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

[mrdoubleb]

Maybe I missed it in the comments, but isn't a large part of the reason for the price drops to offset the tax credit drop off? Tesla stated as much regarding the January price drops:

"Moving beyond the success of Q4, we are taking steps to partially absorb the reduction of the federal EV tax credit (which, as of January 1st, dropped from $7,500 to $3,750). Starting today, we are reducing the price of Model S, Model X and Model 3 vehicles in the U.S. by $2,000."

Tesla Q4 2018 Vehicle Production & Deliveries, Also Announcing $2,000 Price Reduction in US | Tesla, Inc.

Sure, production (and so efficiency) is being ramped to help offset this also. Multiple factors. It's likely and fortunately coincidental that the pace of tax credit drops is keeping pace with the rate of model 3 production efficiency gains.

Would make sense in the US context, but the cut seems to be global

 

[Antares Nebula]

Incompetence or FUD?

 

[Fact Checking]

Incompetence or FUD?

View attachment 430195 View attachment 430196

$30,315 is the "after potential savings" U.S. price of the SR+ displayed on Tesla's website, I think this is just an honest mistake caused by Tesla's arguably confusing default price display: the characterization of the overall pricing changes (minus this error) of Model 3 price cuts and Model S/X price hike appears fair and factual to me.

 

[Mars ☰mperor]

From CNBC:

"To make purchasing our vehicles even simpler, we are standardizing our global vehicle lineup and streamlining the number of trim packages offered for Model S, Model X and Model 3," Tesla said in a statement.

"We are also adjusting our pricing in order to continue to improve affordability for customers."

Just took some time to check global lineup. And it indeed is mostly the same.
Personally, I like this standardization.


For Model 3, right now only Hong Kong and Macau have 2 versions and lack LR AWD.
And China has the additional inventory LR RWD (and of course Giga 3 SR+)

For S&X (just checked the S, logically Model X should be the same), only Long Range and Performance throughout the world, although Ludicrous is still an extra package in a few markets like Taiwan, Hong Kong and Macau.
Also for HK and Macau, the default exterior color is still black. Not something major.
I think it will be completely uniform across the global in no time.

 

[Chocochip]

The unknown variable in all this is the magnitude of Jerome's production increase.

I support — but at the same time feel put off — by this statement…

 

[Prunesquallor]

It’s Time to Wait for Lower Prices on Tesla Stock
"With comparable vehicles from Ford, General Motors and Nio (NYSE:NIO), Motor Trend is behaving as if Tesla were still the only leading-edge electric vehicle manufacturer around, which is absolutely not the case in 2019."

Final Update: Monthly Plug-In EV Sales Scorecard: June 2019
June US EV Sales Estimates:
Tesla (3+S+X): 25,700
GM (Volt+Bolt+CT6): 1994
Ford (Energi): 675
NIO: 0

 

[Unpilot]

It’s Time to Wait for Lower Prices on Tesla Stock
"With comparable vehicles from Ford, General Motors and Nio (NYSE:NIO), Motor Trend is behaving as if Tesla were still the only leading-edge electric vehicle manufacturer around, which is absolutely not the case in 2019."

Final Update: Monthly Plug-In EV Sales Scorecard: June 2019
June US EV Sales Estimates:
Tesla (3+S+X): 25,700
GM (Volt+Bolt+CT6): 1994
Ford (Energi): 675
NIO: 0

Yeah that one is a real head scratcher.....unless the writer/editor had ...say ..an agenda?

 

[PaulusdB]

I've only seen a brief mention here, but the UK announced a new huge BIK tax incentive for EVs last week which I think has a good chance to take UK to Tesla's number 3 market going forward.

