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

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Obviously everything has an impact, but upper-middle/upper class folks are still pretty cash flush.

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Definitely and this is part of why the economy can handle the rate hikes

Just offering up some more stuff that I think could be potential headwinds worthy of consideration and juxtaposition against the optimism, whether or not they actually materialize.


I have a feeling a good chunk of the top 20% will be keeping one eye on real estate during this correction, and that may consume a decent amount of the cash hanging out there
 
So what’s your rationalization? If orders are going down while backlogs have been reduced massively, that should alarm any rational investor. Why do you refuse to consider that this may be caused by demand issues? It’s been a day since Troy posted about demand issues and no one has brought up a reasonable non-demand explanation. If it’s not demand issues, then what is it?
Haven’t dusted off this one for a while.

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I'm not contradicting. I'm saying there are potential issues out there and they're likelihood has increased over the summer. If those issues get worse, there could be a material impact on Tesla. I think as a longer timeframe, Tesla will be fine... but to think that war in Europe won't cause any issues at Tesla is misguided and ignoring reality. How much of an issue and what that impact should be on the share price is a debate.
So have you sold your TSLA shares? I have added as much as possible despite global concerns. I would argue that everyone who is really knowledgeable about Tesla has added to their positions or held. So by extension, if the entire investing universe was as knowledgable as all of us, TSLA would have never dropped this year, despite the war and Covid.
 
Tesla - The Envy of the Auto Industry.
Tesla will grow gross profit per car from $10.1k in Q1 2021 to an estimated $16.9k in Q3 2022.
Profits exclude regulatory credits and leased vehicles.
Dip in Q2 2022 due to Shanghai lockdown.

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How are the currency moves impacting your model on this quarter's financials, if at all?
Wealth destruction is also happening across almost all asset classes and that will predominately impact people who can afford $50-150k vehicles as they own most of the assets. Obviously those people will still not be in trouble, but watching declining asset values might lead to tightening up the purse strings.

We've had Model S Plaids in inventory on the Tesla site for some time, now starting to see Model X Plaids and regular Model S variants


But this is ultimately good for the consumer as Elon mentioned in a recent earnings call -- people don't want to wait for their burger, they want their burger when they want it.


Deflation is another thing to watch out for as it will have the opposite psychological impact when compared with inflation -- if people think prices might come down in the near future, they might hold off buying.

Declining used and trade-in values is another factor that could have a negative impact after the massive run up in prices, people who bought at the highs will likely be less inclined to sell or trade in at a big loss
Deflation is not an issue. If you want to see the FED really go hog wild, start giving negative prints on the inflation numbers, and they will dispatch a flock of helicopters to shower money.

Despite what the FED said yesterday, so much of that is punching market in the face for messing with what they are trying to do. If the CPI prints start coming in weak and economic indicators are plunging they will pivot on a dime.
 
I'm not contradicting. I'm saying there are potential issues out there and they're likelihood has increased over the summer. If those issues get worse, there could be a material impact on Tesla. I think as a longer timeframe, Tesla will be fine... but to think that war in Europe won't cause any issues at Tesla is misguided and ignoring reality. How much of an issue and what that impact should be on the share price is a debate.
And please anyone reading this kindly cancel your cybertruck reservation. Asking for a friend...
 
Companies will need the battery incentives to offset what will surely be much higher costs tied to more domestic production of these things while staying cost competitive with the much cheaper production out of Asia.
Maybe other companies need that to be cost competitive, but we're not invested in those companies are we?

Maybe you missed it, but Tesla has been planning to massively expand domestic battery production for years. Every decision Tesla makes is oriented toward accelerating the transition to sustainable energy, which includes the subgoal of minimizing cost to earn more money for expansion and to ensure that the long-term affordability goals can be met. So this must mean Tesla believed domestic battery production in the USA and N America was going to be the minimum-cost solution before the 2020 elections that enabled this shift in American tax policy to be implemented.

