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

[elasalle]

Ship # 3 left for china and #4 is docking
Still trying to get to the cool table. on Twitter

 

[Curt Renz]

Ok, this is going to be old fashioned harsh from be. But you guys need to hear it.

There is some serious self-delusion going on here. Up until today not a peep but suddenly everyone is : "O they cut production on the S/X, sure that was expected; no big deal.". No, it wasn't. No one here was operating under that assumption (and to my shame I must I admit, not even I was, will I tend to be one of the more pessimist bulls).

This is bad news. Simple as that. Stop deluding yourself about the healthy margins they're going to make. The reality is that demand fell sufficiently that the 75 S/X may simple be back to single digit gross margins or maybe even at gross margin. Cutting the model isn't about creating demand for the P3D, it's about stopping the bleeding. In fact, after disgusting this news I did a quick survey of the user part of this forum. I have found not a single (!) post about a US customer asking questions with an eye toward a possible S/X order, let alone someone confirming a new order after new year. Plenty of CPO talk, but those are negative to the bottom line (and the talk wasn't very positive either). Q1 we'll be back to a better 3 mix yet we'll be barely profitable. We know now why : 2 major markets taking a dive due to fiscal changes was simply too much for Tesla to absorb.

A slowdown in orders would have been anticipated after the push ended to deliver as many cars as possible prior to the halving of the tax credit. After that and with more robots being put in place, now is the proper time to readjust the product mix and workforce in the most efficient manner.

Meanwhile, as is normal most people will be more moved to consider the purchase of a new car when their current one develops a problem or its mileage becomes excessive, rather than due to rebates or tax credits. Some will be those wanting to trade in their five-year-old Model S's.

If demand were really a problem then one educational Super Bowl ad about Tesla and electric cars would likely create an explosive influx of new orders. A great many people are still unaware of the advantages of electric cars, especially Teslas. However let's not expect Tesla advertisements to be created until production capabilities have grown to the point that demand really needs a kick.

 

[keydiver]

We'll be providing more details on our earnings call next week.

I think this might be an important part of Tesla's reply. I think they have a plan, but Elon just doesn't want to tip his hat too early. Hopefully we will find out the reasoning behind all these cuts next week, and everything can go back to normal. (Which includes Anton W hopefully disappearing back under his rock)

 

[Steve m]

Ok, this is going to be old fashioned harsh from be. But you guys need to hear it.

There is some serious self-delusion going on here. Up until today not a peep but suddenly everyone is : "O they cut production on the S/X, sure that was expected; no big deal.". No, it wasn't. No one here was operating under that assumption (and to my shame I must I admit, not even I was, will I tend to be one of the more pessimist bulls).

This is bad news. Simple as that. Stop deluding yourself about the healthy margins they're going to make. The reality is that demand fell sufficiently that the 75 S/X may simple be back to single digit gross margins or maybe even at gross margin. Cutting the model isn't about creating demand for the P3D, it's about stopping the bleeding. In fact, after disgusting this news I did a quick survey of the user part of this forum. I have found not a single (!) post about a US customer asking questions with an eye toward a possible S/X order, let alone someone confirming a new order after new year. Plenty of CPO talk, but those are negative to the bottom line (and the talk wasn't very positive either). Q1 we'll be back to a better 3 mix yet we'll be barely profitable. We know now why : 2 major markets taking a dive due to fiscal changes was simply too much for Tesla to absorb.

Doesn't Tesla usually scale back model S and X production during Q1 and Q2?

 

[azaz]

Ok, this is going to be old fashioned harsh from be. But you guys need to hear it.

There is some serious self-delusion going on here. Up until today not a peep but suddenly everyone is : "O they cut production on the S/X, sure that was expected; no big deal.". No, it wasn't. No one here was operating under that assumption (and to my shame I must I admit, not even I was, will I tend to be one of the more pessimist bulls).

