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

[betstarship]

If Twitter stops the threat of Nuclear Armageddon due to a poll on its website, that's bullish...right?

 

[M|S|M MYP]

Nice! Did you receive an estimated delivery date?

Cheers!

It said Oct-Dec 2022, i will update y'all when we fill out all the docs and get a EDD.

 

[Singuy]

Either way, first mass prod. vehicle it's not totally unreasonable something like this might happen... but what is Toyotas excuse for a similar screw up with wheels falling off their first BEV after having generations of experience manufacturing cars?



I mean, as you note- costs go down as you scale production... One would HOPE the price raises (that they are 1-2 years from being able to actually charge) and other cost reductions get them to at least even by then... but without more insight into the internal financials that is likely not public (and not certain) I don't know that you can answer that definitively right now.

I do know they actually looked like they were gonna hit the 25k they guided for- unlike say GM who appears on track to miss that goal for Lyriq production by an hilariously large #


Further discussion (if desired) prob. to here?

All discussion of Rivian Automotive

I wonder how many shifts they have running right now at the Illinois plant

teslamotorsclub.com

Yeah however we saw gross margins increasing by 10% with operating leverage and economy of scale, and a cheaper manufacturing facility in Shanghai plus a thousand things Tesla did for simplicity sake. We did not see gross margin jump 30 or 40% or anything while 10x, the production.

There's something massively wrong at Rivian that economy of scale cannot make up. Infact their losses can be accelerating as they make more cars when their starting point is -120% gm.

 

[unk45]

I took a look at PACCAR Inc. financials. They are owners of DAF, Leyland, Kenworth and Peterbilt.
Their financials show GM% at 16.5%. I will double that for Tesla at 34%; however, I won't assume 34% until Q2 or Q3 2024.
I will probably start at -10% in Q4 2022, +5% in Q1 2023, +15% Q2 2023 and so on.
There is not much detailed support for my approach. I use 2 pieces of knowledge: Tesla delivers better margins than ICE and that it takes time to ramp to peak gross margins. I am likely conservative here.
Perhaps @unk45 or members with knowledge of this industry can help shed some light on this business.

I agree with conservatism. Paccar is an exception in the industry.
They have had for years excellent financial management,
They maintain their financing operations very wells have excellent credit rating on their finance paper,
There are one of a tiny number of global large truck specialists, competing with Mercedes, whose products cover nearly every segment everywhere (eg. in NA Freightliner, Thomas Busses, Detroit Diesel), Volkswagen (similar to Mercedes but not NA) and Volvo AB (US Mack) and VAG's Traton (Navistar, MAN, Scania, etc).

With that entire list only Paccar shows more nearly consistent financial results, and it is the only one that does nothing other than large trucks.

Paccar also has more consistent financing and parts sale profits than do others, partly because of their increasing percentage of Paccar-manufactured engine in it's trucks. Tesla will hav vastly less parts sales than do the others. Even Tesla windshields are 'Tesla Armor' thus reducing the 2/3 replacements per year for typical Class 8 in US.

So, what does that mean for Tesla? After all, the other all have BEV, especially in the EU. But...every single one of them buy nearly all the BEV components from suppliers, and most of them offer engines from multiple manufacturers. Paccar and Freightliner in particular used to sell to sell new 'gliders' a new truck without an engine or transmission.

What is a Glider Kit? A Form Of Recycling! | Fitzgerald Glider Kits

This is a question we get quite frequently and the answer is simple. A glider kit is a new truck without...

www.fitzgeraldgliderkits.com

While that practice is less common as a tactic to avoid emissions controls it still exists.

Tesla is 100% Tesla. Thus it is unique. Without proven evidence I still believe Tesla will have higher gross margins in this segment simply because it competently integrates technology already present in it's cars, specifically including the motors, batteries and BMS plus a complete vehicle operating system. At launch they emphasized all driver information and trip information integrated in the vehicle. That is a huge cost saver by eliminating as many as six independent applications, formerly with individual screens or on tablets or even paper. The most important factor is increased reliability and reduced operating cost, even when compared with the best BEV's of the others.

I think it is reasonable to assume a 2023 15% GM, with rise to 2024 25%
As with every new product there will be unexpected problems, but in the case of Semi they'll need almost instantaneous fixes. I think support costs will help constrain initial margins.

