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

[KarenRei]

This question should really not be on the list.

There is nothing meaningful for Tesla to comment on with respect to the convertible bonds. The "payment plan" of 50/50 cash/stock is no longer under Tesla's control. Tesla was required to notify the bondholders on December 1st of their intended settlement method (cash, shares, or combination), which only applies if the bondholders elect to exercise their option. If they don't exercise (extremely likely at this point), then 100% of the debt principal will be repaid in cash. Full prospectus here.

Many of those questions shouldn't be asked. This whole project is a bad idea.

 

[Singuy]

Not for investors.

Tesla misses out on profit every time someone buys a Model 3 who otherwise would have bought a Model S.

Not true, since the production and sold numbers for the Model 3 is almost 10 to 1, and the Model 3's margin is not that much worst than a Model S, it's much better for investors for Tesla to sell Model 3s.

 

[anthonyj]

Uh. Elon already said they are changing 75D 100D etc to Standard range, Long range, and Performance like the Model 3. Chill out with the theories that Tesla is removing the standard range S/X, and even if they did it would be for a VERY good reason.

 

[trils0n]

Not for investors.

Tesla misses out on profit every time someone buys a Model 3 who otherwise would have bought a Model S.

Was obviously talking about the customer's perspective. No need to quote me out of context.

And even then, I dont think you would always be correct. A fully loaded P3D probably has better profit and margin than a similarly priced base S75.

 

[EVNow]

Nevada can hardly get enough labor for cell production let alone support a car factory,

Oh yes, they can get labor (to move to Nevada). The problem is where to get water - and in the short term, things like housing. I'm sure all those laid off people in Ohio will move to Nevada in a heartbeat.

 

[EVNow]

Not for investors.

Tesla misses out on profit every time someone buys a Model 3 who otherwise would have bought a Model S.

Why do you care about investors. You are a short - not an investor.

BTW, short troll alert ! Reported.

 

[S3XY]

I agree I think they should return to a "grow like crazy" mode asap. They already clearly have a lead over the OEMs, they should take full advantage of it.

That is coming around the end of the year when Model Y ramp is getting underway.

 

[SPadival]

*Raises hand*



You guys [in the general sense here] really need to cool it with the instinctual need to blame anything other than glowing adoration on shorts. That question is from the head of the Denver Tesla Club, one of the most dedicated Tesla advocates I'm aware of. Believe it or not, there are folks who love Tesla and believe that holding their feet to the fire when they mess up royally is in the company's best interests.

Yep. I upvoted this question.

 

[S3XY]

So last Friday Tesla issued a statement where they made it pretty clear that they cut the 75D to better differentiate the Model 3 and the Model S/X - i.e. probably not to add a new battery pack. Cutting production in half results from that, at least in the short term: the 75D was more than half of the demand.

But there's still a few conflicting things here, in particular Elon said the following:

"Are you moving away from battery sizing in a similar sense to how Model 3s are sold ie Long Range, Performance etc?": Yes​

"Is Model S & X being phased out over the next year or two?": Def not​

This has not happened yet - there's still "100D" and "P100D" models. Also, if the only option was the 100 kWh packs then naming them based on range would be somewhat pointless, right?

But yes, I agree that it looks more and more probable that they are cutting Model S/X production by 50%, to the high trim versions, instead of running it at peak 18,650 cell supply capacity.

This might also give them more factory floor space in Fremont, and maybe one of the chassis lines could be repurposed to make the Model Y chassis? I'm not sure there's much point to do that though.

Another possibility is that they think that HW3 and possible FSD introduction in early April will increase the value of the high end Model S/X as well - which would spur sales and upgrades.

Could they fit Tesla Semi production in this footprint?

 

[EVNow]

I’m getting less and less convinced that the whole “we don’t need and won’t take additional capital” thing is a good idea. They need to grow fast. They need at least one more factory in the US, and one in Europe. Right now the production growth estimates have gone WAY down from where they were a year ago, and I blame a lot of that on trying to self-fund. I feel like they’re putting short-term stock boosts ahead of long term results unnecessarily.

They don't need to issue more stock.

They can get money from
- Normal debt. Wait for Moody's upgrade.
- Cheap debt from country/state government where the factory will go (like in China).

