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

[unk45]

OT.

I’m Indian. Almost everyone that goes to school in India speaks English. Well. Sure it’s not their first language. But damn close. Not at all like ESL.

Grammatically more sound than many Americans. And no, the ones at the call centers are not all named ‘Bob’.

The statistics never consider a multilingual society. As part of multilingual family myself it is a bit disingenuous to speak of mother tongue when people speak more than one language from infancy.

During two decades of working with Indians the English grammar was invariably better than typical among many ’native speakers’. Anybody who ever lived in India would not doubt that there are more childhood English speakers in India than there are people in the US.

 

[Krugerrand]

I think we do have an idea whether Tesla IR mentioned it to analysts, because I'm pretty sure that would be a blatant violation of SEC regulations. I'm not a lawyer but this seems straightforward and it's obvious why such a rule would exist. In line with this expectation, Dave Lee recently spoke with Tesla IR and he said IR told him they can't say anything other than clarifying information that's already public.

SEC.gov | Selective Disclosure and Insider Trading

www.sec.gov

17 CFR 243 ("Regulation FD")

Please. The rules are broken all the time. Never mind the fact Elon has said multiple times over the last few years that Tesla would end the wave. It’s not new news. What’s new is that they made a bigger attempt this quarter than in most past ones to execute it. They could have easily repeated it to analysts and the analysts just brushed it off the way we have when it didn’t happen the first six times it was mentioned.

 

[MC3OZ]

I have 2 big frustrations with Tesla IR right now……

There’s absolutely nothing wrong with ending the wave. In fact it’s invited. But Tesla IR met with analysts multiple times over the past 1-2 months and not once mentioned to them that they’re ending the wave this quarter. Not a peep. Even though they gave many other updates on the status of the business and factories. It’s bizarre that they would not set expectations.

And further if you’re going to surprise analysts and wall st like this with a change in method about how you’re managing your deliveries/production, at least throw your investors a bone and state that you expect to deliver enough volume in Q4 to hit 50% growth for the year.

For a Dave Lee video I learned that Tesla IR can not (in theory) disclose new information, they can however clarify information already in the public domain.

This makes sense to me, any information that could impact on the share price must be disclosed to all relevant parties at the same time.

How it actually works in practise is, maybe new information sneaks out, if people ask the right questions.

When factories are rapidly ramping production, that can make logistics more challenging, but the additional inventory can also smooth the wave and increase efficiencies. What we want to see is increasing production and deliveries each quarter, not a particular number, numbers may jump around a bit.

 

[Gigapress]

Telsa has industry low inventory (other auto majors have ~70 days of stock).

In the USA at least, @SageBrush's observation is closer to correct. Pre-COVID, dealerships had on average a bit more than 80 days of new car stock, but now it's 30 days.

The National Automobile Dealers Association (NADA) releases this data biannually and here's the June update (link):

 

[AudubonB]

Don't New Vehicle Days' Supply data need to be calculated based on future sales? And how are the data calculated in reality? Dollars to donut-spares, I'll bet based on trailing data, so when the economy, consumer spending habits and loan availability simultaneously tank, that aint-a-gonna work no more.

 

[Artful Dodger]

In the USA at least, @SageBrush's observation is closer to correct. Pre-COVID, dealerships had on average a bit more than 80 days of new car stock, but now it's 30 days.

So... 5.5 days of Tesla Inventory vs. 30 days for the industry recently. Allrightythen...

 

[Big Time]

2021 Full year : 936,000 deliveries
2022 Q1 310,000
2022 Q2 254,000
2022 Q3 343,000
2022 YTD deliveries 907,000

936,000 x 1.5 = 1,404,000
- 907,000
Q4 Needs 497,000 for 50% growth in deliveries


497,000 - 343,000 = 154,000
-20,000 in transit
134,000 Needed improvement
perhaps EoQ delivery rush is a thing of the past…but mb not EoY?

134,000 / 2 = 67,000 (Shanghai)

67,000 / 3 = 22,333 (Freemont, Berlin, Austin)

Any of this possible? I’m always an optimistic sap

Shanghai needs to make 744 more cars per day than they did last quarter to hit that additional 67,000. What’s their new daily run rate?

