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

[Doggydogworld]

Note that trade-ins in lieu of cash payments are accounted as automative revenue. The used cars in service&other are Tesla cars, for example those that Tesla took in at the end of a lease.

They do book the value of the trade-in as Automotove Sales Revenue, but I believe they then add that value to Finished Goods Inventory. When they later sell the used car they book the proceeds as Service Revenue and the carrying value as COGS.

There's an element of double counting here, but it's the best way I see for them to handle two separate handle transactions that can occur in different reporting periods.

• Significant costs for loaner cars, partly because they are expensive Teslas, partly due to some of the service delays from service hell/lack of spare parts etc. Tesla can start to address this with quicker service including bringing body shops in-house and better spare parts logistics.
• Significant transport costs. The distance between Tesla and customers is high on average. Tesla can address this with increased work through the Tesla mobile service. They can also reduce the average distance as they open more service shops.

This should almost all be charged to warranty reserve (or pre-paid maintenance). They lost almost 200m on Service in Q1. There are what, 50k cars out of warranty? That's 4k of losses per out-of-warranty car? In a single quarter??? Does not compute.

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• Low capacity utilisation in some service shops. This means sometimes staff and equipment is idle. Of course, some service centers are also massively overworked. It gets much easier to balance utilisation rates as the fleet gets bigger so this should become a smaller issue over time.

Same problem. Service centers are busy, thus the long wait times. Sure, there are a few outposts with underutilized service centers, but how much can they cost? A bored Maytag repairman or two and depreciation of some tools? That's what, 200k per year? You'd need 4000 of these lonely outposts, Tesla can't have more than a couple dozen.

 

[KSilver2000]

I think the cars being in too high of price brackets(back in Q4 and into Q1) naturally limits the amount of consumers and Tesla has been addressing that issue through high production to get to lower prices.

Really?

If you’re talking about buyers not getting into a Tesla because of relatively high prices, I assume you’re referring to entry level trims such as the SR+. But, if that’s the case, Tesla hasn’t lowered the entry level prices much, if at all. Hard to keep track of exact changes now.
They’ve only noticeably reduced the higher performance trims across the lineup. In fact, it’s now even more expensive to get into an entry level S/X because they got rid of the std range S/X.
So, based on what you’re saying, buyers would be priced out even more now, and more so with less tax credits to help getting into the entry-level SR+. Not to mention more expensive FSD.

 

[HG Wells]

I've had multiple people tell me they would have bought a Tesla but for bankruptcy fears they get to listen to daily on CNBC.

Tell them the truth.
They should be more worried about ICE going belly up than Tesla.

 

[jerry33]

I've had multiple people tell me they would have bought a Tesla but for bankruptcy fears they get to listen to daily on CNBC.

And I haven't heard one. Neither anecdote means a lot.

 

[Doggydogworld]

Model S+X COGS of 80k seems impossible though. Take Q1'17 Automotive revenue (excluding leasing) for example. They sold 25,051 Model S+X @ ASP of $81,237, and had a margin of 26.5%. Seems likely that a large number of these were inventory cars / used cars (how else 81k ASP), but still. Q2'17 was 22,026 cars at ASP of $91,431 with 26.9% gross margin.

You can't calculate ASP that way. Only 18,538 of those 25,051 Q1 2017 deliveries counted toward Auto Sales Revenue:

2035m Auto Sales Revenue / 18,538 Auto Sales = 109.8k ASP
1497m Auto Sales COGS / 18,538 Auto Sales = 80.7k Average COGS

 

[StarFoxisDown!]

Really?

If you’re talking about buyers not getting into a Tesla because of relatively high prices, I assume you’re referring to entry level trims such as the SR+. But, if that’s the case, Tesla hasn’t lowered the entry level prices much, if at all. Hard to keep track of exact changes now.
They’ve only noticeably reduced the higher performance trims across the lineup. In fact, it’s now even more expensive to get into an entry level S/X because they got rid of the std range S/X.
So, based on what you’re saying, buyers would be priced out even more now, and more so with less tax credits to help getting into the entry-level SR+. Not to mention more expensive FSD.

