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

[StealthP3D]

I think Tesla is better to scale the production since by contract Tesla has to purchase all the output coming out of GF1.

I don't think Tesla has only one option, that's not how contracts like this are written. They will have built-in flexibilities for both parties and cost-adjustments to reflect those flexibilities.

 

[neroden]

I don't want to incur the wrath of our mods with another visit to the service issue rabbit hole, but I think my positive experience last week merits consideration for a couple of reasons that go beyond the service itself. Specifically, my experience suggests improved intra-division communication, resolution of which will go a long way toward addressing the service concerns rightfully raised by Neroden and others here.

I set up an appointment online for installation of my spoiler (finally!) and to have them evaluate an intermittent rattle coming from a driver door speaker. I played the song with a bass drop that usually triggers it and the Tesla tech quickly agreed there was an issue. They took my car and gave me a loaner X. Boy, what a different driving experience that is coming from a P3D! But I digress.

After turning in my car I went to the showroom and shared with the sales team that I had won a signature black wall charger through referrals, but had heard nothing over the past six months and saw nothing in my "loot box" which would shed any light on a delivery schedule. They candidly said communication between the referral team and them had not been very efficient, but they would send an email on my behalf. Three days later I found the charger on my doorstep.

As for the speaker, the door panels are modular, so they simply replaced mine and the car was ready the next day and has exhibited no further audio defects.

The service team was excellent, the sales team understanding and responsive and communication between the various divisions appears to be improving.

Now I know I should expect nothing less from a showroom near ground zero for Tesla, but, big things come from small beginnings.

Long & Strong

Cheers,

CB1

Thanks for this. I hope this is a sign of improvements coming. Right now the biggest problem is that the first-point-of-contact is failing consistently, but the older, longer-standing problem was lack of interdepartmental communication. So if they fix the interdepartmental communication, that fixes the older and trickier problem, and then they just have to hire SOMEONE to answer the phone, which really *should* be easy.

 

[neroden]

The default color is now white (multi-coat)

Interesting

Was not expecting that. That's a $2500 price cut for white multi-coat. And multi-coat *is* more production-line-time-intensive than single coat. Maybe this is a temporary measure and multi-coat will be replaced by single-coat white later? If so, it's definitely the time to order if you want pearl white!!!

 

[LJS22]

Tesla probably doesn’t want momentum to get stopped in Q3 so they are making sure they can carry this demand into the end of the year. The ultimate goal remains to get as many of these cars on the road as possible. Pricing will be a very short story told, ultimately there’s too much on the horizon to talk about soon and so even if this is spun as a negative I see Tesla will ultimately bounce back with huge gains.

 

[neroden]

These changes are in line with the rumored production increase. Production increase of model 3 results in higher margins, so they lower prices to match demand with the production increase. For model s/x, my take is that profit margin is higher on long range and they think this outweighs the drop in price of long range.

Tesla drops cheapest Model X, S variants, cuts prices to simplify lineup

My take on Model S/X is that the introduction of Raven has ramped demand up above the capacity of the new (combined) Body In White line. (I should remind people that it still hasn't been proven that the Body in White lines for S and X were combined; it's just speculation). Cutting the Standard Range should reduce demand enough to match it back up with the new production limits, which I hypothesize are around 80K-100K/year. I suspect demand was running far above that.

 

[EVNow]

standard range S & X have been removed.

Long range price cut by about 4000 or 5000
Ludicrous cut about 15,000 or 16,000, which I think is fine as this may lead to more higher end sales.

This is more difficult to interpret. May be they are getting too few orders of SR - so, they think by eliminating that but reducing price overall they keep same ASP and margin but reduce complexity? I hope someone asks reasoning behind these moves and we actually get an answer.

 

[heltok]

The big picture here is that Tesla, due to having increased volumes and accumulated experience making BEVs, are now able to sell BEVs cheaper. The competitors that are supposed to enter the market will initially have lower volumes and less experience and will likely not be able to sell cars at matching prices. This will be very hard to overcome without taking huge losses. Tesla was almost not able to ramp up to this point even while having almost zero competition and very loss friendly share holders. Competitors will have a much harder time ramping up sales with lower priced competition from Tesla. Conclusion is that it will be very hard for competitors to enter the market profitable, while Tesla can scale demand and thus production by lowering prices as their costs fall with volume and experience.

This will look negative short term to wall street “experts” but look like Elon playing 3D-chess to long term shareholders.

