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

[Stretch2727]

Because they don't have the batteries?

Partly. I think the real reason is Ford is loosing contribution margin with EV's. Basically the gross margin is negative on current vehicles and they will not be positive until the Gen II vehicles are launched.

I listened to the conference call and here are my takeaways.

-They don't believe they will have positive gross margin on the current EV's. Much of this is due to the current pricing pressure (Tesla) in the industry which was a change from the earlier outlook.

-They were shocked by a teardown of the Austin built Model Y.

-They pay a lot of attention to loyalty so they don't want to loose share as they shift to EV's. If they can't make EV's profitably, hybrids are a way to fill the gap, keep customers until they can profitably scale EV's.

-They are talking Hybrid only. Not plugin Hybrid.

-They think there is a lot of people that will buy a car/truck if it has a built in generator. The current F150 hybrids have Pro-power onboard which basically is like having a small backup generator built into the car. If you look at the website they talk about how many hours it can run (idle) before you run out of gas. It sounds like they are pushing this hybrid system into many vehicles and will sell the backup power feature. They get the better gas mileage of hybrid along with a "free" backup generator as justification to pay more for a hybrid. Actually there is probably a pretty good market for this feature given all the outages in the US.

-He did not give specifics but alluded to a change in market segments when they introduce the Gen II vehicles. He did say "no 2 row small SUV", so maybe the Mach E will not be around long. I think they are going where Tesla is not. Commercial vehicles and large SUV. Where Detroit has been strong.

 

[AndrewZ]

Because they don't have the batteries?

The Inflation Reduction Act is sorta written to incentivize hybrids in terms of scooping up tax credit $$$ for consumers using a given quantity of qualifying materials.

Granted the IRA thus far has been implemented much more leniently than I imagined, the dynamic still exists: if you have X tons/eaches of domestic battery minerals/components, there is nothing in the IRA saying you need to manufacture a battery of a certain size to garner the tax credit for buyers.

So given a limited quantity of battery stuff that qualifies for the tax credit, you can spread those quantities over a smaller volume of BEVs with large batteries that get consumers the full $7500 or you can spread those quantities over a larger volume of hybrids with tiny batteries that still get consumers the full $7500. Theoretically the more vehicles you can produce qualifying for the $7500, the more you'll be able to move at higher MSRP and this might become more important as the IRA battery qualifications become more stringent as the years progress.

 

[Stretch2727]

The Inflation Reduction Act is sorta written to incentivize hybrids in terms of scooping up tax credit $$$ for consumers using a given quantity of qualifying materials.

Granted the IRA thus far has been implemented much more leniently than I imagined, the dynamic still exists: if you have X tons/eaches of domestic battery minerals/components, there is nothing in the IRA saying you need to manufacture a battery of a certain size to garner the tax credit for buyers.

So given a limited quantity of battery stuff that qualifies for the tax credit, you can spread those quantities over a smaller volume of BEVs with large batteries that get consumers the full $7500 or you can spread those quantities over a larger volume of hybrids with tiny batteries that still get consumers the full $7500. Theoretically the more vehicles you can produce qualifying for the $7500, the more you'll be able to move at higher MSRP and this might become more important as the IRA battery qualifications become more stringent as the years progress.

True but the hybrids Ford is introducing will not be plug-in. Adam Jonas directly asked the question and Jim Farley clearly said they will be hybrid only so no tax credit.

Again, they think there is a huge market for hybrid vehicles with built in generators based on the F150 Pro-Power.

 

[ggies07]

Put even simpler, given the choice of ICE vs BEV to someone who's never seen a car... which do you think they'd prefer? 100% EVs would win

I love this example and never thought about it this way...will use in future conversations. Thanks!

 

[ggies07]

They pay a lot of attention to loyalty so they don't want to loose share as they shift to EV's. If they can't make EV's profitably, hybrids are a way to fill the gap, keep customers until they can profitably scale EV's.

This is a wicked assumption. If Tesla can scale EVs as fast as we think, at some point, loyalty goes out the window for following the crowd. If everyone is switching to EVs and some loyal Ford fan is thinking about buying a hybrid, watch out, no one likes to be left out of what's new, hot, and fun.

 

[TN Mtn Man]

Why on Earth would Ford pull a Toyota and sink money into hybrids? That's like companies deciding that ISDN is the future...or thinking we should go back to LaserDiscs. Bad move by Jim Farley.

Agreed-funny how it flies in the face of everything Ford has promised for the last half-decade.

Granted it was an article from CNBC, so who knows how much truth there is to it? Kind of reminds me of those promoting horses and buggies after the Model T came out.

 

[insaneoctane]

Partly. I think the real reason is Ford is loosing contribution margin with EV's. Basically the gross margin is negative on current vehicles and they will not be positive until the Gen II vehicles are launched.

I listened to the conference call and here are my takeaways.

-They don't believe they will have positive gross margin on the current EV's. Much of this is due to the current pricing pressure (Tesla) in the industry which was a change from the earlier outlook.

-They were shocked by a teardown of the Austin built Model Y.