One factor that will loom large soon after initial successful launch is the probable appearance of various subscription services including Supercharging and maintenance. Whether these will be reflected initial sale or in subsequent service steams is another unknown. Because of the typical disruptions Tesla brings we really should be more conservative, especially for 2023.

 

[unk45]

The South Korean government must be heavily subsidizing Hyundai/Kia/Genesis and/or they're putting out loss leader after loss leader to change their image and perception before jacking up prices -- Genesis' lineup is starting to see big price jumps, for example with the G90 initially being the "value" buy against its competitors but the 2023 model is getting closer to price parity.

But that auto group is currently offering too much value for the price, I have a 2021 Genesis GV80 and legitimately don't know how they made money on it based on what I paid compared to the interior quality, warranty, and everything else.

I doubt that there is subsidy involved. Hyundai has more vertical integration than do most OEM's. (Their shipping fleet that Tesla uses too, for example). Since the 1970's Pony they've been very effective in cost reduction and quality control. With ICE they are making money on almost every model, if not all. For the last six months reported they had a 7.4% GM. That is not TSLA or RACE territory, but quite respectable for an ICE-dominated company being clobbered in some markets. From the beginning they have remained consistent to add features that many others make options, doing that makes manufacturing less costly and value appear to be higher. By using Kia as 'value', Hyundai as 'standard' and Genesis as 'luxury' they are being more standardized than VAG, since all three brands are common in nearly everything while being positioned in entirely different markets.

Almost all OEM's do that, even Tesla has many common parts are approaches while making each model obviously positioned quite differently. The Hyundai differences are in packaging.
Those of us who think none of the traditional OEMs will survive aren't watching too closely.

 

[printf42]

Are you able to share your valuation model ?

I am not challenging your valuation model, I disagree with your market share assumptions you based your valuations on.

You can not say just because Chinese are releasing more models and building more capacities they would be able to drop Tesla’s sales by 25% and margin by 30%.

That depends on product offerings and cost, and eventually boils down to engineering capabilities, which can not be predicted by financial models or capacity build ups.

 

[Discoducky]

Alexandra (@TeslaBoomerMama on Twitter) published the S&P report for Tesla and their ratings upgrade. I find it super interesting for many reasons and would encourage folks reading through it.

Quick notes

• Surprised as they seem to have a pretty good grasp on why Tesla is dominating and will continue to dominate.
• Not surprised they think Tesla needs to "expand its range of products" and I think this is legacy auto thinking.
• I find it funny that they think Tesla's growth rate is going to slow due to competition. Ok, I find this extremely funny.
• Seems like they'll upgrade if Tesla keeps growing however and gets to 5% global auto share which seems to be 4M/yr. Also funny as that seems they won't upgrade again until 2024?

 

[Artful Dodger]

Hmmmm. It looks like the US delivery dates are pulling in? I just jumped on the site now, configured the "cheapest" ($69.5K!) model Y and it showed Est. Delivery: Dec 2022 - Apr 2023. I don't remember 2022 being possible last time I did this?

Model 3 had some changes recently, with the ability to order an LR being removed, leaving only the P model with the LR pack. This is likely the most profitable version of the Model 3 to date, so it'd be interesting to know the wait time for a new order.

 

[Nocturnal]

Apparently it's not an easy matter. Remember how Tesla was going that route but then decided to give every Model 3 the exact same trim but just have the range difference? They even give you all the hardware and all you need is to software unlock them later(minus the subwoofer).

Just because they didn't do it doesn't mean it's not "easy". Can't say I blame them. When you are the only game in town there is little need for market segmentation.

Xi bringing all the worst Black Mirror episodes to life and turning China into an increasingly dystopian nightmare surveillance state is going to crush the Chinese capacity for innovation.

That's always been the case. Their weird brand of centrally controlled capitalism let them make major leaps forward over the past few decades but their people aren't taught to be creative free thinkers.

 

[bballshinobi]

If China achieves "strategic autonomy" from the West, where are they going to copy and steal IP from?

