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

[RobStark]

Tesla pickup still in highly futuristic mode.

 

[Carl Raymond]

I have awoken to discover that the delivery of cheap online cars has also delivered cheap online shares.

The messaging is foggy, which of course means the media can spin it any which way.

Tesla announced cheap cars. In the next breath announced store closures and no profit (a one off due to severance, but nobody heard that).

Not surprised the stock is down. It’s too easy to spin.

A peak at the online order count would help. An estimate of the one off cost of store closure might too. Otherwise, we wait out a couple of quarters for some unspinnable data.

 

[Mich]

Alright, in plain English: what Elon implies is, that we have a new "secret" demand lever/regulator: the SR/SR+
If you want a Model 3 right now, you buy the LR. If you want the SR - better wait until June (or longer if you haven't ordered yet). The SR/SR+ is to fill-up the lines if they have spare capacity.

The SR is not to KEEP demand up, the SR is the stocking stuffer to buffer those last 20 cars/day or so? Sounds great to me: Tesla keeps its promise (35k Model 3 exists) and they keep their margins + volume at max.

But why then just 2 weeks for a SR+ or 2-4 weeks for a SR? I'd love to hear something like "we've got orders for 30k of SR, new orders can expect delivery in 4-6 months."

 

[neroden]

Anyone with closer knowledge of Tesla's sales operations, please speak up, but this is my best guess currently:

I think the 140 stores comment is just referring to pure sales locations. Tesla has c.300 stores & galleries in total, but some of them are combined with service centres.

In each store i would guess there are 7-10 advisors and 8-12 customer experience staff. So that is maybe 2500 advisors and 3000 customer experience staff globally.

For advisors hourly pay is c.$21 and commission is $100 per car (if they hit monthly target), i think with some extra for performance cars or immediate delivery etc. Commission can be from sales finished online as long as a sales staff tags themselves to a customer. I don't think customer experience staff get bonus, so maybe their hourly pay is a bit higher.

After adding 50% for taxes, health plan etc, that could be c.$200m advisor pay, c.$50-100m advisor bonus, c.$250m experience specialist pay. Managers then likely make more, and there will be some other admin staff and cost per store. Lets say another $100m. Rent may be another $100-150m (total Tesla rents are c.$200m and operating leases c.$275m).

Jesus, worse than I thought. Some of the stores may be leased, so you may be low on the rent/leasing costs, too. Most of Tesla's stores are in "good" locations so I'd probably bet on $250-$300M there.

So all together i'd guess the current sales infrastructure might be $700-800m annual SG&A costs.

That seems a little high given the level of total SG&A -- some of it has to be for G&A. Also some locations will stay open. I'm going to ass-pull guess a cut of $500M in annual SG&A costs.

 

[KarenRei]

To recap:

• Length of time to delivery holding roughly steady in all markets = production matching delivery
• Production matching delivery = Tesla has the right balance of levers chosen, with many left to pull - most notably, entry of the Model 3 into the numerous markets that Tesla has not introduced it into yet.
• Not all configs available in all markets = Tesla is raising its ASP; cheap versions are only available in the US and Canada, meaning that, no, the $35k Model 3 is not yet near full volume production.

Anything else that needs to be covered?

 

[RobStark]

Where The Tesla Bears Are Wrong
MangoTree Analysis | SA | Mar 04, 2019

Summary:

• Both sides of the bull/bear spectrum are extreme. One hand, ARK Invest has a $4,000 price target. On the other hand, there are bears who think the company is going bankrupt.

ARK Invest $4k price target is if Tesla masters Level 5 autonomy soon and first. Tesla Network is a smashing success as well as Tesla Energy.

ARK Invest base case has a price target of $700. Tesla masters EV manufacturing and is the most profitable BEV OEM.

 

[neroden]

Indeed, that's an excellent point: biggest difference would be chassis and internal plastic elements - relatively low cost parts that are perhaps $5k of a $39k car.

All the high value, high complexity parts are likely close to 100% shared between the Model 3 and Model Y:

• cells, battery pack,
• drive train,
• electronics, sensors,
• Autopilot computer,
• heat pump, cooling system,
• (perhaps seats too)

Elon said 76% of the 10,000 parts are shared - I'd not be surprised if ~90% of the CoGs value was shared. (Maybe @ReflexFunds wants to chime in.)

