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

[Usain]

My problem with modeling Tesla Energy is that I’ve got no idea what the gross profit will be per GWh of battery deployed.

However, considering that nearly the entire market assumes that Tesla Energy will continue to make no profit for years despite the Lathrop production ramp happening means Wall Street earnings estimates are even more ridiculous.

This is my whole reason for investing in Tesla in the first place. The car business is good on its own, but energy storage is where it's at.

Tesla Energy is possibly the most underrated investment of all time. And Wall Street doesn't even try to cover it.

As long as the future of storage is in the form of a battery cell, Tesla will dominate the market. I used to think other non-cell storage schemes had a chance to compete. I don't think so any more.

 

[Gigapress]

IF robotaxis doesn't become viable in the next 2-3 years Tesla will run out of customers that can or want to pay 60k+ for even an EV car. I believe price will be a limiting factor somewhere around 4-5 million cars. This is only about 3 years out and with Elons track record for estimating when robotaxis will be ready it is far from certain they will be ready before then.

By the way if Elon really is convinced it will be Tesla better have started some work on robotaxi cars by now. Just like they better have started some work on whatever the next volume vehicle that is not a robotaxi will be.

But there IS a limit to how many expensive cars can be sold. No matter how good or luxury they are.

If Cybertruck catches on, it could easily sell millions of units in the USA and Canada alone. In North America pickup trucks and SUVs outsell the rest of the vehicle market combined. It’s more than 10 million trucks and SUVs per year in the US alone. Thus far Tesla has captured ~30% market share in the USA in every segment they’ve entered (large luxury sedans, large luxury SUVs, midsize luxury sedans, midsize luxury crossovers). Americans and Canadians will pay ridiculous money they don’t even have to buy big trucks and SUVs. There’s plenty of market for a $60k Cybertruck, especially considering the fuel and maintenance savings compared to an F-150 or Tahoe.

Also, Tesla vehicle longevity increasingly is being recognized by customers. Tesla Economist has discussed this recently. If the new batteries and powertrains actually can last for decades of typical use, and if the crash avoidance software continues to improve so that becomes less likely as a cause of the car’s demise, then the amortized lifetime ownership cost of having a $60k Tesla could actually be quite low.

If it can be reasonably expected to last 20 years and 300k miles and remain in good condition (conservative in my opinion) then the amortized annual hardware cost is $3k and the per-mile hardware cost is $0.20/mile. The vehicle might last even longer, especially for deterioration caused by driving instead of time/weather. There would be more costs such as tires, registration fees, insurance, and maybe getting a fresh paint job and interior refresh, but overall it’s cheaper than the total cost of ownership of an average car today which is usually $0.60/mile for something like a Honda CR-V or Toyota Camry.

One owner doesn’t necessarily need to own the car that long for the longevity to affect the marketplace. It would show up in the slow depreciation and favorable resale value. Or, leasing may become more popular. Tesla could own the car for 20 years and lease it for like $300/month while still making excellent profit margins because if the vehicle only cost Tesla $40k to produce and deliver, their average monthly cost would be around $200/month. $300/month lease is about the average for the car market right now and far below typical prices for luxury car leases.

 

[Usain]

That was 15 months ago. Perhaps the Lathrop facility (along with ample chips and batteries) will generate the needed scale to achieve 30% margins on the Megapacks. At some point this will come; when is difficult to say.

The R&D effort to create cheaper battery storage is enormous. Everyone knows that this is the key to a sustainable future, so all the cool kids are working on it and the cool research dollars are being spent on it. Tesla doesn't have to be the one to pioneer lower costs on batteries. Tesla will still benefit. Just look at LFP cells for example.

Cell costs will continue to fall for a long time. Combine that with economies of scale from ramping and that's where you easily get your high margins on Megapacks.

 

[StealthP3D]

How about that "margin" and "profit" are not Tesla's stated mission. If they are trying to accelerate the transition to sustainable energy/transport then they trying to remove the maximum number of unsustainable vehicles from use. So they should be making vehicles that use the minimum amount of whatever the limiting item is. They've said that's chips now and batteries soon.

Sounds like making smaller, simpler cars is what the mission demands, now that they're profitable and have ensured their future. Of course nobody here knows the relative importance of the mission vs. profits. Me, I'm continuing my naive belief that the mission is what's driving Tesla.

In the real world, you will find that a compact EV at a low price does not replace a luxury gas guzzler, it replaces an economy car. By continuing to produce cars in the luxury price segment Tesla can continue to replace as many luxury cars and SUV's as possible.

The biggest reason Tesla shouldn't go down market any sooner than dictated by market demand is that the current business model of producing as few models as possible allows the fastest, most efficient expansion of production capacity while generating the most free cash for further rapid expansion. It's all about efficiency.

Sure, Tesla has people working on cheaper, compact car concepts, but they will not be put into production until it's advantageous to the overall mission.

 

[SOULPEDL]

Is this going to be the usual pump and dump on earnings? The setup looks the same - rising in anticipation, then selling the news on earnings FUD attacks, then after a couple days it's back pushing even higher (especially with volume ramps underway).

