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

[StealthP3D]

Be prepared for MSM to totally ignore this huge milestone, but instead harp on some minor tactical delay or hiccup in GF3

That's almost a given. What matters is what investors and car buyers actually do. The smartest ones tend to be somewhat contrarian to the MSM by seeing what's actually happening on the ground (without all the fake noise). This was perhaps not the case over the last several months, at least in terms of investors. I sense a change here, and while anything is possible, I do think more and more people are starting to understand the company performance and potential of Tesla. I also think that, short of any macro events, Tesla looks primed to naturally move closer to their potential value. Because it's becoming increasingly obvious that no one else has done their EV homework as well. I wish this was not the case but I think it would be difficult to make the case that any other company was even competing with comparable products. The other fact becoming increasingly obvious is there is no demand problem. Demand is unrelenting and only shows signs of increasing.

It's a rare company that can create this much "blue sky" for themselves.

 

[ReflexFunds]

Does anybody know why the debt in Tesla's 10-Q and 10-K filings are slightly off from the debt in their quarterly earnings reports?

For example, Q1'19 Recourse debt in 10-Q filing is 6,782,303, whereas it is listed as 6,517,022 in their Q1'19 Earnings Report:

Latest 10-Q (Q1'19):
https://ir.tesla.com/static-files/6c1d8708-1f9e-4cf9-b31a-a7c106d03a2c (Page 21)

Recourse: 6,782,303
Non-recouse: 3,543,208

Latest Earnings Letter (Q1'19):
https://ir.tesla.com/static-files/b2218d34-fbee-4f1f-ac95-050eb29dd42f (Page 8)

Recourse: 6,517,022
Non-recourse: 3,485,597

The debt recorded on the balance sheet in the letter is the net carrying value and should equal the sum of the two carrying value columns in the 10-Q. The gap between carrying amount and unpaid principal amount is various accounting adjustments - the gap will generally be closed by booking non-cash interest expense until the debt matures. The real amount of debt outstanding is the $6.78bn/$3.54bn.

 

[X Fan]

Well, another week for the bulls and bears to fight anew. May the longs drive us to 250 this week.

btw: great Tesla publicity on store just off M4 en route to Heathrow this morning....big broadcast on screen of Model 3.

 

[LN1_Casey]

@RobStark @Artful Dodger

Those are very good points about the lack of actual ability to produce the batteries of the pickup, especially since the F-150 market alone is more cars than Tesla produced last year.

However, production would only be a part of the way that the truck would affect the SP. If the truck is too off the wall, than the FUDsters undoubtedly chew it to bits for being a "colossal waste of funds to develop, produce, strangling the line, causes cancer in kittens," etc. Even if Tesla only produces 5k Trucks a quarter, which lets argue that is the amount of batteries they will allocate to them (100k-300k packs split), the news impact of the trucks may negatively affect the SP, even if every truck made is sold.

However, if the truck is interesting enough, even if produced in low numbers and is sold to the same levels of the Model S, I think it would get more people aware of the brand who currently are not. And, more awareness of actual facts of their vehicles (ie; lets say the truck can out tow the F-150, and beat the stock 911 on the drag line), rather than the "knowledge" that all Tesla owners are rich and/or hippies (which is a usual reaction I get when I tell people I plan on getting one). Positive belief about the company to the general masses would help others ignore the inevitable FUD, which would assist the SP.

 

[Right_Said_Fred]

But when Elon starts again with yet another claim/timeline we should be able to call it out

Not 'yet another' claim/timeline, but a repeat of the old claim/timeline made on Autonomy Day. So no, let's not rehash all the old arguments again.

 

[schonelucht]

How does the thread feel that the Tesla Pickup will affect the stock price?

I think the Y announcement shows that the market does not care about reveals anymore. Tesla has sufficiently proven that they can design and launch compelling products and there is no reason to assume the pickup will be different (even if it is 'cyberpunk'-y). What the markets wants to see to fuel a stock price run up is the pickup (or semi) going into actual production and deliveries.

 

[AndyH]

Fully Charge talk with Benchmark and Bernstein.

• Total of all currently proposed battery factories will lead to 28 million EVs per year by 2028.
  
• Last 7 years growth of mining battery minerals is the fastest growth in commodities ever. That includes iron, coal and oil.
  
• Next 5 years will determine the future landscape of the industry (ie the market share of mining companies, suppliers and auto manufacturers will likely continue).
  
• 2000 of the total 130000 tons of cobalt mined each year might originate from child labor.
  
• No critical environmental or social issues when mining battery minerals.
  
