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

[KarenRei]

I am personally affected by the BMS changes (both lower range and lower Supercharging rate), and even *I* am not sure if Tesla has a legal obligation to replace the pack (though I am no legal expert). They issued a software update to correct the safety issue as soon as it was discovered, and do not have anything in the warranty (for packs of that vintage) saying that degredation cannot exceed some specific amount. So from a safety perspective I feel like they're covered.

However, the bigger concern to me as a big TSLA stockholder is in the negative impact to goodwill on the customers---many of whom (like myself) are very early adopters of Tesla products and felt not only rolled over the coals, but were never given an up-front explanation from Tesla. Many of us have a sour taste in our mouths as a result of how this was handled, and it does leave the impression that if you don't drive the latest and greatest car, Tesla doesn't care about you all that much. Not saying that's actually the case, but many affected feel that way--as much as I want to cheer Tesla for everything.

I hope they at least make some sort of gesture of goodwill toward those affected. We all want Tesla customers to be happy, right?

I feel bad for people like you in all this, because now Tesla basically can't do anything for you (at least until the lawsuit is done), as it would be used against them as an admission of wrongdoing. I fully agree that this should have been a goodwill issue. I hope that once this mess has blown over, that they do some sort of goodwill option for you, like offering at-cost upgrades to new 100kWh LR packs, or some cash / store credit or something like that.

Also, the reason for the NHTSA filing is simple: they're getting the NHTSA to do discovery for them. Normally in court you have to fight for the right to force discovery on the defendant. Here the NHTSA will do it for them.

 

[Todd Burch]

You have a point here. Yes, I think the safety concern has been addressed (as it should be, a priority). But (correct me if I'm wrong) I think customers are now upset about the reduced range (and as you say the way Tesla went about it). Tesla fixed the fire risk at the expense of range. Tesla consequently claiming that the range degradation was natural is what I think pissed off folks.

What do you think would be an appropriate financial renumeration, either in cash or trade-in / new purchase discount?

Yes I think you're reading it right.

The thing is that Tesla can use all of these affected packs as battery backups for Superchargers. If they used them for battery backups and replaced the packs with those of a similar range but without the problem, that would be fair. I think that cost would be much less than $10k per car because the existing packs obviously have value.

 

[KarenRei]

Tesla consequently claiming that the range degradation was natural is what I think pissed off folks.

Well, it is "natural", to the degree that it's a consequence of physical processes occurring in the batteries; these batteries could safely charge at high rates and to high voltages when new, but no longer can... and the BMS didn't know (until the update) that they no longer can do so safely. Assuming that this was a safety-related update (rather than a longevity one), which most people assume. But this is certainly not normal by Tesla's standards. It's not like early-Leaf levels of degradation, but people expect better from Teslas, and should expect better from Teslas.

 

[copyhacker]

They execute the trade when the offer hits 320 but don’t assign it to you unless the price goes lower. If it goes higher
They keep it. If lower , then you are filled.

So you’re basically writing them a free put option, yes? (Or a call in the case of a sell order)

Pretty sneaky, sis.

 

[Todd Burch]

Well, it is "natural", to the degree that it's a consequence of physical processes occurring in the batteries; these batteries could safely charge at high rates and to high voltages when new, but no longer can... and the BMS didn't know that they no longer can do so safely. But it's not normal by Tesla's standards. It's not like early-Leaf levels of degradation, but people expect better from Teslas, and should expect better from Teslas.

Yes, I think the concern was that the apparent degredation as indicated by the old BMS software was too optimistic, giving prospective buyers the false impression that those packs would retain their range longer than they actually did.

On the bright side, the new battery chemistry coming down the pike will make all of this a moot point as it looks like it will be far superior from a degredation standpoint.

 

[Mike Smith]

The NHTSA filing says around 2000 vehicles. They could always up that later (surely there were more of this pack than that, no?), but if it stays at 2000 - barring the risk of any punitive punishment - looks like under $40M, as I doubt it costs more than $20k to supply and put a new pack in a Model S. And they certainly have the capacity to make them.

That said, the plaintiff's own argument is that the software was designed to ameliorate a fire risk. Wherein, if the software does what it's supposed to do, the liability should be zero.

There's zero chance of Tesla having to replace the battery packs since they've been made safe. The worst case scenario is that they make a small payment to compensate for the loss of range. I'd say one or two thousand dollars max. Those batteries are pretty old anyways.

 

[moneyburner1]

GF4 should be in Netherland. I think Elon should have Germany and Netherland do a competition to see which country sells more Tesla and use that as a way to gauge where to put the factory. I don't know why Germany beats Netherland as a factory location right now, but it'd be trivial for a German to move to Netherland to work right? But the location of the major dutch port for distribution cannot be moved.

Germans barely move...and if they move they (mostly) will not go to the Netherlands (except for vacation)

 

[PaulusdB]

Does Holland have the labor force to man/woman gf4 ?

Yes, The Netherlands do. In the Holland region you can find the Rotterdam port and Schiphol Amsterdam airport close to a building larger than the Sparks GF that locates Bloemenveiling Aalsmeer (Platform for flower/plants commerce and logistics).

