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

[Tslynk67]

Decided to arm up for Monday.

And oct 16 2019s seemed most favorable.

I hope my model y order can come sooner than later, was in a car accident :/

Sorry to hear that, but I guess you survived it?

 

[Fact Checking]

Also, weren't you just the other day saying that you didn't expect S/X to be down?

I didn't make any claims about Q1 S/X rates, I only observed, based on a single unreliable data point, that the S/X Q1 order book might be fine:

The interesting part here is that new U.S. orders of the Model S/X are currently marked as "Estimated Delivery: 5-7 weeks" - IIRC this was down to 3-4 weeks a year ago. While this might be inaccurate, as the website delivery estimates usually are, combined with the lack of price cuts this suggests the Q1 order book is "fine" for the Model S/X as well.

Btw, 5-7 weeks has dropped to 4-6 weeks since I wrote that comment.

And why exactly, given that S/X wait times are just as long as for the 3? Are they making people wait for the fun of it?

We also know that the delivery estimates on their webpage are unreliable: @Cherry Wine is getting his custom configured Model X today, only 12 days after ordering. It might be a lucky inventory match or a batch match, and it would be nice to know what the production date is once he takes delivery. But they clearly didn't make him wait until the end of the quarter with a California delivery to be able to ship more cars farther away, right?

Today Elon also announced a major Q1 S/X demand boost: a +5% range upgrade. He also announced that the Plaid will have the same range, I.e. countering any Osbourning by the Plaid.

Are you suggesting that Elon should have waited until Q2 with these announcements, because Q1 orders are fine?

Q1 last year was bad, really bad, and 95k Q1'2020 deliveries is where I draw the line right now, which is still 25% better than last year and almost as good as the (profitable) Q3.

I'll update my views as we are getting closer to the end of the quarter:

• more shipping data,
• whether they'll pull any further demand levers,
• plus GF3 production leaks.

 

[CorneliusXX]

How is it more effective to sell fewer cybertrucks? If the production rate is low it won't satisfy demand allowing other makers to sell lesser vehicles. While it could have an impact on market price point for Ford, which of the following forces Ford's hand more with regards to pricing?

1,000 cybertrucks per year at $50k

100,000 cybertrucks per year at $50k

In other words, supply and demand pricing -- if Tesla doesn't scale production of the cyber truck then it would keep supply low and have the opposite effect of what you state.

There's plenty of other reasons to scale fast:

• Even though capex is expected to be lower for CT than other vehicles, it is still required. Increased production from the same asset will lead to higher operating leverage - and higher margins
• Better supply chain economics when purchasing larger orders
• quicker transition of the economy to EVs
• stronger brand value
• more profit - to be reinvested in future production

etc. etc.

 

[Fact Checking]

The rate of loading of new ships is the same as in Q4, indicating the same sort of production rate.

FWIW, the "ship loading days" sum of the first 9 ships in the quarter:

• Q1'19: 20.4 days
• Q2'19: 19.1 days
• Q3'19: 25.1 days
• Q4'19: 24.8 days
• Q1'20: 21.5 days

I.e. 5% above Q1'19 levels, but about 15% below Q3 and Q4 levels.

 

[hobbes]

The crocodile tears for the commercial tree plantation are a waste of energy.

For anyone really concerned about the ecology they should focus on the ancient Hambach Forest in Germany that is being shredded for a coal mine.

Hambach Forest - Wikipedia

Being a local I can assure you that after many protests last summer the forest (in its current size, some of it has already gone over the years) has been saved, Rheinbraun will not extend the brown coal mines there. The english Wikipedia article is not up to date there.

 

[Fact Checking]

I think mentioned earlier that I usually try to keep at least one in excess, as a precaution against accidents and so as to not cause margin pressure when I'm in the middle of rolling spreads. I never maintain more short calls than long

Looks very sensible overall. I'm wondering how you are rolling spreads - for example if you are rolling the upper leg to a strike further up in a bullish increase of leverage at a bit of a cash cost, do you typically buy back the old leg and sell a higher one in the same volatility episode - or use the 'reserve' call to allow the opening of a new upper leg without having to buy back the old one at (possibly) volatility-inflated prices?

