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

[Artful Dodger]

Wow, where did you get those numbers? That's much higher than I expected. That'd be a brilliant stopgap if so - that could support 7k at Fremont + 3k at Shanghai + 4k MY or whatnot.

I looked up the specs for the Schuler press on the manufacturer's website. The press has also been modified by Tesla engineers for extra throughput. That's where the 14K/wk estimate comes from.

I think you're right about the production split, and I think Tesla will need more presses. They likely ordered 3-5 more presses months ago with a staggered delivery schedule over several years. (1 more for GF1, 2 more for GF3, and then 2 for GF4). Rince, repeat.

 

[Krugerrand]

I looked up the specs for the press on the manufacturer's website. The press has also been modified by Tesla engineers for extra throughput. That's were the 14K/wk comes from.

I think you're right about the split, and I think they need more presses. Likely ordered 3-5 more many months ago. (1 more for GF1, 2 each for GF3 and eventually GF4)

So, you’ve made the assumption one press line is doing all M3 body panels? How many is that? Are they doing multiple panels at a time? If so, for which parts? What stroke rate did you use for each part? How much time did you factor in for downtime like die changes, maintenance, end of arm tooling changes, program issues, die issues like broken punches, dull cutting edges, blocked scrap chutes etc...

 

[Sparky]

This is a chart from the Global Environment Outlook report by the UN.

View attachment 386123

...based on data from the NOAA and UCSD.

Sigh. When I ordered my Model S, I cleaned the garage, and painted the floor with a compass rose (see avatar). Etched in the concrete at North and South are, my favorite equation and the Keeling curve in 2012; 390 ppm.

 

[Artful Dodger]

So, you’ve made the assumption one press line is doing all M3 body panels? How many is that? Are they doing multiple panels at a time? If so, for which parts? What stroke rate did you use for each part? How much time did you factor in for downtime like die changes, maintenance, end of arm tooling changes, program issues, die issues like broken punches, dull cutting edges, blocked scrap chutes etc...

No clue. What's your's?

Cheers!

 

[Fact Checking]

Discovery on a motion for contempt is very unlikely. The parties will use declarations and if there is a factual dispute an evidentiary hearing. This is not going to expand past the issue of whether the tweet violated the consent decree.

While I agree in principle, note that the two key declarations in the case already go way beyond the question of the legality of the "about 500k" tweet:

• Elon's affidavit carefully lays out the "chilling effect" of the SEC's censorship of Elon's speech and the "prior restraint" it applies even to speech that is not covered by the settlement. (They also argue that Elon didn't agree to the SEC's reading of the settlement, and even if he agreed to it it's an impermissibly broad construction of the settlement - backed by strong citations.)
• MIT accounting professor's expert opinion carefully lays out the economic harm the SEC's clearly erroneous interpretation of the settlement inflicted on Tesla, Elon and Tesla shareholders in general.

See this longer comment where I outline the lines of attack Elon's lawyers appear to be preparing:

BTW., there's a lot more depth to it, and Elon's lawyers added those layers for an entirely different purpose than just layered defense:

• The reply by Elon's lawyers cites strong precedents that compells the settlement to be narrowly interpreted not just for this case, but for similar future cases as well. I.e. it's an attempt to de-fang the settlement permanently - this protects Tesla shareholders even if the constitutional aspects are not decided.
• Expert opinion from MIT accounting professor establishes facts not just for materiality, but documents the economic harm of the SEC's erroneous interpretation of the settlement caused to shareholders: 1.1 billion dollars.
• Elon volunteered a full sworn testimony of what happened, but his testimony (affidavit) is not just covering the tweet, but is carefully outlining the harm the SEC's erroneous interpretation does and did, which prepares the next step:
• Their constitutional arguments are not primarily defense (the SECs case fails robustly on the facts and on established law already), but offense: Elon's filing is an attempt to strip the SEC's power to harrass Tesla through contempt of court proceedings permanently, by setting a precedent that raises the bar for the SEC significantly.

Basically Tesla is using the fact that the SEC is wrong on the facts and is harming both investors, Tesla and Elon for a legal attack to attempt to strip the SEC of several key powers. About 75% of the filing lays the groundwork for that.

It's a rather ingenuous approach, which even you as a lawyer missed.

The SEC certainly didn't miss it: this attack is why IMO the SEC panicked yesterday and asked not for a contempt hearing but for a reply brief, which is not the usual procedure of contempt proceedings AFAIK.