Ummmm yes pricing limits the groups of consumers that can buy a product. Q1 introduced SR+ in limited markets in low numbers, Q2 introduced SR+ in more markets. Results? Lots of demand.

I'm not sure what point you're trying to make here. Q1 Model 3 numbers were production constrained.....FUD had no effect on Model 3 sales. FUD was at it's peak after Q1 results and it still had no effect. Q2 proved that. The increase in production has further proved that. My comments have been targeted towards the notion that FUD has affected demand and/or will affect demand in the future. I simply don't think that's true.

 

[shootformoon]

If tesla is really immune of FUD, the lead time for you to buy any low trim m3 should be at least 3 months, even if you are at US. Look at the value they are offering: cheaper than bmw 3 series, better performance, better infotainment, better TCO, better almost everything. But bmw 3's US sales only marginably decreases by 20%. If most people get the real message, it should collapse by 50%+.

Tesla is monitoring pace of the orders it receives. That is why you have the wrong perception of it being production limited. I suspect they postponed their production expansion for at least 1 quarter due to the non-exponential increase of the order, thanks to FUD.

Ummmm yes pricing limits the groups of consumers that can buy a product. Q1 introduced SR+ in limited markets in low numbers, Q2 introduced SR+ in more markets. Results? Lots of demand.

I'm not sure what point you're trying to make here. Q1 Model 3 numbers were production constrained.....FUD had no effect on Model 3 sales. FUD was at it's peak after Q1 results and it still had no effect. Q2 proved that. The increase in production has further proved that. My comments have been targeted towards the notion that FUD has affected demand and/or will affect demand in the future. I simply don't think that's true.

 

[KSilver2000]

Ummmm yes pricing limits the groups of consumers that can buy a product.

Umm, that’s what I was saying, too.

True, demand increased since intro of SR+ in Q1.

Still not cheap enough for general mass market IMO. Even at delivery of 150,000/quarter, that’s still ~3% of overall car sales in US alone. Most basic configuration SR+ with FSD is $46K before taxes&credits, and up to $50K. (Don’t want to get into discussion over comparable ICE this and that, self-driving, blah blah).

BTW, no one outside of Tesla knows what the actual ratio of SR+/LR AWD/P3 is, though.

 

[EVNow]

I'm saying it's hasn't caused demand issues.

How would you know ?

Without the FUD, they would have better ASP and would have introduced the lower trims later. We wouldn't have had the Q1 disaster.

 

[Thekiwi]

Love the optimism, and my investing aligns with this view, but I wish I could believe this is just another one of those short stories where the FUD fizzles after profits take hold. Unlike all the other examples of big change (Blackberry, Brick and Mortar retail, Horses etc...) this one's enemy is big oil. Is there any precedence for such a powerful nemesis in past history?

To me, the FUD fizzles when the rest of the industry can do similar or better than a 2012 Model S (then keeps up) because then you at least have other companies in the race and swimming the same direction. Oil will still resist.

Do I think Ford's eF150 will threaten Tesla, no. Is NIO the real competition in China, no. There really isn't any threat to Tesla in the BEV space for many reasons (supercharging, software updates, costs, GFs, distribution...). Throw in fake news and big oil will insist on keeping people in the past, in their own little bubble like the Amish. So what would make the oil money back off? I do not see the Middle East nations making huge profits on solar or cars like they do on oil. I see decades before this situation really changes. Horse to car migration took how long, and the money was behind the cars at that time.

