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

[MrMoo]

Put your money where your mouth is. I'll bet you a TSLA share that margins didn't drop by even 35%, much less your predicted 67%.

So to clarify, you want to do a 1 Tesla share bet that Q1 2023 auto margins went from Q3 28% down to 18% or above?

How would we even pay that out ? lol

 

[Mengy]

I paid $51990 for my Y in 2021 ($1,000 less than the current price), and Gross Margins were 30.5% that quarter. Now they have more than 2X the production, which lowers costs and balances some commodity price increases. Gross margins will be fine.

But cost of goods are much higher today than they were then. Sure we will still have positive margins, but they won't be 28%+ anymore. Maybe we'll get back there someday, possibly a year or two, but as of today after the dramatic and sudden price cuts coupled with increased cost of goods, margins WILL LIKELY be lower than they were back in 2021.

To assume they won't be in this economic environment is unrealistic in my opinion.

We won't see this in the Q4 ER in two weeks of course, heck we might not even see it in Q1 ER 2023, but by Q2 of this year I think we'd start seeing the impacts of these price cuts on margins.

 

[Christine69420]

Norwegian Car Dealership Owner Robert Næss thinks these price cuts from Tesla is dramatic for everyone:

(+) Tesla dumper prisene på nybiler: – Dramatisk for alle

Googly translated excerpts:

- All 512 used Tesla cars listed online on finn.no will have to come down in price too since those listed on the web is priced higher than new cars.

- And that can have consequences for competitors. There is a big risk that other car manufacturers will have to lower their prices in order to be able to compete against Tesla. Those in the same segment don't really have much choice.

- The main competitors of the Tesla Model Y are other SUVs with four-wheel drive in the NOK 500,000-700,000 price range - such as the VW ID4, Ford Mustang, Audi e-tron, Ionic5, Skoda Enyac and Volvo XC40. (Model Y now from 539.000)

- One should not rule it out, but the problem is not really just failing Tesla sales. We are entering a bad time, at the same time as they have to increase production. When fewer people buy new cars overall, it means that they have to take a larger share of the market. I think this is permanent.

According to Næss, the car manufacturers had their best year in 2022. Tesla has good margins, that is, they make good money per car sold.
For the other manufacturers, the picture is more variable.
- But those in the same segment do not have much choice if they manage to deliver cars, so they also have to cut back.

- No ... at the risk of talking down my own business, I think this will spread to other used cars. We at Ecocar bought cars before Christmas to avoid the impact that the new taxes in 2023 bring. This will be exciting to see.

 

[Nocturnal]

Ford, GM, Rivian, lucid stocks are all down about 4.5% fyi.

 

[MrMoo]

But cost of goods are much higher today than they were then. Sure we will still have positive margins, but they won't be 28%+ anymore. Maybe we'll get back there someday, possibly a year or two, but as of today after the dramatic and sudden price cuts coupled with increased cost of goods, margins WILL LIKELY be lower than they were back in 2021.

To assume they won't be in this economic environment is unrealistic in my opinion.

This is what I've been trying to tell everyone.

We know Auto margins were 28% just 3 months ago. You can work out how much profit they make from 1 model Y Sale. Then you subract the discount and you can pretty easily get a rough estimate of where margins are heading.

I'm not sure what people are smoking where they believe that 28% 3 months ago. Subtract 13k per car in ASP and gross margins are.... 28%!!

There is no point comparing to the sale price of a Model Y in 2021. The gross margins are 28% from 3 months ago. But the cost of the car is higher in 2022 than 2021. Its that simple.

 

[larmor]

Do people enjoy paying $8 for milk when it was $5 for the longest time? Is the pandemic world ending supply chain shortage over so that the milk maker is now booking pure profit or passing along costs? I think it is rational for Tesla to lower prices based on return to normal supply chain dynamics. And this clearly answers the question of how can Tesla make a huge cybertruck with better performance and range with a price, up until yesterday which has lower than MY.