I'm also wondering about which one is the better rollover strategy in general:

• roll the upper leg higher while the price not trying to break higher or lower, but is in relative equilibrium at a decent distance both from recent intraday highs and low
• roll the upper leg higher right during a 'spike', taking advantage of momentary volatility (which more often than not doesn't sustain)

Rolling in equilibrium decreases the buyback price but lowers the selling price of the higher strike as well. Rolling during a spike on the other hand adds a bit more price to the closer strike, due to the higher gamma - so it can reduce the efficiency of the roll-up. Wondering whether you are making any such determinations, or consider it noise?

 

[Prunesquallor]

Wild, according to Elon: “Depends on when car was built, as there are many small hardware improvements, so most will be somewhere in between 373 & 390 [for Model S, X will have similar improvements]”

“Regulations require calling it something else, so we added +”

Mystery solved.

Interesting way to avoid Osborning. Don’t announce/unlock improvements until several months after they have been implemented.

 

[Fact Checking]

So what can we do to fight the FUD? It took Tesla years to overcome the narrative here. I don't want to see giga Berlin derailed because of ignorance of the protestors.

I think Tesla supporters are doing a fine job in Germany - but obviously we cannot control the narrative of a carefully architected RT report, which was accurate and professional but was lying by omission. Fortunately AFAICS "RT" doesn't have much traction in Germany beyond the Afd fringes (which fringes are largely impenetrable by facts and logic anyway) - so I don't think there's any particular response needed beyond knowing the intentions and tools of trade of this particular source of disinformation, should this report come up on any social media platform you do care about.

I was very encouraged by the fact that green protesters broke off their Grünheide demonstration a few weeks ago once they learned that Afd supporters were trying to use them.

The German Green Party is a ruling coalition member in Brandenburg and I think they displayed great response and pragmatism to the GF4 project so far, which is the biggest new industrial construction project of Brandenburg since the fall of the Berlin Wall by a wide margin.

 

[Prunesquallor]

...

BTW., I'll just list a couple of range comparisons:

• E-Tron EPA range: 204 miles
• Model X EPA range: 351 miles, +72% higher

Or:

• Taycan 4S EPA range: 201 miles
• Model S EPA range: 390 miles, +94% higher

Not only are legacy OEMs not catching up with Tesla, they are falling further behind.

The “catching up with Tesla” theme always amused me as it really implied OEMs not only had to close Tesla's “current” technological lead, but also innovate faster than Tesla in a field where they had virtually no expertise.

Until some kind of EV technical plateau is reached (similar to today's ICE), I don’t see this changing. If battery technology continues on some type of Moore's-law cost/performance path with Tesla driving the innovation, the OEMs are in a world of hurt. Hence the propaganda attempts at Tesla sabotage will likely continue - Cold War analogies come to mind.

 

[Causalien]

h

Weekend OT options question:

Not a genius with options, but was lucky enough to buy a few Jan 2021 500 calls on a whim that have now appreciated 11,244% (pretty wild to need a thousands separator in your % gain!). So I'm looking for some not-an-advices about what to do now that the dog has caught up with the car. Am I right that the only way to postpone paying taxes would be to exercise the option? If I rolled it, I'd still have to pay taxes on the gain, right?

What might be a good next move? I don't need the cash - would rather keep this pot growing.

Not stock advice, but this is what I did with some of my DITM options:

Sell, put 1/3 into tax, 1/3 into cash generation and 1/3 back to stocks or options. Assuming your position is less than 1 mil. The time to roll the option up to maximize the leverage has already passed. This option is now DITM so you might as well treat it like stocks. Sell it also because right now, long term options has very high volatility, so exercising means losing quite a bit of it.

 

[avoigt]

Yeah, I've been grinning about this all morning already: beyond avoiding the Osborning factor Tesla also found the right way to avoid hurting recent buyers like @Cherry Wine, by phasing in the new hardware in a stealth fashion, software-locking the range to the old one as if nothing was going on, and then increasing the range in one big step when the opportunity was given to smooth over seasonal demand weakness.

