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

[jbcarioca]

Then how is it that Tesla currently provides a CCS2 adapter for older Model S & X to charge on v3 superchargers in EU/AU/NZ that only have a CCS2 plug? I imagine the adapter required in the US would be similar to this with a CCS1 male to tesla female adapter and the necessary microprocessor to communicate between the SC and a Tesla billing app.

View attachment 686444

That is a common misconception. Very careful reading of all the papers helps. As shown the existing Tesla EU adapter proves the point, even though the Tesla CCS Supercharger pin logic varies from typical, although it is within the authorized variations. To understand this fully one needs to study the technical specifications on the CharIN site. Those who imagine that the other members are trying to impede Tesla are dabbling with conspiracy theories.

The CCS standards were driven more by electrical suppliers and utility providers than by OEM members. That is why they're cumbersome and sometimes arcane. In context, understand that equipment providers and utilities are obsessed with electric transmission safety. For that reason, and only that reason, adapters are discouraged unless they provide unusual safety coupled with complying with communication standards, HomeLink Green PHY specifically.

We all need to understand that Tesla can fairly easily allow other OEMs access, and can provide for a wide array fo payment options from 100% OEM paid, 100%. user paid and a wide array of variants. Tesla can, with minimal difficulty provide for OEM system use, construction support, even energy supply.

There's no reason to agonize over the technical issues. They are all trivial for Tesla and an OEM. The commercial terms and options are the issue. Not technology.

In my opinion the primary impediment has been that traditional OEM's perspective is that energizing the vehicle is the owners problem and that of petroleum providers. They almost all do not really understand BEV's uses very well, but they're learning.

 

[AquaY]

I recall back in 2013 Elon stated something like; "It isn't the car makers who made the most money, it was those that supplied the fuel".

What I was found sadly amusing was that here in NY we pay about 65 cents per gallon of gas in taxes.
Exxon Mobile makes between 11 cents and 16 cents per gallon of gas.

 

[st_lopes]

Yes. If Tesla recognizes any portion of their deferred tax asset benefit this quarter it would partially or fully offset the bitcoin impairment.

Copying @st_lopes on this response as he has much more tax expertise than I do.
We have seen other companies in this situation take most of the benefit at one time and not spread over several quarters. But it can be taken over several quarters/years.
However, there is one factor that may be different for Telsa now than with the other companies in the past.
In 2018, the US tax law changed so that there is no expiration on using past losses to offset future tax income starting with the 2018 tax filing..

The table below is not 100% accurate but directionally Tesla's $2B deferred tax benefit can be outlined as follows:
View attachment 686561

Of the $2B in Deferred Tax Benefit, about $200m from 2018 and $133m in 2019 have no expiration.
So perhaps Tesla can take the position that $333m ($200m+$133m) will more likely than not be used in the future and book $333m to income in Q2.
Contrary to what TSLAQ claims, Tesla takes a conservative approach with their accounting so I am not counting on this. But it's possible.

There are three variables that keep weighing on when timing of recognition of these benefits becomes realistic:

1. Global distribution of revenues;
2. Tax benefit of stock-based compensation;
3. US tax legislative changes;

I'll breakdown each point below. Grab a coffee, or a beer.

1. Global Distribution of Revenues: The tax assets are captive in the US because the losses were generated when Tesla was a primarily US only operation. In other words, they can generally only be applied against either US sourced taxable income, or should the US shift back to a global tax basis (see #3), may become available to apply against taxable income from other jurisdictions.
   
   Tesla does not currently disclose Net Income by region for accounting purposes. Even if it did, on a tax basis, my assumption would be that EU and Asia operations are primarily cost+ or residual income (i.e., they pay royalties/license/trademark fees back to the mothership on each vehicle sale) subsidiaries to Tesla US. In other words, they will likely operate a profitable position, given that Tesla US would be the ultimate IP holder and would be compensating those entities to fully cover their cost basis, plus a mark-up. For those interested, this is the tax concept of Transfer Pricing.
   
   This may shift as R&D centres in Shanghai and Berlin come online and should Tesla evolve in to a multi-jurisdiction IP holder (i.e., IP generated in Shanghai may remain owned by Tesla China, IP generated by Berlin may reside in EU), and thus their revenue model becomes more entrepreneurial in each hub location (i.e., they get to recognize more local profit in each location, rather than it being repatriated back to the US).
   
