Short-Term TSLA Price Movements - 2016

[techmaven]

InsideEVs just reported their estimates for May North American deliveries for Tesla:

May 2016 Plug-In Electric Vehicle Sales Report Card

Model S: 1,200
Model X: 1,600

Of course, they can be completely wrong... intra-quarter estimates of Tesla deliveries in North America are fairly unreliable, but still market moving.

Model X just overtook the Leaf in YTD sales in North America and Tesla now occupies 2 out of the top 4 spots. Model X also crossed 5,000 delivered (ever) according to that estimate.

 

[Johan]

How does that lead to them being at an annualized rate of 2000 today?!? Guidance calls for barely 1650 cars/week in the last three quarters of this year.



Again. Their guidance for this quarter is that they will produce 20k cars or 1540 cars/week. Was that a lie or intentially misleiding investors according to you then?

I believe the Q2 guidance is overly cautious. They have themselves some room for (continued) problems with the X ramp and probably figured that if worse comes to worse they would back away from the 80-90k full year guidance at the end of Q2 (if/when announcing "poor" Q2 numbers). What I think will happen instead, given the enthusiasm and confidence I heard yesterday and the light tone in which previously given full year guidance was reaffirmed is that they will be producing at 2000/week through June, slightly beat Q2 guidance, make 50k cars in the second half of the year (2000/week).

 

[Curt Renz]

As expected, mainly negative headlines this morning, particularly about Supercharging not being free for Model 3, even though it has never been free for anyone, but priced into the Model S and X. I expect SP to drop a little today because most people aren't smart enough to understand what was actually said yesterday. At this point, I don't expect ATH for the SP until next year....

I’ve reserved a Model 3 and may rarely if ever visit a Supercharger station. I fly for long distances. I’d prefer a pay-as-you-go method rather than make an upfront payment for Supercharging. As a shareholder I’m pleased that Tesla will be receiving revenues from Model 3 owners who Supercharge.

 

[Grendal]

I’ve reserved a Model 3 and may rarely if ever visit a Supercharger station. I fly for long distances. I’d prefer a pay-as-you-go method rather than making an upfront payment for Supercharging. As a shareholder I’m pleased that Tesla will be receiving revenues from Model 3 owners who Supercharge.

Someone should do a poll. I'm exactly the same and agree for the same reasons. It is simply more cost effective to give Model 3 customers more options. Model 3 is the least expensive Tesla and needs to stay the least expensive. Additional cost needs to be external to the cost of the car.

Also, this showcases the S and X as the more premium vehicle and highlights their additional value.

The videos have been moved around so here they are again together:

 

[tanner]

Someone should do a poll. I'm exactly the same and agree for the same reasons. It is simply more cost effective to give Model 3 customers more options. Model 3 is the least expensive Tesla and needs to stay the least expensive. Additional cost needs to be external to the cost of the car.

Also, this showcases the S and X as the more premium vehicle and highlights their additional value.

I rarely use superchargers, but love them when I drive to LA. It's just so convenient to be able to pull in and charge up in tens of minutes. Sometimes I use them when I don't need to as well... But even with my 2013 MS, I was NOWHERE near the 60k mileage figure outlined previously in this thread.

 

[larmor]

I’ve reserved a Model 3 and may rarely if ever visit a Supercharger station. I fly for long distances. I’d prefer a pay-as-you-go method rather than make an upfront payment for Supercharging. As a shareholder I’m pleased that Tesla will be receiving revenues from Model 3 owners who Supercharge.

Agree, this is business move and away from silicon valley freemium culture.

An aside, not sure why market reacts negatively to news that will increase revenue, or for that matter, improved efficiency in production, or economies of scale-battery which all are for improvement of the spreadsheet...

