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

[jerry33]

Compare that to Elon sleeping on the factory floor and torquing on bolts

The difference is that Elon is not just a professional manager, he actually knows something.

 

[Fact Checking]

Short answer - I have no idea how "VW would have to sell 100,000 ID.3s in 2020 to meet the targets" could possibly be correct. By my calculations 100,000 ID.3s plus 70,000 e-Trons still leave them €4 billion to €6 billion the hole.

Longer answer -
Using the 2018 EU emission numbers (published August 2019)
CO2 emissions from new passenger cars in the European Union: Car manufacturers’ performance in 2018 | International Council on Clean Transportation
show VWG at 122 g/km with a 2020/2021 target of 96, so a required reduction 26 (not 30).
VWG sells about 3.5 million cars in the EU, so with the simple calculation of the current penalty:
3.5 million x 26 g/km x €95/g/km = €8.6 billion. If VWA emission have gotten worse, that could push it to 30 g/km and €10 billion. OK so far.

It could be a bit less dire in 2020 because of the "phase-in" rule that lets manufactures exclude 5% of their fleet - presumably the worst stinkers. My rough estimate says that might bring the 2020VWG penalty from €8.6 billion to €7 billion.

Now things seem to go off the rails. Maybe this is a translation difficulty. The Super-Credits (counting each low-emission car twice) only apply towards an emission reduction of 7.5 g/km versus the 26 (or 30) required. Below that, it's one-for-one. My model says VWA would use up their Super-Credits after about 100,000 ZEVs. That does NOT eliminate their penalty - far from it. It would reduce it by about
€2 billion, or about €20,000 per ZEV - a number similar to that we've seen in the past (and close to the one mentioned in the recent Dan Galves interview). Total penalty elimination would require more than 600,000 ZEV's, by my calculation.

I have no idea how "VW would have to sell 100,000 ID.3s in 2020 to meet the targets" could possibly be correct. By my calculations 100,000 ID.3s plus 70,000 e-Trons still leave them €4 billion to €6 billion the hole.

That's very curious. Could they also be working on reducing the CO₂ average of their ICE fleet, via:

• Selling more hybrids which get treated favorably despite producing almost as much CO₂ as non-hybrids. They can shift buyers towards hybrids via incentives.
  
• Selling fewer of or raising the prices of the worst CO₂ offenders.
• ... and they could use the VW classic: a "software" solution to their emissions problem?

I've also seen auto analysts treat most European carmakers with the assumption that they will be able to avoid most penalties by the end of the year.

 

[Prunesquallor]

That's very curious. Could they also be working on reducing the CO₂ average of their ICE fleet, via:

• Selling more hybrids which get treated favorably despite producing almost as much CO₂ as non-hybrids. They can shift buyers towards hybrids via incentives.
  
• Selling fewer of or raising the prices of the worst CO₂ offenders.
• ... and they could use the VW classic: a "software" solution to their emissions problem?

I've also seen auto analysts treat most European carmakers with the assumption that they will be able to avoid most penalties by the end of the year.

I agree. I need to sift through the model again and make sure there were no egregious errors on my part. I went through the assumptions of that PA Consulting report - they basically assumed robust EV sales. As you say, very curious.

 

[CLK350]

I suspect...both

Yes - of course, and they (Elon Musk and premier Li Kequiang) both are in it, they can mutually profit from ea other. The latest news about Tesla using CATL prismatic cells for the MIC M3s is a great move from Tesla: keep their proprietary battery tech secure while still providing an excellent Chinese M3, lower cost one with the CATL battery, higher cost/ profit with the LR US made batteries.

 

[jerry33]

I suspect VW will make the transition to EVs. They are putting in the most capital and effort compared to all the other ICE companies. This period is their equivalent of Tesla's production hell. A lot of the criticisms above could have been applied to Tesla during the M3 ramp. Diess has the right idea about the direction of the auto market, and the advantage of a good relationship with Elon, which could come into play further down the road. Even if they are delayed by a year or 2, so long as they are ahead of the rest of the industry in terms of switching to EVs, then they are in a strong position. In terms of their software problems, I think should be able to put out something adequate for a first attempt.. eventually. The weakness of VW software is not going to stop them selling EV's, given the rising demand for EVs, and lack of competition.

Their ID3 is actually a good looking car - kind of like an EV Golf. It's designed as an EV from the ground up, rather than retrofitted. It's somewhat smaller/lighter so it should get a decent range compared to EV SUVs. Overall, I think it will sell pretty well, and save VW a huge amount in fines, and I quite like VW's chances of surviving the transition to EVs, at least compared to the other ICE companies.

