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

[jerry33]

Am I right in saying that turned out the reason for S/X sales falling off a cliff is largely production, and we have no evidence that demand fell off as much?

In my opinion, it's largely the elimination of the 75 battery option which accounted for just under half the sales. Any sales not accounted for are because of the lack of refresh which made the S/X appear less appealing than the 3. That should now turn around. I'm pretty sure the original plan was that there would be enough 3 to more than cover the S/X reduction, but because of battery constraints that didn't happen.

 

[Cloxxki]

You are conveniently forgetting that charge and power rates are lower with smaller packs. Also you are increasing cycle rate so overall battery life gets shorter.

The only advantage to smaller battery is weight that you have to carry around, that is it.

Not at all. Charge rate have come a long way. Well, sortof.
Model 3 built in 2017 can take >3C. S and X delivered until now peaked at 1.5C, recent cars 1.1C, to be upgraded OTA to 1.4C.
Let's not pretend Tesla doesn't have the tech to make a 60 kWh car charge at 180 kW.
And let's not forget that Porsche is openly targeting for closer to 4C.

Doubling the C rate of a pack (cooling is a factor) does impact cost to a slight extend, but in the long run not by much. Case in point, Tesla boasting the cheapest cells and packs on the market and >3C. This sets the bar, to themselves and their (education of) customers foremost.

With double the charge rate between cars, in region where the majority of BEV customers live being well covered by DC chargers, a smaller battery simply suffices for the same overall travel speed. Most days are well under a single charge even on base Teslas. Longer days tend to be vastly longer and may need multiple stops. The double charge rate halves stop times and even with a 25% or more reduced capacity, range suffices to make it to the next charge with a wooden bum that calls for a walk off to get circulation back. I can't see myself survive 3 hours on end in the back of a Model 3, for instance. Happy to take a walk after less than two. And we'd travel 1,000 km in much less time, if in a hurry.

 

[Right_Said_Fred]

If you count the other way around, without the shipping f-up, they'have $600M in stead of $700M loss. So where did the rest come from if they guided profits, maybe forever?

Did you really not read the report, listen to the call and read this thread?

 

[neroden]

Am I right in saying that turned out the reason for S/X sales falling off a cliff is largely production, and we have no evidence that demand fell off as much?

Unfortunately, we do have some evidence that demand dropped, in that there was an inventory buildup of S & X in Q1.

Within the US, the tax credit pullforward effect appears to have been very substantial (more than expected?) and probably accounts for more than all of the demand drop -- sales were really unusually high in Q4.

That said, the evidence is that sales dropped much more overseas than in the US in Q1. (I forget who got those numbers.) S&X have always been huge cars for Europe and cannibalization by Model 3 might be expected to be higher in Europe? Or it might have been *delivery* problems rather than production problems -- actually, I believe this.

So I think it's largely production retooling, partly delivery failures, and the expected tax credit hangover. There may have been some underlying demand drop; I figure the new longer range will address a lot of that, though European preference for smaller cars may still have an effect.

 

[Remus]

In order to unwind the "wave", however, Tesla has to change from drawing down in-transit numbers (as they did in Q4) to ramping up in-transit numbers. In other words, they have to produce about 10000 - 15,000 more cars than they did in Q4.

This depends on getting enough cells and not hitting any further bottlenecks at Fremont.

Given a much calmer Elon on Twitter this several months, he must have been pretty annoyed to call out Panasonic

 

[Cloxxki]

Did you really not read the report, listen to the call and read this thread?

I will not pretend to a finance tycoon by any means and I did give it less attention than in previous Q's so you have me there.
My reason to write this is due to the emphasis on the in-transit number as if that covers the unguided significant loss.

 

[BioSehnsucht]

In order to unwind the "wave", however, Tesla has to change from drawing down in-transit numbers (as they did in Q4) to ramping up in-transit numbers. In other words, they have to produce about 10000 - 15,000 more cars than they did in Q4.

This depends on getting enough cells and not hitting any further bottlenecks at Fremont.

Wouldn't just slicing up the production batches for NA/EU/China into smaller batches have the same effect? The "wave" is due to EU/China boats arriving with large loads at nearly same time as the NA production reaches east coast for earlier portion of NA batch and west coast starts to get hit with the NA batch, right?

