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

[Dangerous Fish]

We all want the other auto companies to succeed in replacing their dino-cars with BEVs.

We just don't want them to succeed as well as TSLA.

 

[WarpedOne]

No danger.

 

[Cohiba]

Have we become the $VWQ gang? I sure hope not.

Long term, VW better succeed in making the ID.3 a succes.

Don't get me wrong: not targeting anyone here, (definitely not you. I really love your contributions! )

Just hoping that the concensus here is that hopefully VW can sort out their issues with their transition to a complete EV offering and prove that BEV is indeed the only way forward

Following the Tesla investor community, I saw how intense the hate was from $TSLAQ during the model 3 ramp-up when Tesla went through production hell.
We should definitely avoid lowering ourself to the same low $TSLAQ standards and begin ridiculing VW with their struggles. That's a rather personal note, but I consider it worth sharing.

After the emission scandal, they don’t deserve any support. They lied, and killed people. They knew what they were doing, holding off on going full BEV until it was too late just for taking as much profit as possible. And now they are scrambling to put some half assed product together, because they thought with their years of automotive experience, that it would be a walk in the park to develop. Well, it’s not. They don’t get any sympathy from me, and I hope the people responsible for polluting our air go rot in hell.

 

[The Accountant]

But the real battle will be fought in Hall 74. In the afternoon at 4 pm, the ID.3 rescuers will meet for the second time every day. What problems have they solved, what has remained open, where do they need to step up their efforts again?

Oh boy...I've seen this corporate bureaucracy many times in my 33 year corporate career. Meeting twice per day actually takes away resources from actually working on solving the problems. What is so fluid that really requires meeting twice per day? This happens only when you do not trust the team and must get updates twice daily and give direction twice daily. I often saw teams having pre-meetings the hour before the main meeting. Knowing the CEO can show up at any time, some leaders meet beforehand to ensure they can answer all questions posed. So, you think it's only a 30 min meeting but the resource drain is much more than that. Multiply that by the number of employees attending (twice per day) and you may be burning 40 hours a day in resources. The poor troubleshooter is usually sleep deprived as he/she spends time fixing the problems after-hours while attending meetings during the day.

 

[Hock1]

What are your thoughts on Renaissance buying not being a vote of confidence in the stock, but a covering of a large short option position? I tend to think they were covering vice buying for appreciation. It seems odd they would buy in bulk during a rapid rise in price.

If they were covering a large short position, they would more likely be flat the stock. IMO, it is possible they are buying the stock in an effort to hedge a short call position gone awry. I know---very rare for Renaissance. but, they are not infallible.

 

[Unpilot]

In my 30 years of work I have attended less than a handful of meetings out of hundreds that actually helped me do my job.

 

[Prunesquallor]

(Cc: @Prunesquallor)



For example here's European auto industry analyst Matthias Schmidt:

Matthias Schmidt on Twitter

"Why I believe 2020/21 EU #CO2 targets achievable:

- inclusion of [Norway]
- PHEVs comeback | >50% mix large models
- BEV supply ↑
- 48V MHEV
- Supercredits (max. 7.5g/km over 3yrs) for vehicles <50g/km
- Eco-innovations 7g/km pa.
- Carsharing/fleet deals
- Weight ↑ = +1-2g/km target"​

So he posits that:

• the inclusion of Norway sales in the EU fleet average, which is a mostly-EV country, will be favorable, (true, but Norway is a small market),
  
• he expects plug-in-hybrids to be >50% or large models, (true, but this has a non-trivial cost, so this either shrinks the market or adds extra costs that eat into profits),
  
• he expects ZEV sales to increase, (true, but they have both production bottlenecks and battery supply problems),
  
• he expects "mild hybrid" sales to increase, (unclear to me to what extent this is possible),
  
• he includes Supercredits (which you did too in your model),
• he thinks there are "eco-innovations" in ICE drive-trains worth about 7g/km, (this is a huge factor, I'm curious what that truly means - for example lower motor power by default, only for emissions testing?),
  
• he expects average weight of models to go up, which reduces emissions by 1-2 g/km (this probably means not selling the smaller cars?)

All of these come with costs though - so they are basically spending billions on inferior products to avoid billions in fines ...

A good list, and I’ll dig into those.

I did look into the eco-innovations. The 7 g/km is the maximum that can be counted in emission reduction per EU rules. The most recent report I could find was July 2018.

Overview and evaluation of eco-innovations in European passenger car CO2 standards | International Council on Clean Transportation

According to that, the progress in implementing them had been minuscule, but perhaps progress has been made since then. Eco-innovations include solar roofs, LED lighting and efficient alternators.

