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

[EVDRVN]

Stop trying to make your reality everyone elses. Most people don’t in fact know or care about a company’s solvency or any large investment vehicle if and until it affects them directly. Like not until its doors close and then people are quite happy to buy everything in inventory at greatly reduced prices. Happens all the time. People are vultures.

My reality? It's not my reality it's what I hear from other people but if you think it's not true I will be sure to let them know they are wrong. This is exactly the bubble mentality that turns buyers off to Tesla. People actually do have these concerns about buying a Tesla and it's unfortunate that some Tesla owners "know better" so the concerns of buyers are moot. What does a fire sale have to do with buying concerns? Does that invalidate them?

 

[EVNow]

But I think the biggest issue for not allowing this is the free supercharging. I know it sounds crazy but you just know there will be people that would charge up their car for free and then backload their house to save money.

If that is the issue, I'm fine with them saying we have to call to get it enabled, everytime.

Also, we'd need some hardware for this - and that should stop people trying to use this to gain some $10 with this convoluted method every time. Make that H/W $5k.

 

[Fact Checking]

Sooooo, week-end break. Last and final: got a call on Monday that the car won't make it in time (high VIN 313XXX still in California, not even sure it's actually manufactured). No other M3 RWD around, so they 'offered' me to trade-up to an AWD in inventory in a nearby state, with a rebate (about $2,5k). I took it. First time I get a discount on a new Tesla. A friend I referred got a similar deal for an inventory AWD as well this week in Denver CO.

Curious to see which delivery numbers they'll get to. Clearly all along the process they looked busy (replying to email late at night), a Service guy actually delivered the car to my home and that was the 4th time for him that day. By far the fastest delivery paperwork wise, a big improvement vs last time.

So your March 18 LR order in California would already have been pushed to April production - and your variant: white+black is the second most popular color+interior combination.

I.e. LR production backlog was already 2+ weeks back then, LR RWD inventory already drained, with California delivery which they prioritize at the end of quarter.

Looks like a successful "closest to the factory" end of quarter push effort to me. Everything depends on the push in Europe and China now.

Did you buy AutoPilot or FSD?

 

[S3XY]

If you have a glass of wine, Romance Mode on the screen is required.

Well, I was all by myself so that would've been a bit weird. Although I haven't tried it yet so it would've been a good opportunity.

 

[Carl Raymond]

There is a good chance this stock sees $500 in the next 12-24 months.

My estimate is 700k cars x $45K ASP = $31b + $3b other revenue(ignore service) = $34b annual rev x .2 operating margin = 6.8b ebitda x 13 EV to ebitda valuation multiple = 89b - 9b debt = $80b market cap. So this a conservative estimation as it assume lower asp, reasonable car volume and most importantly lower valuation multiple. Let’s see.

Dear market,

I was unprepared for the last foray into sub $260 territory, however I am ready now.

Can you deliver one more FUDtastic dip please, prior to heading for $500?

Thank you kindly.

 

[S3XY]

If that is the issue, I'm fine with them saying we have to call to get it enabled, everytime.

Also, we'd need some hardware for this - and that should stop people trying to use this to gain some $10 with this convoluted method every time. Make that H/W $5k.

Not sure about the $5k for hardware since a few hundred dollar adapter should be all it takes. But the call per use just might work to weed out the weasels.

 

[EVDRVN]

Oh, so they’re just making them for poos and giggles and not to try and sell. Ah, ok. Well, then. Sound business plan. Carry on.

p

Do I really have to explain product development to you. Are you aware of the Luxury Merceds EV? Likely not as they built it but did not produce it, a very common practice with large companies. In fact it was produced more than 10 years ago.

 

[Krugerrand]

My reality? It's not my reality it's what I hear from other people but if you think it's not true I will be sure to let them know they are wrong. This is exactly the bubble mentality that turns buyers off to Tesla. People actually do have these concerns about buying a Tesla and it's unfortunate that some Tesla owners "know better" so the concerns of buyers are moot. What does a fire sale have to do with buying concerns? Does that invalidate them?

Fearmongering = *yawn*

FYI, not a soul I know has any such beliefs nor thought processes.

 

[PANN]

Neither of these or any other copy I found on-line provided any credible source or proof of such an discount.

If I have to guess it might be referring to new inventory cars, for example they still have a few S75 listed at 630k, which is close to the claimed sales price of 550k.

That's a good guess. Yes could be some inventory S/X 75D cars. I was at a Tesla store in Shanghai on Weds to test drive X 100D, the sale rep. told me they still have a X 75D on inventory and asked whether I'd consider buying it.

 

[MP3Mike]

Not sure about the $5k for hardware since a few hundred dollar adapter should be all it takes. But the call per use just might work to weed out the weasels.

I'm not sure that is true. Can you really use the charger as an invertor? Or would you need an external HV invertor?

 

[Krugerrand]

p

Do I really have to explain product development to you. Are you aware of the Luxury Merceds EV? Likely not as they built it but did not produce it, a very common practice with large companies. In fact it was produced more than 10 years ago.

