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

[Buckminster]

But the rumours were true. JB barely shows up to work.

40 hours per week is barely showing up at Tesla....

How is no one discussing Tesla's 2TWh battery cell manufacturing plan?

This is so much more significant than anything else in the report or the call. A cell supply plan of this scale is enough to solve global warming.

2TWH is really, really insane. Tesla have to have made some massive breakthroughs in cell design and manufacturing in their R&D lab.

I highly doubt Tesla is aiming to sell 30-40 million cars alone. Most likely they aim for huge volumes of stationary storage and to open up their battery and powertrain platform to all takers.

Not sure that anyone else could produce this volume. Also, why would people buy a Tesla with different bodywork and no Tesla s/w? Elon will take no prisoners - in a Robotaxi world, variety in car form factor is no longer an advantage - more of a hindrance.

*I suspect he scores nearly perfect on his SATs and GREs, or whatever the European equivalent is

Multiple guess is for 11 year olds here... I will show myself out.

My point is that I never spoke to anyone on the phone once, and yet so far I’m very satisfied with the service I’ve received.

This. I would never think to call Apple. You reserve a specific type of service reservation and turn up. Phone calls are positively disliked by millennials. Photos of a collision can be loaded up also.
Elon mentioned that the most popular request is how to turn AP on - the website/app could link to a video.


Regarding high percentage of LR sales - are they still limited by not enough batteries?

Big news for me was the GF3 robots - looking "hooked up" in all meanings of the phrase!

 

[Carl Raymond]

Sure, it’s a cherry picked stat, trailing twelve month free cash flow, but it really does paint the truth by smoothing over the seasonal lumpiness.

Gali’s Hyperchange on YouTube makes some good points.

Seems nobody yet has their head around a terawatt hour... If cell production goes x100, by what factor does TSLA multiply? I’ll settle for a third of that growth. x33 puts TSLA at $8250 per share.

 

[kengchang]

The story has materially changed. In H2 2018, Tesla appeared to be in a fantastic position, but not anymore. We have gone from "profit every quarter" to posting a $1.1B GAAP loss in H1 2019 in less than 9 months.
To be honest, every other CEO would have been fired after such a miss. Obviously, Elon should not be fired, but it's hard to ignore the reality.
Now we're looking at "break even" in Q3, but I have my doubts.
Terawatt is just the buzzword of this ER, just like autonomy and the alien dreadhnought.
I expect a stronger second half of course, but with H1 2020 looking "tough", even according to Elon, I see no reason to be long TSLA here.

Have you seen the earning of Ford and Daimler?

 

[Leo9]

Have you seen the earning of Ford and Daimler?

Ford trades at 0.2x P/S with a 6% dividend. No reason to be long Ford either by the way.
TSLA has been repriced from "profitable growth" to "growth, with losses and lower margins". Unfortunately I do not expect this new story to change anytime soon.

 

[CorneliusXX]

TSLA no longer needs to raise money for expansion. That's pretty big

That's for now. If he wants to scale to TWh battery production he'll have to go back to market quite a few times to get more cash.

 

[CorneliusXX]

IMO that's good news: they made 15k S/X units with half the previous assembly workforce. The Q2 margins are mostly dictated by the pre-Raven inventory flush - Q3 Raven margins should be significantly higher.

This also suggests they could scale to ~30k/quarter ~120k/year S/X production in the future.

Elon said on the call that SX is demand limited. We aren't going to see expanding margins and volumes until demand increases.

 

[MarcusMaximus]

Ford trades at 0.2x P/S with a 6% dividend. No reason to be long Ford either by the way.
TSLA has been repriced from "profitable growth" to "growth, with losses and lower margins". Unfortunately I do not expect this new story to change anytime soon.

meh. Margins are coming back up and cash flow improved $1.2bn QoQ. Higher(almost complete) Raven mix vs old inventory clearing Q2 should improve margins and GAAP profits further. From where I’m sitting, the past looks bad, present looks OK and future is looking rosy.

