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

[neroden]

FSD is architecturally pretty close to a game engine: a 3D object engine, physics engine, high level game logic and a user interface - except that in FSD the 3D engine detects 3D objects via an NN - while in a game the 3D engine generates a 3D scene.

Using this analogy, I can say that the part I'm highly skeptical of fast progress on is the high level game logic.

 

[Mike Smith]

CNBC and Reuters are both reporting that Musk said on the conference call (about a capital raise): "It's probably about the right time".

He never said that. They're flat out lying.

UPDATE 1-Tesla says may seek alternative financing sources

Edit: Never mind, I found it - he did say it.

 

[Anstandswauwau]

If the focus of this thread right now isnt reading and interpreting the 10-Q I dont know what to tell you.

TSLAQ already has a field day with this 10-Q; waiting for alternative interpretations by TMC bulls.

Truth is likely to be found somewhere in the middle.

 

[neroden]

EC rent, a Dutch company specialized in EV rentals is ceasing operations because half of their Tesla fleet is out of commission since December 2018 due to parts shortages and no improvements in sight. Owner was a member here. Then there is Shenma which is a large ride sharing operator who claims to be the biggest Asian fleet buyer but took out billboards on Time Square to complain about Tesla service leaving 20% of their fleet inoperable.

This is how you destroy an indistructable brand. And, given the mounting losses in service and maintenance, there is not a lot of financial room to improve on this.

I don't think this problem needs much money. I think it needs administrative competence, in the form of secretaries and managers. This isn't actually super expensive. Tesla needs to just fix it by hiring the right people. Which they have not done.

Most of the "service & other" losses are from selling used cars, which is a business Tesla should get out of.

 

[Artful Dodger]

Thanks.

ELI5 please

Tesla's "loss" in 2019Q1 is mostly explained simply as Model 3s in-transit and total vehicles produced but unsold by end of quarter (they'll sell; don't worry).

Cheers!

 

[neroden]

As for the FSD computer's safe handling of supported and especially unsupported driving cases, we came to the conclusion that it is essential that with every upgrade of the Neural Network, Tesla needs to provide a pretty detailed set of release notes.

Good luck. Nobody in the commercial software business seems to provide release notes at all any more. Software development standards everywhere are awful these days compared to the 1970s.

 

[PhaseWhite]

CNBC and Reuters are both reporting that Musk said on the conference call (about a capital raise): "It's probably about the right time".

He never said that. They're flat out lying.

UPDATE 1-Tesla says may seek alternative financing sources

The source reuters is quoting reads like standard legalese in a 10Q filing. I don't think it's newsworthy.

Edit source:
https://ir.tesla.com/static-files/5cb2477b-8dca-479f-9dda-eb3f59fa67e3

And full context:

In 2019 and beyond, we will continue to utilize our increasing experience and learnings from past and current product ramps to do so at a level of capital efficiency per dollar of spend that we expect to be significantly greater than historical levels. For example, based on our experience with ramping Model 3 at the Tesla Factory, we expect that the capital spend per unit of Model 3 manufacturing capacity at Gigafactory Shanghai will be less than that of our line in Fremont. Likewise, based on such experience and the substantial commonality of components we expect between Model Y and Model 3, we believe that the production ramp of Model Y will be significantly faster than that of Model 3 and cost less per unit of manufacturing capacity than that of Model 3 at Fremont. Considering the pipeline of new products planned at this point, and consistent with our current strategy of using a partner to manufacture cells, as well as considering all other infrastructure growth and investments in Gigafactory 1, Gigafactory 2 and Gigafactory Shanghai, we currently estimate that capital expenditures will be between $2.5 to $3.0 billion annually for the next two fiscal years. Moreover, we expect that the cash we generate from our core operations will generally be sufficient to cover our future capital expenditures and to pay down our near-term debt obligations, although we may choose to seek alternative financing sources. For example, we expect that much of our investment in Gigafactory Shanghai will be funded through indebtedness arranged through local financial institutions in China, including a RMB 3.5 billion term facility that our subsidiary entered into in March 2019. As always, we continually evaluate our capital expenditure needs and may decide it is best to raise additional capital to fund the rapid growth of our business.​

 

[K_Dizzle]

CNBC and Reuters are both reporting that Musk said on the conference call (about a capital raise): "It's probably about the right time".

He never said that. They're flat out lying.

UPDATE 1-Tesla says may seek alternative financing sources

The article quote is accurate.

There is some merit to raising capital,” Musk said on an earnings conference call on Wednesday, after being asked why he had not done so yet. “It’s probably about the right time.”

 

[shootformoon]

In 10Q:
The in-process research and development (“IPR&D”), which we acquired from SolarCity, is accounted for as an indefinite-lived asset until the completion or abandonment of the associated research and development efforts. If the research and development efforts are successfully completed and commercial feasibility is reached, the IPR&D would be amortized over its then estimated useful life. If the research and development efforts are not completed or are abandoned, the IPR&D might be impaired. The fair value of the IPR&D was estimated using the replacement cost method under the cost approach, based on the historical acquisition costs and expenses of the technology adjusted for estimated developer’s profit, opportunity cost and obsolescence factor. In April 2019, the Company determined that it would abandon further development efforts on the IPR&D and will impair the remaining $47.0 million in the quarter ending June 30, 2019.

