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

[Antares Nebula]

If the Tesla SEC confid filing was due to an NDA or something, now that the cat is out of the bag, it seems to me that Tesla has to file an 8k soon, since this is now material info partly known to investors, with the unknown part (the exact amount and payment schedules, etc.) deemed also material. I'm not a securities expert, but that's my initial thinking.

 

[Fact Checking]

To be honest, I think this is bending the narrative in an superbullish way.

Yeah, because you left out the second part of my reply:

Of course a valid way to read this would be that based on Q1 deliveries the losses will be even deeper than Elon expected on February 28.

Another detail is that the February 28 "we do not expect to be profitable" statement was already made with knowledge of the February 25 deal with FCA.

 

[seldon]

No. According to carsonight (he's from Carson, NV) that happened in 2018Q4. He's been replying to bty questions with the same points for months now. Did you see his comment yesterday?

"Thank you for your kind words, but reality is that my estimate was off by a wide margin. I was expecting production of 80K last quarter based on what I was repeatedly told was production of 6K plus battery packs per week. Indeed, we were worried that a certain somebody would not be home for Christmas last year because word was they would not get Christmas off if their production was not up to 7k per week. To say I was surprised is an understatement; it was like taking a step that wasn't there. The people I talk to live their own lives and I certainly do not interrogate them.

"Conversations when we're together are as diverse as somebody has been in the hospital or do you wanna go out target shooting. I value my relations and certainly I'm not going to pester them with constant queries about work. When the subject does come up, you can bet I'm listening. I'm going to be seeing some of them at a birthday party this week, and I'll be very intrested in their comments then."​

So again, we have anecdotal evidence, but are not seeing the whole picture. Shortz work that information deficit to spin everything as bad news. Conversely, not everything is good news, but the truth must be somewhere in between.

Cheers!

Nearly everyone is focused on auto deliveries (or lack of them) yet there are several pieces of evidence that point to an unexpected ramp in Tesla Energy (TE) production that has the potential to provide at least a partial offset to the poor Q1 delivery results. Below I will summarize the available evidence for the Q1 TE ramp:

Elon and JB mentioned that they expect TE to reach same revenue as autos at some point
At model Y event Elon mentioned '2019 will be the year of TE'
In the past TE production was constrained by lack of batteries
In Q1 there was 10K fewer cars produced vs Q4 = enough excess battery capacity to produce additional 50K Powerwalls
There were additional battery lines added in Q4 and reports from Carsonights of more than 6K battery packs per week in Q1 which points to enough battery capacity for 50K-100K powerwalls
If Tesla did not put those packs into cars where did they go? Seems likely they went into TE products.

Hopefully some of the people here can model what this means in terms of financial projections so we can get an idea of how it might impact Q1 numbers. Specifically, if all the excess battery production was sold as TE products how much would revenue and earnings would show up in Q1? Anybody care to try and model that?

 

[JBRR]

My assumption is that the measurement of emissions starts this year already - hence the pooling agreements of various manufacturers.

The fines will start in 2021, but the emissions started accumulating this year.

The pooling agreements had a hard deadline until March 22 - if FCA wanted to improve their 2019 numbers they had to get into a pool.

At least that's my understanding - can anyone perhaps cite the EU rules outlining this?

Your question is answered in FAQ 2, specifically:

"4. When to apply?

Manufacturers may enter into pool no later than 31 December of the first calendar year for which emissions are to be pooled. It is not possible to form a pool retroactively. For example, the manufacturers notify a pooling agreement in January 2013 and state that the pooling should cover in the calendar year 2012. That pool will not be valid since it was notified too late. The Commission will consider 2013 as the first calendar year from which the notified pooling agreement is applicable."

