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

[elasalle]

Yes, of course, Q4 will be new records across the board. Why would I disagree with that?

Here are the current records:

• Highest quarterly global production: 365,923 in Q3 2022
• Highest quarterly global deliveries: 343,830 in Q3 2022
• Highest quarterly China production: 197,412 in Q3 2022
• Highest quarterly China deliveries: 120,576 in Q3 2022
• Highest quarterly China exports: 73,874 in Q1 2022

Tesla will beat all of these in Q4. However, we are trending clearly below the full-year targets. Before somebody says, Tesla's target is 50% average annual growth in vehicle deliveries over a multi-year horizon, yes, that's what the shareholder letter says generally after each quarter but they do have specific targets for 2022 too.

Tesla's 2022 Targets:

• 50% growth in production (link to audio)
• Just under 50% growth in deliveries (link to audio)

We are trending below those targets. I tweeted about it here to explain what they would need to achieve in Q4 to reach the full-year targets:

https://twitter.com/x/status/1591963470060261376

It is what it is. I'm just trying to be as accurate as possible, as quickly as possible. Here is what happened in Q4 2021. At the time, analyst consensus was very low. My estimates were high. However, Tesla was performing better than expected. This is the quarter when Fremont production jumped from 109K in Q3 to 127K in Q4 2021. Also, Giga Shanghai increased its production from 129K in Q3 to 179K in Q4 2021. I could see the increases in VIN data and I kept increasing my estimate. It was an exciting time.

I wish this quarter was similar. Analyst consensus is currently 430K deliveries. Tesla needs 468K to reach 47% growth this year. I wish I could tell you they are trending around that number. I would love to leave analysts behind and keep increasing my estimate. It's just not the right quarter.

Thanks Troy and kudos for coming on and clarifying your intent and approach

If your error rate is > 10% for 1st 40 days why post at all? It just is used as reference by rest of FUDsters that Tesla crowd needs to refute from the beginning of quarter.

Also your accuracy rate is for end of quarter, so rest of quarter is just opinion

Three questions
How do you factor in AUS and NZ … supposed to be like 16 ships?
How are you factoring in the amount of products they can deliver at EOQ by giving these discounts?
Does China insurance cover all of China or just main cities?
These could easily move the needle from 428K to 450K?

 

[unk45]

It's just not that simple. Companies with PR departments also do advertising with the mass media. The PR department is there to ensure the advertising budget is used to promote a good message (e.g. No good message, advertising dollars will be spent on a more friendly platform). If you have no advertising budget, then there is no point in a PR department.

I disagree with these statements. Rather than PR we have been discussing Investor relations (IR) a very different function, although they can e related to each other. Advertising is another topic than the two prior ones.
Non-public companies can have PR and advertising both part of a comprehensive Marketing approach but no Investor Relations, e.g.: Cargill, Mars

https://www.mars.com/

https://www.cargill.com/

The two examples are in many ways similar to that of SpaceX but SpaceX has no SpaceX consumer products other than Starlink, so nearly all their marketing is focussed on the most important customer NASA, closely followed by commercial space.

So, how about Tesla? First, Tesla does have Investor Relations and Marketing functions but no traditional advertising. Marketing, though is highly refined, oriented towards suppliers, governments (permits, licenses,etc) and customers both consumer and commercial. The missing links are all within the single word "conventional".

What many argue with quite solid justification is that Tesla needs a systematic method to coordinate with publicity, from news, social media and all types of customers, plus FUD. Nobody experienced in such topics is likely to argue about that. However, the form that should take engenders huge controversy. Frankly, the vocabulary probably is not particularly important. The function is, and that function is exceedingly difficult in the Elon Musk world.

So, what mention SpaceX? Precisely because Gwynne Shotwell actually behaves and manages SpaceX as CEO, and by he pre-SpaceX background is very well qualified to cope with those issues for that company with or without any explicit organizational entity. The customers, present and potential know how to contact SpaceX for any subject.

