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

[Fact Checking]

Margin is dangerous. You're overleveraged IMHO.

Yeah, so I can really understand @mulder1231 getting into such a position: when a growth stock is in the $250-$350 general range for the past 2 years I did not expect another trip down from $350 to $250 at the end of 2018 either, after Tesla tripled 2016 revenue in 2018, is looking to quadruple 2016 revenue in 2019, and posted two profitable quarters with ~1.4 billion dollars of cash made in each of those quarters and has guided to be FCF positive forever and ever ...

Sh1t happens. My suggestion to @mulder1231: make a decision whether to deleverage now or at around $300 levels, but definitely do it when next practicable. For example if the SEC case goes against Elon with a scathing ruling issued by the judge, making it clear that Elon will face sanctions, the stock could gap down in a major way overnight as well.

Note, I don't think that's going to be the outcome of the SEC lawsuit, and I think TSLA fair value is $500+ right now, but I cannot be 100% certain ...

When over-leveraged don't wait for bad or good things to happen, but write down numeric rules about what to do at each price level - because emotions can easily take over when big price movements happen.

 

[ReflexFunds]

I don't think they'll ship around stamped panels: to store them safely against damage is both a significant expense and decreases transportation density, which increases logistics costs.

Here's what Elon said about what will be made in the Shanghai Gigafactory, on the Q4 conference call 2 months ago:

Elon Musk:

"And earlier this month, we saw the construction of our Gigafactory in Shanghai, and by the end of this year, we expect to be producing Model 3s using a complete vehicle production line. That's body paint, final assembly, general assembly and module production."

"So it basically would be - this will be extremely fast. I get like daily updates of progress of the Shanghai Gigafactory, and those factories are going to go up like lightning."​

Note that while he didn't mention press/stamp lines, he didn't mention injection molding lines either - those are naturally placed close to the body and final assembly lines. Completely-knocked-down-kits (CDK's) sometimes get shipped around the globe but are a major complication on the Fremont Model 3 production side which Tesla doesn't need.

Nor are stamps really expensive at the 3k/week rate they are targeting: I believe the main expense are the paint shop baths and booths, the robots of the chassis/body lines and the robots/stations of the general and final assembly line. I suspect they'll do a plastics shop too, with a lot of molding machines. Plus a new Grohmann Machine to make SR packs.

Big stamping machines may have long lead times - but that simply means that they have to sequence their orders properly for it all to arrive at the intended date. The dimensions and capacity should already be well specified at this stage, as the Model 3 and Model Y dimensions are already pinned down.

Do dies have long lead times, or is Tesla making those themselves?
Have I forgotten anything else?

Cell supply is the big question, IMHO.

Edit, Tesla mentioned stamp lines in the Q4 update letter:

"In the initial phase of Gigafactory Shanghai, we expect to have stamping, paint shop, body joining, and general assembly shops in operation by the end of 2019. This accelerated timeframe should be possible due to the radical simplification of our manufacturing layout and processes compared to our first-generation production line in Fremont. Higher-spec models such as our long-range all-wheel drive (AWD) and Performance versions will continue to be shipped to China from the US."​

I believe "general assembly shops" includes the plastic molding shop.

The only things missing from the China plan is:

• Cell factory: This is probably still being negotiated, but I'd expect cells to be made at the Shanghai Gigafactory, in a similar construct to GF1.
  
• Power-train factory: these are high density, low volume, small size components which are easy to export from the Gigafactory and might help them protect their EV IP.
• Seat factory: which they have in Fremont and which is relatively easy to export as well, although it might make sense to move this to China next, as they are low density components which makes transportation more expensive, plus seats could probably be further simplified for the Chinese market to reduce ASP.
• Glass factory: I think it's made in GF2 right now, and that's not necessarily easy to export. They might be outsourcing window production, and they might opt for a metal roof instead of the glass roof. This would also differentiate the Chinese versions from the import versions very clearly.
• HW3 board factory: this too is probably better done in the U.S., although they might eventually bring this to China too.

I guess Module/Pack production is also targeted for September, but I haven't seen this is an offical permit, and it may be there is a few months of battery pack imports from GF1.

