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

[Dan Detweiler]

While not looking for advice, I am looking for insight.

My mother recently passed away and part of her estate consists of a fairly large (for me) sum of shares in an individual dividend stock that currently earns about 4% annually. I am looking for the pros and cons of transferring them to other stock (aka Tesla) or just letting them sit. If I transferred them it would roughly double my Tesla position. Being very bullish on Tesla I know what I want to do but I am looking for anything I may be missing (tax issues, etc).

Any insight would be most welcome.

Thanks,

Dan

 

[CorneliusXX]

Reports of Autopilot asking people if they disengaged due to a fault or whether it was planned.

Tesla_saves_lives on Twitter

Crowd-sourced fault labeling It's unclear whether this is some sort of special developer mode thing or not.

Dojo

 

[CorneliusXX]

For one they need a lot of cells, which are probably not going to be Panasonic's but Tesla's own. They probably need it for the economics & performance characteristics. Maybe they'll use the 200KWh packs planned for the roadster (and model S plaid?) but it doesn't exists yet. We'll learn much more on Battery day.

The software side probably needs work as well as they want to integrate with all fleet tracking software out there, let alone calibrating Autopilot & Platooning for a very different setup than current cars (20 cameras...). I'd guess the focus is currently on getting feature-complete set for FSD for cars.

They would also need to be ready for megacharging. There's no point in scaling manufacturing of the truck faster than they can roll out the charging.

My guess is that a megacharger is going to either be very expensive to connect to the mains if that is where the majority of the power will be drawn from, or will require a large solar/battery deployment if they use a lower capacity grid connection.

 

[CorneliusXX]

Nice video of AEB saves:

It's getting pretty hard to argue against autopilot when you can see warnings a couple of seconds before multiple crashes. Videos like this can really dispel the FUD.

 

[CorneliusXX]

My guesses 600 kWh and 900 kWh that is 12 Model 3s or 18 Model 3s for a long range semi...

But they would only need to build 10 semis per month initially, displacing about 180 Model 3s...

So for this stage I don't think cells are the constraint... at least not the kind of cells going into Model 3s...

There will be reasons for the schedule.. at the latest we will know the schedule is on battery and drive-train investor day...

As a hunch, I think the Pickup will be built at the same location as the Semi, and I can see an opportunity to also produce a real hard-core off road people mover on the same platform as the pickup just replacing the bed with a bigger cabin.

Also, a line producing a a volume that low would have terrible economics, even if they didn't splurge on robots and kept a mostly manual line they would still have to spend on the tooling and probably have an unoptimised workforce.

 

[Fact Checking]

First big Brexit victim:

Tour Company Thomas Cook Collapses, Global Bookings Canceled | HuffPost

"Longtime British tour company Thomas Cook collapsed after failing to secure rescue funding, and travel bookings for its more than 600,000 global vacationers were canceled early Monday."

"The British government said the return of the firm’s 150,000 British customers now abroad would be the largest repatriation in its peacetime history. The process began Monday and officials warned that delays are inevitable."

"The Civil Aviation Authority said Thomas Cook has ceased trading, its four airlines will be grounded, and its 21,000 employees in 16 countries, including 9,000 in the UK, will lose their jobs."

"The company several months ago had blamed a slowdown in bookings because of Brexit uncertainty for contributing to its crushing debt burden."

"The 178-year-old company had said Friday it was seeking 200 million pounds ($250 million) to avoid going bust and was in weekend talks with shareholders and creditors to stave off failure. The prominent firm, whose airliners were a familiar sight in many parts of the world, also operated around 600 UK travel stores."​

And while Brexit is likely not the only reason for the bankruptcy, holiday bookings are one of the first things to suffer in times of economic uncertainty.

Luxury car sales are another product category normally affected, so this might be relevant to Tesla too: especially as negative effects of a disorderly Brexit will hurt the largest Tesla markets in Europe as well.

Brexit will probably get much worse before it gets better. Hard Brexit on October 31 or after a short delay to December or January looks probable now.

