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

[lklundin]

You would have to be a pretty dumb "environmentalist" to not realize that slowing down the transition to EV's is more harmful to the environment than harvesting the tree crop. And this is coming from someone who has spent tens of thousands of dollars on real environmental action (protecting unique and irreplaceable forests and habitats).

While it's possible that "Grüne Liga" (Green League) is acting in bad faith, one should not underestimate the strangeness of conclusions reached by fanatic idealists.

A modern-era German example of non-sensical idealism is the Baader-Meinhof group. These fine people decided to expose how the German state was inherently violent - by using violence against it thereby causing a violent reaction! QED!

In connection with the USA Elon Musk has tweeted how he has great respect for judges. I would not be surprised if he will be able to conclude that also German judges can be respected.

 

[Fact Checking]

It was very strange that just days before Elon had indicated there was no earthly reason to seek new capital.

Yeah, here you are just plain lying.

In the Q4 conference call Elon replied to this specific question:

Q: "Why not raise capital now and substantially accelerate the growth in production, i.e., build the Gigafactories, investment in Supercharger and customer service?"

Elon: "Well, we're actually spending money as quickly as we can spend it sensibly. So if there's any sensible way to spend money, we're spending it. There is no artificial hold back on expenditures anything that I see that is what looks like a -- it's got good value for money. The answer is yes immediately. So -- but we're spending money I think efficiently and we're not artificially limiting our progress. And then despite all that we are still generating positive cash. So in light of that, it doesn't make sense to raise money because we expect to generate cash despite this growth level."
​

I.e. Elon denied they'd "need" to raise capital to grow faster, he said they are already near maximum growth.

He didn't say they cannot and wouldn't raise money for other reasons, such as a 30% higher share price ($800) than at the time he made those comments ($550). There is a share price at which point Tesla can generate even better returns from that cash.

BTW., in the previous capital raises of Tesla of the past 10 years, the capital raise was followed by a sustained rally three times out of three, in two cases immediately, in the third case after a 3 months delay. Not advice.

 

[Fact Checking]

New article from the Nikkei:

"Tesla teardown finds electronics 6 years ahead of Toyota and VW"

"Self-driving AI sends shivers through traditional supply chains"

A teardown of the Model 3 shows Tesla so far ahead of more established peers that its technology could end the auto supply chain as we know it. (Nikkei xTech)​

...

What stands out most is Tesla's integrated central control unit, or "full self-driving computer." Also known as Hardware 3, this little piece of tech is the company's biggest weapon in the burgeoning EV market. It could end the auto industry supply chain as we know it.

One stunned engineer from a major Japanese automaker examined the computer and declared, "We cannot do it."​

 

[CaliBear1]

Yesterday I played in a charity golf tournament (Aussie fire relief) at the Laguna Golf Club at the Banyan Tree resort on the island of Phuket in Thailand. Much to my surprise, I saw this beauty parked there. After five months, this is the first Tesla I've spotted in the Kingdom. I guess that shouldn't come as a shock since Thailand has no EV infrastructure and the import duty on luxury cars is almost 200% of the vehicle price! This one has Bangkok plates and probably came from Hong Kong.

As an expat friend noted, the island would be a perfect lab for EVs. If only the Thai government would waive import duties for EVs...

And then there's Bangkok. Like many big cities, the Thai Capitol desperately needs to transition to EVs. It is in a constant state of gridlock and consequently choked with poisonous fumes. And don't get me started on the noise pollution! Alas, the economics of Thailand suggest that, despite the need, it will lag significantly in the adoption of an EV culture.

 

[davecolene0606]

I read that it is not unusual for some percentage of workers to not return after the holiday and with the Coronavirus that may be exacerbated. Also, while things are looking better with the new infection rate, it is a long way from being over and it has potential for getting a lot worse.

I'm not trying to say that this is a problem or that it will be a problem. I'm just trying to point out that even the short term future of Tesla is not cast in stone. The current valuation is at levels that will require many fold growth of the company over years. It just seems like a silly bet to expect the company will perform perfectly for that long. The first significant misstep and the stock price will drop and you'd be better off having not bought it earlier. That's why I'm selling at these prices as soon as my gains will be long term and I'll wait for some bad news to bring the stock price to more reasonable prices.

