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

[st_lopes]

Is there a chance that depreciation expense will be large enough to eat into the operating margin due to having to take a larger depreciation expense than would be expected due to initial ramp up of units?

Not at any material or noticeable scale.

The way depreciation (generally each component of the factory has different useful lives and would be depreciated according to the individual useful lives of the assets) on these factories will be recorded is as components of the Cost of Goods Sold of units produced from the respective factories production lines. So, it will be a drag to Gross Margins during the initial ramp up, but given Tesla now has two factories producing at scale, those ramp ups will be a much less noticeable decrease to Gross Margins.

That said, if Tesla wanted to "manage" their margins, they would defer delivering any vehicles from these facilities so as to keep them in inventory (not impacting margins until they are delivered) and only start delivering them once a more meaningful number of units are being produced from those lines in a given quarter, allowing for depreciation to be spread across the larger base of units. I don't expect them to deliberately do that though.

 

[ZachF]

Didn’t you already hit disagree??

So my theory is that the time is fast approaching (and almost happened a few years ago) that Tesla will simply cede the high priced/premium/luxury/niche whatever you want to call it EV segment to the likes of Lucid, Rivian etc… and hammer down on all the other stuffs on their plate that gets us closer to full sustainability, faster.

If Rivian and Lucid and others of that ilk can’t succeed asap we’re arguably in big do-do because Tesla can’t do it all, fast enough.

The best way for them (the others) to succeed is sell a crap ton of their expensive vehicles and work their way down market with those proceeds. They will not sell the required number of vehicles to do that if Tesla keeps making vehicles for that segment that are a) better in every aspect, and b) less expensive to buy, and c) part of a charging network and a home solar network and, and, and.

Your reason to buy other than an S or X or CT has to be literally aesthetic tastes and you’ve got more money than you need so value for money is meaningless. That market is limited to mostly this forum.

Sorry but this is terrible logic.

Ceding "the high priced/premium/luxury/niche" is what dying companies do, because their brand is in the toilet. Think GM and Ford, where Cadillac and Lincoln went from "The standard of the world" to a bad joke with cars like the Cimarron.

Tesla makes large margins on on cars like the S & X, which they can then use to lower margins on entry level cars. That will complete the mission faster than ceding the market to other brands. These cars also create brand equity. If you take away the cars the kids have posters of on their walls, the brand becomes just another commodity maker.

This whole line of thinking comes from (which Elon complains about) reading way to deep into what Elon says.

 

[StarFoxisDown!]

https://twitter.com/x/status/1438184992719343622

Apparently KoGuan Leo has > 5 mil shares of tsla.

I don't particularly like the fact that he's pumping his position. It's one thing to state your position, but those posts about him encouraging others to join in reeks of pump n dump. When you're talking this level of money, just a quick 10-20% gain means a lot to him.

 

[TheTalkingMule]

So nice to see that even super low volume covering is quite painful for these MM's. Or perhaps someone is accumulating. Any way you slice it, this float feels mighty tight! Not the greatest time to be short heading into the next 4 months of bombshells.

Was thinking about PE yet again.....

If The Accountant's numbers come to fruition just over the next 4 months, and to be clear I haven't done the math, it looks like our ACTUAL PE would be ~120 if the share price stays flat. With revenue growth of 80-100% and guidance of another 80-100%.

Have those levels of PE and growth ever combined in a company of this size? I can't say Amazon or anyone ever had such a low PE at the beginning of their S-curve slope.

 

[StarFoxisDown!]

Elon has telegraphed that q3 will be the last wave and also I believe that they will let q4 inventory spill into q1.

Wouldn’t possible reasons be:
1) Holding back Berlin and Austin production, like they did Shanghai because of poor margins at the low volume.
2) Likelihood of U.S. tax credit taking effect at start of the year.

so if true, Q4 may not be that much better than Q3, correct?

Agree on Berlin and possibly Texas holding back deliveries until Q1 because they don't have to start depreciation/amortization until those cars are actually delivered and thus earnings wise, might be better to hold those deliveries.

