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

[Buckminster]

Calling the Elon Musk Private Jet tracker.... If he's on the way to Shanghai , then

Elon has been in Austin for 5 straight days - quite unusual for him these days. My theory is that he is splitting his time (rather than splitting his stock) between GF and the new Raptor factory 1.5 hrs north of Austin.

 

[Thekiwi]

I'm no economist and have not studied this specific topic but his concern about debt seems misplaced, specifically considering MMT, (Modern Monetary Theory).

Doubly so when a large portion of the bill is to combat climate change with incentives for people and businesses/government departments to adopt solar & EVs.

It is beyond bizarre to see someone whom I had previously viewed as the worlds leading climate change fighter to be so opposed to the US government committing hundreds of billions more to fighting climate change, all because it might add a small relatively insignificant amount to US national debt.

It is weird to me that Elon didn’t openly criticize the last administration - despite the fact they imposed tariffs that hurt Tesla and didnt help Tesla or the fight against climate change in any way whatsoever (pulled out of Paris climate accord and killed vehicle clean air standards where possible) - Yet Elon is openly disparaging the current administration and it’s efforts in congress which are passing bills that will clearly be of benefit to Tesla and the fight against climate change.

 

[CorneliusXX]

I'm simply trying to redirect the emphasis. I'm calling for an end to ICE production in 5 years, which is merely consistent with net zero by 2030. That pretty short term, but if accomplished automaker would ramp up EV production very fast. The long-term impact is that we still have a chance at 1.5 degree climate change.

Biden is now calling to phase out ICE production by 2035. That is way too slow to hit net zero by 2050. ICE vehicles made in 2035 will still be spewing CO2 all the way out to 2060.

I too would love an end to ICE production as soon as possible.

 

[Sudre]

In complete humor my brain jumps to a Model Zero US factory that is completely automated except for one Union worker that pushes the start button on the casting machine. Then one year later the US Federal Government has to file for bankruptcy because of the 2 million $12,500 EV tax credits. It would be like the entire middle class and below not paying taxes if enough could be produced.

I always knew there was a reason Medicare would not be around when I retired.

 

[jhm]

Remember that will all of Elon's ambition he only hopes to reach 20% market penetration by 2030 - where is the other 80% going to come from? If these are the only subsidies on the table then it is better to get them than not.

The other 80% comes from China. Seriously, when Tesla is approaching 20% and still has the potential to keep growing 50% per year, all other automaker are in an all out scramble to bring competitive EV product to the market. The survival instinct kicks in much sooner and it is much more compelling than any subsidy could ever be. Make EVs or die. The effect of the subsidy is not really to motivate the transition to EVs, it's to enable legacy maker to survive the transition.

For example, was it necessary for any government to provide tax incentives to phone companies to make smartphones in 2005? The obsolescence of whatever they had in the face of the iPhone was sufficient motivation for phone makers to up their game. Moreover, there was no need to create incremental public demand for smartphones. The only reason why any government might have considered a smartphone subsidy would have been to protect domestic phone makers that were on the verge of massive layoffs.

So in my thinking Tesla has the iPhone of EVs. Sure they're pricey. Everyone wishes they could have one. Competitors are scrambling to put up their own smart phone of an EV. What is left for a government to do?

If the US government does nothing, GM, Ford and Stellantis could simply go bankrupt attempting to compete with Tesla. Or the US government could put out subsidies in the hopes of avoiding bankruptcies and lost jobs. The fallacy, however, is that since EVs require few labor hours to produce, jobs will be lost either way. The only difference is how long jobs making ICEVs or inefficiently making EVs can be preserved. This persistence of inefficiency can only delay the transition to sustainable transport and delay real climate action.

 

[jhm]

Model Zero

I love this name.

 

[bkp_duke]

So took a quick look at the study and the here are some key things.

• PWBM estimates that H.R. 5376, the Build Back Better Act, as written would increase spending by $2.1 trillion over the 10-year budget window and revenue by $1.8 trillion, for a 10-year deficit of $274 billion.

