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

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Paging @The Accountant or other experts : Do you think the below can be considered "making a profit" when it is due to a one-time "accounting credit"?

"Here are the key numbers from Polestar’s third-quarter earnings report, its first as a public company following its merger with a special-purpose acquisition company in June.

• Revenue: $435.4 million, versus $212.9 million in the third quarter of 2021
• Operating loss: $196.4 million, down from $292.9 million a year ago

Despite the operating loss, Polestar was able to report a net profit of $299.4 million, or 14 cents per share, thanks to an accounting credit related to the revaluation of future share payouts. (Because Polestar’s share price has fallen since it went public, it will have to pay out less than it had previously expected, hence the credit.)"


I'd like Polestar to succeed, but it is important for folks to realize how close/far away profitability is for all other BEV makers...

Polestar is on-track for 50k cars in 2022, hopefully with more scale next year they can reach better numbers.

Not an actual profit. This is where GAAP can go wrong. This calculation will go up and down depending on share price and has no relation to cash flows either in or out. No relationship to the actual business or even cash balance.

If they went public via a traditional IPO this line item wouldn’t even exist.

 

[The Accountant]

Cash flows are a good metric to track because they are harder to massage. In the case of Polestar, it has 9-month free cash flow of -$1.0 billion.

This year, it has only spent $7 million on property, plant, and equipment. That number is a bit of a head-scratcher to me. Could be that they just aren't spending any money on innovating or growing manufacturing.

You were faster to the keyboard than I was. Agree, I made a similar comment. The negative cash flow comes from funding losses and increase inventory.
Things are tough for Polestar . . .they may experience the Tesla 2008 moment (new funding came in on Christmas Eve 2008 hours before payroll payments were due).
This is from Polestar's financial statements:

 

[petit_bateau]

You were faster to the keyboard than I was. Agree, I made a similar comment. The negative cash flow comes from funding losses and increase inventory.
Things are tough for Polestar . . .they may experience the Tesla 2008 moment (new funding came in on Christmas Eve 2008 hours before payroll payments were due).
This is from Polestar's financial statements:
View attachment 889001

Suppliers were likely happy to trade with Polestar on reasonable terms when it was backed by Geely. Suppliers are less likely to be quite so accomodating now Geely is out of the picture and Polestar is on a knife-edge without much of a parachute.

I fully agree with the overall assessment that there is little or no profit in the BEV operations of any of Tesla's significant competitors, excepting perhaps BYD and Hyundai/Kia.

 

[ggr]

Suppliers were likely happy to trade with Polestar on reasonable terms when it was backed by Geely. Suppliers are less likely to be quite so accomodating now Geely is out of the picture and Polestar is on a knife-edge without much of a parachute.

I fully agree with the overall assessment that there is little or no profit in the BEV operations of any of Tesla's significant competitors, excepting perhaps BYD and Hyundai/Kia.

So Polestar went public via SPAC about a year ago, but it isn't clear to me that Geely isn't still a major shareholder and might find it necessary to bail them out. The SPAC doesn't have to buy out all existing shareholders, just a majority, as I understand it. But I haven't followed it closely, I could be missing something here.

Aside: At our local mall (Westfield UTC in San Diego) there are now 5 EV brands for sale:
Tesla
Lucid
Vinfast
Arcimoto (tent in the pedestrian part)
Polestar (One car on a pedestal in the pedestrian part, with a minder, and a sign saying "Immediate delivery available".)

Of these, I've never seen an Arcimoto or Vinfast on the road, but I have seen Polestar.

 

[ggr]

Grumpy mod: Reminder that posts about twitter and/or politics are banned in this thread. 10 deleted. --ggr

 

[Dave EV]

My guess is that a significant part of that had been China's quarantine and lockdown protocols making travel and business activities difficult and bringing things to a halt repeatedly.

China allowing travel without quarantine is going to be a huge normalizing step. That and eliminating travel and work lockdowns when infections flare up are going to make it much easier to do business in China. I suspect this will majorly reduce disruptions.

For sure - the question is whether zero-COVID or COVID-is-over policies are less disruptive over time.

At least for the time being, China has decided the latter.

How will this affect TSLA? This is the harder to answer question - factory disruptions were already minimal to Tesla thanks to them being able to effectively enact measures to minimize the risk of the spread of COVID, even in the case of localized outbreaks.