Without question Tesla needs such a person. There is not one but for a public company such functions are necessary. Why not the Chair?
robyn-m-denholm

 

[mongo]

Of course, it makes sense to look at inventory in days of production instead of units. Inventory was worth 4.2 days of production at the end of June 2022. That's the normal level. Then it was 6.5 days at the end of Sep. That's too high. They run out of buyers in mid-Sep when the first 8,000 Yuan insurance promotion was announced.

Why is 6.5 too high?
EoQ global inventory has only been 4 or lower three times. Only once in Q2.
Tesla global days of inventory at quarter end :
2019: 30,18,11,17
2020: 20,17,14,11
2021: 8,9,6,4
2022: 3,4,8
Q2 to Q3 2022 had a 53% jump in production (20% jump compared to Q4 '21 or Q1 '22), shipping/ delivery can't just instantly handle a 130k step change.

 

[deerfield]

Thanks, @deerfield. These two appear to be duplicates. When I click on the details, they both show Peabody-North Shore, 210 Andover Street, Peabody, MA 01960. Because this is very rare, my best guess is, when a car is sold, it takes a while for the website to update. There should be duplicates everywhere if they didn't filter them out. It is very hard to find duplicates.

No, I have been tracking these for over a week now. They have always been there. You had a thesis, but this proofs it wrong.

 

[aubreymcfato]

The fact that ‘freedom of expression’ means ‘freedom to lie’, ‘freedom to cause strife’, ‘freedom to cause confusion’ ‘freedom to spew hate’, ‘freedom to create FUD’ etc… for such a vast segment of the population is a prime example of exactly what is wrong with people.

That was never the intent, should never be the intent. Yet here we are. Congratulations to the human species! Never missing an opportunity to make the world just a little worse than the day before.

Kruggerand, you are a smart cat. You know that people, more often than not, don't really want to blatantly lie. Maybe they are partisan, maybe they are biased, maybe they have an agenda, maybe they are in a rush and oversimplify, etc. You always remind us how imperfect humans are, and I agree, and this is one of the examples.

Hanlon's razor has at least two versions:

1. Never ascribe to malice, that which can be explained by stupidity
2. Don’t ascribe to malice what can be plainly explained by incompetence.

"Freedom of expression" is not only a way to protect lies, but to protect the simple fact that people are by definition imperfect and stupid.

 

[Prunesquallor]

Looks like China Govt subsides.

https://twitter.com/x/status/1604487333562023936

 

[Boomer19]

Gary has it wrong. Elon sold 30.8m of his stock option shares (with high tax basis) last year and only had 37.8m shares left to sell this year.
Gary is assuming that Elon sold the 68m shares this year but that is not the case. 30m last year 37m this year.

this is helpful, and answers my original question. thanks neighbor(hood)!

 

[Krugerrand]

Kruggerand, you are a smart cat. You know that people, more often than not, don't really want to blatantly lie. Maybe they are partisan, maybe they are biased, maybe they have an agenda, maybe they are in a rush and oversimplify, etc. You always remind us how imperfect humans are, and I agree, and this is one of the examples.

Hanlon's razor has at least two versions:

"Freedom of expression" is not only a way to protect lies, but to protect the simple fact that people are by definition imperfect and stupid.

You make a compelling argument for people. The feel of the message, though, doesn’t sit right with me, but I’m unable at this point to express exactly why that is. It may simple be that I think Hanlon doesn’t have it quite right.

Thanks for saying I’m smart, but next time be sure to include how much smarter I am than dogs.

 

[jerry33]

I disagree with these statements. Rather than PR we have been discussing Investor relations (IR) a very different function, although they can e related to each other.

Sorry about that. I was just going by my experience with the mass media vs Tesla for the past decade and it was the conclusion I reached. Stories that get published in mass media are almost always negative or have a negative spin somewhere in them. Stories about the companies that advertise are either positive, not shown, or only mentioned briefly to create the minimum amount of impact. As I can see, it's all about the money and little else.

 

[Criscmt]

Nov, southern california.

Did they finally take it, or got cancelled?

 

[bkp_duke]

Did they finally take it, or got cancelled?