Power-train (i presume motors, inverters, cooling equipment, high voltage equipment etc) and Seats in-house production are targeted for March 2020 at GF3. I presume before then they will export these from the US.

 

[mongo]

"And earlier this month, we saw the construction of our Gigafactory in Shanghai, and by the end of this year, we expect to be producing Model 3s using a complete vehicle production line. That's body paint, final assembly, general assembly and module production."

You already appended the post, but I think that was an error in transcription:
"That's body, paint, final assembly, general assembly and module production."
(Sunce only the body gets painted, 'body paint' makes no sense...) though it still does not specifically call out stamping there.

I think seats will be local (possible material difference). Is there any data to say HW3 is made in US (or by Tesla)? I'd expect that to be imported from their supplier for the US and possibly local in China (along with other modules).

 

[Fact Checking]

though it still does not specifically call out stamping there

Tesla specifically mentioned stamp lines in the Q4 update letter:

"In the initial phase of Gigafactory Shanghai, we expect to have stamping, paint shop, body joining, and general assembly shops in operation by the end of 2019. This accelerated timeframe should be possible due to the radical simplification of our manufacturing layout and processes compared to our first-generation production line in Fremont. Higher-spec models such as our long-range all-wheel drive (AWD) and Performance versions will continue to be shipped to China from the US."​

So I don't think they'll be shipping around body panels, unless there's some unexpected complication.

 

[KarenRei]

Tesla is targeting Body, Paint & Assembly at GF3 in September. Presumably if they hit their May target for external construction then this equipment will all start to be installed at GF3 in June/July.

Start to be installed. But there's a gap. The building is targeted for completion in May. We saw with GA4 how quickly a GA line can go up - GA4 took only a month before it was churning out cars quickly and reliably, because GA is a mostly manual process. GF3's GA will be ready very soon.

Paint, body, stamping, etc lines take a lot longer, as they're heavily automated processes using a lot of expensive equipment with significant lead times and slow rampup rates. Tesla's target is to have them start to go online near the start of Q4, and by the end of the year reach 3k/yr.

There's a significant gap between these two. Tesla isn't going to want to leave an idle GA line at GF3, as running GA in China is a huge cost advantage. They have every incentive in the world to feed Chinese GA with US output. And this is hardly unique in the world, as EVNow notes (knock-down kits). Plus, the more they run the GA line this summer and early fall, the smoother it'll be operating by the time the other lines start to come online (including ironing out any issues with local suppliers).

From what we've seen, Tesla has the ability to scale US operations to handle higher rates of everything by mid-summer (when GF3 GA volume would be ramped up)... except paint. E.g. the understanding is that in Fremont, body can handle well more than 7k, stamping well more than 7k, etc. GF1's motor and battery production can be expanded as needed because unlike Fremont they're land-unlimited, etc. Paint is the one thing that we've been told can't realistically scale over 7k as things stand.

And indeed, when you have production hardware that's capable of running at a higher rate - stamping, body, etc - you want it to. That lowers per-unit depreciation.

So they are doing almost everything there this year. (No mention of motors, seats, cells, packs, plastics, etc.)

​

There is no way they are shipping pre-painted body panels, because you can't paint them until you assemble them into the body. So that would mean that they were using the whole body-in-white and paint shop portion of Fremont. At that point you just send it through GA and you're done.

"Sending it through GA" is a huge value-added / cost-added stage, as it's labour-intensive and involves the majority of the parts installed in the vehicle. GA in China has much lower labour costs, part supplies will be mostly local, and - while I'm not an expert on how the Chinese auto tariff is structured - I strongly suspect it would allow the avoidance of at least part of it, if not all.

This is why knockdown kits are used. There's nothing out there that makes them make sense for other manufacturers but not Tesla.

Its not unusual to send parts (Completely Knocked-Down or CKD kits) to be assembled in another country. BMW and others do it in India.

2018 BMW X3 assembly commences in India

Knock-down kit - Wikipedia

That’s different. Still don’t see Tesla doing that. Doesn’t make sense.

Adding: How is it different? 1) Painted parts. The whole context of the post that started this was unpainted parts.