If they just cycled the region batches faster, there would be a steady stream of smaller amounts of cars to each region, instead of waves of cars coinciding at once.

 

[Maitri982]

My first post here. Hello all.

Anyone here can do whatever they want, and I don't give stock advice, but for me this stock is going to blow through $1,000 in the not too distant future. I like a business with big moats, and this company has several key ones. The basic thesis is that electric cars and the general electrification of society through green power are the future. If you start with that then Tesla confers the following:

• BY FAR the best electric car drivetrains/power modules on the market. Their lead here is huge. No one is close. If it was trivial problem to solve others would have solved it.
• It is best automotive battery supplier and produces at scale. Gigafactory not matched by anyone and another one being constructed in largest electric car market in the world.
• Best software: software is hard. They have huge lead on car software including over the air updates. STILL no one else doing this like they are
• Best Self Driving: FSD is game changer but even if they fall short they will be light years ahead of everyone else. makes cars more appealing
• Integrated power company: yes...they have neglected solar city/roof tiles etc...but if that changes thats another big market as are the powerwalls.
• New cars coming: roadster (fastest in world), tesla semi, model y...so more demand drivers. And guess what? they still dont have ad budget as people just buy them without seeing TV or net ad.
• Supercharger Network: uh...does anyone else have one of these yet? No? V3 1000 MPH charge rate is big game changer. They keep building more and more of these. No one likely to catch them.

They are spending heavy to solidify their position on all these fronts, which is smart thing to do, but means balance sheet will look fragile for some time. So for those who bemoan this quarter i suggest you remind yourself that these businesses don't operate in 3 month increments like the analysts want to program you to think. They work over long arcs of time...especially a business like this.

Musk also getting a handle now on manufacturing...they were cutting their teeth for years but I think they are smart and have learned something now. This will help the new lines being constructed and reduce costs. I see the day coming when a 20-25K decent range car with autopilot and maybe even FSD is available. Will that drive even more demand??

Anyways...bought more today. Look forward to sitting back and seeing the story play out. Cheers...

 

[EVNow]

I was kind of surprised when they said they were training the system to recognize two different objects as one. A bike mounted on a car is one car. This is one of those instances where humen trains the ai in the wrong way. Edge cases will interfere with each other.
Which is why, I am not very optimistic about the NN time line and that it is a linear progress not an exponential progress.

No - everything that moves together should be viewed as a single object. There should be enough training to differentiate between things moving together vs separately.

Are you going to train all those buses as 21 objects 1 bus + 20 individuals and try to keep track of each of them ?

 

[dc_h]

Wedbush out with a downgrade

Profitability will not 'magically return to the Tesla story,' analyst says in downgrade

Hilarious how Wedbush started pumping the stock at $370 on December 14th, and reiterated their price target like what, 20 times? So that institutions could unload? Now he downgrades at the lows. Cute. Good buy signal

Roger McNamee compared Wall Street to a centrifuge taking money out of the economy and Silicon Valley investing money in future productivity. Probably another reason for Wall Street to dislike Tesla.

 

[Singer3000]

Unfortunately, we do have some evidence that demand dropped, in that there was an inventory buildup of S & X in Q1.

Within the US, the tax credit pullforward effect appears to have been very substantial (more than expected?) and probably accounts for more than all of the demand drop -- sales were really unusually high in Q4.

That said, the evidence is that sales dropped much more overseas than in the US in Q1. (I forget who got those numbers.) S&X have always been huge cars for Europe and cannibalization by Model 3 might be expected to be higher in Europe? Or it might have been *delivery* problems rather than production problems -- actually, I believe this.

So I think it's largely production retooling, partly delivery failures, and the expected tax credit hangover. There may have been some underlying demand drop; I figure the new longer range will address a lot of that, though European preference for smaller cars may still have an effect.

Inside the bubble I think it’s quite easy to become complacent about demand. When you think the EV transition is an irrestible and unstoppable force. Imagine what it’s like within the company. “We spend literally zero time thinking about demand”. Doesn’t mean the assessment on the overall trend is wrong but in certain periods they need to be much more careful with their forecasts, pricing offerings and impact of demand pulls forwards/push backs.

