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

[Artful Dodger]

to follow up on this: Alexandra / Teslaboomermama [TBM] has been doing a lot of great analysis of tesla, and today on a tesla bulls podcast mentioned that someone from tesla recently reached out to her about all her recent twitter posts about auto financing & the advantages of tesla offering its own finance etc, got her to explain some details, and said they intend to “do something with it”.

This is an important point from TMB: (See her 10-year Yield Curve 'graph' tweeted below). Basically, Interest Rates are "High" if you're borrowing for a short term like 3 years. If you're borrowing for 10 years, then Interest Rates are cheap.

IMO, Tesla should bundle that affordable auto loan with a 10-yr powertrain warranty for a modest additional cost to lock in the asset resale value. Across the industry, only Tesla could do this with its reliable electric powertrain and superior battery chemistry.

I know far less about auto financing than TBM. Paging @CorneliusXX @unk45 .

Alexandra Merz on Brighter w. Herbert:

When I put my graph out with that move up the yield curve somebody from Tesla reached out by DM then asked me a couple of questions. How would you do it, what do you mean with asset backed and I mean I spilled what I could. I'm not the specialist in auto loan financing, by far not right, but they are reading our tweets. The guy took notes and said he's gonna so something with it. I don't know maybe something comes out of it, maybe it doesn't, but I do believe we should bring forwad our ideas even if sometimes they're against the trend.

Alexandra Merz on Twitter: "To make Tesla cars affordable, offer financing by Tesla (instead of banks) and use the yield curve intelligently to lower the monthly payments. By moving from 6 to 10 years, you lower the monthly payment by 33%. Tesla cars last longer, and can be summoned back in case of repo. https://t.co/9Dih08liK5" / Twitter​

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US Treasuries Yield Curve (JPEG Image, 1200 × 675 pixels) | Mar 26, 2023​

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Alexandra Merz on Twitter: "A $50k car moves from $750/month to $500/month." / Twitter​

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I think this idea could be very helpful after the next FMOC meeting.​

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Cheers!​

 

[unk45]

This is an important point from TMB: (See her 10-year Yield Curve 'graph' tweeted below). Basically, Interest Rates are "High" if you're borrowing for a short term like 3 years. If you're borrowing for 10 years, then Interest Rates are cheap.

IMO, Tesla should bundle that affordable auto loan with a 10-yr powertrain warranty for a modest additional cost to lock in the asset resale value. Across the industry, only Tesla could do this with its reliable electric powertrain and superior battery chemistry.

I know far less about auto financing than TBM. Paging @CorneliusXX @unk45 .

Alexandra Merz on Brighter w. Herbert:

Alexandra Merz on Twitter: "To make Tesla cars affordable, offer financing by Tesla (instead of banks) and use the yield curve intelligently to lower the monthly payments. By moving from 6 to 10 years, you lower the monthly payment by 33%. Tesla cars last longer, and can be summoned back in case of repo. https://t.co/9Dih08liK5" / Twitter​

​

US Treasuries Yield Curve (JPEG Image, 1200 × 675 pixels) | Mar 26, 2023​

​

​

Alexandra Merz on Twitter: "A $50k car moves from $750/month to $500/month." / Twitter​

​

I think this idea could be very helpful after the next FMOC meeting.​

​

Cheers!​

From a pure payment perspective this works but…
1. past 10 year loan efforts (eg Chase Auto Finance for Volvo years ago), had serious credit problems, customers who took that option were poorer risks despite high initial credit scores reflecting negative selection within score bands. Further vehicle condition deteriorated so collateral value declined faster than loan value, so loss severity was catastrophic. Gap insurance was available but they lost huge amounts on it. Following sales declined too since people could not afford a trade.
2. Tesla has a plethora of choices to achieve similar goals more economically and less hostile to borrower quality. Simple to complex: Free Supercharging, interest rate subvention shorter term, loan with residual value (true finance lease), no cost color options, where available package with insurance (this one is very tricky), offer contract for car replacement every couple of years, or shorter (ie copy Apple).
3. there are many more choices better than ten year losers. They’ll quickly find that out in Spain a market where negative selection is an art form.

 

[Artful Dodger]

They’ll quickly find that out in Spain a market where negative selection is an art form.