So hmm this says increase debt by $274 billion over 10 years. Well how does debt increase by 24%? Well it presents an alternative scenario where all the temporary measures (EV tax credit is one) are made permanent. Also reading the text GDP falls because more people will have healthcare and wont have to continue to work until they drop dead to maintain healthcare. Also the debt increases by 24% in 2050.

• In an alternative, illustrative scenario in which all temporary provisions in H.R. 5376 are made permanent, spending would instead total $4.6 trillion over the 10-year budget window. In this scenario, by 2050 federal debt increase by 24.4 percent and GDP would fall by 2.9 percent relative to current law.

People are owning Elon after this post by pointing out temporary provisions that indeed did go away including the previous $7500 tax credit for buying Teslas.

There is another fundamental flaw - and I'll use the EV rebate as an example. Many items in the BBB are not capped in terms of expense. So say they are "estimating" that they have to provide credits for 5 million EVs over 10 years (pulled that number out of my @$$, don't take it literal), but the number eligible for the rebate actually sold over 10 years is 2X that, or 5X, or even 10X (if Tesla goes bonkers). There are no provisions to cap cost on this thing, and that's what the legislators that support it are intentionally not answering.

 

[CorneliusXX]

The other 80% comes from China. Seriously, when Tesla is approaching 20% and still has the potential to keep growing 50% per year, all other automaker are in an all out scramble to bring competitive EV product to the market. The survival instinct kicks in much sooner and it is much more compelling than any subsidy could ever be. Make EVs or die. The effect of the subsidy is not really to motivate the transition to EVs, it's to enable legacy maker to survive the transition.

For example, was it necessary for any government to provide tax incentives to phone companies to make smartphones in 2005? The obsolescence of whatever they had in the face of the iPhone was sufficient motivation for phone makers to up their game. Moreover, there was no need to create incremental public demand for smartphones. The only reason why any government might have considered a smartphone subsidy would have been to protect domestic phone makers that were on the verge of massive layoffs.

So in my thinking Tesla has the iPhone of EVs. Sure they're pricey. Everyone wishes they could have one. Competitors are scrambling to put up their own smart phone of an EV. What is left for a government to do?

If the US government does nothing, GM, Ford and Stellantis could simply go bankrupt attempting to compete with Tesla. Or the US government could put out subsidies in the hopes of avoiding bankruptcies and lost jobs. The fallacy, however, is that since EVs require few labor hours to produce, jobs will be lost either way. The only difference is how long jobs making ICEVs or inefficiently making EVs can be preserved. This persistence of inefficiency can only delay the transition to sustainable transport and delay real climate action.

I think the phone comparison isn't quite directly comparable for two reasons 1) supply chain constraints, and 2) product lifecycles.

With phones the core supply chains didn't need to change as there was enough of the right material being mined to produce phones without too many issues. For EVs there needs to be supply chain reorganisation from the base level upwards - there isn't enough nickel/lithium/graphite, etc currently being mined to produce in the quantities we need. Subsidies will incentivise the change needed.

The second fact is lifecycle - it didn't matter if it took a few extra years for smartphones to become available because there wasn't global warming to worry about and people didn't keep phones for 15-20 years - so there was no point in subsidising smartphones. But with EVs, if there isn't enough supply to replace ICE then there will be a lot more ICE vehicles spewing out emissions for a long time.

China might make the other 80% of EVs - but they are doing it with gigantic subsidies. I don't think that is a good outcome for the west.

 

[Ogre]

There is another fundamental flaw - and I'll use the EV rebate as an example. Many items in the BBB are not capped in terms of expense. So say they are "estimating" that they have to provide credits for 5 million EVs over 10 years (pulled that number out of my @$$, don't take it literal), but the number eligible for the rebate actually sold over 10 years is 2X that, or 5X, or even 10X (if Tesla goes bonkers). There are no provisions to cap cost on this thing, and that's what the legislators that support it are intentionally not answering.

