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

[ThisStockGood]

What was it before?

March - May 2023.

 

[BigDawgz]

Gary answers why this won't happen... internal growth projects are far from funded.

Yeah he typically values Tesla as simply a car company, so would kind of explain why he is ignoring all of the other internal projects going on, such as energy, robot, AI, insurance etc.

 

[hobbes]

Giga Berlin Paint Shop produces first Model Ys in Mercury Silver Metallic and Deep Crimson Multicoat

According to CEO Elon Musk, Giga Berlin will have the world’s most advanced Paint Shop, able to produce “more layers of stunning colours that subtly change with curvature.” Thanks to some source code discovered in […]

driveteslacanada.ca

No source given unfortunately.

 

[jhm]

Panasonic supplies 18650 cells to Tesla which can only go into S&X. Tesla is about to be cell-constrained again soon, so the 18650 supply should continue to be used at full throttle.

Taking equipment out to put in new equipment costs time, money and attention, as does redesigning the cars. While it’s true that significant cost could be cut out of S&X production and more than 100k units could be sold at lower prices, it’s not worth the opportunity cost when engineering and other personnel can work on scaling 3&Y production faster and improving those products. Switching S&X to the latest technology would require a total revamp of the guts of the car.

With finite Gigapress supply from IDRA it’s best to use them for the highest-value purpose which is Model Y mass production.

S&X produce a meaningful amount of free cash flow. At current prices they probably make around $40k profit margin per unit, which at 100k per year is $4B extra income.

It makes more sense to expand Austin Berlin and Shanghai faster than to squander resources on revamping Fremont which is a terribly compromised facility in comparison to the new ones because it’s retrofitted.

Yeah, a lot of this comes down to the inefficiency of the Fremont plant. Even the Model Y at Fremont use substantially more robots that Model Y at Austin or Berlin. So its not just a model problem; it's a factory problem. Moreover, given the cost of living in the Bay Area, Fremont is probably the worst plant for high labor input manufacturing. And then of course, there is the whole political climate of California. So it looks like Tesla may be just biding its time in Fremont. What's the business case for investing in higher efficiency manufacturing at Fremont? Perhaps in the larger scheme of things Fremont is just part of the learning curve, the place Tesla learned how not to make cars.

 

[2daMoon]

You are still missing that they can't put their current production setup in the space that the S&X line use. And Elon said that there is no point knocking down the current building, taking production capacity offline for years, to rebuild it the new way. (Not to mention how horrible the permitting process is in California.) So it makes sense to continue to use that space to produce cars that people want.

If demand falls too far below production, I expect that they would just discontinue the S&X and use that space for something else. (But not a new car production line.) Maybe they would use it for R&D?

Doing so the way you describe would be putting the cart before the horse. I agree this would not make sense as a plan.

The way I envision it would be to keep Freemont S/X production running until a more efficient line for S and X is running in Texas. Then, once that line is up to scale, retire the line in Freemont and repurpose the space and equipment for expansion of other lines there.

The Texas versions of the flagship S/X might simplify production by utilizing the same front and rear castings used by the Y, with their own bodywork attached. (or, could have unique castings with dedicated IDRA machines assigned, if volume justifies it)

Their packs could be designed to go in from the bottom with seats, regardless of which batteries are used in the pack. The rate of production would go up significantly with these two changes (castings, packs), and, the ASP of those models could then come down because of improved production efficiency.

The key thing would be that nothing changes at Freemont until the lines at Texas are able to match/exceed Freemont's S/X production rate. The flagship models continue on, production rate increases, and prices are reduced.

 

[Stretch2727]

Gary has added point # 5 to his Tesla catalysts: Buyback in October.

I find Gary to be very conservative; so this prediction of a buyback in October is a bit out of character.
My thinking is that Tesla would not entertain a buyback for a few years. Perhaps in early 2025 when cash on hand exceeds $80b.

View attachment 831544

If Tesla just sold almost $1B BTC out of concern for cash because the shutdown in China why would they even consider a buyback?

I think Gary should take this one off the list as I think it would actually hurt the stock. Tesla is still in a capital intense business that needs a huge cash cushion for a black swan or severe downturn. Maybe in a few years if revenue has shifted to robotaxi/software and they have a huge Apple like cushion of cash.

