Short-Term TSLA Price Movements - 2016

[anon]

It's interesting to note that Model X wait times in most regions are currently one month longer than for Model S (even when selecting the 6/7 seat option). That suggests to me that demand is currently holding up well, but perhaps there is another explanation, such as parts shortages on the X leading to limits on scaling up X production as quickly as S production.

 

[tander]

I picked up that SCTY management was not very capable a couple years ago, but I reasoned that Elon was the ultimate mastermind and that he could fix SCTY. I just didn't expect him to try to fix SCTY at the expense of TSLA.

If the SCTY merger does go through, I really hope Lyndon is let go of. If Lyndon becomes SVP, Tesla Energy... then that would be beyond terrible for TSLA, IMO. I would have to consider liquidating a lot of my position at that point.

Fundamentals can be preceded by technicals, but if technicals aren't supported by fundamentals than any rally likely won't be sustained over a long period of time (ie., several quarters).

If the Model X was a hit, I think we'd be at $350 right now and make $450 when Model 3 ships. If you look through my past posts, I was upset and public very early on with the Model X ramp issues because I knew it could really dampen the SP and make raising money more difficult. I could go on about why I think the X fiasco makes Tesla a much more vulnerable company, but I won't since I'll probably be misunderstood as anti-Tesla. Ironically though is that I care so much about this stuff, and at times I can be critical when it's called for because I care about Tesla so much and I want them to do well.

Hey Dave and others who are upset about the merger. I respect and appreciate your opinions (and thanks again for that chat with Andrea James, she's sharp!) and you may turn out to be right, but I think you may not be seeing the forest. With regard toward the Model X, that car is pretty much designed for the Chinese market, which Tesla is really just dipping its feet/clawing its way into. With regard to the merger, I don't know if it's fair to blame Rive, or think that the merger doesn't make sense or it's a bad time. It's always kind of a bad time because it's a very big picture thing. But is it a good idea? I think so. For example there really is a big savings cost if Tesla can start selling solar in the stores, as right now SCTY has a very high "customer acquisition cost", solar panels are boring, they don't just sell themselves for the most part. But if you can catch somebody's eye with a car, and maybe sell them panels at the same time, that's big. Moreover, Tesla and SolarCity already basically operate as one company, just not in name. It makes it easier if they are under the same roof so to speak.

With regard toward Rive, what makes you think he's done a bad job? The stock price, earnings, financing? He's had one mission, grow at all cost, and he's done that. With regard to the company financials, are they bad? Yes, they're not great, and they've been getting worse. But that's actually a GOOD and probably somewhat intentional thing when your are faced with doing a "go shop" period. They didn't actually want any other suiters, they wanted it to look bad, it would really mess up the merger if Berkshire Hathaway or someone made an offer and SCTY either had to sell to them or TSLA had to do a counter offer. If you have to put something on the auction block but don't really want to sell it, you make it look extra dirty and disheveled, then when you got it home you'd straighten it up and enjoy it again, things are not as bad as they sound. Not to mention that people are just kinda of shellshocked by the solar industry in general right now. Yes when you look at the trees (financials etc.) it looks like Rive has been downright negligent. But when you look at the forest and see what he's been actually doing and the fact that they are competing with state sponsored monopolies, it's impressive. On the outside it might appear like Rive has just been creating a mess and Musk is coming in to clean it up, in reality I suspect Rive has been doing exactly what Musk wanted of him all along and he'll either stay on as a valued member of the management team or sit back and enjoy the view from a board seat.

 

[DaveT]

Ok, so here are my 2 cents reflecting to the debate on the last few pages - this may get long, so i spilt it to two posts.

1, GM Bolt / LG and Samsung as a competitor or supplier to competitors

DaveT's theory - as I understood it

Normally I read and agree with almost everything that DaveT writes, but this time I am in the other camp. Dave's thesis is that LG and or Samsung can now match Panasonic on battery pricing, hence the GM Bolt. Dave deducts this from the fact that Tesla has talked to and qualified both LG and Samsung, so he says it shows they must have been on pair. The fact the deal didn't go through (save for the Roadster) is due to Panasonic being able to meet Tesla demand - that's how i read his posts. He also discounts the insider information we read on GM losing 5 grand on each Bolt and the one about LG flipping out over GM disclosing the heavily discounted $145 price they charge for cells. I see this quite differently.

