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

[AlexS]

Confidential internal emails would not be subject to an SEC violation unless it could be shown that EM deliberately leaked it OR asked someone else to leak it. trying to prove either might prove difficult, especially if leaked by a trusted person who would not turn EM in.

If I would be Tesla employee and own bunch of TSLA I would leak it next minute I got the e-mail in current situation.

 

[ReflexFunds]

It is looking likely this email is real, but I'm sure we'll get confirmation soon.

These numbers look good for Model 3 demand at this stage. A US order backlog for SR+ cars would have been built in Q1, so net new orders in Q2 will be suffering from order pull forward into Q1. The SR+ launch in Europe and Asia plus US lease launch both happened in Q2 though, so pent up demand for these options will have offset the Q1 US SR+ pull forward to some extent. It would be helpful to know the total unfulfilled order backlog.
It's hard to know what order rates look like for S/X, and to what degree they have now managed to ramp production back up. I'm sure order rate will have improved significantly from Q1, but it likely isn't yet back at the c.25k/Q target rate, and production could hold back S/X in Q2.
I expect Model 3 demand in China is starting to be held back significantly by progress with GF3. GF3 cars will be dramatically cheaper than US cars and if people are hopeful the wait may now be just 4-6 months they will be very hesitant to pay the post tariff, incentive excluded cars currently on offer.

Further to this, I think it's useful to look in a bit more detail at what this tells us about demand.
The 50k net orders so far in Q2 maps to a current quarterly net order rate of c.90k. There are some factors holding this back and some factors possibly artificially boosting it relative to a pure run rate demand level.

Factors acting against the current 90k order rate.

• US SR+ launch in Q1 will have pulled orders into Q1 and created a backlog.
• Still adverse seasonality in 1H.
• Orders normally skewed to final month due to end of Q sales push/discounts.
• Many China customers will be waiting for the significantly cheaper GF3 Model 3s.
• Some S/X customers will be waiting for a further refresh as has been heavily rumoured.
• Relentless FUD
• No marketing.
• Still no Model 3 launch or direct S/X sales in many countries in the world.
• Some lingering demand pull forward impact from the tax credit changes in US and Holland at the end of 2018.
• No GF3 production which will dramatically reduce end consumer prices in China and dramatically increase the addressable market.
• No Model Y yet available! The Tesla product with the largest addressable market.
• No Pickup. No Semi.
• $200k+ lifetime financial, health and environmental subsidies for every ICE car sold.

Factors boosting the current 90k order rate.

• SR+ was launched in Europe and Asia during Q2, as well as leasing in US, which will have released some pent up demand/reservation conversions into orders.
• Some demand pull forward benefit in the US due to a smaller tax credit step down at the end of Q2.
• Some demand pull forward benefit in China due to fears of rising tariffs.
• Some pent up demand for Raven S/X cars.

On the whole, I think there are far more short term factors holding back the current 3/S/X order rate than those currently boosting it.
It looks to me like Tesla will again be supply constrained on all models in Q2, however demand and supply are tracking close to each other at current pricing and ideally Tesla would have more of an imbalance and more pricing power.


So given current demand level, when to advertise?
At the point where either Tesla's deliveries or pricing becomes significantly held back by demand, it makes 100% sense to start advertising. I'm glad Elon finally acknowledged advertising as a possibility last week. As Elon says, Tesla advertising will be "information & entertainment" rather than manipulation. It is not fair currently that such a large % of the population are stuck buying more expensive/inferior/dangerous cars because they are simply unaware or misinformed about the advantages of EVs and the value of Teslas. At some stage, advertising will become a necessary evil to widen Tesla's addressable market beyond the exclusive club of Elon's Twitter followers and friends of current owners. Tesla currently averages around $10k gross profit per car - I think advertising spend could make sense up to this amount per car on marginal car sales to customers they do not currently reach. At the point where Tesla is demand rather than supply constrained, increased demand will mean they can increase production rates which reduces costs and increases margins across all cars. It also puts more cars on the road which increases their word of mouth customer marketing and also puts more potential future Robotaxis on the road. It also increase their ability to increase pricing and gross margins.

So for example, if Tesla's 3/S/X Fremont run rate car demand gets to c.100k quarter, but they have a path to getting production to 120k, it would make sense to spend up to $10k/car in advertising to win the incremental 20k demand - or c.$200m per quarter (this is just an example, I doubt they're ever going to have to pay this much to boost demand to supply capacity). This would lead to significantly higher net profit than if they had sold just 100k cars with no advertising spend - even though in this extreme example the full gross profit of the 20k incremental sales was spent on advertising (because the gross profit of the other 100k cars increased due to operating leverage). This would have the added benefit of removing the incentive for the media to attack Tesla in favour of their current paying auto advertising customers.

 

[bhtooefr]

Speaking of the July 4 holiday, reminder that we're coming right up on another holiday (although not one with as much impact on WS, only one day closed making a three day weekend, not the effective ~5 day weekend of July 4 (with half a day of trading on the 3rd, and then a day on the 5th).

 

[Prunesquallor]

The big question is whether short sales will be allowed. I've read nothing that addresses short sales. If the exchange at least prohibited market maker naked short sales, that would help a lot.

What would be the point of LTSE if it didn't?