Not advice though.

 

[Carl Raymond]

First big Brexit victim:

Tour Company Thomas Cook Collapses, Global Bookings Canceled | HuffPost

"Longtime British tour company Thomas Cook collapsed after failing to secure rescue funding, and travel bookings for its more than 600,000 global vacationers were canceled early Monday."

"The British government said the return of the firm’s 150,000 British customers now abroad would be the largest repatriation in its peacetime history. The process began Monday and officials warned that delays are inevitable."

"The Civil Aviation Authority said Thomas Cook has ceased trading, its four airlines will be grounded, and its 21,000 employees in 16 countries, including 9,000 in the UK, will lose their jobs."

"The company several months ago had blamed a slowdown in bookings because of Brexit uncertainty for contributing to its crushing debt burden."

"The 178-year-old company had said Friday it was seeking 200 million pounds ($250 million) to avoid going bust and was in weekend talks with shareholders and creditors to stave off failure. The prominent firm, whose airliners were a familiar sight in many parts of the world, also operated around 600 UK travel stores."​

And while Brexit is likely not the only reason for the bankruptcy, holiday bookings are one of the first things to suffer in times of economic uncertainty.

Luxury car sales are another product category normally affected, so this might be relevant to Tesla too: especially as negative effects of a disorderly Brexit will hurt the largest Tesla markets in Europe as well.

Brexit will probably get much worse before it gets better. Hard Brexit on October 31 or after a short delay to December or January looks probable now.

Not advice though.

Yeah, a brexit victim, but also a victim of ‘the internet’. It’s never been easier to book flights and accommodation online.

Edit: In a way bodes well for Tesla. Those charging middleman fees (dealers) are on notice.

 

[Dutchie]

While not looking for advice, I am looking for insight.

My mother recently passed away and part of her estate consists of a fairly large (for me) sum of shares in an individual dividend stock that currently earns about 4% annually. I am looking for the pros and cons of transferring them to other stock (aka Tesla) or just letting them sit. If I transferred them it would roughly double my Tesla position. Being very bullish on Tesla I know what I want to do but I am looking for anything I may be missing (tax issues, etc).

Any insight would be most welcome.

Thanks,

Dan

Sorry for your loss.
It is very difficult to give advise, it all depends on your total financial situation and how well you sleep at night. I too have TSLA but even is Tesla goes belly-up I will be OK as I have other financial positions and equity as well.
Judging from your scant information and the fact that you already have probably a considerable position in TSLA I would keep the dividend paying stock. But it is just me

 

[Fact Checking]

Sorry for your loss.
It is very difficult to give advise, it all depends on your total financial situation and how well you sleep at night. I too have TSLA but even is Tesla goes belly-up I will be OK as I have other financial positions and equity as well.
Judging from your scant information and the fact that you already have probably a considerable position in TSLA I would keep the dividend paying stock. But it is just me

To add to that line of thought, the original go/no-go decision whether to convert a 4% dividend stock to TSLA outlined by @Dan Detweiler might not be the only possibility: you don't have to switch positions in a binary manner, i.e. go all-or-nothing to TSLA.

Instead it would be feasible to define milestones when to convert the 'safe' stock to TSLA in smaller steps in the next 12 months or so, as elements of the bull thesis get confirmed (or falsified):

• Q3 deliveries,
  
• first GF3 units are shipped,
• Q3 financials,
• Q4 deliveries and results,
  
• GF3 scales up to higher production rates,
• Model Y, Model S Plaid, Semi, Roadster, etc.

I'd also observe the macro situation:

• how problematic is Brexit going to be,
• will Trump or Warren win the presidency next year,
• is a dominantly Republican-appointed Fed going to sabotage a Warren presidency with higher rates, etc.

There's significant macro headwinds possible. Plus if Q1'2020 is as ugly as Q1'2019 then it might not be pretty for TSLA if other revenue generating projects like GF3 are delayed.

