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

[Christine69420]

This is a painful truth that many of us may not like because we love driving and we love owning automobiles. I am not sure the generation currently in their teens and early twenties shares our love. It's going to be a bygone era very soon that many of us will wax nostalgic about. As a vertically integrated company, Tesla will be well-positioned to capitalize in a big way...not IF, but WHEN they solve FSD.

Driving ourself will go the way of horses and sailboats - only those really keen will be doing it.

 

[Oil4AsphaultOnly]

Out of curiousity (and perhaps a lapse of judgement) I started a twitter discussion with a Tesla (and TSLA) basher, no clue if he is TSLAQ or whatever.

His subject kept changing after my questions about his challenges to Shanghai production capacity and and then about profitability, then when I moved onto margins I got this response that I haven’t seen before:

“...Well no - their margins aren’t higher than traditional OEMs. Traditional OEMs include R&D in their COGs and Tesla does not. ...”

I haven’t done my own math, but everything I read says that Tesla’s margins are now in the 20% range, giving them something like $5k revenue over manufacturing cost for an average Model 3, vs more like 10% for folks like Ford and $1k revenue over manufacturing costs. Is he claiming that this difference is a fraudulent claim because Tesla costs exclude R&D and others do not?

Is there a good source for “real” margin comparisons that will verify Tesla’s competitive margin advantage? Pehaps the numbers get distorted by the capital expenditures in support of exponential manufacturing growth, which only applies to Tesla?

Thanks for your help.

Yes and no. TSLA does indeed list R&D separately (like how tech companies do it), but Tesla also has to pay for factory and tooling that other companies have amortized long ago (which is an added cost against gross margin). So Tesla still has better margins net of these differences.

 

[woodisgood]

Driving ourself will go the way of horses and sailboats - only those really keen will be doing it.

At a certain point it will simply be illegal. Who knows how far away that is, but there will be a lot of cars that will be suddenly scrap. Good time to start an auto recycling business?

 

[RFernatt]

Driving ourself will go the way of horses and sailboats - only those really keen will be doing it.

Maybe in cities and suburbs, but I don't see that happening for a long while in rural areas. Independence and self reliance, work vehicles, not to mention poor roads/markings/signage and weather issues will make it a much longer slog outside metro areas.

 

[AudubonB]

Out of curiousity (and perhaps a lapse of judgement) I started a twitter discussion with a Tesla (and TSLA) basher, no clue if he is TSLAQ or whatever.

His subject kept changing after my questions about his challenges to Shanghai production capacity and and then about profitability, then when I moved onto margins I got this response that I haven’t seen before:

“...Well no - their margins aren’t higher than traditional OEMs. Traditional OEMs include R&D in their COGs and Tesla does not. ...”

I haven’t done my own math, but everything I read says that Tesla’s margins are now in the 20% range, giving them something like $5k revenue over manufacturing cost for an average Model 3, vs more like 10% for folks like Ford and $1k revenue over manufacturing costs. Is he claiming that this difference is a fraudulent claim because Tesla costs exclude R&D and others do not?

Is there a good source for “real” margin comparisons that will verify Tesla’s competitive margin advantage? Pehaps the numbers get distorted by the capital expenditures in support of exponential manufacturing growth, which only applies to Tesla?

Thanks for your help.

It is possible he's throwing shade at you - trying to baffle you with, ah, jargon.
It is possible he's conflating Tesla's non-GAAP reporting with their GAAP reporting. FASB's rules regarding R&D requires that company's R&D costs be expensed each year rather than capitalized, as FASB deems it too difficult - and rife for mischief - to determine accurately what the future tangible benefits will accrue to a company as a result of their R&D.
It is possible that he is considering solely the R&D that an acquired company - for example, Grohmann Engineering - had accrued. In such a situation, it is expected that the price paid tangibly included its assessment of what Grohmann's R&D was worth.

Here is a fair article that may help: R&D Capitalization vs Expense - How to Capitalize Research & Development

 

[Tslynk67]

Our boy Gali on Yahoo finance

Why this investor believes Tesla will become a trillion dollar company

Gali did well, but he could have shot down the "shipping all the parts from the US" nonsense immediately, he sort of got around to it at the end and inferred rather than debunked, but OK, It's hard to be on the spot in these interviews on TV, I've done it myself and if you're not used to it and aren't pre-fed with the questions that will be asked, then a tough ask.

 

[-=buzz=-]

Out of curiousity (and perhaps a lapse of judgement) I started a twitter discussion with a Tesla (and TSLA) basher, no clue if he is TSLAQ or whatever.

His subject kept changing after my questions about his challenges to Shanghai production capacity and and then about profitability, then when I moved onto margins I got this response that I haven’t seen before:

“...Well no - their margins aren’t higher than traditional OEMs. Traditional OEMs include R&D in their COGs and Tesla does not. ...”

I haven’t done my own math, but everything I read says that Tesla’s margins are now in the 20% range, giving them something like $5k revenue over manufacturing cost for an average Model 3, vs more like 10% for folks like Ford and $1k revenue over manufacturing costs. Is he claiming that this difference is a fraudulent claim because Tesla costs exclude R&D and others do not?

Is there a good source for “real” margin comparisons that will verify Tesla’s competitive margin advantage? Pehaps the numbers get distorted by the capital expenditures in support of exponential manufacturing growth, which only applies to Tesla?

Thanks for your help.

