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

[scaesare]

So, when do we get the announcement that VW decided to not spend 4 billion to develop their own EV software and instead is paying Tesla 2 billion to license their software?

While it certainly is probably in VW's best interests to offload as much of this as possible, I suspect this is not going to be easy for them to do with the rest of their current "non drivetrain" hardware architecture.

The Tesla hardware is highly vertically integrated and their software platform is built on that. While the drivetrain can operate independently of other portions of the car, there is a lot of code needed for that to work well and be integrated with the rest of the systems (charging, displays, accessories, etc...). Today VW's hardware is a mish-mash of electronic components from different vendors that are somewhat opaque in terms of operation.

Same goes for autopilot... without the integrated sensor suite, steering and braking, redundant systems, etc... there's going to be a lot of work for VW to do...

 

[H Mak]

BTW @H Mak I have been wanting to ask it that is an LC8 in your avatar, and if so, is it yours? And if so............congratulations! I have an LC8 in my 990 Adventure for back roads and trail riding here in the Rocky Mountain states, and it is truly a masterpiece - one that actually brings harmony to the argument of horsepower vs torque by embracing both!

OT warning to non-bikers!
Yes its my third KTM, it's the 1290 Superduke GT. Before this I had the 990 Superduke and 1190 Adventure. I love KTM!

 

[StealthP3D]

It also doesn't hurt to be able to point to a pattern of sincere offers of collaboration if/when traditional OEMs collapse and leave Tesla in a monopoly or near-monopoly position. Might help defend against anti-trust efforts.

I think worries of anti-trust concerns with Tesla are unfounded, at least in the next 10 or more years. Anti-trust law does not regulate fast innovation that puts everyone else out of business. It's only when the monopoly power is abused to continue to exclude new competitors that anti-trust enters the picture. Fast innovation that no other company can match does not qualify.

 

[Todd Burch]

For those that continue to claim the daily morning drops aren't manipulation and are just a reflection of the macros:

Here's the NASDAQ this morning:

And TSLA:

Not manipulated my a**. NASDAQ dropped 0.06%. TSLA dropped 1%, a multiplier of >16x.

 

[Krugerrand]

What are the odds that we see a Kolodny hit-piece on CNBS, but no mention of S&P credit upgrade...

Looks like a bit of protectionism ongoing in South Korea: South Korea launches safety probe into Tesla vehicles By Reuters

SEOUL (Reuters) - South Korea said it is investigating suspected safety issues with vehicles made by U.S. automaker Tesla Inc (O:TSLA), which is competing strongly with Hyundai Motor Co (KS:005380) in the South Korean electric vehicle market.

It’s my understanding (from a South Korean’s mouth) that unions are crazy powerful there and can dictate pretty much whatever they want to the government.

 

[gluu]

Frankly, the only way Sandy would know the cost per kWh for Tesla is if he had internal info from Tesla's battery suppliers. Considering Tesla's very tight battery supply chain (it's typically a few hundred meters N-S inside the Giga Nevada, at the moment and for the past 3 years), I doubt he has that info. It would seem he simply looked at the average cost of cells for that general quantity of battery cells order for that chemistry back in 2018 vs. in 2020. He himself admitted during the Model Y teardown that the cells in the Y are identical to the cells in the 3, but the pack architecture (specifically, assembly materials) changed somewhat. It doesn't mean Tesla is paying that much more currently for the Model 3 packs than for the Model Y packs. It also doesn't mean the numbers Sandy mentioned are accurate with any relevant degree of accuracy. In fact, nobody outside of Tesla and Panasonic knows the real cost of battery cells, and only Tesla knows the cost of the battery pack. The only possible insight we may have on Tesla's battery costs is the market price for raw minerals. That's it! And the cost of raw materials is just a fraction of the total battery pack cost per kWh.

Ultimately you’re right that we don’t have exact numbers since we’re not Tesla/Panasonic, but I would wager that Munro is not far off. Also, while in absolute terms we may not know Tesla’s costs, the delta in costs here is relevant and is likely accurate.

 

[gwright]

I see one problem with that scenario. Namely, it's the one path that has a very high risk of all automakers becoming limited of key raw materials like nickel. Think about it, if many or most of the big OEM's ramped production simultaneously of essentially the same tech Tesla uses, that would shock the raw materials markets. I'm one of the people who believes raw materials can naturally ramp quickly enough without severe supply constraints but that appraisal assumes the other makers continue to be caught with their pants down. All bets are off if you have multiple large makers all ramping EV's in huge volumes simultaneously.

The charging infrastructure is another potential problem. In a scenario where other big manufacturers were able to ramp EV's in large volume quickly, they could partner with Tesla so all their licensed vehicles could join the Supercharger network (assuming the other makers were willing to pony up the money to expand the network in a proportional manner). The cool thing about this is it would also benefit Tesla owners who would find SC stations popping up all over the place, even in out-of-the-way places.

To do this the ramping up of the mining of the raw materials would have to be part of a coordinated plan and I'm not sure that has a realistic chance of happening on the scale needed. One thing I've learned over the years is that even fast, disruptive change appears to be slow as molasses when viewed from an individuals human perspective, year over year. These kind of changes take time even when you have "all hands on deck".

CleanTechnica posted an interview with some mining folks that speaks to this point. Per their comments, mines take years to develop, and the price pressure their customers demand makes the cap-x needed to develop new mines less appealing. They suggest that manufacturers (including Tesla) need to offer reasonable, flexible contracts to provide that incentive, unless they want to get into the mining business themselves. We saw this play out to some degree between Tesla and Panasonic - Tesla seemingly asking why prices for their cells aren't falling faster. Raw materials will be an important (and underappreciated) variable in the battery supply chain. Elon's comments about nickel mining during ER highlight this as well.

