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

[Tes La Ferrari]

Imagine if Jeep would have made this the new Wrangler, they wouldn't have ever had to buy credits from Tesla; and Atlantis wouldn't be sinking into the ocean.

Vanderhall Brawley GTS - 5940477

View Vanderhall Brawley GTS images from our Vanderhall Brawley GTS photo gallery. Photo ID: 5940477

www.motor1.com

 

[Beltsbear]

I really doubt we will see any Gigafactories that are not self contained. The batteries and cars will be built next to each other as in Austin and Berlin. Believe that will always be the plan going forwards.

I think that is the ideal but that ignores geopolitical problems that rare earths and other metals cause. If Brazil just exports the raw materials, they have very little skin in the game. A politician can go against Brazil's own interests as a show of nationalism to block exports much easier if the country has fewer jobs created by the process. When you combine government incentives from Brazil, and the low cost of labor and finally the locality of supply, it does indeed make sense to have some facilities separate. That facility could export raw cells, or completed battery packs. They could be used in automotive or energy. For example, they could be used to build powerwalls for markets including and close to brazil.

 

[petit_bateau]

I think that is the ideal but that ignores geopolitical problems that rare earths and other metals cause. If Brazil just exports the raw materials, they have very little skin in the game. A politician can go against Brazil's own interests as a show of nationalism to block exports much easier if the country has fewer jobs created by the process. When you combine government incentives from Brazil, and the low cost of labor and finally the locality of supply, it does indeed make sense to have some facilities separate. That facility could export raw cells, or completed battery packs. They could be used in automotive or energy. For example, they could be used to build powerwalls for markets including and close to brazil.

Exactly.

It is the combination of the political plus the industrial economics, that gives rise to the list I do:

Brazil for sales to Brazil & Argentina, and southern cone.
Mexico for sales to Mexico and Central America.

The other factories I see coming are India*, maybe either Japan or Korea, plus additional ones in China, EU, USA.

That's a total of six more factories, plus expansion continuing at Texas, Berlin, and Shanghai, but not much more capacity at Fremont. That'll be enough to go beyond the 20m vehicles/year that is the 2030-target.

(The UK might get one if the taxpayer pays for it.)

(* only if the Indian gov agrees to 100% Tesla-ownership)

=============

It is worth noting the ranking of car sales by country, then considering which of those are inside free trade zones (EU, NAFTA), and then considering that Tesla would probably not want to build an integrated cell+vehicle plant of less than 500,000 units/year.

Rank	Country	Cars Sold	Year ↑↓%	Top Brands
1.	China	19,290,137	↓ 7%	Volkswagen 2,609,325 Honda 1,638,749 Toyota 1,537,723
2.	United States	14,599,190	↓ 14%	Ford 1,929,364 Toyota 1,837,392 Chevy 1,740,915
3.	Japan	4,598,607	↓ 12%	Toyota 1,454,577 Suzuki 930,847 Honda 619,202
4.	Germany	2,917,435	↓ 19%	Volkswagen 525,631 Mercedes 303,180 BMW 240,972
5.	India	2,472,820	↓ 17%	Maruti Suzuki 1,213,406 Hyundai 423,655 Tata 169,894
6.	Brazil	1,954,871	↓ 26%	Chevrolet 338,524 Volkswagen 327,655 Fiat 321,733
7.	South Korea	1,874,629	↑ 6%	Hyundai 671,218 Kia 553,731 Genesis 108,728
8.	Canada	1,656,739	↓ 14%	Ford 232,188 Toyota 196,873 Honda 146,370
9.	France	1,650,221	↓ 25%	Renault 315,188 Peugeot 302,134 Citroen 163,428
10.	United Kingdom	1,631,077	↓ 30%	Ford 153,344 Volkswagen 148,415 BMW 114,936

Car Sales by Country | Global Car Sales Data | 1. China 2. US

Top 25 countries for car sales per year. This list of car sales by country includes global rank, number of units sold, and top car brands within each country listed.

www.factorywarrantylist.com

 

[EVCollies]

@ The Accountant and others regularly discuss what I regard as the single most important accounting rule Tesla employs.
That is the rule governing income recognition on sale of a vehicle. Tesla is alone among automakers, I believe :
"We recognize revenue on automotive sales upon delivery to the customer, which is when the control of a vehicle transfers. Payments are typically received at the point control transfers or in accordance with payment terms customary to the business." Tesla 2020 10K

Contrast this with GM:
"We present both wholesale and total vehicle sales data to assist in the analysis of our revenue and our market share. Wholesale vehicle sales data consists of sales to GM's dealers and distributors as well as sales to the U.S. Government and excludes vehicles sold by our joint ventures. Wholesale vehicle sales data correlates to our revenue recognized from the sale of vehicles, which is the largest component of Automotive net sales and revenue." General Motors 10K 2020

Thus Tesla cannot and does not record sale of surplus vehicles to dealers. GM can and does do that.