   This kind of shift would just further delay recognition of a US specific benefit.
   
   
2. Stock-Based Compensation ("SBC"): This is one of the most significant contributors to US companies not paying US Corporate Tax. Whereas we know what the SBC charges are for financial reporting purposes, we DO NOT know what they are for tax purposes. For accounting purposes, SBC is usually calculated at date of granting of the options/restricted units using some form of valuation model (i.e., usually Black-Scholes). However, for tax purposes, generally the fair market value of the options/restricted units on day of VEST is what the entity gets as a tax write off. That is an enormous difference, particularly for Elon's compensation package.
   
   In other words, SBC alone may be enough to absorb tax basis in the US for the near future, meaning that NONE of the tax asset may get realized until SBC is fully consumed. This is also extremely US centric, given that is where the lions' share of heavy hitting SBC employees currently reside.
   
   
3. US Tax Changes: Prior to the Trump administration, the US was a jurisdiction that would try to tax entities on their GLOBAL tax basis. It was actually one of the only countries in the world that did that (i.e., it adds an enormous amount of complexity and compliance burden to the US Tax system, which means it encourages a lot of people to misbehave). Because of that framework, extremely sophisticated structures (ref: double dutch or irish structures; panama papers; isle of man papers) were derived by some significant US IP holders (e.g., amazon, google, apple). The general principle of those structures is that you would put just enough substance in a foreign jurisdiction (and the right "kind" of substance) to argue that IP was actually owned by that foreign entity rather than the US HQ. In doing so, you would be able to carve it out from the Global tax basis calculations. The incentive here was that the US Corporate Rate was also one of the highest in the world, so large organizations tried their best to shift as much taxable income as possible through these structures.
   
   The Trump administration's tax reform modernized the system to a certain extent. It didn't become fully territorial like nearly every other country's regime, but instead took a hybrid approach. It effectively lowered the US Corporate rate and allowed a certain amount of income to remain taxed solely in foreign jurisdictions. In essence, as long as an entity was paying ~13% tax in the foreign jurisdiction, it had no additional tax to pay in the US on that same income.
   
   That change again delays how much of the tax asset can be recognized, because again the benefit is primarily US-based, and now less of Tesla's Global Taxable Income is repatriated back to the US.
   
   Final point here, the Biden administration has proposed another tax overhaul that effectively reverts the US back to a GLOBAL tax basis regime, coupled with a large jump in the corporate rate, and some major restrictions as to how those prior carve-outs of taxable income may be applied. If this passes, then that may be the catalyst for recognizing the benefit, as the lions' share of Tesla's global revenue would now be repatriated to the US.

TL;DR: Overall, I think we are likely to see a realization of some of the benefit in 2022 or 2023 at the latest. #3 may be the largest catalyst to timing, as I feel like #1 and #2 will actually serve to keep deferring when the full benefit may be realized, given how Tesla's business continues to become more globalized. I was previously more bullish that we would have seen it in 2020 or early 2021 given the inflection point in Tesla's profitability. I had underestimated #1 and #2 above in my initial analysis.

 

[Krugerrand]

There are three variables that keep weighing on when timing of recognition of these benefits becomes realistic:

1. Global distribution of revenues;
2. Tax benefit of stock-based compensation;
3. US tax legislative changes;

I'll breakdown each point below. Grab a coffee, or a beer.

1. Global Distribution of Revenues: The tax assets are captive in the US because the losses were generated when Tesla was a primarily US only operation. In other words, they can generally only be applied against either US sourced taxable income, or should the US shift back to a global tax basis (see #3), may become available to apply against taxable income from other jurisdictions.
   
   Tesla does not currently disclose Net Income by region for accounting purposes. Even if it did, on a tax basis, my assumption would be that EU and Asia operations are primarily cost+ or residual income (i.e., they pay royalties/license/trademark fees back to the mothership on each vehicle sale) subsidiaries to Tesla US. In other words, they will likely operate a profitable position, given that Tesla US would be the ultimate IP holder and would be compensating those entities to fully cover their cost basis, plus a mark-up. For those interested, this is the tax concept of Transfer Pricing.
   