Very much disagree about Q4. Just Giga China maintaining their Sept production rate along with S/X getting up to 15k of production gets Q4 to 275k P/D.

Elon saying Q3 will be the last wave has much more to do with Berlin and Texas being up and operational than anything else.

 

[deshkart]

Agree on Berlin and possibly Texas holding back deliveries until Q1 because they don't have to start depreciation/amortization until those cars are actually delivered and thus earnings wise, might be better to hold those deliveries.

Very much disagree about Q4. Just Giga China maintaining their Sept production rate along with S/X getting up to 15k of production gets Q4 to 275k P/D.

Elon saying Q3 will be the last wave has much more to do with Berlin and Texas being up and operational than anything else.

There is high chance FSD wide release will lead to realization of FSD deferred revenue which can compensate for amortization in Q4?

 

[ZachF]

On top of that, being able to design cars like the Plaid S and Roadster is what attracts the top enthusiastic engineering talent, and designing those top of the line cars keeps your engineering team sharp and well-honed as well.

 

[2daMoon]

Morning Musings #1:
There is a very large revelation here that is quite confusing. A cathode mill for 100 GW/yr is monstrous - triple Tesla’s Gigafactory and the same size as (one of) that GF’s early final production size….
….yet, the accepted reason for the scaled-back size AND the delay in same has been for a lack of available labor.

Now, a cathode mill ought to be far less labor-intensive than a complete battery production facility, so that is an ameliorating factor; regardless, it seems to me that a shortage of hands is a shortage of hands irrespective of anything else. I am, based only upon my having met the two gentlemen, quite certain that Mr Straubel’s departure from Mr Musk’s organization was amicable and calculating, so one might posit that there is a backstory that could involve Panasonic and Tesla’s inability to shake loose from same - a restriction that would not apply to Mr Straubel’s NewCo.

If the above is even partly true, then a shift of employees from Tesla could be one answer to the conundrum.

Seems like I remember reading in the article how they are not planning on building it in Reno, rather, they are looking for someplace mid-USA.

I immediately thought of somewhere near Austin, but there are likely plenty of good spots to consider.

 

[AudubonB]

I don't particularly like the fact that he's pumping his position. It's one thing to state your position, but those posts about him encouraging others to join in reeks of pump n dump. When you're talking this level of money, just a quick 10-20% gain means a lot to him.

My heretofore sole post regarding this gentleman was that I smelt a rat. I see no reason to have changed my position.

There is NOTHING that passes the smell test here.

 

[StarFoxisDown!]

There is high chance FSD wide release will lead to realization of FSD deferred revenue which can compensate for amortization in Q4?

Deferred FSD recognition would no doubt compensate by a large margin, but I think they'll make their decision based on how much they can produce out of each factory during Q4, which is why I see more of a chance that Berlin's production is delivered in Q1 than Texas. If Texas can make and deliver more than 10-15k in Q4, they'll deliver them in Q4.

 

[WattsHappening]

Elon has telegraphed that q3 will be the last wave and also I believe that they will let q4 inventory spill into q1.

Wouldn’t possible reasons be:
1) Holding back Berlin and Austin production, like they did Shanghai because of poor margins at the low volume.
2) Likelihood of U.S. tax credit taking effect at start of the year.

so if true, Q4 may not be that much better than Q3, correct?

Not at any material or noticeable scale.

The way depreciation (generally each component of the factory has different useful lives and would be depreciated according to the individual useful lives of the assets) on these factories will be recorded is as components of the Cost of Goods Sold of units produced from the respective factories production lines. So, it will be a drag to Gross Margins during the initial ramp up, but given Tesla now has two factories producing at scale, those ramp ups will be a much less noticeable decrease to Gross Margins.

That said, if Tesla wanted to "manage" their margins, they would defer delivering any vehicles from these facilities so as to keep them in inventory (not impacting margins until they are delivered) and only start delivering them once a more meaningful number of units are being produced from those lines in a given quarter, allowing for depreciation to be spread across the larger base of units. I don't expect them to deliberately do that though.

