he's fully drank the major recession is inevitable kool aid and assumes Tesla will be selling cars with little to no profit, or even at a loss. That does not seem plausible to me.
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Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable
- Thread starter AudubonB
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- elon is an ass
he's fully drank the major recession is inevitable kool aid and assumes Tesla will be selling cars with little to no profit, or even at a loss. That does not seem plausible to me.
I said previously—worth repeating—there is a lot of frustration, lots of feelings of betrayal (largely misplaced IMO), and scapegoating right now. The number of people cut by this is quite large and many of them the most loyal to the brand.
He’s not the only one in the community who I’ve seen turn into a bear short and long term.
DanCar
Active Member
Was previously announced that Tom Zhu would take over Austin manufacturing lead.Interesting news (if true)
Exclusive: Tesla's head of China takes over sales in North America
Tesla's head of China, Tom Zhu, has taken over responsibilities for sales, service, and deliveries in North America.electrek.co
/cloudfront-us-east-2.images.arcpublishing.com/reuters/566XFHVXRNLAXPAY3UHI2MFKSA.jpg)
Tesla sends Shanghai boss and aides to jumpstart U.S. output
Tesla Inc's China chief Tom Zhu and a team of his reports has been brought in to troubleshoot production issues in the United States, fueling talk among colleagues he is being groomed for a bigger role at a time when Chief Executive Elon Musk has been distracted by Twitter.
www.reuters.com
gabeincal
Active Member
Hoping Tesla Energy has a great 2023!
www.teslarati.com
Tesla Megapack-powered project at Queensland Green Power Hub given green light for construction
A Tesla Megapack-powered project being developed by Neoen at Queensland Green Power Hub has been given the green light
www.teslarati.com
Also the Elon's $4B stock sales in Dec gave the "traditional" impression that Q4 would be inline with guidance.
verystandard
Member
I hope he don't go full Greg now to buy puts at this level and "educate" the others. Heck they might earn a bit like his fellow but not sure how that goes when things turn around.
I'm looking forward for the day TSLA won't be treated like WSB stocks and instead "slow and steady wins the race" type of stocks
Regarding your opening and closing comments: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:
Tesla also mentioned this multiple times in discussing Q3 results. On October 2nd, Elon replied to a comment on Twitter about the wave.
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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.
Martin Viecha reiterated this today, as @lazybot pointed out.
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.
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.
View attachment 891451
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.
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.
- 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.
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."
Those who anticipated production and delivery growth at ~40% YoY for 2022 may very well be reasonably predicting 2023 YoY growth to be ~40% or so as well, and potentially the same for 2024, etc. While Tesla certainly could produce more than this via ramping up production at their 4 existing S/X/3/Y factories, adding a full 3rd shift, etc, it is within the range of possibilities that Tesla would choose to grow production at 40% rather than 50% for various (valid) reasons, depending on macroeconomic / pandemic / geopolitical / branding / margin / etc considerations. Likewise, Tesla certainly could adjust pricing / margins / free Supercharger usage / add new paint colors / etc to produce more than enough demand in 2023 and 2024, it is within the range of possibilities that Tesla would choose to grow demand at 40% rather than 50%. It is also quite possible that we see a Q4 2022 earnings report reflecting margin closer to 25% - 26% than to the 27% - 30% TSLA investors have become accustomed to. (I hope 25% - 26% is low, but we shall see in 24 days and I will be happy to have all on here bring this up at that time, but for now I merely conjecture that some reasonable investor might rationally be using a figure closer to 25.5% than to 28.5% in their modeling.) We shall see what impact to margins occurred in Q4, and what (if any) incentives and price adjustments Tesla chooses to have in 2023 Q1 in order to achieve their desired demand level and margin balancing points.