This is bad news. Simple as that. Stop deluding yourself about the healthy margins they're going to make. The reality is that demand fell sufficiently that the 75 S/X may simple be back to single digit gross margins or maybe even at gross margin. Cutting the model isn't about creating demand for the P3D, it's about stopping the bleeding. In fact, after disgusting this news I did a quick survey of the user part of this forum. I have found not a single (!) post about a US customer asking questions with an eye toward a possible S/X order, let alone someone confirming a new order after new year. Plenty of CPO talk, but those are negative to the bottom line (and the talk wasn't very positive either). Q1 we'll be back to a better 3 mix yet we'll be barely profitable. We know now why : 2 major markets taking a dive due to fiscal changes was simply too much for Tesla to absorb.

me and you are on the same page. lately, no matter what, the news is good according to people when it so clearly isn't. people kept saying Musk's Q1 quote was just him underselling but paired with lower S/X production it seems that isn't the case.

 

[SO16]

TeslaLand here really is an interesting place. Every news is positive news.

Production rate is increasing? Great news!
Production rate is decreasing? Even better!

Stock going up? Yay for my long position.
Stock going down? Yay I will buy more.

Paint lady tweeting details about production rate? She's the best.
Paint lady is laid off? She was tweeting, she deserved it.

The Orwelian world of Muskophiles...

Seeing as how most things regarding Tesla end up better than what the shorts predict, not surprised.

But In Antonland, they always spins everything negative which ultimately turns out to be a non-issue.

Which is worse?

 

[Anton W]

Sounds awfully similar to Shortsville.

Production rate is increasing? Tesla is making a bunch of vehicles they can't sell!
Production rate is decreasing? Tesla can't sell its vehicles!

Stock going up? Yay I will short more.
Stock going down? Yay I'm earning money.

Sandy Munro releasing a video saying Model 3s suck? He's the best.
Sandy Munro releasing video after video, interview after interview saying Model 3 is amazing and revolutionary? He's being paid off by Tesla.

Nice attempt at changing the subject...

 

[RobStark]

So you were talking 7,000 model 3s a week. That's the amount I expected because I remember reading about a month ago were they had their first day of 1,000 model 3s in one day. That was also the number that was predicted in the last conference call. So why is Bloomberg consistently of by 2,000 cars a week? I guess it's because they are so conservative.

Bloomberg is a 13 week trailing average.

 

[Mader Levap]

TeslaLand here really is an interesting place. Every news is positive news.

Nice projection here, since for you every news is bad news.

Production rate is increasing? Great news!
Production rate is decreasing? Even better!

No one claimed here production decrease is good thing. I've seen posts denying there is decrease or rationalizing it. But that is not what you wrote.

Stock going up? Yay for my long position.
Stock going down? Yay I will buy more.

For some reason stock does not want to STAY down, efforts of professional liars notwithstanding. If one thinks stock will eventually shot up, buying on dip is rational.

Paint lady tweeting details about production rate? She's the best.
Paint lady is laid off? She was tweeting, she deserved it.

No one said she deserved it.

Looks like someone likes to make up things a lot...

 

[KarenRei]

Nice attempt at changing the subject...

It's literally the exact same thing you wrote, inverted. You couldn't get any more "on subject" than that.

 

[M3Rider]

me and you are on the same page. lately, no matter what, the news is good according to people when it so clearly isn't. people kept saying Musk's Q1 quote was just him underselling but paired with lower S/X production it seems that isn't the case.

Lower S/X production was created on purpose when 75Ds were cut. We don't know the reason yet and it sounds like this will be explained during the ER. Seems very feasible that Tesla wants to maintain an edge over competitors, who have started announcing cars with a comparable range. Since Tesla is a leader in the low battery cost and performance efficiency, they could convert that into the visible specs gap over the competition if they wanted to. So, when people compare specs, they always see who the leader is.
But other explanations such as margins/focusing resources on more profitable undertakings can be in the cards too.

