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

[schonelucht]

Only $27M of the China loan facility is currently outstanding, up from the also modest $11M previously. Is Tesla mostly self-financing Shanghai development right now or will the big ticket amounts hit later?

 

[Artful Dodger]

Which reminds me: what happened to the story of Tesla being able to claim Maxwell's income but not their expenses? Is there any evidence in Q2 numbers that they did that?

The Maxwell acquistion is in the 10-Q, under Consolidated Statements Cash Flows

Supplemental Non-Cash Investing and Financing Activities:

Equity issued in connection with business combination: $207,222,000​

That section should let you find the info you seek.

Cheers!

 

[SteveG3]

Group, help me out here and see if I've got this right. Did you listen to the earnings call? The analysts all piled onto TSLA because they didn't meet a 20% gross margin target on the vehicles, but TSLA never issued an estimate on gross margin. They did 18.9% gross margin in Q2 (down from 20.6%) in Q2 last year.

Revenue is up 40% from Q1, and their cash flow is looking good at $614MM for Q2. Their gross margin was hurt, as I understand it, in some substantial part, by their inability to recognize some of the revenue/cash from sales, specifically because they are taking in money for EAP/FSD that they haven't delivered, as well as deposits. They can't recognize these amounts under EBITDA until they deliver on the promised features or vehicles. I've commented elsewhere on the timeline for FSD (not sure how it works under accounting rules if you don't deliver within a given period of time), but as long as they stay responsible within those accounting rules for delivery of these things, their gross margins on vehicle sales should be fine and should move towards the 30% that Elon has promised.

Beyond all that, conceptually, it makes no sense to compare Tesla to other car companies because they are breaking so many molds. Consider:

-- No other auto maker could have this mismatch between gross margin on sales and cash taken in, because no other auto maker has produced a car that can roll out a feature electronically using software. So all the drive-by analysts don't pause to listen -- do they HEAR what Elon is saying? -- and just use their old rules of thumb. Honestly, you can see analysts on CNBC saying things that are just laughably false about TSLA.
-- The other auto makers are still stuck in the 20th century mold of selling their cars to dealers, who then have 1000s of depreciating assets on their books, many of which they eventually have to sell at a steep discount or even loss. The auto maker is sitting pretty with full revenue recognition and gross margins that don't vary, but this model is very broken and would be done away with if dealers weren't such a powerful lobby. Because it's STUPID to have so many depreciating assets on anyone's books! Only Tesla is actually subject to the laws of true supply and demand for their vehicles, and demand is GREAT.
-- Tesla's leases give rise to another form of deferred income. The other auto makers sell their vehicles to a leasing company, recognizing full price when sold to the leasing company. Tesla itself leases the vehicles, so they get far less revenue up front and slowly over time, but then they get to pocket the difference between expected value at the end of the lease and FMV, and can sell the vehicle when the lease is up.
-- Due to the ability to enhance a delivered vehicle, Tesla is sitting on a goldmine of possible revenue, through the ability to offer additional paid features. The possibilities are huge, including "free" Supercharging packages paid up front, or entertainment options (there's talk of Netflix deal, where you can watch videos as long as the car is in park).
-- The other auto makers are so far behind the laws that politicians are passing for EVs that some legacy auto makers are PAYING Tesla to use their fleet for fleet-wide emissions limits. Just look at this report, where Chrysler-Fiat is paying Tesla hundreds of millions to allow Chrysler-Fiat to use Tesla's fleet as part of its own for fuel economy standards to avoid fines by regulators: Fiat Chrysler to pay Tesla hundreds of millions for emissions credits. Is ANYONE talking about this on Wall Street? Nope, just on Electrek and the like.

Let me know your thoughts about the above, especially if you are a TSLA investor (or Wall Street analyst)!

