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

[neroden]

Now that a record deliveries quarter is within reach, the short argument seems to be that they won't be able to make a profit like they did in q4 because ASP is dropping due to a higher mix of SR Model 3s and that this will be the case going forward. What's the most effective argument against that thesis?

I don't know what the most effective argument is, because that's psychology, and people be crazy.

This is the most valid argument IMO:

The ASP will only drop so far (there's still lots of demand for LR, and lots of unfulfilled demand for SR at these prices) -- but production numbers will keep increasing for at least 10 years (starting with Shanghai, Model Y, and whatever else they can squeeze out of Fremont this year), and production costs will keep dropping (they have a strong record of doing that).

I'm ultra long so I'm not worried too much about the short term, but I do want to argue effectively against the FUD. And I want to educate myself. I'm a software engineer, not a finance expert

The top-level summary of the finances: Gross margins -- profit per car -- are already great. The total gross profit (revenues minus per-car costs) isn't yet enough to reliably cover the fixed costs of R&D, SG&A, and interest. This is why increased production numbers are so important.

 

[Cartegena]

My understanding was Hochholdinger was in charge of Model 3 production while Passin was in charge of Fremont.In my mind that puts Passin above Hochholdinger. Now Hochholdinger has left without a direct replacement and Jerome is President of Automotive Operations. Jerome only reports to Elon. That puts Jerome above Passin.

"The Information reporter Amir Efrati noted that the internal org chart "helped to confirm" that Gil Passin, head of manufacturing for years, was also gone from the company." As Top Executives Leave Tesla, Elon Musk Is Left With 29 Direct Reports

 

[neroden]

Notice that Elon didn't say "Panasonic?" Notice that he said "we?"

I think the Maxwell acquisition has been on his mind for some time. 400 wh/kg makes electric flight possible with "substantial innovation in the airframe. At 500 it starts to become quite compelling."

Sigh. OK, sounds like they might design their own airplane. They do have some experience with aerodynamics!

That's fine as long as they solve their existing problems (customer communications, internal communications) first, and also get the existing development projects (Semi, Pickup, Solar Roof, Model Y, Roadster 2) out of the pipeline and generating revenue first.

 

[SPadival]

We stopped Pravduh for a few reasons, but a big one was that it seemed too combative or seemed to stimulate too much combat.

Good. I cannot imagine the PTSD like symptoms it will cause if you go through negative article after negative article. Just look at TSLAQ on twitter.

 

[neroden]

Dunno, but in early August watch the Customer Deposit balance as an imperfect indicator of future demand, especially if the recent trend reverses:
1Q19 $0.77 Billion
4Q18 $0.79 Billion
3Q18 $0.91 Billion
2Q18 $0.94 Billion
1Q18 0.98 Billion

By failing to honor reservation order, Tesla has trained people to avoid putting down deposits until the last minute, so I don't think it's a good indicator of future demand any more. I really wish they hadn't made that screwup; otherwise people would put down deposits early.

 

[neroden]

Interesting to see his evolution from ~74K to ~91K through the quarter.

Is that kind of evolution normal for him?

Troy pretty much blindly extrapolates from his raw data, which is... well, it's not a good way to make a projection, but at least it doesn't have much opinion in it.

 

[SoGA Fan Club]

Question about 2019 full year guidance of 360,000 to 400,000. And please don't just click the disagree button because you don't like the question.

Back when Elon tweeted that Tesla would sell 500,000 cars this year, prompting the SEC mess, I recall reading on this forum that this was NOT material information since Tesla had actually guided for 500,000 on the conference - everyone was saying that the 360,000-400,000 was Model 3 only, and then the S/X was 100k. Someone even challenged this and a poster provided a link to the transcript which proved this was indeed true.

But now, it seems like it's flipped BACK to full year guidance for all cars being 360,000 to 400,000. Is this correct or is my memory playing tricks on me?

 

[neroden]

Question about 2019 full year guidance of 360,000 to 400,000. And please don't just click the disagree button because you don't like the question.

Back when Elon tweeted that Tesla would sell 500,000 cars this year, prompting the SEC mess, I recall reading on this forum that this was NOT material information since Tesla had actually guided for 500,000 on the conference - everyone was saying that the 360,000-400,000 was Model 3 only, and then the S/X was 100k. Someone even challenged this and a poster provided a link to the transcript which proved this was indeed true.

But now, it seems like it's flipped BACK to full year guidance for all cars being 360,000 to 400,000. Is this correct or is my memory playing tricks on me?

The big issue is that Musk abandoned near-term plans to get more than 7000/week Model 3s out of Fremont. Original target was 10000/week. This was a failure, and should be acknowledged as such. If you do the math, with the final rate being 7000/week you just can't get to to 360K-400K Model 3. With the final rate being 10000/week, you can. That was the material change.

 

[MP3Mike]

I'd be amazed if they could fit out all the services, put the manufacturing lines in place and calibrate them to the level of precision required, have the supply network producing enough parts and train enough staff to have a line humming at 1k per week or more without any hiccups that slow production.

We are now less than 6 months until the end of the year, that is a mountain of work that needs to be organised almost flawlessly.

