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

[gora321]

Diego‏ @SnoozeThroughF1
Replying to @ICannot_Enough @WallStCritic @BarkMSmeagol
I have a $35k $tsla model 3 too. It also includes the premium interior, paint, and battery upgraded I wanted.

10:54 AM - 6 Feb 2019

 

[StarFoxisDown!]

Greg Wester on Twitter

Very much looking forward to Autopilot and eventually FSD becoming a subscription service down the road. In addition to those subscription services, Tesla eventually striking a deal with a media service or multiple media services to have content on their tesla car platform( Netflix, ESPN, etc...) will also be big.

 

[gora321]

Greg Wester‏ @gwestr 2h2 hours ago
Gas motors are aged in miles driven Boat motors are aged in hours run EV motors are aged in kW hours spent Sort of unfair that a Tesla can drive 1 million miles or 30,000 hours!

 

[AlexS]

Weak end to the day :Þ

not really, on down day it held support level 316-317, should be OK

 

[Mark's Beagle]

I'll personally give you the benefit of the doubt, even though I find your posting style... weird... for a long. But I'll reiterate that while I welcome shorts who are aboveboard, astroturfers (aka in this context, people who pretend to be long but actually are short) are very much unwelcome. E.g.: people with different viewpoints = welcome, but liars can go to hell.

As stated, I'm going to operate on the assumption for now that you're in neither group and actually are long. Perhaps trying to parody something - I've certainly had humour fly past me before. Now, if you actually belong in the former group (short and open about it), please say so now. But if it turns out that you're in the latter group, and just pretending to be a long, well...

I own a model 3, and cry every time I have to drive my wife's CRV.

 

[TradingInvest]

According to Elon, in 2 years they will reach $100 per kWh at pack level. That means the battery pack in the base model will only cost ~$5000. At that point there is not much to save even if another car company discover a battery breakthrough. Tesla planned and executed very well in this regard.

 

[M3Rider]

I think their guidance of 360k-400k deliveries in the Q4 update letter is fundamentally cautious and conservative, with the assumption of a global recession. Elon made this very clear in the conference call:

Elon Musk

"Okay. And we expect that exponential to continue. So with the deliveries this year being - even in the face of - if there's a global recession - even if there's a global recession, we're expecting deliveries this year to be about 50% higher than last year. And this - it could be a lot more than that. But even with tough economic times, to see 50% growth is pretty nutty."​

In 2018 they delivered 245.5k vehicles, "about 50% higher" deliveries is 370k vehicles - right in the guidance range.

If Brexiters fail to crash the world economy out of spite I don't expect a global recession from any other source. In that case demand will increase even more - I think there's probably some pent-up demand in the U.S., EU and China already, from economic worries.

I.e. of the ~6 global recession risks that were present in Q4:

• China recession going global
  
• China trade war causing global recession
  
• Federal Reserve rate hikes causing U.S. recession
  
• U.S. housing market crash causing U.S. recession
  
• BRExit crash causing global recession
  
• U.S. tech sector driven U.S. recession

The probability of all of these has decreased substantially based on latest events and based on latest economic data, with the exception of BRExit, which is still the same delusive cluster-sugar headed for a hard BRExit I warned about months ago. Today's Tusk comments made it finally really clear to everyone in the U.K. that Europe is sick of the egocentric BRExit mess and is perfectly fine with the U.K. performing economic seppuku via hard-BRExit.

Once there's a China trade deal and the UK has finally crashed out of the EU there's going to be good growth everywhere (except the UK that is - but it's a comparatively small market), and Trump certainly doesn't want a U.S. recession right before his re-election fight. The Fed is probably not going to do anything drastic, to stay out of 2020 presidential election politics.

In fact later in the conference call Elon outlined his expectations for 2019 in more detail:

Elon Musk

"I mean, my best guess, this is just a guess, my best guess for demand of Model 3 worldwide is something - in a strong economy, it's something on the order of 700,000 or 800,000 units a year. That's my best guess for demand of Model 3 in a strong economy."

"If the economy goes into a recession, then I think that could be something under 40% less. But I think even in a recession, worldwide demand is still something in the order of 500,000 for Model 3."​

These numbers mean that Tesla expects 40-60% higher Model 3 demand if there is no recession. That would increase the 360k-400k guidance to well above the 500k/year supply that is available.

I.e. I think Tesla is being cautious, they have guided for a recession but are ready to jump on signs of economic growth. There's space for a significant upside surprise.