 

[elasalle]

Where MY gets built might be directly related to whether Tesla does a tax raise or not ...
frugal and do it in Fremont (no cash raise)
strategic, do cash raise and include that in decision to decide where to do it ...

 

[Dan Detweiler]

I've addressed all I think. You just don't like my answers which is fine.
I command your energy in attacked whom you seem to be identifying as a troll but if you look a little deeper in my writing you'll find that I just hold TSLA and its fans to higher standards. I dare say I know my *sugar*.

Modesty...yeah modesty I think is probably a strong point for you, right?

Dan

 

[Doggydogworld]

Why is Cash from Operations adversely affected by repaying the principal of a convertible note?:

"Our cash position decreased from $3.7 billion to $2.2 billion mainly due to a $920 million repayment of convertible notes, of which $188 million negatively impacted operating cash flow."​

​

The accounting for the convertible was convoluted. Especially due to the stupid bull call spread Tesla bought in conjunction with the deal. The 10-K says:

In accordance with GAAP relating to embedded conversion features, we initially valued and bifurcated the conversion features associated with these notes. We recorded to stockholders’ equity $188.1 million for the 2019 Notes’ conversion feature and $369.4 million for the 2021 Notes’ conversion feature. The resulting debt discounts are being amortized to interest expense at an effective interest rate of 4.89% and 5.96%, respectively.​

You can think of it as a reversal of the 188.1m of non-cash interest they expensed over the 5 years of the bond's life. It ate away at the 188.1m of equity, but on 3/1 when nobody converted that equity "reappeared" and created a non-cash profit. They subtract that non-cash profit when calculating OCF.

At least that's my first take, I need to spend more time on it to be sure.

 

[Pras]

No - everything that moves together should be viewed as a single object. There should be enough training to differentiate between things moving together vs separately.

Are you going to train all those buses as 30 objects 1 bus + 20 individuals and try to keep track of each of them ?

Can we stop showing India traffic as the problem for FSD to solve? I mean we can just assume that fsd won’t be in India until people start to obey basic traffic laws.

 

[Artful Dodger]

The guidance on likely best monthly delivery ever means in april they have already delivered at least 32k cars in this month (dec 18 40k car in one month.)

I think Tesla means the "best first month of any quarter" rather than the best month ever. @KarenRei said she thinks that previous best would be Oct 2018.

 

[Remus]

Unfortunately, we do have some evidence that demand dropped, in that there was an inventory buildup of S & X in Q1.

Within the US, the tax credit pullforward effect appears to have been very substantial (more than expected?) and probably accounts for more than all of the demand drop -- sales were really unusually high in Q4.

That said, the evidence is that sales dropped much more overseas than in the US in Q1. (I forget who got those numbers.) S&X have always been huge cars for Europe and cannibalization by Model 3 might be expected to be higher in Europe? Or it might have been *delivery* problems rather than production problems -- actually, I believe this.

So I think it's largely production retooling, partly delivery failures, and the expected tax credit hangover. There may have been some underlying demand drop; I figure the new longer range will address a lot of that, though European preference for smaller cars may still have an effect.

Just came back from a vacation in France country side. Have been in the U.S. for 20 years, it scared me to death for me to drive on their narrow road.

 

[tinm]

What is this latest insanity from CNBC? Tesla cars are “quite old”?!

Tesla cars are now 'quite old' and the exclusive brand is at risk, analyst says

 

[mongo]

Unfortunately, we do have some evidence that demand dropped, in that there was an inventory buildup of S & X in Q1.

Within the US, the tax credit pullforward effect appears to have been very substantial (more than expected?) and probably accounts for more than all of the demand drop -- sales were really unusually high in Q4.

That said, the evidence is that sales dropped much more overseas than in the US in Q1. (I forget who got those numbers.) S&X have always been huge cars for Europe and cannibalization by Model 3 might be expected to be higher in Europe? Or it might have been *delivery* problems rather than production problems -- actually, I believe this.

So I think it's largely production retooling, partly delivery failures, and the expected tax credit hangover. There may have been some underlying demand drop; I figure the new longer range will address a lot of that, though European preference for smaller cars may still have an effect.