 

[Carl Raymond]

Just picked up some shares. Made an assumption that that EM email from China was authentic. Based on the reasoning that if one were to go to the trouble of faking an email, you would make it more bullish, like 100k run rate for Q2.

 

[Todd Burch]

Premarket is rising, albeit slowly. Back up to 184 now.

And 185.5 now. Rising steadily. The turnaround begins today.

I am über long (NOT long on Uber), and I am never right in predicting price action.

But this morning marks the bottom.

 

[Chocochip]

Question: I know the (stupid) SEC agreement limits what Elon can share about production numbers in tweets and the company blog. Does it say anything about internal e-mails? I guess they are okay, but can anyone confirm?

I'd wonder what kind of world we live in where the CEO of a company is legally prevented from addressing current production levels in employee-only emails...

 

[Doobydo]

Even if the mail is from Elon why would the numbers have to be real? He's gotten predictors about sales wrong regularly, and he talks in language that obfuscates what the real numbers are, "factory gated" "net new" etc. His back is up against the wall right now. I wouldn't be looking for internal emails (that he expects to be leaked) for hope

 

[stef]

Even if the mail is from Elon why would the numbers have to be real? He's gotten predictors about sales wrong regularly, and he talks in language that obfuscates what the real numbers are, "factory gated" "net new" etc. His back is up against the wall right now. I wouldn't be looking for internal emails (that he expects to be leaked) for hope

Welcome. Great first post.

 

[bdy0627]

Does this sound familiar? I removed dates and numbers.

Tesla (TSLA) stock is down more than xx so far this year. It hit its lowest level.. on Wednesday.

Wall Street has grown increasingly skeptical about the company in recent weeks.

analyst...said in a report Tuesday that investors should "avoid" Tesla stock. He cited concerns about sluggish demand

And even longtime Tesla bull Adam Jonas of Morgan Stanley is suddenly feeling...less optimistic about the electric car company.

Jonas is no longer convinced.

"Low demand for electric vehicles categorically and globally...leads us to reduce volume assumptions for the Model 3," Jonas wrote.

That's bad news.

Tesla...delivered xx vehicles to customers. That was below the forecast of xx that Musk promised at the beginning of last year.

So Wall Street is very anxious.

Tesla probably needs to indicate that it plans to deliver more than xx vehicles this year in order to keep investors from freaking out any more than they have already.


This is from the bearish article in February 2016 someone linked yesterday, but could have easily been re-released this week with the same statements.
Tesla's worst nightmare ... cheap gas

 

[jerry33]

I have a tough time believing Vancouver as a city is seeing 800 orders a week based on rumor. I would love to see this verified.

2,400 per week for Vancouver is simply a dream. No way that is true.

Have you looked at the housing prices there? Astronomical. You have to be really wealthy to move there. I have no difficulty with 800 per week. 2,400 might be a stretch.

 

[Doobydo]

Welcome. Great first post.

Thanks. When people are talking about losing 80% of their net worth and holding to 0, maybe some sense is required.

 

[avoigt]

Lets assume for the sake of the argument its fake.

If I am a short faking it the message would be very different and if I am a long wanting to bring a positive message out I would go with a number that is much higher to create the required attention for the purpose of the mail.

Thats no prove that its real but the person would have put a lot of efforts making the wording sounding real picking the right termini but did lack that much on the key part which are the numbers.

If we look back in history when Elons mails leaked he did the same kind of motivation talk with a similar message. Also as Elon cannot tweet like he wants to and the SP falls further its certainly itching in his finger to write a message that he knows will be leaked.

Adding all of that together and maybe this is wishful thinking its unlikely to me that it is fake.

@KarenRei

You have been mentioned in this Teslarati article for your Sherlock Homes work

Tesla on track to beat Q4 2018's record deliveries, claims leaked Elon Musk email

Maybe partly my fault as I mentioned you on Twitter...

 

[ggies07]

Gene's turn for more negative impact: Tesla shares set to fall for a seventh straight day as more analysts warn of trouble

See, a circle jerk....all the way. They are creating their own self-fulfilling prophecy......

 

[uselesslogin]

Even if the mail is from Elon why would the numbers have to be real? He's gotten predictors about sales wrong regularly, and he talks in language that obfuscates what the real numbers are, "factory gated" "net new" etc. His back is up against the wall right now. I wouldn't be looking for internal emails (that he expects to be leaked) for hope

Lol, net new orders obfuscates what? You know that number is lower than gross new orders, right?

 

[Hock1]

What would be the point of LTSE if it didn't?

Agreed. It's just that I've read quite a bit about the LTSE but no mention. One would think no-shorting would be a huge attractant.

 

[Pras]

How does Adam Jonas sounds now? Just yesterday he was suggesting 70k. He is off by 30% within just one quarter, and then he is forecasting 5 year scenarios. Good job Adam, I hope you never work for me.

 

[Mars ☰mperor]

Jumped!

So email confirmed?

 

[Silent Ludicrosy]

Tried to put in a $183 limit order and it immediately shot up to 191.

 

[Pras]

@KarenRei

You have been mentioned in this Teslarati article for your Sherlock Homes work

Tesla on track to beat Q4 2018's record deliveries, claims leaked Elon Musk email

Maybe partly my fault as I mentioned you on Twitter...

Maybe the wink yesterday was a sign for @KarenRei to get back to her job.