Short-Term TSLA Price Movements - 2016

[schonelucht]

Especially when Elon just talked about how trust, integrity et al.

Yet with all the integrity, trust etc... apparently the organisation was still fine going against all this and offering discounts, blatantly on the website. Inspect source code on the page that listed an inventory car even would show the field with a name 'discount' (it's since the memo repurposed for the EV incentives, don't bother to look anymore). Ok, he set the record straight yesterday, but then again he had talked about no discounts before, for example with the famous anecdote of how even his cousin had to go order one like everyone else. Also, it bothers no one that he has lost enough control/focus on his organisation that he let such an important principle lapse? I mean a principle that is 'absolutely vital' and 'fundamental to our integrity' and even 'nothing that matters more' , wouldn't you expect a CEO to be absolutely on top of that, wouldn't Jobs at the height of his Apple period be on it like a rabid dog? I suspect he's been busy more with SpaceX than with Tesla that the last months and it's starting to show. In a very real way. Regardless of the numbers, any principle (and violation thereof) that your CEO calls 'fundamental' is _never_ immaterial.

 

[3Victoria]

Shorts -- I just realized that its their shorts that are too tight. I sometimes read Park Sméagol tweets for fun and a good laugh. Seems to be in tight with BonaireVolt -- seems BonaireVolt has some nefarious email and suspects a cover-up. Shorts seem to have their shorts in a twist.

 

[schonelucht]

How does it show up in SGA?

The accounting is the price of the vehicles sold as revenue less the COGS to get to GM.

SG&A is an entirely different bucket.

If it weren't, every company would shove discounts into SG&A as a way to pump up their gross margins.

Here is how it works : classic P90D rolls off the line in February, wheeled to a showroom. By the end of that quarter, the car is not sold. $0 is recorded in revenue for that quarter (of course) and $0 is recorded in cost of automotive revenue for that quarter (of course) margins of that quarter are not influenced at all by that car. Let's say that car took $100k to manufacture : that amount goes in finished goods inventory. Car is listed for $150k or gross margin of 33%

At the end of the second quarter, the car is still not sold. Meanwhile, it is now 3 months old and has driven 5000 miles for demo purposes. Tesla considers that car to have lost $8000 in value. Finished goods inventory is updated and the record there goes from $100k to $92k. That $8k is recorded as sales expense (which it really is, the car was used to sell other cars). List price of the car as a 'newly used' on the website is lowered to $138k

In July the facelifts are now widely accepted and known as the new Tesla look. Customers aren't even looking at the classics anymore. Therefore Tesla must recognize additional lost value. It makes a good effort to estimate that lost value as $21k. It drops the list price of the car from $138k to $117k. At the same time it records $14k in SG&A and removes that amount from the finished goods inventory, just like it did the last quarter with regular depreciation (leaving $78k on the books).

In August the car finds a buyer for $117k. That amount is added to automotive revenue, finished goods inventory is lowered by $78k and it is added to the cost of automotive revenue that quarter. Gross margin is calculated on that car as being : ($117k - $78) divided by $117k or 33%.

See, if a car is not sold the same quarter as it is manufactured, discounts due to depreciation show up in SG&A and not gross margin.

 

[Intl Professor]

why is he still refusing to hire a COO?

Not exclusivel intended as humor. Because he's too busy to hire one?

 

[schonelucht]

Renault Nederland has spilled the prices on the new 41kWh 2017 Zoe using LG Chem batteries. What's interesting here is that they offer the car with battery or without battery (in which case you rent it). The price difference is 7900 EUR or EUR 6529 EUR without VAT (sales tax). Assuming zero margin, price of the batteries on the pack level therefore is 160EUR/kWh or approximately $180/kWh. Remember, this is on the pack level. All very consistent with the other price point we know from LG Chem : $145/kWh on the cell level for GM.

 

[TMSE]

Renault Nederland has spilled the prices on the new 41kWh 2017 Zoe using LG Chem batteries. What's interesting here is that they offer the car with battery or without battery (in which case you rent it). The price difference is 7900 EUR or EUR 6529 EUR without VAT (sales tax). Assuming zero margin, price of the batteries on the pack level therefore is 160EUR/kWh or approximately $180/kWh. Remember, this is on the pack level. All very consistent with the other price point we know from LG Chem : $145/kWh on the cell level for GM.

