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

[neroden]

OT

But God, what an awfully boring car.

I like boring. What I like most about my Tesla is how it doesn't shake or make loud noises when it moves. I don't have all those exciting explosions happening, or the exciting gear shifting, or the exciting fumes coming out of the back. More boring than gasoline cars. In a good way.

 

[neroden]

OT

If you're wearing your Tesla brakes as fast as a Camry, you're driving it wrong.

Yeah. Interesting example: I live in a heavy-brake-pad-use area (lots and lots and lots of hills). So my friction brakes actually get used and my brake pads do get wear. But I haven't replaced my Tesla brake pads in 6 years. I used to have to replace Toyota brake pads every three years... but I should have replaced them more frequently -- I actually kept replacing the brake shoes because I'd worn right through the pads and started wearing the shoes out before I noticed.

 

[neroden]

Semi-OT

Scaling is always difficult. If it wasn't, Facebook, Netflix and Apple wouldn't be running on Amazon's services, which were created to support Amazon's stores.

An interesting and bizarre fact: the whole of Amazon's storefront basically exists, financially speaking, as a testsuite for Amazon Web Services. The reason nobody else can match Amazon Web Service is that nobody else can create that punishing a testsuite. Basically, if your cloud computing design can support Amazon.com, it can support anyone, and that's why AWS is always ahead.

 

[neroden]

Request for financial analysis (@neroden ? @ReflexFunds ? @Fact Checking @KarenRei ?):

Business Insider highlights of Tesla Bull Gordon Johnson is the usual tripe, but includes one quantifiable complaint, that Tesla is not spending enough on capex. (I won’t include a link, easy to find by title “Tesla’s biggest bear on Wall Street ... blabla”):

“"Tesla's cap-ex in the quarter was a joke," he said of the $249.7 million reported line item. "For the past three quarters running, Tesla's cap-ex has been under its depreciation and amortization, meaning it's not investing enough to upkeep its equipment. That's not what growth companies do."

Wild guess: Is this perhaps because big capex expenditures were 4+ quarters ago, in cash, and the biggest one since is Shanghai which is financed by Chinese loans so doesn’t show up here? Maybe measuring capex on quarterly basis is not terribly meaningful? Or, is it possible that he has a point?

Musk actually addressed this on the earnings call though nobody asked. He and Zach Kirkhorn specifically said that this capex level was sustainable, and although it might look like they were postponing capex, they weren't, they'd just figured out how to do things cheaper. You can believe them or not believe them, but they addressed this preemptively.

 

[ReflexFunds]

Request for financial analysis (@neroden ? @ReflexFunds ? @Fact Checking @KarenRei ?):

Business Insider highlights of Tesla Bull Gordon Johnson is the usual tripe, but includes one quantifiable complaint, that Tesla is not spending enough on capex. (I won’t include a link, easy to find by title “Tesla’s biggest bear on Wall Street ... blabla”):

“"Tesla's cap-ex in the quarter was a joke," he said of the $249.7 million reported line item. "For the past three quarters running, Tesla's cap-ex has been under its depreciation and amortization, meaning it's not investing enough to upkeep its equipment. That's not what growth companies do."

Wild guess: Is this perhaps because big capex expenditures were 4+ quarters ago, in cash, and the biggest one since is Shanghai which is financed by Chinese loans so doesn’t show up here? Maybe measuring capex on quarterly basis is not terribly meaningful? Or, is it possible that he has a point?

Safe bet, If Gordon Johnson ever says anything, he hasn't got a point.

Gordon has never looked at a growth company so he doesn't understand how capex works. And if he did, he would try to misrepresent it anyway.

In the first place D&A relative to capex isn't a meaningful metric for a growth company. Secondly capex for new capacity is very lumpy so quarterly capex does not reflect growth plans. Thirdly capital efficiency is a good thing and the less Tesla spends on capex per unit of new capacity the better. Finally, It looks likely that China is paying to build GF3 external construction, and if this is the case this expansion does not cost Tesla anything.

Capex consists of 1) maintenance capex (annual repairs and continued costs which really are more like opex), 2) replacement capex (once a machine/equipment reaches the end of its useful life, it must be replaced) and 3) growth capex (this is to fund production capacity expansion or efficiency investments to reduce production costs).
The capex type most relevant to depreciation is replacement capex. Depreciation tries to spread the lumpy upfront cash cost of this equipment over its lifetime. If a company has 20 factories built at different times and broadly flat sales for the last 5-10 years, then the overall cash cost of replacing equipment each year should be spread out too and roughly flat each year, and replacement + maintenance capex should roughly equal depreciation (however it is possible the new equipment is significantly more or less capital efficient than that bought 5-10 years ago).

But Tesla's business is not in steady state - the majority of its equipment is new and far from needing replacing. So right now replacement capex is very low (it will pick up in several years time when current equipment needs replacing). So for most businesses, depreciation should roughly equal maintenance + replacement capex to keep roughly flat profits. But right now, Tesla's replacement capex is close to zero, so everything above the maintenance level is for growth. I expect quarterly maintenance capex is likely only $100-150m, so even in Q2 Tesla I expect had $100-150m of growth capex. This is in addition to c.$324m of R&D, which is also largely for growth projects. (Again, at most companies the majority of R&D is for replacement projects for new models to replace retired models and to maintain flat sales, but at Tesla currently R&D is nearly all for growth projects)

 

[ReflexFunds]

It just occurred to me, unless I missed something, that the earnings call shed no light on the leaked Jerome email about production at Fremont, either via forward-looking statements or analyst questions.

