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

[Krugerrand]

A finished vehicle has a certain amount of profit potential based on the competition (Tesla). Nothing anti-mission about taking 60% of that profit potential as supplier of the skateboard. The OEM will then be forced to create lean operations for everything else and try to make money. (i.e. eliminate dealerships)

The OEMs can’t afford to pay a premium. Think about it. Who’s making the fat gross profit? Who’s selling direct and who’s selling to a middle man? What more can an OEM offer on a vehicle that Tesla can’t? Obnoxious interiors. Which then means premium priced vehicles. Which means that it’s not a mass market affordable vehicle. Which means it doesn’t do poo to advance the mission.

No, OEMs can’t afford to pay a premium. Tesla would have to sell just a bit above cost AND that’s the Elon way anyway. If he wants to advance the mission, he has to sell at a price that allows the OEMs to make at least their current margins because they still have legacy costs and still have to sell to the dealerships. But, but!!! The dealerships are going to say, no we do not want EVs because most of our profits are in service.

Nope, this can’t work as the world is now. If it ever happens. I agree with the side that says we aren’t there yet.

 

[Paul_SF]

Good point! I wouldn't be surprised if a lean internal Alphabet/Apple/Amazon startup could better leverage Tesla's platform than the incumbents with all of their overheads and inefficiencies.

Although at the same time, you can't underestimate how complex manufacturing is either. These large tech firms certainly have the reputation and funds to attract top talent though.

Sony?
Panasonyc?

edit : added Panasonyc

 

[Singuy]

Tesla can make money while accelerating the mission.

They don't need to slow their own production ramp or vehicle program in any way, batteries for Tesla vehicles are always the priority, but after that they can sell excess production to other including new packs for existing Tesla cars.

The main criteria is that a business area is profitable and does not impinge on other more profitable areas.

EDIT:: And Tesla doesn't necessarily need to license their latest technology, just an agreed product spec for an agreed price.

Tesla can't even license their latest technology since their latest technology is what is available today, and tomorrow the technology is already replaced. Other car manufactures will pay Tesla $$ while being 1-3 years behind indefinitely due to the nature of how legacy work with their model years. And lets not forget that Tesla can finally sell software and generate money if all cars sold are running on Tesla OS (Tesla ride hailing network being one of them!).

If this was the computer world, Tesla just said "hey case makers, you can pay us for our CPUs and Windows vs you guys trying to build your own *sugar* version". Legacy car makers are nothing but low margin PC builders like Dell.

 

[Mo City]

The OEMs can’t afford to pay a premium. Think about it. Who’s making the fat gross profit? Who’s selling direct and who’s selling to a middle man? What more can an OEM offer on a vehicle that Tesla can’t? Obnoxious interiors. Which then means premium priced vehicles. Which means that it’s not a mass market affordable vehicle. Which means it doesn’t do poo to advance the mission.

No, OEMs can’t afford to pay a premium. Tesla would have to sell just a bit above cost AND that’s the Elon way anyway. If he wants to advance the mission, he has to sell at a price that allows the OEMs to make at least their current margins because they still have legacy costs and still have to sell to the dealerships. But, but!!! The dealerships are going to say, no we do not want EVs because most of our profits are in service.

Nope, this can’t work as the world is now. If it ever happens. I agree with the side that says we aren’t there yet.

Obviously we aren't there yet. But, again, when survival mode grips OEMs, their thinking will change and some will choose to join the beast instead of being eaten by the beast.

Regarding premiums, OEMs paying Tesla a premium for a drive train would still be less expensive than manufacturing or outsourcing an identical product.

None of this has anything to do with dealerships. They don't want EVs under any circumstances for exactly the reason you state. Therefore, this issue is not relevant to our discussion.

Nobody believes OEMs would "make at least their current margins". Clearly they would not.

 

[FrankSG]

Selling power trains to Alphabet, Apple and Amazon doesn't solve their hardest problem: mass production. So a partnership with Tesla is not all that IMO.

