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

[StealthP3D]

With knowing that BEVs need way less service over the long run so that service revenue stream doesn't exist so they go out and build their charging network to get 10%+ profit perpetually through their Supercharger network. Meanwhile Ford, GM, LICE doesnt have this and have given away all the potential profits to the 3rd party companies like EVgo, Chargepoint, Electrify America (VW?). Even though it isnt much, there is something to be said about a never ending, slowly increasing source of profit.

I agree, Q3 could be the start of some mind blowing numbers from all facets of Tesla's business. I can't wait!

Charging is a slowly increasing source of profit?

If Tesla increases production of autos by an average amount of 50% per year while the number of early cars with free supercharging for the life of the car is not increasing, would not the profits be increasing at a rate above 50% compounded annually? And wouldn't you consider any source of profit that was growing at more than 50% compound growth to be increasing more than "slowly"? But, in fact, the number of cars with free supercharging for life are declining, both in actual numbers and especially as a percentage of the fleet that have access to Supercharging. This will have a positive effect on profit growth because, obviously, they are a 100% drag on profits. After thinking about this some more, if we remove cars that charge for free (to simplify the problem), I suppose profits scale linearly with fleet size. So if production is growing 50% annually, and the average life of a car is 15 years, what is the rate of growth of the fleet over time? Maybe someone with better math skill than I can help out here.

I believe it was a couple of years ago that Tesla increased Supercharging fees by a substantial amount, much more than any increase in the price of electricity. Another factor in play is the reduction of cars that have free supercharging, not for the life of the car, but for as long as it is owned by the original purchaser. When the original purchaser transfers ownership, the free supercharging ends. My Performance Model 3 is one of these and Tesla sold a considerable number of cars with this benefit in 2018. The introduction of the Model Y and also the Plaid Model S would be enough to cause many of those owners to trade-in or sell their 2018 Model 3 Performance, thus ending the free Supercharging. A number of owners with free Supercharging are constantly road-tripping for the price of replacing the tires as they wear out.

I agree that Q3 numbers could shock expectations if a number of profit catalysts coincide at once but I'm also prepared for Q2 to play that role instead (due to the already low expectations). Some profit catalysts can be triggered at Tesla's pleasure and Tesla has a certain amount of discretion as to when they spend/recognize expenses with two factories ramping at once so we won't know for sure until Tesla reports. Fun times!

 

[Xepa777]

Germany has not much sunshine, high labor costs, high environmental review costs (even for environmentally beneficial projects, as Giga Berlin showed), and relatively expensive real estate.

Solar was an order of magnitude more expensive in 2010 than in 2022, and the world was mired in a severe recession and credit crunch that drove up the capital costs for solar, making the economics even worse because solar energy is dominated by upfront expenses.

Now in places like Arizona, Saudi Arabia and Qatar, solar is the cheapest energy of all time. Of all time. Ever. Cheaper than paying people $10/hr to gather sticks, chop wood and build a bonfire. We also have extremely low interest rates which further favors solar over traditional energy architectures.

In 2010 we were decidedly not past the tipping point for renewables, especially somewhere like Germany. In 2022 we are past it. I would estimate that we passed the self-sustaining chain reaction threshold circa 2020. I invested in TSLA and other renewables companies in 2018 with half my life savings to help with that push.

Do you have stats on Arizona? I’d like to bookmark that for reference, very intriguing!

 

[Ogre]

Charging is a slowly increasing source of profit?

If Tesla increases production of autos by an average amount of 50% per year while the number of early cars with free supercharging for the life of the car is not increasing, would not the profits be increasing at a rate above 50% compounded annually? And wouldn't you consider any source of profit that was growing at more than 50% compound growth to be increasing more than "slowly"? But, in fact, the number of cars with free supercharging for life are declining, both in actual numbers and especially as a percentage of the fleet that have access to Supercharging. This will have a positive effect on profit growth because, obviously, they are a 100% drag on profits. After thinking about this some more, if we remove cars that charge for free (to simplify the problem), I suppose profits scale linearly with fleet size. So if production is growing 50% annually, and the average life of a car is 15 years, what is the rate of growth of the fleet over time? Maybe someone with better math skill than I can help out here.

