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

[Artful Dodger]

I had a profound thought last night after a few drinks. It is my opinion that Elon and co purposely upped the 1 time charges this quarter so that the QoQ operating margins would continue to increase sequentially even with new factories coming online. Elon did not have to do his options exercise last quarter and Tesla did not have to take the full 250m hit from elons package last quarter. I believe this was a big brain move by Zach so that we can have the narrative of "Tesla was able to increase operating margins while ramping 2 new factories. They are truly juggernauts of business." HODL

Whiskey flash!

 

[StealthP3D]

2019 Autonomy Day: didn't find full transcript: Elon Musk claims Tesla cars could be sold without steering wheels and pedals within three years
Robotaxi next year, “Probably, two years from now, we’ll make a product that has no steering wheels and pedals, and if we need to accelerate that time, we’ll just delete parts. It’s easy.”

2020 Battery day:Tesla 2020 Battery Day Transcript September 22
"And I think probably, like I said, about three years from now, we’re confident we can make a very compelling $25,000 electric vehicle that’s also fully autonomous."

Sure, 'about 3 years', 'can make', but focusing on timing wording overlooks the most critical gating function: fully autonomous.
Thus, no one should even begin to expect the $25k car until after FSD is fully operational.
And there are cells...
And there are chips...
And there is factory capacity...

The most critical gating function on the $25K car is whether making it helps or hurts the mission. In other words, does Tesla want to make it? Elon's statement was he was confident the $25K car could be made in three years, not that they would make it in 3 years. The incredible demand for the 3&Y that stretches months or even a year in some cases, completely negates the need to make a cheaper car, at this time. The need for the $25K car was always predicated on running out of demand for cars as expensive as Model 3. But we still can't see the limit in demand for Models 3 & Y!

This is good news, people! As usual the naysayers choose to not understand the very thing they previously said was most important, that demand for cars costing $40K and above is not large enough to support a company like Tesla being anything but a niche player. Now that they learn the demand limit for EV's in the higher price categories are far beyond what they claimed, they do not say, "Oh, wow, Tesla is killing it", LOL! No, now they try to turn this unprecedented demand for more expensive cars into a negative - "Oh, no! No cheaper car!" while ignoring the very reason there is no cheaper car is because Tesla can sell so many more expensive ones than they thought!

You can't make this stuff up, pure idiocy. Don't worry, it probably won't take too long for the smarter people with money to invest to act on this. This has been a re-occurring theme with Tesla for a few years now. Mind-blowing earnings are released, and the stock sells off. Then, over the next week or two or three, the buying builds. Sometimes slowly, sometimes suddenly. But, often, the buying picks up steam on no news and just keeps accelerating. Smart people with tens or hundreds of millions to invest often don't like to act with haste. They sit back and observe and deploy assets after the dust has settled and the value is clear. They often dollar cost average and add more as the price rises.

The biggest wildcard right now is that many investors of this type would like more visibility on the macro environment. TSLA can't rally as strong as we would like until the concerns with the overall market have abated. It's impossible to tell how long that will take but don't be surprised if it's not very long. These kinds of things are impossible to predict consistently and thus the most profitable way to proceed, time and time again, is to assume it won't be long. That is the only assumption that assures you get all of TSLA's gains over time. This holds true, on average, whether holding or buying. That's why statistics show beyond a reasonable doubt that time in the market beats trying to time the market.

 

[generalenthu]

Interesting, some talks that fed may not raise rates because atlanticfed's estimate for 1q 2022 GDP growth is 0.1%. Aggressive rate hikes = instant recession. Perhaps partial reason for Friday's rally.

GDPNow

Provides a

www.atlantafed.org

have to disagree with this view. especially after hearing how JPOW's presser went. In fact, a recession doesn't matter to the fed and they only care about unemployment and inflation.

on the plus side, I think the unemployment picture is too rosy now, as the participation rate went down. As the fiscal stimulus (unemployment, child care credit, etc.) has stopped, more people will come back into the work force, which will cause unemployment to tick up, and to the extent that all the transfer payments (Which were in excess off lost wages thru the pandemic) normalize, it will put downward pressure on inflation. There is a school of thought that the fed would like to engineer a mild recession which will quickly get inflation in control rather than let it fester and see inflation entrenched. This will result in much higher target rates and eventually a deeper recession.

There's about zero chance that fed decides not to raise rates at the next meeting and there is a tiny chance that they do a 50 bps hike. And I'd prefer a fast raise in rates, so that the terminal rate where fed stops is lower. Say 3% instead of 4%.

