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

[Fact Checking]

2 - Jonas thinks that demand is a problem even at current delivery levels (70k/qrtr). What's the point of the Shanghai factory if Tesla is unable to sell full capacity from Fremont?

This is perhaps one of the silliest arguments of Adam Jonas @ Morgan Stanley ...

The Chinese auto market is, despite appearances, isolated to a large degree. The highest volume, most profitable ICE cars are produced locally (or 'nearby' in Asia) - imports are significant but not as significant as in western countries.

There's three main economic reasons for this:

• Heavy import tariffs and logistics chain costs put domestic carmakers at a big price advantage.
• Domestic carmakers also get various incentives, in particular EV's, such as a direct price subsidy of EV purchases given to the customer, regardless of taxable income. I.e. everyone gets a significant amount of ASP reduction paid by the Chinese state. As long as the car was made domestically ... which Tesla wasn't until Shanghai.
• The domestic Chinese currency is being held artificially weak, which reduces free disposable income of Chinese families measured in USD - and Tesla is making cars on an USD basis. I.e. Tesla has to pay U.S. income levels to make cars, has to ship components to the U.S. and then the whole car back to China, which adds at least 2 months of delay plus logistics and capital allocation costs.

The cumulative advantage of domestic carmakers in China is gigantic: they can make and offer comparable cars at ~half the ASP and make a similar amount of gross profit on those units sold.

To say that Tesla hasn't even scratched the surface of Chinese demand for luxury/premium EVs is the understatement of the century.

Sandy Munro estimated a 20-30% cost of goods reduction of Shanghai made SR+ cars at minimum - and I think the real number might be even better.

If Tesla simply delivers a $35k car in China they'll instantly generate about $5k-$10k cash on every unit sold, or 0.5-1.0 billion dollars of profit and cash on every 100k units made. And their first Shanghai phase is for 150k units/year, with the completed first phase at ~400k units/year. Which is a quarter of the planned capacity - full capacity will be 1.5 million units/year...

Adam Jonas of "could Tesla's AI chip become Terminator?" infame has slowly assumed the role of a TSLAQ troll.

(But for Tesla investors it's also a cautionary tale: sometimes the trolls win, and Jonas was right about how ugly Q1 would be and his low share price target verified - so this is very much not advice.)

 

[dqd88]

Ok, shorts would have a field day with this, it would feed the 'demand problem' narrative in the financial media. However, Elon would recover the moral high ground that has slipped a bit from his grasp and I think it would wipe out any real or perceived demand problem in the next 12-24 months while Model Y, semi and pick up truck come along to set us on our irreversible 1,000,000 cars/year course.

The genesis for this idea is my own experience. At my office, I offered to pay $500/Model 3 deposit as a way to spur the adoption of sustainable transport. I contributed to 12 deposits, so far 3 cars have been purchased, a few orders cancelled, and some are still waiting or in queue. I think it helped, and the side outcome was great goodwill. So.......

"15 years ago, I invested $100M, nearly everything I had, into Tesla because I saw the need to transition the world to the use of sustainable transport. Other key early investors and customers joined at that moment and together we launched the Tesla Motors. To all of them and all of you who are Tesla owners, thank you.

Now, the need to shift the world to sustainable transport and energy is greater than ever. And I am grateful and very fortunate that Tesla has grown tremendously in the last 15 years, as it lets me go all in once again on this idea and this company.

So today I am creating a $1B fund of my own money to help accelerate the adoption of sustainable transport and energy. I am offering to offset the cost of every Tesla purchase worldwide, until the money is exhausted and where I can legally do so, because Tesla's success has afforded me the opportunity.

The details are simple: I will offset $5,000 in cost for any Tesla purchased until $200M of my pledge is exhausted; after that I will pay $4,000 in cost for any Tesla purchased until the next $200M of my pledge is exhausted; after that $3,000/Tesla for the next $200M, then $2,000/Tesla for the next $200M and finally $1,000/Tesla for the final $200M.

I've never been more excited for this company and its future. I invite you to join the Tesla family"

Elon

Comes off as a bit desperate imo

 

[bhtooefr]

What if Tesla took their $2.4B cash raise and bought shares and calls representing 30% of TSLA? They'd be in the position to force a short squeeze using exactly the same tactics Porsche Automobil Holding SE used to take over Volkswagen in 2008.