-They pay a lot of attention to loyalty so they don't want to loose share as they shift to EV's. If they can't make EV's profitably, hybrids are a way to fill the gap, keep customers until they can profitably scale EV's.

-They are talking Hybrid only. Not plugin Hybrid.

-They think there is a lot of people that will buy a car/truck if it has a built in generator. The current F150 hybrids have Pro-power onboard which basically is like having a small backup generator built into the car. If you look at the website they talk about how many hours it can run (idle) before you run out of gas. It sounds like they are pushing this hybrid system into many vehicles and will sell the backup power feature. They get the better gas mileage of hybrid along with a "free" backup generator as justification to pay more for a hybrid. Actually there is probably a pretty good market for this feature given all the outages in the US.

-He did not give specifics but alluded to a change in market segments when they introduce the Gen II vehicles. He did say "no 2 row small SUV", so maybe the Mach E will not be around long. I think they are going where Tesla is not. Commercial vehicles and large SUV. Where Detroit has been strong.

I guess he forgot to mention that hybrids are their dealers wet-dreams with both ICE and BEV drivetrain components to maintain? Hmmmm, shocked that didn't come up...

 

[insaneoctane]

The Inflation Reduction Act is sorta written to incentivize hybrids in terms of scooping up tax credit $$$ for consumers using a given quantity of qualifying materials.

Granted the IRA thus far has been implemented much more leniently than I imagined, the dynamic still exists: if you have X tons/eaches of domestic battery minerals/components, there is nothing in the IRA saying you need to manufacture a battery of a certain size to garner the tax credit for buyers.

So given a limited quantity of battery stuff that qualifies for the tax credit, you can spread those quantities over a smaller volume of BEVs with large batteries that get consumers the full $7500 or you can spread those quantities over a larger volume of hybrids with tiny batteries that still get consumers the full $7500. Theoretically the more vehicles you can produce qualifying for the $7500, the more you'll be able to move at higher MSRP and this might become more important as the IRA battery qualifications become more stringent as the years progress.

I kinda agree. Unless you are hardcore about designing EVs for affordable manufacturing at scale, going to hybrid and picking up the pennies offered by the IRA is probably the right short term solution. Unfortunately it has increased odds of your ultimate failure and bankruptcy since it's an admission that you can't compete with Tesla yet and they've already had over a decade to try and do that. This strategy is just kicking the can...

 

[Jeeps17]

I guess you can’t keep your brush in the trunk. Frunk?

Montrealer here. We keep our brushes in the main cabin, usually on the floor in the rear passenger footwell. It is easy to brush off snow above a door by hand before opening it, with minimal ingress into the cabin. Once done the brush (the flat model we use) does not affect rear passenger comfort in any way, and residual snow on the brush after use just melts onto the rubber floor mats.

Apologies for the weekend OT.

 

[AndrewZ]

I kinda agree. Unless you are hardcore about designing EVs for affordable manufacturing at scale, going to hybrid and picking up the pennies offered by the IRA is probably the right short term solution. Unfortunately it has increased odds of your ultimate failure and bankruptcy since it's an admission that you can't compete with Tesla yet and they've already had over a decade to try and do that. This strategy is just kicking the can...

BEVs can still be produced too, but there will be a point where there is a true limit on how many IRA-qualifying kWh can be produced as the domestic and free trade sourcing requirements increase -- I thought this would have been a big factor right from the start, not even sure how it's possible that all F150 Lightnings sold today can qualify for $7500.

Starting next year, batteries are supposed to qualify for $0 if they contain any components from China / Russia / North Korea / Iran on top of the percentages that need to be sourced from friendly countries.

As this becomes more and more stringent, theoretically fewer and fewer kWh can be produced that will satisfy the requirements and qualify for tax credits. Of course this all hinges on the interpretation, and so far the legislation seems to have been interpreted very generously.

 

[CatB]

I love this example and never thought about it this way...will use in future conversations. Thanks!

Years ago, someone posted a hilarious "product review" (apparently a riff on a similar books vs ebooks review) here on TMC on "ICE cars for EV drivers"
I can't find it now, but it included gems like "so how much will it cost to install a fuel pump at my house?"

(Sorry for tangential OT, but EV acceptance is part of Tesla's mission and a factor in Tesla's success)

 

[alhounos]

Pretty sweet video on the Solar Roof + Powerwall combo, hope Tesla manages to scale it and bring costs down

For those unaware, the YouTuber here MKBHD is one of the biggest stars on YouTube, his videos regularly get many millions of views. Great exposure here.

Coincidentally I just got an email from Tesla encouraging me to get a solar roof. Maybe the rumors of the death of that business have been exaggerated….

 

[winfield100]

It's a Boomburg 'pushpoll' anyways, what did you expect? They only conducted that poll to collect the answers the editorial board intended to publish all along. 'Useful idiots' comes to mind. MSM been attacking Elon since 2017 when they collectively decided they would 'play-the-man, not-the-ball'.

Tesla Sales, meantime, is limited by Production, not by the MSM, flail as they might. It's gonna be a long, lonely decade in that editorial rum as they scrape the bottom of the barrel for new ways to fail at their old brief.

Hah!

