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

[Anstandswauwau]

Expect a flop. Too much hype. Even if it is actually a breakthrough and better than everyone else, which I think is likely, it is overhyped and will disappoint.

This.

No doubt Tesla is years ahead of their competitors in regards of FSD. However, I'm afraid that no matter what amazing stuff they'll demo on the 22nd, it will be easy to nullify by playing the "uncertainty"-card:

• "Sure it works fine in a demo setup, but will it actually work under real-life conditions? Super Cruise works well in constraint environments, too.", "Investor demo is meaningless, we'll have to see how it performs in different environments / it has to prove itself in the long run first" etc.
  
  
• "Will Tesla FSD – as presented today – ever be approved by jurisdictions? If so, when?"
  
  
• "With all that uncertainty, will customers actually spend $10k upfront on FSD that the may never be able to use?"

 

[Pras]

Yes, an FSD car may be safer than an average driver, but almost everyone considers themselves above average!

Except that in case of robo-cabs, the comparison is not with yourself, but with average cabbies.

 

[mongo]

What if they split Tesla and Tesla Network into two companies, and take Tesla private?

Elon said a main reason for not taking Tesla private was that private investors would not be able to follow. That hasn't changed, so I doubt that it would happen.

 

[Tslynk67]

It is now likely that in about 10 days I’m going to do something I’ve never done before in over 40 years of owning cars: I’m going to buy a software upgrade to a car I own (I didn’t opt for FSD when I bought my M3).

The price I will pay for this upgrade is more than I’ve paid Apple for all the iPhones I’ve purchased in the last decade. More than all the software I have purchased for any purpose in the aggregate in my lifetime.

Wall Street: are you paying attention to this?

Have to say I'm feeling pretty smug for picking up FSD four weeks back at the bargain price of €2100

 

[Todd Burch]

Tesla could avoid the image of a “canned” demo by putting a big bearish investor or reporter into the passenger seat, a Tesla safety driver in the driver’s seat, and then asking the reporter/investor to pick a nearby destination.

Might be too risky at this point, but it’s a possible way to prove that the demo is not scripted.

 

[Sancho]

Spin off doesn't make sense, as the data from Tesla cars produced are critical for AV. In terms of antitrust / monopolistic concerns, it will only come if Tesla sells Autopilot tech to other firms. Tesla doesn't need to sell this until it is at a mature state and there is regulatory approval.

There would likely be a data sharing agreement between Tesla and Network Newco. In addition to all sorts of other collaborative arrangements.

 

[bdy0627]

EU prices include (significant) taxes, US don't.

The best comparison would be Norway, since there's no VAT. SR+ is $43315. There's 10% import tariffs to Europe, so thats $39377. Now factor in the cost of overseas shipping, on top of domestic delivery.

Margins are lower for a given Model 3 model to Europe. But more than offsetting this is the fact that all of Europe was AWD or better, and all of China LR RWD or better. Quite a rich mix. Meanwhile, US and Canada were MR or better until the end of the quarter.

I just don't see where people are pulling these low margin figures for Q1 from.

Interesting. Let's compare model 3 sales to Q3 2018. There are some similarities between the quarters.
https://ir.tesla.com/static-files/725970e6-eda5-47ab-96e1-422d4045f799

Q3 2018
U.S. only
Production: 53,239 (4,100 per week)
Deliveries: 56,065
ASP: $56,800
Model 3 revenue: $3.196B
Gross Margin: 20.5%
Model 3 in transit: 8,048
Model 3 inventory not delivered or in transit: 1,760 ($100M)

Q1 2019
Production: 62,950 (4,840 per week)
Deliveries: 50,900
ASP: $54,000?
Model 3 revenue?: $2.749B (with ASP of $54k)
Gross Margin: ? (Luv's model estimates 18.5%); production was undoubtedly more efficient in Q1 than Q3; unsure about raw materials
Model 3 in transit: 8,480
Model 3 inventory not delivered or in transit: 11,400 ($615M)

Consider:
Production is up 18% from Q3
Deliveries are down 10% compared with Q3
ASP is down probably about 5-6%
Revenue is down 14% from Q3 (assuming ASP of $54k)
In transit is very similar
Inventory not delivered or in transit is way higher in Q3 ($615M)
I'm not an accountant or even great at math, but I have a hard time seeing these numbers turning into a good financial result for Q1.

