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

[Thekiwi]

Does anyone know more about the point @Thekiwi brought up about the impact that the drastic shift in US$ exchange rates will have on 2023 vehicle pricing? I'm not even sure how to start researching this one but it's important because it looks like it could materially affect gross margins in Q4 and next year.

What I'm mainly wondering:

1. To what extent is Tesla hedged against forex changes, if at all?
2. How much of this is mitigated by the fact that most of Tesla's sales outside the US are coming from Berlin and Shanghai and so the costs are in yuan and euros?
3. What reasons might Tesla have had for not updating local prices in response to in some cases 20%+ swings in exchange rates in the last six months? I mean if I can actually buy a Tesla in New Zealand for the equivalent of US$38k right now before sales tax, what's stopping people or companies from buying them in bulk and shipping off to resell in the US for a $20k profit? I don't understand.

Tesla's 10-Q says they generally don't hedge forex risk.


I found @unk45's post about this, but I don't know how to attempt to translate this to ASP and COGS forecasts.

Just in regards to importing from another country:

For NZ/AUS -> North America in particular it wouldn’t work easily as its LHD vs RHD models (and also uses a CCS plug). I have no idea how much a conversion to LHD would be, and I suspect that would invalidate warranty. This protects tesla against grey market export impact from those markets. However China itself being LHD (like North America) would be a candidate for acquiring cheaper teslas to export to USA to try and arbitrage the price difference. I have no idea what Tesla has in place to discourage that.

One other thing to remember is the prices I gave for New Zealand were with sales tax removed to show the amount that tesla receives, one would need to pay that sales tax of course to acquire the vehicle for export. So the price is closer to $44k USD, and then their is the delivery fee locally, plus the cost to export it to USA.

Also I am talking about the SR model here - so its not apples to apples Vs the LR USA model Y.

 

[StealthP3D]

BMW , Mercedes. and VW are arguably among the most desired cars in the world with high sales. All three used slave labor during WW2. Memories are short. Tesla is a company with an eccentric leader. we all knew it when we bought in. This too shall pass.

Memories are not short. This is delusional because the allied forces didn't stop until they took down the Nazi regime and completely neutered their power. To the credit of the allied forces, they did not punish the German people but developed a plan by which they could strengthen their economy so they could afford to make reparations. The Russian people are not the bad actors here; Putin and his cronies are. The Nazi regime did not have nuclear weapons so a show of overwhelming force was the correct move (and even that required patience for the right time to act).

Putin will eventually get what he has coming but Elon has recognized that now is probably the time to de-escalate before Putin thinks his best option is a nuclear exclamation point. That serves no one. Putin's days are numbered and it's best to let this play out without nuclear escalation. Past wrongs will be remedied as Russia continues to lose influence and their oil-based economy collapses. Time is not on Putin's side. Let him hang himself and sort it all out later. That's all I see Elon saying and I think he's right. It's time to take a break while the clock continues to tick.

 

[M|S|M MYP]

I like our chances even more now:

 

[Gigapress]

Volkswagen was started as project run by a Nazi government organization called the German Labor Front, which unilaterally took over all trade unions in Germany, ransacked their offices, destroyed a bunch of their property, stole their assets and in some cases beat and murdered union officials. Adolf Hitler himself became directly involved in the project out of a desire to produce a "people's car" (volkswagen later became the name after WWII) that any German could afford (with tax subsidies and government-run production, since it wasn't a commercially viable idea at the time). Hitler worked with Ferdinand Porsche to design and build the first factory, which is now VW's flagship Wolfsburg plant. During the war, they filled the production line with slave labor from the concentration camps, 15 thousand enslaved people in total, and used the factory to produce utility vehicles for the Wehrmacht.

I don't think you can get more universally unpopular than Hitler and the Nazi party, but that hasn't stopped Volkswagen and Porsche from becoming financially successful. Granted, the British Army was in charge for several years after the war and arguably it was a new company after restarting, but VW did not admit to how many people the company had enslaved or agree to pay restitution until 1998 when they got a class action lawsuit from a group of survivors. Also, in more recent times, VW leadership actually committed mass murder via serious emissions testing fraud, and yet they're still selling cars people are buying. Some people cared enough to stop buying, but obviously millions of people haven't, seeing as VW Group's all-time high sales occurred in 2019. Humans have short memories and don't care about abstract social issues like this as much as we might imagine.

