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

[JRP3]

Why should ASP drop - cost should drop and margin should improve. This is what happened earlier with S&X. With 3 - in Q1 - margin dropped (unexpected).

We need to consider demand and price together. If there is large demand, but at lower ASP that hurts margin, it is not useful. We need enough demand at higher ASP & Margin.

Introduction of the Model 3 was always going to lower ASP, higher volume lower priced product offering almost all the same features will do that.

 

[DaveT]

Other auto companies' expertise lies in manufacturing.

Tesla's expertise is in manufacturing, energy and software/AI.

In order for other auto companies to compete with Tesla in the EV and autonomous transport spaces, they need to become experts in energy and in software/AI... or at least partner in substantial ways with energy and software/AI companies. It's not going to be easy for them.

 

[TMThree]

If cash flow is positive end of quarter and the stock doesn’t go up, I do wonder if Elon would consider borrowing to buy up to 5 billion more in Tesla. His Spacex stake is now 17 billion. It would eliminate most of the float at this price and tighten his control.
I’ve always been skeptical of any mixing of assets and control, but I wonder if Elon’s silence on the stock price is opportunistic, or just wisdom that anything he says will be twisted.

I would laugh my ass off if he knows it's going to beat estimates and this is allowing him to buy millions in shares at discount.

 

[Buckminster]

Instead of Tesla advertising why not update the Tesla website, make a little more jazzy, more informative. Put positive Tesla news front and center on the website. It will increase clicks to the website, and attention to Tesla. Keep the money in house.

Median result on this poll is advertising to start 2020, so we don't need to wait long.

Collectively, we are always 100% accurate on these things....

 

[Brian12345]

Posts from Tesla supporters that demean groups of people that are different from you only hurts Tesla’s image and eliminates opportunities to influence readers.

You guys are ambassadors and would do well to remember that when you post.

You all are better than that.

 

[EVNow]

Introduction of the Model 3 was always going to lower ASP, higher volume lower priced product offering almost all the same features will do that.

Do you know why people reduce prices and advertise ? Because, they then don't need to reduce prices even further to sell. Tesla keeps reducing prices - thousand per car, but does not advertise on the web to make the final sale. I'm not talking about million dollar TV ads. I'm talking about tactical, $1/click web ads. They are very effective at following up, comparable to the expensive option of someone picking up the phone and calling - which Tesla already does.

This from Q1 ER letter.

Model S and Model X gross margin declined in Q1 predominantly due to reduced volume and pricing actions.

Frankly, this "no advertisement" is looking more like ideology than strategy.

 

[EVNow]

That would be about a 100:1 return on money spent (going by gross profit). I don't know if it would be that effective.

I would simply argue for empirical A/B testing. They can hammer a single US state with ads, and then compare the impact to surrounding states. Run the experiment, right?

Pure demand gen won't be that effective. But if you are targeting people who have already shown some interest in Tesla (basically following up on the leads), it can be quite effective from what I've seen in the industry.

 

[Doggydogworld]

Tesla's CAGR for the past 3 years is ~75% and for the last 5 years is ~60%.

The market cares more about the next few years.

Average analyst estimate is 16% revenue growth this year and 23% next year. They predict a YOY decline in Q3, which I believe would be Tesla's first as a public company. The last few quarters capex was less than depreciation. The unsecured bonds yield over 9%. This is not the profile of a healthy hypergrowth company.

The TMC/ARK fan club sees things differently, of course. But until the broader investor community sees more evidence of future growth and/or profits, TSLA will remain under pressure.

 

[EVNow]

Few days back @jhm made a very useful post about how web ads work in the modern world. I think everyone should read this - with an open mind.

Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable

Ha, ha. Did you know I used to work in quantitative marketing? I actually have a very favorable of view of market research, brand marketing, CRM and smart media buys. My area of focus was CRM and direct response marketing.

Go Google, "Disney vacation." Visit the website. Now watch what ads follow you as you move about on the internet. You will see little spots for Disney vacations for months. Disney pays for these ads because they there is a high probability that you are in the market for a vacation and have an interest in Disney. So it is super cost effective to try to keep Disney vacations at the top of your mind. We are talking about pennies of online ad spend to reel in a vacation booking worth several thousands of revenue dollars to Disney.

Now Google, "Tesla Model S." Visit the site. How many Tesla Model S ads follow you the rest of the day? How many ads for other cars follow you around the internet? If Tesla is buying your personal ad space, every competitor is buying it at a lower cost, and Tesla runs the risk that you will forget about your little Model S fantasy and fill your mind with some other noise.

If Tesla really wants to be an online only marketer of cars, they really need to step up their online marketing game. Following up on web searches is really basic Internet Marketing 101. The cool thing is that it can be highly targeted to persons "in-market" and the intensity of the media buy can be dialed up and down depending on net order rates without sending huge messages to investors. Disney does an awesome job keeping their resorts and them parks packed at all times through a lot of direct marketing touches. It's a lot more discrete than Tesla announcing a price cut to cars one day, only to bump it back up a month later.​

 

[DaveT]

The Model S debuted in 2012 and showed Tesla's software advantage over other auto makers.

Fast forward 7 years later, and you'd think that other auto makers would have catched up some, at least, in terms of software.

But the gap between Tesla and auto makers in terms of software has only widened, especially in regards AI/autonomous driving software.

I'm expecting the gap to continue to widen.

