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

[Speedr117]

Based on older Warranty Week contributor analysis and some limited conversations I suspect the following three items to be mostly responsible for that impairment, which is unprecedentedly for Tesla, which typically overstates accruals:
1. Legacy 90 batteries, which were problematic and now nearing warranty end;
2. The Ludicrous versions which initially had had substantial issues;
3. Some motor and BMS issues especially with high mileage older versions.

Obviously there could be several other factors that could be specific to severe weather conditions, but there seems to be less of those.

Since Tesla does not disclose these items they are perforce based on anecdotal clues.
In short, these are guesses!

Thanks!

 

[growler23]

The people on the social platform Musk owns complaining about buying the car Musk makes while their home uses energy which has an increasingly high chance of having been stored or generated on a Tesla product.

It tracks.

On what feels to me like a tematically related, but perhaps more sober note. May be not in the style of the moment after the earnings call, but...

Does anyone else get a sort of overall feel that Tesla is doing a outstanding job of managing/throttling the money flows to keep all the the plates spinning in this rather wild macro environment:

Outflow side (all with interrelated demands and unpredictable features)
1) Rapid development towards revolutionizing low-cost, low-embedded-energy, mass-produced batteries. Costly, esp. in terms of time.
2) Rapid development of unheard-of-efficient manufacturing techniques to be implemented in a factory shortly. Costly to start up - no production for a year plus.
3) Rapid costly (infrastructure always is!) development of the Supercharger network: absolutely required STILL (in the US anyway) to enable expansion in sales / mission
4) Rapid investment in GW scale stationary storage production on multiple continents (hopefully less costly than automotive factory but still - startup costs).
Basically, tons to spend money on, none of which can be ignored.


Inflow side (also hard to predict or even [in the case of legislation] understand)
1) Automotive demand, per quarter or faster, per market (Elon asked for a crystal ball on this IIRC) to determine pricing
2) Government subsidies, with rapidly changing/clarifying rules, possibly up for cancellation due to politics. Predict that, bookies!
3) Probably other stuff here I'm not aware of since I'm not an accountant type

They have to balance these forces (and more) in real time without starving any one priority for too long, and they are certainly interrelated in weird ways. After Investor Day, I am not worried that this all has to be in Elon headspace, but even for a 20 person management team, they have a lot to manage.
This Q1 report strikes me as Tesla managing all these things well enough to stay above water, while the world/market goes through a trough between ocean waves. If you can keep your head above in the trough, you will be 6 feet high when the next wave comes.

My $0.02. I'm staying long - if prices do dip, and dip enough, will nibble a few more kibble.

 

[H Mak]

T-5 for those interested in things that go up

 

[JRP3]

• In my bullish projections last year based on higher automotive prices I majorly underestimated the effects of potentially bad macros and the cyclical demand for cars. My bad.

• As Elon pointed out, delayed car purchases during an automotive market downswing largely come back as pent-up demand during subsequent boom times

I wish Tesla would’ve addressed the advertising question because that’s been a topic of so much controversy. At least explaining their rationale would’ve been helpful so people understand what’s behind continuing the same strategy and slashing prices.

All of this seems in contrast to Elon's claim of greater demand than production.

 

[UncaNed]

Does anyone know what the warranty impairment for older Model S & X's was for? Are they planning on needing to replace batteries or something major that it would be worth mentioning?

Anecdotally, when I brought my 2018 X75Din for a mirror I broke, they replaced a long list of expensive-sounding items I never dreamed needed replacement; speakers, air suspension, charge plug port that had taken in water; If this is representative, then I can believe they'll need to replace a bit much at least on 2018 Model X's. But I feel like I must have more than made up for the cost with the purchase my May 2022 Plaid X.

IMHO all that matters is that Tesla has thoroughly addressed all these things so future iterations of model S and X's won't have these warranty issues, and most of these parts last hundreds of thousands of miles.