So it's not just legal mumbo jumbo:



It's highly unlikely that she will skip the details, because this is not a usual judge: the federal judge hearing Elon's case, Judge Alison Julie Nathan, is a top lawyer and judge with an outstanding background, she clerked on the 9th circuit and on the U.S. Supreme Court, then she worked as White House counsel and assistant to Barack Obama:

Judge Alison Julie Nathan (S.D. New York) – CourtListener.com

• She was clerk to the 9th Circuit, one of the most important circuits in the U.S. (2000-2001),
• She was a clerk to Justice Stevens at the U.S. Supreme Court (2001-2002),
• She was associate White House counsel and special assistant to President Barack Obama (2009-2010)

Her ruling yesterday (adding two more rounds of filings and adding an evidentiary hearing before the contempt hearing) suggests that she wants to approach this case methodologically and broadly.

A broad case is absolutely not what the SEC wanted: they wanted a quick ruling holding Elon in contempt, then they wanted sanctions ... (I expect the SEC's reply brief to attempt to narrow the case back on various procedural grounds.)

(BTW., you heard it here first: I believe if there's a Democratic victory in 2020 Judge Alison Julie Nathan will be one of the candidates to be nominated to the Supreme Court.)

I believe she was waiting for a high profile case with constitutional arguments like this, which case has the potential to set important precedents.

Also note that the judge could have limited Elon's broadening of the argument already by calling a contempt hearing straight away - instead she allowed the SEC another round of reply and signaled willingness to hold an evidentiary hearing to cross-examine the broader evidence and testimony.

I fully expect the SEC's rebuttal brief to argue against the broadening.

Note that broader evidence only matters under the broad issues Elon's filing rises - under the SEC's theory the whole matter could be decided just based on the undisputed literal contents of the tweets, Tesla's prior guidance and the wording of the consent degree. Neither the expert testimony not Elon's state of mind would matter under the SEC's theory.

To me this strongly suggests that the judge is not only taking the constitutional arguments seriously but agrees that they are relevant - which is not unsurprising from a judge who clerked for Justice Stevens on the Supreme Court ...

 

[TNEVol]

While I agree in principle, note that the two key declarations in the case already go way beyond the question of the legality of the "about 500k" tweet:

• Elon's affidavit carefully lays out the "chilling effect" of the SEC's censorship of Elon's speech and the "prior restraint" it applies even to speech that is not covered by the settlement. (They also argue that Elon didn't agree to it, and even if he agreed to it it's an impermissibly broad construction of the settlement.)
• MIT accounting professor's expert opinion carefully lays out the economic harm the SEC's clearly erroneous interpretation of the settlement inflicted on Tesla, Elon and Tesla shareholders in general.

See this longer comment where I outline the lines of attack Elon's lawyers appear to be preparing:



Also note that the judge could have rejected Elon's broadening of the argument and could have called a contempt hearing straight away - instead she allowed the SEC another round of reply and signaled willingness to hold and evidentiary hearing to cross-examine broader evidence and testimony.

Note that broader evidence only matters under the broad issues Elon's filing rises - under the SEC's theory the whole matter could be decided just based on the undisputed literal contents of the tweets. Neither expert testimony not Elon's state of mind would matter under the SEC's theory.

To me this strongly suggests that the judge is not only taking the constitutional arguments seriously but agrees that they are relevant - which is not unsurprising from a judge who clerked for Justice Stevens on the Supreme Court ...

We'll see. Hope you are right. I am perhaps a little jaundiced by age.

 

[Heart Land]

It's real. I live in Ohio and wrote to my representative about it. Here's their response:



It probably won't be a sizeable hit to EV adoption here in Ohio because we have cheap electricity and among the lowest (any) car ownership costs of any state in the US, but probably bad news for other states looking for precedent on outrageous EV taxes. Hopefully they'll set a more reasonable value like $50-$100.

Slightly OT, but if anyone wants to pitch in their voice, here's the form I used to get that response from my legislator: Proposed Ohio EV & Hybrid Fee - Action Network

Yep, thanks for the info. That fee is a bummer though. I guess Uncle Sam gets his money one way or another.

 

[RobStark]

That pic also makes my point.

To a much far lesser degree.

Perhaps Elon is thinking a complex intricate look without the empty space causing wind turbulence.

Or that he might be willing to sacrifice some aero efficiency for looks.

Or the steampunk can be on the inside and bladerunner on the outside.

Not that he is making a 1929 Rat SteamPunk truck.