   This may shift as R&D centres in Shanghai and Berlin come online and should Tesla evolve in to a multi-jurisdiction IP holder (i.e., IP generated in Shanghai may remain owned by Tesla China, IP generated by Berlin may reside in EU), and thus their revenue model becomes more entrepreneurial in each hub location (i.e., they get to recognize more local profit in each location, rather than it being repatriated back to the US).
   
   This kind of shift would just further delay recognition of a US specific benefit.
   
   
2. Stock-Based Compensation ("SBC"): This is one of the most significant contributors to US companies not paying US Corporate Tax. Whereas we know what the SBC charges are for financial reporting purposes, we DO NOT know what they are for tax purposes. For accounting purposes, SBC is usually calculated at date of granting of the options/restricted units using some form of valuation model (i.e., usually Black-Scholes). However, for tax purposes, generally the fair market value of the options/restricted units on day of VEST is what the entity gets as a tax write off. That is an enormous difference, particularly for Elon's compensation package.
   
   In other words, SBC alone may be enough to absorb tax basis in the US for the near future, meaning that NONE of the tax asset may get realized until SBC is fully consumed. This is also extremely US centric, given that is where the lions' share of heavy hitting SBC employees currently reside.
   
   
3. US Tax Changes: Prior to the Trump administration, the US was a jurisdiction that would try to tax entities on their GLOBAL tax basis. It was actually one of the only countries in the world that did that (i.e., it adds an enormous amount of complexity and compliance burden to the US Tax system, which means it encourages a lot of people to misbehave). Because of that framework, extremely sophisticated structures (ref: double dutch or irish structures; panama papers; isle of man papers) were derived by some significant US IP holders (e.g., amazon, google, apple). The general principle of those structures is that you would put just enough substance in a foreign jurisdiction (and the right "kind" of substance) to argue that IP was actually owned by that foreign entity rather than the US HQ. In doing so, you would be able to carve it out from the Global tax basis calculations. The incentive here was that the US Corporate Rate was also one of the highest in the world, so large organizations tried their best to shift as much taxable income as possible through these structures.
   
   The Trump administration's tax reform modernized the system to a certain extent. It didn't become fully territorial like nearly every other country's regime, but instead took a hybrid approach. It effectively lowered the US Corporate rate and allowed a certain amount of income to remain taxed solely in foreign jurisdictions. In essence, as long as an entity was paying ~13% tax in the foreign jurisdiction, it had no additional tax to pay in the US on that same income.
   
   That change again delays how much of the tax asset can be recognized, because again the benefit is primarily US-based, and now less of Tesla's Global Taxable Income is repatriated back to the US.
   
   Final point here, the Biden administration has proposed another tax overhaul that effectively reverts the US back to a GLOBAL tax basis regime, coupled with a large jump in the corporate rate, and some major restrictions as to how those prior carve-outs of taxable income may be applied. If this passes, then that may be the catalyst for recognizing the benefit, as the lions' share of Tesla's global revenue would now be repatriated to the US.

TL;DR: Overall, I think we are likely to see a realization of some of the benefit in 2022 or 2023 at the latest. #3 may be the largest catalyst to timing, as I feel like #1 and #2 will actually serve to keep deferring when the full benefit may be realized, given how Tesla's business continues to become more globalized. I was previously more bullish that we would have seen it in 2020 or early 2021 given the inflection point in Tesla's profitability. I had underestimated #1 and #2 above in my initial analysis.

I got lost right after grab the beverage of my choice suggestion. Please tell the story in pictures or provide a one word summary of how I should feel at the end of the lesson. Thank you.

 

[MABMAB]

On real estate costs: My local sales and service center was initially all in one location. Another location was added for service, it was much larger, sales stayed at the old location, had room for maybe three cars inside. I did regular drive bys as an investor, once noted a car going down a side road nearby, followed it. It seems they had a third location where lots of cars could and would fit inside along with large parking outside. Activity would come and go.

A year or two ago the first two places closed down as they bought or rented a much larger facility. It looks nice, is well run, clean. Major road, not tucked off a side road like before, is near a few other new car lots. The large drop off center (it is where trucks would deliver cars to) remained open for a while.

