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

[TSLA Siempre]

Are you saying it does mean that is neither here nor there?

Pricing is, by far, the most fundamental thing that affects demand.

No. This is literally Econ 101. Price will move you along a given demand curve. Product features and other external factors like elons actions and brand perception move the demand curve up or down.

 

[Chunky Jr.]

Not sure if this is spin or what at this point, but more explanation about what's going on at Giga Shanghai

https://twitter.com/x/status/1607218287192215555

https://twitter.com/x/status/1607219818205433856

 

[Ogre]

I don’t know where this conversation started but when the product has near infinite demand and your primary limitation is factory production capacity the idea of holding up a bunch of product to try to satisfy some incentive loophole sounds like a logistical nightmare for something you could sell for a hefty profit without the incentive in the first place.

TL;DR : they aren’t doing any of this silliness

Tesla is hoarding hundreds of battery packs in Texas. I was just thinking out loud about a theory of why they might be doing that. @mongo helpfully made it clear it's unlikely my theory would play out.

The conversation started like 5 posts above yours... its not like it would have taken deep research to figure it out.

 

[Ogre]

what's the worst case scenario for TSLA?

Musk gets hit by a bus.

As for stock price moves... who knows. We're way outside what the consensus here thought was "Worst Possible Bear Case".

I don't think you can rule out $80/ share at this point if Q4 is bad (Not a prediction). Seems completely irrational to me, but the market is punishing every fault in Tesla disproportionately at the moment. I'd stay away from margin and not make any bets with a limited time frame.

 

[FireMedic]

The graph hereunder shows you are right (it incudes passenger vehicles as well as light trucks, buses and vans).
According to the National Bureau of Economic Research (the official arbiter of US recessions) there were 10 recessions between 1948 and 2011.
The most recent began in December 2007 and ended in June 2009 (1.5 year duration).
At the time there was a drop of a little over 30% in vehicle sales.

I agree with the possible room to grow by EV's and most important: it is unclear if we have a recession coming.
But if it is: vehicle pricing will be a very important factor and Tesla is in a very good position with regard to flexibility in that aspect.


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And from us in Bali, where the monsoon season has started: hope all people in the USA will be able to cope with the bad weather and wishing you all a merry Christmas and a happy and healthy 2023!

I’d be curious to see that chart with an overlay of auto stock market caps.

IE; at what point in that recession cycle did Wall Street price in reduced auto volumes, and subsequently pivot toward increasing vehicle sales volumes.

Everyone seems to be pricing tesla for massive demand contraction, I just don’t see it.

Estimates calling for lower ASP’s and no volume growth past Q4 ‘22 seem overly pessimistic to me. One or the other, sure; but both?

I think anyone who has spent any significant amount of time driving a tesla (or any EV for that matter) would take issue with that assumption. The value proposition of an EV vs ICE is not a fair fight. GAME OVER.

ON A COMPLETELY UNRELATED NOTE: I’m selling everything I don’t need ATM, including lots of tesla Knick knacks. I sold a mobile connector yesterday to a fella that took delivery of a new model Y just 3 days before the $7,500 discount + 10k SC miles.

I offered my condolences and was expecting a lot of negativity. Surprisingly he was over the moon about his new car and closed with “I don’t miss one single thing about my Audi Q7S that I traded in for this thing, like when I ditched my blackberry for an iPhone, but better”.

 

[FireMedic]

No. This is literally Econ 101. Price will move you along a given demand curve. Product features and other external factors like elons actions and brand perception move the demand curve up or down.

Nope. It’s just the product features and value. Some people do have brand loyalty and will need to be discounted as late adopters. A wild guess says >50% of consumers will ignore all other factors. That’s a massive market!

But where did Toyota fans come from…GM, FORD, CHRYSLER etc. Was it because they wanted to buy cars from a WW2 enemy? No, it’s because these Japanese imports had the BEST PRODUCT FEATURES FOR THE PRICE.