 

[bkp_duke]

While I agree COGS are likely trending back down to previous levels, let's be realistic about this. Material costs are not going to immediately go back to 2021 levels today, it will take time over the next year or two most likely. This cliff of a price cut will not be met with a subsequent cliff of COGS reduction, that simply isn't realistic.

The price drop is good for ensuring production ramps go as planned and deliveries keep accelerating, but margins ARE going to take a hit due to this. The degree of the hit can be argued, and I agree margins will creep back up over time as both COGS reduce and economies of scale kicks in, but that will probably happen gradually, not today.

Aluminum - today is already at the mid-point of 2021, and below 2022 by a wide margin:

Aluminum - Price - Chart - Historical Data - News

Aluminum increased 72 USD/Tonne or 3.02% since the beginning of 2024, according to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity. Aluminum - values, historical data, forecasts and news - updated on April of 2024.

tradingeconomics.com

Steel - markedly below both 2021 and 2022 (there is a substantial amount of both steel and aluminum in Tesla Model 3 and Y body construction (Al alloy for the gigacasts).

Steel - Price - Chart - Historical Data - News

Steel decreased 356 Yuan/MT or 9.06% since the beginning of 2024, according to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity. Steel - values, historical data, forecasts and news - updated on April of 2024.

tradingeconomics.com

Containerized freight costs have dropped back BELOW 2021 levels and are now approaching 2020 levels:

Global container shipping rates 2022 | Statista

Container freight rates oscillated dramatically between January 2019 and November 2022.

www.statista.com

Lithium and Nickel are both up finally trending downward from 2022. Fortunately there are actually only a few KG of Li in a battery pack (despite the name, it's far from the major constituent).

Lithium - Price - Chart - Historical Data - News

Lithium increased 13,000 CNY/T or 13.47% since the beginning of 2024, according to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity. Lithium - values, historical data, forecasts and news - updated on April of 2024.

tradingeconomics.com

Nickel - Price - Chart - Historical Data - News

Nickel increased 2,894.50 USD/MT or 17.68% since the beginning of 2024, according to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity. Nickel - values, historical data, forecasts and news - updated on April of 2024.

tradingeconomics.com

These are spot prices, we know well from Tesla's own financial disclosures that they have bulk, long-term contracts that would be well below these prices.

 

[MP3Mike]

Excludes software and options, so FSD, wheels and even paint may not change eligibility.

No, options are not excluded. From Tesla:

Accessories are excluded, like for example the UMC.

But I'm pretty sure that the wheels and paint are "physically attached to the vehicle" at the time of delivery.

 

[traxila]

But cost of goods are much higher today than they were then. Sure we will still have positive margins, but they won't be 28%+ anymore. Maybe we'll get back there someday, possibly a year or two, but as of today after the dramatic and sudden price cuts coupled with increased cost of goods, margins WILL LIKELY be lower than they were back in 2021.

To assume they won't be in this economic environment is unrealistic in my opinion.

We won't see this in the Q4 ER in two weeks of course, heck we might not even see it in Q1 ER 2023, but by Q2 of this year I think we'd start seeing the impacts of these price cuts on margins.

Don’t forget the IRA direct manufacturer 45/kwh battery credit.

 

[X Fan]

Local sales team suggested we could pick up my wife's Y earlier this month.....glad we waited. $13k saved w/ matrix lights included!!!!

 

[BornToFly]

My brother had an EV6 on order. He just ordered a Model Y because of the price drop.

 

[JustMe]

Do people enjoy paying $8 for milk when it was $5 for the longest time? Is the pandemic world ending supply chain shortage over so that the milk maker is now booking pure profit or passing along costs? I think it is rational for Tesla to lower prices based on return to normal supply chain dynamics. And this clearly answers the question of how can Tesla make a huge cybertruck with better performance and range with a price, up until yesterday which has lower than MY.

The problem with milk prices is greedy cows were demanding higher wages.