As said previously, COVID-is-over policies will incur further short-term disruptions across China, it seems beyond the zero-COVID policies. But how will the long-term effects play out?

Q1 2023 will be very interesting, and we shall see how TSLA responds.

 

[adiggs]

Cash flows are a good metric to track because they are harder to massage. In the case of Polestar, it has 9-month free cash flow of -$1.0 billion. Default dead?

This year, it has only spent $7 million on property, plant, and equipment. That number is a bit of a head-scratcher to me. Could be that they just aren't spending any money on innovating or growing manufacturing.

Edit: Further context. BYD's 6-month free cash flow to June was roughly +$1 billion. See report. Tesla's 9-month free cash flow to September was +$6.1 billion. See report.

The cash flow statement is also a good thing to keep an eye on, but it represents a different idea from the income statement, and itself can be misleading.

How Does the Current Portion of Long-term Debt Affect Cash Flow Statement? - Wikiaccounting

Companies obtain finance from various sources. Usually, this finance comes from equity holders, which constitutes equity finance. This finance is perpetual and can be crucial in helping companies start their operations as startups. However, as companies progress, they have more options available...

www.wikiaccounting.com

In the cash flow statement will be cash flow from financing (debt / loans) activity, in addition to cash flow from operations. The former might still be a problem and indicative of a company with going concern issues, if they're borrowing money for something other than R&D / capital / capacity build.

 

[UncaNed]

This is an interesting video showing the historical market trends for six month downturns like we have seen over the past six months:

Looking back over the past 100 years, historically after six month downwards like we've just had, the market reverses and goes back up about NOW. Three times over the past 100 years this six month gradual downturn has signaled the starting point of an even MORE severe crash (1928, 1940, and 2001).

So the crux is we are now at a make or break point for the market historically. We will either begin to rally up from here OR start a much steeper and very sudden crash to a much lower bottom, which after a few months would instantly reverse and rally straight up like a rocketship.

In other words, looking back over 100 years of data, we are close to bottom now. And, statistically speaking we are nearly AT the bottom, but if we drop further it will be abrupt, violent, deep, and then a few months later hit bottom and blast upwards like a geyser.

We are close now, I think.

On that note, Merry Christmas everyone!!!

Interesting, but I'm ordering up the biggest salt grain Amazon has. Do any of the previous instances involve many huge widespread simultaneous disruptions by one new player?

Seems to me lots of likely political and economic events could drag the larger worldwide economy one direction or the opposite for another 3 months or more, regardless of how well random events happened to match up into nice neat little 6-month well-behaved downturns in the past. Something about data correlation or something...?

 

[Dikkie Dik]

Dark clouds for Volkswagen according to this article.
The brand Volkswagen will actually sell less BEV’s this year than last year. They’re loosing from Tesla in the premium segment and the Chinese in the budget segment.

Volkswagen Faces 2023 Profit Hit, While Its Biggest Challenge Is Electric

Like its European competitors, Volkswagen’s profits could halve in 2023. Its traditional challenges of opaque governance and the existential threat from a China blowup remain, but next year its number one challenge is likely to be meeting its plans for an electric future.

www.forbes.com

Too bad the article doesn’t give numbers for VAG as a group, but data shows they’re loosing market share in Europe the last three years by 1% per year while Tesla is gaining about 1%.

Electric Vehicle registrations in Europe: 15 countries, majority of BEV market

 

[Singuy]

If people are curious about BYD's breakdown for Nov

In Nov, Tesla delivered 62.5k to the Chinese, 37.7k globally

In comparison

From a total of BYD's global+Chinese market of 113,915

Model 3 LR competitor@ 222k yuan BYD Seal: 15,356
Model Y SR competitor @155k ($22kUSD) Yuan BYD Yuan Plus: 29,402
Model 3P competitor @288k yuan Hans EV:13,383
Leaf competitor BYD Dolphin@ 97k yuan : 26,063 ($15k U.S)
Qin and Tang doesn't have a break down, probably makes up the other 29.7k

So Hans and Qin's EV looks to be stalling in sales, Dolphin is in high ramp phase as well as the Seal. Seal is brand new and has been out for only 3 months.

So when looking at BYD weekly data schooling Tesla, just remember 1/2 of it are PHEVs, and then 30%-40% of the rest are low range 15k dollar leaf competitor.

https://twitter.com/x/status/1605025149488574464

 

[Snerruc]

I haven’t worked in about 40 years, but I know people working in several industries in my area. Covid is basically a non event for them. Flu is more of a concern.