1. Had to look this one up. Thanks!

Adverse Selection: Definition, How It Works, and The Lemons Problem | Investopedia

Adverse Selection: Definition, How It Works, and The Lemons Problem

Adverse selection refers to the tendency of high-risk individuals obtaining insurance or when one negotiating party has valuable information another lacks.

www.investopedia.com

2. Could you tweet those "plethora of choices" to Alexandra Merz? Or comment on her blog?

Time has come to protect Tesla | substack blog (TeslaBoomerMama) 11/8/2022

 

[Surfer of Life]

This is an important point from TMB: (See her 10-year Yield Curve 'graph' tweeted below). Basically, Interest Rates are "High" if you're borrowing for a short term like 3 years. If you're borrowing for 10 years, then Interest Rates are cheap.

IMO, Tesla should bundle that affordable auto loan with a 10-yr powertrain warranty for a modest additional cost to lock in the asset resale value. Across the industry, only Tesla could do this with its reliable electric powertrain and superior battery chemistry.

I know far less about auto financing than TBM. Paging @CorneliusXX @unk45 .

Alexandra Merz on Brighter w. Herbert:

Alexandra Merz on Twitter: "To make Tesla cars affordable, offer financing by Tesla (instead of banks) and use the yield curve intelligently to lower the monthly payments. By moving from 6 to 10 years, you lower the monthly payment by 33%. Tesla cars last longer, and can be summoned back in case of repo. https://t.co/9Dih08liK5" / Twitter​

​

US Treasuries Yield Curve (JPEG Image, 1200 × 675 pixels) | Mar 26, 2023​

​

​

Alexandra Merz on Twitter: "A $50k car moves from $750/month to $500/month." / Twitter​

​

I think this idea could be very helpful after the next FMOC meeting.​

​

Cheers!​

I can assure you that Tesla cars most certainly CANNOT “be summoned back for repo” except in the the aFSD fantasyland some of us here live in. I’m pretty sure that won’t be an option for another 10 years.

 

[mongo]

Hmm, they implemented this new trim line despite the suspected imminence of the Highland version. I guess they want to move as much metal as they can in the meantime, and they were ready with this.

I'm being wildly optomistic here.
You say "despite"; however, we haven't seen what a new Model 3 LR looks like. Delivery window shows June for me versus May for SR and P.
If a limited P, range specs shouldn't get worse, unless due to tires, and P should have the sticky ones:
It could just be new pack and/or drive units, or...

Acceleration 0-60 mph

Model 3	5.8 sec
Model 3 Long Range	4.2 sec
Model 3 Performance	3.1 sec*

Range

Model 3	267 - 272 miles
Model 3 Long Range	310 - 325+ miles
Model 3 Performance	315 miles

Range varies with wheel selection and is reflected under each wheel option

Top Speed

Model 3	140 mph
Model 3 Long Range	145 mph
Model 3 Performance	162 mph

Drivetrain

Model 3	Rear-Wheel Drive
Model 3 Long Range	Dual Motor All-Wheel Drive
Model 3 Performance	Dual Motor All-Wheel Drive

Powerful Efficiency​

Tesla designed Model 3 from the ground-up as an electric vehicle using system-level integration throughout. Each component, including batteries, motors and even exterior aerodynamics are optimized to benefit from one another and create one of the most efficient, yet unbelievably powerful vehicles ever built.
*With first foot of rollout subtracted.

Very Cold Weather​

For the best long range driving experience in the coldest driving conditions, we recommend a Long Range or Performance Model 3.

(Yes, I know the configurator image is the same for all three. Like I said, being wildly optimistic. )

 

[Unpilot]

I’m pretty sure that won’t be an option for another 10 years.

I know we aren't supposed to bet here anymore....but I'd take the other side of that one.
Ten years is forever as AI is concerned.

 

[mongo]

I can assure you that Tesla cars most certainly CANNOT “be summoned back for repo” except in the the aFSD fantasyland some of us here live in. I’m pretty sure that won’t be an option for another 10 years.

Smart summon to tow truck/ driver for repo, not self-driving back to delivery center.
Could also remote disable when parked in a convenient location.

 

[FEERSUMENDJIN]

I addition to this, we also had a shift in the market towards premium and bigger models, and a reduction of incentives.
When I bought my Renault Zoe, in Italy, in 2020, I had almost **12k** discount between several national incentives and a discount from the dealer. Price tag was around 25k.

