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

[brian45011]

A silly question:
the shorts pay an interest every day on their borrowed stock? how much is it?

Since early August 2018, margin interest when underwater, no hard-to-borrow fees.

 

[Curt Renz]

Benzinga: 2 hours ago: Tesla Motors, Inc. (NASDAQ:TSLA), Ford Motor Company (NYSE:F) - UPDATE: Vertical's Johnson Notes To Benzinga It's Unclear How Tax Credit Measure Would Impact Tesla Vehicles Sold With Existing Tax Credits

This appeared in my Thinkorswim newfeed. It's incredible that Benzinga would widely publish a headline about a source who admits he is unclear about something. Of course that source is a vociferous Tesla short seller. It seems rather clear to me that the proposed law would first apply to those filing taxes next early year and claiming a credit for a Tesla car purchased this year. In other words, under the proposal a $7000 credit could be claimed by this year's Tesla car buyers, replacing the current $3750 credit.

 

[Cherry Wine]

The bill is bipartisan - but supported only by Alexander who is retiring and Collins who frequently breaks with other Republicans (because her state is competitive and she faces a re-election in 2020). I don't see them saying anything about how they will get it through Senate. So, it could just be one of those bills that will just languish and will never get taken up or it has real legs if the auto industry lobbies hard to get it passed. At this moment I don't have a sense of where it is ... will need more reporting on this (esp. comments from other Senators or auto industry lobbyists).

Right now, my read is that the bill is likely lip service for author and/or voting member constituencies and nothing more. The fact that it's bipartisan gives it a little more life, but currently my magic 8 ball is saying "Outlook not so good." If Senate leadership starts making supportive statements that would be a good sign, and if the White House were to do the same I'd say the bill would be more likely than not to be signed into law. Of course, with this White House, public statements can differ from day to day, so... *shrug*

 

[Drumheller]

Awful hit piece in WSJ today by Holman Jenkins:
Opinion | Get Ready for a Pileup, Tesla
“Get Ready for a Pileup, Tesla”

I have WSJ subscription so am willing to add a comment with your help on some specifics, have 2 days before they close comments. Might be marginally useful because existing comments are largely uninformed or off-topic, including the few that are pro-BEV.

I will summarize here bcuz paywall, esp what data I think I need for a comment:

Basis for article data is cited as this one from McKinsey: Improving electric vehicle economics | McKinsey

Let’s call that report “MKR” for reference.

Pitch of the article (NOT my pitch)

• Tesla is only making money because of tax incentives which are expiring, and “Morgan Stanley says Tesla sales will be 344k below its low end last predicted range”. Comment: WTF source and context missing for this number out of the blue.
• BEVs are being sold at a $12k loss, citing MKR. What MKR actually says if you follow the link is:
  • However, there is a problem: today, most OEMs do not make a profit from the sale of EVs. In fact, these vehicles often cost $12,000 more to produce than comparable vehicles powered by internal-combustion engines (ICEs) in the small- to midsize-car segment and the small-utility-vehicle segment (Exhibit 1). What is more, carmakers often struggle to recoup those costs through pricing alone. The result: apart from a few premium models, OEMs stand to lose money on almost every EV sold, which is clearly unsustainable.
  • Comment: Since there are so few BEVs being manufactured, sounds to me like this is really “Chevy Bolt is being sold at a $10k loss before tax incentive”. I think we knew that.
• A whole pile of new BEVs are coming to the US market this year, all by committing $300B to manufacture money-losing cars, but they can break even because of tax breaks.
• Tesla is losing the tax breaks this year, so it is totally screwed because:
  • It’s sales are declining and it only makes money because of tax breaks
  • All these new cars coming get the tax break.
• Comment: can we point to Tesla margins that exceed the original $7500 tax break, certainly exceeded the $3750 incentive level during Q1 which I believe exceeded Q4 in M3 sales, despite FUD we have all seen; also
• Jenkins goes on to claim that BEV successes elsewhere in the world are a sham because of government subsidies.
  • Punchline at end of article: “The kicker is that Norway can afford its electric car habit partly because it’s one of the world’s biggest oil and gas exporters. Pretty much the same basic model now has been adopted by green regulators everywhere. The world is ruthlessly promoting an electric-car industry that is a hothouse flower and will need massive and continuing subsidies from buyers and users of gasoline-powered cars.”
  • Comment: easy to refute that last?

