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

[ReflexFunds]

Elon might also have disclosed the name of their new project:

Elon Musk:

"I think you probably need to study or reset like Master Plan for our Powerplant 3, but it's really like yes to some degree, but Battery Day will be kind of national --, which is like okay, how do we get from kind of – any-tens of gigawatt hours per year to multiple terawatt hours per year."​

Is this a transcription error, or did Elon just name it "Powerplant 3"?

​

The line wasn't so clear, but I think Elon just mumbled something like Master plan part part part 3

 

[SageBrush]

So the question is whether Musk's strong Twitter presence precludes the need for advertising.

As if advertising is a vehicle for information dissemination

 

[Right_Said_Fred]

I was flabbergasted when some people yesterday evening started talking about a disappointing, bad call. I actually think it was the most positive ever (even beating the exuberance of Q3 2018):

#1 - I saw a strong team:

- Elon (though nervous in the beginning, probably because of the JB announcement coming up): he clearly knows where he is going to take Tesla, which is world domination in multiple sectors.
- Drew: long experience at Tesla, will have no trouble replacing JB (who can still be consulted if necessary)
- Zach: very knowledgeable, gives me a better feeling than Deepak.

#2 - Realistic expectations, also by Elon. He has indicated that Q3 will probably be break even and warned that Q1 and maybe also Q2 will be tough. So expectations for those three quarters are not pumped up and can be a positive surprise. No guidance was given for production and delivery numbers in Q3 and Q4, so there is no clear mark that can be missed (I expect both to show record deliveries though).

#3 - Expectations of positive cash flow from now on, but no bold claims about profitabilty (again a chance to positively surprise). And a very healthy $5 billion in the bank, likely growing in Q3. Bye bye bankrupcy talk.

#4 - Strong cost control on the production side, will will likely show up in much better Q3 margins (Q2 was still hurt by pre-Raven rabates and lower regulatory credits).

#5 - A sneak preview into the future, where Masterplan Part Three will likely dwarf the two older masterplans. It could lead to Tesla world domination in anything energy and transport related.

#6 - Not much talk and hyperbole about FSD. Let it speak for itself when it comes out. And if for any reason it does not materialize or gets delayed, there is always #5.

 

[DurandalAI]

Rest assured I’ve been writing tests the last week that is taking longer than developing the actual new features

That's pretty standard that testing takes longer than dev, when you include unit, regression, and UAT.
I guess my point is while I see regression testing a lot in the enterprise world, in the mobile phone app world (and seemingly with Tesla) they don't do enough testing, except through the screamer test method.

 

[Fact Checking]

Once Tesla Taxi is up and running, they probably will stop making the S&X or at least one of them, and only do the 3 and Y.

No, stop, just stop.

Elon's points about S/X were wildly taken out of context. Here is original, full context:

Elon: "The demand for -- sales demand for 3 is like on the order of three quarters of a million units a year, and it's probably 1.25 million per year for Model [Y], so they combined is like maybe two million from those two vehicles, and then S/X is like there may be 80,000 to 100,000 a year. So it's like 4% or 5% of the volume in 3 and Y. And then you could throw like a truck in there, pickup truck and a semi, but it just gets smaller and smaller. So they are great products, but they’re -- from a volume standpoint, they're not all that important in the long-term."​

He clearly prefaced it with a "from a volume standpoint" - but having those products is very important to continue to be seen as a luxury/premium car maker - just like the Audi A8, BMW 7-series or the Mercedes S-Class are important that they won't stop making anytime soon, despite low unit counts.

Elon also clearly said that he sees long-term demand for the Model S/X at 80k-100k a year. He lumped the Pickup Truck and even the Semi in there as lower unit count products.

Do you really think Tesla is going to discontinue the model that was awarded the "Car of the Year" of the last 70 years in one of the most prestigious car magazines in the U.S.? Discontinue the safest SUV on the planet?

 

[Antares Nebula]

JB leaving has really shaken my confidence in this company. Also, I think Tesla made a big mistake by not updating the S. Even a mild exterior refresh would have rekindled S demand. What a waste.

