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

[Gigapress]

When asked about Tesla doing Cybertruck factory wrapping in 2021, Elon's response was “Not at first, but there are many third-party options for wrapping.” So, Tesla is in fact looking into doing this eventually, though it remains unknown exactly when and whether it will involve some innovation of the wrapping process.

https://twitter.com/x/status/1469369876754149381

 

[Hiline]

So what just happened to cause the SP and market to dump?

I don't know. What happened on Friday? Thursday? Wednesday? 42 days ago?

Trying to explain daily stock price movements is a fool's errand.

 

[cliff harris]

I think as Tesla's sales get larger, the color variation will get larger too. I'm well aware of Elons comments about what a pain that is for service centers etc...but Thats a while ago now, and Tesla's production growth has been pretty impressive since then.

When you only sell 10,000 cars in a country, then having 100 permutations of colors and models to keep components for is likely a real pita. But sell 50,000 units and its absolutely not a problem.

Also...its only really a problem for repairing bodywork. If Teslas continue to be in less accidents due to FSD etc, the number of times you need bodywork per vehicle is going to go down. Plus it will be rare enough that you are happy to take a chance that you will need to wait a month to get replacement panels!

I DO think that color options need to scale along with units sold. Right now, I'm always the only red model Y in a car park, but once there are 10x as many teslas in the UK, that might make finding mine harder . (And red is not the most common color at all).

 

[SarahsDad]

Simple typo or CNBC showing it’s subliminal true feeling about Tesla’s CEO?

 

[Max Plaid]

The earnings have been dampened by the efforts to eliminate the wave. It looks like Q2 will be the last quarter that is impacted by this. Therefore we will only see in Q3 what the steady-state effect is.
Also, the extrapolated 10K deliveries in those 4 countries may not be indicative of the sales in all of Europe. The 4 reporting countries represent only a small portion of the entire EU sales. The biggest sales happen in countries (Germany, France) relatively close to the main distribution points (Belgium/Zeebrugge for Chinese production, Germany/Berlin for German production) Just take a look at last year’s delivery numbers for Belgium and The Netherlands: Tesla used the proximity of Zeebrugge to deliver a very disproportionally large number of cars in BE and NL in december. Idem for Germany for EU production.

The answer lies in the EU deliveries page maintained by @hobbes - so far European deliveries running around 2x 2022

Wiki - Tesla Europe Registration Stats

This wiki belongs to the thread EU Market situation and outlook. Click HERE (CTRL-click to open in new tab) to add new data using a Google form. Any forum member can contribute. We encourage you to do so! Your entry will appear after the data is double-checked by other volunteers. If the data...

teslamotorsclub.com

 

[Ogre]

Tesla reopens Cybertruck pre-orders for Mexico and Canada.

Seems like a good sign to me we’re going to see a fast ramp and huge volume.

Also, someone suggested possibly Cybertruck production in Mexico too? Interesting thought.

https://twitter.com/x/status/1632803171809763330

 

[Wingfoiler]

In the context of the recurring conversation around price cuts and demand, I thought it might be helpful to graphically show what I understand the price elasticity picture to be for 3/Y. The exact shape of the curve is wrong, but it may still be directionally useful. I’m sure there are many here who are far more familiar with these economic topics than yours truly, so please provide constructive feedback.

A few things to point out from this:

• It is critical to internalize the non-linear nature of the price elasticity curve.
• It is critical to consider where Tesla is on the curve in terms of both COGS and production capacity. The recent price cuts + IRA, and Elon’s comments at ID2023 help confirm that 3/Y is on the non-linear part of the curve.
• The maniacal focus on reducing COGS while increasing production capacity ensures that price cuts will happen over time, all other factors being equal.
• The dramatic price reductions for the Gen 3 platform should reduce the probability that Tesla pends much, if any, time on the right side of the curve for vehicles built on that platform.
• To further drive that last point, a sweet non-linear curve isn’t that useful if an automaker is stuck way too far to the right. See a Rivian example below – I’m not very familiar with their business but I believe this is directionally accurate.

