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

[Fact Checking]

PT update at Jefferies?

Yeah, they "downgraded" their price target from $600 to $800 (really).

They say in their opinion that they want to wait for Battery Investor Day before making up their mind. They are certainly free to do so.

 

[Singuy]

We all knew Model Y was coming though still good to hear these 15 March dates (which is the 1-year anniversary of the launch event by the way).

But more interesting are you folks that are now getting HW3 retrofitted at Tesla’s initiative. Because that means the software capability should imminently be diverging between HW2 and HW3. And I don’t mean just with prettier pictures on the screen, I mean functionality.

And we all by now know that means the following:

a) taking big bucks of deferred revenue from the balance sheet through the Revenue line
b) higher gross margin on future sales (with lower proportion of new FSD revenue being deferred),
c) likely higher take-rate and ASP for FSD option, boosting cashflows
d) potentially more credibility given by the market to the Autonomous vision

Well their 10k did say they are expecting to realize almost all of FSD deferred revenue this year so something is coming. Hopefully the complete rewrite contains the transformative changes that happened with NOA from 2018. Currently I feel that smart summon is definitely worst, and the car needs to slow way down for a upcoming exit. No reason the car should be going 50+ off an exit ramp. My exit to work has a steep turning radius and I cancel autopilot now 80% of the time because the computer doesn't react fast enough for the sharp turn due to the approaching speed being bonkers high. This is with HW 2.5

 

[UnknownSoldier]

TSLA opens at up 2%. Here we go I guess.

 

[Singer3000]

Well their 10k did say they are expecting to realize almost all of FSD deferred revenue this year so something is coming. Hopefully the complete rewrite contains the transformative changes that happened with NOA from 2018. Currently I feel that smart summon is definitely worst, and the car needs to slow way down for a upcoming exit. No reason the car should be going 50+ off an exit ramp. My exit to work has a steep turning radius and I cancel autopilot now 80% of the time because the computer doesn't react fast enough for the sharp turn due to the approaching speed being bonkers high. This is with HW 2.5

They’ve been saying that for several quarters in their statements, with the deferred revenue in current assets getting bigger and bigger. Maybe this time they really mean it.

 

[Papafox]

I'm curious why you'd sell these shares at a loss on Monday, wouldn't it be better to hold them until recovery?

I trade from an IRA so I'm not worried about tax consequences. I just rebought the 100 shares in pre-market for a short-term trade at about what I sold them. I will sell these trading shares when we hit what I perceive to be a local high. Like CLK350 says, keeping core positions and trading shares separated is good discipline.

With core positions I'm pretty much buy and hold but with trading shares and options I play the ups and downs. I wanted to see some calming of the market before moving back in with the trading shares.

 

[Ipe]

We all knew Model Y was coming though still good to hear these 15 March dates (which is the 1-year anniversary of the launch event by the way).

And the 2063rd Ides after Caesar. Sounds like a good SP to me.

 

[JRP3]

Just added !
Moneyball on Twitter

#LFP cell density already broke 200 Wh/kg in experimental phase, company said.

Does not equal the previously posted numbers, which were definitely for NMC. To be clear 200 Wh/kg for LFP is great, but it's not ready for prime time by a long shot.

 

[dl003]

Market is about to tank again. Where's Trump when you need him?

 

[CLK350]

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.

I have a more benevolent approach to Herb Diess and VW: first, because Elon Musk and Herb Diess are on friendly terms (actually have been for years when Tesla was in trouble and possibly negotiating w/ Google and VW), see also and second because VW is the only ICE to make and EV commitment seriously enough to actually build battery plants at scale, which no other carmaker has done. They all are hoping to source their future batteries from Chinese battery makers. Basically, highly likely that all except VW are preparing for a standard bankruptcy (bankwupt!) exit to get rid of their union contracts etc. and resurface as a smaller car maker capitalizing mostly on their brand name.

 

[Krugerrand]

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.

I did not know accounting could be so frontline battlefield. It may be more interesting than I first imagined. Not really, but wanted to throw you a bone.

