Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[Silentk]

Could you post a link to the original tweet? Thanks.

not sure how to do that. Have added the twitter account name to post (@thirdrowtesla)

 

[madodel]

Bernstein worries that Tesla's Model Y may cannibalize some Model 3 sales

Does that make the Model Y the newest Tesla Killer?

 

[Eugene Ash]

It’s funny they mentioned Tesla becoming vertically integrated multiple times today like it’s a new thing. And even made a suggestion that they could make their own battery in the future haha
SomePeopleCallMeTheSpaceCowboy on Twitter
a little clip of them being compared to apple’s vertical integration

Tesla is the new apple: every one is behind in efficiency, packaging, retail and most importantly margin.

Even in global automotive sales slump they will grow as they are now, when other automakers' sales decline.

He definitely read my comment here

 

[X Fan]

Daimler AG reports loss and is slashing dividends tremendously.

Daimler’s Profit Slump Pushes It to Slash Dividend

 

[jbcarioca]

At the time GM sold almost as many full size trucks as Ford,it simply split the sales between Chevy Silverado and GMC Sierra.

Ford took out massive loans before the financial crisis hit, even putting their Blue Oval logo as collateral for a loan.

GM did not have that foresight, did not have nearly as big rainy day fund and so went bankrupt.

All true. At the same time, if my memory is correct, Ford had betters GM's on the F-150 than did GM on Silverado/Sierra. From our perspective it's obviously true that "cash is king' and Ford had better financial management than did GM. For years before GMAC made more profits than did the rest of GM. Partly as a result GMAC people were ascendant. Rick Wagoner personally was blamed for much of the mistakes. I knew him in the early 1990's when he was EVP finance. He was one fo very few who had some affinity for the auto side, influenced perhaps by his stint at GM Brasil.

The brutal reality then was the GM had stifling bureaucracy. It still has that despite Mary Barra's best efforts.
The differences between GM and Ford vs VAG, BMW, DB are only cultural ones. The US ones seem finance-centric, the Germans seem engineer-centric. FCA and PSA are different, with BMW joining them as family-centric firms. VAG has been that too, but they have been more influenced by engineering issues. Personalities obviously have played outsized roles at several of them, for good or ill.

When we think of Elon, these people come to mind as comparisons:
https://www.ft.com/content/b5334860-c83d-11e9-a1f4-
Sergio Marchionne - Wikipedia

Nobody compares with Elon Musk at all. Each of the others, and the many others not mentioned are corporate veterans. None, exactly none, have any deep understanding of technology nor do they even understand what a 'first principle' might be. At their best they are engineers, entirely capable at optimizing the production of something known.
Not one can think of something that might be but is not.

Perhaps unlikely for me I have met and worked around several auto CEO's. Those have been German, US, Japanese and Korean. Two of them had multiple nationalities. I never met one who was not impressive. I never met one who impressed me that they really knew what made their world function. A couple of them were monumentally arrogant and ignored evidence. Those two survived and thrived anyway. Their companies did not do so well as they did.

Elon Musk is so entirely different than all the others that the auto industry analysts will not ever understand how Tesla works. The tech analysts might be less ill-equipped but they cannot understand the powerhouse of engineering and manufacturing process innovation that Tesla actually is. It is even more absurd that SpaceX co-exists while almost the entire aerospace industry watches in incredulity. That actually worsens the ability of securities analysts to understand anything at all about Tesla.

So, as we consider actual market of TSLA we must understand that all the market analysis we can make will not actually provide a good outlook because only after the competitors begin to fail will we see analysts begin to understand. Thus I think the only recent parallels for us to consider are Amazon, Microsoft and Alphabet. Those three all have predominately consumer reputations but have very large commercial/industrial/governmental clients. So does Tesla. All three have gone though long periods when they were considered to have no good business model.
To this day cloud services, utility/commercial energy storage and internet services are ill understood among analysts.

If those things are true then it follows that technical trading can work profitably and long term investment can be profitable but nearly all attempts to forecast results will probably be doomed. As Harvey Milk once allegedly said "just because it is impossible doesn't keep us from trying!". OK, an entirely different subject, but the sentiment works, does it not?