The open ended nature of this thing is one of my big concerns too.

Resetting the cap to another 200k units would bother me a lot less. The cost estimate is laughably low and Tesla will break through the entire estimated cost in less than 3 years.

There are a lot of ways they could have put a cap on this but they didn’t bother. I’m surprised this didn’t get flagged when they audited it.

 

[LYTRIDR]

And how does that work? Tesla has a standing order for any and all battery cells that can be produced by anyone, and this is the sole limit on production for 2022 and the reason another 2 gigafactories aren't breaking ground today.

How will an EV subsidy in that environment increase EV supply?

It is all about the supply chain, the certainty of offtake partnerships from the mine to the finished electrode, and the capacity to create the cells with these materials. While Elon has stated that he wants everyone to make as many batteries as possible, there have been precious few offtake partnerships with the junior miners which need the confidence and the capital to expand operations.

Take Novonix for example. They are the only US producer of qualified synthetic anode material. The best info I can find says 220 lbs of anode are needed for each BEV on average and they plan 10,000 tons of capacity online next year. That is only enough anode for around 90,000 vehicles per year. They plan to scale to 150,000 tons per annum, or enough anode for fewer than 1.4 million vehicles/year by 2030. We need much, much more production domestically and the process can scale, the feedstock can be made available, but the confidence that the finished product will be in demand and profitable when produced in larger quantities (double, triple, more?) MUST be very high to offset the additional risk associated with the accelerated expansion plans. Further, the furnaces made by Harper have long lead times and Harper also wants assurances that they will be paid. Confidence in the business model begets further confidence unlocking scale.

With this in mind, there is no known offtake partnership between Tesla and Novonix. In fact, NVX:ASX dumped 30+ percent of its value in one trading session last week when news broke that Tesla applied for an extension of the Tariff exemption under section 201 to import synthetic anode from China.

Ford, GM, VW, Toyota, Stellantis, etc. are all potential offtake partners, but as the current market sits, if you were on the board of Novonix, would you want to bet your future with a tie-up to one of these companies? The counterparty risk if (when) one of these companies goes bankrupt would prompt me to a risk-off position and I'd be more likely to maintain my current growth plans for the next few years until more information is available and my balance sheet strengthens. However, a large structural price advantage for BEV would significantly de-risk faster expansion, create increased confidence that there will be a long-term deficit in battery materials, and prompt me to accelerate expansion plans.

 

[MartinAustin]

No way in heck is Tesla showing the compact car soon. Certainly not tomorrow. They will not show this car until it is nearly ready for production. The entire factory will need to be built first, and the battery supply will need to be secured. It could possibly be shown vey late 2022, but most probably 2023. While 3 took some S sales, and Y took some 3 sales, the new compact model will probably take half the demand for the model 3 away the moment it shows. The 3 will still be useful for taxi work and stuff, but many people in buy a 3 even though they want a smaller car because it is the best smallish vehicle available.

Exactly.

In fact, Tesla bears and shorts who, desperate to reduce demand, will soon be banging drums over and over, declaring "the $25,000 Model 2 is around the corner, we expect the reveal this month" etc. - hoping people will put off ordering from the existing product line. We should expect endless speculative renders+coverage from insideevs.com and other sites that depend on clicks.

In 2013 I went from a Honda Civic to my Model S, because that was the only Tesla available. When a $25,000 Tesla is available, it will surely eat into sales of the 3+Y.

 

[jhm]

And how does that work? Tesla has a standing order for any and all battery cells that can be produced by anyone, and this is the sole limit on production for 2022 and the reason another 2 gigafactories aren't breaking ground today.

How will an EV subsidy in that environment increase EV supply?

Not that I have a problem with even a terrible EV subsidy. Even this one. Even with the union nonsense. It makes EVs cheaper and that may be helpful in a few years to make sure all non-believers are killed off and that oil subsidies don't provide a lifeline to ICE.

