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

[AudubonB]

RED IS BACK......

And, the gods of the internet willing, will be so in full force quite shortly.

~~~Caveat Scriptor!~~~~~

To begin with:

ZERO more tree nonsense posts. Just because Mr Musk blows his nose doesn’t provide a reason to start discussing boogers.

AnENT this post, anyone is, as always, welcome to start a tree thread. But no more here.

~Vetinari~

 

[EVNow]

I think Tesla will try to maintain GAAP profit to be minimal.

I don't subscribe to the popular view here that Musk will reduce the price - just because the cost is reduced or Tesla can make a profit even with reducing price. Musk is acutely aware of the need to make Tesla financially strong and healthy. He won't try to maximize profits - instead he wants to drive unit growth - but he is not averse to $1B profit. He even said Q4 '20 will be "incredible" (IIRC).

Tesla will change the prices to sell 100% of production, while doing their best to increase production and reduce cost.

 

[bhtooefr]

-Samsung or some other large IT company joining the race

So naming Samsung is an interesting one.

Most technology/gadget companies don't have enough manufacturing expertise to do a car well. Contract manufacturers are the norm for most of them, and while they may know software, they don't know the rest of the car. In some ways not knowing the rest of the car means that parts that need reinvention can be reinvented, but also, there's some things you have to learn the hard way.

Samsung has in-house manufacturing, including of batteries that are used in EVs... and they also produce cars, including an EV. ...of course, the problem there is that Samsung's entire automotive lineup is variations on Renault-Nissan Alliance products, a result of their partnering with Renault. (The EV is a licensed clone of the Renault Fluence Z.E.) Which means they're not going to do anything interesting.

(If I had to bet on a consumer electronics manufacturer getting into EVs, I'd actually guess LG, based on some of the moves they're trying to make to protect their market, and the amount of engineering they did on the Bolt. Basically, do the HTC strategy, of moving out of the shadows of building everyone else's stuff, and sell under their own brand.)

 

[EVNow]

May I ask for the source of that information, and can you or anyone else (shout-out to @Hock1, @Doggydogworld, @brian45011, @luvb2b) link to some sort of public document or article that shows or strongly implies that "Nasdaq Market Makers" (Nasdaq member firms - of which there are hundreds I believe), are allowed unlimited short positions within the ~5 business days stock borrowing window?

I think the whole market makers as manipulators idea is fairly exaggerated. Oh yes, Hedge funds and even some big individual investors would try to manipulate stocks.

For eg., the price action we are seeing now can simply be attributed to call option buyers cashing out. A market maker would hedge the sale of a call by buying equivalent number of shares (1 call contract = 100 long shares, 1 put contract = 100 short shares). So, when that call is closed, the equivalent action is to sell the shares bought earlier to hedge the call writing.

When someone buys a 100 put contracts the MM (or counterparty) could short 10,000 shares. They have to do it fairly immediately to hedge properly. I'll try to look up some option volumes to see how much of the stock volume is driven by the option volume.

ps : Ofcourse this is simplistic. I guess hedging that MMs do is much more sophisticated.

 

[TradingInvest]

I agree with this. Not very popular here, but I haven’t heard any rational arguments against it. We know it’s true, Apple even offered to buy Tesla at $240 a few years ago. Imo it would be good for both Tesla and Apple, see my post here:
Apple Confirms 190 Layoffs From Self-Driving Car Project

Imo the biggest threats to Tesla are the following:
-Us being wrong and VW/Toyota/etc will eat Tesla’s lunch. Given that nothing has happened in 7years and Tesla scaling rapidly it seems unlikely.
-Alphabet/Deepmind/Waymo solving FSD and Tesla being unable to do so for some reason. Seems unlikely to me as Tesla has demoed FSD many times over the years and seems to be making steady progress and Waymo not accelerating their development.
-Apple doing something secret and one day releases a complete great product and scales up manufacturing through Magma Steyr/Foxconn. Never underestimate Apple. But if they do I think it would take years from reveal to mass production. Imo still open.
-Samsung or some other large IT company joining the race

The future of transportation is a puzzle with many pieces. At this point only Tesla is tackling all the piece in the right way. Namely: AI FSD, both HW and SW, reliable battery, long life battery, fast charging, large scale battery supply starts from mining supply to production, local production in each continent, extensive charging network which is reliable and high speed, insurance, vehicles designed beautifully, make it simple so it's easier to mass produce, cover high volume vehicles but don't create too many variations, high efficiency, design vehicles that can last million miles, low maintenance, low cost, direct sales, no sales commission, Tesla owned bodyshop, FSD ride sharing. And this is not the full list.

