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

[printf42]

Here’s the thing about the timing of this price cut, if Elon knew that Q1 2020 wont be as good, wouldn’t it make more sense to cut prices after Q1? Say in Q3 when Tesla is in a better place financially? We have Model Y prep coming up, won’t we need as much powder as possible to ramp Model Y and to spiff up Q1?

On the other hand, we can argue that Tesla May have found a way to lower the price of Model 3 through further efficiencies and decided to pass on the savings to customers now as a PR move, and to put pressure on competitors.

I was actually wondering when and how they would lower the price. Because 355k RMB is roughly the same as imported SR+ which included 15% import tariffs. Now MIC cars don’t pay tariff the price doesn’t make much sense.

So now we know why they didn’t deliver MIC cars in Q4, they want to wait for the subsidies to finalize so they can set the right price before delivering the first car to customers. You know when you lower price Chinese customers tend to cry louder then Fred, you don’t want that kind of publicity right after first batch of MIC deliveries.

 

[Fact Checking]

Here’s the thing about the timing of this price cut, if Elon knew that Q1 2020 wont be as good, wouldn’t it make more sense to cut prices after Q1? Say in Q3 when Tesla is in a better place financially? We have Model Y prep coming up, won’t we need as much powder as possible to ramp Model Y and to spiff up Q1?

Tesla didn't cut the price from their own margins to induce demand (in the hope of gaining more from higher volumes than the margin reducing effect is), they simply passed through a 10% VAT reduction to customers.

Previously they set the Model 3's price with a 10% VAT included (which money Tesla would collect from customers and transfer to the VAT account of the Chinese state) - but then they got the exemption, as the first foreign owned automaker in China, ever.

So everything is going as planned, Tesla is making exactly as much money per every MIC Model 3 sold as planned, except that the addressable market is even higher, due to 10% lower end customer prices.

In fact I think it was a good move to pass through the VAT cut to customers before volume deliveries started: early adopters would be grumbling if Tesla passed through the VAT cut only in a few months.

 

[printf42]

Tesla didn't cut the price from their own margins to induce demand, they simply passed through a 10% VAT reduction to customers. Previously they set the Model 3's price with a 10% VAT included (which money Tesla would collect from customers and transfer to the VAT account of the Chinese state) - but then they got the exemption, as the first foreign owned automaker in China, ever.

So everything is going as planned, Tesla is making exactly as much money per every MIC Model 3 sold as planned, except that the addressable market is even higher, due to 10% lower end customer prices.

Chinese VAT is 17%, and you still pay that no mater where it’s manufactured, as long as you sell in China(if you MIC then export to other market, you get that 17% back).
The difference for MIC is you don’t pay tariffs for locally sourced components, pay lower rates for imported components VS. fully assembled cars, and get lower labor cost.

 

[PeterJA]

At this point, I am worried that we may miss Q4 guidance. China production has me thinking, that perhaps Tesla/Elon was overly confident of record deliveries there, and perhaps counted that in our guidance. I would not have been this worried, but I fear the stock price being at this point, has my 90% exposure quite vulnerable in the short term. I’ll have to ponder this over tonight, and may have a chance to purchase some insurance as protection.

I’ll be happy to be wrong, but my gut tells me differently.

Your "90% exposure" is not vulnerable unless you are forced to sell shares or are gambling with options. Did you max out a margin loan or risk 90% of your assets on options? If not, there is no need to clutter this thread with your worries.

I see many folks here expressing worry about short-term stock movements and events that mean zero to a buy-and-hold investor. I don't care if Tesla misses Q4 guidance. I don't care if the stock goes to $200 again. If you don't understand why, then you don't understand what an historic, unprecedented, unstoppable juggernaut you have invested in. Again I recommend @FrankSG 's blog as a starting place to calm your fears.
My Tesla Investment Thesis 2.0: Tesla's Monopoly Potential

It may be helpful to note that Amazon stock dropped 90% in the early 2000s. Compared to that, TSLA's 50% drop last year was a walk in the park. But buy-and-hold investors in AMZN lost nothing when it fell to $8. Now it is at $1900.
At one point, Amazon lost more than 90% of its value. But long-term investors still got rich

 

[Fact Checking]

Chinese VAT is 17%, and you still pay that no mater where it’s manufactured, as long as you sell in China(if you MIC then export to other market, you get that 17% back).
The difference for MIC is you don’t pay tariffs for locally sourced components, and lower labor cost.

VAT for cars was lowered to around 10% in early 2019, but Tesla got even the 10% VAT exempted:

China to exempt Tesla cars from 10% purchase tax

"Tesla sees China as one of its most important, growing markets, and the exemption from a 10% purchase tax could reduce the cost of buying a Tesla by up to 99,000 yuan ($13,957.82), according to a post on Tesla’s social media WeChat account.