It seems CIRCABC changed their system yesterday, which makes it harder to locate the relevant docs.
So, direct links:

EU regulation on pools:
REGULATION (EC) No 443/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 443/2009

FCA intent to form pool:
https://circabc.europa.eu/sd/a/c37a5306-28b9-4753-88aa-b7f3f42c1878/M1%20declarations%20of%20intent%20to%20form%20open%20pools%20(25.02.2019).pdf
FAQ 1
https://circabc.europa.eu/sd/a/f9dce50e-8b82-4771-9f7a-547e11e265be/FAQ%20open%20pools%20May%202018.pdf
FAQ 2
https://circabc.europa.eu/sd/a/58db598e-bdaa-446a-b593-ca64f95d1bc3/FAQ%20pooling%20May2018.pdf
List of pools:
https://circabc.europa.eu/sd/a/c616f73f-9c3f-49ee-8f27-8b081d3212b7/M1%20pooling%20list%2003.04.2019.pdf

note: copy/paste the links into browser. TMC direct link is not working correctly because of the syntax of the links.

 

[SO16]

That’s possible. Thing is Tesla already gets flak for doing things like that. They get flak for giving prices after tax incentives and fuel savings with * pricing below. That’s the same as OEMs advertising base price in an ad and then * at the bottom with the real price no where near the big fonted advertising price.

That practice is considered by some to be slimy. I’d rather Tesla not play the game of typical OEMs, ever.

Tricking people, seeming to give people things and then taking them away, adding fine print, all of that is something I’d like to see go away entirely.

What’s wrong with just saying, our car can do such and such and the price is x? If you don’t need it to do that fancy stuff then it will cost you y. Period, end of story.

Your whole premise was wanting Tesla to show a base car doing stuff a base car can’t actually do to suck people into wanting it and then surprising them with the ‘real’ price. I’d rather Tesla be above that. I don’t like when other companies do it to customers (or me) and it makes me not trust any advertising at all. Let’s be above that.

*sigh*. Ok. You win

 

[Carl Raymond]

I don't think I've seen this before. Cleantechnica gets top billing right now when news results are sorted by relevance. I assume the ranking is based on traffic visible to google - users who select this article following a google search, and users logged in to their google account who browse this article.

I'll take this as a positive sign that the public is learning which news sources can be trusted for Tesla news.

View attachment 394831

OT

Penny drop. All these news sites would have the google analytics code snippet in their common footer. Thus *all* traffic visible to Google. The penny drop is that I now understand why google analytics offers so much for free. It’s google’s all seeing eyes, voluntarily installed by web masters.

 

[Leo9]

MS cutting price target to $240

“
Morgan Stanley analyst Adam Jonas says he's increasingly concerned about the impact that investor concerns over Tesla's (NASDAQ:TSLA) "financial strength and liquidity could have on employee morale, customer perceptions and standing with key stakeholders and suppliers."

If and how Tesla can access capital is a top theme in discussions with investors. Jonas assumes Tesla will raise $2.5B in equity in Q3; says even bullish investors support a capital raise to put to sleep questions around its financing needs.

"The fundamental narrative around Tesla appears more clouded than we have seen in several years. Signs of weakening demand have raised long-standing questions about the company’s ability to fund itself as an independent company."

Jonas drops his Tesla price target to $240 (previous $260).”

 

[SebastianR]

My assumption is that the measurement of emissions starts this year already - hence the pooling agreements of various manufacturers.

The fines will start in 2021, but the emissions started accumulating this year.

The pooling agreements had a hard deadline until March 22 - if FCA wanted to improve their 2019 numbers they had to get into a pool.

At least that's my understanding - can anyone perhaps cite the EU rules outlining this?

