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

[jkirkwood001]

Speculation:

Will Tesla introduce their in-house better battery cells abruptly or gradually? By replacing all current cells or supplementing them? The consensus here seems to be gradually-by-supplementing. I tend to disagree. Consider the Osborne argument.

If Tesla announces dramatically better battery technology coming SOON, won't that hurt sales of cars with the inferior batteries? Even if only Plaid S/X and Semi get the new batteries first, won't a substantial number of 3/Y buyers assume they are coming to 3/Y and wait?

If I was a tech company with dramatically better tech in the pipeline, I would quietly test it, make damn-sure it is ready, sneak it into all my products, and THEN announce it. This is exactly what Tesla did with their first self-driving hardware.
All Tesla Cars Being Produced Now Have Full Self-Driving Hardware
Will Tesla do this again with their super-batteries?

Possibly supporting evidence:

1) The Maxwell, Hibar, and Jeff Dahn acquisitions occurred quite awhile ago. And presumably Tesla started testing the desired technology long before they paid for it.

2) Tesla has the ability to software-limit battery performance and unlock it later. Could cars start getting the new batteries in secret?

3) Tesla announced greater range for Model Y but not Model 3. Why one and not the other? Was it because Model Y can't be Osborned? (because it's not being delivered yet)

4) Tesla didn't promise profitability this quarter due to ramping up new products. Could those products include new batteries?

5) Tesla has proven ability to keep secrets (FSD hardware, Cybertruck design, etc.) and move faster than anybody expects.

6) Rumors of a major S/X refresh last year reportedly did hurt sales until Elon quashed the rumors. So Tesla is quite aware of the Osborne problem.

7) Battery Day is now promised for April, which presumably means after the Q1 Production/Delivery Report in early April but before the Earnings Report in late April. Isn't this the perfect time to wow the market and explain that Q1 earnings will be weak because of ramping costs, not weak sales?

8) Elon has bet the company on new technology before.

9) Anything else?

Possibly contradictory evidence:

1) To my knowledge, no one has reported new battery equipment or production. (But see #5 above.)

2) Maybe abrupt introduction is higher risk than gradual. (But see #8 above.)

3) Anything else?

Importance to investors:

Maybe not much. We already know TSLA has a megaton of positive catalysts coming soon: Shanghai ramp and expansion, Berlin construction, Model Y ramp, Solar Glass ramp, Semi launch, Full Self-Driving updates and revenue recognition, Fiat-Chrysler payments, tax allowance credits, S&P 500 inclusion, bond upgrades, and haloes from Crew Dragon and Starship and Starlink and Boring tunnels and Lord knows what else Elon delivers.

But a possible April announcement that all Tesla models have dramatically better batteries NOW (in April), not later, seems one more reason for TSLA longs to hang onto their heinies and their shares.

Really interesting analysis and proposition - thanks.

 

[jhm]

LOL if Germany drags its feet and Tesla hasn't signed the final agreement (has it?) then I could see it pulling up shop and saying "see ya suckers, we ain't got time for slowness."

Maybe Tesla should start developing a second European Giga. The campus that is allowed to advance more quickly will generate more jobs sooner to the credit of regional planners.

 

[Nocturnal]

Really good video from Cramer yesterday on Tesla and why it's following the Netlix and Amazon stories. He makes some nice digs at the shorts, admits he was wrong on the stock etc. I don't know about you guys, but hearing good things about Tesla from the media is still novel.

Also, can you believe people give this guy money to invest for them? Not even the fact that he thinks this, but that he is so unaware or so insulated in a bubble of internet trolls, that he thinks it's not a problem to share these views? "If you don't allow Hollywood execs to pray on women then action movies won't be good." What even?

Lots of time left and I think you’d be right if the markets weren’t tanking today and it wasn’t a Friday. We’ll see though.