If that is true, why is that LG or GM or Renault have no plans to build any Gigafactory?

 

[bh1783]

If that is true, why is that LG or GM or Renault have no plans to build any Gigafactory?

LG Chem Opens New Battery Factory In China
LG Chem Factory May Have Largest Battery Factory In US - Gas 2
LG Chem plans to build electric car battery factory in Poland - source
LG Chem already has battery factories in Korea, China, Michigan and has planned expansion in Poland.

 

[TMSE]

LG Chem Opens New Battery Factory In China
LG Chem Factory May Have Largest Battery Factory In US - Gas 2
LG Chem plans to build electric car battery factory in Poland - source
LG Chem already has battery factories in Korea, China, Michigan and has planned expansion in Poland.

I have seen those news reports. Each of those LG factories are under 5 Gwh, whereas Tesla Gigafactory will have annual output of 150 Gwh, almost two order of magnitude difference.

With 150Gwh, Tesla can make nearly 1.5 million cars, whereas LG can supply enough battery, from its all factories, for no more than 200 thousand pure EV cars by 2020.

 

[schonelucht]

If that is true, why is that LG or GM or Renault have no plans to build any Gigafactory?

Because they already have multiple battery plants with room to expand.

Edit : but I don't really see what it has to do with the truthfulness of my original post?

 

[vgrinshpun]

Renault Nederland has spilled the prices on the new 41kWh 2017 Zoe using LG Chem batteries. What's interesting here is that they offer the car with battery or without battery (in which case you rent it). The price difference is 7900 EUR or EUR 6529 EUR without VAT (sales tax). Assuming zero margin, price of the batteries on the pack level therefore is 160EUR/kWh or approximately $180/kWh. Remember, this is on the pack level. All very consistent with the other price point we know from LG Chem : $145/kWh on the cell level for GM.

Can you provide link for this data?

 

[TMSE]

Because they already have multiple battery plants with room to expand.

Edit : but I don't really see what it has to do with the truthfulness of my original post?

It could be truthful, but definitely immaterial as it shows lack of interest among LG, GM, Renault to scale up in any meaningful way.

While Tesla is aiming for battery supply for millions of cars, the so called competition is happy with few hundred thousand, all put together. Their goal is to build compliance cars. That's it.

 

[schonelucht]

Can you provide link for this data?

Sorry, I completely forgot to do that. It's reported by multiple sources but the most comprehensive report is from insideev. As you can see the 2017 Renault Zoe starts from 31,890 EUR after tax. That comes down to under $30k before tax or incentives in the US. Price wise at least, the majors are readying themselves to take on the Model 3.

 

[Ulmo]

In August the car finds a buyer for $117k. That amount is added to automotive revenue, finished goods inventory is lowered by $78k and it is added to the cost of automotive revenue that quarter. Gross margin is calculated on that car as being : ($117k - $78) divided by $117k or 33%.

Wow, that seems like a poor definition for gross margin. I always thought it was sale amount divided by manufacture cost. Using my way, the fixed item is the cost to make that product, and the variable is the sales amount, whereas using the "standard" way (which I didn't know until now), the fixed item is the sales amount, and the variable is the manufacturing cost, causing problems like execs being overly prejudiced to put the squeeze on manufacturing rather than sales, one example of which is the China Syndrome (cheap manufacturing for crappy results, and not enough attempt on finding good market rates at the selling end). But, I learn something new every day. It's nice to see bit by bit where these prejudices come from.

 

[vgrinshpun]

Sorry, I completely forgot to do that. It's reported by multiple sources but the most comprehensive report is from insideev. As you can see the 2017 Renault Zoe starts from 31,890 EUR after tax. That comes down to under $30k before tax or incentives in the US. Price wise at least, the majors are readying themselves to take on the Model 3.