TSLA will rise and sink with all rising and sinking boats - while I do expect Tesla to be more recession resilient than the rest of the automotive sector, it's certainly not 100% recession resilient right now.

But I'd basically do it based on comfort level primarily, few people will be able to sleep well at night 100% invested in any single company, let alone 100% TSLA. Beyond the well-known volatility, the debt-leverage and the powerful incumbents Tesla is disrupting, a Richter scale 10 earthquake around Fremont is still a tail end risk after all as well - even if Apple appears to have decided for the time being that they'd rather not expand into the automotive sector in what might be a bear market and a global recession in 1-2 years.

It's also a possibility to use part of the dividend stock hyper-speculatively in a leveraged fashion without margin risks: for example to sell say 25% of the dividend stock and use the cash to buy contracts of TSLA 2022 $400 call option LEAPs, and in every quarter after dividend payment if you are still comfortable with it.

That's about 1:10 leverage of the cash that would realize the 2 year 4 months benefits of about ~2 times the current TSLA position (or lose all the cash spent on options), while 75% of the dividend stock is kept. The downside is that it's a depreciating asset with total loss being a common outcome, and if you don't time the market well the draw-down can be brutal even if in the end the options pay off.

Not advice.

 

[ReflexFunds]

What's your source for this ratio? The only cell analysis I've seen (not counting Jack Rickard unwinding a cell for show and tell) was this 2017 JECS paper. These cells came out of a Model S that was in service for 6 months, so probably a late 2015/early 2016 build. They found a standard 80/15/5 NCA mix. They also found no silicon in the anode. I expect Tesla tweaked the chemistry since then, but 93% Ni would be a pretty major change that should affect specific energy and such more than we've seen.

Or the inexpensive Chinese version could be a true SR, with 10% less range.

I don't see Tesla building cells in China for years, if ever.

I don't think the JECS paper actually measured the exact cathode composition. My read was that they showed it was definitely NCA, then they said so it is probably the standard 80/15/5.

93% Nickel is from the P3 Model 3 cell teardown in 2018 commissioned by UBS. UBS don't show details of P3's method though.

The Made in China Model 3 is already being ordered and advertised with the same SR+ range. Elon also said some time ago that cell count could be adjusted to account for energy density differences in China cells.

Why would Tesla not build cells in China? They are planning manufacturing capacity for 2TWh per year - they would have huge shipping costs to China if they are only going to manufacture cells in US and Europe.

 

[Fact Checking]

First leak about (Australian) Q3 delivery numbers:

The stunning Model 3 delivery numbers that will rock Australia's car industry | The Driven

"The Driven, however, understands that the exact number – delivered in three ship cargos – is 2,414. This is confirmed by several sources. Most of these are expected to be delivered in September."

"That is a stunning achievement. It comes as sales of petrol and diesel cars slump dramatically – down 18 per cent in August for passenger petrol cars, and 8 per cent fall in SUV sales."​

Here's the current state of the Australian car market:

Sales of electric and hybrid cars surge higher, as petrol and diesel sales slump | The Driven
​

The August figures were: Diesel 152, Electric/PHEV 23, Hybrid 624 and Petrol: 11,898.

So while most of this is pent-up, ~2K Teslas in September will be a nice month for EVs.

 

[KarenRei]

First leak about (Australian) Q3 delivery numbers:

The stunning Model 3 delivery numbers that will rock Australia's car industry | The Driven

"The Driven, however, understands that the exact number – delivered in three ship cargos – is 2,414. This is confirmed by several sources. Most of these are expected to be delivered in September."

"That is a stunning achievement. It comes as sales of petrol and diesel cars slump dramatically – down 18 per cent in August for passenger petrol cars, and 8 per cent fall in SUV sales."​

Here's the current state of the Australian car market:

Sales of electric and hybrid cars surge higher, as petrol and diesel sales slump | The Driven
​

The August figures were: Diesel 152, Electric/PHEV 23, Hybrid 624 and Petrol: 11,898.