So which part of the solarcity R&D is abandoned? I deem it as good news. They should focus.

 

[Mike Smith]

CNBC and Reuters are both reporting that Musk said on the conference call (about a capital raise): "It's probably about the right time".

He never said that. They're flat out lying.

UPDATE 1-Tesla says may seek alternative financing sources

Also, read the Seeking Alpha transcript of what Musk said about a capital raise (if you can). They completely mangle it despite it being quite easy to hear him. The reason they do this is that they know other reporters will directly quote from it (Seeking Alpha is the official transcriber for Nasdaq), the goal being to make Musk sound like he has a severe brain injury.

"Yes. First of all, I’ll just say that I don’t think capital has been constrained on our growth thus far and the type of those fund in fact, if there was a final constraint on growth would’ve faced capital before now. But I think it is very important as company scales to make sure we are on a solid foundation and that we’re we have the appropriate financial discipline throughout the company and are spending money very efficiently. At this point, I think we are doing that. There’s more work to do, and Tesla today is far more efficient operating organization than it was a year ago. We’ve made dramatic improvements across the board. And so, I think there’s merit to the idea of raising capital at this point."

Tesla, Inc (TSLA) CEO Elon Musk on Q1 2019 Results - Earnings Call Transcript | Seeking Alpha

 

[Alexander Grea]

Tesla's "loss" in 2019Q1 is mostly explained simply as Model 3s in-transit and total vehicles produced but unsold by end of quarter (they'll sell; don't worry).

Cheers!

Inventory is not an expense. It does not affect net income in any way. It only impacts the cash flows.

 

[mongo]

"Automotive Regulatory Credits

We recognize revenue on the sale of regulatory credits at the time control of the regulatory credits is transferred to the purchasing party as automotive revenue in the consolidated statement of operations. Deferred revenue related to sales of automotive regulatory credits was $140.0 million and $0 as of March 31, 2019 and December 31, 2018, respectively. We expect to recognize the deferred revenue as of March 31, 2019 over the next 2 to 3 years."

Is this FCA? As I'm reading this it's a one time payment of 140m$, but that doesn't square up for me at all.

Timeline doesn't match. As I understand it, the current pool agreement is for 2019 only. No reason to spread out payments. Likely expected ZEV returns. Also pooling is not selling of credits, it's emissions math.

 

[Anstandswauwau]

CNBC and Reuters are both reporting that Musk said on the conference call (about a capital raise): "It's probably about the right time".

He never said that. They're flat out lying.

UPDATE 1-Tesla says may seek alternative financing sources

Well, he technically said that but I think it can be interpreted both ways:

Elon R. Musk -- Chief Executive Officer

Yeah. I mean, I don't think raising capital should be substitute for making the Company operate more effectively. So that -- in that sense, I think it's just -- it's important to have strong financial discipline of the Company and just to make sure we don't have extraneous expenses and that we're just being frugal with capital. If we keep raising capital every time, then it just take -- if we now have the forcing function for improving the fundamental operation of the business. So, I think it is healthy to be on a Spartan diet for a while. At this point, I do think there are -- it is similar to raising capital. That's a -- but this is sort of probably about the right timing, but yeah.

Toni Sacconaghi -- Sanford C. Bernstein & Co. -- Analyst

So, does that mean that investors should expect the capital raise in the near- to medium-term? And I hear you on the force and constraint, but I mean, growth does eat cash, especially in a capital-intensive business, and if you really do believe you have a first mover advantage, why wouldn't you want to push it as quickly as possible even if it meant raising capital in the short- term?

Elon R. Musk -- Chief Executive Officer

Yeah. First of all, I'll just say that I don't think that capital has been constraint on our growth thus far. And if I thought there was a final constraint on growth, we would have raised capital before now. But I think it is very important as the Company scales to make sure we are on a solid foundation and that we're -- we have the appropriate financial discipline throughout the Company and are spending money very efficiently. At this point, I think we are doing that, but there is more work to do. And Tesla today is far more efficiently operating organization than it was a year ago. We've made dramatic improvements across the board. And so, I think there is merit to the idea of raising capital at this point.

Source

 

[neroden]

Inventory is not an expense. It does not affect net income in any way. It only impacts the cash flows.

I'll be digging into GAAP income later, but due to the wonderful distortions caused by VIE accounting, depreciation accounting, and so forth, I do tend to think the cash flows are more important most of the time. The inventory-in-transit buildup had a very obvious hit to cash flow.

Unwinding the wave means we'll get another hit like that in Q2.

 

[mongo]

CNBC and Reuters are both reporting that Musk said on the conference call (about a capital raise): "It's probably about the right time".

He never said that. They're flat out lying.

UPDATE 1-Tesla says may seek alternative financing sources

From Motley Fool Tesla, Inc. (TSLA) Q1 2019 Earnings Call Transcript -- The Motley Fool

Operator

Thank you. Our next question comes from Toni Sacconaghi with Bernstein.