"Short term" stock price is important - as EM explained - it affects how the employees feel about being compensated. It affects their mood and work.

 

[SPadival]

Just to remember want we went through already.

Shorts will invent a new lie at ER. Be prepared.

ValueAnalyst on Twitter

@ValueAnalyst , Please don’t pull a Fred Lambert - please credit TMC and the author of that post, @Fact Checking

 

[RobStark]

Great reason to get solar. Might I offer a solar roof and home battery pack?

True, but not every Tesla owner is a homeowner with roof appropriate for rooftop solar.

 

[tsunamiofhurt]

@ValueAnalyst , Please don’t pull a Fred Lambert - please credit TMC and the author of that post, @Fact Checking

To be fair, VA did credit TMC/FC in their original tweet. ValueAnalyst on Twitter

EDIT:
Seems like the link actually goes to a different page of the thread.

 

[Thekiwi]

Not for investors.

Tesla misses out on profit every time someone buys a Model 3 who otherwise would have bought a Model S.

Not necessarily: a fully loaded model 3 can generate more profits than a base model 75KW, especially as model 3 volume increases.

 

[printf42]

New claims on reddit from a Tesla supplier that S&X production is being cut in half. Their posting history seems relatively credible.

"Tesla's mass layoffs and reduced car production have Wall Street 'waking up from the dream' by hauserd in r/technews

catalina1992
13 points 3 hours ago

Yup they are cutting production of the model s and x by half to concentrate on the model 3.

Source: I sell polymer solutions for* them for the x and the s and I found out this week my sales are gonna be cut in half. Between this and the raising prices because of the tariffs 2019 is gonna he rough."


This obviously aligns with the removal of the 75D options which were c.55% of sales in 2018. The comment suggests the production cut could be long term rather than temporary, but I'm sure Tesla could ramp back up relatively quickly later this year if they launch new battery options or a refresh.

Tesla's decision to remove the 75D makes very little sense to me if they don't have a near term replacement plan. I don't think it likely that Tesla's decision could increase profit or aid its mission.


I still expect new battery options, refresh and production ramp back up at some stage this year, but below I've tried estimating the gross profit impact if S/X volume is just 50k this year:

The 55k 75D sales generated around $1.1bn gross profit in 2018 on my model (vs total S/X gross profit of $2.6bn before GHG credits). Lets say tax credit reduction in US, changes to incentives in Holland and China economic slowdown would have reduced 75D and 100D demand c.5k each in 2019. So Tesla might have been looking at 50k 75D sales and 40k 100D sales if they had not discontinued the 75D. If Tesla now target 50k production this year, this suggests they expect c.10k prior 75D buyers to trade up to 100D. This would add c.$355m gross profit on my numbers. If 15k 75D buyers trade down to a Model 3 AWD P, then this will add c.$360m to gross profit. The $2.5k 100D price cut would then be a $125m impact.

So overall we have $2.6bn 2018 gross profit - $265m demand - $1bn 75D sales + $355m 100D trade up sales - $125m 100D price cuts + $360m 3P trade down sales. This takes us to 2019 gross profit of $1.9bn, down $675m yoy. This all assumes no production cost savings - for every $1k saving per car profit will increase $50m.
If Tesla hadn't removed 75D then gross profit would instead have fallen: -$265m demand - $100m 100D price cuts - $50m 75D price cuts = - $415m. For Tesla's discontinuation of the 75D to have a neutral profit impact then another 11k 75D buyers would have to change to Model 3 P. So this would be 50k 75D buyers become 26k 3 P buyers and 10k 100D buyers while 14k customers are lost.

This guy said he found out his sales is gonna be cut in half. Probably means he is anticipating the orders would drop since every one talks about Tesla makes half of S&X now.(which we don’t know whether it’s true or not) His tone doesn’t sound like he already see orders dropped in half.

Even if it’s true his orders dropped, raw materials doesn’t look like an area you would concentrate all your orders to a sole supplier, so 50% drop in one supplier doesn’t mean a 50% drop overall.

About this 75 trim cut, my thought is it’s not even remotely likely related to demand. S&X has been supply constrained for quite a while, there is no way demand suddenly dropped to 50% of current supply so they have to cut production.

