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

[neroden]

Hmmmmm
Is Tesla following Old GM's playbook?

Short answer: No, Tesla is following Old Ford's playbook. Their production curve looks almost identical. Ford went from 11K in 1909 to 500K in 1916, which is only 7 years. In 2012 Tesla made 2650 cars, in 2013 about 22K cars, and now it's 6 or 7 years later and they're going to make around 500K cars.

Ford was already a private company (though he had some minority partners who didn't get bought out until 1920). He didn't have this media circus and didn't have to report when he fired people.

 

[elasalle]

The rule of thumb I read was that cutting prices on a car $5000 *doubled* addressable market.

The stores weren't pulling their weight.

Perfectly matches the requirements when capacity increases from 5K/week to 10K/week(goal) ..

 

[neroden]

Just so you know. I don’t believe a word of that claim. We discussed this a few years ago.

Fair 'nuff, I don't generally believe that rule of thumb either.

 

[AlMc]

What do you guys think about ARKK as a growth stock fund?

I have often thought (considering seriously at this point) that it is a way to participate in TSLA with people that seem to know how to manage better when to buy and sell it than I do.

 

[Krugerrand]

Wonder when Tesla will realize it's time for damage control.

Leaving investors with a bunch of questions unanswered about a major decision is never a good plan. They'll invent the worst possible scenarios in their minds.

Talk:

• Margins
• Volume
• Demand
• Stores

Here’s the thing; it doesn’t actually matter what Tesla says. Case in point; we will not need to raise capital. Since that statement (and it’s been repeated by Tesla multiple times) I’ve seen DOZENS of headlines about how Tesla needs to raise capital. Indeed, just a new headline today. Tesla said they’d pay the bonds in cash. Up until the actual day, headlines all read how that wasn’t possible.

So, I say let the confusion run rampant. I’m not confused. I wasn’t confused when they merged Solar City, I’m not confused now. The real problem is the impatience of people. We go through this every single time Tesla does something contrary to the consensus. Every bloody time. It’s gotten old.

 

[Fact Checking]

Single payer health care would restore the competitiveness of American business, but the leeches in the health insurance and hospital conglomerate businesses (and pharma) don't want that.

Don't forget doctors, doctors and doctors, who are fleecing Medicare like there's no tomorrow.

They also have high public support, so journalists and politicians shy away from calling them out, but they are a big part of the problem.

 

[Zaxxon]

How many times does this have to be explained?
Nafnlaus on Twitter

I know you like to continue repeatedly asking how many times it has to be explained, but you're not really explaining it. #howmanytimesdoyouhavetoaskhowmanytimesdoesithavetobeexplained

It's 2-4 weeks because it's properly matched to production, via controlling market availability. If a mismatch forms, that ratio will change, until Tesla readjusts market availability. Current market availability is a small fraction of the total global market (peak SR demand will be in China).

We've got TMC non-reservation holders in the US who ordered SR+ on Sunday (two days after orders began) with delivery dates in Ohio scheduled for this month. Maybe that's expected, and maybe it's not. But with Musk's mention that SR production won't reach volume until midyear, it's not obvious that it's expected. Certainly not obvious enough to take a high-and-mighty tack when (continuously) responding to other folks here.

Everyone should take a chill pill, realize that none of us here has sufficient information to know whether Tesla has the supply properly calibrated such that demand matches production, and check back in *checks pocketwatch* let's call it two to four weeks?

 

[anthonyj]

New information in the DB report is that Tesla has a $1500 cash margin on Model 3. That is absolutely 100% material, no question about it. Maybe DB was misleading and this is just their guess but they made it sound like they got this information from Tesla. That's a Reg FD violation. Black and white.

If SEC sees this, who would be charged, Tesla or Elon? Not trying to provoke fear, just generally annoyed and confused

 

[KarenRei]

Maybe I'm mistaken, but I don't see how it can be 2-4 weeks. I believe there should've been around 60-80k SR reservations sitting around.

Napkin math:
455k total reservations as of 8/2017 minus 20% cancelled=364k. Say 50% is N.A. That's 182k.

I believe around 100k of these were delivered as of 12/2018(all LRs prior to Q3+ ~90% of Q3(Ps and non-AWDs were up for grabs w/o reservation) + 25% of Q4 deliveries.

So, ~82k outstanding remaining. Unknows are: How many of these canceled between 8/2017 and 3/2019. And how many new reservations were added between 8/2017 and 8/2018, when reservations were disabled.

Unlikely that any of these were ordering in Jan/Feb, since they should've gone for MR+$7.5k credit when they had the chance.

I'm thinking there was likely a net decrease due to cancellations, so maybe 70k.

