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

[mongo]

This in itself is concerning. Remember the list of cars that the IRS provided was supplied by Tesla. Tesla has known for a good deal longer what cars they were going to tell the IRS were eligible. If Elon hasnt been able to make decisions yet on any adjustments to the pricing and options for cars that is bad, but not nearly as bad as simply telling prospective customers visiting Tesla.Com which cars are NOW eligible for the tax credits. Maybe he indeed attended the meeting where decision makers discussed these things and he wasnt paying attention.

How would Tesla know which cars qualify before Treasury set the rules for qualification?

 

[UkNorthampton]

How much did Hertz actually pay for the cars though? I heard our Caltrains fleet 3’s (SR+) were just a little over $30k

Possible discount might have been delivery fee - if Hertz used their own transporters (shortage at time). Elon said Hertz paid retail price, no discount on car itself. Not sure if any software tweaks added (minor cost to Tesla, possibly useful across customers or future rideshare options).

 

[cdub]

When you tell Wall St you're going to grow 30% and grow 40% it is amazing
When you tell Wall St you're going to grow 40% and grow 40% it is good
When you tell Wall St you're going to grow 50% and grow 40% it is bad

I know. But it's still crazy.

 

[elasalle]

simple thoughts ...

March 1st, investor day , Gen 3 platform.

Are we finally gonna see the 25K car (US first few years 32.5K)?
Austin, Berlin and China should have enough land/space for the expansion ... (tents will do for prototype line ..)

Code name ..Corolla ... cheap/volume for low end mass market car ... (volume = ~ 2M per year global)

rather than some great performance/tech gains etc, I think it's time to see product which will address mass volume, TAM.

after all, each car gets 7.5K credit.
smaller the battery size, more chance they use SuperCharging more frequently(vs at home)
makes more sense Mr. Zhu is here for Gen 3 mass market product, than for CT/AI/optimus
+ We need a car that is 25K after 1-2 years of usage, as used car cap for 4K IRA rebate is 25K.(what will this do the used car market )

If above is the plan, and 4Q is gonna bring in ~ $4B FCF, then a buy back at these low prices would be a no-brainer
(+btw,Elon is for buyback)
(++ we paid off a lot of debt with previous gains to finally have very little debt, and tesla is spending $$ wisely and as fast as possible )

cheers!!

 

[JupiterMan]

Tesla SHOULD NOT be gaining market share in the EU as all the legacy OEMs come to market with their BEV offerings.

For years Europe has relied upon Fremont and Shanghai imports, which have slumped in many quarters as covid restrictions reduced Teslas available in EU - in particular in 2020 and 2022.

Europe is also now only just seeing S/X deliveries restart after a two year hiatus for other reasons.

This has had an affect of reducing Tesla market share in recent years. Now local production in Berlin is ramping I would not be surprised to see Tesla market share increasing, albeit perhaps temporarily whilst others try to catch up, then Berlin will likely expand and it will likely grow again!

 

[Todd Burch]

I think we have to wait until Q1 results to see if this account is reliable or not. They may just be off by one quarter.

You may be right. It could be that production for Lathrop Megapacks really started ramping in Q4, but we won't see the benefits (with complete, signed-off, and purchased installations) until Q1 results.

 

[Stretch2727]

Noting that 2022 volume of 1.31 million cars, then 40% CAGR for 8 years = 2030 at 20 million cars!

Most curious that we have the “50% growth” and “20 million cars” guidance at the same time.

I think most people were assuming 50% growth now with a decline as we approach 2030. This is pretty typical of maturing companies. If we are only able to achieve 40% growth for the next few years I think the 20 million cars is out the window as the growth will slow from this in the later part of the decade.

 

[Singuy]

I think you're confusing production and delivery guidance. From the P&D:

"In 2022, vehicle deliveries grew 40% YoY to 1.31 million while production grew 47% YoY to 1.37 million."

