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

[Ohmster]

Despite the poor location and constraints Freemont is a huge asset and Tesla literally could not have gotten here without Freemont. We'd be years behind.

I think Fremont’s future is primarily as a pilot line and potentially supplementary capacity. Silicon Valley still has a significant brain power density advantage. A collocated design team for LV initial production trials and new technology validation is an under appreciated strength.

And no, I don’t live there. Did for a very brief stint, but came screaming back to SoCal within a year. Just personal biases and/or preferences.

 

[Thekiwi]

Put Model 3 on Ships instead of local car carriers and take $25m to the bottom line; it's a no brainer.

Here is my take on June China deliveries.
- They were fantastic. June local sales were solid at 28,138 with April at 11,671 and May at 21,936.
- Telsa is now profitable excluding Reg Credits at 170k in deliveries. There is no need to optimize all deliveries at Qtr end.
- The smart thing to do is sell them where you make the most profit.
- There were 5,017 vehicles exported in June (see yellow below), and likely are in transit and won't count as a sale until Q3.
- You have a choice to either sell the 5k vehicles in China for $41k or sell them abroad for $47k.
- That's $6k more per car selling abroad. Let's deduct $1k for shipping (too high but let's do simple math). That's $5k more profit per car.
- 5,000 cars at $5,000 more per car gets you $25m more in profit. That's the correct business decision.

View attachment 682725

Numbers stack up - but these were excess vehicles to local demand anyway, China orders were still available for delivery in last week of quarter if someone wanted to buy them.

The more interesting question is why they are choosing to release Model Y SR to the local market instead of exporting the higher margin Y LR for export to new countries instead where there is pent up demand for tens of thousands of the LR models.

 

[Singuy]

Put Model 3 on Ships instead of local car carriers and take $25m to the bottom line; it's a no brainer.

Here is my take on June China deliveries.
- They were fantastic. June local sales were solid at 28,138 with April at 11,671 and May at 21,936.
- Telsa is now profitable excluding Reg Credits at 170k in deliveries. There is no need to optimize all deliveries at Qtr end.
- The smart thing to do is sell them where you make the most profit.
- There were 5,017 vehicles exported in June (see yellow below), and likely are in transit and won't count as a sale until Q3.
- You have a choice to either sell the 5k vehicles in China for $41k or sell them abroad for $47k.
- That's $6k more per car selling abroad. Let's deduct $1k for shipping (too high but let's do simple math). That's $5k more profit per car.
- 5,000 cars at $5,000 more per car gets you $25m more in profit. That's the correct business decision.

View attachment 682725

Have you adjusted the calculated profit after import duties to EU?

 

[kengchang]

Numbers stack up - but these were excess vehicles to local demand anyway, China orders were still available for delivery in last week of quarter if someone wanted to buy them.

The more interesting question is why they are choosing to release Model Y SR to the local market instead of exporting the higher margin Y LR for export to new countries instead where there is pent up demand for tens of thousands of the LR models.

BIW capacity > battery capacity. LFP cell to the rescue.

 

[Prunesquallor]

Well that’s my point - as much as I approve of the Model Y SR (will be buying one myself once it gets released in NZ), Tesla would not have released it yet if demand for Model Y LR was still strong enough in China to soak up available production, that obviously is no longer the case. This was always going to happen at some point (there are only so many buyers in China for the higher priced LR model) - I am just surprised it happened in only the 2nd quarter of Y availability. Compare it to North America where the model Y has been available for 5 quarters and every model is LR or P and they still can’t meet demand.

In a battery-constrained world, cars with smaller batteries=more cars.

 

[nativewolf]

Put Model 3 on Ships instead of local car carriers and take $25m to the bottom line; it's a no brainer.

Here is my take on June China deliveries.
- They were fantastic. June local sales were solid at 28,138 with April at 11,671 and May at 21,936.
- Telsa is now profitable excluding Reg Credits at 170k in deliveries. There is no need to optimize all deliveries at Qtr end.
- The smart thing to do is sell them where you make the most profit.
- There were 5,017 vehicles exported in June (see yellow below), and likely are in transit and won't count as a sale until Q3.
- You have a choice to either sell the 5k vehicles in China for $41k or sell them abroad for $47k.
- That's $6k more per car selling abroad. Let's deduct $1k for shipping (too high but let's do simple math). That's $5k more profit per car.
- 5,000 cars at $5,000 more per car gets you $25m more in profit. That's the correct business decision.

