Short-Term TSLA Price Movements - 2016

[neroden]

Is there any reason for anyone to really not feel confident in a mid 2017 start date? Or is it just because previous product delays?

Well, we're really debating when they'll get to full-volume production, not when they'll manage to produce the first car. The target date for all suppliers in July 1, but Musk said he knows that won't happen; *something* will go wrong. The question, I believe, is how much time to allow for unknown contingencies. Adam Jonas seems to be going with a *year and a half*, which seems excessive to me. Anything less than three months would be out of line with standard practice in the construction industry. So somewhere in between...

Based on Musk claiming that he's expecting 100K Model 3s in 2017 (I can't remember where I read that), along with the planned production line rates of 400K/year, and understanding that automated production lines go from 0 to full speed instantly (no "training the workers" rampup), I think that management is using an assumption of 3 months contingency. Since management is notoriously optimistic, I'm using an assumption of 6 months contingency. But hey, it could be nine months, who knows...

 

[GBleck]

To quote Bill Murray in Scrooged "Have you tried staples?"

Not sure if you can automate this though. This example is from a new dental operatory chair. Comfy, supper thin and you can perform CPR in it without breaking.

Then maybe eliminate sewing entirely, at least for non leather options. Seems as if heating/pressing/forming fibers and plastic into shape could be fully automated and with modern materials should lead to perfectly fine products.

 

[Off Shore]

Thinking about Tesla's competition, I found it instructive to look at Ford's in 1915. This Wikipedia article List of defunct automobile manufacturers of the United States - Wikipedia provides an idea of how the "playing field" looked at that time. Ford's adoption of the assembly line seems to have fundamentally changed not only the rules of the game but also the shape, size and number of dimensions of the field, resulting in a massive die-off of competitors. Tesla's innovations, including high-capacity batteries, a fast-charging network, OTA updates, automated assembly, and an automated driving AI collecting data at > 1M miles/day (and growing) will present similar challenges to anyone wishing to compete with them. NB not all of Ford's competitors disappeared, only nearly all.

 

[dennis]

As I mentioned in a previous post of mine. Part of the production (tooling to be exact) depreciates over units but everything else except labor and parts depreciates overtime and is independent of units. So if they ordered a big pressing machine designed to produce 200k a year to fill up those veiled area but only produced 30k, the depreciation of that big machine will be shared by the 30k units, increasing the COGS significantly before ramping up. I believe this is what we are seeing for the around 0 gross margin of current TE.

Also in that previous post of mine, I don't think we can rule out the possibility that they thought they got it, hired labor to go for 200k a year, but due to lack of sufficient time to check and re-check, ended up with 30k and the labor cost per car again would be significantly higher than expected. Very similar to the Model X's case you present here.


Due to the worries of no mass production, I am worried about the gross margin of Model 3 in 2017 if no significant amounts were produced. It would reinforce the perception of Tesla loses money on each car they make.

I included the higher labor cost per unit volume in my posts and pointed out that hurt the Model X GM before it finally reached volume in Q3.

As for the impact of the non-tooling portion of the capex on GM, I believe if you run some numbers you will find it is not significant if Tesla delivers 30K Model 3 in 2017, the figure everyone has been discussing. Let's assume 1/2 of the $1B in 4Q M3 capex is for non-tooling items that will therefore be depreciated straight line. The useful life of big machines like stamping presses has to be at least 10 years, but we will use that to be conservative. $500M/40=$12.5M per quarter of depreciation to be divided over the units produced. Let's further assume that 4K employee M3's are produced in Q3 and 26K customer M3's in Q4.

Q3 depreciation/unit= $3125
Q4 depreciation/unit = $481, or 1% GM impact on a $42K ASP

My conclusion is that if Tesla reaches 26K or 30K units in a quarter the depreciation of $.5B in non-tooling capex will not have a material impact on gross margins. However if they stay mired in a few thousand units per quarter for multiple quarters like happened with the Model X then that depreciation will have a significant impact on GM.

 

[Yggdrasill]

What do you guys over there need all that space and tow hitch for anyways?

Lots of different things. For one thing, we have lots of cabins; over 400k cabins for a population of 5 million. Going to the cabin for the weekend is extremely common, which means filling the car up with people and luggage. The cabins also need to be maintained, which means towing is useful. Another aspect is that we are generally a nature-loving people, we love hiking, skiing, boating, etc. That means we need room for all sorts of equipment. A third aspect is that the percentage of home-ownership is high, at right around 80% (vs 63% for the US), and we have a lot of detached homes, 60% of the population lives in detached single-family dwellings (vs 43% for the US). A well kept yard and house is generally a high priority, and often requires towing.

Also, wages are high, for instance, a position as a cashier will start at around 30k USD per year (and there are no mexicans...), so it's uncommon to pay others to do stuff like yard work. Almost no one can comfortably afford it. One other thing to mention is that cars are generally expensive. The car taxes go up fast with size. Thus it's often the case that a family will go for one larger car to cover all use cases. Maybe with a small commuter-type car as well.

 

[Alketi]

Is anyone concerned with the apparent "compression" in the production prototype road testing timeline? What's the normal time allowed for road testing -- 1+ years ?

Tesla's projected schedule appears to only allow for 3 - 6 months.

Thoughts?

 

[Krugerrand]

Really Professor? Sugar happens so much to him, I'm afraid he'll become diabetic ...

Easy to make fun and criticize when it's not you out there putting your neck on the line trying to change the world, eh?

 

[McMuggets]

Implications of this?:

Tech Billionaire Peter Thiel Discussed As Possible Trump Transition Chair | The Huffington Post

Thiel is an investor in SpaceX and Tesla. He also has said "I would never bet against Elon in anything. Hard rule #1." seen here

 

[neroden]

Is anyone concerned with the apparent "compression" in the production prototype road testing timeline? What's the normal time allowed for road testing -- 1+ years ?