Not worried though, I’m pulling for some fun on Monday and Tuesday

Same. I have a 2/7 call at $585 that I'm holding. ​

 

[jkirkwood001]

Third Row Podcast Part 2 summary:

• Big change going on in the background of Autopilot: instead of having planning, image perception, etc all being separate, they're all being combined, with all camera imagery being handled jointly rather than running image recognition, etc on each one. Big change in both quality and efficiency.
• This is not Dojo; Dojo is about training speed. Comes out late this year or early next year.
• Sees computer vision as being like navigation was in the 1990s - a very hard problem due to the limitations of your hardware combined with early-generation software. Expects autonomy a decade from now to feel easy like navigation is today.
• Auto industry is used to slow rates of improvements. Still not really a car today that matches the 2012 Model S, from a price-for-capabilities standpoint.
• The founding principles of Tesla were basically completely wrong. Notion was we'd take a Lotus Elise, put an AC Propulsion drivetrain in it, but them together, we'll have an electric car, and it'll be great! Sounds pretty easy. But the AC propulsion technology basically couldn't be industrialized. Handcrafted electronics with an analog motor controller. It'd respond either completely or not at all. It just couldn't be scaled; it would have been basically finicky super-expensive prototype cars.Ended up using basically nothing of it. And basically 7-10% of the Lotus Elise. Would have been better just to make a car from scratch.
• But things are often like that. What matters is that you can iterate quickly and adapt.
• Mass manufacturing difficulty is underappreciated. Only at peak made 10 or so Roadsters per week. If two got made in day, that was a good day
• Final assembly was at an old Ford dealership in Menlo Park. The "test track" was just normal driving around the area.
• NUMMI plant was just a big box. Only broken equiment left. Some literally weren't even the scrap value. You couldn't get a scrap dealer to come take them for free. Tesla made a lot of them work, though (such as the plastic injection moulding machine, paint robots, etc). Body line had to be made from new, it was fully stripped.
• Worked out, but it was very difficult, esp. since top suppliers wouldn't work with them, or they'd get their "D-Team". It was vertically integrate or die.
• Tried outsourcing - battery was going to be made at a place that made BBQ grilles in Thailand. They realized this was a crazy idea, for all of the transport, how long it'd take to find out if there was a problem and iterate on it, etc etc etc. They could have ended up with 5 months of scrap inventory for a problem.
• There's no logic to having battery packs be made of modules anymore - they plan to move away from it. The initial idea, from the Roadster days was that if something broke, you'd swap out a module, like swapping out a dead server in a server room. But it's becoming less economically reasonable of a proposition now.
• Went through a lot of trouble designing the S pack for pack swap. But now even phones are going away from battery swap. Makes more sense just to increase the range and makes charging faster. It seems obvious now, but back then it wasn't as clear. But you still have atavism - just like Model 3 still has modules, Model S/X still have swappable batteries.
• The structure of an organization is reflected in the structure of the production. Tesla had a module team, so Model 3 has modules (this has been restructured to just a "battery team"). And then you end up with a box in a box. Because this team wanted an enclosure, and this team wanted an enclosure, so you have a box within a box. And then on the Model 3 you have the pack, and then an underbody, a third enclosure, because the body team wants to have an enclosed body. Lots of brackets on brackets. The teams historically haven't been integrated as much as he'd like to see.
• Building a production system is 100 times harder than a prototype. The reason that companies like Tucker died is because production is way harder than hand-building to show off.
• "Here's a real important point that is not well appreciated, this is a point that should be advanced by short-sellers, but I've not seen it articulated - but it should be: the incumbent car companies make most of their money by selling spare parts to their existing fleet at high margins. And they sell the new cars at a de-facto zero margin or even at a loss. It's kind of like printer cartridges and razor blades: you sell the razor at a loss and the blades at a profit, or the printer at a loss and the cartridges at a profit, or video game consoles - the actual cost of say, an X-box may be $600 but you can buy it for $300-400 because they make up for it on the games that are bought. So if you're a new company, you do not have a fleet. You have no fleet from which to subsidize the sale of your new cars. This is the primary reason there has not been a successful car company startup in the United States. Most car companies have 80%, 70% of their fleet out of warranty. ... Even if they stopped selling new cars, they would still... (laughs) their profits would increase!"
