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

[MarcusMaximus]

Sorry, it’s an allusion to the Culture Ship “Sleeper Service” from the novel “Excession” that has probably spent at least the last 40+ years building FTL engines and can out accelerate probably all the GCU’s to at least 233,500x the speed of light.
If you haven’t read any Iain M Banks science fiction,
I suggest you start with “Consider Phlebas” then the other ~9 more.
Read Next “Player of games” where the drone ships got their names
Elon seems to have read some of these for ideas.
(I really need a neurallace like yesterday)
“Of course I still love you” is the name of a ship, as is “just read the instructions”



Culture series - Wikipedia
(There is also a reference to Elon essentially saving humanity in the novel “7 Eves” by pushing an iceberg across the solar system with a fusion powered hijacked space ship so the ISS can use the mass to boost to a higher orbit after the moon breaks up and bombards the surface in a hellacious meteor shower of really big rocks and he dies of rad poisoning but leaves clues how to get in like names of Culture Ships)
Ok?

PSA: The Culture Series being a series does not imply a continuous story or recurring characters.

 

[Chunky Jr.]

Hopefully this is a sign of strong demand for the solar roof

Tesla Is Hiring Solarglass Installers Across The US In Support Of Version 3 Launch | CleanTechnica

 

[Silent Ludicrosy]

Wallstreet hasn’t priced in the Tesla blanket yet. I expect huge gains Monday. Tesla Blanket

 

[JusRelax]

I didn't think about how attractive a bulletproof truck would be in areas like Mexico...

A mayor in Mexico put down his own money to reserve 15 Cybertrucks, and he's hoping for a discount from Elon Musk

 

[kbM3]

I don’t think people should count on a blowout quarter and I definitely don’t recommend people betting more than they can lose on short term stock price gains from Q4 deliveries/earnings, however it’s also stupid to ignore that there is at least a possibility of a large increase in production this Q, particularly in light of accumulating evidence. You are never going to make money on the stock market if you discard new evidence just because it doesn't match current consensus - consensus is priced in. You make money when you are right and consensus is wrong.

I’m sticking with a base case deliveries estimate of 110k (hitting minimum FY guidance requires towards 105k), but I think it is possible production could be anywhere from 104k to 120k and deliveries up to 130k given the 15k Model 3 inventory at the end of q3.

We have many data points which alone I would largely ignore, but together are painting a consistent picture: Jerome’s July email, CFTC supplier comments, Q3 “commercial negotiations” COGs reduction, Elon’s Q2 FY guidance, Galliers and Ellinghorst due diligence last year, Panasonic public comments, Carsonight leak, International shipments tracking, US delivery data in Troy’s spreadsheet.


Arguments for a large step up in Model 3 Fremont production:

• In July Jerome told employees they were preparing to raise output at Fremont. "The company is “making preparations” to raise output at its auto plant in Fremont, California, Tesla’s automotive president, Jerome Guillen, said in an email to employees on Tuesday. “While we can’t be too specific in this email, I know you will be delighted with the upcoming developments.”
• In July CFTC announced doubling of Model 3 components starting in August 2019. 'Precision stamping service provider China FineBlanking Technology (CFTC) will increase monthly shipments of components for relays used in Tesla Model 3 from about 20,000 units currently to 40,000 beginning August 2019, according to industry sources.” Presuming this is for both US and GF3, this could be towards 10k per week Model 3 production capacity.
• During Q3 Tesla achieved a very significant reduction in COGs which they partially attributed to "commercial negotiations with suppliers”. A significant reduction in supplier prices is consistent with a significant ramp in orders which delivers the supplier staff and depreciation cost leverage.
• In the Q2 call Elon said he expected Fremont Model 3 production to get to 8.3-8.6k per week by year end (but of course he may have been misspeaking and thinking about global production). Joseph Osha: And just as a follow-on then, could we see you manage to make 8,000, 7,500, 8,000 Model 3s in Fremont by the end of the year you think? Elon: Yes. I mean I feel confident it's -- let's just say that the trend is very clearly towards being able to get to 10,000 vehicles a week of which that would be -- there is rough numbers like 8,300 to 8,600 Model 3s and the balance in S and X. So, there's sort of 1,600 to 1,800 SX. In round numbers 8,500 3s, 1,500 SX per week, but probably a bit more than that.”
• Last year the Galliers and Ellinghorst report said Fremont could get Model 3 production to 8-10k per week with limited capex. “Based off our tour and what we saw, we see no reason why Stamping and General Assembly should not be able to handle [seven to eight thousand cars per week] today, and even potentially 10k units, with very little incremental Capex. We believe the same is also true for the Paint Shop when it comes to reaching 8k units a week, with some incremental capex potentially required to get to 10k units. For Body, our understanding is that incremental capex is required (our impression is in the tens and not hundreds of millions) in order to get to both 8k units and eventually 10k units.
• Panasonic published a graph showing a predicted 20% QoQ GF1 cell production increase in Q4 in a public presentation last week.
• Carsonight reported 20% QoQ GF1 Pack production increase to 8k per week. Cleantechnica reported 7k packs were sent to China in the 12 weeks to mid October before shipments were finished. If we assume this is true and there has been no further pack stockpile build since, then about 10 out of 12 weeks were produced in Q3 and 2 of 12 in Q4 (so 1.2k packs sent in Q4). This puts Q4 packs going to Fremont at 13*8k -1.2k = 104k -1.2k = 102.8k Model 3s produced at Fremont
• International ship loading days up 60% QoQ QTD and assuming we are now finished for the quarter, will finish up 49% QoQ. This suggests International Shipments of 50-55k Model 3s this quarter. This is real data by the way and not "tea leaves", some people are spending a huge amount of time tracking all the shipments.
• US delivery date entries in Troy's tracker are up 40% in the first 64 days of the quarter (up to December 3rd) vs the first 64 days of Q3. I have seen many people assume Tesla has been producing 100% international cars this quarter, but this doesn't look to be true at all. It seems US production has also increased QoQ so far this quarter. There are 149 delivery date entries in the spreadsheet in this period in Q4 vs 114 in the same period of Q3, 40% QoQ growth. This did include a large acceleration in the last 7 days. If we assume Tesla stopped International production after 57 days this Q we can instead take just the first 57 days of Q4. Here there are 107 entries or +4% growth vs 103 in Q3. InsideEVs estimated 44k US deliveries in Q3 (I don't trust their monthly breakdown) and in Troy's tracker 1/3rd of Q3 US delivery entries were in the first 57 days - suggesting c.15k US deliveries in the first 57 days of Q3. Taking 4% growth suggests 15.5k deliveries in this period of Q4. If we assume half of these were inventory and half new production it suggests Tesla potentially produced 58-63k Model 3s in the first 57 days - which extrapolates to 93k-101.5k total Q4 Model 3 production and largely reconciling with the datapoints we have from GF1.

Arguments against a large step up in Model 3 Fremont production:

• We haven’t heard stories of significant production shut down or new equipment installation at Fremont.
• We haven’t heard any specific leaks that Tesla is aiming for a huge step up in delivery targets this quarter. (But these emails are more common when Tesla is fighting to meet targets and may not be necessary if they are already almost sold out for the Q).
• Why did Tesla not ramp up to this production rate before if they had the capacity with limited capex? (Most likely because they needed to wait for Panasonic cell production rate to catch up and for word of mouth marketing plus new region rollouts to get quarterly demand to the next level.)
• Ramping up Model 3 production in the US shortly before ending exports to China and also shortly before potentially cannibalising demand with Model Y launch could lead to excess production for US and European markets next year. However it’s possible this ramp is only temporary and they will redirect components to GF3 and Model Y next year when the new production lines are ready for them.
• Towards 100k Model 3 production in Q4 just feels too good to be true.

Extrapolating Panasonic battery data.

Pretty interesting calculations and conclusions.

Twitter

 

[printf42]

Wallstreet hasn’t priced in the Tesla blanket yet. I expect huge gains Monday. Tesla Blanket

Every YouTuber would buy one, casually laying around in the background, like what they did with the Tesla surfboard(and boring flamethrower).

 

[CorneliusXX]

I don’t think people should count on a blowout quarter and I definitely don’t recommend people betting more than they can lose on short term stock price gains from Q4 deliveries/earnings, however it’s also stupid to ignore that there is at least a possibility of a large increase in production this Q, particularly in light of accumulating evidence. You are never going to make money on the stock market if you discard new evidence just because it doesn't match current consensus - consensus is priced in. You make money when you are right and consensus is wrong.

