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

[dhanson865]

I feel like you're very misinformed here

- Why would the Model Y need to sell like the Corolla when Tesla has the upcoming Model 2? You're comparing a vehicle that's not even remotely in the same class as the Model Y.

There is going to be a time between now and the "model 2" as you call it when there are ~4x as many Model Y being produced as there are now. Do you think 4x as many can be sold at the current price or do you expect Tesla to drop the prices as availability increases drastically.

It's clear Tesla will raise the price of the 3/Y when the smaller/cheaper car comes out (whatever they call it). They did the same with the Model S when the Model 3 came out, they'll do it again when a cheaper car comes.

But that's a long way off, plenty of time to be pumping out hundreds of thousands of Model Y between now and then. Pricing will be adjusted up and down as Tesla sees fit, it won't stay still if there is any unsold capacity, and it won't stay still if the order queue gets too deep.

I personally expect a cheaper price to come on 3 and Y in the next year or two. I just can't say how many days, weeks, or months they will be cheaper and I can't say they'll move price in unison.

 

[ChefBoyardee]

Something I was thinking regarding FSD:

• 15 minute commute to work = 10 driving hours per month
• Buy FSD, work during the drive, and as long as you make more than $20/hr, it pays for itself (time is money)
• Check morning emails on the drive to work, and wrap up end-of-day stuff on the drive home - easily fits people's current work patterns
• + Benefits for safety, road trips, drunk driving, no longer needing Ubers, etc, it's a no-brainer to get the FSD subscription

Assumptions:

• 50% / yr production growth, tapering towards 2030
• Lvl 5 public launch before 2025

2025
Price: $200 / mo
Fleet size: 11.5 Million
Take rate: 50%
Margin: 80%
Earnings per month: $924 Million

2030
Price: $250 / mo
Fleet size: 70 Million
Take rate: 75%
Margin: 90%
Earnings per month: 11.8 Billion


Even once the S curve for production starts tapering down, FSD revenue will be accelerating. I think this will keep the PE ratio high for a long time.

I'm pretty confident the 75% take rate will happen at some point. The longer it takes to solve Lvl 5, the more explosive the FSD growth will be because the fleet size (the portion of FSD's TAM that can grow at SaaS speeds) will continue to grow.

Oh, and competitors solving autonomy will only help to further the cultural change needed to boost adoption. It's going to be a new paradigm for transportation and most analysts don't see it yet.

It's going to be a fun decade

(Feedback is welcome, still trying to wrap my own head around this)

 

[StarFoxisDown!]

There is going to be a time between now and the "model 2" as you call it when there are ~4x as many Model Y being produced as there are now. Do you think 4x as many can be sold at the current price or do you expect Tesla to drop the prices as availability increases drastically.

It's clear Tesla will raise the price of the 3/Y when the smaller/cheaper car comes out (whatever they call it). They did the same with the Model S when the Model 3 came out, they'll do it again when a cheaper car comes.

But that's a long way off, plenty of time to be pumping out hundreds of thousands of Model Y between now and then. Pricing will be adjusted up and down as Tesla sees fit, it won't stay still if there is any unsold capacity, and it won't stay still if the order queue gets too deep.

I personally expect a cheaper price to come on 3 and Y in the next year or two. I just can't say how many days, weeks, or months it'll be cheaper.

To be clear I'm not saying 3/Y ASP will not decline over the next 4 years. It clearly will to some extent. But the decline will not come at the expense of profits/margins.

Just a list of off the top of my head cost savings for the 3 and Y over the next 3-4 years

- Shipping costs/logistics. Once Berlin is fully operational, not only will the majority of the Tesla's sold in Europe no longer have shipping costs associated with them since they'll be locally made, but they'll also be able to lower the price with zero margin hit because they won't be paying import duties

- Larger bulk buys of materials which gives Tesla further pricing power as the 3 and Y are produced at 3 different Gigafactories.

- Continually progression of internally sourcing materials/pieces as well as locally sourcing materials, thereby reducing costs of production

- Continued efficiency out of new Gigafactories. Texas alone is clearly being constructed to do 1 million annual vehicles. If you thought operational leverage was impressive at Giga China(which is still ramping btw), then Texas will blow it out of the water.