• FUD! They say that Tesla has to follow Apple's lead and disclose its sources for minerals. Facepalm.
  
• In the industry there's no doubt anymore over EVs. No debate. It's only a question of when.

First 5min is audio only.

 

[LN1_Casey]

I think the Y announcement shows that the market does not care about reveals anymore. Tesla has sufficiently proven that they can design and launch compelling products and there is no reason to assume the pickup will be different (even if it is 'cyberpunk'-y). What the markets wants to see to fuel a stock price run up is the pickup (or semi) going into actual production and deliveries.

I will say that the Model Y reveal was indeed very lack luster. However, the Model Y is, in my opinion, lack luster itself. It's just like a Model 3 that is a bit taller, it really doesn't differentiate itself very well, which would have generated more interest in the vehicle. Mediocre compared to the models already released. (Not saying it won't sell well, being a cross-over, but it's boring, worse than the Model 3 in my preference, which is my current least liked of the line up of Tesla.)

Take the Semi reveal; that definitely got more people talking about it, since it was very new. Innovative, made bold choices like with the centered seating. And that's not including the Roadster immediately after, which is a monument to itself.

You could argue that the Semi only got the reaction due to the attention of the Roadster (and the lack of a true 'secrets reveal' at the Y unveil helped nix it's own reaction), but I'd disagree. If the Roadster was the only reason the Semi was discussed after, than they'd not talk about the Semi at all. It'd always be Roadster first.

 

[ReflexFunds]

Some data in on China 1H EV production (via DKurac)

#China H1 #NEV production at 609 K, +60% YoY.
H1 installed #EV battery capacity at 30.01 GWh, +93% YoY.
Passenger NEV capacity at 22.42 GWh, +150% YoY.
Buses at 5.13 GWh, -9% YoY.
SPV at 2.47 GWh, +157% YoY. (GGII)

Prismatic: 24.67 GWh, +109% YoY.
Pouch: 2.63 GWh, +38% YoY.
Cylindrical: 2.71 GWh, +47% YoY.

It doesn't look like there is much cylindrical battery experience/capacity in China. Given how soon GF3 production is due to start, surely it is pointing to Tesla importing from Panasonic at GF1 or the S/X cell factory in Japan.

 

[FrankSG]

The debt recorded on the balance sheet in the letter is the net carrying value and should equal the sum of the two carrying value columns in the 10-Q. The gap between carrying amount and unpaid principal amount is various accounting adjustments - the gap will generally be closed by booking non-cash interest expense until the debt matures. The real amount of debt outstanding is the $6.78bn/$3.54bn.

Thank you! Very helpful.

 

[ReflexFunds]

Some data in on China 1H EV production (via DKurac)

#China H1 #NEV production at 609 K, +60% YoY.
H1 installed #EV battery capacity at 30.01 GWh, +93% YoY.
Passenger NEV capacity at 22.42 GWh, +150% YoY.
Buses at 5.13 GWh, -9% YoY.
SPV at 2.47 GWh, +157% YoY. (GGII)

Prismatic: 24.67 GWh, +109% YoY.
Pouch: 2.63 GWh, +38% YoY.
Cylindrical: 2.71 GWh, +47% YoY.

It doesn't look like there is much cylindrical battery experience/capacity in China. Given how soon GF3 production is due to start, surely it is pointing to Tesla importing from Panasonic at GF1 or the S/X cell factory in Japan.

Also 1H numbers coming in from the key Chinese EV manufacturers. It will be interesting to see how things change in July. Many EV models just exist for the subsidies in China and they were reduced significantly at the end of June.

#BYD H1 at 140,761, +97.5% YoY. #EV: 95,779, +301.76% YoY. #PHEV: 44,982, -5.16% YoY.
June #NEV sales at 26,571 units. Passenger NEV June at 25,849. #EV: 18,864. #PHEV: 6,985.

#BAIC #BJEV H1 sales at 65,159 units, +21.57% YoY.H1 production at 11,222 units, -71.75% YoY.
June sales at 26,072, +438% YoY. June production at 5,986, +813% YoY.
BAIC BJEV 2019 sales target at 150 K.

#Geely H1 #NEV sales at 57,585 units.
June sales at 15,985 units, +57% YoY.
Geely 2019 sales target at >100 K.

#JAC H1 sales at 39,065, +95.01% YoY. Annual #NEV sales target at 80 K.
June passenger #EV sales at 9,842 units, +429.42% YoY.