These people have no excuse not to order, assuming they were saving up the last 3 years.
Unless some hardships etc.
So, say 60k. If these people ordered, it's 2 months of production. Considering that SR production is just "ramping up" and at least 50% will be LRs and MRs, I think that whomever has not ordered by now will not get the $3,750 credit.

There is no flood of US/Canadian SR reservations.

The vast majority of people went with MR, something else, or their financial situation changed. It's hard to sit around waiting for a car for years. Yes, there are some, but not some bottomless supply.

I don't know how many times they have to say in the ERs that they're dealing mostly with new orders now, not reservations. And there's nothing wrong with that. That's the goal. New orders will continue to come in, because we live in a world of billions of people who regularly buy new cars, and some fraction thereof will want a Tesla and live in a market where they can get one.

 

[neroden]

View attachment 383387 EV startup NIO abandons plan to make its own cars

Chinese EV startup NIO no longer plans to make its own cars, the company announced Tuesday. Plans to build a factory in Shanghai — where Tesla is currently constructing the third Gigafactory — have been scuttled, and NIO will instead continue using its current contract manufacturer, state-owned automaker JAC Motors.

Wow.

JAC isn't looking good. The state of Chinese automakers is very turbulent right now, but BYD and BAIC are going strong in EVs, and JAC... isn't. Maybe this is JAC's way of attempting to get back into the EV business.

 

[neroden]

If SEC sees this, who would be charged, Tesla or Elon? Not trying to provoke fear, just generally annoyed and confused

That one would be Tesla, I think.

But the SEC doesn't prosecute real violations of securities laws, only made-up BS.

 

[Fact Checking]

it's here Dropbox - Tesla Call Transcript (2.28.19).pdf

Here's a cleaned up text version:

Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable
​

 

[KarenRei]

I know you like to continue repeatedly asking how many times it has to be explained, but you're not really explaining it. #howmanytimesdoyouhavetoaskhowmanytimesdoesithavetobeexplained



We've got TMC non-reservation holders in the US who ordered SR+ on Sunday (two days after orders began) with delivery dates in Ohio scheduled for this month. Maybe that's expected, and maybe it's not. But with Musk's mention that SR production won't reach volume until midyear, it's not obvious that it's expected. Certainly not obvious enough to take a high-and-mighty tack when (continuously) responding to other folks here.

Everyone should take a chill pill, realize that none of us here has sufficient information to know whether Tesla has the supply properly calibrated such that demand matches production, and check back in *checks pocketwatch* let's call it two to four weeks?

Can you offer a counter to what I wrote then?

• SR is only available in the US and Canada. Do you deny this?
• US and Canada are only a minority the target SR market (the biggest SR market is to be China). Do you deny this?
• Therefore, SRs are only being produced in a minority of their target market. Do you deny this?
• Even in the US and Canada, SRs are only part of the mix, as they recently reduced prices on the upper end as well. Do you deny this?

So you have a fraction of the mix in a fraction of the market. Why do you think production can't keep up with this?

Where did this notion that there's some bottomless, insatiable SR demand in the US+Canada alone come from? Tesla is making 6-7k/wk, out of the 10k/wk global target. The US better well be eating up its share of SRs, or Tesla's target is way too low.

 

[jerry33]

What do you mean close to nothing? My parents uses the universal healthcare all the time. It has a coverage rate of 90%, with a co-pay for 10% on procedures that cost peanuts to begin with. Their bill after a complete check up after MRI and the works end up being about 10-20 US dollars.

Now many things are non-formulary as in if you start using imported medications/devices/tubings/etc etc then it'll cost 100% out of pocket.

I believe what's mean is that the cost to the patient is next to nothing.

 

[Cartegena]

I was kind of assuming they were simplifying since just pulling out depreciation is creating a bizarre half-breed of a useless stat. On a cash basis, I certainly think it's profitable and ramping up revenue is good for cash cycle and so on... it's just that cash flow on this basis isn't a very good proxy for the strength of the business so it is a strange thing to optimize for. If they need cash, just go get some cash Elon. geeze.

Does Tesla add back deferred revenue and subtract COGS related stock-based compensation?

 

[neroden]

What do you mean close to nothing? My parents uses the universal healthcare all the time. It has a coverage rate of 90%, with a co-pay for 10% on procedures that cost peanuts to begin with. Their bill after a complete check up after MRI and the works end up being about 10-20 US dollars.

Now many things are non-formulary as in if you start using imported medications/devices/tubings/etc etc then it'll cost 100% out of pocket.

