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

[larmor]

NHTSA has jurisdiction only over the US and its territories. At worst, a hostile US administration can slow down Tesla's FSD release in America. Because most of the data collection from the fleet is here, this would slow things down but it's not a showstopper, because Tesla sells vehicles in dozens of countries.

Only one country needs to grant approval for the dominoes to start falling. If Canada, for instance, has robotaxis and all the benefits and the sky doesn't fall, Americans will clamor for the rules to be changed.

Robotaxis will be first in China.

 

[CLK350]

Considering the tsunami of FCF headed our way, do you understand Elon's statement at the shareholder meeting that they don't expect to pay dividends any time soon?

This seems to contradict:
1) He's repeatedly said that the limiting growth factors are talent and supply chain and that if Tesla could find more ways to spend money reasonably they would
2) Tesla's CapEx efficiency has been improving at a stupendous rate. E.g. Giga Shanghai's up front investment costs paid for themselves in less than a year. So if anything, with rising ROIC we'd expect it to be even harder to reinvest all FCF into growth (a good problem to have).

So with your projection of $48 billion in FCF for 2022-24, what can they do?
- pay down debt

• Tesla's total debt is only around $10 billion last time I looked

- buy back shares

• This is effectively a dividend with different tax implications, so I think we can rule this out

- pay dividends

• Elon just said this isn't coming any time soon

- purchase another company

• Maybe, but large-scale mergers and acquisitions are slow, difficult and prone to failure, so it'd be hard to spend all the FCF

- buy Bitcoin

• Meh, still too much FCF for this. They have quite enough BTC in my opinion and I wish they owned zero. Seems unlikely that they'd pile all their excess profits into BTC before paying a dividend.

- add to their cash account

• They already seem to have enough cash at $24 billion last quarter IIRC, and at a certain point they have more than enough dry powder to weather out any conceivable headwinds

All I can think of is that Elon is intimating that a massive, monumental increase in CapEx is coming soon, beyond that which we already know about that fed into your $48 B estimate. I can only think of one way to profitably spend that much in '22-'24 and beyond: Directing most automotive production away from consumer sales & leasing in favor of building the Tesla Network robotaxi fleet. At a unit production cost of let's say $24,000 each, that would fund production of about 2 million robotaxis while keeping cash and debt roughly constant.

Thoughts?

I have no idea about the legal /tech etc. But here are some ideas

- buying land /mineral rights, and/or mining companies or lease the mines to mining companies -
- buying land (mountains? ) in windy areas and lease to wind turbine operators - or just creating/ buying small power utilities

- funding a non-profit whose mission is to reduce our carbon footprint, which would include lobbyists (to basically do the job of our political leaders who are too busy spending resources getting elected, and so not really having time to study any issues seriously) - and a news reporting enterprise, biased towards truth and science for a change. Helping educate people in mostly truthful ways would help Tesla's mission too.
It could also provide scholarships for students of all ages who would commit to work for foundation approved enterprises or if not reimburse these as loans etc. Or plain start a complete school system, aka Ed Astra out of alpha for a larger audience.

- any cash spent in "non profitable" ways should be considered as advertising in a smarter way.

- Assuming SpaceX splits Starlink into a separate private company, Tesla could buy private shares of Starlink. Thus indirectly accelerating funding Mars exploration when Starlink goes public

 

[Nocturnal]

surprised many of you are worried about the new addition to NHTSA.
another over-confident, intellectually jealous shill for the establishment? or maybe not.

either way many of us are around long enough to have seen these tricks before. to those who are newer, a reminder that tesla is doing the right thing…that’s all that matters in the end.

FSD holds monstrous societal implications. know that it will not be a walk in park getting there. meanwhile, don’t worry about the day to day noise.

I've had to remind myself that this is the US government we are talking about. Even if they are acting 100% maliciously, they will take 5 years to come out with a "gotcha" set of rules and Tesla will just say "oh yeah, we implemented that like 2 years ago." THE GOVERNMENT! lol

 

[Singuy]

At the end of the day, at most NTSHA will require ALL car companies to fully educate their customers the limitations of the ADAS system before they are allowed to enable it. This means someone at the dealer educating the patreons before entering a passcode for it to be enabled or Tesla showing a mandatory video on screen before enabling any of the self driving features. The biggest problem here is the misconception of what an ADAS system is capable of. NTSHA's beef with Tesla has always been the naming of their products sounding too close to fully self driving so an introduction video will solve all of that. Yes it's in the manual that no one ever reads.

 

[Words of HABIT]

Hmm, say hello to the bears? Every firm has a stooge they trot out from time to time.

Another analyst just put out a shocking bear case for Tesla: Citi says stock could drop to $36

Morgan Stanley caused a stir with its "bear case" scenario of $10. Now, Citi is getting in on the act.

www.cnbc.com

@thesmokingman, Why are you linking to a May 22nd, 2019 article that has little to no relevance today?