AFAIK, part of what let Porsche pull that corner off was more lax regulations.

The US markets have much, much tighter regulations to try to prevent anything that looks like a corner. (Of course, a lot of those regulations were designed to exist alongside the uptick rule, which doesn't exist any more...)

 

[Cloxxki]

Ok analysts, what new information you have that Tesla’s business is falling apart, they just following each other without absolutely no new information, bloomberg tracker showing they cranking 6K per week Model 3, if demand is in such bad shape Elon is not stupid he would cut production and lay off people.

It's the other way around. And I've not found an answer from a Tesla fan on any of the many BEV websites I frequent.
What changed for Tesla to go from bright outlook, no more debt, no more losses, no more share issues needed, plenty of demand, good margin per car, all guided very recently? What new information has come to them in the last 6 months or so?

 

[TheMrX]

Inside GF3:

Imgur

Installing the ventilation system. Floor looks to be complete. Should be working on installing production lines quite soon.

Oh! Hello you!

Glad you are back with us in this war, thanks for bringing fresh ammo

 

[Leo9]

(Days in Q2) * (Vehicles Per Day) = Vehicles in Q2
(Days in Q2) * (50000 / (Days in Q2 "as of yesterday")) = Vehicles in Q2
(30+31+30)*(50000/(21+30)) ~= 89216.

Lol, I guess I understimated the importance of a few days. Thanks. That looks a lot better.

 

[Todd Burch]

Closer to 90k as others have pointed out.

Now add in Australia and other unopened markets.

Then add in all the China orders that are holding off for GF3.

Then factor in that Q2 is not the strongest auto sales quarter (start of Q2 is slower than end of Q2 and life is not linear).

Then factor in word of mouth sales increasing over time.

Then factor in rising gas prices.

Then factor in a drop in insurance cost once Tesla insurance goes online.

Then factor in peak FUD.

I’d say that number is pretty good.

Comes off as a bit desperate imo

Agree. I would not want Elon to do this.

 

[dqd88]

Inside GF3:

Imgur

Installing the ventilation system. Floor looks to be complete. Should be working on installing production lines quite soon.

The pace is simply amazing. Replacing my sink drain plug has been on my to-do list for 8 months.

 

[Fact Checking]

50.000 new orders in 2 months is just 75k per quarter, so not super exciting.

That's wrong, because it assumes an even distribution of new orders: in reality the first two months of a quarter tend to represent about ~50% of orders, so the real target could be 100k for this quarter. (But that's probably the upper range.)

Especially the win-down of the $3.75k tax credit could be an incentive in the U.S. to place orders. $3k is roughly the per household tax liability in the U.S. - so for certain income classes this tax credit 'cliff' on June 30 could be more important than the $7.5k->$3.75k reduction.

 

[Todd Burch]

Reminder: if you sell, you’re funding a man with a toothbrush and a toilet. Never forget.

 

[RobStark]

• Domestic carmakers also get various incentives, in particular EV's, such as a direct price subsidy of EV purchases given to the customer, regardless of taxable income. I.e. everyone gets a significant amount of ASP reduction paid by the Chinese state. As long as the car was made domestically ... which Tesla wasn't until Shanghai.

Direct subsidies are being phased out for BEVs.

China is introducing CARB type regulatory credits though.

It remains to be seen how much those credits are worth.

 

[elasalle]

Just a thought ...
While we wait for ROBOTaxi ..why not ..
Tesla POT Service: (Plain Old Taxi) Service

..
Make use of access inventory
Disrupt Lyft, Uber -- create similar ride hailing app (ride hailing app could be created in 1 month)
Start in high population areas, with high visibility (free advertising) .... like New York, Paris/London ... few area codes and expand
Hire drivers/ help owners lease and take ownership via low interest loans via partners
Provide drivers with Service package, e.g. high frequency super charging at lower rates


..once ROBOTAXI becomes available buy back cars if owners agree(price should have appreciated by then )

..cheers!!

+Tesla Insurance
let's face it, FSD in places like New York will be like the last places to get approved
High Durability, Efficient cars, EV charging means we can price gouge -- in fact Tesla should partner with Yellow Cabs .. which are feeling the effects of Uber/Lyft
max usage of cars, less idle time means.. this is part of Master Plan 1 to EV adoption
I want Uber/Lyft valuation

 

[j6Lpi429@3j]

A happy thought:
I'm reading a book by a guy called dan ariely. His books are always good, and this one is about irrationality and money. he notes that one study showed that in a vast sample of stock market portfolios, the group that did better over the long run than all the others was the group of people who had completely forgotten they even had a stock market portfolio when asked.
So yeah...
Buy and hold. for the long, long run.