Another Tesla killer bites the dust.

 

[EVDRVN]

Another Tesla killer bites the dust.

Not relevant.

 

[humbaba]

Personal Data should be encrypted!

Easy to say. Now, how do you implement. The decryption key (or a key to decrypt the key ) has to be stored somewhere or entered by the user. Also note that encryption is fast on your computer -- thanks to custom support in hardware. The iPhone has similar. Is this the case for the hardware used in a Tesla? Other vehicles? How is key management handled? Key exchanges? Authentication?

In the case at hand, how is encryption supposed to solve the problem? For mobile data the general idea is to encrypt with a key, and then encrypt the key with a secret (say, a password). "Wiping" the device is achieved by erasing the encrypted key -- very fast. This can work (to a point) even if it is not an encrypted key but the encryption key itself.

I'm not suggesting it isn't solvable or that it shouldn't be solved -- but it isn't as easy as saying "just encrypt it."

 

[Beltsbear]

So, dealing with a power outage here with a cell phone battery under 30%. What to do? Hop in your Model 3 in the garage with a glass of wine, plug in your cell to charge it up, listen to Slacker and read TMC on the center display. Try doing that in your ICE!

You can do that in an ICE too. You just might never make up!

 

[Krugerrand]

Not relevant.

Yeah, kinda is. If it had been a no compromise EV, priced competitively to a comparable ICE, they’d still be making them and selling them like hotcakes and making good profit margins. But...not so much.

 

[Fact Checking]

You must be drinking. Do I really have to explain product development to you. Are you aware of the Luxury Merceds EV?

All of this groupthink is living in the Tesla bubble,

I think that's a little inside the Tesla bubble and a bit of Tesla snobbery which is not conducive to EV adoption of course.

Repeated unprovoked ad hominem attacks. Way to convince your audience. And you are trying to lecture Elon and Tesla about proper communications?

I always laugh when people think that Toyota could not compete in the EV space when they choose. I saw prototype EVs from the a big German automaker before there was a Model S or any production EV on the market. Many companies have had development for a long time but various reasons kept them from entering "all in".

I have to say that your comments are proof of an "ICE bubble" and you are possibly in denial about it. Here are some hard facts:

That "EV prototype" you saw years ago must have been either the Audi E-Tron, a vaporware product announced back in 2009 as a "Tesla killer":

Audi's Electric E-tron Is Real, And Coming Soon
Watch Out, Tesla, Audi's e-Tron Is Coming​

(Or the forever delayed EQC from Mercedes which won't reach volume until 2020. Maybe.)

Today it's 10 years later and Audi was finally forced to bring the E-Tron into production, but it's hopelessly outclassed by the Model 3 already (let alone by the Model S and X), which has put the leadership of Volkswagen, Audi and Porsche into crisis mode:

"Tesla Model 3 cost surprised Porsche and Audi after reverse-engineering"

"The e-tron as the first electric Audi is not only late. It does not reach some target values and has become far too expensive with more than two billion euros in development costs. The approximately 600,000 cars sold for the break-even are now regarded as an illusion."​

These are direct leaks from the top executives of Volkswagen, straight from the horse's mouth.

Here is the reason Audi, Volkswagen's luxury brand were not making EVs for 10 years, by their own admission: they were unable to make competitive EVs 10 years ago and are still unable to make competitive EVs today.

EVs are an entirely new market that the legacy OEMs are not prepared for to enter. The countless EV "prototypes" by luxury German brands are meaningless: there's 10,000 parts that go into an EV like the Model 3, but the biggest value-add and differentiator of ICE carmakers, the ICE power train with its own 10,000+ parts count alone, is missing. Everything else that isn't an ICE powertrain the big OEMs are mostly just buying from commodity car parts suppliers themselves...

See @ReflexFund's excellent post about the economics of why ICE makers are in a structural disadvantage to make EVs:

"Why ICE OEMs are handicapped relative to new EV companies"​

Today probably the only way most legacy OEMs could profitably make competitive EVs would be by liquidating their assets, writing off their ICE making capacity, paying off their obligations such as pensions and emissions fraud related legal liabilities, dissolving the company and creating a new EV company from scratch from the remaining cash and brand value. Note that chances are that "remaining funds" would be negative after such a liquidation event: i.e. many ICE OEMs are possibly already structurally bankrupt today and shareholders are bagholders. (Will probably take years for this process to play out though.)

And note that Audi and Porsche have been working on their BEV platforms for years, while Toyota is horribly, horribly late.

 

[2virgule5]

So your March 18 LR order in California would already have been pushed to April production - and your variant: white+black is the second most popular color+interior combination.

I.e. LR production backlog was already 2+ weeks back then, LR RWD inventory already drained, with California delivery which they prioritize at the end of quarter.

Looks like a successful "closest to the factory" end of quarter push effort to me. Everything depends on the push in Europe and China now.

Did you buy AutoPilot or FSD?

