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

[Paul_SF]

https://twitter.com/x/status/1451381310291857411

Free upgrades to new FSD Hardware and easy to do.

 

[willow_hiller]

For anyone with access to BBC iPlayer, their new show "Shop Well for the Planet?" is worth a watch, just to see how mainstream electric vehicles are becoming in the UK. BBC One - Shop Well for the Planet?

They've combined the hosts from "Eat Well for Less?" and "Shop Well for Less?" into this new show with a focus on environmentally friendly lifestyles. And so far the conclusion of every episode is "Electric vehicles are affordable for the average family, easy to operate and charge, and are the single most impactful change a household can make to reduce their carbon footprint while saving money."

 

[22522]

Can you explain further about what the service revenue stream Gary wanted Tesla to implement?

Also I agree that advertisement at legacy car level is a waste. However, there's also a cost to not advertise, which is the anti-tesla advertising campaign by MSM. This destroy brand value which is not exactly free. I would rather Tesla figure out an advertisement number of insignificance that can offset the cost of brand value destruction. I don't know if this number even exist, but it's worth a discussion.

Sure. You heard on the call that "the best service is no service."
Any mention of service revenue streams is counter to the best service. I think Gary acquiesced when someone else mentioned service revenue streams, rather than stating that service revenue streams categorically should not exist. [Note: service does not scale well and destroys the robotaxi option].

Brand value means lots of things.

Toyota Is Most Valuable Car Brand, Tesla Is Growing Like Crazy: Study

A new study lists the world's most valuable companies, and while Tesla isn't in the top ten, it showed the most growth though it still trails Toyota.

www.motor1.com

All data indicate that Tesla brand value is going up faster than any other company.

If I were to copy somebody, I would copy the company who is making hay. That would be Tesla.

So this brand threat stuff is not factual and does not warrant a change in behavior, as what Tesla is doing now is working better than any method that humans know about. (Any other approach would likely worsen results. Why would you do this?).

 

[Knightshade]

Free upgrades to new FSD Hardware and easy to do.

Been expecting that for a long while now.

Bet you they also get a new rear-view mirror with the interior cam for driver monitoring at the same time.

 

[Skryll]

Can you explain further about what the service revenue stream Gary wanted Tesla to implement?

Also I agree that advertisement at legacy car level is a waste. However, there's also a cost to not advertise, which is the anti-tesla advertising campaign by MSM. This destroy brand value which is not exactly free. I would rather Tesla figure out an advertisement number of insignificance that can offset the cost of brand value destruction. I don't know if this number even exist, but it's worth a discussion.

They have figured it out a long time ago. Viral marketing, Free Supercharging, Referral program, twitter presence and entertainment (drama), and making the product so exiting your customers become your sales force. I got two home chargers out of the referral program. I sold one and used the other, to somebody else I convinced to buy a Model X. PR dollars well spent.

Gary is wrong on some other items - gigafactory Shanghai leveraged learnings from Fremont/Spark. Berlin and Austin are leveraging what was learned from Shanghai, radical improvements are happening. It takes more learning before building the next ones, and the ramp will be even faster that way, because some structural decisions that stood in the way of ramping faster will have been understood and revised for the next gigafactories.

 

[22522]

I so hope that this is NOT the case. Terrible for us as investors, terrible for the mission as well. I'm still in awe from what I've learned over the past month or so about how Tesla operates internally, and have been evangelizing it within my own circle, to include the company I work for. I want the Tesla model to succeed for all sorts of reasons. A huge breath of fresh air.

I should have clarified. When one is really busy, as Elon is, maintaining signal to noise can be problematic - that means taxing. If we make working on TESLA a rewarding (self actualizing) activity for Elon we can get the 18 months back.

It is tedious for Elon to have to keep pointing at the scoreboard, maybe we should do more of that as you have in your exemplary post above!

 

[Singuy]

They have figured it out a long time ago. Viral marketing, Free Supercharging, Referral program, twitter presence and entertainment (drama), and making the product so exiting your customers become your sales force. I got two home chargers out of the referral program. I sold one and used the other, to somebody else I convinced to buy a Model X. PR dollars well spent.

