Short-Term TSLA Price Movements - 2016

[SunCatcher]

I agree that the 60X is obviously to stimulated demand and that isn't a bad thing. Of course they have to modulate demand.

I personally just wish they would start a modest ad compaign and be done with it. Get the long reservation lists going again so we can have another conversation. The old argument against ads were that they didn't need it, didn't dare make longer reservation lists for fear of upsetting buyers. I don't think they have that risk anymore, so buy some artfully produced TV spots. It will have some broader benefits too. I think the industry, particularly the ad-supported media will stop treating TM like literal aliens and they can control their message better with the general public. Right now they are letting their enemies define them which cannot go on forever. I kind of think they passed the point where it was optimal to get out in front of their messaging already. There is a small but ever growing segment that will "politically" identify tesla as negative. Start a charm campaign.

I wholeheartedly agree. Small to modest campaign aimed at educating the general public about Tesla. I repeat myself when I say that I still can't believe how many people I talk to that don't have a clue about this company and its product. If irregular ads appeared, even along the lines of some of the cool privately produced videos we've seen, the mainstream public would be abuzz with asking for more details.

And media that depends on advertising revenues would think twice about mealy-mouthing an emerging industry giant, whose ads are available to only a few of them. Can you imagine?

Tesla could even make use of the waiting aspect. When a restaurant is so popular that you have to book well in advance, it makes it even more desirable/sought after.

I personally hate most ads, but love the clever few that win me over. And unfortunately, advertising is the way our world works.

 

[dc_h]

I think the 60 is a good move. Range anxiety has subsided where EV's are more common, and reducing the price makes it easier to justify the Tesla, even if you still need\want a an ICE car with greater range. Is this a demand lever, that seems very much a yes. Do they need to stimulate demand as they increase capacity from 1200 cars per week to 2000+, that also seems likely. Do they need to take action to reduce the impact of a rising dollar, that also seems practical. You can interpret as bullish or bearish, as you wish. The fact that Tesla has options to increase demand is bullish. The fact that there is not unlimited demand for a $120,000 car is too bad for humanity, but reality. I believe I read that the market for cars increases about 50% for every 10% decrease in prices, so increases your market by 50% without deploying more sales centers or advertising is cost effective.
The big strategic issue is it does seem that Tesla is prioritizing growth over margins. I don't pretend to know the exact impact to earnings, but think this is strategic to the goal of producing 500,000 cars in 2018. They need to staff up for the Model 3 now and those people need to have cars to build. Being profitable may be easier producing 120,000 cars annually with a 25% GM, than 80,000 cars with a 28% GM.
I suspect another demand lever will be pulled soon, with a software enabled 100D. This will probably be headlined as Tesla-flation and noting how overly expensive all Tesla our, ignoring today's headline of the loss of pricing power.

Elon, remember, don't explain yourself, your enemies won't care and your friends understand. You can't get away with that all the time, but a lot of the press nonsense is just bought and paid PR. Getting your goat is as important as sowing doubt.

 

[EarlyAdopter]

The skew towards high priced Model X's (and S's)in the mix was key to GM growth. Where does guidance go now?

GM can also grow through improved production efficiencies and reduced input costs.

I seem to recall Tesla making significant investments in both of those areas...

 

[Bgarret]

Yep. It's pretty obvious when Tesla principals make SEC scrutinized statements to investors in quarterly reports describing QoQ and YoY demand growth. For the falling demand idea to be correct, they would all need to be lying in a felony sort of way. That's not very likely.

Margin killing is also a gross miss characterization of reality. Even with pessimistic assumptions about cell and pack cost, the worst case scenario is roughly 2% loss to gross margin. This also ignores the fact that the margin on future upgrades to 75 kWh are staggeringly good, and that the entire GM loss can likely be recovered completely even with low double digit conversion rates.

Having 400k people in line for a lower priced car changes strategy. Some will splurge to get an S or X at the right price, so offering a lower priced version with the potential for a high margin update is fantastic, not a negative as I keep seeing you suggest.