Volkswagen got caught committing mass murder, harming people with asthma and other breathing problems, etc, yet in 2019 they sold 11M vehicles and in 2021 they achieved an all-time high operating income of $26 billion. Elon sometimes sends controversial tweets that are upsetting to people, and some of them I wish he would hit "delete" on his draft instead of "send". However, if the crap that VW has done and other auto companies have done (look up the history of GM, Ford, et al.) hasn't stopped them from selling millions of cars and raking in billions, I really struggle to see how some unpleasant tweets and occasional broadcasting of confidently incorrect opinions are somehow going to slow down Tesla as much as a lot of people are worried about.

I think we also need to bear in mind most of us and our friends and family are among the world's 1% or even 0.1% richest. Most people in the overall car market are buying what they can afford, that performs their desired functions, that looks and feels acceptable to their tastes. Maybe they care about safety too, or whether the vehicle will help them get laid. Making a social statement or moral stand with a product as expensive as a car is a luxury for the wealthy, especially for a product like Model Y or Cybertruck that's overwhelmingly better at satisfying most people's preferences than any competing product. If all else fails, Tesla is now at a point where they could dominate with nothing more than selling to cost-conscious, high-volume, lower-end segments such as small crossovers, vans, small sedans, and pickup trucks for fleet buyers. Nobody can compete with Tesla on total cost of ownership for a BEV. They'd get thinner gross margins but 10-20x more sales volume.

In any case, my bet is that the Model Y is still going to be the best-selling vehicle in California and Norway again in October. And the month after that, and the next...

 

[lafrisbee]

Dang?
SNAP!
This from my twitter sojourn
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John W. Rich (Fake Tech Exec)

@Cokedupoptions


Elon Musk weighing in on Russia/Ukraine since he is an expert in failed takeover attempts"

 

[Gigapress]

Elon does not partake in 420. He has explained this in two interviews I've heard. He went into depth about it recently

Anyone knowledgeable about 420 could tell immediately when he took a puff from Joe Rogan's joint and clearly didn't know how to do it right. One of my biggest investment tranches in 2018 was in the aftermath of the media and stock market overreaction about that.

 

[StealthP3D]

Does anyone know more about the point @Thekiwi brought up about the impact that the drastic shift in US$ exchange rates will have on 2023 vehicle pricing? I'm not even sure how to start researching this one but it's important because it looks like it could materially affect gross margins in Q4 and next year.

What I'm mainly wondering:

1. To what extent is Tesla hedged against forex changes, if at all?

I take Tesla at their word when they say "Accordingly, changes in exchange rates affect our revenue and other operating results as expressed in U.S. dollars as we do not typically hedge foreign currency risk." Unless Tesla instructs differently in the future, I would assume no hedging of foreign currencies.

1. How much of this is mitigated by the fact that most of Tesla's sales outside the US are coming from Berlin and Shanghai and so the costs are in yuan and euros?

That will mitigate the currency fluctuations to some degree, but the profits get converted to USD and that's where the biggest negative impact is when the local currencies decline relative to the USD.

1. What reasons might Tesla have had for not updating local prices in response to in some cases 20%+ swings in exchange rates in the last six months? I mean if I can actually buy a Tesla in New Zealand for the equivalent of US$38k right now before sales tax, what's stopping people or companies from buying them in bulk and shipping off to resell in the US for a $20k profit? I don't understand.

There are all kinds of issues with importing new cars from New Zealand and I am not familiar with any of them. I doubt it would be a profitable way to deploy capital. $20K would likely not be enough to cover all expenses and Tesla would find out and stop selling to anyone importing vehicles. When you buy a vehicle from Tesla you agree that the purpose of the purchase is for your own use, not to re-sell it. I don't think Tesla would take legal action, but they have every right to blacklist you from continuing the practice. And that assumes the car would even be legal "as is" when it's imported. I don't believe it would be. The steering wheel would be on the wrong side, it would have the wrong kind of charge port and that's probably just the tip of the iceberg.