 

[M3Rider]

FSD will not be allowed to be used commercially on anything other than Tesla Network. They will not be able to self drive on the Uber network.

Understandable. But I think they can still use them provided that TN gets its cut.
So, they get 80-90% profit maybe?
It would not be through the Uber app though, just an investment of sorts.

And I don't see this making sense w/ leasing, since you're locked to a very limited mileage and have to return the car after 3 years.

 

[bdy0627]

Excellent question. The reference to "investor" wording could actually be referring to existing investors (shareholders). A spinoff of the Tesla Network to existing shareholders would be a boon to the share price as the market would assess the value of the autonomous program vis-a-vis Waymo and other similar projects. As long as the Tesla initiative were seen to be at least equal to the others, there would be a quantum repricing of the stock. In addition, a spinoff would cause massive problems for the shorts, IMO.

How exactly would a spinoff work in terms of the stock? What actually would happen?

 

[Buckminster]

Ok, I was wrong. And this is awful news. 33% below theoretical capacity on the Panasonic side? Ouch, ouch, ouch. Pana needs to get their act together. Because Tesla absolutely needs to get to higher production rates fast.

I think it is great news. Pana getting more people in, more lines, more cobalt etc. seems eminently achievable. Plus the whole SR thing using fewer cells.

Anyone have links to their models? What sort of margins are they assuming? Because from my vantage point it looks like margins should be quite good. S+X ASP should be significantly higher than in Q4 (production costs only slightly higher) due to elimination of the 75Ds. 3 should be overwhelmingly LR, particularly AWD - indeed, over 1/3rd of their sales (Europe) had to be at least AWD, and over half their sales (Europe + China) had to be at least LR - vs. Q4 which was overwhelmingly MRs. Profit on an EU AWD isn't as much as on a US AWD, but it's still way more than on a MR.

Factor in another quarter of general production cost improvements.... and remember that raw material costs are down, and Tesla just renegotiated its 18650 contract....

Sure, there's going to be severence costs this quarter, and that will cost them to be sure. But as far as margins go....

Go on - you're nearly there:

GO TO 'Diagnostics mode'
GO TO 'Parallel processor in loop - reset'
GO TO 'Emotional chip - power up'
GO TO 'Engage celebration mode'

 

[defc0n]

Have to say I'm feeling pretty smug for picking up FSD four weeks back at the bargain price of €2100

 

[bdy0627]

Let's hope Elon's Dev kit is indeed what we think it is. Level 3 driving on the highway is still not possible with current update. Exiting the highway is a huge problem with heavy or semi heavy traffic. The car would also want to exit way too late..sometimes speeding up one lane away from the correct lane when the exit is less than 0.1 mile away. So far I have been disengaging EAP 100% of the time in heavy traffic because it doesn't work.

Mine has been very very good, but I am not in dense highway traffic in Appleton, WI. Here, it is functioning at level 3 with the occasional time where the car makes a couple of tries before changing lanes or even aborts the lane change. That's rare though now. What will the car do when there is bumper to bumper traffic in the lane the car wants into and no one is letting it in? Has anyone seen how it gets it done?

 

[Sancho]

If Musk does announce a spinoff of Tesla Network into its own new company, it’s a clever secondary meaning to “Autonomy” Day.

 

[Ad Astra]

Let's hope Elon's Dev kit is indeed what we think it is. Level 3 driving on the highway is still not possible with current update. Exiting the highway is a huge problem with heavy or semi heavy traffic. The car would also want to exit way too late..sometimes speeding up one lane away from the correct lane when the exit is less than 0.1 mile away. So far I have been disengaging EAP 100% of the time in heavy traffic because it doesn't work.