 

[davepsilon]

Just hoping that the concensus here is that hopefully VW can sort out their issues with their transition to a complete EV offering and prove that BEV is indeed the only way forward

I want VW to succeed. The transition to an EV dominant auto market will only help the world in reducing pollution and also help Tesla in reaching a broader audience. But I Hope the consensus on VW’s ability to succeed with the ID.3 represents the facts on the ground whether those be good or bad.

The media reports from the recent months have shown ID.3 is in an engineering crisis. The development did not proceed according to the timeline anticipated. A decision was made to start limited production anyway and it appears that the fixes have also not come on the timeline that puts the limited production decision in a good light. This is a costly misstep, but not a company ending one. I expect VW will fix it to a satisfactory level this year. But I do not expect it to be a great product. ID.4 would do best to start with a clean slate. Engineering crisis are great teachers (just look at the smoothness of Giga Shanghai), with the learnings from ID.3, ID.4 could be great.

 

[davecolene0606]

I hope they do not go to market with such inferior quality. Tesla is really disrupting the industry and competition is feeling the pressure.

It’s not apples to apples but seems like a very Boeing like scenario playing out with VW.

Anybody remember when Boeing snickered at Tesla’s offer to assist with their Li battery issues on the B787?

Pride cometh before the fall...

Fire Away!
(It’s the batteries, Stupid!)

 

[Rarity]

Thank you all for the very informative discussion and reporting on VW. I will continue to follow with interest.

Reinforces my hunch that it is much easier for a software and electronics company to make cars than it is for a car company to make software and electronics. The leadership structures of the car companies just don't have the necessary backgrounds.

 

[generalenthu]

Short answer - I have no idea how "VW would have to sell 100,000 ID.3s in 2020 to meet the targets" could possibly be correct. By my calculations 100,000 ID.3s plus 70,000 e-Trons still leave them €4 billion to €6 billion the hole.

Longer answer -
Using the 2018 EU emission numbers (published August 2019)
CO2 emissions from new passenger cars in the European Union: Car manufacturers’ performance in 2018 | International Council on Clean Transportation
show VWG at 122 g/km with a 2020/2021 target of 96, so a required reduction 26 (not 30).
VWG sells about 3.5 million cars in the EU, so with the simple calculation of the current penalty:
3.5 million x 26 g/km x €95/g/km = €8.6 billion. If VWA emission have gotten worse, that could push it to 30 g/km and €10 billion. OK so far.

It could be a bit less dire in 2020 because of the "phase-in" rule that lets manufactures exclude 5% of their fleet - presumably the worst stinkers. My rough estimate says that might bring the 2020VWG penalty from €8.6 billion to €7 billion.

Now things seem to go off the rails. Maybe this is a translation difficulty. The Super-Credits (counting each low-emission car twice) only apply towards an emission reduction of 7.5 g/km versus the 26 (or 30) required. Below that, it's one-for-one. My model says VWA would use up their Super-Credits after about 100,000 ZEVs. That does NOT eliminate their penalty - far from it. It would reduce it by about €2 billion, or about €20,000 per ZEV - a number similar to that we've seen in the past (and close to the one mentioned in the recent Dan Galves interview). Total penalty elimination would require more than 600,000 ZEV's, by my calculation.

I have no idea how "VW would have to sell 100,000 ID.3s in 2020 to meet the targets" could possibly be correct. By my calculations 100,000 ID.3s plus 70,000 e-Trons still leave them €4 billion to €6 billion the hole.

I read this as VW having an internal target as at most 5 Billion EUR in fines.

 

[Highway2Heel]

Oh boy...I've seen this corporate bureaucracy many times in my 33 year corporate career. Meeting twice per day actually takes away resources from actually working on solving the problems. What is so fluid that really requires meeting twice per day? This happens only when you do not trust the team and must get updates twice daily and give direction twice daily. I often saw teams having pre-meetings the hour before the main meeting. Knowing the CEO can show up at any time, some leaders meet beforehand to ensure they can answer all questions posed. So, you think it's only a 30 min meeting but the resource drain is much more than that. Multiply that by the number of employees attending (twice per day) and you may be burning 40 hours a day in resources. The poor troubleshooter is usually sleep deprived as he/she spends time fixing the problems after-hours while attending meetings during the day.

Preach. I’ve lived this. Frequent meetings are the domain of the clueless and lazy. A game of corporate red rover waiting for someone to come over...and solve the problem...and all it ends up being is a bunch of standing around.