To be clear, I don’t know if Tesla will be able to maintain amazing gross margins while ramping new factories like crazy. For long term investors in TSLA, the important thing is that Tesla has room for significant growth with current models with marginal price cuts, and can maintain enough FCF that they can fund aggressive growth. From Zach/Elon’s comments recently neither of those seems to be a significant risk at this point.

 

[Gigapress]

In the context of the recurring conversation around price cuts and demand, I thought it might be helpful to graphically show what I understand the price elasticity picture to be for 3/Y. The exact shape of the curve is wrong, but it may still be directionally useful. I’m sure there are many here who are far more familiar with these economic topics than yours truly, so please provide constructive feedback.

View attachment 914528

A few things to point out from this:

• It is critical to internalize the non-linear nature of the price elasticity curve.
• It is critical to consider where Tesla is on the curve in terms of both COGS and production capacity. The recent price cuts + IRA, and Elon’s comments at ID2023 help confirm that 3/Y is on the non-linear part of the curve.
• The maniacal focus on reducing COGS while increasing production capacity ensures that price cuts will happen over time, all other factors being equal.
• The dramatic price reductions for the Gen 3 platform should reduce the probability that Tesla pends much, if any, time on the right side of the curve for vehicles built on that platform.
• To further drive that last point, a sweet non-linear curve isn’t that useful if an automaker is stuck way too far to the right. See a Rivian example below – I’m not very familiar with their business but I believe this is directionally accurate.

View attachment 914529

To be clear, I don’t know if Tesla will be able to maintain amazing gross margins while ramping new factories like crazy. For long term investors in TSLA, the important thing is that Tesla has room for significant growth with current models with marginal price cuts, and can maintain enough FCF that they can fund aggressive growth. From Zach/Elon’s comments recently neither of those seems to be a significant risk at this point.

Great post Wingfoiler! You're two for two on crushing it with posts. Please stay and keep contributing.

I think it's important for investors to understand the implications of this nonlinear demand curve on the future of the business. In the long run, maintaining 25-30% gross margins actually is the wrong strategy and not something long-term investors should be concerned about.

The reason is to enable greater scale. Lowering prices to earn half as much money per car is a good trade if it more than doubles the number of units sold, especially if operating expense won’t grow much as a function of the number of cars made. Due to the nonlinear demand curve, this is essentially how it will play out.

As an investor, I love to see Tesla earning $15k/car and still have a multi-month waiting list for orders, but I don’t want this forever. This is fundamental economics; a manufacturing firm that has strong gross margins, market-leading cost control, and customers who are sensitive to price should drop prices and sell more units. Right now, supply and demand are not in a stable long-term equilibrium. Demand growth is still outpacing supply growth, as evidenced by the margins.

Here is the same notional graph with the nonlinear demand curve (the blue line) shown as well as profit implications. In this hypothetical example, the quantity demanded increases exponentially by 12% for every $1k margin reduction. Underlying this, but not shown, is the assumption that this is not just a $1k price reduction per 12% demand increase, which would probably be excessively optimistic. It's actually reflecting a projection that average gross profit per car will decline as Tesla moves into lower price segments, just as we've seen in the transition from selling exclusively S&X to selling primarily 3&Y.

In this example, the optimal pricing strategy produces $8k gross profit per vehicle on average and results in 18 million vehicles sold. This is not exact but the purpose is to illustrate the interplay between price, quantity, and operating leverage.