Hmm I guess we can make a case that negative media is intentional as that activates a more cult like behavior which defends the product and hence in extention advertise for Tesla.

 

[Skryll]

Hmm I guess we can make a case that negative media is intentional as that activates a more cult like behavior which defends the product and hence in extention advertise for Tesla.

I don't think it is intentional but luck has it a lot that circumstance plays into teslas hands. Luck has been one of teslas superpowers. I think it comes from ignoring the distractions and executing with persistence while being true to oneself. Just look at insurance companies jacking up premiums and the natural solution instead of complaining is to be your own insurance company, opening yet another revenue stream.

 

[Singuy]

I don't think it is intentional but luck has it a lot that circumstance plays into teslas hands. Luck has been one of teslas superpowers. I think it comes from ignoring the distractions and executing with persistence while being true to oneself. Just look at insurance companies jacking up premiums and the natural solution instead of complaining is to be your own insurance company, opening yet another revenue stream.

Not stopping the negative media is intentional is what I mean...the case to not advertise solely to stop negative media.

 

[Ogre]

2. Believes Tesla will hit 5M cars by 2025, but thinks they need to start investing into more gigafactories now as he doesn't see Tesla scaling fast enough with just Berlin/Texas by 2025.

They can probably get very near to 5m cars by 2025 with existing facilities, particularly if they break ground on new buildings in Texas. Tera Texas, is likely close to capable of 2m vehicles per year by itself. Berlin and Shanghai are very likely going to be able to scale to 1m each at peak. I’m sure they will have more factory square footage in the next 2 years regardless.

9. He rather Tesla buy back shares than to buy BTC. His thinking is if he can invest in it, then the company shouldn't as it creates no additional return. He then calculates the value of holding cash and why it should be returned back to the shareholder as a form of buy backs if you have nothing to do with it. However BTC position is a rounding error and he has made his peace with it.

The problem with buybacks is the only way Tesla can recapture that money is by re-issuing shares or taking on debt. I know it’s a popular financial engineering tactic to take on debt to buy back shares, but it’s always been a questionable tactic in my book. In a few years they will be able to buy back shares without taking on debt.

 

[CaliBear1]

I'm not providing a link but the Jalopnik article is interesting for this data:

Behind All The EV News, Big Production Cuts At VW

Volkswagen has produced just 300,000 cars at its main Wolfsburg plant so far this year, a company source with knowledge of the matter said, the lowest figure since 1958 and far behind its average output before the pandemic.

The plant, which makes cars from the Golf, Tiguan, and Seat brands among others, produced an average of 780,000 vehicles per year in the past decade and the company said in 2018 it aimed to boost this figure to a million.

Couldn’t be happening to a better, more altruistic company.

 

[deshkart]

Gary Black - Tesla releasing 25k EV is lights off for the auto industry.

 

[Dancing Lemur]

Anecdotal note: I got my “move your Model X order up by changing to 6-seater“ call tonight. Mine is a Plaid, and when I pressed the rep, he said it could be as soon as a few weeks, but almost certainly by the end of the year (East coast).

I did change it, though I think the 5-seater is actually what I want. But I can take one for the team to help the 4th quarter, and the dogs can find somewhere else to sit back there. I guess I’ll have to sell a couple more covered calls tomorrow…

 

[DaveT]

Don't know why all the hate on Gary. Everything he is saying is pretty reasonable and I feel like he's much better at defending Tesla and his thesis than some of the bulls from CNBC interviews. Anyways, TLDW

1. More conservative fund managers that track the S&P are underweight on Tesla due to valuation, but are bringing to equal weight after Q2 2021 report(per research via from his broker)

2. Believes Tesla will hit 5M cars by 2025, but thinks they need to start investing into more gigafactories now as he doesn't see Tesla scaling fast enough with just Berlin/Texas by 2025.

3. His theory that Elon didn't want to talk about new factories is because he is trying to get Tesla investment grade

4. Believes Tesla is investment grade already(and provides the math for it).

5. Risk consist of competition as other legacy makers are finally "waking up" by using existing brands and having the EV version of that brand (ie. F150 EV, Porsche Macan EV) vs using off brand names like ID4 and such.