#Chang'an H1 sales at 28,644, -8.1% YoY.
June #NEV sales at 10,976 units, +23% YoY, +145.3% MoM.
Chang'an 2019 sales target at 76.5 K.

#GAC H1 total passenger #NEV sales at 18.1 K, +135% YoY.
GAC New Energy, sold 10.9 K passenger units, +73% YoY.
GAC New Energy 2019 sales target at 40 K units.

 

[CorneliusXX]

Limited time to buy a Tesla?? When new products are still in the works. I don't see for instance the Roadster being utilized as a Robotaxi. Surely that one can still be purchased.

For those expecting Tesla to become a mass manufacturer selling mid-range products. Roadster is cost prohibitive to the vast majority of people. If these plans come to pass there is effectively a limited time to buy.

 

[Prunesquallor]

@RobStark @Artful Dodger

Those are very good points about the lack of actual ability to produce the batteries of the pickup, especially since the F-150 market alone is more cars than Tesla produced last year.

However, production would only be a part of the way that the truck would affect the SP. If the truck is too off the wall, than the FUDsters undoubtedly chew it to bits for being a "colossal waste of funds to develop, produce, strangling the line, causes cancer in kittens," etc. Even if Tesla only produces 5k Trucks a quarter, which lets argue that is the amount of batteries they will allocate to them (100k-300k packs split), the news impact of the trucks may negatively affect the SP, even if every truck made is sold.

However, if the truck is interesting enough, even if produced in low numbers and is sold to the same levels of the Model S, I think it would get more people aware of the brand who currently are not. And, more awareness of actual facts of their vehicles (ie; lets say the truck can out tow the F-150, and beat the stock 911 on the drag line), rather than the "knowledge" that all Tesla owners are rich and/or hippies (which is a usual reaction I get when I tell people I plan on getting one). Positive belief about the company to the general masses would help others ignore the inevitable FUD, which would assist the SP.

To be honest, I think an electric cyberpunk pickup is going to be a bridge too far for many potential customers. Right now, an "amazing" pickup feature is a tailgate with a fold-out step .
Another huge factor is going to be the date that Rivian trucks are available. If availability dates and costs of the Tesla and Rivian pickups are comparable, I think Rivian, with a more traditional appearance, wins.

 

[X Fan]

To be honest, I think an electric cyberpunk pickup is going to be a bridge too far for many potential customers. Right now, an "amazing" pickup feature is a tailgate with a fold-out step .
Another huge factor is going to be the date that Rivian trucks are available. If availability dates and costs of the Tesla and Rivian pickups are comparable, I think Rivian, with a more traditional appearance, wins.

Perhaps, but Rivian’s charging solution/infrastructure plan is what?

 

[AndyH]

Prismatic: 24.67 GWh, +109% YoY.
Pouch: 2.63 GWh, +38% YoY.
Cylindrical: 2.71 GWh, +47% YoY.

It doesn't look like there is much cylindrical battery experience/capacity in China. Given how soon GF3 production is due to start, surely it is pointing to Tesla importing from Panasonic at GF1 or the S/X cell factory in Japan.

Are those cylindrical cells the total Chinese output or just the amount of cylindrical cells used in the auto industry?

Judging by what I've read there's a lot more than 2.71gwh being produced.

One article lists 14 smaller companies that have been making 18650 and are now already manufacturing 21700 or are in the process of acquiring capacity. Some have several GWhs worth of production. When looking at the websites of the 14 listed companies some seem to be legit companies with decades worth of battery production. The article does mention how easy it is to convert 18650 machinery to 21700. Panasonic also alluded to that recently.

The two most likely sources for 21700 is Aucksun and CATL which isn't mentioned in the article above but they are the largest manufacturers of 21700 in China. Tesla has been reported to be in talks with CATL.

One shouldn't put too much trust in these Chinese articles but they do indicate that there are a lot of manufacturers of 21700 in China. Tesla needs 8gwh to do 3k/week. There's no exact numbers of total production of 21700 in China right now but judging by the disclosed numbers by the different manufacturers it could be well beyond 10gwh.

Ps. Reading Chinese articles that have been translated into English and are published at Chinese news sites is hilarious. For example this article about one of the likely sources of 2170:

"Although Tianjin Lishen signed a deal with the Tesla Shanghai factory to make an Oolong incident, the market is very interested in the scope of Tianjin Lishen's entry into Tesla."

Searching for "Oolong incident" gives you articles about how Huawei is suffering from their "Oolong incident" so it is clearly something controversial. I hope that Tesla knows what they're getting themselves into here. Maybe best stay away from anything tea-related for now.