I’m sticking with a base case deliveries estimate of 110k (hitting minimum FY guidance requires towards 105k), but I think it is possible production could be anywhere from 104k to 120k and deliveries up to 130k given the 15k Model 3 inventory at the end of q3.

We have many data points which alone I would largely ignore, but together are painting a consistent picture: Jerome’s July email, CFTC supplier comments, Q3 “commercial negotiations” COGs reduction, Elon’s Q2 FY guidance, Galliers and Ellinghorst due diligence last year, Panasonic public comments, Carsonight leak, International shipments tracking, US delivery data in Troy’s spreadsheet.


Arguments for a large step up in Model 3 Fremont production:

• In July Jerome told employees they were preparing to raise output at Fremont. "The company is “making preparations” to raise output at its auto plant in Fremont, California, Tesla’s automotive president, Jerome Guillen, said in an email to employees on Tuesday. “While we can’t be too specific in this email, I know you will be delighted with the upcoming developments.”
• In July CFTC announced doubling of Model 3 components starting in August 2019. 'Precision stamping service provider China FineBlanking Technology (CFTC) will increase monthly shipments of components for relays used in Tesla Model 3 from about 20,000 units currently to 40,000 beginning August 2019, according to industry sources.” Presuming this is for both US and GF3, this could be towards 10k per week Model 3 production capacity.
• During Q3 Tesla achieved a very significant reduction in COGs which they partially attributed to "commercial negotiations with suppliers”. A significant reduction in supplier prices is consistent with a significant ramp in orders which delivers the supplier staff and depreciation cost leverage.
• In the Q2 call Elon said he expected Fremont Model 3 production to get to 8.3-8.6k per week by year end (but of course he may have been misspeaking and thinking about global production). Joseph Osha: And just as a follow-on then, could we see you manage to make 8,000, 7,500, 8,000 Model 3s in Fremont by the end of the year you think? Elon: Yes. I mean I feel confident it's -- let's just say that the trend is very clearly towards being able to get to 10,000 vehicles a week of which that would be -- there is rough numbers like 8,300 to 8,600 Model 3s and the balance in S and X. So, there's sort of 1,600 to 1,800 SX. In round numbers 8,500 3s, 1,500 SX per week, but probably a bit more than that.”
• Last year the Galliers and Ellinghorst report said Fremont could get Model 3 production to 8-10k per week with limited capex. “Based off our tour and what we saw, we see no reason why Stamping and General Assembly should not be able to handle [seven to eight thousand cars per week] today, and even potentially 10k units, with very little incremental Capex. We believe the same is also true for the Paint Shop when it comes to reaching 8k units a week, with some incremental capex potentially required to get to 10k units. For Body, our understanding is that incremental capex is required (our impression is in the tens and not hundreds of millions) in order to get to both 8k units and eventually 10k units.
• Panasonic published a graph showing a predicted 20% QoQ GF1 cell production increase in Q4 in a public presentation last week.
• Carsonight reported 20% QoQ GF1 Pack production increase to 8k per week. Cleantechnica reported 7k packs were sent to China in the 12 weeks to mid October before shipments were finished. If we assume this is true and there has been no further pack stockpile build since, then about 10 out of 12 weeks were produced in Q3 and 2 of 12 in Q4 (so 1.2k packs sent in Q4). This puts Q4 packs going to Fremont at 13*8k -1.2k = 104k -1.2k = 102.8k Model 3s produced at Fremont
• International ship loading days up 60% QoQ QTD and assuming we are now finished for the quarter, will finish up 49% QoQ. This suggests International Shipments of 50-55k Model 3s this quarter. This is real data by the way and not "tea leaves", some people are spending a huge amount of time tracking all the shipments.
• US delivery date entries in Troy's tracker are up 40% in the first 64 days of the quarter (up to December 3rd) vs the first 64 days of Q3. I have seen many people assume Tesla has been producing 100% international cars this quarter, but this doesn't look to be true at all. It seems US production has also increased QoQ so far this quarter. There are 149 delivery date entries in the spreadsheet in this period in Q4 vs 114 in the same period of Q3, 40% QoQ growth. This did include a large acceleration in the last 7 days. If we assume Tesla stopped International production after 57 days this Q we can instead take just the first 57 days of Q4. Here there are 107 entries or +4% growth vs 103 in Q3. InsideEVs estimated 44k US deliveries in Q3 (I don't trust their monthly breakdown) and in Troy's tracker 1/3rd of Q3 US delivery entries were in the first 57 days - suggesting c.15k US deliveries in the first 57 days of Q3. Taking 4% growth suggests 15.5k deliveries in this period of Q4. If we assume half of these were inventory and half new production it suggests Tesla potentially produced 58-63k Model 3s in the first 57 days - which extrapolates to 93k-101.5k total Q4 Model 3 production and largely reconciling with the datapoints we have from GF1.

