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

[Causalien]

"Seamless Navigate on Autopilot" is now rolling out to the wider fleet:

Introducing a More Seamless Navigate on Autopilot​

"Today, we’re beginning to roll out our latest version of Navigate on Autopilot for a more seamless active guidance experience. In this new version, drivers will now have the option to use Navigate on Autopilot without having to confirm lane changes via the turn stalk."

"Through our internal testing and Early Access Program, more than half a million miles have already been driven with the lane change confirmation turned off."​

Since this is part of the FSD option it should increase the $3k+$5k FSD take rate in Q2.

These are 100% margin options, so should improve margins across all configurations.

Can they actually recognize these revenue in GAAP, that's the question.

 

[neroden]

I expect the next two months to be LR exports to China and Europe again, which should work through the backlog in those regions (not including RHD countries), and another all-US push in June, and then RHD or SR/SR+ or both to Europe in July/August. Probably back to US in September again, maybe not. Either way Q3 financials will look ugly; big hangover and lower price mix. SR probably not to China until local production starts in Q4.

Same pattern in Q4 for Europe/US, probably, with another tax credit expiration. 525 mil bond payment too in Q4 2019. Prob. Low starting deliveries in China.

Q1 2020 should look ugly too due to hangover. Euro backlog should be cleared. Q2 2020 should show organic demand levels... Finally.

Financials remain limited by inability to produce model 3 fast enough IMO. If they really get the rates up, Euro backlog could be cleared before Q4 and China in Q4; might have to start delivering those Brazil reservations. But that would be better than being stuck at these lower production rates.

S/X underluing demand is unclear, but should bounce back in Q2 and then drop in Q3 and then rise again in Q4 and drop again in Q1 2020 due to tax credit effects. S is getting old as a design, and no refresh is planned; there might be a big "last chance to buy the S" sales push and no new S for a year, even. The design shape is so perfect I hope they keep making it but changing the design internals to use the new cheaper to produce Model 3 design techniques requires redesigning nearly everything but the shape.

 

[M3Rider]

If Tesla decided to take a one time hit to build US inventory pipeline, that might explain not taking the hit to build Euro delivery "steady" pipeline yet. They should be able to take that hit in Q2 unless they need to another tax crdit expiry EOQ rush in the US. Anyone got guesses as to whether they will? Bet they will.

Well, our prior assumption was that Q1 "tiny profit" would be due to filling up Euro pipeline with Elon hinting early on in the quarter about ~10K in transit cars at EOQ. However, it turned out that there was no attempt to fill the pipeline with all the ships arriving to their destinations prior to EOQ and no new ships being on the way. Nevertheless, Elon correctly predicted 10K in transit although it happened due to ship weather delays, customs issues etc. With only one ship being late to China and partially one European ship being late to Norway it seems that international hold up is likely not more than 4-5K, with the rest being N.A. in-transit.

When I saw that no new ships were departing in March, my first thought was that they decided to fill the pipeline gradually - like add 1 ship per quarter to the pipeline, so that the 1st one arrives a week late, the next quarter they have 2 ships - one arriving a week late, another 2 weeks late for the quarter etc. That would allow them not to take a huge hit in 1 quarter, but possibly maintain profitability in each quarter and slowly fill the pipeline. However, it seems the plan for this quarter was no ships in transit. I think it was a good guess of Elon that enough logistics issues would pile up to cause a 10K in transit. Going forward, I'm thinking they need to balance market/investor expectations versus their most efficient way of going forward, so with subpar Q1 results it's not a good idea to fill the whole international pipeline and take a 20-30k "in-transit" hit...market would not take it well I think. So, either 1 ship per quarter going forward or they skip filling the pipeline in Q2 alltogether to let everybody chill after seeing OK Q2 numbers.

 

[Antares Nebula]

Not advice, but my two cents is to be very careful tomorrow. I mean this seems like such a miss, but really it was only a 10k total miss (5k, 5k). The easy and obvious thing to do is sell or short tomorrow. And I'm tempted to (buy puts say), but it's never that easy in the market. How low will it go? It already fell significantly from 380 to 250s, flushing out all the weak hands. Bad news was kinda priced in and expected. Phil Lebeau on CNBC today said that 55k M3s would rally the stock. With such low expectations, how much more further can it fall? Will it break the recent 254 low? I'm not so sure.