And the guidance from Zach on the last earnings call:

"As we look ahead, our plans show that we're on track for the 50% annual growth in production this year, although we are tracking supply chain risks which are beyond our control. On the delivery side, we do expect to be just under 50% growth due to an increase in the cars in transit at the end of the year, as noted, just above. This means that, again, you should expect a gap between production and deliveries in Q4, and those cars in transit will be delivered shortly to their customers upon arrival to their destination in Q1."

So they missed production growth targets by 3%. It's hard to say how much they missed delivery growth targets by because "just under" is ambiguous.

I posted earlier that if they actually hit 50% yoy production growth and keeping the same gap percentage wise between deliveries/production, they would have delivered 1.35M cars, which is closer to 45% yoy. So it was a production issue, not a demand issue everyone is yelling about. I honestly didn't think Tesla predicted China was going to abandon their zero covid policy late NOV.

 

[NicoV]

About a decade ago I/we pulled our business out of being a storage designer/manufacturer. One of the reasons I did so was because I knew we did not have the depth of capital to go head-to-head with Musk/Tesla in the space, and nor could we compensate with low labour costs. So we focussed in other places. I/we were very right to be concerned as Tesla's offering was attractive: they simply had more firepower and it showed.

Collectively the Chinese on the other hand did not step back. They have comparable depth of capital to Tesla/Musk (or far more, depending on how you view things) and they pushed ahead with moving LFP from concept to reality, reaching (now) a price/performance point that is globally relevant to the mass market for storage. (and related stuff) They primarily did that because they were motivated by the vehicle market. The term I have used for 15+ years is that there is a mobility-premium for wrapping a battery in a vehicle shell, and the market simply does not - for many very understandable reasons - want to grant that premium margin to stationary storage. So LFP was aimed at vehicles. But it is also en passant solving the storage problem which is now scaling fast.

The size of that rapidly growing mass market from year-to-year is a closely held secret, if indeed anyone knows all the puzzle pieces. I try to track it through different approaches, but it is nigh-on impossible to quantify. I'm not sure many other people have a much better understanding, however much they sell their research reports for (they used to come to me, trying to blag me to get my data for their report). As you probably know I suss out the vehicle/battery splits each year to try and keep tabs on that, enough to do some basic public domain analysis. Quantifying storage with an equivalent precision was tough. From the limited poor quality signals I could assess, until last year I thought Tesla had overwhelming dominance in the utility segment, but was less obviously dominant in the domestic segment, and there were signs that the commercial segment was a fizzle for everyone.

In the course of the last year it has become clearer from the qualitative public domain info that Tesla is no longer competitive in the domestic market. That is why apart from some special niche markets (such as the USA ..... which is why a lot of US-ians aren't reading the tea leaves well ....) Tesla has largely pulled out of attempts to grow their presence in domestic. Instead Tesla has focussed its efforts on the larger utility-scale products and projects. Now does this mean that Tesla can't sell every (domestic) Powerwall it produces: no. Does this mean the price for Powerwall's is reducing : no. So But go look in the market beyond the USA and the Tesla Powerwall is practically a dead product, swamped under a tidal wave of Chinese clones. Overall the Chinese are growing their absolute market size faster than Tesla is, and hence Tesla's market share is reducing.

Anyone who has ever read Christensen's "Innovators Dilemma" can tell you what is most likely to come next. I've spoilt things by giving my opinion. Tesla will sell every utility scale Megapack they can make for the next few years and will command a premium price for them. None of them will sell into China. Many will sell into USA or to clients in the wider western alliance who are allergic to China. But increasingly the Chinese will move upscale into the utility segment and take what in the longer term will likely become the commanding position. And then Tesla utility-scale storage margins will wither year-by-year with no path back, no matter how many turnaround plans are attempted. The projected scenario in the graphs I gave earlier are very much the high-case; the low-case is far less attractive.