Cancelled

 

[Criscmt]

Gary has it wrong. Elon sold 30.8m of his stock option shares (with high tax basis) last year and only had 37.8m shares left to sell this year.
Gary is assuming that Elon sold the 68m shares this year but that is not the case. 30m last year 37m this year.

Are you saying Elon sold all shares in his possession, in other words, no sales until next tranche from 2018 CEO compensation plan?

Mind reminding if some will vest end of this quarter?

This likely was discussed here before, Elon transferred 5B+ worth of shares to his foundation. If those were sold this quarter, we won’t know until next quarter. I was suspecting huge volumes in some of the days Elon didn’t sell could be by the foundation. Any thoughts? What are the odds the foundation sold and ultimately the money went to Twitter as investment or something? If it went to Twitter, I guess, we likely would’ve heard?

 

[Criscmt]

Cancelled

Last couple of questions on this I guess, are they planning to order one and take next year?
Are they in income bracket below 300k+?

 

[StealthP3D]

TESLA ENERGY
We have all been waiting for the Energy segment to take off.
This individual makes a good argument that it will be arriving soon:

View attachment 886369

That would align with what we heard on the October Q3 earnings call. They told us it was essentially the first time they had plenty of cells, they were not cell constrained when it came to autos at least. This could be another very significant added tailwind to Q4 results. Unfortunately, I doubt analysts will want to model this growing revenue stream going forward because growth of energy is dependent upon cells remaining unconstrained.

As usual, keep your eyes on the batteries! People are off in the weeds worrying about not having a public relations department. That would be like me worrying about whether people would still like me if they saw my socks didn't match.

 

[rsm287]

FUD - fear, uncertainty and doubt.

Do not underestimate how powerful this stuff can be. The most effective FUD usually contains a few small grains of truth, just enough to give it an air of believability. It is also more effective when you can’t immediately point to evidence to disprove it (or if you need to wait some period of time for evidence or results that would disprove it). Then there are times when the issue is more complex and important context or information is left out that would otherwise lead you to draw a different conclusion if you knew all the facts.

How many times have we seen claims that Tesla has a ‘demand problem’ and yet the numbers continue to grow at an average CAGR of over 50%?

We are all exposed to mis-information on a regular basis and the more often we hear something and the more sources we hear it from, the more likely we are to let it seep into our perception of reality.

As investors we all have a tendency to seek any new information on Tesla because it’s good to be informed on what’s happening with the company. For those of us that are also fans of the company, the mission and the products, we also get a dopamine hit every time we find out the latest new thing about Tesla, which subconsciously encourages us to keep seeking more information.

Knowing more is generally a good thing, but this can also be problematic if we get so far into the weeds that we can’t see the big picture anymore. We’ve all seen instances of people who’ve become overly focused on one particular aspect, only to lose an overall sense of perspective, distorting their perception of reality.

Of course, if we zoom out too far, we might also miss something that could be valuable to us as investors, so the trick is in finding the right balance.

In the early years of Tesla it was more important to know every little detail because there was still a good chance that the company could die at any moment. At that stage, knowing what was happening from day to day or week to week was a lot more important.

As the company grows it becomes more and more difficult for us to follow everything that’s happening, but the reality is that Tesla has reached a point where we don’t have to worry about every single little detail anymore.

There was a time when keeping track of production and deliveries on a weekly basis was more critical, but I really don’t think this is the case anymore. It’s interesting to follow the data (and of course we all want to know how it’s going), but even with all the effort that goes into tracking the data, you inevitably don’t see the whole picture and results are often inaccurate.

Weekly or monthly data is inherently noisy for lots of reasons (whether that be logistics or factory upgrades or supply shortages or other local conditions such as Covid shutdowns or local incentives….the list goes on).

Tesla publishes actual production and delivery results every quarter and I think we’ve reached a point where this is more than frequent enough for investors to keep track of progress. Even quarterly results can be noisy…

As investors, it’s the trajectory over the longer term that’s most important to keep track of.