When EM talked about demand, he did not tie it up with their current production capacity, like "ok, the min demand is 500k and we can do that and if it's good times and demand is 700-800k, then we can do that too"

The number of 50% growth is tied to the average for 2018 and we know profitability in Q1-Q2 2018 was not the best.

So, if we compare guided numbers to Q4, then there's not much growth in production and potential costs improvements compared to Q4 ER that stem from "economies of scale". I guess they'll come from other improvements.

It is probably a good approach to set the bar low and "beat", rather than "miss" guidance.

On the other hand, we may see it right in Q1 - if they beat 90k by a large number, then the guidance was too pessimistic and probably shoud not be relied on for the rest of the year.

However, if they are close to the guidance number, then they may have other reasons for containing the growth - whether that's related to costs cutting and not being ready to scale until that is done or being constrained by some bottleneck(s).

Another reason for moderation is a pretty firm statement that they target 7k/week for the EOY.
If they did 7k average for the year, that'd be 336k 3s. With S/X having larger batteries and being cell constrained prob some 70k max. So, very close to 400k total.

If you expect them to beat that and have a lot of upside, they need to be at 7k+/week average.
But then how do you explain this from the letter?

OUTLOOK
Model 3 production volumes in Fremont should gradually continue to grow throughout 2019 and reach a sustained rate of 7,000 units
per week by the end of the year.

If we assume less than 7k average, for example 6k average, then we get 360k.

So, to me the guidance looks like they'll be doing 6k/week for the most of the year and then do a EOY rush reaching/exceeding 7k.

I guess another variable is GF3. It may be able to add few 10s of Ks by EOY.

 

[KarenRei]

not really, on down day it held support level 316-317, should be OK

Was mainly just looking for an excuse to restore my spreads, any sort of reasonable uptick. But it was just a wobble-down-and-down day.

 

[JRP3]

I think some longs are just waaaaay too sensitive and can't take a joke, or pointed criticism.

Or we've simply seen too many shorts in disguise making garbage claims over and over and over again and have little tolerance for more. Long or short, new posters probably shouldn't assume they suddenly have some unique perspective we haven't considered before. Of course it's possible, just unlikely.

 

[DurandalAI]

Tesla should clarify if this Amazon Tesla store is real. Also what about the other store/brand called TSLA, does it have anything to do with real Tesla? I don't want to donate my money to a fake business.

Unfortunately bootleg products on Amazon has become a real problem, one that I genuinely wish that Amazon would take action on. It's been quite frustrating for my wife on some items, and I have to spend more time researching a product to ensure authenticity before ordering, when I shouldn't have to. When I go to Musician's Friend to order a Shure microphone, I know it's legit. On Amazon, I have no way of knowing.

 

[Curt Renz]

I’m in DaveT’s camp... unclear why price cuts are better, more effective than Marketing. The need to raise awareness is paramount and some type of marketing could be useful here.

Indeed, significant awareness of Tesla and the advantages of EVs is not nearly as widespread as many here at TMC might assume. However as long as production capacity is somewhat limited, it makes sense to entice some prospects to purchase versions with high margin options. The tiny price cut just announced could have been seen as just enough to nudge a few folks awaiting the standard-range version to buy immediately. More aggressive marketing that might even include advertising can be delayed until production clearly outpaces demand.

 

[wipster]

Weak end to the day :Þ

No that doesn't happen until Friday...

 

[StarFoxisDown!]

When EM talked about demand, he did not tie it up with their current production capacity, like "ok, the min demand is 500k and we can do that and if it's good times and demand is 700-800k, then we can do that too"

The number of 50% growth is tied to the average for 2018 and we know profitability in Q1-Q2 2018 was not the best.

So, if we compare guided numbers to Q4, then there's not much growth in production and potential costs improvements compared to Q4 ER that stem from "economies of scale". I guess they'll come from other improvements.

It is probably a good approach to set the bar low and "beat", rather than "miss" guidance.

On the other hand, we may see it right in Q1 - if they beat 90k by a large number, then the guidance was too pessimistic and probably shoud not be relied on for the rest of the year.

However, if they are close to the guidance number, then they may have other reasons for containing the growth - whether that's related to costs cutting and not being ready to scale until that is done or being constrained by some bottleneck(s).

Another reason for moderation is a pretty firm statement that they target 7k/week for the EOY.
If they did 7k average for the year, that'd be 336k 3s. With S/X having larger batteries and being cell constrained prob some 70k max. So, very close to 400k total.