As of two days ago it seems like this drop off location was no longer being rented by TSLA, looked like some HVAC work was being done. Sales and service lot was as empty as I have seen it at the new place. I hope similar consolidation of locations has taken place and hope it helps the bottom line some. GROW TSLA GROW!

 

[UkNorthampton]

OT: This video is worth the watch. Mom takes a Tesla Model 3 over SUV's and cars with a hatch.

I think it's on topic because of the reach of the channel/video. Youtube says video published about an hour ago - with 53000+ views. When I did a rough check a few months ago, this channel was huge compared to many others I compared it to, especially as it's UK (despite the spelling - Peppa would NOT approve #PeppaEffect).

Edit: 16 minutes later.... Youtube says 85,141 views

 

[scaesare]

I like the idea of a unique identifier built into the adapter, so a car set up with the adapter just plugs in and billing is automatic (no app used except one-time setup and expired credit card). I hate all the different apps for different networks, and the clunky way to identify your plug to the app to initiate charging, and there’s a special place in hell for the ones that charge you in fixed blocks up front with no refunds for unused credits. Thankfully I only tried to see how it works and don’t rely on it regularly, but the Supercharger plug-and-go is massively better.

It would not concern me if non-Teslas require an adapter… Selfishly, I’m not really sure I want to make it completely frictionless for them to use superchargers. Avoiding the app and plug ID process would be enough to make it a generally superior charging experience.

A likely scenario. It would make the "adapter sharing" as sometimes currently happens a bit more awkward, however. But if they are cheap enough, that may not matter as much...

 

[scaesare]

Current superchargers are "dumb". The car initiates the charge (according to Ignineerix who has re-enabled paid supercharging on 1000s of salvage cars). So unless Tesla upgrades all of their superchargers to be "smart", the change will have to be in the 3rd party cars. Maybe they'll combine this with the rollout of the 300kw superchargers.

However, sniffing the data exchange during the Supercharger-to-car handshake, it has been noted that the car VIN is passed to the supercharger... it just didn't initially make use of it. That could be made use of as part of this plan...

 

[jim0266]

I believe it was her husband who bought those calls. I picked up several when I saw that news, last I looked mine were underwater since they were purchased later.

If they are still holding those calls they would be ~$45,000 underwater.

Tesla, Inc. (TSlA) [OP] P 12/22/2020
DESCRIPTION: Purchased 25 call options with a strike price of $500 and an expiration date of 3/18/22.

SP that day ranged between $614 and $650. 1pm purchase that day would have been $225.25 each. Today's mark at post time is $207

 

[wtlloyd]

What I was found sadly amusing was that here in NY we pay about 65 cents per gallon of gas in taxes.
Exxon Mobile makes between 11 cents and 16 cents per gallon of gas.

As it should be. Oil companies are no more than licensees of a world resource. Obscene profits are a failure of regulation.
Looked at merely even in a human time scale of 1000's of years, extractive industries companies are a mere blip in time, looting an irreplaceable resource for an idiotic purpose. Burning FF for ephemeral transit purposes when those feedstocks are a heritage for all future planet generations is, now that we can do much better, criminal.
And that's without even bringing up the forcing of rapid climate change.

 

[BrownOuttaSpec]

The infrastructure bill includes $7.5B for EV charging infrastructure(for now at least).

One version of the bill included the following text:

INTEROPERABILITY.—Federal funds provided by this Act may not be used to construct any publicly available EVSE that has the ability to serve vehicle produced by only one vehicle manufacturer.

Looks like Tesla has already got this covered, that looks like a Tesla connector to me!

Aptera Motors

Aptera is the world’s first Solar Electric Vehicle that requires no charging for most daily use - giving you the freedom to do more with less impact on the planet.

www.aptera.us

 

[Ocelot]

What percentage of Tesla owners do you think read elons master plan? Most people just buy the car they like the look and sound of, and the specs. They don't read the company mission statement. If a Tesla owner tells me they feel cheated that suddenly 2 years after purchase their once often-empty supercharger location has queues full of cheaper cars, I would agree with them.

I don't think that will happen, as I expect charger expansion to be rapid, and no ICE manufacturer will want to allow it, but I wouldn't blame a tesla owner being angry if they did. As a UK owner of a model S, it *is* annoying that the nearest supercharger to me is CCS only, and my 2015 model S cannot use it.