- Continual manufacturing efficiency increase. Everyone should have taken note about the Q4 and Q1 earnings calls where on the Q4 earnings call, Zach specifically stated that margins took a temporary hit due to them starting the GigaPress manufacturing method and that margins would return to Q3 levels, if not higher, the next quarter.........and Tesla delivered on that. The GigaPress will pay dividends on lowering costs when Berlin, Texas, and China are all implementing it.

- 4680 Battery ramp which will be the single biggest cost reduction on all future Tesla's on the most expensive part of the vehicle.

And the ultimate wild card is the US EV tax credit. If that passes at even $7500 rebate/credit, I'd put money down on the 3/Y/S/X/Cybertruck will see zero price reductions for the next 3 years in the US market. Even without the US EV tax credit and the Model 3/Y at their current price points, I think there's plenty of organic demand for take them through mid 2023 without any significant price reductions. I personally estimate that Model 2 will come in late 2023 or early 2024.

 

[dhanson865]

And the ultimate wild card is the EV tax credit. If that passes at even $7500 rebate/credit, I'd put money down on the 3/Y/S/X/Cybertruck will see zero price reductions for the next 3 years.

Last I heard that $7500 is only affecting US pricing and Tesla sells the Model Y world wide.

But hey I need to buy a Tesla or two in the next few years so I don't mind focusing on the US picture for a second.

I'm saying ~4x the production and lower costs leaves room to adjust the price downward even in the US. They will reduce the cost of manufacturing over time and will have room to adjust as needed.

but my introspection doesn't last forever, they'll be selling Model Y in dozens of other countries. Tell me you don't expect European Model Y prices to drop after the GF in Germany starts spitting out volume. I expect pricing to drop worldwide (maybe less in countries with good EV incentives) but I can't take my mind off of ~4x the volume coming on line driving prices lower.

 

[StarFoxisDown!]

Last I heard that $7500 is only affecting US pricing and Tesla sells the Model Y world wide.

But hey I need to buy a Tesla or two in the next few years so I don't mind focusing on the US picture for a second.

I'm saying ~4x the production and lower costs leaves room to adjust the price downward even in the US. They will reduce the cost of manufacturing over time and will have room to adjust as needed.

but my introspection doesn't last forever, they'll be selling Model Y in dozens of other countries. Tell me you don't expect European Model Y prices to drop after the GF in Germany starts spitting out volume. I expect pricing to drop worldwide (maybe less in countries with good EV incentives) but I can't take my mind off of ~4x the volume coming on line driving prices lower.

Again my response to Mengy was about profits/margins, not ASP. I didn't say anything about the ASP not going down. In fact, I 100% think the ASP of the Y will go down in 2023 when they introduce the SR Y for the US and European markets.

But I don't feel like that they will need to do that for 2022. There's plenty of pent up demand in Europe to just sell the LR and P variants and in the US, the tax credit will send demand through the roof. I think it's 50/50 on if they even introduce the SR Y in the US in 2022 if the tax credit passes.

But again, the SR Y wouldn't be a price cut. It's a lower entry model with lower costs to produce. So margins/profits are not going to get reduced.

Also......have they even announced a price for the Model Y in Europe yet? Hard to have a price drop when the price isn't set yet.

 

[Radish11]

Any guesses as to Shanghai production capacity end of 2022?

 

[TSLA Pilot]

I take this as good news as to Tesla's efficiencies. Or maybe bad news dare I say "low demand?"

After getting four different quotes for a 4kw PV system of which 2 were local installers and added to that was SunRun and Tesla. The Tesla system was the only one to include a battery and was only $3k more than the least expensive competitor (with no battery) and the same price as solar only (no battery) with the most expensive competitor.

The interesting news is that it has been only two weeks since she made the order online. Permitting is already done and install is scheduled for one week. That is faster than most for sure. I take this as good news.

Irony here is that she is paying for it with SPWR profits.

Given the choice, ALWAYS go with a battery-tied PV system.

Otherwise, you have zero power output if the grid is down.

If the cost is only a lousy $3k more for the Tesla system, and it has a battery, then I hope you went with the Tesla Energy system?

 

[InTheShadows]

Because the share price likely won't grow linearly with revenues. The PE ratio is high now and that will come down as Tesla grows larger, thus the share price won't increase in step with the financials. I wish it would, but I don't think it will, and I doubt Wall Street will allow it to happen.

Tesla's mission is not to create the most profits, it is to accelerate the transition to green energy. Even if that means lowering profit margins to bring prices lower to increase adoption as manufacturing capacity allows. I know most people think we'll be keeping current Tesla profit margins but my gut feeling is Tesla will lower them as production outpaces demand down the road. And that will lower revenues, making the share price increase slower than we might predict today.