 

[damonbrodie]

The fewer, the better. Announcing 3 new factories would signal they are not making any headway on manufacturing efficiency and economies of scale. I'm hoping that Tesla can blow us away with how productive they can make Shanghai, Berlin and Austin.

I think it was at Battery Day that Elon spoke at some length about maximizing the efficiency of factories in two ways:

production line speed and
utilizing the factory space more efficiently. He even went as far to include the third dimension of vertical space.

Previous guidance on the announcement of new factory locations was by the end of this year (maybe) and there were only 2 anticipated at that time. It won't bum me out at all if there is only one due to learning how to do more with less. One issue legacy auto has is their manufacturing is really spread out, especially when you consider their suppliers facilities (and there are a lot more of those vs. Tesla suppliers). Legacy auto often has separate engine plants, transmission plants, etc. When you buy a legacy auto, you have to pay for all that inefficiency.

Even the general assembly plants of legacy auto are terribly inefficient. Tesla's out-dated Fremont Plant puts out more cars per quarter vs. any legacy plant in the US. even though it's only a little over 5 million square feet. And that's tiny compared to Tesla's new Gigafactories and many larger legacy plants that put out fewer cars. The output of Tesla's new Gigafactories is going to massively dwarf the output of any legacy auto factories and this is one primary reason why legacy cannot and will not be price competitive with Tesla. Tesla will enjoy strong margins while legacy auto will not.

We already know that they significantly reduced the robot count with the giga castings:

And it is a similar story with the 4680 battery line with DBE. Austin and Berlin should ultimately be able to build a LOT of cars per unit of factory space.

 

[Drezil]

Gary has added point # 5 to his Tesla catalysts: Buyback in October.

I find Gary to be very conservative; so this prediction of a buyback in October is a bit out of character.
My thinking is that Tesla would not entertain a buyback for a few years. Perhaps in early 2025 when cash on hand exceeds $80b.

View attachment 831544

I thought the first idea before a buyback would be "buyback of shares distributed each quarter" - basically stopping the dilution each quarter due to share created & given as employee benefits..
Not actually lowering the number of outstanding shares.

 

[Ohmster]

Do we really believe that when Tesla is straining to crank out 10M units per year that it will keep making 100k bespoke Model S/X for sentimental reasons? It seems to me that Model S/X needs to provide 5% to10% of total units sold just to be relevant. So the relevance is growing thin.

Moreover, these are the oldest models in production. If one assumes that Tesla needs a halo car for advertisement purposes, then why not replace Model S/X with Roadster 2? When the Model S came out, it superseded the Roadster as the halo car. Musk was never so sentimental as to continue the original Roadster as Model S became available. So why should the Model S/X still be produced when Roadster 2 becomes available?

What I'm pressing for with all these questions is a real business case for the Model S/X? Legacy, heritage, sentiment, halo, these notions do not amount to a business case for a growing automaker of the caliber of Tesla. Product lines that do not scale over time, how does that fit with the ethos of a company that seeks 50% or higher annual growth? My sense of Elon Musk is that he cares much more about scalability and innovation than sentiment and the brand power of a halo car. These things may matter to a legacy automaker, but Tesla is not an ordinary OEM.

Unless Tesla looks at those models as their flagship product line. Most hardware manufacturers have a flagship product, whether it's either an OLED TV or a video card. I doubt that the Nvidia GTX 4090ti will account for even 1% of the video cards that will be sold in 2023 using an Nvidia design. It's about bragging rights for selling the fastest card(d).

I don't think that is likely. The S & X are popular cars, they are in demand, and they have high margins. Tesla is probably pretty happy making both cars at about the rate they are right now, with maybe a bit more ramping up but nothing extravagant.

They have larger things to worry about right now than retrofitting and retiring the S & X to make room for other things. If they need room they'll simply add on to an existing factory or build a new one, no big deal.

The S and X are indeed halo/flagship/top-of-line cars for Tesla. They still turn heads and make other Tesla owners smile. There isn’t a day I park in a public area that I don’t get some indication that it continues to stand out. And this in SoCal. Land of Tesla gigadensity.

