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

[Gigapress]

Troy's estimation method is garbage. He is looking at lagging indicators and making lots of questionable assumptions, which is inherently flawed when modeling for factories that are rapidly growing production and deliveries. The only realistic way we're getting 415k deliveries in Q4 is either major extended production shutdowns or a huge addition of like 69k vehicles to inventory in transit in an epic single-quarter unwinding of The Wave.

Fremont made about 142k last quarter. Conservatively 146k in Q4 I think. Tesla has reported S&X are still gradually ramping. Troy is estimating 146k too so no conflict there.

The massive problem is the other estimates of deliveries:

• 214k Shanghai
• 29k Berlin
• 26k Austin.

Shanghai produced 88k in October, with a holiday week and presumably partial production rate. Also they're probably still making tweaks and fixes after the recent line upgrades. They also have a long-term trend of increasing production in nearly every month that's uninterrupted by major external forces. 90k in Nov and 92k in Dec is likely, if not a bit more. 88+90+92 = 270k for Q4. How the heck would they only deliver 214k? What is Troy thinking there? He keeps harping on demand collapsing in China, but really? ~56k cars from that factory not being delivered in Q4?

Berlin and Austin already are making 2k+ per week and are ramping faster than ever. Conservatively assume 3k per week quarterly average and only 12 weeks worth of Q4 production between the winter holidays and other downtime, and thus we get 36k each. Remember, Tesla guidance of 5k per week run rate by Dec 31st has not changed.

146+270+2*36 = 488k of production for Q4, with plenty of headroom for an extra 10-30k depending mainly on Ber&Aus ramp speed.

Sanity check:

Tesla again has guided for hitting 50% YoY production growth​

2022 production was 930k as of Q3​

2021 production was also 930k​

50% growth --> 1.40M​

1.40M - 0.93M = 0.47M​

0.488M is slightly greater than 0.47M, aligning with confident expectation of slightly exceeding 50% target​

​

So barring any disruptions, 488k production is in the bag based on known production rates. If so, Troy is predicting an incredible 488 - 415 = 73 THOUSAND cars being made in Q4 but not sold. Tesla is selling about 5k cars per day right now. 73k/5k = ~15 days of sales. Troy's estimate implies roughly a tripling of vehicle inventory QoQ from 8 days to 8+15 = 23 days, or roughly 115k cars.

Will production likely exceed deliveries as Tesla continues unwinding the wave? Yes. Will inventory triple? Very unlikely, especially in light of Tesla's firm comments on strong global demand and aggressive expansion of production output.

View attachment 875183
(Source: Tesla quarterly reports)

Update on this: I found @Troy's own production estimates, as of Nov 3rd. I think these are off by at least 40k units, probably 50k, and maybe 60k.

Source

Troy actually published estimates that imply literally zero growth at Shanghai and growth screeching to a halt at Berlin and Texas in late October. This wouldn't really bother me except that 1) he charged people money for this analysis on the basis of ostensibly having expertise in this area and 2) it is influencing the market.

• When Troy published 246k estimated Shanghai production for Q4, we already knew per the Chinese Passenger Car Association that Shanghai had produced 82k in September. 82k * 3 = 246k.

• As of Nov 3rd we also knew that Berlin had surpassed 2k per week in the last week of September and was, in Elon's words on the Q3 call, "ramping rapidly". Despite this, Troy's estimate for the Q4 average was 30.0k / 13 = 2.3k / week. The official target is still 5k/week by the end of the year.

• Texas had reached 2k in the 3rd week of October according to Elon on the Q3 call. Compare that with Troy's estimates: Texas: 27.2k / 13 = 2.07k / week Q4 average. Again, still officially targeted for 5k/wk EoY.

 

[GrimRe]

https://twitter.com/x/status/1592995805753126912

Troy doubling down on ~70k vehicle inventory end of Q4.

