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Short-Term TSLA Price Movements - 2016

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#19,326
It's a buying opportunity... it will amount to nothing, and there is obviously some panic selling.

CNBC appears to have a headline indicating there is an investigation into rear suspension, but they won't say by who, and won't say who's informing them of this!!!

Meanwhile they are happy to add that the stock fell 2% "following the news" LOL
 
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#19,337
Fallenone said:
OK I know I've probably been pretty annoying so far today. Because I am pretty disappointed by the 60 kWh model news. Here's a summary of my thoughts. I earnestly welcome solid counters to my reasoning.

Part A, the facts and near-facts.
1. Tesla is selling more and more cars on a yearly basis. And I have no doubt they will sell more than 50k they did last year.
2. A lower priced product will increase overall demand of their product lines.
3. The 60 kWh model is in fact a software limited 75 kWh model, therefore, costs for Tesla making those are same. If production rate is significantly higher, than the cost would be lower by a certain amount (unclear how much), but this doesn't change the fact the costs are still the same.
4. Battery cost has been falling.
5. Gross margin on Model S haven't improved since it hit ~25%.
6. Tesla wants to maximize profit, which is a combination of units sold and ASP.
7. Tesla wants to meet guidance.

Part B, Tesla's own guidance and near-guidance.
1. 2016 delivery 80k-90k. Reaffirmed in April and May for at least three times.
2. 2016 H2 delivery 50k, per Q1 ER letter.
3. Annualized production rate at 90k-100k by the end of this year, per shareholders meeting 9 days ago.
4. Cells will start being produced at GF by the end of this year and would lower their cost.

Part C, reasonable speculations (at least I think so).
1. Production rate has been lower than 2000/week for the most part of 2016 H1. Most likely around 1200/week in Q1 and 1450/week in Q2.
2. Based Model 75 has a gross margin of 22%. The cost of it would be $62.3k. The new base 60 kWh sold would have a mere 6% gross margin if customer choose not to upgrade it to 75 kWh. Even considering all the options and assuming all options are having 100% margins, the gross margin for a maxed out 60 kWh is only 16.6%. This is still lower than the base 75 kWh while carrying a higher price (82k vs 76k).
3. Most of the increase in units sold, compared to not introducing the 60 kWh, won't upgrade to 75 kWh, otherwise they would have bought the 75 kWh.
4. Tesla is making much less money on these increased units sold caused by this move.
5. No significant cost decrease would happen for the most part of H2 this year.

So considering everything here, I can't see this 60 kWh move being bullish on the stock. I think it's for whatever reason, Tesla can't hit their 80k guidance in deliveries, and have too lower the price and margins they get by having this 60 kWh out there to increase demand. Especially if you think B3 above. This is a rare case when we see/hear they give information on production expectation so close to a price change. The only silver lining I can see here, is H2 their production rate will be significantly higher than H1, and the cost would be lower. However, this only applies to the cost for the parts, which makes up no more than 2/3 of their costs IMO. Labor would be the same as they increase workers employed (remember the job fair in May?). Tooling costs would be the same as they account it on a per car basis so producing slow or faster will not change the tooling cost. To make the 60 kWh as profitable as the 75 kWh (22% margin), they need to cut cost in parts by 20%.

Wait I think this is not super far-fetched if they increase production from 1350/week to 2000/week, also having the Model 3 demand tantalizing suppliers for greater discounts.

Never mind my rambling. We might see a boost in margins this year.

Buy buy buy!
Click to expand...
Interesting post, agree with much of it, my thoughts;
A6. Tesla doesn't want to maximize profit, it wants to "accelerate the advent...". Ford dropped the price of Model T's from like 900 in 1910 to 350 in 1925, it worked out okay.
B1. That's public guidance. Internally I'm sure they are pushing for more than 90k if they can do a good job of it.
C4. Yes in the short term they might make less, but they are betting on a lot of the cars eventually upgrading the battery, and the batteries are going to get cheaper and cheaper to make.
 
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