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

[jbcarioca]

The Tesla Economist (I think) did a video on how "Automotive Revenues" include selling parts, artificially inflating comparative figures with Tesla. Views? Any way to break them apart (can't remember if video covered or even estimated).

I'd like to see the video. Frankly, parts sales by OEMs including Tesla, are significant profit contributors. The single most lucrative category usually is collision parts. Thesladoes exceedingly well with those too. No OEM, to my knowledge, provides enough public information to quantify that. Internal documents do so. For many legacy collision parts aftermarket suppliers thrive, precisely because of that high OEM markup.

There is ZERO artificial inflation in that business. It is, in most jurisdictions, a core regulatory requirement to support manufactured vehicles and that explicitly includes collision parts. Every auto insurance collision coverage pricing gives a hint about the parts. OEM specific requirements frequently force body shops to make significant investment in software, training and hardware that all add to OEM profits as well.

Once again, this is NOT artificial inflation. It is core business. An OEM that fails to support vehicle repair will be out of business very quickly.

 

[Silent Ludicrosy]

unfortunate...analog antennas

View attachment 771433

If they’re smart they’ll rebrand that antenna as a “lightning rod.”

 

[Discoducky]

PSA...latest update

Felicity Ace continues to burn, salvage crew dispatched

"It was not clear whether the batteries first sparked the fire."

 

[Sofie]

Something to lighten the mood - S Plaid vs. Taycan vs. Lucid Air

Now this is the kind of post I come here for on a Saturday (edit: and the Accountants posts as always)

 

[kbM3]

I'd like to see the video. Frankly, parts sales by OEMs including Tesla, are significant profit contributors. The single most lucrative category usually is collision parts. Thesladoes exceedingly well with those too. No OEM, to my knowledge, provides enough public information to quantify that. Internal documents do so. For many legacy collision parts aftermarket suppliers thrive, precisely because of that high OEM markup.

There is ZERO artificial inflation in that business. It is, in most jurisdictions, a core regulatory requirement to support manufactured vehicles and that explicitly includes collision parts. Every auto insurance collision coverage pricing gives a hint about the parts. OEM specific requirements frequently force body shops to make significant investment in software, training and hardware that all add to OEM profits as well.

Once again, this is NOT artificial inflation. It is core business. An OEM that fails to support vehicle repair will be out of business very quickly.

On the 3rd Row podcast, Elon explained why parts sales are not significant profit contributors for Tesla. It boils down to 50% + annual growth means 80% of the fleet is always under warranty.

 

[mrmage]

Pretty sure many participants here predicted this…

https://twitter.com/x/status/1494927200562286595

Rivian delivered 1000 in 2021 and has a market cap of 60B. F delivered 27x more EVs, so the spinoff should be worth 1.6T. Makes as much sense as anything else that's happened recently.

Seriously, I'll bet the spinoff's market cap exceeds F, and F's market cap will go up too because of their ownership. Which also makes as much sense as anything else recently!

 

[Tommy O]

On the 3rd Row podcast, Elon explained why parts sales are not significant profit contributors for Tesla. It boils down to 50% + annual growth means 80% of the fleet is always under warranty

Yep.

Another tidbit lost to history, is that Elon pointed out in that same podcast that if the short sellers were smart, they would have pointed out the gigantic % of Tesla cars under warranty currently (at the time) and going into the future.

I think about this often.

 

[mongo]

Yep.

Another tidbit lost to history, is that Elon pointed out in that same podcast that if the short sellers were smart, they would have pointed out the gigantic % of Tesla cars under warranty currently (at the time) and going into the future.

I think about this often.

And then you remember that, historically, Tesla has recorded excessive warranty reserves.

Tesla's Warranty Reserve
Re: Tesla [TSLA] Has A Warranty Accounting Mystery — Exploring The Goodwill Theory

 

[Tommy O]

And then you remember that, historically, Tesla has recorded excessive warranty reserves.

I certainly do. Glad you mentioned it. I probably should have included that in my original post.

My point was Elon’s clarity of thought.

 

[Artful Dodger]

I'll see if I can find that video.
I believe:
. .when an OEM sells parts to a Dealership, the OEM records the sale in revenues.

The "profit on parts" video was from our very own @DaveT, here:

Ford and GM’s dirty little secret (Ep. 541) | Dave Lee on Investing (Feb 15, 2022)

Thanks, Dave. Good vid.

Cheers!

 

[Tommy O]

Had a lot of laughs earlier reading about Elon’s controversial tweets. Since this is an investor’s forum, I think I have a personal story related to Tesla that might help some of you see more clearly.

I live in a red state in the US, but moved to a redder area within the past couple years. My neighbors are awesome and do not in the least fit the caricature of what many believe.

Anyway, when we moved in, we were pretty much the only Tesla owning family in our subdivision. Lot of oil and gas workers here (great, hard working people). But we roll in in our Tesla and I’m I’m 220 lbs of knotted fury. Plus I’m super smart, cool, good looking, smart, did I mention smart and cool, and awesome and most importantly humble.

The teslas have multiplied here since I’ve moved in. Covid reproductive rate has nothing on me and my Tesla moving into a new town.

Y’all need to focus on the big picture. Why pick nits on a company that’s trying its hardest to save the g-d world??

 

[StealthP3D]

Honestly, I'm FAR more likely to invest in EV-only Ford spinoff than current Ford...But I still would rather add to my Tesla position vs gamble that too much of the incompetent DNA remains.