A related convention is reporting of inventory "days on hand". While the global practice does vary somewhat, the general convention is that a 60 day inventory on hand is optimal. Due to the typical OEM wholesale practices the manufacturer tends to have cash flow delayed until the vehicle is sold by a dealer. The typical "floor plan" structures vary widely so OEM's can be paid prior to dealer sale when the floor plan is not offered by the OEM. Even when that si the case the OEM tends to be paid at least 30 days after the wholesale revenue has been recognized.

What does that mean? Tesla averages less than two weeks inventory days on hand. When they recognize a sale Tesla has cash. When the typical OEM recognizes a sale they wait at least 30 days to receive cash, usually more.

Tesla not has typical payment terms from suppliers of net 90, net 60 in a few cases.

So, Tesla generates more cash flow as growth advances. Higher growth yields higher cash flow to Tesla, and Tesla alone.
Virtually all other OEM's burn more cash as they grow faster because their business cycle is much longer than is Tesla's.

Thus far the Tesla advantage is only in recognition of sale. Since their sales are direct the conventional wisdom suggest stay would ahem higher inventory and slower cash flow, but that is not so.

Therefore we must also observe another major Tesla advantage, high vertical integration. Not since the original Ford River Rouge plant has a auto OEM had such high vertical integration.

Tesla has a very rapid conversion cycle from raw material to completed vehicle due to an industry leading manufacturing efficiency. They thus are buying raw materials and rapidly converting those to finished goods. They also how small inventories of supplied parts, which do have those long payment cycles.

Because they go from parts and material to a finished vehicle in a cycle of< I am informed, roughly 14 days. On average Tesla delivers completed vehicles, on average, in about 21 days. For the majority of sales it seems they are actually faster than these times.

When we use these conservative numbers we find that Tesla generates cash of an extra 26 days as they grow, and that is using net-60 payment terms.

Elon and others have from time to time said they now must pay suppliers after Tesla has already been paid. The simple example here shows how that happens.

Finally, this also shows why Tesla is anxious to begin producing where the cars are to be sold. People used to think that is mostly about reducing shipping costs, which in part it is. The biggest benefit, though, is in improving cash flow. When shipping vehicles from Fremont and Shanghai to Europe or even distant parts of Noth America or China the shipping times alone eradicate most or all the cash flow advantage, plus the direct shipping costs and or tax costs.

When considering tax issues Tesla built Tilburg. When Tesla builds a factory in Mexico they'll have both NAFTA and Mercosur access duty free. When a 'Model 2' appears the scale economies in Mexico plus cheap shipping will allow them access to the worlds' sixth largest vehicle market without too much bureaucracy. The cash flow consequences will become positive there also because of rapid conversion cycles.

Of course we all know there are FSD subscriptions and paid Supercharger access as well as opening Supercharger access to other brands. All of that will have very positive cash flow consequences also. Further, even if priced favorably to consumers the net Sup[erchargers will defray system costs and potentially generate profits. For context please note that Tesla is already licensed as a power provider in the EU and UK.

Very soon I am confident that our forecasting mavens will begin modeling these factors.

Great info, if legacy OEM feel this pain when trying to ramp up their business, was it a benefit when the chip shortage shut down plants and what will happen when/if they ramp business back up?

Wonder if the rear steering will be standard across the entire CT line, or just tri-motor? It would be pretty incredible if the base $39K CT offered this.

About that $39K CT, do you remember the fate of the $39K Y? Just like the $35K Model 3, they won't be seen for quite some time.

 

[SebastianR]

Great info, if legacy OEM feel this pain when trying to ramp up their business, was it a benefit when the chip shortage shut down plants and what will happen when/if they ramp business back up?

I don't think you can call it a "benefit" that the chip shortage hit, but I would call it a convenient excuse. We all know we probably hit Peak Car in 2017:

This Is What Peak Car Looks Like

For many people, new forms of mobility are making privately owned vehicles obsolete.

www.bloomberg.com

So the 2020 decline was clearly blamed on COVID, a 2021 decline is blamed on chip-shortages and the 2022 slump will be blamed on - well let's see. But there will be an excuse for sure (also note for instance, that in Germany the ICE vehicles are miraculously hit worst by the chip shortages, while BEVs from Audi & Co. are continued to being ramped...)

I'm not a legacy car maker accountant but the difficult task of the old guard is to manage costs down of a dying business while investing into future business lines. A chip shortage is almost ideal to explain why certain plants are (temporarily?) closed...