Just my gut feeling, I could be wrong.

They are all about growth and building Gigafactories right now. I fully anticipate that they will have the same number of Gigafactories under construction that they have in operation for the next decade. I would not be surprised that once Berlin and Texas have production under way that 3-4 more factories will be started. We may even learn of official factories being launched tomorrow.

On top of that Berlin and Texas are to be double output of Fremont and Shanghai. I don’t think the next factories will double again, however I wouldn’t be shocked to see them 1.5x.

When the gigafactories were first announced circa 5 years ago I remember Elon saying that the gigafactories in themselves would end up being a product.

 

[Singuy]

Anyone care to critique this video (the math, not his assumptions)? His base assumption is an average growth of 20%/year till 2030 due to many risk factors like competition/recession/saturation/unrealistic expectations which we on their forum roll our eyes at. However he comes with with a PT of 2337 by 2030 even with these assumptions which is pretty freaken bullish.

 

[JustMe]

Anyone care to critique this video (the math, not his assumptions)? His base assumption is an average growth of 20%/year till 2030 due to many risk factors like competition/recession/saturation/unrealistic expectations which we on their forum roll our eyes at. However he comes with with a PT of 2337 by 2030 even with these assumptions which is pretty freaken bullish.

I wouldn’t call a price target of $2337 in 2030 all that bullish. It amounts to a tad over 15% annualized price growth - not that much better than the average stock market.

 

[Artful Dodger]

That's where I feel people are being too optimistic, as I think Tesla will purposefully lower margins to bring prices lower and keep demand high as production ramps into overdrive.

I disagree with both your predictions. For margins, Tesla will necessarily increase margins as FSD safety and its commenserate 'take rate' step up together hand-in-hand.

As for decreasing prices to make autos more affordable, that's what the "Model 2" $25K car is for (we're just waiting for ~$75/KWh 4680 LFP batteries). Then the penultimate product for affordable transportantion will be the "Model 1" robotaxi. At $1/mile or less, it'll be the cheapest form of ride hailing, and far more attractive to city dwellers who have to pay for parking.

No need to fear: it's all in the Master Plan Part Deux. Nothing has changed; humans are still impatient.

Cheers!

 

[⚡️ELECTROMAN⚡️]

I’m trying to find a post I really liked from a few months back. I think it was maybe by @The Accountant or @PeterJA. It listed out how quickly Tesla was expanding and how they were doing this with positive cash flow and also adding to their cash pile. I’m sure there’s a lot of posts like that, but this one particularly stood out. I think it got added to the honorable mention thread. What happened to that thread? I know I’m a pain in the ass. Sorry.

 

[MC3OZ]

I’m trying to find a post I really liked from a few months back.

Is this it? :- Moderators' Choice: Posts of Particular Merit

 

[PeterJA]

... but I can't take my mind off of ~4x the volume coming on line driving prices lower.

Of course nobody knows for sure, but my gut says you are underestimating future demand for Model Y/3. (You didn't mention Model 3, but I include it because Tesla can shift production between Y and 3 as needed.)

Every new EV announcement by "competitors" shows they can't really compete with Tesla. Yet their advertising increases public awareness of EVs, which helps Tesla more than them. Also, every additional Tesla car on the street increases awareness and test drives from friends/family, which increases demand. This process is far from finished.

BMW's announced attempt to compete with Model Y (BMW i4) might compete with Audi E-tron for the biggest EV flop in China.

 

[Wicket]

Has Tesla concretely said they are going to give the model Y 4680 treatment to the model 3? (I'm prepared for this to be a simple yes and thus the rest of this silly)

I can generate a strategy that might concentrate on getting the 2 out first assuming limited engineering resources but that's just green fielding it. One would think that a drivetrain refresh that was comparable would be fairly simple but I'm sure it does have plenty of costs associated with it. The 3/Y/2 is a bit of a packed space. The 3/Y alone overlap quite a bit. A 2/Y solution is more clear-cut on price and size and the next 3 could potentially be more like a 5 series. With 2/Y being more modern designs the 3 would stagnate obviously but then on the scale of Tesla's business growth they may still have demand for the product at current output levels so it is nevertheless efficient.

Is it a settled question which comes first between model 2 and model 3+4680?

