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

[StealthP3D]

Correct. Tesla mentioned this a few time when discussing the increasing losses in service& others. Apparently used car sales runs about break even. But that info is from a few quarters ago. I’d need to look it up to be sure. I would certainly welcome a break down of service revenue into service & other versus used car sales.

My wifes relatives own a busy Volvo dealership. The used car buyer for the dealership (who is no fan of EV's if you know what I mean) told me at Christmas that that the vehicles Tesla sells at auction have developed a reputation as being the ones you want to buy. Very well maintained and cared for. These are the cars Tesla takes as trade-ins, probably mostly on Model 3 sales. I can see how buyers of Teslas might be trading in better than average examples since buying a Tesla is all the excuse you need to upgrade. In contrast, those buying another gas car might be doing it because there is something wrong with their current car. I would assume the revenue Tesla gets from used car auctions might have risen with the reputation they've developed as having the best used cars in the industry. He buys all the used cars for his dealership which is a lot because they sell a lot more used cars than new ones. And it's very profitable because they get top-dollar for used cars.

This is another potential tailwind for Tesla in Q2 (but probably doeesn't amount to much other than a good indicator that they are probably not doing worse than before in terms of liquidating trade-in cars and may be doing a bit better).

 

[pyromatter]

 

[Mars ☰mperor]

This freaking news has been on CNBC for more than 3 days, still front and center Tesla news.

They say it's updated, yet I don't see no updated sugar whatsoever.
They just want it to be the first thing normal people see about Tesla.

So obvious, so blatant misinformation campaign.


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Regarding the official Tesla FUD-fighting thing that is mentioned in the annual shareholder meeting over a month ago, I think Tesla is not moving fast enough.

I know Elon is busy saving the world. But this should not be overlooked.

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I have two people in mind who can help draft the damn FUD-fighting info page.

Tim Urban, the author of Wait But Why, has enough knowledge about Tesla and has written extensively about Tesla and Elon

How Tesla Will Change The World — Wait But Why

The Elon Musk Post Series — Wait But Why



And Matthew Inman, aka the Oatmeal, also has a great comics post about the Model S

What it's like to own a Tesla

Just get someone to do it!
The combination of these 2 guys would be great!
I'm sure they will do it spectacularly!
We can crowd fund to support them. I feel these guys may even want to just do it for Tesla and Elon.

The FUD campaign has been too long.
Whenever someone spread misinformation in the future, we'll just post the link and tell them to read the f***ing article.

Talk about FUD damage, the freaking "short-cut" news by CNBC Lora Kolodny was picked up by major Chinese national media as well, not to mention other media.

On weibo, a video by CCTV (China Central Television) about this has been watched 3.22 million times, how many people only read the words but did not watch the video?
This is only one weibo account, how many other accounts re-tweeted this?
How many people watched it on TV?

 

[Stars aligned]

I’m no accountant, but something strikes me as not right with Gali’s HyperChange Q2 preview. Hopefully somebody with better understanding can clarify.

In Q1, the bottom line was bad. Cars were made (costly), transported, and not delivered (sold). So you lose big time on those cars(?).

In Q2, that should reverse. Those cars are delivered, but not made, so there should be a windfall on those cars.

I can’t see where Gali has taken this into account. He’s just taken total cars delivered and assigned a margin of 18 percent across the board.

Or is inventory factored in somewhere as standard practice?

You are likely right.

Inventory in finished goods was 2.15 bn, compared to 1.58 bn in Q4. Finished goods are mostly cars in transit to customers and inventory cars. Also, there were write downs of 80m, which I think are mostly related to pre Raven S and X. So in relation to cars inventory, the net loss was increased by 2.15-1.58+0.08=0.65bn.

If they manage to deliver almost all cars in Q2 (and we know the inventory end of Q2 has been exceptionally low), then this will have the reverse effect. Let's assume the inventory end of Q2 is 1.3bn. Then the result will increase due to this by 0.85bn.

The same is valid for work in progress and raw materials inventory.This was in Q1 also higher as in Q4, probably because Tesla was handicapped as they couldn't get enough cells. Let's say that makes another 0.15bn. In this case the reverse effect would be 1.0 bn for the overall inventory.

Also interesting is the effect of the inventory write down. If we assume there were 4k pre-Raven S and X in inventory and 60m of write down went into this inventory, than the new relevant price for Tesla is COGS - write down, say 80k - (60m/4k) = 65k. If they sell this pre-Raven inventory for ASP of 80k, the within-the-quarter margin is 23%.

Edit: OTOH, this effect is already factored in when calculating revenues from the full 95k cars delivered in Q1.

