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

[Dikkie Dik]

https://twitter.com/x/status/1609989797585555457

 

[Ohmster]

P&D numbers without, and even with, context are meaningless now.

Revenue, margin, EBITDA, YOY growth. That’s where it is at.

 

[generalenthu]

12 becomes 10 days if you use a 91 day quarter.

May want to double check that. It goes up.

The logic is perhaps, 75 is the number of days available for delivery. But then most of the quarter, they 're not delivering cars like they do in the last 2 weeks. So 75 is not really a constraint.

 

[Ogre]

Maybe the CyberTruck, but don't see the Y being a "Generation 3".

I’ve seen the phrase before, but never a clear explanation of what it might mean exactly. I’ve also seen a few interpretations of what Generation 1/ 2/ and 3 might be. I think the most common understanding is Roadster was Gen 0, Model S was Gen 1, Model 3/ Y Gen 2 & 2.5…. But maybe Model Y is generation 3? I just don’t know.

I can’t say I’ve ever seen something consistent about this from Tesla.

 

[ZeApelido]

TMCers:

“Only long term matters”

Also TMCers:

F5 F5 F5 F5

 

[thesmokingman]

If this headline doesn't mean that all the big boys are in and that they want a rally from here for at least a bit then I dunno what it means. Nothing about missing expectations until the bottom of the article. Written by Lara no less.

Maybe it will change by tomorrow.

View attachment 891460

When we put this year into context, 40% growth is insanely good especially in regards to the huge macro issues.

 

[Ogre]

I am more concerned we have not seen a clear strategy to take advantage of the IRA act. At minimum on the Model 3 as it has been known for a while the LR Model 3 will not meet the price cap.

Until the IRS announced the actual qualified vehicles last week, there was nothing to strategize on. It was an ambush.

Tesla needed that information out and if there is a decrease in pricing or a lower priced model incoming, they will want to wait until it’s ready for orders to announce it or risk losing sales on people putting off their purchases.

That means if they need to change their production to respond to this, we won’t hear about it until the new model(s) are ready for delivery.

 

[SOULPEDL]

https://twitter.com/x/status/1609989797585555457

" ...Model Y are not considered as SUVs and are therefore capped at a maximum MSRP of $55,000, so unless Tesla drops the price to under that limit, it will not qualify."

 

[Dikkie Dik]

CAGR at 62%

https://twitter.com/x/status/1609973423589199872

 

[mongo]

May want to double check that. It goes up.

The logic is perhaps, 75 is the number of days available for delivery. But then most of the quarter, they 're not delivering cars like they do in the last 2 weeks. So 75 is not really a constraint.

Thanks for correction, I need to go have lunch I think...
I figured 75 was six days of sales a week (minus 3). It is referenced as coming from the Automotive News definition.

 

[EVWatcher]

Imagine if Shanghai hadn’t closed up shop for a week and there were even more units in transit with a larger P+D delta.

 

[StealthP3D]

so much pessimism- great from contrarian standpoint
selling TSLA at -70% or shorting it here, probability of it ending well is rather low in my opinion
it is not uncommon after a severe selloff like TSLA had over last 14 months, to test lows 2 to 3 times
i am looking at stock to bottom within a matter of days to weeks, if not much sooner
we will see, but i am not half as pessimistic as many on this board

I'm not pessimistic at all. It was a strong report that bodes well for the mission and the future. We finished off the last quarter of 2022 with an annual production run rate of 1,758,804 vehicles (not counting semi). All of them pure EV's, all of them commanding with strong margins (including the ones sold at a $7500 discount), in a very troubling quarter (if you listen to all the mainstream naysayers).

I'm afraid many of you are failing to understand the magnificence of this. And the Freemont plant is putting out more cars than GM ever could in their heyday on the same site, and more than the joint venture of Toyota and GM could put out even though many of them were the tiny, cheap and easy to produce cars like the Vibe, Geo and Prizm. Tesla churns out more high value cars than GM and/or Toyota ever made of smaller, cheaper cars, using the same facility. The difference in economic output must be mind-boggling, even once inflation is accounted for.

What do you think Tesla will do with two factories that are only now starting to hit their stride and have not even approached their potential output capacity yet. Apparently, some of you think they will use those factories to build cars that people don't even want! Ha!