So you won’t be selling till November 19 2020?

Fire Away!
(It’s the batteries, Stupid!)

 

[KarenRei]

Regarding options, there's a lot I am learning here, but I am still a bit mystified about the importance of ITM vs OTM..
Say I buy a $1880 call march 2021.. Assuming the stock has been going up considerably by the end of the option period, I can always sell again with a profit and buy a new LEAP.. Why does it matter whether the option was ITM when I sold? Why would I wait till the expiry? Where's the risk of losing my money? Even if the stock went down I'd still be able to sell at a loss without actually losing 100% of my premium.. Or do I miss something?

You can sell calls at any point before expiry, ITM or not. It's an arbitrary line for the most part. That said, delta changes fastest as they go NTM->ITM->NTM (although they change fastest relative to cost basis the further OTM they are... you pay for that with theta, of course).

So a quick update after a whirlwind of a weekend. Picked up the Model X yesterday - LOVE. IT. Car was pretty much flawless, with the only flaw being a very faint circular patch of swirl marks on the hood about the size of a small plate. Very hard to see unless under certain lighting conditions (which is why I didn't notice it until we got it home and under the fluorescent lights in our garage). Tesla pledged to have the detail team polish it out whenever we'd like. Go Tesla!

Some bits of data that I can share beyond just gushing about the car:

• "Long Range Plus" / Mfg. Date: In case anyone is curious, the car was manufactured (per the door jamb sticker) in 02/2020. It (unsurprisingly) has the software-locked 328mi max range.
• Tesla Insurance: Added my wife to our Tesla insurance policy, which dropped the premium by $0.88/mo. Was on hold for about 3-4 minutes to make the change, but once I was through it was very painless.
• Deliveries / Foot traffic: The delivery / service center was doing steady business both yesterday and today (when I went back to pick up my other vehicle, since I had to pick-up alone yesterday). Plenty of folks taking test drives, checking out the cars, and I'm pretty sure someone placed an order while I was there. There were two other Model X deliveries taking place at approximately the same time as mine yesterday. I was told that they had about five deliveries planned for Saturday.

Also, I scratched a long-standing itch and test drove a Performance 3 today. All I can say is...holy ****.

Any 3 deliveries, or just S/X? You're AFAIK the only person here who's had a US delivery recently, so I'm curious exactly what they're delivering. Would be interesting also to know whether they've been delivering for the past several weeks or just started; and whether they expect to keep delivering like this all the way up to the end of the quarter, or whether they just received a batch of inventory.

Hmm, this appears to have happened about the same time as the report of a batch of new inventory on the website (which disappeared quickly, from reports at the time here - haven't checked myself). So some cars came from somewhere. If I recall correctly, the batch also had 3s in it, no? The timing on your vehicle's production would match up with a relatively recent US batch. Wonder when they slipped that in, given the solid international shipping rate of late... hmm, there was one ship in February with a short loading time, it might have been around then...

Any clue how this delivery rate compares to a typical EOQ delivery rate for this particular delivery centre? Basically, I'm interested in all the intel you can get

(Also, that reminds me to go check up on inventory trends...)

New article from the Nikkei:

"Tesla teardown finds electronics 6 years ahead of Toyota and VW"

"Self-driving AI sends shivers through traditional supply chains"

A teardown of the Model 3 shows Tesla so far ahead of more established peers that its technology could end the auto supply chain as we know it. (Nikkei xTech)
...

What stands out most is Tesla's integrated central control unit, or "full self-driving computer." Also known as Hardware 3, this little piece of tech is the company's biggest weapon in the burgeoning EV market. It could end the auto industry supply chain as we know it.

One stunned engineer from a major Japanese automaker examined the computer and declared, "We cannot do it."​

Gee, why does this sound familiar....

(Exact same thing we heard 2 years ago out of Germany)

ED: Hmm, after reading, this appears to be an interesting, different, but just damning problem: Tesla's centralized "car OS" (rather than using a bunch of disjoint boxes produced by different OEMs) poses a threat to their codependent relationship with their suppliers:

The real reason for holding off? Automakers worry that computers like Tesla's will render obsolete the parts supply chains they have cultivated over decades, the engineer said.

