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

[mongo]

Vans can be quite profitable, the Transit seems to have been the only thing keeping Ford Europe alive. Mind you the absolute margin is damming with faint praise, good only in comparison to the rest of the line up. I'm sure Tesla could do better.

"Jim Farley, Ford’s head of global markets, said commercial vans are earning 13 percent profit margins for the automaker in Europe. Ford is shifting its focus to concentrate on vans and SUVs to hit its long-term target of a 6 percent margin in the region, Farley said."

Ford seeks European profitability with shift to SUVs, vans

Ford is redirecting spending in Europe away from cars to focus on more profitable SUVs and commercial vans to return the region to profit.

europe.autonews.com

Sure. Just to be clear on my point, Transit is not a US version walk-in/ step van (I typoed out the dash on my original post which made it less apparent).
The high roof Transit is definitely standable though.

Walk-in van means a special cargo/mail delivery vehicle that has only one designated seating position. That designated seating position must be forward facing and for use only by the driver. The vehicle usually has a thin and light sliding (or folding) side door for easy operation and a high roof clearance that a person of medium stature can enter the passenger compartment area in an up-right position.

 

[Singuy]

I was considering having a dabble in Rivian when they were down to $20/share back in May. People love their vehicles and they've got guaranteed demand for their vans.

Not to sound too tautological but the only reason they're losing money is because they're just not making enough vehicles (Neroden mentioned the same thing on here about Tesla back in the day when Tesla was still not at scale, which helped solidify my understanding of the company when I was first learning about it) but production is increasing (albeit from a very small base). I know design is easy, manufacturing is difficult but the direction is going the right way and QoQ growth looks solid - Q2 nearly doubled Q1 production. They're still a long way from profit but their cost of revenues was 6x revenues in Q1 and only 3x revenues in Q2 - mostly due to increased production IMO and again heading in the right direction.

I could see Rivian be able to 20x from their $20/share position while for Tesla the same multiple is more difficult as Tesla would have to be the largest company in the world by a factor of 6. I'm not saying Rivian is a better investment - The difference is that Tesla is almost guaranteed to go another 3x-4x at a minimum over the medium term IMO (as far as a guarantee is possible) and that Rivian could end up staying a minnow and blowing through their cash pile before reaching proper scale, or just not figure out manufacturing at scale economically. Given how well Tesla has already performed, if Tesla goes another 3x-4x I know I could hang up my investing boots for life and live in luxury so it's difficult to invest in anything else.

Based their current cost structure they have massive hurdles to clear. They are at their infancy when it comes to spending money as the nearest service center near me, the second largest EV market being Florida, is in Texas.

It's good to reduce the cost per revenue, but their starting point is a massive massive loss. As I pointed out, Tesla already had a positive gross margin at Rivians scale and still took them another 8 years to hit a constant rate of profitability. And if you look at Tesla as they scale, expenses got bigger and bigger. If you were to apply the same multiplier of 22.5x to rivians spending as they grow in scale, they will end up having cogs plus operations to be something like 38 billion a quarter if they hit 1M car run rate.

As Elon said, if they don't change dramatically at reducing cost yesterday, their chance of survival is very low.

 

[GOVA]

I was considering having a dabble in Rivian when they were down to $20/share back in May. People love their vehicles and they've got guaranteed demand for their vans.

Not to sound too tautological but the only reason they're losing money is because they're just not making enough vehicles (Neroden mentioned the same thing on here about Tesla back in the day when Tesla was still not at scale, which helped solidify my understanding of the company when I was first learning about it) but production is increasing (albeit from a very small base). I know design is easy, manufacturing is difficult but the direction is going the right way and QoQ growth looks solid - Q2 nearly doubled Q1 production. They're still a long way from profit but their cost of revenues was 6x revenues in Q1 and only 3x revenues in Q2 - mostly due to increased production IMO and again heading in the right direction.

I could see Rivian be able to 20x from their $20/share position while for Tesla the same multiple is more difficult as Tesla would have to be the largest company in the world by a factor of 6. I'm not saying Rivian is a better investment - The difference is that Tesla is almost guaranteed to go another 3x-4x at a minimum over the medium term IMO (as far as a guarantee is possible) and that Rivian could end up staying a minnow and blowing through their cash pile before reaching proper scale, or just not figure out manufacturing at scale economically. Given how well Tesla has already performed, if Tesla goes another 3x-4x I know I could hang up my investing boots for life and live in luxury so it's difficult to invest in anything else.

Remember Bollinger Motors, the original off-road one? Rivan is still around because they keep getting the money that Bollinger did not.

And, yes, this is the trick - to get to producing at scale, make a great car and profit on what's made.

