Tesla, he still needed to cater Elon during the gigafactory sweepstakes. And it doesn't get tougher than Texas, an oil dependent state..

 

[Fallenone]

Don't you think the car dealers, oil companies are throwing obstacles for Tesla here? If anything obstacles are much more intense in the US. The Chinese are not innovators, they cannot create high demand manufacturing jobs like western companies, they need Tesla more than Tesla needs them. A population of 10% unemployment would equate to 140,000,000 people in China. With Tesla waiving a gigafactory, you do everything in your power to invite them in. Why do you think litigation over the "Tesla" brand name went away under the radar in China? Likely someone high above got involved bc Elon promised a factory one day..

As much as Governor of Texas hated Tesla, he still needed to cater Elon during the gigafactory sweepstakes

Believe it or not, Tesla fought nearly 2 years to be considered as an alternative energy car in Beijing. And even then, it is still not treated with the same incentives as other Chinese BEV/PHEV companies. That's the kind of obstacle I'm talking about.

And for the who needs who part, China's unemployment rate is 4%, US 5%. New cars sales in 2015, China 21m 7% growth yoy, US 17m 6% growth yoy. Seems to me Tesla needs China more, and US needs Tesla more.

 

[everman]

If queues are like this I think we will reach over 300k reservations at the end of 2017 when production starts.

...or within 48 hours...

I'm just now catching up, been so busy camping to be the first reservation in the mountain time zone, then flying to the unveiling for a test ride!

More to follow...

 

[maoing]

I agree with the first 3 but not the last one

Near term catalysts:

Reservation updates
Q1 deliveries
Analyst upgrades and comments
Model 3 Reveal Event "Part 2"

 

[maoing]

That's very good point. I hope we strike 300K by Monday morning.

Weekends offer plenty of free time and social time. Many more people will learn and reserve.

 

[Fallenone]

I'm not sure if this has been mentioned, but automotive stocks traded down across the board today. This is likely attributed to Tesla's massive success in its M3 sales. The fact that Tesla stocks traded up, breaking its usual trend of post-reveal pullback indicates to me that investors/institutions are starting to take into account that with Tesla's increase in market share, would likely mean a decrease in sales for other automotive manufactures. I wonder how much money moving out of traditional automotive stocks went into Tesla today?

I thought it was the Model 3 effect initially too. But latter think it's more related to the lower than expected cars sales in March for the other automakers. I think this even played a role in suppressing the gains of TSLA today as it is considered an automaker and lumped in the "auto" basket by some funds.

 

[Krugerrand]

I hope we strike 300K by Monday morning.

Doesn't appear to me that hope is required. As of a few hours ago the count was 232,000. I suspect it'll hit 300,000 sometime tomorrow (Saturday).

 

[maoing]

the more the better. but big reservation number will refrain new reservation rate, first, tax credit will be gone; second, a lot of people just can't afford such long wait time

Doesn't appear to me that hope is required. As of a few hours ago the count was 232,000. I suspect it'll hit 300,000 sometime tomorrow (Saturday).

 

[Krugerrand]

the more the better. but big reservation number will refrain new reservation rate, first, tax credit will be gone; second, a lot of people just can't afford such long wait time

That's certainly one way to think about it. The other way is that the bigger the number gets, the more people panic they won't be able to get one in a timely manner and thus will reserve.

And no, the tax credit doesn't just go away. It gets reduced.

People are notoriously resourceful. For instance, my reservation is in and there's not a chance my current vehicle can last until my turn comes up for the Model 3. Guess what I'm going to do? Here's a couple of options:

1. Buy a used vehicle to tide me over
2. Lease a vehicle to tide me over

Please do tell us, though, what exactly is the 'big reservation number' that will cause people to stop reserving.

 

[FredTMC]

I agree with the first 3 but not the last one

Thx! Why not?

 

[sundaymorning]

Believe it or not, Tesla fought nearly 2 years to be considered as an alternative energy car in Beijing. And even then, it is still not treated with the same incentives as other Chinese BEV/PHEV companies. That's the kind of obstacle I'm talking about.

And for the who needs who part, China's unemployment rate is 4%, US 5%. New cars sales in 2015, China 21m 7% growth yoy, US 17m 6% growth yoy. Seems to me Tesla needs China more, and US needs Tesla more.

The unemployment rate I was referring was hypothetical and in an event of a slowdown in China. Even at the current 4% that you've stated, you are looking at 60 million unemployed in China. With rumors of the Chinese market slowing down a bit, that number can easily double in a recession similar to what we've experienced here in the US.