I also don't see Apple or (especially) Amazon ever capitulating to Elon. Larry Page has a good relationship with Elon but he no longer runs Alphabet.

On the other hand, EV power trains are the missing piece of the puzzle for legacies for long term survival. One or more of them will eventually surrender to Tesla.

Looking at Shanghai, it's starting to look like Tesla might already be on par with other OEMs in terms of mass manufacturing. I'm willing to bet that by the time Tesla finishes Berlin, Texas, or the factory after that, Tesla will undeniably be one of the, if not the, best at mass manufacturing.

 

[Mo City]

Looking at Shanghai, it's starting to look like Tesla might already be on par with other OEMs in terms of mass manufacturing. I'm willing to bet that by the time Tesla finishes Berlin, Texas, or the factory after that, Tesla will undeniably be one of the, if not the, best at mass manufacturing.

I agree. "The factory is the product". Revolutionizing production and taking vertical integration to the next level are more feathers in Elon's cap that set Tesla and SpaceX apart from their competitors.

Berlin and Austin are going to blow off the doors, rattle the industry and create a level of fear and dread we haven't seen before.

Can't wait.

 

[ggr]

Hi, where is the thread? Can't find it, thanks.

Really? About 10 lines down from this one.
Applying options strategy 'the wheel' to TSLA

 

[Krugerrand]

Obviously we aren't there yet. But, again, when survival mode grips OEMs, their thinking will change and some will choose to join the beast instead of being eaten by the beast.

Regarding premiums, OEMs paying Tesla a premium for a drive train would still be less expensive than manufacturing or outsourcing an identical product.

None of this has anything to do with dealerships. They don't want EVs under any circumstances for exactly the reason you state. Therefore, this issue is not relevant to our discussion.

Nobody believes OEMs would "make at least their current margins". Clearly they would not.

Of course it’s relevant. OEMs sell to dealerships. It’s all part of legacy costs. If OEMs didn’t have a middle man to their customers, then they’d have more wiggle room to pay that premium to Tesla. That could work. Except now OEMs would have to build out stores, galleries and service centers. Unless they want to pay Tesla another service premium for Tesla to service any problems with their cars.

 

[Drumheller]

The OEMs can’t afford to pay a premium. Think about it. Who’s making the fat gross profit? Who’s selling direct and who’s selling to a middle man? What more can an OEM offer on a vehicle that Tesla can’t? Obnoxious interiors. Which then means premium priced vehicles. Which means that it’s not a mass market affordable vehicle. Which means it doesn’t do poo to advance the mission.

No, OEMs can’t afford to pay a premium. Tesla would have to sell just a bit above cost AND that’s the Elon way anyway. If he wants to advance the mission, he has to sell at a price that allows the OEMs to make at least their current margins because they still have legacy costs and still have to sell to the dealerships. But, but!!! The dealerships are going to say, no we do not want EVs because most of our profits are in service.

Nope, this can’t work as the world is now. If it ever happens. I agree with the side that says we aren’t there yet.

I think it could work similarly to how Tesla ramped up. First sell the skateboards, with a healthy profit margin, to OEMs that want to use them in their high end premium lines. That opens the door and gets a few more EVs on the road than just Tesla alone. It would be helpful if those cars could also use the supercharging network.

Then, the OEMs begin changing their models and getting more efficient (this is wishful thinking / theory of how I think it could possibly work). After a threshold, they could afford to buy more quantity from Tesla and push down into more affordable cars. Repeat.


Of course, if Elon is serious about this, and I think he is, that indicates a massive production increase in batteries coming.

 

[StealthP3D]

Wow, they’re personally calling out Elon as one of their biggest risks and one of the reasons why the rating is not higher. “Key Man risk is very high.”

Yes. If they had half a brain they would give Tesla a higher rating based solely on Musk's track record!