But otherwise I agree with your post.

 

[bkp_duke]

So to clarify, you want to do a 1 Tesla share bet that Q1 2023 auto margins went from Q3 28% down to 18% or above?

How would we even pay that out ? lol

I'll happily Paypal you the cash equivalent. Anything above 18.00% AUTOMOTIVE margins for Q3 2021, you owe me the cash equivalent of 1 TSLA share. Anything below 18.00% and I owe you the cash equivalent of 1 TSLA share.

 

[NicoV]

My brother had an EV6 on order. He just ordered a Model Y because of the price drop.

These price drops are going to have a dramatic effect on all EV’s with long delivery times. I expect lots of cancellations.

 

[JRP3]

Lol *sugar* so i guess -8% on stock tomorrow.

Hit -7% in pre so not a bad call really.

 

[gaswalla]

People focusing on margins, which is knee-jerk reaction... should be recognizing that Tesla just launched predatory pricing in the EV market.. long run, this will crush other EV and ICE manufacturers.. short term discussion is transient

 

[traxila]

This is what I've been trying to tell everyone.

We know Auto margins were 28% just 3 months ago. You can work out how much profit they make from 1 model Y Sale. Then you subract the discount and you can pretty easily get a rough estimate of where margins are heading.

I'm not sure what people are smoking where they believe that 28% 3 months ago. Subtract 13k per car in ASP and gross margins are.... 28%!!

There is no point comparing to the sale price of a Model Y in 2021. The gross margins are 28% from 3 months ago. But the cost of the car is higher in 2022 than 2021. Its that simple.

You keep neglecting to mention that Berlin and Austin just flipped in the past few weeks from having margin negative pressures to margin neutral pressures and soon to be margin positive. This is a big deal for margins.

Again, the question you should really be asking is how was Tesla able to get such ridiculous margins before having ramped two gigantic factories. EM had already answered this: Tesla prices were embarrassingly high.

Not anymore.

 

[MrMoo]

I'll happily Paypal you the cash equivalent. Anything above 18.00% AUTOMOTIVE margins for Q3 2021, you owe me the cash equivalent of 1 TSLA share. Anything below 18.00% and I owe you the cash equivalent of 1 TSLA share.

Wait sorry can we clarify the quarter? Do you mean Q1 2023? I'll do that bet. Friendly bet of course =) It's in my best interest to be wrong here.

I'll do that deal. Anything above 18% Automotive margins for Q1 2023 and i'll Paypal the cash equivalent of 1 Tesla share. Anything below 18% and you can paypal me.

You keep neglecting to mention that Berlin and Austin just flipped in the past few weeks from having margin negative pressures to margin neutral pressures and soon to be margin positive. This is a big deal for margins.

Again, the question you should really be asking is how was Tesla able to get such ridiculous margins before having ramped two gigantic factories. EM had already answered this: Tesla prices were embarrassingly high.

Not anymore.

Forgive me was there was newsletter? I wasn't told that Berlin and Austin flipped in the past few weeks. Do you have an exact date?

What I'm actually trying to do is be realistic about this price cut. I'm not sure on the absolute figures since volume will increase but the % changes are going to be for the worse.

 

[2daMoon]

Here we go... market is open

 

[Discoducky]

Why would a company lower prices when it has a ton of market share (BEV market share, not overall, in most places) *AND* has feature/value dominance? Fear? Uncertainty? Doubt? (insert your bias here with many handwringing posts)

Tesla is following its stated mission and the equation is simple.

As more factories ramp + pre-pandemic market prices return + COGS goes down + Tesla relentlessly innovates = margins go up.

Tesla is again, drastically increasing output as two massive factories ramp, thus better economies of scale, thus higher margins. The mission is not for higher margins so they lower prices to manage the backlog.

Higher production output lowers the backlog faster, thus lowering prices to an appropriate backlog to compensate for the higher production output.

The mission dictates accelerating the transition, well folks, this is what it looks like.