 

[lafrisbee]

A lot has changed perception and valuation wise in the past year, and Tesla has made continuous progress on production and most quarterly earnings line items, but really the bigger picture is unchanged from when I posted this last January and the future for Tesla looks just as positive as ever.

I'll update the sections of this prior post this week with a bit of extra detail, starting with the general EV transtion below:
Let me know if anything I missed here, I feel like there are several things I've forgotten.


Why BEVs will reach >90% of global new car sales much sooner than you expect

Cheaper Product

• Electricity cost are 70-75% cheaper per mile than petrol or diesel.
• EVs should be 70%+ cheaper to maintain (due to significantly fewer moving parts, no damaging combustion engine, regenerative breaking saving brake wear etc) once EV service networks reach economies of scale.
• EVs can be built to last 2-3x longer than an ICE car (0.5-1 million miles). Tesla’s powertrain is designed to last 1 million miles. Batteries currently last ~0.3 million miles (and can be easily replaced) but Tesla is likely close to releasing its million-mile battery.
• EV depreciation per year should be significantly less than ICE cars due to their far longer lifespans, cheaper cost of ownership and fears of ICE car bans (which will accelerate ICE depreciation rates).
• All of this leads to a total cost of ownership significantly lower than comparable ICE cars despite still significant EV upfront production cost handicap due to battery costs.
• Consumers are not stupid, and when they are made aware that EVs are already cheaper than ICEs on a total cost of ownership basis, most will buy them.
• But most EV components are following rapid technology cost experience curves (Wright’s Law) and EVs are rapidly approaching upfront cost parity too (Model 3 and Model Y are already at cost parity for comparable spec ICE cars despite being significantly higher margin). Upfront price parity will vary by market and segment, but most are likely to be reached in the next 5 years.
• EVs are significantly safer to drive due to front crumple zone (no engine in front of the driver), lower centre of gravity (limiting rollovers) and lower combustion risk (so far ~10x less per mile because EVs do not contain a huge tank of highly flammable fuel)..
• Over time, this should drive significantly cheaper insurance vs ICE cars.

Better Product

• EVs are faster to accelerate and brake, while the low centres of gravity and low polar moments of inertia give superior driving dynamics.
• EVs are much quieter which leads to both a more enjoyable drive and less noise pollution on city streets.
• Leaving a car to charge overnight at home or during the day at work is significantly more convenient than regular trips to the gas station. 99% of charging will take place at home and only rarely for long trips will you need to visit a supercharger. But a supercharge can already add 75 miles in 5 minutes or 180 miles in 15 minutes to a Model 3.
• Many different interests are aligned to roll out the necessary EV charging infrastructure: EV manufacturers, EV charger start-ups, Electricity utilities wanting to open up a new demand stream, governments working on advancing clean energy etc

Government and consumer support due to health, envirnmental and strategic benefits.

• Regulations are increasingly supportive of the EV transition, particularly in Europe and China, and as the EV transition gains momentum it becomes increasingly obvious we can transition the global economy to Clean Energy while delivering increased economic growth which makes it a much easier political decision to ban ICE cars.
• Current studies suggest ICE cars kill 1m+ people per year from air pollution and there is growing awareness of the issue. Both politicians and consumers are increasingly aware of the need to make a change.
• ICE car CO2 emissions are a key contributor to global warming which is likely to lead to huge economic damage and wealth destruction, 1 billion + people losing their homes and an unprecedented wave of climate refugees. Awareness of the urgency of addressing CO2 emissions to avoid the risk of the worst outcomes is increasing rapidly.
• EVs already emit significantly less CO2 than ICE cars even if they are powered by 100% coal power. However, coal is rapidly dying (it is not economic), and electricity grids are getting cleaner every year.
• The EV transition will massively accelerate the experience curve for batteries which will make building solar/wind + battery storage cheaper than continuing to operate existing fossil fuel power plants. Without this reduction in battery costs it is very difficult to get renewable energy >~30% of electricity due to issues with intermittency, but EV growth will make stationary storage cheap enough to solve intermittency and will rapidly transition global electricity to renewables and ensure cars are charged fully by clean sources.
  