And because the Japanese offered better features and value AND were improving efficiency of manufacturing vs the incumbents; they dominated! And until Tesla they remained unchallenged, got lazy, and like we saw before; their fans will jump ship.

I know because it happened to me, and many others close to me. I was a FORD guy; that’s painful to admit. I took 1 test drive and immediately questioned everything I thought I knew about the auto industry and the lies they’d been telling me. I absolutely felt like a fool, people don’t like to be fooled. Media can be very persuasive; but not more than personal experience and word of mouth. And once you see their lies, you start to question everything they say.

The more Tesla’s Tesla sells; the more Tesla’s Teslas’ sell!

 

[Chenkers]

They are expanding Fremont 4680 production with a new building 4X the size of the old building. I expect the existing line to remain, but new lines to be added.

Just a little flavor to add to this.

This is 2 overlapping factory ramps combined: Fremont and Austin. Plus Fremont just added 4x additional floor space which should allow them to continue expansion there.

This should give us enough capacity for the Cybertruck ramp up and beyond.

The reporting on this Fremont 4680 expansion hasn't been very clear and easily allows it to be overrepresented. Tesla's in-house cell development efforts expand in Fremont

The new building they're expanding into (901 Page Avenue) is currently utilised as Tesla's seat factory, so there's not a lot of available space. The permits for the 4680 expansion are only for $1.5m in works and relate to a cell laboratory on the first floor. So no, I don't think this is new lines or a meaningful expansion, just a small testing lab on the first floor of the seat factory.

 

[Ogre]

The reporting on this Fremont 4680 expansion hasn't been very clear and easily allows it to be overrepresented. Tesla's in-house cell development efforts expand in Fremont

The new building they're expanding into (901 Page Avenue) is currently utilised as Tesla's seat factory, so there's not a lot of available space. The permits for the 4680 expansion are only for $1.5m in works and relate to a cell laboratory on the first floor. So no, I don't think this is new lines or a meaningful expansion, just a small testing lab on the first floor of the seat factory.

The big effort was always Texas so the "expansion" in Fremont was unexpected and a bit odd.

Regardless, well before Texas hits their 100 GWh, Berlin will start ramping and we'll see more Gigafactories coming online hopefully soon to pick up the slack after.

 

[carterm2]

Good news... air travel and hotel bookings in China are rebounding ...

https://twitter.com/x/status/1607235295430455297

 

[StealthP3D]

No. This is literally Econ 101. Price will move you along a given demand curve. Product features and other external factors like elons actions and brand perception move the demand curve up or down.

Demand and demand curve are not one and the same.

A demand curve is a graphical representation of the relationship between the price of a product and the quantity of that product demanded by consumers. It shows the quantity that consumers are willing and able to purchase at different prices, thereby illustrating the demand for the product at different prices.

In other words, the price of an item is fundamental to the demand for that item. That's why the demand curve is not a straight, flat line.

 

[Singuy]

After using FSD for a 120 mile drive, hwy NOA continues to disappoint as it was the only cause of my interventions. City street FSD beta performed great. Can't wait for single stack!

 

[Cosmacelf]

I don’t know where this conversation started but when the product has near infinite demand and your primary limitation is factory production capacity the idea of holding up a bunch of product to try to satisfy some incentive loophole sounds like a logistical nightmare for something you could sell for a hefty profit without the incentive in the first place.

TL;DR : they aren’t doing any of this silliness

Ah, but I don’t think they have a production capacity limitation for 4680 packs right now. They have to do Model switch overs, spin up CT. It isn’t uncommon for a manufacturer to inventory parts … parts of a factory can run ahead of other sections. And inventorying an almost finished pack to be able to claim production in 2023 is exactly the kind of optimization that Tesla would do. I don’t know that is what is going on, but that’s what it looks like to me.

 

[Cosmacelf]

Can we assume that those are 4680s with dry cathode? This is the pilot facility near the Fremont factory, correct? Do I remember correctly that at Austin, they are doing 4680 but with externally made cathodes (non-dry) for now?