@Artful Dodger
"hope springs eternal"
I have read the Washington Post for around 55years +. WaPo has degraded IMHO

They presently have a writer who publishes negative to very negative about anything Tesla.

Wapo did/does have a mildly positive about California road trip in EV and mentions Tesla faintly positively but the general public and commenters are mostly negative. failing chargers, slow chargers, payment problems, stuck chargers, etc

As a cynic, you could look at the WaPo 10-15 years ago,
Sunday edition and a full complete section was Automotive (no longer) and the advertising costs were eyewatering for full and 1/2 page ads, of which there were alot,
Tesla does not advertise, so zero revenue for Bezos

 

[Ipcress]

I'm only speaking for my area in Canada - American politics/culture are different from Manitoba's. It's not a huge uptake compared to other parts of the world, but the demographic I described are the people I see switching over. I'm not going to take your bait and make this political - your presuppositions totally missed my point.

However, I wouldn't be surprised to see small to medium business switch over en masse everywhere once Tesla releases a cheaper car and/or CyberVan (maybe the Cybertruck is enough depending on pricing - I know several farmers that have reservations, or who have already bought the Lightning to save on fuel costs).

Agreed. In three or so years the Tesla $25,000 car will cost $16,500 with the gov't rebate. And will feature the best charging network in North America. Can you spell tsunami? Exciting!

 

[winfield100]

-They think there is a lot of people that will buy a car/truck if it has a built in generator. The current F150 hybrids have Pro-power onboard which basically is like having a small backup generator built into the car. If you look at the website they talk about how many hours it can run (idle) before you run out of gas. It sounds like they are pushing this hybrid system into many vehicles and will sell the backup power feature. They get the better gas mileage of hybrid along with a "free" backup generator as justification to pay more for a hybrid. Actually there is probably a pretty good market for this feature given all the outages in the US.

-He did not give specifics but alluded to a change in market segments when they introduce the Gen II vehicles. He did say "no 2 row small SUV", so maybe the Mach E will not be around long. I think they are going where Tesla is not. Commercial vehicles and large SUV. Where Detroit has been strong.

This has been available for 10-15 years for anyone with a spare UPS, a few Anderson Connectors to tap off the HV battery and a working Prius at the most basic.
not a new concept. You just hit the "On" button and leave in standby

PriUPS-getting electricity FROM your hybrid vehicle

 

[WattsHappening]

Weekend OT.

Pretty cool light show.

https://twitter.com/x/status/1685341422667681792

 

[navguy12]

I'm only speaking for my area in Canada - American politics/culture are different from Manitoba's. It's not a huge uptake compared to other parts of the world, but the demographic I described are the people I see switching over. I'm not going to take your bait and make this political - your presuppositions totally missed my point.

However, I wouldn't be surprised to see small to medium business switch over en masse everywhere once Tesla releases a cheaper car and/or CyberVan (maybe the Cybertruck is enough depending on pricing - I know several farmers that have reservations, or who have already bought the Lightning to save on fuel costs).

“…most don't care about climate change: either apathetic or tired of rich celebrities/politicians telling them they're to blame and need to pay more environmental taxes while hypocritically flying around the world in jets…”

Your original observation included this quote that I construed as very political. If that wasn’t your intention, my apologies.

Incidentally, the excuse used for inaction in this area of Canada is always “well, look at China”…

I also know several farmers in central Ontario that are waiting for the CyberTruck after seeing how my TM3 has worked out for the past 62 months.

 

[navguy12]

I just realized how far off we all could be on estimating EV market readiness. The fact that many have incorrect mental models of what it means to own an EV, people don't actually know yet. Any survey would need to come with a sanity questionnaire at this point - just throw out the answers if they are misguided. And this could be the remaining hold-outs.

Put another way, if ICE lovers knew the difference in all aspects (cost, environment, simplicity...), wouldn't they all want EVs? So those mental blocks and false biases will eventually erode over time.

Put even simpler, given the choice of ICE vs BEV to someone who's never seen a car... which do you think they'd prefer? 100% EVs would win (towing and other unique use cases aside). ICE is so idiotic in comparison, and when the temperature in Phx hits 130F and there's no denying reasons why, those holdouts will become marked rebels and had better hide their dirty little secrets. People will be running over to their exhaust pipes with garbage bags trying to capture the mess before shutting it down (just kidding, lol).

IMO, an EV Survey is measuring someone's bias based on Facts + FUD. Despite bias, the choice is clear and not even worth debating. Further, the hatred for those who resist this migration will constantly increase with every storm... and they will be nasty. Anyone profiting from such in 5 yrs, look out.

I’ve been asked by some folks in my apartment complex to do an EV educational show and tell…which will include answering popular FUD questions.

 

[unk45]

Bad énough to hear
Year after year
Misinfo about Cybertruck,
BUT
Whatever the season
I can think of no reason
For hatchbacks to run here amok.

Wrong place, wrong priorities, wrong Mod to tread on his toes.

Who was the Mod who tried to stop poetry?

 

[Buckminster]

Positive news for Monday?

https://twitter.com/x/status/1685350168785281024

Ukraine talks.