View attachment 682725

That's the positive take. Interesting that they are threatening to send MIC Y to Germany to pressure Germany into faster approvals. I had concerns with Germany as a location from the onset, since the UK did Brexit I would have thought Poland. Elon picked Berlin and if he can get it going it is brilliant.

The one concern seems to be that the sales in China might require even more price reductions thus making even more sense to export.

 

[The Accountant]

Have you adjusted the calculated profit after import duties to EU?

I didn't include that in my simple math. What's the duty percentage?

 

[kengchang]

I didn't include that in my simple math. What's the duty percentage?

10% I think? not sure if China has special rate

 

[Prunesquallor]

More than any revised permit application or water use plan or reforesting , the simple act of moving German jobs to China should get Regulators attention.

Balls in your court, Berlin.

Yeah, horns of a dilemma. Dick around with permits and demand looks elsewhere. Get your sugar together and demand buys locally. If true, I think this is a deliberate message.

“Bishop half level right to knight six. Checkmate"

 

[Thekiwi]

https://twitter.com/x/status/1412775516130582533

That makes the end of the construction of the support buildings for current lines as far I understand. As I said in last post, efficiency was upgraded on existing Production line in early Q2, but no signs of an entire new production line installed at all.

 

[InTheShadows]

Should we be worried?

A Tesla 'death cross' has appeared for the first time in more than 2 years

Tesla Inc.'s stock chart has produced the first bearish "death cross" pattern in more than two years on Friday, which some market technicians could view as a...

www.marketwatch.com

Only worried if I can’t buy more chairs. Found enough to get 6 more this morning. Sorry AAPL.

 

[The Accountant]

Numbers stack up - but these were excess vehicles to local demand anyway, China orders were still available for delivery in last week of quarter if someone wanted to buy them.

The more interesting question is why they are choosing to release Model Y SR to the local market instead of exporting the higher margin Y LR for export to new countries instead where there is pent up demand for tens of thousands of the LR models.

You make a fair point.
I'm looking at GigaShanghai as a site feeding global demand. As long as there is global demand for Shanghai's growing supply, I am good with that.
China's demand will fluctuate as initial pent up demand gets filled and new models launch but we should see it settle into something more predictible hopefully by next year.

 

[Thekiwi]

In a battery-constrained world, cars with smaller batteries=more cars.

You make a fair point.
I'm looking at GigaShanghai as a site feeding global demand. As long as there is global demand for Shanghai's growing supply, I am good with that.
China's demand will fluctuate as initial pent up demand gets filled and new models launch but we should see it settle into something more predictible hopefully by next year.

I suppose the answer lies somewhere within the fact that Shanghai uses different battery formats for its SR & LR models (IIRC), so factory output is perhaps determined by the supply of those two separate supply chains.

eg LR battery supply is limited, so only enough to perhaps enable a small amount of Y LR exports (Hong Kong, Macau) whereas SR battery supply has ramped to the level they can start delivering a SR model Y locally (as well as Hong Kong/Macau).

Will be interesting to see what gets announced for Germany today if rumor is true.

 

[Artful Dodger]

Well that’s my point - as much as I approve of the Model Y SR (will be buying one myself once it gets released in NZ), Tesla would not have released it yet if demand for Model Y LR was still strong enough in China to soak up available production, that obviously is no longer the case. This was always going to happen at some point (there are only so many buyers in China for the higher priced LR model) - I am just surprised it happened in only the 2nd quarter of Y availability. Compare it to North America where the model Y has been available for 5 quarters and every model is LR or P and they still can’t meet demand.

You are projecting your fears and interests. During 2020Q2 earnings call, Elon said:

“The thing that bugs me the most is that our cars are not affordable enough. We need to fix that. We want to be slightly positive and maximize growth, and make the cars as affordable as possible”.​

This latest move in China directly goes to addressing that issue, thus is a top priority for Tesla. What did you expect price cuts to look like? Will you cry 'demand problem' when Tesla releases the $25K car in 2023? How about when they deliver 2M of those cars from the new Shanghai factory in 2024?

There is no demand problem, except for the FUD you're consuming (apparently willingly).