At this time I'm not 100% sure Tesla will win FSD race. I think Tesla has the right strategy, they are leading in the race. I think there is a good chance full featured FSD will come next year. I'm pretty happy shorts are still treating this company as a niche losing vehicle company. They think this company is super over valued and there is an upper limit for the market cap, which is between 70~80B. I hope they get really aggressive at shorting once Tesla rise to $80B. They would not understand how in the world the market cap could rise to 800B.

Traditional car companies are in big trouble. They know it. I'm not worried about them. My view is nobody else can make a profit, except Tesla can have 30% gross margin. It doesn't matter how other companies will compete. There are 2 billion ICE vehicles waiting to be replaced. Each year Tesla wants to replace 1% of them with great EVs. That goal seems moderate.

 

[MC3OZ]

The world-wide grid is a practical alternative to SEASONAL storage. Where I live, on the Winter solstice we get about 7 hrs per day of sunlight, and the solar azimuth at noon is about 10 degrees.

While HDVC is a good option, it can also be used for offshore wind. Tidal energy is a good option in some areas.
So the cheapest option is tapping all available RE resources.
The Pumped Hydro/Hydro, or Hydrogen may provide additional useful seasonal storage.
After all this options are exhausted, importing electricity from other areas is a good idea...

 

[MC3OZ]

Assume we can't burn fossils anymore. Then where does this power come from?

The short answer is for generation you need to use everything in the tool kit:- Solar, Wind, Offshore Wind, Tidal, Hydro..

For storage you also need to use everything in the tool kit:- Batteries, Pumped Hydro, Hydrogen, Liquefied Compressed air.

While I am a strong supporter of Tesla, and I believe batteries will change the world, for seasonal storage, the other options are better.

For transmission we also need to use the full toolkit which is a mix of HVDC and HVAC.

While no one said it is easy, people are making it sound very difficult, but in reality we have already invented all of the technologies we need, we know the costs, people know how to design grids that will work with the right mix of these technologies...

Arguments here are similar to "range anxiety" concerns around EVs, people make it sound difficult by ignoring the solution, or only using one part of the solution... when you look at the total eco-system, it can be made to work.

 

[ElectricOrgan]

The short answer is for generation you need to use everything in the tool kit:- Solar, Wind, Offshore Wind, Tidal, Hydro..

For storage you also need to use everything in the tool kit:- Batteries, Pumped Hydro, Hydrogen, Liquefied Compressed air.

While I am a strong supporter of Tesla, and I believe batteries will change the world, for seasonal storage, the other options are better.

For transmission we also need to use the full toolkit which is a mix of HVDC and HVAC.

While no one said it is easy, people are making it sound very difficult, but in reality we have already invented all of the technologies we need, we know the costs, people know how to design grids that will work with the right mix of these technologies...

Arguments here are similar to "range anxiety" concerns around EVs, people make it sound difficult by ignoring the solution, or only using one part of the solution... when you look at the total eco-system, it can be made to work.

In the context of EV charging renewables will do the job pretty well. But because renewables aren't reliable there will need to be ways of mitigating the difference in renewable energy availability and EV charging demand.

Probably the easiest way is simply by managing the demand. Very few users will need to charge every day/night. So charging needs to be put off when renewables aren't available and charged when they are. Heck, one person I know says we should use the batteries in EVs to smooth out the demand peaks. lol I find that funny because these batteries are so expensive. But certainly there is no reason to burn fossil fuel charging a car at 50% when the owner only expects to need 20% of that charge over the next 24 hours. Wait for a day or even two until renewables are back up.

Adding batteries to renewables to charge batteries in cars is a bit of a stretch.

 

[TradingInvest]

The short answer is for generation you need to use everything in the tool kit:- Solar, Wind, Offshore Wind, Tidal, Hydro..

For storage you also need to use everything in the tool kit:- Batteries, Pumped Hydro, Hydrogen, Liquefied Compressed air.

While I am a strong supporter of Tesla, and I believe batteries will change the world, for seasonal storage, the other options are better.

For transmission we also need to use the full toolkit which is a mix of HVDC and HVAC.