 

[MD70]

L

View attachment 723286
Watching the share price today is like watching paint dry; however, you're in luck . . I have something much more exciting for you: Accounting.
(trying to solicit a response from the grouchy cat . . .you know who you are).

There were some discussions about Free Cash Flow (FCF) a few posts back.
FCF is Cash generated from business operations less spending on Capital Expenditures.
Here is Tesla's FCF for the last 4 quarters and my estimate for Q3 2021:

View attachment 723287

With Free Cash Flow, Tesla is then:
- free to pay down debt
- free to buyback shares
- free to pay dividends
- free to purchase another company
- free to buy Bitcoin
- or free to add to their cash account

Here is how Tesla has used their FCF in the past and what I expect in Q3:
View attachment 723288
As you can see, Tesla has used much of it's FCF to pay down debt and buy Bitcoin.
They raised cash from Equity raises in Q3 & Q4 2020.

My annual projections for FCF are:
$ 4b - 2021
$ 9b - 2022
$15b - 2023
$24b - 2024

There is only so much debt to be paid down; Tesla will be sitting on a pile of cash.

I think as soon as Tesla has large FCF they should allocate it to increasing the supercharger network, increasing the number of service centres and stockpiling parts for service because as the cumulative number of vehicles increase this part of Tesla will have to take the burden and could become overwhelmed if it isn’t increased to meet the demand.

 

[RobDickinson]

- Assuming SpaceX splits Starlink into a separate private company, Tesla could buy private shares of Starlink. Thus indirectly accelerating funding Mars exploration when Starlink goes public

This.. this would be a hard sell legally I assume? Why would Tesla as a business want to buy starlink stock?

 

[thesmokingman]

Why are you linking to a May 22nd, 2019 article that has little to no relevance today.

The history of it is not of interest to you? The point is it's the same stooge different date, same story.

 

[RobDickinson]

At the end of the day, at most NTSHA will require ALL car companies to fully educate their customers the limitations of the ADAS system before they are allowed to enable it. This means someone at the dealer educating the patreons before entering a passcode for it to be enabled or Tesla showing a mandatory video on screen before enabling any of the self driving features. The biggest problem here is the misconception of what an ADAS system is capable of. NTSHA's beef with Tesla has always been the naming of their products sounding too close to fully self driving so an introduction video will solve all of that. Yes it's in the manual that no one ever reads.

If their beef is with naming then how about co-pilot etc? Their beef is with tesla being ahead.

They can invent as many new rules and regulations as they need to slow tesla down then give a pass to everyone else when they have competing products.

 

[Gigapress]

think back to battery day when he mentioned how many terafactories would be needed to fulfill the future demand for batteries…24b may be insignificant in the grand scheme, especially if they have to do the bulk of the heavy lifting on their own.

i tend to agree with him that this isn’t time to think about dividend. they are in hyper-growth mode despite the backdrop over last 18 months. but what do i know? i also didn’t think there was going to be a split (some here may remember me eating crow for that one )

The "problem" is those factories are going to spit out immense cash flows shortly after construction. $24b is just the 2024 estimate. With ever increasing efficiency, FSD and just operating leverage from scaling up, cash flows could very well be $100+ billion by 2028.

I mean, I recall Ron Baron estimating that Giga Shanghai paid for itself within like 5 months of construction completion. That's an eye-popping IRR of roughly 200% after accounting for the fact that construction and low rate initial production took about 2 years.

To a first approximation, the only way Tesla would be able to reinvest all cash flow would be if production capacity investments are growing at the same rate as their capital from previous investments. Until about 2020, Tesla's ROIC was less than their production investment growth rate, and this is the main reason why they accumulated debt and had detractors claiming it was a structurally unprofitable pyramid scheme. But now, with Tesla's incremental ROIC on new factories in the 100% to 200% range, Tesla's 50-100% growth in manufacturing capacity will be unable to keep up.

Thus, if Tesla is not going to pay a dividend nor build up a multi-hundred billion cash balance in this decade, then they must have something else planned. A rapid robotaxi fleet buildout, where Tesla rather than consumers pay the upfront costs, is the most reasonable capital sink I can imagine. If we're aiming for let's say:

• A fleet of 10^8 AEVs
• By 2035
• With unit cost of $50k on average (this includes Semis and Vans/Minibusses dragging up the average)

Then that will take about half a trillion dollars of investment.

Another huge potential capital sink--I just realized--is investing in their own solar + battery projects as a virtual power plant operator instead of selling the batteries to someone else. This could also suck up on the order of 10^12 dollars. Same kind of logic: Tesla basically buying their own products with their own money and then sell the services over time. Tesla knows their own product and will have super cheap capital, and so could make arbitrage profit off this information asymmetry.