No, no fraud. Just different accounting practices.
Simplified:
Tesla books R&D as common expense (silicon valley style), while traditional car companies accrue it to the 'car project' and amortize over COGS..

So gross margin really isn't apple-to-apple. But whether this is completely equalized by R&D is questionable. Given the claims of $10B development cost for a new engine generation, while Tesla released/prototyped 6 models on 500m per quarter..

 

[Tslynk67]

Your Order Has Been Executed!

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$420.69 - the gift that keeps giving!

 

[Singer3000]

Out of curiousity (and perhaps a lapse of judgement) I started a twitter discussion with a Tesla (and TSLA) basher, no clue if he is TSLAQ or whatever.

His subject kept changing after my questions about his challenges to Shanghai production capacity and and then about profitability, then when I moved onto margins I got this response that I haven’t seen before:

“...Well no - their margins aren’t higher than traditional OEMs. Traditional OEMs include R&D in their COGs and Tesla does not. ...”

I haven’t done my own math, but everything I read says that Tesla’s margins are now in the 20% range, giving them something like $5k revenue over manufacturing cost for an average Model 3, vs more like 10% for folks like Ford and $1k revenue over manufacturing costs. Is he claiming that this difference is a fraudulent claim because Tesla costs exclude R&D and others do not?

Is there a good source for “real” margin comparisons that will verify Tesla’s competitive margin advantage? Pehaps the numbers get distorted by the capital expenditures in support of exponential manufacturing growth, which only applies to Tesla?

Thanks for your help.

Ask him if it’s apples to apples to include FSD R&D in gross margins when most other auto company aren’t even seriously pursuing autonomous tech. And to note also, the £7k Tesla takes in for FSD sales barely hits the Income Statement yet, mostly taken to deferred revenue on the balance sheet.

 

[AMN]

Am I late to the party? Did I miss anything over the last month?

 

[VValleyEV]

Our boy Gali on Yahoo finance

Why this investor believes Tesla will become a trillion dollar company

Egad. Note the article (not Gali) repeats that story about the China cars being manufactured from complete kits sent from Fremont.

 

[JRP3]

Maybe in cities and suburbs, but I don't see that happening for a long while in rural areas. Independence and self reliance, work vehicles, not to mention poor roads/markings/signage and weather issues will make it a much longer slog outside metro areas.

What's easier for humans, empty country roads or crowded highways and cities?

 

[JRP3]

Did I miss anything over the last month?

A lower buy price

 

[Opus BC fan]

Nice price action today with these macro headwinds...

 

[Nocturnal]

$420.69 - the gift that keeps giving!

Point of information. It's a gift that keeps on giving, and receiving.

 

[VValleyEV]

Ask him if it’s apples to apples to include FSD R&D in gross margins when most other auto company aren’t even seriously pursuing autonomous tech. And to note also, the £7k Tesla takes in for FSD sales barely hits the Income Statement yet, mostly taken to deferred revenue on the balance sheet.

Excellent observation and info. Does anyone (calling @Fact Checking ) have any numbers for the amount/proportion of Tesla R&D that is FSD? Even better, it is it easy for me to find this in the officially published quarterly reports? (teaching me to frish)

 

[AMN]

A lower buy price

I have enough of that. Didn't have 420 in the collection.

 

[Artful Dodger]

Maybe in cities and suburbs, but I don't see that happening for a long while in rural areas. Independence and self reliance, work vehicles, not to mention poor roads/markings/signage and weather issues will make it a much longer slog outside metro areas.

The 2nd Generation FSD chip will solve that, because it will allow training to occur directly from the User/Operator to the local device. ie: you can teach it how you want it to drive, and it'll learn what you want.

BTW, I also wouldn't send a 16 yr-old driver out in a blinding snow storm, nor my Tesla. The Owner will need to transition from "Operator" to "Manager". In some ways, this will be much easier than Robotaxi/TN where the number of unknowns if nearly unlimited.

But I can see a robotic grain truck working on my cousin's Farm.

Cheers!

 

[Nocturnal]

At a certain point it will simply be illegal. Who knows how far away that is, but there will be a lot of cars that will be suddenly scrap. Good time to start an auto recycling business?

Either illegal or crazy expensive to insure. Give it 10 years and used ICE vehicles will be piling up like crazy. I assume a major business exporting serviceable vehicles to poor nations for pennies on the dollar (which sadly will hurt climate change efforts)

 

[Rarity]

“...Well no - their margins aren’t higher than traditional OEMs. Traditional OEMs include R&D in their COGs and Tesla does not. ...”

I haven’t done my own math, but everything I read says that Tesla’s margins are now in the 20% range, giving them something like $5k revenue over manufacturing cost for an average Model 3, vs more like 10% for folks like Ford and $1k revenue over manufacturing costs. Is he claiming that this difference is a fraudulent claim because Tesla costs exclude R&D and others do not?

Is there a good source for “real” margin comparisons that will verify Tesla’s competitive margin advantage? Pehaps the numbers get distorted by the capital expenditures in support of exponential manufacturing growth, which only applies to Tesla?

Some of the OEMs have R&D among the operating expenses. Honda (20.8% gross margins for FY2019) and Daimler (19.8% gross margins for 2018) break it out. Compare to Tesla gross margins at 18.9% for the most recent quarter.

Of course, Tesla's gross margins are a moving target. Next year should be favorable.