In addition, they have legacy envy margins and from the queue of would be owners, plenty of demand.

Fremont did shut down the S line earlier this year. And this after the initial line change for the refresh last year. They will never make production in Fremont as efficient as the other factories. But it is a good place for prototypes, testing new tech, and low volume product.

So. S&X

• Have demand > capacity
• Have great margins
• Still turn heads
• Present free adverts for the brand
• Outperform anything in their class
• Do not present any significant opportunity costs
• Are on lines that don’t make sense to convert to higher volume models

Why discontinue them?

 

[Gigapress]

So it looks like Tesla may be just biding its time in Fremont. What's the business case for investing in higher efficiency manufacturing at Fremont? Perhaps in the larger scheme of things Fremont is just part of the learning curve, the place Tesla learned how not to make cars.

Exactly. It's clear which of these two factories is better to invest in expanding and improving.

 

[petit_bateau]

Doing so the way you describe would be putting the cart before the horse. I agree this would not make sense as a plan.

The way I envision it would be to keep Freemont S/X production running until a more efficient line for S and X is running in Texas. Then, once that line is up to scale, retire the line in Freemont and repurpose the space and equipment for expansion of other lines there.

"the line" includes people, please remember that

 

[jhm]

Doing so the way you describe would be putting the cart before the horse. I agree this would not make sense as a plan.

The way I envision it would be to keep Freemont S/X production running until a more efficient line for S and X is running in Texas. Then, once that line is up to scale, retire the line in Freemont and repurpose the space and equipment for expansion of other lines there.

The Texas versions of the flagship S/X might simplify production by utilizing the same front and rear castings used by the Y, with their own bodywork attached. (or, could have unique castings with dedicated IDRA machines assigned, if volume justifies it)

Their packs could be designed to go in from the bottom with seats, regardless of which batteries are used in the pack. The rate of production would go up significantly with these two changes (castings, packs), and, the ASP of those models could then come down because of improved production efficiency.

The key thing would be that nothing changes at Freemont until the lines at Texas are able to match/exceed Freemont's S/X production rate. The flagship models continue on, production rate increases, and prices are reduced.

Thank you. This seems to be the kind of forward thinking I'd expect from Tesla.

I think the deeper question is what really is the best use of the Fremont plant. Austin and Berlin will totally dominate on efficiency and volume. Shanghai is damn awesome too. So naturally, new investment goes into the Gigafactories. But if Tesla could clear out some space in Fremont, what could they do with it?

Optimus, maybe?

 

[ZeApelido]

One potential source of revenue you may not have thought of:

Elon Musk's Father Ready To Donate Sperm To Colombian Women - Tesla (NASDAQ:TSLA)

Tesla Inc (NASDAQ: TSLA) CEO Elon Musk’s father says he’s been asked by a South American company to donate his sperm to women in Colombia.

www.benzinga.com

They say, 'Why go to Elon when they can go to the actual person who created Elon?'

Oh boy.

 

[hobbes]

Looks like the pile drivers for the stamping expansion at Giga Berlin are operating again, construction there had been stopped for a while (Tobi´s video from Wednesday):

 

[Electroman]

All the non-jocular speculation I've read here regarding the (apparently glass) acquisition probe has revolved around it being bulletproof glass.

Perhaps it is - that by itself does not demonstrate a Critical Person exemption. One can posit, inter alia, such was requested not for Mr Musk but for an ex-wife, for one or more offspring, and so forth. THAT would raise eyebrows and most certainly would be front & center for the Board's Ethics committee, with the discussion revolving around whether diminishing the prospect for pain and anguish for a Critical Person be the responsibility of the corporation.

Perhaps it is - but for Mr Musk himself. It boggles the mind that his venues - houses, automobiles etc. - already would not be so equipped. But if there is a new Latest & Greatest? Is Tesla Inc. responsible for such?


But perhaps it is not bulletproof glass at all. After all, there are any number of sources for such a product....they ALL are "out of supply" so to speak? Perhaps it is for electrochromic glass. Or a special soundproofing material. Those two possibilities, however, also instantly would go to the Board's Ethics Committee because alternatives - very, very mundane alternatives - exist and it would be supremely difficult to argue successfully that the functioning of a Critical Person could not be obtained by any of those other possibilities.