I find it interesting that in America the less educated tend to discount China as an adversary but the educated tend to overrate China. I am Taiwanese-American and I grew up in Taiwan so seeing the different American opinions of China has always amused me. For example, there are people who think China is just a sweatshop that produces cheap, low quality stuff, and we also have the more educated scholars who think China will take our lunch in 10 years. If you ever been to China or seen how their companies work, you will know neither will be the case. China will produce good quality cars, because their labor is cheap and are used to work long hours in conditions Americans won't tolerate (look up 996 working hour). If we line up 100 high school educated Shanghai employees and 100 high school educated Fremont employees, I am willing to bet that the Shanghai cars will have better quality and lower cost. The perception that China makes low quality stuff isn't because they are not capable of doing so but because they lack the incentive to innovate. Compliance and obedience are built in their culture; deviating from the guideline is always frawned upon. Price is the only strategy they can think of in any business/indsutry. They won't spend their budget in innovation because they will look to run on zero or even negative margin so they can gain market share. They will keep lowering prices until no player in the marketplace makes money, then they start cheating by using worse materials or lower quality control to squeeze out some profit that way. Unless the Chinese EV companies adopt Tesla's culture, they won't be able to compete with us. Apple doesn't make the "best" or most cost-effective smart phones but every Chinese wants an iPhone if they can afford it. Tesla will be the same way.

Sorry for my ranting. It just irks me everytime i see these "OMG look at what China is doing!" comments. It's like see a white guy saying how exquisite Chinese cusine is when he's eating fried rice and chow mein in a Panda Express.

 

[TheTalkingMule]

If Twitter stops the threat of Nuclear Armageddon due to a poll on its website, that's bullish...right?

It depends on the Fed reaction to total nuclear annihilation. Let's ask Powell!

 

[Nocturnal]

Semi OT but it's always nice to point out positive media for our Twitter loving business associate. We heard a bit about this a couple years ago but now the plan is for him to a space walk too. Gonna be fun to see Cruise doing stunts in a SpaceX spacesuit.

Universal studio's chairwoman Dame Donna Langley has revealed that Tom Cruise is expected do a spacewalk for his next movie, making history as he will be blasted into space for an upcoming Universal blockbuster. Plans for the stunt-loving actor to star in such a movie first emerged in 2020 with Elon Musk's SpaceX and NASA both involved in the project.

Tom Cruise Expected to Film Movie with NASA and Elon Musk’s SpaceX in Outer Space

Cruise is also expected to do a spacewalk outside of The International Space Station.

movieweb.com

 

[Skryll]

Can you post a screenshot? im seeing $519/month in CA.

Scroll down and switch tires from 19" to 18".
Note lease is for 10,000 miles at that price, goes up to $548 for the 15k mile limit lease.

 

[Skryll]

[...]
-That is why Chinese automakers are already adopting GigaPresses (btw: remember that IDRA si Chinese owned);

LK Group Hong Kong company that also has Chinese branch, acquired IDRA in 2008

 

[Todd Burch]

Alexandra (@TeslaBoomerMama on Twitter) published the S&P report for Tesla and their ratings upgrade. I find it super interesting for many reasons and would encourage folks reading through it.

Quick notes

• Surprised as they seem to have a pretty good grasp on why Tesla is dominating and will continue to dominate.
• Not surprised they think Tesla needs to "expand its range of products" and I think this is legacy auto thinking.
• I find it funny that they think Tesla's growth rate is going to slow due to competition. Ok, I find this extremely funny.
• Seems like they'll upgrade if Tesla keeps growing however and gets to 5% global auto share which seems to be 4M/yr. Also funny as that seems they won't upgrade again until 2024?

I think when we see more revenue and margins from the energy side (maybe starting with Q3?) that will perhaps account for expanding its range of products. The ratings agencies, like many others, seem to see Tesla only as an auto manufacturer.

 

[bkp_duke]

Cathie Wood's latest labor market / monetary policy video:

TD;DW - to no surprise to this group, Powell is making a big mistake and it's already starting to show in monetary supply and global economies.

 

[Singuy]

Trade war is already here and will only escalate. Anti CCP sentiment is bipartisan now here in the US.

The west has seen how stupid it was to make themselves dependent on bellicose fascist dictatorships as the Europe-Russia relationship has recently shown.

China needs the western market more than the west needs the Chinese market, and China needs western tech more than the west needs Chinese tech. The trade war will hurt them more than the west.

Xi bringing all the worst Black Mirror episodes to life and turning China into an increasingly dystopian nightmare surveillance state is going to crush the Chinese capacity for innovation.

