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

[Steve m]

Are you being accidentally or willfully retarded? I hadn't scoped you for a troll before

Welcome to /dev/null

 

[AudubonB]

MOD:
Calm down and cut it out, both of you.

In fact, do the rest of the community a favor and take the rest of the night off. And that is NOT advice, it’s the way it is.

 

[Artful Dodger]

I don't expect the ovens to go anywhere, though. As long as they keep needing more 2170s it makes sense to use DBE for new lines and keep the old lines running.

The problem with keeping the old lines is continuing to be able to sell the old product. If the new battery cells are 20% lighter for the same energy capacity, and 20% cheaper per watt hr, who will buy them? Make them available for Pickup or Semi only? Then how much Osborning occurs with potential customers deferring their purchase until they can get the 'state-of-the-art' batteries? We've already seen this in play with Model S/X purchases being delayed pending a mythical switch to 2170s, even when there is NO ACTUAL difference between them and 18650s in terms of energy density or chemistry/life span. Also, Tesla doesn not have the space to build new DBE lines at GF1 w/o removing some of the existing bty cell lines. They may be able to retain a few old lines if they keep the ones intended for storage products, but even then DBE process cells have 2x the life of wet slurry electrode cells, a characteristic which is MOST important for storage products (think 20yrs life rather than 10).

TL;dr Tesla will replace the old Panasonic cell lines as quickly as possible.

 

[Cosmacelf]

Interesting. And the difference between a "marketing genius" and a "snake-oil salesman" is what? From your description, it's a fine line.

As a young child, the first "business" thought or idea I had was to wonder why advertising was necessary. At age 7 I thought if a product was useful and would make your life better, wouldn't someone tell you about it (besides the companies marketing)? I've always thought a good product will sell itself. Fast forward to present: It looks like that is exactly what the Model 3 is doing. As a child I thought the government should outlaw all non-factual marketing, leaving just a basic description of the product and its capabilities. I thought this would make capitalism work better for the people of the world. And I still do.

The problem is who is the arbiter of truth? I wouldn’t trust “The Government” to balance my checkbook, let alone figure out whether or not Chevy’s ads are 100% accurate. How do measure the truthfulness of the statement “The most luxurious vehicle”?

The best arbiter of truth is actually the “market”, ie all us consumers. The fifth estate, ie bloggers and journalists, help with disseminating information, but at the end of the day, it is the aggregate purchasing decisions of us consumers who determine what is true what isn’t.

Advertising, even false advertising, has its place. Tesla is just very unusual in that it gets by with essentially free PR. And yes, it’s products are indeed so good that word of mouth is a huge factor.

 

[Compton]

An EV apparently exploded and damaged a house in a Montreal suburb. Every article I’ve found just states “ An EV exploded causing damage” but nowhere does it states what brand it was. Of course when I checked it up in comments section, it seems to have been a Hyundai Kona EV....

Can you IMAGINE the headlines had this been a Tesla?!?!?! Every article would have it as the headline, never mind repeating it 10 times in the main body. Stuff like this really pisses me off!!!!

Montreal firefighters investigating after electric vehicle blows up in garage

Firefighters investigating after electric car explodes in Île-Bizard garage

Explosion d'un véhicule électrique dans un garage de L'Île-Bizard | Justice et faits divers

Explosion d’une voiture électrique à L’Île-Bizard: deux résidences interdites d’accès

Perhaps it was an e-tron but the journalists were afraid that an explosive turd would confuse the readers.

 

[Bet TSLA]

I've seen some odd buy/sell spikes on Yahoo's chart before, but this one is the best to date

View attachment 434464

Speaking of odd glitches. For a couple of minutes today my E*Trade account showed me down $2.4T. Yes, trillion. I have a long position in TTD, which was up quite substantially today. And there were some very tiny red digits showing my supposed loss. Just for a couple of minutes though, then it reverted to sanity.

I can tell you the potential margin call had me really worried.

And, in a bit of great good fortune, it lasted long enough for me to show my wife.