My counter

Barring any major technology breakthrough at LG and Sammy that we don't know about, this is mainly a matter of volumes. According to this chart from Celantechinca, in 2015 Pana was about 3x the size of LG and 9-10x of Samsung. Now this is production, not capacity and we know LG has been building factories in China, but when these negotiations were going on, do we honestly believe LG could have gotten the same production efficiencies and same deal on raw materials as Panasonic, 3x its size? The math does not add up. And that's before adding any of the edge Tesla has with its custom anode/cathode and electrolyte design and Panasonic has with its manufacturing experience (fueled by their Tesla experience of the last 10 years). So I for one think the stories do make sense about LG doing a heavy discount on the batteries for the Bolt by bundling it with half the components in the car (well anything that matters, really) and also in the interest to gain market share and lock GM in long term. Add to that the insider info Dave discounts where GM still loses 5k (7.5k after the rumored price drop) on every car and you certainly understand why the limited production to 30-50k per year.

Let me put it this way: if LG is truly at Tesla levels with cell/pack pricing and the paired up with GM who have the ability and the experience to produce millions of cars a year (unlike Tesla), why in the world did they limit production to such a small quantity? It wouldn't make sense - especially in light of Model 3 (proven demand at that price point). And looking ahead, I do get LG, Sammy, BYD are all planning and building 10-20-30GWh factories, but how will volumes, manufacturing efficiencies and deals on raw materials compare to Tesla's 150GWh monster?

Alright, let's take this angle. Can you prove that LG Chem is not making any profit out of selling cells for $145/kWh?

Do we even know how much Panasonic charges to Tesla? For all we know, Panasonic could be charging Tesla less than $145/kWh and making a healthy profit margin. So, for LG Chem to charge $145/kWh, that could be higher than Panasonic's price (ie., maybe 10%?) and it's also possible that LG Chem is taking a lower profit margin. But it doesn't mean that they're "losing money" by selling cells at $145/kWh.

It is a big boost of validity for Samsung SDI, LG Chem, and SK Innovation, to have Tesla not only interested in your cells (Tesla tests cells from all over the world anyway) but wanting to ink a deal for supply. And according to the article I posted earlier, Samsung SDI and Tesla were in final stages of talks in inking a deal to supply TE cells. I'm not saying that this proves that LG Chem and others' cell prices are as low as Panasonic, but if we assume that Tesla is/was actually serious about inking a deal, then I think it's evidence that Samsung SDI (and probably others) cells were close in quality and price to Panasonic's cells. When I say "close" it could be marginally higher in price... but it still needs to be attractive enough for Tesla to be that serious.

@mrdoubleb, you mention volume... and that does give an advantage with costs, but the question is how big is that advantage. Note that I never claimed that LG Chem had the "same" costs as Panasonic... I think they are higher but probably not by much (ie., within 10% or max 15%). The chart you linked to also was just for EV batteries and doesn't show manufacturing production for all lithium-ion batteries, including non-EV. But again, even if Panasonic holds a large volume advantage, it doesn't necessarily mean that LG Chem can't make money at $145/kWh... especially in the case where Panasonic let's say hypothetically can make money at a lower price.

LG flipping out over GM disclosing cell cost... I think Panasonic would do the same if Tesla disclosed their cost. Again, volume partners get special, preferential pricing that isn't available or even known to others. Just because it's special/preferential doesn't mean the company (whether it's Panasonic or LG Chem) is losing money on the deal. They're pissed when others find out about the special prices because it makes their lives more complicated when selling to non-preferential partners.