Sixteen variants - all the Tesla models sold in the country - are listed on a document issued by MIIT on its website, including Model S, X and 3."​

The MIC Tesla is exempted too, and Tesla has now passed through the VAT cut to customers.

 

[printf42]

VAT for cars was lowered to around 10% in early 2019, but Tesla got even the 10% VAT exempted:

China to exempt Tesla cars from 10% purchase tax

"Tesla sees China as one of its most important, growing markets, and the exemption from a 10% purchase tax could reduce the cost of buying a Tesla by up to 99,000 yuan ($13,957.82), according to a post on Tesla’s social media WeChat account.

Sixteen variants - all the Tesla models sold in the country - are listed on a document issued by MIIT on its website, including Model S, X and 3."​

The MIC Tesla is exempted too, and Tesla has now passed through the VAT cut to customers.

That 10% is talking about the up-to-52k purchase tax exemption, not VAT.
Manufacturers pay VAT and price it in MSRP, end consumers don’t pay that separately.

 

[JustMe]

For a bit of perspective - about 1.2 million cars over the 300k rmb price point were sold in China in 2018. That market is projected to grow by 8+% CAGR over the next 5 years.
China Luxury Car Market | Growth, Statistics, Industry Forecast 2019-2024

Tesla bears have focused too much on the waxing and waning of the Chinese EV market. That’s obviously misguided.

Can Tesla grow to take 20% of the luxury vehicle market in China? That would be just about right for GF3 cranking out 150k Model 3 & 150k model Y per year. That would be about $15 Billion in revenue, for those keeping score at home.

 

[M3Rider]

The subsidy is separate from the tax exemption.
The price was 355k RMB with up to 52k sales tax exemption (which applies to both MIC and imported cars).
Now the price is 323.8k, then private buyer can apply for 24.75k subsidies for MIC cars only. Which effectively brings the price down to 299k. And, the 52k purchase tax examinations still applies.

So Tesla did lower the purchase price to 323.8k, which is a 8.8% discount from reservation prices.

@RobStark said it would not happen when I mentioned the possibility in the past

 

[Thekiwi]

It wouldn’t be the craziest thing in the world if investors thought that investing in an auto company whose products don’t run on petrol might be a good option if geo political risk causes a large spike in oil prices.

 

[tinm]

It wouldn’t be the craziest thing in the world if investors thought that investing in an auto company whose products don’t run on petrol might be a good option if geo political risk causes a large spike in oil prices.

Nutty thing is, in places like New Mexico (which continues to ban Tesla), a “large spike in oil prices” would be welcomed by this state’s government as fully 1/3 of the state’s revenue comes from fracking the Permian Basin. It’d just get the state even drunker and even more addicted to oil. It’d also boost the struggling fracking companies who need a high oil price. Why, the whole Iran situation sounds like a deliberate—, nah nevermind.

 

[jhm]

https://electrek.co/2020/01/02/did-...-that-ev-charging-is-too-difficult-for-women/

I think we can strike Nissan off our list of viable competitors..

Nissan may be feeling a little inadequate.

 

[MXWing]

ps : Trending on twitter : World War 3.

Lots of stupid people on Twitter.

How much are you willing to pay for a call option on WW3 Actually starting?

Khamenei unless he wants to die is going to sit there and do nothing other than posture.

 

[printf42]

For a bit of perspective - about 1.2 million cars over the 300k rmb price point were sold in China in 2018. That market is projected to grow by 8+% CAGR over the next 5 years.
China Luxury Car Market | Growth, Statistics, Industry Forecast 2019-2024

Tesla bears have focused too much on the waxing and waning of the Chinese EV market. That’s obviously misguided.

Can Tesla grow to take 20% of the luxury vehicle market in China? That would be just about right for GF3 cranking out 150k Model 3 & 150k model Y per year. That would be about $15 Billion in revenue, for those keeping score at home.

You forgot to account for the purchase tax exempt, which makes Model 3 compete with 250k ICE cars, I imagine the market would be larger.
Also, Tesla stretch is a real thing, anywhere in the world.

 

[M3Rider]

Lots of stupid people on Twitter.

How much are you willing to pay for a call option on WW3 Actually starting?

Khamenei unless he wants to die is going to sit there and do nothing other than posture.

From reading more of twitter, the consensus is they'll hack the grids and turn off electricity, plus block the straight of Hormuz to cut oil. Actually, not sure what would be the point in the latter, I believe U.S. is a net exporter of oil, don't really need it.

 

[jhm]

From reading more of twitter, the consensus is they'll hack the grids and turn off electricity, plus block the straight of Hormuz to cut oil. Actually, not sure what would be the point in the latter, I believe U.S. is a net exporter of oil, don't really need it.

US imports heavy crude and exports light crude because US refiners require a heavier mix than is produced domestically.

 

[Buckminster]

Latest from Dave T. Nothing groundbreaking but worth a look.