The expectation around what this terminal rate is far more important to valuations that what the pace / size of hikes is this year. It almost doesnt matter.

It goes without saying that this terminal rate being at 4% vs 3% has sizable implications for valuation of all growth equities, including TSLA, hence something that folks need to pay some attention to.

 

[Artful Dodger]

I came across this YT movie by Greenpeace on the stranglehold of big fossil on politics in Australia. It is as interesting

I recommend watching the Hollywood movie Syriana. It's a graphic depiction of the lenghts Big Carbon will go to in order to get there way.

Spoiler: Syriana movie trailer

 

[deshkart]

Market is already pricing in nearly 2% in terminal rate. But this graph is interesting because of so many rate hike expectations over the last decade that never came to reality. What will happen this time ?

 

[ggies07]

Andrea nails it. Tesla had a great Q4 - so what? Doesn't matter now that Elon has announced the company is moving beyond sustainable energy products.

 

[Singuy]

have to disagree with this view. especially after hearing how JPOW's presser went. In fact, a recession doesn't matter to the fed and they only care about unemployment and inflation.

on the plus side, I think the unemployment picture is too rosy now, as the participation rate went down. As the fiscal stimulus (unemployment, child care credit, etc.) has stopped, more people will come back into the work force, which will cause unemployment to tick up, and to the extent that all the transfer payments (Which were in excess off lost wages thru the pandemic) normalize, it will put downward pressure on inflation. There is a school of thought that the fed would like to engineer a mild recession which will quickly get inflation in control rather than let it fester and see inflation entrenched. This will result in much higher target rates and eventually a deeper recession.

There's about zero chance that fed decides not to raise rates at the next meeting and there is a tiny chance that they do a 50 bps hike. And I'd prefer a fast raise in rates, so that the terminal rate where fed stops is lower. Say 3% instead of 4%.

The expectation around what this terminal rate is far more important to valuations that what the pace / size of hikes is this year. It almost doesnt matter.

It goes without saying that this terminal rate being at 4% vs 3% has sizable implications for valuation of all growth equities, including TSLA, hence something that folks need to pay some attention to.

Is inflation caused by a heated economy or caused by transitory supply chain issues? These economic data points more toward the latter which means raising rates does nothing to inflation besides causing a recession. So if rates having a risk of not solving inflation but instead increase unemployment rate, then you end up with the worst outcome called stagflation everyone is worried about. So these number are significant.

 

[betstarship]

Andrea nails it. Tesla had a great Q4 - so what? Doesn't matter now that Elon has announced the company is moving beyond sustainable energy products.

View attachment 761887

I dunno - to do robotics requires batteries, especially new types, sustainable energy and transportation doesn't necessarily have to require wheels, right? could be legs? rails? etc.?

 

[TN Mtn Man]

Something I've been thinking about since the earnings call, and the focus on growth, along with the FSD comments (take timeline as you like). In my generation everyone was anxious to get a drivers license and their own car-it was pretty much a right of passage. These days though, car ownership is less of a issue for many younger people. A fair number choose not to get a car, to rely on mass transit and ride-shares. That leads to a few thoughts. First, cars are an expensive, depreciating asset (Covid times not withstanding) likely the largest most people own. And they get used what, maybe an hour a day? (just a guess). So, lets say FSD and the ability to robotaxi your car comes out-what kind of daily operation can we get? It's never going to be 24 hours a day of course, but for argument lets say 10 hours a day. This assumes more people continue the trend of robotaxi/ride share rather than ownership, and that grows as more vehicles become available via robotaxi. Think about that-10 hours a day of operation instead of 1. That means theoretically that the vehicle is serving 10 people a day, rather than 1. Which means....potentially, a 90% decrease in vehicle sales. OK, those won't be exact numbers but the trend could be there.

So, following that-is perhaps Musk/Tesla focusing on sales and growth, focused on capturing as many sales as possible before that eventual downturn occurs? I'm not saying sales won't continue to rise for Tesla, I think they will continue to take market share from other companies. But the total number of vehicles sold is likely to decline at some point. When you think about it, every Tesla built since what, '17, can theoretically be turned into a robotaxi. Once FSD is cracked, this could happen far more quickly than we'd dream. Much like this whole translation to EV in the first place. Far fetched perhaps, but maybe part of the though process.

And continuing that thought process...given robotaxi expansion, is there really that much of a need for the $25K car? (let alone pulling other resources to get there).