 

[Prunesquallor]

https://twitter.com/x/status/1413253018720612360

 

[Artful Dodger]

What is this about a new production line? In Shanghai? I don’t think I have seen that reported anywhere - do you have a link? Tesla shutdown the existing model Y line in early Q2 to improve its speed, but I dont think anyone has claimed it has added an entirely new production line.

There was more about the buildout plan for MiC Model Y released on Feb 2, 2021:

Moneyball on Twitter: "Tesla GF3 Phase I Stage 2 approved for construction, stage divided in A & B part. B to add 2 production lines to testing equipment of "new model early stage initiation project". Stage to raise M3 capacity, produce MY/M3/derivative, #China media reports.​

https://twitter.com/x/status/1356858776163282946

Media conveniently 'forgot' that 2 Model Y lines is precisely what Tesla said they would build, because it doesn't fit the media narrative: constant FUD, only.

There's more Model Y production plans linked in that thread, from even earlier than Feb 2021. It is public information.

 

[Thekiwi]

You are projecting your fears and interests. During 2020Q2 earnings call, Elon said:

“The thing that bugs me the most is that our cars are not affordable enough. We need to fix that. We want to be slightly positive and maximize growth, and make the cars as affordable as possible”.​

This latest move in China directly goes to addressing that issue, thus is a top priority for Tesla. What did you expect price cuts to look like? Will you cry 'demand problem' when Tesla releases the $25K car in 2023? How about when they deliver 2M of those cars from the new Shanghai factory in 2024?

There is no demand problem, except for the FUD you're consuming (apparently willingly).

I‘m not sure what you are getting at. You are saying the exact thing I’m saying but calling it projected fear and FUD influenced when I say it.

Yes Tesla has to introduce lower priced models to increase its total addressable market, that’s basic Econ 101.

That is a completely separate conversation to discussing what the demand situation is for specific existing priced models in various markets. I’m not talking about a “demand problem“ for all Tesla cars in all markets, I’m discussing the supply/demand equilibrium being reached for the Model Y LR sold in China - and the solution to that excess production capacity is to export more and introduce the new SR variant.

The same exact thing will happen in North America once Austin capacity comes online and supply will exceed demand for LR model Y, Tesla will introduce a cheaper model Y variant to increase demand.

There is nothing at all FUD-dy or controversial about that and I don’t think anyone here needs to feel threatened in any way by this eventuality at all.

 

[traxila]

You make a fair point.
I'm looking at GigaShanghai as a site feeding global demand. As long as there is global demand for Shanghai's growing supply, I am good with that.
China's demand will fluctuate as initial pent up demand gets filled and new models launch but we should see it settle into something more predictible hopefully by next year.

Just like we have seen the world over, there is no better PR than people driving Teslas. The more people who have Teslas in a location, the more people that desire them as the results and word of mouth overwhelms the relentless FUD.

China is just getting started. It is hard for anyone, including Chinese, to actually grasp what a tremendously large country it is. Demand will explode as people on the ground realize the lies are endless.

 

[OrthoSurg]

The #1 thing we can do to stop this clickbait nonsense is to ignore it. We spend all day literally linking to it.

I refuse to accept the outrage of all these posters who just proved clickbaiting works. Stop linking to garbage!

yesterday when I went to watch the hockey game with friends. Some guy told me he read an article of a driver dying in a Model S Plaid bursting into flames. I told him 150 gas car caught on fire during the same day and probably 15 people died too. I don’t even have to read clickbait FUD articles anymore. People read them for me and I counter them with general counter-FUD already prepared one liners. I am now immune to FUD.

 

[The Accountant]

Let's take a moment to marvel at this:
- Tesla is expanding Fremont's production capacity.
- Building out the Kato Road facility
- Significantly expanding Shanghai
- Building a new facilty in Austin
- Building a new facilty in Berlin

..and
- they are not funding this with a Capital Raise
- they are not funding it with Debt
- they are not drawing down their Cash on the balance sheet.

Tesla is funding all this with cash generated from Operations. Yep, the company that "loses money on every car it sells", generates enough cash each quarter from operations to fund this massive expansion.
Even after funding all these Capital Expenditures, they still have cash left over (Free Cash Flow). In fact, since Q2 2020, they will have generated Free Cash Flow of $4.4B by Q2 2021.