 

[AudubonB]

I Promise to pay you back Thursday for the 2.4B you lend me today.

 

[Cosmacelf]

Safe bet, If Gordon Johnson ever says anything, he hasn't got a point.

Gordon has never looked at a growth company so he doesn't understand how capex works. And if he did, he would try to misrepresent it anyway.

In the first place D&A relative to capex isn't a meaningful metric for a growth company. Secondly capex for new capacity is very lumpy so quarterly capex does not reflect growth plans. Thirdly capital efficiency is a good thing and the less Tesla spends on capex per unit of new capacity the better. Finally, It looks likely that China is paying to build GF3 external construction, and if this is the case this expansion does not cost Tesla anything.

Capex consists of 1) maintenance capex (annual repairs and continued costs which really are more like opex), 2) replacement capex (once a machine/equipment reaches the end of its useful life, it must be replaced) and 3) growth capex (this is to fund production capacity expansion or efficiency investments to reduce production costs).
The capex type most relevant to depreciation is replacement capex. Depreciation tries to spread the lumpy upfront cash cost of this equipment over its lifetime. If a company has 20 factories built at different times and broadly flat sales for the last 5-10 years, then the overall cash cost of replacing equipment each year should be spread out too and roughly flat each year, and replacement + maintenance capex should roughly equal depreciation (however it is possible the new equipment is significantly more or less capital efficient than that bought 5-10 years ago).

But Tesla's business is not in steady state - the majority of its equipment is new and far from needing replacing. So right now replacement capex is very low (it will pick up in several years time when current equipment needs replacing). So for most businesses, depreciation should roughly equal maintenance + replacement capex to keep roughly flat profits. But right now, Tesla's replacement capex is close to zero, so everything above the maintenance level is for growth. I expect quarterly maintenance capex is likely only $100-150m, so even in Q2 Tesla I expect had $100-150m of growth capex. This is in addition to c.$324m of R&D, which is also largely for growth projects. (Again, at most companies the majority of R&D is for replacement projects for new models to replace retired models and to maintain flat sales, but at Tesla currently R&D is nearly all for growth projects)

What do you mean by China may be paying to build GF3? You mean China owns the building? I thought Tesla got a local loan for the build out.

 

[Cosmacelf]

While at the local service center, I asked about s/x deliveries. The advisor told me that s/x deliveries were actually better than last month. I noticed that they also had an s and an x on display in the showroom area and a person staffing the room. Someone was even taking delivery. Anecdotal, but still good signs, I guess.

When I bought my X two weeks ago in San Diego, same thing. The store sales guy said that they were expecting sales to drop off after June, but that didn’t happen. Sales still strong.

 

[Singer3000]

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.

The emergence of Zack Kirkhorn is in my view the single most positive feature of the past year.

He’s already made Tesla’s financial disclosure more consistent, transparent and timely. He is absolutely nailing the laser focus on working capital efficiency, opex control and efficiency of capex. His contributions on the calls are concise, relevant and point the audience towards the most relevant long term features. And while it’s hard to know who gets the credit, I don’t take it as a coincidence that the long overdue capital raise happened after he took over.

So great to see this sort of talent coming through the ranks. If it’s replicated in the other divisions then we don’t have much to worry about.

 

[Cosmacelf]

The emergence of Zack Kirkhorn is in my view the single most positive feature of the past year.

He’s already made Tesla’s financial disclosure more consistent, transparent and timely. He is absolutely nailing the laser focus on working capital efficiency, opex control and efficiency of capex. His contributions on the calls are concise, relevant and point the audience towards the most relevant long term features. And while it’s hard to know who gets the credit, I don’t take it as a coincidence that the long overdue capital raise happened after he took over.

So great to see this sort of talent coming through the ranks. If it’s replicated in the other divisions then we don’t have much to worry about.

To be fair, Deepak had very fast capital raises too. The only time they messed up a capital raise was when they had the guy that replaced Deepak the first time he tried to retire. That guy messed up the bond offering, making it institutional only (no retail prospectus), and thus giving it an artificially low value in the after markets.

