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

[Singuy]

Good News:

I saw 3 Woodside mansions with newly installed massive Tesla Solar Roofs on my 10 mile run today.

Bad News:

The only way I will currently afford a few of those panels now is if I take a 2nd job as a roof installer.

Tsla investors 2021: Buying mansions for wife and kids
Tsla Investor 2023: Building mansions for TslaQ

 

[Drumheller]

If Tesla lowers prices in the USA, I think we may see the website update on the 9th or 10th

 

[FSDtester#1]

Constant refreshes is a sign of a poor product longevity. And think of the elephant in the room, GIga Press. You need to scale production to make a casting worthwhile. And exterior refreshes cost money, increases complexity with parts, and support, adding further costs. Tesla will know when they need to make a change I trust.

Gigapress is a big guy, but I would not pick on him by comparing to an elephant
/s

 

[MXWing]

Exactly this. Some people are trying to construct a narrative where Tesla is being forced to lower prices against their business plan because demand has fallen.

But that narrative doesn't make sense in the context of the last several years. Tesla has been deliberately raising prices in order to suppress demand because they physically could not manufacture cars fast enough. Now that Tesla has a sufficient surplus of batteries, two fully ramped Gigafactories, and two ramping Gigafactories, supply has increased, and Tesla is choosing to lower prices to increase the quantity of cars sold for a given demand curve.

Have people forgotten the Econ 101 basics?

And Tesla's supply is going to be where MR=MC.

No one actually knows Tesla's internal equation for this but you can believe they are acting as rational actors.

The Bird Chef Twit, not so much. Tesla != Elon & != TSLA.

 

[StealthP3D]

Maybe, but those of us who believed Tesla's aspirational "500K deliveries in 2020" guidance that they provided in 2014 did very well.

And Tesla is WELL above the pre-covid guidance of 50% per year since 2020, right through chip shortages, global pandemic, etc.

People can ignore at their own peril the statement that's been well-grounded in reality for decades: Don't bet against Elon Musk!

 

[Prunesquallor]

First wave of Covid through the big cities. That seemed fast.

https://twitter.com/x/status/1611489425099476992

 

[JupiterMan]

The value that you can sell it to another person doesn't count

really? for all of Teslas history that has been excactly the return.

 

[geometro]

I don’t want to be that guy, but I don’t like the ad hoc selling that Elon does… he should be on a stock sale program (or better yet stop selling!). The selling in December does not look great optically given where P&D came out and now the price cuts (todays market action could have gone either way as we saw in pre market).

Still slightly grumpy about the decimation over the past few months.

 

[StealthP3D]

If Dividends aren't the end goal, then what value does a stock have in your opinion? The value that you can sell it to another person doesn't count. Buying a share is buying a tiny part of a business. You buy a business because you want to collect profits from it's operation.

That is not always true, hence my fine art example. In my 30 years investing, I can count on two hands the number of stocks I bought because they either paid a dividend or thought they were about to pay a dividend. Most often, I buy a stock because I think someone else will pay more for it as the business grows. I understand your contention that the stock is only worth money because they might pay a dividend, but I consider it kind of a theoretical argument. Here's why:

Look at Bitcoin, like stock ownership, it's just a collection of zeros and ones. It's safe to say it can never pay a dividend, people buy it because they think someone else will pay more for it in the future. Or maybe they just like to say they own it. It doesn't matter, the point is, it cannot pay a cash dividend because of the nature of the instrument. Just like fine art. The first principles, essential reason why most people buy a non-dividend bearing stock is to sell it for more. All other explanations are further removed from this truth.

A person might buy a share of a company to convert their $20 into an asset that is not denominated in dollars, but real assets. While it's true that company might pay a dividend in the future, and that stocks, in general, might be valued on their perceived ability to do just that, it's not the only reason why someone might want to assign value to a stock. The most common and most essential reason is that someone might pay them more for it in the future.

You can theorize why that might be (potential for dividends), but I like to take things down to their essential elements without making assumptions if I can help it. In this case I don't need to make assumptions except that the person buying it thinks it will be worth more in the future or at least hold its value better than the money used to purchase it.

Cheers!

 

[MC3OZ]

There’s still 7 to 8 years inflation to take into account, and my 1% net profit marging is absurdly low. It’s just an example, you can pick your own numbers.

My guess - worst case 20 Million sales $30,000 ASP (15 Million lower priced) - 10% margin.
To get to 20 Million sales per year the bulk need to be lower priced.
However if Tesla is only getting 10% margin, what is everyone else making?

IMO Tesla will get the following margin premiums:-

• Brand/ecosystem - 1%
• FSD - 1%
• In house cell production - 1%
• Manufacturing efficiency - 1%

I could put BYD at 8% due to the last 2 items.