 

[gerebgraus]

I'm a little bit worried about CATL. What if CATL has done some magic (and owns the patents) and is leading the next gen battery chemistry and/or pack technology?

I'm sure you all disagree. But can you calm me down?

CATL and TSLA and everybody else have lot of patents. Musk's correct position that patent litigations are against the speed of innovation. His "you are free to use our patents if you agree not to sue us for patent violation" seems to work like a charm. As far as I know, nobody has sued Tesla for patent violation yet in spite of the fact that you absolutely cannot do anything in tech. without using somebody else's patent. The millions of patents mostly are not brilliant discoveries, but simply using standard methods to solve new problems in the industry. So Tesla will use whatever CATL patent it finds useful and also the other way around. It is also clear that the two companies are working together for SR+ batteries. Apparently this collaboration will have limited duration. So CATL is confident that it will be able to sell these packs to others after TSLA starts to make its own batteries. Moreover, it is likely that both companies will learn from each other and that helps the BEV industry.

Of course, as far as TSLA and CATL relation this is entirely speculation on my part. Everything we know about Tesla's plan about moving forward with battery innovation is just speculations based on rumors. We will know a little bit more after battery day.

 

[Tim S]

We all knew Model Y was coming though still good to hear these 15 March dates (which is the 1-year anniversary of the launch event by the way).

But more interesting are you folks that are now getting HW3 retrofitted at Tesla’s initiative. Because that means the software capability should imminently be diverging between HW2 and HW3. And I don’t mean just with prettier pictures on the screen, I mean functionality.

And we all by now know that means the following:

a) taking big bucks of deferred revenue from the balance sheet through the Revenue line
b) higher gross margin on future sales (with lower proportion of new FSD revenue being deferred),
c) likely higher take-rate and ASP for FSD option, boosting cashflows
d) potentially more credibility given by the market to the Autonomous vision

I also got my FSD Computer (HW3) installed last week. I got my Model 3 in May 2018, VIN ending in 19xxx.

 

[CLK350]

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.

I have a more benevolent approach to Herb Diess and VW: first, because Elon Musk and Herb Diess are on friendly terms (actually have been for years when Tesla was in trouble and possibly negotiating w/ Google and VW), see also

at 5:48 and second because VW is the only ICE to make and EV commitment seriously enough to actually build battery plants at scale, which no other carmaker has done. They all are hoping to source their future batteries from Chinese battery makers. Basically, highly likely that all except VW are preparing for a standard bankruptcy (bankwupt!) exit to get rid of their union contracts etc. and resurface as a smaller car maker capitalizing mostly on their brand name.

 

[shootformoon]

Diess is the guy who so many on this board want to bring to tesla? Yes he wants to do the right thing(go electric) but frankly I do not think he knows how to do it the right way.

I always feel good when tesla promotes younger insider to the higher positions instead of bringing so called "experienced executives". What do these experienced executives offer? Old inefficient method, old suboptimal process, old lazy culture. Why tesla is moving so fast and so revolutionary? They are not bounded, or even tainted by these career paper pushers. It is laughable just to read the methods they use to solve the ID3 software problems. Haha, meetings. More meetings.

This market has a lot of pumping in general that any end to the Trump presidency will cause a drop. Extended QE, heavy corporate tax cuts, and soon-to-expire personal tax cuts for wealthy individuals are likely all candidates to be reversed with the blue wave.

I think TSLA will still fair decently well in such an environment though. It has so much momentum and opportunity ahead of it for the next few years. Plus its normal volatility alone means it'll go through 50% drops even without recessions, due to the FUD and short sellers out there. I'll be prepping my non-TSLA portfolios for such an event, but TSLA will probably be left alone.

The market will also realize that a heavily progressive congress would translate into far more opportunity for TSLA and other renewable-focused companies. Bernie's green new deal is *massive* if congress had a realistic chance of passing anything remotely close to it for TSLA and other green companies.

Manager Magazin, a leading German business publication with excellent sources at the Volkswagen board, at VW, Porsche and Audi high level leadership, and at the two biggest shareholder families, the Porsches and Piëchs - has just published a bombshell article.