6. The risk he sees is low as Tesla continues to expand TAM as he believes EV shares increases

7. Believes Rivian has a better chance of competing against Tesla than legacy as he sees other automakers are doing a lot of theatrics. Diess "lighting a fire under his manager's butt" is an example of doing it for show but don't see any progress.

8. X holding company is very negative for investment portfolio managers as it takes the profits down since Space X/boring/others are not profitable. Essentially diluting Tesla's profits. He sees himself and others massively dump shares if this is announced.

9. He rather Tesla buy back shares than to buy BTC. His thinking is if he can invest in it, then the company shouldn't as it creates no additional return. He then calculates the value of holding cash and why it should be returned back to the shareholder as a form of buy backs if you have nothing to do with it. However BTC position is a rounding error and he has made his peace with it.

10. Believes Tesla is cheap if you believe next year's EPS is 10 dollars. Does some calculation to show why it's cheap vs other techs and the S&P.

Great summary! Gary provides a lot of valuable insights into the portfolio manager and fund world. I learn something new every time I talk with him.

 

[Discoducky]

Great summary! Gary provides a lot of valuable insights into the portfolio manager and fund world. I learn something new every time I talk with him.

I don't mind Gary until he talks about AI. I wish he'd run things by @jamesdouma first.

 

[StealthP3D]

Now to answer your question about why all the hate on Gary. I can only speak for myself, and it is not hate.

1) He tries for force (badger) Tesla/Elon into the pattern of behavior that plays best to portfolio managers. The big 3 have been playing to portfolio managers for years. This behavior is why they are where they are. So he is trying to force Tesla to be more like GM (in every respect, as you can't pick and choose.) So there is conflict. People here do not want TESLA to perform like GM. Gary does not know that GM like performance is what he is asking for.

2) He thinks Telsa should direct funds to PR and advertising. That means lower R&D expenditures and consequently worse product as the money has to come from somewhere. Someone here pointed at advertising costs vs R&D costs per vehicle for car companies. I parroted it. Reflect on that a while.

3) He has talked about developing a service revenue stream [IIRC]. That means holding customers hostage and extorting money from them. This destroys Net Promoter Score and kills the durable demand that Tesla relies on. If people don't want to tell their friends to become hostages, Tesla flexibility on delivery and upgrades disappears. The company dynamic changes completely and they get trapped in traditional automakers' "pay people to take it" flow requirements.

So Elon and Tesla have worked very hard to structure the company to avoid the pitfalls of the big automakers.

No advertising.
No discounts.
No distribution channel (even though distribution can help you magically dress your numbers at the end of each quarter).
Distribution channel has no voice on the car ( A car salesman is very self confident. Their input is "I am great." "I can sell anything with your badge on it." "Just make it as cheap as possible so I maximize both profit per sale and service revenue." "if you do that for me, I will help you make the numbers look good at the end of each quarter.")
Etc.

Gary yells in Elon's ear to get Elon to behave like they train you to behave in business school, not caring, or understanding that that behavior will make TESLA and it's products mediocre - Just like all the dead and dying companies in, and products from, the rust belt.


So we all know that a Harvard MBA will kill Tesla and make them just like all the other companies with a high concentration of Harvard MBAs.
Do a demographic study.
Gary is taking a run at it and softening Elon up to where caring about Tesla is not worth the trouble. Body blows in early rounds.
He has probably already hastened Telsa's demise by 18 months.
Eventually Elon will hand the reins to a Harvard MBA who will hire their friends and TESLA's moment will have passed. They will start preying on customers, forget about Net Promoter Scores, start advertising, create a PR department to lie to the public before facts are in, and lie to the public to protect stock prices - just like the oil company PR people.

I hope this answers your question. Munro has seen this progression before, first hand. He knows how the story goes.

I like Gary.
Elon is way better at creating wealth.
Gary does not act as if he respects Elon, or what Elon has done.