 

[Silentk]

Seeking "Warrants for Dummies" advice...

I can use Degiro in Europe for warrants (closest thing to options here I believe), and have been trying to figure out how they work.

I have taken screen shots of one example warrant, attached below, and wonder if anyone would have the time to explain it in super simple terms (ELI5!) for me. For example, I can't seem to see any expiry date on these.

They also offer ISIN DE000VE2BXM9 at €196, DE000VE3FCW1 at €57.70, DE000VE3FEP1 at €23.10, and this one DE000VE3FJD6 at €3.925]

Update, managed to contact Degiro and they say there is an IT error, so the full data was not showing up on these products, expiration date etc.

 

[Mkorpal]

Anywho, back to the topic we are all here for. Market looks to rebound from yesterday’s sell off. I’m hoping that and news of a firm Y release date gets us back on track.

 

[davecolene0606]

That's very curious. Could they also be working on reducing the CO₂ average of their ICE fleet, via:

• Selling more hybrids which get treated favorably despite producing almost as much CO₂ as non-hybrids. They can shift buyers towards hybrids via incentives.
  
• Selling fewer of or raising the prices of the worst CO₂ offenders.
• ... and they could use the VW classic: a "software" solution to their emissions problem?

I've also seen auto analysts treat most European carmakers with the assumption that they will be able to avoid most penalties by the end of the year.

It’s really kinda crazy that Homo sapiens can’t wrap its big fat brain around the concept that taking 6.8lbs of liquid hydrocarbons out of the ground and burning it yields 16lbs of CO2 and a raft of other toxic gases and compounds no matter if you:
1. Burn it more efficiently
2. Send it through any type of emission control scheme
3. Inflate their emissions for ICE cars under WLTP testing

the result is the same. Perhaps the only ones to realize this are the software engineers who wrote the cheat software cuz they dam well knew physics overrides the marketing dept.

Fire Away!
(It’s the batteries, Stupid!)

 

[ZachF]

In my 30 years of work I have attended less than a handful of meetings out of hundreds that actually helped me do my job.

Can second this.

Most meetings are to provide justification for managerial bloat.

 

[ZachF]

Does anyone have any figures/guesses as to how these EU fines are going to impact prices for ICE automobiles? I have to imagine OEMs are going to be raising prices across the board... And that can't be good for sales.

 

[jerry33]

Can second this.

Most meetings are to provide justification for managerial bloat.

Managers get graded on how many checkboxes they can fill each quarter. Meetings are a checkbox item. Hence, frequent meetings. They don't have anything to do with actual performance.

 

[davecolene0606]

After the emission scandal, they don’t deserve any support. They lied, and killed people. They knew what they were doing, holding off on going full BEV until it was too late just for taking as much profit as possible. And now they are scrambling to put some half assed product together, because they thought with their years of automotive experience, that it would be a walk in the park to develop. Well, it’s not. They don’t get any sympathy from me, and I hope the people responsible for polluting our air go rot in hell.

Crappy leadership and company cultures can be interrupted by shareholders applying appropriate pressure and by getting rid of generational family control.

Here’s hoping Herb success in his efforts. I personally think the true indicator of a company really willing to switch to EV will be the first one that announces that they are joining the Tesla Supercharging network.

Fire Away!
(It’s the batteries, Stupid!)

 

[Singuy]

Don't get me wrong: not targeting anyone here, (definitely not you. I really love your contributions! )

Just hoping that the concensus here is that hopefully VW can sort out their issues with their transition to a complete EV offering and prove that BEV is indeed the only way forward

Following the Tesla investor community, I saw how intense the hate was from $TSLAQ during the model 3 ramp-up when Tesla went through production hell.
We should definitely avoid lowering ourself to the same low $TSLAQ standards and begin ridiculing VW with their struggles. That's a rather personal note, but I consider it worth sharing.

I want VW Group to succeed when they have the right mind set, as in they need to realize their EV offering is there to kill off their ICE offerings, not to Osborne or kill off Tesla. Nothing they have done have showed me this. They announce fake ranges and prices years ahead to Osborne as much as they can. They park Etrons in front of Tesla super chargers and service centers. From my perspective, they just want to get rid of this pest named Tesla more than wanting a sustainable future.

Not one company is willing to work with Tesla even though Musk has numerous times said zero people contacted them about using their super chargers. Why? Because they don't want to admit or give Tesla any credibility as they are seen as weed that can't be killed off. So until they begin to show me that they finally embrace and cut off their right hand just to save themselves and the planet, they can go F themselves with every failure.