 

[Zaddy Daddy]

I suspect this is really the year of the megapack and the semi.

Semi?? They are hand-building them right now. There is no volume production line this year.

 

[JusRelax]

Anyone not watching - go now to watch this historic moment!

 

[Hiline]

All of this seems in contrast to Elon's claim of greater demand than production.

Price cutting is also in contrast to this claim. Action speaks louder than words.

 

[Prunesquallor]

RUD

Was pretty clear not all booster engines operated. Loss of control after max-q.

 

[Knightshade]

Price cutting is also in contrast to this claim. Action speaks louder than words.

I think part of the issue is different people have a different definition of demand.

The classic economic sense of "X people are willing to buy this thing at Y price" versus "Does anybody want to buy this thing"

Hence you get people talking past each other with things like "They're cutting prices because nobody wants to buy them"

What's happening is LOTS of people want to buy them- but many of those can't afford to at higher prices. Elon has mentioned this a bunch.

Lower price increases TAM.

 

[cab]

Sadly, Starship blowing up will now become "Rocket Explodes! TSLA collapsing! Elon has lost his touch!" headlines in 3...2...1

 

[FreqFlyer]

Starship went "boom"! As they stated, the data gained was the important thing. Not all of the engines were operating.

 

[GOVA]

RUD

Was pretty clear not all booster engines operated. Loss of control after max-q.

Which helped me with a new avatar.

 

[Prunesquallor]

Which helped me with a new avatar.

Yeah, six out of 31 33 engines not operating.

 

[Kenypowa]

The first stage engines are straight out of a sci-fi movie.

Stock price goes up and down, but Tesla and SpaceX are going to be the most consequential companies in the next 20 years. Excitement is guaranted!

 

[Krugerrand]

On what feels to me like a tematically related, but perhaps more sober note. May be not in the style of the moment after the earnings call, but...

Does anyone else get a sort of overall feel that Tesla is doing a outstanding job of managing/throttling the money flows to keep all the the plates spinning in this rather wild macro environment:

Outflow side (all with interrelated demands and unpredictable features)
1) Rapid development towards revolutionizing low-cost, low-embedded-energy, mass-produced batteries. Costly, esp. in terms of time.
2) Rapid development of unheard-of-efficient manufacturing techniques to be implemented in a factory shortly. Costly to start up - no production for a year plus.
3) Rapid costly (infrastructure always is!) development of the Supercharger network: absolutely required STILL (in the US anyway) to enable expansion in sales / mission
4) Rapid investment in GW scale stationary storage production on multiple continents (hopefully less costly than automotive factory but still - startup costs).
Basically, tons to spend money on, none of which can be ignored.


Inflow side (also hard to predict or even [in the case of legislation] understand)
1) Automotive demand, per quarter or faster, per market (Elon asked for a crystal ball on this IIRC) to determine pricing
2) Government subsidies, with rapidly changing/clarifying rules, possibly up for cancellation due to politics. Predict that, bookies!
3) Probably other stuff here I'm not aware of since I'm not an accountant type

They have to balance these forces (and more) in real time without starving any one priority for too long, and they are certainly interrelated in weird ways. After Investor Day, I am not worried that this all has to be in Elon headspace, but even for a 20 person management team, they have a lot to manage.
This Q1 report strikes me as Tesla managing all these things well enough to stay above water, while the world/market goes through a trough between ocean waves. If you can keep your head above in the trough, you will be 6 feet high when the next wave comes.

My $0.02. I'm staying long - if prices do dip, and dip enough, will nibble a few more kibble.

Simply yes.

I think anyone ignoring the big picture needs to go do something else and clear their head because they’ve got tunnel vision and missed the forest for the trees.

Trees: GM, IRA credits, ASP, FX etc…

Forest: They literally said that Tesla is ‘uniquely’ positioned to continue business as usual during current uncertain economic times.