• Innovation rarely comes from insiders, who are complacent with their status; it usually takes outsiders. Such as with SpaceX: it's actually surprising how little innovation there's been in rocketry, despite SpaceX showing landing and reusing rockets many times.
• Not very warm on Rocketlab's idea of catching boosters with a helicopter, both from logistic and economic perspectives. But still thinks it's good they're working toward reusability.
• Earth-to-Earth: Main constraint is noise. Coming in for landing, the double sonic boom is very loud. Have to do offshore. But definitely can be done. And thinks that the economics can be made to work as well, to make it economically competitive with air travel.
• Electric VTOL aircraft: "a lot of difficulty associated with that". You can't do them all at once, with respect to allocating the resources. It can definitely be done, but it's where's best to put your resources, which are very constrained. Not just technically, but also, it's an entirely different regulatory regime. There are no car companies that are also aircraft companies.
• Asked if, due to the good financial health at Tesla, whether that means they can now start pumping a lot more focus on diverse R&D projects. Said it doesn't work that way. That if they know a factory that mass produces superb engineers, please let him know. It's not a money thing; there's a fundamental limit on "exceptional engineers" available.
• Asked about how priorities are chosen. They're usually dictated by necessity or choice. What do they absolutely need to make work E.g. with Model 3, there were so many mistakes with the production process that they had to dedicate pretty much the entire team to fixing Model 3 production problems. Said that it felt like the scene in Indiana Jones where they were being chased by the giant boulder
• Biggest focus now is to get to be making cars on each continent. Its insane to be making cars in CA and shipping them to Europe and Asia. Huge expense, high capital carrying costs due to at-sea inventory, tariffs, extra chance for damage, etc. Creates a lot of costs and is hard to manage. Increases factory complexity at California to deal with all different regulatory regimes. Including LHD vs. RHD, due to some random bureaucrat a hundred years ago And can't even have the same stickers, because not everyone speaks English.
• Having more factories will really destress the company a lot and improve its economics.
• Had to ship cars to Europe where the supplier of the headlights for Europe couldn't match rate, so they'd ship cars with US headlights and then swap them out at the port, just to keep the inventory moving.
• The first quarter last year was a tragedy of errors. Belgium (where they were shipping the cars) went on strike! "What do to you mean, Belgium went on strike?! Okay, now what do we do???" Also mentioned the China sticker issue.
• Ships are also a pain. Time waiting to ship, to load it... ships break down, get delayed by storms, get stuck waiting for ports, etc.
• Tesla has had a massive uphill battle to sell cars in China, due to no subsidies (unlike local manufacturers), facing tariffs, shipping, etc. Proud of how well they did despite the barriers they were up against.
• Cars in the US, they'd get paid by customers before having to pay suppliers, which is great for scaleup. For EU and China, it's reversed. Europe is much harder, due to the Panama canal delays. Esp. when the canal gets backed up. In the worst case they can be forced to go around Tierra del Fuego, which is a transit nightmare scenario.
• Asked what's the best reason for choosing Berlin rather than other places in Europe: (joking) "They have the best nightclubs" (everyone laughs). Says that they they investigated numerous locations, but needed to move quickly, and Berlin allowed that. The fact that BMW had been looking to build a plant there meant that there'd already been a year's worth of environmental paperwork been done on that location for an auto plant. Made it much faster. Local and state governments were also very supportive. Close enough to Berlin that people can still live in the city and commute to the factory. Train station will be moved to where you can hop right off the train and into the factory; no need to even drive in. Goes back to joking: "GigaBerlin sounds like the name of a great night club. I'd for sure work for a company that had a great nightclub"
• Asked about the roller coaster. Still wants to do that eventually. Would just have it be modified Teslas designed to ride rails.
• Asked whether he expected that many orders for Cybertruck. "No, no really?"
• Kimbal: "Elon told me that this was a daring design. I'm more excited about this design than any other design. And I saw it and I was just taken aback. Not by the design, just by the pure aggression that the truck.. you just stand in front of it, and it's like, "ooookay, I'm afraid". Elon: "Well, it seems that a lot of the reason that people buy trucks in the US, it's like, what's the most bad*ss truck. Like, which one's the toughest truck. Well, what's tougher than a truck? A tank. Like, a tank from the future!" ... "How do you ought-tough a truck? You make a futuristic armoured-personnel carrier."
• "I wasn't sure whether nobody would buy it, or lots of people would but it. I told the team that if nobody buys it, we can make a truck that looks like every other truck".