From the article that EVNow gave you:

"The term SKD for semi-knocked-down refers to a kit with a complete, welded car body, usually coated or already painted."

 

[STARR X]

I find this quite a puzzle actually. It makes sense that Tesla is cell constrained, because how else to explain the lack of progress on Tesla Energy? Is this because Tesla didn't build out the plant and infrastructure at GF1? Or because they couldn't persuade Pana to commit to its share of capex? Or some other bottleneck entirely (doubt it's raw material supply but who can say). There seems to be a slight contradiction between an apparent inability of Tesla Energy to get close to matching demand and the repeated statements that Tesla is not capital constrained.

I think they are cell constrained too. But they have been holding off on expanding the factory until they close on the Mazwell deal. The expansion will include new Maxwell cell production lines that most likely will be used for the Semi & Roadster, Model Y and somehow mixed in with Model 3.

(I note that I am like the 3rd or 4th person to make a similar comment. Sorry, will go back to just lurking.)

 

[Fact Checking]

There's a significant gap between these two. Tesla isn't going to want to leave an idle GA line, when running GA in China is a huge cost advantage. They have every incentive in the world to feed Chinese GA with US output. And this is hardly unique in the world, as EVNow notes (knock-down kits). Plus, the more they run the GA line this summer and early fall, the smoother it'll be operating by the time the other lines start to come online (including ironing out any issues with local suppliers).

I believe they'll only do this if there's some softening in demand.

From what we've seen in Europe so far, softening demand for the Model 3 in a European spring and summer is not going to happen unless Brexsh1t crashes the European economy:

• 70% of German car sales are still with manual transmission and the Model 3 offers continuous accelerations by default in all configurations, with no mileage and price penalty caused by automatic transmissions?
• A third of the fueling cost of a gasoline or diesel car?
• Acceleration that is at least as good as any of the €100k+ BMW luxury models and ridiculously better than any BMW model in the target €50k-€75k price range?
  
• Absolutely no engine noise at any speed?
• Free air conditioning for days on a single charge and Dog Mode, Cabin Overheat Protection and Camping Mode?

Show me an ICE car that can do all that at any price and I'll show you a liar.

The Model 3 will be selling in Europe like ice cream in hell, with not much left over for China I believe.

 

[mongo]

Start to be installed. But there's a gap. The building is targeted for completion in May. We saw with GA4 how quickly a GA line can go up - GA4 took only a month before it was churning out cars quickly and reliably, because GA is a mostly manual process. GF3's GA will be ready very soon.

Paint, body, stamping, etc lines take a lot longer, as they're heavily automated processes using a lot of expensive equipment with significant lead times and slow rampup rates. Tesla's target is to have them start to go online near the start of Q4, and by the end of the year reach 3k/yr.

There's a significant gap between these two. Tesla isn't going to want to leave an idle GA line at GF3, as running GA in China is a huge cost advantage. They have every incentive in the world to feed Chinese GA with US output. And this is hardly unique in the world, as EVNow notes (knock-down kits). Plus, the more they run the GA line this summer and early fall, the smoother it'll be operating by the time the other lines start to come online (including ironing out any issues with local suppliers).

From what we've seen, Tesla has the ability to scale US operations to handle higher rates of everything by mid-summer (when GF3 GA volume would be ramped up)... except paint. E.g. the understanding is that in Fremont, body can handle well more than 7k, stamping well more than 7k, etc. GF1's motor and battery production can be expanded as needed because unlike Fremont they're land-unlimited, etc. Paint is the one thing that we've been told can't realistically scale over 7k as things stand.

And indeed, when you have production hardware that's capable of running at a higher rate - stamping, body, etc - you want it to. That lowers per-unit depreciation.



"Sending it through GA" is a huge value-added / cost-added stage, as it's labour-intensive and involves the majority of the parts installed in the vehicle. GA in China has much lower labour costs, part supplies will be mostly local, and - while I'm not an expert on how the Chinese auto tariff is structured - I strongly suspect it would allow the avoidance of at least part of it, if not all.

This is why knockdown kits are used. There's nothing out there that makes them make sense for other manufacturers but not Tesla.





