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

[JRP3]

I expect ASP for the 3 to be higher than 42k, I don't expect the base model to stay around very long.

 

[Fred42]

Shouldn't that have a Chevy or Chrysler nameplate on it? Or maybe the original Ford Econoline Wagon? From what I see here Fiat-Chrysler is dying, and Ford is in for some hurt when the all electric Tesla Pickup arrives.

The Fiat part might be dying but the Chrysler part has enough life left in it to survive in some form even if Fiat or Fiat-Renault slips into the quicksand.
I hope Tesla is planning a higher end mass market pickup to closely follow up on the initial expensive and aggressive pickup. Sales volume with good margin.

 

[Chunky Jr.]

That is why you need to advertise (cheaply on the web).

Aren't they doing that now via Twitter and YouTube? That seems more effective than random web ads.

 

[mblakele]

This week The Economist published an article on the FCA-Renault deal...

Fiat Chrysler seeks a merger with Renault: Making it work will be tricky

This may be relevant to TSLA to the extent that it affects deals with Tesla for CARB credits, EU pooling, etc.

 

[elasalle]

.

Pure demand gen won't be that effective. But if you are targeting people who have already shown some interest in Tesla (basically following up on the leads), it can be quite effective from what I've seen in the industry.

Tesla ad's just need to be targeted to users searching for cars.
I have BMW, Porsche and Maserratti following me to all my internet devices

 

[EVNow]

Come on, you know Q1 was special because of the tax credit being cut in half, rumors of refresh, and Q1 typically being weaker than Q4. Let's wait a bit before jumping on the demand issue.

We have always talked about how people were spending way beyond what they normally spend to get S. Now that 3 is available it shouldn't surprise us that those people are just buying 3.

With refresh, it is possible we get some of that demand back. But what about future quarters ? At least in Europe S demand has gone down because of 3.

 

[NateB]

Oh geeze. Why do people keep confusing "Reduced Volume" in Q1 with Reduce Demand. I see no valid argument that indicates demand. Clearly people don't own one or believe the Troll crap out there.

Show me evidence there is a demand issue.

Tldr; based on price cuts, demand for high trims softened in Q1 and ads could help short-term financials, but Tesla will prob be fine long term either way.

To me the price cuts were evidence of lower-than-hoped-for demand. Especially the model S/X cuts but also the model 3 higher trims. I did not expect these price cuts, and they contributed to lower profits. The fact that Elon was hoping (with perfect execution) to break even in Q1 suggests to me that he wasn't planning on those price decreases either. Price cuts are also probably the main reason why Tesla is not guiding for Q2 profits. I think that S/X demand was hit by a triple-whammy of 1) US tax credit pull-forward of demand 2) some cannibalization from Model 3 outside US as model 3 orders opened for overseas markets, and 3) rumors/expectation of a refresh.

Tesla's products are good enough to support much higher demand, in my opinion, but the majority of potential customers know very little about the cars. So I agree with the posters saying that advertising could increase demand and help ASP and short/mid term financials. On the other hand, I agree philosophically with Elon that putting money into either improving the product or reducing the price creates real unambiguous value for the customer, whereas ads often seem like they create zero or negative value (depending on the information-to-deception ratio). Elon's strategy may not be the best one, but it's probably responsible for the highest owner satisfaction in the industry. So personally I'm still uncertain, but leaning towards favoring some more traditional advertising.

If not, Tesla will have to continue to rely on word-of-mouth/Joe Rogan/social media to slowly increase demand. They used to get help from media coverage (endless Iron Man references) but no longer. There will definitely be a big demand bump from the next S/X refresh, and maybe they will get a bump from release of some FSD features in the next 6 months, but recently people tend to focus on the flaws when new Autopilot features are released, and by the time the initial flaws are fixed the press (and YouTube videos) have died down.

Regardless, Tesla has cash, the best products, and the best roadmap, so they'll be fine in the long term, I think. They're working harder/smarter than everyone else (all in) on the biggest problems/opportunities of future mobility (electrification, autonomy, connected/updateable).

 

[EVNow]

Aren't they doing that now via Twitter and YouTube? That seems more effective than random web ads.

Web ads are not random. Read the jhm post I reposted.

 

[Drax7]

We have always talked about how people were spending way beyond what they normally spend to get S. Now that 3 is available it shouldn't surprise us that those people are just buying 3.

With refresh, it is possible we get some of that demand back. But what about future quarters ? At least in Europe S demand has gone down because of 3.

Out of 70 million cars sold yearly, sales of 50,000 Model S yearly does not seem far fetched .

 

[SO16]

No, yes and yes.

No indication of trouble selling S/X Ravens but they do need to work through older inventory.