 

[Criscmt]

• Yes, higher-than-expected numbers for weekly China car insurance would help with Q4 deliveries. The next one will be released on Tuesday, 20 Dec.
• More than-expected exports from China between now and the end of December would help with Q4 production but not with Q4 deliveries.
• Ideally close to zero numbers for new inventory in the US would help a little with Q4 deliveries but not Q4 production. However, there is a potential downside risk here. The estimates could drop a lot compared to where they are now.
• If more ships are late than I already accounted for, this would reduce Q4 deliveries but wouldn't affect Q4 production.

I include things that are likely to happen in my estimates before they happen. That includes positive assumptions too. At the end of Q3, I was too optimistic despite some clues. My delivery estimate was too high. Production is easier to estimate because of VIN data but deliveries are more difficult. I can calculate how many cars they could deliver if they pushed hard but that's not the same as how many they will actually deliver. The end-of-quarter push for Q3 was more relaxed than usual.

> The end-of-quarter push for Q3 was more relaxed than usual.

Looks like this quarter it’s back to usual, not anymore relaxed. Is that right?

 

[ElectricIAC]

> The end-of-quarter push for Q3 was more relaxed than usual.

Looks like this quarter it’s back to usual, not anymore relaxed. Is that right?

The hit pieces by the msm have also been more aggressive this Q so no surprise an incentive is being thrown out there.

Some see it as a negative to discount in place of PR massaging: I see it as smart marketing that plays on FOMO and every dollar that isn’t going toward marketing is a dollar you can pass on to the consumer in savings.

 

[Queeg500]

What is the last date that Elon is allowed to sell $TSLA before the earnings report ?

 

[StealthP3D]

No, I have been tracking these for over a week now. They have always been there. You had a thesis, but this proofs it wrong.

You mean there have been the same two cars in inventory for over a week?

Uh-oh....DEMAND PROBLEM! Quick, sell it all! /s

On a more serious note, it seems obvious that Tesla wouldn't want to list duplicates, and certainly not tens of duplicates if such a situation accidently developed due to timing of shipments and sales not lining up perfectly, as it would serve no purpose other than act as a sort of imperfect live inventory report.

I believe what Tesla meant when they said they are trying to end the wave is they were spending too much time/resources matching each car with each buyer, and they want to streamline the process. They have reached volumes that are high enough that the number of cars required to be kept in inventory is low enough relative to overall production volumes that it makes sense to streamline the delivery process by allowing a more liberal inventory to smooth delivery logistics without building inventory too excessively.

Legacy auto has done this on a much less efficient manner for many decades but, somehow, when Tesla tries to do it on a very lean level, they are accused of having a demand problem.

Legacy auto brands like Ford, GM have dealerships in every medium and large city in America, and many small towns too, many times more retail locations than Tesla has, and it's the norm, not the exception, to see those lots bursting at the seams with unsold inventory vehicles. Tesla will never be that inefficient, but it does make sense to lubricate the delivery process by trying to keep a small number of cars for immediate delivery. They won't have one of every configuration at all times, and sometimes they might two or more if they just got shipments recently, but it will save them a lot of time and phone calls if they can just hand over the car to each new buyer most of time.

It's very tricky to do this because even a perfectly steady overall demand has natural ebbs and flows due to statistics. Purchases will sometimes be distributed evenly and other times they will clump together. But overall demand is not perfectly steady, it has natural ebbs and flows too. Layer that on top of seasonal demand, combined with the fact that deliveries have a certain amount of "lumpiness" to them, and it makes logistics not as simple as it may seem at first glance.

Then you have pricing. Car sales are very sensitive to price changes. It seems Tesla has taken the strategy of trying to ride a fine line of having cars in inventory for immediate purchase but not pricing them so low that they run out of inventory and leave money on the table. So, prices will vary with seasonal changes in demand and other things.

People who get alarmed at normal price variations are letting the fear centers of their brains take over.

 

[Stormy24]

What is the last date that Elon is allowed to sell $TSLA before the earnings report ?

Friday gone so people have been saying.