From the article that EVNow gave you:

"The term SKD for semi-knocked-down refers to a kit with a complete, welded car body, usually coated or already painted."

• Tesla can't build more cars until their suppliers have capacity in place (for the low cost variant)
  
• Long lead is irrelevant is you were planning longer than the lead time
• Startup ramp is much shorted if you are commissioning identical equipment in a (mostly) identical configuration
• SKD would require a carrier cart per vehicle, vehicle density of shipping would match that of built cars (3k shipped per week) so 9k+ carts needed only for the transition period
  
• SKD would require fork trucks/ tugs to move the carts to/from port/factory and load/unload ship

 

[KarenRei]

I believe they'll only do this if there's some softening in demand.

From what we've seen in Europe so far, softening demand for the Model 3 in a European spring and summer is not going to happen unless Brexsh1t crashes the European economy:

• 70% of German car sales are still with manual transmission and the Model 3 offers continuous accelerations by default in all configurations, with no mileage and price penalty caused by automatic transmissions?
• A third of the fueling cost of a gasoline or diesel car?
• Acceleration that is at least as good as any of the €100k+ BMW luxury models?
  
• Absolutely no engine noise at any speed?
• Free air conditioning for days on a single charge and Dog Mode plus Cabin Overheat Protection and Camping Mode?

Show me an ICE car that can do all that at any price and I'll show you a liar.

The Model 3 will be selling in Europe like ice cream in hell, with not much left over for China I believe.

That's exactly the thing - if they can come up with more paint shop capacity, they can sell more total cars.

 

[KarenRei]

Tesla can't build more cars until their suppliers have capacity in place (for the low cost variant)

And one presumes that whatever their plans are, they've long ago worked them out with their suppliers, as anything else would be idiocy.

• Long lead is irrelevant is you were planning longer than the lead time
• Startup ramp is much shorted if you are commissioning identical equipment in a (mostly) identical configuration

We don't have to speculate about these aspects - we've been told them by Tesla. And that's start of operation at the beginning of Q4, ramped up to 3k/wk by the end of Q4.

• SKD would require a carrier cart per vehicle, vehicle density of shipping would match that of built cars (3k shipped per week) so 9k+ carts needed only for the transition period
• SKD would require fork trucks/ tugs to move the carts to/from port/factory and load/unload ship

Correct, just like for any other manufacturer. It does not save you on shipping, and you can't use RO-RO shipping. But it lets you use lower-cost labour (for the most labour-intensive stage), lower-cost parts, and potentially avoid some or all of tariffs, as well as increasing your total production capacity and reducing per-unit depreciation on your existing hardware which isn't running at full design capacity. These are all massive advantages.

 

[samuel edyangu]

Since I accidentally killed the 2018 thread, here's a cross-post of that fateful missive.

Happy New Year, all! Here's to 2019, the year we see (my predictions...):

• The fabled $35k Tesla become reality
• The Model Y (give it to me now!)
• Gigafactory 1 next phase of build-out, and many more panels on top
• Gigafactory 3 begin production (of something)
• HW 3 and some minor FSD umbrella features (but definitely not FSD)
• Tesla getting customer communications under control (where 'control' indicates at least third-grader aptitude)
• Superchargers in North Dakota (see also: 2018, 2017, 2016)
• The production Semi specs
• Elon doing something amazing
• Elon doing something incredibly stupid

What are your predictions?

Enjoy!

haha

 

[Pras]

A week or so back I told my colleague about plans to get rid of my Acura and go 100% electric. He immediately said I should at least keep one ICE (having already bought a Model 3). He was worried that I should keep the ice for long drives. I jumped on this opportunity to talk about long drives and charging and all the fun, and that we only use Tesla for long drive and keep the ice suv for local second car use.

Fast forward, yesterday he asked me about Y and then said he is thinking of buying a model 3 or Y. I did what most of you would do so.

The point I want to make is that the current generation of buyers, in US as of now, are what I would call as “validators”. They are not the Tesla enthusiasts, but still curious enough. They will provide an independent assessment (beyond the likes of folks in this forum) to the rest of mass who will then generate the ongoing demand.