I agree with what you wrote. I should of been more specific. When I said “ anyone’ , I meant anyone lurking around here.

 

[EnzoXYZ]

Also, it becomes a pure advertisement for Tesla that utilizes their biggest source of marketing... Tesla customers. Certainly a VW or Ford owner will end up chatting some Tesla owners while charging, check each others cars out, and then the advantages of Tesla over everyone else becomes even more clear. Faster charging, faster in general, easier ways to charge, autopilot/fsd (as I'm sure many will be curious), 'dumb' things like games and netflix, etc etc. Which will drive more over to Tesla.

Can’ believe you’re not worry about Tesla owners getting enticed by F or VW EV offerings

Don’t do it Elon!!

 

[Tes La Ferrari]

If they are still holding those calls they would be ~$45,000 underwater.

Tesla, Inc. (TSlA) [OP] P 12/22/2020
DESCRIPTION: Purchased 25 call options with a strike price of $500 and an expiration date of 3/18/22.

SP that day ranged between $614 and $650. 1pm purchase that day would have been $225.25 each. Today's mark at post time is $207

Interesting. Could you share the tool / site you are using to obtain historical option pricing data in such detail? Thanks

 

[Drezil]

I just got an FYI in my IBKR workstation that some analyst initiated coverage with a Hold-Rating .. but it does not detail who it was.

Is this really recent? Or just some bot wrapping up things? Anyone knows if some new analyst started covering & what their PT is?

(Reported to IBKR via Reuters .. thats all i know)

 

[lafrisbee]

The Car And Driver numbers at least are USA-only (or perhaps inc Canada, I am unsure), and are 6-month YTD, i.e. Q1+Q2. The Car And Driver text seems fairly clear that they are Q1+Q2 when I read the text and look at what we know of sales data. For sure we can see that they cannot be global numbers by comparing them with Tesla Q2 P&D numbers which are 382,140 for Q1+Q2 for 3/Y vs the 127,939 for the 3/Y shown here. Anyway here are the Car And Driver numbers in a table. The Teslarati article is best ignored.

View attachment 686546

I thought that might be it... how could a writer get that by the Idiotor?
I just thought it should be mentioned that the article refers to world domination and quotes the total world production while using the total production from only one Gigafactory.
What was also strange was the amount of time and the number of TMC members that read the article and yet didn't mention either the error or the uselessness of such a pathetic attempt to write.
Having just a little background in the news industry it appears that some print was needed and the writer just slapped some sheet up there, and the Idiotor had no oversight. other than to just get something on the page.
It is very telling.
(I actually looked for a way to tell the writer their error but one was not easily found on the site. And then the article got posted and "liked" here so I figured I should be delicate at first..but come on, read people.)
Hmmm, the article seems to have disappeared????????? NOPE> I can still see it, but it seems different...nevertheless, it shows the intent of the writer is not to report the news, but to produce copy.

 

[jerry33]

I like the idea of a unique identifier built into the adapter, so a car set up with the adapter just plugs in and billing is automatic

As long as no one steals the adapter. Or worse, someone has an adapter and they hack the ID number. A better way would be a toll-tag like device in the car. Then the adapter is fungible.

 

[StarFoxisDown!]

Sure Nio can be up 6% to a 76 billion valuation on very strong volume.....

 

[JusRelax]

Sure Nio can be up 6% to a 76 billion valuation on very strong volume.....

Anything happen in China specifically beneficial for chinese EV's?

 

[Beltsbear]

As long as no one steals the adapter. Or worse, someone has an adapter and they hack the ID number. A better way would be a toll-tag like device in the car. Then the adapter is fungible.

All of that is easily countered. The ID as you call it would actually be a cryptographic key exchange and WOULD NOT be hackable if done properly. Anyone with their adapter stolen would have it turned off like a credit card. The adapter would not be valuable as a stolen item, because you know the precise location every time it is used.

The adapter with a small computer in it is almost certainly what will happen. Let's just say Tesla charges $199 for it up front and $20 a month. Now Tesla owners have something they get for free, while others pay to access the network and for more build out. The rates for supercharging would be similar for fast charging vehicles, but if they allowed slower charging vehicles on, those people would be charged more for using the spot longer.