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

[mongo]

So if you take the ASP in Q4 for model 3 at ~54k$, and margins at ~20% then cost to manufacture is 43k$ for the mixed options vehicle that this represents. I simply don't think you can start pulling off pieces of that sufficiently to get anywhere near profitable for a 35k$ to 37k$ vehicle and that's at the gross profit line. Let's say you want to get to 30k$ gross cost for the base model in order to sufficiently justify selling it, and that it covers op. ex and so on. Someone show me how you get from 43k$ to 30k$? The battery is less than 4k$ of that.

At the same time, the base model after incentives is now ~29k$ or a mid-range Honda Accord. That's entirely too inexpensive. They should sell too many of them. I think they are going to empty off the reservation list and jack the prices up.

Fixed costs vs variable cost. More volume means more profit per car. Process improvements mean more profit per car.
Tear downs of LR estimated $28k assembled cost.

Lower company expenses means less profit needed per car.

 

[M3Rider]

Deutsche Bank- Hold rating
"The decision to move forward the introduction of its cheaper Model 3 variant will likely be viewed by investors as another sign of plateauing demand for Tesla's long and mid-range versions in the US, and we expect a negative stock reaction tomorrow. ... At the same time, Tesla's move should take concerns around Tesla's delivery volumes off the table, by tapping into the large pool of existing reservations for the cheaper variants, and unlocking very large potential new demand... But investor questions should rapidly shift to the margin outlook for Model 3 after introducing the lower-priced standard range... Based on multiple conversations with the company, we get the sense management has high conviction in its ability to maintain Model 3 gross margins at 20%+ and improve them to 25% by end of the year, even as ASP declines.. This would represent large upside surprise versus investor expectations, but the market is unlikely to give credit for it until Tesla achieves it. ... With 1Q19 expected to be a large "air pocket" for earnings and cash flow, we believe the stock could remain under pressure in the near term, and we will reassess its risk-reward after the quarter"

So if you take the ASP in Q4 for model 3 at ~54k$, and margins at ~20% then cost to manufacture is 43k$ for the mixed options vehicle that this represents. I simply don't think you can start pulling off pieces of that sufficiently to get anywhere near profitable for a 35k$ to 37k$ vehicle and that's at the gross profit line. Let's say you want to get to 30k$ gross cost for the base model in order to sufficiently justify selling it, and that it covers op. ex and so on. Someone show me how you get from 43k$ to 30k$? The battery is less than 4k$ of that.

At the same time, the base model after incentives is now ~29k$ or a mid-range Honda Accord. That's entirely too inexpensive. They should sell too many of them. I think they are going to empty off the reservation list and jack the prices up.

 

[ZachF]

March 1st.... page 1000

 

[AcesDealt]

Fixed costs vs variable cost. More volume means more profit per car. Process improvements mean more profit per car.
Tear downs of LR estimated $28k assembled cost.

Lower company expenses means less profit needed per car.

This is handwaving. The actual details don't support the general arguments.

 

[AcesDealt]

Deutsche Bank- Hold rating
"The decision to move forward the introduction of its cheaper Model 3 variant will likely be viewed by investors as another sign of plateauing demand for Tesla's long and mid-range versions in the US, and we expect a negative stock reaction tomorrow. ... At the same time, Tesla's move should take concerns around Tesla's delivery volumes off the table, by tapping into the large pool of existing reservations for the cheaper variants, and unlocking very large potential new demand... But investor questions should rapidly shift to the margin outlook for Model 3 after introducing the lower-priced standard range... Based on multiple conversations with the company, we get the sense management has high conviction in its ability to maintain Model 3 gross margins at 20%+ and improve them to 25% by end of the year, even as ASP declines.. This would represent large upside surprise versus investor expectations, but the market is unlikely to give credit for it until Tesla achieves it. ... With 1Q19 expected to be a large "air pocket" for earnings and cash flow, we believe the stock could remain under pressure in the near term, and we will reassess its risk-reward after the quarter"

A little skepticism of management guidance is surely called for by now, right? The math problem is right in front of you. Try to do it. How do you get from 43k$ gross cost per model in Q4 to something substantially under 35k$?