I believe it was a couple of years ago that Tesla increased Supercharging fees by a substantial amount, much more than any increase in the price of electricity. Another factor in play is the reduction of cars that have free supercharging, not for the life of the car, but for as long as it is owned by the original purchaser. When the original purchaser transfers ownership, the free supercharging ends. My Performance Model 3 is one of these and Tesla sold a considerable number of cars with this benefit in 2018. The introduction of the Model Y and also the Plaid Model S would be enough to cause many of those owners to trade-in or sell their 2018 Model 3 Performance, thus ending the free Supercharging. A number of owners with free Supercharging are constantly road-tripping for the price of replacing the tires as they wear out.

I agree that Q3 numbers could shock expectations if a number of profit catalysts coincide at once but I'm also prepared for Q2 to play that role instead (due to the already low expectations). Some profit catalysts can be triggered at Tesla's pleasure and Tesla has a certain amount of discretion as to when they spend/recognize expenses with two factories ramping at once so we won't know for sure until Tesla reports. Fun times!

There is a lot of weird accounting around Supercharging. Since there is a bunch of capital, depreciation is highest in the first couple of years after launch. How long do Superchargers last for once they are installed and what is the depreciation cycle on them? I suspect they break even or maybe even operate at a small loss for the first couple years then earn increasing profits as their depreciation cycle plays out.

So profitability on Superchargers might well lag 2-3 years behind actual network growth.

Of course Tesla has been aggressively pushing to bring Supercharger costs down and they have significantly improved installation costs. That will reduce depreciation in those first years.

We were out this Memorial Day holiday weekend and the Superchargers along the highway 5 corridor were slammed but there didn’t seem to be too much waiting. We didn’t wait anywhere and only saw 1-2 cars waiting at the Granzella charger which tends to be very busy.

 

[jbcarioca]

Local and regional tipping points are far more complex than just looking at one cost shifting lower than legacy.

2010 Germany was most definitely past their renewables tipping point and it took extraordinary political effort to slow the market down by 2015 or so. I often cite the month of December 2011 in Germany where the feed-in-tariff rate was about to take another big step down and their marketplace installed over 3GW of solar. In one month. That's a lot.

Yes, the FiT was and remains a subsidy scheme that artificially boosts the value of solar production on the grid. But so what? That's precisely what they intended to do, and it didn't really cost much money.

By 2012/13 the tariff was so low the market ground to a halt and Germany quickly shifted to the more traditional large scale auction for sourcing solar and wind.

Anywho.....from 2010 onward IMO nearly the entire world was past the "tipping point" on renewables. Executed efficiently at scale, the wind and solar technology provided electricity at a comparable price to nearly anything in the market. Obviously we've moved even far cheaper since then.

The only thing that stopped Germany from continuing on to greater renewables adoption was grid congestion and corruptions. Tesla will have that solved for them within 5 or 6 years in my estimation and they'll quickly surpass their 100% renewables goal for 2035.

The specific companies for wind, North Sea and on land too. Vestas, Siemens, Goldwind and GE…

Global Wind Turbine Industry Factsheet 2022: Top 10 Largest Wind Turbine Manufacturers

The top 10 wind turbine manufacturers continue to dominate the global wind energy market in 2022 due to their significant wind power capacity installations over

blog.bizvibe.com

These products are transforming Europe, the UK and near global energy markets. The US lags, except for Texas, weirdly. We tend perhaps to overlook all this because Tesla participates only in the storage part, and really are not dominant there as they are with cars.

With the gigantic scale of new mostly offshore projects we will see other countries following the North Sea progress of, notably, Denmark and UK. Most of us probably have seen the onshore farms all over windy Europe, West Texas or even Brazil:

Winds of change

The Brazilian Association of Wind Energy (ABEEólica) estimates that Brazil has the potential to generate 500 gigawatts (GW) of wind power, enough to supply three times the country’s current energy demand, which is currently met by a range of sources including wind, hydroelectric, biomass...

revistapesquisa.fapesp.br

Apart from regulatory issues wind is now so cheap and predictable that storage requirements are less proportionately than they were only five years ago.

Solar and Tesla specifically are unlikely to be the central focus in the next transition because wind is simpler to scale. Obviously wind, solar, tidal and other sources are all poised for huge continuing growth. Just as it was for electrification and grid development these new developments will take decades to overcome fossil fuels. Replacement of ancient grids and ubiquitous incorporation of distributed energy sources will take decades too, simply because the installed base is so large.

For comparison, just think of the antiquated and inefficient use of 110/117/120 volt systems in large parts of the world. They happened by whim, but have ended out wasting huge amounts of power generation. Grids themselves are almost all inefficient and ancient. This transition will be even more fraught than has been the transportation side thus far.