[Edited for clarity by adding words and commas here and there.]

Well put! I also don't hate Gary, I just don't think he is particularly relevant and the list of things he keeps harping on that Elon SHOULD be doing is a rather arrogant, Johnny-come-lately way of saying that he knows more about running a multi-billion dollar, multi-national manufacturing empire than Elon and that Elon doesn't know what he's doing. It's laughable.

The months long backlog for Tesla cars, all without a shred of advertising, shows just how wrong he has been. Advertising would have damaged the brand irretrievably by shattering the magic that is Tesla while increasing order wait times and making the cars more expensive (or lowering profits if the price was kept the same). Walking quietly is actually a good thing for Tesla to practice at this point in their development (not shouting their branding message to anyone who has exposure to traditional media). It's all about bringing the most cars to the people at the best prices and with the least amount of the kind of BS that is ingrained in legacy auto. Gary doesn't seem to understand the paradigm shift that is happening right under his nose.

I have to question the insight of people who think Gary is God's gift to Tesla investors.

 

[[email protected]]

Anecdotal note: I got my “move your Model X order up by changing to 6-seater“ call tonight. Mine is a Plaid, and when I pressed the rep, he said it could be as soon as a few weeks, but almost certainly by the end of the year (East coast).

I did change it, though I think the 5-seater is actually what I want. But I can take one for the team to help the 4th quarter, and the dogs can find somewhere else to sit back there. I guess I’ll have to sell a couple more covered calls tomorrow…

I got that call in 2016, and after price dickering, made the change from 5 to 6. Now, after 5 years, I personally love the strange, wonderful configuration of seats, floor space and limitless leg room in the back seats. And a completely separate HVAC. Elon's Faberge egg it is...

 

[Gigapress]

Boring Company Vegas Loop 29-mile expansion plan was just officially approved this week. It will have a fleet of 700 Teslas when this phase is complete, running tens of thousands of Vegas residents and tourists per hour around the city providing amazing advertisement for Tesla and eventually showing off FSD.

During the Clark County Commission hearing, Boring Co CEO Steve Davis mentioned ambitions to have Vegas as the first node in a soon-to-be national Loop network. In what seemed to me to be a telling slip of the tongue, he initially said "international". He also said that eventually the plan is still to allow connectivity between Loop and Hyperloop. Additionally, he stated on record that this will be the cheapest and safest urban transport architecture ever designed.

At the hearing, prominent local business leaders, unions, and others all voiced wholeheartedly their approval of the proposal and then the Commission voted unanimously in favor. They are talking about this project as nothing short of revolutionary for Vegas and the whole planet.

LV Convention and Visitors Authority CEO Steve Davis confirmed in an interview that stations can be integrated into any aboveground patch of asphalt and also into underground parking garages. We also learned that at this point they can dig faster than they can construct stations.

In my opinion, this is extremely bullish for Tesla, because

1) It's associated with Elon's influence, wealth and credibility
2) No other company produces better vehicles for this system
3) This will massively accelerate the transition to sustainable energy because it multiplies the benefits of AEVs

Clark County Planning Commission on 2021-10-19 7:00 PM

Live and Recorded Public meetings of Clark County Planning Commission on 2021-10-19 7:00 PM for County of Clark

clark.granicus.com

 

[uujjj2]

Biden is not actually anti-Tesla and Elon Musk is not actually anti-Biden. But both men have an interest in making it appear that way. Let me explain.

For Biden, he must win Michigan. And it's not just electorally essential; it's his legacy. Legacy is a big deal to presidents, and for Biden his legacy is tied to global warming, and even more so electric cars. Biden has been tied to electric cars since his days with the ATVM loan program. To make mass adoption of EVs successful, he needs the UAW and the Detroit automakers to buy in. Tesla is not popular with Detroit, so if pretending to dislike Tesla helps get them on board, well so be it.

