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

[T@oo]

> Tesla only had 30 days of inventory.

Make that about 14 days. (10k / 700). And even that is misleading as they most likely have been matched to buyers already. A true inventory might me be a low single digit number.

 

[X Fan]

On vacation & in very balmy Paris this week (lol @ the climate change non-believers).

Saw an article re: BMW. They are moving up their EV/Hybrid timeline by two years and expect to release 25 vehicles by 2023. I3X next year, then Next and I4 in 2021. Minis going on sale this year. Also, building software that will shift hybrid cars to only electric when in cities that mandate electric only (lol, hopefully there will be enough energy left for drivers).

 

[Fact Checking]

Already up $3 in Germany. The new Elon email removes the doubts about production that the BI article had created.

There has also just been good macro news as well, haven't checked that the underlying news is, but both NASDAQ and Dow futures have gone sharply up, starting at around 4:06am ET.

Might be a G20 related leak?

 

[Fact Checking]

Also, building software that will shift hybrid cars to only electric when in cities that mandate electric only (lol, hopefully there will be enough energy left for drivers).

BTW., cities might mandate electric cars with no ICE engines whatsoever on policy grounds: polluting elsewhere has effects here too, the wind doesn't stop at city limits.

That capability and workaround might be tailored to the increasing number of German cities enacting ICE bans. Instead of stopping the bans they'll probably lobby behind the scenes to allow these workarounds. (I also predict an easily enabled 'cheating' capability that turns off the geofence.)

Won't really help BMW's product portfolio problems IMO: citizens of those cities will insist on real EVs with real range.

 

[Fact Checking]

Tesla is lean. At the end of Q1, Tesla only had 30 days of inventory. The low inventory makes it harder to get the right car to the early orderer.

Note that what matters to fast order matching to local inventory is new car (unsold) inventory, and Tesla's new car inventory is significantly lower than 4 weeks.

In the Model S/X space I think @Doggydogworld's end-of-Q1 S/X inventory estimates are pretty accurate:

My total guess for the 13.7-14k produced but not delivered as of 3/31/19:

4k - demos, "new" loaners and showroom cars
2k - in transit
2k - US unsold new inventory
2k - Euro unsold new inventory
2.5k - China unsold new inventory
1k - old loaners transferred to PP&E
0.2-0.5k - scrapped, "lost at sea", insurance salvage, etc.​

6.5k of Model S+X inventory - but this was artificially high as most of those were pre-Raven. With 2k/week production capacity that's 3.5 weeks of production.

But Model 3 new inventory at the end of Q1 was only around 11k:

  =========|============|============|============|===========|================|=============
  quarter  | production | deliveries | Δinventory | inventory | transit        | fleet
  =========|============|============|============|===========|================|=============
  2017/Q2  |          0 |          0 |          0 |         0 |       0        |      0
  2017/Q3  |        260 |        220 |        +40 |        40 |      40        |      0
  2017/Q4  |      2,425 |      1,550 |       +875 |       915 |     860        |     55
  2017/10K |            |         -6 |         +6 |       921 |     866        |     55
  2018/Q1  |      9,766 |      8,180 |     +1,586 |     2,507 |   2,040        |    467
  2018/Q2  |     28,578 |     18,440 |    +10,138 |    12,645 |  11,166        |  1,479
  2018/Q3  |     53,239 |     55,840 |     -2,601 |    10,044 |   8,048        |  1,996
  2018/Q4  |     61,394 |     63,150 |     -1,756 |     8,288 |   1,010        |  7,278
  2018/10K |            |       +312 |       -312 |     7,976 |     698        |  7,278
  2019/Q1  |     62,950 |     50,932 |    +12,018 |    19,996 |   8,350 [est.] | 11,644 [est.]

But note that "fleet" would include showroom models and loaners. If they have that in a similar proportion as the S/X internal fleet then the real new Model 3's inventory might have been as low as 5k units - one week of production, but even if we count all units as new it's only two weeks of production.

This is in very stark contrast with traditional ICE OEM inventory stats, recently posted by @RobStark:

72 days worth of inventory on dealer lots on average - and I'm sure that even with well spread out car factories within the U.S. there's up to ~10 days additional delay in getting those cars from factories to dealerships, depending on location.

So we are talking about 10+ weeks worth of OEM dealership inventory versus Tesla's new car inventory of 1-2 weeks.

Tesla is in a bit of a catch-22 situation regarding inventory: they should and want to smooth out the wave, but if they do:

• they'll take a capital (cash levels) hit,
• they'll starve demand if they build inventory at the expense of deliveries and take a revenue hit,
• they'll reignite all the "no demand" FUD.

In hindsight @schonelucht was probably right to predict that Q2 isn't going to be the quarter when Tesla "unwinds the wave".

The natural solution is IMO going to be a couple of robust quarters with $1b+ net cash inflows. That is going to give Tesla the cash cushion to ignore the Wall Street freakout. We are probably not there yet.