 

[ZeApelido]

My wife is a total Tesla basher on the outside (they're too "delicate", too many tech bros own them, etc...). Even though the stock has made us $$$.

But on the inside, she wants one, she just doesn't want to admit it.

But she knows how to trigger me. Today, referring to the Model S, she said,

"you know, those S-Class ones aren't bad".

 

[TheWalkingDad]

Shop Smart. Shop S-Mart.

 

[dhanson865]

About that $39K CT, do you remember the fate of the $39K Y? Just like the $35K Model 3, they won't be seen for quite some time.

I'd be happy with a SR+ AWD that is $5,000 less than the LR AWD.

If they are cell limited but can make the motors at a higher rate give me that config for the 3 and Y.

 

[Wicket]

Great info, if legacy OEM feel this pain when trying to ramp up their business, was it a benefit when the chip shortage shut down plants and what will happen when/if they ramp business back up?

About that $39K CT, do you remember the fate of the $39K Y? Just like the $35K Model 3, they won't be seen for quite some time.

I'd be willing to bet it is more than 2 years from 1st CT delivery to 40k$ CT. It always comes down to gross profit per kWh I'd say and the only way they pump out the truck with more batteries at similar price to a model Y SR with fewer batteries is if the margin otherwise is dramatically better and I don't see necessarily why. (edit: additionally they will likely ramp CT a bit slower than the Y given the freshness of the design and so that backlog is likely to keeping topping itself off).

No guarantees but I suspect demand will so outpace capacity that Tesla is just stuck having to sell really expensive cars. Shucks.

 

[Thekiwi]

Australia/NZ markets are too small to support domestic production at Tesla's size for vehicles - with total sales at c.1m units p.a. That combined with high salaries and no protective import tariffs makes it more likely that a factory in SE Asia would be a more workable solution - e.g. Thailand. Australian automotive manufacturing has basically dropped to zero over the last few decades. Historically there were GM, Ford, Toyota and Mitsubishi factories in Australia.

They could potentially do batteries/stationary storage in Australia given local resources, highly automated production and likely high demand given the solar resources available.

Was going to say the same thing - battery production in Australia probably would be the only likely candidate for Tesla.

Japan though Is the real head scratcher, Tesla really needs to crack that. They are very hesitant to adopt foreign brands that compete against their national industries, but when the levee breaks for whoever can breakthrough it is a real huge payoff (Obvious example is a company that shall not be named that sells a very popular smartphone).

 

[buttershrimp]

My wife is a total Tesla basher on the outside (they're too "delicate", too many tech bros own them, etc...). Even though the stock has made us $$$.

But on the inside, she wants one, she just doesn't want to admit it.

But she knows how to trigger me. Today, referring to the Model S, she said,

"you know, those S-Class ones aren't bad".

Here is what you do, slightly break things on her car…. Make the fob not work on the car she drives, unplug fuses that make air conditioning work, then casually say, “that’s so weird, when that happens to me I call mobile service”.

 

[ZeApelido]

Here is what you do, slightly break things on her car…. Make the fob not work on the car she drives, unplug fuses that make air conditioning work, then casually say, “that’s so weird, when that happens to me I call mobile service”.

My wife is Israeli American, are you trying to give me a death sentence?

 

[Wicket]

Was going to say the same thing - battery production in Australia probably would be the only likely candidate for Tesla.

Japan though Is the real head scratcher, Tesla really needs to crack that. They are very hesitant to adopt foreign brands that compete against their national industries, but when the levee breaks for whoever can breakthrough it is a real huge payoff (Obvious example is a company that shall not be named that sells a very popular smartphone).

Made me curious what sells in Japan so here is copy/paste. I was looking for top non-Japanese brands. Looks like German lux brands which I think is similar to China. Also, Isuzu is still a thing? Mercedes at 1.2% of market is pretty *yawn* but it doesn't make me super optimistic.

Brand	Sales 2019	Sales 2018	% 18/19
	Total	5,195,216	5,272,067	-1.5
1	Toyota	1,547,173	1,508,647	2.6
2	Honda	722,075	747,226	-3.4
3	Suzuki	696,014	714,594	-2.6
4	Daihatsu	658,849	646,781	1.9
5	Nissan	568,743	616,033	-7.9
6	Mazda	203,580	220,743	-7.8
7	Subaru	131,261	148,453	-11.6
8	Mitsubishi	103,486	104,591	-1.1
9	Isuzu	81,442	76,747	6.1
10	Hino	69,791	70,811	-1.4
11	Mercedes-Benz	66,553	67,554	-1.5
12	Lexus	62,394	55,096	13.2
13	BMW	46,814	50,982	-8.2
14	Volkswagen	46,794	51,961	-9.9
15	Mitsubishi Fuso	41,272	42,348	-2.5
16	Audi	24,222	26,473	-8.5
17	Mini	23,813	25,984	-8.4
18	Volvo	19,007	17,805	6.8
19	Jeep	13,360	11,438	6.8
20	Peugeot	10,626	9,881	7.5
21	UD Trucks	10,388	9,974	4.2
22	Porsche	7,192	7,166	0.4
23	Renault	6,805	7,253	-6.2
24	Fiat	5,988	6,014	-0.4
25	Land Rover	4,560	3,972	14.8
	Source: JADA