For Elon Musk, he's a much less political guy than people seem to think. Five years ago people thought he was some staunch liberal. Now people think he's a Trump supporter. He's never been either. Elon's goal, like Biden, is mass adoption of EVs and renewables. To get mass adoption of EVs, he has to sell EVs to Trump supporters in the sticks not just rich California tree huggers. Elon made his fortune off California tree huggers, but if pretending to dislike them helps Tesla sell EVs in the sticks, well so be it.

(This extends internationally too. Elon goes to China and tells them that China is awesome and America is entitled and complacent. Then he comes back to America and wraps himself in the American flag.)

So there's a kabuki theater going on here between two electric car promoters. We Tesla fans need to calm down about this Missy Cummins thing, and about the White House EV summit, and about Elon donating money to pro-oil politicians. This is all a show. Don't get sucked in.

Moderator edit: This post has been un-deleted but ALL further reacting posts utterly instantly violated TMC’s No Political statements. Zero tolerance.
I figured this comment would be controversial. It definitely got a reaction. But I got overwhelmingly favorable responses from Americans. Oddly, I got a bunch of "disagrees" from Europeans.

Lemme add a little more color on why Biden believes (correctly) that it's important for Detroit automakers and the UAW to buy in to the EV transition. It's not that traditional auto is going to crush Tesla and the startups. It's got to do with labor and wages. See, a big problem for green energy is that fossil fuel jobs are heavily unionized and high paying, while solar jobs aren't. Moreover, ICE auto production is heavily unionized and high paying, while although Tesla Fremont's total comp is actually higher than the UAW, the wages Tesla is said to be offering in Texas are definitely not.

There's a narrative being developed that the green energy transition is going to lead to lower wages. The fossil fuel industry is already heavily pushing this narrative, and it has a receptive audience among working class people whose wages have been stagnant for a long time. These are the same people who were receptive to Donald Trump's message.

The backlash isn't some minor factor. There are millions of workers directly employed by fossil fuel and ICE auto industries. Tens of millions whose livelihoods indirectly depend on them. If the message catches on, this group of people is going to stick to ICE even as EV becomes better, as a badge of cultural identity. It sounds irrational for 30-40% of people to cling to ICE out of cultural resentment, but hey look a similar percentage refused a vaccine during a pandemic for the same reason. 30-40% sticking to ICE means climate doom.

By getting the Detroit 3 and the UAW to commit to all-EV by 2035, at that White House EV summit, Biden has taken away that option. There will be no American brand ICE cars on sale at all. He has anticipated and mitigated the anti-EV backlash.

Biden's been pushing EVs for over a decade. Biden's ATVM loan program funded Tesla's first factory! You really think Biden hates Tesla? Really? Lemme show you my ski condo in Delaware.

Now, there's another potential source of anti-EV backlash, one Elon Musk has noticed and worked to mitigate. All of the top-tier EV-only automakers are based in California: Tesla, Lucid, Rivian, even Fisker, Canoo, and Faraday. Imagine a future where the fossil fuel industry is gone and traditional auto is gone. Imagine all the wealth from the fossil fuel sector in Texas and the South, plus all the wealth from the Midwestern auto industry, instead being funneled to California. On top of all the truck, taxi, and bus driving jobs, being replaced by autonomous tech also coming from California. How's that gonna play in Middle America?

Elon Musk moved to California with nothing but a suitcase of clothes. He moved out a quarter century later the richest man in the world, richest because so many thousands of Californians worked their tails off for him for so many years. And he dated a string of hot celebrity chicks along the way! You really think Elon hates California? Really? You wanna see my oceanfront property in Austin?

So all of this, Biden hugging the UAW and Detroit 3, Elon putting distance to California, plus the climate bill being worked out between Manchin and Biden that's basically a payoff to fossil fuel workers, this is all about protecting the march to a zero GHG economy from being undermined by a backlash.

If you think Biden really hates Tesla and Elon really hates California, feel free to click disagree so I know who the suckers are.

 

[Artful Dodger]

Interactive Brokers sent out a note yesterday that said implied movement after earnings is 4.3%. Not sure how they calculate it.

FWIW they also gave consensus EPS as 1.49 and revenue as 13.4 B.

... and, TAH-DA! There's your 4.3% intraday move for TSLA.

Cheers!