Right now, a Zoe starts at 33.5k, and incentives are very few.
There are no more affordable EVs: best bang for your buck is a M3, but it's still 40k.

MGs are the true affordable option in Europe right now. Or the Italian favourite the 500e is under 30K

 

[hobbes]

could be LG china 2170 cells assembled in Shanghai or Nevada

If cells were assembled in Nevada car should get full 7500 credit not half, no?!

 

[jeewee3000]

I can assure you that Tesla cars most certainly CANNOT “be summoned back for repo” except in the the aFSD fantasyland some of us here live in. I’m pretty sure that won’t be an option for another 10 years.

Not summoned back for repo, but Tesla vehicles can ping their location to the mothership so the repo man can find the car. This would have to be allowed by the contract of course.

 

[Christine69420]

Tesla Model Y is the best selling car model - not bad for the first month in a quarter. The delivery wave is flattening - helped by Giga Berlin.

These two graphs show the positive trend well:

This one from Tesla Registration Stats shows 978 Teslas delivered in Norway in April - the best first month of a quarter by quite a margin.

This one from Electric Vehicle registrations in Europe: 14 countries, 90+% of BEV market shows us that it's not only in Norway (978 deliveries). 2018 Teslas was delivered in the other 3 countries with live registration updates. These lines start growing earlier and earlier.

 

[CorneliusXX]

From a pure payment perspective this works but…
1. past 10 year loan efforts (eg Chase Auto Finance for Volvo years ago), had serious credit problems, customers who took that option were poorer risks despite high initial credit scores reflecting negative selection within score bands. Further vehicle condition deteriorated so collateral value declined faster than loan value, so loss severity was catastrophic. Gap insurance was available but they lost huge amounts on it. Following sales declined too since people could not afford a trade.
2. Tesla has a plethora of choices to achieve similar goals more economically and less hostile to borrower quality. Simple to complex: Free Supercharging, interest rate subvention shorter term, loan with residual value (true finance lease), no cost color options, where available package with insurance (this one is very tricky), offer contract for car replacement every couple of years, or shorter (ie copy Apple).
3. there are many more choices better than ten year losers. They’ll quickly find that out in Spain a market where negative selection is an art form.

Agree.

I also have doubts as to how much cheaper the borrowing rate would be on a 10y vs 7y money. Assuming matched funding (I.e. tesla borrowing as much as they are lending at the same tenors) and an amortising loan then only a portion of what tesla borrows to fund the loan will be at the cheaper rate. Then as said in the quoted post, the credit risk premium should be higher which would also reduce some of the benefit. Hard to get a high confidence on the benefit without quite detailed modelling and discussing with financiers on how they would price their funds.

Also, there are only a handful of Teslas that are 10y+ in age. While there are very logical reasons for EVs to last longer than ICE there is limited data showing that reflected in the price after 10 years (What happens to the value of a 2023 M3 in 5 years when Tesla is pumping out millions of $25k M2 and FSD hasn't landed). If tesla was going to take any risk on these loans they would have more uncertainty than in a standard auto loan.

We should encourage Tesla to be increasing their captive finance proposition as there is a lot of opportunity there - particularly when banks are getting skittish as Tesla should get better terms with less competition - but start small with anything too exotic so we don't get burned down the road if things don't turn out the way we expect.

 

[MP3Mike]

This probably is the CATL M3P cell that we've seen being talked about many times

LFMP - LFP + Manganese

Unlikely.

A 325 mile car that I can charge to 100% every night sounds good to me, even with giving up half of the tax credit. Assuming it's LFMP or LFP.

Probably not. It is probably LG cells made in China that are made into packs at GigaNevada. (Lower capacity cells than the Panasonic ones.)

If cells were assembled in Nevada car should get full 7500 credit not half, no?!

Cells imported and then assembled into packs in Nevada. Not that the cells themselves are assembled in Nevada.

 

[Krugerrand]

FYI folks - get your *new* Tesla Roadster

Three Brand-New Tesla Roadsters Found in Shipping Container After 13 Years

The last new Tesla Roadsters in the world are coming home, where they'll be put up for sale after a thorough inspection.

www.thedrive.com

 

[TN Mtn Man]

Ford cutting price of electric Mustang Mach-E by thousands of dollars

Ford will lower pricing of the Mach-E by $1,000 to $4,000. The cuts will make the starting price of the vehicle be between $42,995 and $59,995.

www.cnbc.com

Ford Motor is once again cutting the starting prices of its electric Mustang Mach-E by thousands of dollars, as the automaker increases production of the crossover and reopens order banks for the vehicle.