 

[RobStark]

Where did the steampunk idea come from? I think it’s expected to be cyberpunk. Which, yes, would be Blade Runner-like.

Elon musk himself said steampunk and bladerunner like.

 

[Curt Renz]

It's real. I live in Ohio and wrote to my representative about it. Here's their response:



It probably won't be a sizeable hit to EV adoption here in Ohio because we have cheap electricity and among the lowest (any) car ownership costs of any state in the US, but probably bad news for other states looking for precedent on outrageous EV taxes. Hopefully they'll set a more reasonable value like $50-$100.

Slightly OT, but if anyone wants to pitch in their voice, here's the form I used to get that response from my legislator: Proposed Ohio EV & Hybrid Fee - Action Network

Apparently that Ohio tax proposal does not consider miles driven. It's the same for anyone who drives 50,000 miles a year or 2,000. As a retiree I'm in the latter camp. Tesla can easily report your odometer readings to the state due to the wireless readings it takes of your car's usage. That's even less of an intrusion than your brokerage being required to report your stock trading to the IRS.

The proposed tax in Ohio will discourage low mileage drivers from buying an electric car. Moreover, it's large trucks that are almost entirely responsible for erosion of the roads. Their owners are the ones who should be paying more than they are. Although gasoline propelled cars cause more harm to roads than electric cars due to the dripping of fuel and oil, and the exhaust fumes. That’s not to mention no need for electric cars to visit the state’s emission checking stations.

Thankfully, I'm not in Ohio. I'll just have to do what I can to make sure that Illinois handles this matter reasonably and fairly.

EDIT: I just now emailed my concern to the Illinois governor and my two state legislators. Taxation of electric cars is inevitable, but I just wanted to get in front of the matter here and make sure it is eventually done right. Others may want to do the same.

 

[Fact Checking]

I agree with everything you said, but...
Tesla policy, or agreement with SEC (or both) calls for pre-approval of material information, or what could be material information (I've seen it somewhere in documents I read). Production progress and numbers are categories specifically called in Tesla's policy as potentially material. That this tweet didn't turn out to be material is a fact proven by market reaction, but it could have been material.

This expansive interpretation of the settlement is basically the SEC's reading of it, which restrictive interpretation is strongly disputed by Elon, Tesla's lawyers and Elon's lawyers.

They offer the following understanding of the settlement instead: Elon, when he is tweeting, decides based on the content of the tweet whether it could be material information. In this case he decided that since it was already published, i.e. de facto immaterial information, no pre-approval would be required.

And Elon was right: indeed the tweet was immaterial and not even the SEC is arguing that it was material.

The notion that Elon is supposed to pre-approve even immaterial information is the SEC's expansive reading of the settlement, which amounts to censorship of all Tesla related written communication by Elon, which was never agreed upon by Elon, or by Tesla.

Yet part of it the reason it didn't become material is certainly built-in suspicion in stuff Elon says, which isn't helping his case much.

The "about 500k" tweet was immaterial primarily for two strong reasons: it was existing guidance, and it was a tweet in reply to the '4000 cars loaded' tweet of Elon:

Elon Musk on Twitter

"4000 Tesla cars loading in SF for Europe"

"Tesla made 0 cars in 2011, but will make around 500k in 2019"​

The "0 to 500k" tweet that he sent 13 minutes later was an optimistic celebration of achievement of how far Tesla has come in 8 years. It was also firmly within existing guidance.

Already public information is immaterial by definition:

Such a requirement would make no sense, because “information already known on the market is . . . immaterial.”

Gissin, 739 F. Supp. 2d at 502.​

Elon's lawyers are also citing the legal standard here:

see also In re Nokia Oyj (Nokia Corp.) Sec. Litig., 423 F. Supp. 2d 364, 397 (S.D.N.Y. 2006)

(“In reviewing forward-looking statements, courts are instructed to consider the total mix of information and are supposed to bear in mind that disclosure requirements are not intended to attribute to investors a child-like simplicity. Rather, investors are presumed to have the ability to be able to digest varying reports and data.”​

Finally, not even the SEC is arguing that the tweet was material information.

 

[Electroman]

I mean, basically every media and outlet is biased against Tesla, and this is has been damaging the reputation of Tesla for years.

If you take away CleanTechnica, Electrec, insideevs, Teslarati - none of them MSM - Tesla has no friends in the media. Everyone else is churning out FUD after FUD every day.