 

[kbM3]

Exactly, it's not as if they're going to be sitting around gathering dust without any buyers, they're in transit and will just boost next quarters delivery numbers. We all know wall street will have their fun short term...

It depends.

If this Q was a one time thing, then yes deliveries would outpace production by 20k in q4.

If however this is an ongoing change in policy as Tesla seems to claim, then deliveries will roughly equal production in q4 (no further hit, but no boost).

Another way of looking at it is that yes those 20k cars will be delivered this month, but there will be another 20k cars in December in transit/inventory, that will offset them.

 

[Gigapress]

Please. The rules are broken all the time.

All the time? I'm not aware of any instances of Tesla IR noncompliance with securities regulations, and the SEC definitely enforces Regulation FD to some extent at least, because for example they charged AT&T in 2021 with allegations of exactly this kind of selective disclosure and the lawsuit is still ongoing.

SEC.gov | SEC Charges AT&T and Three Executives with Selectively Providing Information to Wall Street Analysts

www.sec.gov

Never mind the fact Elon has said multiple times over the last few years that Tesla would end the wave. It’s not new news.

Ending the wave abruptly right in this quarter is news, especially since the sudden gap between deliveries and production could have happened for many reasons, each with different trading implications. Those who know in advance about that sudden shift in strategy would have an unfair advantage until the number is explained on the 19th. The swirling media reports, investor concern about potentially declining demand, and our talking about it suggests that investors do believe this information is important. You really think the courts wouldn't consider this material information for investors?

 

[SmokyPeat]

It depends.

If this Q was a one time thing, then yes deliveries would outpace production by 20k in q4.

If however this is an ongoing change in policy as Tesla seems to claim, then deliveries will roughly equal production in q4 (no further hit, but no boost).

Another way of looking at it is that yes those 20k cars will be delivered this month, but there will be another 20k cars in December in transit/inventory, that will offset them.

Don't forget the ~4k undelivered vehicles from Q2. I think there's a good chance that whatever logistics issues hampered deliveries last quarter will have eased by end of year.

 

[Singuy]

LoL, looks like earnings call questions are already being asked and Elon is already answering them.

https://twitter.com/x/status/1576637452726702081

 

[Gigapress]

Don't New Vehicle Days' Supply data need to be calculated based on future sales? And how are the data calculated in reality? Dollars to donut-spares, I'll bet based on trailing data, so when the economy, consumer spending habits and loan availability simultaneously tank, that aint-a-gonna work no more.

It appears NADA's calculation is based on trailing sales data. They show 6.8M vehicles sold in 1H '22 and 1.2M vehicles in inventory, which works out to roughly 1 month worth of sales on hand. Yes, if legacy auto demand plummets then these estimates will be too low, but probably by 50% in the worst case scenario. Even in 2008, vehicle sales didn't drop by that much.

 

[mongo]

I have 2 big frustrations with Tesla IR right now……

There’s absolutely nothing wrong with ending the wave. In fact it’s invited. But Tesla IR met with analysts multiple times over the past 1-2 months and not once mentioned to them that they’re ending the wave this quarter. Not a peep. Even though they gave many other updates on the status of the business and factories. It’s bizarre that they would not set expectations.

And further if you’re going to surprise analysts and wall st like this with a change in method about how you’re managing your deliveries/production, at least throw your investors a bone and state that you expect to deliver enough volume in Q4 to hit 50% growth for the year.

You mean like this:

Exactly. Giga Shanghai makes cars for export in first half of quarter, then cars for far away parts of China, then cars for nearby parts of China. Net result is a crazy wave of deliveries end of quarter. It is tough on our team, so we’re hoping to reduce the wave in Q4 & Q1.

With Q1/Q2 having Covid issues, Q3 seems less late than most predictions.

https://twitter.com/x/status/1440729549239558148

 

[Artful Dodger]

25%?! That would be something.

Da.

... and/or Suisse.

 

[Artful Dodger]

Shanghai needs to make 744 more cars per day than they did last quarter to hit that additional 67,000. What’s their new daily run rate?