A lot of the rest 6%,

6% margin on EVs isn't enough to stay in business. 6% margin on ICE sales is barely propped up by finance and the dealer network. And in turn the dealer network is propped up by servicing.

The we come to the fact that Tesla has other sources of income.

Current:-

• Insurance
• Fast charging
• Energy trading
• Energy sales

Likely future:- (exact timing unknown)

• FSD
• Robotaxis
• Optimus
• Dojo
• Home HVAC
• Mining raw materials processing. - might simply increase margins or result in battery cell sales.

Possible future (post 2030) - no reason to rule anything in or out, but the possibilities are almost endless.

Even if Tesla somehow stood still between now an 2030, a lot of the competition would struggle to catch up to where Tesla is now by 2030.

If anything my 4% margin premium for Tesla is probably an understatement.

Overall the chances are Tesla long term margin will be higher than 10%, we could add 4% and say 14%.

This isn't a handicap race where the slowest runner gets a head-start, it is a genuine race, where the leader has an advantage.

 

[willow_hiller]

And Tesla's supply is going to be where MR=MC.

No one actually knows Tesla's internal equation for this but you can believe they are acting as rational actors.

True, but only in a fully competitive market. The EV market is competitive up until the point at which the competitors run out of batteries. Past that point, Tesla will be operating semi-monopolistically, and can definitely still command high margins.

That, and I find that the concept of marginal costs tend to break down a little bit when the product is at least partially digital. Tesla's costs for developing FSD don't vary much at the margin; they pay the developers and the capital costs of their servers, but deploying FSD to one additional vehicle costs practically $0.

 

[Skipdd]

On the Chinese access to US critical infrastructure, in practice they can't access bidding on the energy projects at all for US industrial policy reasons that were in place before the security issues were raised. Be in no doubt whatsoever that the US is not a free market economy. It is in fact deeply protectionist. Especially in some sectors. One can debate whether that is a good thing or not, but it is so.

With respect to the rest of the world, there is Chinese origin kit going in everywhere, both in storage, grid, and generation. Has been for decades. The important clients are well aware of the security issues and many of them have their own precautionary risk management measures in place. My observation (from my very recent HV grid days) is that US kit is simply uncompetitive, and so it often comes to a fairly 'straight' fight between European, LatAm, Chinese, and Indian sourced-kit. (many of which factories I am pretty familiar with).

By the way, what makes you think that Chinese kit is the only stuff that might be at risk of phoning home ?

I don’t think that the Chinese kit is the only one capable of doing this. I am only speaking of the moat in so far as the US market is concerned, though I suspect that over time the issues the US has could surface in other EU countries. And the risk is not just for remote access. There are other possibilities as well. I’m not saying they would necessarily occur but when it comes to securing infrastructure from various threats there are a lot of things to guard against. All it takes is saber rattling by a large nation state to cause countries dependent on same state to think about their posture. I am also not taking a position pro/con on open vs protected. I was only speaking to Tesla’s ability to withstand the challenge at the moment. If over time, they don’t gain/maintain engineering/manufacturing competitive edge then their business will be at risk. On that we agree. And to be honest, this is the Tesla mantra - “first principles engineering..”

Once upon a time I was working for a company who decided to outsource most of their purchasing function to a non-US country, and I was managing a federal client for them. I had to explain to management how certain governments and/or bad actors infiltrated the supply chains of others with very bad consequences. We kept the purchasing function for that customer in-house and in the US.

 

[Mark Alset]

Simple way for Tesla to address the lack of $7500 tax credit for 5 seat Model Y AWD:

Just do the same thing they did at the end of December--offer anyone who takes delivery in January $7500 off (possibly ask to see returns and only give to people who would otherwise qualify for IRS credit); then repeat each month until the IRS classifies the car as an SUV at the $80k cap.

Gives Tesla far more margin than reducing price of the base model to $55,000 ($65,990-$55,000 is > $7500). And then people would be able to configure however they wanted w/o fear of going over the $55,000 cap (so more people would be inclined to pick other colors, etc).

Seems Tesla could cover this. Case in point:

I placed an order for the 5 seat AWD Model Y approx one year ago (Jan 14, 2022) for a total price of $60,990 (blue AWD, white seats). The same config now is $67,990 ($7000 more).

Tesla effectively baked in the $7500 credit with the insane price increases over 2022. With commodity prices dropping, wouldn't be surprised if they could drop the base price down (but the should NOT drop the base price).

They should keep the higher base price of the 5 seat AWD so that once the IRS re-classifies the car as a SUV, people get the $7500 credit on the higher base. Tesla margins shoot back up.

In other words, it would be dumb for Tesla to drop prices. Instead just offer a $7500 credit that only lasts until the IRS one kicks in.