 

[capster]

Chinese auto makers still have serious stigma issues to get past to ever be relevant in the US market. Even in Europe. The reason Toyota/Honda/Kia were able to make inroads into the US market was through efficiency. US legacy auto was bloated and gave that trio an opening and they took it. Otherwise, it's doubtful that Toyota/Honda/Kia would have ever become big players in the US market. Toyota still probably would have done ok since Japan had a reputation for high quality from the likes of Sony.

The Chinese still have the image of cheap, poor quality in the US. Thus the only way they make inroads into the US market is efficiency. Problem is....they're competing with Tesla, who is obsessed with efficiency. Combine that with the fact of Tesla's brand + the IRA giving local production/sourcing auto makers a massive advantage and yeah.........I agree with @Singuy , Chinese EV Auto makers will not make it through into the US market.

If the legacy US OEM’s weren’t still trying to slow roll the transition, I might agree with you both.

Let’s dismiss the perceived lack of quality assertions shall we?
* Lots of high quality electronics are made in China and sold in the US.
* The reputation of legacy Western OEM’s isn’t exactly stellar on EV’s or even in general.
* Tesla has sold Made in China cars in Germany.
* Japan once had a reputation for poor quality. They shook that off decisively.

Also, I’m only asserting that one or more Chinese car companies may sell vehicles in the US. The cars may be manufactured or assembled in the US or Mexico or Canada in highly automated factories honed in China and inspired by Tesla. They may sport the badging of a known-in-the-US brand (or not).

tl;dr: Those companies and countries that try to slow the transition rather than pursue it with a life-or-death urgency will lose.

 

[Nocturnal]

Tdameritrade had a headline from Reuters supposedly stating Murdoch, a Tesla shareholder, says musk identified a pototential successor in the last few months.

This coincided with a sudden drop in after hours trading. I give this a 0 credibility rating coming from reuters..

Their tesla reporting has gone from FUD to fake lately but the claim is that Murdoch said this at the trial. That's something easy for them to verify.

Would be good news anyway.

 

[capster]

Don't know if it will save them, but I do think that protectionism could have a big impact. The US is decreasingly tolerant of a large trade deficit with China and Europe has always had less tolerance than the US on that score.

If Tesla didn't have a growing factory in Germany, you can bet that the Europeans would be pitching a fit about its imports into Europe from Shanghai.

You have to make products that consumers actually want to buy (at a price they‘re willing to pay and in sufficient quantities) for protectionism to help you.

If you don’t and someone ‘outside’ is making the products that consumers want, those products will find their way in.

 

[StarFoxisDown!]

Their tesla reporting has gone from FUD to fake lately but the claim is that Murdoch said this at the trial. That's something easy for them to verify.

Would be good news anyway.

https://twitter.com/x/status/1592984024636887040

Rueter's as usual, reports only the news that furthers their agenda......like leaving out this bit

 

[Singuy]

Their tesla reporting has gone from FUD to fake lately but the claim is that Murdoch said this at the trial. That's something easy for them to verify.

Would be good news anyway.

Oh yes, institutional investors would LOVE LOVE LOVE for Tesla to get rid of the key man risk and any brand erosion as Musk becomes more and more political. The business will be exactly the same with or without Musk as the CEO. In fact Musk absolutely hates all the admin stuff the CEO has to deal with. The CEO will do exactly what Musk wants and company culture remains the same. If the CEO deviates from Musk's vision then he'll get the board to fire the CEO and everyone knows this.

 

[Gigapress]

https://twitter.com/x/status/1592995805753126912

Troy doubling down on ~70k vehicle inventory end of Q4.

Tesla made 87.7k in China in Oct. @Troy 's brilliant update apparently was to project 87.7k for Nov and Dec as well, seeing as the new estimate is 263.1k which equals 87.7k * 3.

Troy actually slightly lowered the Berlin estimate since last time.

I assume that as usual these numbers will continue to be revised upward as the quarter progresses and we hear production rate updates.

 

[Rarity]

If the legacy US OEM’s weren’t still trying to slow roll the transition, I might agree with you both.

Let’s dismiss the perceived lack of quality assertions shall we?
* Lots of high quality electronics are made in China and sold in the US.
* The reputation of legacy Western OEM’s isn’t exactly stellar on EV’s or even in general.
* Tesla has sold Made in China cars in Germany.
* Japan once had a reputation for poor quality. They shook that off decisively.