Feedback on Reddit and other social media is overwhelmingly positive, with none of the usual "I just bought my Model S and then Tesla does this!! " posts whatsoever.

Elon also announced that the Plaid will have the same range, i.e. apparently there's no big reason to wait for Plaid unless you want to spend $120k+ on a racing car ...

Whoever figured out this particular trick to use software locking and OTA updates in such a creative fashion deserves a big bonus.

BTW., I'll just list a couple of range comparisons:

• E-Tron EPA range (2019): 204 miles
• Model X EPA range: 351 miles, +72% higher

Or:

• Taycan 4S EPA range (2020): 201 miles
• Model S EPA range: 390 miles, +94% higher

Not only are legacy OEMs not catching up with Tesla, they are falling further behind.

I'd like to underline the falling further behind part about batteries concerning German OEMs. The reason is actually not that they don't innovate but the levers to innovate with the supply chain they have chosen to cope with their existing organizational needs trying not to change them fundamentally, are very much limited. Its a structural issue I don't them charging from unfortunately.

The fields they can work on are not many and in those the improvements will be noticeable and we have seen for instance range increases from the e-tron as well as the I-pace but underwhelming versus what Tesla will achieve with lower effort e.g. investment, resources.

Many reasons for that one is for instance the lack of having a top software organization which is BTW another organizational and cultural issue. OEMs here in Germany did consider software always as a nice to have feature you can put in but nothing fundamental for the drive train and success . This is the case until today and they would need to change the organization completely to make a difference. Some people like Diess have understood that but I expect him to be exchanged by Blume (CEO Porsche) soon.

IOW the escape velocity from Tesla getting new levers of innovation with their advances structure, supply chain, vertical integration as well as newly build GF which are a key differentiator, has happened already. The Battery day will likely be extremely exciting for the few nerds under us understanding the true difference but missed from the wider audience like at autonomy day.

My expectation is that the public will realize when vehicles are launched with ranges of 400- 450 miles while all other try to go to 200-230 likely maxing out their abilities with very high incremental costs while Tesla will with the new tech I expect them to present goes over the years to 500mi for lower costs. Why should anybody consider any other BEV regardless how much they like the interior if you can have that range coupled with the V3 supercharger that based on latest Tests charge as fast as the 800V Taycan architecture at the 350kw Ionity charger (compare nextmove.com video) if we talk about the most important SoC from 0% to 50%.

Thats the game over moment most have not realized. What Tesla has achieved in the last 10 years is just amazing but the best is still ahead of us.

Mod: Changed typo, bolded --Intl Professor, Hope I got intended meaning.

 

[Fact Checking]

So I was asking @Prunesquallor this question:

Do you have any data about how many vehicles Ford is selling, their current CO₂ levels and how many Mach-E's they'd have to sell in Europe this year to face no penalties? Their current ZEV offerings are essentially zero, right?

And then found that he already estimated it a few months ago:

This all makes sense. Ford has about the same EU market share as FCA (6%), so my earlier FCA-Tesla assessment roughly applies. 30,000 Ford EVs sold in the EU in 2022 will just about use up their Super-Credits. That’s the biggest penalty reduction bang-for-the-buck with limited production. I’d estimate penalty reduction of ~400 million euros in 2022 (if they can actually sell 30,000 Mach-E's).

So if Ford intends to build 50,000 Mach-E's (with batteries included) and sell them, then they would want to target up to 30,000 in Europe - which, depending on allocation between quarters, might take some Tesla Model 3 sales until the Model Y's from GF4 start delivering.

Due to the huge penalty reduction of 'supercredits' the penalty reduction advantage is about €20,000 for the first 30,000 units IIRC, so they could price them below production costs and still come up ahead. The Mach-E "First Edition" is priced $61,000 (€56,000), but they'd have to price it significantly below the €55,000 of the Model 3 AWD LR to be able to sell them in volume I think. The SUV form factor gives some advantage but not that much advantage in Europe, I think.