 

[BioSehnsucht]

Not really. Ukraine is propped up by the rest of the West. If the US & NATO choose to stop supplying arms to Ukraine, they can't hold out too long.

So Elon is trying to sway public opinion against the war to see if our politicians follow.

The west likely prevented a "victory" for Russia, but at the same time, without the west, it's likely Russia would have "enjoyed" a situation similar to Afghanistan (even without active CIA meddling), with a persistent guerilla resistance and unfriendly local population. It's not impossible that Russia would have lost more in the long run than a swift defeat now would bring, just looking at the military assets and such, but with a better ability to resupply and reinforce, they might not feel that way. Might have been worth the trade if the rest of the world resumed working with them though, economically, depending on what they were able to squeeze out of the Ukraine.

At this point I think that short of nuclear war (in which case everyone gets ****ed, especially including Russia), Russia has pretty well blown things in general. The only way they recover economically is going to be with some serious regime changes, so that the rest of the world is willing to work with them again. The long term effects of their failing war in the Ukraine is going to hurt them more than militarily, and they were already on shaking ground economically if you look to a future that doesn't require Russian energy resources.

Hopefully Putin doesn't push the button just because he'd rather watch the world burn than "lose", but that may require his own people to prevent catastrophe. And while clearly many are sane (notice the fleeing men of military age), that doesn't mean the people they have manning the silos and subs (assuming their threats are feasible and the arsenal hasn't fallen into disrepair as some claim, which would make the rest moot) aren't properly "motivated" or "educated" to follow orders blindly, or at least sufficently treated as mushrooms (kept in the dark and fed BS) / gaslit.

 

[Tommy O]

Used prices on Teslas from their website are crazy low right now.

Not to be a totally blind Tesla bull, but you can basically get a 2019 model 3 for $25k + $15k FSD right now, since FSD is included, excluding transportation costs of about $2k (for my area, where it's literally illegal to sell Teslas...one day, humans will grow brains).

Expecting all the OCD people to tear apart my wording there, but that's how it is. Tell all of your friends. Teslas for the people!

What's super funny is a lot of these 2019 Teslas are coming off lease and Tesla basically gets to sell the car some >1 multiple number of times because of this, with the way used car prices are. Heh. Heh heh. Surely this won't impact earnings!

 

[spacerfc]

Well that's actually been the likely outcome all along. Zelenskyy said early on that they would probably agree to 'peace' if things went back to where they were.

But I can see how some here will now try to turn that result into Elon saving the world.

No, if the war ended in a compromise, it wouldn't be Elon saving the world, but it would be another example of Elon having a good grasp of reality and can foresee the most likely outcome.

And if you think a compromise is the likely outcome, which is what Musk is proposing, why are you dunking on him in the first place???

 

[Artful Dodger]

We must have bottomed out if those polls didn't tank the stock further. Bullish?

Hedgies defended the -10% 'curcuit breaker' three separate times today. You only do that if you don't want the alternate uptick rule in place tomorrow. Not bullish.

I think hedgies + fossil fools think this is there last best chance to sink Tesla. Morons (c.f. JPMoargas $159 PT). They can not hurt Tesla, only TSLA. But they fantasize that Tesla demand only comes from fanbois w. all their earthly money in TSLA. They are wrong. Tesla hasn't even started to move down market yet to the fat part of the demand curve because they can build big expensive cars fast enough. Yet. But that's about to change.

Elon is thumbing his nose at Wall St. by ending the wave right now in the middle of the worst dual world-crisis in at least 30 years. I say, if you've sized your bets appropriately, this is just noise, not the end. We will win.

Cheers to the Longs!