Also, what is Panasonic's special tech/innovation that allows them to have such a drastic price advantage over LG Chem and Samsung SDI? Panasonic makes better auto cells. But from what I've seen, there's nothing super special with Panasonic cells that make them super cheap to produce that other companies can't do.

I know people here want to believe that the competition is light years behind. But I think take a step back and think about Tesla's overall mission... It's a great thing LG Chem is selling cells for $145/kWh. It helps with the overall mission to expedite the transition to sustainable transport.

Alright, how about we all end this conversation with this... let's make a compromise. How about we say there's a chance that LG Chem is making a profit on $145/kWh? And that probability we leave to each person to decide. But I don't think it's accurate to say there's "no chance" LG Chem is making money at $145/kWh... I just don't see any convincing evidence that backs up that claim.

 

[Turing]

Before they started MX production Tesla revamped their production line. Setting up 2 lines S and X designed to do initial production, plus a 3rd line designed to do final assembly for both. In spite of the fact that problems with the X final assembly have had a negative impact on S production, the S production has increased nicely. The mistakes the markets are making is to equate the X problems as general problems, rather than X specific problems, and to think there is any reason at all to think they will happen with the M3, which is being designed from the ground up to be easy to build. If anything their problems with the X make it less likely that they will have similar problems with the M3, because they are clearly bending over backwards to avoid repeating that mistake.

I think this is a key point. Musk has admitted to some hubris around the Model X what with overdesigning it and adding too much complexity. Early on i thought all the extra tech stuff in the MX was going to be worth it since it will make it increasingly unique and the added free marketing would make up for it. Considering the major delays that assumption was probably wrong and i wish they had made the MX with more production efficiency in mind. But Elon has admitted to this error and hubris and has vowed to make production efficiency the key metric wrt M3. So the fact that the tesla team has learned this hard lesson, in my opinion, makes the M3 less likely to go through "production hell" not more likely. And it was better that they learned that lesson during MX than M3. So I'm actually hopeful that we wont see major delays with M3 ramping, minor delays aren't going to be a big deal imo.

 

[DaveT]

Yes, the evidence is that there hasn't even been a full quarter of production since the ramp steadied and major issues were resolved. Model X is already ahead of where Model S was post-launch, and demand for Tesla cars is a feedback loop--more cars on the road, more people riding in their friends' relatives' coworkers' Model X, confidence QC issues are resolved = more demand.

So with all that in mind--definitely premature to say Model X demand is low. I wouldn't be surprised to see parity in S / X deliveries within the next 4 quarters.

I guess we'll choose to disagree on this one. I think Model X demand at this point is lower than expected (as evidenced by low delivery wait times and a previous reservation queue w/lots of cancellations). I think there's a chance it could recover, and I hope it does. But a lot of damage has been done with QC issues and how they've treated owners.

 

[DaveT]

Agree!

Pllus IMO the reason that MX deliveries were about half of MS deliveries in Q2 is that they still hadn't resolved the production issue. I'm sure someone here will say it's a demand problem, but I don't believe that. One reason I'm optimistic about Q3 is that if they've finally nailed the MX production that should improve MS production as well.

If you don't think Model X demand is lower than Model S, just go into any Tesla store (that displays both S/X) and ask the store employees what interest and demand is like for the Model X vs the Model S.

 

[Turing]

Sure, things could turn around for the Model X, and I hope they do. But Tesla was expecting demand for Model X to be same or even more than the Model S. But current demand for Model X clearly seems lower than the S. Do you have any evidence that shows otherwise?

It seems pretty hard to make this kind of demand comparison at this point in the product life cycle. The MX is still working through its backlog, early production cars had common issues, so many potential buyers could likely be waiting on the sideline for the backlog to clear so they only have to wait a month or so like MS, and for more mainstream word to get out that the production issues with the car have been solved. Also the MX qualifies for section 179 tax break on top of federal and state tax credits, that opens it up to a lot of small business people. I also expect the soon to be released 100D MX to be really popular.

 

[Oil4AsphaultOnly]

Alright, let's take this angle. Can you prove that LG Chem is not making any profit out of selling cells for $145/kWh?