I do not think you can calculate $/kWh like was done in your original post. The 7900 EUR differential is the same for either "Entry" 22kWh or "Life" 41kWh variants. When divided by 22kWh the differential yields 359 EUR/kWh

 

[TMSE]

Renault Nederland has spilled the prices on the new 41kWh 2017 Zoe using LG Chem batteries. What's interesting here is that they offer the car with battery or without battery (in which case you rent it). The price difference is 7900 EUR or EUR 6529 EUR without VAT (sales tax). Assuming zero margin, price of the batteries on the pack level therefore is 160EUR/kWh or approximately $180/kWh. Remember, this is on the pack level. All very consistent with the other price point we know from LG Chem : $145/kWh on the cell level for GM.

something doesn't add up here. You conveniently took the 41kwh example. Take the 22kwh example instead: buy vs. rent difference is about same, around 8000 EUR. Why would 22kwh and 41kwh cost the same?Price of batteries per your method for 22kwh is more than $400/kWh.

 

[Ulmo]

Sorry, I completely forgot to do that. It's reported by multiple sources but the most comprehensive report is from insideev. As you can see the 2017 Renault Zoe starts from 31,890 EUR after tax. That comes down to under $30k before tax or incentives in the US. Price wise at least, the majors are readying themselves to take on the Model 3.

The other car companies are catching up to Tesla, but not all the way caught up yet: the Zoe has a "new air circulation system", which is probably much better than the Leaf-as-brick no temperature control battery that would fail en masse with the first sunny day in most parts of the country (Central Valley California, Southern California, and I assume most of the rest of the country in summer), but still not as good as Tesla's liquid cooled versions, which are still getting better.

 

[schonelucht]

I do not think you can calculate $/kWh like was done in your original post. The 7900 EUR differential is the same for either "Entry" 22kWh or "Life" 41kWh variants. When divided by 22kWh the differential yields 359 EUR/kWh

That's because the 'entry' model is in fact just the 2015 Zoe, using the old battery pack . That one is indeed much costlier (also nearly twice as heavy and large per kWh). The new battery pack is exclusively on the 41kWh model.

Edit : also, it is likely that Renault is taking a very big margin on the old battery here and is positioning this entry level car as a way to give huge discounts. For Dutch tax purposes, Renault needs to specify the actual value of the battery, even if you rent it. That specification is obviously public information and is 4802,71EUR (includes 21% VAT). Still more expensive of course per kWh, but again, that's the 'old' model where a joint venture with NEC is the battery source instead of LG Chem's new product.

 

[vgrinshpun]

That's because the 'entry' model is in fact just the 2015 Zoe, using the old battery pack . That one is indeed much costlier (also nearly twice as heavy and large per kWh). The new battery pack is exclusively on the 41kWh model.

Or they just include down payment in the base price to keep the monthly "rent" lower. The almost 2 times reduction in cost between the old and new battery is too good to be true.

We have no idea what scheme is used for pricing, so I do not buy your conclusion.

 

[Matias]

The heavily discounted new cars have been publicized in Tesla's system for the past two weeks. Every store in the U.S. has been pushing these cars and pushing them hard. My rough guess is that 500-1500 of these new cars w/discounts have been sold. (Note: I could be wrong, and perhaps we'll never know unless Tesla eventually discloses how many new cars were sold at a discount.)

It is somewhat funny, that Elon does not know something, that every other person, who is interested about Tesla knows..

But I understand it as he has two public companies and one private company (with urgent issues) to take care of.

 

[schonelucht]

Or they just include down payment in the base price to keep the monthly "rent" lower. The almost 2 times reduction in cost between the old and new battery is too good to be true.

Well yes twice is indeed too good to be true. But then again it isn't twice the reduction : the entry level includes a gross margin of at least 3000 EUR, the other models likely include no gross margin. See here . It's in Dutch but on page 10 it lists the 'fiscale waarde' of the battery for the current model (AKA the entry model). And by the by about doubling being to good to be true : apparently Renault did manage to double the pack's efficiency expressed in volume and weight per kWh.

There is always going to be a small factor of speculation, that same factor of speculation is there in equal measures when we guess what Tesla's battery and pack costs are going to be for the Model 3. But once data points and assumptions from totally different sources (GM and Renault in this case) start to confirm each other, then it becomes more and more likely that the speculation is in fact based in reality.