What's different this time? Does anyone think it's back to 699 this week briefly?

 

[AudubonB]

"This process sucks. Here is how we can do it better."
"Sorry, that will piss off Debbie/Keith in position XYZ so we can't."

I've had this conversation countless times in my years as a Utility consultant. A company like Tesla coming in and cleaning house would be very enjoyable for me to watch.

You’ve spent years as a Utility consultant?

Can we take up a Misery/Hardship collection, please?

 

[woodisgood]

Anyone know if NHTSA’s newest “investigation” into a 2021 crash involving AP and a motorcyclist is Chuck Cook’s incident?

 

[henchman24]

Is this going to be the usual pump and dump on earnings? The setup looks the same - rising in anticipation, then selling the news on earnings FUD attacks, then after a couple days it's back pushing even higher (especially with volume ramps underway).

What's different this time? Does anyone think it's back to 699 this week briefly?

If there is an earnings that has a good chance of generating major FUD... this is the one. Lots of headwinds where the results could come in low.

That said, this is also the quarter that slightly better than expectations could really set the rocket off. Markets being forward looking could say, 'Well this is as bad as it gets and they still made $2 EPS! Must mean $4 is happening soon!' That could set off a whole buying streak.

I think it will be the former, hoping for the latter.

 

[Dreadnought]

Anyone know if NHTSA’s newest “investigation” into a 2021 crash involving AP and a motorcyclist is Chuck Cook’s incident?

Don't think so. The Reuters article refers to an accident on July 7. Chuck's encounter was more than 3 months ago.

 

[MP3Mike]

Anyone know if NHTSA’s newest “investigation” into a 2021 crash involving AP and a motorcyclist is Chuck Cook’s incident?

Highly doubtful, as he said his video clearly showed the wheel coming off of the motorcycle before anything impacted his vehicle.

 

[Mengy]

If there is an earnings that has a good chance of generating major FUD... this is the one. Lots of headwinds where the results could come in low.

That said, this is also the quarter that slightly better than expectations could really set the rocket off. Markets being forward looking could say, 'Well this is as bad as it gets and they still made $2 EPS! Must mean $4 is happening soon!' That could set off a whole buying streak.

I think it will be the former, hoping for the latter.

I think it will be the former too. Q2 earnings will certainly be less than Q1 and that is all the data the FUDsters will need to spin into overdrive.

Of course for the well informed it shouldn't matter because we know where Tesla will be in Q3 and from there on out, Q2 is just a blip along the way and was no fault of Tesla's by any means. But the TSLAQ will try their best to seize on this rare opportunity, count on it.

 

[Tim S]

Thanks for the heads-up.
TE actually arrives at $2.00. He does an "experiment" at the end of his video reducing margins by 1% and arrives at $1.90 to note it is still above WS consensus. So I will go with $2.00 as his official forecast for the quarter.

Also - There are conflicting reports on consensus. We have seen $1.73 reported but Gary Black has it at $1.84. I will go with Gary's number for now until there is more clarity here.

View attachment 829697

FYI ETrade (Morgan Stanley) says consensus is $1.83...

 

[M|S|M MYP]

Is this going to be the usual pump and dump on earnings? The setup looks the same - rising in anticipation, then selling the news on earnings FUD attacks, then after a couple days it's back pushing even higher (especially with volume ramps underway).

What's different this time? Does anyone think it's back to 699 this week briefly?

So go to sleep and come back next week?

 

[AudubonB]

If Cybertruck catches on, it could easily sell millions of units in the USA and Canada alone. In North America pickup trucks and SUVs outsell the rest of the vehicle market combined. It’s more than 10 million trucks and SUVs per year in the US alone. Thus far Tesla has captured ~30% market share in the USA in every segment they’ve entered (large luxury sedans, large luxury SUVs, midsize luxury sedans, midsize luxury crossovers). Americans and Canadians will pay ridiculous money they don’t even have to buy big trucks and SUVs. There’s plenty of market for a $60k Cybertruck, especially considering the fuel and maintenance savings compared to an F-150 or Tahoe.

Also, Tesla vehicle longevity increasingly is being recognized by customers. Tesla Economist has discussed recently. If the new batteries and powertrains actually can last for decades of typical use, and if the crash avoidance software continues to improve so that becomes less likely as a cause of the car’s demise, then the amortized lifetime ownership cost of having a $60k Tesla could actually be quite low.

If it can be reasonably expected to last 20 years and 300k miles and remain in good condition (conservative in my opinion) then the amortized annual hardware cost is $3k and the per-mile hardware cost is $0.20/mile. The vehicle might last even longer, especially for deterioration caused by driving instead of time/weather. There would be more costs such as tires, registration fees, insurance, and maybe getting a fresh paint job and interior refresh, but overall it’s cheaper than the total cost of ownership of an average car today which is usually $0.60/mile for something like a Honda CR-V or Toyota Camry.