 

[humbaba]

This is handwaving. The actual details don't support the general arguments.

so you can't grasp the difference between fixed costs and variable costs. Got it.

 

[humbaba]

A little skepticism of management guidance is surely called for by now, right? The math problem is right in front of you. Try to do it. How do you get from 43k$ gross cost per model in Q4 to something substantially under 35k$?

ah, c'mon, aren't you getting paid enough to have a thicker skin than this? And you'd been doing so well. But don't feel bad, we really appreciate your concern about all of us poor investors.

 

[humbaba]

so you can't grasp the difference between fixed costs and variable costs. Got it.

@AcesDealt ah, a disagree. I love you too

 

[omarsultan]

When you say "those buyers still represent" you are making an assumption. One that is not supported by Tesla's numbers for their sales. Its north of 80% just buy online as it is. I don't think it is dangerous or arrogant for a company to not try and encompass all potential customers. In fact, the vast swath of people who can afford no more than a $35k car have been ignored until now.

And, please note, I'm not saying that Tesla isn't leaving money on the table. And I mean no offense to those that want or need the experience. But they are clearly optimizing for selling more units. They can't do it all and are making decisions. In this case I see the decision as furthering the mission (accelerating adoption) and not risking the business (they are cutting costs to better afford the former).

So, two things with that 80% number. First, it only represents the final step in the buying process. It does not capture what it took to get the customer to that point--test drives, visits to the store to kick the tires, get questions answered about charging, warranties, whether the white sets clean up OK, etc).

Second, the 80% only represents a small, small percentage of all cars sold. Most of this are still flowing through traditional brick-and-mortar stores. For those buyers, "normal" is going to look at the car, touch, the car, take the car for a test drive, etc. If you are going to get folks to change their buying behavior, you need to offer them some substantial benefit. Since folks keep using Amazon as an example, let's look at that. When they were just a book seller and battling B&N, Borders, etc, they offered two advantages over their competitors: 1) greater selection and 2) lower prices. With this move, not so sure what the tangible advantage is for a 100% online retail model.

I don't disagree with your broader point, but this move does not seem well thought out--it seems like one of those things that sounds great in Silicon Valley but falls flat in the real world (and I say the as a denizen of Silicon Valley).

 

[Navin]

Thread by @TeslaHistorian: "THE 35K MODEL 3 TWEETSTORM Put on some sad violin music and press F to pay respects to the latest addition to the short thesis cemetery. Her […]"

 

[Singuy]

Some anger is brewing in the online community. Tesla's rep apparently said Tesla made FSD free for all those who purchased EAP free due to the price drop recently. This offer is only good for cars bought in 2019. 2018 owners are currently pissed.

I have a feeling every early adopter will end up getting free FSD or free autopilot..or free something if you bought both for all customers who purchased before yesterday. Tesla is usually like that so time will tell.

 

[Nocturnal]

Actually, I would prefer just the opposite. I paid $5500 for EAP on my Model 3 (after the sale), but really only wanted the TACC and AP1 features. But, I'm not going to pull a "FRED" and go crying to Tesla that I want my $2000 back. All total, my L3MUR would be $8,000 less if I ordered it today ($4250 with difference in tax credit), but that's life. My timing at car buying seems to be as good as my timing on buying Tesla stock.

In both cases the answer is "hold". Your car will eventually depreciate down to zero and your stock will eventually go up to 4k.

Some anger is brewing in the online community. Tesla's rep apparently said Tesla made FSD free for all those who purchased EAP free due to the price drop recently. This offer is only good for cars bought in 2019. 2018 owners are currently pissed.

I have a feeling every early adopter will end up getting free FSD or free autopilot..or free something if you bought both for all customers who purchased before yesterday. Tesla is usually like that so time will tell.