Also, I’m only asserting that one or more Chinese car companies may sell vehicles in the US. The cars may be manufactured or assembled in the US or Mexico or Canada in highly automated factories honed in China and inspired by Tesla. They may sport the badging of a-known-in-the-US brand (or not).

tl;dr: Those companies and countries that try to slow the transition rather than pursue it with a life-or-death urgency will lose.

As a counterpoint to the Chinese manufacturing in the United States, I note that CATL has been delaying its North American factory. I don't know if this delay is Beijing-directed or whether it is due to a general hesitancy to create a local supply chain for North America.

It seems that the politics in Canada is even less favorable to China than it is in the United States. Maybe Mexico would be different.

 

[Cobbler]

A poll:
Press if you think Tom Zhu is the new Tesla CEO

Press if you think Herbert Diess is the new Tesla CEO

Mod: I trust this is a joke, but point out that we do not do emoji polls here. --ggr

 

[GrimRe]

Tesla made 87.7k in China in Oct. @Troy 's brilliant update apparently was to project 87.7k for Nov and Dec as well, seeing as the new estimate is 263.1k which equals 87.7k * 3.

Troy actually slightly lowered the Berlin estimate since last time.

I assume that as usual these numbers will continue to be revised upward as the quarter progresses and we hear production rate updates.

Hopefully Tesla will announce 3K weekly run-rate for either Berlin or Austin (or both) this month. I think they would need to be around that number to hit the 5K by year end?
Why is Troy so bearish on the inventory levels? there is zero inventory for sale on the China website and the insurance perk was just continuing the existing offer not a new thing.

 

[capster]

As a counterpoint to the Chinese manufacturing in the United States, I note that CATL has been delaying its North American factory. I don't know if this delay is Beijing-directed or whether it is due to a general hesitancy to create a local supply chain for North America.

It seems that the politics in Canada is even less favorable to China than it is in the United States. Maybe Mexico would be different.

It was Beijing directed (around the time of Pelosi’s Taiwan trip, iirc). That’ll pass in my opinion.

I expect the brawl over EV’s, renewables, and other aspects of the energy transformation between China and the US/Allied countries to intensify. I believe all the governments know what’s what and are positioned accordingly.

I just think the legacy Western OEM’s are not pulling their weight and probably still farting around on purpose hoping for more sweeteners in addition to tripping over their own feet.

 

[Singuy]

As a counterpoint to the Chinese manufacturing in the United States, I note that CATL has been delaying its North American factory. I don't know if this delay is Beijing-directed or whether it is due to a general hesitancy to create a local supply chain for North America.

It seems that the politics in Canada is even less favorable to China than it is in the United States. Maybe Mexico would be different.

Ha, sorry to say that any Chinese company who wants to manufacture in the US will be hit by a bag of lazy entitled and expensive workers compared to the what they are used to in China. The Chinese work like 14hr straight 6 days a week. It's built into the culture that time is money and shouldn't be wasted. Also the hierarchy of respect in China is defined by money and status, which bleeds into all sorts of social events like marriage. Then you have many who comes from nothing with not only a fire in their eyes but also an entire family to support out in the country side which is still extremely poor.

The reason why Musk's US workers work harder than normal is because he instilled a sense of urgency of duty into them with the mission. Also with him leading by example also helps. The Chinese didn't really need any mission...just make sure the pay is decent then they are good to go.

So companies like BYD or CATL may enjoy the margins they can obtain in China, but good luck in the U.S. This is why it's so hard to compete against poorer countries in manufacturing because the people are relentless when it comes to high productivity.

 

[MikeC]

Rueter's as usual, reports only the news that furthers their agenda......like leaving out this bit

https://twitter.com/x/status/1592984332515229696

I thought a succession plan was supposed to be good for key man risk, blah, blah, blah

 

[ggr]

It's "pronunciations"

I think you missed the neologism.

Edit: Audie beat me to the clarification.