 

[henchman24]

L

I think as soon as Tesla has large FCF they should allocate it to increasing the supercharger network, increasing the number of service centres and stockpiling parts for service because as the cumulative number of vehicles increase this part of Tesla will have to take the burden and could become overwhelmed if it isn’t increased to meet the demand.

That has already been happening... the number of supercharger locations has increased by nearly 50% (2094 Dec 31,20 vs 3062 today). I'm sure service centers have too (I haven't tracked but sure somebody has... turns out Tesla... up 34%). Local to me, has doubled locations over the past 2 years by adding Superior and Loveland. There are still plenty of gaps, but the rate of the increase is really quite strong in those areas.

 

[Singuy]

If their beef is with naming then how about co-pilot etc? Their beef is with tesla being ahead.

They can invent as many new rules and regulations as they need to slow tesla down then give a pass to everyone else when they have competing products.

They may not even know that's the name. Autopilot is the most famous and I guess the most infamous as a result. I talked to drivers of other brand with ADAS systems and they never bother to use it because it's too complex and confusing.

 

[Gigapress]

Robotaxis will be first in China.

Doubt, only because Tesla not getting enough data in China due to low take rate of FSD package. I still think USA still 80% probability of being first. I think NHTSA is more reasonable behind the scenes of the political theater.

 

[thesmokingman]

They are SUPPOSED TO BE THE EXPERTS AND GOVERNING BODY, you think they have not noticed what ford are doing?

Yea, it is crazy. The Ford system just lets go w/o any warning!!

 

[RobDickinson]

Doubt, only because Tesla not getting enough data in China due to low take rate of FSD package. I still think USA still 80% probability of being first. I think NHTSA is more reasonable behind the scenes of the political theater.

if tesla needed too they could stimulate the china market, they'll have lots of cars there, they can gather some data even if the car isnt running fsd too.

I honestly think they wont, and that they'll focus on USA first despite political roadblocks because then can push through most of those with a mix of good data and legal rep.

 

[Gigapress]

if tesla needed too they could stimulate the china market, they'll have lots of cars there, they can gather some data even if the car isnt running fsd too.

I honestly think they wont, and that they'll focus on USA first despite political roadblocks because then can push through most of those with a mix of good data and legal rep.

Right but at autonomy day 2019 and AI day 2021, Tesla emphasized the importance of their multifaceted approach to fleet learning. I believe that having direct user feedback from people actively using FSD beta is indispensable, despite the complementary benefits of running shadow mode testing and of general fleet data collection. If it weren't, I don't see a good reason why Tesla would even have FSD beta in the first place instead of waiting until the software is ready to activate as a Lvl 4 system.

 

[CLK350]

This.. this would be a hard sell legally I assume? Why would Tesla as a business want to buy starlink stock?

A long term investment - once Starlink does its IPO and goes public, Tesla will have made big (paper) profits, they can then of course sell Starlink stock for cash since it will then be a public company. Nothing prevents a company from buying other companies or share of other companies, be they public or not. For instance, SpaceX tried to buy ( .. the 3D company it uses to "print" its rocket engines ) but the owners refused, so SpaceX only has shares of that company, which IIRC is going for an IPO.

 

[Ogre]

- Assuming SpaceX splits Starlink into a separate private company, Tesla could buy private shares of Starlink. Thus indirectly accelerating funding Mars exploration when Starlink goes public

If SpaceX splits out Starlink, it will be in order for it to IPO so they can raise money. They don‘t need Tesla backing, Starlink will have plenty of interest from outsiders. It is the sort of business Wall Street laps up.

 

[RobDickinson]

A long term investment - once Starlink does its IPO and goes public, Tesla will have made big (paper) profits, they can then of course sell Starlink stock for cash since it will then be a public company. Nothing prevents a company from buying other companies or share of other companies, be they public or not. For instance, SpaceX tried to buy ( .. the 3D company it uses to "print" its rocket engines ) but the owners refused, so SpaceX only has shares of that company, which IIRC is going for an IPO.

Spacex isnt publicly listed and obviously has a vested interest in rocket engines.

Tesla has enough trouble buying solarcity. no problems with things like maxwell or grohmann engineering because they are good business related assets.

 

[redan]

Good interview of Adam Jonas on CNBC. He doesn't get everything right, but he has definitely come full circle. Once Morgan Stanley starts upping their 6M TSLA production estimate for 2030, their PT will start to take off (currently $900).

Get ready for revved up Tesla profits, Morgan Stanley's Adam Jonas predicts

Morgan Stanley's Adam Jonas looks ahead to Tesla's earnings. With CNBC's Melissa Lee and the Fast Money traders, Guy Adami, Tim Seymour, Dan Nathan and Karen Finerman.

www.cnbc.com