While no one said it is easy, people are making it sound very difficult, but in reality we have already invented all of the technologies we need, we know the costs, people know how to design grids that will work with the right mix of these technologies...

Arguments here are similar to "range anxiety" concerns around EVs, people make it sound difficult by ignoring the solution, or only using one part of the solution... when you look at the total eco-system, it can be made to work.

I used to think for large scale energy storage, the most economical solution has to be molten salt. I even made a preliminary design to store energy for a large city (just for fun). I was trying to see how cost effective it would be when compared with batteries. Weight lifting could also become competitive, along with pumped water and liquefied air. It's true all of these are cheaper than battery today.

But I was wrong. Now I understand the future will be distributed energy generation and storage. The storage will be batteries. We will have small scales of other forms of energy storage, nothing can really compete on cost and convenience. I hate to admit, Tesla got everything right.

 

[MC3OZ]

I used to think for large scale energy storage, the most economical solution has to be molten salt.

Same here, it was how I first got interested in this topic..

Basically PV has out-competed Solar Thermal, IMO the probably reason is that PV is a manufactured product, and Solar Thermal resembles a construction project.

PV can exist at a variety of scales, and no one has worked out how to do small scale prefab Solar Thermal cost effectively.

Some Solar Thermal projects seem to go well, others seem to become a shambles, or take longer than they should be become fully operational. It is still a slight mystery why Solar Thermal is doing so badly, no mystery at all why PV is doing well.

PV and batteries are both very flexible, and scale very well.

 

[StealthP3D]

One thing for sure, if Apple did come out with a car, that would be some crazy competition. In the desktop or smartphone space, Apple was always viewed as the cool, slick, and fun products, while Windows and Android was more the nerdy, boring, or 9to5, suit and tie products. And this defined the competitive dynamics of the marketplace. But imagine if you had two Apple like companies competing against each other in desktops and smartphones. What would that be like?

My jaw is dropping here. Apple is not going to go into the auto-making business with Tesla and they certainly aren't going to do it on their own. It's like you don't understand that money alone cannot solve all the barriers to entry of auto manufacturing. Tesla won't have them and they can't do it alone. This much is as obvious as the fact that the sun will rise tomorrow. Maybe they will tie the knot with Toyota or Honda. Maybe GMC. Even then, the combined effort could not possibly offer credible competition to Tesla for (at a minimum) 5 years. More likely 8 or 9 years even if things went relatively well.

Your view of Apple is divorced from reality in my experience. Apple was never "cool and slick" to most people I knew. We always thought Apple was designed for idiots. Of course, it sold well, fortunately there are plenty of people who are challenged by anything more complicated than sending a tweet or tying their shoe! Android gave the power to the user. Users could make it as simple or complex as they desired. Apple dumbed everything down until you couldn't even make it do what you wanted or how you wanted it to do it. Then you slam MSFT products as being "nerdy" or "boring". Since when is innovation boring? Need I remind you that over the last 5 years MSFT stock has nearly *twice* the returns vs. AAPL stock? That's because Apple is relatively weak when it comes to true innovation. And you think Apple can design and manufacture a competitive EV? I think you're divorced from reality. Because that requires *massive* innovation.

Tesla has paid their dues when it comes to learning how to make cars. Apple has not. Why would Tesla *ever* partner with Apple?

 

[MC3OZ]

But I was wrong. Now I understand the future will be distributed energy generation and storage. The storage will be batteries. We will have small scales of other forms of energy storage, nothing can really compete on cost and convenience. I hate to admit, Tesla got everything right.

I see all houses/buildings as eventually having a battery, and all solar farms as having at least 4 hours worth of battery storage, add that up it is a lot of batteries.

Where batteries are not a good fit is seasonal 2-10 weeks of the year, with low, solar and onshore wind.

If batteries become cheap enough, it could be all batteries, but having battery capacity you only use 2 weeks per year is a bit of a waste.

I also think Tesla is right, and they are only just getting started on the energy side of the business,

 

[heltok]

So naming Samsung is an interesting one.

Most technology/gadget companies don't have enough manufacturing expertise to do a car well. Contract manufacturers are the norm for most of them, and while they may know software, they don't know the rest of the car. In some ways not knowing the rest of the car means that parts that need reinvention can be reinvented, but also, there's some things you have to learn the hard way.