Tesla's projected schedule appears to only allow for 3 - 6 months.

Thoughts?

Seriously, what do they need to do in road testing anyway? We've already seen Model 3 prototypes on test drives, so we know the fundamentals are sound.

Snow & ice, adverse weather stuff? They screwed some of that up on the initial Model S and it turned out not to matter financially. I figure they learned enough from Model S they *probably* won't screw that up on Model 3 but if they do, well, they're selling into California first.

 

[larmor]

Seriously, what do they need to do in road testing anyway? We've already seen Model 3 prototypes on test drives, so we know the fundamentals are sound.

Snow & ice, adverse weather stuff? They screwed some of that up on the initial Model S and it turned out not to matter financially. I figure they learned enough from Model S they *probably* won't screw that up on Model 3 but if they do, well, they're selling into California first.

Ok i will go down the M3 rabbit hole, although really this is for the long term or near long term thread. Earlier, someone had suggested that an M3 chassis was cloaked in an MS. If the wheel based matched, testing could be happening in the open.

 

[Value Ev]

Easy to make fun and criticize when it's not you out there putting your neck on the line trying to change the world, eh?

Exactly.
One can not criticize unless they are trying to change the world
Yet there are people here who aren't putting their necks on the line to change the world and they have the nerve to criticize GM and other leaders. No one criticizes those criticizers. Go figure.

Do you know who else tries to change the world and gets (got) criticized?

Jesus Christ and
President-elect Donald Trump

 

[dmckinstry]

Is there any reason for anyone to really not feel confident in a mid 2017 start date? Or is it just because previous product delays?

I'm ever an (misguided) optimist, but I expect them to at least begin delivering employee's cars in Q3,

 

[Krugerrand]

Exactly.
One can not criticize unless they are trying to change the world
Yet there are people here who aren't putting their necks on the line to change the world and they have the nerve to criticize GM and other leaders. No one criticizes those criticizers. Go figure.

Do you know who else tries to change the world and gets (got) criticized?

Jesus Christ and
President-elect Donald Trump

GM is not trying to change the world. They quite specifically are spending money to block Tesla from selling their cars and they made a compliance car in the Bolt mostly to try and one up Tesla by being first to market.

I will not address your political jab because this is quite specifically not the place for political discussion.

Once again I *yawn* at your purposeful obtuseness.

 

[Krugerrand]

I'm very excited to see what FF comes up with. People have written them off after their disastrous FFZero demo...

Actually, I'm far more concerned about their spending habits and their ability to regroup.

 

[RobStark]

I tend to agree they probably won't be as good-looking as the Volvos. (They are however still camoflaged, so it's hard to tell exactly.)

We can't tell exactly but we can see it is not an elegant rectangular shape but a bulbous one.

As a competitor to Tesla, the Jaguar I-Pace is likely the top contender here in Norway, with 741 preorders as of three days ago. If it has a tow hitch, access to Tesla superchargers and the right price, it's not impossible for sales to exceed those of the Model 3 here. (We really do hate sedans.) In fact, I might get one, if Jaguar executes it well.

Elon said they were negotiating with a non-German European company a long time ago.

If Jaguar Land Rover was planning to partner with Tesla I think they would have hinted at faster DC fast charging a while ago.

A lot of IFs. At least they don't have to ship the cars from California to Norway.

 

[Krugerrand]

I've been following Tesla too long to feel confident about mid 2017. I'll be really happy if they start shipping by the end of Q3.

I don't even know how anyone can suggest mid-2017. Elon clearly stated July 1 wasn't going to happen. That's the target and anyone that doesn't meet the target - and somebody isn't going to meet it for sure - is going to get axed. That's pretty much what said.

 

[Value Ev]

GM is not trying to change the world. They quite specifically are spending money to block Tesla from selling their cars and they made a compliance car in the Bolt mostly to try and one up Tesla by being first to market.

Once again I *yawn* at your purposeful obtuseness.

Oh please.
What exactly is wrong with having a car that one ups Tesla in the market. Elon Musk says that more EVs are better for the world, and GM is going to provide more EVs so by definition that is GOOD. Do you disagree with Mr. Musk?
GM is leading the auto industry in the use of solar: Solar Array at Corvette Plant Drives GM to Lead in Solar Energy Use
They also are providing a huge amount of jobs not just to their employees but to their supply chain - that is a positive thing for the world.
They are also providing affordable transportation rather than just selling to the very rich which is also a positive thing. Or do you want it like the old days when only the rich could afford a $100k car like the Tesla?


If you are yawning, that is due to a lack of oxygen or too much CO2 buildup.
You may want to look into that since the body and the brain need a good flow of oxygen.

 

[Krugerrand]

Is anyone concerned with the apparent "compression" in the production prototype road testing timeline? What's the normal time allowed for road testing -- 1+ years ?

Tesla's projected schedule appears to only allow for 3 - 6 months.

Thoughts?

No, because the car is built from the same tech as the S and X. There is no new tech going into the Model 3. What would they possibly have to extensively road test?

 

[Value Ev]

I don't even know how anyone can suggest mid-2017. Elon clearly stated July 1 wasn't going to happen. That's the target and anyone that doesn't meet the target - and somebody isn't going to meet it for sure - is going to get axed. .

No he didn't clearly state it wouldn't happen.
They have met targets before. You may want to learn what they said they would do and actually DID in Q3.

Stop spreading FUD!!!

 

[Krugerrand]

No he didn't clearly state it wouldn't happen.
They have met targets before. You may want to learn what they said they would do and actually DID in Q3.

Stop spreading FUD!!!

Yes, he did.