 

[lazybot]

Indeed.

The history of AI is littered with episodes of radical over-optimism. The reality is that narrow AI has made a ton of progress, but it sounds very naive to talk about how FSD has solved (or even is solving) general AI (not that Elon says that.) or, given the evidence before our eyes, that FSD level 4 is close.

And while one or two or three years of gross over optimism about FSD are maybe understandable, by now I cannot avoid worrying whether Elon’s understanding of AI as applied to FSD may be fundamentally flawed. By now surely it’s not enough to say”it’s harder than I thought.” I mean, that was obvious years ago. But the same forecast errors are
repeated. And there is zero evidence that he’s adjusted his mental model.
I’m a huge Tesla (and Elon) fan and have the FSD beta. I do experience occasional wonderful drives. I agree/really hope that evertually, with the gradual progress we see, we will realize we are at level 3. I’m excited to see. But it is idiotic in many circumstances, and wonder how how many years it will take and whether the hardware can do it. So until we do see, we have to have to ignore our lying eyes about “robotaxis” and cars without steering wheels.

The robot is cool, but I see no evidence yet that the FSD code will do the trick. The perception part is important, but the driving/path planning uses traditional algorithms, I understand. If so, they have a gigantic amount to figure out in terms of making the robot useful.

I personally have zero interest in a car without steering wheel, even if level 4 ( level 5 seems hard to imagine for many years), and partly for that reason I find convincing the points others have made about the limited market for “robotaxis.”

This call reminded me of the panicky investor during the model 3 ramp where he first emphasized robotaxis and all that, which seemed at the time (and in retrospect) like a deflection from the then-pressing ramp challenges.

So I was also very distressed by the call, even before true market reaction (of course I didn’t sell!).

I agree with your views on FSD and robotaxi. While I believe Tesla is ahead of competition in solving autonomy there is going to be a long tail of edge cases that need to be solved mostly at the software level but potentially some at the hardware level(camera limitation, compute limitation) I am not sure how long this will take but it could be well beyond 2022 that Elon is projecting. Also given the headwinds Tesla is facing both at Federal (hostile admin) and State level (laws preventing direct sale to consumer) it is not hard to think vested interests can pose significant obstacles that can cause Tesla to loose any advantage it has in terms of being the first to solve autonomy. Elon has previously said every automaker will have autonomy at some point and that manufacturing is going to be Tesla's long term advantage. So this all in approach on autonomy from the latest conf call is confusing to me as this seems to be moving away from the 20 million cars by 2030 plan.

 

[Paul_SF]

Something I've been thinking about since the earnings call, and the focus on growth, along with the FSD comments (take timeline as you like). In my generation everyone was anxious to get a drivers license and their own car-it was pretty much a right of passage. These days though, car ownership is less of a issue for many younger people. A fair number choose not to get a car, to rely on mass transit and ride-shares. That leads to a few thoughts. First, cars are an expensive, depreciating asset (Covid times not withstanding) likely the largest most people own. And they get used what, maybe an hour a day? (just a guess). So, lets say FSD and the ability to robotaxi your car comes out-what kind of daily operation can we get? It's never going to be 24 hours a day of course, but for argument lets say 10 hours a day. This assumes more people continue the trend of robotaxi/ride share rather than ownership, and that grows as more vehicles become available via robotaxi. Think about that-10 hours a day of operation instead of 1. That means theoretically that the vehicle is serving 10 people a day, rather than 1. Which means....potentially, a 90% decrease in vehicle sales. OK, those won't be exact numbers but the trend could be there.

So, following that-is perhaps Musk/Tesla focusing on sales and growth, focused on capturing as many sales as possible before that eventual downturn occurs? I'm not saying sales won't continue to rise for Tesla, I think they will continue to take market share from other companies. But the total number of vehicles sold is likely to decline at some point. When you think about it, every Tesla built since what, '17, can theoretically be turned into a robotaxi. Once FSD is cracked, this could happen far more quickly than we'd dream. Much like this whole translation to EV in the first place. Far fetched perhaps, but maybe part of the though process.

And continuing that thought process...given robotaxi expansion, is there really that much of a need for the $25K car? (let alone pulling other resources to get there).

We will need tens of millions of EV, all kinds, for tens of years from now. Tesla is the only one having a clear strategy to make 20million a year this decade. They will make more next decade. With FSD being the major feature. Each car will be used way more than a dumb car now.

We are 8billions and we all need transportation.