Samsung has in-house manufacturing, including of batteries that are used in EVs... and they also produce cars, including an EV. ...of course, the problem there is that Samsung's entire automotive lineup is variations on Renault-Nissan Alliance products, a result of their partnering with Renault. (The EV is a licensed clone of the Renault Fluence Z.E.) Which means they're not going to do anything interesting.

(If I had to bet on a consumer electronics manufacturer getting into EVs, I'd actually guess LG, based on some of the moves they're trying to make to protect their market, and the amount of engineering they did on the Bolt. Basically, do the HTC strategy, of moving out of the shadows of building everyone else's stuff, and sell under their own brand.)

Samsung should not be underestimated. They have showed that they can enter new markets rapidly and compete with Apple on design and software. And they are huge:

(4y old but still relevant)

Their Renault cars are not very impressive, though my friend is crazy about Twizy. But who knows, maybe they have a few hundred engineers locked in a basement somewhere developing their own Tesla Model S 2012 clone ready to enter the Asian market and then soon expand to the rest of the world. Once they have a good design I think they can just give a ton of money to Foxconn and a few years later they will have a few hundred thousand cars production rate:
https://www.cultofmac.com/298002/iphone-maker-foxconn-plans-roll-15k-electric-cars/

 

[MC3OZ]

IMO tech industries are relatively easy to disrupt automotive is at the other end of the scale, very difficult..

Apple or Google could buy GM or Ford cheap in a fire sale, they then need 5-10 years to bring the EV side of the business up to scale and get to where Tesla is now.

Others like VW Group, the Chinese, Nissan, Hyundai and Daimler are further down the track, with a track record of making EVs, advanced plans and car industry experience. This group can compete with Tesla in 2-3 years time...

Google and Apple are at least 5 years away from competing... sure they can do the tech side, and get a car company to make the shell, but what about batteries, motors, fast charging, service, components, sales and distribution... If they inherit a dealer network that is more of a hindrance than a help.. And if they shut down the ICE lines, that is a lot of redundancies...

Even if they partner a car maker, they need that car maker to remain viable....

On the other hand Tesla could be making smart phones with ,with an app store in 2-3 years, there is at least one Chinese company that would love to partner them. Smart phones, apps and app stores are way easier than cars..

 

[Antares Nebula]

My jaw is dropping here. Apple is not going to go into the auto-making business with Tesla and they certainly aren't going to do it on their own. It's like you don't understand that money alone cannot solve all the barriers to entry of auto manufacturing. Tesla won't have them and they can't do it alone. This much is as obvious as the fact that the sun will rise tomorrow. Maybe they will tie the knot with Toyota or Honda. Maybe GMC. Even then, the combined effort could not possibly offer credible competition to Tesla for (at a minimum) 5 years. More likely 8 or 9 years even if things went relatively well.

Your view of Apple is divorced from reality in my experience. Apple was never "cool and slick" to most people I knew. We always thought Apple was designed for idiots. Of course, it sold well, fortunately there are plenty of people who are challenged by anything more complicated than sending a tweet or tying their shoe! Android gave the power to the user. Users could make it as simple or complex as they desired. Apple dumbed everything down until you couldn't even make it do what you wanted or how you wanted it to do it. Then you slam MSFT products as being "nerdy" or "boring". Since when is innovation boring? Need I remind you that over the last 5 years MSFT stock has nearly *twice* the returns vs. AAPL stock? That's what happens when innovation is lacking. And you think they can design and manufacture a competitive EV? I think you're divorced from reality. Because that requires *massive* innovation.

Tesla has paid their dues when it comes to learning how to make cars. Apple has not. Why would Tesla *ever* partner with Apple?

Agree to diagree?

 

[StealthP3D]

I think the whole market makers as manipulators idea is fairly exaggerated. Oh yes, Hedge funds and even some big individual investors would try to manipulate stocks.

For eg., the price action we are seeing now can simply be attributed to call option buyers cashing out. A market maker would hedge the sale of a call by buying equivalent number of shares (1 call contract = 100 long shares, 1 put contract = 100 short shares). So, when that call is closed, the equivalent action is to sell the shares bought earlier to hedge the call writing.

When someone buys a 100 put contracts the MM (or counterparty) could short 10,000 shares. They have to do it fairly immediately to hedge properly. I'll try to look up some option volumes to see how much of the stock volume is driven by the option volume.

