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

[Krugerrand]

This is a "demand" issue post...where is that cat fellow?

See that SP rise? Yeah, that’s because of all the posts over the last few days that fit into my must-buy-another-share criteria. At this rate I’ll be having that garage sale sooner rather than later.

 

[schonelucht]

I assume you assume this because of the $140M in the 10Q? But what justification do you have for thinking that this is a one-time payment, or that it's over multiple years? The pooling agreement is for only one year, even though it could have specified multiple years.

If this payment is for one year pool, why recognize it over 2-3 years? Tesla's overriding concern is cash preservation. (see the $164M term loan at 6+% kicked out for another two months after short term extensions in December and January) I agree there is a possibility more will follow, but I'd model it on the safe side. Better a positive than a negative surprise.

 

[EVNow]

I agree there was a big growth due to M3. But most of the revenue jump has been done now.

The growth story is necessary if there is no profitability. In 2016 TSLA was not profitable and it was not a problem because we knew that Model 3 is coming and will make TSLA hugely profitable. Q1 and Q2 is probably temporary but it puts us into a position where we don't have either profits or a growth story in the future that will bring huge profits. Unless you buy into robotaxis being this story.

If TSLA will be sustainably profitable from Q3 onwards then the problem is solved.

Well, if you ignore FSD, you still have huge growth opportunities in Y, Semi and Pickup.

 

[schonelucht]

So lets see. Because Tesla can't provide parts and half your cars are not working you have to shut down entire business that also operates other car types.

It's called a liquidity crunch. Look it up. Something, something 2008.

Wow. Call me crazy, but if half my cars still work fine and people want to rent them then I should rent them instead of letting them sit there and collect dust. You know...businesses exist to make money.

Banks will indeed call you crazy for suggesting that.

 

[Alexander Grea]

We had 2 big uncertainties. SEC and capital raise. SEC is thankfully cleared at least until next time..

If they can raise capital from a strategic source then we will easily go back to 300+. If it is a regular capital raise on the market then probably will have a relief rally to 250-260 but will be tough to actually break out of the downward channel.

 

[schonelucht]

Oh. OK, yes, "it's a possibility more payments will follow". It's a *likely* possibility. All the insider leaks indicated the FCA contract was for more than $140 million, therefore I believe it is for more than $140 million.

Sure, ultimately it's a belief and both are equally valid in my opinion. Let's agree to disagree and revisit the topic next quarter(s).

 

[Cloxxki]

So if we are talking about 10+ years long term outlook: income will only be as high if Tesla's solution is going to become a de-facto monopoly, and they can price their taxi services to around the pricing of human driven taxi services.

Otherwise if there's competition then robotaxis will set the price of taxi services to below that of human taxi services, human taxi services will gradually die out and robotaxi services will conduct a usual race to the bottom, prices somewhere around the price of expected capital returns.

I.e. the very long run lower price target for a $50k capital investment will be ~5% of the capital, $2.5k/year, or $25k over 10 years.

But in the initial phase they will track taxi services pricing, and will generate 10x higher returns - especially if Tesla becomes the dominant leader in the segment, which they have every chance to achieve.

Exactly.
With less than a monopoly, robo taxis could become de facto sandwich machines that offer a free ride with a (profitable) sandwich. Tesla can only set their pricing and commissions as long as the competition doesn't have a product.
Tesla can build cars at a limited rate, this is well established. Sensors and chips can be churned out much quicker.
The moment Waymo is at Level 5, all they need to do is communicate hardware requirements to car makers or aftermarket fitters and open their business for software installs. Smartest may be issuing their own hardware but that could be as simple as a SIM card. So how fast might Waymo be able to issue SIM cards? How low could costs be for a Waymo taxi? The car maker that can churn out the most and most affordable Waymo-ready cars will sell lots. And the taxi operator buying those will earn a multifold per car compared to a Model 3 on Tesla Network.

 

[TheTalkingMule]

I could see $140M being a part of the FCA deal, but certainly not the whole thing. It's my understanding their penalties would run into the billions and Elon doesn't strike me as the kind of fellow to bail out ICE manufacturers.

Maybe $140M is for the first partial year of compliance? When do we expect full transparency for this deal. 2Q19 earning call?

 

[bdy0627]

Shorts lost the $240 battle. The battle will now be not letting this bounce really get out of control, as in above Friday's high.

 

[Prunesquallor]

How does it deal with bug impacts? (along with gravel thrown by truck in front)

Lasers! Zap!

 

[Alexander Grea]

Well, if you ignore FSD, you still have huge growth opportunities in Y, Semi and Pickup.

Y - Agree but it is too far out right now to have a material impact on the SP.
Semi - A commodity market like Tesla Energy. Not bought for the same reason as Tesla's cars (emotions and desire)
Pickup - If they go with the insane unconventional design that they have hinted then it's a nothingburger and won't sell any volume.

Having a Range Rover like actual SUV platform like Rivian has would be a massive growth story. Taking both the pickup and SUV market. I know it will have less range or bigger battery but they need to do it because that is the shape that customers are drooling for. Customers are not rational robots and they are willing to sacrifice 20% range or pay 20% higher if they can get the actual SUV or pickup shape.

 

[Cloxxki]

So about Tesla insurance.

Allstate provides a discount plus sustained discount using their drive wise system that monitors when you drive, how fast, and how many harsh braking events.