Perhaps the children will speak up. This little girl inspires me. Very well spoken kid for 16! I saw her Ted Talk, wow. Simple rhetorical questions, one after another firing away. Greta Thunberg: ‘They see us as a threat because we’re having an impact’

Big Oil isn’t going to make any sort of large long term impact on the transition to EVs, The horse has already bolted. Existing automakers are all scrambling to secure long term battery supply as various governments/cities around the world have already announced the end date of ICE sales and/or increasingly arduous penalties on automotive pollution.

I think many overestimate the minimum viable EV product acceptable to many - there are many who have no need for something with as much range as a Tesla, and so the adoption of low end cheaper EV cars will be faster than many expect. That doesn’t mean Tesla has to offer a cheap sub 100 mile car, but it does mean the market will/is already increasingly served by low end EV manufactures, especially in emerging markets, and 2nd hand premium vehicles will also increasingly make ICE vehicles economics look ridiculous to the average suburban commuter.

I don’t pretend Tesla has no competition. The simple fact is that the majority of new cars sold in 2030 will be EVs, and that will include most of the existing large automakers, as well as many other new entrants. Will Tesla still have the best EVs? Probably. But most will simply be buying the cheapest vehicle that suits their needs regardless of performance, just like most car buyers have been doing for decades.

(Tesla will do very well selling millions of units annually of mid-range/premium vehicles - and may even have an autonomous product doing well also)

 

[StarFoxisDown!]

If tesla is really immune of FUD, the lead time for you to buy any low trim m3 should be at least 3 months, even if you are at US. Look at the value they are offering: cheaper than bmw 3 series, better performance, better infotainment, better TCO, better almost everything. But bmw 3's US sales only marginably decreases by 20%. If most people get the real message, it should collapse by 50%+.

Tesla is monitoring pace of the orders it receives. That is why you have the wrong perception of it being production limited. I suspect they postponed their production expansion for at least 1 quarter due to the non-exponential increase of the order, thanks to FUD.

Not sure how much evidence you need in front of you. Panasonic has openly admitted they are lagging on cells and that it was the direct cause for why Tesla couldn't make more 3's in Q1. It was impossible for Tesla to make more Model 3's for Q1. It was impossible for Tesla to make more Model 3's for Q2. Tesla's website said you could get a SR+ in 2-3 weeks in the first few weeks of the SR+ being available. It was proven that the website estimate for delivery is wrong. This was verified from many people that ordered that said they were not going to get their 3 until weeks later.

I'll repeat....FUD has not cost Tesla any sales right now. If Tesla could have made more Model 3, they would have sold them. I think you have a crazy level of expectations of you believe that there's should be a order backlog of 285,000 Model 3's(current quarterly production rate times 3)

 

[Causalien]

Eh.....I don't think the FUD has had any effects on Tesla's demand. Sure some people have easily bought into it and/or just are anti climate chance, etc...but that hasn't actually had any effect on Tesla's sales. Literally the only quarter where you could even remotely say that the FUD had any effect was Q1 but even then, it was Tesla's own production issues(both 3 and updating the S/X with Raven) and delivery logistics that caused the Q1 results.

Going forward, I think the FUD effect is going to be practically non-existent. The FUD will still exist for sure....but with Tesla delivering 100k+ vehicles every quarter for Q3 and Q4 and then upwards of 150k/quarter in 2020, it's practically game, set, match. The cars are moving advertisements...….whether it's the speed, the electric novelty, the huge screen interface, the Apps(the racing game and fart apps are huge hits with consumers)

The FUD works. The things I hear from people who does not follow tech at all are all regurgitated spill from TSLAQ crowd. These people all have the means to buy several TSLA in the upper echelon of society. They also, don't use the internet LOL. Some don't even have computers. Thing is. There's a big population of people like these who's sole information source are the traditional media.

 

[StarFoxisDown!]

How would you know ?

Without the FUD, they would have better ASP and would have introduced the lower trims later. We wouldn't have had the Q1 disaster.