They are reporting about the cluster-sugar that the Volkswagen ID.3 has become, with a rich supply of anonymous insider sources from within the ID.3 project.

Here's an English translation posted to /r/teslainvestorsclub, it's long but worth reading the whole thing:

More Problems at Volkswagen [translation from Manager Magazine "Volkswagen – Showdown in Hall 74"] : teslainvestorsclub

The start into the electrical age is getting very bumpy for CEO Herbert Diess. More than 10,000 technicians are currently trying to solve the problems of the showcase project ID.3. There are already signs of the first personnel casualties.

Location: Volkswagen plant Wolfsburg, Hall 74, 8.30 a.m.

Every working day, software experts, engineers and top managers meet here for a half-hour morning round. Head of Development Frank Welsch (55) is a regular participant, as are Christian Senger (45), Member of the Board of Management for Digital Affairs, and Thomas Ulbrich (53), who is responsible for electromobility. Suppliers send top people. Almost all the board members were there; sometimes Volkswagen boss Herbert Diess (61) comes himself and shows the importance of the morning round.

Because even if the ID.3 marketing slogan ("Now you can") has been suggesting for months that it's about to start - the e-mobile is not ready for the masses. Many at the top of the company doubt that it will be ready by summer as planned.

If it goes wrong, the ID.3 could destroy careers, theoretically even that of Herbert Diess. New drivetrain, new software and electronics architecture: ID.3 stands for the transformation to an electrical and technology group. It is Diess' very personal project. The VW group CEO also manages the VW brand.

All the more important is the rescue round. This is where the technical problems are discussed, this is where orders are placed which are then processed by ID.3 teams throughout the group. More than 10,000 technicians and engineers are currently working on ID.3, including external developers, our sources in Wolfsburg say. They have just brought in hundreds of additional experts, top people from Audi and Porsche, for example; they are flown in on Mondays and out again on Fridays.

When Chancellor Angela Merkel (65) personally came to Zwickau at the beginning of November 2019 for the start of production, it looked as if everything was going according to plan. Only the cars are rolling, at the moment, according to the production schedule, there are a good 50 of them a day, stupidly parked. The software does not work as it should.

The basic architecture was developed too hastily, say VW experts, system parts often don't work with each other and have bugs. At some point in the next few months, when the quality is high enough, the green light will be given for the [new] software to be installed on the cars that were already built.

Did Diess want too much too fast? In addition to the electric drive, a completely new software organization was necessary? The Porsches and Piëchs, major owners and actually Diess' most important allies, have never really been convinced of their protégé's electric focus. Now they are getting restless. In small group discussions they expressed their displeasure, they say.

Employee boss Bernd Osterloh (63) and the IG-Metall parliamentary group remind internally that the VW group missed out on billions in 2018 because of the delayed changeover to new emission regulations - and now fear similar things in terms of CO2 penalties. The group must save 30 grams of CO2 per car in order to achieve the EU targets, as Herbert Diess himself recently said. 30 grams, that would be a fine of around ten billion euros in 2020. Indisputable.

Without the ID.3 CO₂ fines cannot be avoided. Purely electric vehicles will still be counted twice this year [under the 'SuperCredit' rules]. VW would have to sell 100,000 ID.3s in 2020 to meet the targets; this is how they originally calculated. They have now reduced this number; 80,000 must also be enough. The E-Golf and E-up, both of which have a compromising electric performance and are both in deficit, are supposed to make up for the shortfall a bit. Both are currently being squandered with high discounts. This speaks more for panic than for trust in ID.3.

Audis e-tron and Porsche's Taycan could also help, because the CO2 emissions are calculated for the group in Brussels. But there is a catch there too. Audi has already lowered the forecasts for the e-tron. They wanted to sell their electric SUV and a spin-off in 2020 up to 70,000 times. In the meantime, the scenarios have reached a good 40,000; battery experts consider this figure to be wishful thinking, which is how big the battery crisis is.

LG Chem supplies too few battery cells and is constantly reporting new production problems. Batteries from Samsung, which are to be added in the summer, do not yet have the necessary quality. Audi and Porsche, whose Taycan uses cells similar to those of the e-tron, are battling to make up for the low capacity. The matter went to the group board of directors. Porsche boss Oliver Blume (51) won.