The other point is that all the comment about pent up demand will soon ease out is overblown. The pent up demand was only from the enthusiast and the true demand will start to show up only now.

 

[Words of HABIT]

I am considering going up for the case. I have contacted another TMC member for advice (thanks!) and been on the Court website. NO CELL PHONES allowed in court so may get nothing till after the case is over which I suspect could be around 3pm.

I just hope if I go up there are enough seats in the courtroom......

AIMc, don't forget to wear your pin.

 

[mrdoubleb]

I believe they'll only do this if there's some softening in demand.

From what we've seen in Europe so far, softening demand for the Model 3 in a European spring and summer is not going to happen unless Brexsh1t crashes the European economy:

• 70% of German car sales are still with manual transmission and the Model 3 offers continuous accelerations by default in all configurations, with no mileage and price penalty caused by automatic transmissions?
• A third of the fueling cost of a gasoline or diesel car?
• Acceleration that is at least as good as any of the €100k+ BMW luxury models and ridiculously better than any BMW model in the target €50k-€75k price range?
  
• Absolutely no engine noise at any speed?
• Free air conditioning for days on a single charge and Dog Mode, Cabin Overheat Protection and Camping Mode?

Show me an ICE car that can do all that at any price and I'll show you a liar.

The Model 3 will be selling in Europe like ice cream in hell, with not much left over for China I believe.

Well and they haven`t even allowed "Other Europe" to configure yet. I know a few angry people over here with reservations made 3 years ago and no communication from Tesla on the hold-up... Also, in countries where Tesla is not incorporated yet, they may not be eligible for subsides and tax incentives. Like for us, we have a ~5000 EUR incentive but we can`t use that as Tesla does not officially sell cars here via a local subsidiary. BTW also makes it a lot harder to set up financing.

So I guess they have a couple more demand levers they could pull in Europe and we haven`t even talked about RWD LR, or SR/SR+ which are not available yet, or the right hand drive market. The UK was starting to become one of Tesla`s top 3 markets in Europe but they can`t even configure yet.

 

[Singer3000]

I would expect to see the construction crews for the building expansion showing up soon though.

Yeah for 2020 we’re promised Model Y at the GF, and at the least the cells and drivetrains for the Semi there too. And these gwh storage projects and powerwall ramp too. Am impatient to see shovels in the ground, anecdotes of “running out of space” at a site that big seem like something they should be fixing!

 

[Fred42]

(Emphasis mine.)

Bizarre. You must have had an unusually lucky experience with driving.

I've experienced many, many instances of aggressive tailgating, cars cutting in front of me, passing on the right at high speed, all kinds of dangerous driving and road rage. Stuff which could have seriously killed me. Happens at least once a WEEK around here. I particularly remember the people who sped around me on the right side, cutting me off, in a lane which was ending. Happened *four times* in the same place.

Public transportation? Way safer. I've had far more scary, violent encounters while driving than in person. There are maniacs in cars all over the roads.

This experience is around Ithaca or somewhere else?

 

[Tslynk67]

Lycan,
Can you add some headers on your graph please to describe what information is being presented. All I'm seeing is bars and numbers.

Sorry, dear chap, I thought everyone knew this page - it's the default destination when the SP is red to cheer ones-self up:

Tesla Registration Stats

 

[Tslynk67]

Anyone want to take a guess as to why the SR deliveries have been delayed?

My guess: Homologation. That because the seats, and therefore the restraint system, are different that they have to get re-certified and additional crash testing may be required and Tesla thought they could skip it. (I seem to recall that P100Ds sat at delivery centers for a few weeks while a similar situation got dealt with.)

Demand issues - too much demand, for better specs...

 

[Carl Raymond]

I smell a MMD. Just put in a buy ticket. First since before end of Q3 2018. Price just too damn attractive.

Edit: just saw the pre market go green for a brief moment, then suddenly it was back to 267.01
Somebody is holding it down, just inside red territory, for psyc out.

 

[JRP3]

This experience is around Ithaca or somewhere else?

My experience in the area has been nothing like that, though I suspect he drives more miles than I do.