 

[Raisin45567]

Been saying this since October. Elon lies on Twitter about all sorts of things, why can we trust him about Tesla now? Now would be a good time for him to start rebuilding trust.

It’s true and wonder why they are not more repercussions.

 

[thx1139]

" ...Model Y are not considered as SUVs and are therefore capped at a maximum MSRP of $55,000, so unless Tesla drops the price to under that limit, it will not qualify."

Well I am fairly certain that Tesla could easily fit those in at $55K. The real question is could they manufacturer enough in USA to really make it worthwhile?

 

[generalenthu]

I'm not pessimistic at all. It was a strong report that bodes well for the mission and the future. We finished off the last quarter of 2022 with an annual production run rate of 1,758,804 vehicles (not counting semi). All of them pure EV's, all of them commanding with strong margins (including the ones sold at a $7500 discount), in a very troubling quarter (if you listen to all the mainstream naysayers).

I'm afraid many of you are failing to understand the magnificence of this. And the Freemont plant is putting out more cars than GM ever could in their heyday on the same site, and more than the joint venture of Toyota and GM could put out even though many of them were the tiny, cheap and easy to produce cars like the Vibe, Geo and Prizm. Tesla churns out more high value cars than GM and/or Toyota ever made of smaller, cheaper cars, using the same facility. The difference in economic output must be mind-boggling, even once inflation is accounted for.

What do you think Tesla will do with two factories that are only now starting to hit their stride and have not even approached their potential output capacity yet. Apparently, some of you think they will use those factories to build cars that people don't even want! Ha!

Just occurred to me that the capex for next year would be minimial for the s3xy lines as current production capacity with a slight ramp at Austin and Berlin will get Tesla to 40-45% growth. Additional growth needs to come from cybertruck, semi, etc., but the numbers have to be huge to make a material difference to the P&D growth targets.

To have cybertruck take the growth in deliveries from 40% to 50%, we need 130k of them which is higher than what's possible in 2023 I think.

 

[capster]

Collectively, we are the biggest bulls out there and we're disappointed and negative. I imagine the bears are ecstatic.

And how many times have we had good news only to have the rug pulled out from under us? The Street makes money by confounding expectations and that applies to those of shorts as well as longs.

The Street will keep shorting until the shorting is losing traction and the flow of dumb shorts slows. Sharp rallies probably offer the best prospects for fleecing the dumb shorts. Deciding when to reverse has to be dicey for the Street already at these levels, even if they have more information than we do.

My own guess is that the Street might chance a head fake lower, but that we will be flattish entering January and still see a rise into earnings. But what do I know? I‘ve often been wrong about the short term stock price movement. I’m positioned for the long haul.

 

[betstarship]

I'm not pessimistic at all. It was a strong report that bodes well for the mission and the future. We finished off the last quarter of 2022 with an annual production run rate of 1,758,804 vehicles (not counting semi). All of them pure EV's, all of them commanding with strong margins (including the ones sold at a $7500 discount), in a very troubling quarter (if you listen to all the mainstream naysayers).

I'm afraid many of you are failing to understand the magnificence of this. And the Freemont plant is putting out more cars than GM ever could in their heyday on the same site, and more than the joint venture of Toyota and GM could put out even though many of them were the tiny, cheap and easy to produce cars like the Vibe, Geo and Prizm. Tesla churns out more high value cars than GM and/or Toyota ever made of smaller, cheaper cars, using the same facility. The difference in economic output must be mind-boggling, even once inflation is accounted for.

What do you think Tesla will do with two factories that are only now starting to hit their stride and have not even approached their potential output capacity yet. Apparently, some of you think they will use those factories to build cars that people don't even want! Ha!

Wait, there's more!

At that run-rate, they'd need...only a 16.8% increase in current production output in 2023 to hit over 50% increase y-o-y this year!

Edit: to show the math:

2022: 1,369,611 production
2023: 50% increase in production = 2,054,416.5 production

At current Q4/2022 run-rate, 1,758,804 production in 2022.

