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

[Ulmo]

i straight up do not buy this. If it were true, they'd 1) be delivering primarily Performance models, 2) not pulling demand levers all the time and 3) selling way more S/X cars.

Considering how undeveloped Model S is compared to Model 3, they are selling way more of the S than I would expect. I don't know the exact mix. Model X makes sense, however, since it has some things Model 3 doesn't have.

Model 3 is already expensive enough that many people are already springing for way more than the advertised $35,000 price as it is; looking for high demand skewing to higher costs should allow you to see the high number of purchasers above $35,000 already. Also, Elon has stated that he doesn't want to avoid selling a trend-setting car to non-trend-setters who get niche sport cars; i.e., he is maximizing network effect, which is something that would not happen if he mixed maximally toward the performance cars. As we can see, VW has decided to start at the top as Tesla did with their Roadster, and the Porsche Taycan is a way better car than the Roadster, a decade later. They're catching up, and within a decade, customers won't care about the market shares of the respective surviving companies when they choose what car to buy since they will all have compelling products.

 

[Zero CO2]

Can you think of an EV part that the cost dropped meaningfully because so many companies got into EV business? I seriously want to understand this. My thought is different.

After iPhone was introduced, was it good or bad for Apple if more companies started working on smart phones? If no other companies worked on smart phones, I think in the past decade Apple would have sold 3 times more phones with more profit per phone.

Most parts that Tesla needs are either generic for all cars, or specific for Tesla's design. I don't think VW getting into EVs can help Tesla reduce parts' cost. In stead they bid up material cost and reduce Tesla's margin.

The benefit of other car companies getting into EV is they may stop actively going against EV. Also, if they build charging networks, in the end all EVs might be able to share all the charging networks. The third benefit is reducing patent lawsuits.

Overall, if other companies stay with analog phones (ICE), Tesla would do better and end up with 100 gigafactories. Tesla's EVs are significantly better than ICE vehicles, most people can see the benefits once they get a chance.

Fair enough.... my main point was on accelerating the transition to EVs... more OEMs making EVs means more parts volume ... lower part prices ... commoditization of the HW... Telsa will still be wildly successful differentiating with SW... it will take Telsa too long by itself to do what you are saying

 

[Ulmo]

Those actually in power, and the “experts” they listen to, are the ones who really need to figure things out, with help from us as voters of course.

We're past the chicken-egg problem of initial development. At this point, the free market is the optimum way to deliver clean energy products (generation, delivery, storage, use). It will be done in about 3 decades, and mostly a gone issue within 2.

 

[RobStark]

2) There is an embarrassing lack of choice for potential EV buyers. If, for whatever reason a potential EV buyer does not care for the Model 3, there is literally NO in-class competitor even in the planning stages. A potential buyer could very well give up on EVs for their next purchase. Again,hurts The Cause.

Polestar 2.

 

[MarcusMaximus]

Do they? A Tesla will charge at a far higher rate than a Taycan and the Model S just crushed their lap time in Germany. Am I misinterpreting this post?

They Taycan charges at 270kW, where the top Tesla currently charges at 250kW(yes, miles/hour is much higher in the Tesla) and I did note current fare. Yes, Tesla has a faster car coming out next year that beats it on that track. Granted we have no idea how a Raven Long Range Performance S would do, but I believe we would know if Tesla thought it could beat the Taycan on that track.

That said, for those without context: I’m not saying the Taycan is better than the S. Just that it’s at least starting to get kinda close to where Tesla was 7 years ago.

 

[Ulmo]

I gotta say I really like the lack of door pockets. And lack of central console in my pre-fl S. Car stays organised and clean, instead of collecting random junk in those pockets.
But I'm a minimalist in many other ways too.

That obviously works for, what is it now, 750,000 people that have bought Tesla cars? It's just not all 8,000,000,000 people on the planet that that particular style works for. But there's plenty more left in the 98% of the market share Tesla doesn't yet have.