Taking any rational approach to valuation, if the preponderance of the data leads an investor to view 40% YoY growth rate and 25% margins as the likely future for the next 1-3 years, then PE compression was absolutely justified. NOTE: 40% and 25% are not altogether that much of a stretch from the 50% and 27%-30% benchmarks, and 40% and 25% are ABSOLUTELY levels that Tesla (or in fact most any company) should be very proud of! However, it does definitely lead to a different PE, hence compression from the prior PE.
It does not have to be either extreme; humans find extremes / all-or-nothings as easy and comforting, but reality almost always exists in between, with a great deal more nuance and hidden cause-and-effect than just taking everything in the world around you at face value or at no value. It does not have to be "This was just Tesla unwinding the wave, no demand issues" nor does it have to be "This is all demand issues and Tesla executive leadership has been misleading (or worse). Consider, for example, why did Tesla choose to unwind the wave at this time? PURE CONJECTURE: A reasonable middle-ground scenario that could have played out was in 2022 Q3, Tesla executive leadership began to see risk on the demand side due to a combination of internal (massive 2022 price increases) and external (massive macroeconomic / geopolitical / pandemic / etc) factors. Based on the data available to them at the time, and faced with choices such as "We can push thru it by doing <x, y, z>" or "We can allow the wave to partially unwind rather than jumping thru those <x, y, z> hoops", both of which would be valid choices, they chose the latter. During 2022 Q4, after experimenting with various demand levers (most especially in China, where some are projecting the bulk of the current production-minus-deliveries gap to be), the costs of various demand levers became more clear, and throughout the quarter Tesla executive leadership decided to continue to unwind the wave rather than push thru it with the <t, u, v> levers which were available to them then. Both in 2022 Q3 and 2022 Q4, Tesla leadership chose to communicate the action they were taking (unwinding the wave) and point out some specific benefits of doing so (avoiding higher end-of-quarter costs, avoiding potential negative customer experience in that rush, etc) without going into detail of ALL the factors (such as potential weakness in demand) which led them to make that choice now (vs earlier in 2022 Q1 or Q2, or later by waiting until 2023, etc).
TLDR: PE compression has largely come from a lack of DEMAND for (vs available supply of) TSLA shares (maybe in part based on different forward financial projections of vehicle demand / margins and maybe in part due to other factors that have made people want to sell / not want to buy the stock). Also, It's certainly reasonable to conjecture that perhaps Tesla executive leadership's decision to unwind the wave at this time was due in part to their internal data and projections regarding vehicle demand.
Paracelsus
Active Member
Didn’t see this posted here yet - and it is newsworthy - More proof of ‘the safest car made’ rating.
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Even though I’m peeved at lack of CEO leadership towards investors and a bit dismayed by the guidance given on the Q3 call I believe that this has been a successful quarter for Tesla on production scaling.
50% y/y growth in 2023 would be 2.05m produced or about 513,500 per quarter. Since the current quarter was about 440,000 and both Texas and Berlin are ramping I think this is very achievable
50% y/y growth in 2023 would be 2.05m produced or about 513,500 per quarter. Since the current quarter was about 440,000 and both Texas and Berlin are ramping I think this is very achievable
47% YoY growth during the shittiest quarter china covid lockdown recession talks inflation crazy world at war is fine with me.
Now let’s see if WS thinks the -70% SP move from last year has factored in 47% instead of 50% growth.
Now let’s see if WS thinks the -70% SP move from last year has factored in 47% instead of 50% growth.
Many here overreacting to today’s P&D report, mostly those with very lofty personal expectations and were ignoring/ridiculing the numerous reports out of china. FYI to those still not following what is happening in China: It will be worse in Q1 than Q4 there, they wont be over the short term slump until closer to quarter end at best.
Having said that - I am extremely positive at present. China issues are a short term concern that will soon pass, while Tesla demand in Europe, North America & ROW all remain strong, with plenty of extra demand coming in 2023 with the IRA & Model Y SR introduction proper, and Berlin continuing to ramp for European customers.
Also excited for the unexpectedly detailed announcement for the investor day. Curious that the current discount incentives in China end on Feb 28th, the day before the March 1st Investor day. Possibly a “HW4 now shipping” announcement at investor day?