 

[Mike Smith]

Tesla drops cheapest Model X, S variants, cuts prices to simplify lineup

My take on Model S/X is that the introduction of Raven has ramped demand up above the capacity of the new (combined) Body In White line. (I should remind people that it still hasn't been proven that the Body in White lines for S and X were combined; it's just speculation). Cutting the Standard Range should reduce demand enough to match it back up with the new production limits, which I hypothesize are around 80K-100K/year. I suspect demand was running far above that.

These price changes certainly seem to suggest the production increase Jerome mentioned was referring to Model 3, not S/X.

 

[StarFoxisDown!]

My only complaint with these recent pricing cuts is why not wait until earnings.....comment on it on the earnings call, say the great efficiencies gained allow the lower prices.

 

[neroden]

I believe the price reductions for Model 3 are indeed related to the production ramp-up. So far, the Model 3 order rate has been higher than the production rate; but they are about to increase the production rate, and I bet they know that they're increasing it to a rate higher than the current order rate. So they're preemptively cutting prices to increase demand because they know there's a huge production boost coming.

 

[EVNow]

My only complaint with these recent pricing cuts is why not wait until earnings.....comment on it on the earnings call, say the great efficiencies gained allow the lower prices.

Get bad news (for investors) out of the way before ER ?

They could’ve announced just after Q2 but wanted to deliver the previously ordered cars at the old price, I guess.

 

[kengchang]

I believe the price reductions for Model 3 are indeed related to the production ramp-up. So far, the Model 3 order rate has been higher than the production rate; but they are about to increase the production rate, and I bet they know that they're increasing it to a rate higher than the current order rate. So they're preemptively cutting prices to increase demand because they know there's a huge production boost coming.

Also with least amount of people taking delivery since July 1st, less people being ticked off by lowered price

 

[Singuy]

My only complaint with these recent pricing cuts is why not wait until earnings.....comment on it on the earnings call, say the great efficiencies gained allow the lower prices.

Welp, last chance to buy I guess before earnings. Was going to buy some under 240 but price action has been bullish the past two days. Guess this is my chance.

 

[Mike Smith]

I believe the price reductions for Model 3 are indeed related to the production ramp-up. So far, the Model 3 order rate has been higher than the production rate; but they are about to increase the production rate, and I bet they know that they're increasing it to a rate higher than the current order rate. So they're preemptively cutting prices to increase demand because they know there's a huge production boost coming.

Everyone thinks Model 3 cannibalizing S/X sales is a big problem, but Tesla has said repeatedly that they're targeting the same margins for all three vehicles.

 

[Singuy]

Get bad news (for investors) out of the way before ER ?

They could’ve announced just after Q2 but wanted to deliver the previously ordered cars at the old price, I guess.

Well the reason to save this for ER or after ER is to spin it as good news. Now we have a week of shorts coming back with a vengeance making up nonsense again.

 

[SoGA Fan Club]

Tesla will almost certainly not need to reduce prices.

Ouch. Talk about making a comment at the worst possible time. How long after this post did the price reduction get announced......15 minutes?

 

[EVNow]

Everyone thinks Model 3 cannibalizing S/X sales is a big problem, but Tesla has said repeatedly that they're targeting the same margins for all three vehicles.

20% of 100k is $20k. 20% of 50k is $10k.

Cannibalization halves the operating profit.

 

[neroden]

Everyone thinks Model 3 cannibalizing S/X sales is a big problem, but Tesla has said repeatedly that they're targeting the same margins for all three vehicles.

So, price adjustments can't really target margins, because that isn't how customers behave when demand is even slightly elastic. Supply can't adjust quickly....

Tesla's consistent limitation is production constraints (achieving those economies of scale), so I hope Tesla is setting pricing so that order flow will match achievable production rate. When achievable production rate is low compared to order flow, prices should rise; when production rate rises enough, prices should drop. I think this is pretty much what's been happening. Order flow should be largely independent of production rate in the short term (although arguably it reacts to production rate with a time lag due to the word of mouth effect).

I think margins are targeted largely by production cost changes and feature removal, while pricing is more reflective of the demand/supply balance. With demand increasing consistently, jumps and bottlenecks in supply will have pricing actions associated with them.

Not sure, just my educated guesses.

 

[Mike Smith]

20% of 100k is $20k. 20% of 50k is $10k.

Cannibalization halves the operating profit.

Not true - they sell a lot more units at the lower price. It's probably 10X easier to sell at Model 3 price level than Model S, and revenue is still half as much. If the margins are the same, they're actually going to make a lot more money by this cannibalization.

 

[schonelucht]

Tesla drops cheapest Model X, S variants, cuts prices to simplify lineup

My take on Model S/X is that the introduction of Raven has ramped demand up above the capacity of the new (combined) Body In White line.

If that was the case, it doesn’t make sense to cut the price of the remaining model.