BIK tax rates are paid on company cars because the car is a "benefit in kind" which is essentially a supplement to salary.
This year UK BIK tax rates are at 16% to 37% of the sale price per year - with the the rate based on emissions. This rate is then multiplied by the employee's tax rate (20%, 40% or 50%) - I would guess the majority of company cars go to employees on the 40% tax rate.
So for example a car with CO2 emissions at 100-104g/km would pay 25%, for a 40% tax bracket and £30k car price, would pay 25%*40%*30 = £3k per year, or £9k over a 3 year lease ($11.3k).
From next tax year (April 2020) the EV BIK tax rate will be 0%, then 1% in 2021 and 2% in 2022. So compared to a 100h/km £30k ICE, this is equivalent to a c.$11k EV incentive over 3 years of ownership.
My read of the rules is that the new tax rate will apply to EVs even if they are on the road already today - So the amount of monthly tax will suddenly reduce in April 2020, but it should not cause companies to delay EV purchases today.
The UK also has a £3.5k ($4.4k) EV grant which i assume will also apply to the company cars (can anyone confirm this?) taking the total 3 year incentive to $15.4k.
Also, no BIK tax is paid on electricity charging costs provided by your employer.

The market for BIK company cars in UK is likely 350k-500k per year (compared to a total UK car market of 2,400k). This is similar in size to the entire car market in the Netherlands (450k) and significantly larger than the Norway car market (150k).
This is now a very significant incentive and it seems hard to justify purchasing a ICE car via the BIK system now there are EVs such as Model 3 available. This tax change will likely also encourage people to acquire cars via their companies rather than in person (an untaxed EV is now much better value than a pay rise or bonus) so should act to increase the overall UK company car market.

In addition to this, the UK also provides a grant up to 75% of home chargepoint installation costs, and has just announced all new homes will be required to have an EV chargepoint and that all non-residential buildings undergoing major renovation projects must introduce chargers to 20% of parking spaces.

Considering UK petrol prices are over double the US average, the 2.4 million annual UK car demand is starting to look very well positioned to transition to EVs. The main obstacle is FUD and lack of knowledge of the EV options available and TCOE advantage.

You are right.
The effect of such tax changes cannot be overestimated. See what happened in The Netherlands.

• In 2013 BIK was 0% for five years on new BEV's
• In 2014 BIK was changed to 4% per annum for five years on new BEV's
• In 2019 BIK was changed to 4% per annum for five years on new BEV's, capped to € 50K RSP (above that 22% per annum like ICE cars)
• In 2020 BIK will change to 8% per annum for five years on new BEV's, capped to € 45K RSP (above that 22% per annum like ICE cars)

There has been a steady decline in the BIK initiatives as some feel EV ownership is overstimulated at the expense of the average taxpayer.
Anyhow, this got The Netherlands to its current ranking for regions with high EV uptake, all the way up there with Norway and California. (The UK is about four times the population of The Netherlands, mind you.)

 

[Fact Checking]

Maybe I missed it in the comments, but isn't a large part of the reason for the price drops to offset the tax credit drop off? Tesla stated as much regarding the January price drops:

"Moving beyond the success of Q4, we are taking steps to partially absorb the reduction of the federal EV tax credit (which, as of January 1st, dropped from $7,500 to $3,750). Starting today, we are reducing the price of Model S, Model X and Model 3 vehicles in the U.S. by $2,000."

Tesla Q4 2018 Vehicle Production & Deliveries, Also Announcing $2,000 Price Reduction in US | Tesla, Inc.

Sure, production (and so efficiency) is being ramped to help offset this also. Multiple factors. It's likely and fortunately coincidental that the pace of tax credit drops is keeping pace with the rate of model 3 production efficiency gains.

Note that "price drops" is a false narrative that even TMC bulls have adopted uncritically.

In reality, if we weigh the ASP by take-rate, the following happened yesterday:

• Model S/X effective ASP was hiked significantly, by about +$4,000.
• Model 3 effective ASP was cut by -$900.

The net revenue and cash flow effect of these pricing changes is almost exactly zero if we apply them to Q2 deliveries. There might be some small increase in CoGs due to Perl White being one more layer of paint than Black.

Yes, there were also bundling and Performance pricing reductions performed as well to make the entry Model 3 more desirable and to move people towards more expensive Performance options - but the take-rate of those was pretty low to begin with: never significantly above 10% beyond Q3 I believe.

Obviously the Model 3 entry price drop will probably drive higher volumes - so assuming that S/X sales remain at the ~15k levels, when applied to increased Q3 and Q4 Model 3 deliveries these pricing changes are a net positive to revenue and cash flow.

(Shout-out to @EVNow and @Doggydogworld who have a much more accurate notion of ASPs and take rates than me. Please correct me if this is wrong.)