Do we even know how much Panasonic charges to Tesla? For all we know, Panasonic could be charging Tesla less than $145/kWh and making a healthy profit margin. So, for LG Chem to charge $145/kWh, that could be higher than Panasonic's price (ie., maybe 10%?) and it's also possible that LG Chem is taking a lower profit margin. But it doesn't mean that they're "losing money" by selling cells at $145/kWh.

It is a big boost of validity for Samsung SDI, LG Chem, and SK Innovation, to have Tesla not only interested in your cells (Tesla tests cells from all over the world anyway) but wanting to ink a deal for supply. And according to the article I posted earlier, Samsung SDI and Tesla were in final stages of talks in inking a deal to supply TE cells. I'm not saying that this proves that LG Chem and others' cell prices are as low as Panasonic, but if we assume that Tesla is/was actually serious about inking a deal, then I think it's evidence that Samsung SDI (and probably others) cells were close in quality and price to Panasonic's cells. When I say "close" it could be marginally higher in price... but it still needs to be attractive enough for Tesla to be that serious.

@mrdoubleb, you mention volume... and that does give an advantage with costs, but the question is how big it that advantage. Note that I never claimed that LG Chem had the "same" costs as Panasonic... I think they are higher but probably not by much (ie., within 10% or max 15%). The chart you linked to also was just for EV batteries and doesn't show manufacturing production for all lithium-ion batteries, including non-EV. But again, even if Panasonic holds a large volume advantage, it doesn't necessarily mean that LG Chem can't make money at $145/kWh... especially in the case where Panasonic let's say hypothetically can make money at a lower price.

LG flipping out over GM disclosing cell cost... I think Panasonic would do the same if Tesla disclosed their cost. Again, volume partners get special, preferential pricing that isn't available or even known to others. Just because it's special/preferential doesn't mean the company (whether it's Panasonic or LG Chem) is losing money on the deal. They're pissed when others find out about the special prices because it makes their lives more complicated when selling to non-preferential partners.

Also, what is Panasonic's special tech/innovation that allows them to have such a drastic price advantage over LG Chem and Samsung SDI? Panasonic makes better auto cells. But from what I've seen, there's nothing super special with Panasonic cells that make them super cheap to produce that other companies can't do.

I know people here want to believe that the competition is light years behind. But I think take a step back and think about Tesla's overall mission... It's a great thing LG Chem is selling cells for $145/kWh. It helps with the overall mission to expedite the transition to sustainable transport.

Alright, how about we all end this conversation with this... let's make a compromise. How about we say there's a chance that LG Chem is making a profit on $145/kWh? And that probability we leave to each person to decide. But I don't think it's accurate to say there's "no chance" LG Chem is making money at $145/kWh... I just don't see any convincing evidence that backs up that claim.

Although I'd love to see this discussion close, but there's a little details missed in this exchange. The comparisons are apples and oranges, since Panasonic supplies cells to Tesla in a commodity format, one that they've fully depreciated the entire factory and tooling on (osaka plant). While LG is supplying pouch formatted cells to GM, to which their tooling costs haven't been fully depreciated yet. So Panasonic and LG's material costs might be the same, but their operating and capital costs are definitely different.

 

[DaveT]

Alright folks, just spent like half of the past two days writing on here, and my wife wants me back. I'm going to take a break but I'll probably check-in in a week.

 

[Thumper]

Thanks to all for your thoughtful input.

 

[Cattledog]

I also expect the soon to be released 100D MX to be really popular.

This.
20" wheels and 100D will yield 300+ EPA mileage. Will help for sure. I'd buy that configuration now (but we have a sig).

 

[AlMc]

Only one data point for sure but it appears EM/TM pulling out all the stops to move cars, giving discounts on new cars:

https://forums.tesla.com/forum/forums/new-inventory-cars-are-going-15k

 

[TrendTrader007]

Fundamentals can be preceded by technicals, but if technicals aren't supported by fundamentals than any rally likely won't be sustained over a long period of time (ie., several quarters).