 

[CButterK]

I believe the Q2 guidance is overly cautious. They have themselves some room for (continued) problems with the X ramp and probably figured that if worse comes to worse they would back away from the 80-90k full year guidance at the end of Q2 (if/when announcing "poor" Q2 numbers). What I think will happen instead, given the enthusiasm and confidence I heard yesterday and the light tone in which previously given full year guidance was reaffirmed is that they will be producing at 2000/week through June, slightly beat Q2 guidance, make 50k cars in the second half of the year (2000/week).

Exactly. 2 other comments made yesterday points in this direction as well. I forget the context, but I recall him saying without hesitation, 50K model S & 50K model X(reference to production?), and also, the Model X struggle at this point is a Software issue(to be resolved within a month via OTA update?). So, sounds like they are comfortable with 50/50 production ratio and cranking out M/X at maximum rate, to be fully fixed with OTA update.

Am I way off the mark in this interpretation?

 

[Grendal]

Agree, this is business move and away from silicon valley freemium culture.

An aside, not sure why market reacts negatively to news that will increase revenue, or for that matter, improved efficiency in production, or economies of scale-battery which all are for improvement of the spreadsheet...

The market is a fickle thing and there was a "feeling" amongst investors that Supercharging was free from the rollout. Insiders like us at TMC knew better but there was still a contingent of wishful thinking even here.

Buying opportunity since the market will realize that this is more profitable in the future.

 

[neroden]

Since TSLA is engineering oriented, I can see why they have an aversion to tackle this issue. Engineers hates thinking about service and service is basically a manhour per customer thing that does not have any hack or shortcut.

People want to hear back same day. People want to be pampered and feel like a king.

And people don't want to drive 4 hours for service.

I also don't see them being able to tackle this issue until the first production line is ironed out.

Fair enough. Well, that leaves them with one weak point for competitors to attack until they get it fixed. Although the competitors are all hampered by use of franchised dealers who don't know anything at all about electric cars.

 

[MitchJi]

I figured that at roughly at 1800 cars per week , at $100,000 per car, they cover all expenses.
That is sum of cost of goods sold, plus depreciation, plus R&D , plus interest cost. Not model 3.
That run rate is crucial in my mind, if and only if my calculations are accurate. Its crucial
because at that rate the firm is self sustaining.

Self sustaining basically means no solvency issues.

Not including TE.

Just some food for thought... first Gigafactory phase coming online at 20 GWh of capacity, starting at end of this year. Assume gradual ramp for 6 months to hit that mark, so say 8 GWh of cell production at that point....

That's 9.75 GWh. That means Tesla Energy has about 8 GWh of cell supply in 2017. At $250/kWh (assuming pricing drops down to original pricing), we're talking $2 billion in revenue for TE in 2017. That's $200 million in gross profit at 10% gross margin, $300 million at 15% gross profit.

They are making over 15% now, according to both Elon and JB. But the GF producd cells were supposed to be at least 35% cheaper. I used the past tense because I don't think it's possible for the GF to drastically increase the production and not substantially decrease their costs. The cells are probably about 80% of the cost of the TE products and 20-30% is reasonable for the additional savings so margins of at least 40% seem likely.

I believe the Q2 guidance is overly cautious. They have themselves some room for (continued) problems with the X ramp and probably figured that if worse comes to worse they would back away from the 80-90k full year guidance at the end of Q2 (if/when announcing "poor" Q2 numbers). What I think will happen instead, given the enthusiasm and confidence I heard yesterday and the light tone in which previously given full year guidance was reaffirmed is that they will be producing at 2000/week through June, slightly beat Q2 guidance, make 50k cars in the second half of the year (2000/week).

This appears to be the major unanswered question. Maybe DaveT can get an answer from Tesla IR?

 

[Fallenone]

InsideEVs just reported their estimates for May North American deliveries for Tesla:

May 2016 Plug-In Electric Vehicle Sales Report Card

Model S: 1,200
Model X: 1,600

Of course, they can be completely wrong... intra-quarter estimates of Tesla deliveries in North America are fairly unreliable, but still market moving.