At least in this area Tesla can be a significant supplier but generally need not be THE leader. Exceptions: Texas, grid services and EV charging infrastructure with a major role in prodding household-level grid integration. Even these roles are gigantic.

Thus far we mostly ignore these when viewing TSLA. It has taken Tesla longer to ‘crack the code’ than many of us expected. I will not guess timing, but all those utility licenses will not be wasted. Supercharger grid integration seems likely to be one of the first major plays, just as Australia and Texas are developing as the prototypes for global expansion.

This subject came up during Elon’s recent visit to Manaus, I understand. The planned privatization of Eletrobras

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwj03snayYv4AhWnjJUCHbC6BY8QFnoECEcQAQ&url=https%3A%2F%2Fen.wikipedia.org%2Fwiki%2FEletrobras&usg=AOvVaw1oj2linZPzUQr3Au2L7a45

seems likely to present a gigantic opportunity to redevelop the entire country grid, generation and distribution. China’s State Grid is already in Brazil, and they are the only example in recent memory of developing a modern grid system.

If the world is very lucky all this can come together soon enough for the planet. J B Straubel was dreaming of this in 2009, Elon bought the vision. This is not often discussed in the context of Tesla.

Rockets-done, cars-done, BEV charging networks-done.

Now there is Mars and renewing Grids

 

[Singuy]

Not sure that email is legit...a few folks say they haven't seen it in engineering...

https://twitter.com/x/status/1531867103854317568

 

[MC3OZ]

The specific companies for wind, North Sea and on land too. Vestas, Siemens, Goldwind and GE…

Global Wind Turbine Industry Factsheet 2022: Top 10 Largest Wind Turbine Manufacturers

The top 10 wind turbine manufacturers continue to dominate the global wind energy market in 2022 due to their significant wind power capacity installations over

blog.bizvibe.com

These products are transforming Europe, the UK and near global energy markets. The US lags, except for Texas, weirdly. We tend perhaps to overlook all this because Tesla participates only in the storage part, and really are not dominant there as they are with cars.

With the gigantic scale of new mostly offshore projects we will see other countries following the North Sea progress of, notably, Denmark and UK. Most of us probably have seen the onshore farms all over windy Europe, West Texas or even Brazil:

Winds of change

The Brazilian Association of Wind Energy (ABEEólica) estimates that Brazil has the potential to generate 500 gigawatts (GW) of wind power, enough to supply three times the country’s current energy demand, which is currently met by a range of sources including wind, hydroelectric, biomass...

revistapesquisa.fapesp.br

Apart from regulatory issues wind is now so cheap and predictable that storage requirements are less proportionately than they were only five years ago.

Solar and Tesla specifically are unlikely to be the central focus in the next transition because wind is simpler to scale. Obviously wind, solar, tidal and other sources are all poised for huge continuing growth. Just as it was for electrification and grid development these new developments will take decades to overcome fossil fuels. Replacement of ancient grids and ubiquitous incorporation of distributed energy sources will take decades too, simply because the installed base is so large.

For comparison, just think of the antiquated and inefficient use of 110/117/120 volt systems in large parts of the world. They happened by whim, but have ended out wasting huge amounts of power generation. Grids themselves are almost all inefficient and ancient. This transition will be even more fraught than has been the transportation side thus far.

At least in this area Tesla can be a significant supplier but generally need not be THE leader. Exceptions: Texas, grid services and EV charging infrastructure with a major role in prodding household-level grid integration. Even these roles are gigantic.

Thus far we mostly ignore these when viewing TSLA. It has taken Tesla longer to ‘crack the code’ than many of us expected. I will not guess timing, but all those utility licenses will not be wasted. Supercharger grid integration seems likely to be one of the first major plays, just as Australia and Texas are developing as the prototypes for global expansion.

This subject came up during Elon’s recent visit to Manaus, I understand. The planned privatization of Eletrobras

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwj03snayYv4AhWnjJUCHbC6BY8QFnoECEcQAQ&url=https%3A%2F%2Fen.wikipedia.org%2Fwiki%2FEletrobras&usg=AOvVaw1oj2linZPzUQr3Au2L7a45

seems likely to present a gigantic opportunity to redevelop the entire country grid, generation and distribution. China’s State Grid is already in Brazil, and they are the only example in recent memory of developing a modern grid system.