I would like to know more about the reason JB left. It appears amicable and not a confidence issue. Nonetheless, he is still pretty young, and so not retiring. So why leave? New company (we know he's starting some kind of project there with recycling), philanthropy, etc.?

 

[j6Lpi429@3j]

TBH 16 years at ANY company is a long time. hands up everyone who has been in their current job 16 years.

 

[Remus]

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.

If you followed Microsoft closely from 2012 to 2016 .....
No you wouldn't, somewhere in the middle you would have concluded that this company has no vision and no strategy to make cloud work. They have cancelled loads of projects that they promised to take them to the next level. Windows is a hot mess. After sinking loads of money, Bing was still a niche and losing shares. and nobody is using azure. It had been years of empty promise of a cloud future, but azure is still losing money, they have no strategy against AWS.

As I said, lots of disappointed longs.

But the shorts won't be happy either, with the record cash and positive FCF.

Looks like the way to profitability is far more difficult than Elon painted. I am disappointed too. But they built themselves a super long runway, and slowly making progress. As far as I can tell no one else is even close. Just look at Apple's project Titan.

 

[DurandalAI]

TBH 16 years at ANY company is a long time. hands up everyone who has been in their current job 16 years.

In my field, anything longer than 5 years is a miracle unless you've hit the top of your career. (IT & ITSec)

 

[jerry33]

TBH 16 years at ANY company is a long time. hands up everyone who has been in their current job 16 years.

Twenty years for me before they paid me to leave. (IT, just FYI)

 

[Singuy]

I was flabbergasted when some people yesterday evening started talking about a disappointing, bad call. I actually think it was the most positive ever (even beating the exuberance of Q3 2018):

#1 - I saw a strong team:

- Elon (though nervous in the beginning, probably because of the JB announcement coming up): he clearly knows where he is going to take Tesla, which is world domination in multiple sectors.
- Drew: long experience at Tesla, will have no trouble replacing JB (who can still be consulted if necessary)
- Zach: very knowledgeable, gives me a better feeling than Deepak.

#2 - Realistic expectations, also by Elon. He has indicated that Q3 will probably be break even and warned that Q1 and maybe also Q2 will be tough. So expectations for those three quarters are not pumped up and can be a positive surprise. No guidance was given for production and delivery numbers in Q3 and Q4, so there is no clear mark that can be missed (I expect both to show record deliveries though).

#3 - Expectations of positive cash flow from now on, but no bold claims about profitabilty (again a chance to positively surprise). And a very healthy $5 billion in the bank, likely growing in Q3. Bye bye bankrupcy talk.

#4 - Strong cost control on the production side, will will likely show up in much better Q3 margins (Q2 was still hurt by pre-Raven rabates and lower regulatory credits).

#5 - A sneak preview into the future, where Masterplan Part Three will likely dwarf the two older masterplans. It could lead to Tesla world domination in anything energy and transport related.

#6 - Not much talk and hyperbole about FSD. Let it speak for itself when it comes out. And if for any reason it does not materialize or gets delayed, there is always #5.

As for #2, I think people here need to understand that q1 will be a money bleeding quarter that may lead into q2. Musk said CF(-) for any new product launch. There will be two new product launches, the Y and the 3 Shanghai. Do treat the 3 at Shanghai as a new product launch because any product that needs to go through the S curve is a product launch. Tesla will be building a fat piggy bank before q1 2020 to weather the storm. It will be a quarter of huge loses and he has warned us. Q3 of 2020 is the expected time line for Y realized revenue plus 3's top of the S curve which may break even, while q4 will be amazing.

 

[wnorris]

JB leaving has really shaken my confidence in this company. Also, I think Tesla made a big mistake by not updating the S. Even a mild exterior refresh would have rekindled S demand. What a waste.

Most would prefer JB to not have left, but it will not have a material impact on the company at this point. He is still affiliated and his 'visibility' within the company had tapered off over the last year. From a battery standpoint, it certainly sounds like his leaving timing is strategic as Tesla is fairly well situated for the next 3 to 5 years. The battery investor day presentation should provide more color on this.

People need to be careful with the wording used by Elon and Tesla on how they update their vehicles. Elon has emphasized that they are continually updating their vehicles in a rolling style vice model year. The S/X will eventually get an interior/exterior refresh, but it will likely be piecemeal and slowly occur over an extended time frame.

