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

[Curt Renz]

MarketWatch - 80 minutes ago: Tesla makes its first Model 3 deliveries to Europe

 

[TradingInvest]

Yep. The FIRST DAY I drove to work after receiving my 2012 S I sold another S. This person literally followed me into my office parking lot, curious, and I offered a test drive. Sold.

Gave a second test drive to someone else within a month and that person bought too.

Have now personally sold 2 3s and 2 Ss as a result of my test drives, which I know is nowhere near the most...but if everyone did that...

My experience is the same. Test drive plus a little bit of explanation get the car sold immediately. It's so much more compelling than any gasoline cars.

I wrote down the advantages of Tesla cars so I don't have to go through them in my mind every time.

Safety, fun to drive, saves on gasoline, great for the environment, less maintenance, premium audio system, autopilot, free SW update, front trunk, large space inside that can hold a mattress, nice user interface, video recording, great handling, games, higher resale value, highest owner satisfaction rate. Am I missing anything?

 

[EVNow]

I agree that the bulk of demand for Model 3 will be in the $35-$45k range, but I think you are overestimating the minimum range demanded by most people for an EV - many are wanting them primarily as commuter cars and 220 miles is more than ample range. in fact I think a significantly lower range would even be acceptable to many (the ~150 mile “City Range” I suggested earlier). Worth remembering the bulk of non-tesla EVs have been sold at much lower ranges.

I think 200 mile is the minimum that will sell in large numbers (in US).

People don't want just a commuter car - but a "weekend" car as well that they can take to exurbs and nearby towns and factory outlets and airports. In winter, at normal freeway speeds - with range to spare, after a few years of battery degradation.

Note that the 150 mile Leaf 2 has not been a big seller. Infact it sells less than Leaf 1 did, with 73 (later 84) mile range. Infact less than 1,700 per month in US in December. Its been selling better in Asia & EU - so may be, Tesla can make a sub-standard (!) range 3 for those markets.

 

[scaesare]

minor correction: $100/kWh, not $125.

Oof, right.

Thanks.

 

[tinm]

I disagree. The 400k reservations were for a 200 mile, $35k car.

Availability of Bolt of Leaf 2 LR hasn't changed that. They are mostly still waiting for the $35k, 200 mile car. Along with leasing, the $35k car will let Tesla sell 500k 3s per year, when they can make that many.

We placed a reservation in March 2016 for a 3 but it was never for the standard range 3. We wanted as much range as we could get. But we haven’t bought the 3 yet due to potential risks of owning 2 Teslas in a state with zero service centers, plus wanting to wait for hundreds of thousands of VINs to pump out of factory before getting the 3.

Just one data point but I bet we were not the only 3 resv holder intent on the dual motor LR version from day one.

 

[EVNow]

Just one data point but I bet we were not the only 3 resv holder intent on the dual motor LR version from day one.

Sure, but a vast majority of the people wanted the $35k, 200 mile car - they didn't somehow think they'll get a $35k, 300 mile car.

 

[skitown]

We placed a reservation in March 2016 for a 3 but it was never for the standard range 3. We wanted as much range as we could get. But we haven’t bought the 3 yet due to potential risks of owning 2 Teslas in a state with zero service centers, plus wanting to wait for hundreds of thousands of VINs to pump out of factory before getting the 3.

Just one data point but I bet we were not the only 3 resv holder intent on the dual motor LR version from day one.

Get the 3 also already! It’s awesome. We have an 85D as well and live ~8 hours from the nearest Service Center. Join me in my Tesla insanity.

 

[Singer3000]

A SR Model 3 at 220 miles just isn't enough range for most to get super excited about an EV.

SR demand in Europe may end up exceeding SR demand in US quite comfortably.

 

[SPadival]

Self explanatory

More Tesla Love from Joe Rogan & Travis Barker (Starts 1:44) : teslamotors

 

[Singuy]

I think 200 mile is the minimum that will sell in large numbers (in US).

People don't want just a commuter car - but a "weekend" car as well that they can take to exurbs and nearby towns and factory outlets and airports. In winter, at normal freeway speeds - with range to spare, after a few years of battery degradation.

Note that the 150 mile Leaf 2 has not been a big seller. Infact it sells less than Leaf 1 did, with 73 (later 84) mile range. Infact less than 1,700 per month in US in December. Its been selling better in Asia & EU - so may be, Tesla can make a sub-standard (!) range 3 for those markets.