Elon and the shareholder letter both said Tesla expect to have Fremont Model 3 at 8.5k by year end, i'm pretty sure this is the production increase Jerome mentioned.

 

[KarenRei]

Add another ~$300-400M revenue at ~11% ASP to the balance sheet next quarter?

South Australia says Tesla virtual power plant charging ahead | RenewEconomy

(Estimating USD ~$6700 per unit, ~49000 units .... but then, there's also a solar component to add in...)

 

[CorneliusXX]

We’re going to start a car company. Meh, I’ll believe it when I see it.

We’re going to make a worldwide fastest charging network for long distance travel. Meh, I’ll believe it when I see it.

We’re going to build a battery factory. Meh, I’ll believe it when I see it.

We’re going to build the most compelling, non-compromise EVs that out perform, out safety, out fun etc... any ICE in their class. Meh, I’ll believe it when I see it.

We’re going to produce more Lithium batteries than everyone else in the world combined. Meh, I’ll believe it when I see it.

We’re going to make reusable rockets. Meh, I’ll believe it when I see it.

We’re going to modularize wiring in our vehicles. Meh, I’ll believe it when I see it.

We’re going to build multiple Gigafactories around the world. Meh, I’ll believe it when I see it.

Hmm...*wonders if perhaps some people are a bit - what’s the word I’m looking for here?*

We’re going to make cars fully autonomous.
We’re going to create Robotaxis.
We’re going to make an energy sustainability ecosystem of solar roof, battery storage and EVs.
We’re going to show a path forward to producing 2 terawhatthehellever of batteries per year.

Meh, I’ll believe it when I see it.

Timelines aside, at this point if you’re still doubting where Tesla is going and what they’ll accomplish, and taking a ‘I’ll believe it when I see it’ stance then at best you lack the ability to connect the dots.

It's not me you need to convince. Except for advanced summon.

 

[Alphacrux]

While at the local service center, I asked about s/x deliveries. The advisor told me that s/x deliveries were actually better than last month. I noticed that they also had an s and an x on display in the showroom area and a person staffing the room. Someone was even taking delivery. Anecdotal, but still good signs, I guess.

 

[MarcusMaximus]

Found this attack ad on CNBC that seems to contain outright libel:

Safety groups want FTC, state probes of Tesla's Autopilot system–and its marketing efforts

Between repeated claims of “several” fatal autopilot accidents this year(there’s been 1) and false claims that the IIHS report was a survey of “2000 owners”(it was 2000 random people), this article seems to cross the boundary from merely extremely misleading into outright false. Worse, the falsehoods look to be intentional.

 

[madodel]

Found this attack ad on CNBC that seems to contain outright libel:

Safety groups want FTC, state probes of Tesla's Autopilot system–and its marketing efforts

Between repeated claims of “several” fatal autopilot accidents this year(there’s been 1) and false claims that the IIHS report was a survey of “2000 owners”(it was 2000 random people), this article seems to cross the boundary from merely extremely misleading into outright false. Worse, the falsehoods look to be intentional.

Is that Safety Group run out of a toilet in NYC?

 

[NannerAirCraft]

Add another ~$300-400M revenue at ~11% ASP to the balance sheet next quarter?

South Australia says Tesla virtual power plant charging ahead | RenewEconomy

(Estimating USD ~$6700 per unit, ~49000 units .... but then, there's also a solar component to add in...)

I don't see any mention of when Phase 3 will start from the article and I'm guessing it all won't happen in one quarter. Anyone have info on how long until they start installing the next 50,000?

 

[Mobius484]

Found this attack ad on CNBC that seems to contain outright libel:

Safety groups want FTC, state probes of Tesla's Autopilot system–and its marketing efforts

Between repeated claims of “several” fatal autopilot accidents this year(there’s been 1) and false claims that the IIHS report was a survey of “2000 owners”(it was 2000 random people), this article seems to cross the boundary from merely extremely misleading into outright false. Worse, the falsehoods look to be intentional.

They don’t care. CNBC. Enough said.

 

[powertoold]

Getting a government sanction on AP would mean a win for all the other FSD competitors. They'll try their best to nitpick and get governments to rule against AP.

AP is also a feature that draws in a lot of potential buyers.

 

[Opus BC fan]

Looks like everyone now realizes that the drop was based on nothing. We have a whole weekend for people to re-read the numbers and re-listen to the call and then realize they should have bought, not sold. Hoping for some solid green starting monday.

Be aware that TSLA is trading under the "Uptick Rule".

 

[KarenRei]

Be aware that TSLA is trading under the "Uptick Rule".

There was no shortage of upticks today. I doubt anyone who wanted to short had trouble doing so.

 

[Artful Dodger]

About 40 degrees Celsius here in Germany today supposedly the hottest day ever measure since 19th century.

44C in Paris yesterday. Hottest day ever measured there, as hot at the US midwest was last week.

And its not just Europe baking in the sun, Arctic Sea Ice is at the lowest level for today since records began. So 44 TWh of batteries needed by 2040? Tic Toc.

 

[Cartegena]

I think Elon has lost patience with the world and the slow pace of its clean energy transition. Now he wants to cause the auto OEMs pain, he wants to destroy them.

Can you blame him? If the entrenched executives at the OEMs are too addled to appreciate the genius of Elon's visions, don't they deserve an agonizing, but quick, demise?

 

[Curt Renz]

Today's trades at ARK Invest:

 

[Stars aligned]

Be aware that TSLA is trading under the "Uptick Rule".

so scaaaaaaryyyyy