The Detroit automaker said Tuesday it will lower pricing of the Mach-E by a range of $1,000 to $4,000. The cuts will make the starting price of the vehicle fall between $42,995 and $59,995.

 

[Hiline]

If you own a 3-10 year old car that is reliable, it is quite easy to put off a purchase for 1-3 more years while the market settles a bit. The likelihood there will be significantly better deals on EVs in 2-3 years is nearly 100%. The high interest rates we're seeing at the moment make it even more likely people will put off a purchase for a year or two.

I strongly suspect there are a lot of people hanging onto their ICE car for a couple more years while they get ready for their EV purchases.

I was thinking the used ICE market would crash, but starting to think they will have a long tail as new car sales fall off a cliff and economies of scale invert on cars like the Corolla. My mechanic buddy will have plenty to keep him busy for another 10 years before he retires.

I think this is the same issue for all car manufacturers at this point. People are pushing out their car purchase in anticipation of lower EV prices and lower interest rates, not to mention cars last much longer nowadays than they did a decade or two ago. Used cars are in favor right now, and then in the next 2-3 years new cars are going to make a comeback, and this is when we're going to see an explosion of EV purchases. This will be exciting to watch, but Tesla is going to have to navigate the immediate low demand period first.

 

[BornToFly]

Tesla had positive margins on the Model S from the beginning. Ford has negative 102% margins almost 3 years after starting production of the Mach-e. This should tell an investor everything they need to know.

 

[Krugerrand]

Ford cutting price of electric Mustang Mach-E by thousands of dollars

Ford will lower pricing of the Mach-E by $1,000 to $4,000. The cuts will make the starting price of the vehicle be between $42,995 and $59,995.

www.cnbc.com

There go their 20% gross margins.

 

[2daMoon]

What does it say about a country lagging in EV sales if the catalyst needed to break the habit of ICE is the collapse of the industry, rather than obvious benefits of making the change?

It just seems odd how the EU and China seem to be making the transition scale based upon logic at both the buyer's and legislator's levels while the US needs to see drama in order to come around.

Well, I think we are on the cusp of the needed drama and that the problems contributing to the slow uptake in EVs are closer than ever to being overcome. These industry giants behind Big Auto and Big Oil have painted themselves into a corner by trying to milk the unsuspecting for all they're worth.

Visiting a friend, he was talking about the cost for repairs on his cars and other related issues and I asked if he had considered the advantages of an electric vehicle.

His answer was, "But what if I want to take a long trip?"

I replied, "How do you take a long trip now? You stop and fill up as you go." Then, I went into how 95% of his "fill-ups" will be done at home with an EV.

This opened the FUDgates with him countering about how long it takes to charge (which I explained wasn't an issue) and he went down the standard list of reasons not to go EV that folks in the US have been spoon-fed. Like, asking me how much does it cost to replace the battery? Which I explained were good for a million miles now.

Other things I mentioned included how the legacy ICE OEMs are struggling, scaling down production, piling up inventory, and encouraging employees to take buyouts in order to reduce their workforce. I also mentioned energy, the adoption S-curve, and all the usual bullet points. Until I could see his eyes begin to glaze over.

I asked if he would like me to send him some links to more info, as I explained the breadth and depth of Tesla. He said he would like to learn more. The links have been sent to whet his appetite. But, I know him well enough to not be surprised if he never mentions EVs again.

Having been involved in TMC has opened my eyes to many perspectives from people who work and live in other parts of the world. I find it frustrating and a little embarrassing when I see us lagging behind in the US.

Maybe it IS the Fluoride in the water, or the Disneyesque model of the American Dream that has been such a part of our indoctrination. Is this what leads so many in the US to wave flags, wear T-shirts with one-liners, and affix bumper stickers, and hold our heads proud that we have chosen a side, despite not having made any effort to confirm the stories we are told?

Rather, shouldn't people apply logic and reason to establish what are the important facts in any given instance?

Oh well, I'll keep spreading the word and can't wait until the tide begins to rise to the long overdue crest we here can see coming on the horizon.

HODL

 

[Krugerrand]

- This should tell an investor everything they need to know.

But apparently it doesn’t for some.