 

[Leo9]

meh. Margins are coming back up and cash flow improved $1.2bn QoQ. Higher(almost complete) Raven mix vs old inventory clearing Q2 should improve margins and GAAP profits further. From where I’m sitting, the past looks bad, present looks OK and future is looking rosy.

Q1 was a disaster, that's hardly a fair comparison. Look at Q3 and Q4 of last year and the picture is not as rosy despite even higher deliveries. Expectations have come down a lot, and the share price followed.

 

[StealthP3D]

Elon said on the call that SX is demand limited. We aren't going to see expanding margins and volumes until demand increases.

We won't see expanding margins on S&X unless S&X demand increases. Which Musk thought they could figure out and fix it. But he made it clear that S&X are shrinking in importance as Model 3 continues to ramp up towards 8,400/week and they believe the cost efficiencies would continue to improve. Model 3 and the upcoming Model Y is where the expanding margins and volume are.

So, no, that's not really what they said.

 

[CorneliusXX]

GF4 (Europe) probably operational in 2021.

I can almost guarantee this timeline will be missed. No way they can navigate EU regs and get a new factory up to speed when they won't even announce a location until next year. Not too much of an issue though, plenty of growth to be had from Fremont and GF3 in the interim.

 

[Antares Nebula]

Elon said on the call that SX is demand limited. We aren't going to see expanding margins and volumes until demand increases.

Duh! And it will be as long as SX is inferior or not that much superior in some important areas to 3. Down vote me all you want, but its a fact. Yes, I recognize the other superior aspects (more room, range, etc.) and the recent Raven upgrades (better suspension, range, acceleration, etc.). But battery, even though larger range, is technologically inferior. Need to do V3 SC max speed, like Model 3. This is not debatable at all and is the most important. Many people not buying because of this, and any prospective customers who asks my advice, I cannot in all sincerity say otherwise.

As far as interior or exterior cosmetic changes, this is a debatable point. Some people say that the design is long in the tooth; others say they love it and don't wanna change. The only thing I'll add is that maybe clean up the interior a little bit, making it more simple and modern like the Model 3. I don't know. Don't have a strong opinion here.

Other important tech. Maybe put the center screen in landscape mode (like the 3). Would also make UI design easier across all platforms. Then, I would get rid of the second small screen behind the steering wheel and instead put in a nice HUD (heads up display). Hell, even the Honda Accord has a HUD now. This would be a good differentiating feature vs Model 3.

So basically, make the motor and battery tech equivalent or better to Model 3. Clean up the interior; maybe add a few more luxury amenities. Landscape center screen and driver side HUD.

Now you have a car that is in every way superior or at least equal to Model 3. A true flagship. I guarantee you that demand (and therefore sales) will go back up.

I do believe that, contrary to Musk's recent twitter pronouncements, Tesla is working on some kind of refresh here. These are high margin products and Tesla would be foolish leaving money on the table as they are doing now by not doing the appropriate upgrades.

 

[Fact Checking]

Elon said on the call that SX is demand limited. We aren't going to see expanding margins and volumes until demand increases.

The two are not necessarily mutually exclusive: every single comparable luxury car model that is selling in similar numbers, be it the 7-series or the S-class, is demand limited - yet they are sold with good margins.

The reason Q1-Q2 S/X margins were poor were primarily price cuts and discounts to move pre-Raven inventory, combined with worse fixed cost absorption due to lower unit counts and Q1 sales were further hit by the tax cliff in the U.S. (@EVNow might be able to confirm - his financial model performed very well in Q2.)

But a significant part of those is a one time factor until pre-Raven inventory is sold (which it is now):

• Fixed S/X costs will drop gradually as 15-20-quarter (4-5 year) depreciation schedules of S/X production lines start running out. The rest of S/X fixed costs should be optimized via high utilization of the single shift.
• In Q3 Tesla increased Raven prices:
  • by removing the Standard Range option,
  • by having no pre-Raven units left which were sold at a discount,
  • and by removing the free Supercharging perk on inventory vehicles.
• There's also the question of what effect the irresponsible leaks and speculation about an impending "interior refresh" by Elektrec over the last year has caused on demand. For a Tesla shareholder Fred Lambert is incredibly naive about the effect his leaks are having on demand: Tesla customers will take a Tesla leak in one of the EV magazines far more seriously than leaks in any of the Tesla hostile mainstream media publications. His frequent whining about price drops also fuels buyer's remorse about buying the most satisfying car in the U.S. ...
• Some S/X demand levers might also be pulled in Q3:
  • an upgrade from 200 kW to v3 250 kW charging speeds of the 100 kWh Raven pack might be in order,
  • In Q3 or Q4 the first HW3 based FSD features will be released, which will further pull up S/X margins as well, as EAP did gradually over the last ~3 years.