So while most of this is pent-up, ~2K Teslas in September will be a nice month for EVs.

My only caution (apart from not knowing The Driven's source) is that I'm not sure what number they're referring to. In this article, and their last article, they variously mix up the terms "orders", "deliveries", "cargos", etc. Is this supposed to be 2414 vehicles already delivered? 2414 vehicles to deliver? 2414 people who've ordered and have a vehicle on the way "somewhere"? I don't have a lot of confidence due to their wording.

ED: I tweeted to the author to ask for clarification.

 

[Fact Checking]

Latest China GF3 leak from Vincent:

Vincent on Twitter

The notable aspect of this picture is that in comparison to previous leaks that showed a body-in-white chassis, this one appears to be painted white already, with another one painted blue on the left - ready to go through final assembly.

I.e. GF3 stamping, body shop and paint shop are already producing sample units (!).

This is probably why they started bringing assembly line workers (the largest population of workers within a car factory) on site last week. For example in one of the drone videos from 3 days ago a queue of workers can be seen:

I presume these are line workers, and that they are getting their factory IDs there - or some other administrative step on their first day of on-site employment. In principle it's possible that one of the new workers in that line took the picture Vincent posted.

Tesla probably uses only a fraction of the full workforce for the assembly line trial runs, and hiring will ramp up as production ramps up. They'll also first need to bring the 220KV substation online to be able to produce at any sort of volume - and that unit still looked like a couple of weeks away from being finished in the latest videos.

But overall everything appears to be progressing smoothly, and they also got the second acceptance testing certificate in record time (without which a new car cannot be sold in China) - so no "missing homologation" or "held up by customs officers 2 weeks before end of quarter" nonsense: China wants these Teslas to be made.

 

[Fact Checking]

Is this supposed to be 2414 vehicles already delivered? 2414 vehicles to deliver? 2414 people who've ordered and have a vehicle on the way "somewhere"? I don't have a lot of confidence due to their wording.

My understanding from the wording is that 2,414 is the ones they got via 3 ships and intend to deliver mostly in September. The wording was pretty unambiguous in my opinion, as they define the term in the first paragraph:

"There has been wide speculation about the exact number of Tesla Model 3 electric vehicles deliveries that have and will take place in the initial roll-out of the long-awaited car in Australia."​

So the 2,414 is not a completed deliveries leak but a pretty accurate inventory size leak based on multiple sources, and Australian Delivery Hell is still possible in principle - although none of the ships were delayed I think.

 

[KarenRei]

Latest China GF3 leak from Vincent:

Vincent on Twitter

The notable aspect of this picture is that in comparison to previous leaks that showed a body-in-white chassis, this one appears to be painted white already, with another one painted blue on the left - ready to go through final assembly.

I.e. GF3 stamping, body shop and paint shop are already producing sample units (!).

This is probably why they started bringing assembly line workers (the largest population of workers within a car factory) on site last week. For example in one of the drone videos from 3 days ago a queue of workers can be seen:

View attachment 458066​

I presume these are line workers, and that they are getting their factory IDs there - or some other administrative step on their first day of on-site employment. In principle it's possible that one of the new workers in that line took the picture Vincent posted.

Tesla probably uses only a fraction of the full workforce for the assembly line trial runs, and hiring will ramp up as production ramps up. They'll also first need to bring the 220KV substation online to be able to produce at any sort of volume - and that unit still looked like a couple of weeks away from being finished in the latest videos.

But overall everything appears to be progressing smoothly, and they also got the second acceptance testing certificate in record time (without which a new car cannot be sold in China) - so no missing homologation or held up by customs officers nonsense: China wants these Teslas to be made.

They're going to need them. The substation is supposed to go live within a couple weeks, which will let them ramp up volume... but to do so, everything else has to be ready.

Too bad that you can't get a sense of progress inside the building from the outside, but at least there are things that one can see. For example, I've noticed that the loading docks appear to be finished on one side of the building, but still need to be cleaned up on the other. Obviously you can't have mass production until both sides are ready. It'll be really obvious once mass production has started, as there will be a constant stream of trucks arriving.