If the world is very lucky all this can come together soon enough for the planet. J B Straubel was dreaming of this in 2009, Elon bought the vision. This is not often discussed in the context of Tesla.

Rockets-done, cars-done, BEV charging networks-done.

Now there is Mars and renewing Grids

I think there is a role for wind, solar and batteries and the optimal mix depends partially on location. Solar works better for Spain than Norway and some countries are landlocked.


Offshore wind is great, but these big projects, wind is problematic at best on a domestic scale.

Domestic solar $0.06 kWh needs domestic battery storage at the same cost or lower. I think every freestanding house that currently has a dishwasher will one day have a battery.

Electricity grids are sized for peak demand, batteries can reduce the need to upgrade the grid, and increase the utilization of existing assets.

Tesla solar roof - fundamentally a good product but in many ways similar to the original Roadster. Things need to be improved and costs lowered. Likely to be a slow growing market.

Energy storage batteries- cost per KWh / cycle is all important, likely to be a rapidly growing market at the right price.

Auotbidder and VPP - moderate growth, but great margins.

I have been taking an interest in the single crystal battery that lasts 100 years.
As a rough rule of thumb, if 10,000 cycles costs 30% more than 4,000 cycles, for grid scale storage 10,000 cycles is the way to go.

For domestic storage and EVs, 4,000 cycles is probably adequate.

The Tesla semi is one vechicle where 10,000 cycles might eventually be worth the premium, with a 500 mile range that is 5 million miles or 13 years of continuous operation if cycled twice daily.

 

[BioSehnsucht]

https://twitter.com/x/status/1531867103854317568

With Covid a declining (but non-zero) issue, this is less of a problem in term of actual policies than it would have been a year ago, but from a perception standpoint (both external PR and internal morale) it certainly isn't helpful for it to be spelled out in such a heavy handed way.

That said, I totally agree a Fremont HR person should have a physical office that is someplace in the vicinity. Doesn't have to be in the Fremont factory proper, as long as it's reasonably located for anyone who wants or needs to have a physical face-to-face with HR. Having HR managed out of state seems like a terrible idea because there'll always be people who want a physical face to face rather than a zoom call, plus it helps to have such people be more relatable by living in the same area you do.

On the upside, caring about where Fremont HR people are located implies an increasing care about having HR workforce so maybe we'll see the issues with understaffing anything that isn't production or engineering finally start to go away...

 

[Max Plaid]

Welp, Wall St had no problem corralling any TSLA breakouts today. Dropped it right from the start and all they had to was cap the rest of the day

Side Note - Who in their right mind would be buying Amazon (Up 5% today) at TTM P/E of 57 over TSLA at 102.......especially when anyone that can do basic math and still think TSLA is going to do at least 1.4 million deliveries this year can deduce that TSLA would end the year at TTM P/E of around 57, if not lower than that, if the stock was still at 759 come end of 2022.

$AMZN splits 20:1 on Friday, I imagine that's the catalyst right now...

 

[hobbes]

Elon Musk confirms IDRA's new 9,000 ton Giga Press is for the Cybertruck

Tesla’s Giga Press supplier IDRA Group has been teasing an all-new 9,000 ton Giga Press over the last few weeks, and will officially unveil the massive machine at an open house in Italy next week. […]

driveteslacanada.ca

 

[ZachF]

Welp, Wall St had no problem corralling any TSLA breakouts today. Dropped it right from the start and all they had to was cap the rest of the day

Side Note - Who in their right mind would be buying Amazon (Up 5% today) at TTM P/E of 57 over TSLA at 102.......especially when anyone that can do basic math and still think TSLA is going to do at least 1.4 million deliveries this year can deduce that TSLA would end the year at TTM P/E of around 57, if not lower than that, if the stock was still at 759 come end of 2022.

Amazon will probably barely make any money this year, if they’re lucky they’ll bounce back to ~$20b in profits next year… which is less than what Tesla will probably make, and Tesla will only leave them in the rear view mirror from there on.

 

[hobbes]

Not sure that email is legit...a few folks say they haven't seen it in engineering...

Mail is adressed to "ExecStaff", maybe this order is actually only meant for execs?

 

[ZachF]

WRT WFH, vertical integration and co-location of production and design is much of Tesla’s (and SpaceX’s) secret sauce that allows Tesla to innovate so quickly. Engineers and production workers working among each other allows rapid problem solving and product improvements.