Slowly this narrative that somehow Tesla is not going to make all the cars they can will die as fast as it appeared. It’s just FUD.

 

[MC3OZ]

Yeah, I expect a transition to dual castings stuctural battery eventually, but only when new lines get added. Just like Fremont keeps the OG 3 line running when Shanghai has a casting based line.
No reason to rip out all the working infrastructure/ capacity and not have a use for 2170 (or LFP prismatic pack) capacity.

It seems logical that a Model 3 with front and rear castings will first be made on a new line, Berlin is a likely candidate.

I expect Fremont may be the last factory to migrate, but we need to consider the advantages.

Possible advantages are :-

1. It produces a better car and a cheaper to make car.
2. It frees up bodyshop Robots which can be redeployed elsewhere.
3. It frees up space at Fremont which is a valuable commodity.

Possible problems with doing it at Fremont are :-

1. A lack of casting machines or space to put them.
2. Limited paintshop capacity. May mean upgrade doesn't add capacity.

I suspect upgrading Fremont and squeezing more production out Fremont is a big challenge and a major headache. But that is great training for designing, building and upgrading newer factories.

 

[Andy O]

The robot is cool, but I see no evidence yet that the FSD code will do the trick. The perception part is important, but the driving/path planning uses traditional algorithms, I understand. If so, they have a gigantic amount to figure out in terms of making the robot useful.

While I agree with most of your post and I wish to thank you for it, I disagree with one of your conclusions. I believe that algorithms would be quite sufficient to make a robot useful in a limited world such as a warehouse or supermarket. Not only useful but useful this year at a reasonable cost and a profit to the robot manufacturer.

 

[woodisgood]

Something I've been thinking about since the earnings call, and the focus on growth, along with the FSD comments (take timeline as you like). In my generation everyone was anxious to get a drivers license and their own car-it was pretty much a right of passage. These days though, car ownership is less of a issue for many younger people. A fair number choose not to get a car, to rely on mass transit and ride-shares. That leads to a few thoughts. First, cars are an expensive, depreciating asset (Covid times not withstanding) likely the largest most people own. And they get used what, maybe an hour a day? (just a guess). So, lets say FSD and the ability to robotaxi your car comes out-what kind of daily operation can we get? It's never going to be 24 hours a day of course, but for argument lets say 10 hours a day. This assumes more people continue the trend of robotaxi/ride share rather than ownership, and that grows as more vehicles become available via robotaxi. Think about that-10 hours a day of operation instead of 1. That means theoretically that the vehicle is serving 10 people a day, rather than 1. Which means....potentially, a 90% decrease in vehicle sales. OK, those won't be exact numbers but the trend could be there.

So, following that-is perhaps Musk/Tesla focusing on sales and growth, focused on capturing as many sales as possible before that eventual downturn occurs? I'm not saying sales won't continue to rise for Tesla, I think they will continue to take market share from other companies. But the total number of vehicles sold is likely to decline at some point. When you think about it, every Tesla built since what, '17, can theoretically be turned into a robotaxi. Once FSD is cracked, this could happen far more quickly than we'd dream. Much like this whole translation to EV in the first place. Far fetched perhaps, but maybe part of the though process.

And continuing that thought process...given robotaxi expansion, is there really that much of a need for the $25K car? (let alone pulling other resources to get there).

Quite the first post, welcome. It is true that FSD, when achieved, will have some pretty far-reaching consequences, depending on some of the decisions Tesla will make. This is why I believe Elon is careful not to paint too detailed a picture at the moment…for one much needs to clarify itself, but also this could be used to spin pre-emptive FUD like, “You’ll be selling fewer vehicles! No more growth!” while omitting the massive software revenue that will dwarf the vehicle revenues.

Just one possible future of many. All eyes on FSD.

 

[UnknownSoldier]

I recommend watching the Hollywood movie Syriana. It's a graphic depiction of the lenghts Big Carbon will go to in order to get there way.

Spoiler: Syriana movie trailer

I saw this movie years ago and it's still haunting to this day.

WHAT IS THE PRICE OF OIL?