Could very well by. But the reason I'm (still) confused and think of 2020 only are complaints e.g. of the Norwegians that the car makers are holding back their EVs until 2020 and refuse to deliver them now:

Zwei Jahre aufs Elektroauto warten? Norwegen kritisiert Autoindustrie

Sein Eindruck [Ståle Frydenlund]: Einige Autohersteller in Europa halten ihre emissionsfreien Fahrzeuge mit Absicht bis zum nächsten Jahr zurück. Denn ab 2020 gilt ein strengerer EU-Flottengrenzwert von 95 Gramm CO2 je Kilometer für alle neu zugelassenen Autos. Der VW-Konzern wies den indirekten Vorwurf aus dem Norden zurück: Erst Ende 2019 werde die erste E-Auto-Fabrik in Zwickau wirklich "massenfähig" sein, erklärte er. Die Nachfrage sei größer als das Angebot. Die Vorstellung, Autos zurückzuhalten, sei abwegig.

tl;drGerman: Ståle Frydenlund thinks that car makers hold back their EVs and intentionally only delivery in 2020 even though there is massive demand since the 95g threshold is only effective in 2020. VW is denying this allegation and says they can't make more EVs right now (and only in 2020 they will be able to make more EVs).

So yes, if any expert on EU emission targets could release us from our collective "not knowing enough"- that would be much appreciated

EDIT - thanks for this:

Your question is answered in FAQ 2, specifically:

"4. When to apply?

Manufacturers may enter into pool no later than 31 December of the first calendar year for which emissions are to be pooled. It is not possible to form a pool retroactively. For example, the manufacturers notify a pooling agreement in January 2013 and state that the pooling should cover in the calendar year 2012. That pool will not be valid since it was notified too late. The Commission will consider 2013 as the first calendar year from which the notified pooling agreement is applicable."

So this means that this agreement just now is for 2019 - right? Latest chance for the current calendar year according to this FAQ is the 31 December for the ongoing year (unless I read this wrong).

And the agreement is only for 2019 (as per EU documents posted yesterday). So again, I'm not certain what FCA can gain already this year from this arrangement?

 

[lklundin]

Also interesting is that Tesla must have hoarded A LOT of ZEV credits by now, with just $100m sold in 2018. Does anyone stateside have a feel for whether the buyers are sitting on their hands until they find out if the regime will survive, or some other reason? A lot of Model 3s were shifted in the applicable markets in Q3 (and Q4) and it doesn't look like many of those credits have been sold at all.

Based on history alone, one might expect that Q1 saw some substantial ZEV sales. Blue is the quarterly ZEV sales, green is the past four quarters divided by 4.

Is it wise for Tesla to hoard these ZEV credits?

I see a risk that a sudden regulatory change could render them worthless over night.

 

[Singer3000]

Is it wise for Tesla to hoard these ZEV credits?

I see a risk that a sudden regulatory change could render them worthless over night.

I think as others have mentioned, it may be that they're not doing so on purpose but because buyers have dried up. If the Federal government blocked the scheme then buying credits is a waste of money. And maybe the other OEMs can scrape by until they can see where it's headed.

 

[JBRR]

Could very well by. But the reason I'm (still) confused and think of 2020 only are complaints e.g. of the Norwegians that the car makers are holding back their EVs until 2020 and refuse to deliver them now:

Zwei Jahre aufs Elektroauto warten? Norwegen kritisiert Autoindustrie



tl;drGerman: Ståle Frydenlund thinks that car makers hold back their EVs and intentionally only delivery in 2020 even though there is massive demand since the 95g threshold is only effective in 2020. VW is denying this allegation and says they can't make more EVs right now (and only in 2020 they will be able to make more EVs).

So yes, if any expert on EU emission targets could release us from our collective "not knowing enough"- that would be much appreciated

EDIT - thanks for this:



So this means that this agreement just now is for 2019 - right? Latest chance for the current calendar year according to this FAQ is the 31 December for the ongoing year (unless I read this wrong).

And the agreement is only for 2019 (as per EU documents posted yesterday). So again, I'm not certain what FCA can gain already this year from this arrangement?

Can someone shed light on why everyone is focused on 2020 and 2021?

As I read the regulation, the excess emissions premium is stepping up in 2019 already.

https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:140:0001:0015:EN:PDF

"
Article 9
Excess emissions premium

1. In respect of each calendar year from 2012 onwards for which a manufacturer’s average specific emissions of CO2exceed its specific emissions target in that year, the Commission shall impose an excess emissions premium on the manufacturer or, in the case of a pool, the pool manager.

