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

[Dan Detweiler]

External Combustion Engine.

Wait, you mean other cars have fires besides Teslas? I thought Teslas were the car that you were going to die by fire in...hmmm, who knew?

Dan

 

[Fact Checking]

Hyundai will have to learn to actually earn a profit on its EVs.

https://premium.goauto.com.au/low-margin-huge-potential-for-ioniq-hyundai/

This is IMO the primary reason why ICE makers have been fighting EVs for the last ~20 years:

• it's an entirely new market for them,
• with a one-way, irreversible conversion of customers from ICE to EVs,
• which EV market is not just entirely new to them, but they cannot enter it without disrupting their very long lead time investment cycle of their ICE markets.

I.e. while ICE OEMs are experienced in mass manufacturing ICE cars, they are otherwise at a big, systemic, structural disadvantage to enter the EV market, due to the cannibalization link.

I know that I'm preaching to the choir here , but this is worth repeating as more evidence of this process arises.

The 2018 China numbers are brutal:

• ICE sales fell -14% YoY
• EV sales grew to +7% of the market
• I.e. ~7% former ICE customers are deferring new car purchases.

This gives way beyond tariff war uncertainties.

I.e. this is first real-world evidence of my thesis that EV supply can take away about 200% of the corresponding ICE demand. This will both expand the EV market and suck the capital supply of ICE carmakers much faster than a simple 1:1 shift of markets would.

(Shout out to @ReflexFunds, @brian45011 and @neroden.)

 

[Dan Detweiler]

Taycan confirmed to have 90kWh pack, 22kW AC charger, no hitch, optional heat pump.

Fred Alert.

350kW would be a nearly 4C charge rate if that's 90kWh-actual rather than 90kWh-usable. Fry those cells... (The cells have been previously stated to be 270Wh/kg, so they're using an energy-dense chemistry (like Tesla), not a power-dense one.) That is, if you can actually find a place to charge at 350kW (most of the stations Ionity is building aren't actually 350kW; they're designed to be upgraded to 350kW at a later date).

I'd love to use the now-known pack size to estimate efficiency, but we don't know whether the "400km/250mi range" A) will hold in reality, B) whether that's NEDC or WLTP, and C) whether that's 90kWh actual or usable. If it's 90kWh-usable, and it does hold (for some cycle), that'd be 225Wh/km / 360Wh/mi. Even for EPA-combined that'd be a real guzzler, let alone WLTP, let alone NEDC. I had thought that Taycan was going to be the first mainstream automaker's EV built with an understanding of the importance of efficiency. But apparently, nope...

(Unless usable capacity is way less than 90kWh)

Add to the above the already-known $92,5k entry price, 600hp, and a 0-100kph of 3,5s.

Well...aren't you the little doubting Thomasina this morning.
Somebody pee in corn flakes? LOL!

Dan

 

[KarenRei]

This is IMO the primary reason why ICE makers have been fighting EVs for the last ~20 years: it's an entirely new market for them, with a one-way, irreversible conversion of customers from ICE to EVs, which EV market is not just entirely new to them, but they cannot enter it without disrupting their very long lead time investment cycle of their ICE markets.

It's the (very obvious) reason why they keep refusing to make them in massive numbers or push them heavily. Raise their prices by a Tesla-style 20% margin. E.g. Ioniq for $36378, Kona for $43740, etc. And we're talking US-spec here, which doesn't even have any sort of pack heating. It ruins the notion that they're "lower end" price bracket vehicles vs. a larger, much nicer, longer range, faster charging, better network, much faster, better spec'ed Model 3.

 

[KarenRei]

Well...aren't you the little doubting Thomasina this morning.
Somebody pee in corn flakes? LOL!

Dan

I don't get this response. My post was a simple reporting of facts, followed by basic math, and only minimum analysis.

 

[Pezpunk]

seems like the Taycan is not a great family sedan like the Model S -- doesn't have the range, efficiency, storage space, and costs a lot more for a comparable spec. what it will have on the Model S is 1) the Porsche moniker (which lends legitimacy and prestige to certain people) and 2) probably a lot better track performance for anything other than a straight line (the Model S will still be quicker on the drag strip). People who typically buy Porsches will buy this, love it to smithereens, and go to work preaching to their petrol head friends how revolutionary and immensely better EVs are than gas cars.

 

[schonelucht]

First Model 3 testrides are happening in the Netherlands.

 

[NicoV]

I.e. 7% former ICE customers are deferring new car purchases.

Well that’s assuming that it is normal for the Chinese market to have no growth. The real percentage is probably A LOT higher as more chinese can afford a car year after year.