• Fuel independence from Russia, Africa and the Middle East is a major advantage for national defence for countries such as China and much of Europe

Negative Feedback loops for ICE cars

• ICE production costs are increasing due to more strict emissions limits requiring more expensive tech.
• ICE OEMs are forced to start to sell EVs to avoid emissions fines, which means they will have to raise consumer awareness of the many advantages of EVs (and fight all the disinforamtion).
• ICE car sales will likely collapse faster than EV capacity can be built, accelerating the EV penetration in % terms. Few people will want to buy ICE in 5 years as it will be clear they will soon be obsolete and will face rapid depreciation (and even local or national bans).
• Falling ICE car sales reduces fixed cost leverage and increases production costs, putting them at a further disadvantage vs EVs.

Robotaxi wildcard

• All self-driving cars will be electric because after stripping out driver costs, an EV taxi service will make 3-4x more profit than an ICE taxi service due to lower fuel, maintenance & depreciation. Succedding with Robotaxis is a black swan (from the markets perspective that gives it ~0% probability) that will massively accelerate the EV transition (both in quantity of cars built and even further in terms of EV miles driven per year)

Could you make a relaxation podcast of the above so when I lay my head on the pillow at night all I have to say is, "Alexa, play Why BEV's will be 90%"?

 

[Nocturnal]

The Ford F-150 has been the highest selling vehicle of any kind in the US for decades, as of this year, the best selling for 38 years consecutively. That vehicle is the one of the primary reasons why Ford did not go bankrupt with the other US manufacturers. They have huge ongoing profits supplying parts for those generations, and have very high owner loyalty.

For anybody unacquainted with the North American pickup fetish this seems wildly implausible. For those who know that market the Cybertruck suddenly makes perfect sense. The Cybertruck need only conquer ~5% of existing F150 aficionados to be a huge success. Of course the Cybertruck is overtly appealing to a broader audience, or so it seems.

I thought everyone knew that!

 

[azaz]

777 has been tough to break through since yesterday at least

 

[jerry33]

@ReflexFunds thanks for the high level summary I’m in agreement on almost all points. But in your old post under ICE OEM handicaps you say “EVs only share 10%-20% of components and production process with ICEs”. That’s too low for a complete car. But it is challenging to communicate because Tesla is innovating in these areas despite the fact they are common elements to ice cars.

Body frame, body panels, paint, glass, interior, wiring, suspension, tires & wheels, friction brakes, steering wheel, infotainment system, autonomy & safety systems all common to cars no matter the power plant. EV changes drivetrain, drivetrain control system, and hvac. Adds regen brakes. Deletes alternator and potentially low voltage electrical system. So majority of components and production processes are shared though the optimization for components does shift to lightweight / aerodynamic ones due to current battery tech for energy density and cost.

I think you are counting the parts wrong. Every part has to be counted because every part has to be made. Engine and drive train are not two parts, they are hundreds of parts, most of which are not interchangeable.

 

[ggr]

Susquehanna International Group, Llp reports 44.65% decrease in ownership of TSLA / Tesla Motors, Inc. - 13F, 13D, 13G Filings - Fintel.io

I don't understand something. According to the quote above...

November 14, 2019 - Susquehanna International Group, ... disclosing ownership of 158,805 shares ... as of September 30, 2019. ...previous ... on August 14, 2019 disclosing 28,159 shares. This represents a change in shares of -44.65 percent ... .

They own lots more shares in September than were reported (presumably for end of quarter) in August, but this is a decrease?

 

[LST]

How do people view and react to the ease with which big players move the SP up / down?

You have to take it as it is, and try to take advantage of it. In the early days (2008-2014-ish) there was a real imminent risk, that FUD, short sellers and the like could really harm Tesla. Gullible people might have refrained to buy a Tesla, or invest in TSLA. The anti-EV narrative is still out and strong. Manipulation certainly takes place. The effect is that the stock is still undervalued at this time.

This is a positive, since Tesla is not dependent on raising capital as it used to be. Positive in the way that strong longs have much more time to accumulate their long position over time, buying on dips and playing the huge volatility with options. You have to compute your own price targets, where you find the stock is a bargain, in which range you hold, and where eventually over time you'd be willing to sell. Being just long gives you piece of mind.