Which country are your parents in and how easy is it to move there? ;-)

 

[elasalle]

Here is a summary of requested todays market action thread - Tesla down 3.09% Joke

 

[ReflexFunds]

"Tesla indicated that initially, the $35k Model 3 will generate a positive cash gross margin (gross profit plus depreciation of approximately $1,500)"

How you go from "they'll generate a positive cash gross margin" to "they'll lose $3,5k" is beyond me. $38,5k was what it cost in December, which - ignoring a whole quarter of margin improvements, including lower depreciation from faster production, and also before 7% layoffs.

What does the $1.5k cash gross margin reported by Deutsche correspond to?

• Tesla's cash gross margin appears to be gross profit + depreciation but there is still a question mark on exactly how much depreciation they allocate on a car level.
• I estimate variable depreciation (tied to production volumes on certain tooling) is c.$0.7k per model 3, while fixed depreciation (fixed amount per quarter no matter what level of production) averages out between $2k (if at 7k per week) and $2.6k (if at 5k per week).
• So depending on whether or not they also add back the non variable depreciation in their calculation, gross profit would currently be -$1.5k to +$0.8k on an accounting basis for the $35k model 3 at 6k per week.
• While this cash basis calculation is a useful measure, there are also other items which are non cash in the short term and short term cash flow per car would be higher than $1.5k. Other costs such as warranty reserve and deferred revenue are non cash initially, but eventually consume cash over the next 4-5 years - hence why it appears Tesla does not adjust for them. There is also some stock comp in COGs, but very minor, and not clear if Tesla adjusts for it here.
• Also worth noting in the US Tesla should also earn c.$1-2k ghg credits per car.

Where will margin go from here?

• -$1.5k to +$0.8k gross profit is a decent accounting gross profit for the $35k car for now, but I expect they target around $3.5k to $5k by year end.
• If accurate, the weights of the Tesla models on its website could give a very big clue as to how they are going to reduce costs from here.
• The weight of the SR Model 3 is the same as the SR+, which suggests 60kwh battery with 8.3kwh unused cells due to software limitations. This could be around $1.2k extra cost.
• The weights of the MR, SR+ and SR models all correspond to exactly the same battery pack weight (ex cells & modules) as the LR car. So none of the cars are yet using the new battery pack design and are using a depopulated LR pack. This may be why the SR is software limited; the pack is not stable when almost half empty.
• This means there is still significant savings to come from ramping up the new Grohmann module and pack lines. It is unclear if SR/SR+/MR will eventually use the same pack structure, or if they will each have their own design optimised for cell count.

How much savings could Tesla get from the new battery pack design? (Note this is all based on the assumption Tesla SR/SR+ & MR new weights are accurate on their website).

• Lets start by assuming the LR pack has $120/kWh cell costs, $20/kWh module costs and $40/kWh pack costs. This roughly corresponds to the weight breakdown of the pack. At cell level raw material costs per kg are likely higher, however labour costs per kg are likely much higher on the module and pack. Sandy Munro estimated cell costs of $150/kWh and module/pack at $30/kWh. I'm pretty sure his cell costs are too high, though they may include some of the module cost. I'm also pretty sure his module/pack costs are too low, particularly given Tesla's difficulty with its initial automated lines.
• Cell and module costs are variable between LR, MR and SR+, but pack costs are fixed per car with the current design. So for the MR cell+module is still $140/kWh but pack costs increases to $47/kWh. SR+ pack costs are $51/kWh and SR pack costs are $51/kWh (in addition to having 8kWh too many cells in the first place).
• If the new module/pack design increases automation and allows for variable pack size for each module, then perhaps the LR module and pack costs can reduce from $20/kWh & 40/kWh to $15/kWh and $30/kWh respectively.
• But these costs can now all potentially be variable between LR/MR/SR+ & SR.
• Applying these design savings and the new variable pack costs, as well as reducing the cell count in the SR rather than the software limit leads to: $1.1k savings per LR car, $1.4k per MR, $1.6k per SR+ and $2.9k savings per SR car.
• So in summary I think the new battery pack line could increase SR gross margin by c.$2.9k per car.

 

[EVNow]

Here’s the thing; it doesn’t actually matter what Tesla says. Case in point; we will not need to raise capital. Since that statement (and it’s been repeated by Tesla multiple times) I’ve seen DOZENS of headlines about how Tesla needs to raise capital. Indeed, just a new headline today. Tesla said they’d pay the bonds in cash. Up until the actual day, headlines all read how that wasn’t possible.

The explanation is not to completely stop FUD, but to reassure investors - esp. institutional (and may be weak longs).

Its like - how politicians have to sort out confusion for the media - even though opponents will continue to make allegations.

 

[AlexS]

Here's a cleaned up text version:

Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable
​

I don't know who wrote the blog post on Tesla website - it was horrible. (should be fired).
this transcript is way more positive than the blog post.