 

[Thekiwi]

There has also just been good macro news as well, haven't checked that the underlying news is, but both NASDAQ and Dow futures have gone sharply up, starting at around 4:06am ET.

Might be a G20 related leak?

Steve Mnuchin said “negotiations with China are 90% complete” in an early morning interview.

 

[Antares Nebula]

Uh, oh (stock is down a bit):

Tesla loses its head of production at critical time, source says - Electrek


I'm actually not surprised. I was expecting some negative news. It seems traders want to take the stock down this week, as one final opportunity to cover before the Q2 report. Think of it this way: one final gift for a buying opportunity before the breakout on the Q2 report (I know, we've had plenty of buying opportunities... sigh!).

 

[Mars ☰mperor]

Freaking Fred hit again.

Executive departure, blah blah

 

[mariaaa]

I hope for 210 to buy some more shares.

 

[stef]

Uh, oh (stock is down a bit):

Tesla loses its head of production at critical time, source says - Electrek


I'm actually not surprised. I was expecting some negative news. It seems traders want to take the stock down this week, as one final opportunity to cover before the Q2 report. Think of it this way: one final gift for a buying opportunity before the breakout on the Q2 report (I know, we've had plenty of buying opportunities... sigh!).

Who would be this production guy? Not going to click that damn link

 

[Fact Checking]

Uh, oh (stock is down a bit):

Tesla loses its head of production at critical time, source says - Electrek

Actually, "head of production" is inaccurate and misleading, that would be Jerome Guillien, President of Automotive and in charge of automotive operations, characterized thusly in another article by Fred himself:

Tesla announces management changes, Elon Musk says record quarter, 'ignore media' - Electrek

'The most notable change is a promotion for long-time Tesla engineer is executive Jerome Guillen, who most recently has been leading the Tesla Semi program.'

'He is now President of Automotive in charge of “all automotive operations and program management” and he will report directly to Elon.'
​

Peter Hochholdinger is "Vice President of Production", an executive two levels below Elon, reporting to Jerome Guillien. I'm sure he got an irresistible offer.

Edit:

Also, as @Antares Nebula pointed it out, Tesla apparently hired another "Vice President of Production" already last year:

"Last year, we reported on Tesla hiring Bert Bruggeman, an experienced manufacturing executive from the semiconductor industry, as their new ‘Vice-President of Production at Fremont plant’, but it hasn’t been clear what his role is in relation to Hochholdinger since Tesla confirmed that he was still in charge of production at the time."​

Maybe Hochholdinger notified Tesla well in advance and they hired Bruggeman as a replacement. Or the two were competing for the same effective role and Bruggeman won and Hochholdinger left. Or something else happened.

 

[Antares Nebula]

What's worse is that the market is actually up on positive trade talks. Always the same: Market up, TSLA down.

 

[Antares Nebula]

Who would be this production guy? Not going to click that damn link

I made the sacrifice for you:

"
Tesla’s head of production in charge of all vehicle manufacturing at Fremont factory, Peter Hochholdinger, is not at the automaker anymore, according to a source familiar with the matter.

It was a big deal when Tesla hired Hochholdinger.

Mod: It is against both copyright law and the TMC terms of service to quote entire articles. Don't do this. --ggr

 

[Antares Nebula]

But, also note (from article):

Last year, we reported on Tesla hiring Bert Bruggeman, an experienced manufacturing executive from the semiconductor industry, as their new ‘Vice-President of Production at Fremont plant’, but it hasn’t been clear what his role is in relation to Hochholdinger since Tesla confirmed that he was still in charge of production at the time.

Two people with the same title. So it may be a moot point. Hochholdinger may have left some time ago (who knows?), Bruggeman may infact be (and have been) head of production.

 

[Antares Nebula]

I hope for 210 to buy some more shares.

For what it's worth:

Gap fills just under 205 and 197. And head and shoulders pattern targeting 195/200.

(Or look at some entrails -- whatever's your poison.)

 

[Fact Checking]

What's worse is that the market is actually up on positive trade talks. Always the same: Market up, TSLA down.

These big pre-market swings are often just trying to set the narrative and sentiment with comparatively very few shares traded, especially in thinner summer trading. The drop from $222 to $217 in pre-market trading was performed with a sale of just around 4k shares. Regardless of whether TSLA goes up and down in regular trading, any loss from such a small position is peanuts to a big player with a large position.

Right now I suspect there's quite some interest in trying to nullify the positive news of "we are close to a record quarter" email from Elon, which is a far more fundamental piece of information related to Q2 results than an executive leaving.

 

[KarenRei]

Actually, "head of production" is inaccurate and misleading, that would be Jerome Guillien, President of Automotive and in charge of automotive operations, characterized thusly in another article by Fred himself:

Tesla announces management changes, Elon Musk says record quarter, 'ignore media' - Electrek

'The most notable change is a promotion for long-time Tesla engineer is executive Jerome Guillen, who most recently has been leading the Tesla Semi program.'