Serious question, why are you wondering this? Getting lost in the details of specifically how a cell is manufactured, especially since we know they are upgrading it as time goes on, seems way too granular? I mean, we aren’t privy to costing spreadsheets, and cost is the only important thing that can come out of this analysis, unless I’m missing something? It isn’t as if we were tracking super bottle development when that got added to Model Y as a cost saving innovation…

 

[verystandard]

Uncle Leo goes full on Greg mode now. The recent decline really breaks him.

https://twitter.com/x/status/1607289712288632833

 

[Todd Burch]

China COVID info, from https://www.cnn.com/2022/12/26/economy/china-covid-surge-economy-strain-intl-hnk/index.html.

Key excerpts below:

“Factories and companies are also forced to shut down or cut production because of more workers getting sick.”

“Auto manufacturers sold 946,000 vehicles from December 1 to December 18, down 15% from the same period last year, according to most recent statistics from the China Passenger Car Association.”

“BYD, the country’s largest electric vehicle manufacturer, said it had to slash production by 2,000 to 3,000 vehicles per day as more workers are unable to work.”

“The Covid outbreak has severely impacted our production,” Lian Yubo, vice president of BYD, said Thursday at a forum in Shenzhen. “20% to 30% of our employees are sick at home.”

He added that the company’s monthly production is likely to fall short of target by 20,000 to 30,000 vehicles for December.”

“Many factories have been forced to shut down for weeks because of sick workers and lack of orders, according to Chinese media.”


Nothing Tesla-specific in the article, but:

-China COVID situation a mess right now.
-Lots of factories temporarily shutting down due to sick workers or problems with suppliers due to sick workers.
-Last week of BYD deliveries they may have been lucky. Likely to see impact for them this week.

Conclusion:

There is no Tesla-specific demand problem in China. Looks much more like a country-wide problem over the next few weeks not at all specific to Tesla.

 

[hobbes]

Serious question, why are you wondering this? Getting lost in the details of specifically how a cell is manufactured, especially since we know they are upgrading it as time goes on, seems way too granular? I mean, we aren’t privy to costing spreadsheets, and cost is the only important thing that can come out of this analysis, unless I’m missing something? It isn’t as if we were tracking super bottle development when that got added to Model Y as a cost saving innovation…

Dry electrode tech was THE key to reducing cell production footprint leading to major reduction in invest, because space for drying electrodes produced from wet process was not needed any more. Yeah it is cost, but so are the giga castings... Less cost leads to higher margins and eventually to higher share price (supposedly ) which should be interesting, no?

 

[verystandard]

China COVID info, from https://www.cnn.com/2022/12/26/economy/china-covid-surge-economy-strain-intl-hnk/index.html.

Key excerpts below:

“Factories and companies are also forced to shut down or cut production because of more workers getting sick.”

“Auto manufacturers sold 946,000 vehicles from December 1 to December 18, down 15% from the same period last year, according to most recent statistics from the China Passenger Car Association.”

“BYD, the country’s largest electric vehicle manufacturer, said it had to slash production by 2,000 to 3,000 vehicles per day as more workers are unable to work.”

“The Covid outbreak has severely impacted our production,” Lian Yubo, vice president of BYD, said Thursday at a forum in Shenzhen. “20% to 30% of our employees are sick at home.”

He added that the company’s monthly production is likely to fall short of target by 20,000 to 30,000 vehicles for December.”

“Many factories have been forced to shut down for weeks because of sick workers and lack of orders, according to Chinese media.”


Nothing Tesla-specific in the article, but:

-China COVID situation a mess right now.
-Lots of factories temporarily shutting down due to sick workers or problems with suppliers due to sick workers.
-Last week of BYD deliveries they may have been lucky. Likely to see impact for them this week.

Conclusion:

There is no Tesla-specific demand problem in China. Looks much more like a country-wide problem over the next few weeks not at all specific to Tesla.