First Diess is going to have to survive. If he doesn't, they will just scrap the EV project and that will be that.
Second, they're going to have to sell the ID3 at very cheap prices because they have year old degraded batteries in them (maybe year and a half). This won't make their stockholders particularly happy.
Third, they will have to convince people that the software is actually okay. (Lots of advertising expense)
They might make it, but it will be a near death experience at best.

 

[mongo]

10,000 people working on fixing bugs. That must be absolute horror. How do you even coordinate between so many people? A team of a few hundred engineers and developers would probably make more progress.

That includes the suppliers of all the outsourced modules in the car, it's not 10k VW employees.
Yes, it's a huge number, and likely a non-effective team size, but do not underestimate the quantity of warm bodies that get thrown at a problem when there is an issue with your product stopping manufacturing at the OEM.

 

[Fact Checking]

(Cc: @Prunesquallor)

That's very curious. Could they also be working on reducing the CO₂ average of their ICE fleet, via:

• Selling more hybrids which get treated favorably despite producing almost as much CO₂ as non-hybrids. They can shift buyers towards hybrids via incentives.
  
• Selling fewer of or raising the prices of the worst CO₂ offenders.
• ... and they could use the VW classic: a "software" solution to their emissions problem?

I've also seen auto analysts treat most European carmakers with the assumption that they will be able to avoid most penalties by the end of the year.

For example here's European auto industry analyst Matthias Schmidt:

Matthias Schmidt on Twitter

"Why I believe 2020/21 EU #CO2 targets achievable:

- inclusion of [Norway]
- PHEVs comeback | >50% mix large models
- BEV supply ↑
- 48V MHEV
- Supercredits (max. 7.5g/km over 3yrs) for vehicles <50g/km
- Eco-innovations 7g/km pa.
- Carsharing/fleet deals
- Weight ↑ = +1-2g/km target"​

So he posits that:

• the inclusion of Norway sales in the EU fleet average, which is a mostly-EV country, will be favorable, (true, but Norway is a small market),
  
• he expects plug-in-hybrids to be >50% or large models, (true, but this has a non-trivial cost, so this either shrinks the market or adds extra costs that eat into profits),
  
• he expects ZEV sales to increase, (true, but they have both production bottlenecks and battery supply problems),
  
• he expects "mild hybrid" sales to increase, (unclear to me to what extent this is possible),
  
• he includes Supercredits (which you did too in your model),
• he thinks there are "eco-innovations" in ICE drive-trains worth about 7g/km, (this is a huge factor, I'm curious what that truly means - for example lower motor power by default, only for emissions testing?),
  
• he expects average weight of models to go up, which reduces emissions by 1-2 g/km (this probably means not selling the smaller cars?)

All of these come with costs though - so they are basically spending billions on inferior products to avoid billions in fines ...

 

[Cobbler]

Have we become the $VWQ gang? I sure hope not.

Long term, VW better succeed in making the ID.3 a succes.

 

[Fact Checking]

New Have we become the $VWQ gang? I sure hope not.

Which post are you basing this on?

Most of the ID.3 comments here are trying to:

• estimate how much of a competitive factor the lower priced ID3 is going to be to Tesla this year and next year,
• how much Tesla's ZEV sales in Europe are worth to FCA and other European carmakers once the pooling deal runs out in two years,
• how the ID.3's struggles demonstrate Tesla's lead in software and R&D, which was being questioned and underestimated by analysts again and again. This advantage of Tesla cannot be driven home better than through the contrast of the struggle legacy automakers are experiencing.

 

[Tslynk67]

Needless to say, the 100 shares I bought on Friday for the Monday morning buyer's exuberance were quite red when I woke with the chickens to see how the day was progressing. I closed that trade this morning at a little under 850 and accepted a loss.

I'm curious why you'd sell these shares at a loss on Monday, wouldn't it be better to hold them until recovery?

 

[Tslynk67]

Yes - of course, and they (Elon Musk and premier Li Kequiang) both are in it, they can mutually profit from ea other. The latest news about Tesla using CATL prismatic cells for the MIC M3s is a great move from Tesla: keep their proprietary battery tech secure while still providing an excellent Chinese M3, lower cost one with the CATL battery, higher cost/ profit with the LR US made batteries.

At first I scoffed at your suggestion that China and Tesla might conspire to squeeze battery supplies to other manufacturers, but after some reflection and seeing how China operates, a quiet word to CATL executives from the Chinese authorities - without any knowledge on Tesla's side - isn't beyond the realm of possibility.