This is really an awful stinker of a piece, would like to provide some focused reply, even without expectation that it will make much difference.

Thanks for your help.

At the end of your comment, I suggest adding that you are unsubscribing due to the lies and yellow journalism.

Then actually unsubscribe. Subscribers are the product they sell to advertisers. Lowering that number is the best way to give feedback.

 

[humbaba]

You are incorrect about the tax break: it is a reduction to taxes owed, not taxable income. This is what makes the tax break so appealing to the wealthy -- if you make $300k per year having a $7.5k deduction is peanuts. But $7.5k off of your tax burden? Well, that's... not priceless, but it is worth $7.5k.

(conversely, for those without such high taxes it is irrelevant because it cannot contribute to the tax refund.)

 

[brian45011]

Personally I would have preferred seeing this in an 8k, for the simple reason we would have more clarity on the deal.

As to the requirement they file an 8k, there could be some wiggle room. From your link “requires the disclosure of material definitive agreements entered into by a company that are not made in the ordinary course of business.”

One could argue that selling regulatory credits generally and using their zero emission vehicles to offset other manufactures emissions specifically has become an ordinary course of Tesla’s business.

Ergo, the literal minimum. If this transaction contributes significantly both to Cash from Operation and GAAP profitability, why not publicize the details about those benefits?

 

[oneday]

You are incorrect about the tax break: it is a reduction to taxes owed, not taxable income. This is what makes the tax break so appealing to the wealthy -- if you make $300k per year having a $7.5k deduction is peanuts. But $7.5k off of your tax burden? Well, that's... not priceless, but it is worth $7.5k.

(conversely, for those without such high taxes it is irrelevant because it cannot contribute to the tax refund.)

Not sure the exact number but it’s somewhere around $50k taxable income to have at least a $7,500 tax burden. So I would say it qualifies a large portion of the population.

 

[humbaba]

At the end of your comment, I suggest adding that you are unsubscribing due to the lies and yellow journalism.

Then actually unsubscribe. Subscribers are the product they sell to advertisers. Lowering that number is the best way to give feedback.

That's what I did with Wired after the (second?) libelous bit of anti-Musk drivel they published. The impression I have received is that the feedback went into the bit bucket, but I did have a support ticket with them just to get the account closed (which they won't do despite having instructions for doing just that which I followed -- instead they keep sending me notices to resubscribe) so at least there's a record of it.

Still: I recommend providing the feedback when unsubscribing. As unlikely as it is to happen, if they had enough of a drop in subscription they would probably task someone with browsing comments for why.

 

[Cherry Wine]

For those who want to track S. 1094, aka the "Driving America Forward Act", or read the text once it's actually published, watch this space.

 

[capster]

Regarding your inserted comment: Sure, but not to vehicles that received any current rebate.

Reuters: The bill dubbed the “Driving America Forward Act” would grant each automaker a $7,000 tax credit for an additional 400,000 vehicles on top of the existing 200,000 vehicles eligible for $7,500 tax credits.

Credits for cars bought this year would not be claimed until taxes are filed early next year. So under the proposed law as summarized by Reuters, it appears that the $7000 credit would be retroactive to the beginning of this year for Tesla car buyers, and the $3750 credit would no longer apply.

Remember, proposals are starting points. @schonelucht asked for a prediction of outcomes.

I too would hope whatever bill is ultimately crafted is fair to and benefits Tesla.

I wish I could assign as much as an even money expectation to that outcome.

Unfortunately, every time I've feel I've become too cynical about the Oil and the Rolling-oil-burner manufacturing industries and the US Federal Government wrt to EV's and action on climate change events prove me wrong.

Tl;dr YMMV and I hope it does.

 

[ZachF]

Not sure the exact number but it’s somewhere around $50k taxable income to have at least a $7,500 tax burden. So I would say it qualifies a large portion of the population.

If you're self-employed and single it can be much lower than that.

 

[humbaba]

Not sure the exact number but it’s somewhere around $50k taxable income to have at least a $7,500 tax burden. So I would say it qualifies a large portion of the population.

This was discussed last fall, but I don't feel like digging it up to cite the stats on how many/few people are likely affected (you can't really pin it down because tax rules are so... flexible).