I will believe Tesla has a demand problem when I see an ad on national TV with Elon standing in front of a SpaceX rocket in a velour jacket as a Model S, Model X and Model III drive up autonomously to "The Flight of the Valkyries" and he asks people if they want one. He could run an incentive program letting a random reservation holder land the next SpaceX rocket on "Just Read the Instructions". If there were potential demand issues, they would act now and not try to hide them.

 

[X Yes?]

GM can also grow through improved production efficiencies and reduced input costs.

I seem to recall Tesla making significant investments in both of those areas...

Q2 ER on deck

We'll hopefully get some visibility on that vs. warranty cost on the continuing Model X door problems.

 

[jhm]

Well about 25 minutes ago, shorts attacked the SCTY price to maintain the gap between Tesla and SolarCity.

As I've said, they have to defend this gap to undermine both stocks.

 

[motobaleno]

Not sure why the shorts and the negative nellies seem to think that Tesla doing something that will increase demand should be seen as a negative thing.

Tesla just finished a quarter with their highest run-rate yet, (albeit only for the last part of the quarter) and they've said that by the end of 2016 they intend to be at a run rate of 2400 cars/week.

If they're going to produce an additional 400 cars/week by the end of the year, and additional 200/week by the end of Q3, they have to find an additional 7200 buyers that they didn't have to find if they just maintained 2000 cars/wk.

Of course you need to raise demand in order to do that. There is still a 10-12 week lead time to get your car. That indicates that demand isn't the problem.

As they continue to ramp the production capacity, they need to ramp the demand to fill it. Pretty basic to me.

Ignoring all of that though, I believe that X60 is purely a case of they already make 60kWh software limited 75kWh skateboards for the S60, so why not get a basically free extra product out of it.

In addition, I don't think they sell very many software limited S60's but it gets people in the door to buy a higher margin product. I believe the same will hold true for X60. I believe it is purely a product intended to take advantage of the decoy effect. By providing a third (or fourth) option which is somehow undesirable, you impact the decision people make, and you can drive them to buy higher margin things they wouldn't have otherwise.

so you are basically saying that just now tesla is not production-limited but demand-limited: that's a pretty dangerous statement...

 

[Vitold]

It's not like he/his media team won't know what Fortune writes about him or Tesla. It's a symbolic action of course - as in "Fortune is a shitty news outlet who publish lies about me and my company".

It's probably not whole Fortune, just Carol (and friends) who is a retired Fortune editor-at-large who now does edits for Buffett, who, as we know, is feuding with SolarCity in Nevada over net metering and also an investor in BYD - which does EV, hybrid, solar and batteries.

She was introduced to Mr. Buffett by her husband, John, a retired partner at First Manhattan, the New York investment manager. The couple, married 54 years, are longtime Berkshire Hathaway shareholders. They raised two children in Larchmont, N.Y., the Westchester suburb where they still live.
[...]
Ms. Loomis also plans to continue her regular conversations with Mr. Buffett and assist him with his writings. After editing the Berkshire Hathaway shareholder letter for nearly 40 years, she likes to remind Mr. Buffett that he still needs her help.

 

[tanner]

Oh boy, we're going down now...

 

[Johan]

Well about 25 minutes ago, shorts attacked the SCTY price to maintain the gap between Tesla and SolarCity.

As I've said, they have to defend this gap to undermine both stocks.

It is easier (=takes less capital) to move SCTY... Luckily the days of SCTY existing as an entity of its own are counted.

 

[FluxCap]

Well about 25 minutes ago, shorts attacked the SCTY price to maintain the gap between Tesla and SolarCity.

As I've said, they have to defend this gap to undermine both stocks.

I'm seriously enjoying slurping up SCTY shares at a discount to merger price. The boards are unanimous in support of the merger, and it makes sense for both companies to become one company (which I'm betting will be more clear after GF launch party). It it is going to happen. Snagging free soon-to-be-TSLA shares feels good.

 

[racer26]

so you are basically saying that just now tesla is not production-limited but demand-limited: that's a pretty dangerous statement...