No I don't think they would have had a higher ASP. I don't get why people are confused with this. Tesla was never going to sell 500k model 3's a year with a ASP of 60k. The sedan market is only so big and it's declining. There are only so many buyers in each price bracket. It's been shown many times how the customer base for a sedan that's 35-45k is exponentially bigger than 50K+.

 

[Carl Raymond]

How would you know ?

Without the FUD, they would have better ASP and would have introduced the lower trims later. We wouldn't have had the Q1 disaster.

I think “disaster” should be replaced with “stock price collapse”. Not one rivet in GF3 was delayed. Growth continues at max. Hardly a disaster.

Yes, a capital raising took place and raised less than it otherwise might. I’ll give that. In hindsight, 18 mths from now, it will be insignificant.

 

[StarFoxisDown!]

The FUD works. The things I hear from people who does not follow tech at all are all regurgitated spill from TSLAQ crowd. These people all have the means to buy several TSLA in the upper echelon of society. They also, don't use the internet LOL. Some don't even have computers. Thing is. There's a big population of people like these who's sole information source are the traditional media.

Again....I'm not saying FUD hasn't had any affects on anyone. I'm saying it hasn't affected sales. If Tesla could have made more Model 3's at a lower price range, they would have sold every one of them My belief is pricing and being able to increase production was the biggest constraint because it directly affects who can buy. Lots of Tesla lovers that can't afford a 50k Model 3 but can afford a 39k SR+

 

[KSilver2000]

How would you know ?

Without the FUD, they would have better ASP and would have introduced the lower trims later. We wouldn't have had the Q1 disaster.

I disagree.
FUD has negligible effect on ASP. Volume more affected, but not price.

First, I doubt the take rate of SR+ is as high as some people want to think. Second, people don’t somehow move up/down trim levels because of FUD.

 

[UncaNed]

OT

I've been thinking recently about how a team driving across the United States with just the car doing the actual driving might charge at superchargers without getting out of the car. Would it not be possible to put the charging port behind a flip-down license plate and then design a supercharger with a flip-down nozzle (if that's the correct word) in the center section of the SC then use the rear view camera for backing up and pluging itself in? Obviously this would take a slight redesign of the SC, but they do have a lot of area in the middle where they could put a type of flip down nozzle. I was thinking along the lines of the fueling method used on military aircraft.

Anyway, I hope this makes sense cuz I just got up and my coffee hasn't kicked in yet...

Of course! We'll have charger trucks that drop one of those clever military filling hoses that you tailgate and connect to so you can charge on the fly, not only without having to stop, but all while saving even MORE power through platooning!

What exactly you were drinking BEFORE you had your coffee at 1:33 PM EST?

 

[UncaNed]

I've had multiple people tell me they would have bought a Tesla but for bankruptcy fears they get to listen to daily on CNBC.

I heard that too, and I don't really talk to that many folks. YET - Tesla is not limited by demand.

When ICE manufacturers start collapsing, it will become apparent that they were lying about Tesla going bankrupt.

 

[mrmage]

Again....I'm not saying FUD hasn't had any affects on anyone. I'm saying it hasn't affected sales. If Tesla could have made more Model 3's at a lower price range, they would have sold every one of them My belief is pricing and being able to increase production was the biggest constraint because it directly affects who can buy. Lots of Tesla lovers that can't afford a 50k Model 3 but can afford a 39k SR+

It definitely affects sales. I know of at least 2 or 3 people who did not buy because of FUD. Multiply this effect out, and it's a lot of people.

Put another way: if Tesla had 2x the demand across all price points, they would have more aggressive expansion plans.

They would raise more money at lower cost, and build out faster. Not saying they're not doing pretty darn well now, but a tailwind would push production higher.

 

[Carl Raymond]

The FUD works.

It works to suppress the stock price. It does not work to prevent educated analytical people from doing their homework and concluding that the best car to buy is a Tesla.

Different mechanisms. The first is about the crowd. The latter is about the few. A few is plenty to absorb all Tesla production, for now.