I do agree that a more modern interior would likely go a long way to stimulate demand. I would have to think that Elon is exploring this as a way to get S/X numbers back to where they previously were.

 

[Hock1]

I feel like this was terribly mistimed. Nobody should expect a 50-100% YoY growth for Q32019.

50% growth YoY in Q32019 is 125,250 cars delivered, or just a tick under the magical 10k cars/wk. Of course, I'll be extremely happy if Tesla hits that, but I think the chances of that are very low.

Unless I missed something, I am quite sure EM was referring to annual growth, not quarterly (yoy).

 

[Fact Checking]

I would like to know more about the reason JB left. It appears amicable and not a confidence issue. Nonetheless, he is still pretty young, and so not retiring. So why leave? New company (we know he's starting some kind of project there with recycling), philanthropy, etc.?

Best-case scenario for Tesla investors is that JB left due to what Fred's article suggested: coming in less and less to work, potentially burned out - he needs to take a timeout, rest and lose a bit of weight.

Worst-case scenario is that he's going to a Tesla competitor but is required to take a cool-down period of a couple of months until he has bleeding edge Tesla proprietary knowledge. This variant appears less likely if he continues as a Tesla advisor: he'd continue to be privy to private Tesla plans and any cool-down timeout would reset every time he learned about new business plans.

We might know for sure in a couple of months I suspect.

 

[Antares Nebula]

Best-case scenario for Tesla investors is that JB left due to what Fred's article suggested: coming in less and less to work, potentially burned out - he needs to take a timeout, rest and lose a bit of weight.

Worst-case scenario is that he's going to a Tesla competitor but is required to take a cool-down period of a couple of months until he has bleeding edge Tesla proprietary knowledge. This variant appears less likely if he continues as a Tesla advisor: he'd continue to be privy to private Tesla plans and any cool-down timeout would reset every time he learned about new business plans.

We might know for sure in a couple of months I suspect.

You don't think that he's quitting so that he can spend more time with his recycling project? That (or full time philanthropy) would be the best case scenario, IMO.

 

[DurandalAI]

Best-case scenario for Tesla investors is that JB left due to what Fred's article suggested: coming in less and less to work, potentially burned out - he needs to take a timeout, rest and lose a bit of weight.

Worst-case scenario is that he's going to a Tesla competitor but is required to take a cool-down period of a couple of months until he has bleeding edge Tesla proprietary knowledge. This variant appears less likely if he continues as a Tesla advisor: he'd continue to be privy to private Tesla plans and any cool-down timeout would reset every time he learned about new business plans.

We might know for sure in a couple of months I suspect.

I believe that JB is likely too emotionally invested in Tesla to go to a competitor. I think he's probably just burned out and wants to do his own thing. He'll still be on payroll and as long as he is, subject to an NDA. Plus, he likely has a huge amount of stock, going to a competitor would be disadvantageous from this perspective as well.

 

[Fact Checking]

You don't think that he's quitting so that he can spend more time with his recycling project? That would be the best case scenario, IMO.

It's part of the first scenario I outlined: a good way to take a timeout is to spend time with a pet project that is probably not going to be the next Amazon or Tesla but is fun, low-stress and you consider it important. Such as a battery recycling startup.

 

[wnorris]

It's part of the first scenario I outlined: a good way to take a timeout is to spend time with a pet project that is probably not going to be the next Amazon or Tesla but is fun and you consider it important. Such as battery recycling.

I would not be surprised to see Tesla eventually acquire JB's battery recycling start-up or heavily utilize / license their technology. JB likely bleeds Tesla and will be tightly intertwined with them for the foreseeable future.

 

[AlexS]

Interesting if ARK will add today or sell

 

[MP3Mike]

BTW., for all the Fred bashing, let's give credit where credit is due - he noticed something few here on TMC appear to have commented on so far, that there are previously undisclosed low-res images in the Q2 update letter about Tesla's Shanghai progress and the manufacturing lines in particular:

That isn't fair I noticed them immediately and figured everyone else would as well. (They were too low res to make a big deal about.) Elon even directly mentioned them on the conference call.