(2,054,417 - 1,758,804) / 1,758,804 = 16.8%

 

[Gigapress]

I'll be curious to see how this gets sugar coated. Getting a little harder to project the same degree of growth into the future. Some degree of PE compression was clearly justified.

No it's not getting harder to project the same degree of growth, except maybe a slight adjustment on the production side, and substantial PE compression was not justified.

Here is my take. Tesla is doing exactly what they said they would do: finally ending the delivery wave.

In fact, in the P&D updates for Q3 and Q4, Tesla actually explained that this was the reason:

Q3 P&D report: "Historically, our delivery volumes have skewed towards the end of each quarter due to regional batch building of cars. As our production volumes continue to grow, it is becoming increasingly challenging to secure vehicle transportation capacity and at a reasonable cost during these peak logistics weeks. In Q3, we began transitioning to a more even regional mix of vehicle builds each week, which led to an increase in cars in transit at the end of the quarter. These cars have been ordered and will be delivered to customers upon arrival at their destination."

Q4 P&D report: "We continued to transition towards a more even regional mix of vehicle builds which again led to a further increase in cars in transit at the end of the quarter."

Tesla also mentioned this multiple times in discussing Q3 results. On October 2nd, Elon replied to a comment on Twitter about the wave.

Apparently Tesla thought this was an important enough topic to put onto the front-page executive summary of the Q3 report. They also included a full-page pair of charts depicting the historical sawtooth delivery pattern compared to the ideal constant delivery flow and clearly showing that ideally end-of-quarter inventory would be "notably higher". The topic was then discussed at length by Zach Kirkhorn in his opening remarks on the call, and reiterated by Elon later in the call.

Q3 report executive summary: "…we are reaching such significant delivery volumes in the final weeks of each quarter that transportation capacity is becoming expensive and difficult to secure. As a result, we began transitioning to a smoother delivery pace, leading to more vehicles in transit at the end of the quarter. We expect that smoothing our outbound logistics throughout the quarter will improve cost per vehicle."

Zach Kirkhorn on Q3 Call: "Specifically on cars in transit, as noted in our press release on October 2, we've started to experience limits on outbound logistics capacity which we didn't anticipate. This issue is particularly present for ships from Shanghai to Europe and local trucking within certain parts of the U.S. and Europe. Our historical operating pattern of batch building by delivery region leads to extreme concentrations of outbound logistics needs in the final weeks of each quarter.

Just to put this in perspective, roughly two-thirds of our Q3 deliveries occurred in September and one-third in the final two weeks. As a result, we have begun to smooth the regional builds throughout the quarter to reduce our peak needs for outbound logistics. We expect this to simplify our operations, reduce costs, and improve the experience of our customers. As we look ahead, our plans show that we're on track for the 50% annual growth in production this year, although we are tracking supply chain risks which are beyond our control.

On the delivery side, we do expect to be just under 50% growth due to an increase in the cars in transit at the end of the year, as noted, just above. This means that, again, you should expect a gap between production and deliveries in Q4, and those cars in transit will be delivered shortly to their customers upon arrival to their destination in Q1."

Elon Musk on Q3 Call: "Actually, I want to caveat, I should say, growing production by 50% every year because deliveries -- we're trying to smooth out the deliveries and not have this crazy delivery wave at the end of every quarter. So, in fact, we're just fundamentally running out of -- there weren't enough boats, there weren't enough trains, there weren't enough car carriers to actually support the wave because it got too big. So, whether we like it or not, we actually have to smooth out the delivery of cars intra-quarter because there aren't just enough transportation objects to move them around."

Martin Viecha reiterated this today, as @lazybot pointed out.

https://twitter.com/x/status/1609959752062177288

Discussion
Ending the wave is beneficial, and I wish Tesla had done this sooner, like they said they would a couple years ago but never did. The only purpose of the wave was to make short-term quarterly delivery and financial numbers look more impressive by minimizing vehicle inventory at arbitrary calendar dates four times per year. As Elon and Zach explained, this strategy came with unnecessary operational complexity and higher costs, yet resulted in a worse experience for customers and employees.

One of the fundamental principles of lean manufacturing is to "level the line" wherever practical. This applies to outbound logistics as well as the factory itself. Production leveling reduces muri waste, which is the Japanese word that the Toyota Production System uses (and now most other manufacturing companies too) to describe the waste resulting from of overburdening people, machines, and systems.