Model X just overtook the Leaf in YTD sales in North America and Tesla now occupies 2 out of the top 4 spots. Model X also crossed 5,000 delivered (ever) according to that estimate.

It's also interesting to read their comments. Saying almost no Model S US deliveries in the first two weeks and the majority was in the past 7 days. Reasons were the face lift holding buyers back to wait, and focusing on delivering X which takes more time.

 

[drinkerofkoolaid]

It's a bit ironic that anyone would think Tesla charging for lifetime Supercharger access on the Model 3 is a bad thing, especially since the person who brought it up basically made an excellent argument for why it should be an optional feature.

The person who asked the question, who mentioned his Model S has 160,000 miles on it and has required almost no service besides replacing the tires, asked why Tesla doesn't charge for using the Superchargers especially since a lot of people are using the Superchargers even when they really don't need to, and the lifetime of a Model S is clearly a lot longer than any gasoline vehicle.

 

[Curt Renz]

The market is a fickle thing and there was a "feeling" amongst investors that Supercharging was free from the rollout. Insiders like us at TMC knew better but there was still a contingent of wishful thinking even here.

Buying opportunity since the market will realize that this is more profitable in the future.

Elon indicated two months ago that Model 3's would be Supercharger capable, but never mentioned that usage would be free. I assumed this meant there would be an upfront cost and/or pay-as-you-go option. Some others may have assumed differently. But for a mass produced less expensive car, it is financially prudent for the company to expect some payment for Supercharging. The stock market may be taking its time this morning to realize that.

 

[Drax7]

Price action wise, if we close higher on the day than yesterday , its time to add.
just my interpretation of the price action.

 

[techmaven]

They are making over 15% now, according to both Elon and JB. But the GF produced cells were supposed to be at least 35% cheaper. I used the past tense because I don't think it's possible for the GF to drastically increase the production and not substantially decrease their costs. The cells are probably about 80% of the cost of the TE products and 20-30% is reasonable for the additional savings so margins of about 40% seem likely.

I forgot to run the numbers the other way, I was still assuming low margins from the current product offering. I just ran some updated numbers... wow, hmmm... Assuming they can hit the $135/kWh cell pricing, then $170/kWh at the TE pack level, plus some additional overhead costs to bring it to $180/kWh and they choose to sell at $250/kWh, that's 28% gross margin. At 28% margin, that's $560 million in gross profit in 2017 for Tesla Energy. Seems achievable.

 

[AudubonB]

Moderator Input:
A super-brief note, given my hyper-limited bandwidth, to provide a great big Thank You to all participants for recent discussions that have remained lively while sticking - essentially - to topic and have avoided fireworks.

Non-Mod input:
I have been contemplating the concept of SpC usage of Model 3s and Tesla's revelation that a usage fee of some sort will apply, as follows:

Let us assume there is an upfront fee for SpC access of $X. Now, unlike every other feature of the automobile - whether motor or battery or seats or carpet or windshield - that specific feature of the vehicle will retain precisely 100% of its utility to any potential secondhand owner of the car.

So now let's take a look at two Model 3s, using indeterminates to stand in for numbers, the first one without and the second one with SpC access. Their initial costs will be $Z and $Z+X.

The appropriate prices for these two cars as used vehicles, some time down the road, will be diminished by Y%....but not quite. Rather, the correct prices should be (Z*1-Y) and (Z*1-Y)+X. This is a spectacular distinction that is without precedent.

THEREFORE - to my way of thinking, the only criterion a potential buyer should consider when contemplating whether or not to add SpC accessibility is his or her NPV of that upfront $X. There are very, very few non-depreciable assets in our lives - but this is one of them.

Caveat? Yes. The above assumes that Tesla will offer Model 3 accessibility via the bulk upfront charge, as it did with 60kWh Model Ss. Were it to go the route of assessing a per-use fee or annual access subscription, then the above does not apply.

