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

[FSDtester#1]

523.5 is NHTSA

Both NHTSA and EPA have their own internal classification systems that do not follow the letter of the base regulations (mass, volume, frontal area). Especially in terms of model line vs specific vehicle build.

Per their regulations, EPA classification is at the discretion of the Administrator, that's hard to codify to for an external agency. "vehicle MSRP cut off is determied by whomever is running the EPA" 40 CFR § 600.315-08 - Classes of comparable automobiles.

Treasury could add a clause grouping all versions of a vehicle under the highest limit variant of the group.

Then they need to do it stat!

 

[Mengy]

But couldn't EPA classification have been used?

It certainly could have, but it wasn't. Because......reasons.

The real kicker is the MY7 qualifies but the MY5 doesn't. That fact alone is just terribly stupid.

 

[Webeevdrivers]

Demand Concerns are Shortsighted - Zoom Out

The Model 3 and Y account for 95% of Tesla’s delivery volume these days. As far as most customers are concerned, the 3&Y are essentially the exact same car design with two slightly different options for size and shape. Indeed, when revealed in 2019 the Model Y was basically sold as “Here’s a bigger Model 3 that has 75% of the parts in common.” The differentiation was so minimal that in 2019 after the reveal most pundits thought that the Y would barely generate any additional demand because it was nothing new or special. 3&Y have exactly identical interiors, software, stereo systems and so on. A untrained eye can't even to tell the difference in the exteriors on sight unless the vehicles were parked right next to each other so the height difference is more obvious. Most customers deciding between the two models really are just deciding on whether the Y’s extra cargo capacity and higher roof justify the price premium.

Tesla just built 420k cars in the 3/Y platform in a single quarter, or almost 1.7M annualized. Berlin and Texas have “>250,000” per year nameplate production capacity. If they combine for 600k Ys per year production rate by the end of 2023, the 3/Y will be at a total annualized run rate of 2.3M.

This success is unprecedented, to say the least.

The Toyota Corolla’s best year ever was 2015 with 1.34M units sold, which still today stands as the all-time world record for most units sold of any vehicle model in a single year. The 3/Y family just nearly matched this record in 2022 with a combined 1.30M units made and 1.25M delivered, and without Shanghai shutdowns the Corolla’s record would have been surpassed. In 2023, the Y by itself will come close to the Corolla's 2015 record, and might actually beat it if production ramps go well; if not, in 2024 for sure. Even after adjusting for inflation, the Y is priced more than double the average Corolla price in 2015.

Tesla is achieving this with ~30% gross margins for 3/Y that no one else can come close to. At the latest factories with the latest tech reducing cost, Ys will be earning 40-50% margins for a while until prices come down. Tesla could eventually push drastically more volume of 3s and Ys by reducing prices further as costs improve and as margins are gradually leaned out. This has actually been the plan the entire time.

What is Tesla not doing thus far for accomplishing this with 3/Y:

• Paying for advertising
• Offering many customization options
  • 5 paint colors in most markets (7 in Europe)
  • 2 interior colors
  • 2 wheel styles
  • No typical bonus options like heads up displays or heated steering wheels
• Refreshing the cosmetic styling of 3/Y since launch 5 years ago
• Switching the paint colors available
• Offering the standard-range Y and long-range 3 anymore

So, the Model Y is by far the most economically successful vehicle model ever, and it’s not even close. The 3&Y put together as one very closely related family are even more dominant. The numbers don’t lie.

Thus, Tesla has a viable path to selling millions 3/Y cars each year at 20% gross margin or better.

Tesla crushed the high-end luxury market with the S&X. Then they crushed the medium-luxury mid-sized sedan and crossover SUV markets with 3&Y. They appear poised to crush the pickup truck and large SUV market with Cybertruck. Yet Tesla is still not even touching most of the overall vehicle market. For example, they don't sell any economy cars in any segment, nor any boxy crossovers like the RAV-4, coupes, vans, minivans, small hatchbacks, small sedans, or commercial trucks (except for a handful of full-sized semis). There’s an order of magnitude more opportunity out there for Tesla to claim. This is why the demand will probably be there for the goal of 20M units sold per year even without autonomous driving ever working out.

Will Tesla’s success extend to other vehicle shapes and sizes, or to cheaper cars with less luxury? I think all signs point towards a resounding “Yes”. The same reasons why 3/Y is so successful will apply equally to other segments. For example:

• Software, user experience, FSD/autopilot
• Efficient manufacturing methods
• Front and rear gigacastings
• Battery management systems
• Thermal management systems (octovalve, heat pump, super manifold, amazing software and hardware integration)
• Motors
• Structural battery pack
• Safety
• Fancy, beautiful paint coming from Berlin and soon to a gigafactory near you
• Glass roofs
• Dealership-free, haggle-free purchasing + Low inventory and high cash turnover rate
• Supercharger network
• 4680s for long-range variants
• EV market mindshare
• Tesla and Elon Musk accounts on Twitter generating tens of millions of impressions effortlessly and for $0

And so on. Tesla has an extensible, flexible platform for software, hardware, manufacturing and marketing that’s almost entirely independent of the shape, size and luxuriousness of the vehicle cabin. Competitors do not have the above list of advantages and might never catch up. Designing vehicles for different segments is a relatively routine and straightforward endeavor, and Franz Von Holzhausen has a stellar track record of leading design teams to make car artwork that millions of people love, not only during his career at Tesla but also at other companies like Mazda.

All of this is happening in the macro environment of humanity’s dawning awareness of the value of EVs and of the severe dangers, both geopolitical and environmental, of continued fossil fuel dependence. EV demand continues its unabated exponential growth and governments policies around the world are tilting the balance ever more in favor of EVs over ICEVs every year. That’s good news for the world’s largest and best producer of EVs.