Yup. In addition to the fact that most FSD revenue is not yet recognized, consider Zach’s commentary at the opening of the call. I think all his commentary is worth a listen, but, focusing just for for a minute plus from 12:00 minutes into the call, note:


Adjusting for the impact of regulatory credits, automotive gross margins improved materially

He explained that regulatory credits are lumpy quarter to quarter, and, that despite the global Model 3 ASP being down from Q1, continued improvements in cost efficiency were strong enough for an increase to gross profit per Model 3. If I understand Zach correctly (not totally clear I do), S3X gross margins improved when backing out the noise of regulatory credits, and Model 3 gross margins improved even without backing out that noise.


You can also note from that same portion of the call the following Q2 specific events that hit the bottom line,

- $117 million in restructuring expenses

- $104 million sequential reduction in regulatory credits

- $66 million reduction in other income line nearly entirely due to foreign exchange (ie currency rate fluctuations)

Basically about $285 million in headwinds to the EPS figures. Now, there was a tailwind to EPS of the 8,000 or so extra vehicles delivered from prior quarters’ production. We can try to make an estimate of that positive impact (and I think it would be helpful for us to try to figure that, if not already done in the thread), but, overall, looks like EPS included pretty substantial non-recurring hits that are not related to the basic operations of the business.

 

[jerry33]

You've got to be kidding me: cellular phones are basic necessities of most forms of modern life and of being able to get and keep jobs, friends and family, and to stay safe. Just like internet access, cellular phones are close to a basic human right today.

Not only that, but in countries where electricity in the home is only for the wealthy, people still have cellphones and go to the local store every couple of days to charge them. The North Texas Renewable Energy Group's members have created a high quality home solar panel that will run one or two electric lights and charge two cellphones for $90. Of course, many people in these countries can't pony up the $90, so they pay $2 every other day to charge them at the store and have no electric lights at home. The NTREG is working on this. There are also local suppliers for this kind of thing, but the quality is very poor and they don't work for very long.

 

[schonelucht]

Basically about $285 million in headwinds to the EPS figures. Now, there was a tailwind to EPS of the 8,000 or so extra vehicles delivered from prior quarters’ production. We can try to make an estimate of that positive impact (and I think it would be helpful for us to try to figure that, if not already done in the thread), but, overall, looks like EPS included pretty substantial non-recurring hits that are not related to the basic operations of the business.

I would be tempted to take this quarter's automotive gross profit and just do a linear portion of it with respect to the total number of cars delivered. Not perfect, but close enough in error margin that it does not matter anymore : ie, mousenuts territory (I take Elon's threshold here : anything below $25M doesn't really matter on the total)

 

[winfield100]

No, Hyundai Konas are literally exploding.
Hyundai Kona Electric Explodes, Blows Hole In Garage: Cause Unknown

Tesla sales may be figuratively exploding, but given previous media scares, I suggest you don't use the phrase "literally exploding" unless you mean it...

@neroden
i agree, i usually delete almost all my comments here (they are mostly quips anyway with little investing information) prior to the one hour limit and have still seen on at least one instance on Sleeze Kinky Alfalfa (SA) a negative spin

 

[Doggydogworld]

The extremely vast majority of multi-unit housing stock are 30-50 years old. It’s cost-prohibitive for these landlords to provide charging stalls like a ChargePoint pedestal. (Of course it’s easy to install a basic residential charger, but no way to bill electric use to individual users then).

I've lived in 8-10 apartment complexes over the decades, mostly in the '80s and '90s which are now 30-50 years old by definition. Every complex had covered parking (carports and/or garages) available at extra charge. Not all had outlets, but all were wired for lighting. It'd be trivial for landlords to add 240V outlets to these units and charge $30/month extra or whatever to use them.

Only 15-25% of spots are usually covered, but less than 1% of the US fleet are EVs so it's not a near term issue.

 

[winfield100]

The extremely vast majority of multi-unit housing renters in the US do not have a household income to make an EV car purchase feasible—yet.