Spoiler: Numbers in tabular format

Profit / Vehicle	Quantity Demanded	Fixed Costs	Gross Profit	Net Profit
$0	48	$15	$0	-$15
$1	43	$15	$43	$28
$2	38	$15	$77	$62
$3	34	$15	$103	$88
$4	31	$15	$123	$108
$5	27	$15	$137	$122
$6	24	$15	$147	$132
$7	22	$15	$153	$138
$8	19	$15	$156	$141
$9	17	$15	$157	$142
$10	16	$15	$155	$140
$11	14	$15	$153	$138
$12	12	$15	$149	$134
$13	11	$15	$144	$129
$14	10	$15	$138	$123
$15	9	$15	$132	$117
$16	8	$15	$126	$111
$17	7	$15	$119	$104
$18	6	$15	$113	$98
$19	6	$15	$106	$91
$20	5	$15	$100	$85

 

[dhanson865]

In the context of the recurring conversation around price cuts and demand, I thought it might be helpful to graphically show what I understand the price elasticity picture to be for 3/Y. The exact shape of the curve is wrong, but it may still be directionally useful. I’m sure there are many here who are far more familiar with these economic topics than yours truly, so please provide constructive feedback.

View attachment 914528

A few things to point out from this:

• It is critical to internalize the non-linear nature of the price elasticity curve.
• It is critical to consider where Tesla is on the curve in terms of both COGS and production capacity. The recent price cuts + IRA, and Elon’s comments at ID2023 help confirm that 3/Y is on the non-linear part of the curve.
• The maniacal focus on reducing COGS while increasing production capacity ensures that price cuts will happen over time, all other factors being equal.
• The dramatic price reductions for the Gen 3 platform should reduce the probability that Tesla pends much, if any, time on the right side of the curve for vehicles built on that platform.
• To further drive that last point, a sweet non-linear curve isn’t that useful if an automaker is stuck way too far to the right. See a Rivian example below – I’m not very familiar with their business but I believe this is directionally accurate.

View attachment 914529

To be clear, I don’t know if Tesla will be able to maintain amazing gross margins while ramping new factories like crazy. For long term investors in TSLA, the important thing is that Tesla has room for significant growth with current models with marginal price cuts, and can maintain enough FCF that they can fund aggressive growth. From Zach/Elon’s comments recently neither of those seems to be a significant risk at this point.

So weird to see the axis labels that way. I'm used to a similar curve but with Dollars on the Y axis and # of vehicles on the X axis.

 

[insaneoctane]

I looked at the TSLA 1 month chart. Nothing to see here, clearly no price manipulations, no money to be made here....

 

[insaneoctane]

I've been thinking about this as well. IIRC Elon had fielded a question about it in the past and the response was something like "we are thinking about it".

I'm not sure it would make sense though. It would tie that particular car to a particular buyer and make slotting orders more difficult. It would also mean needing to stock the various wrap colors at service centers (or somewhere). The real killer for me though is just thinking about all the customer complaints if the wrap isn't 100% perfect or if it get's scratched and they go ballistic. The vast majority of buyers have no idea what a vinyl wrap consists of and the pros and cons.

I agree. I'd be concerned about the warranty claims every time someone catches a rock and tears the wrap. Even though it's analogous to an standard rock chip that isn't covered by warranty today, I can see the MM having a field day with Tesla's new "problematic wrapping process". Even if it's generally a good idea, I'm not sure it would be worth the headache?

 

[Ogre]

Great post Wingfoiler! You're two for two on crushing it with posts. Please stay and keep contributing.

I think it's important for investors to understand the implications of this nonlinear demand curve on the future of the business. In the long run, maintaining 25-30% gross margins actually is the wrong strategy and not something long-term investors should be concerned about.

The reason is to enable greater scale. Lowering prices to earn half as much money per car is a good trade if it more than doubles the number of units sold, especially if operating expense won’t grow much as a function of the number of cars made. Due to the nonlinear demand curve, this is essentially how it will play out.

As an investor, I love to see Tesla earning $15k/car and still have a multi-month waiting list for orders, but I don’t want this forever. This is fundamental economics; a manufacturing firm that has strong gross margins, market-leading cost control, and customers who are sensitive to price should drop prices and sell more units. Right now, supply and demand are not in a stable long-term equilibrium. Demand growth is still outpacing supply growth, as evidenced by the margins.