Is this a logical harvesting strategy for Tesla, yes. Is it a sign of weaknesses inside Tesla, also yes. Ultimately we know that pathway is terminal in the hardware space. (Tesla keeps on saying that is has not got a capital problem, but it has been AWOL on deploying it aggressively in this space. So that means Tesla has had a leadership talent problem in this space. I'd have though that much was patently obvious given the history of what we now call Tesla Energy). Does it mean investors should worry, absolutely, because by the time storage sales revenues are that significant then also the stuffing will have been beaten out of margins.

I realise it is not popular to say this, but a corresponding story is so far playing out in the BEV market. The data shows that Tesla is year-on-year losing market share by volume, by GWh, and by revenue. I last posted this graph about 11-months ago. Clearly Tesla has put its first team into bat in the vehicle market, and the seconds are playing in the storage market (and crikey knows who are in the solar market). The first team are playing an excellent game. The second team may be about to get a second wind for a while. And the third team are playing in some 0.1% league.

The analysts who are asking questions on the quarterly call are about as dangerous as a newborn baby deer. The better-armed hunters in the market have shot off a lot of ammunition recently, and some of it has hit home - that was because they can detect a valid scent, even if they don't yet fully understand it. Tesla needs to decide whether it is predator or prey, rather than distractedly fiddling with blue feathery baubles in another room.

View attachment 891986

Those are interesting observations about the storage market. When I wrote
Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable I was surprised that only one of the three 100MWh systems was made by Tesla. I thought only Tesla was capable of building and selling these things, but apparently Huawei can too. The third one doesn’t state which hardware is used so I doubt it’s Tesla. Your post explains what’s going on here.

On the residential storage side, I’m waiting many years now to hear something from Tesla about my reservation of a solar roof+powerwall installation. My main reason for choosing Tesla is the assumption that a single vendor integrating solar, battery storage and car charging would provide the best solution.

The European grid is greening fast though. We’re in the middle of the winter and we get more and more periods with negative electricity prices. To to point where I start wondering if it still makes economic sense to install residential solar (We can only sell our surplus at market prices, i.e. practically zero when it’s sunny). I even question if it would ever be profitable to install a home battery. Home batteries still seem terribly expensive and of little capacity. 10kWh would only give us a couple of hours backup in the winter. Such a size can only be reasonably used to prevent paying high peak prices. Maybe it’s just better to go for a dynamic (hourly changing) electricity tariff and charge our cars when the electricity is very cheap.

 

[TrendTrader007]

Investing 101: never pays to be elated at top and despondent at bottom
Luckily, TMC has several veteran Tesla investors who engage in exactly the reverse and therefore are deservedly wealthy
Unlike the bird

 

[Mengy]

Thank you.

And production in particular would have been at 50% with a week less of COVID issues in China.

Yep, and if not for the Q2 shutdown in China I'm pretty sure both P&D would have been over 50% for the year. That shutdown really hit P&D hard.

 

[bigsmooth125]

This in itself is concerning. Remember the list of cars that the IRS provided was supplied by Tesla. Tesla has known for a good deal longer what cars they were going to tell the IRS were eligible. If Elon hasnt been able to make decisions yet on any adjustments to the pricing and options for cars that is bad, but not nearly as bad as simply not telling prospective customers visiting Tesla.Com which cars are NOW eligible for the tax credits. Maybe he indeed attended the meeting where decision makers discussed these things and he wasnt paying attention.

I am sorry there is no valid excuse to not have Tesla.Com updated with the "Potential Savings" price not take into account the $7500 tax credit. Tesla has known for weeks what cars they said are eligible.

Agreed. I was sure the website was going to be updated on January 1, especially when the "Potential Savings" contains various speculative assumptions and the IRA tax credit is a much more concrete source of savings, if a buyer meets the requirements.

 

[Dikkie Dik]

This has had an affect of reducing Tesla market share in recent years.

No, as I posted earlier the opposite is true. From 13,2% in 2020 to 14.8% in 2022.