 

[Fact Checking]

Weekend OT options question:

Not a genius with options, but was lucky enough to buy a few Jan 2021 500 calls on a whim that have now appreciated 11,244% (pretty wild to need a thousands separator in your % gain!). So I'm looking for some not-an-advices about what to do now that the dog has caught up with the car. Am I right that the only way to postpone paying taxes would be to exercise the option? If I rolled it, I'd still have to pay taxes on the gain, right?

What might be a good next move? I don't need the cash - would rather keep this pot growing.

Not stock advice, but this is what I did with some of my DITM options:

Sell, put 1/3 into tax, 1/3 into cash generation and 1/3 back to stocks or options. Assuming your position is less than 1 mil. The time to roll the option up to maximize the leverage has already passed. This option is now DITM so you might as well treat it like stocks. Sell it also because right now, long term options has very high volatility, so exercising means losing quite a bit of it.

So the problem with the 2021/01/15 $500 calls is that they are very illiquid with high spreads: they were trading at $334/$350 yesterday. Yes, round numbers to the dollar - liquidity is that bad and the spread is 5% wide (!), which is robbery - MM's preying on unsuspecting lottery call winners and extracting a 2.5% tax.

There's several solutions:

• When converting to cash you might want to post a sell-limit order into the mid-spread, i.e. set the limit to $342.00, and wait for a kind soul who wants DITM options at a 2.5% discount to what market makers are willing to offer. Mind you it will have to be adjusted to the current market price rather frequently, and this could take a few hours unless you are lucky. I'd also suggest double-checking the pricing with an options pricing calculator, to make sure the mid-price is fair market value and your price isn't being thrown off by someone else already having posted into the spread.
  
• You can also convert it to a DITM call spread by selling a higher leg with a strike below the current share price but with no criminally high spread yet. This will effectively lock in a fair chunk of the gains and pay it out to you in cash immediately, the rest of the gains will be paid out on expiry if the spread is still in the money by that time. Do mind the gap in this case though: there's a substantial risk of early exercise on DITM call spreads, which can result in all sorts of complications ...
• You could also exercise right now, but that only realizes $300 of intrinsic value and throws away about $42 of extrinsic value, a far bigger loss of 14% than the 2.5% loss from the spread.

But, if @Yonki's preference is to "keep this pot growing", then the best policy might be to wait for it to expire next January, and line up the cash or the margin backing to be able to finance it.

If cash is short it's possible to enter a technical short position on the expiry week on a desired price level - the broker is going to net out the position to zero and you'll keep the short sale to strike level cash difference minus a minor expiry and short maintenance expense which should be a few cents per share at most.

If you want to keep some of the shares you can also enter a smaller short position - again the broker is going to net it all out on expiry. Makes sense to ask them though to make sure this will all work out fine, and notify them well in advance that you intend to exercise the option by letting it expire in the money. Also get from them in writing an assurance that your call will be accepted as collateral should TSLA shoot up and move against your technical short position into the negative - i.e. you won't face a surprise margin call.

(Note that in the U.S. converting a DITM call option to shares in this fashion doesn't count as a sale I believe, so no capital gains taxes owed yet - but don't quote me on it, ask your tax adviser.)

Note that you'll be able to exercise with lower and lower cost as time goes on: 1 month away from expiry extrinsic value will have dropped significantly if it's deep in the money - and you will have invested 11 months of your current extrinsic value for a chance for the stock to potentially move higher.

It could also move lower due to various factors, so take care, and this is not advice.

 

[avoigt]

About the GF4:

29 Harvester working in a 2 shift system which means they feel to be good in time. A 3 shift could be initiated if they wanted so there is buffer time.

Video in German.

 

[Prunesquallor]

So I was asking @Prunesquallor this question:



And then found that he already estimated it a few months ago:



So if Ford intends to build 50,000 Mach-E's (with batteries included) and sell them, then they would want to target up to 30,000 in Europe - which, depending on allocation between quarters, might take some Tesla Model 3 sales until the Model Y's from GF4 start delivering.