About 3K per day. Its either 22k/wk or 20.5k at Shanghai. Depends on how REUTERS spins it.

 

[unk45]

Hopefully Lula can garner a majority and avoid a runoff w/ Bolsanaro. Seems very reminiscent of our 2020 election in the US. Except most of the ugliness happened post election here. Given recent geopolitical events, I think at least one of the next Gigafactories will be in the US/Canada.

There is a runoff on oct 3”0. Lula has 47.5%, Bolsonaro 43.9% now with 94.5% reporting and remaining votes from areas not capable of changing results. Ciro Gomes has 3.06% now and all his votes will go to Lula (he’s former PT), and Simone Tebet votes 4,24% will gosto Lula mostly. My entire family voted for Simone and we’ll all go to Lula. The big surprise is how strong Bolsonaro has been, including, for example the leading position in both RJ and SP.

Even though Lula will win, there is very high tension with Bolsonaristas/evangeloístas and everyone else. This has unfortunate analogue with US 2020. The difference is that nobody sane questions election integrity in Brasil. Voting is mandatory, there is biometric voter confirmation, etc.

The aftermath of Bolsonaro will be problematical since he has dramatically reduced education funding primary through university. The list goes on. Bolsonaro abstained from UN condemnation of Russia invasion because Russia offered fertilizer.

There will be opportunity for Tesla here eventually. That will not be plausible until much of this damage has been repaired. That may not be soon, partly because most wealthy Brasilians have supported Bolsonaro because he’s been generous with them. It takes serious people to vote against their personal interests.

It us a sad day here. Tesla might come here for raw materials but anything else now would be foolish.

 

[The Accountant]

Yeah, it's about $0.10 per share on the difference in inventory in transit: ($60K ASP, +18K Inv vs. Q2, w. 1.31B shares)

(60000*(22000-4000)*0.3)/(3.13*10^9) = $0.10/sh​

... but of course if ASP happened to go up $4K in Q3 v Q2, then it'd be a push.

Paging @The Accountant

Interesting exercise.
By plugging in the 343.8k deliveries into my model, Non-GAAP EPS decreased from $1.36 to $1.22 (still a beat to Wall Street of $1.07)
To get back to the $1.36 eps, ASP would have to come in higher in my model by $1,800 per car. It's possible.

 

[MC3OZ]

The best way to unwind the wave in China is start building cars for export in the last few weeks of the quarter, and slowly bring that time period forward.

The next step is to build for domestic Chinese sales slightly earlier in the quarter.

This can add an additional 2-3 weeks to deliver cars in China, with an eventual cost of 2-3 weeks of production inventory in transit to overseas destinations. However, if this is done gradually, the impact on any particular quarter is minimised. Seems like the job is already perhaps 30-50% done.

This problem is more significant for Shanghai, Fremont, Berlin and Austin may have slightly easier logistics due to the majority of the customers being located closer to the factory.

 

[unk45]

This is the historic average in recent years (well documented elsewhere). Tesla historically runs with days of inventory while everyone else runs with months. Q3 may be an anomaly, but if this is to be adjusted, it will happen by other auto majors decreasing their production (then blaming it on 'chips').

Cheers!

We have had many posts explaining the consequences of Tesla income recognition vs everyone else. The consequence is that Tesla would have higher Days on Hand than others except that they produce vehicle that normally have already been sold. Structurally Tesla maintains that rapid conversion cycle only because demand always exceeds supply.

With dealer model income is recognized upon transfer to dealer/distributor, which often precedes actual physical delivery to dealer. Tesla recognizes income only when delivery is completed and payment received from end user.

In effect that means Tesla usually receives payment before payment is due for suppliers. Hence they have higher positive cash flow as they grow faster.

That is unprecedented! Several of us have searched for another instance of this phenomenon but have not found one. If I find another I will probably buy it.

 

[unk45]

Interesting exercise.
By plugging in the 343.8k deliveries into my model, Non-GAAP EPS decreased from $1.36 to $1.22 (still a beat to Wall Street of $1.07)
To get back to the $1.36 eps, ASP would have to come in higher in my model by $1,800 per car. It's possible.

…or some of those other income sources would need to have made significant contribution.