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

[Fact Checking]

BTW., I suspect an interesting topic for the "Battery Investor Day" will be whether Tesla is going to keep the cylindrical form factor or might switch to prismatic cells - which are cheaper/faster to manufacture and have higher volumetric density.

I think the default assumption should be that they are going to stay with the 21,700 format, but the probability that they might use something else is higher than 0% - because if Tesla starts making their own cells the industry standard compatibility and outside supplier arguments become much less important, and the overall complexity and cost of raw materials to battery modules, with the physical properties of the final product, becomes the key parameter.

Another advantage that prismatic cells might have over cylindrical cells is protection against a worst-case runaway thermal cycle within the casing. For critical applications such as EV-airplanes or EV-ships, where passengers cannot simply disembark in case of a fire, and where the capital value of the vehicle is too high to allow a runaway fire within the battery pack in case of worst-case cell failure, the (much) lower mass fraction of protective casing mass versus battery content mass might be a critical factor.

Note that the non-invasive migration of their vehicle platforms to prismatic cells might be possible because they use less volume - so the changes to the battery pack would not impact the rest of the vehicle.

This might also explain the delay of the Tesla Semi, beyond their cell supply constraints: if they are certain about prismatic cells then they'd not want to roll out the Semi based on a cylindrical form factor.

In addition to prismatic cells, the pouch cell format is a possibility too.

Maxwell's battery presentation from last year mentioned prototypes in the pouch cell format:

http://www.powersourcesconference.com/Power Sources 2018 Digest/docs/3-1.pdf

"Additionally, prolonged cycle life performance of dry coated electrodes in small prototype pouch cells and large format pouch cells, ≥10Ah, is under evaluation."​

Obviously the cell form factor picked by Maxwell in their R&D effort does not limit the form factors that can be used by their dry cell technology - it can be used for cylindrical cells just as much - but I think Tesla will have a really close first principles look at what battery form factor they are going to use going forward.

 

[Thekiwi]

It actually does make sense for Tesla to release the Pickup as fast as possible, even if it is cell limited production wise.

Tesla has had to release cheaper SKUs of the model 3 (SR+) to maintain demand/supply equilibrium which has dropped ASP & Margins. But once the Y (& then pickup) are shipping, the ASP & Margins will increase as demand for the additional form factors means Tesla can choose to sell the same amount of cars at higher prices (in that scenario Tesla can match battery output by shipping higher priced versions of the new models instead of the lower end model 3 units, an easy way to do that temporarily is making FSD option standard with a $45k price on SR+).

Eg: instead of shipping 500k model 3 cars at an ASP in the ~$45k range, it could instead ship 200k Model 3 + 200k model y + 100k pickups = 500k units well above $55k ASP. So the same amount of cars but with a 20% higher ASP and corresponding margin increase. this would also allow additional time for battery costs to drop so that when battery cells finally ramp up to support significantly higher output above 500k cars, the margins on the lower priced models will be significantly better.

(Note: I’m being purely hypothetical with those ASP and volume numbers. And it’s more likely tesla will still sell every model 3 possible it can while model y ramps up in 2020 - presuming they have ample cell supply then). My point above was that IF they are still cell constrained after Y & pickup launch, it will be a nice situation where they can ship higher margin vehicles only until battery supply improves

 

[Cobbler]

In addition to prismatic cells, the pouch cell format is a possibility too.

Maxwell's battery presentation from last year mentioned prototypes in the pouch cell format:

http://www.powersourcesconference.com/Power Sources 2018 Digest/docs/3-1.pdf

"Additionally, prolonged cycle life performance of dry coated electrodes in small prototype pouch cells and large format pouch cells, ≥10Ah, is under evaluation."​

Obviously the cell form factor picked by Maxwell in their R&D effort does not limit the form factors that can be used by their dry cell technology - it can be used for cylindrical cells just as much - but I think Tesla will have a really close first principles look at what battery form factor they are going to use going forward.

Maybe a split: prismatic for energystorage business vs cylindrical for drivelines (thermal cooling?)

 

[JRP3]

Maxwell tech does not change the advantages of cylindrical cells. Tesla will not be switching.

 

[Dan Detweiler]

Be forewarned with this one. Pure utter speculation here and thinking WAY outside the box on my part.

At the risk of sounding completely ridiculous (a constant possibility with my lines of thinking, lol) let's make a few assumptions.

1) Assume that true full autonomy does, at some point, come to pass.
2) Assume that acceleration of the adoption of renewable energy in transportation is a core driving force to Tesla.
3) Assume that the majority of the world does NOT hold the same transportation values as the United States. What I mean here is that the rest of the world relies heavily on and accepts mass transit for short and long distance travel needs. The US (me included) have doggedly retained the desire for personal independence in their transportation.