It's not gonna make more EVs tho.

Right. Effectively the benefit of the subsidy goes mostly to the bottleneck, in this case batteries. Automakers get into a bidding war for available cells, and most of the incremental revenue goes with it to the battery makers. Now of course, classical economics would suggest that investment in anything that relieves the bottleneck goes way up to. So in this sense, the supply is increased. I recognize that argument as valid. However, the battery bottleneck and attendant high battery prices can all make ICEVs more price competitive in the meanwhile. So if you're legacy auto with lots of profitable ICE inventory to move, you don't really mind if the battery bottleneck stalls the EV ramp. I think this may explain why Tesla is so aggressive in grabbing as much battery supply as possible. Strategically, they can't allow legacy to get their hands on enough of it to choke off the production ramp that Tesla wants to run. That is, if legacy could deprive Tesla of cells it would slow down the EV ramp for the whole industry.

Another unintended consequence of the EV incentive could be that competition for battery cells could also price stationary batteries out of utility markets. This could be pretty bad for fight climate change. The supply of grid batteries is increasingly important to maximizing the pace at which wind and solar can be added to the grid. In terms of climate trade-offs it is probably better to moderate the EV ramp than to slow solar and wind installation.

Since EVs and power grids are competing for scarce battery supplies, an incentive to one can disadvantage the other. It seems that deep policy work could have focused more on opening up the battery supply chain than in incentivizing downstream demand. Obviously, if any sort of government coordination could open up more battery supply, this would translate into more and cheap EVs and more and cheaper battery-stored wind and solar power.

Does BBB tackle this bottleneck? I'd think if there was anything there that could help Tesla get more battery supply, Musk would be pointing to it.

 

[Wicket]

In complete humor my brain jumps to a Model Zero US factory that is completely automated except for one Union worker that pushes the start button on the casting machine. Then one year later the US Federal Government has to file for bankruptcy because of the 2 million $12,500 EV tax credits. It would be like the entire middle class and below not paying taxes if enough could be produced.

I always knew there was a reason Medicare would not be around when I retired.

Tip of the hat sir. I thought of almost the entirely same line of satire but you did it better. Only difference is it would be more like 30m in practice (us averages 17m or so per year).

I will say I stumbled on an article that claimed the senate is considering a phase out at 50% marketshare. Something like that but maybe 10% would go a long way to improving my unhappiness. Or even just cutting the subsidy per car by perhaps 75%. At the end of the day understanding the problem requires going below the level of vague gesturing about helping out ev adoption and into looking at the costs and side effects. I wouldn't say a peep if this was 2k$ per car (optimal may be north of 0k$ but is quite obviously not 12.5k$). Perhaps thinking from first principals about what number that should be would help the more dogmatically inclined (as opposed to categorically obv..)

Also it appears Biden is going to announce a full transition to EVs for the federal government tomorrow. No points for guessing who won't get that contract. Although I don't know what kind of laws may require bidding I also doubt Tesla would bother since they already have rich buyers aplenty and a bureaucrat going ludicrous speed is unlikely to be Elon's idea of a good thing.

 

[jhm]

Also it appears Biden is going to announce a full transition to EVs for the federal government tomorrow. No points for guessing who won't get that contract. Although I don't know what kind of laws may require bidding I also doubt Tesla would bother since they already have rich buyers aplenty and a bureaucrat going ludicrous speed is unlikely to be Elon's idea of a good thing.

Elon would tell the government to go place orders for cars online along with Hertz. No fleet pricing.

 

[thx1139]

There is another fundamental flaw - and I'll use the EV rebate as an example. Many items in the BBB are not capped in terms of expense. So say they are "estimating" that they have to provide credits for 5 million EVs over 10 years (pulled that number out of my @$$, don't take it literal), but the number eligible for the rebate actually sold over 10 years is 2X that, or 5X, or even 10X (if Tesla goes bonkers). There are no provisions to cap cost on this thing, and that's what the legislators that support it are intentionally not answering.