If the Model X was a hit, I think we'd be at $350 right now and make $450 when Model 3 ships. If you look through my past posts, I was upset and public very early on with the Model X ramp issues because I knew it could really dampen the SP and make raising money more difficult. I could go on about why I think the X fiasco makes Tesla a much more vulnerable company, but I won't since I'll probably be misunderstood as anti-Tesla. Ironically though is that I care so much about this stuff, and at times I can be critical when it's called for because I care about Tesla so much and I want them to do well.

well you clearly are a critical thinker and i'd rather listen to the opinions of a critical thinker than the cheering masses

 

[Ryo]

In my opinion, I think the more important problem was that Tesla didn't do comprehensive enough testing on the Model X. They should have had 50+ Model X prototypes on the road, running all day in various instances in public and private places, and this should have gone on for at least 6 months prior to production. If they had done this, they would have caught all the major problems of the X and fixed them. The problem with the X, as I see it, is that they skimped on the testing.

What I'm looking for is whether or not Tesla will show evidence that they have 50-100 test vehicles doing extensive and rigorous testing at least 6 months before production. If they do this, then I think Model 3 ramp will go great. If there's no evidence of this (and we still hear or see just a few to several prototypes in January 2017), then I'd be worried that Model 3 ramp will not only go slower than anticipated but also have more quality issues than expected.

And as a Tesla fan and investor, I'm hoping Tesla nails the Model 3 ramp.

How about 300 prototypes?

Tesla Model 3: Tesla is ordering enough parts for a fleet of ~300 prototypes

 

[techmaven]

If LG Chem's cell costs are so much higher than Panasonic's, then why would Tesla consider buying TE cells from LG Chem, Samsung SDI, and SK Innovation? And why would Tesla consider buying Samsung SDI cells for Model X as an additional supplier to Panasonic?

So.. first on automotive cells.

LG Chem's Ochang facility had been chronically underutilized. This is an old article, but note that they really haven't had any large scale EV wins for it since then until the Bolt and Ioniq:
LG Chem to Crank up Its Idle Battery Productions Lines | Korea IT Times
Ochang in South Korea is 3.2 GWh nominally back then, and in the units that LG uses, it's a 200,000 EV battery plant.
If you add up LG's Ochang, SK, Holland MI, US, Nanjing, CN, they are around 5.5 GWh going to 6.5 GWh or so in the next year. Sometime late 2017 or early 2018, the Poland plant should come online, about the same size as Holland MI.

More background:
http://www.autonews.com/article/20151214/OEM06/312149992/lg-chem-quietly-surges-in-battery-race
The Chosun Ilbo (English Edition): Daily News from Korea - LG Chem to Build EV Battery Plant in Europe

GM is using up the capacity in the Ochang plant that LG has been desperate to utilize since it opened about 4 years ago. In some ways, it parallels Tesla's use of copious spare capacity at Panasonic's Suminoe plant in 2012.

Looking at GM's price graph, which they didn't have to release, they expect cell prices to be the same in 2018, and possibly stay the same in 2019. So the $145/kWh price is best seen as a 3 year fixed contract price. That could mean LG makes money day 1, it might not. Certainly parts of Ochang are already depreciated, but not all of it. I believe they also had to install cell production lines.

This does mean going beyond a certain point and the costs and most importantly, the lead time is uncertain. Likely two years to really bring on a plant as a carbon copy without too much re-work to drive down costs.

As for TE, things are very much murkier. I don't know the cells going into TE products. However, Tesla's retail pricing on the TE products leaves a lot of room.

 

[Zhelko Dimic]

I have my doubts as to if Tesla has really learned their lesson with Model X. Tesla/Elon points to hubris and the difficulty making the Model X as the main problem for the X issues, and they point to designing Model 3 with DFM (Design For Manufacturing) principles. I think that helps. But I don't think it hits the nail on the head.

I don't think hubris is gone, and here is why.