Is it really though?

First, I'm not sure that I'm saying that. There are an awful lot of pieces to this puzzle and I hardly profess to understand all of them.

Second, it wouldn't be terribly surprising if S/X are reaching the point where production can in fact match demand. The total market demand for $80-100k luxury sedans just isn't that large. In 2015, Tesla sold ~25k Model S in the USA, and the USA collectively bought just shy of 100k high-end luxury sedans (Tesla S, Audi A7/A8, BMW 6 and 7 series, Jaguar XJ, Lexus LS, Mercedes CLS and S class, and Porsche Panamera). Tesla already had a 25% market share at the end of 2015, and they were targeting a 50%+ YoY gain for 2016. How long can you keep growing sales 50% year over year when you already own 25% of the market? Some portion of buyers will be the diehard brand lovers of BMW, Mercedes, Audi, etc.

I believe the company as a whole is still production limited -- there are 400,000 of us waiting on Model 3's, many of whom (especially those of us not in USA) will be waiting until mid-late 2018.

 

[jhm]

It is easier (=takes less capital) to move SCTY... Luckily the days of SCTY existing as an entity of its own are counted.

Yup, they're hitting SCTY hard right now. Think of this as a proxy attack on TSLA.

 

[Vitold]

Is it really though?

First, I'm not sure that I'm saying that. There are an awful lot of pieces to this puzzle and I hardly profess to understand all of them.

Second, it wouldn't be terribly surprising if S/X are reaching the point where production can in fact match demand. The total market demand for $80-100k luxury sedans just isn't that large. In 2015, Tesla sold ~25k Model S in the USA, and the USA collectively bought just shy of 100k high-end luxury sedans (Tesla S, Audi A7/A8, BMW 6 and 7 series, Jaguar XJ, Lexus LS, Mercedes CLS and S class, and Porsche Panamera). Tesla already had a 25% market share at the end of 2015, and they were targeting a 50%+ YoY gain for 2016. How long can you keep growing sales 50% year over year when you already own 25% of the market?

Market could be larger because buyers have nothing else to buy (as they do with ICE) if they want EV SUV.

 

[racer26]

Market could be larger because buyers have no where else to go (as they do with ICE) if they want EV SUV.

Sure, to some degree. And I believe that's happened with S too to some degree. But there truly is a limit to how much, as most people simply can't afford a vehicle that expensive no matter how far they stretch.

 

[SBenson]

Tesla ends ‘Resale Value Guarantee’ on new vehicle purchases

 

[winfield100]

Yup, they're hitting SCTY hard right now. Think of this as a proxy attack on TSLA.

twas nice getting another 200 shares SCTY

 

[jhm]

I'm seriously enjoying slurping up SCTY shares at a discount to merger price. The boards are unanimous in support of the merger, and it makes sense for both companies to become one company (which I'm betting will be more clear after GF launch party). It it is going to happen. Snagging free soon-to-be-TSLA shares feels good.

Yeah, I'm optimistic that the GF party and delivery of Secret Master Plan 2 will bring clarity to this.

This stuff is an obvious no-brainer for Musk, which leaves most people scratching their skull. But that's the way vision works. Once you see something in the right light, it seems obvious and transparent. But without vision, it seems opaque and counterintuitive. So most of us will have to wait for the vision download.

 

[Curt Renz]

Tesla ends ‘Resale Value Guarantee’ on new vehicle purchases

That shoots another hole in the lack of demand argument.

 

[Irishjugg]

Yes, it it is my opinion that this move pulls demand forward from future quarters.

My opinions have been much more accurate than Tesla opinions, as of late. I'm opining about cash needs, capital raises, margins, GAAP (or non GAAP) profitability, production targets, deliveries, stuff like that.

I disagree, your back patting is a bit too revisionist for my liking, though I'm not going to waste the time going back to pull examples. You seem genuinely incapable of thinking you cod be, or were incorrect about something and that's troubling given the flimsy and speculation driven"evidence" you use.