I agree, Kirkhorn does appear impressive.

 

[EVNow]

The emergence of Zack Kirkhorn is in my view the single most positive feature of the past year.

Yes, much better disclosures- for eg., exact number of vehicles under lease accounting, instead of rough %.

 

[StarFoxisDown!]

When I bought my X two weeks ago in San Diego, same thing. The store sales guy said that they were expecting sales to drop off after June, but that didn’t happen. Sales still strong.

Auto sales seasonally pick up in the 2nd half of the year. Summer is usually the start of it......looks pretty positive for S/x in Q3 and Q4

 

[EVNow]

When I bought my X two weeks ago in San Diego, same thing. The store sales guy said that they were expecting sales to drop off after June, but that didn’t happen. Sales still strong.

Lots of Raven orders were not delivered in June and spilled over to July. I wonder what the July order rate is ...

 

[Cosmacelf]

Lots of Raven orders were not delivered in June and spilled over to July. I wonder what the July order rate is ...

You bring up a good point. I wonder how much S and X sales softness in 2Q was due to the anticipated Raven refresh?

I, for one, decided to replace my three and a half year old X with a Raven X. I suspect a lot of people will be doing this in Q3 since the Raven refresh is a significant enough upgrade.

 

[MarcusMaximus]

You bring up a good point. I wonder how much S and X sales softness in 2Q was due to the anticipated Raven refresh?

I, for one, decided to replace my three and a half year old X with a Raven X. I suspect a lot of people will be doing this in Q3 since the Raven refresh is a significant enough upgrade.

I would also imagine people looking at an LR S/X are probably less worried about the $1875 drop in the tax credit, particularly with the drop in price of those S/X specs. Seems to be backed up by consistent extremely low inventory in my area.

 

[Papafox]

The emergence of Zack Kirkhorn is in my view the single most positive feature of the past year.

He’s already made Tesla’s financial disclosure more consistent, transparent and timely. He is absolutely nailing the laser focus on working capital efficiency, opex control and efficiency of capex. His contributions on the calls are concise, relevant and point the audience towards the most relevant long term features. And while it’s hard to know who gets the credit, I don’t take it as a coincidence that the long overdue capital raise happened after he took over.

So great to see this sort of talent coming through the ranks. If it’s replicated in the other divisions then we don’t have much to worry about.

Great observations.

Consider too that Drew Baglino has been an essential (but not in limelight) part of the team for ages. He's now well positioned to take over many of J.B.'s duties. Tesla has a unique culture and I think promoting from within will be the company's best strategy going forward. By the time someone outside of Tesla has acquired the talent to be a top decision maker, they're most often no longer of a disposition to transition into the pressure cooker, working with Elon, and their time at the company is typically short. Additionally, changing strategies on a dime to something unconventional when needed is likely foreign to most non-Tesla types.

 

[Papafox]

Speaking of odd glitches. For a couple of minutes today my E*Trade account showed me down $2.4T. Yes, trillion. ...

Thank goodness I finally found someone who had a worse quarter than me.

 

[CorneliusXX]

Pretty sure that Panasonic owns those ovens. The writedown would be on them.

This is a bit outside my level of accounting knowledge however I believe if the expectation is that Tesla will be the sole purchaser of the goods from the equipment they have to bring the costs on to their balance sheet.

 

[Buckminster]

I keep thinking the following:

1. The more Wall St and the media has this misguided impression that Tesla is failing,
2. The more established automakers believe Tesla is not worth chasing because they'll die,
3. The more they refuse to budge from their existing ICE model,
4. The further ahead Tesla gets from the competition.
5. The higher TSLA goes longer term.

Bad for the future of our world, but ultimately good for my pocketbook. I will then spend those TSLA profits on more Teslas, which is then good for the world. Therefore, it's a win-win. Unless you're an established automaker, in which case you're doomed.

Great logic. This could be a good angle for us. Reply to FUD with this logic - thanking them for their contribution to Tesla's long term success. That'll spook em!