My point was to debunk a factually incorrect claim about the tax break. I had no intention of raising hackles over the classism of the system so I should have kept those comments out. My apologies.

 

[jerry33]

You are incorrect about the tax break: it is a reduction to taxes owed, not taxable income. This is what makes the tax break so appealing to the wealthy -- if you make $300k per year having a $7.5k deduction is peanuts. But $7.5k off of your tax burden? Well, that's... not priceless, but it is worth $7.5k.

(conversely, for those without such high taxes it is irrelevant because it cannot contribute to the tax refund.)

$300K is way above my pay grade, but I've actually received four of the $7,500 tax credits over the years. (The only years where I actually got a small refund. The amount withheld--even if you add quite a bit each pay period never comes close to covering the taxes).

 

[brian45011]

I think presentation will be rather advertisement for FSD and to bring awareness of it to wider audience rather than showing their technological advances and making promises of Tesla Network.

Over the last decade, Investor Presentations were often the precursors to capital raises. It's difficult to see how Tesla can produce the Model Y next year at GF-1 without a capital infusion. Perhaps the ABL creditors have devised a way to wire around PENA's rights in NV, and will add some GF-1 assets to the borrowing base and their securitizations.

 

[RobStark]

Going nowhere. Ignore.

Republican Lamar Alexander is a Senator for Nissan, er, I mean Tennessee and Republican Collins is a moderate. Except maybe the Senator for Orion Plant (Michigan) the rest of the Republican Senate is _not_ going to vote for it. The EV tax credits will be left alone.

Everything is negotiable.

Democrats will have to give Trump-Republicans something they want.

Passing the USMCA trade deal? China deal? Border Wall funding?

Maybe part of a larger increase in gasoline tax road/bridges infrastructure spending bill? Most Republican Senators are dead set against increasing the gasoline tax but Trump is not. Some Senators may be induced to vote in return for specific projects in their State.

 

[Remus]

I used to be an Apple hater. I am way too familiar with your argument here as I used to make them myself, ever since iPhone came out. I really believed those nonsense at that time.

The noice reached a high during antenna gate. We Apple haters argued there was no innovation from 3G to 3Gs to 4 and 4s. Nokia would have a big come back, Sony was really the true innovator, even Steve Jobs admired...

But it's no only Apple is it?!. This kind of stupid argument appears whenever there is a disruptor. So back ten years ago when ARM chip is new, it really seems Intel could really easily crush it. Why not? Intel was and still is the innovative leader. What you said about i-pace can also be said about ATOM at that point. It's not a slam dunk, but Intel will have an ARM killer in about two iterations, reclaiming it's king status. Just you wait...

Now what about Amazon? How many times we heard about that it can't compete with Walmart, even Macy, since you really need to try before you buy. And how many times we heard AWS is laughable, since big company will never let their data leave their premise, and even if they do, IBM will offer much more compelling services.

There is no gradual transition, those waited already faded to irrelevancy.

Now can we stop this nonsense now? The incumbents, if they could they would. The fact that they didn't is a clear indication of their incompetency. You give them tons of credit for things they "maybe able to do" yet discount everything Tesla already done. Go ahead and short Tesla if you want, you are not changing any minds as we heard about the exact same arguments over and over again for years.

Boys who cried wolf, it has been too many years. wake me up when they are really here.

You seem the operate on the assumption that cars such as I-Pace are supposed to be the absolute best the legacy car makers can achieve. It's not a best effort. Maybe for Jaguar, but they are not exactly tech leaders (anymore).
It's simply not in the best interest for the industry for any BEV to be made that's ultimately appealing to consumers TODAY. Not even if all brands merged and focused on making that one desirable vehicle, they would never be able to make enough of them as they need to build new tooling and source batteries. It takes investment and/or sacrificing production lines needed for other cars that already sell and keep jobs covered.
Had I-Pace been 25% less energy thirty, charging at 250 kW and costing $50K, they'd only had a long waiting line, no extra income. Selling the design to other brands would still not have saved anyone from losing business. The way Model S and X buyers are not sitting on their money waiting for an upgrade, the whole market would crawl to a halt limited by BEV supply. That would cost hundreds of thousands of jobs, basically overnight.
And if legacy car makers were so foolish to make that compelling one car, losing so much business, would Tesla pick up that business? No. They can't make Model 3 any faster than they did now 10 months ago.