So, with this in mind, does Tesla at some point stop selling to the public and become a solely autonomous vehicle manufacturer with concentration on the Tesla network, independent of personal ownership? Truck and auto fleet at the beck and call of anyone, living anywhere (apartments, condos, etc.) with no worries by owners of maintenance, insurance, etc. Does this scenario not reach a wider segment of the population and provide for all the needs of anyone, anywhere? Does this not bring a much larger dissemination of electric vehicles into use for a larger percentage of transportation needs? Does this eliminate the concern for quarter over quarter public sales and production numbers? Once established, just maintain the fleet and circulate vehicle into and out of the rental loop.

I know it's a stretch to imagine this, especially in North America where independent vehicle ownership has become such a hallmark of our society, but I could see something like this come to pass on a global front on down the road.

Dan

 

[X Fan]

a good article today from Financial Times on cobalt mining in the DRC:

Congo, child labour and your electric car

 

[jerry33]

Be forewarned with this one. Pure utter speculation here and thinking WAY outside the box on my part.

At the risk of sounding completely ridiculous (a constant possibility with my lines of thinking, lol) let's make a few assumptions.

1) Assume that true full autonomy does, at some point, come to pass.
2) Assume that acceleration of the adoption of renewable energy in transportation is a core driving force to Tesla.
3) Assume that the majority of the world does NOT hold the same transportation values as the United States. What I mean here is that the rest of the world relies heavily on and accepts mass transit for short and long distance travel needs. The US (me included) have doggedly retained the desire for personal independence in their transportation.

So, with this in mind, does Tesla at some point stop selling to the public and become a solely autonomous vehicle manufacturer with concentration on the Tesla network, independent of personal ownership? Truck and auto fleet at the beck and call of anyone, living anywhere (apartments, condos, etc.) with no worries by owners of maintenance, insurance, etc. Does this scenario not reach a wider segment of the population and provide for all the needs of anyone, anywhere? Does this not bring a much larger dissemination of electric vehicles into use for a larger percentage of transportation needs? Does this eliminate the concern for quarter over quarter public sales and production numbers? Once established, just maintain the fleet and circulate vehicle into and out of the rental loop.

I know it's a stretch to imagine this, especially in North America where independent vehicle ownership has become such a hallmark of our society, but I could see something like this come to pass on a global front on down the road.

Dan

For #3, the reason this has come about is that GM and Firestone talked cities into letting them run the transit systems and then proceeded to dismantle it so they could sell buses and tires. Today, the bus system is broken in most cities for a variety of political reasons. (In some cities, the politicians are scared that good transit will allow undesirables to move into their area). FSD with autonomy could bring back real transit if it's shown to be reliable. That is if you need to leave for work at 07:00 to arrive on time, the FSD car needs to be there at 07:00--this is not the case with Taxis, Uber, and buses in many cities.

I don't believe there is any system that can provide all the needs of anyone anywhere. Even in Europe where transit is the norm, many still have cars for vacations, etc.

FSD (FSD means FSD with autonomy) is going to be electric because of costs. No ICE vehicle will be able to compete.

The number of cars produced vs. FSD income is dependent upon how much of the business is FSD income. Best scenario is that FSD proves very reliable and people start using it rather than personal cars for much of their transportation. In that case FSD should be the majority of the income. Worst case is that FSD is not reliable (reliable means the car arrives on time every time, unlike Uber which sometimes never shows, or taxis which can show up to an hour later, or buses which don't keep to the schedule. The reliability of buses depends on the city, some are very reliable, and some aren't).

 

[NicoV]

Sounds to me like the investment side isn’t done buying yet.

“There was much higher demand and deliveries than I predicted, but I was right because it all came from Q3 and Q4.”

Palm, meet face.

The beauty of this logic is that it can be used every quarter to explain why he was wrong: Demand from the future.

 

[Fact Checking]

Deliveries. Tesla beat our 2Q delivery estimate by 13,622 units. We removed 6,500 units from 3Q and 7,200 units from 4Q. We now expect 3Q deliveries to fall sequentially to 91,300 units before recovering slightly to 97,200 units in 4Q. Model mix and price deterioration take our forecasted Y/Y revenue growth to down 3% for 3Q and down 2% for 4Q.

I guess I shouldn't really attempt to make sense of the seemingly random utterings of Adam "Is the FSD chip Terminator?" Jonas which opinion he, in an act of blatant professional malfeasance, is masking as "stock analyst opinion", but let's contrast his latest projections with known facts.

