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

[KarenRei]

I'll save everyone some more reading. Of course I don't deny it. But it's not sufficient to assume that your understanding of the situation is the correct one. We'll find out soon enough. Until then, you and I are both speculating. Only one of us is telling others that we're explaining the correct understanding of the situation.

The thing is, you're not speculating. You're saying that you don't get it.
I've given an explanation, the points of which you don't deny. So what's the problem?

There's no inexplicability if one accepts that US+Canada SR demand is a minority of global demand, and that there's no endless backlog of US+CA SR reservations waiting to go.

Sure, there could also be things like website bugs, I don't deny that. But that doesn't change the basics.

Sorry, I'm not trying to be confrontative. It's just that there's an obvious explanation, so there's no need for people to keep going "I don't get it.".

 

[Fact Checking]

@KarenRei, @ReflexFunds, @AcesDealt, @schonelucht, @neroden:

I believe this sentence by DB might be mis-parsed:

"Tesla indicated that initially, the $35k Model 3 will generate a positive cash gross margin (gross profit plus depreciation of approximately $1,500)"​

I believe the $1,500 is a reference to per unit depreciation, not gross margin.

Tesla didn't specify cash margin of $1,500, and it would have been highly inappropriate for them to do so in a private call.

In fact the $1,500 figure might be DB's estimate of depreciation, which seems way too low to me: initial Grohmann Machine (which took months to build and which has the size of a football field) utilization and output will be low, so the per unit depreciation of the new machine should be much higher than $1,500, especially in Q1.

Note that Tesla is tracking per car cost of goods on a very fine-grained, per machine basis. I expect them to not mix the SR machine depreciation overhead with MR and LR units.

Which explains while Tesla management is talking about cash margins - they are the right metric during the Grohmann Machine ramp-up S-curve.

 

[sdtslafan]

I wish I could understand what is going on with Tesla. Recent changes regarding pricing and stores have been so abrupt. I'm not sure how to explain it but my concern is that the company is not being upfront with investors. Likely in my opinion there was a rapid drop off in demand OR costs have not come down as expected, and Elon as a result made these very rash decisions to cut costs and attempt to spur demand. His hope is that a large increase in demand and production will allow for economies of scale that will bring down costs and increase cash flow. But this was super abrupt and disruptive to everyone. The only reason I'm not selling my shares is that I know Elon could pull a rabbit out of a hat at any time. But I am disillusioned and wish these changes had been more gradual. Of course things could turn out very well if Elon can effectively increase demand while cutting costs, perhaps by using some of the money saved from closing stores for focused and effective advertising. Also, I believe any change in management that could bring stability would positively affect the share price. Just the mention of a "COO" would result in a price bump in my opinion.

 

[KarenRei]

@KarenRei, @ReflexFunds, @AcesDealt, @schonelucht, @neroden:

I believe this sentence by DB might be mis-parsed:

"Tesla indicated that initially, the $35k Model 3 will generate a positive cash gross margin (gross profit plus depreciation of approximately $1,500)"​

I believe the $1,500 is a reference to per unit depreciation, not gross margin.

Tesla didn't specify cash margin of $1,500, and it would have been highly inappropriate for them to do so in a private call.

Your interpretation would make sense. If so, then no additional information was given away in that meeting, as Elon twice used past tense when discussing achieving a positive gross margin on the $35k vehicle.

 

[Cosmacelf]

Thank you. I wish there was a normal country with universal healthcare where I had citizenship, but instead I'm just a US citizen. :-(

People who live near the southern US border apparently routinely get all their healthcare in Mexico because it's cheap and good, even though they have to pay cash. I'm not close enough to do that. Canada's also cheaper even though US patients have to pay cash, but they really prefer to avoid treating US patients, and it's still a long drive for me.

Please guys, let’s stop with the healthcare discussion. It is political. For instance, I’m originally from Canada and I can say that it isn’t nirvana up there if you actually need medical services. 6 month waits for an MRI are common as is restricted access to more advanced medical procedures. The US system is also mucked up, but Medicare shares some burden for mucking it up due to reimbursement rules. If you really want to discuss healthcare, let’s take it to a separate thread.