ps : Ofcourse this is simplistic. I guess hedging that MMs do is much more sophisticated.

I totally disagree that TSLA is not actively manipulated, and it's almost certainly with the involvement of the MMs. In the world of potentially disruptive speculative stocks, I've never seen such unnatural price action. And I believe it would require the collusion of MMs to achieve what I'm seeing. Most likely it's some kind of unholy alliance of big oil money with the MMs.

 

[JustMe]

There’s a lot of speculation going on about the slow pace of deliveries to Europe this month. Some people think this is reflecting plummeting demand. But I’m starting to think we’re in for a classic Tesla surprise of sorts... Over in the More UK-bound Ships? forum, they are tracking cargo ships in real time, chomping at the bit waiting for their cars to arrive. And it turns out that there are an awful lot of Teslas being gently rocked by ocean waves right now.

Franco Mosotto is organizing this shipping data in an amazingly detailed spreadsheet: Tesla Carriers

Here’s the bottom line:

As of now there are 11 ships in transit with cargo or scheduled to be loaded by day 35 of q4.

Q1: 16 ships total.. 11th ship day 52
Q2: 13 ships total. 11th ship day 57
Q3: 12 ships total. 11th ship day 65

There’s quite a surge of shipments going on. I’m looking forward to reading the next production and delivery report!

cheers

 

[Dan Detweiler]

All this talk about profitability and the coming competition got me thinking. One question...

Do we know for sure that any of the other EV manufacturers are actually turning a profit off the sale of their EVs? If they are what are their margins? Until they can demonstrate profitability from EVs then they are not in any way sustainable and could not represent any significant shift away from the status quo ICE focused product line up.

A compliance car, or in this case, an "improve my image to the public" car is meaningless if it does not represent an opportunity to make money. So...have any of the others demonstrated profitability with their EVs? Leaf, Bolt, iPace, Taycan, Zoe, eTron? Any of these making money? Because if they are not then they are in no way competition for Tesla because they are not sustainable in their product lines as the public's demand for EVs rises.

Thoughts?

Dan

 

[Remus]

I highly doubt Buffett considered purchasing Tesla. Not at all his play. Not at this stage. However, his two lieutenants may have considered it as a trade (they have taken short term trades in the past), but again, I doubt it.

I'm a huge Buffett fan and have followed him closely, but I think he maybe slipping up as of late. Look at IBM and Heinz. Also he has now underperformed the index for the last decade. Perhaps he is getting too old or perhaps he has been affected by all the media limelight. Still, what he has achieved is incredible.

For those that aspire to be great investors here (beyond just their Tesla investment), I highly recommend:

https://www.amazon.com/Warren-Buffett-Way-Investment-Strategies/dp/0471177504

There's a saying in silicone valley, if buffet decides to invest in your company, then your growth must have been over.

 

[Antares Nebula]

I agree with this. Not very popular here, but I haven’t heard any rational arguments against it. We know it’s true, Apple even offered to buy Tesla at $240 a few years ago. Imo it would be good for both Tesla and Apple, see my post here:
Apple Confirms 190 Layoffs From Self-Driving Car Project

Imo the biggest threats to Tesla are the following:
-Us being wrong and VW/Toyota/etc will eat Tesla’s lunch. Given that nothing has happened in 7years and Tesla scaling rapidly it seems unlikely.
-Alphabet/Deepmind/Waymo solving FSD and Tesla being unable to do so for some reason. Seems unlikely to me as Tesla has demoed FSD many times over the years and seems to be making steady progress and Waymo not accelerating their development.
-Apple doing something secret and one day releases a complete great product and scales up manufacturing through Magma Steyr/Foxconn. Never underestimate Apple. But if they do I think it would take years from reveal to mass production. Imo still open.
-Samsung or some other large IT company joining the race

I agree, we cannot underestimate Apple. But the Tim Cook era has not been convincing, as far as innovation goes. But the jury is still out. If Apple can deliver a kick-ass AR glass AND (later) a car, Cook can redeem himself in the eyes of the skeptics.

I think it's very possible that Apple could drop a bomb. There has been speculation, but no one knows for sure. On the other hand, making a car is a much bigger operation than making phones or computers, and there is likely to be supply chain leak somewhere. Some folks believe the timetable is about 2023-2025. See, for example:

Apple Car: It's no secret, Apple's actively working on Car tech