I really think a lot of people here massively underestimate how terrible Xi is.

It's funny because the Chinese on TV says exactly the opposite, how the west need them more than they need them, and they have the expertise to innovate while the west doesn't have the ability to manufacture due to heavy regulations and lazy labors.

You can't say the Chinese are being crushed by their capacity to innovate while Elon's only fear is China's ability to innovate quicker as the US becomes more complacent. Can't really have both statements being true....

 

[nvx1977]

The biggest challenge investing in a high PE stock such as TSLA is that, since by definition a high PE is awarded by the market based on future earnings, the market can assign a wildly different value at any given time based on differing assumptions about future events. It’s not irrational that the SP is now $223, nor would it be irrational if it was currently $666.

BUT, just because the range of rational prices is very wide doesn’t mean there aren’t better or worse times to invest. I believe this is an incredibly good time to invest based on two factors:

1) the current SP is well below what an average PE would be based on our projections of future profits, and

2) more importantly, those future profits are very imminent!

There have been great entry points before (e.g. early 2020 and mid 2021) but the future earnings justifying that were over a year into the future. A lot can happen in a year (and did! e.g. Covid factory shutdowns).

But now the future earnings justifying a higher SP are the CURRENT QUARTER. At the latest we will know with certainty by January how profitable Q4 will be, but it is likely we will have strong indications earlier — perhaps as soon as in a few weeks during the earnings call, when we will get a good glimpse into likely margins and production for Q4.

The first point above speaks to how tightly the spring is coiled. The second point speaks to how imminent a release of the spring is likely to be.

Together, they paint a powerful picture of the potential near future of the SP.

Of course, black swans (including deep recessions) can come out of nowhere, so be careful out there!

I really want this to be true (the market finally realizing that TSLA is actually undervalued), but I feel like the macro headwinds are still too strong. Frankly I'm still trying to fathom how impulsive and knee-jerk the broader market has reacted to rising rates. Do these investors really understand why in general growth stocks aren't attractive in the face of higher rates? And if so, why penalize TSLA, a company that does not need capital raises, has extremely low debt, and a generous cash bank? TSLA is faring a bit better than a bunch of other growth stocks in my portfolio, but only barely so.

Seems like the market is very cargo culty, and as long as people just blindly reason by analogy, there's the risk that TSLA doesn't break out in the shorter term, even if P/D and margins impress in the next few quarters.

Agreed, we don't know if we've hit bottom yet. But historically, it's times like these where if you just cherrypick a handful of growth stocks blindfolded, you'll be way ahead in a decade. The market fear is overblown.

 

[nvx1977]

Trade war is already here and will only escalate. Anti CCP sentiment is bipartisan now here in the US.

The west has seen how stupid it was to make themselves dependent on bellicose fascist dictatorships as the Europe-Russia relationship has recently shown.

China needs the western market more than the west needs the Chinese market, and China needs western tech more than the west needs Chinese tech. The trade war will hurt them more than the west.

Xi bringing all the worst Black Mirror episodes to life and turning China into an increasingly dystopian nightmare surveillance state is going to crush the Chinese capacity for innovation.

I really think a lot of people here massively underestimate how terrible Xi is.

It sounds like your assessment of Xi has a strong western bias to it. The surveillance state has been there for decades, and despite that, China's tech innovations have flourished.

Xi is widely respected in China for massively lifting those in poverty into economic prosperity. He is also much more politically savvy than his contemporaries, as well as in comparison to the leadership of the countries that China are allied with (Russia, NK , etc).

China's economic and military might is finally to the point where the west can't push them around anymore, and that has been frustrating for the west. This was most evident when the US stood idle while China played war games over Taiwan post-Pelosi visit. Stark contrast to 1996. This is another source of pride for the Chinese, after being bullied by western forces for over 200 years and seen as the 'sick man of asia'.

 

[⚡️ELECTROMAN⚡️]

If your NPV "China" case is accurate, I should move my investment elsewhere with a predicted SP of $398 in 2030, which doesn't even revisit our current 52-week high by the end of the decade...hell, it means that I won't even break even on one lot of TSLA that I bought in January until 2029....

So all of a sudden it's a busted growth story? Too much Chinese competition just like that. I didn't realize my TSLA investment was so fragile. Are you sure all of those new Chinese EV's aren't similar to VW announcing 28 different EV models?