My theory is they for some reason wants to reduce the S&X production for a while so they cut the lowest margin trim. The reason could be 2170 refresh or interior refresh, or free up body production/paint production for M3 or MY. Or even moving battery pack production to GF1 or Lathrop to free up floor space for MY, whatever it is, it would good for the long run.

The S&X production slow down is not the result of 75 trim cut, it’s the reason why it’s cut in the first place.

Anyway, we can expect this be asked next week and we will have an definitive answer by then.

 

[sundaymorning]

Wall Street Journal - yesterday:

It’s incredible that China sold 1.2 million EVs last year, and that China is already Tesla’s second biggest market behind the US. It will be fascinating once Tesla reveals the Model Y. Nio’s SUV is a good looking car inside and out, it’s starting cost is around $54,000, with Model Y coming out at $45k I think the price point will be very tempting to many Chinese buyers. Although to be fair, the NIO SUV will have more interior room as well as being a bigger car.

March, Model Y and the China GF can’t come soon enough.

 

[Thekiwi]

very concerning, would wanna understand the rationale for this on the ER.

A “50% cut to model s/x” isnt the same thing as a 50% reduction year on year.

There is normally a drop off in deliveries from Q4 to Q1 for the mature, fully rolled out lines.

Q42017 delivered 28,425 Model S and Model X vehicles
Q12018 delivered 21,815 Model S and Model X vehicles

I don’t think anyone here is expecting Q1 model S & X deliveries to be half the level of Q1 a year ago.

Last quarter, Tesla delivered approximately 27,550 S/X units (according to Jan 2 update:13,500 Model S, and 14,050 Model X vehicles)

A 50% cut of the Q4 number would come to 13,775 units, which would be a 37% drop on last years Q1 number, which implies some substantial price inelasticity if the 75KW SKU indeed accounted for 50%+ of units. (Or that they are planning price reductions at some point in the quarter, or demand has increased in some markets)

 

[MarcusMaximus]

True, but not every Tesla owner is a homeowner with roof appropriate for rooftop solar.

*raises hand* I have a shared roof. While I could, technically, get solar installed on just my section(with approval from HOA), no big installer is willing to touch it. That includes Tesla(I’ve tried).

 

[Bet TSLA]

Terrible idea. Worst of both worlds. You obviously couldn't go to the customer with such a large vehicle so customers would still have to come to you. It would be difficult to offer rentals. The cost of such a truck with the all the R&D that would go with it would probably be higher than a basic SC. Whatever work you would start would have to be finished the same day. Can't do anything in poor weather or "real" winter. So on so forth...

Well, you've identified yourself as the guy that Elon fires. Can't be done! I suggest an idea outside the box and you come back with why, if you do it the usual way, there will be problems. Of course there will be. So you don't do it the usual way. You think of alternative solutions, preferable based on first principles.

Rentals? I'm sure Enterprise can come up with something. You can't go to the customer? True, but you can go near, at least as near as a service center would be, and once the program is ramped up you can do it today. Customers love having the option of some hassle today as opposed to nothing until next year. Cost? Expensive up front, and cheaper down the road. Plus you've pumped semi sales by demonstrating an awesome use case that others can riff on. Your other assertions are baseless -- poor weather and winter are irrelevant, and single day for fixes is simply not an issue.

In any case, maybe it doesn't look like this exactly, but I'm betting that Tesla has more up their corporate sleeve than the mobile ranger corps to deliver "invisible love".

 

[Mars ☰mperor]

These can be answered already:

Yes, the Shanghai Gigafactory is built in mainland China, and all cars manufactured there are domestic, Chinese cars - which obviously don't pay "import" tariffs. So zero tariffs.



AFAIK they will be eligible for full EV subsidies if all cells are manufactured in China as well - i.e. not imported from the U.S.

My guess: initial production runs might be using U.S. battery packs, but they'll otherwise try to get their Chinese battery supply going ASAP.

I am still not quite sure.

A few days ago while I visited a Tesla store in Shanghai, the sales rep said Model 3s coming out of Giga 3 can’t avoid tariff because Giga 3 is 100% percent foreign venture. Also no subsidies. But I need to hear the official wording on these.

Come to think of it, Tesla actually did not mention tariff and subsidies regarding Giga 3 at all.