This might be related to the lane change settings. Have you tried setting it to Mad Max? The system appears to be somewhat conservative in the other modes under the conditions you described. My LR model 3 has ~24k miles (mostly highway) and at least 70% of those miles have been driven with NoA with little to no issues save for a few interchanges that are squirrely due to heavy construction. Given the formal description of level 3 autonomy, I don’t understand how Tesla’s current system can be construed to be anything but.

 

[Causalien]

If Musk does announce a spinoff of Tesla Network into its own new company, it’s a clever secondary meaning to “Autonomy” Day.

April 22, 2019. Skynet was born.

 

[bdy0627]

Update on (non-plus) SR availability in Europe:

Bunch of people, including myself, have called local Tesla stores yesterday and asked for the off-menu SR:

Contrary to the RWD LR off-menu, which can be ordered, they have currently no info on the SR. So as it stands right now, the likelihood that SR will land in Europe is rather slim, I'd say.

Good. Let's not rush it. That's not what Tesla needs right now. Better to keep it on the down low for now.

 

[bdy0627]

That's exactly what I am seeing. In a spinoff, an entirely new security is introduced and distributed to the shareholders of 173M +/- shares of TSLA. However, if it were possible to look at all of the long positions held across the market (forgetting for now that there may be shorted stock that has not been delivered), one would see a total of 173M PLUS all of the shares that have been shorted. For simplicity, let's say 27M short. In a spinoff, there would be shareholders of 200M shares who will be expecting to receive shares in the spun off company. Since, the shorts cannot create and deliver shares to the holder of the stock to whom they have shorted, the stock must be returned to the lenders of 27M shares. (BTW, in the case of a company announcing an unexpected cash dividend, the shorts simply deliver cash to the holders of the shorted shares---known as an "in lieu" of dividend.)

How do existing call options work in this situation?

 

[Hock1]

How exactly would a spinoff work in terms of the stock? What actually would happen?

From Investopia:

Understanding Spinoff
When a corporation spins off a business unit that has its own management structure, it sets it up as an independent company under a renamed business entity. The company that initiates the spinoff is referred to as the parent company. A spinoff retains its assets, employees, and intellectual property from the parent company, which gives it support in a number of ways, such as investing equity in the newly formed firm and providing legal, technology or financial services.

A spinoff may occur for various reasons. A company may conduct a spinoff so it can focus its resources and better manage the division that has more long-term potential. Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs. For example, a company might spin off one of its mature business units that are experiencing little or no growth so it can focus on a product or service with higher growth prospects. Alternatively, if a portion of the business is headed in a different direction and has different strategic priorities from the parent company, it may be spun off so it can unlock value as an independent operation.


A company may also separate a business unit into its own entity if it has been looking for a buyer to acquire it for a while but couldn't find one. For example, the offers to purchase the unit may be unattractive, and the parent company might realize that it can provide more value to its shareholders by spinning off that unit.


A corporation creates a spinoff by distributing 100 percent of its ownership interest in that business unit as a stock dividend to existing shareholders. It can also offer its existing shareholders a discount to exchange their shares in the parent company for shares of the spinoff. For example, an investor could exchange $100 of the parent’s stock for $110 of the spinoff’s stock. Spinoffs tend to increase returns for shareholders because the newly independent companies can better focus on their specific products or services.

 

[Hock1]

How do existing call options work in this situation?

As a result of participating in the stock market for over 50 years as an investor and a broker, I've learned not to use options at all (except for the occasional married put). So, I'm not the person to answer that question (with certainty).

 

[Prime_Number]

A thought experiment looking out 10 years from now.

EVERY large city in the world has at least one major corridor of congested traffic.

If in helping a city with it's sewer, electricity, telecom and associated infrastructure at a fair price, the Boring Company was able to construct a short 10 mile tunnel for vehicular traffic, what advantage would this give to the Tesla Network ?

All things being equal, if the cost of the ride was the same regardless of provider, would you use Waymo, Uber, Lyft, or the Tesla Network if you knew the Tesla Network could get you to your destination in half the time ?