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

[X Fan]

If you want to find people having terrible customer service and long wait times for their Tesla troubles, there are a dime a dozen on youtube. TFL make weekly episode about how Tesla's service sucks and ridiculous. You also find it over reddit too, and 20% of the conference call was about service. So I don't know what kind of secret problem you stumbled upon that no one else knows about.

FWIW: in the social media age coupled with profile of Tesla buyer & the amount of delivered vehicles in play, it’s inevitable that there will be postings of “bad” service.

My experience in working with both the Charlotte, NC and Naples/Ft Lauderdale mobile/center service units has been extremely positive. I’ve never had a bad call!

However, my key concern is that the communication link to the service center is now too kludgy and I don’t think Elon/his team fully recognize the customer base’s frustration with the new process.

btw: This frustration will ultimately impact share price.

Btw2: I hope Elon is not playing to Wall St. by slowing down Capex and moving out delivery dates for upcoming products. They now have sufficient cash & I’d prefer product development to be accelerated and money appropriated to both vehicles and Self-driving application.

 

[fmonera]

Professionals needs to shake out weak holders before really driving the price up. Otherwise, weak holders will sell during the up move and force the professionals to buy weak sells at unfavorable prices. It is much better for them to drive the price down (or take advance of sharp movements) until most of the weak holders has left selling low trying to save some money.

Have your exit strategy decided before buying, and then stick to your plan. Whether this exit strategy is good or not, depends on your understanding of the market. But when trading decissions are influenced by your feelings, that will always be a bad move.

 

[mrdoubleb]

One thing that just occurred to me looking at the ER, that I am not sure I`ve seen discussed.

Q2 2018 Tesla sold ~40k cars and SG&A was 750 million.

Q2 2019 Tesla sold ~95k cars and SG&A was 647 million.

That is remarkable.

 

[Chunky Jr.]

Tesla to become the Standard Oil of the EV revolution.

IMHO, I think a better analogy is that Tesla will be the Intel/Windows of the EV revolution. It's pretty clear that other automakers are having a really hard time matching Tesla's range and performance numbers. It wouldn't surprise me if other automakers decided to buy/license the Tesla "skateboard" and differentiate via interior and exterior design, along with the console/dash software. Just like computer companies stopped making their own CPU and OS, traditional auto manufacturers will stop making their own battery packs, drive trains, and corresponding software and focus more on what the end user will see.

Basically I see the EV as a rolling consumer gadget, so it makes sense to me that the model becomes more like a PC or smartphone, and less like a traditional car.

On top of that, if it does go this route, Tesla can also collect a fee from supercharging, and in that sense it is a bit like Standard Oil too

 

[dww12]

So someone please explain to someone who doesn’t know anything about corporate finance how it works with losses and cash flow. From what I understand they lost 408 million. Ok. But how can they have 600 million more in the piggy bank now than they did last quarter? And if so why care about losses?

Not an owner (but an EV driver) Huge tesla fan.

Thank you.

Just a guess, but say you buy an investment property, the depreciation on that can make it look like you are losing money, but in fact the property may be worth more and you have the income from it in the bank. Cash is what you need to pay the bills, your earnings loss is just on paper.

 

[Cirrus MS100D]

Was Tesla Insurance covered on call?
Why is Insurance taking so long, doesn't need any manufacturing, GF's, no lead time.
Should have announced only after idea is full baked.

+ Makes me wonder if insurance and AP/FSD features are tied in some way though ...

Crickets and nobody asked?

Wasn’t it only “some software” and “small acquisition” and “1 month” away?

 

[X Fan]

I think I know what question he would have asked:

JB Straubel gives up CTO role. In our view, this may be the biggest news of the quarter. Investors may question what motivated the 15-year Tesla vet to give up direct operational responsibility at this time. Unfortunately, nobody asked this on the call.

And his second thought:

Despite Elon Musk’s comments about how the S and X will mathematically account for a smaller and smaller percentage of global unit volume, we still believe the S and X are important revenue generators and do anticipate significant refreshment (especially for the X) of the hardware/design of these products in coming years.

Head scratcher to me... why would Model X need a refresher? It’s such a unique car, way way ahead of anything you can buy today.

+1. As Rob Stark mentioned a few pages ago, Model X is fine (still light years ahead of the competition) but Model S needs a refresh (370 miles aside).

 

[jerry33]

So someone please explain to someone who doesn’t know anything about corporate finance how it works with losses and cash flow. From what I understand they lost 408 million. Ok. But how can they have 600 million more in the piggy bank now than they did last quarter? And if so why care about losses?

It's the difference between GAAP accounting and real life. GAAP accounting specifies what constitutes expense and income, so a certain amount of GAAP expense and income is paper shuffling only, not actual cash paid out of pocket. GAAP works best for mature companies, it's typically awful for growth companies.

 

[Webeevdrivers]

Just a guess, but say you buy an investment property, the depreciation on that can make it look like you are losing money, but in fact the property may be worth more and you have the income from it in the bank. Cash is what you need to pay the bills, your earnings loss is just on paper.

Now you are talking my language. So are they just depreciating assets like buildings and equipment? And if so, can they just not continue on indefinitely like this? I mean how can someone say a company with 5 billion bucks in the bank...and growing...is going to be bankrupt in a year?

 

[Webeevdrivers]

It's the difference between GAAP accounting and real life. GAAP accounting specifies what constitutes expense and income, so a certain amount of GAAP expense and income is paper shuffling only, not actual cash paid out of pocket. GAAP works best for mature companies, it's typically awful for growth companies.

What is GAAP. Appreciate the patience.

 

[jerry33]

What is GAAP. Appreciate the patience.

Generally Accepted Accounting Principles.