Rivian is a money pit, period. As long as others are willing to pump billions into them, they might be around for a bit. They wanted to increase the price immediately once they realized how much they lose on each car. Also, there is quickly saturating market for the price they need to sell their trucks/suvs and make a profit. EV F150 is here too, CT is around the corner as well.

Getting from garage like production to mass production is the step of monumental proportions, it is hard and expesive. Finally, their product is a car alone, nothing else. We'll see how that plays out in 5-10 years.

I wish they make it through, but how long can others burn very big money with Rivian?

 

[Singuy]

Remember Bollinger Motors, the original off-road one? Rivan is still around because they keep getting the money that Bollinger did not.

And, yes, this is the trick - to get to producing at scale, make a great car and profit on what's made.

Rivian is a money pit, period. As long as others are willing to pump billions into them, they might be around for a bit. They wanted to increase the price immediately once they realized how much they lose on each car. Also, there is quickly saturating market for the price they need to sell their trucks/suvs and make a profit. EV F150 is here too, CT is around the corner as well.

Getting from garage like production to mass production is the step of monumental proportions, it is hard and expesive. Finally, their product is a car alone, nothing else. We'll see how that plays out in 5-10 years.

I wish they make it through, but how long can others burn very big money with Rivian?

I still don't understand how they spend as much as Tesla on operations when the company has like 1/10th the employee count, 1/20th the amount of service stations, and zero charging infrastructure. What will their operating cost be with 100k employees? Amazon should audit them and take charge. I don't think the Ceo knows how to run a business.

 

[Krugerrand]

Not to sound too tautological but the only reason they're losing money is because they're just not making enough vehicles (Neroden mentioned the same thing on here about Tesla back in the day when Tesla was still not at scale, which helped solidify my understanding of the company when I was first learning about it) but production is increasing (albeit from a very small base). I know design is easy, manufacturing is difficult but the direction is going the right way and QoQ growth looks solid - Q2 nearly doubled Q1 production. They're still a long way from profit but their cost of revenues was 6x revenues in Q1 and only 3x revenues in Q2 - mostly due to increased production IMO and again heading in the right direction.

Umm…no. That’s not the ONLY reason (or even the most important reason) as has been discussed just in the last page or so.

Compared head to head with Tesla during the exact same phases of history clearly indicates Rivian is in big trouble unless they drastically cut costs and improve efficiencies in all aspects of their business - AND increase production substantially.

The $20+B that Rivian raised was a huge mistake in that it was akin to someone who’s never been able to balance a checkbook suddenly winning the lottery. Typically, and we hear the stories all the time, those people blow through their winnings in a matter of months and find themselves just as broke as they’ve always been.

Tesla/Elon have always had a very different psychology about money than Rivian/management.

I stand by my original words when Rivian first got the $20B - it’s not going to be nearly enough and they’ll blow through it in record time.

 

[Singuy]

Cory just made a declaration!

 

[The Accountant]

I still don't understand how they spend as much as Tesla on operations when the company has like 1/10th the employee count, 1/20th the amount of service stations, and zero charging infrastructure. What will their operating cost be with 100k employees? Amazon should audit them and take charge. I don't think the Ceo knows how to run a business.

Within the Q2 loss of $1.7B, Rivian had a total of $1.1B for COGS and $1.0B for Operating Expenses . . . that's $2.1B in spend.
I estimate that this $2.1B in spend includes:

$570m payroll costs​

$242m stock compensation​

$113m inventory write-downs​

$161m deprecation​

$150m material costs within cogs​

$864m other expenses​

​

Edit: corrections made as @CorneliusXX pointed out an error in my numbers​

 

[Singuy]

Within the Q2 loss of $1.7B, Rivian had a total of $1.1B for COGS and $1.0B for Operating Expenses . . . that's $2.1B in spend.
I estimate that this $2.1B in spend includes:

$570m payroll costs​

$559m stock compensation​

$301m inventory write-downs​

$245m deprecation​

$150m material costs within cogs​

$275m other expenses​

So once Rivian has Tesla amount of employees their payroll will be over 5 billion a quarter? I think I'm going to quit my job and be Rivians janitor, I think they make 5x my pay as a pharmacist.

 

[CorneliusXX]

Umm…no. That’s not the ONLY reason (or even the most important reason) as has been discussed just in the last page or so.

Compared head to head with Tesla during the exact same phases of history clearly indicates Rivian is in big trouble unless they drastically cut costs and improve efficiencies in all aspects of their business - AND increase production substantially.

The $20+B that Rivian raised was a huge mistake in that it was akin to someone who’s never been able to balance a checkbook suddenly winning the lottery. Typically, and we hear the stories all the time, those people blow through their winnings in a matter of months and find themselves just as broke as they’ve always been.