I imagine they'll have to separate construction traffic for Phase 2 from the operational traffic for Phase 1. They'll need to basically have relocated all construction-related supplies and hardware away from Phase 1.

 

[MC3OZ]

My only caution (apart from not knowing The Driven's source) is that I'm not sure what number they're referring to. In this article, and their last article, they variously mix up the terms "orders", "deliveries", "cargos", etc. Is this supposed to be 2414 vehicles already delivered? 2414 vehicles to deliver? 2414 people who've ordered and have a vehicle on the way "somewhere"? I don't have a lot of confidence due to their wording.

ED: I tweeted to the author to ask for clarification.

As a data point, I'm pickup up a Model 3 on Saturday in Brisbane, they rang today and ask if I wanted to pick it up Thursday night instead staying open to 7pm, Thursday night is a typical late night shopping night here.

So in typical fashion they are flat our with deliveries... so I expect 2,000 or more delivered by the end of September... cars should mostly be in the right cities but now.

But stories of other people being offered earlier deliveries are occurring, that means they are working through deliveries, or are trying to fill any free slots that become available.

 

[Fact Checking]

It'll be really obvious once mass production has started, as there will be a constant stream of trucks arriving.

Also, another obvious sign of mass production having started will be, hopefully, a constant stream of new cars leaving.

 

[KarenRei]

Well, at least Bloomberg is savaging someone other than Tesla in the EV space for a change.

Bloomberg - Are you a robot?

 

[Fact Checking]

They're going to need them. The substation is supposed to go live within a couple weeks, which will let them ramp up volume... but to do so, everything else has to be ready.

Frankly I wouldn't expect a binary switch from trial runs to mass production, but a gradual ramp-up from maybe 100 on the first week, to 200 on the next week, 1,000/week in a month or two, and 3,000/week in 3-6 months. And that's the optimistic scenario with no hick-ups with key machinery in the critical path of production and no hick-ups in the ramp-up of their partly brand new supply chain routes.

It would be crazy for Tesla to risk ordering and paying for a lot of parts through their supply chain without being certain that they can be built into cars and converted to cash within a couple of days of arrival. We are talking about a supply chain maximum volume of up to ~1 billion dollars per quarter for GF3.

But their suppliers face similar risks that Tesla isn't covering: they too need lead time before they can expand supply. The speed of Tesla's production will be limited by the weakest link: the slowest to ramp up supplier out of over a thousand suppliers ...

So it will be a gradual process, and the speed of ramp-up will be defined by the number of supply-chain expansion steps (this is discretionary to Tesla: how much inventory risk are they willing to assume?), times the maximum lead-up time for the slowest-to-expand suppliers (which delay is pretty much a fixed property of Tesla's supply chain).

Of course it happens in a very complicated, interwoven dance where different suppliers are ramped in a different fashion in parallel, and where Tesla will likely pre-order less expensive but critical parts that are easy to store in warehouses, such as relays:

Tesla supplier hints at massive increase in Model 3 production - Electrek​

(That was one piece of particularly irresponsible speculation by Fred, but I digress.)

 

[KarenRei]

Frankly I wouldn't expect binary switch to mass production, but a gradual ramp-up from 100 on the first week, to 200 on the next one, 1,000/week in a month and 3,000/week in 3-6 months.

It would be crazy for Tesla to risk ordering and paying for a lot of parts through their supply chain without being certain that they can be built into cars and converted to cash within a couple of days of arrival. We are talking about a supply chain maximum volume of up to ~1 billion dollars per quarter for GF3.

Fully agreed; I wasn't meaning to imply a sudden jump to 3k. But even with a couple hundred per week, you'll be seeing delivery trucks at some of the docks at any given point in time in the drone and satellite footage. You'll also see them before you actually see cars start appearing outside. Delivery trucks at the loading docks should be the first visible clue that they're doing more than just trial stamping / fitting / painting.