If Raven sales stabilize at around 1.5k/week (20k units per quarter) there's no reason S/X margins couldn't increase back up into the 25% range, even if 20k/quarter is the ceiling. (Which I don't think it is, Tesla still has low market penetration in a number of key markets.)

In my opinion in Q3 or Q4 S/X will be back to generating about ~$500m of cash per quarter.

 

[CorneliusXX]

Having attended the shareholder's meeting, I instantly realized JB was leaving when he and Drew were brought onstage by Elon. It was obvious, and it was my first thought.

Hearing Elon joke about S and X spelling SEXY just now on the call and hearing him say S/X in the same breath are not that important in the long term is really shocking. Makes me think their days are numbered.

They'll stay, it's just that when the company is moving towards mass production the niche products will never really move the needle. If BMW canned their 8 series their balance sheet wouldn't really change.

 

[LordAstinus]

Commentary on earnings from Adam Jonas:

Key negative:

Substantial miss on gross margin ex-reg credits 17.2% vs. Cons of 20.6% and MSe 20.0%.

Key positive:

Stronger than expected FCF number of $614mm vs. Cons of $143mm and MSe of ($30mm) – this is due to lower CAPEX (lowered FY guide as well).

TSLA also reiterated their full year delivery outlook of 360-400k units, but bears will say that matters less given the lack of profitability. Achieving the low end of the FY unit volume guidance may make it difficult for Tesla to increase revenue sequentially... which begs the question of how auto gross margin can improve materially on flattish sequential revenues.

Keep lowering costs.

 

[Antares Nebula]

• There's also the question of what effect the irresponsible leaks and speculation about an impending "interior refresh" by Elektrec has caused on demand. For a Tesla shareholder Fred Lambert is incredibly naive about the effect his leaks are having on demand: Tesla customers will take a Tesla leak in one of the EV magazines far more seriously than leaks in any of the Tesla hostile mainstream media publications. His frequent whining about price drops also fuels buyer's remorse about buying the most satisfying car in the U.S. ...
• Some S/X demand levers might also be pulled in Q3: an upgrade from 200 kW to v3 250 kW charging speeds of the 100 kWh Raven pack might be in order.

If Raven sales stabilize at around 1.5k/week (20k units per quarter) there's no reason S/X margins couldn't increase back up into the 25% range, even if 20k/quarter is the ceiling. (Which I don't think it is, Tesla still has low market penetration in a number of key markets.)

I'm not a fan of Electrek or Fred, but I would be careful about laying blame at his feet. Many others on Twitter and Youtube were making similar speculations. Moreover, any reasonably intelligent customer would expect nothing less of a flagship model. The blame, IMO, clearly lies with Tesla. It was a major unforced error on their part not to have S,X technologically equivalent or better to Model 3 by Q1. (See my post above.) They're taking steps to fix that now with Raven and then hopefully a V3 max speed capable battery (as you note above). Better late than never.

@Fact Checking, I like your posts and comments, but you're going to lose credibility if you always blame others and never allow Tesla or Musk to be at fault. They are not perfect. No one is. Still, I remain one of Tesla's biggest fans and will strongly defend them against any and all critics.

 

[CorneliusXX]

How is no one discussing Tesla's 2TWh battery cell manufacturing plan?

This is so much more significant than anything else in the report or the call. A cell supply plan of this scale is enough to solve global warming.

2TWH is really, really insane. Tesla have to have made some massive breakthroughs in cell design and manufacturing in their R&D lab.