Why the heck would they give them FSD free?

 

[CorneliusXX]

Call me delusional, but I think there's a chance for green today.

You are the lusional!

 

[Bobfitz1]

Your projection is not linear. It is
(wait for it...)
EXPONENTIAL!!!!!!!!!!!!!!

Yikes. You'd never believe I used to be good at math 40 + years back.
Forgot that if increase % is constant year over year projection is linear,
rather than the actual yearly increase amount being constant.

 

[elasalle]

Any Tesla Killer news today? Or did they all get Killed?

 

[humbaba]

Some anger is brewing in the online community. Tesla's rep apparently said Tesla made FSD free for all those who purchased EAP free due to the price drop recently. This offer is only good for cars bought in 2019. 2018 owners are currently pissed.

I have a feeling every early adopter will end up getting free FSD or free autopilot..or free something if you bought both for all customers who purchased before yesterday. Tesla is usually like that so time will tell.

ummm... I realize there are interests that want to whip up a frenzy, but as someone who bought EAP in late 2018 there are two things that make me happier about the current arrangement:

1) EAP is not the same as the new autopilot and has some features that were moved to FSD
2) The $3k for FSD with purchase that was available then has been restored to us

So basically we are getting more from EAP than someone paying for AP now. And we can have FSD as if we'd originally purchased it, no harm no foul.

That is, IMO, very fair.

 

[John W. Ratcliff]

So, there is a lot to parse about what happened in the past 24 hours. However, the one thing I am most surprised by is the negative reaction about Tesla going to all on-line sales.

I do get that people want to sit in and drive a car before they buy it.

However, this is hardly difficult to do with a Tesla.

Almost every single Tesla owner is wildly enthusiastic about their car and incredibly eager to show it off and share it with others.

Through car meetup events, car shows, and simply friends and neighbors, there are untold opportunities to experience a Tesla in person before buying.

*sugar*, I put down a $50,000 deposit on a Tesla Roadster that I won't get to see or sit in for three years!

I think people who are interested in a Tesla are going to hear plenty from their friends, neighbors and car enthusiasts.

 

[mongo]

Some anger is brewing in the online community. Tesla's rep apparently said Tesla made FSD free for all those who purchased EAP free due to the price drop recently. This offer is only good for cars bought in 2019. 2018 owners are currently pissed.

I have a feeling every early adopter will end up getting free FSD or free autopilot..or free something if you bought both for all customers who purchased before yesterday. Tesla is usually like that so time will tell.

I expect it is confusion. Previously purchased EAP (5k version) will get NoA, Auto Park and Advanced Summon. Going forward, these three things are part of FSD.
FSD also includes other thing like traffic lights and such, those are not being given to EAP holders.
Elon tweeted that Tesla will release an update on EAP, AP, FSD today.

 

[KarenRei]

A little skepticism of management guidance is surely called for by now, right? The math problem is right in front of you. Try to do it. How do you get from 43k$ gross cost per model in Q4 to something substantially under 35k$?

By laying off 7% of your staff and then getting another 6% cut by closing stores, for starters? Come on, I know you're better than this.

Also:

• New pack design
• Increased production rates (lower depreciation per vehicle)
• Lower raw materials costs (check out nickel sulfate, lithium carbonate, and cobalt prices)
• Lower battery costs in general (they've been falling fast over time, even when raw material prices were rising)
• General process improvements
• End of the referral programme
• Slightly smaller warranty reserves per vehicle, as reliability has improved.

Also, it was $38k in December, not $43k.

38k / 1,07 / 1,06 = $33,8k, just from these two cost reductions alone.

 

[jerry33]

Almost every single Tesla owner is wildly enthusiastic about their car and incredibly eager to show it off and share it with others.

This is certainly true, but usually people want to see the latest iteration. I still share with others, but at six years, it doesn't even have curb feelers.