I post those not to pass judgment as I have no more inside information as to the whole story than do others. Rather, it is to dampen the judgment that, since Tesla needs Mr Musk, it behooves it to supply bulletproof glass.

If I were the board, I would give a complete blank check for him to use Tesla resources and money anyway he likes including for his personal pursuits. And I will put that in the contract. If he wants to buy a yacht using Tesla's money, that should be fine. Stock holders who don't agree with that can sell TSLA and buy Ford. If you can't trust Musk to use the company resources responsibly and wisely, then there is no future for Tesla.

 

[MC3OZ]

Why do we think Model S/X should be kept for sentiment, a "halo" or advertising purposes? If this is all this line is good for, we should discontinue production at first convenience and make room for new products that have relevance to the company going forward. As it is, production is so inefficient that they are simply a waste of valuable space.

This is an interesting debate, Model S/X have good demand and good margins, higher margins than when they partially funded Model 3 development.

IMO they need to move Model Y to front and rear castings, and free up some space for Roadster production at Fremont.

Long term I would also move Model 3 to a 4680 structural pack.

To redevelop Fremont and transition Model 3, they possibly need a new factory in Mexico to make 3 and Y. They then need to shutdown Model 3 at Fremont if they want to redevelop the fsctory.

Tesla also needs some new Models some of which will be lower volume.

Fremont specalising in complex lower volume Models and R&D means that the other factories are free to crank out higher volume Models more efficiently.

New Models designed for volume manufacturing is a better use of resources for now.

Around 2035 Tesla might have a full suite of factories and Models, and EV market competition might be intense, Model S/X might start to look dated. When we get to that point that is the time for the rededign / scrap decision.

 

[Electroman]

Huh- Needham/Rajvindra Gill entry is a pretty weird outlier... only highly ranked (by tipranks) person on there with a target under $1000... and WAY below not just $1000, but even the current price.

I am now seeing the clown emoji or icon against the name for every reference to Gordon Johnson. Well deserved.

 

[Ogre]

New Models designed for volume manufacturing is a better use of resources for now.

This is Tesla's going forward strategy. Model S and X won't be retired any time soon, but they will be further and further on the edge of mainstream Tesla as newer products come online and production efficiency increases. Each generation of production is a leap forward in production efficiency.

Model S/ X was Tesla's Gen 1 manufacturing.
Model 3 was Tesla's Gen 2 manufacturing. (Robotics)
Model Y is Tesla's Gen 3 & 3.1 manufacturing. (GigaPress)
Cybertruck will be Gen 4.

None of the prior lines go away, it's more production to keep them running and build new lines since they need new lines regardless.

I expect Cybertruck will be just as big a leap forward in manufacturing as the Model Y was.

 

[InDaClub]

Connecticut adds more electric vehicles to rebate program

HARTFORD, Conn. (AP) — Connecticut officials have begun rolling out a wide-ranging new law aimed at reducing vehicle emissions, including adding 10 more electric vehicles that will now be eligible for the state's rebate program.

apnews.com

HARTFORD, Conn. (AP) — Connecticut officials have begun rolling out a wide-ranging new law aimed at reducing vehicle emissions, including adding 10 more electric vehicles that will now be eligible for the state’s rebate program.

The legislation, which increases funding for the initiative, raises the MSRP cap for eligible purchased and leased battery electric vehicles, plug-in hybrid electric vehicles and fuel cell electric vehicles to $50,000. In turn, state residents who meet certain income requirements can qualify for up to $9,500 in incentives depending on the type of vehicle.

“We’ve seen a doubling, a doubling of the number of electric vehicles registered on the road here in Connecticut just in the last two years, as folks are ... struggling with high gas prices,” said Department of Energy and Environmental Protection Commissioner Katie Dykes during a news conference highlighting the new law on Friday in New Haven. Dykes said the Connecticut Automotive Retailers Association has seen an uptick in customers who want access to electric vehicles.

 

[WADan]

Sorry if this had been posted. But we need to support this man:

The only way to stop BS is to call it out in all glorious details!