The still petrol based industry is trying to get a gradual transition going. Not exposing BEVs greatness too quickly. Not building too many hyper fast chargers. Not because they could never build a compelling BEV, but because it would be like jumping a meter up from joy right into noose.

Tesla is making the others look foolish, but only to that small group of hippies and some really open and clear minded car nerds who can also see Tesla's deficiencies and view the world a bit differently than the average readership on BEV sites.

I have good hopes Porsche Taycan will hold fewer punches. It's been a long time coming and they are readying themselves to replace a good amount of petrol car sales to be lost, or even grow overall. Sounds easy, but it's really hard, even for a smaller premium brand like Porsche.

The software thing... Tesla showed promise, but in my opinion didn't quite deliver, especially on its own promises, let alone based on the architecture effected. What would have been a good year to launch an app store, allow external designers come up with new screen interfaces to sell to the public over the Tesla App Store? I think 2016 would have been acceptable. Now, we get some Easter eggs and seeing charge speed in both kW and mph is still too much to ask. Where is Nerd Mode, huh?
Vital difference between legacy car makers and Tesla is that other brands make a car that their customers want to buy. Tesla seems to change as much to that as they can get away with. Maybe too much. It's seen in the smallest details that are blatantly obvious, cost 10.000's if not 100.000's of sales, but for which Tesla happily takes out 7-8 years to fix. Towing, Estate, how much would that cost now, really? That's what many people who don't have a Tesla yet but could swing that, actually want. Soon there will be a whole generation that could buy 3 or Y but just prefers an instrument cluster and gets themselves on a reservation list for Polestar, Volvo, BMW, etc.

 

[humbaba]

$300K is way above my pay grade, but I've actually received four of the $7,500 tax credits over the years. (The only years where I actually got a small refund. The amount withheld--even if you add quite a bit each pay period never comes close to covering the taxes).

That number was pulled out of the air and -- I think -- is fairly guaranteed to have a significant tax burden. The tax law is so convoluted it is hard to be certain -- everything depends on the details.

Again, my intention was not to start a tax/class debate. Yet I did, for which I apologize*. I could edit the comment to make it more appropriate, but then it makes your response out of place.

* above is an explanation for the detail, not a justification for including that portion of the comment. There was none.

 

[ggr]

You are incorrect about the tax break: it is a reduction to taxes owed, not taxable income. This is what makes the tax break so appealing to the wealthy -- if you make $300k per year having a $7.5k deduction is peanuts. But $7.5k off of your tax burden? Well, that's... not priceless, but it is worth $7.5k.

(conversely, for those without such high taxes it is irrelevant because it cannot contribute to the tax refund.)

Maybe I'm misunderstanding your last comment, but it absolutely can contribute to your tax refund. When you do your taxes, there are a bunch of big numbers like your total income, the total tax payable on that income, and the total amount you have already paid (via paycheck deductions, estimated tax payments, etc.). For most people those last two are supposed to mostly balance out, and you are owed a small amount of refund or owe the IRS a small amount. The tax credit on buying an EV is like you payed another extra amount during the year ($3750 if you buy now) to the IRS. If that shifts the balance between what you owed for the whole year and what you paid, you will get a refund for it.

 

[scaesare]

How would the others pay for it? Tesla doesn't use a card, it uses the car to authorize. Now I suppose you could create an adapter with a card reader and an internet connection, but that would add cost to the adaptor and I don't suppose it would be that hard to hack since access to the hardware is usually the easiest way.

Minor point: While currently the car is responsible for the transaction (at least on the S, I haven't seen a sniff of the 3 datastream, but assume it's the same), the VIN is transmitted from the car to the Supercharger during the digital comms handshake. While the Superchargers apparently don't do anything with that data currently, they in theory could use their attached cellular data links to validate a car from a partner in the program.

(If they did that, I think it may make sense to validate all cars that way, actually...)

 

[jerry33]

Maybe I'm misunderstanding your last comment, but it absolutely can contribute to your tax refund.

I believe the idea was that if the total tax owed (before any witholding) is less than $7,500, you can't collect the full amount. There has to be tax owing for a tax credit to apply. So alternative minimum tax enters into it.