 

[traxila]

I think most people were assuming 50% growth now with a decline as we approach 2030. This is pretty typical of maturing companies. If we are only able to achieve 40% growth for the next few years I think the 20 million cars is out the window as the growth will slow from this in the later part of the decade.

If macros are horrible this year then Tesla may fail again at 50%.

Otherwise, adding up the four factories with ramps included, 50% should be pretty easy this year, even with an essentially flat Shanghai.

Fremont 550K
Shanghai 900K
Berlin 300K
Austin 300K

2.05M

 

[Singuy]

This in itself is concerning. Remember the list of cars that the IRS provided was supplied by Tesla. Tesla has known for a good deal longer what cars they were going to tell the IRS were eligible. If Elon hasnt been able to make decisions yet on any adjustments to the pricing and options for cars that is bad, but not nearly as bad as simply not telling prospective customers visiting Tesla.Com which cars are NOW eligible for the tax credits. Maybe he indeed attended the meeting where decision makers discussed these things and he wasnt paying attention.

I am sorry there is no valid excuse to not have Tesla.Com updated with the "Potential Savings" price not take into account the $7500 tax credit. Tesla has known for weeks what cars they said are eligible.

Maybe they are waiting on Model Y clarifications. Perhaps Tesla doesn't want thousands of Model Y 7 seat orders and then Model Y 5 seats qualifies which leads to a bunch of switch-a-roos.

The most curious part is on the LR model 3. Maybe the specs are being updated. But lol at Musk not paying attention when his biggest concern for 2023 is a lack of demand due to high interest rates+recession. Pretty sure this is priority #1.

 

[bkp_duke]

If macros are horrible this year then Tesla may fail again at 50%.

Otherwise, adding up the four factories with ramps included, 50% should be pretty easy this year, even with an essentially flat Shanghai.

Fremont 550K
Shanghai 900K
Berlin 300K
Austin 300K

2.05M

Agreed. 50% in 2024 has me a bit concerned, however. Even if a new GF were announced today, we would not see substantial ramp out of it till late 2024, at best.

 

[thx1139]

How would Tesla know which cars qualify before Treasury set the rules for qualification?

Because the rules the manufacturers based decisions on were known in advance. They arent new. What is new and coming in March is guidance that can exclude more based on the battery material and battery production. The IRS pushed that off.

Again even knowing just last week it is no excuse that the Website doesnt mention at all that Model 3 is eligible for $7500 tax credit when you look at potential savings. Model Y a little more complicated because it would need to be only when 7 seats are added.

 

[Singuy]

Agreed. 50% in 2024 has me a bit concerned, however. Even if a new GF were announced today, we would not see substantial ramp out of it till late 2024, at best.

I think we should move away from 50% yoy vehicle growth because that's actually pretty difficult in the millions but start focusing on yoy revenue growth which is much more plausible.

 

[thx1139]

Maybe they are waiting on Model Y clarifications. Perhaps Tesla doesn't want thousands of Model Y 7 seat orders and then Model Y 5 seats qualifies which leads to a bunch of switch-a-roos.

The most curious part is on the LR model 3. Maybe the specs are being updated. But lol at Musk not paying attention when his biggest concern for 2023 is a lack of demand due to high interest rates+recession. Pretty sure this is priority #1.

What clarification? IRS changing guidance slightly and Model Y 5 seat becoming eligible isnt a problem and it wouldnt happen that quickly. Safe to assume if IRS change guidance at all it will happen when the announce the battery guidance in March. So you have 3 months to take orders and maybe build up a backlog again.

 

[Mengy]

I think we should move away from 50% yoy vehicle growth because that's actually pretty difficult in the millions but start focusing on yoy revenue growth which is much more plausible.

But, as Tesla needs to reduce prices on cars (which they will), thereby lowering margins, they will need to increase production & deliveries to make up for the lower prices & margins.

We need a few factories in construction for Gen3, and IMHO, they need to start building those factories THIS year in 2023 in order to get ready. OR, we will likely see the 50% production growth per year decline for a few years.