Oh...would you look at that...Tesla explicitly said domestic battery production would be cheaper two years ago on Battery Day:

Drew Baglino: Now that we have this process [for consuming raw nickel metal] obviously we're going to go and start building our own cathode facility in North America and leveraging all of the North American resources that exist for nickel and lithium, and just doing that--localizing our cathode supply chain and production--we can reduce miles traveled by all the materials that end up in the cathode by 80%, which is huge for cost. ... The way the lithium ends up in the cell is through the cathode, so the we should obviously on-site lithium conversion as well, which is what we will do using a new process that we're gonna pioneer...33% reduction in lithium cost.

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Tesla had cancelled a $1b bond sale backed by vehicle leases six months ago and that was attributed to market volatility, so taking on debt definitely seems to be in the cards. Having minimal debt is a huge advantage going into a recession but my concern would be the capital-intensive nature of building massive factories and still hitting current production timelines while working through the recession or whatever is coming for us right now.
I looked this up and saw that Tesla has been issuing such bonds since 2018. Therefore, if anything, canceling the bond sale in March indicates a reduction in Tesla's appetite for debt relative to earlier years. Per the Bloomberg report (source), "Tesla started its ABS program in early 2018 and has issued seven transactions."

Debt has been declining for a while now. Note that the non-recourse debt for vehicle and energy product financing has been shrinking even as the fleet of vehicles and energy products has been growing explosively, so when viewed as a fraction of the whole the debt has really been falling fast.

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Furthermore, why has Tesla been able to pay down all this debt so quickly? Hmmm...oh I remember, it's because of the firehose of free cash flow that has been growing and will continue to do so, making debt even more unnecessary in the future.

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The fact that Tesla is holding up so well is testament to the strength of the company, because otherwise I think the natural inclination would be fleeing a business with such high capital requirements in an environment like this
A business with such high capital requirements??????????? Are you looking at the same financial statements as the rest of us?

Tesla has only spent $12.7B in CapEx in total in the last 9 reported quarters, while building Berlin and Austin from the ground up in that time period and doing everything else. Tesla factories are cheap. Tesla R&D is cheap. Pretty much all Tesla capital investments are cheap these days. This must be true unless that $12.7B number is fraudulent.

As you astutely pointed out a few months ago, we are boning our customers hard with high vehicle prices and these morons keep falling for it and buying anyway. As such, the factories pay for themselves so quickly that interest rates are literally a rounding error in the economics. I posted about this just yesterday:

Stunning CapEx Efficiency
Tesla has spent cumulatively $12.7B on capital expenditures since Q2 2020 when Gigas Berlin and Texas began construction. There has also been investment in Shanghai and Fremont as well as other capital expenditures not related to vehicle capacity expansion, so this is an upper bound for how much the new factories cost.

Q2 2020$ 546
Q3 2020$ 1,005
Q4 2020$ 1,151
Q1 2021$ 1,348
Q2 2021$ 1,505
Q3 2021$ 1,819
Q4 2021$ 1,810
Q1 2022$ 1,767
Q2 2022$ 1,730

These initial phases of capacity in Berlin and Austin should be able to yield around 500k cars per year each, or 1M combined. Thus, we can roughly estimate that Tesla can expand production capacity for at most $12.7B / 1M cars/yr = $12.7k per car of annual capacity.

In H1 '22 Tesla earned $9.62B auto gross profit off of 565k deliveries, for a global average of $17k gross profit per car.

Neglecting time-value of money effects to keep this estimation simple, this means Tesla is getting roughly (17-12.7)/12.7 = 30% return on investment just in the first year of factory operation. In other words, the factory pays for itself within less than a year of volume production plus a 30% bonus and then every year thereafter is just gravy.

If we model the factory as lasting 10 years before needing new investment, the cashflows look something approximately like this, and the internal rate of return for the project is a whopping 92%!!