It only took 15 days to build a new GA line including pouring the concrete and erecting the sprung structure... But I would expect the body and paint sections to take longer to get setup.

 

[Tslynk67]

I wish Tesla would put the delivery report out now, before the bell, then at least we'll get 1.5 days to trade on it. Risks getting list over the holiday period.

Unless it's another Q1, of course

 

[neroden]

It's fast to set everything up, especially if you ordered it in advance, which Tesla did. I'd expect 90% of the Gigafactory 3 equipment to be in place in, say, a month.

It's slow to *debug* everything and get everything working *right*. So when the factory appears complete from photographs through the windows... it's gonna be three more months, minimum, before it's really humming.

 

[FreqFlyer]

View attachment 425532

Full review:

2019 Tesla Model S review: Familiar, yet oh so much better

I am noticing in reviews starting from last year, about the S or X the design and interior being dated. Supposedly an interior refresh is coming this fall but I the nip and tuck to outside is more than just new headlight and tail lights.

 

[Right_Said_Fred]

Question about 2019 full year guidance of 360,000 to 400,000. And please don't just click the disagree button because you don't like the question.

Back when Elon tweeted that Tesla would sell 500,000 cars this year, prompting the SEC mess, I recall reading on this forum that this was NOT material information since Tesla had actually guided for 500,000 on the conference - everyone was saying that the 360,000-400,000 was Model 3 only, and then the S/X was 100k. Someone even challenged this and a poster provided a link to the transcript which proved this was indeed true.

But now, it seems like it's flipped BACK to full year guidance for all cars being 360,000 to 400,000. Is this correct or is my memory playing tricks on me?

He later corrected it and said he meant to say a yearly build rate of 500,000 at the end of 2019. That is still within sight: 7,000 Model 3 per week in Fremont, 2,000 Model S and X per week in Fremont (possible with interior and exterior upgrade) and 1,000 Model 3 per week from Shanghai. Give or take a few months.

 

[Swampgator]

Last time they reported on the 3rd was not good news. Hope this is not a repeat.

 

[Pezpunk]

I'd say the factory will produce somewhere between 5k-15k Model 3's by Q4.

sigh.

more Tesla bulls settings themselves up for disappointment by talking themselves into optimistic expectations out of thin air that exceeds Tesla's own (rarely-exceeded) guidance.

my advice is, when someone says they are on schedule, don't assume they mean they are wildly ahead of schedule. please.

 

[Right_Said_Fred]

The big issue is that Musk abandoned near-term plans to get more than 7000/week Model 3s out of Fremont. Original target was 10000/week. This was a failure, and should be acknowledged as such. If you do the math, with the final rate being 7000/week you just can't get to to 360K-400K Model 3. With the final rate being 10000/week, you can. That was the material change.

Why is abandoning the 10,000 target for Fremont a failure? They constantly adapt to changing circumstances and that is what they should do! Why hold on to a target set a few years ago when it is better to keep Fremont at 7,000 this year and build the other 3,000 in Shanghai? It also leaves space for Model Y in Fremont.

 

[mongo]

The big issue is that Musk abandoned near-term plans to get more than 7000/week Model 3s out of Fremont. Original target was 10000/week. This was a failure, and should be acknowledged as such. If you do the math, with the final rate being 7000/week you just can't get to to 360K-400K Model 3. With the final rate being 10000/week, you can. That was the material change.

Disagree. The amount of money/ equipment/ space to get Fremont from 7k to 10k (along with near term GF1 pack supply to support it) may have been clearly the wrong choice compared to investing in a full line of improved equipment for GF3.
Especially if they are now able to find Y in Fremont due to that available space.

What if a big/ bulky/ expensive/ long lead piece of equipment turns out to max out at 8k/ wk? Why jump that section to a 16k/ week capacity just to boost output 2k?

In hindsight, even if Fremont could do 10k/ wk now, is there any indication GF1 could?

 

[LN1_Casey]

sigh.

more Tesla bulls settings themselves up for disappointment by talking themselves into optimistic expectations out of thin air that exceeds Tesla's own (rarely-met) guidance.

my advice is, when someone says they are on schedule, don't assume they mean they are wildly ahead of schedule. please.

Hey, I'm a pessimist for most of things in life (wage gap, climate change, political spectrum, human potential, etc). Let me be optimistic about something.

 

[EinSV]

Just a heads up. Most of the Wall Street analysts have taken their shots so doubt they will be the cause of the short attack later this week. My guess is we get something from either Moody’s (relief pitcher) or a report from some sort of obscure supply chain publication like Nikkei talking about issues with Panasonic etc. it will come from left field but the source will be obvious for those like us who know what’s up.

Good call. Round 1: Jeff Sonnenfeld (Chanos' Yale business school colleague) was trotted out on CNBC this morning to complain about Elon, as he can be relied on to do from time to time.

 

[Driver Dave]

The 2022 BMW i4 Could Be the Tesla Model 3's Biggest Threat Yet
2022 BMW i4 – New Electric Sports Sedan

"Wait, we'll have something in 2022!"

It is like "Wait, we'll have sears.com launched in 4 years!"

Old car companies are doomed.

TSLA Long. It's obvious.