Such systems will drastically cut the number of electronic control units, or ECUs, in cars. For suppliers that depend on these components, and their employees, this is a matter of life and death.

So big automakers apparently feel obliged to continue using complicated webs of dozens of ECUs, while we only found a few in the Model 3. Put another way, the supply chains that have helped today's auto giants grow are now beginning to hamper their ability to innovate.

Then there's this - vertical integration on display:

Our teardown underscored this in another way as well.

Most parts inside the Model 3 do not bear the name of a supplier. Instead, many have the Tesla logo, including the substrates inside the ECUs. This suggests the company maintains tight control over the development of almost all key technologies in the car.

 

[lklundin]

Sorry if this has already been discussed before, but there are just too many messages here to be able to keep up, but what if a competitor of Tesla came with a battery breakthrough, like say lighter with 2000mi on a charge and faster charging, i.e. completely crushes Tesla tech, how would that affect Tesla? I know Tesla cars are more than their range, i.e. with autopilot, FSD, OAU's, infotainment, etc.. but wouldn't that seriously dampen Tesla's potential as an investment?

Actually, if there is going to be a monumental break through in battery technology, then the one company that has the best chance of being behind it is Tesla. Over the years, they are the ones that have been approached by all kinds of hopeful start-ups - and JB Straubl has carefully ignored all the hopeless ones, with Tesla acquiring the promising ones...

 

[KarenRei]

Sorry if this has already been discussed before, but there are just too many messages here to be able to keep up, but what if a competitor of Tesla came with a battery breakthrough, like say lighter with 2000mi on a charge and faster charging, i.e. completely crushes Tesla tech, how would that affect Tesla? I know Tesla cars are more than their range, i.e. with autopilot, FSD, OAU's, infotainment, etc.. but wouldn't that seriously dampen Tesla's potential as an investment?

First off, while this is how people expect batteries to evolve, this is never how batteries in the real world evolve. There's never some sort of "massive leap forward". Battery development is a long hard slog, and basic research for every type of battery is very much public info (even though some of the applied research may not be, or may have some lag time). Any new tech might ultimately greatly surpass today's best li-ion tech, but it gets there from a point behind li-ion tech, and has to fight for every gain, bit by bit.

Secondly, the premise of this requires several unlikely events.

• That the company gets locked up into a single automaker or auto coalition. Except that automakers - apart from Tesla - have generally shown that they prefer to buy from independent manufacturers rather than make their own cells.
• That it's not Tesla who locks them up, despite Tesla having a demonstrable history of being far the most aggressive in terms of locking up new tech from new entrants in the battery world.
• That other automakers have the best resources for acquiring and locking up the new tech, despite Tesla's market cap and fundraising prowess.
• That it's not a whole family of technologies built on an extensive corpus of research from varying parties (e.g., a tech base on which anyone can build their own battery tech), but some "supertech" tech family developed entirely by a single party that controls all of the rights to it. Again, this is not how things actually work. Some particular entity might have a year or two lead on applied research in a particular field, and patent rights to some specific implementations that work well - for example, Maxwell with dry manufacturing - but virtually never does anyone have an orders-of-magnitude lead on basic research which renders them completely untouchable.
• That appropriate manufacturing scale (greater than that of the existing manufacturing infrastructure for existing tech that's been built up over years) can be reached rapidly, and that the cells can also be produced for cheaper.

It's just an unrealistic premise.

BTW - in case anyone mentions the old Cobasys patent dispute:

• Cobasys was more than willing to fill large orders; what they weren't willing to do was to set up a line to make cells for just a couple hundred vehicles per year. Even Ovshinsky didn't dispute this. "Cobasys is not preventing anybody. Cobasys just needs an infusion of cash." The problem was that nobody wanted to pump money into them for EVs, which everyone was giving up on at the time. As GM put it when they sold off their stake at a huge loss: "GM says the venture won't be able to make advanced nickel-metal-hydride batteries affordable unless it can increase production. That means gaining nonautomotive customers, said GM spokesman Jeff Kuhlman". Cobasys instead stuck with the more lucrative emerging hybrid market.
• Cobasys's patents only covered large format cells. Tesla's approach of using small format cells, by contrast, would have been perfectly cromulent.
• Cobasys's patents only covered a specific NiMH tech. Other companies, like Electro Energy and Nilar, produced large-format NiMH cells with their own tech at the time.
• Even the best NiMHs were not a literal order of magnitude improvement over lead-acid. They were absolutely an important improvement, but not the sort of jump you're positing. And they were also more expensive.

