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

[lascavarian]

There may be a crisis of moral imagination on the horizon.

EM has been pretty good about including all safety features as default. Other features, maybe as upgrades at a cost.

If TACC/AP/FSD are demonstrating in the real world to be substantially more safe for occupants then where is the morality in not including them as default when customer lives are demonstrably at risk?

This may be a pricing wiggle in the future with AP at least being a standard feature with only FSD being an option. What a wonderful conundrum.

 

[mblakele]

Note that Elon is mostly right here: he says, in essence, that there are lots of consumers who'd love to be Tesla's customers, who should be Tesla's customers, but just cannot.

And note that the Model 3 isn't a Koenigsegg or Gulfstream G650 kind of frivolous hyper-luxury product, the Model 3 is "just" a regular car (car like a car should be) that Elon just couldn't make inexpensive fast enough enough, and this was really killing him.

So I don't agree that Elon was using "demand" imprecisely, I actually think he correctly identified a super important barrier to EV adoption (affordability) - and the Model 3 was their first attempt at breaking through that barrier.

Price of a car is significantly different from 99% of consumer products: a car is the second most expensive purchase people do.

Exactly, and that's why I think it's a terminology problem: different usages of "demand". Elon seems to use "demand" to mean "consumers who'd love to be" or "should be" customers... without reference to price. Broadly that's ok: words are flexible. But it isn't the classical econ definition, is it?

If demand is "the quantity of a good that consumers are willing and able to purchase at various prices during a given period of time" then those customers who "just cannot" because of the price, aren't part of demand at that price. But they're part of the potential market for the product. They can be reached by using what we call demand levers: lowering prices, providing incentives, etc.

 

[sparcs]

I hope Tesla adapts a Model 3 assembly line to be able to build both the 3 and the Y. They might not need all of their 3 assembly capacity (especially if they get GF4 up and running), and if they do a good job with development of the Y (fingers crossed) they might need all the production capacity they can get and more. Then they can build 3's as needed and keep the assembly line working full time.

Sedans aren't going away despite the popularity of crossovers. Model 3 is now priced low enough to compete against high volume models like the Accord and Camry which I believe make up a quarter of mid-size sedan sales in the US. We were seeing signs of this previously with trade-ins, but it's only going to get worse for them now that the price gap has narrowed. You'll see even more lower volume sedans completely exit the market rather than try to compete with Tesla.

 

[Dwdnjck]

Camry was,always,the.target.

 

[ggies07]

it is possible that Tesla got ahead a little and built some last week

Got ahead? They are behind by almost 3 years, nobody on here should be complaining about demand and blah blah blah.

 

[colettimj]

gogogo spacex

Grumpy Grandpa (me): "Back in my day, rocket boosters just burned up and you had to drive your car yourself!"

 

[Fact Checking]

Exactly, and that's why I think it's a terminology problem: different usages of "demand". Elon seems to use "demand" to mean "consumers who'd love to be" or "should be" customers... without reference to price. Broadly that's ok: words are flexible. But it isn't the classical econ definition, is it?

If demand is "the quantity of a good that consumers are willing and able to purchase at various prices during a given period of time" then those customers who "just cannot" because of the price, aren't part of demand at that price. But they're part of the potential market for the product. They can be reached by using what we call demand levers: lowering prices, providing incentives, etc.

Yes, Elon doesn't use it "correctly", but there's simply no good word for what he is trying to communicate: the binary filter locking out way too many people who'd like to own a Tesla.

There's basically no other major consumer products firm that is locked out of 80% of people's lives just due to affordability.

Almost every luxury products firm can sell to ~80% of consumers, either via lower quantities, or by tiered features:

• You can buy an entry level B&W speaker, you don't have to buy the $20,000 Nautilus to own a B&W set.
• You can buy a MacBook Air for $999, you don't have to buy a fully configured $10,000 iMac Pro.
• You can buy a Mercedes or BMW in the $30k-35k MRSP range.
• Except Tesla: a new Tesla used to start at $80k, locking out ~90% of consumers.