2. The excess emissions premium under paragraph 1 shall be calculated using the following formulae:

(a) From 2012 until 2018:

(i) Where the manufacturer’s average specific emissions of CO2exceed its specific emissions target by more than 3 g CO2/km(Excess emissions – 3 g CO2/km) × 95 €/g CO2/km + 1 g CO2/km × 25 €/g CO2/km + 1 g CO2/km × 15 €/g CO2/km + 1 g CO2/km × 5 €/g CO2/km) × number of new passenger cars.

(ii) Where the manufacturer’s average specific emissions of CO2exceed its specific emissions target by more than 2 g CO2/km but no more than 3 g CO2/km(Excess emissions – 2 g CO2/km) × 25 €/g CO2/km + 1 g CO2/km × 15 €/g CO2/km + 1 g CO2/km × 5 €/g CO2/km) × number of new passenger cars.

(iii) Where the manufacturer’s average specific emissions of CO2exceed its specific emissions target by more than 1 but no more than 2 g CO2/km(Excess emissions – 1 g CO2/km) × 15 €/g CO2/km + 1 g CO2/km × 5 €/g CO2/km) × number of new passenger cars.(iv) Where the manufacturer’s average specific emissions of CO2exceed its specific emissions target by no more than 1 g CO2/kmExcess emissions × 5 €/g CO2/km) × number of new passenger cars.

(b) From 2019:

(Excess emissions × 95 €/g CO2/km) × number of new passenger cars.
"

And then there is this annex
https://ec.europa.eu/transparency/regdoc/rep/3/2017/EN/C-2017-3492-F1-EN-ANNEX-1-PART-1.PDF

which just seems to be adding new ways to calculate the 2020 and 2021 numbers?

 

[neroden]

Nearly everyone is focused on auto deliveries (or lack of them) yet there are several pieces of evidence that point to an unexpected ramp in Tesla Energy (TE) production that has the potential to provide at least a partial offset to the poor Q1 delivery results. Below I will summarize the available evidence for the Q1 TE ramp:

Elon and JB mentioned that they expect TE to reach same revenue as autos at some point
At model Y event Elon mentioned '2019 will be the year of TE'
In the past TE production was constrained by lack of batteries
In Q1 there was 10K fewer cars produced vs Q4 = enough excess battery capacity to produce additional 50K Powerwalls
There were additional battery lines added in Q4 and reports from Carsonights of more than 6K battery packs per week in Q1 which points to enough battery capacity for 50K-100K powerwalls
If Tesla did not put those packs into cars where did they go? Seems likely they went into TE products.

Hopefully some of the people here can model what this means in terms of financial projections so we can get an idea of how it might impact Q1 numbers. Specifically, if all the excess battery production was sold as TE products how much would revenue and earnings would show up in Q1? Anybody care to try and model that?

For 50K extra Powerwalls? $30M to $100M profit depending on gross margin assumptions (10% - 30%). Not huge.

 

[Artful Dodger]

UPDATE - Tesla To Host Autonomy Investor Day

PALO ALTO, Calif., April 04, 2019 (GLOBE NEWSWIRE) -- UPDATE: Based on investor feedback, and in order to accommodate as many attendees as possible, we are moving Autonomy Investor Day to April 22nd. The event will still be held at Tesla Headquarters in Palo Alto.

Source: Tesla, Inc.

 

[Artful Dodger]

For 50K extra Powerwalls? $30M to $100M profit depending on gross margin assumptions (10% - 30%). Not huge.

Yeah, and it's not trivial to switch production from NMC (used in TE products) to NCA (for autos). Not to mention a major switch in supply logistics. I think its unrealistic to do this with a month's notice. The supplier's can't react that fast.

I'm more interested in seeing if any Model 3 packs were stockpiled in Q1. All reports from GF1 is they they were working flat out throughtout Q1. Not everything adds up...

I wonder how things are at Lathrop? Could be a big burst of Production coming in Q2. Course, now we're all scared of 'VINology', but that's a good thing.