 

[Prunesquallor]

Might be slightly OT but...

I wonder if there might be something to this. While I was employed at Tesla, I created a significant amount of training content (mostly well received) and recently I started toying with the idea of creating Tesla related content from an owner/investors perspective in an attempt to combat the FUD. Unfortunately, this strategy is only effective if the reach is expansive enough and, since I do not partake in social media, I fear that most of the content will fail to reach a wide enough audience. That begs the question: what would crowdsourced advertising in this context look like?

I personally prefer FAQ/graphics content as opposed to video. (I HATE watching a talking head on video as opposed to being able to read at my own pace). I was thinking about doing something like that to counter the major FUD points 1) more polluting that burning gas, 2) cost 3) availability 4) best selling <fill in the blank> in <fill in the region>, etc, maybe as click-through graphics. But I don’t do social media either, so someone else would have to figure out a venue.

 

[SOULPEDL]

Oh geeze. Why do people keep confusing "Reduced Volume" in Q1 with Reduce Demand. I see no valid argument that indicates demand. Clearly people don't own one or believe the Troll crap out there.

Show me evidence there is a demand issue.

 

[Zaxxon]

Look, those people were never going to be supporters of the brand in the first place, anymore than the folks who despise Apple (fill in company of choice).

I’ll never buy a Ford. Never have, never will, never had a positive thing to say about them. That’s based on nothing Ford has or has not done. It’s not based on adverts or people telling me they suck or vehicle safety or recalls or anything tangible. Their brand could never get better in my opinion even if they made an aluminum pickup or an EV and not even if they rescued kittens.

It’s the same for all the Tesla haters and most of the FUD believers.

The people who can damage a brand are the ones who support it and believe in it and then don’t. Think about that for a minute; the difference between that group of people and the ones you think are damaging the brand, who never had a good thing to say about it in the first place nor cared to.

This is an entirely different argument, and is beside the point. You're right--there is a group of Tesla lovers, and a group that is unlikely to back Tesla regardless.

The salient point is that there's also a third group, much larger than the other two, and it's filled with folks not decided one way or the other. This group is heavily influenced by the headlines, and their average view of the Tesla brand is absolutely being tarnished.

In short, the FUD damages the brand not by turning off those who 'support Tesla and then don't.' The damage comes from turning the large undecided masses negative.

 

[AcesDealt]

Oh geeze. Why do people keep confusing "Reduced Volume" in Q1 with Reduce Demand. I see no valid argument that indicates demand. Clearly people don't own one or believe the Troll crap out there.

Show me evidence there is a demand issue.

They didn't sell 25k P100D S/X models to California in Q1. There is a demand issue for these models in California.

What definition of demand are you using?

 

[EVNow]

Oh geeze. Why do people keep confusing "Reduced Volume" in Q1 with Reduce Demand. I see no valid argument that indicates demand. Clearly people don't own one or believe the Troll crap out there.

Show me evidence there is a demand issue.

The demand for S has gone down. Look at the discounting, look at the Q1 deliveries & inventory. EM & Deepak said (in Q4 ER) they are looking at 80k instead of 100k s+x. What more evidence do you want ?

 

[azaz]

Do you know why people reduce prices and advertise ? Because, they then don't need to reduce prices even further to sell. Tesla keeps reducing prices - thousand per car, but does not advertise on the web to make the final sale. I'm not talking about million dollar TV ads. I'm talking about tactical, $1/click web ads. They are very effective at following up, comparable to the expensive option of someone picking up the phone and calling - which Tesla already does.

This from Q1 ER letter.


Frankly, this "no advertisement" is looking more like ideology than strategy.

someone made a really good point earlier that Elon's contrarian attitude can really suck at times like this

 

[azaz]

The demand for S has gone down. Look at the discounting, look at the Q1 deliveries & inventory. EM & Deepak said (in Q4 ER) they are looking at 80k instead of 100k s+x. What more evidence do you want ?

we don't really know how much of it is temporary tho, esp with refresh soon.

it is interesting tho since my hypothesis two years ago, and almost every bulls was that S?X demand would just keep increasing as EV marketshare increased. that's clearly not the case. best case S demand is probably 125k a year.

 

[JRP3]

The demand for S has gone down. Look at the discounting, look at the Q1 deliveries & inventory. EM & Deepak said (in Q4 ER) they are looking at 80k instead of 100k s+x. What more evidence do you want ?

Come on, you know Q1 was special because of the tax credit being cut in half, rumors of refresh, and Q1 typically being weaker than Q4. Let's wait a bit before jumping on the demand issue.

 

[JRP3]

it is interesting tho since my hypothesis two years ago, and almost every bulls was that S?X demand would just keep increasing as EV marketshare increased. that's clearly not the case.

I don't even think most bulls said that.

 

[AcesDealt]

we don't really know how much of it is temporary tho, esp with refresh soon.

it is interesting tho since my hypothesis two years ago, and almost every bulls was that S?X demand would just keep increasing as EV marketshare increased. that's clearly not the case. best case S demand is probably 125k a year.

Yeah -- I was being cautious and had them pencilled as stuck to 100k for every year going forward. oops.

But you can actually boil the entire Tesla story down to a single variable and that's the cost of the model 3 to build. COGS is running about 44k$-45k$ per unit right now and that is nowhere near close to the original target. Elon predicted ASP would be 42k$, much less COGS!!! I should have walked away when I first figured this out.