The extremely vast majority of multi-unit housing stock are 30-50 years old. It’s cost-prohibitive for these landlords to provide charging stalls like a ChargePoint pedestal. (Of course it’s easy to install a basic residential charger, but no way to bill electric use to individual users then). A client of mine contacted ChargePoint previously to ask because his property is in a higher income area and he was curious.... ~$7,500 per charger all-in, meaning charger, meter and panel upgrade, trenching, permits, everything. Of course, it could be cheaper the more you do at once. Then on top of that, it would be at least $3/day if you want ChargePoint to maintain it. Even if the owner’s electricity rate was just a flat $.10/kWh, which is unheard of in CA, the payback period would be unimaginable. This is why even new apartments being built these days don’t all have many chargers, if any.

Might be a little cheaper to install in Midwest states because lower labor rates. But, those places also tend to have cheaper apartments with lower income tenants.

My EV/PHEV charger since 11/30/2013 to 4/13/2018, plus 1 wall socket about 1.2kW/hr, but good enough for me 99.5% of the time. My friend would take his 60S from Washington DC to Rehoboth Beach Delaware years ago and use a similar charging infrastructure, extension cord out the window (he was at the beach, you park and walk around the beach)

 

[ReflexFunds]

“Deferred revenue related to the access to our Supercharger network, internet connectivity, Autopilot and FSD features and over-the-air software updates on automotive sales with and without resale value guarantee amounted to $1.19 billion and $882.8 million as of June 30, 2019 and December 31, 2018, respectively. Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of the balance sheet date. Revenue recognized from the deferred revenue balance as of December 31, 2018 was $113.5 million for the six months ended June 30, 2019 . From the deferred revenue balance as of January 1, 2018, revenue recognized during the six months ended June 30, 2018 was $44.5 million. Of the total deferred revenue on automotive sales with and without resale value guarantees, we expect to recognize $567.0 million of revenue in the next 12 months.”

The last line is interesting.

It looks $76m of the Dec-18 deferred auto revenue balance was booked in Q2 vs $37m in Q1. I think the Q1 number was mostly related to non FSD deferred revenue (superchargers, internet, OTA updates etc), so i'd guess the $40m QoQ growth in Q2 is booked from FSD deferred revenue due to the wider NoA rollout.

The overall deferred auto revenue balance increased $150m QoQ despite the $76m booked from the Dec-18 balance - so likely around $230m gross new deferred auto revenue generated in the quarter.

The 12 month expected revenue recognition balance increased $105m QoQ to $567m.
If we assume $160m annually for non FSD deferred revenue recognition, I guess around $400m deferred FSD revenue is expected to be booked in the next 12 months. This $400m is likely mostly going to be booked in Q3 and Q4 upon Enhanced Summon, Stop light, Traffic Light and City driving autopilot release.

 

[Doggydogworld]

I always presumed Jose Pontes from EV-Sales blog worked on InsideEV's Tesla numbers. He writes for InsideEVs in any case and uses the same numbers in his estimates.

8k Model 3 deliveries in Canada in June just seems too many. That would put Model 3 at 4% of the entire Canada auto market, with Model 3 June month sales roughly equal to Toyota Camry 1H19 YTD sales.
I have no idea really though, so who knows. I saw the anecdotes of 800 per week etc as well, but i assumed that was over exuberance somewhere along the communication chain.

Also, I find this from Autonews highly entertaining. Canada June sales down 9.5% as losing streak hits 16 months. The methodology they use to estimate Tesla June Canada sales at 650 is beyond me. I think the number is made up solely to give Mercedes and BMW some company in their (most likely Tesla driven) luxury sales collapses.

"Luxury automakers didn’t fare well, either. Mercedes-Benz sales were down 19 percent while BMW fell 16 percent.
And Tesla sales were cut in nearly half, down 47 percent to an estimated 650 deliveries."

I think he does use InsideEVs numbers for US. And I think they use his numbers for worldwide. But nobody seems to have good numbers for Canada.