 

[ReflexFunds]

I'm not sure how reliable the quotes are, but there is press in China that Elon has told his China team that Tesla's future global HQ and future CEO should be Chinese. He also noted the future CEO should have an engineering background.

马斯克：未来特斯拉CEO应该来自中国 - Tesla 特斯拉电动汽车 - cnBeta.COM

 

[elasalle]

I'm not sure how reliable the quotes are, but there is press in China that Elon has told his China team that Tesla's future global HQ and future CEO should be Chinese. He also noted the future CEO should have an engineering background.

马斯克：未来特斯拉CEO应该来自中国 - Tesla 特斯拉电动汽车 - cnBeta.COM

When EM gave speech at GF opening in Shanghai, he did say one day one of you from China might be CEO of Tesla ...

 

[ReflexFunds]

Warranty work does not affect Service revenue, COGS or margins. Automotive sales COGS include an estimate of warranty costs. They add this amount to a warranty reserve account. When they perform warranty work on a car they charge the expense against that reserve. It does not show up as an expense during the quarter they do the work.

If the amount of warranty work trends higher or lower than the estimates over time they will change the estimate they accrue at the time of sale. This will affect Cost of Automotive Sales. It doesn't affect Service revenue or Service COGS.

The vast majority of Tesla's Service Revenue and COGS are used car sales. They have negative margins because they aren't very good at selling used cars. They may also lose money on non-warranty work, including "goodwill" repairs. Some bears believe they improperly charge work that should go against warranty reserves to general Services COGS in an effort to keep warranty accruals low and boost Auto Sales gross margins. I've seen no evidence of this. The size of the losses is a concern, though.

I think there are a few reasons for the large gross profit losses in Services & Other. I assume the used car business is the majority of revenues, but close to breakeven - maybe slight losses when Tesla prioritises working capital efficiency (quicker car sales) over profit/breakeven.
My guess is most of the losses are in the Service business though, I think for several key reasons:

• Significant costs for loaner cars, partly because they are expensive Teslas, partly due to some of the service delays from service hell/lack of spare parts etc. Tesla can start to address this with quicker service including bringing body shops in-house and better spare parts logistics.
• Significant transport costs. The distance between Tesla and customers is high on average. Tesla can address this with increased work through the Tesla mobile service. They can also reduce the average distance as they open more service shops.
• Low capacity utilisation in some service shops. This means sometimes staff and equipment is idle. Of course, some service centers are also massively overworked. It gets much easier to balance utilisation rates as the fleet gets bigger so this should become a smaller issue over time.
• Use of "goodwill" repairs. I don't think Tesla does anything against the rules here, but some work is allocated to goodwill and so not covered by the warranty reserve. This will be work not strictly covered by the warranty but where Tesla still approves free repair work - in a way this could be thought of as a marketing expense - better word of mouth customer advertising if customers are kept happy. Possibly some of this work would be disputed in court by the customer if it wasn't offered for free - so goodwill/warranty is always a somewhat blurry line. Tesla continuously increases the reliability/quality of new cars so as a larger % of Tesla's fleet becomes newer cars, this expense should reduce. Tesla may also become less generous with some goodwill repairs.

Hopefully Tesla can make progress on both improving the quality of service and reducing the cost of service this year. For the most part these two do actually go together so Tesla is highly incentivised to work on this.

 

[Prunesquallor]

I'm not sure how reliable the quotes are, but there is press in China that Elon has told his China team that Tesla's future global HQ and future CEO should be Chinese. He also noted the future CEO should have an engineering background.

马斯克：未来特斯拉CEO应该来自中国 - Tesla 特斯拉电动汽车 - cnBeta.COM

If the U.S. continues to treat Tesla like crap with Wall Street stock manipulation, repressive state dealership laws, deceptive press, etc. I could totally see Musk pulling up stakes and moving to whatever location is most conducive to the mission.

 

[tschmidty]

82% dual motor!! Providing an upgrade path towards the P3 by lowering prices has worked brilliantly. Most people end up buying $5k of frivolous options once they make the big decision - Elon pushes them up a whole "engine size". Gross Margin could rocket well above 20% in Q3 but still affected by loss of revenue / profit from the SR S/X.

Performance is not just a software upgrade like many people think, it does involve some different hardware.

 

[Fact Checking]

Performance is not just a software upgrade like many people think, it does involve some different hardware.

Performance models also come with more a valuable warranty, should any of the components fail with a higher probability at the higher power/performance levels.

So even if it was the same HW (it isn't), the warranty alone makes it more than just a software option.