Cheers!

 

[KarenRei]

"Thank you for your kind words, but reality is that my estimate was off by a wide margin. I was expecting production of 80K last quarter based on what I was repeatedly told was production of 6K plus battery packs per week. Indeed, we were worried that a certain somebody would not be home for Christmas last year because word was they would not get Christmas off if their production was not up to 7k per week. To say I was surprised is an understatement; it was like taking a step that wasn't there. The people I talk to live their own lives and I certainly do not interrogate them.

It's not mutually exclusive. Tesla could have been accumulating battery packs for anticipated needs later in the year (e.g. to have enough stock to feed GF3, since local battery production won't be online until next year. Or.. for other needs.

Would cost maybe $200M this quarter and require storage.

So, um, have they managed to make wind turbines which don't get knocked over by the Icelandic wind?

We have wind turbines here, but not many. Power is already so cheap and abundant due to geo and hydro.

Iceland has so much cheap Geothermal and hydro power that they've become a major aluminum smelter.

IEA Sankey Diagram
IEA Sankey Diagram

... despite not having any alumium mines here Even the smallest of our smelters uses more power than all of our homes and businesses combined.

Now I'm not saying that Tesla needs to be buying ad-space for a 2-minute trailer before the next Avengers movie. But would it really kill them to do a time limited bill-board campaign on half a dozen key trunk routes into this zone? "No!" I hear you say. "Tesla doesn't waste money on advertising! Such a campaign would cost HUNDREDS of pounds! And they're production constrained!"

To which I say, "Uh huh".

So you think that Tesla ran out of buyers in W. Europe + Scandinavia, even though there were still extensive numbers of vehicles left in transit, and they had extensive shipping delays? And that going from "only the two most expensive models on sale" to "all models on sale" wouldn't make any difference? And covering the portions of Europe that can't get any at all, also no difference?

To which I say, "Uh huh".

 

[Singer3000]

It's not mutually exclusive. Tesla could have been accumulating battery packs for anticipated needs later in the year (e.g. to have enough stock to feed GF3, since local battery production won't be online until next year. Or.. for other needs.

Would cost maybe $200M this quarter and require storage.



We have wind turbines here, but not many. Power is already so cheap and abundant due to geo and hydro.



... despite not having any alumium mines here Even the smallest of our smelters uses more power than all of our homes and businesses combined.



So you think that Tesla ran out of buyers in W. Europe + Scandinavia, even though there were still extensive numbers of vehicles left in transit, and they had extensive shipping delays? And that going from "only the two most expensive models on sale" to "all models sale" wouldn't make any difference? And covering the portions of Europe that they can't get any at all, also no difference?

To which I say, "Uh huh".

Hi Karen, how many Model S did Tesla sell in Q1 as a proportion of their production capacity?

Did Tesla’s production of Model 3 flatline qoq due to production constraints or some other reason?

Why did Tesla reduce pricing of their products across the board? Was this because they had a long line of buyers that exceeded production capacity at the prevailing higher prices?

It shouldn’t be a dirty topic of conversation to think about how Tesla might stimulate sales without having to squeeze gross margins.

 

[Dangerous Fish]

Does Tesla have any infuence over that webpage, or could it be captured by the incumbents like so many other areas of incentives are under regulatory capture? Could someone inquire why Tesla isn't on that page?

"About Go Ultra Low
Go Ultra Low is a ground-breaking joint government and industry campaign which aims to increase purchase consideration of electric vehicles by helping motorists and fleets understand the benefits, cost savings and capabilities of the wide range of electric vehicles on the market.

The campaign is funded by the Office for Low Emission Vehicles (OLEV) and eight vehicle manufacturers working in association with the Society of Motor Manufacturers and Traders (SMMT). The vehicle manufacturers currently supporting the campaign are: Audi, Hyundai, Kia, Nissan, Renault, Toyota and Volkswagen."

There will be a reason why certain manufacturers are not 'supporting' the campaign. BTW, it was launched as a 12-month campaign over 5 years ago. It seems to be limping along now without actually doing much campaigning.