Here is the same notional graph with the nonlinear demand curve (the blue line) shown as well as profit implications. In this hypothetical example, the quantity demanded increases exponentially by 12% for every $1k price reduction, and as a result the optimal price produces $8k gross profit per vehicle and results in 18 million vehicles sold. This is not exact but the point is to illustrate the interplay between price, quantity, and operating leverage.

View attachment 914537

Spoiler: Numbers in tabular format

Profit / Vehicle	Quantity Demanded	Fixed Costs	Gross Profit	Net Profit
$0	48	$15	$0	-$15
$1	43	$15	$43	$28
$2	38	$15	$77	$62
$3	34	$15	$103	$88
$4	31	$15	$123	$108
$5	27	$15	$137	$122
$6	24	$15	$147	$132
$7	22	$15	$153	$138
$8	19	$15	$156	$141
$9	17	$15	$157	$142
$10	16	$15	$155	$140
$11	14	$15	$153	$138
$12	12	$15	$149	$134
$13	11	$15	$144	$129
$14	10	$15	$138	$123
$15	9	$15	$132	$117
$16	8	$15	$126	$111
$17	7	$15	$119	$104
$18	6	$15	$113	$98
$19	6	$15	$106	$91
$20	5	$15	$100	$85

The big question in my mind is whether Tesla will pursue the profit maximizing course, or the volume maximizing course.

One possibility is they pursue profit maximizing in the profitable markets while pursuing volume growth in newer, less profitable markets. Tesla already does this to a large degree I think with European exports versus Chinese local deliveries. At their Mexican production facility, they might do something very similar.

 

[Artful Dodger]

To be clear, I don’t know if Tesla will be able to maintain amazing gross margins while ramping new factories like crazy. For long term investors in TSLA, the important thing is that Tesla has room for significant growth with current models with marginal price cuts, and can maintain enough FCF that they can fund aggressive growth. From Zach/Elon’s comments recently neither of those seems to be a significant risk at this point.

Tesla is doing something unique in the Auto market: cutting prices in lockstep with reductions in COGS. Zach said Model 3 averaged -7% COGS per year over the past 4 years.

This allows Tesla to maintain their profitability, while eating the other's market share. Remember all those 'birds here 4 years ago? Oh, they were certain that Tesla's market share would decrease. Wake-up Time! Tesla's market share is INCREASING, all due to a superior offering at evermore competitive prices.

Today, we hear the croaking of some short-winged 'birds. They are somtimes mistaken for the common Raven, but in reality they are American bitterns.

 

[GhostSkater]

https://twitter.com/x/status/1632813953146404865

 

[NicoV]

The answer lies in the EU deliveries page maintained by @hobbes - so far European deliveries running around 2x 2022

Wiki - Tesla Europe Registration Stats

This wiki belongs to the thread EU Market situation and outlook. Click HERE (CTRL-click to open in new tab) to add new data using a Google form. Any forum member can contribute. We encourage you to do so! Your entry will appear after the data is double-checked by other volunteers. If the data...

teslamotorsclub.com

Yes, but I think that’s purely because the wave is being eliminated. My assumption is that the somewhat linear behavior we’re seeing since the third week of the quarter will keep more or less the same slope this month. There may be an end of quarter delivery peak (I’d be very happy if that was the case) but I doubt there will be a peak as big as in december. There are still 6 ships from China en route to Europe, I doubt all those cars will be delivered by the end of the month.

 

[Buckminster]

Camp 3 are me, who acknowledges Tesla has navigated the last 2 decades of insurmountable obstacles in the face of Camp 1 and all the other Camps of people who have thought and continue to think they know better even while being proven wrong. Therefore, Camp 3 just sits back, toasts up some s’mores, and watches things continue to unfold without judgement. If Camp 3 were to see actual proof that the company was doomed, proof like balance sheet weakness ala Lucid or Rivian then Camp 3 would pack up their toys and move to another stock sandbox to play. That’s what reasonable, logical people do. Everyone else complains and moans and points fingers and acts like they know better while doing nothing. Camp 3 sends those people to collect firewood at the mouth of the bear cave.