 

[saniflash]

ED: Hmm, after reading, this appears to be an interesting, different, but just damning problem: Tesla's centralized "car OS" (rather than using a bunch of disjoint boxes produced by different OEMs) poses a threat to their codependent relationship with their suppliers

very interesting, yet another dilemma for the incumbents that I personally hadn't realized so far.

 

[Singer3000]

Actually, if there is going to be a monumental break through in battery technology, then the one company that has the best chance of being behind it is Tesla. Over the years, they are the ones that have been approached by all kinds of hopeful start-ups - and JB Straubl has carefully ignored all the hopeless ones, with Tesla acquiring the promising ones...

It was also said here at the time of the Maxwell purchase but bears repeating: Because Tesla has the biggest scale and is hence largest consumer of batteries, Tesla will have the best ROI on any acquisition that shifts down the cost per kWh.

For someone else to outbid them on new battery tech requires a leap faith in the boardroom in terms of forecast EV production and/or an acquisition as a late in the game Hail Mary pass.

 

[LN1_Casey]

New article from the Nikkei:

"Tesla teardown finds electronics 6 years ahead of Toyota and VW"

"Self-driving AI sends shivers through traditional supply chains"

A teardown of the Model 3 shows Tesla so far ahead of more established peers that its technology could end the auto supply chain as we know it. (Nikkei xTech)
...

What stands out most is Tesla's integrated central control unit, or "full self-driving computer." Also known as Hardware 3, this little piece of tech is the company's biggest weapon in the burgeoning EV market. It could end the auto industry supply chain as we know it.

One stunned engineer from a major Japanese automaker examined the computer and declared, "We cannot do it."​

Amazing how Tesla held the Automatous day, and it barely twitched in the general field, despite they themselves saying “this boggled my mind the improvement we’ve accomplished” (or words to that effect).

Now they’ve done an breakdown of the cars tech and actually looked, they’re all “well... Ford.”

 

[Tslynk67]

Synthetic long and short positions are considered riskier than spreads, because of their easy leverage and the resulting big potential losses - while spreads have a limited downside. Synthetic options positions are "stock replacement strategies" that have less upfront cash/margin footprints than owning the stock.

As a stock replacement strategy another approach is to score a few long term lottery tickets that move deep in the money - those will follow the stock most of the time, but use up only a fraction of the initial investment. The downside is the significant premium paid relative to stock: a 2022/01 LEAP at-the-money contract is trading at a $220 premium at the moment - this is the amount of gains you give up over 2 years time period should the stock stay flat at the current $800, and you'll only start making at $1,000 and above.

Another approach is to go with deep out of the money options and write it off as an investment loss straight away - for example the 2022/01 LEAPS at $1,880's are going for around $55 right now - which is still elevated and assumes big, over 140% appreciation in the TSLA stock price in the next two years to reach the $1,935 break-even price, and IV of these is still well above the historic average of 50% at 53%.

The $1,500-$1,880 2022's are probably the closest to any realistically priced long term shots at the moment, but of course there's a significant risk of a 100% loss, plus there will be an unnerving draw-down of the position should there be a significant dip. No more inexpensive moonshots available anymore.

A middle-of-the-road approach would be $1,250 2-year LEAPs for around $110 which assume appreciation to $1,360 as a break-even point - this is a 35% annual upside which is more or less consistent with a bull thesis and allows the harvesting of any explosive appreciation.

There's significant downside risks compared to just using the cash to buy stock, and the leverage isn't all that great, a few days after a big run-up is usually not a good moment to buy bullish options.

Not advice.