Indeed if I wanted to stick to my LR-RWD, late April would have been delivery date here in the East Coast (website was announcing 2 weeks at time of order but we know it is not accurate nor updated often). Fyi the AWD I got was made in Jan 2019 (VIN 199XXX). Scrapping MR & reintroducing LR-RWD looks like a good move and they are clearly supply limited.

I got basic AP with it, but upgraded my PM3 to FSD for 2k while I could.

After Q1 2018 (1st M3), Q2 (one for the kids), Q3 (AP promotional price for 2nd M3), Q4 (trade-in and 'upgrade' to PM3) and this last one, I swear that's my last contribution to cash flow before model Y! (unless they decide to deliver my powerwalls )

 

[Artful Dodger]

Current SR+ take rates in the U.S. and Canada (the only market where SR and SR+ is available) over vanilla SR are probably over 90% (!).

We know this from recent tweets of Tom Randall (author of the Model 3 Bloomberg tracker):

Tom Randall on Twitter

"We also received SR+ VINs from 19 states and provinces in U.S. and Canada."

Tom Randall on Twitter

"Just 2 SR. Loads of SR+"

Tom Randall on Twitter

"I just looked at the survey database. One of the owners noted that Tesla called and upsold them to SR+. I'm trying to connect with the other owner. Regardless, it seems like SR deliveries haven't started in earnest, while SR+ are selling very well."​

I.e. only one vanilla SR VIN was reported, while "loads of" SR+ VINs from 19 states and Canada.

Those are direct VIN reports from owners to Bloomberg.

I.e. terms of ASP, the Q1'19 base price of the Model 3 is probably above $40k: $35k + $2.5k (SR+) + $1.5k (color) + $3k (AutoPilot), where both color and AutoPilot have high take rates.

This means "SR" cash margins are probably higher than 20% already (!). To that come the LR and higher spec models, with probably higher than 30% cash margins.

This is probably why Tesla stopped selling the Medium Range without announcing it: they saw the SR+ take rates and that in Q1 it's already more profitable to sell an optioned SR than a bare-bones MR...

Excellent analysis as always, F/C. I might be able to add a few points:

• other info indicates an initial batch of 500 SRs was produced shortly after Fremont switched from Int'l production to Domestic
  
• If we assume those were the only SRs prod. in Q1, then the remaining production in March (approx. 23 days) would yield about 23K Model 3s of all specs:
  • of interest is the bty pack, since all AWD/P Model 3s have the LR pack
  • assume current 2170 cell supply is the equivalent to 6K LR packs per week
  • a 54KWhr SR+ pack gives Fremont max. capacity of 7K Model 3s/wk
    • about 3,430 LR
      
    • and 3,570 SR+
    • 7K packs as above use the same no. of cells as 6K LRs
• then, 23 days with that LR/SR+ mix also gives 23K Model 3 produced
• this is also the max. margin mix given these constraints:
  • 450K cells / day available at GF1
  • 7K/wk Model 3s max. at Fremont / General Assembly

Adding that March number to my previous estimate for Int'l production of 52K, then my updated estimate for 2019Q1 Model 3 production is 75K. (note that this is arrived at completely independantly of the BB estimate, which is currently at 79,856*

* estimate display on BB website on Mar 29, 2019 @ 8:30 pm EDT

Cheers!

P.S. My estimate also implies that if S/X production is at least 15K in 2019Q1, then Tesla will produce 90K cars in Q1. And that's already in new record teritory. Remarkable.

 

[Krugerrand]

Unprovoked ad hominem attacks. Way to convince your audience.

Oh, he wasn’t just honestly asking a question?

For the record, I might have been sipping a Perrier and feeding my cat pieces of free range, grain fed, steroid and antibiotic free chicken in my Model 3 with Romance Mode on. Or not because that sounded really weird. So, yeah that didn’t happen.

 

[Fact Checking]

• ssume current 2170 cell supply is the equivalent to 6K LR packs per week

• a 54KWhr SR+ pack gives Fremont max. capacity of 7K Model 3s/wk
  • about 3,430 LR
    
  • and 3,570 SR+
  • 7K packs as above use the same no. of cells as 6K LRs

More numbers:

I believe Carsonight estimated 6.2k/week LR battery packs maximum output - limited by Panasonic cell supply.

If a LR pack is 78 kWh and SR is 54 kWh, then the maximum SR pack output (with same cell supply) would be 6.2*78/54 = 8,955 packs/week.

If cell supply remains the main constraint for the next two quarters then I believe Tesla is going to tweak pricing and options mix to maximize margins - which would put the output probably about halfway between 6.2k/week and 8.9k/week - i.e. to around 7.5k/week, which is close to the low-capex maximum capacity of Fremont.

Shifting demand mix to more than ~50% towards SR won't make sense beyond that point, because then the primary constraint would be Fremont capacity. Also, Tesla will likely continue to serve the very lucrative European and Chinese markets, which can only buy the 2-3 highest ASP configurations for now.

I.e. building new capacity in Shanghai (Model 3 capacity in 2019) and in the Reno Gigafactory (Model Y in 2020) is the key to Tesla expansion - Fremont and Reno is the "capex printing machine" until those projects start ramping up.