Tesla can monitor you in a whole new level. I wonder if they will change your rates on the fly for doing risky things like max acceleration events and how often you run red lights. Essentially the car pretty much knows everything about you.. even know if you are cheating on your spouse or not. So I don't really know how hardcore they are willing to go with this. Once underwriting is assessing risks of an individual, the sky is kind of the limit.

Good one.
Real-time insurance rate monitor on the right top of the main screen, then?
Max accelerations on public roads, with missiles such as Teslas, cannot be excused. Especially not if they surpass the speed limits. And I'm sure it will not take long to correlate that with damage data. So you can have the spoils of the oversize motor and battery, but you'll effectively pay per use :-D

 

[Hock1]

Tesla was planning on buying roughly $20 million in Maxwell's products this year and next year, and around $60m per year thereafter.

If true, this tells me Tesla was planning on using Maxwell's ultra-capacitors, perhaps for Roadster, for the next 2-3 years. I spoke with the CEO of Maxwell about a year ago. At that time they were targeting 2023 for incorporation of dry electrode tech into batteries. IMO, unless Tesla has found a short cut, (which I wouldn't doubt), 2020 sounds optimistic for dry electrode tech.

 

[EVNow]

Y - Agree but it is too far out right now to have a material impact on the SP.
Semi - A commodity market like Tesla Energy. Not bought for the same reason as Tesla's cars (emotions and desire)
Pickup - If they go with the insane unconventional design that they have hinted then it's a nothingburger and won't sell any volume.

Yes, for Semi they have to just show the cost saving. Pickup could be a big volume too - besides they can always make a conventional pickup.

BTW, I have to say Tesla seems to be not bluffing about FSD. They certainly believe they can get to robotaxis soon. Otherwise insurance product doesn't make that much sense. It will come in stages - starting with the cars that can be "summoned" and "auto parked". The rider can drive the car for the trip with the help of EAP/FSD. They can do this for years until the rider is comfortable enough to let the car drive itself completely.

 

[mongo]

If true, this tells me Tesla was planning on using Maxwell's ultra-capacitors, perhaps for Roadster, for the next 2-3 years. I spoke with the CEO of Maxwell about a year ago. At that time they were targeting 2023 for incorporation of dry electrode tech into batteries. IMO, unless Tesla has found a short cut, (which I wouldn't doubt), 2020 sounds optimistic for dry electrode tech.

Interesting data. I think capacitors would make more sense for surge capacity in the Powerwall/ Powerpack energy products then they would for Roadster.

 

[Artful Dodger]

I have not read anything about demonstrated 1.2x capacity. Would you mind sharing a link?

Maxwell posted a PDF after a battery conference this past winter. Here's a slide:

Here's Fig.6 from a paper presented at that conference by Maxwell scientists showing the life cycle performance of these new process bty cells: (over 85% capacity remaining after 2,400 cycles)

Maxcells are the real deal. Look for them in Tesla products next year.

Cheers!

 

[EVNow]

Tesla can monitor you in a whole new level. I wonder if they will change your rates on the fly for doing risky things like max acceleration events and how often you run red lights. Essentially the car pretty much knows everything about you.. even know if you are cheating on your spouse or not. So I don't really know how hardcore they are willing to go with this. Once underwriting is assessing risks of an individual, the sky is kind of the limit.

The interesting part of this - from FSD perspective is - they can give preference to good drivers when selecting training data. This is a good way to weed out bad drivers. May be that is what Karpathy was hinting at - may not still meet @neroden definition of good driving, but this lets them automate training which is essential to make learning exponential and thus make FSD exponentially better.

Manual training is expensive - both in terms of time and dollars.

May be I should open a India based training center (won't be surprised if the external company they are using already does this in India).

 

[VValleyEV]

Thanks to all who recommended the "ignore" feature. I had forgotten about that. And thanks to the mods for banning the "Elon shouldn't tweet" member.

Back on topic, kind of... there is apparently now a new Tesla Service Center in Albany NY (in the suburb of Latham actually). Only 160 miles from @neroden! Latham - 326 Old Niskayuna Road | Tesla. 5 miles from me

This is excellent news. I live in AZ but have a lot of family in the Rhinebeck area, only an hour’s drive south, and have not mentioned Tesla to any of them yet because I know they would not consider without a service center somewhere within an hour or so away. They don’t like driving anywhere near NYC, so Mt Kisco is almost as close but they wouldn’t consider it.

 

[neroden]

If this payment is for one year pool, why recognize it over 2-3 years?

I don't think the recognition term is up to Tesla. If the payment is for 2019, they might not be able to recognize it until the FCA fine is determined, which might not happen for a very long time.

Tesla's overriding concern is cash preservation. (see the $164M term loan at 6+% kicked out for another two months after short term extensions in December and January) I agree there is a possibility more will follow, but I'd model it on the safe side. Better a positive than a negative surprise.

On these I more or less agree. I wish I knew the structure of the VIEs with the term loans; I know they're for solar leases/PPAs. Tesla doesn't generally want to finance VIEs itself (that's what got SolarCity in trouble), and I wonder whether they're planning a different refinancing of those VIEs and just haven't lined it up yet.

 

[neroden]

The moment Waymo is at Level 5

Don't worry, they'll never get there.