SCTY merger at this point clearly increases risk for Tesla.
So if you don't buy that Elon is saving Elon's shareholders at the expense of TSLA shareholders; which perhaps you're right about; than, what seems logical is that Elon believes they can power trough and solve all issues - including ones brought by SCTY.

This is exactly like FWD on Model X, and hubris that got him in that trouble.
Of course they will prevail, and it's great long term (both FWD and SCTY), and in the meantime, everyone get ready for few restless years, or at least quarters. Because solving complex problems always takes longer than anticipated.

 

[cziegler]

Fundamentals can be preceded by technicals, but if technicals aren't supported by fundamentals than any rally likely won't be sustained over a long period of time (ie., several quarters).

If the Model X was a hit, I think we'd be at $350 right now and make $450 when Model 3 ships. If you look through my past posts, I was upset and public very early on with the Model X ramp issues because I knew it could really dampen the SP and make raising money more difficult. I could go on about why I think the X fiasco makes Tesla a much more vulnerable company, but I won't since I'll probably be misunderstood as anti-Tesla. Ironically though is that I care so much about this stuff, and at times I can be critical when it's called for because I care about Tesla so much and I want them to do well.

I'm with you on the deep feelings for Tesla: Big picture, medium to long-term, I believe the X ramp issue was a blessing in disguise. I say this based on Elon's mea culpa for hubris, and the wisdom gained by Tesla's team will increase the odds of a successful M3 program. Side note: X isn't a failure, it just had to repeat the first grade ;-) - my family members love their X and especially, the FWD. As soon as Tesla adds a folding second row seat, I'll be in for an X too.

 

[3Victoria]

I am long Tesla. My choice is to trust that in the long term the SP will increase or not. If not then I should place my money in alternate investments. There are many possible pitfalls. I assume that EM and his team spend way more time than I do foreseeing them and avoiding them. I remain long.

 

[Papafox]

Just as a rough update on Model X deliveries in the quarter, I was seeing X deliveries in the 7,000-9,000 VIN areas delivered at the end of Q2 and here's some text from the Model X Sept delivery thread:

"Confirmed 8/24, Production start 9/7ish, Production complete 9/14, original delivery est. Oct 15th (my wedding date), but DS just called and scheduled me for a 9/27 delivery!! on East coast in Decatur!

VIN 189XX Black 60D X 6 seater premium, AP, blk leather, smart air, high amp charging, tow hitch.."

There's plenty of room for error in VIN counting, so take with a grain of salt, but I see the X deliveries will be a huge part of total deliveries in Q3 and Tesla is clearly succeeding in producing and shipping faster than originally expected.

 

[sundaymorning]

It's true that Tesla could have some hidden agenda in attempting to buy cells from Samsung SDI, LG Chem, and SK Innovation. But it's also true that Tesla simply could be very serious about buying cells from them because they make good cells at a good price. Yes, Panasonic likely makes the best cell for auto... but it doesn't mean that other companies can't match Panasonic's price. IMO Panasonic doesn't have any amazing proprietary tech that brings down the cost of the cell significantly over their competition.

It's easy to discount LG Chem's $145/kWh price... but I think the more appropriate question is can you prove that they aren't making money at that price?

We're not going to be able to prove that Dave, but from what we're seeing it's not looking good for LG. I remember A123 was selling their batteries to Fisker at about $40k loss per unit (I don't remember the exact price) but it was in the 5digit loss per unit. LG may be doing the same, we just don't know.

Regarding the scty merger, some has mentioned about the lack of communication from Tesla to the average investor, enabling us to understand more about its benefits to vote "yes".

It occurred to me today that Elon has it right all along, I believe he's already locked in that 2/3 majority vote to make this deal happen. I believe the big institutions are mostly behind him on this. Why else would Tesla be so mum on this topic if there were any fear or doubt that the merger wouldn't go happen. They're mum for a reason, the transition from Solarcity to Tesla energy may already be happening underneath our feet. Elon's mentioned it several times, he's "confident."

I have no doubt, this I'm willing to bet on.