If I bought LEAPs then I'd be looking to sell them long before the expiry date, I wouldn't be looking for them to go into the money particularly.

I guess this is because of the US taxation where you want to convert the options into shares to avoid paying tax?

 

[Fact Checking]

Then there's this - vertical integration on display:

Our teardown underscored this in another way as well.

Most parts inside the Model 3 do not bear the name of a supplier. Instead, many have the Tesla logo, including the substrates inside the ECUs. This suggests the company maintains tight control over the development of almost all key technologies in the car.

Spoiler: Live footage of my reaction that Toyota only learned this in 2020

 

[T@oo]

Spoiler: Live footage of my reaction

This should be ORLY.

 

[Dare]

Damn,
The Germany GF4 news makes feel so anxious, plus the NCoVirus thing in China. The SP is going to be horrible Tuesday. My tolerance lower bound is $650
My parents are going to mock me again

The Spiegel’s should have told their son to move out of the basement years ago.

 

[CyberDutchie]

Teslas are ubiquitous in Medina, where Gates lives, and Overlake CC, where he's a member. He just wants to stand out from the Teslanaire crowd.

Regardless, I'm appalled by his ignorant and (probably) inadvertent contributions to EV FUD.

It could be that Taycan is using some Microsoft technology, and, Porsche probably is a large corporate customer of Microsoft. Whereas Tesla software is Linux based and probably using more Google products vs. Microsoft products.

 

[CaliBear1]

Perhaps, but I don't think he would highlight EV shortcomings after purchasing a Porsche EV of it had significant MSFT S/W in it if that were the case.

It could be that Taycan is using some Microsoft technology, and, Porsche probably is a large corporate customer of Microsoft. Whereas Tesla software is Linux based and probably using more Google products vs. Microsoft products.

 

[avoigt]

Update about GF4,

The economy Minister Steinback from Brandenburg declared to work closely together with Tesla on that matter and they have confidence that the works can continue and they won't allow time pressure. He continued that if it won't be solved fast they will work on an extension period (into the breeding season).

Such a permission can be given if it's "in public interest". IMO this is clearly the case here as the few remaining standing trees do not justify a delay in construction. It's good to see that politicians work together with Tesla to get it done. Other German politicians from different parties and even important economy lobby groups did speak out calling it a shame to have stopped works and a prove point for international's investors to show that German can lift large projects.

In the meantime two female environmentalists did erect a platform between trees enrolling a banner with the words. "Corporate disempowerment, despise profit logic."

How badly informed can someone be to claim Tesla is all about profits. That does not make any sense but shows how FUD has taken its toll.

 

[avoigt]

It could be that Taycan is using some Microsoft technology, and, Porsche probably is a large corporate customer of Microsoft. Whereas Tesla software is Linux based and probably using more Google products vs. Microsoft products.

Porsche has, in the meantime maybe had, fundamental and severe issues with their operating IT system for the Taycan.

 

[ItsNotAboutTheMoney]

Yesterday I played in a charity golf tournament (Aussie fire relief) at the Laguna Golf Club at the Banyan Tree resort on the island of Phuket in Thailand. Much to my surprise, I saw this beauty parked there. After five months, this is the first Tesla I've spotted in the Kingdom. I guess that shouldn't come as a shock since Thailand has no EV infrastructure and the import duty on luxury cars is almost 200% of the vehicle price! This one has Bangkok plates and probably came from Hong Kong.

As an expat friend noted, the island would be a perfect lab for EVs. If only the Thai government would waive import duties for EVs...

And then there's Bangkok. Like many big cities, the Thai Capitol desperately needs to transition to EVs. It is in a constant state of gridlock and consequently choked with poisonous fumes. And don't get me started on the noise pollution! Alas, the economics of Thailand suggest that, despite the need, it will lag significantly in the adoption of an EV culture.

In some of his videos in Thailand, Bjorn Nyland spoke with Thai EV owners and they generally said they imported from Hong Kong, and maybe one from the UK.

But, Thailand has 0% tariff on cars from China, so the MG is currently by far the cheapest, and if the Shanghai factory makes RHD cars it could export to Thailand and be extremely competitive.