I hope that whoever got sick from this wave will recovers soon as the life is slowly back to normal.

Amid Millions Of New Infections, China Learns To Live With Covid

Mask-wearing Beijing and Shanghai commuters crowded subway trains on Monday as China's two biggest cities edged closer to living with COVID-19 even as frontline medical workers scrambled to cope with millions of new infections.

www.ndtv.com

 

[Todesbuckler]

Let's do some number-crunching:

We probably all know people arguing that Tesla should be valued like other car makers.
A typical argument goes like this: Tesla only sells 10% of Toyota and the stock should trade at 10% of Toyota's value.

Well, this completely neglects the difference between ICEs (a dying industry) and EVs (a growing industry), but also the differences in profitability, other revenue streams and debt levels of both companies. Instead of cars sold, one could take a look at earnings.

So, let's take a look at the valuation. First, equity valuation:

Based on trailing 12-month non-GAAP earnings, Tesla has a PE of 30 compared to 10 for Toyota. Hence, a 202% higher premium for a higher expected earnings growth. If we take the latest quarter, Tesla has an annualized non-GAAP PE of below 27. Here, Tesla trades at a 85% premium compared to Toyota.


Alright, let's look at the total firm value, including debt: The enterprise value:

Right now, Tesla almost trades at the same enterprise value as Toyota.

Tesla has around 15 Billion $ in excess cash (21 Billion $ in cash - about 6 Billion $ in debt). Toyota has about 157 Billion $ in debt.
For the enterprise value calculation, the multiple is usually calculated with EBITDA (earnings + interest + tax+ amortization + depreciation).
Based on trailing 12-month adjusted EBITDA, the enterprise value of Tesla is 21 times its EBITDA. For the annualized Q3 22 EBITDA, the multiple is below 19 times. In this case, Tesla trades at a 65% premium to Toyota.

Well, everyone can make their own assumptions about the growth potential for both companies to evaluate differences in static valuation multiples. Most investors would probably agree that Tesla should trade higher relative to their earnings than Toyota due to a significantly higher earnings growth. Right now, I view Tesla's valuation as relatively low compared to Toyota, even with modest growth assumptions.

Numbers from Tesla are from their latest shareholder deck. For Toyota, I used the current exchange rate and Yahoo Finance figures (likely GAAP instead of non-GAAP). Please let me know if I included some mistakes. Maybe also @The Accountant can add his thoughts.

 

[Chenkers]

https://twitter.com/x/status/1607080893952180225

I've noticed some conjecture online that the photo on the right in Tesla's 868k 4680 tweet is taken in Texas, while the photo on the left clearly looks like Fremont.

If you look at the indoor photo on the right, you can see a column marked with grid reference F-13 in the background. In his videos Joe Tegtmeyer has some handy plans that show the grid layout for each floor of Giga Texas. Looking back at these, I can see that grid F-13 is definitley within the battery production area on the ground floor. So it appears that the 868k per week 4680 production may be combined output from both Fremont and Texas.

 

[MC3OZ]

Dry electrode tech was THE key to reducing cell production footprint leading to major reduction in invest, because space for drying electrodes produced from wet process was not needed any more. Yeah it is cost, but so are the giga castings... Less cost leads to higher margins and eventually to higher share price (supposedly ) which should be interesting, no?

My impression is that the cathode plant may be for building nickel cathodes via a wet process.

The anode is a dry process and we know nothing about iron cathodes, which might be wet or dry.

Elon and Drew once stated that DBE not working (for the cathode?) added 10% cost.

Odviously there is a reason why they are building the cathode plant, it is important, and it was part of battery day.

Even without an operational cathode plant they are able to build significant volumes of 4680 cells.

It is likely that they are getting the benefits of some cost savings outlined on battery day, but are still working on some aspects.

Perhaps it is not a matter of success or failure, but more like a slow grind to the desired result.