If my hypothesis is correct, the new "adjustable" Grohmann battery pack machine will mean they can tweak the battery pack sizes for Model Y with very little difficulty as well.

 

[Mich]

Could it be possible that a new GF is silently going online these days? Producing additional 5k of M3+MY?

 

[FS_FRA]

OK, I give up, what the heck are FIT credits?

Feed-in-Tarif

Solar PV.

Not sure how credits would work though.

 

[Fact Checking]

Both sides of the bull/bear spectrum are extreme. One hand, ARK Invest has a $4,000 price target.

That's misleading: ARK's TSLA price targets are $4,000 for the most optimistic outcome, the lower one is $700.

 

[Nocturnal]

Regarding the lack of demand hypothesis. If Tesla is seeing low demand, wouldn't they advertise?

 

[Fact Checking]

Could it be possible that a new GF is silently going online these days? Producing additional 5k of M3+MY?

No. First car is September-October at the earliest.

 

[SebastianR]

But why then just 2 weeks for a SR+ or 2-4 weeks for a SR? I'd love to hear something like "we've got orders for 30k of SR, new orders can expect delivery in 4-6 months."

I have no idea. Also in Germany, they still offer delivery of any Model 3 in March. That seems unrealistic - especially when folks still wait for their call and ordered a long time ago - check the German TFF-Forum: cars are moving to customers, but you can't get any new car in mere weeks.

tl;dr: I don't know why they do it. But the estimated delivery indicator is utter fiction (Elon time?)

 

[Fact Checking]

But why then just 2 weeks for a SR+ or 2-4 weeks for a SR? I'd love to hear something like "we've got orders for 30k of SR, new orders can expect delivery in 4-6 months."

It's an embedded JavaScript last updated March 1 (the SR reveal), it's not continuously updated.

My guess the number will be updated later this week, once the first flood of SR orders is in and they can sort out reservation holders.

 

[electrichapp]

I think Tesla is expecting most orders would be for the SR+ and that the SR+ is just a software-locked MR so they are producing them now. Hence the 2 weeks lead time.
The SR with has cloth seats and is more stripped down need special handling so the 4 weeks lead time.

 

[neroden]

Despite the other corrections, which I acknowledged, his original 'correction' was totally wrong and that got the number of informatives. etc...



I did actually but made a silly typo in doing it. Sorry about that. (#20700).

So you did mean 1.8 billion? 1.1 million got you a "funny" reaction from me

 

[Nuclear Fusion]

New VIN Registrations Reveal That The RHD Tesla Model 3 Is Coming! | CleanTechnica

 

[MD70]

All this angst about the delivery times could have been avoided if they had put delivery starts in 2 weeks time.
It’s unfortunate that in the little details Tesla screws up.

 

[neroden]

I'd also say that Tesla probably wouldn't have to build too many Superchargers to be able to claim: "there's a Supercharger within 150 miles public road driving distance from every point in the contiguous U.S."?

Mostly North Dakota.

 

[gringotuanis]

I guess SP won’t move until Q1 numbers are out. I read lots of optimism for long term here but pessimism about SP for short term, even after Q1 numbers. Trying to wrap my head around why.

So, let’s see, the negative narratives from analysts might be:

• If Q1 shows a loss that is anything other than tiny, shouts of doom of course.
• if Q1 shows close to break even and only modest sales and production, same shouts of doom.
• if Q1 shows close to break even but strong sales and production, see they can’t make money on the 35k M3
• If inventory goes up, will be argued due to demand drop rather than new pipeline of cars in transit to overseas.
• If order backlog increases, will be argued they are rationing M3 SR production because it loses money, and they are just putting off doomsday.
• If Q1 shows a small but real profit that surprises, will be somehow attributed to creative accounting that just defers the final day of reckoning.

Is there any Q1 outcome that we think is both possible and would convert some analysts to the buy side?

If Musk would discuss the current margins on the cheapest model (it sounds like he avoided that topic on the call), coupled with publishing current orders of the short range if they're going thru the roof...I think you would see a bump even ahead of Q1 earnings