 

[KSilver2000]

Considering how undeveloped Model S is compared to Model 3, they are selling way more of the S than I would expect. I don't know the exact mix. Model X makes sense, however, since it has some things Model 3 doesn't have.

Model 3 is already expensive enough that many people are already springing for way more than the advertised $35,000 price as it is; looking for high demand skewing to higher costs should allow you to see the high number of purchasers above $35,000 already. Also, Elon has stated that he doesn't want to avoid selling a trend-setting car to non-trend-setters who get niche sport cars; i.e., he is maximizing network effect, which is something that would not happen if he mixed maximally toward the performance cars. As we can see, VW has decided to start at the top as Tesla did with their Roadster, and the Porsche Taycan is a way better car than the Roadster, a decade later. They're catching up, and within a decade, customers won't care about the market shares of the respective surviving companies when they choose what car to buy since they will all have compelling products.

Where is it advertised as $35,000?
Right now, the absolute basic model 3 is $40,190 with dest/doc fee, and before taxes/incentives.

 

[Buckminster]

This will eventually happen as a side effect of having strong positive cash flow in every quarter. If that extra income is primarily reinvested via capex then that creates a strong GAAP income stream as well.

But while Tesla is growing there's always going to be the 'leading shock-wave of fast expansion' that artificially reduces GAAP income:

• increased opex (you expand your business before you can increase production and draw more customers),
• lower operational efficiencies, (expanding businesses are always less efficient than steady-state ones), there could be an up to 5-10% of gap (up to $300m-$600m expense, per quarter),
  
• increasing stock compensation GAAP expense (~$200m per quarter),
• elevated levels of capex spending depreciation and amortization GAAP expenses that are 2x-3x the level of a 'steady state' business with similar capital costs, (about +$300m per quarter),
  
• interest expense, (~$120m per quarter),
  
• elevated levels of growth-opex, such as R&D expenses, (+$300m per quarter).

If we add up these factors it's about $700m-1.2b per quarter currently (there's a lot of vagaries in the exact figures).

I.e. the sum of Tesla's businesses is already vastly profitable, just masked by various growth expenses. If Tesla slowed down to say Porsche's steady-state business they'd be even more profitable as Porsche.

But "slowing down" is not Tesla's mission.

Thanks for putting this together FC.
Moderator - Post of particular merit or I join neroden at Historic Ithaca Conservatory of Music. They could really do with some support.

 

[MarcusMaximus]

Where is it advertised as $35,000?
Right now, the absolute basic model 3 is $40,100 with dest/doc fee, and before taxes/incentives.

Have they actually stopped taking off-menu orders for the 3 SR? (I’m aware some people like to claim it never existed, but it did/does and I know people who have one)

 

[Ulmo]

Polestar 2.

Nice. I config'd a nice $63,000 car there. Available July 2020. Things are looking up.

Meanwhile, some companies are already shipping (Tesla, Audi, Jaguar, Kia/Hyundai, etc.).

 

[RobStark]

Where is it advertised as $35,000?
Right now, the absolute basic model 3 is $40,100 with dest/doc fee, and before taxes/incentives.

It isn't advertised but is available at store or calling Tesla direct. They want the 10 minutes to try and upsell you.

Historically, price of cars are not advertised or quoted with dest/doc fee.

 

[RobStark]

Nice. I config'd a nice $63,000 car there. Available July 2020. Things are looking up.

Meanwhile, some companies are already shipping (Tesla, Audi, Jaguar, Kia/Hyundai, etc.).

Like Tesla, they will start with the top spec (Performance) version first and work their way down.

Also has a hatchback.

 

[TradingInvest]

Considering how undeveloped Model S is compared to Model 3, they are selling way more of the S than I would expect. I don't know the exact mix. Model X makes sense, however, since it has some things Model 3 doesn't have.