 

[Curt Renz]

September 2019

 

[MP3Mike]

Of course it’s relevant. OEMs sell to dealerships. It’s all part of legacy costs. If OEMs didn’t have a middle man to their customers, then they’d have more wiggle room to pay that premium to Tesla. That could work. Except now OEMs would have to build out stores, galleries and service centers. Unless they want to pay Tesla another service premium for Tesla to service any problems with their cars.

The sticky wicket there is that they can't build out stores, services centers, etc. unless they buy back all of the franchises they have sold to dealerships. And that is assuming that the dealerships would all even be willing to sell. Personally I think the only way they can get rid of the franchises is to go out of business.

 

[StealthP3D]

That's what car brands basically are now. No one knows or cares where the engine and powertrain come from. They just care about the specs, how it looks, and the reputation of the brand.

Actually, I think having a Tesla powertrain would be a huge selling point. Think about it, the most important parts of the car engineered by the leader in EV technology. Yeah, that's gonna be worth bragging about. I just don't know if the existing OEM's could swallow their pride enough to do that.

 

[Mo City]

Of course it’s relevant. OEMs sell to dealerships. It’s all part of legacy costs. If OEMs didn’t have a middle man to their customers, then they’d have more wiggle room to pay that premium to Tesla. That could work. Except now OEMs would have to build out stores, galleries and service centers. Unless they want to pay Tesla another service premium for Tesla to service any problems with their cars.

It's not because the debate is HOW the OEMs will switch to EVs, not if. Dealerships don't give a care where EV power trains come from. They hate them because repairs and parts represent 50% of their profits.

 

[printf42]

It's not because the debate is HOW the OEMs will switch to EVs, not if. Dealerships don't give a care where EV power trains come from. They hate them because repairs and parts represent 50% of their profits.

Don’t worry, OEM will design their cars to need enough services to keep dealers happy, also keep the parts revenue coming.
But probably because of that, they wouldn’t like Tesla drivetrains, they would need to be creative to achieve that goal if the core of the car lasts million miles and came with OTA.

 

[JBRR]

Morgan Stanley Px raised to 1050

 

[bhtooefr]

Don’t worry, OEM will design their cars to need enough services to keep dealers happy, also keep the parts revenue coming.
But probably because of that, they wouldn’t like Tesla drivetrains, they would need to be creative to achieve that goal if the core of the car lasts million miles and came with OTA.

There are, of course, ways to reduce those lifespans - using things like incorrect fluids would help. (And, I mean, Renault actually does that on the Twizy, as I understand - the factory gearbox fill is not what the gearbox manufacturer specifies.)

 

[Bet TSLA]

I agree. "The factory is the product". Revolutionizing production and taking vertical integration to the next level are more feathers in Elon's cap that set Tesla and SpaceX apart from their competitors.

Berlin and Austin are going to blow off the doors, rattle the industry and create a level of fear and dread we haven't seen before.

Can't wait.

You know, you guys just aren't hearing what Elon is saying. The way that Tesla shares technology and fulfills the mission and makes a profit is by selling the product: the factory. Everybody needs more batteries, so here's the IP to build yourself a battery factory. You need a drive train? Here's what you'll need to build a drive train factory. Collect royalties. Let factories proliferate using other people's money and people and time and government support. Tesla doesn't starve itself of batteries or drive trains or anything else.

And software? I suspect they just license it, but it's possible they can sell a software factory as well. Very difficult. Never been done before. So I suspect just licensing. But they could also open source a fair chunk of it.

And as Elon has made very clear, what protects them and keeps them ahead is their pace of innovation. It's a helluva challenging approach.

 

[Paul_SF]

OT, but a good read:

Statement by Jeff Bezos to the U.S. House Committee on the Judiciary

 

[gluu]

Interesting Munro chat. He mentions that Model 3 battery pack was 135$/kWh while Model Y is 110$/kWh. This must mean that the roadrunner batteries must be significantly cheaper than 100/kWh in my opinion. Mentioned at 1:11:00

Also mentions that Munro does work on mining equipment and that he’s heard things about Tesla looking for Nickel mining equipment. Mentioned at 45:40.