 

[Singuy]

So someone please explain to someone who doesn’t know anything about corporate finance how it works with losses and cash flow. From what I understand they lost 408 million. Ok. But how can they have 600 million more in the piggy bank now than they did last quarter? And if so why care about losses?

Not an owner (but an EV driver) Huge tesla fan.

Thank you.

From my understanding is that all the robots, building and machines were paid for from the piggy bank(or borrowed money) a long time ago but their "cost" were not counted at the time of payment but "depreciated" over time. So they no longer need to buy robots from the piggy bank but still need to account for the depreciation on the books over quarters because it was not counted as a business expenses instantly at the time of purchase. So the loss is just paper accounting...but currently all the positive money they make goes to the piggy bank.

 

[FreqFlyer]

A thought regarding interior S/X refresh:

The entire modern history of cars is one of buying a new car to get the latest styling, and color, and fancy new dashboard, and new style steering wheel...yada yada. But we are no longer in that world.
We are now in a world where a car is an old fashioned human-driven car, or an AP1 car, or an AP2 car or soon a FSD car.
In other words, what makes a car *NEW* is no longer the style, but the technological capability.

I have a 2015 model S (arachnid wheels being fitted AS I SPEAK!), and I love it. A new-look interior would not prompt me to upgrade. the things that make me nervously hover over the 'buy button' are FSD capabilities and longer range. THAT is what will get S/X owners to upgrade.
Think about it: You can lose $20,000 in the trade-in for your S/X for a new model. Do you want...
option a) New interior
option b) True FSD, faster charging, 33% longer range, more responsive and capable MCU.

I know which option I'd pay the money for.

16 million car sales in the US alone disagrees with that notion. If what you state is true, then why the "excitement" over a S and X refresh? I tell you why, the millennial you speak of have a shorter attention span of two seconds and are waiting for the next "new".

 

[Webeevdrivers]

Generally Accepted Accounting Principles.

Thank you.

 

[Chickenlittle]

+1. As Rob Stark mentioned a few pages ago, Model X is fine (still light years ahead of the competition) but Model S needs a refresh (370 miles aside).

So you want to spend more on model S refresh to capture additional 30,000 car sales a year versus pursuing 750,000 model 3 sales and 1.5 million model Y sales a year. Perhaps they should freeze China factory until model S refresh done?

 

[Boomer19]

reaching ~28GWh from ~23.5 in just a qtr is a nice diamond in rough

finally something going right on that front after qtrs of disappointment.

the cost of energy/storage is roughly same YoY and QoQ but the revenue is down YoY slightly, up ~12% since Q1

but storage deployed has doubled YoY and nearly doubled since Q1

then why no extra revenue from it?? i figured an increase in revenue from energy storage that would put us close to 7b in total rev rather than the ~6.4b #

i know i’m only talking about roughly 5-7% increase in total revenue,
but looking for help as to why i was wrong about this

 

[doddiozil]

It's the difference between GAAP accounting and real life. GAAP accounting specifies what constitutes expense and income, so a certain amount of GAAP expense and income is paper shuffling only, not actual cash paid out of pocket. GAAP works best for mature companies, it's typically awful for growth companies.

Don't agree with that. What is the alternative? Cash basis accounting? Then Tesla would have to expense all capital improvements immediately causing far worse net loss each quarter while growing. Can you imagine expensing every dollar they are putting into the gigafactory in china right now? Billions of dollars in net loss would be the result

 

[FreqFlyer]

+1. As Rob Stark mentioned a few pages ago, Model X is fine (still light years ahead of the competition) but Model S needs a refresh (370 miles aside).

The X is an expensive car to build too. I wander how much lower the cost to build the X be if it shared a stretched 3 platform, same for the S.

EM is right, when the Pickup Truck debuts, it will no doubt be a high margin vehicle (just like trucks are for the D3) and the importance of the S and X to the bottom line will diminish. Possible there is not a 2nd gen S or X in the next master plan, the S and X have done their job. And who knows what CUV/SUV product the Tesla Pickup Truck will spawn. Another high margin vehicle that is much cheaper to build than the present X.

 

[Chunky Jr.]

Bull:

• generates lots of cash
• make products people love
• leader in battery technology (about to get even bigger lead with Maxwell)
• leader in charging technology and infrastructure
• leader in self driving tach and data collection
• vertical integration leads to higher margins and better consumer experience
• energy storage a rapidly growing market with potential to be enormous
• EVs are the future, and Tesla by far the leader in this market

Bear:

• FUD

 

[StealthP3D]

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.

You are twisting around what Musk said and that's the last thing we need here.

While he did say "cash flow positive" except at new product launches, he was not including the Model 3 in Shanghai as a "new product". Because it's not a new product.

You can bet Musk will put his nose to the grindstone and apply everything learned from the initial production of the Model 3 to Shanghai. The initial launch of the Model 3 was a very slow ramp because they were too ambitious about how it was going to be built and automated. I think it's clear that the forecast Shanghai production numbers, being lower than Freemont, are not implying anything but a mirroring of how they build them in Freemont. Labor is less expensive and the workers follow instructions better and are more dedicated to company goals. I think the production ramp will more closely resemble the building of GF3 than the initial Model 3 production ramp. It's a very different thing to launch a new product, with new everything, then it is to make exactly the same product, with the same parts and tolerances, in a different location.

As to building a "fat piggy bank before Q1 2020 to weather the storm", well, that's being overly dramatic because Tesla has more cash on hand right now than any time in their history. And it's growing. And the Model 3 in Shanghai will be additive to their cash position in Q2 as they start flooding China with Model 3's.

But you are pretty good at twisting Musks comments to paint the bleakest possible picture.