YearCash FlowIRR
1-6.3592%
2-6.35
317
417
517
617
717
817
917
1017
1117
1217

But wait! This was with excessively conservative estimates. Berlin and Austin definitely didn't cost $6.3B each because Tesla also spent a large portion of their CapEx budget on Shanghai, Lathrop, R&D, Berlin/Texas future production, Superchargers, and more. So let's say these factories actually cost closer to $4B each (or $8B combined) for that 1M/year capacity. Now the estimate is $8k investment per car/year.

Also, the new factories are going to earn much more than $17k per car. I think Berlin and Austin will earn closer to $25k per car on average. Now we can estimate that the factories will have paid for themselves 3x over in the first year of volume production, and shockingly the IRR is 169%.

YearCash FlowIRR
1-4169%
2-4
325
425
525
625
725
825
925
1025
1125
1225

169% compound annualized return on investment. WTF.

The ROI is so absurdly high I don't actually even need to model for 10 years of cashflows, because almost all of the IRR is coming from the first two years of volume production. If you could invest $1k in a security at this rate of ROI, then after 10 years you'd have $20 million. Wow.

I can't estimate this precisely, but with such an extreme result it doesn't even matter for practical purposes. I don't know of any other business in any industry that can generate returns like this, let alone with investments carrying such low risk. It's not like this is some speculative venture that we hope will work, like we might see in biotech or pharmaceuticals. This is just for building out more Model Y production facilities.
 
Probably the single biggest reason that Troy and carebears are grossly overstating the China demand dynamic is that it would then mean that Tesla was completely incompetent on managing where production goes - export or local.

What I mean by that is Tesla could have done another 3-4 ships easily for export instead of doing 30k+ of local sales in Aug. They could have easily done another 1-2 ships at the beginning of Sept to go to Australia. But they didn’t. Tesla has the complete insight into the orders books and order flows at all times. I’m sorry, but I don’t think demand in China could completely evaporate from what Tesla was seeing in the matter of couple weeks. I’m not talking about demand being a bit soft. It would have had to have been a complete collapse in China demand for them to burn through their entire order books.

Then we have the small incentive that Tesla set for a specific time period (final two weeks of Sept). All of which tells me Tesla China set up their local delivery logistics to work out to where a much larger % of deliveries will happen in the final 2 weeks of Sept.

Troy, in all his wisdom 🙄, apparently can’t grasp this concept. Even though it has played out this way quarter after quarter in the US. But of course Troy can never be wrong 🥴.

And then two weeks from now if Tesla did in fact deliver over 90k in Sept, he’ll ignore all the carebear FUD he created
 
So have you sold your TSLA shares? I have added as much as possible despite global concerns. I would argue that everyone who is really knowledgeable about Tesla has added to their positions or held. So by extension, if the entire investing universe was as knowledgable as all of us, TSLA would have never dropped this year, despite the war and Covid.
Why would I sell? My timeframe is in years and decades... not next week or month or quarter. I'll be adding more and leveraging more (conversions from shares to leaps while I can harvest some losses to offset gains). To say that there isn't some level of risk in the next 6 months isn't the reality of the situation.
 
TSLA is in the process of tumbling down a cliff at the moment as it performs worse and worse against its beta with every passing moment. TSLA had a nice run of strength there but todays trading action really breaks all of the momentum and uptrend lines. Prepare some significant underperformance

So I doubt you’ll get woken up until this time next week 🥴
All good! Looking to expire some $310/$267 BPS next week, so wake me up if I need to roll a week or two for credit.

Something tells me we're above max pain this Friday close and I coast into next weekend with no worries as we cross $1000 pre-split.
 
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I blame Reuters. Historically and generally in the auto industry, "recall" means calling the car back to the dealer for repair. Even software updates must be performed by the dealer for most automakers.

A non-misleading headline would be: "Tesla fixes window-reversing software with over-the-air update." That's what is stated in the second paragraph of the article, which Reuters hopes will be read less than the headline and first paragraph.
Despite Reuters ignorance and/or agenda posing as news many readers here will move on to read other national, political or international "news" from such sources and accept it as factual. Michael Crichton characterized it thusly...