 

[EinSV]

I forgot to run the numbers the other way, I was still assuming low margins from the current product offering. I just ran some updated numbers... wow, hmmm... Assuming they can hit the $135/kWh cell pricing, then $170/kWh at the TE pack level, plus some additional overhead costs to bring it to $180/kWh and they choose to sell at $250/kWh, that's 28% gross margin. At 28% margin, that's $560 million in gross profit in 2017 for Tesla Energy. Seems achievable.

Impressive numbers, but the margin calculation seems conservative for 2017, since Powerpack and Powerwall pricing is almost twice the $250/kWh estimate (e.g., currently $470/kWh for Powerpack). Even if they do some discounting for some large customers, I assume they'll follow the pattern from the vehicle business and all things being equal ship the highest margin product first.

 

[Tenable]

It's a bit ironic that anyone would think Tesla charging for lifetime Supercharger access on the Model 3 is a bad thing, especially since the person who brought it up basically made an excellent argument for why it should be an optional feature.

The person who asked the question, who mentioned his Model S has 160,000 miles on it and has required almost no service besides replacing the tires, asked why Tesla doesn't charge for using the Superchargers especially since a lot of people are using the Superchargers even when they really don't need to, and the lifetime of a Model S is clearly a lot longer than any gasoline vehicle.

Likely its just about the average usage. I can't remember the number, but I remember reading something a while back stating the average MS owner doesn't drive many miles. I am very much in this camp. I love my Model S, but I live in the city center I rarely drive more than 5-10 miles, I've used a supercharger twice. In hindsight, perhaps I should have leased.

I'm sure there are many people who abuse the SCs as was demonstrated by Tesla sending out letters, but across the country in large markets like Dallas, there are very few and even if there were a dozen I would prefer to charge at home.

 

[drinkerofkoolaid]

Interesting meeting taking place in Florence from June 4th-June 5th.

http://ec.europa.eu/energy/sites/ener/files/documents/FF Agenda_26_05.pdf


These are only a few of the questions being discussed, that I thought were particularly significant for Tesla and Solar City. I suggest reading the entire document. It wouldn't make sense for me to post all of them here. I think the entire meeting is to discuss how to integrate power storage solutions (such as the Powerwall and Powerpack). For more information on CACM check out the following website.

I have highlighted the topics I think are most important. I will look for further information later tonight.

Capacity Allocation and Congestion Management (CACM)

Key Questions for Discussion:

1. What are the stakeholders’ views of the current draft electricity balancing code? To what extent can future flexibility challenges be addressed through this tool?
2. How can small and large consumers be encouraged to be more active in providing and benefiting from flexibility? What market barriers prevent demand participation?
3. What should be the roles of and the relationships between TSOs, DSOs and other existing or new players as regards flexibility?
4. What role can electricity storage play in delivering flexibility to the market? What are the shortcomings?
5. What else needs to be done in order to ensure flexibility can be provided within the market?
6. What can be done to ensure that Member States rely on resources outside their borders as a contribution to their security of supply?
7. What would be the added value and the challenges arising from a common assessment of generation adequacy at regional and/or at Union level?
8. How can adequacy assessments and their results provide a basis for a decision on the need for CRMs? How can it be ensured that CRMs, if needed, are the most competitive and least distortive for the market? What features of CRMs could be made common at regional and/or at Union level.
9. What should the key priorities be for implementation and enforcement of existing EU energy legislation?

 

[techmaven]

Impressive numbers, but the margin calculation seems conservative for 2017, since Powerpack and Powerwall pricing is almost twice the $250/kWh estimate (e.g., currently $470/kWh for Powerpack). Even if they do some discounting for some large customers, I assume they'll follow the pattern from the vehicle business and all things being equal ship the highest margin product first.

I am making the assumption that they will bring the price points back down in 2017. Further, the PowerWall has a lot more overhead per kWh, so going with the $250/kWh seems right. Yes, they could have even higher margin, but I would assume the market would provide sufficient competition at that point to drive a lower price point. Plus, initial production always has higher COGS so it's probably not worth thinking about > 30% margins.