Note that BMW was listed on the website originally but seems to have disappeared. Can't see Jaguar on there either. You know, that 'British' car company? I suspect some of the manufacturers decided not to renew their membership because they weren't getting anything back from it.

Tesla aren't a member of the SMMT anyway, so that may be why they aren't included.

I don't think many potential EV customers will make a buying decision based on what's on the GoUltraLow website. If they do, they deserve the Twizy it will probably select for them.

 

[Artful Dodger]

Firstly, do we know it for a fact that they are using two chips for redundancy? Another approach would be to build redundancy and fail-over into the chip itself, which would increase the gate count and power consumption by far less than the +100% of a dual chip solution.

Yeah it'll be 2 chips (later 5). Why do I say this? Because that's how NASA does it, allowing them to use inexpensive civilian-grade computer hardware in the high radiation environment of space.

Most of Elon's strategic choices are easy to understand using this simple heuristic:

• What new technology will be needed on Mars?
• How do we commercialize it right now?"

That's why Tesla doesn't make wind turbines. Not that they couldn't (they make motors and power electronics already). Those turbines just wouldn't work in the thin Martian atmosphere, so Tesla builds solar panels instead, which will work on Mars. Simple.

That's also why Kimbal Musk is working on hydroponic farming in a shipping container. Want to bet they will fit inside a SpaceX Starship? It's a long way to Mars for take-out food, and we're gonna need a snack...

So how will Tesla NN chips be used on Mars? Colonist will need shelter when they arrive. A fleet of AI-driven robots will assemble the first habs in preparation for our arrival: (simple)

Cheers!

 

[KarenRei]

Hi Karen, how many Model S did Tesla sell in Q1 as a proportion of their production capacity?

If you're looking for dispute that Model 3 osbournes S, you're not going to find it from me. I've been amazed that it took this long for it to happen. And now, S and X are osbourning S and X, since almost everyone seems to think a refresh is imminent.

Did Tesla’s production of Model 3 flatline qoq due to production constraints or some other reason?

So you think Tesla should have, instead of producing 77k vehicles and delivering 63k, they should have instead produced 90-100k and delivered 63k, and thus tacked another 1B loss to FCF? Great plan there.

Why did Tesla reduce pricing of their products across the board?

With SR in the mix in the US (which IMHO was clearly demand limited in Jan + Feb, due to the front-loading effect of the tax credit cliff, and seasonal low volumes; it's hard to say whether March was more limited by demand or deliveries), now you have the SR osbourning higher-end 3s. You have to reduce their price to continue to sell them, and it's important because their margins are so good (even price-reduced). Global S+X price reductions, again, you're not going to get any dispute from me that S+X has been osbourned and needs stimulus - although the real stimulus they need is not a "buy our car!" ad, it's a refresh so it can regain the crown of "the latest tech".

Until then, the proper solution is to eliminate the low-margin S+X variants - which made up the lion's share of sales - to "downsell" buyers to the higher-end 3 variants, which make more profit, and have all remaining S+X sales have higher margins. Remember, it's not about raw volume - it's about how much you earn.

 

[KarenRei]

Something just occurred to me. Even if "Raven" won't be ready for deliveries for 3-6 months... If "Raven" S+X are determined to be osbourning the current line too much, Tesla could start selling them today - with said long delivery times - and taking in $2,5k nonrefundable deposits, e.g. instant cash (although of course not profit), as well as making it easy to figure out how much of existing S+X vehicles to make over the next two quarters, so they don't get stuck with a ton of previous-gen inventory to move. It would of course further osbourne S+X, but that could be partially compensated for by making a clear price differential between the new and old generations. They could then slowly ramp down the price of the new S+X over the subsequent year or two. The higher price new-gen variant would make S+X massively profitable, since if anything the new S+X would be cheaper to make than the old one.

Making "Raven" available early would also discourage people from buying "competing" (*snicker*) EVs in the meantime.