 

[JustMe]

Something I've been thinking about since the earnings call, and the focus on growth, along with the FSD comments (take timeline as you like). In my generation everyone was anxious to get a drivers license and their own car-it was pretty much a right of passage. These days though, car ownership is less of a issue for many younger people. A fair number choose not to get a car, to rely on mass transit and ride-shares. That leads to a few thoughts. First, cars are an expensive, depreciating asset (Covid times not withstanding) likely the largest most people own. And they get used what, maybe an hour a day? (just a guess). So, lets say FSD and the ability to robotaxi your car comes out-what kind of daily operation can we get? It's never going to be 24 hours a day of course, but for argument lets say 10 hours a day. This assumes more people continue the trend of robotaxi/ride share rather than ownership, and that grows as more vehicles become available via robotaxi. Think about that-10 hours a day of operation instead of 1. That means theoretically that the vehicle is serving 10 people a day, rather than 1. Which means....potentially, a 90% decrease in vehicle sales. OK, those won't be exact numbers but the trend could be there.

So, following that-is perhaps Musk/Tesla focusing on sales and growth, focused on capturing as many sales as possible before that eventual downturn occurs? I'm not saying sales won't continue to rise for Tesla, I think they will continue to take market share from other companies. But the total number of vehicles sold is likely to decline at some point. When you think about it, every Tesla built since what, '17, can theoretically be turned into a robotaxi. Once FSD is cracked, this could happen far more quickly than we'd dream. Much like this whole translation to EV in the first place. Far fetched perhaps, but maybe part of the though process.

And continuing that thought process...given robotaxi expansion, is there really that much of a need for the $25K car? (let alone pulling other resources to get there).

This was what Elon was saying in the earnings call, although he estimated 5x increase in utilization. Tony Seba predicted that transportation as a service will largely replace car ownership and profoundly transform cities by freeing up the land devoted to cars being parked for most of the day. His YouTube videos are great.

If a $60k FSD can operate as a robotaxi, it could provide cheaper transportation than owning a $25k car - if your lifestyle could accommodate that.

A compact car is definitely needed though for a lot of regions in Europe, Japan, etc. It’s very likely that Tesla has one in the works but your guess is as good as mine what form that will take.

 

[loquitur]

I had a profound thought last night after a few drinks. It is my opinion that Elon and co purposely upped the 1 time charges this quarter so that the QoQ operating margins would continue to increase sequentially even with new factories coming online. Elon did not have to do his options exercise last quarter and Tesla did not have to take the full 250m hit from elons package last quarter. I believe this was a big brain move by Zach so that we can have the narrative of "Tesla was able to increase operating margins while ramping 2 new factories. They are truly juggernauts of business." HODL

I generally agree that taking one-time charges is better for Tesla now to boost future YOY comparisons
if Wall St. is too stupid to see through that. However (and this may be very secondary since Elon
is so filthy rich he might not care) moving some stock sales forward to calendar 2021 may have value.
To wit:

(1) Any 2022 stock sales (or unrealized gains if Congress goes for that) may be taxed at a higher rate
for him at the federal level, (2) This is true if a California state proposal goes thru to raise the marginal rate 3.5% for >$5M income (capital gains are income in CA). There is also a proposal for a 0.4% tax on Californians with a net worth of over $30M, which may help explain why Musk is changing residence to Texas, and (3) There was supposedly some psychological value at getting politicians Sanders & Warren,
(and Robert Reich) off Musk's back for not contributing more to govt. coffers. That didn't really work though, because of the whole "unrealized" gains thing.

 

[Abergdc]

While I agree with most of your post and I wish to thank you for it, I disagree with one of your conclusions. I believe that algorithms would be quite sufficient to make a robot useful in a limited world such as a warehouse or supermarket. Not only useful but useful this year at a reasonable cost and a profit to the robot manufacturer.

I hope you’re right!

 

[MD70]

I have heard a lot about the delayed permits for Berlin but not much about the process for getting approval for Austin.
Who exactly has to approve the production for Texas ?

 

[generalenthu]

Is inflation caused by a heated economy or caused by transitory supply chain issues? These economic data points more toward the latter which means raising rates does nothing to inflation besides causing a recession. So if rates having a risk of not solving inflation but instead increase unemployment rate, then you end up with the worst outcome called stagflation everyone is worried about. So these number are significant.

That's not how the fed looks at things. And a recession means a negative growth for 2 qtrs that will put brakes in the economy, decreasing the demand. This should bring back the inflation measures under control, and it is important to do that for a variety of reasons.

Stagflation sets in when inflation expectations get unmoored, and it's easier to control that when inflation reads high and employement is full. So I think fed has to raise rates here, and they are already behind the curve here. This is the consensus view.

Where I differ from consensus is how quickly and easily inflation will come under control. I agree there is a big transitory component to it, driven by supply chain. So I see 6 hikes this year as improbable though it's quickly becoming the baseline in many models.