The Leaf 2 selling less than Leaf 1 has nothing to do with range(since your argument is increasing range increase demand and then use the Leaf 2 as an example??) but it's due to the model 3 taking all subpar EVs marketshare(which accounts for 80% of all EVs sold).

The Tesla brand and sexy appeal is good enough to sell lower range cars if the price is right. A 25k car @180 mile range will probably sell pretty well. Something like this will probably kill off all other EVs out there. The problem is, a 180 mile range car is a hard sell for potential ICE buyers who rather not sacrifice too much.

So Elon think the real competition for a Tesla is ICE, not other EVs. I believe he will continue to focus on a no compromise solution. The roaster 2.0 is a testament to that.

 

[Fact Checking]

I’m probably wasting breath here, but if some want to get the terminology right...

An increase or a shift to the right in demand is when the entire demand curve moves. It means more will sell, *for the same price*.

Mostly what is described on these pages as an increase in demand is just movement along a static demand curve, caused by reduced price. This is not an *increase* in demand.

The reduced price theoretically reflects an increase in supply, since theory tells us that market price is where the demand and supply curves meet.

Demand curve - Wikipedia

There's a number of nuances that are important for Tesla's supply/demand curve:

• By all means Tesla is a supplier of a unique product with no equivalent substitute product available on the market. Their main competitors are Tesla's own products. Regular supply/demand economics do NOT apply. For Tesla price reduction/increases are primarily not tools to manage demand in terms of finding demand for supply while trying to stay competitive with competitors, but to extract either the maximum amount of profit margin, or to drive the highest revenue - whichever their goal is currently.
  
• Tesla's main marketing channel is "word of mouth", and product recognition/penetration is nowhere near 100% yet - it's probably not even at 30% yet, even in the U.S. Put differently: just by educating the public about EVs and Tesla in particular, demand could increase 3x or more - and this would organically increase demand for higher price configurations as well. I.e. selling to isolated social circles where a member willing to buy an EV can finally afford a Tesla would teach other members of that group as well about EVs and could result in AWD and Performance sales, with EAP and FSD.
  
• Reductions of the lowest entry price also increase the 'addressable market', which is a way to increase demand. In this fashion transforming the costs of the referral program into a price reduction is also a tool to reach broader and broader socioeconomic groups. In particular $39,999 ASP is going to be an important psychological price barrier in the U.S., and Tesla is working their way towards that goal. There's many people who can afford but would never consider a $40k-$50k car, but would at least be willing to book a test drive for a 39,999 car, out of curiosity...
  
• Tesla reducing entry prices is also going to force incumbent ICE carmakers to offer real, mass-produced cars, not just compliance vehicles. The price of Tesla's models is an important forcing function: for example there's a good chance that entire lines of high margin BMW and Mercedes sports sedans (BMW M3, M4, Mercedes AMG, etc.) got the Model 3 Performance as a competitor in Europe, which they are unable to compete with using an ICE engine.
  
• While getting a new order for a new car is a 100% sale for Tesla, getting a current customer of a premium ICE vehicle to defer the purchase of their next ICE vehicle by 1-2 years (to see how this whole EV thing works out) is probably a 30-40% sale, so should be considered a future demand increasing measure as well. Every single price reduction is going to reduce the demand of comparable ICE vehicles even when it does not result in the sale of a Tesla yet.

All of these factors increase the number of people willing to place a new order for a Tesla car now or in the future, so for Tesla price reductions are meaningful, "real" measures to increase demand for Tesla vehicles.

 

[lklundin]

Sales tax is exactly the same in a jurisdiction. Somewhere between 0-11%

Variance between neighboring cities is usually no more than .5%.

When it is more people know it and shop across the border.

Any idiot can add the price of a product plus 0-11%.

Thank you for so eloquently demonstrating the difference between US and EU perception of consumer rights.

 

[schonelucht]

Poster in the Dutch sectuon confirmed the issue was an untimely software update which hung the car. Poster was (only customer) on site waiting for his delivery seeing it play out in real time... talking about unlucky. A bit dishonest by Elon to insinuate it had something to do with Zeebrugge while it had everything to do with their own software test practices.

 

[SpudLime]

And of course we need a tax revenue source for road construction and maintenance, to replace the declining gasoline tax at the pump. But I have a hunch that if we really created a level playing field, EVs with today’s technology would already come out way ahead of ICE cars, no subsidies necessary.