 

[TN Mtn Man]

The west likely prevented a "victory" for Russia, but at the same time, without the west, it's likely Russia would have "enjoyed" a situation similar to Afghanistan (even without active CIA meddling), with a persistent guerilla resistance and unfriendly local population. It's not impossible that Russia would have lost more in the long run than a swift defeat now would bring, just looking at the military assets and such, but with a better ability to resupply and reinforce, they might not feel that way. Might have been worth the trade if the rest of the world resumed working with them though, economically, depending on what they were able to squeeze out of the Ukraine.

At this point I think that short of nuclear war (in which case everyone gets ****ed, especially including Russia), Russia has pretty well blown things in general. The only way they recover economically is going to be with some serious regime changes, so that the rest of the world is willing to work with them again. The long term effects of their failing war in the Ukraine is going to hurt them more than militarily, and they were already on shaking ground economically if you look to a future that doesn't require Russian energy resources.

Hopefully Putin doesn't push the button just because he'd rather watch the world burn than "lose", but that may require his own people to prevent catastrophe. And while clearly many are sane (notice the fleeing men of military age), that doesn't mean the people they have manning the silos and subs (assuming their threats are feasible and the arsenal hasn't fallen into disrepair as some claim, which would make the rest moot) aren't properly "motivated" or "educated" to follow orders blindly, or at least sufficently treated as mushrooms (kept in the dark and fed BS) / gaslit.

IMO Putin might have "gotten away with it" had he stuck with invading/occupying just the Eastern provinces of Ukraine with a majority of the population of Russian descent. Russia swept through those areas in a matter of a few days, before the Western nations mobilized tens of billions of dollars of military weapons, equipment and supplies, and before Ukraine could mobilize and launch effective counterattacks. The situation would have been fait accompli, much like Crimea, with the world community less inclined to react. He could have muddied the waters internationally claiming that people of Russian ancestry were being abused in those regions by Ukraine. More important, with regions adjacent to the Russian border, there would be much less in the line of logistics issues or vulnerable supply lines. Also, Russian forces could have been concentrated and set up strong defensive positions. Instead they were dispersed across much of Ukraine, with long, vulnerable supply lines. And the threat to the capital and attacks on other major cities galvanized the international community, leading us to where we are today.

I don't see a nuclear exchange in the works. Russia has too much to loose, first internationally; they will be a worldwide pariah, with a gutted economy (assuming other countries don't start lobbing nukes back, a thought too horrible to contemplate). Lets not forget that Russia is also downwind of Ukraine. Granted Putin has been behaving increasingly irrationally so I'm not putting money on that.

How do we get out of it? Elon is right-the more Putin is pushed into a corner the more desperate and irrational he likely becomes and the more likely to lash out. "Letting" Russia occupy a couple provinces could be less bad than the alternative, and could be addressed in the future as the situation stabilizes. Or...the Russian people can rise up and overthrow Putin. Of course, who knows if that leads to someone worse. Or he is assassinated, again, leaving a power vacuum. Putin being out and a more compliant leader opens the door to normalize relations with Russia. The Russian people aren't our enemy, it's the leadership that's the issue.

 

[Bet TSLA]

If it’s not about the money, why would you condemn Elon for giving his opinion about an end to this war?

That's easy. Because he wrecks his credibility by tweeting about things he knows little or nothing about. And, as an influential guy, it's his responsibility to not promote charlatans and nonsense.

This is undoubtedly Elon's best tweet today:

https://twitter.com/x/status/1576990025215983616

 

[heltok]

Ok, some thoughts on Elon's tweets and the reactions to them.

Imo Elon says what he believes is true and thinks is best for humanity, sometimes he is right, sometimes he is wrong. This time people reacted very strongly to him. People are pissed at Russia, they have killed, raped, tortured, pillaged, stolen, lied and all other sins. Ukrainians' temper is hot right now and they are tasting blood having had some success in the last months, they want to get revenge and teach Russia to never do the same thing again. Fair enough.

Here comes Elon, saying that Ukraine should consider stopping the war against Russia and give some concessions. They get pissed at this, they don't want to do anything nice to Russia which Russia doesn't deserve. Feelings run wild and the level of openness to whatever Elon is saying is very low.