 

[Rarity]

It was Beijing directed (around the time of Pelosi’s Taiwan trip, iirc). That’ll pass in my opinion.

I expect the brawl over EV’s, renewables, and other aspects of the energy transformation between China and the US/Allied countries to intensify. I believe all the governments know what’s what and are positioned accordingly.

I just think the legacy Western OEM’s are not pulling their weight and probably still farting around on purpose hoping for more sweeteners in addition to tripping over their own feet.

That will pass, but if I were CATL, I would worry about the headaches going forward of being in the middle. Why not prioritize elsewhere and save the hassle? If I'm manufacturing in the US, I have to set up a whole new local supply chain and support it politically and with business relationships.

Understood that there could be examples of success from folks who are a bit more savvy, such as Volvo/Geely.

Agreed about the legacy Western/Japanese OEMs, but there a variety of ways for them to die that aren't directly related to Chinese competition in Europe and North America.

 

[Ogre]

... if I were CATL, I would worry about the headaches going forward of being in the middle. Why not prioritize elsewhere and save the hassle? If I'm manufacturing in the US, I have to set up a whole new local supply chain and support it politically and with business relationships.

Exactly this.

Right now this is a massive, rapidly growing opportunity. Demand is growing faster than Chinese OEMs can provide product. They can choose to expand into markets where they are profitable, or they can expand into markets where there is very little chance to profit. Where do you invest your limited resources?

IRA has at least temporarily created an effective moat in the US for US/ North American manufacturing.

 

[Rarity]

Ha, sorry to say that any Chinese company who wants to manufacture in the US will be hit by a bag of lazy entitled and expensive workers compared to the what they are used to in China. The Chinese work like 14hr straight 6 days a week. It's built into the culture that time is money and shouldn't be wasted. Also the hierarchy of respect in China is defined by money and status, which bleeds into all sorts of social events like marriage. Then you have many who comes from nothing with not only a fire in their eyes but also an entire family to support out in the country side which is still extremely poor.

The reason why Musk's US workers work harder than normal is because he instilled a sense of urgency of duty into them with the mission. Also with him leading by example also helps. The Chinese didn't really need any mission...just make sure the pay is decent then they are good to go.

So companies like BYD or CATL may enjoy the margins they can obtain in China, but good luck in the U.S. This is why it's so hard to compete against poorer countries in manufacturing because the people are relentless when it comes to high productivity.

I too have watched American Factory. But everybody has successfully set up ICE production in the US. So failure is for sure not guaranteed. Rather, I guess that the Chinese companies are hesitating to stray outside their government-nurtured supply chains on BEVs.

 

[GOVA]

As a counterpoint to the Chinese manufacturing in the United States, I note that CATL has been delaying its North American factory. I don't know if this delay is Beijing-directed or whether it is due to a general hesitancy to create a local supply chain for North America.

It seems that the politics in Canada is even less favorable to China than it is in the United States. Maybe Mexico would be different.

Let me offer a different alternative. This could be based on lack of proper talent in the US especially with workers that they seek.

Also, they might not want to deal or hear about Worker Unions.

 

[Singuy]

I too have watched American Factory. But everybody has successfully set up ICE production in the US. So failure is for sure not guaranteed. Rather, I guess that the Chinese companies are hesitating to stray outside their government-nurtured supply chains.

Well the best GM Chinese BEV company is BYD sitting at around 18%. You most likely have to take at least a 10% GM hit to be in the U.S. Seems like GM for Tesla Model 3s are 25% in US and 35% in China? This becomes a problem because after Opex, you are in the red for BYD. So basically you have to run your company in the red as you build the support infrastructure across the U.S in a high interest rate environment. You'll also have to spend maybe upwards of a billion just to promote the thing because BYD who? Back of the paper napkin math tells me it's a suicide mission only Tesla have accomplished and we have yet to see a second player. Rivian and Lucid's P&L tells us they have like a 100% chance of bankruptcy if they don't shrink that -300% gm by half next Q.

Btw, I have never seen American Factory so I'm not sure about the content.