Here's the historic track record of Tesla's last 3 years of S+X vehicle deliveries (this way we can measure approximate seasonal patterns without the Model 3 ramp-up):

      2016/Q2 => 14,370
      2016/Q3 => 24,500 (+70%)

      2017/Q2 => 22,000
      2017/Q3 => 25,930 (+18%)

      2018/Q2 => 22,300
      2018/Q3 => 27,660 (+24%)

Even ignoring the Model 3 ramp-up, in every single year Tesla managed to deliver at least 18% more vehicles in Q3 than in Q2 - and this is a well-known seasonal pattern in the auto industry as well: Q3 and Q4 are generally stronger than Q1 and Q2.

Basically Adam "missed Q2 deliveries by 21%" Jonas's assumption is that:

• Tesla is going to both break their years old pattern and depart from the overall auto industry seasonal pattern, and they expect deliveries to fall due to a $1,850 tax incentive reduction that only a fraction of customers can take advantage of in one of their three major markets ...,
• he is assuming that the Raven refresh is not going to boost Q3 demand at all (barely any Raven deliveries in Europe or China so far),
• he is assuming that any post Raven refresh is not going to boost Q4 demand at all,
• he is ignoring that while overall demand for EVs continues to increase globally by double digit percentage points per year, Tesla's competitors are falling far short of even matching any of Tesla's models on price, range, charging speed, performance and production volume - let alone beat it,
  
• he is not crediting any growth in Model 3 deliveries to left-hand-drive countries such as the U.K. or Japan,
  
• he is also inexplicably ignoring any deliveries from the Shanghai Gigafactory, where vehicle production is guided to begin in September (Q3) already.

I also have the feeling that Jonas is preparing the "oh, Tesla built a whole Gigafactory, in Shanghai, in secret!!!" defense for why his Q3 and Q4 projections missed so badly? Although I think he'll have more luck with the insanity defense.

Or is Adam "asking worse than boneheaded questions on Tesla earnings calls" Jonas competing for the "Worst Analyst Prediction of 2019" prize perhaps?

 

[Christine69420]

About Adam Jonas:

What I don’t understand is how he thinks Tesla is fundamentally overvalued but still has a $230 target for the stock. Isn’t that where we are today?

Could just be he hasn't checked the stock price in a while. And now he hurried out his article not to be late for lunch or something. In general I belive lazyness is a factor in many articles about Tesla.

So, with this in mind, does Tesla at some point stop selling to the public and become a solely autonomous vehicle manufacturer with concentration on the Tesla network, independent of personal ownership?

If so my current TMX will be 20 years old before I sell it! If Tesla/Musk want to get everybody driving EVs they must sell to indivduals. My life is to chaotic to manage with taxis. I need a car. We may have better public transport in Norway than in the US - but it's far from good enough for people to give up their cars. Perhaps in big cities. But most of the zipcodes you really need a car.

 

[Bobfitz1]

It's exciting, but Im starting to wonder what % of those 1 million cars owners will actually turn on taxi mode?

Just posing a question. If I own an FSD Tesla and join the Tesla Network to profit from operating it as a robo-taxi, and one day it kills a passenger, pedestrian or other driver, who is liable? Me, TN, my insurance company? How much more will the insurance company make me pay for covering commercial additional driving of the car?
No doubt there are a multiplicity of ways these issues will eventually get sorted out. But I do think it will take a lot longer than a year or two after FSD is technically able to safely drive car owners autonomously for most such legal and liability questions to be sorted out. The discussion during Autonomy Day was mainly focused on technical feasibility and potential revenue once robo-taxi Network is operating. Not so much about these questions.

 

[HG Wells]

Sounds to me like the investment side isn’t done buying yet.

“There was much higher demand and deliveries than I predicted, but I was right because it all came from Q3 and Q4.”

Palm, meet face.

I am sure he is right. There was at least one person who would have bought in July but because of the tax incentives bought in June.
Now, whats the max number ? Two maybe three thousand. I don't think it will affect orders past mid July.

Tesla has a demand problem.
TOO MUCH DEMAND !

 

[Krugerrand]

But when Elon starts again with yet another claim/timeline we should be able to call it out

Go call it out on his Twitter account then. We’ve heard it here plenty. Everyone here is already standing in their respective corners.

 

[Todd Burch]

Someone should remind Dr. Jonas, Financial Expert (PhD) that the rest of us can see what he writes, and the deeper he clings to his Tesla failure fantasy, the dumber he looks.

 

[Prunesquallor]

Truck and auto fleet at the beck and call of anyone, living anywhere (apartments, condos, etc.) with no worries by owners of maintenance, insurance, etc. Does this scenario not reach a wider segment of the population and provide for all the needs of anyone, anywhere?

