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

[Carl Raymond]

I think this is like the feds dual mandate. Tesla needs to stay modestly profitable, so they are cutting costs and driving productivity harder then they ever did before. The profit issue is to avoid capital markets and the weakness it engenders when they have to sell the company to Wall Street. This isn’t just a cash flow thing, it means they can focus on long term goals and act like a private company.
The other mandate is max growth. This has a lot of affects and demands. If they pressure suppliers on price and don’t increase sales, they’re just weakening the suppliers and don’t get long term buy-in. Every time Tesla lowers prices it increases demand and helps them drive demand higher which helps drive more demand. If Tesla pushes Panasonic to install more cell capacity they need to use that new capacity to help Panasonic get their return on investment. There are other suppliers that Tesla is pushing for cost reduction and giving up some minor profit to make sure all suppliers are running at capacity and getting ready to continue incremental growth.

Thinking left field, there’s also the Tesla Network to consider. The more cars on the road and the higher the production rate at the time when full autonomy becomes a thing, the sooner Tesla become a trillion dollar company.

I know many don’t believe full autonomy will happen any time soon, but that group does not include Elon Musk.

 

[anthonyj]

Sorry my bad....when I say spoken for I was talking more about sales that will happen. I guess confidence in that there wouldn't be any issues having that amount of sales? "Spoken for" was the wrong term to use.

And it could totally be Elon saying we saved this much, we're fine on margin....pass along the savings. I just wish that philosophy was communicated clearly. Using Amazon was a good example. You knew that they didn't care about profits and only cared amount market share....because they constantly communicated that, and communicated it very well. I'd love for Elon to come out on the earnings call and say "We're focused on being self-sufficient, maximizing our EV market share and EV market share in general by forcing our competitors to match our cost savings or risk losing customers"

I love the Amazon way for Tesla....they just need to make their messaging as clear as Amazon about their intentions.

 

[sundaymorning]

View attachment 374873

Did Tesla do another $1,100 price cut for Model 3, when was it impemented?

 

[Singer3000]

If Elon wants the quarter to be profitable, he'll make it profitable because he can just scale some small project down or hold off on some purchases for Capex to hit profitability.

You are correct that smart CFOs can find ways to manipulate profit and loss in the short term. But capex does not affect profit until depreciation of the investment commences. Perhaps you mean Elon will scale down R&D, which is not a capitalised item but is carried in Opex? Well Tesla did just execute a very well publicised redundancy programme so probably yes.

Sorry if I sound pedantic or condescending but I am of the view that you need to be precise in differentiating between Cashflow and Profit if you’re going to stray away from Index investing.

 

[srius]

Probably exaggerated, but nonetheless, the chickens have been coming home to roost for a while now on the SCTY acquisition. Arguably, Elon should have let it implode, or bought the assets at bankruptcy. Speaking as a strictly TSLA shareholder. I’m sure SCTY shareholders appreciated the bailout.

The primary purpose of saving Solar City is to preserve the infallible image of Elon - totally worth the cost of dilution. Unfortunately, Elon didn't hold his end of bargain and broke down last year.
The GF2 story is likely more true than false. The poor ramp-up of solar panel production speaks for itself. Tesla might be able to make excuses on solar roof production as there are no other companies producing solar roofs. But there are plenty of companies produce solar panels in large scale.
Tesla has never been good at orderly executions (Solar City might be worse). Elon has been able to compensate this Tesla flaw with his immense abilities to fix any emerging problems and continue to improve the solutions. But GF2 is relatively low priority as Tesla/Elon has his hands full with EVs.

 

[anthonyj]

Did Tesla do another $1,100 price cut for Model 3, when was it impemented?

A few hours ago

 

[Mark's Beagle]

Price cuts to maintain demand while keeping high margins is actually a sign of strength.

Just give up the hyperbull unlimited demand BS.

To quote the honorable Judge Judy,

"Don't pee on my leg and tell me it's raining"

 

[mltv]

Price cuts to maintain demand while keeping high margins is actually a sign of strength.

Just give up the hyperbull unlimited demand BS.

To quote the honorable Judge Judy,

"Don't pee on my leg and tell me it's raining"

It also bought my brand loyalty if it keeps on giving the best price for an already high demand awesome product. I see nothing wrong with that.

 

[SPadival]

Russ Mitchell of LA Times is another one of those reporters who is openly hostile to Tesla

Few days ago, I posted this tweet:
S Padival on Twitter

And on cue, he tweeted this today:

Russ Mitchell on Twitter

Note the likes and RTs by whos who of TSLA FUDsters. Anyone with an LA Times subscription - please consider cancelling .

 

[Buckminster]

My gut is telling me this price cut(at this specific time) is a demand lever being pulled.

Am I being overly pessimistic to think that by passing the savings to customers in a time period where they can ship a bunch of cars overseas, leaving a significant less amount for domestic sales, they are just giving away $1,100 that could also be reinvested in growth and essentially increasing the waiting list?