Herbert Diess had an idea of how difficult the start into e-mobility would be. He said at a top management conference in January that compliance with the limit values for supplying, building and selling cars with batteries was "perhaps the most difficult task Volkswagen has ever had to face.

The problems are everywhere. They just postponed the Taycan delivery in Germany again for several weeks. The Ionity charging station joint venture, also supported by Volkswagen, is nowhere near as far as promised. And the teams responsible for the next electric VW ID.4 - scheduled to start at the end of 2020 - are urgently waiting for the people who now have to save the ID.3; a cascade of postponements is in the offing.

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? They are working in a disciplined manner on the electrical front, almost militarily, as contributors tell.

The hundreds of test drivers who are on the road in the evenings and at night report new bugs every morning in Hall 74; up to 300 would do it every day, says one of our sources who is participating in the meetings frequently. Negative scenarios of a delay of three to a maximum of twelve months are already circulating, which Diess' people dismiss as "complete nonsense".

But what to do if it doesn't work? Then it will have personnel consequences below the CEO level.

With foresight, Diess has expanded the VW brand board of directors to a council of eleven. In the event of a major ID.3 delay, he could fire various board members. Welsch, Head of Development, has been joined by Chief Technology Officer Matthias Rabe (57), who could take over. Another digital board member is also being sought, according to our sources at Wolfsburg. Herbert Diess has installed a firewall - at least as far as his CEO position is concerned.
​

(I have slightly improved upon the what I assume was a machine translation of Reddit user jandetlefsen. I have access to the original article in German which is behind a paywall, and the translation is accurate as far as I can tell.)

(Cc: @avoigt)

Note the countless number of red flags:

• Sources indicate of an additional delay of 3-12 months, on top of the summer deadline.
• hundreds of test drivers (VW employees driving the ID.3) on the road, 300 of them reporting bugs on a daily basis.
• VW is cannibalizing their other development teams, such as the ID.4, E-Tron and Taycan teams. Software developers are flown in from their regular workplaces (where their homes are) on Mondays and they fly back on Friday. Those must be some super happy software developers browsing Tesla's GF4 list of jobs right now ...
• Note the low production rate of the ID.3 of only 50 per day, almost 4 months after the pompous "start of production" last year. That's 350/week, 1,400/month, 16,800/year ...which falls far short of the 80,000 ZEV units VW needs to make in 2020 to avoid 10 billion Euros of fines. BTW., maybe @Prunesquallor can explain that figure: how can 80,000 units save VW 10 billion euros? That's €120,000 per ZEV unit made - that sounds ridiculously high.
• Note the tidbit explaining the E-Tron production reduction: internally Audi and Porsche was fighting about battery supply, and the Porsche CEO won the infighting and the E-Tron got scaled down and the Taycan is getting the battery supply ...
  
• Sources at the shareholder families Porsche and Piëch expressed (anonymous) unhappiness with Diess as well. Those shareholders could depose Diess, if they wanted to.
• Diess has restructured the board to have "scapegoats" he could fire - but the responsibility for a ID.3 failure would squarely rest on his shoulders.

Anyone who knows how good software projects looks like recognizes in what a mess Volkswagen is: their software team is at Wolfsburg, being flown in weekly from other projects such as the ID.4, but their factory is in Zwickau, spewing out 50 new ID.3's every day, only to be parked in open air parking lots ...

Every "ID.3 crisis group" working day begins with a 30 minutes meeting. Remember what Elon said about the pointlessness of meetings and the necessity of high-rate innovation to happen in flat meritocracies? It's all true ...

 

[gerebgraus]

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 seems to me that the laudable strict European regulations will lead to the bankruptcy of all European carmakers in a very short time.