Crazy long backlog of Model 3 orders did, in fact, cause a lot of problems and lost sales(as people got annoyed/angry at the long delays) as well as hurting the stock with production “delays” since they couldn’t hit the accelerated rates.

And creating pent up demand that they can’t actually fill does create a problem for the reason above.

EDIT: some nuance on #2: I wouldn’t say it was a mistake to take preorders, and Tesla couldn’t really control how many people wanted the 3, but the situation did hurt them

Creating the Model 3 backlog was necessary to prove to Tesla AND Panasonic that that there IS demand.

 

[Navin]

If I was Tesla I would have a monthly contest for the person who could create the best home made commercial for Tesla. The winner of the contest could win a free model 3. The amount of PR and free advertising for this would be thru the roof via social media. The cost to Tesla - 12 model 3 cars. Hell - they can even be demo cars.

 

[EVNow]

But you can actually boil the entire Tesla story down to a single variable and that's the cost of the model 3 to build. COGS is running about 44k$-45k$ per unit right now and that is nowhere near close to the original target. Elon predicted ASP would be 42k$, much less COGS!!!

I think it's a bit difficult to think of COGS for a mix of models. Basic thing is, they need 20%+ margin on 3. Both for LR and SR+.

This is where progress towards FSD is so useful. As they show more working features, the take rate on AP and FSD will increase, helping up the margin.

 

[EVNow]

Out of 70 million cars sold yearly, sales of 50,000 Model S yearly does not seem far fetched .

But market for 100k+ ASP cars is much lower.

 

[ggr]

Yeah -- I was being cautious and had them pencilled as stuck to 100k for every year going forward. oops.

But you can actually boil the entire Tesla story down to a single variable and that's the cost of the model 3 to build. COGS is running about 44k$-45k$ per unit right now and that is nowhere near close to the original target. Elon predicted ASP would be 42k$, much less COGS!!! I should have walked away when I first figured this out.

Can you justify your COGS number? I've never seen it anywhere before, and it directly contradicts information directly from Elon in earnings calls.

 

[SO16]

My coworker are asking me if I feel safe having my Tesla park in my garage due to spontaneous combustion. My dad is advising me to not us AP due to it killing people. The brand is being damaged. In fact elon's going private email specifically said the reason to go private is because teslas brand is being damaged.

Ask your coworkers if they are concerned about all the recalls from practically every gas car manufacturers due to fire risks.

Ask your dad if he is concerned about the few people who have died because of seatbelts and not being able to get out of the car. Hopefully he’d say “no, that’s absurd. Of course seatbelts save lives on average”.

R.I. Rep. Trillo says 30,000 people have died because they used seat belts

Tesla has already responded with fire risk and autopilot safety comparisons several times. It will take time for many people to come around. Fortunately more are every day. We can’t expect everyone to be on board. Will probably take a couple more decades.

 

[EVNow]

Can you justify your COGS number? I've never seen it anywhere before, and it directly contradicts information directly from Elon in earnings calls.

ASP of about $55k and 20% margin.

BTW, ASP and margin are lower if you ignore non-ZEV credits.

 

[SO16]

The Chinese rules have changed for all automakers,not just Tesla.

BMW to Take Control of China Joint Venture in $4 Billion Deal

75% control. Still not as good as Tesla. The article seems to avoid Teslas deal by stating that BMW is the first foreign automaker to take advantage of the relaxed rules. (Unless it’s farther in the article. I didn’t read it due to paywall.

 

[ZachShahan]

Musk said if the burn continues, they'll be screwed in 10 months.

No, Musk said that this is what he said: Some Thoughts On Elon Musk's Emails To Employees — & The Media + Wall Street's Response | CleanTechnica

So read what he said I said he said.

 

[AcesDealt]

Can you justify your COGS number? I've never seen it anywhere before, and it directly contradicts information directly from Elon in earnings calls.

This number has been retrievable from the financial statements since model 3 was at high volume (last 3 quarters). You just have to take the income statement and factor out the S/X and you get the numbers for the model 3 which were approximately: 53.3k$ for ASP, 56.4k$ for ASP + GHG credits, and $45.3k cost. The gross margin there is 15%/20% depending on counting GHG which conforms to Tesla's remarks.

Further, you can walk back from ASP of 53.3k$ to 39.5k$ for the base SR+ model and if you assume something like an average 50% incremental margin for the upgrades between average mix and base, you get to ~38k$ COGS to build the base SR+. They don't make peanuts on selling the SR+ model which is the fundamental reason all the talk about unit sales is deceptive and the main reason why this stock has collapsed.

 

[MarcusMaximus]

Creating the Model 3 backlog was necessary to prove to Tesla AND Panasonic that that there IS demand.

Perhaps, but not so large of one. Had they gotten the 100k they were hoping for, it still would have shown that, without the need to speed up production timelines unrealistically.