Having said that - I am extremely positive at present. China issues are a short term concern that will soon pass, while Tesla demand in Europe, North America & ROW all remain strong, with plenty of extra demand coming in 2023 with the IRA & Model Y SR introduction proper, and Berlin continuing to ramp for European customers.
Also excited for the unexpectedly detailed announcement for the investor day. Curious that the current discount incentives in China end on Feb 28th, the day before the March 1st Investor day. Possibly a “HW4 now shipping” announcement at investor day?
jabloomf1230
Minister of Silly Walks
bballshinobi
Member
Damn, it’s heartbreaking to watch Tesla Economist’s total meltdown on the bird… a solid reminder not to gamble the options market and not invest money, you cannot afford to loose short term.
It’s almost impressive the 180 degrees shift he made overnight after years of posting bullish predictions
Don’t get me wrong -my best wishes for him.
Didn't his dad's retirement account lose $10 million of paper profit? I think he sold everything for his dad too in order to "protect" his money. I would be really bitter and negative too if I was him. He has to justify to himself mentally selling right now is the right decision.
Lol i like how a lot of people that called Troy a bear and *sugar* on him for an entire quarter have moved onto Tesla Economist now.
Note: I don't think they are the same people. Just commenting on how we like to judge.
Note: I don't think they are the same people. Just commenting on how we like to judge.
Just occurred to me when reading the complaints on IRA. Since the Mach E is no longer eligible, does this mean it actually lost a tax credit it actually had until now because of the IRA? That'd actually be pretty crazy if true!
Part of the problem also seems to be logistics issues.
Cars seem to be sitting on docks in Shanghai for too long, it is a long boat trip from Shanghai to Europe.
Satisfying more European demand from Berlin seems much better from a logistics point of view.
Shipping cars from Shanghai to Asia Pacific locations with reduced travel time seems like a better solution.
Local Chinese demand issues are not a major problem if the cars can be sold elsewhere, but selling them elsewhere requires shipping them somewhere and in time for sale in Q4.
The patchy nature of inventory also suggests this, in some locations inventory seems to be sold down to low numbers and show room cars were sold off. Yet in other locations there is excess inventory, and there seems to be a lot of cars in transit.
There is a lesson here for the higher volume compact Gen3 models, more factories are needed to locate production closer to the end customer, less time in transit on boats is ideal.
It is also true that Tesla needs more Models and some lower priced cars. The 4680 ramp is probably important for the Gen3 cars.
6-12 months ago Tesla had more demand then they could cope with, it seemed like a simple ramping of production to crank out more Model Ys was all that was needed. Now the game has shifted slightly, demand in China combined with logistics out of Shanghai appear to be an issue.
Situations always change, a company needs to be nimble and to respond to changed circumstances as they arise. Sometimes there is a lag in getting the response right, and there are short term issues with no immediate fix.
Currently there are still a lot of ICE cars being sold, which I view as future EV market share up for grabs,
Gen3 cars are very important, but I hope that Tesla sandbags the production dates to avoid Osborning some Model 3/Y demand,
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It's freaking December. Tesla may not want to shut down, but I'd bet many suppliers, even in China, pretty much write off the last two weeks with holidays, vacations, etc.
JSML
Member
I can assure you that Wallstreet is not viewing 40% annual growth and 25% margins as likely for the next 3 years in a row.
Current TTM PE ratio is 34. Three years of 40% growth, assuming gross profit margin at 25% nets the same net margin as now, due to efficiency, would put the PE at 12.5 at the end of 3 years for a company growing at 40%.
Not seeing the 40% growth is the reason the share price is where it is at. Personally, I want Tesla to push the growth at the expense of margins. Keep up the 40% growth and the market will reward the stock price even if margins aren't that good.
Paracelsus
Active Member
Link to petition to change language in IRA to include all versions of Model Y (currently 15,000 signatures as of this posting):
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