 

[neroden]

Trump to offer shutdown-ending immigration deal, still wants wall money - source

So, protection for Dreamers in exchange for $5.9B for wall.

Not a serious offer. The deal 2 years back was *a path to permanent citizenship* for Dreamers; that deal is still available. This Trump joke proposal is temporary *sugar*, and Dems aren't going to fall for that temporary *sugar* again.

Funny thing is 2 years back, Dems offered $29B for border security in exchange for DACA - that Trump rejected. The great deal maker that he is - he is now making a counter offer of DACA for $5.9B.

Would be interesting whether Dems will take it. I think this deal would have large support among Dem base.

Nope -- he's offering nothing.

 

[Lessmog]

Bloomberg is a 13 week trailing average.

Oops, I misread that as an average trailing wreck. Hence my funny. Sorry for any confusion.

 

[EVNow]

Stock going up? Yay for my long position.
Stock going down? Yay I will buy more.

Isn't this the crux of investing ?

If you believe in the long term growth of a stock - why would you not cheer it going up - and buy it on dips.

BTW, if you look back there have been times when some of us wished the stock would go down because we were waiting to buy - and others would get angry because they have already bought. So, generally wishing for the price to go down has stopped. That doesn't mean when I want to buy silently I'm waiting for the SP to go down.

Shorts should want to sell when the SP is high - and Longs should want to buy when the SP is low. So anyone who is doing something to make the SP move in the opposite direction is trying to manipulate the SP.

 

[Tslynk67]

TeslaLand here really is an interesting place. Every news is positive news.

Production rate is increasing? Great news!
Production rate is decreasing? Even better!

Stock going up? Yay for my long position.
Stock going down? Yay I will buy more.

Paint lady tweeting details about production rate? She's the best.
Paint lady is laid off? She was tweeting, she deserved it.

The Orwelian world of Muskophiles...

Why are you here?

Reported.

 

[Buckminster]

Ok, this is going to be old fashioned harsh from be. But you guys need to hear it.

There is some serious self-delusion going on here. Up until today not a peep but suddenly everyone is : "O they cut production on the S/X, sure that was expected; no big deal.". No, it wasn't. No one here was operating under that assumption (and to my shame I must I admit, not even I was, will I tend to be one of the more pessimist bulls).

This is bad news. Simple as that. Stop deluding yourself about the healthy margins they're going to make. The reality is that demand fell sufficiently that the 75 S/X may simple be back to single digit gross margins or maybe even at gross margin. Cutting the model isn't about creating demand for the P3D, it's about stopping the bleeding. In fact, after disgusting this news I did a quick survey of the user part of this forum. I have found not a single (!) post about a US customer asking questions with an eye toward a possible S/X order, let alone someone confirming a new order after new year. Plenty of CPO talk, but those are negative to the bottom line (and the talk wasn't very positive either). Q1 we'll be back to a better 3 mix yet we'll be barely profitable. We know now why : 2 major markets taking a dive due to fiscal changes was simply too much for Tesla to absorb.

Can you please clarify your thinking for me please.

• Are you stating that up until 2 weeks ago, S/X sales was less than 2k/week?
  • That Vicki was lying?
  • If this is your thesis then I understand the margin reductions logic
• Or are you saying that demand has just dropped and will impact production quantities and therefore margins going forwards
  • If so, why would Tesla remove the 75?

 

[reddit_tl]

Ok, this is going to be old fashioned harsh from be. But you guys need to hear it.

There is some serious self-delusion going on here. Up until today not a peep but suddenly everyone is : "O they cut production on the S/X, sure that was expected; no big deal.". No, it wasn't. No one here was operating under that assumption (and to my shame I must I admit, not even I was, will I tend to be one of the more pessimist bulls).