The problem with a Ford EV spinoff is it will expose just how poor Ford's EV margins are. And leave an ICE company with shrinking revenue, shrinking margins and even more rapidly shrinking earnings. How much is that worth? The spin-off would grow debt for as far as the eye can see. No real value would be "unlocked" because Ford is already valued for their EV and ICE business combined. If investors are rational, the sum value of the two businesses should be slightly less than the combined business because of certain necessary redundancies and inefficiencies. But by "exploring" the possibility of an EV spin-off Farley can pump F stock and I think that's exactly what he is doing. I think the chances of Ford spinning off their EV business is less than 50/50.

One reason to do this is because it could be used to enrich insiders at the expense of pension funds and the stock buying public simply by acting like EV Ford is super promising and dumping the EV shares before the public figures out they can't offer any more value to consumers in the EV space than they can in the ICE space. Considering the upside for Ford insiders, OK, maybe I under-estimated the odds of this happening. It could be as high as 60-70%. Because the path they are on now does not look good for the value of insider's stock and options.

Perhaps if Ford could use a spin-off to ditch the Ford Dealership franchises (from a cut of EV sales) it might be worth it. But then EV Ford needs to develop a service network or develop service contracts with Ford Dealerships. I don't see the consumer winning anything here. Ford has to be able to offer the EV consumer competitive value if they are going to succeed and I don't see how spinning off the EV business gets them closer to that goal.

 

[StealthP3D]

Isn’t that going to crash F on Tuesday?

I would assume any spin-off will grant Ford shareholders shares in the new company (that's what a spin-off is) so this could light a little fire under F stock.

 

[Tommy O]

The problem with a Ford EV spinoff is it will expose just how poor Ford's EV margins are.

Great point. Didn’t think about this at all until you brought it up, even though it’s so obvious.

Wow. Gonna chew on this and the potential valuation a spin-off might receive.

 

[dhanson865]

Insightful commentary on Tesla even if it's funny it might make you cry.

oh and I really hate that this forum's media settings auto play videos like this with no visible volume control and volume at max.

The audio is worth listening to this time, but I hate autoplay videos no matter the source or content.

Science_journalism_in_a_nutshell/

 

[StealthP3D]

Insightful commentary on Tesla even if it's funny it might make you cry.

oh and I really hate that this forum's media settings auto play videos like this with no visible volume control and volume at max.

The audio is worth listening to this time, but I hate autoplay videos no matter the source or content.

Science_journalism_in_a_nutshell/

Media files in this forum NEVER play in my browser unless I click on them. And that's true of the Reddit link you provided as well. I think you might need to adjust the settings in your browser.

 

[insaneoctane]

The problem with a Ford EV spinoff is it will expose just how poor Ford's EV margins are. And leave an ICE company with shrinking revenue, shrinking margins and even more rapidly shrinking earnings. How much is that worth? The spin-off would grow debt for as far as the eye can see. No real value would be "unlocked" because Ford is already valued for their EV and ICE business combined. If investors are rational, the sum value of the two businesses should be slightly less than the combined business because of certain necessary redundancies and inefficiencies. But by "exploring" the possibility of an EV spin-off Farley can pump F stock and I think that's exactly what he is doing. I think the chances of Ford spinning off their EV business is less than 50/50.

One reason to do this is because it could be used to enrich insiders at the expense of pension funds and the stock buying public simply by acting like EV Ford is super promising and dumping the EV shares before the public figures out they can't offer any more value to consumers in the EV space than they can in the ICE space. Considering the upside for Ford insiders, OK, maybe I under-estimated the odds of this happening. It could be as high as 60-70%. Because the path they are on now does not look good for the value of insider's stock and options.

Perhaps if Ford could use a spin-off to ditch the Ford Dealership franchises (from a cut of EV sales) it might be worth it. But then EV Ford needs to develop a service network or develop service contracts with Ford Dealerships. I don't see the consumer winning anything here. Ford has to be able to offer the EV consumer competitive value if they are going to succeed and I don't see how spinning off the EV business gets them closer to that goal.

Revealing the poor EV margins isn't a big deal IMO. Totally worth it to be rid of dealerships and pensions! They need to be free of the death spiral as it implodes, profitability can come in the future like all their make believe EVs.

 

[Boomer19]

Media files in this forum NEVER play in my browser unless I click on them. And that's true of the Reddit link you provided as well. I think you might need to adjust the settings in your browser.

do you use desktop or mobile iOS/android?

i use iphone to participate in forum. if i understood dhanson correctly i think he means the videos play when “thumbing/scrolling” through the pages and unintentionally clicking a video.

im guessing it’s more an iOS thing and less under forum control. however, i could understand a POV that thinks catering to desktop over mobile is ironically “Barra-ish” (sorry couldn’t resist!)

 

[StealthP3D]

Revealing the poor EV margins isn't a big deal IMO. Totally worth it to be rid of dealerships and pensions! They need to be free of the death spiral as it implodes, profitability can come in the future like all their make believe EVs.

Where would a Ford EV be serviced if they get rid of the dealerships? And how can a Ford EV be sold direct to consumer in violation of laws designed to protect the parent company from competing with their dealerships? It doesn't make sense that Ford could arbitrarily split some models off and sell them direct simply because they have EV drivetrains. And how can they split off part of the company and not have it contribute to the pension obligation? Why can't companies do that as a matter of course to rid themselves of pension obligations? Just split off the most valuable parts and let the parts with the pension obligations wither and die?

I think this kind of spin-off fails multiple "sniff tests" because the part they want to spin-off is the most valuable part of Ford. What they would really be doing is spinning off the ICE part of the company and letting it fail. What's in a name?

 

[Artful Dodger]

Telsa China has published "Principle of Safety - Part 2". Autopilot demonstrating superior accident avoidance thru actual in-car video, highlighting the benefits of Tesla's active safety / self-driving technology:

GO GIGA | Tesla Giga Principle of Safety - Part 2 | Youtube (Feb 18, 2022)

Cheers!