Arguments against a large step up in Model 3 Fremont production:

• We haven’t heard stories of significant production shut down or new equipment installation at Fremont.
• We haven’t heard any specific leaks that Tesla is aiming for a huge step up in delivery targets this quarter. (But these emails are more common when Tesla is fighting to meet targets and may not be necessary if they are already almost sold out for the Q).
• Why did Tesla not ramp up to this production rate before if they had the capacity with limited capex? (Most likely because they needed to wait for Panasonic cell production rate to catch up and for word of mouth marketing plus new region rollouts to get quarterly demand to the next level.)
• Ramping up Model 3 production in the US shortly before ending exports to China and also shortly before potentially cannibalising demand with Model Y launch could lead to excess production for US and European markets next year. However it’s possible this ramp is only temporary and they will redirect components to GF3 and Model Y next year when the new production lines are ready for them.
• Towards 100k Model 3 production in Q4 just feels too good to be true.

Great writeup and very helpful.

On the arguments against, I would add that there are other items we have not seen that we would likely see if production was going to increase 20% or more QoQ.

• No word on additional shifts - Tesla would have had to have increased efficiency dramatically to production to ramp with the same number of shifts. This should have been noticed through increased hiring
• Substantial energy product increase - Rumours of increased powerwall and megapack production have circulated this quarter, potentially using more cell supply from Panasonic and trimming the potential to increase vehicle output as Pana increase production.
• Not enough leaks from suppliers - Given the number of suppliers, shouldn't we have heard from more than just one supplier that orders have increased

 

[SO16]

This.

If you ever want to get mad, check out Scot Work's twitter page (@ghost_scot) and see what they do. They search out prospective customers and try to scare them off, and search out any owners with any sort of problems, try to convince them that everyone has their problem and hates Tesla, and to convince them to return their cars, sue Tesla, and/or complain to the media. They of course never bother mentioning that they're short-sellers.

If any of you ever have any spare time, by all means check his page regularly to see who they're targeting and let their victims know what game they're being played with.

Sure, they may stop a few drops from flowing down the river of sales but that’s about it. The more time goes on, the more that people see thru their pathetic BS.

 

[CorneliusXX]

Wallstreet hasn’t priced in the Tesla blanket yet. I expect huge gains Monday. Tesla Blanket

Typical Tesla - taking all the credit of those hard working Merinos.

 

[MC3OZ]

Cities have tried reducing parking space in the past. All it did was increase congestion and they had to pull back. The city I'm familiar with (Vancouver) after they had reduced the number of parking spaces a building (downtown) could have, realized that they couldn't get enough buses on the street to make up the difference (e.g. length of buses > km of downtown streets). Having said that, Vancouver is actually a place where transit works. You can get from most places to downtown with a minimum of fuss. Transfer times are minimal (generally less than a couple of minutes). Compare that to DFW where transfer times are 30 to 90 minutes.

The theory is Robo-taxis spend more time driving, and less time parked, as overall 1 Robo-Taxi should replace 5-10 cars..

A more subtle variant is Robo-taxis don't care where they are parked, and that can be a bit further away form their last drop off, or their next pickup... and perhaps they schedule their arrival for around the time the customer requested, if booked in advance..

I also expect in some cases Boring Co might create some underground parking spaces for Robo-Taxis and they can comprise a long line of vehicles more or less bumper-to-bumper...

What is more interesting is to emulate Mass Transit with say 16 passengers per car, Boring co needs the equivalent of stations and platforms to organise groups of people going to around the same area..... The economics of Boring co providing a Mass Transit like solution are very interesting... the logistics require some propositioning of the fleet when flows of passengers are primarily leaving an area..
I thought about it just enough to realise it wasn't a simple problem...