One owner doesn’t necessarily need to own the car that long for the longevity to affect the marketplace. It would show up in the slow depreciation and favorable resale value. Or, leasing may become more popular. Tesla could own the car for 20 years and lease it for like $300/month while still making excellent profit margins because if the vehicle only cost Tesla $40k to produce and deliver, their average monthly cost would be around $200/month. $300/month lease is about the average for the car market right now and far below typical prices for luxury car leases.

The flaw, alas, in the above is that Tesla never has achieved the base rate prices it has pre-announced, with the meaningless exception of the original Roadster and a minuscule, equally meaningless number of $35,000 Model 3s. Were I someone who places bets, I would wager that Tesla never will sell a CT under the mid-80k mark, few under $90k, and a mean price for the first, say, three years’ production at $95k. I brook no exceptions or adjustments for “But FSD,” “But Other Options,” or “But inflation.”

 

[M|S|M MYP]

The flaw, alas, in the above is that Tesla never has achieved the base rate prices it has pre-announced, with the meaningless exception of the original Roadster and a minuscule, equally meaningless number of $35,000 Model 3s. Were I someone who places bets, I would wager that Tesla never will sell a CT under the mid-80k mark, few under $90k, and a mean price for the first, say, three years’ production at $95k. I brook no exceptions or adjustments for “But FSD,” “But Other Options,” or “But inflation.”

I guess we should be lucky then that $TSLA will make us enough $$ to buy a CT without having to worry about the prices

 

[SOULPEDL]

I think it will be the former too. Q2 earnings will certainly be less than Q1 and that is all the data the FUDsters will need to spin into overdrive.

Of course for the well informed it shouldn't matter because we know where Tesla will be in Q3 and from there on out, Q2 is just a blip along the way and was no fault of Tesla's by any means. But the TSLAQ will try their best to seize on this rare opportunity, count on it.

Ya, and where's that MMD today? Saving their float tokens for later in the week is my hunch.
Feeling like 800 is possible ahead of earnings. But wow, where did the 1,000 calls come from? Is that new?

 

[Gigapress]

The flaw, alas, in the above is that Tesla never has achieved the base rate prices it has pre-announced, with the meaningless exception of the original Roadster and a minuscule, equally meaningless number of $35,000 Model 3s. Were I someone who places bets, I would wager that Tesla never will sell a CT under the mid-80k mark, few under $90k, and a mean price for the first, say, three years’ production at $95k. I brook no exceptions or adjustments for “But FSD,” “But Other Options,” or “But inflation.”

I agree with that completely. I was just responding to the idea that Tesla probably couldn't sell 5+ million cars per year at $60k. Cybertruck at $60k would dominate the market. For at least the next 5 years, I expect CT average pricing closer to Model S & X because of high demand and low supply.

 

[Christine69420]

I might not be alone in making my own estimates for Tesla production and financial results. But with no background in this I don't think they are even close to publishing quality. So I'll keep them private.

But in my most optimistic for Q2 scenario I end up even higher than Tesla Economist in his original estimate before whoops'ing. And that is mostly based on this image from the October 2021 Earnings Call:

View attachment 829682

And this quote from the Q1 Update:

Energy storage deployments increased by 90% YoY in Q1 to 846 MWh, mainly
driven by strong Powerwall deployments. As demand remains substantially above
capacity, growth has been limited by ongoing supply chain challenges. We are in
the process of ramping production at a dedicated Megapack factory to address the
growing demand.

This potential is slowed by the infamous chip shortage but still make me exited.

There is also this article with inside sources that I tend to put in the rumour category but also include in my most optimistic scenario going forward:

Tesla set to introduce larger Megapacks this quarter, targeting to grow Megapack production to nearly 50GWh by 2023

And the quote I like - from January the 7th:

With the help of the Lathrop Megafactory, Tesla is targeting to increase their annual Megapack production capacity to a massive 50GWh by the end of next year.

The figure was revealed during an all-hands Tesla Energy division meeting late last month, the details of which were shared with Drive Tesla.

According to our source, almost half of that capacity will be available this year – 20.73GWh by the end of 2022.

 

[ByeByeJohnny]

I agree with that completely. I was just responding to the idea that Tesla probably couldn't sell 5+ million cars per year at $60k. Cybertruck at $60k would dominate the market. For at least the next 5 years, I expect CT average pricing closer to Model S & X because of high demand and low supply.

I will eat ... something ... if Tesla produces more than a 500k Cybertrucks per year by 2025. So largely irrelevant to the discussion. As is the Roadster.

 

[AudubonB]

I agree with that completely. I was just responding to the idea that Tesla probably couldn't sell 5+ million cars per year at $60k. Cybertruck at $60k would dominate the market. For at least the next 5 years, I expect CT average pricing closer to Model S & X because of high demand and low supply.

Fair enough; I’m happy you agree. Your post delved so deep into amortized costs and annual expenses that it seemed you were on board that $60k price point. And….@Electroman AND @StealthP3D need tell me their preferred charities were I to lose that bet (except I weaseled out by saying ”WERE I a betting man…”, so they need tell me why they disagree).