'He is now President of Automotive in charge of “all automotive operations and program management” and he will report directly to Elon.'
​

Peter Hochholdinger is "Vice President of Production", an executive two levels below Elon, reporting to Jerome Guillien. I'm sure he got an irresistible offer.

Edit:

Also, as @Antares Nebula pointed it out, Tesla apparently hired another "Vice President of Production" already last year:

"Last year, we reported on Tesla hiring Bert Bruggeman, an experienced manufacturing executive from the semiconductor industry, as their new ‘Vice-President of Production at Fremont plant’, but it hasn’t been clear what his role is in relation to Hochholdinger since Tesla confirmed that he was still in charge of production at the time."​

Maybe Hochholdinger notified Tesla well in advance and they hired Bruggeman as a replacement. Or the two were competing for the same effective role and Bruggeman won and Hochholdinger left. Or something else happened.

When will people ever get over this executive departure nonsense? TSLAQ of course hangs on every one of them - they even built a spreadsheet:

Dropbox - Tesla Executive Departures List.pdf - Simplify your life

... The problem being that their own spreadsheet undercuts their case, since it shows that departures are little-changed over time, and that the average stay of a person who's departed is something like 3-4 years, which suggests something like 4-5 years average for execs as a whole. Even 3-4 years wouldn't be unusual at all for a silicon valley company.

 

[KarenRei]

Delivery of Ravens appears to have finally started in Norway:

Tesla Registration Stats

"Appears" because it's not for sure, but there's now a number of S/X vehicles whose type is either blank, or "na".

Still mostly inventory, though. But this should switch over relatively quickly. Raven in EU/China will primarily have an effect in Q3.

 

[stef]

I made the sacrifice for you:

"
Tesla’s head of production in charge of all vehicle manufacturing at Fremont factory, Peter Hochholdinger, is not at the automaker anymore, according to a source familiar with the matter.

It was a big deal when Tesla hired Hochholdinger.

He was coming from Audi where he was in charge of the production the Audi A4, A5 and Q5 resulting in him overseeing more than 400,000 cars built annually.

When Tesla hired him in 2016, Hochholdinger’s experience boosted confidence in Tesla bringing Model 3 to production in high volume and the company sent out a press release to publicize the new hire.

On his LinkedIn profile, he describes his position at Tesla:

“Peter is Tesla’s Vice President of Production and responsible for the car plant and seat factory in Fremont, CA, the castings site in Lathrop, CA and the Tilburg factory in The Netherlands.”

Now we learn that Hochholdinger is not at Tesla anymore.

A source familiar with the matter tipped Electrek about the executive not being at the automaker anymore and we confirmed with another source that Hochholdinger is not in Tesla’s directory any longer.

We contacted Tesla about Hochholdinger leaving and company representatives didn’t respond to several requests for comment.

Hochholdinger also didn’t respond to a request for comment.

Last year, we reported on Tesla hiring Bert Bruggeman, an experienced manufacturing executive from the semiconductor industry, as their new ‘Vice-President of Production at Fremont plant’, but it hasn’t been clear what his role is in relation to Hochholdinger since Tesla confirmed that he was still in charge of production at the time.

The head of production’s departure comes at a critical for Tesla’s manufacturing team as the automaker is trying to massively increase its production capacity and figure out a way to fit Model Y production at its very crowded Fremont factory.

Electrek’s Take
Again, Tesla hiring Hochholdinger was a big deal at the time.

He had more experience than most people at Tesla when it comes to large-scale car manufacturing. Only Gilbert Passin, who was leading manufacturing at Tesla since the acquisition in the Fremont factory, might have had more experience in car manufacturing on Tesla’s executive team.

Passin left Tesla for Wrightspeed last year.

While I often defend Tesla on their highly publicized executive departures, I think it’s fair to say that they had some significant talent exodus over the last year or so and now with Passin and Hochholdinger, it’s especially true for the production executive team.

Lately, we have seen Tesla promote more from within the company. Maybe we are going to see that for the production leadership.
"

So the guy from Audi. I know for experience German like to go back home, especially those working in automotive and I remember thinking at the time he would stay no more than 3 years ...
As Alex Roy likes to say... I must be Nostradamus

Edit: I don’t know he’s going back to Germany but would be quite surprised if he’s not

 

[jerry33]

Sure, but that can happen without a "dealership". The "galleries" (like in Texas as I assume you know) can provide a showroom, test drives, info, etc., then help you go online to buy a car (and check inventory).

I thought Tesla had pretty much put all those court challenges behind them.

No, those challenges keep coming up. Earlier this year we barely avoided a no-service for Teslas in Texas bill. This kind of legislation will keep coming up until the dealer association loses it's political power.

There is a lot galleries can't do that stores can. They can't discuss price or financing. Test drives have to be arranged in advance. They can't help you go online and buy a car (you have to go back home to do that). About all they are good for is you can look at the car sit in it, and ask certain questions, and see the paint and interior colours and materials.