It's actually 7k in Canada, since InsideEVs has 25.7k in the US plus a few in Mexico and Electrek says they came a couple hundred short of 33k. Of course 7k is still a huge spike, but not out of character for Canada. I recall they delivered something like 4-5k in Ontario alone in May or June of 2018 when the 14k incentive was set to expire. They rented out a convention hall for a mass delivery event. MIght have done 1% of the entire nation's monthly vehicle sales at that event!

 

[winfield100]

I've lived in 8-10 apartment complexes over the decades, mostly in the '80s and '90s which are now 30-50 years old by definition. Every complex had covered parking (carports and/or garages) available at extra charge. Not all had outlets, but all were wired for lighting. It'd be trivial for landlords to add 240V outlets to these units and charge $30/month extra or whatever to use them.

Only 15-25% of spots are usually covered, but less than 1% of the US fleet are EVs so it's not a near term issue.

@Doggydogworld
(from 4.5 years commuting with a max 41mile electric range PHEV, plugging into 110v @ work and sharing a plug w/others, so moving midday usually, EV listserv to coordinate and 110v 20 amp at home)
Statistically, how many of them need 240v, 30 - 50amp outlets? (5.7 - 9.6kw)(17-28 miles/hr)(130 - ~200miles per nightly charge)
VS
110v @20 amps ~1.5kw (4-5 miles/hr or 32-50miles/ nightly charge)
these are rough numbers, but considering the vehicles are partially charged and are being somewhat topped up,; they are low level AI's that should "know usual routes and energy needed", they "talk to each other"

 

[j6Lpi429@3j]

My god the TSLAQ shorts are delusional. I don't think its malicious, just a total and utter lack of any intelligence whatsoever. the latest conspiracy is that tesla has SO MUCH MONEY they are bailing out spacex. Surely parody at this point?

hullutimo on Twitter

What cretins are believing this crap?

 

[jerry33]

@Doggydogworld
(from 4.5 years commuting with a max 41mile electric range PHEV, plugging into 110v @ work and sharing a plug w/others, so moving midday usually, EV listserv to coordinate and 110v 20 amp at home)
Statistically, how many of them need 240v, 30 - 50amp outlets? (5.7 - 9.6kw)(17-28 miles/hr)(130 - ~200miles per nightly charge)

Not many, but if you are pulling wires, the cost difference is minimal, so you might as well get the 14-50. And note the 14-50 is much better when you do a full charge for that trip. So for little extra cost, you get a lot of convenience. In an older home, you're likely to have Federal Pacific or Zinsco panels which have safety issues (not tripping on overloads). These should be replaced whether or not you are purchasing an EV, so that can't really be added to the cost of the EV, even though it happens at the same time.

 

[bhtooefr]

Oh, also, reminder: uptick rule isn't in effect any more (that was a thing for Thursday and Friday), so expect the shorts to be back in full force.

 

[Huskyf]

Tanks to Morgan Stanley for the drop !

 

[urarthur]

Tanks to Morgan Stanley for the drop !

ahh yes lowered delivery estimate from 347K to 345K, no not a joke. But hey everyone can run the headline MS lowered estimate on Tesla.

 

[ggies07]

ahh yes lowered delivery estimate from 347K to 345K, no not a joke. But hey everyone can run the headline MS lowered estimate on Tesla.

When the renewable energy transition is complete, will this go down in history as the most manipulated stock?.............

 

[Singuy]

ahh yes lowered delivery estimate from 347K to 345K, no not a joke. But hey everyone can run the headline MS lowered estimate on Tesla.

They lowered deliveries by 0.6%? Who lower and increase "estimates" using statistical errors? So what they factored in how some people might take an extra long poop session or two at the factory and extrapolate that for the rest of the year?

 

[Sudre]

OT life choices, addiction, cellular phones and poverty:
.......prematurely about something you haven't experienced directly...

WOW! You just wasted everyones time explaining more clearly exactly what I was trying to say about how different people spend their money on different priorities depending on position in life, social standing, and happiness.
Thanks.

 

[schonelucht]

Is there any sign of continued Fiat payments in the 10-Q?