Edit: S/X price hike was +$4k, not +$5k.

 

[AlexS]

Well, if they reduced prices ahead of earnings report, that should mean that they can reduce prices. So very strong Q2 results confirmed.

 

[elasalle]

No Demand (Q1/Q2) vs. Spurring more Demand (now) ... big difference.

 

[stef]

Well, if they reduced prices ahead of earnings report, that should mean that they can reduce prices. So very strong Q2 results confirmed.

Agreed. The timing is quite possibly matching internal confirmation of the Q2 financials.
If was demand they would have done it at the beginning of the month (and not mention order log increasing as they did in P&D report)

 

[Fact Checking]

Well, if they reduced prices ahead of earnings report, that should mean that they can reduce prices. So very strong Q2 results confirmed.

I think Q2 financial results and Q3 pricing adjustments are mostly decoupled - pricing decisions are primarily driven by:

• the order book (demand),
• production capacity (supply),
• and the cost of production (cost of goods, margins).

And no, Tesla didn't just reduce prices yesterday, they also raised prices: they reduced the entry price of the most popular Model 3s by about $1k and increased the entry price of the Model S/X by about +$5k. The net ASP effect across all sales is approximately zero if deliveries stay at Q2 levels (which they probably won't).

I don't think these pricing adjustments are necessarily indicative of Q2 results, one way or another.

 

[Sudre]

Well, if they reduced prices ahead of earnings report, that should mean that they can reduce prices. So very strong Q2 results confirmed.

I agree. Can you imagine the TSLAQ response if Tesla lowered price then reported a Q2 loss! TSLA would be steamrolled back down under $200 with “They are already losing money on every car but now they lowered the price $2000. They are doomed!”

That kind of tells me Q2 can’t be to bad.

 

[Artful Dodger]

Note that "price drops" is a false narrative that even TMC bulls have adopted uncritically.

Remind me, wasn't there a recent drop in US tariffs due to the cessation of hostilities in the trade war with China? We need to ask how much Tesla's costs went down due to tariffs.

 

[Unpilot]

The "concern" over price changes seems strange to me.

In an extreme example ..IF Tesla could give the cars away they would.
This is fitting to the mission. Get as many non poison emitting cars on the road as possible.

Elon has stated many times the desire to lower cost's and pass those savings on to consumer's.

Only rent seeking and giant face sucking aliens (GS) don't understand this.

For the disagree's..... yes it is a tight rope balance act to get it right. But I trust the folks with the keys.

 

[replicant]

It’s Time to Wait for Lower Prices on Tesla Stock

BLUF: It's FUD. No hard facts to back up claims.

Specifically though it narks on the Motortrend vehicle of the year, and how supposedly that Telsa is by no means the leading edge of EVs.



Ok, which Ford/GM/Nio vehicle are you talking about? The Chevy Bolt that stopped production? The Nio who had a recall on most of the very few vehicles they have produced due to a severe fire hazard? The Ford... uh, does Ford even have an EV out?

Maybe we should stop linking to these shitty/FUD articles altogether, so as to stop giving them "SEO juice".
I'd suggest to break the hyperlink so anyone who want to read it could do so by removing the extra space (e.g "yaho o.com/...")

 

[traxila]

I agree. Can you imagine the TSLAQ response if Tesla lowered price then reported a Q2 loss! TSLA would be steamrolled back down under $200 with “They are already losing money on every car but now they lowered the price $2000. They are doomed!”

That kind of tells me Q2 can’t be to bad.

People here should get used to the fact that there will be a Q2 loss. Wild card here is if FCA or EV credits go big.

As for the TSLAQ response....seriously who GAF?

Tesla looks to be suffering from never ending demand if you ask me.

 

[DurandalAI]

People here should get used to the fact that there will be a Q2 loss. Wild card here is if FCA or EV credits go big.

As for the TSLAQ response....seriously who GAF?

Tesla looks to be suffering from never ending demand if you ask me.

Well, if TSLAQ gets all excited, it likely will raise the price of puts I'm selling to them!

 

[TheTalkingMule]

Lol@cnbc

Apparently one of the two biggest things to watch in all of the global investment world this morning is......Tesla shortcuts!

Embarrassing