With the $35k Model 3 this has changed - it should be within the financial reach of about ~60% of new car consumers.

I.e. theres a big difference between people choosing other products because they prefer them to Tesla's products (regular definition of demand), versus not choosing Tesla only because they truly cannot afford any of Tesla's products.

 

[AlMc]

Note that Elon is mostly right here: he says, in essence, that there are lots of consumers who'd love to be Tesla's customers, who should be Tesla's customers, but just cannot.

And note that the Model 3 isn't a Koenigsegg or Gulfstream G650 kind of frivolous hyper-luxury product, the Model 3 is "just" a regular car (car like a car should be) that Elon just couldn't make inexpensive fast enough enough, and this was really killing him.

So I don't agree that Elon was using "demand" imprecisely, I actually think he correctly identified a super important barrier to EV adoption (affordability) - and the Model 3 was their first attempt at breaking through that barrier.

Price of a car is significantly different from 99% of consumer products: a car is the second most expensive purchase people do.

Please correct me if I am wrong. I believe most new car buyers are shopping on monthly payment as much as price. Wouldn't leasing open up as many (more?) people at this moment than the introduction of 35K car AND allow Tesla to still maintain profitability...then introduce the 35K?

 

[30seconds]

What I find interesting about this move to close stores and lower prices is that Tesla is setting themselves up to be the lowest fixed cost manufacturer of EVs on the planet.

He’s left the American manufactures in the dust, lapped the Europeans and now gunning for Toyota.

 

[Lessmog]

Well, that certainly elevated my mood!

Morgunblaðið - Tesla Motors Iceland ehf. stofnað
Tesla Motors Iceland ehf. (6202191260)

Tesla has officially registered an Icelandic branch!!!

Seems you have made an impression where it counts? Well done!

 

[wipster]

We actually don't know that what Dana reported was true, we only know that yesterday's news doesn't conclusively prove that what she wrote was false...

So it was either true, or false, or true but misleadingly reported, or any mixture of these. My guess is that it was probably true, but I wouldn't ever think of betting on it, Dana has a track record of writing misleading articles about Tesla.

So it is actually a case of Shrodinger's hack?

 

[Krugerrand]

What I find interesting about this move to close stores and lower prices is that Tesla is setting themselves up to be the lowest fixed cost manufacturer of EVs on the planet.

He’s left the American manufactures in the dust, lapped the Europeans and now gunning for Toyota.

And people didn’t think he was serious those years ago back in Norway? when he told a group of owners (paraphrased), if they (OEMS) won’t join us, we’ll make them or they’ll die.

Welcome to the road to Hell, boys and girls. Last call for alcohol. It’s about to get hot in here.

 

[brian45011]

We actually don't know that what Dana reported was true, we only know that yesterday's news doesn't conclusively prove that what she wrote was false...

So it was either true, or false, or true but misleadingly reported, or any mixture of these. My guess is that it was probably true, but I wouldn't ever think of betting on it.

Why is the report of a 50% shares/ 50%cash setlement election by Tesla during the Early Conversion period even being questionned? Five years ago in the prospectus, Tesla commited to give note holders notice of how conversions during that period would be settled:

All conversions of 2019 notes occurring on or after December 1, 2018 (the applicable Free Conversion Date for the 2019 notes) will be settled using the same relative proportion of cash and/or shares of our common stock as all other conversions occurring on or after December 1, 2018. We will inform holders of the settlement method we elect for any conversions occurring on or after December 1, 2018 no later than December 1, 2018.
​

The report of Tesla's 50/50 election was reported in early December. In late November shares were trading around $350, then rising above the conversion ratio in early December.

 

[jerry33]

Please correct me if I am wrong. I believe most new car buyers are shopping on monthly payment as much as price. Wouldn't leasing open up as many (more?) people at this moment than the introduction of 35K car AND allow Tesla to still maintain profitability...then introduce the 35K?