 

[dl003]

I have a more benevolent approach to Herb Diess and VW: first, because Elon Musk and Herb Diess are on friendly terms (actually have been for years when Tesla was in trouble and possibly negotiating w/ Google and VW), see also

at 5:48 and second because VW is the only ICE to make and EV commitment seriously enough to actually build battery plants at scale, which no other carmaker has done. They all are hoping to source their future batteries from Chinese battery makers. Basically, highly likely that all except VW are preparing for a standard bankruptcy (bankwupt!) exit to get rid of their union contracts etc. and resurface as a smaller car maker capitalizing mostly on their brand name.

Under Diess maybe. There's no telling what they're up to now with the rumor of him being pushed out.

 

[Krugerrand]

I think we should all want to see them succeed as well, since many life forms depend on it. The world is depending on all of them to switch to EV or to die. The problem is based on their long track record, do we believe them?

We do not believe them.

More importantly we don’t actually need the lying, cheating scumbags to stay in business. They can die.

Resources should be going to the other EV companies and startups, and to battery manufacturers, not to saving the companies who thought it was okay to and continue to poison everyone and the planet.

 

[Fact Checking]

Incidentally, and this might be of interest to @Prunesquallor, he posted this tidbit about the Tesla FCA pooling agreement just yesterday:

Matthias Schmidt on Twitter

"Pool party.

FCA already dipped a few toes into the Tesla pool last year (2019) to remain compliant it appears."

These slides are from FCA's 2019 annual report I suppose? Can anyone find a link to the FCA 2019 annual report? None of the obvious online sources seems to have it ...

I'll try to measure the length of those bars to see to what extent FCA is planing to use the Tesla pool.

So here's the previously undisclosed data embedded in that chart, which @Prunesquallor or others might help decode:

• 2019 "Tesla Pooling Arrangement Contribution", already paid: 6 pixels high
  
• 2020 "Lower diesel mix" minus eco-improvements: 16 pixels
  
• 2020 "Compass, Renegade, Wrangler PHEVs, [Fiat] 500 BEV": 20 pixels
  
• 2020 "Tesla Pooling Arrangement Contribution", planned: 18 pixels
  
• 2020 "5% Compliance Exemption": 5 pixels
• Height difference between 125 g/km and 95 g/km bars: 59 pixels

Based on this, Tesla's pooling contribution in 2020 would be worth about (125-95)*18/59 = 9.1 g/km, or about 30.5% of the 30 g/km emissions reduction FCA is targeting in 2020 to be completely penalty free.

If it's accurate that FCA is facing total penalties of €1.7b, which penalty figure I took from @Prunesquallor post from December, then Tesla's penalty reduction benefit is about €518m - which is lower than what we speculated about before. The reason for the discrepancy is probably that we missed the many other tools the EU left open for FCA to game the emissions statistics.

Now we don't know how much of this €518m figure Tesla would be getting - but back in April 2019, when the deal was signed, Tesla also marked ZEV credits as deferred revenue - which they recognized in Q4'2019. This is how they accounted for these supposed FCA credits in Q1'2019:

"Deferred revenue related to sales of automotive regulatory credits was $140.0 million and $0 as of
March 31, 2019 and December 31, 2018, respectively."​

So if the 6 pixels high bar in FCA's 2019 Tesla pooling cost was $140m, then the 2020 bar of 18 pixels would indicate a planned payment of $420m - or about €380m. This would suggest that Tesla gives FCA an about 25% discount on the ZEV credits they are selling in Europe - i.e. they keep about 75% of the penalty reduction benefit.

Note that the 2019 bar is particularly small, and depending on how I measure it might be 7 pixels high, in which case the calculation is 18/7*140 = $360m, or €327m - a 37% discount and a 63% recovery rate for Tesla.

Finally, these estimates also depend on the €1.7b FCA penalties figure being accurate - do we have any other estimates that we could compare it against?

 

[⚡️ELECTROMAN⚡️]

Done. Nerd maybe an endearing term around here. Elon is a nerd.

True it's a complement. I would be a nerd if I was smarter. Too much lead ingestion as a child.

 

[oldTAVguy]

Adam Jonas- Latest Price Targets
Buy Ford - $11 was at 52 week low today $7.60
Buy GM - $46 just hit 52 week low today $32.89
Well they have upside compared to their historical price.