 

[neroden]

Your interpretation would make sense. If so, then no additional information was given away in that meeting, as Elon twice used past tense when discussing achieving a positive gross margin on the $35k vehicle.

Yeah, I also hope FactChecking is correct.

 

[SOULPEDL]

I said exactly that yesterday or the day before - all the days are a blur.

No luxury OEM can compete with ANY EV they have planned for this year, or the next, or the next, or the next... Every single planned EV is DOA just on price alone, never mind range, charging network, EAP/FSD. They are fubarred!

See, no confusion from me. I know what he’s doing; just what he said he would. Greatest lesson in life I ever learned, know who are dealing with before you open your mouth or make a move. Is an advice.

I read you, then I look at your cat... as if talking to me.
The photo matches the master's words here.

 

[StarFoxisDown!]

I wish I could understand what is going on with Tesla. Recent changes regarding pricing and stores have been so abrupt. I'm not sure how to explain it but my concern is that the company is not being upfront with investors. Likely in my opinion there was a rapid drop off in demand OR costs have not come down as expected, and Elon as a result made these very rash decisions to cut costs and attempt to spur demand. His hope is that a large increase in demand and production will allow for economies of scale that will bring down costs and increase cash flow. But this was super abrupt and disruptive to everyone. The only reason I'm not selling my shares is that I know Elon could pull a rabbit out of a hat at any time. But I am disillusioned and wish these changes had been more gradual. Of course things could turn out very well if Elon can effectively increase demand while cutting costs, perhaps by using some of the money saved from closing stores for focused and effective advertising. Also, I believe any change in management that could bring stability would positively affect the share price. Just the mention of a "COO" would result in a price bump in my opinion.

Just the Vin registrations alone contradict any claims of a rapid demand drop off in Q1. Simply put, if there was a rapid drop off in Q1, they wouldn't be registering 123k Vin's in Q1.....with a month still left.

 

[neroden]

Please guys, let’s stop with the healthcare discussion. It is political. For instance, I’m originally from Canada and I can say that it isn’t nirvana up there if you actually need medical services.

Having dealt with the US "system" most of my life, *and* had random healthcare emergencies in Canada, I can say, yeah, it is nirvana in Canada -- by comparison.


This came up because Tesla has to pay way more for "employee health care" in the US than anywhere else, vastly increasing labor costs. Just paying the national insurance taxes for pretty much any other country at all would be cheaper. (I mean, they already pay substantial national insurance taxes in the US, for Medicare.)

 

[Krugerrand]

I think it's fairly straightforward...

Tesla can't sell all the cars it can make at the old price. It's hoping to increase demand by dropping the price.

I don't accept the idea that Tesla would unnecessarily turn away relatively large sums per sale when it needs cash to support lots of things (SuperChargers, Service Center expansion, MY, semi, etc.).

Mission trumps everything. Money is means to an end, not the goal. Better to sell more for less, better to pressure OEMs to stop making ICE and make EVs or get of my lawn.

 

[sdtslafan]

Neroden, I saw that you disagreed with my post which actually is a relief. Can you elaborate?

 

[M3Rider]

There is no flood of US/Canadian SR reservations.

I assume you meant orders. I don't believe such info was disclosed, so don't know what this statement is based on.

I waited 2.5 years, so it'd be not much longer for SR waiters. Yes, I assume some cancelled, but definitely not 100%. I think worst case, one month worth of orders left.

I agree that nothing is wrong with the new orders. The difference between new orders and reservations is that the latter have done all the research and were ready to pull the trigger asap.

People who just heard about $35k Tesla and got interested, need time to figure out their charging solution/cost, how the winter weather affects the range. So, it may take them a while to get comfortable with the purchase decision.

 

[sdtslafan]

Just the Vin registrations alone contradict any claims of a rapid demand drop off in Q1. Simply put, if there was a rapid drop off in Q1, they wouldn't be registering 123k Vin's in Q1.....with a month still left.