 

[ZeApelido]

Happy 4th!

https://twitter.com/x/status/1411782046524100612

 

[Wicket]

Happy 4th!

https://twitter.com/x/status/1411782046524100612

omfg I'm dying

 

[ZachF]

Made me curious what sells in Japan so here is copy/paste. I was looking for top non-Japanese brands. Looks like German lux brands which I think is similar to China. Also, Isuzu is still a thing? Mercedes at 1.2% of market is pretty *yawn* but it doesn't make me super optimistic.

Brand	Sales 2019	Sales 2018	% 18/19
	Total	5,195,216	5,272,067	-1.5
1	Toyota	1,547,173	1,508,647	2.6
2	Honda	722,075	747,226	-3.4
3	Suzuki	696,014	714,594	-2.6
4	Daihatsu	658,849	646,781	1.9
5	Nissan	568,743	616,033	-7.9
6	Mazda	203,580	220,743	-7.8
7	Subaru	131,261	148,453	-11.6
8	Mitsubishi	103,486	104,591	-1.1
9	Isuzu	81,442	76,747	6.1
10	Hino	69,791	70,811	-1.4
11	Mercedes-Benz	66,553	67,554	-1.5
12	Lexus	62,394	55,096	13.2
13	BMW	46,814	50,982	-8.2
14	Volkswagen	46,794	51,961	-9.9
15	Mitsubishi Fuso	41,272	42,348	-2.5
16	Audi	24,222	26,473	-8.5
17	Mini	23,813	25,984	-8.4
18	Volvo	19,007	17,805	6.8
19	Jeep	13,360	11,438	6.8
20	Peugeot	10,626	9,881	7.5
21	UD Trucks	10,388	9,974	4.2
22	Porsche	7,192	7,166	0.4
23	Renault	6,805	7,253	-6.2
24	Fiat	5,988	6,014	-0.4
25	Land Rover	4,560	3,972	14.8
	Source: JADA

Japan is protectionist as hell about automobiles.

Auto imports face hundreds of tiny little barriers that individually can be plausibly denied as protectionism, but add up to a nearly complete barrier.

 

[Singuy]

Was going to say the same thing - battery production in Australia probably would be the only likely candidate for Tesla.

Japan though Is the real head scratcher, Tesla really needs to crack that. They are very hesitant to adopt foreign brands that compete against their national industries, but when the levee breaks for whoever can breakthrough it is a real huge payoff (Obvious example is a company that shall not be named that sells a very popular smartphone).

Hard to crack the Japanese thing but sending that Japanese billionaire to the moon may help. It's a country of people full of nationalistic behavior. They are unfriendly to foreign immigration and rather solve the labor shortage problem with robots than with immigrants.

 

[ZachF]

Trending on my Apple feed.

Tesla, Chinese start-ups eclipse Toyota, VW in the world’s largest EV market as buyers focus on cutting-edge technology
Established carmaking giants have got off to a bumpy start in their campaign to tap China’s accelerated pace of electrification, with sales of their new battery-powered vehicle models hitting a stumbling block. Globally renowned marquees such as…
Read in South China Morning Post: Tesla, Chinese start-ups eclipse Toyota, VW in the world’s largest EV market as buyers focus on cutting-edge technology — South China Morning Post

Summary: Tesla, NIO and XPeng are dominating the China EV market. Toyota and VW and other "vintage" OEM sales are disappointing and off to a slow start. "Swiss bank US has predicted that EV sales in China would jump nearly sixfold to 6.5 million vehicles in 2025, up from 1.17 million units last year."

To the major OEMs:

 

[JustMe]

Happy 4th!

https://twitter.com/x/status/1411782046524100612

Am I a bad person for watching that whole thing waiting for a Zuck faceplant?

 

[JustMe]

Hard to crack the Japanese thing but sending that Japanese billionaire to the moon may help. It's a country of people full of nationalistic behavior. They are unfriendly to foreign immigration and rather solve the labor shortage problem with robots than with immigrants.

The Japanese people I’ve met love the US and some American brands. However US auto companies have not put much effort into appealing to the tastes and needs of Japanese consumers. I hope Tesla can do better. It may take a compact Model 2 to break through.