Just my obvious 2cts.

 

[StealthP3D]

Could we all just start a church of Elonology? Here in the states, all you need for near total religious tax exemption is a few forms and a church. If the talking-snake-book folks did it, why can't we?

Additionally, articles from the mainstream media can be used to bolster our case that we are more of a religion than a business.

 

[ggr]

But you can make reservations! For free! I have near a hundred reservations under the name Donald Duck, for his business, Fake Company, at their address on Imaginary Lane in Not-A-Real City. I still occasionally get an update letter addressed to Donald Duck.

I hope my Nicola Semi gets delivered before Donald's. It includes $1M of Hydrogen refueling for a bargain basement price yet to be determined.

 

[Nocturnal]

Model Y cannibalizing Model 3 is a bizarre statement. I have never heard companies whining about their customers switching from a budget item to a high-profit margin product.

I'm shorting Apple because I believe the IPhone 11 is cannibalizing IPhone 10 sales.

 

[lascavarian]

I think you are counting the parts wrong. Every part has to be counted because every part has to be made. Engine and drive train are not two parts, they are hundreds of parts, most of which are not interchangeable.

And so many of the engine and emissions related components are part of regulation and require inspection or performance confirmation. It is a horrible broth of tubes, pumps, connections, toxic gases, tanks and sensors all of which continually bear down on the owner requiring continuing hassle and expense.

 

[jerry33]

So when you say "much sooner than you expect", what are you expecting? Or what are you expecting we're expecting?

I suspect most analysts (and therefore most people and politicians) are expecting 2050 at the earliest (That's Biden's optimistic goal--I'm sure he'd like it further out than that). Certainly that's what will happen if it continues the way it has been. Only the EU and a few other countries have actual goals which could be changed (unfortunately) at the drop of a political hat. Unless people exhibit some political will and continue to do so, the U.S. will lag far behind the front running countries. What we're pinning our hopes on is that Tesla will expand production far more rapidly and force other companies to do the same (most likely Asian start-ups). With some luck, the expanded production will bankrupt one or more fossil fuel companies.

The one other thing to keep in mind is that because EVs last longer than ICE, the production won't need to be as high going into the future because the average age of vehicles will be longer.

 

[dmvevguy]

Anyone worried about Q1 by any chance? Lack of federal tax credit, 1 week delay on Shanghai factory, etc.? Just curious to get perspective for short term Q1 as I have $ ready to be deployed, but trying to figure out if it makes sense to wait until after Q1 and before Investor / battery day in April...

 

[qphan79]

With Tesla still being pretty secretive about the Model Y and deliveries starting in a matter of weeks, do you think that there will be an announcement soon of a delivery event? Perhaps even highlight some of the features and differences compared to Model 3? Or will they want to avoid any comparisons to Model 3 that would “cannibalize” their sales. Hopefully we hear something announced by next week!

 

[Nocturnal]

Anyone worried about Q1 by any chance? Lack of federal tax credit, 1 week delay on Shanghai factory, etc.? Just curious to get perspective for short term Q1 as I have $ ready to be deployed, but trying to figure out if it makes sense to wait until after Q1 and before Investor / battery day in April...

I am. Well, not worried per se as I'll use that as an opportunity to buy some options and maybe shares but I think there are good odds we have some pain. Expectations are sky high right now. A bad Q1 will be spun as "demand problems" and all the casual investors and analysts that are just riding the bandwagon will likely decide that the sky is falling.

With Tesla still being pretty secretive about the Model Y and deliveries starting in a matter of weeks, do you think that there will be an announcement soon of a delivery event? Perhaps even highlight some of the features and differences compared to Model 3? Or will they want to avoid any comparisons to Model 3 that would “cannibalize” their sales. Hopefully we hear something announced by next week!

They mentioned that to the consumer the differences will be much more than we think. I'm curious to see what they meant by that. ​

 

[S3XY]

Investor's day renamed to "Tesla April Company Talk" and to take place at Giga NY

Elon Musk on Twitter

Personal prediction: Giga Texas gets announced here

WOOT! Might need to call in sick that day (cough).