There's only one Tesla right now, but plenty of other hard working Asian or 3rd world markets begging for a company like Tesla to enter. India, Vietnam, etc.. There will be politics and obstacles in every country, but how do you think Mercedes, BMW, or GM got into China in the first place?

As far as incentives are concerned, the reason Tesla is treated unfairly is because they don't yet have a manufactur in China, this is the biggest hurdle and could easily be rectified with waiving a gigafactory carrot in front of the Chinese. Why should the Chinese give Tesla anything when Tesla offers zero incentives for China? Well Mr. China, I now want to put a fraction of your 60 million in a high paying job. No I'm not talking about sweat shops, I'm takin manufacturing, engineering and technology! Now we're talking..

 

[maoing]

I just said big reservation number might "refrain" not "stop" reservation rate. A few of my friends used to be interested in M3, now are afraid of the long wait time, so they gave up. I don't think many car buyers had experience of wating for several years from reservation to delivery except loyal S/X owners.

The only way TM resolves the issue is to raise billions of fund not only expedite the M3 factory build progress but also increase the capacity to say 1 million cars by 2020. Elon already mentioned "need to rethink production planning", so it won't be supprised to see above happens.

That's certainly one way to think about it. The other way is that the bigger the number gets, the more people panic they won't be able to get one in a timely manner and thus will reserve.

And no, the tax credit doesn't just go away. It gets reduced.

People are notoriously resourceful. For instance, my reservation is in and there's not a chance my current vehicle can last until my turn comes up for the Model 3. Guess what I'm going to do? Here's a couple of options:

1. Buy a used vehicle to tide me over
2. Lease a vehicle to tide me over

Please do tell us, though, what exactly is the 'big reservation number' that will cause people to stop reserving.

 

[maoing]

Part 2 reveal is left for sometime in 2017 I think.

Thx! Why not?

 

[sundaymorning]

I thought it was the Model 3 effect initially too. But latter think it's more related to the lower than expected cars sales in March for the other automakers. I think this even played a role in suppressing the gains of TSLA today as it is considered an automaker and lumped in the "auto" basket by some funds.

Perhaps the world was waiting for the Tesla reveal in March, and we're not interested in looking elsewhere. This explains why the auto industry didn't do as well in March, the proof is Tesla's 232k and climbing...Tesla undoubtedly took away many of the traditional automanufacture's lunch this month and will continue to for the months to follow. They have been doing this the last two years in the luxury sedan market with the S. However, the M3 is a whole different animal.

 

[Johan]

So of all the tweets in the last day or so, I have to say I found the 42k ASP one the most interesting. That's significantly lower than I had been expecting, and also significantly lower than the percentage difference between S base and S ASP.

So this means one of two things: 1) Elon thinks the option take rate will be much much lower on the 3 than the S. This makes sense since there will probably be more price-sensitive customers, and he maybe got data from M3 vs. other 3 series sales (which I couldn't find with a quick search) and maybe there is a really low take rate on options in that vehicle segment so he's assuming that.

or 2) The performance model will be much cheaper than anyone anticipated. I was counting on 60-70k to compete with (and beat) the BMW M3 (which is 65k or so base, and can go into the 80s with options). But if any significant number of people are buying 70k Model 3s, then there's almost no way the ASP would end up at 42k - the math just doesn't work out unless we're talking about like a 5% take rate of performance models and very few compelling options inbetween. This is very very interesting to me.

I suppose there's also the possibility of 3) which is that there would be no performance model to compete with the BMW M3. But I just can't see that as happening.

I think he may be just plain wrong here. They were before with Model S. The high uptake of Performance cars surprised them, so did the low uptake of the 40 kWh battery. I agree with you there will definitely be a performance model and it will sell very well. The car looks like a freaking Porscheferrari and a lot of people are going to factor in fuel savings and get one that drives the way it looks.

 

[sundaymorning]

Tesla doesn't need to resolve anything except keep churning out those S and X..

Bear argument: First the S won't sell... (we sold everyone of them we could build). Then X will cannabolize S (we kept selling out on S)..

Then now M3 will stunt S sales without bringing brand awareness for Tesla? Great job with cherry picking datapoint, bears. But nice try I'm not buying into the BS. Let me tell you something about luxury. If you've owned a luxury S500, 7 series or Lexus LS like I do, you'll never consider an alternative C class, 3 Bimmer or IS unless you absolutely have to for financial reasons... Why? Because it's a downgrade, once you've tasted luxury and can afford to live in luxury, why compromise? You only live once.. The 3 is a different market.