 

[Fact Checking]

UPDATE 3-Hyundai Motor suffers first net loss in 8 years as China sales skid | NEWSTAGE

BTW., another detail:

'Firm’s China vehicle sales slide 23 pct in Q4"​

This is way beyond the fall of the China ICE market of -14% - and Hyundai China sales are not affected by U.S. tariffs.

It is suggesting that during the EV conversion the demand of premium ICE cars (Hyundai is in higher ICE price segments in China) is falling even faster.

Possible driver: those who are still buying ICE cars know that ICE cars are obsolete, and are buying cheaper, temporary ICE cars when forced to.

"Premium/luxury price category, largely obsolete ICE car" is apparently a big turn-off to Chinese customers.

 

[Navin]

Note that ICE sales are collapsing in China largely unrelated to the trade war, while the EV market is exploding in size, due to the Chinese government aggressively supporting the EV market to improve air quality, and to reduce China's dependence on oil:

New Car Sales In China Fell 5.8% In 2018 | CleanTechnica

China Amazes With 180,000 Plug-In Electric Car Sales In December​

Note that even the CleanTechnica article about 2018 has not highlighted that ICE sales are literally collapsing: if we take out EV sales from all car sale then in November ICE sales collapsed -14% year-over-year, while EV sales grew 59% year-over-year, taking over 7% of all new car sales:

China Has Record Electric Car Sales Month, BYD Tang #1 — #CleanTechnica Report | CleanTechnica
6.3% Plug-In Vehicle Market Share In China! — #CleanTechnica Electric Car Sales Report | CleanTechnica​

It's absolutely brutal, and ICE makers simply cannot convert their production facilities this fast, without running into losses.

Over 7% of all new cars are EVs, ICE sales down -14%. I.e. there's about -7% of market loss to EVs, while another -7% market loss to car purchasers who are deferring their car purchase.

Great commentary. How do you reconcile the recent comments Elon made to Chinese media about growth being challenged thru 2019 with these general growth stats EVs in general are having. The two don’t seem to reconcile - would love to hear your thoughts. Could Tesla be having some challenges in China selling MR/performance m3 and model s & x this year??

 

[shlokavica22]

In short: secondhand diesel become unsellable, with prices falling 11% last year, causing diesel lease prices to go up 2 to 4% compared to last year due to lower resell value at the end of lease. Even export to other countries becomes difficult as those countries also start to have cities with diesel bans.

It's not only diesel. I follow the leasing terms for Lexus (Petrol hybrid) and the residual value went down significantly. Interestingly (but not surprisingly), they keep the total price unchanged, meaning that the manufacturer's/dealer's cut is now lower.

 

[Fact Checking]

Well that’s assuming that it is normal for the Chinese market to have no growth. The real percentage is probably A LOT higher as more chinese can afford a car year after year.

Yes, although the trade war is affecting growth negatively in China, so assuming 0% growth baseline is a conservative approach.

 

[HG Wells]

OT but pre open

Trump ally Roger Stone was arrested on Friday morning and charged with one count of obstruction of justice, five counts of false statements, and one count of witness tampering.

Now (since the raid was pre dawn) the questions are.

Pull Passport ?
Flight risk ?

Who's next ?

Stocks go UP or DOWN ?

 

[shlokavica22]

General media hasn't bought into EVs. They still think they are - expensive & not practical. They think of it as niche. These are generally non-auto journalists.

It's much simpler than that- he who pays the piper calls the tune.
When the media starts plauding TSLA, you will know that it's too late investing in it.

 

[jbcarioca]

... At this point, S and X buyers aren't early adopters. Few were asking questions in November, or October (I check intermittently). We're well into the "not signing up for an internet forum" demographic, making it harder to extrapolate. :-(

I certainly do think we're seeing a serious dip in S/X demand in the US due to th $7500 tax credit expiration, and possibly more permanent dips due to macro issues or Osbourning. I just don't want to over-read into the information...
.

It seems to me obvious that the underlying S and X platform is now more than a decade old. We are all well aware that significant parts of S & X were derived directly from the Daimler-Benz parts bin, including suppliers. Of course many components have nothing to do with that, including FWD and the entire basis for OTA, software/firmware. Still, teh pure manufacturing bits including, maybe, ~50% of manufacturing content, derives from taht era. Almost as a certainty, a good portion of those components are no longer in wide new manufacturing so supliers such as Bosch, etc are unlikely to do S & X parts sourcing on highly attractive terms. Beyond those, a quick look at any Model 3 shows just how far the manufacturing design has come since the early days.

I am confident that we can ignore the 2017-era, Musk/Straubel 'no immediate redesign planned' comments. Franz von Holzhausen and company are exceedingly clever and competent. They can quite easily scale the Model 3 innovations and more in new Models S and X while greatly reducing marginal costs to manufacture. I'd happily bet large sums that they've already done most of that.