Ok good point, but then if demand is so strong then why the price cut? They could keep the prices up and make extra profit and then gradually bring the prices down. It doesn't make sense to drop the price so much in my opinion if you have people lined up at the higher prices.

 

[MarcusMaximus]

Check back in 2-4 weeks? That's like eternity with Tesla and news cycles!
I give it 1-2 weeks and we'll all be talking about something completely different (besides the Y of course).

1-2 weeks? Supercharger v3 goes live *tomorrow*

 

[neroden]

Neroden, I saw that you disagreed with my post which actually is a relief. Can you elaborate?

Let's put it this way: Am I the only person who has been saying for years that Tesla should get rid of their bloated, unproductive physical stores?

I thought the announcement was a welcome and overdue "we finally noticed that this was not a good use of money", so I found it reassuring. Yes it was sudden -- but I'm glad to see a sudden change when the previous plan was not good.

In fact, I value Musk's ability to change plans on short notice.

(I do think they need a better scheme for pricing changes, and I outlined one a few years ago; and I do think the appointment of a COO -- which Guillen is basically doing already -- would calm down Wall Street.)

 

[Opus BC fan]

You got it wrong, in that movie the guy was a short, I’m pretty sure every one in TSLAQ crowd feels themselves as that guy in real life.

Edit: I was late on this one just a few posts.

You are correct in that I am not a short.

My point was that it "feels" like being "that guy" in that I am sure of my (our) assessment and seemingly having everyone, and their brother, following the so-called experts off a cliff...

 

[neroden]

My point was that it "feels" like to be sure of your assessment and have everyone, and their brother, following the so-called experts off a cliff...

This is a feeling I am very used to. Greta Thunberg probably is getting used to it too.

 

[StarFoxisDown!]

Ok good point, but then if demand is so strong then why the price cut? They could keep the prices up and make extra profit and then gradually bring the prices down. It doesn't make sense to drop the price so much in my opinion if you have people lined up at the higher prices.

Well the variable that we don't know right now is their production rate. If they're making 7k/week(or even greater) for model 3, you could say that they're preemptively getting ahead of any demand issues. They probably know that there's only a certain amount of demand for a certain price range. Instead of producing a ton of high trim cars and there not being enough demand for the higher priced options, they would rather drop the prices some before they get to that point, introduce short range version, etc...

There is a real demand drop off for the high end trims(especially since a lot of high end trims were brought forward before tax credit got halved), not for the model 3 itself. The media loves to portray it as there's not enough model 3 demand. In reality, there's plenty of model 3 demand but there are limits for the more expensive trims.

 

[Zaxxon]

Do you believe the delivery dates? I have this bridge here in Brooklyn which we can have for you tomorrow. I'll believe it if I see it.

They have to prioritize reservation holders now that Musk promised to do so in public. The non-reservation holders will have to get pushed back.

This is not a website date, but a delivery date from a delivery center to a non-reservation holder purchaser. So yes, I put some stock in it, though of course it's Tesla so things could change. Just wanted to clarify that I'm not referring to the website guesstimate.

Check back in 2-4 weeks? That's like eternity with Tesla and news cycles!
I give it 1-2 weeks and we'll all be talking about something completely different (besides the Y of course).

True. There's also Supercharging and whatever mess Elon creates for the middle-third of this particular month.

 

[Fact Checking]

Anyone here thinks the SR is going to be made in a completely new production line? What is musk referring to when it comes to volume production and S curve? No such thing happened with the MR when that was in the mix.

See this comment of mine:

Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable​

TL;DR: in the past few months Tesla built a large production line at the Gigafactory, the "new Grohmann Machine". It has the size of a football field and it is making SR battery packs.

This new production line needs to be ramped up and it has an S-curve. Elon expects it to reach high volume production in the summer.

The Medium Range didn't have an S-curve and didn't need to be ramped up, because it's using the Long Range pack with blanks.