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Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable
- Thread starter AudubonB
- Start date
Thinking through the implications of this is interesting. Elon has missed articulating this only partially. Rather, he may look at it as the OEMs missing integrating collision service with collision parts and collision insurance. After all, Tesla has 11 body centers in the US and one in London and is rolling out insurance. Tesla has been feeling its way on this. It started in 2019 by announcing nine body centers in the US. It has made adjustments. One of those 9 either hasn't come about or has closed. But it has grown somewhat.
Overall, Musk may view collision service, parts, and insurance as something to be minimized within reason. Paired with superchargers, finance, and after-warranty service, I think that takes in all of the carrying/running costs (or opportunities, if you wish) of this asset over the entire asset life cycle.
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So maybe I'm being over optomistic here, but could the DOJ investigation into potentially nefarious stock manipulation activites have been a result of the SEC suit vs Elon & Co which resulted in the trades/ positions of said potentially nefarious individuals being reported (for claims of "damages") and subsequently investigated? Possibly futher aided by the grand ledger reckoning which occured during the great stock split?
Would be hilarious if Elon is in on it (the investigation that is), but that's probably my hunger talking.
Would be hilarious if Elon is in on it (the investigation that is), but that's probably my hunger talking.
Congo Line
(not the dance)
If Ford and GM make so much margin/money from their financing arms, is there potential for Tesla to do so as well?
thesmokingman
Active Member
Probably not. This more likely sprouted from the GME and reddit fiasco.
Thanks for that. Now I understand the discrepancies. @DaveT does a really good juob at presenting his thesis, and it perfectly fits the need to make money on the posts.
He does, however, begin with a very basic logical flaw. He equates cars with razors or printers. That is absurd and wrong. The disposable razor blade and the printer cartridge are necessary disposable items without which the product will not work. Hence manufacturers will happily seell the device at a loss in order to get an installed base. A car or truck, any car or truck will operate perfectly well without anything in the manufacturers aftermarket catalog.
After that there is the idea that manufacturers sell at a loss or breakeven in order to ahem the aftermarket gravy train. That, too, is absurd.
Put simply, the barriers to entry of high capital intensity, long lead times, and other uncertainties are all deadly serious. Distribution is another gigantic problem. All true and undebated.
The argument that aftermarket activity is hidden because the details are not disclosed would be compelling were they the key to barriers to entry, but they are not. We might also want to discuss new vehicle sales practices such as extended warranties (the single most egregious item where they are sold, at typical markups by dealers of over 100%), lending, leasing, and accessories (collectively called T&T for trash and trinkets).
There are seven easy categories of aftermarket revenue sources:
1. accessories;
2. wear parts;
3. collision repair parts;
4. service items;
5. repair parts;
6. upgrades;
7. subscriptions and non-physical upgrades.
Of those seven only items 2,3,4,5 are ones that have clear preference for the OEM supplies by a majority of buyers.
If anybody wants to delve in each one I can do it, as can a number of others who know these issues.
There are few opportunities for a manufacturer to generate such huge margins that they might offset low margin original sale.
Here they are:
Collision parts sales: This requires several specific elements; very expensive parts, unavailability of non-OEM substitutes, exotic materials (e.g.aluminum alloy, carbon fiber,) plus high accident damage rates without total damage judgement. In effect, relatively rare cars.
Subscriptions: what OEMs have large amounts of those, and OTA paid upgrades.
Other than those there are places to make money in all the categories but the potential participation is too low to make a major contribution.
Again, if anybody wants mare detail we should use another thread.
Finally the ne entrants have better changes in subscriptions and OTA upgrades than does any traditional OEM. The briers to entry may not be so high as they were before ICE became obsolescent.
As stated above, perhaps we should add, at least as it relates to Tesla's thinking about this:
8. collision service;
9. collision insurance; and
10. supercharging.
I detest the qualifier, 'influencers'.
thesmokingman
Active Member
The thing that is hilarious about this is the fact that these legacy cars are designed to fail in essence. If they were made to last then that would be counter to their after sales and out of warranty business model.
That's also another dirty secret me thinks.
The only thing most of them influence me to do is block them. The main contributions of the ladies seem to be taking selfies in their cars, running them through beauty filters, and fishing for compliments.
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Nolimits
Member
I wondered why they are not doing this. Seemed like a no brainer unless they don’t want to get into banking/lending. Perhaps they are stretched thin? With elons PayPal background I thought this was an easy way to get into finance/more profits.
If the goal of Tesla insurance is to allow more People into teslas, further advancing the mission - then tesla financing would fit in the same realm. Seems like a no brainer.
BrownOuttaSpec
Active Member
I think it's funny that he corrected it from the 1st to the 7th just to possibly avoid it being mistaken as a April Fool's joke...
StealthP3D
Well-Known Member
Harley Davidson (HOG) a high brand value product mired in ICE technology, has previously announced (around 2nd wk of December via SPAC method) a similar plan to split off their Livewre EV line.
HOG holds about 74% of new company and HOG CEO will be CEO of new company for up to 2 years. You may find some predictive value in the result on the their stock price.
LiveWire to Become the First Publicly Traded EV Motorcycle Company in the U.S. Through Merger with AEA-Bridges Impact Corp. | Harley-Davidson USA
The Investor Relations website contains information about Harley-Davidson USA's business for stockholders, potential investors, and financial analysts.investor.harley-davidson.com
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The Harley-Davidson plan (as announced) is not encompassed by my understanding of the word "spin-off". It's completely different thing. The new company will still be owned 74% by H-D and HOG shareholders get no separate stake in the EV division. Essentially, H-D is capitalizing their EV division by selling some of it off. Shareholders actually end up with less interest in the EV portion of the business than they do now. But that's considered fair because the division has more cash with which to use for R&D. It's considered that shareholders have traded some of the EV division for cash and the SPAC shareholders have taken over that interest. That's how the deal is described in a nutshell in the press release.