A friend and former colleague who was a manufacturing executive for a major Asian vehicle producer tells me that the total parts count of the typical [their brand] 2017 new model was about 80% of the count for 2007 new models. That is pure unattributable anecdote, but I believe him. After all I had a P85D and now have a P3D and the reduced complexity and increased robustness of the new one is transparently obvious. By coincidence I recently experienced a 2005-era pristine VW Golf and a day later a new 2018 version. The change was as obvious as was the S vs 3 comparison.

So, skipping endless anecdotes, but thinking about the VAG platforms, Peter Hochholdinger comes to mind who learned his craft at Audi and knows platform technologies in a manufacturing context exceedingly well. Regardless of his current role, Tesla has certainly learned a lot for him. By extension, what conceivable logic would there be to NOT reengineer S and X now, when nobody expects it, when doing so would decrease maginal costs, improve quality and reduce servicing demands?

I think we're assuming that a S and X redesign would increase complexity and capex. I think that is incorrect. In the VAG context, for example, nobody rational would think that Bugatti/Lamborghini/VW Fox share parts, but they do, including engine parts. Were they not doing that the small volume high value vehicles would be impossible as contributors. OK, Bentley still does not make money. Think about platform logic, the specific analogy of Tesla 'battery/motor/controller technology' with VAG 'engine technology'. Then tell me how Tesla will face gigantic cost for capex without disproportionate production cost reductions. Then think about parts sourcing costs when ~50% of vehicle costs will be shared among all models.

Obviously this is a purely logical process with no numbers inferred. If we had a few hundred thousand dollars to spend on it the expected savings could be pretty well documented. My friend's company did that in the late 1990's and the benefits continue today. This is NOT Deming, although that works for pure production efficiencies. This is about finding discontinuities, and spreading discontinuous innovation through Deming-like processes once the discontinuity has been proven.

!. Tesla will work assiduously to render each existing model obsolete as quickly as they can prove the replacement will be better in every way.
2. They'll refine an existing one as long as they cannot prove the first premise.
3. S and X are now in the first category.
4. Model Y, Semi, Roadster are all on schedule probably, benefitting by reuse of Model 3 innovations.

Is that not more or less the sequence we're all debating?

 

[Fact Checking]

Great commentary. How do you reconcile the recent comments Elon made to Chinese media about growth being challenged thru 2019 with these general growth stats EVs in general are having. The two don’t seem to reconcile - would love to hear your thoughts. Could Tesla be having some challenges in China selling MR/performance m3 and model s & x this year??

I think Elon is referring to a couple of headwinds in 2019:

• Tariffs will go back to 40% on March 1, trade agreement is not certain yet.
• If trade war is ongoing then China might grow even slower - which could hurt Tesla sales too,
• First Model 3's (and maybe Y's) are going to roll off the lines in Shanghai at the end of this year - those will be the first Teslas that can be sold with 0% tariffs and can take advantage of the full EV incentives Chinese EV buyers enjoy.

Most of these worries should go away if there's a trade agreement between the U.S. and China.

 

[shlokavica22]

And right now he's probably fuming because Tesla finally had a good drop, but he had less capital to short with to amplify it His leverage against the stock is down.

It also doesn't help that GM is one of their major holdings. It's double yummy.

 

[shlokavica22]

Perhaps I'm wrong, but I'm feeling a bit green today.

Yesterday showed an upslope in the absence of news; opportunistic buying seems to have become a more powerful force than fear selling.

Absent bad news, and on neutral or positive macros, I have a suspicion that we might see the same thing again - perhaps even amplified. But time will tell.

Of course, if it goes on long enough, people trying to cash out on a "not ridiculously low" SP before the ER might become a factor.

ER is very close now. Not much time left to jump on the train.
I'm actually glad this drop happened. It allowed to many of us to add to our call positions on the cheap and we are now going into the ER when the market has low expectations.

 

[printf42]

How big a deal is no lunar new year holiday in China? Is this something that is skipped for something moderately important or only high priority projects?

As I said before, Luna new year, aka spring festival is a big deal for Chinese, even more so for laborers. It’s like Christmas which is the only time people would all go back hometown.
Very few projects would keep running through it.

 

[secondstage]

First Model 3 testrides are happening in the Netherlands.

Cool. Netherland has the same amount of Model 3 orders as Switzerland but more than the double of people live their.
So there should be plenty of more orders possible.
Also what is with UAE? I think Tela should start making the right hand model 3 in the first half year of 2019, so the awd+performance mix will be still high.