Dan

You’ve got a bit of circular logic going here, I think. You presume the service has been flawlessly, universally deployed and then claim it should provide flawless, universal service. That’s a sci-fi movie end case, but does not address whether the near-term tech really can handle enough use cases, whether deployment is economical for all locations (e.g., suburban, rural) and whether it is desirable by a wide enough demographic.

 

[LN1_Casey]

Just posing a question. If I own an FSD Tesla and join the Tesla Network to profit from operating it as a robo-taxi, and one day it kills a passenger, pedestrian or other driver, who is liable? Me, TN, my insurance company? How much more will the insurance company make me pay for covering commercial additional driving of the car?
No doubt there are a multiplicity of ways these issues will eventually get sorted out. But I do think it will take a lot longer than a year or two after FSD is technically able to safely drive car owners autonomously for most such legal and liability questions to be sorted out. The discussion during Autonomy Day was mainly focused on technical feasibility and potential revenue once robo-taxi Network is operating. Not so much about these questions.

To be fair though, the legal world is a dark bog that is slow to adapt to anything. We had emails for decades, and we've only recently had a case law go into affect about the the right to obtain an email via a warrant. Recently as in 2018.

Once FSD goes into effect, there will inevitably be an accident where the owner of the vehicle will claim it's Tesla's fault, the victim/victim's family will claim it's whoever has deeper pockets/both/not us, and Tesla will state it's not their fault. Once that goes to court, it will be appealed, and then again, and then it'll end up on the Supreme Court's desk about who is at fault, and how to decide fault. This can take years, even after implementation goes through the respective state's legislature.

And that's not even touching onto the complexity gets added when the owner/victim is not a part of the same state. Say the victim is from FL, who has decided it's the owners responsibility. But, the vehicle was owned by a TX, who says it's Tesla. But, the vehicle was traveling between the locations, and had the accident in Georgia, who disallows the service from any operators in the state.

 

[Krugerrand]

Interesting way to look at it.

From a simple search online, there’s about 660,000 Airbnb listings (many are investment properties) in the US and about 100 million housing units. So, that would make it less than 1%. Sounds about right. I, personally, don’t know of anyone in my network that lists their main residence on Airbnb.
I would never list my personal house on Airbnb, nor would I with a daily car either on the TN. Just don’t want random strangers’ bottoms in my stuff.

If I was certain that having a spare Tesla on the TN would net me a very high IRR, then sure. But, supply and demand will eventually cross, and the TN will not be much (if any) profitable after time.

I know two people who run Airbnbs; one does it out of a ‘cottage’ on their property just a few hundred feet from their main home, the second does it out of their main home.

I’ve booked at one Airbnb and the owners lived in the same home they rented out.

See how I just blew your perspective out of the water. Point being, neither of us has a clear understanding nor the required information to come to an accurate conclusion.

I’m very unlikely to put my Tesla on the TN for the same reason as you, but I assure you there are plenty enough people who will. Don’t you fret. There are people chomping at the bit to try it out just as there were plenty of people willing to buy the first EVs produced and once they proved viable the next group of people jumped in to buy an so on.

 

[Chocochip]

Adam Jonas has found a new narrative (took him a week to come up with this one): record Q2 is pull-in from what would have normally been H2 sales:

“We update our TesIa earnings forecast following better than expected 2Q deliveries. At this stage, we have assumed the 2Q beat pulled forward demand from the remainder of the year, leaving our full year delivery forecast unchanged at 347k units. Reiterate EW and $230 PT.”

Adjustments to the model:

Deliveries. Tesla beat our 2Q delivery estimate by 13,622 units. We removed 6,500 units from 3Q and 7,200 units from 4Q. We now expect 3Q deliveries to fall sequentially to 91,300 units before recovering slightly to 97,200 units in 4Q.

Translation: "We weren't wrong with our delivery forecasts. The discrepancy occurred because Tesla has wrongly delivered too many cars in Q2."

 

[Zaxxon]

Deliveries. Tesla beat our 2Q delivery estimate by 13,622 units. We removed 6,500 units from 3Q and 7,200 units from 4Q.

The best part of this is they don't even do their own math in an internally-consistent way. "Tesla beat our estimate by 13,622 units. We believe this is solely due to demand pull-forward, so we removed 13,700 units from 3Q/4Q."

 

[Chunky Jr.]

I think Rivian, with a more traditional appearance, wins.

That assumes that Rivian will not experience their own version of production hell. They also will not have Model S and X sales to help with the cash flow needed to solve it.