 

[CyberDutchie]

Adam Jonas has found a new narrative (took him a week to come up with this one): record Q2 is pull-in from what would have normally been H2 sales:

“We update our TesIa earnings forecast following better than expected 2Q deliveries. At this stage, we have assumed the 2Q beat pulled forward demand from the remainder of the year, leaving our full year delivery forecast unchanged at 347k units. Reiterate EW and $230 PT.”

Adjustments to the model:

Deliveries. Tesla beat our 2Q delivery estimate by 13,622 units. We removed 6,500 units from 3Q and 7,200 units from 4Q. We now expect 3Q deliveries to fall sequentially to 91,300 units before recovering slightly to 97,200 units in 4Q. Model mix and price deterioration take our forecasted Y/Y revenue growth to down 3% for 3Q and down 2% for 4Q.

Gross margin. We left our 2Q19 auto gross margin unchanged at 20.0% (ex regulatory credits) and 21.5% including credits. We forecast 3Q and 4Q auto gross margin on an ex-regulatory credit basis to be 20.6% and 20.9% respectively.

What I don’t understand is how he thinks Tesla is fundamentally overvalued but still has a $230 target for the stock. Isn’t that where we are today?

 

[kbM3]

My guess is that Tesla will take out gigantic funding lines secured against the vehicles while they generate taxi income. The initial payoff for each vehicle should only be a couple of years.

It's just difficult to tell how the transition will go. Does it start some time next year with a partial retention of production or is there another 5 or 10 years before the change. And in the interim what happens to the cost of the FSD option for customers who purchase the vehicle?

My guess is that if the EV robo-taxi quasi monopoly works out (admittedly a massive huge IF), Tesla will simply raise prices for all models. If the $30k/year profit for 10 year for owners scenario seems realistic, they should easily be able to raise prices to over $150k each.

 

[Fact Checking]

Prismatic: 24.67 GWh, +109% YoY.
Pouch: 2.63 GWh, +38% YoY.
Cylindrical: 2.71 GWh, +47% YoY.

It doesn't look like there is much cylindrical battery experience/capacity in China. Given how soon GF3 production is due to start, surely it is pointing to Tesla importing from Panasonic at GF1 or the S/X cell factory in Japan.

BTW., I suspect an interesting topic for the "Battery Investor Day" will be whether Tesla is going to keep the cylindrical form factor or might switch to prismatic cells - which are cheaper/faster to manufacture and have higher volumetric density.

I think the default assumption should be that they are going to stay with the 21,700 format, but the probability that they might use something else is higher than 0% - because if Tesla starts making their own cells the industry standard compatibility and outside supplier arguments become much less important, and the overall complexity and cost of raw materials to battery modules, with the physical properties of the final product, becomes the key parameter.

Another advantage that prismatic cells might have over cylindrical cells is protection against a worst-case runaway thermal cycle within the casing. For critical applications such as EV-airplanes or EV-ships, where passengers cannot simply disembark in case of a fire, and where the capital value of the vehicle is too high to allow a runaway fire within the battery pack in case of worst-case cell failure, the (much) lower mass fraction of protective casing mass versus battery content mass might be a critical factor.

Note that the non-invasive migration of their vehicle platforms to prismatic cells might be possible because they use less volume - so the changes to the battery pack would not impact the rest of the vehicle.

This might also explain the delay of the Tesla Semi, beyond their cell supply constraints: if they are certain about prismatic cells then they'd not want to roll out the Semi based on a cylindrical form factor.

 

[Todd Burch]

What I don’t understand is how he thinks Tesla is fundamentally overvalued but still has a $230 target for the stock. Isn’t that where we are today?

Sounds to me like the investment side isn’t done buying yet.

“There was much higher demand and deliveries than I predicted, but I was right because it all came from Q3 and Q4.”

Palm, meet face.

 

[Todd Burch]

BTW., I suspect an interesting topic for the "Battery Investor Day" will be whether Tesla is going to keep the cylindrical form factor or might switch to prismatic cells - which are cheaper/faster to manufacture and have higher volumetric density.

I don’t see them changing anytime soon. That would require substantially different tolerance for heat in the battery chemistry. Maxwell tech makes things better, but charging at high speeds will still dictate the current form factor for the foreseeable future.

Given higher charging speeds vs. prismatic cells, I think Tesla will choose higher charging speeds until charging is closer to the 5-10 minute range.

So are we going to see big institutional buying start back today?

Hoping that TSLA takes a well-deserved jaunt back up out of this nonsensical valuation it’s been in this year.