Tesla/Elon have always had a very different psychology about money than Rivian/management.

I stand by my original words when Rivian first got the $20B - it’s not going to be nearly enough and they’ll blow through it in record time.

It's more risky but it appears that Rivian wants to have a faster ramp than Tesla (from what I've seen they want to get from 0 to 1m units p.a. in 9 years (target 2030). Rivian is gearing up for several hundred thousand vehicles from the get go. Tesla had staged volume production with only hundreds p.a. for the roadster 1, tens of thousands for S/X then hundreds of thousands for 3/Y. Rivian is trying to make those 3 leaps in one go. which means they need to spend more than Tesla did comparatively to accelerate the ramp. Tesla took 14 years (2008-22) to get to 1m p.a. Far higher R&D and SGA should be expected if timelines are accelerated.

There's also been more than half a decade of inflation since tesla was producing at similar volumes.

I'm not saying it will work out, but it's not unreasonable at this stage in their lifecycle while having those sorts of ambitions.

 

[The Accountant]

Umm…no. That’s not the ONLY reason (or even the most important reason) as has been discussed just in the last page or so.

Compared head to head with Tesla during the exact same phases of history clearly indicates Rivian is in big trouble unless they drastically cut costs and improve efficiencies in all aspects of their business - AND increase production substantially.

The $20+B that Rivian raised was a huge mistake in that it was akin to someone who’s never been able to balance a checkbook suddenly winning the lottery. Typically, and we hear the stories all the time, those people blow through their winnings in a matter of months and find themselves just as broke as they’ve always been.

Tesla/Elon have always had a very different psychology about money than Rivian/management.

I stand by my original words when Rivian first got the $20B - it’s not going to be nearly enough and they’ll blow through it in record time.

Maybe a simple way to look at it:

Tesla in Q2 2016 had about 14,000 employees and delivered 14,820 vehicles
Rivian in Q2 2022 had about 14,000 employees and delivered 4,467 vehicles

 

[Singuy]

It's more risky but it appears that Rivian wants to have a faster ramp than Tesla (from what I've seen they want to get from 0 to 1m units p.a. in 9 years (target 2030). Rivian is gearing up for several hundred thousand vehicles from the get go. Tesla had staged volume production with only hundreds p.a. for the roadster 1, tens of thousands for S/X then hundreds of thousands for 3/Y. Rivian is trying to make those 3 leaps in one go. which means they need to spend more than Tesla did comparatively to accelerate the ramp. Tesla took 14 years (2008-22) to get to 1m p.a. Far higher R&D and SGA should be expected if timelines are accelerated.

There's also been more than half a decade of inflation since tesla was producing at similar volumes.

I'm not saying it will work out, but it's not unreasonable at this stage in their lifecycle while having those sorts of ambitions.

Over half a billion dollars in stock based compensation in 6 months is totally acceptable when they have 10k employees. This number has nothing to do with trying to scale faster. Rivian is just diluting shareholders like crazy. In comparison Tesla SBC was 700M but had 10x the employee count. Rivian is paying 37k per employee in SBC over 6 months or almost 80k a year. This doesn't even factor in the estimated payroll.

Also major difference is Tesla's market cap is 25x of Rivians so 700M is like almost nothing percentage of dilution.

 

[Max Plaid]

Cory just made a declaration!

Thanks @Singuy for giving the heads-up on Cory's channel a while back, I've been watching religiously every day for a few months now and has made a significant, positive impact to my trading returns

 

[CorneliusXX]

Within the Q2 loss of $1.7B, Rivian had a total of $1.1B for COGS and $1.0B for Operating Expenses . . . that's $2.1B in spend.
I estimate that this $2.1B in spend includes:

$570m payroll costs​

$559m stock compensation​

$301m inventory write-downs​

$245m deprecation​

$150m material costs within cogs​

$275m other expenses​

Are you using the 6 monthly figures instead of the 3 monthly for Q2?

 

[Tony73]

It's more risky but it appears that Rivian wants to have a faster ramp than Tesla (from what I've seen they want to get from 0 to 1m units p.a. in 9 years (target 2030). Rivian is gearing up for several hundred thousand vehicles from the get go. Tesla had staged volume production with only hundreds p.a. for the roadster 1, tens of thousands for S/X then hundreds of thousands for 3/Y. Rivian is trying to make those 3 leaps in one go. which means they need to spend more than Tesla did comparatively to accelerate the ramp. Tesla took 14 years (2008-22) to get to 1m p.a. Far higher R&D and SGA should be expected if timelines are accelerated.

There's also been more than half a decade of inflation since tesla was producing at similar volumes.

I'm not saying it will work out, but it's not unreasonable at this stage in their lifecycle while having those sorts of ambitions.