There is plenty of educated staff available in the Brainport area (Eindhoven) already supplying the automotive industry. Finally the Groningen area has plenty of room and green energy supply next to its port.
(The country is only 100 by 200 miles, roughly speaking, and daily commutes of two times one hour are generally accepted.)

 

[pnungesser]

Thanks. Yes, I would think 2000 is too small, but unsure. From what I understand it's specific model years, with specific battery pack sizes. So not the entire prior S,X line. On the other hand $20k per car would be very expensive. If the total number of affected cars is max 10k, then you're talking about 10k x $20k = $200mm, which is kinda steep, but absorbable for Tesla. Anything more would start getting concerning.

I think the best solution (for all parties concerned), should a recall happen, is that either a financial renumeration or trade-in with a max $10k discount/benefit. I mean why retrofit these older models with new batteries? They don't have all the latest self-driving tech. Better to software limit their range and sell/trade them for a discount, and eventually phase them out.

Does anyone have a link to check which cars are affected?

 

[MP3Mike]

Does anyone have a link to check which cars are affected?

Other than Tesla, no.

 

[ggr]

Other than Tesla, no.

Mod: Discussing financial impact of this is sort-of on topic, but there are other places to give anecdotes or talk about the range issue. So we can stop now.--ggr

 

[Mike Smith]

https://www.smh.com.au/national/ele...petrol-by-2023-professor-20190826-p52kv2.html

 

[Bobfitz1]

Woohoo, so many problems with this logic. Firstly, are you talking gross margin or net margin? Tesla has NEVER said 30% gross margin, except maybe as an aspirational goal one day. That they've settled around 20-25% is amazing in the current industry. And this is completely unrelated to the reasons they've prioritized growth. Lastly, they are shipping more cars! That's the growth they've always said they were prioritizing! Demand problem is fabricated.

IMO a current demand problem is fabricated. Over the past 1 1/2 years Tesla has successfully managed a quarter to quarter balancing act between their production and the demand at that point in time. Both the production increase rate and demand have fluctuated during this period for various reasons at different points in time. At times since M3 ramp took off, Tesla has seen the demand increase rate lag behind the production increase rate and they have used various means to increase demand to keep up.

This explains why they introduced SR M3 earlier than it could have a good margin and near immediately introducing SR+ to better dial in the production/demand balance at that time. It also partly explains the big reduction in the price of M3 performance variant.
They observed M3 Osborning lower priced S/X variants and elected to make the best of that by getting rid of them and cut costs by reducing shifts on S/X line. They may also have believed that dropping lower price S/X would increase sales of highest margin M3s.

So while increasing demand to absorb higher production has been a problem at points the past 18 months, at this point demand is leading production rate at least adequately. This production/demand dynamic is about to change greatly for the better with GF3 starting production and ramping over the next several quarters, tapping a store of demand in China so huge the cars produced there can be priced to have better margins than U.S. production. This boost to ASP and margins will last for some time and the ramping of MY starting mid next year will make the financials even better. As will the slow but inexorable word of mouth demand growth and continued battery cost reductions.

Even if Musk keeps profits nil the next several years to further accelerate growth, the combination of all these positive trends hopefully will increase large investor confidence that Tesla will sustain it's extraordinary growth over the coming years and bring SP and valuation to earlier levels and beyond.

 

[TheTalkingMule]

There's zero chance of Tesla having to replace the battery packs since they've been made safe. The worst case scenario is that they make a small payment to compensate for the loss of range. I'd say one or two thousand dollars max. Those batteries are pretty old anyways.

Great way to turn this narrative around might be a pledged battery swap post-2021 if the old packs hit a certain ceiling of range. A few years from now the cost of such a swap would be halved and it would be good PR.

 

[TheTalkingMule]

And we're green. That was a hell of a morning dip!

 

[UncaNed]

And we're green. That was a hell of a morning dip!

What, $3.00??

 

[Todd Burch]

Any thoughts on why Tesla doesn't do a small price increase on the Model 3, since demand slightly outstrips supply right now? Since they are so close to break-even, every little bit helps. Even $500 might help tip the balance.

 

[ggr]

Any thoughts on why Tesla doesn't do a small price increase on the Model 3, since demand slightly outstrips supply right now? Since they are so close to break-even, every little bit helps. Even $500 might help tip the balance.

Tesla is continually improving the cost of production, so they can avoid the bad optics of increasing the price by just waiting a little longer before the next price reduction. Remember, too, their explicit goal is to get more cars out there, not to make the most profit (although in the long term they are probably the same thing).

 

[EVNow]

Any thoughts on why Tesla doesn't do a small price increase on the Model 3, since demand slightly outstrips supply right now? Since they are so close to break-even, every little bit helps. Even $500 might help tip the balance.

Why do you think so ?

 

[scaesare]

Ironically, with robotaxi (where Tesla owns the fleet), battery swap actually becomes more viable.

Interestingly, the Model 3 appears to have been designed without quick battery-swap capability. It has bolts that must be removed from inside the cabin, as opposed to exclusively from the bottom, like on the S.

I also don't believe the 3 has the quick-connectors for power and cooling lines.