 

[ZachF]

Any idea when we can expect the Shanghai P/D data now that it’s June? That alone is probably going to tell us more than anything else what Q2 P/D is going to look like.

 

[ThisStockGood]

Guys, it’s summer in Denmark and TSLA is on sale. Lets bring some Tesla love on this board. Cheers!

Happy buying folks

 

[hobbes]

Berlin ramp

Looked up the numbers for Y performance on teslastats.no, this is the only source where we can identify deliveries of Berlin made Y. First deliveries event in Germany was March 22, first 2 deliveries in Norway were April 13. Starting from there, weekly numbers were:

Week starting Apr 11: 2
Week starting Apr 18: 4
Week starting Apr 25: 22
Week starting May 2: 4
Week starting May 9: 8
Week starting May 16: 99
Week starting May 23: 78

Norway has about 13% of European Y market so far this year according to our wiki Wiki - Tesla Europe Registration Stats . Last year that was about 30%, and we know they have been shipping Y performance out of Europe, so very high error margin on possible extrapolation for total run rate so I am refraining from explicitely doing it.

However, Teslamag reported 86/day (=430/week) production for week of May 9, so order of magnitude checks out assuming the cars in Norway get delivered a week after being produced.

 

[The Accountant]

Any idea when we can expect the Shanghai P/D data now that it’s June? That alone is probably going to tell us more than anything else what Q2 P/D is going to look like.

The insured units (local deliveries - this excludes exports) were 8,455 for May.
This excludes the 4 ships (exports) that departed in May.

The CPCA reported numbers are more accurate than the insured data. So we should wait for the CPCA numbers.

Now keep in mind that April was reported as 10,757 produced and 1,512 delivered.
As those undelivered April cars get to customers in May, we may see more deliveries than production in May.
I had not accounted for these undelivered April vehicles in my Q2 estimates so its possible my delivery estimate is 9200 short.

 

[cusetownusa]

Just another reference point and a reminder for myself to not sell any shares. - Wait times on tesla website: for model Y now Dec 2022-mar2023.

That’s for a Y with the induction wheels. My exact same Y that I picked up 3 weeks ago and ordered back in September, MSM 5 seater with 19” Gemini wheels, is about $10,000 more now with an estimated delivery of March 2023-June 2023. Crazy

Also anecdotally, interest in my Tesla from everyone I talk to is very high. I live in a fairly conservative area that is slow to change but now that they see me living with one and can ask a million questions, it’s like a light bulb is going off in there head with the idea of owning an EV starting to become a real possibility. High gas prices really help peaking their interest as well.

Also, it’s crazy how much kids are drawn to my car. Not many Tesla around here so it’s the first Tesla they have all seen in person and they all love it. The reactions I get are like how I would have reacted as a kid when If I would see a Lamborghini. (For example, My wife took the car to her parents and a random kid on a bike stopped and told her her car is awesome and was the first time he has seen a tesla in person. She let him sit inside and he told her it was the best day of his life. Lol). A lot of future Tesla owners out there. Future is bright.

 

[TheTalkingMule]

Any idea when we can expect the Shanghai P/D data now that it’s June? That alone is probably going to tell us more than anything else what Q2 P/D is going to look like.

Numbers are out for other Chinese carmakers. A mixed bag of results with Nio basically flat year over year and the other players less affected.

I think Tesla will surprise to the upside on 2Q, depending on where expectations land of course.

Chinese automaker Nio reports May EV sales constrained by Covid as rivals XPeng and Li Auto gain ground

Nio's sales were up just 4% year over year as the company struggled to build and deliver vehicles amid the latest Covid outbreaks.

www.cnbc.com

 

[Nocturnal]

Tesla backlog is bound to get larger.

US summer fuel shortages could be worse than 1970s oil crisis: IEA chief

The United States and Europe could experience fuel shortages this summer that could be worse than the 1970s oil crisis as demand ramps up for travel season,...

www.marketwatch.com

 

[Stretch2727]

Interesting article claiming we have hit the peak for the number of ICE vehicles at 1.23 Billion and that it will only decline from here. This may include 2 and 3 wheelers.

Also, some calculations on the amount of electricity EV's will use at 10-13% in 2040. Totally manageable considering most charging is at night.

Rapid EV Growth Hastens the Peak, Then Fall, of Internal Combustion

Electric vehicles are taking off even faster than BNEF expected. Soon, the global fleet of gas cars will start to shrink and profoundly effect transportation and energy.

www.bloomberg.com