But I will not be surprised with any outcome. This result may cause new yearly lows or we may stabilize at 270 or higher. Impossible to predict really. And there is the whole SEC thing too. Patience over hasty actions may be the wiser play. Not advice of course, JM2C.

 

[StarFoxisDown!]

If they really do start to ramp up TE deployments, it would be great if they announced those quarterly at the same time as vehicles numbers. Would help offset the usual spin from the media.

Also.....man did the FSD event become really really important to the share price very quickly lol

 

[Causalien]

I will say this: Q2 P&D report can't come soon enough. Can somebody put me in a coma and wake me up in three months?

LOL. Ya...

We may see $250 tomorrow. Then who knows, maybe SEC wins the lawsuit. Hey, not the first time that the worst case scenario happens with TSLA.

 

[neroden]

To everyone panicking about demand and demanding ads: look at in-transit numbers. 10,600 vehicles in transit. That means, of the Model 3’s produced during the quarter, a total of between 1,450 and 3,500 weren’t spoken for by EOQ. And S/X was 0-2,050(and, of course, if you assume either of those was on the high end of the range, it means the other was just as far on the low end).

You have to add the 7000 not delivered at the end of Q4 2018 (not sure of thw 3/S/X breakdownof those) so more than that not sppken for at EOQ Q1. So around 10k not spoken for, which fits with under "two weeks" of Model 3 production as stated. Suspecting the inventory is heavily biased towards S actually, but cannot prove it.

Given that I figured total demand for Model 3 in US roughly 5000/week, but I guess 1/3 of that was pulled forward to the MR from March (LR hangover probably ended end of Feb) so I think 1.3 weeks inventory buildup is about what I expect. We should start to see wait times in the US rising in mid to late April.

Part of the inventory is IMO due to Tesla guessing interior color preferences wrong, too much black not enough white, which thay can correct when they restart US production

 

[Drumheller]

I think the biggest silver lining here is that expectations for Q2 may be lowered significantly allowing for an eventual significantly upward surprise, especially if it's enough to secure S&P addition.

I'm not sure about that. The letter reaffirmed yearly guidance of 360k to 400k model 3s (if I read that correctly)

There is also the tax credit drop off again on July 1st. So I think those two things will keep expectations higher for Q2


My question is: is there a production or a demand problem? I disagree with the sentiment of this thread in some ways. The FUD is working on people that dont follow Telsa. Most of my family is in the midwest USA and buying a Tesla is not an option to them. The FUD has worked on them, despite me owning a Model S for years that several of them have driven.

I dont know if the answer is advertising, but somehow Tesla needs to be actively putting facts out to a larger audience to refute FUD. Too many people still believe the mainstream media.

 

[AZRI11]

I will say this: Q2 P&D report can't come soon enough. Can somebody put me in a coma and wake me up in three months?

Guaranteed to fall asleep for at "least" 3 months

 

[MP3Mike]

I'm not sure about that. The letter reaffirmed yearly guidance of 360k to 400k model 3s (if I read that correctly)

It says "We reaffirm our prior guidance of 360,000 to 400,000 vehicle deliveries in 2019." I read that as total vehicle deliveries, if they were only talking about Model 3s I would think they would have said that instead of using the generic word vehicle.

 

[Nuclear Fusion]

AutoPilot and FSD take rates were not disclosed but could further improve margins over Q4 levels, despite the price drops.

Also Model Y & Model 3 SR deposits

 

[Thekiwi]

Yes, but China would have a significantly higher proportion of SR/SR+ sales, due to:

• lower purchase power,
• the 15% import tariffs,
• EV incentives only available to cars made in China,
• lower GF3 ASPs, which could be below $30,000 later on while still generating 25% margins. Both labor and materials costs are significantly lower.

So once GF3 is fully ramped up I'd expect over 90% of Fremont capacity to go towards North America and Europe.

One wonders how long Shanghai will remain SR only. Presumably they will also be producing SR+ there? And then if there is little difference between SR+ and the LR, why would Tesla stick with importing from US and having the 15% tariff applied?

 

[Pezpunk]

So investors can start selling their TSLA at 4 a.m. ET? Looks like Charles Schwab won't let me start selling untill 7 a.m. ET. WTF!?

ah, taking a "sell low" strategy, eh?