If you expect them to beat that and have a lot of upside, they need to be at 7k+/week average.
But then how do you explain this from the letter?


If we assume less than 7k average, for example 6k average, then we get 360k.

Yeah I think they are being very conservative and want to create a atmosphere of beating or "crushing" earnings on an ongoing basis. Apple for many, many years would give conservative guidance and crush it every time.

Like you said, I'll be watching Q1 production numbers a lot. I'm also watching to see if we get anymore big batches of Vin's registered during the month of Feb. They've already registered more Vin's in Jan than the entire Q4. I think if we saw another 20k of Vin's registered this month, it would be a very good sign.

 

[MartinAustin]

I’m in DaveT’s camp... unclear why price cuts are better, more effective than Marketing. The need to raise awareness is paramount and some type of marketing could be useful here.

IMO owners are still marketing their Tesla cars to others who haven't bought one yet.

This happened before the referral program existed.

How many Audi A8 or BMW 7-Series owners make it their goal to market the car to others with no benefit from BMW?

Ceasing to provide $1100-worth of electricity to buyers, and simply reducing the price of the car, helps to get more people to make the move away from ICE and over to Tesla.

There many be reservationholders who've been waiting for the $35,000 car, that are continuing to drive their ICE vehicles - polluting as they go. Tesla has made many attempts to get reservationholders to buy existing products... beginning with marketing the S75 to reservationholders in mid-2016. Every time a new variant of the Model 3 comes out, Tesla goes back to that pool of reservationholders and tries to get them to buy. Incremental price cuts to the vehicles is definitely a tool in this process. IIRC the price of the Model 3 has fallen from $49,000 to $45,000 to $43,000 to $40,900. Each time, Tesla nibble a few more buyers from the pool of reservationholders - and of course, get new buyers coming into the brand who never had a reservation. There is nothing wrong with maintaining strong demand, both from a fiscal standpoint and from a "mission" standpoint. In the first case, you make plenty of money, maintain market share and widen your moat vs. the other manufacturers. In the second case, you are taking ICE cars off the road earlier than you may have done if you did nothing and let those buyers wait until the very last release in your product range.

 

[gene]

IMO owners are still marketing their Tesla cars to others who haven't bought one yet.

This happened before the referral program existed.

.

With my Model S from early 2013, I am pretty sure I sold more people on buying Tesla's than during all the Referral Program years.

 

[Carl Raymond]

I’m in DaveT’s camp... unclear why price cuts are better, more effective than Marketing. The need to raise awareness is paramount and some type of marketing could be useful here.

This was discussed on the earnings call. Price cuts are profit neutral, more cars at lesser margin, evens out. But the big upside is, more cars, more EVangelists, fewer tailpipes.

 

[Thekiwi]

They bashed a bit. Talked about competitors coming, huge upcoming debt payment and the need for the stock to be above $360 (did not mention that Tesla has clearly stated that the debt payment is not an issue), and a bit about demand concerns.

It will be great once March 1st has passed and we stop hearing these morons on tv concern-freaking about the debt payment.

 

[Toumal]

It will be great once March 1st has passed and we stop hearing these morons on tv concern-freaking about the debt payment.

They will pivot to the latest Tesla-killer announcement from VW: better, cheaper, coming "soon".

 

[Thekiwi]

Interesting comments on here about the price cuts.

If SR+PUP is going to be a $39-$40k vehicle - One has to think that the current MR+PUP at $41,900 is likely going to be the best price vs features model 3 offered for quite some time, and I dont think the offer will stick around once the SR+PUP arrives.

I would think the advice for anyone waiting for a SR+PUP, is to instead get the current MR+PUP while it’s available for just $2-$3k extra - the deal is just too good for the extra 40-50 miles of range.

Also, probably a bit early to be contemplating this, but I think a shorter “City-Range” (CR) option based on a software limited SR+PUP might be something worth considering in 2020, say a 160 mile range with PUP at $35k, with a $5k option to software unlock to full SR, eventually offering the CR 160 mile range at $30K non-PUP when margins allow.)

Tesla has a Structural Profit advantage vs traditional automakers when it comes to its EV offering, and while I think maximising margins is a good thing, at this stage I think its probably better to sacrifice some potential higher margin sales and go for marketshare while they maintain the outsized advantage from its vertical integration and direct sales model.

 

[EVNow]

It will be great once March 1st has passed and we stop hearing these morons on tv concern-freaking about the debt payment.

There will be something else. They will continue that until it becomes unbearably obvious even to CNBC watchers that the analysts are idiots.