Camp 1 needs to or show some documentation about how they’ve taken a start up of Tesla’s ilk through innumerable obstacles of decimation and transformed it into a $600B+ company with a set of impeccable financials and the very real potential of becoming a multi trillion dollar company as soon as WS is done milking the dummies. Camp 3 is waiting -

I'm going with basecamp - presumably that is an option.

Put Elon down for basedcamp...

 

[M|S|M MYP]

Tesla reopens Cybertruck pre-orders for Mexico and Canada.

Seems like a good sign to me we’re going to see a fast ramp and huge volume.

Also, someone suggested possibly Cybertruck production in Mexico too? Interesting thought.

https://twitter.com/x/status/1632803171809763330

TSLAQ will say Tesla needs to pad the EPS so another million preorders will add $150M to the bottom line

 

[lafrisbee]

Simple typo or CNBC showing it’s subliminal true feeling about Tesla’s CEO?

View attachment 914527

Not politically correct to say the word musk so the spell checker errs on the side of caution? I got a week suspension from Twitter for saying tweeting. Everyone was attacking Rep. Marjorie Greene. I wanted to point out she wasn't all bad so I tried to tweet, "I'd bang her, but on my terms." Twitter has me suspended for a week. I asked for them to review my suspension and they claimed they "thoroughly" did. Bullpoop. The algo probably thought by "Bang" I meant I would kill her.
I am not happy, and elon hasn't come by the house with a twelve pack to apologize...yet

 

[lafrisbee]

In the context of the recurring conversation around price cuts and demand, I thought it might be helpful to graphically show what I understand the price elasticity picture to be for 3/Y. The exact shape of the curve is wrong, but it may still be directionally useful. I’m sure there are many here who are far more familiar with these economic topics than yours truly, so please provide constructive feedback.

View attachment 914528

A few things to point out from this:

• It is critical to internalize the non-linear nature of the price elasticity curve.
• It is critical to consider where Tesla is on the curve in terms of both COGS and production capacity. The recent price cuts + IRA, and Elon’s comments at ID2023 help confirm that 3/Y is on the non-linear part of the curve.
• The maniacal focus on reducing COGS while increasing production capacity ensures that price cuts will happen over time, all other factors being equal.
• The dramatic price reductions for the Gen 3 platform should reduce the probability that Tesla pends much, if any, time on the right side of the curve for vehicles built on that platform.
• To further drive that last point, a sweet non-linear curve isn’t that useful if an automaker is stuck way too far to the right. See a Rivian example below – I’m not very familiar with their business but I believe this is directionally accurate.

View attachment 914529

To be clear, I don’t know if Tesla will be able to maintain amazing gross margins while ramping new factories like crazy. For long term investors in TSLA, the important thing is that Tesla has room for significant growth with current models with marginal price cuts, and can maintain enough FCF that they can fund aggressive growth. From Zach/Elon’s comments recently neither of those seems to be a significant risk at this point.

I am going to believe you just based on how cool the charts are, and your word use.

 

[lafrisbee]

I agree. I'd be concerned about the warranty claims every time someone catches a rock and tears the wrap. Even though it's analogous to an standard rock chip that isn't covered by warranty today, I can see the MM having a field day with Tesla's new "problematic wrapping process". Even if it's generally a good idea, I'm not sure it would be worth the headache?

Hey elon, can you offer a "paint" option that is not meant to be paint?
What I think of is like a premium primer coat for those that are sure they want to get their car personally painted.
You go to the delivery center, check out your car, and drive or trailer it to a custom paint shop. A better paint job than anything else out there.

Perhaps the same for wraps if a different surface would work better.