I thought they said they underestimated the demand for P version over AWD (but I am failing to find that in the transcript.
Tesla, Inc. (TSLA) Q1 2019 Earnings Call Transcript -- The Motley Fool
To the general audience, regarding the big loss:

On the P&L side, we incurred $188 million of one-time adjustment that flowed through to net income. A $120 million of this was related to S and X pricing adjustments that we announced on February 28. This included a reserve for potential increased return rate for our residual value guarantee and buyback guaranteed vehicles and also an adjustment for the inventory value of our used Tesla inventory and service loaners. There is an additional $67 million related to Q1 restructuring and other charges that flowed through.

Within the automotive business, one thing that I want to note here is that, automotive revenue was negatively impacted by $501 million attributed to the reserve increase for S and X that I just noted. If you adjust for this, the decline from Q4 to Q1 in revenue is roughly in line with the decline in deliveries. Within automotive gross margin, Model 3 gross margin declined slightly to approximately to 20%. This is due to two factors. One is, the pricing adjustments that we made on February 28, as well as the mix shift toward the standard range lineup which we launched. We also successfully executed on a number of cost reductions, which offset this impact. Labor content, warehousing and scrap are the examples of a double-digit improvements from Q4 to Q1.

 

[neroden]

Good to hear the "institutional view". I visualize you as a small glass fronted skyscraper.

Quarter was as bad as expected. Cash balance is actually a touch better in a nasty quarter with a lot of vehicles in transit and the quarter ending on a Sunday again. Today is likely the point of max bearishness, but I'm pretty optimistic on the go forward.

The supply bottlenecks have been resolved,

They said that and gave no detail. I really hope there doesn't turn out to be another supply bottleneck, but given Tesla's history, I wouldn't bet on it. Come Q2 report, I wouldn't be at all surprised if something else was bottlenecking them below their targeted production rate. This is my primary cross-fingers worry.

the full product portfolio is refreshed and rolled out globally. I would argue that no consumer product company in the world has the product vitality / freshness of Tesla. I see Q2 being a far better quarter than Q1 and then the true earnings power beginning to show through in Q3 this year.

Importantly too, deliveries should grow QoQ for quite literally the next two years between Shanghai coming online, Model Y launching (likely ahead of schedule), the semi ramping, and probably a European factory next year.

Cash flow should be positive from here on so they don't need capital (though I wish they'd raise but they won't do it here).

Q1 was terrible, but that should have been known post delivery results. I think you should quite literally throw it out. In no way is it indicative of the future earnings power of the business. Between supply bottlenecks, logistics challenges, and the Model S / X transition there's just not much of meaning to take away.

People are wayyyy too bearish. Next datapoint is going to be InsideEVs estimate for April deliveries, which I think will surprise people to the upside and confirm that demand has rebounded.

Oh, huh, you're right. Analysts do watch those numbers.

Beyond the quarter, I was at the analyst day and had a long conversation with Elon after the presentation. If Tesla achieves its autonomuos vision, the Company will be quite literally the most valuable business in the world. People are ascribing a 0% probability that Tesla can achieve their autonomous vision. I would argue that a 0% probability on anything Elon Musk is a very bad assumption. Maybe he'll be late but he almost always gets the job done. Cornell paper which came out supporting vision is very interesting validation from a third party.

I'll still give it a 0% probability (which does not mean it's impossible... continuous probability has some characteristics surprising to those who haven't studied it).

But even if they don't achieve their sleep-in-your-car-everywhere-all-the-time goal, and I don't think they do, I'm not sure how any other carmaker can compete with Tesla.

Within the near future, it will be accurate to say that Teslas "drive themselves most of the time". Every commuter wants that. Every bad driver wants that. Everyone who drives a lot wants that. Even if you have to keep your eyes on the road and hit the brakes if the car starts doing something stupid, that's a lot less attention than is necessary for driving anyone else's car, and is much more relaxing.

Within the further future, Tesla will probably have geofenced, limited robotaxis which bail out, pull over, and dump you at the sidewalk occasionally -- which still makes money in San Francisco or LA.

To compete, anyone else needs a giant fleet to collect edge cases. (Cruise even *recognizes* this.) That's only the first step, but none of them have it.