I highly doubt Tesla is aiming to sell 30-40 million cars alone. Most likely they aim for huge volumes of stationary storage and to open up their battery and powertrain platform to all takers.

I think the issue is that no one will really accept the goal until they see a credible plan and the tech to make it happen. It's just so far from what is happening today.

That doesn't mean it won't happen but when the claim is so big it needs substantial justification.

 

[RobStark]

Not so sure. At least near me, I’m seeing Raven S’s flying off the shelves. From over a hundred a couple weeks ago to 19 two days ago to 0 right now. Not seeing any indicator of slowing S demand.

Sales numbers say different.

Elon's comments imply differently. Is perplexed as to why sales are falling; what percentage due to cannibalization and what percentage to delay in ordering arising from false hope for an imminent refresh. Then deflects by saying Gen II vehicles not very important. This quarters numbers would look different if they moved 25k Gen II vehicles and ~12k Model S. They don't see enough demand to warrant a 2nd shift on the production line. It used to be sustainable demand for Gen II was 100k per year but now is looking like 60k per year.

 

[RobStark]

Not sure that anyone else could produce this volume. Also, why would people buy a Tesla with different bodywork and no Tesla s/w? Elon will take no prisoners - in a Robotaxi world, variety in car form factor is no longer an advantage - more of a hindrance.

Because some prefer traditional interior.

Because some people prefer traditional exterior.

Because some people prefer to have service done within 20 miles of their residence.

Because some people prefer their own private car to cheaper robotaxi.

Because some trust/value and are loyal to a brand other than Tesla.

 

[Fact Checking]

@Fact Checking, I like your posts and comments, but you're going to lose credibility if you always blame others and never allow Tesla or Musk to be at fault.

Sorry, but what are you talking about?

I did blame Tesla and call out several strategic and tactical mistakes over the time. A quick search gives these examples:

• "Blade Runner" pickup truck is probably a mistake by Elon:

And yes, it's probably the first major mistake Elon made in a long time.

• The Q1 tax credit cliff and Raven refresh was handled poorly by Tesla:

There's one major PR mistake Tesla made in Q1: knowing that the S/X refresh would not be ready in time and knowing their Q1 U.S. order book

• Service communications failures are a big mistake (blame is on Elon):

Put differently: a 84% reliability score of the "bare minimum expected levels of customer service" doesn't even have a single nine in it ...

And I also outlined that I expect Tesla to make all new mistakes again and again:

While I expect Tesla to make all new mistakes

But:

I'm not a fan of Electrek or Fred, but I would be careful about laying blame at his feet. Many others on Twitter and Youtube were making similar speculations.

Elektrec is the most popular EV news source, and of the 3-4 main news sources that Tesla fans read and find credible, Elektrec is by far the most irresponsible one to publish leaks, speculate freely and whine about pricing changes.

This is a simple fact, and I didn't "blame" Fred solely or even primarily, this was a single item in a long list of factors ...

Moreover, any reasonably intelligent customer would expect nothing less of a flagship model.

And Raven is basically there now technologically - but Fred still kept depicting a major interior refresh as imminent...

The blame, IMO, clearly lies with Tesla. It was a major unforced error on their part not to have S,X technologically equivalent or better to Model 3 by Q1. (See my post above.)

Agreed, see my post above.

They're taking steps to fix that now with Raven and then hopefully a V3 max speed capable battery (as you note above). Better late than never.

Actually, pure speculation: the current 100 kWh Raven battery packs might already be v3 250 kW charging capable.

Tesla might have sandbagged this to move pre-Raven inventory, and might enable it OTA in September or December, for the Q3 or Q4 push - depending on the size of the Raven backlog.

(Or not - this is speculation only.)

 

[RobStark]

They'll stay, it's just that when the company is moving towards mass production the niche products will never really move the needle. If BMW canned their 8 series their balance sheet wouldn't really change.

BMW has an almost identical 6 Series Grand Coupe and a 7 Series formal sedan.

BMW sells 17 lines in the USA. Of course if they deleted 1 of their lower volume lines it wouldn't change much.

They have more lines specific to Europe and others specific to China.

Model S and Model X is much more important to Tesla than 8 Series to BMW.