 

[elasalle]

Inside GF3:

Imgur

Installing the ventilation system. Floor looks to be complete. Should be working on installing production lines quite soon.

Good to have you back Karen.

 

[X Fan]

Inside GF3:

Imgur

Installing the ventilation system. Floor looks to be complete. Should be working on installing production lines quite soon.

Welcome back....missed you!

 

[Fact Checking]

Direct subsidies are being phased out for BEVs.

That's true (some will still remain, and they are more generous than some western ones), but note that this actually supports the argument I tried to make:

• Tesla built a beachhead in the Chinese EV market despite the generous incentives that mostly helped low ASP locally made entry level EVs.
• The reduction of those subsidies, and the changing of subsidies to scale with battery range should indirectly help higher ASP units, including Tesla.

Finally Shanghai should also give Tesla a de-Trump-ified access to the Chinese market.

 

[Pras]

That's true (some will still remain, and they are more generous than some western ones), but note that this actually supports the argument I tried to make:

• Tesla built a beachhead in the Chinese EV market despite the generous incentives that mostly helped low ASP locally made entry level EVs.
• The reduction of those subsidies, and the changing of subsidies to scale with battery range should indirectly help higher ASP units, including Tesla.

Finally Shanghai should also give Tesla a de-Trump-ified access to the Chinese market.

On the last point, China has to love Tesla, See how the cutting edge American company is doing full manufacturing there (also how China opened itself already). So I guess Chinese should give Tesla concessions.

 

[Fact Checking]

On the last point, China has to love Tesla, See how the cutting edge American company is doing full manufacturing there (also how China opened itself already). So I guess Chinese should give Tesla concessions.

If China was smart they'd buy a significant stake in Tesla at the current discount prices.

 

[Cloxxki]

I do think YOY auto revenue growth of 50% can continue for a few more years. They are proving it is really hard to grow faster.

How would you suggest they achieve +50 over 2018?
S and X are way down in numbers AND in price.
Model 3 takes a much larger piece of the cake in numbers, but now they're building mostly the lower spec'd ones. And prices have been mostly reduced.
I feel we can ignore Energy product sales, I see no explosion from that relatively small side gig this year.
Achieving +50% in 2019 will be hard enough, but if they do, it will make 2020 even more of a challenge.
Model Y will start ramping up mid year if all goes to plan. And we know exactly what to expect from Tesla in that respect. But even then, it's easy to presume that those Model Y will be added to a Model 3 production at full capacity. It will not be. Already today there are strong reports of dwindling demand for the 3, and you can bet that the first Y's, all higher spec, will be mostly bought by early Model 3 owners who just cannot pass up a new car with actual rear door and more comfortable seating position but over double the usable cargo space. Vastly, vastly nicer design for all but pure posers that would otherwise shop BMW 3 sedans. Model 3 demand will plummet, even in markets anticipating Y's arrival a year out. Few will take such a compromise for a huge depreciation hit over just a year's ownership.
GF3 might actually make some cars even 2019 and add a nice number over 2020. But all will be lower spec 3's built with from externally sourced cells. Not the ideal way to make a huge profit on a premium car. For revenue, I cannot deny it will help a lot to sell a bunch of 3's in China. But that's actually a super competitive market with players who care deeply about what customers actually want in a car. Don't be surprised if the Chinese buyers also show patience to start their Tesla journey with a Model Y.
I get a sense that Tesla still believes that Model 3 is the answers to evveryone's prayers when really it's a marvel of tech wrapped in a deeply compromised form factor. If you have a family, you are probably better off with a run of the mill Chinese BEV or a LEAF. A high perfomance car, in the most regulated country in the world? Cool and edgy, but any product to be sold in volume needs to bring value. The Polestar 2 will be built in China as well. Not in 6-figure volume for a while but enough to make the Chinese 1%er go "hmmmm...".

 

[Mars ☰mperor]

50.000 new orders in 2 months is just 75k per quarter, so not super exciting.

What timezone do you live in?