I wouldn’t count the roadster years. The roadster was a hand assembled proof of concept. The real start of mass manufacturing at Tesla was June 2012 with the launch of model S. It took Tesla nine years from that start to hit a million unit run rate.
Rivian should be faster while burning less cash. The EV supply chain is much more developed. It just points to just how incredibly lean and capital efficient Tesla is.

 

[The Accountant]

Are you using the 6 monthly figures instead of the 3 monthly for Q2?
View attachment 840450

Yes , my bad. I thought that was a 3 month 6 month table.
I made an edit for the correction

 

[TheTalkingMule]

It should be plainly obvious to any TSLA investor that Rivian is not going to succeed. They have no niche, all they have is the backing of Amazon. Perhaps that'll be enough to survive, but they'll never earn a proper $100B valuation from here. From here on out you're gonna need to actually execute and produce.

They're neither lean, nor terribly innovative. They're neither going fast or going big. I assume Amazon will simply absorb them a la SolarCity in a few years.

This feels like the SCTY business model conversations we had here back in the day. @SBenson and the like would continually point to there being no fundamental path to scale and profits. That's how I feel about Rivian.

 

[Ratanpara]

Based their current cost structure they have massive hurdles to clear. They are at their infancy when it comes to spending money as the nearest service center near me, the second largest EV market being Florida, is in Texas.

It's good to reduce the cost per revenue, but their starting point is a massive massive loss. As I pointed out, Tesla already had a positive gross margin at Rivians scale and still took them another 8 years to hit a constant rate of profitability. And if you look at Tesla as they scale, expenses got bigger and bigger. If you were to apply the same multiplier of 22.5x to rivians spending as they grow in scale, they will end up having cogs plus operations to be something like 38 billion a quarter if they hit 1M car run rate.

As Elon said, if they don't change dramatically at reducing cost yesterday, their chance of survival is very low.

Looking at Rivian microscopically at this stage does not make sense, Big question is, can they ramp quickly ?, Rivian investment will not be pain free, Tesla lost money for good 10 years with Model S&X voulme around 100K, went almost under during Model 3 ramp.

 

[Singuy]

What is understated here when people look at Rivian and Lucid is that Tesla has NEVER made a negative gross profit since IPO. They had positive profit margins every quarter no matter how small. Musk makes a point of never losing money on product they make after learning his lesson from roaster 1.0. Total company loss after expenses yes, but always positive when you minus COGS from revenue.

Tesla Gross Margin 2010-2023 | TSLA

Current and historical gross margin for Tesla (TSLA) over the last 10 years. The current gross profit margin for Tesla as of September 30, 2023 is <strong>%</strong>.

www.macrotrends.net

 

[betstarship]

It's not a good idea to compare the two companies as apples-to-apples even if they're both building EV's. The reason people are doing that is because there's a dearth of EV companies in the space that have even gotten to 1000's of EV's sold per quarter.

Macro:
- EV's are now becoming a number one priority for the common consumer (i.e. cost-conscious), not just the EV early adopter crowd
- Many governments, if not all, are following the Paris Climate Accord and the US is going forward with the Inflation Reduction Act
- Climate change is causing even more to realize this is a necessary transition due to so many disasters popping up (and is just the beginning if we don't avert quickly enough)
- The market for SUVs and large trucks is huge...its 2-3x larger than sedans in the United States alone

Rivian:
- They started ramping while as a public company
- They have demand via Amazon, which de-risks the company, as they could simply fulfill the order and focus there for years.
- They have demand via their main product line and their order holders are patiently waiting
- You can see they're building great products at high quality as their advocates are growing across the interwebs

Opportunities
- They're going to get access to Tesla's supercharger network once it's open in the United States

I'd recommend looking at how Tesla scaled in the first year since becoming a public company (2010) and how long that took back then. It was a far more hostile macro environment and they got help from Daimler and Toyota in terms of investments to scale up, if people remember. Further, it took two years in the public space to scale up to mass production scale of the Model S in 2012. Rivian went public in Q2/2021 and started producing from there for orders. Tesla was pre Paris Climate Accord (and probably was a major reason for getting mass-government support for EV/Battery/Solar technology into the world's eyes). Rivian is post. That's how I see it.

 

[Tony73]

Tesla’s accumulated deficit peaked at -$6 billion in 2019 and is now positive. Rivian will probably blow through that by mid next year. I don’t see how they achieve the scale to justify the amount of cash they are spending.
They are unlikely to succeed internationally. They don’t have Tesla’s brand or visibility.
Rivian’s future is probably as a niche North American manufacturer of lifestyle trucks and family SUVs. They might do a couple hundred thousand units a year. They need to rein in their spending