 

[RobStark]

One wonders how long Shanghai will remain SR only. Presumably they will also be producing SR+ there? And then if there is little difference between SR+ and the LR, why would Tesla stick with importing from US and having the 15% tariff applied?

For the same reason Mercedes,Audi, and BMW import their premium models into China.

The buyers of premium cars in China want cars made in the West and not China.

 

[Antares Nebula]

Yes, but:

• Raising cash would come with its own set of problems.
• Note how one of their biggest delivery problems is China, where they are not cash constrained to grow and build GF3.
• Even in Q1 they possibly generated 1b+ of cash from operations - so these final 2 weeks of March were basically a one time event that won't ever repeat.

Also note that even after raising cash the optics of 20k+ vehicles in transit would be bad - the market doesn't accept them as the cash equivalent instruments they are.

So I still maintain that raising cash now is unnecessary and counterproductive: probably all the one time costs of not having higher cash levels are paid already in essence.

@Fact Checking what do you think is the cash balance? I'm guessing 2 - 2.5B

 

[Fact Checking]

Well, our prior assumption was that Q1 "tiny profit" would be due to filling up Euro pipeline with Elon hinting early on in the quarter about ~10K in transit cars at EOQ. However, it turned out that there was no attempt to fill the pipeline with all the ships arriving to their destinations prior to EOQ and no new ships being on the way. Nevertheless, Elon correctly predicted 10K in transit although it happened due to ship weather delays, customs issues etc. With only one ship being late to China and partially one European ship being late to Norway it seems that international hold up is likely not more than 4-5K, with the rest being N.A. in-transit.

I don't think anyone expected the international pipeline to be filled completely: doing so at 5k/week production, with 35 days delivery delays would have added about 25k in-transit vehicles from the Model 3 pipeline alone.

So the assumption was always that Q1 would fill the pipeline partially, which is exactly what happened with 10k units in transit.

Also note the other one time risks: the China customs holdup was only resolved by March 14. Had they kept sending ships they'd have risked 20k+ units in transit stuck in customs alone ... Likewise part of the EU delivery pathways were not tested before in such volumes.

Should be much smoother in Q2.

 

[sundaymorning]

They were clearly conserving cash in March, as @schonelucht correctly speculated.

They could have made EU and China units and could have kept putting them on ships but didn't: doing so might have increased Model 3 production from 61k to 71k but would have ballooned in-transit from 11k to 21k, which would have consumed up to a billion dollars of cash.

End of Q1 cash levels could still be around Q3 levels, despite the $920m debt repayment. With 20k+ in-transit they'd have risked Q2 levels, with bad bankwuptcy optics.

This is precisely it. There’s still a lot of levers that could be pulled for demand: leasing, Standard & plus hasn’t been introduced to Europe or China yet. Looks like Q1 was a wash to setup for the rest of the year.

 

[CyberDutchie]

Let’s face it, Tesla f’ed up Q1 big time and Wallstreet is smelling blood:

Given so much attention on Tesla’s cashflow and liquidity, many expected Tesla to try to calm the market by disclosing the quarter end cash figure. Tesla only said it has ‘sufficient’ cash on hand but did not disclose a precise figure or range... leaving bears to continue to question the firm’s financial strength and potentially adding to uncertainty with customers and suppliers.

 

[Thekiwi]

It says "We reaffirm our prior guidance of 360,000 to 400,000 vehicle deliveries in 2019." I read that as total vehicle deliveries, if they were only talking about Model 3s I would think they would have said that instead of using the generic word vehicle.

I agree - Q4 earnings letter said:

“In total, we are expecting to deliver 360,000 to 400,000 vehicles in 2019, representing a growth of approximately 45% to 65% compared to 2018“

Clearly they are talking about total vehicles (S/3/X) as the “45% to 65%” comparison figures line up with total S/3/X sales for 2018 (245k).

 

[kyzhk]

OT, US Tax/option expert:

Haven't had a chance to harvest paper losses until now (short puts assigned ~$330 earlier this year).

I think I would be able to sell these $TSLA shares at a loss, and sell >30days expiration OTM put options at the same time. This should not trigger wash sale (assuming I am not assigned within 30days), correct?