 

[Antares Nebula]

What is people's cash flow estimate this qtr from customers upgrading to Autopilot (and/or Full Self-driving) during the current discount window?

First, we need to estimate the number of potential upgrades (customers currently without Autopilot and/or FSD). Then what is the likelihood of those customers actually upgrading. And then how many will upgrade to Autopilot only ($2000) or Autopilot + FSD ($2000 + $3000). And finally, how many customers that already have Autopilot will upgrade to FSD ($3000).

Tesla fan Vincent recently conducted a poll, in which 66% said they were upgrading to FSD:

Vincent on Twitter
Price Drop On Tesla Autopilot & Full Self Driving Creates Surge In Demand | CleanTechnica

So, this is a bit of a complex calculation. But if you estimate that just 100,000 customers upgrade to Autopilot, and 100,000 upgrade to FSD, you have:

(100,000 x 2000) + (100,000 x 3000) = $500M cash flow from Autopilot/FSD discount window. This is very significant! Could push profits and cash flow into the black for Q1.

Too much? I could be totally off here. Thoughts people?

 

[Causalien]

We'll see. Hope you are right. I am perhaps a little jaundiced by age.

Yep same here. Having seen too much government action against TSLA. My default expectation of this is another gov action against tsla. I do support the fight, but sorry. Nothing's been going right for 10 years when it comes to gov actions.

Elon should start a corp in China. Say... Boring can be China based or something, and see how different the treatment is.

 

[Fact Checking]

We'll see. Hope you are right. I am perhaps a little jaundiced by age.

I'll admit one thing: Elon's lawyers are playing a gutsy game here, the procedural limitations of contempt of court proceedings are dangerous in that Elon is just one unfavorable ruling away from being found contemptor who faces sanctions which could permanently broaden the settlement's scope for him. Judges are given broad powers in contempt of court proceedings, so if the judge is leaning against Elon they'd be facing an uphill battle on appeal. There's remarkably few due process safeguards in contempt of court proceedings, so if the case is going against him there's little procedural space for them to regroup and recover.

So IMHO it's rather impressive how Elon's lawyers went for a hyper-aggressive ~33 pages attack here, only ~3 pages of which would have sufficed to avoid the contempt charges...

BTW., this IMO also explains why Dane Butswinkas left as Tesla's General Counsel and explains why Elon switched lawyers in early March: I just don't see Dane Butswinkas as a hyper-aggressive constitutional litigator, and I think Elon went against his advice. Also, it's pretty clear from the filings now that it was probably Dane Butswinkas who convinced Elon to send the third "clarification" tweet - which gave the ammunition for the SEC to attack, and there might have been a loss of trust after that.

The SEC's reply on March 19 will be an interesting read. I don't think the SEC has much litigation experience in arguing genuine constitutional arguments: the usual opponents of the SEC are actual crooks and fraudsters who want the SEC to impose a monetary fine on them and forget about the whole thing...

But now the SEC is facing Elon who was genuinely wronged and harmed by the SEC, who literally didn't do anything illegal before or now and who only settled with the SEC under the duress of shareholder interest and SEC blackmail, and who is armed with top trial and constitutional lawyers with all the resources in the world to make a powerful statement ...

 

[Zaxxon]

And then how many will upgrade to Autopilot only ($2000) or Autopilot + FSD ($2000 + $3000). And finally, how many customers that already have Autopilot will upgrade to FSD ($3000).

For the Model 3 with EAP already, the FSD cost is $2k, not $3k.

 

[Fact Checking]

$500M cash flow from Autopilot/FSD discount window.

Very optimistic IMHO: take-rate of EAP was pretty high already which grandfathers in all existing FSD features, and I'd guess only a minority of existing Tesla owners are aware of these offers.

It's definitely a wildcard, but I don't think it's a $500m wildcard: 10,000+10,000 upgrades and a $40m-$50m boost would be a nice result already.

 

[TradingInvest]

What is people's cash flow estimate this qtr from customers upgrading to Autopilot (and/or Full Self-driving) during the current discount window?

First, we need to estimate the number of potential upgrades (customers currently without Autopilot and/or FSD). Then what is the likelihood of those customers actually upgrading. And then how many will upgrade to Autopilot only ($2000) or Autopilot + FSD ($2000 + $3000). And finally, how many customers that already have Autopilot will upgrade to FSD ($3000).