First Diess is going to have to survive. If he doesn't, they will just scrap the EV project and that will be that.
Second, they're going to have to sell the ID3 at very cheap prices because they have year old degraded batteries in them (maybe year and a half). This won't make their stockholders particularly happy.
Third, they will have to convince people that the software is actually okay. (Lots of advertising expense)
They might make it, but it will be a near death experience at best.

Except that there are very aggressive emissions targets to be hit in the EU now, plus starting 2025 in Norway and then extending to most EU countries in 2030, sales of new ICE are banned.

So VW - and the rest of the bunch - need to come up with something, and pronto, too.

Only response I can see to this from Tesla's side would be to break ground on at least one new GF every single year going forwards - this implies expansion of existing GF's too in order to keep up with the demand.

 

[bhtooefr]

he expects "mild hybrid" sales to increase, (unclear to me to what extent this is possible)

Seems like a lot of manufacturers are making mild hybrid systems standard on a lot of their European models, which would rather forcibly increase the sales.

he thinks there are "eco-innovations" in ICE drive-trains worth about 7g/km, (this is a huge factor, I'm curious what that truly means - for example lower motor power by default, only for emissions testing?),

There's some room in transmissions to improve efficiency, and there's also software changes that can improve standardized test performance at the expense of driveability.

There's also changing gasoline engines' combustion cycles from Otto to Miller (late intake valve closing) or Budack (early intake valve closing), and increasing displacement and compression ratio to compensate, which improves thermal efficiency. (Note that VW is already starting to do this, replacing their 1.4 liter engines with 1.5 liter EIVC engines, and their 1.8 liter engines with 2.0 liter EIVC engines.) This costs very little to implement but can provide significant gains if your engine architecture supports the larger displacement.

he expects average weight of models to go up, which reduces emissions by 1-2 g/km (this probably means not selling the smaller cars?)

Yeah, I would quote that as raising the targets by 1-2 g/km, although it's possible that not selling the smaller cars actually reduces emissions while simultaneously raising the targets (because the smaller cars are less able to support the cost of technological improvements in efficiency, while also having worse aerodynamics).

 

[avoigt]

(Cc: @Prunesquallor)



For example here's European auto industry analyst Matthias Schmidt:

Matthias Schmidt on Twitter

"Why I believe 2020/21 EU #CO2 targets achievable:

- inclusion of [Norway]
- PHEVs comeback | >50% mix large models
- BEV supply ↑
- 48V MHEV
- Supercredits (max. 7.5g/km over 3yrs) for vehicles <50g/km
- Eco-innovations 7g/km pa.
- Carsharing/fleet deals
- Weight ↑ = +1-2g/km target"​

So he posits that:

• the inclusion of Norway sales in the EU fleet average, which is a mostly-EV country, will be favorable, (true, but Norway is a small market),
  
• he expects plug-in-hybrids to be >50% or large models, (true, but this has a non-trivial cost, so this either shrinks the market or adds extra costs that eat into profits),
  
• he expects ZEV sales to increase, (true, but they have both production bottlenecks and battery supply problems),
  
• he expects "mild hybrid" sales to increase, (unclear to me to what extent this is possible),
  
• he includes Supercredits (which you did too in your model),
• he thinks there are "eco-innovations" in ICE drive-trains worth about 7g/km, (this is a huge factor, I'm curious what that truly means - for example lower motor power by default, only for emissions testing?),
  
• he expects average weight of models to go up, which reduces emissions by 1-2 g/km (this probably means not selling the smaller cars?)

All of these come with costs though - so they are basically spending billions on inferior products to avoid billions in fines ...

I am very careful with everything Matthias Schmidt writes. He earns his money with work he is doing with the large ICE here in Germany and you are very quickly compromised in your analytics if you rely on that funding for your livelihood. Not saying he is writing what they ask for but he often has a pretty one sides reporting with his data and critical elements are left out him painting a certain picture.

I stopped trusting him as a source since that happened just too often.

 

[Fact Checking]

There's also changing gasoline engines' combustion cycles from Otto to Miller (late intake valve closing) or Budack (early intake valve closing), and increasing displacement and compression ratio to compensate, which improves thermal efficiency. (Note that VW is already starting to do this, replacing their 1.4 liter engines with 1.5 liter EIVC engines, and their 1.8 liter engines with 2.0 liter EIVC engines.) This costs very little to implement but can provide significant gains if your engine architecture supports the larger displacement.

This is not without costs though either: in many European countries car taxation is based on engine size, and these increases would automatically increase taxation.

This would further push customers towards BEV - which is of course the emissions reduction intent of the European CO₂ penalties.