If this spurred demand so they could ship more cars out than before I would understand it under the Tesla mission, but aren’t they already shipping all they can make? Put that $60 million or whatever it is towards R&D for something.

The cost for MR in US is $34,850
After savings....
Coincidence that this is <$35k?
All models available in US in Feb. Clearly there is a demand issue in US (only) without introducing SR. Nobody ever said that Tesla would make 5k per week for US forever. Not enough auto carrying ships in the world? Perhaps Elon needs to keep EU in premium territory for max profits. In France you can't buy MR at all still.

$42.9k for MR w/ premium -> $37.9k for MR w/o premium. Okay, it isn't actually an option at the moment, but my point is that this is getting very close. Will the MR simply be rechristened the SR for a launch in the middle of the year? Given the pricing movement in January and now February, it doesn't seem that improbable.

While the pack costs were supposed to make that prohibitive, we don't really know what the pack costs are. I wouldn't even be entertaining the notion except for the $3.1k price reduction over a five week period.

I still expect MR to disappear eventually (not popular prediction here). The price drop adds weight to that. They are not going to sell:
SR $35k
MR $37.9k (+2.9k)
LR $44.9k (+7k) - 5k less than today with PUP

I expect:
SR $35k
SR dual $39k
LR $44k (dual only?, will they sell without PUP?)

There seem to be too many options but it is necessary to pull people away from the $35k option.

Another reason for the price drop is that SR is still 4-6 months away according to the website. How many months has it said that for?

 

[Esme Es Mejor]

Nothing wrong with moving down the price - demand curve per se - but if you claim you are production constrained it doesn't fit.

They didn’t claim to be production constrained. Of course, they are currently production constrained in Europe and China, but that should only last a few quarters at most.

The focus hasn’t been on production or demand, but on costs— bringing down costs so they can offer the lower-priced variants while maintaining their margins. That they chose this demand lever suggests that they’ve controlled costs well enough that they could afford it. It they couldn’t afford this price cut, they could have chosen a different demand lever— like leasing.

Making sure there is ample demand in North America also gives them flexibility at the end of the quarter. If the financials are good enough that they can have 10k+ cars in transit to Europe & China and still show a profit, they can choose to do so. If they need to minimize cars in transit in order to show a profit, they can channel production exclusively to North America at the end of the quarter. But to have that flexibility, they need to be sure there is ample demand in North America.

 

[gora321]

Kristof Lambrecht‏ @Kristof_1978
Customer deliveries of model 3 start next week. I got confirmation from two people in Belgium

that will receive their car on the 14th. #tesla #model3 #TheWaitIsAlmostOver

 

[gora321]

Daphne‏ @DeeLex_MCEM
Omg IT'S HERE! Just saw a bright red @TESLA MODEL 3 in the streets of Paris for the FIRST time ever! I screamed of surprise (& happiness, lbr) in my motorcycle helmet. No kidding. I can hear Marie Kondo "Does this spark joy for you?" Yes yes, yes it does. Thank you @elonmusk

5:21 AM - 5 Feb 2019

 

[heltok]

Another aspect I am not sure if it has been mentioned. Tax credit fell 3750. Price fell 2000. But for companies such as car rental companies, taxi companies etc the tax credit was meaningless. Maybe they will pick up some of the demand now. So hopefully when I roadtrip rental comapnies will start offering Model 3 for rent? Seems like a lot of us would love to drive a Model 3 when we go on a holiday. And the taxi companies must at some point realize that driving Model 3 as a taxi makes a lot of sense? Maybe Tesla gave some companies a good deal for a few hundred Model 3 if taking delivery in March when they shift production from Europe to America again.

 

[Fact Checking]

I really don't want to wait until 2020 for S&P 500 inclusion.

There's two possibilities: May/June or August/September 2019 S&P 500 inclusion.

For S&P inclusion they'd have to either post GAAP profits of >$260m in early May (Q1), or any GAAP profit in early August (Q2).

Q2 profits are going to benefit from several factors:

• +10,000 European/Chinese in-transit deliveries from Q1, all with Long Range AWD and Performance margins,
• end of Q2 sales push due to $3,750 tax credit reduction in Q3,
• European Model 3 demand will further increase in Q2: spring/summer is peak new car season,
• HW3 will probably be installed in all new cars by then and there might be the first FSD features activated as well,
• seasonal increase in solar and storage products.

It would require a Force Majeure event for Q2 to not be robustly profitable.

 

[gora321]

Tesla Driver ‍ on Twitter

 

[Buckminster]

It would require a Force Majeure event for Q2 to not be robustly profitable.

 

[gora321]

 

[gora321]

ValueAnalyst on Twitter

 

[FS_FRA]

Model 3 now $35K....

Elon just tweeted.

“.....Model 3 starting cost now ~$35k (after ~$8k of credits & fuel savings)....”

.....I just wish Tesla would stop the “after credits and fuel saving” BS. There is a serious need for honesty in advertising: not all potential buyers can realise that saving. A car that costs $43k cost $43k, and not $35k.


A buyer that can then realise $8k saving: great for you!