In a spin-off, shareholders end up with new shares in the business that is spun-off. That's how I became a shareholder in Leap Wireless at no cost to myself and was able to sell the shares after the spin-off for "free money". Leap Wireless was spun off from Qualcomm. In this transaction, HOG still owns 74% of the EV division and shareholders get nothing except for a smaller share of a re-capitalized EV business. Someone please correct me if I've over-looked something because I have not done a deep dive.
If H-D investors really believed in the potential of the EV division, they would stop this transaction because the money needed to re-capitalize the EV division could be raised through more traditional means and carried as debt thereby leaving HOG shareholders interest in the EV division undiluted. That conclusion is debatable depending upon whether you think the EV division will be profitable enough eventually to pay for the debt, but this is not a spin-off and I don't expect it to have any predictive value as to how a more traditional spin-off by Ford of their EV division would go down if they actually decide to do such a radical thing.
When I see Elon tweets like this I always assume no one else at Tesla knows about it either. Then somebody sees it and says boss you can't do it that day you have to babysit little X that day.
insaneoctane
Well-Known Member
My gut tells me that the EV spinoff will likely have a completely different agreement with dealerships that guts the current relationship but still offers limited profit-sharing ties. They don't need nearly as many service centers as there are dealerships today, so not all need to agree to the new terms to support the new EV spinoff. Why don't you think the new spinoff can't dictate new terms? The current business model will not stand up to Tesla's and Ford can't ditch the legacy agreements, but they can devise new ones for a spinoff, no?
EDIT: @jbcarioca says GM tried this unsuccessfully with Saturn. Feels like where there's a will to survive, this might be the solution if they can navigate it. Dealerships sound an awful lot like unions in this context too...
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Here's a bit of info to hopefully help craft questions...
From my experience working with him, he is still very involved, but more of an engineering manager level giving guidance rather than discrete direction, but it is the same principles being applied. I got to see this first hand with the engineering builds of Model X where he was very involved in AP, obviously, pretty much everyday, but for other things like body controls, seats, software UI, etc it was more of a strong weekly guidance. As an example when the seats started to become an issue he dove in basically took over for a few months (ugh, I was in the room when an engineer was fired...sucked), but he took a step back from AP during that time as he simply didn't have enough time and I was hitting my targets. Another example was when Model X was running heavy and needed to loose about ~40lbs to hit range targets, he again dove in and took over hearing daily about how every single part could potentially be re-engineered to loose weight.
Another example you might be interested in that even when for closely held projects, he doesn't dive into every last detail, except when he doesn't grasp the lowest level of detail and it interests him for some reason. He sat in on a code review for critical safety of pedal monitor as he couldn't understand why the coding was taking so long. It went well and he was gracious to my engineer who handled it amazingly well.
StealthP3D
Well-Known Member
The timing of everything seems correct so it wouldn't surprise me if the two are related!
I think people poo-poo the idea that Elon is super brilliant too much. No, he's not infallible, no one ever said he was, but autism can encompass amazing things. Sure, the downside is autism makes people seem "different" than normal. But autism encompasses a wide spectrum of different attributes. Autistic people to seem different and it's common for non-autistic people to view that difference as a negative even though that difference is often the direct result of the special and amazing abilities many autistic people have. These abilities are sometimes so amazing it leaves ordinary people feeling very uncomfortable, so this side of autism tends to not get as much attention as it deserves. These differences can make the autistic person feel like a freak of nature (in a bad way). The easily repeatable and verifiable abilities like being able to memorize an entire phone book in one go are amazing enough, but this kind of thing only scratches the surface of what some people with autism are capable of doing when they harness their innate mental abilities and apply it to the tasks at hand. An autistic persons brain simply functions differently than most people's brains and my observation is that Elon uses this to analyze potential outcomes and take a course of action with the highest probability of getting to the outcome he wants. This may require him to do and say things that seem counter-productive to the mission, but Elon doesn't let that concern him because he has already seen the path that he believes leads to the goal at hand and he's following that path.
Yet there will always be people in the peanut gallery telling him he is messing up, that he doesn't know what he's doing. He doesn't care because he can see he's on the quickest path with the highest chance of success.
He looks stupid to ordinary people because FSD is always within grasp but never arrives. But perhaps the path to success requires people to believe that it might be possible so, when it finally happens, people think "Well, it's about time" rather than "That's impossible, I think it's still too dangerous".
There's a reason why things tend to go Elon's way and it's not that he possesses uncanny luck. If you want things to go your way you have to make them go your way. The secret is in knowing how to do that. Some people try really hard to make things go their way but they are incredibly bad at knowing how to do that so they end up defeating themselves. Musk knows how to make things go his way and he has some superpowers that can help him out. This, combined with incredible dedication, is why things tend to go his way. Those who have been paying attention will draw the same conclusions because no one has been able to explain this except to say he is "lucky" or that he works long hours. Those explanations (alone) do not pass my sniff test.
That is why I no longer doubt Musk. No, he's not infallible but I know of no better person to invest in. And it doesn't hurt that almost every person that works at Tesla is trying to make the world a better place.
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I thought that as well, he sent a Tweet out for the date of the AP/Dual motor event right after we demonstrated AEB, lane keeping and TACC. Literally, minutes after the demo was over he sent the Tweet before getting into his car, he didn't tell us beforehand, but it was super cool nonetheless.
That's the kind of CEO he is. Mad respect, but it was a challenge sometimes, I and many engineers had to live at Hawthorne for several days to hit the deadline.
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