Due to the huge penalty reduction of 'supercredits' the penalty reduction advantage is about €20,000 for the first 30,000 units IIRC, so they could price them below production costs and still come up ahead. The Mach-E "First Edition" is priced $61,000 (€56,000), but they'd have to price it significantly below the €55,000 of the Model 3 AWD LR to be able to sell them in volume I think. The SUV form factor gives some advantage but not that much advantage in Europe, I think.

Good points.

The reason I want to rerun (and rework) the model is that it is currently set up for the “pooling” scenario where ZEVs are added to the ICE fleet rather than replacing segments of the ICE fleet (as would presumably be the case with Ford). The latter would give somewhat more optimistic results. Also, Ford's average vehicle weights are higher than FCA's which translates into more lenient CO2 targets (96 vs 92 g/km), again giving more optimistic results.

Regardless, it probably still makes sense for Ford to ship a lot of Mach-Es to the EU ASAP and, as you point out, even sell them at a loss.

Hopefully, with a long US weekend with no work, travel or f$#&ing stock ticker to watch, I can tweak the model. The other thing I want to do is rerun the original FCA-Tesla assessment with some probabilistic inputs to give a range of expected 2020 payments. If Tesla actually reports Q1 payments, it will be amusing to compare.

edit: Also, Ford is introducing its Kuga (Escape) as a PHEV in the EU this year. The ICE Kuga was a reasonably good seller for Ford, and the PHEV has low enough emissions to qualify for Super-Credit status. This plus the Mach-E may help Ford quite a bit in 2021.

 

[Christine69420]

Ford and other ICE car makers can indeed sell EVs at a loss and still profit from reducing the EU penalties. So they can also splurge on ad campaigns to get the sales they need.

So if Ford intends to build 50,000 Mach-E's (with batteries included) and sell them, then they would want to target up to 30,000 in Europe - which, depending on allocation between quarters, might take some Tesla Model 3 sales until the Model Y's from GF4 start delivering.

They are selling it hard in Norway: Home

Price from NOK 422,000 ($45,635) with 600 km range, <5 sec 0-100 km/t, charge 93 km range in 10 minutes as their main slogans.

A few? have been touring Norwegian Ford dealers. Preorder now!

Edit: Model 3 from NOK 384,900 ($41,623) and Model Y from NOK 507,000 ($54,827).

 

[HG Wells]

In Norway are their a lot of NOK NOK jokes ?

 

[Christine69420]

In Norway are their a lot of NOK NOK jokes ?

Not really - we don't need to specify the valuta among ourselves.

 

[steak&chicken]

Weekend OT options question:

Not a genius with options, but was lucky enough to buy a few Jan 2021 500 calls on a whim that have now appreciated 11,244% (pretty wild to need a thousands separator in your % gain!). So I'm looking for some not-an-advices about what to do now that the dog has caught up with the car. Am I right that the only way to postpone paying taxes would be to exercise the option? If I rolled it, I'd still have to pay taxes on the gain, right?

What might be a good next move? I don't need the cash - would rather keep this pot growing.

I have Jan 2021 $300 and $420 calls I'm sitting on. They're so DITM that there's virtually no premium. So I'm just going to hold it til expiration and let it exercise when the time comes. I don't want to sell it now because of taxes and don't want to exercise now because I don't want to go further in margin debt at the moment. DITM options move 1:1 with the stock price so it's still leverage.

I also have Feb 21 $500 call that's expiring next week. I'm going to let that exercise and start writing covered calls on it. Right now, I'm just trying to minimize my taxes so I'm only selling stuff I really need to sell or any loss I can write off. Plus I think TSLA price will be lot higher in the future so why sell the option now and pay taxes only to buy the shares again?

 

[Unpilot]

Elon is evil I tell ya. He is going to force me to upgrade my 2017 Model S to the longer range one.

390 miles!!

I don't need it...( Never felt range anxiety with current car)...but boy do I want it!

That's his evil plan...make the product so compelling you have no choice but buy.

What a wonderful world we live in.

To the future

Edit....And free unlimited super charging