Model 3 is already expensive enough that many people are already springing for way more than the advertised $35,000 price as it is; looking for high demand skewing to higher costs should allow you to see the high number of purchasers above $35,000 already. Also, Elon has stated that he doesn't want to avoid selling a trend-setting car to non-trend-setters who get niche sport cars; i.e., he is maximizing network effect, which is something that would not happen if he mixed maximally toward the performance cars. As we can see, VW has decided to start at the top as Tesla did with their Roadster, and the Porsche Taycan is a way better car than the Roadster, a decade later. They're catching up, and within a decade, customers won't care about the market shares of the respective surviving companies when they choose what car to buy since they will all have compelling products.

I feel catching up won't be easy. Give it another 8 years, will VW's software be as good as Tesla's today? I doubt.
Tesla would move forward by another 16 years in the next 8 years.

Every short talks about how powerful the legacy companies are. They are sure those companies will kill Tesla when those giants wake up on EV. I think what's more likely to happen in the next decade is this: Tesla builds gigafactories in each continent. They nolonger have the extra burden on tariff and shipping. Their production cost is slightly lower than the competitors (Tesla has been working on this for years). Then Tesla sells cars (hardware) at cost, makes profit on software. In this scenario all other car companies will turn into NIO.

 

[KarenRei]

I see five big risks to Tesla Gigafactory in Germany:

• Unions actually work there and are beneficial to workers and are a mostly positive political force, but the main German union that covers automotive workers (IG Metall) is very reactionary against EVs in particular. I fear in Germany Tesla's factory would be immediately unionized and IG Metall would sabotage Tesla from within, because they fear what the EV transition will do in their much larger factories at VW etc. Tesla Grohmann only barely avoided unionization by IG Metall in ~2017, and that's because Grohmann was primarily a white collar engineering firm, while IG Metall has a blue collar core identity ...
  
• Bureaucracy is particularly heavy in Germany, and the real estate and construction industry is overheated, so I'd guess it would take twice as much time to build a Gigafactory and would cost twice as much.
• Tesla might be able to install themselves as a big employer in the Nordrhein-Westfalen state, which only has smaller car factories from Opel, Mercedes and Ford, and might gain some political protection that way - but it's a pretty liberal state that will side with unions in disputes - and in any case a factory with 10-20 thousand jobs won't have much of a political pull within Germany compared to the rest of the automotive industry that is employing millions directly and 2-3 times as many indirectly.
• On the German federal level (Chancellor) and on the European Union level Germany won't be representing Tesla's interests, they'll be representing the German car industry's interest. EV incentives related shenanigans like the 3.2m length limitation might be executed against Tesla just as much...
• The German press will be just as hostile: German carmakers are spending billions in advertisements in Germany alone and are the biggest source of advertising income both at the print media and the broadcast media level.

By going Poland (or Spain) Tesla would gain not just sovereign country level protection, but also EU level protection - Poland has veto power and a lot of political muscle.

But maybe Elon wants the "Made in Germany" sticker badly - if so then it will come at a steep price IMHO.

You know, thinking about it a bit more, I think Tesla could have its cake and eat it too, by positioning GF4 on the Polish or Czech side of the border, near a place with established industry inside Germany... so that German OEMs can make parts for it. So this would still give Tesla some economic pull in Germany, and the ability to play up a "German quality" mantle if they want it, without being beholden to the German government, regulations, unions. Transparent Factory in Dresden, for example, makes the E-Golf (although I'm not sure where its suppliers are located; I presume nearby).

 

[Zaxxon]

Polestar 2.

True, something like 1% of potential annual Model 3 buyers could instead opt for the Polestar 2 before completely exhausting the supply of that vehicle.

 

[Ulmo]

Somehow those 'traditional' offerings are not appealing to those traditional clients:

US Audi E-Tron sales:

April 253
May 856
June 726
July 678
August 593
September 434

US Jaguar I-Pace sales:

January 210
February 186
March 212
April 237
May 228
June 236
July 213
August 160
September 160

Note: these are cars that qualify for the full $7500 federal credit and, in the case of the Jaguar I-Pace, are heavily discounted. Their sales trajectories are pretty worrisome.

In Europe E-Tron is doing better, with the sale of about 1,500 cars per month, but the I-Pace has been on a downward trajectory for 4 months already, with sales halving in that period to about 750 per month.