Agree on Berlin and possibly Texas holding back deliveries until Q1 because they don't have to start depreciation/amortization until those cars are actually delivered and thus earnings wise, might be better to hold those deliveries.

Very much disagree about Q4. Just Giga China maintaining their Sept production rate along with S/X getting up to 15k of production gets Q4 to 275k P/D.

Elon saying Q3 will be the last wave has much more to do with Berlin and Texas being up and operational than anything else.

Thanks guys. Very informative and helpful.

So it is something to be managed. They wouldn't want to deliver just a small number of units from either factory as that may hit gross margins and operating margins. If that's the case, I suppose there is a greater-than-zero probability they hold back shipments from either factory until Q1, depending on when and how many cars are built.

 

[Tyler34]

I think this has more to do with not forcing employees to work long hard hours through the holidays just to mass deliver cars in q4 instead of q1.

 

[petit_bateau]

Should Tesla franchise their Superchargers out? The new factory can produce 10k a year, that's a LOT of planning and management to deploy, not to mention capital. I'm just starting to think this through but I can see some benefits (and some downsides of course). Oftentimes it's helpful to let the free market have a go at something. Perhaps one location offers juice at cost, but has a really solid convenience store and restaurant, another might upcharge because you have a really nice view of the ocean or something while you charge.

The current system of adding SCs to gas station locations is more of a partnership right?

At 60 vehicles per connector, with a fleet growing at 1m vehicles per year, then there needs to be 16,000 new connectors per year.

A factory that can only produce 10,000 connectors per year is undersized, and needs to double in size immediately.

 

[phantasms]

At 60 vehicles per connector,...

Where did you grab that number?

 

[M|S|M MYP]

Best thing ive seen all day:

But we all know:

 

[petit_bateau]

Where did you grab that number?

From my database of quarterlies and all the other stats I keep in my database. It is currently a contention ratio of 67 vehicles per connector in the fleet and has been trending up in a way that concerns me. It used to be 40.

 

[JustMe]

What the hell SEC?! Halt the stock! WTF?!

 

[2daMoon]

At 60 vehicles per connector, with a fleet growing at 1m vehicles per year, then there needs to be 16,000 new connectors per year.

A factory that can only produce 10,000 connectors per year is undersized, and needs to double in size immediately.

They were able to make a handful of Superchargers somewhere before that factory came online.

It seemed to me the new factory was most likely for China, or, Asia/Australia SC expansion. Maybe some to Europe.

Isn't Giga New York producing them for the US? Granted, they could put another SC factory somewhere in the US, if only they had some land with a little elbow room to build on.

 

[Alchemist42]

I sold some TSLA yesterday...


... to pay for my Model 3 SR+ which is due to arrive on September 27th! This marks the fulfillment of a dream pretty much exactly eight years in the making, since I first rode in the back of a Model S in 2013. And it would never have been possible without the countless hours spent in this very thread convincing me to go pretty much all in TSLA in 2019 and 2020 and HODLing fast even in the face of all kinds of manipulations. A heartfelt thank you to all of you magnificent bunch! I'm glad to be able to give back a little bit with my purchase and push the delivery ticker one digit higher.

A few random observations about the German market from the past few weeks:
- Model 3 and Model Y are absolutely flying off the parking lots at pretty much all Tesla locations
- The sales people are constantly busy and tell me it is definitely the biggest end-of-quarter push in Germany so far
- Until Monday, there still was a constant influx of stock cars (mostly SR+ and LR with the 76 kWh LG battery from China) that could be ordered from the website. However, every time a new batch came in it was at most a few days until all cars with the exception of some rarer configurations were sold out. By now there is almost nothing left and all delivery estimates for new cars have been switched to November or later.

 

[StarFoxisDown!]

At 60 vehicles per connector, with a fleet growing at 1m vehicles per year, then there needs to be 16,000 new connectors per year.

A factory that can only produce 10,000 connectors per year is undersized, and needs to double in size immediately.

Tesla was already making about 5,000 connectors before the new China factory started which has the capacity for 10,000 connectors. So Tesla in total has capacity now for 15,000 connectors per year.