 

[Paracelsus]

I should add that Jonas raising his Bull case to $2,700 further cements my opinion that there will be a secondary offering near the current price of $1,500 and that Morgan Stanley has decided that they will be willing to part with their new shares for about double the offering price...............perhaps to help out their Wall Street family that will still be caught short at that price while they are still trying to accumulate the remaining ~20 million or so shares required. How generous of Morgan Stanley!

 

[Krugerrand]

Sorry, but the two Teslas I have purchased (over the last seven years) indicate that Tesla does not lag behind in fit or finish.

I reported here a couple years back when this issue was being discussed at that time for the 1,000th time that I’d been sitting beside a Maserati in a traffic jam with the nastiest wave in the door panels.

It’s all just disingenuous talk. Every OEM struggles with panel gaps on various vehicles. And many have had decades and decades to not perfect their techniques in every area; recalls anyone?

 

[JustSaying]

While researching this, I just learned that Tesla also helped Toyota with the drive train on the short lived RAV4 EV back in 2013.

Really makes you wonder what the automotive world would look like now if Mercedes and Toyota hadn't pulled the rug out from underneath those vehicles.

Unfortunately, the Tesla based RAV 4 EV only had a range of 100 miles. As I remember they ended up giving them away.

 

[StealthP3D]

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.

I didn't know that mining equipment came in "nickel flavored" varieties!

 

[Jack6591]

I know that the S&P matter has been beaten to death. However, I assume that the announcement will come after market close. Does anyone know?

 

[replicant]

It’s setting up for a major major move this week. Unusually stable.

True, true.

 

[saniflash]

I know that the S&P matter has been beaten to death. However, I assume that the announcement will come after market close. Does anyone know?

yes: When will S&P500 inclusion be announced?

edit: post says that inclusions are usually announces after market close --> my takeaway is to not be short calls overnight currently

 

[StealthP3D]

Curt, I love your posts, but I believe this premise is incorrect and I have seen similar posts from you on the topic for years. Here’s a simple example of what you describe.

If I own 10% of a company with 100 shares priced at $1,000/share (I own ten shares valued at $10,000 total, company market cap is $100k) and the company expects to grow at 7% per year for 10 years, then in ten years, the market cap will be $200k and I will have ten shares worth $20,000 total.

If the company issues 20 new shares at $1,000/share but only expects a 2% return on a fixed income investment as you suggest, then I now only own 8.3% of the company. Because the additional capital didn’t impact the company’s original growth, in ten years that portion is still valued at $200k plus the returns on $20k at 2% for ten years. This ends up at $224k and change. With 120 shares outstanding, each share is $187 and my position ends up being $18,700 total. Yes, the pie is bigger, but my share is disproportionately smaller.

This is the premise you present as being a wash, and the disparity grows even more when the rates of return are spread further apart.

The only way a capital raise doesn’t negatively impact shareholders is if the return on that capital matches or exceeds the expected growth without it. It must allow the company to grow more quickly or to grow for a longer period of time (in some cases, this means surviving). If these conditions are not met, it’s not simply a wash.

This is a generic example, and of course raising capital is often beneficial. If Tesla’s management team thinks Tesla can achieve greater returns with additional capital, absolutely they should go for it.

Very well put! That is exactly what I was trying to get across in an earlier post but I didn't spend the time to word it as concisely and accurately as this.

 

[JustSaying]

Reuters - early this morning: End game for oil? OPEC prepares for an age of dwindling demand

“The main concern is that oil demand will peak in the next few years due to rapid technological advances, especially in car batteries.”

 

[M|S|M MYP]

Unfortunately, the Tesla based RAV 4 EV only had a range of 100 miles. As I remember they ended up giving them away.

And back then....100 mile EV range was equivalent to 300+ miles today

 

[j6Lpi429@3j]

BTW nissan dropped about 7% yesterday:

Yahoo is now a part of Verizon Media

TOKYO (Reuters) - Nissan Motor Co <7201.T> warned of a record $4.5 billion operating loss this year and its lowest sales in a decade as the COVID-19 pandemic hampers its turnaround efforts.

Japan's No.2 carmaker is battling to recover from a rapid expansion that has left it with dismal margins and an ageing portfolio, as well as revive its alliance with Renault <RENA.PA> that was rocked by the arrest of long-time boss Carlos Ghosn.

But the virus pandemic and associated plunge in demand has taken a heavy toll on the car industry, with Nissan reporting a second straight quarter of operating losses on Tuesday.

The company forecast an operating loss of 470 billion yen ($4.5 billion) for the year to March 2021, much larger than analysts' consensus estimate for a 262.8 billion yen loss, according to Refinitiv data. That would be the second annual loss in a row.

I'm wondering if some of that car investment money might shift over towards the only car company actually growing right now...

 

[Todd Burch]

Here's an example of leveraging the transitive property of equality to solve a problem:

1. Tesla wants nickel for batteries.
2. Tesla CEO = Elon Musk.
3. Elon Musk = SpaceX CEO.
4. SpaceX has rockets.
5. SpaceX rockets can land in a zero-atmosphere environment.
6. Many asteroids have high nickel content.
7. Asteroids have no atmosphere.

Draw your own conclusions.

 

[vikings123]

OT but a real good one. I cannot believe this.

I'm liquidating all my TSLA for the new COVID savior KODK. Already halted two times lol.