Business as usual! Building out current factories and increasing production of all products, while building new factories and continuing to bring new products to market as fast as possible. All this while other companies layoff, take on debt, get bought out, have to merge or outright close their doors. While wars rage, banks implode, interest rates rise, cost of living rises, individuals lose their life and retirement savings -

You can’t have ever run a business if you don’t recognize the virtually impervious wall Tesla has built around their bottom line. Sheer, bloody genius.

 

[Krugerrand]

All of this seems in contrast to Elon's claim of greater demand than production.

It doesn’t matter what it seems. The reality is demand is greater than production, evidenced by continued factory expansion and production growth. Period. End of story.

 

[Mengy]

If FSD was real in 5 years, what would you do as a CEO of the company?
The answer is sell as many cars as you can now, which will become FSD customers later. Conquer market share, squeeze competition, put cars that historically have sold themselves on the road, conquer "mindshare" in customers and potential ones, leverage on brand loyalty, which you are very good at. Put cars on the streets which will increase data harvesting for FSD.

The point is that a lot of investors don't like these long waits. 5 years, in Wall Street terms, in an entire generation. They literally don't care about a game that long. Even if its a complete, armageddon-style revolution as real self-driving.
Real self-driving will change everything. It is a matter of time tho. Maybe 5 years, maybe more.

Here is my main issue with the "FSD is more important than anything else" line of thinking:

Yes I do believe FSD will be revolutionary, eventually, BUT I also think it will take a long, LONG time to play out even after the point where FSD reaches Level 5. Once FSD is solved I do not think we are going to see an immediate massive inflow of revenues to Tesla.

Currently FSD costs $15,000 to buy, it will likely cost more once it is Level 5. How many normal everyday people will be willing to pay that price for software when it only does something they can do themselves and already do every day (driving)? I know the argument is "people will pay it happily" but my hunch is they won't because it's just too expensive for a luxury they don't need. I know I have no intention of paying $15K+ for it, I'm completely happy with standard Autopilot on my Model Y. Sure some people will buy it, but Elon's constant statement that "FSD will be the largest value increase in history" feels overly optimistic to me.

FSD being solved probably won't be a "switch throw" for immediate revenues nor an immediate increase to TSLA. A few Tesla owners will pay the huge price tag, some taxi style companies will grow around it and deploy robotaxi services, and Tesla themselves will most likely build their own robotaxi fleet. But that will take time, a lot of time, to set up, build, and deploy.

What if very few people buy it? What if few people want to use robotaxis? What if FSD never gets solved? What if someone else like OpenAI somehow incredulously gets there first? There is so much uncertainty to this prophetic forecast for the future of Tesla and TSLA that relying on it to bring value to the company and stock worries me.

In the meantime Tesla needs to survive and be world leading without FSD, and while I am confident it will, here on TMC we are all concerned about our shares of TSLA. And I'm pretty sure we would all rather our TSLA went up instead of sideways or even down. Whenever I hear Elon (or anyone) claim FSD is our Ace in the Hole to get margins back up again I shudder, because that is both an extremely long term and uncertain outlook.

 

[Hiline]

I think part of the issue is different people have a different definition of demand.

The classic economic sense of "X people are willing to buy this thing at Y price" versus "Does anybody want to buy this thing"

Hence you get people talking past each other with things like "They're cutting prices because nobody wants to buy them"

What's happening is LOTS of people want to buy them- but many of those can't afford to at higher prices. Elon has mentioned this a bunch.

Lower price increases TAM.

I think you’re right. The second definition is so weird though. There are very few things people don’t ever want to buy. If someone isn’t willing to pay, say, $20k for a Tesla, do they want to buy a Tesla or no?

This is why demand needs to be tied to a specific price level. Hence the demand curve, which I know is an economics concept…

But now I understand why I and many others got downvoted for saying Tesla cut prices because demand was lower than supply at the old price levels. Really thought this was intuitive to everyone.

 

[JRP3]

End of story.

Repeated price cuts tell a different story.