 

[EXOTIC1]

anyone like lucid under $7?
or will they be BK soon?

 

[Singuy]

anyone like lucid under $7?
or will they be BK soon?

Nope, and Yes

 

[EXOTIC1]

Nope, and Yes

thx
they still have a TON of $ behind them

 

[EVMeister]

thx
they still have a TON of $ behind them

But not in front of them.

 

[Singuy]

thx
they still have a TON of $ behind them

I can't tell you where the stock will go short term. Hell the average price target for Lucid is $17.5 and these analysts see the same earnings report we see. So there's no universal consensus among wall street analysts that Lucid will go BK. Citi group has the highest PT for Lucid, and has always been bearish on Tsla.

However just looking at the earnings report it's super clear that Lucid is a cash furnace that is unprecedented...until you compare them to Rivian then it's a club membership of 2. Everyone makes the mistake comparing Lucid to Tesla, how Tesla once lost money too are just plain wrong. The amount of money Tesla lost given the same amount of revenue generated in time are orders of magnitude different. This is why many investors here stuck with Tesla because there was a possibility to profitability vs Lucid where there's zero chance until something changes. ie. Stop all production, rework the car and assembly line from the ground up, massively cut staff by over 50%, massively cut executives to almost nothing, and change company culture from trying to one up Tesla with useless superlatives but actually try to make a profitable car.

 

[ThisStockGood]

That’s a lot of plaid

https://twitter.com/x/status/1607478597949825025

 

[OrthoSurg]

This is an interesting video showing the historical market trends for six month downturns like we have seen over the past six months:

Looking back over the past 100 years, historically after six month downwards like we've just had, the market reverses and goes back up about NOW. Three times over the past 100 years this six month gradual downturn has signaled the starting point of an even MORE severe crash (1928, 1940, and 2001).

So the crux is we are now at a make or break point for the market historically. We will either begin to rally up from here OR start a much steeper and very sudden crash to a much lower bottom, which after a few months would instantly reverse and rally straight up like a rocketship.

In other words, looking back over 100 years of data, we are close to bottom now. And, statistically speaking we are nearly AT the bottom, but if we drop further it will be abrupt, violent, deep, and then a few months later hit bottom and blast upwards like a geyser.

We are close now, I think.

On that note, Merry Christmas everyone!!!

So if we break SPY 200MA at 348 in the next month then we go 100% cash for 1 month and then buy everything back at 50% lower?

 

[NicoV]

Russia proposes to send gas to Europe via the Yamal pipeline or via Turkish pipelines. Or via LNG ships.
This may put even more stress on the gas price, that already reached lows not seen since the shutdown of Northstream 1, and already at pre-war levels.
Due to unusually warm weather the stock levels are still very high e.g. 93% in Germany, 89% in France, even 97% in Poland.
Covid in China means less LNG needed in China, which is thus cheaply sold to Europe.
This also means lower electricity prices and diesel is also going down in price:

Gasprijs op vooroorlogs niveau, is het ergste leed geleden?

Rusland is, bij monde van vicepremier Alexander Novak, toch bereid meer gas richting Europa te sturen. Die aankondiging komt boven op het nieuws dat de Europese gasprijs opnieuw lager staat dan voor de oorlog.

www.standaard.be

Since the inflation in Europe was for a significant part energy-related, this will cause less inflation, maybe even deflation.

 

[Thekiwi]

With the “we-dont-call-it-a-shutdown” shutdown confirmed by Tesla China for this last week of December, it appears the Reuters reports from earlier in December have on balance been proven out to be true.

Prediction made: Reuters reported a planned production slowdown in the several weeks leading up to Xmas, followed by a week long shutdown from xmas to new years.

What eventuated: At least one on the ground local source (WUWA) confirmed the production slowdown had taken place in the weeks leading up to xmas, and tesla itself has confirmed the now in place production halt.

We can of course debate the reasons behind the weeks of production slowdown and the production halt this December, but in future perhaps it is unwise for members here to swiftly call Reuters reports as bogus when they eventuate.

==========

When it comes to what actually happened - it will be valuable for us to hear from Tesla at earnings why these decisions were made. Most here assumed any temporary demand slump in china would not slow production as excess production capacity could all be directed to the export markets (especially with Tesla “unwinding the wave”), which has not happened to the extent we would have expected.