 

[SwTslaGrl]

• he thinks there are "eco-innovations" in ICE drive-trains worth about 7g/km, (this is a huge factor, I'm curious what that truly means - for example lower motor power by default, only for emissions testing?),
  
• he expects average weight of models to go up, which reduces emissions by 1-2 g/km (this probably means not selling the smaller cars?)

All of these come with costs though - so they are basically spending billions on inferior products to avoid billions in fines ...

I think ICE parts suppliers could still promote their products for lower emissions, like this CEO in 2017 Bosch CEO: Don't write off diesel yet

 

[Fact Checking]

I am very careful with everything Matthias Schmidt writes. He earns his money with work he is doing with the large ICE here in Germany and you are very quickly compromised in your analytics if you reply on that funding for your livelihood. Not saying he is writing what they ask for but he often has a pretty one sides reporting with his data and critical elements are left out him painting a certain picture.

I stopped trusting him as a source since that happened just too often.

Incidentally, and this might be of interest to @Prunesquallor, he posted this tidbit about the Tesla FCA pooling agreement just yesterday:

Matthias Schmidt on Twitter

"Pool party.

FCA already dipped a few toes into the Tesla pool last year (2019) to remain compliant it appears."

These slides are from FCA's 2019 annual report I suppose? Can anyone find a link to the FCA 2019 annual report? None of the obvious online sources seems to have it ...

I'll try to measure the length of those bars to see to what extent FCA is planing to use the Tesla pool.

 

[ReflexFunds]

Seems like a lot of manufacturers are making mild hybrid systems standard on a lot of their European models, which would rather forcibly increase the sales.


There's some room in transmissions to improve efficiency, and there's also software changes that can improve standardized test performance at the expense of driveability.

There's also changing gasoline engines' combustion cycles from Otto to Miller (late intake valve closing) or Budack (early intake valve closing), and increasing displacement and compression ratio to compensate, which improves thermal efficiency. (Note that VW is already starting to do this, replacing their 1.4 liter engines with 1.5 liter EIVC engines, and their 1.8 liter engines with 2.0 liter EIVC engines.) This costs very little to implement but can provide significant gains if your engine architecture supports the larger displacement.


Yeah, I would quote that as raising the targets by 1-2 g/km, although it's possible that not selling the smaller cars actually reduces emissions while simultaneously raising the targets (because the smaller cars are less able to support the cost of technological improvements in efficiency, while also having worse aerodynamics).

Plus there are reports that ICE OEMS have recently been inflating their emissions for ICE cars under WLTP testing to set an easier baseline for the EU % CO2 reduction targets. "by switching off the start-stop system, choosing less fuel-efficient gearshift patterns and selecting for instance the Dynamic rather than the Eco mode during the type approval test." So they can now reverse these practices now the emissions baselines have been set.

WLTP: why some carmakers pushed for higher CO2 emissions

 

[LJS22]

So Elon's giving support to the Giga Austin rumors:

Elon Musk on Twitter

"On a wall in Austin"

While Austin is big, does anyone recognize this green wall by any chance? Or has hours to waste looking through Street View footage?

To go down the CSI zomming-in path, in particular this reflection in a window might be helpful:

View attachment 514981​

That has an "industrial zone" feeling.

Docks next to the Colorado River perhaps?

Edit: my unparalleled CSI skills finally brought me to Google for "Austin I love you so much wall", which gave me plenty of hits of this well-known wall on "Jo's Coffee" in downtown Austin:

View attachment 514984​

The reflection in the photo is probably that of a traffic light pole:

View attachment 514985​

So I presume downtown Austin this is not the location of Giga Austin.

Elon was just grabbing some street tacos after laying down the law at the Capitol over his giga/direct sales deal!

Truly shocked nobody recognized him walking down the street. That area is busy

all good news it sounds like this morning. Y is on its way and I also got summoned for my retrofit to hw3.

 

[Cobbler]

Which post are you basing this on?...

Don't get me wrong: not targeting anyone here, (definitely not you. I really love your contributions! )

Just hoping that the concensus here is that hopefully VW can sort out their issues with their transition to a complete EV offering and prove that BEV is indeed the only way forward

Following the Tesla investor community, I saw how intense the hate was from $TSLAQ during the model 3 ramp-up when Tesla went through production hell.
We should definitely avoid lowering ourself to the same low $TSLAQ standards and begin ridiculing VW with their struggles. That's a rather personal note, but I consider it worth sharing.

 

[Highway2Heel]

I had an employee like this. Spent more time trying to avoid responsibility than embracing responsibility. He’d have exerted less effort (and kept his job) if he’d just done the right thing.