Which begs me to ask why dont studies like the one Elon is sharing catch that? Or maybe the cost for it is misunderstood. Looks like Clean Energy Tax Credits are 320 billion over 10 years. That is 16 million $10K tax credits if half of the 160 of the 320 billion is for cars.

 

[MP3Mike]

Although I don't know what kind of laws may require bidding I also doubt Tesla would bother since

Yep, just like they didn't bother bidding on the "low volume" USPS fleet purchase. They don't currently have the resources to make custom low volume vehicles.

Though it does seem that they are working with law enforcement on customizations for the Model 3/Y, mainly software and working with existing companies to outfit them with proper lighting, sirens, controls, etc.

So maybe for general, non-special purpose vehicles, Tesla could participate in the government fleet program.

 

[Skryll]

The other 80% comes from China. Seriously, when Tesla is approaching 20% and still has the potential to keep growing 50% per year, all other automaker are in an all out scramble to bring competitive EV product to the market. The survival instinct kicks in much sooner and it is much more compelling than any subsidy could ever be. Make EVs or die. The effect of the subsidy is not really to motivate the transition to EVs, it's to enable legacy maker to survive the transition.

For example, was it necessary for any government to provide tax incentives to phone companies to make smartphones in 2005? The obsolescence of whatever they had in the face of the iPhone was sufficient motivation for phone makers to up their game. Moreover, there was no need to create incremental public demand for smartphones. The only reason why any government might have considered a smartphone subsidy would have been to protect domestic phone makers that were on the verge of massive layoffs.

So in my thinking Tesla has the iPhone of EVs. Sure they're pricey. Everyone wishes they could have one. Competitors are scrambling to put up their own smart phone of an EV. What is left for a government to do?

If the US government does nothing, GM, Ford and Stellantis could simply go bankrupt attempting to compete with Tesla. Or the US government could put out subsidies in the hopes of avoiding bankruptcies and lost jobs. The fallacy, however, is that since EVs require few labor hours to produce, jobs will be lost either way. The only difference is how long jobs making ICEVs or inefficiently making EVs can be preserved. This persistence of inefficiency can only delay the transition to sustainable transport and delay real climate action.

As buttageg pointed out, it’s more about directing the EV towards long commute rural users in lower income areas where it displaces more CO2 polluting cars.

 

[SOULPEDL]

FYI, I think that's a 4680 in the video, here's how.
It's very scientific... using ppt no less. No tricks.

It's on a shiny surface is all, mirror reflection all the way down it

 

[Thekiwi]

There is another fundamental flaw - and I'll use the EV rebate as an example. Many items in the BBB are not capped in terms of expense. So say they are "estimating" that they have to provide credits for 5 million EVs over 10 years (pulled that number out of my @$$, don't take it literal), but the number eligible for the rebate actually sold over 10 years is 2X that, or 5X, or even 10X (if Tesla goes bonkers). There are no provisions to cap cost on this thing, and that's what the legislators that support it are intentionally not answering.

I dont understand why everyone on this forum doesn’t see this exact situation (No capping of EV subsidy) as the best possible thing imaginable, for both fighting climate change and for their Tesla investment.

”Oh No! This bill might mean Americans adopt Tesla EVs in much larger numbers than planned for only a tiny relative increase in US national debt!!“

<insert dabbing tears with hundred dollar bills GIF>

 

[Mengy]

I dont understand why everyone on this forum doesn’t see this exact situation (No capping of EV subsidy) as the best possible thing imaginable, for both fighting climate change and for their Tesla investment.

”Oh No! This bill might mean Americans adopt Tesla EVs in much larger numbers than planned for only a tiny relative increase in US national debt!!“

But it won't be a tiny increase to the US debt, not with how Tesla is ramping up. That is the concern.