Such a great summary - takk, Karen.

 

[neezer]

I'm getting nervous now about the virus; the macro hit to the market in general, plus directly at ones with operations in China such as TSLA, AAPL, etc. If this exponentially grows next week, too many will want to go into cash and a holding pattern...

 

[woof]

Pitbulls time to drop the bone, seriously.

Bones? Where did they get bones? I like bones! Can I have one??

Trust me, I’m way more dastardly than Tarantino. I make him look like a chocolate sundae on a perfect Saturday afternoon at the beach on a private island in the Caribbean.

Caribbean....now we know where to look!

Possibly, if fate in on your side (though why would it be?!), you’ll luck out and I will be able to buy the superpower of my choice at which point I will simply blow you up with my mind when I tire of your pathetic attempts to escape.

Wow...krugerrand's are usually all shiny and stuff, but this one is getting dark dark dark. Did someone get Meow Mix instead of Friskies this morning? You wouldn't be related to Morris, per chance?

I trust this now ends all the silly talk.

You know it won't.

 

[humbaba]

I'm getting nervous now about the virus; the macro hit to the market in general, plus directly at ones with operations in China such as TSLA, AAPL, etc. If this exponentially grows next week, too many will want to go into cash and a holding pattern...

Well, unless you have short term options or need to sell shares in the short term what this represents is a buying opportunity. So far not much of one, but if it tanks -- well, that's what I have dry powder for. While I'm not expecting a meaningful buying opportunity I will definitely take advantage if one presents itself.

 

[willow_hiller]

This is not Dojo; Dojo is about training speed. Comes out late this year or early next year.

To clarify, this podcast was recorded in 2019, correct?

Does "early next year" mean "early 2020"?

 

[LJS22]

I'm getting nervous now about the virus; the macro hit to the market in general, plus directly at ones with operations in China such as TSLA, AAPL, etc. If this exponentially grows next week, too many will want to go into cash and a holding pattern...

Well if it’s as bad as they think it is then money won’t matter. But if it’s not as bad as they think it is then the market will rebound in a big way.
Do with this information what you will.

 

[ReflexFunds]

[

I take issue with the red statement you made here, most specifically because it has been broadcast through many media - it is not you I am specifically criticizing.
It is the premise that is sloppy: that Mr Musks’s shares are not part of the free float.

“I will be the last to sell”, and such other well-known statements are not, to my firm knowledge, any contractual obligation Mr Musk has with Tesla Inc., with Standard & Poor’s, with Wall St or with you or me. It may and with an immense degree of likelihood is true but that ought not to enter into S&P’s calculus.

A friend of mine used to be wealthy. Ranked at #8 in the world, he dismissed fears the investment community had about one of his business projects, saying that if it turned south he would bail it out with his own assets.
The problem was, when it turned south, his $30 billion of assets also disappeared and his creditors had zero recourse. In this case, he didn’t so much sell his shares as simply had them dissolved away (it was some of both, in fact).

I have mentioned this before but the joke almost bears worth repeating. I’m now worth $1 billion dollars more than he....not because my TSLA has done that well but because his net worth is now -$1 billion.

@jbcarioca can confirm the generalities of that little story.

The takeaway is not, of course, that Mr Musk is a Mr EB, but that his shares are not encumbered: they are a part of free float.

Let’s see how S&P treats them when the time comes.

I agree with your categorisation of Elon's shares generally, but S&P has their own clear definition for free float and it includes a very broad group of exclusions which would include all of Elon's shares:

https://us.spindices.com/documents/index-policies/methodology-sp-float-adjustment.pdf

However, shares held by the following types of shareholders are excluded regardless of whether the particular shareholder intends to exercise any form of control.
Long-term strategic shareholders generally include, but are not limited to:
1. Officers and Directors (O+D) and related individuals whose holdings are publicly disclosed
2. Private Equity, Venture Capital & Special Equity Firms
3. Asset Managers and Insurance Companies with board of director representation
4. Shares held by another Publicly Traded Company
5. Holders of Restricted Shares*
6. Company-sponsored Employee Share Plans/Trusts, Defined Contribution Plans/Savings, and Investment Plans
7. Foundations or Family Trusts associated with the Company
8. Government Entities at all levels except Government Retirement/Pension Funds
9. Sovereign Wealth Funds
10. Any individual person listed as a 5% or greater stakeholder in a company as reported in regulatory filings (a 5% threshold is used as detailed information on holders and their relationship to the company is generally not available).
* Restricted shares are generally not included in total shares outstanding except for shares held as part of a lock-up agreement.

The following holders’ shares are generally considered part of public float:
1. Depositary Banks
2. Pension Funds (including Government Pension and Retirement Funds)
3. Mutual Funds, & ETF providers, Investment Funds, and Asset Managers (including Hedge Funds with no board of director representation)
4. Investment Funds of Insurance Companies1
5. Independent Foundations not associated with the company

 

[SOULPEDL]

So literally the only protected animals that have to be relocated are anthills.