Production leveling - Wikipedia

en.wikipedia.org

Muri (Japanese term) - Wikipedia

en.wikipedia.org

Let's bear in mind Tesla's inventory is still at an industry low by a huge margin.

NADA (the National Automobile Dealers Association) published in their mid-year 2022 NADA Data report this page showing that, under normal pre-chip shortage circumstances, in the US the average dealership had around 60-85 days worth of inventory on lots and in transit. In stark contrast, even with the Q3 and Q4 pipeline-filling caused by ending the wave, Tesla has only about 14 days of inventory right now.

Also, cars in transit account for nearly all Tesla's inventory, with very few cars sitting in parking lots accumulating dirt, bird poop, and costs from capital sunk into the inventory and less-obvious costs like insurance, security and property tax. The norm for the rest of the industry is to do this with all the cars and wait for an interested customer to show up. Tesla still generally doesn't even have same-day purchasing like other car companies or pretty much all consumer retail businesses in general.

Tesla's inventory (measured as days of sales) will eventually come down when the bulk of production is not coming from merely two factories shipping cars all around the planet. Other car companies have many more factories with a much shorter average shipping distance for each car. This is yet another advantage of economies of scale that Tesla is currently not enjoying but will in the future to enabled reducing ASPs while maintaining strong margins. Tesla will save not only on shipping costs but also on the various costs of carrying inventory.

I’m more disappointed that production was lower than expected. I had estimated 15k more than this and as of now I don't know what caused the error. However, it's still a fantastic number in the grand scheme of things, and production should bump up considerably in the next few weeks when Berlin and Texas add third shift work and Shanghai resumes full production.

• 23% Q/Q increase; 44% Y/Y increase
• 2M cars per year exit run rate, 40k per week, as management guided for all year long
• Tesla is now making more cars than Suzuki, and will likely pass Mercedes in Q1 and then Changan and BMW in Q3 or Q4.

Demand issues, if any, are temporary. Tesla is now in 14th place globally amongst car companies for unit volume, despite 95% of that volume coming from what is essentially a single vehicle model, 3/Y, that comes in two slightly different sizes and hasn't had a significant styling refresh since launch five years ago. The only selections for styling customization are five paint options (seven in Europe) and your choice of black or white for the seat leather. Products with demand challenges in the car industry do not earn 30% gross margins and have such limited selection, all with zero paid advertising. This is basic economics.

Let's be clear: To assert that Tesla's gap in deliveries and production was primarily caused by limited demand is to assert that Tesla's corporate communications on the matter have been misleading to the point of arguably being outright fraudulent. Just say it: "I think they're lying and you should believe my narrative that I invented instead."

 

[SOULPEDL]

Well I am fairly certain that Tesla could easily fit those in at $55K. The real question is could they manufacturer enough in USA to really make it worthwhile?

That's the $46.8K question. They could even recover the discount with a boost or range upgrade post sale. Manage the rollout for a smooth factory throttle up by tweaking range/price like always.

 

[petit_bateau]

Roughly 10% of a quarters production appears to be in transit. There are 13 weeks in a quarter. 10% would imply average transit time for a tesla in an ideal delivery cycle would be 1.3 weeks.

Does anyone know what the average transit time for a tesla sold is?

View attachment 891459


Edit: Little more napkin math. If tesla is to grow so to will the number of cars in transit at the end of every quarter. It should have been a red flag from last quarter that expectations were that production and deliveries were so close together. We should be ready for at least 7% or 1 weeks of any given quarters production to be in transit moving forward. Obviously the previous quarters in transit vehicles will be sold in the current quarter but as tesla is constantly growing production volume it will always have more in transit the current quarter than the previous quarter.

If they were to aim for a steady 15-days of inventory that would still be exceedingly good by industry standards. To get a car out of Berlin, by train to (say) Portugal, and unload, prepare, then deliver would be crackingly good performance in two weeks. Or to wherever. Add in those vehicles which have to cross oceans (S&X, 3 to Europe, etc) and I would be pleasantly surprised if they can keep it that low. Anything lower will likely be a signal of end-of-quarter dressing the shop.