It would, except that leasing is a very poor deal for consumers. The reason is that things can change unexpectedly. For example, new job, much longer commute so now you pay a fortune in mileage. Your lease is up, but you've just become unemployed and are now without a car. Leases are good if you can write them off as a business expense because then there is no question about the amount written off, unlike depreciation. However, the majority can't write them off.

 

[KarenRei]

And people didn’t think he was serious those years ago back in Norway? when he told a group of owners (paraphrased), if they (OEMS) won’t join us, we’ll make them or they’ll die.

Welcome to the road to Hell, boys and girls. Last call for alcohol. It’s about to get hot in here.

Speaking of other OEMs - a fun thought.

Tesla's big price cut will dramatically cut into their sales. Obviously.
But they're selling their EVs for a reason - in the US, a major reason is to get ZEV credits.
With fewer ZEV credits, they'll have to buy more from Tesla.

Fun times.

 

[mblakele]

This week The Economist has an article about "decoupling". It's basically a book plug, but I think the ideas have some bearing on Tesla's recent moves.

These steps are all part of what Mr Teixeira calls the “customer value chain”. Disrupters have muscled in on some parts of this chain. One example is the practice of “showrooming”. Shoppers enter an electrical store like Best Buy and examine what’s on offer. But instead of purchasing the item in the store, they buy it online. Amazon has even created an app allowing customers to scan a product’s bar code, or take its picture, and discover its online price. The selection of products has been decoupled from their purchase.​

Compare with Tesla's recent move to close some stores and turn others into gallery-only locations. They're showrooming themselves. Another example parallels the move to substitute easy returns for formal test-drives:

...Birchbox, where customers are sent samples of beauty products, eliminating the need to visit a store to try them.​

Tesla already decouples software features from hardware, allowing customers to upgrade after purchase. And with OTA updates, Tesla has further decoupled software from hands-on service.

Other examples point to things Tesla hasn't done — at least not yet. The example of Trov, which decouples insurance from annual premiums, relates to the frequently suggested idea of "renting" AP/FSD by the trip.The hypothetical example of decoupling a restaurant table from its food suggests letting your smartphone take over functions on the vehicle display, similar to Apple CarPlay or Android Auto. Of course there's bound to be some tension between customers' desires for specific decouplings and business models. Tesla isn't likely to license CarPlay or Android Auto if they plan to roll out their own app platform, and they aren't likely to "rent" software features like FSD if they think they need the revenue stream from up-front sales.

Sadly the article doesn't mention Tesla as an example of decoupling. But maybe that's just as well since recent coverage of Tesla in The Economist has tended to be negative and superficial: see the article on Alternative Data for example.

 

[jerry33]

Speaking of other OEMs - a fun thought.

Tesla's big price cut will dramatically cut into their sales. Obviously.
But they're selling their EVs for a reason - in the US, a major reason is to get ZEV credits.
With fewer ZEV credits, they'll have to buy more from Tesla.

Fun times.

But if Tesla doesn't sell them, they will have to change their product mix reducing the number of their most profitable cars.

 

[KarenRei]

But if Tesla doesn't sell them, they will have to change their product mix reducing the number of their most profitable cars.

Or pay the fines if they really don't want to give Tesla money - but that means paying a premium over what Tesla charges (the fines form the upper bounds of the value of a ZEV credit sold by another manufacturer).

The problem for them is that the ZEV credit requirements keep growing, rapidly. Jumps from 4,5% to 7% between 2018 and 2019.

 

[EVNow]

Would have preferred the 'leasing model 3' demand lever vs 35K car at this point in time.

GAAP-wise, $35k is better.

 

[Zaxxon]

Got ahead? They are behind by almost 3 years, nobody on here should be complaining about demand and blah blah blah.

Did you order yours? I seem to recall you were waiting patient-ishly for the SR.