Tesla fan Vincent recently conducted a poll, in which 66% said they were upgrading to FSD:

Vincent on Twitter
Price Drop On Tesla Autopilot & Full Self Driving Creates Surge In Demand | CleanTechnica

So, this is a bit of a complex calculation. But if you estimate that just 100,000 customers upgrade to Autopilot, and 100,000 upgrade to FSD, you have:

(100,000 x 2000) + (100,000 x 3000) = $500M cash flow from Autopilot/FSD discount window. This is very significant! Could push profits and cash flow into the black for Q1.

Too much? I could be totally off here. Thoughts people?

Should take this poll result with a grain of salt. I think those who follow Vincent tend to be strong Tesla supporters/investors, they are more likely to upgrade.

By the way, I think taking the $2k FSD upgrade is a no brainer. You will get the HW3 upgrade, this will improve the image processing speed by 1000-2000%, and be able to hold a larger neural network. By far this is a safety improvement, on top of the FSD features Tesla said will be released later this year.

 

[TNEVol]

I'll admit one thing: Elon's lawyers are playing a gutsy game here, the procedural limitations of contempt of court proceedings are dangerous in that Elon is just one unfavorable ruling away from being found contemptor who faces sanctions which could permanently broaden the settlement's scope for him. Judges are given broad powers in contempt of court proceedings, so if the judge is leaning against Elon they'd be facing an uphill battle on appeal. There's remarkably few due process safeguards in contempt of court proceedings, so if the case is going against him there's little procedural space for them to regroup and recover.

So IMHO it's rather impressive how Elon's lawyers went for a hyper-aggressive ~33 pages attack here, only ~3 pages of which would have sufficed to avoid the contempt charges...

BTW., this IMO also explains why Dane Butswinkas left as Tesla's General Counsel and explains why Elon switched lawyers in early March: I just don't see Dane Butswinkas as a hyper-aggressive constitutional litigator, and I think Elon went against his advice. Also, it's pretty clear from the filings now that it was probably Dane Butswinkas who convinced Elon to send the third "clarification" tweet - which gave the ammunition for the SEC to attack, and there might have been a loss of trust after that.

The SEC's reply on March 19 will be an interesting read. I don't think the SEC has much litigation experience in arguing genuine constitutional arguments: the usual opponents of the SEC are actual crooks and fraudsters who want the SEC to impose a monetary fine on them and forget about the whole thing...

But now the SEC is facing Elon who was genuinely wronged and harmed by the SEC, who literally didn't do anything illegal before or now and who only settled with the SEC under the duress of shareholder interest and SEC blackmail, and who is armed with top trial and constitutional lawyers with all the resources in the world to make a powerful statement ...

Dane is also a witness if he was the lawyer oversight. He had to get off of the defense. Also I think it was a terrible fit . Litigators tend to over control their clients when moved to corporate because they over compensate for legal risks. On the other hand in-house corporate counsel often defer too much to management and do not provide independent advice. Dane IMO was likely too much of a litigator and previous counsel too much dependent on EM to give him realistic advice. This is perhaps on of the most trusting relationships. I would probably tear my hair out if I had to represent EM

 

[ClimateOptimst]

What is people's cash flow estimate this qtr from customers upgrading to Autopilot (and/or Full Self-driving) during the current discount window?

First, we need to estimate the number of potential upgrades (customers currently without Autopilot and/or FSD). Then what is the likelihood of those customers actually upgrading. And then how many will upgrade to Autopilot only ($2000) or Autopilot + FSD ($2000 + $3000). And finally, how many customers that already have Autopilot will upgrade to FSD ($3000).

Tesla fan Vincent recently conducted a poll, in which 66% said they were upgrading to FSD:

Vincent on Twitter
Price Drop On Tesla Autopilot & Full Self Driving Creates Surge In Demand | CleanTechnica

So, this is a bit of a complex calculation. But if you estimate that just 100,000 customers upgrade to Autopilot, and 100,000 upgrade to FSD, you have:

(100,000 x 2000) + (100,000 x 3000) = $500M cash flow from Autopilot/FSD discount window. This is very significant! Could push profits and cash flow into the black for Q1.

Too much? I could be totally off here. Thoughts people?

Good point. It may be a silver lining of the tumultuous price changes & maybe something Elon's previous guidance for a loss this quarter hadn't fully accounted for at the time he made the statement? With M Y reservations also coming in the next few weeks, the balance sheet reported during the next quarterly may look a lot better than current expectations, especially if they manage to manage end of quarter inventories to be close or better than they're previous estimates around ~10k...