The reactions to Elon I read are mostly on the form of:
"Elon is an idiot"
"Elon is wrong"
"Elon is influenced by pro Russians/Trump/Sacks"
"Elon should not talk about something he doesn't understand"
"Elon should apologize"
"We will never buy a Tesla again"
"So you're saying... that Ukraine should respect the Russian sham election/etc/etc"

Very low level of openness, very low on the refutation pyramid:

Maybe it's bad for Elon to kick the hornets nest. It's a very infected topic. But Elon is worried about Nuclear war and wants to prevent it so he just says his thoughts, not really caring how people react to it. That's the Aspie way, worrying more if a statement is true than if it's well received.

Maybe he is wrong, he is not the first person to ever be wrong. But the refutation has to come from a calm mind, trying to interpret what he says generously, using logic to help him find where is wrong and what the truth actually is. But this is hard to do, and right now feelings run wild. And twitter and other social media is a terrible place for debates and recently has become a cesspool.

What seems most likely is that emotions will run wild for a while. When they do people are physically unable to hear the other side. Emotions will calm down eventually. Then hopefully some good discussion will follow. Twitter is a terrible place for this, but maybe some good podcasts, substack tldrs or good old debate around the TV at home will follow in the next days where the central point will be discussed and maybe refuted, better supported, nuanced or at least understood.

 

[Bet TSLA]

FSD is not a solved problem yet, Tesla don’t want to rollout half baked solution just to impress people. No one knew what it would take to solve it, but if you watched FSD beta videos the past year, you know it came a long way and feels close.

I've been driving FSD beta for the past year. It has improved a little in most areas (and a lot in a few, and not at all in others) and doesn't feel at all close to ready for prime time.

Videos really don't tell you much.

 

[Artful Dodger]

Actually, I think the soft price was enabled by missing production numbers that were inflated after the Shanghai shutdown and the manipulators taking advantage of that fact. But if people want to credit Elon with it, I'm good with that too! ;-)

Welcome back. I'm sure you meant 'missing delivery numbers' which were inflated by the susual suspects. Tesla remains spectacularly on-track for +50% YoY deliveries.

And in 2023 we only need to get to 2.1M deliveries for another spectacular +50% year. And that's just deliveries: GAAP profits will ↑ > 100% due to Operational Leverage. And that's w/o TE.

And I'll give full credit to Elon for blogging about this plan over 6 years ago now...

Spectacular!

 

[PeterJA]

I haven't caught up yet so I'm sorry if this has been posted already. Dillon cheered me up alot.

 

[Artful Dodger]

This is not sustainable.
I just sold off ~15% of my remaining TSLA shares to cover yet another scary margin call and buy more call options.

Yeah, this is why Wall St. usually wins in the end. They know where your break point is. This is why Uncle Leo (and I) don't use margin, or invest money we need to live.

Hope your next long essay contains some life lessons about living with thieves. Sometimes, a quick, easy-to-understand aphorism is worth > 10K words.

Distill truth.

 

[Artful Dodger]

I want to remind everyone that last October, TSLA went from $254 to $403. Can't remember the specifics but I'm guessing there was a lot of anticipation for the ER,

No, it was triggered by the $4B Hertz fleet purchase (October 25, 2021, 7:11 AM EDT). TSLA gapped up that day, and that gap was not closed for over 7 months. Now, we're back below the SP before the Hertz announcement.

Wall St. lives off the churn, and is shameless about doing whatever they need to achieve it.

 

[ByeByeJohnny]

No, if the war ended in a compromise, it wouldn't be Elon saving the world, but it would be another example of Elon having a good grasp of reality and can foresee the most likely outcome.

And if you think a compromise is the likely outcome, which is what Musk is proposing, why are you dunking on him in the first place???

No, it wouldn't be Elon but you are obviously too new in this thread to know how some cats here would say it was.

And yes, If Elon backtracks on the 'voting' idea, which as many has said here has already been done 30 years ago with 90+% voting for Ukraine then he's in line with what many predicts. Never mind how utterly insensitive that idea was to begin with.

That doesn't change the fact that the way he presented his 'idea' has been my major problem with this fiasco. Which you would know if you had actually read any of my posts.