This is bad news. Simple as that. Stop deluding yourself about the healthy margins they're going to make. The reality is that demand fell sufficiently that the 75 S/X may simple be back to single digit gross margins or maybe even at gross margin. Cutting the model isn't about creating demand for the P3D, it's about stopping the bleeding. In fact, after disgusting this news I did a quick survey of the user part of this forum. I have found not a single (!) post about a US customer asking questions with an eye toward a possible S/X order, let alone someone confirming a new order after new year. Plenty of CPO talk, but those are negative to the bottom line (and the talk wasn't very positive either). Q1 we'll be back to a better 3 mix yet we'll be barely profitable. We know now why : 2 major markets taking a dive due to fiscal changes was simply too much for Tesla to absorb.

I didn't expect the production cut, but I think some of the points made about battery constraints and production efficiency seem valid.

Here your opinion of reduced demand for S/X relied mostly on the observation from user discussions. I am not sure how reliable that is TBH. S/X have been here for a long time relative to 3 and their sales were pretty stable. Sure, the china tariff situation took a cut, but otherwise they were pretty stable. I don't see how that is going to change significantly. New refresh on them could have the possibility of increasing their appeal.

So while you are right that many people (including me) did not expect the cut (don't forget the productivity increase tho), simply accepting the thesis that must indicate demand issue is premature.

My diagnosis, take it for a grain of salt, is that model 3 is an amazing machine, esp its battery system and power train. Tesla needs to differentiate S/X from model 3 by making some changes. What exactly will be changed is not totally clear. The 75kWh battery seems to be an obvious choice and it is cumbersome to include that option anyway. So they streamline the production while making a refresh. It may reduce some production number temporarily. I don't think that is necessarily a demand issue.

 

[KarenRei]

Lower S/X production was created on purpose when 75Ds were cut. We don't know the reason yet and it sounds like this will be explained during the ER.

Yep, and yep. Honestly, I've been wondering if there would be some sort of measurable decline in S/X sales with people just switching to the 3, but they really held up well in 2018. But now the 3 is going into Europe and Asia to undercut S/X sales there. Going to a smaller number of higher margin S/X, *and* freeing up space / capacity in Fremont, seems like the obvious choice.

Seems very feasible that Tesla wants to maintain an edge over competitors, who have started announcing cars with a comparable range. Since Tesla is a leader in the battery cost and performance efficiency, they could convert that into the visible specs gap over the competition if they wanted to. So, when people compare specs, they always see who the leader is.

Agree totally. They made their designs so horribly inefficient that even the S and X with their inefficient induction motors beat the "competition"'s range with just a 75kWh pack But now they can no longer make comparisons to the 75D. The amount of range that consumers can now consider the "base standard" for high-end models just got pushed up.

I estimate that Tesla would have to reduce pricing on 100D and P100D by about $12k to make the same margin as they had before getting rid of the 75D. The whole "their margins will drop on lower volume" argument doesn't hold up well, because Tesla has just laid off the unneeded labour, and the stamping and paint hardware's depreciation will now go to the Model 3 as its production can now utilize capacity that formerly went to S/X. I suspect that with a $7-8k price cut on the 100D and P100D, and selling ~85% as many of them, they'll make as much money as they had before they got rid of the 75D.

 

[azaz]

Lower S/X production was created on purpose when 75Ds were cut. We don't know the reason yet and it sounds like this will be explained during the ER. Seems very feasible that Tesla wants to maintain an edge over competitors, who have started announcing cars with a comparable range. Since Tesla is a leader in the battery cost and performance efficiency, they could convert that into the visible specs gap over the competition if they wanted to. So, when people compare specs, they always see who the leader is.
But other explanations such as margins/focusing resources on more profitable undertakings can be in the cards too.

imo it is more likely that 75Ds were cut because sales were slow than the other way around, waiting for ER tho

 

[reddit_tl]

I picked up some shares today, but expecting additional two days of decline while with less magnitude.

So no calls for me. Just picking shares for now.