 

[sundaymorning]

Your "90% exposure" is not vulnerable unless you are forced to sell shares or are gambling with options. Did you max out a margin loan or risk 90% of your assets on options? If not, there is no need to clutter this thread with your worries.

I see many folks here expressing worry about short-term stock movements and events that mean zero to a buy-and-hold investor. I don't care if Tesla misses Q4 guidance. I don't care if the stock goes to $200 again. If you don't understand why, then you don't understand what an historic, unprecedented, unstoppable juggernaut you have invested in. Again I recommend @FrankSG 's blog as a starting place to calm your fears.
My Tesla Investment Thesis 2.0: Tesla's Monopoly Potential

It may be helpful to note that Amazon stock dropped 90% in the early 2000s. Compared to that, TSLA's 50% drop last year was a walk in the park. But buy-and-hold investors in AMZN lost nothing when it fell to $8. Now it is at $1900.
At one point, Amazon lost more than 90% of its value. But long-term investors still got rich

I used to be a hold forever guy, but my strategy has shifted from hold forever through thick or thin..to swinging maybe 30% of my portfolio and taking advantage of the price movements, especially with the current volatility. This may sound greedy of me, but if my gut is right, I’ll be making a substantial amount of money on my decision tomorrow to purchase some protective puts. When the stock was down, shorts could have covered, many didn’t.. so here they are with their backs against the wall.

I’m trying to remain focused on the short term observations so that in an event of a miss (I give that a 50% chance right now), I could have more powder to buy lower. What also concerns me as a bull is that being here since 2012 I’ve seen many longs burn out after two years of waiting for the ship to turn, many of those investors simply couldn’t stomach the down stretch because they took advise from super bulls. It isn’t just about you nor about me on this board, but there are also countless nubs as well as long term traders who may be buying in at current prices, gambling with out of the money options... thinking that this quarter is a lock. If those guys burn out as many here have in the past then we are contributing to their demise. As a community, I’m trying to poke around to see if there are any explanations that would steer me away from wasting my dimes on protective puts tomorrow. So far I haven’t. Although @Fact Checking did put me at ease somewhat with the price cut and VAT explanation. If I had not brought that up, I would have not understood the VAT transfer. So excuse me if I am putting my thoughts out there, but having been burned hard and enduring some pains through the past 5 years I am inclined to be more cautious than ever with over promises for the short term. You are welcome to put me on ignore if you feel that my thoughts are clogging up this board for the next 24 hours.

Does anyone know if Elon mentioned anything pertaining to China’s tax credit as being a hinderance to deliveries in Q4? Did he say anything about holding back deliveries bc they were waiting for it’s approval? If not, I feel that it may be an unpleasant surprise as they simply thought the exempt would be “automatic” instead of having to wait for its approval. This may sound silly, but so was sending M3 builds without the correct Chinese requirements last quarter.

 

[Fact Checking]

That 10% is talking about the up-to-52k purchase tax exemption, not VAT.
Manufacturers pay VAT and price it in MSRP, end consumers don’t pay that separately.

You are right - I misunderstood the vehicle purchase tax, it's indeed paid by consumers.

New link about the MIC purchase tax exemption:

Bloomberg - Are you a robot?​

With all that Tesla's MIC SR+ price of $43k is about 10% higher than the Fremont SR+ is within the US ($39k), so they should still have healthy margins, despite lower initial volumes.

 

[Fact Checking]

You forgot to account for the purchase tax exempt, which makes Model 3 compete with 250k ICE cars, I imagine the market would be larger.
Also, Tesla stretch is a real thing, anywhere in the world.

Plus gasoline prices in Beijing for example are ~$4.5/gallon, which is a significant cost: ~$70 to refuel a BMW 3-Series - and high performance engines also have punitive local taxes.

Tesla's price advantages cannot be matched by German Big Three.

 

[Artful Dodger]

I wouldn't mind having an Archimoto 3 wheeler for $7500 off. That would put it in golf cart price range. ​

Nope. Its a motorcycle, not a car:

FAQ - Arcimoto

"Are there any tax incentives for the FUV?

"Currently, there are no federal tax incentives. Unfortunately, the federal EV tax credit only applies to passenger vehicles and light trucks. The federal tax credit for electric motorcycles, which is the one that would apply to our vehicle, was sunsetted at the end of 2016 and has not been reinstated. We are working to change that.

Your state may or may not have an applicable electric motorcycle tax credit. Currently the states of California, Massachusetts, Maryland, Arizona, and Illinois offer tax incentives. These are subject to change, so check with your state’s laws.

Also, we’d love your help. Contact your representatives and tell them you would like to see a tax credit for electric motorcycles and three-wheeled vehicles. Let’s take away roadblocks to the rEVolution."​

Looks can be deceiving. FUV is a 3-wheeler, and licenced for the road as a motorcycle.