Media carries with it a credibility that is totally undeserved. You have all experienced this, in what I call the Murray Gell-Mann Amnesia effect….

Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.

In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.
 
Probably the single biggest reason that Troy and carebears are grossly overstating the China demand dynamic is that it would then mean that Tesla was completely incompetent on managing where production goes - export or local.

What I mean by that is Tesla could have done another 3-4 ships easily for export instead of doing 30k+ of local sales in Aug. They could have easily done another 1-2 ships at the beginning of Sept to go to Australia. But they didn’t. Tesla has the complete insight into the orders books and order flows at all times. I’m sorry, but I don’t think demand in China could completely evaporate from what Tesla was seeing in the matter of couple weeks. I’m not talking about demand being a bit soft. It would have had to have been a complete collapse in China demand for them to burn through their entire order books.

Then we have the small incentive that Tesla set for a specific time period (final two weeks of Sept). All of which tells me Tesla China set up their local delivery logistics to work out to where a much larger % of deliveries will happen in the final 2 weeks of Sept.

Troy, in all his wisdom 🙄, apparently can’t grasp this concept. Even though it has played out this way quarter after quarter in the US. But of course Troy can never be wrong 🥴.

And then two weeks from now if Tesla did in fact deliver over 90k in Sept, he’ll ignore all the carebear FUD he created
I hope you are correct. This is actually the first reasonable non-demand issue explanation for the poor delivery numbers thus far.

That said, if demand is really that high, why would they need to give a discount to move deliveries?
 
But you are biased. Your bias is you are trying to extrapolate and make conclusions from a SINGLE datapoint - one that isn't verified.

1) We all know that Tesla batches China deliveries at the end of the quarter (shortest logistics delivery - load things on ships the first 2 months of the quarter for export, last month deliver locally, shipping via land to furthest distance in the first 2 weeks, and closer to Shanghai the last 2 weeks).
2) We KNOW that there is a new incentive beginning Oct 1 for Chinese buyer from the CCCP. It is perfectly reasonable to expect a significant number of buyers are going to push their delivery dates to Oct to take advantage of that. Tesla put out something, a small incentive, to counter that, but the Asian mindset is all about "what discount can you give me" - MANY customers will wait for the gov incentive since they know about it.
3) Your BYD argument is flawed for 2 reasons - A) they bundle hybrids in their "EV" numbers, which is just BS and not an apples to apples comparison, and B) their price point is like 1/3 that of Tesla. They are NOT the same market segment.
4) EVEN IF you are correct (and most here say the data supports you are NOT) - Shanghai is Tesla's proclaimed export hub. They could literally not sell a SINGLE car in China, and still run that factory at it's max run rate of 1mil+ cars per year for export.

TL;DR - THERE IS NO DEMAND PROBLEM. There is a comprehension problem on your end. You are a SPECULATOR, not an INVESTOR. Investors have time horizons much longer than a few weeks out.

Either that, or you are GoJo's latest paid shill trying to stir up trouble.
This actually answers a lot of my concerns.
I guess we'll get more confirmation next week. I'm hoping for 30K minimum.
 
What if Troy is the real care bear?
He is always low balling the delivery estimates towards the end of each quarter, TSLAQ amplifies his lowball estimates and market makers go to work dropping TSLA at the end of each quarter .
Since Q3 deliveries are going to be extremely good compared to previous quarters, the doom and gloom has shifted to demand issues .

Is it me or does anyone else see the pattern here?


AD used to also make this claim that such a pattern existed.

It's been debunked repeatedly though... last time AD made it it was pointed out Troy had been wrong to the high side more often than the low side going back at least several years (though it was very close, like 60/40 of guessing high or low)- he appears to have stopped making the claim since so credit to him there, but now it's back I guess?

I've not seen it checked in probably 2-3 quarters, but at best that'd still put him around 50/50 in guessing wrong high or guessing wrong low (and as you mention, last 2 Qs he was very close either way).


There's plenty I disagree with about Troys stuff, but the bias you claim does not appear to exist in the actual predictions he makes.