 

[Off Shore]

Uhh, what’s their point supposed to be? The “no demand” narrative would be served by showing empty Superchargers. Crowded Superchargers imply... we need more Superchargers because there are so many Teslas on the road.

I detect a gaping defect in logic.

Waaay to much nuance for that crowd.

 

[Words of HABIT]

In the example used by @Words of HABIT in their post above, the cars of 10,000 produced and not sold do not impact the Q4 profit. Those costs go to the balance sheet as Inventory. It moves from Inventory to Cost of Goods Sold (impacting profit) once the vehicles are sold (delivered) in Q1 2020.
So producing more cars than delivered does not hurt profits (only cash flow).

Edit: The 10,000 over-production is only an example. I don't believe that production will exceed deliveries in Q4 by any material quantity. It may be the reverse: deliveries may exceed production with a slight draw-down of inventories.

OEM post profit upon selling vehicles to their Dealers. Tesla only recognizes profit upon delivery of cars to end user customers. If production is greater than deliveries for Q4, profit is negatively affected in Q4, and positively affected the following Q1 when those excess cars in transit are delivered. Increasing inventory for Q4 does not result in increase in profit for Q4, it only accounts for where the costs are spent and tracked which indicate future profits.

 

[Artful Dodger]

to add to your point, at Autonomy Investor Day, Tesla stated 4.5 miles/kWh initially and hopefully 5 miles/ kWh so they are definitely targeting efficiency in the dedicated robo-taxi, and one would presume that requires great aero.

There's no reason to believe by the time Tesla is ready to make the Model 2/Cybertaxi that they won't also be ready to use die-cast metal-foam stainless steel for its body. That's 3 year away likely, as is the Model 2. So good aero is not mutually excusive with stainless steel exoskeleton/Cyber construction methods. And it'll be cheaper on labor in the body shop, being formed from a single casting but no longer needing laser-scribing, bending, and welding of flat SS sheets. Very cheap factory, and fast/easy to duplicate to scale volume.

Cheers!

 

[sundaymorning]

This could be good for the market tomorrow:

Asia stocks trade higher as Chinese manufacturing data exceeds expectations

 

[defc0n]

Initial blanket offering

 

[JRP3]

Wallstreet hasn’t priced in the Tesla blanket yet. I expect huge gains Monday. Tesla Blanket

Cue the vegans at the next shareholder meeting.

 

[Zhelko Dimic]

Agreed. As weird as it sounds, your last bullet point - "just feels too good to be true" - is the one that makes it hardest for me to accept. It's "what we'd love to hear", which automatically makes it suspect. Even though there's quite a good bit of evidence pointing at it.

True. Yet, when there were problems, there were always indications of it, for those willing to look for them. I've always seen them, not always believed them. This time, there is nothing...
So, this quarter is likely to play in 'good to great' range , and even 'Good' may raise SP

 

[Navin]

don't be surprised to see a ws downgrade tomorrow am

 

[hacer]

Lol, the F-117 Nighthawk was low-radar observable in part because it was covered with RADAR Absorbent Materials (RAM).

Cybertruck is constructed of RADAR Reflective Materials (AF).

Its gonna lite up the po-po like a Christmas tree...

Cheers!

Strong reflections but with the smooth flat surface the reflections will NOT travel back to the source except for the very low probability of normal incidence. The F117 has flat surfaces at all the weird angles so that what little its skin reflects does not head back to the radar source even for multiple reflections.

Keep in mind that a stealth plane has to be invisible in a completely empty environment. Police radar sees mostly clutter so it just displays the largest Doppler shift (thus the fastest object). However it requires a minimum amplitude too because the tops of the wheel rims are instantaneously moving faster than the main body and so that part must be ignored. So the Cybertruck might actually be radar stealthy.

 

[RobStark]

• Of more potential importance: what about a minicar? A SmartCar-sized 1-person+groceries, or at best a 2-person vehicle? The non-NoAm market for such vehicles already is firmly established as a very important one; it seems to me the Origami School of Vehicle Manufacturing would marry so well to this structure to make, verily, a Match Made in Cyberheaven.

There are lots of companies targeting that low margin mini EV business why enter it?

Tesla enters high margin tough to match ICEv specs markets where others fear to tread.

After not pursuing Bubba you think Elon will pursue White Van Man?