So, what, the grasshoppers get left behind? Serves them right. (Partisan Politics in a "A Bug's Life")

Hello, my name is Inigo Montoya...

 

[elasalle]

Anyone with ideas on what technologies will be used for Cybertruck. Specifically interested in vendors who have that tech. Think of things like Laser Welding etc?

 

[TheTalkingMule]

I'm getting nervous now about the virus; the macro hit to the market in general, plus directly at ones with operations in China such as TSLA, AAPL, etc. If this exponentially grows next week, too many will want to go into cash and a holding pattern...

The only real impact will be to energy markets. This could be the unforeseen demand disruption that pushes oil & gas into the bankruptcy spiral(see: @jhm 's Shorting Oil investors thread). My ongoing theory is the financial market contagion from that will be the impetus for our long-delayed global recession.

Other than the possibility of that.....it's no big deal. Personally I could stand to lose 15-30lbs, so I'll probably walk around all weekend shaking hands with folks.

 

[StealthP3D]

I'm getting nervous now about the virus; the macro hit to the market in general, plus directly at ones with operations in China such as TSLA, AAPL, etc. If this exponentially grows next week, too many will want to go into cash and a holding pattern...

I've never found "nervousness" about things like this to be an emotion that helped me increase my investment returns.

There are no signs that the Coronavirus is going to have ANY lasting impact on the markets or Tesla so worrying about it isn't going to help you be a better investor. In fact, worrying about things like this is a primary reason for the poor performance of most individual investors.

 

[neezer]

^^ Fair enough, even if one thinks they'll try to be really smart in timing the pull-out, it's still a "timing the market is always worse than time in the market"

 

[Nocturnal]

I'm getting nervous now about the virus; the macro hit to the market in general, plus directly at ones with operations in China such as TSLA, AAPL, etc. If this exponentially grows next week, too many will want to go into cash and a holding pattern...

Well if it’s as bad as they think it is then money won’t matter. But if it’s not as bad as they think it is then the market will rebound in a big way.
Do with this information what you will.

I think it's vastly overblown from an actual health risk. My only concern is that if it spreads then people will stay home and not buy things.

FWIW, people are nervous. Face masks are sold out everywhere. I'm not afraid, and friends in healthcare are getting briefed that it's not a major concern. That said, it is good to remind everyone that FEMA recommends we always have 2 weeks of food and water. As mentioned above if it is something truly bad then it won't matter, if it's just another SARS then it will be a buying opportunity.​

 

[Causalien]

I see Spiegel has gone from constantly tweeting (retweeting) random Tesla/Musk fraud conspiracies to constantly posting coronavirus conspiracies. He's convinced that it is much worse than China is telling and that they are burning bodies to cover it up. I think he has given up on all the Tesla conspiracies and is now praying this virus will do to Tesla what his lies/FUD couldn't. I think more importantly, he hopes he can at least convince people the situation is dire - whether it is or not.

What is up with people who see these weird conspiracies and negativity in EVERYTHING? Is is just a personality? Or is it a mental illness? I used to work with a guy JUST like Spiegel. He was constantly warning me of the impending financial collapse and telling me I needed to be stocking up on survival items like dried food and packaged meals. To this day, he is 100% convinced that it's not a matter of if, but when. And, every day, it's surely closer to being almost here. I can't imagine living in that kind of fear.

Ya, that one is exceptional.

I can see most asians with memories of SARS quarantine behaving like that. Not somebody in usa.

To be fair, Chinese gov cannot be trusted. Logically speaking they are more likely to lie out of incompetence than malice. Sure, they've improved their transparency, but the majority of the bureaucracy are still the same corrupt officials that presided over the SARS outbreak. They just happens to be corrupt officials on Xi's side.

 

[neezer]

I think it's vastly overblown from an actual health risk. My only concern is that if it spreads then people will stay home and not buy things. ​

Or that they say sorry, Tesla Giga3 will remain shut down for the entirety of Feb. Maybe longer? And then the shorties blow up the news.

 

[sparcs]

Third Row Podcast Part 2 summary:

karen to the rescue saving us from all those "influencers". Thanks!

 

[Curt Renz]

I'm getting nervous now about the virus; the macro hit to the market in general, plus directly at ones with operations in China such as TSLA, AAPL, etc. If this exponentially grows next week, too many will want to go into cash and a holding pattern...

A consideration should be whether shares are held short term or long term (at least a year). The difference in taxes can be quite significant.