States do this already. Here in VA, I have to pay an annual fee on top of my personal property tax that covers not paying the pump taxes.

 

[Carl Raymond]

This. I also heard from a Tesla employee (Westfield Woodland Hills?) merch would fly off the retail shelf. They discontinued merch in that location to make room for a Model 3.

Sorry for this ‘seniors’ question. What does ‘This.’ mean as a stand-alone sentence at start of a comment? Is it to emphasise the preceding quote, or to emphasise one’s own words that follow?

 

[Fact Checking]

The Leaf 2 selling less than Leaf 1 has nothing to do with range(since your argument is increasing range increase demand and then use the Leaf 2 as an example??) but it's due to the model 3 taking all subpar EVs marketshare(which accounts for 80% of all EVs sold).

Yeah, the Leaf 2018 is already suffering from the lowest Model 3 ASP being "too close". Leaf 2/3 MRSP starts at $30,000, with the following trim levels (sorry, 1 year old pricing - couldn't find the newest ones):

So basically the $42,900 Model 3 will beat these specs in major ways:

• Even the Medium Range Model 3 has almost twice the effective range of the Leaf's ~150 miles.
• "Fast charging" is a higher trim option on the Leaf, it's a default trim on the Model 3.
  
• The Model 3 has a liquid cooled active battery management system that is best for battery longevity and thus resale value.
• "Navigation" is a default trim feature on Tesla, it's an extra option on the Leaf.
  
• The Model 3 is a mid-size sedan, the Leaf is a compact car. Trunk and frunk space significantly larger.
• You get all the safety features with the Model 3 at the entry level already, and this is an OTA upgraded promise for the future as well. With the Leaf every trim level introduces new safety features.
• Model 3 acceleration is much better.
  
• Unbeatable audio: the Leaf has 7-speaker Bose system, while the Model 3 has 12-speaker premium audio which is comparing very favorably with high end car audio systems from Harmon Kardon, Kenwood and Alpine.

So the Leaf 2018 isn't really competitive with the Model 3 - it can probably only capture U.S. sales where buyers are absolutely stretching with maximum incentives in the $22k-$25k effective price range, which price category Tesla cannot reach yet - or are leasing it.

I.e. every time an EV tried to compete in Tesla's price range it didn't end well. Almost all successful EV products carefully dodge Tesla and create healthy price separation downwards.

Even Volkswagen AG blinked: their new VW I.D. EV got down-sized and redirected from the $30k-$35k price range towards the ~$25k-$30k price range in the last minute, I believe in an attempt to avoid competing with Tesla directly.

Or as a VW executive recently admitted:

VW Boss: Tesla Controls 50% Of EV Market, We're Aiming For The Rest

What about Tesla? Keogh says, “Right now [U.S.] market share is 50 percent Tesla and 50 percent everyone else. Who is going to win the other 50 percent? That breakthrough product has not arrived yet.”
​

 

[Fact Checking]

Sorry for this ‘seniors’ question. What does ‘This.’ mean as a stand-alone sentence at start of a comment? Is it to emphasise the preceding quote, or to emphasise one’s own words that follow?

It's Internet slang for strong approval of the quoted/replied-to comment:

Urban Dictionary: This​

 

[SpudLime]

So much pontificating, typing forever over a price drop of $1100. The guy literally just said in the earnings call that he wants the price to be more affordable to everyone.

It’s his main mission. To get everyone off fossil fuels. To do that everyone needs to be able to afford an EV. So many folks want to tell him how to run his business. Every fiber of the guy is to reduce the price. Keeping the company going is secondary.

How is that simple plan not acceptable to so many folks?

 

[Compton]

Cumulative sales of EVs. M3 vs others.

Tesla Model 3 Fan on Twitter

 

[Fact Checking]

So much pontificating, typing forever over a price drop of $1100. The guy literally just said in the earnings call that he wants the price to be more affordable to everyone.

Bears/shorts were waiting for an excuse for a bear attack and for a nullification of the good Q4 results, and increasing 'doubt' and 'concern' about Tesla's 2019 earnings.

Since ASP is a key input variable to every model of Tesla earnings, taking $1,100 out of ASP when selling around 100k vehicles per quarter is a significant shift in revenue and profits when assuming simplistic demand/supply forces, especially if your $TSLA price target is a super honest and well founded $185 that is in absolutely no relation to your firm's short position.