 

[mongo]

Performance is not just a software upgrade like many people think, it does involve some different hardware.

P+ (now the only P) has brake and other upgrades. Some AWDs have P- capable motors. For those, it was just a SW option change.

 

[printf42]

I was looking at questions asked on say.com.
Sad to see again a few trick questions that were designed to spin negative headlines.

But one question seems to be missing:

• Have TSLA considered to dual list or even move to LTSE or somewhere similar to fight the short incentivized smear campaign?

Seems people are starting to forget such an option exists, I feel even if Tesla only say they’re looking at the options would be enough to move the needle a little bit.

Btw: There is a recode/decode podcast featuring the LTSE founder recently. I actually didn’t know this guy is the author of “lean startup”, sounds like a legit guy to me, at least he knows a thing or two about growth companies.

 

[defc0n]

Something something Potemkin village

 

[Beltsbear]

Performance is not just a software upgrade like many people think, it does involve some different hardware.

We really don’t know. There may be a different inverter, but there’s not much evidence of that in the parts catalog.

 

[Thekiwi]

I was looking at questions asked on say.com.
Sad to see again a few trick questions that were designed to spin negative headlines.

But one question seems to be missing:

• Have TSLA considered to dual list or even move to LTSE or somewhere similar to fight the short incentivized smear campaign?

Seems people are starting to forget such an option exists, I feel even if Tesla only say they’re looking at the options would be enough to move the needle a little bit.

Btw: There is a recode/decode podcast featuring the LTSE founder recently. I actually didn’t know this guy is the author of “lean startup”, sounds like a legit guy to me, at least he knows a thing or two about growth companies.

I don’t think it’s really worth the effort now. Tesla only has 4 or 5 more quarters to get through before the Y is in volume production, after which point quarterly unit volume and ASP will be generating consistent and large GAAP profits. After that the European GF, pickup, Semi & solar roof will ensure steady growth for another half decade (at which point Tesla has crossed the million vehicles shipped annually mark and can consider more vehicle variants).

My point being Is that within short order all but the stupidest Short traders and most gullible journalists will have realised Tesla is sitting in a very healthy financial position, and the sea of FUD will dry up fast to essentially nothing. Instead the debate will become about exactly how big the profits will be.

I’ve only been investing in stocks for about 20 years, but over that time I’ve seen the same pattern of extreme FUD and eventual dissipation hit several successful high growth companies in a similar fashion as to what Tesla is experiencing. Amazon, Apple & Facebook all essentially went through similar fazes: lots of bearish doom predictions based on similar FUD:

- “the company is structurally unprofitable”
- “the competition is coming and will eventually kill it”
- “the customers are all idiots caught up in marketing hype”
- “The CEO/founder is a fraud”

Eventually of course all the FUD is revealed as stupidity, and the companies mature into massively profitable enterprises. (the FUD for Tesla is slightly louder as social media is more prominent today, and Musk is way more famous)

Have patience, all will be resolved, and sooner rather than later. There are other, better short opportunities of highly likely ACTUAL structurally unprofitable companies that have been listed over the last year or two that will no doubt soon become the new targets of shorts. (I’m not a short seller, but if I was I imagine I would be all over a certain ride haIling company and a certain music streaming company.)

 

[EVNow]

Tesla only has 4 or 5 more quarters to get through before the Y is in volume production, after which point quarterly unit volume and ASP will be generating consistent and large GAAP profits.

If they just have double the Model 3 deliveries in Q4 '20 (i.e. Y volume + 3 Volume = 2 * M3 Volume Q2 '19) then they will have some $400M gaap profit. Even if we assume a 20% increase in SG&A, it is still $300M gaap profit.

BTW, since they will start with higher priced Y options in the beginning, again, we'll probably see big changes in profit as Y volume ramps up. Tesla should either make lower priced Ys from beginning or guide properly.

 

[dc_h]

Good weekend off track Elon interview

CBSN

 

[Navin]

Anyone in media understand how much Russ makes as a special guest writer on something like the below? Does he get paid directly or does he have to share with his employer - LA Times. No question he is anti-Tesla - just trying to follow the money to understand the incentives and how things play out behind the scenes.

 

[Thumper]

CBS Sunday Morning just ran a segment on Space X and Elon that was %100 positive.

 

[Artful Dodger]

There is a recode/decode podcast featuring the LTSE founder recently. I actually didn’t know this guy is the author of “lean startup”, sounds like a legit guy to me, at least he knows a thing or two about growth companies.

LTSE CEO Eric Ries | Full interview | ReCode 2019 (32:10)