 

[Knightshade]

Regarding Tesla wanting to maximize profit or not--In todays edition of "Why do people not believe what Elon said" we visit the Q2 2020 ER call

We need to, you know, not go bankrupt, obviously, that’s important....But we’re not trying to be super profitable, either

I think just we want to be like slightly profitable and maximize growth and make the cars as affordable as possible

 

[Blue horseshoe]

Has Tesla concretely said they are going to give the model Y 4680 treatment to the model 3? (I'm prepared for this to be a simple yes and thus the rest of this silly)

I can generate a strategy that might concentrate on getting the 2 out first assuming limited engineering resources but that's just green fielding it. One would think that a drivetrain refresh that was comparable would be fairly simple but I'm sure it does have plenty of costs associated with it. The 3/Y/2 is a bit of a packed space. The 3/Y alone overlap quite a bit. A 2/Y solution is more clear-cut on price and size and the next 3 could potentially be more like a 5 series. With 2/Y being more modern designs the 3 would stagnate obviously but then on the scale of Tesla's business growth they may still have demand for the product at current output levels so it is nevertheless efficient.

Is it a settled question which comes first between model 2 and model 3+4680?

I think the main issue is we are battery constrained. As 4680 scales and is used for y, s, x, semi, cyber, and roadster this will free up 18650 and 21700 cells to be used in other models and products and increase production.

I attached the above slide from teslas battery day presentation because I think it shows Tesla's focus on battery makeup rather than form factor.

 

[JustMe]

Has Tesla concretely said they are going to give the model Y 4680 treatment to the model 3? (I'm prepared for this to be a simple yes and thus the rest of this silly)

Is it a settled question which comes first between model 2 and model 3+4680?

I believe Elon has said that the Model 3 would be updated eventually but that it would not be any time soon because the current car design works well enough and they have higher priorities.

As to your second question - nope.

Instead of Model 2, they should call it Ice Killer Alpha. It will sell in the millions

 

[MC3OZ]

View attachment 688162
I think the main issue is we are battery constrained. As 4680 scales and is used for y, s, x, semi, cyber, and roadster this will free up 18650 and 21700 cells to be used in other models and products and increase production.

I attached the above slide from teslas battery day presentation because I think it shows Tesla's focus on battery makeup rather than form factor.

For Model 3/2 we can see Iron based is the option, probably 4680 LFP cells.
In China I think they can get a supplier probably LG, Samsung or CATL to make them, that that should allow Model 2 production to start.
So my hunch for Model 2 is structural 4680 LFP pack, with front and rear castings.

For the US/Europe I can see Tesla's Lithium clay extraction process and or supplies of Lithium from Australia as being critical.
That is because I can see Tesla mostly making LFP 4680 cells at Austin and those cells going into Model 3/2, and energy storage products.
Once they have the cells, it is an open question whether Austin would start with Model 3 or Model 2. I see LFP Model 3/2 as the ideal candidates for city Robotaxis.

Cell production at Berlin and hence Model 3/2 is hard to gauge. if Lithium is in short supply it is directed to the Nickel based cells and higher end cars.

So Model 2/3 and energy storage LFP cells, are why Tesla is doing the Lithium clay extraction. these projects need lots of Lithium at the right price.

 

[Mengy]

I feel like you're very misinformed here

- Why would the Model Y need to sell like the Corolla when Tesla has the upcoming Model 2? You're comparing a vehicle that's not even remotely in the same class as the Model Y.

I base this hunch on a statement Elon made some time ago where he expects to sell more Model Y's than Toyota sells Corolla annually a few years from now. Yet there is a huge price difference between them both today. Thus, I feel like Tesla will actively lower the prices on their cars over time to sell more of them per year.

Realize that once Austin and Berlin fully ramp up the production per year on Y/3 is going to be MUCH higher than we have today. It's very possible they will outpace demand at current prices, which are rather high compared to the likes of a Corolla. Due to economies of scale Tesla should be able to lower prices AND margins on Y/3 while still keeping profits per quarter well into the black enough to keep growing at 50% per year.

I'm not saying this will definitely happen, just that I feel there is a high chance based on things Elon has said coupled with Tesla's mission, which is not to make as much profit as possible. I think as long as Tesla stays profitable and healthy Elon will put the mission ahead of the shareholders. Just my hunch!


EDIT: Elon might have said Camry, not Corolla, I'm not sure which one it was but I think it was Corolla!