The Jaguar is not that serious, but the Etron is. 11,000 cars in the release year for Audi is pretty good compared to Tesla's release year for their Model S.

There's no doubt every car company except Tesla is behind Tesla by many years. We all agree with that. But I think some of the others will catch up to being a surviving car company, if not catch up in delivery numbers.

 

[Doggydogworld]

Ok - important point is that the height is a significant differentiator. After all what's the difference between BMW 3 series and X3.

I'm glad you asked. There are two main differences:

1. X3 is 9" taller (66" vs. 57")
2. X3 has the SUV/CUV look (aka two-box shape)​

Ride height/seating position is important, but the look is what really matters. A look that conveys strength (aka safety) and rugged adventurism is paramount. All the other things people claim motivate SUV/CUV purchases - passenger seating, cargo space, handling, ease of ingress/egress, price, fuel economy and safety - are just rationalizations. Otherwise they'd buy minivans, which win by a landslide on all counts while offering the same ride height/seating position advantage.

So, let's estimate Model Y's market impact using my wildly popular Market Impact Score metric. SUV wannabes can score a maximum of 10 points on ride height and 20 points on rugged SUV look.

BMW X3 - 25 points. 10 for ride height + 15 for look (good 2-box shape, but more streamlined than rugged)
BMW 3 Series Hatchback - 2 points. Only 2 inches taller and looks almost identical to the base sedan
Tesla Model Y- 5 points. It's 5 inches taller, but also looks almost identical to the base sedan

So there you have it, scientific proof that Model Y's market impact will be a bit more than BMW's Series 3 Hatchback but much, much less than the X3

 

[Ulmo]

These things are, of course, subjective, yes. In the objective measures(range, performance, interior space, charging network), none of those match a 2012 S. In the subjective measures, it appears the market at large disagrees with you(as do I).

You sound like a Tesla hater of 2013, only flipped around to the non-Tesla hater of today. I'm not saying you are. But you are exactly echoing the B.S. that people said about Tesla back in 2013 and so, and by every objective measure some people care about (comfort, sound proofing, suspension, space, pockets, charging network), all of those in the Etron far far exceed the 2012 Model S (except the charging network if you're not talking about the 2012 Model S in 2012). I don't know how you think the charge network for Tesla is superior to the Etron for their respective release years; are you comparing a used 2012 S to a new Etron in today's market? In that case, sure, the CCS networks are ever so slightly behind the Tesla network, by about a year or two, but many of them are located in much better locations than the Tesla SuperChargers already, and there's a lot of features the Model S is missing that are present in an Etron.

 

[MP3Mike]

The only problem is Tesla needs other car companies to succeed for the EV transition to accelerate and costs to come down due to greater volume of EV parts in general ... the lack of success here may actually not be a good thing

Sure on the original Model S they used a lot of off the shelf parts... But, what parts is it going to bring the cost down of that Tesla uses now?

Tesla is customizing just about everything. They design/make their own seats and steering wheels, they designed custom calipers on the Model 3 to decrease drag, they just applied for patents for even newer/more efficient seats, wipers, and power steering units.

Shoot even their tires are custom.

They aren't like GM where they order most of the car from LG and just assemble it.

 

[TradingInvest]

Just like he did this morning, CNBC's Mike Santoli in particular has numerous times hosted interviews in what appear to be a bull-bear debate format, but turn out to be two Tesla bears reinforcing each other with Santoli essentially concluding in agreement. He does not ask his guests to reveal whether they are short Tesla. This is quite different from the way I handled similar situations when I worked in TV financial news.

As long as Tesla does not advertise while its competitors do, apparently CNBC feels that Tesla is fair game for largely negative coverage.

I don't have evidence, I guess traders/companies can pay money to get onto CNBC programs on a specific day, to help their trading positions. The last time Mark Tepper went onto CNBC to trash talk Tesla was also a Friday. Today again. Everything he said was nonsense. Based on what he said in these two occasions, seems to me he is shorting Tesla. The only thing I'm not sure is if he also bought weekly Puts.