Toni Sacconaghi -- Sanford C. Bernstein & Co. -- Analyst

Yes, thank you. Elon, I was wondering if you could talk about this whole notion of raising capital for about the last year, you sort of shooed it as almost an evil thing, and I think a lot of investors believe that the Company might be better served and its growth aspirations if it did raise capital or had a stronger cash base. And given that you used up about $2 billion worth of cash in the quarter, aren't you potentially trying to go through a very thin space while trying to grow quickly and be self-funding, which, quite frankly, may be unrealistic. So, why not raise capital? And why do you view that as something that Tesla shouldn't do, or wouldn't do? And I have a follow-up, please.

Elon R. Musk -- Chief Executive Officer

Yeah. I mean, I don't think raising capital should be substitute for making the Company operate more effectively. So that -- in that sense, I think it's just -- it's important to have strong financial discipline of the Company and just to make sure we don't have extraneous expenses and that we're just being frugal with capital. If we keep raising capital every time, then it just take -- if we now have the forcing function for improving the fundamental operation of the business. So, I think it is healthy to be on a Spartan diet for a while. At this point, I do think there are -- it is similar to raising capital. That's a -- but this is sort of probably about the right timing, but yeah.

Toni Sacconaghi -- Sanford C. Bernstein & Co. -- Analyst

So, does that mean that investors should expect the capital raise in the near- to medium-term? And I hear you on the force and constraint, but I mean, growth does eat cash, especially in a capital-intensive business, and if you really do believe you have a first mover advantage, why wouldn't you want to push it as quickly as possible even if it meant raising capital in the short- term?

Elon R. Musk -- Chief Executive Officer

Yeah. First of all, I'll just say that I don't think that capital has been constraint on our growth thus far. And if I thought there was a final constraint on growth, we would have raised capital before now. But I think it is very important as the Company scales to make sure we are on a solid foundation and that we're -- we have the appropriate financial discipline throughout the Company and are spending money very efficiently. At this point, I think we are doing that, but there is more work to do. And Tesla today is far more efficiently operating organization than it was a year ago. We've made dramatic improvements across the board. And so, I think there is merit to the idea of raising capital at this point.

Zachary Kirkhorn -- Chief Financial Officer

Just to add to that, the journey we've been on for the last 12 months to 18 months on being more efficient and how we spend money has really changed the culture inside the Company. It enabled us to accelerate a number of cost reductions on the COGS side of our products and then make improvements in operating expenses as well. And then as we look forward to capital investments for Giga Shanghai and Model Y and ultimately our European facility, our CapEx per unit of capacity has come down significantly through the work of the team here. So, I think it has been a very productive journey for us.

Elon R. Musk -- Chief Executive Officer

And technically, we did raise some big capital in China for the Shanghai Giga on the order of $500 million. So, that -- we want to make sure that we don't have to grow upon global capitals fund under the Shanghai factory.

Martin Viecha -- Senior Director of Investor Relations

Thank you. So let's go to the next question, please.

Edit: Ninjaed by @Anstandswauwau

 

[neroden]

In 10Q:
The in-process research and development (“IPR&D”), which we acquired from SolarCity, is accounted for as an indefinite-lived asset until the completion or abandonment of the associated research and development efforts. If the research and development efforts are successfully completed and commercial feasibility is reached, the IPR&D would be amortized over its then estimated useful life. If the research and development efforts are not completed or are abandoned, the IPR&D might be impaired. The fair value of the IPR&D was estimated using the replacement cost method under the cost approach, based on the historical acquisition costs and expenses of the technology adjusted for estimated developer’s profit, opportunity cost and obsolescence factor. In April 2019, the Company determined that it would abandon further development efforts on the IPR&D and will impair the remaining $47.0 million in the quarter ending June 30, 2019.

So which part of the solarcity R&D is abandoned? I deem it as good news. They should focus.

Silevo was abandoned, basically. The Silevo purchase turned out to be a bad merger.

 

[mongo]

Inventory is not an expense. It does not affect net income in any way. It only impacts the cash flows.

Car sales = income.
Having cars you didn't sell impacts income. (and also show up in inventory)

 

[Boomer19]

You're quoting the article. The problem is he never said that. He only said the first part. The second part is made up.

exactly. and they quoted it. but this is what they do. on one hand, it allows us to trade on an uninformed/misinformed public. on the other hand...
i’d like to see these scumbag “news” organizations taken to the woodshed

 

[Artful Dodger]

Inventory is not an expense. It does not affect net income in any way. It only impacts the cash flows.

... he says, without mentioning the impact on cash flows.

How about $145 M missing profit for a quick approximation?

Cheers!

 

[Mike Smith]

From Motley Fool Tesla, Inc. (TSLA) Q1 2019 Earnings Call Transcript -- The Motley Fool

Edit: Ninjaed by @Anstandswauwau

I was wrong, it is there. I see Motley Fool is doing their own transcripts now. I know they started doing this because the official Seeking Alpha one is completely unreliable.