 

[BornToFly]

I looked up what Auto Gross Margins were in Q3 2021 when China prices were just a little higher than they are now.
They were 30.5%

With lower commodity prices now, and double the production, GMs will be fine in 2023.
Add another 40% delivery growth, and EPS will

 

[Captkerosene]

Now that 2022 is over we can look back and calculate a (CK)non-GAAP PE for the year. Non-GAAP in that I make adjustments for changes in the value of assets held instead of looking only at earnings. An example of that would be that if you owned a $1M home that went up 100K in value. Your GAAP earnings were zero but your (CK)non-GAAP earnings would be 100K. Giving your house a (CK) PE of 10. Another example would be to look at the GAAP earnings of the Mona Lisa. The earnings are accrued over decades but only recognized on the sale. So, a PE of infinity and then almost zero. So much of our earnings at Tesla are not reflected in the profit and loss statement I think it makes GAAP near useless in determining the value of our shares.

So, here we go. My unofficial official earnings report for 2022:

- 10B. cash earnings.
- 100B. value of FSD. (based on 1T when done. We went from 70% to 80% complete.)
- 10B. Semi "start" of production.
- 10B. CT prep for mass production.
- 1B. value of work done to get lithium refinery going.
- 10B. Bot progress. Mostly in the form of real world AI.
- 5B. factory buildouts and improvements.
- 10B. Tesla Energy nearing ramp.
- 10B. skunkworks projects.

166B total of value created but not recognized.

Puts the current "real" PE at somewhere between two and three. Around eight at our highest valuation.

Someone earlier asked what they should tell their son who worried that Tesla was trending towards being a big car company that didn't reward its investors. My answer would be to go through all the progress Tesla made during the year in setting the stage for future earnings. Earnings that will be returned to shareholders in dividends, share repurchases or share price appreciation. (See BRK.A for an example.)

We need to get out of the 12 month Wall Street price target earnings modeling rut. Current profits only matter in that they help fund future innovation ... and we're way past having to worry about issues like that.

Bought more TSLA today.

 

[Zero CO2]

ARK in for some more TSLA today
sold XPENG

ARKK view fund page​

1/6/2023​

Direction	Ticker	Company Name	Shares Traded | % of Total ETF​
Buy	TSLA	TESLA INC	24,506 | 0.0465​
Sell	FATE	FATE THERAPEUTICS INC	19,096 | 0.0014​
Sell	MTLS	MATERIALISE NV	11,110 | 0.0016​
Sell	NVDA	NVIDIA CORP	31,758 | 0.0777​

ARKQ view fund page​

1/6/2023​

Direction	Ticker	Company Name	Shares Traded | % of Total ETF​
Buy	TSLA	TESLA INC	33,538 | 0.4804​
Sell	ONVO	ORGANOVO HOLDINGS INC	32 | 0.0000​
Sell	TSP	TUSIMPLE HOLDINGS INC	50 | 0.0000​
Sell	XPEV	XPENG INC	169,472 | 0.2199​
Sell	NIU	NIU TECHNOLOGIES	355,671 | 0.2394​

​

 

[Bet TSLA]

https://twitter.com/x/status/1611183611394551809

Hmm. I think I'll prioritize paying no attention to jerks like David Sacks. I think that will work much better.

 

[ShareLofty]

Simple way for Tesla to address the lack of $7500 tax credit for 5 seat Model Y AWD:

Just do the same thing they did at the end of December--offer anyone who takes delivery in January $7500 off (possibly ask to see returns and only give to people who would otherwise qualify for IRS credit); then repeat each month until the IRS classifies the car as an SUV at the $80k cap.

And then when Treasury changes guidance in March to make all Model Ys eligible for the SUV $80,000 cap the buyers will have received $15,000 off. Terrible idea. For 2023 the credit is not at point of sale. You have to file your taxes to get the credit which means any changes are retroactive to 1/1/2023.

 

[bballshinobi]

I love people that have buy orders below $100! Because it helps build a wall that's difficult for the share price to break through. The market makers can see that wall so they will only take it through it if they have a strong plan. And those are the same people buying in with FOMO as the price climbs past $140, all for want of a better deal by only 10 bucks!

Best of both worlds unless you also happen to be that person!

I am sure it's just the MMs themselves since there is an incredible amount of $100 puts open interest for January. MMs will take us below $100, if they want, once those puts expire.

 

[Ogre]

Simple way for Tesla to address the lack of $7500 tax credit for 5 seat Model Y AWD:

People are overthinking this.

If Tesla needs to lower prices to stimulate demand they will. Right now it looks like they are doing just fine without any big changes or discounting.

Tesla doesn't have the competition in the US that they have in China and the economy here is not as bad as the Chinese economy is either.

As Musk is inclined to say: "The best discount is no discount". And that strategy seems to be working so far.