Vegas Loop is then the dark horse. It is effectively a factory that mass produces first impressions of Tesla vehicles for people who are in an entertainment wonderland intentionally and expertly engineered to put them in the mood for openness to new experiences and for craving novelty and stimulation. This is exactly the psychological state you want potential customers to be in when introducing them to a new product they might be otherwise disinterested in or skeptical of. They need to have their mental guard down and be curious enough to, for example, ask the driver about the car while riding in it. Furthermore, at some point when the Teslas drive people autonomously through the tunnels as robotaxis, the experience is going to blow people’s minds. They’ll post about it on social media, tell everybody about it as a highlight of their trip when they get home, and probably remember it for the rest of their lives. If we look out to 2024 or however long it takes to get robotaxis going in this simplified, secured, closed-loop system, we must bear in mind that millions of people will have this robotaxi ride be their first ever experience in a Tesla. Most people remember losing their EV virginity but this is going to be a whole new level of astonishment and delight for the next wave of converts. All of this this is still deeply underappreciated by the market. The Vegas Loop is small now, but in a few years it will sprawl out across the entire heart of Las Vegas, the entertainment capitol of the Western Hemisphere with 42 million visitors per year and a strong long term tourism growth trend. Miami-Fort Lauderdale is close behind for both tourism and getting their own Loop. Construction and daily operation of existing segments is occurring right now and people keep forgetting about it, even TSLA investors who follow Tesla stuff daily. This project doesn’t generate daily news but it does generate thousands of first rides daily for people who have never even sat in any EV before.

Demand for 3/Y will experience short-term fluctuations, and Tesla may offer temporary discounts for end-of-quarter inventory clearance or to build good will, but the trajectory over the long term is incredibly favorable. Myopic focus on quarterly results and Elon’s politics causes investors, especially institutional folks who control most of the float, to miss the bigger picture.

Great post. Learned a couple things. Thank you.

 

[Opus BC fan]

Okay I’m back lol.
Question. Is this the bottom? Want to buy more.

Welcome back. My belief is this is the bottom but I have been wrong many times before

 

[AndrewZ]

I think that if the government targeted Tesla in any way with the IRA, it would indeed be built around it dominating the EV market.

The legislation is the Inflation Reduction Act. How would you reduce inflation in EV prices, the next generation of clean transport? You would put low price ceilings on the best-selling EV models.

Putting an $80k cap on the Model Y would not reduce inflation, some people were even hopeful it would allow Tesla to increase
prices on vehicles that already went from $48,990 to $65,990 during the pandemic.

Why people are just thinking about pricing and profits and not how that ties into inflation and the rate hikes, I don’t even know. If the IRA did allow vehicle manufacturers to drastically increase prices, that just means PCE metrics would head higher and so would interest rates.

 

[Artful Dodger]

Okay I’m back lol.
Question. Is this the bottom? Want to buy more.

Welcome back! We missed you!

Just nybble, IMO. This is a great price, true, but dollar-cost-average so you have some dry powder for Earnings, and the inevitable slump in the 6 weeks between then and the next P&D report.

Also, keep an eye on the FED. Any sign they are done, or nearly done, raising rates will spark a relief rally for the Market.

Cheers!

 

[jerry33]

Sorry, guys. My fault. Had to cancel this morning because Tesla wanted me to take the car now. Will reorder once TSLA recovers.

 

[gtrplyr1]

Okay I’m back lol.
Question. Is this the bottom? Want to buy more.

Anyone crazy enough to answer this?

 

[Knightshade]

In actual news, Tesla continues to execute and plan for the future. Locking up Lithium supplies for future growth.

Tesla Locks Battery Material Supply; This Lithium Stock To Benefit

The agreement secures Tesla's lithium supply through 2025.

www.investors.com

Errr... not really no.

That contract is actually a revised version of the one they already had... since 2020...with Piedmont Lithium.

A company that is years late on delivering from the original contract due to their (Piedmonts) own incompetence.... (incompetence which has been detailed here numerous times)


The only thing the "new" deal appears to do is:

Move where Piedmont will be supplying from (because their original NC source still is years and years behind schedule with no end point in sight to actually produce anything).... and actually reduces the amount of Lithium "secured" by the deal from 160k tons in the original deal down to 125k tons....so Tesla will be getting LESS lithium over the next few years than they originally planned to get from this deal, not more.

 

[StealthP3D]

I think we can say that in Q4 demand was a little weak, hence the price cuts.

If demand is soft then you drop prices and reach a new equilibrium. Let’s hope that softness was temporary.

Maybe Tesla raised the prices one too many times in order to cut the wait lists in 2022. The prices at the end of the year, after the cuts, were roughly the same as the prices at the beginning of the year even though production has increased dramatically.

Prices rise = Oh, no! Tesla will run out of demand or they must have a production problem!
Prices fall = Oh, no! Tesla has a demand problem

Me = Looks like Tesla is more nimble than legacy auto at matching pricing to supply and demand. Margins are the best in the industry.

Legacy auto: Low margins and falling sales = demand problem
Tesla: Highest margins and rising sales = no demand problem

This is easy enough for a first grader to understand so it's entertaining to see so many people working themselves into a tizzy over two weeks worth of production listed in inventory at the end of the year, especially after management disclosed that Q3 production was already overwhelming the shipping capacity and Q4 is higher yet. Meanwhile legacy auto sales fall further as Tesla continues to ramp up production.

It's utterly ridiculous to watch so many people melt like the witch in the Wizard of Oz. Oh, no! I'm scared!

 

[M|S|M MYP]

Halt the stock please

Happy New Year y'all!

 

[dl003]

Concerning any unfair advantage that the incumbents now have due to the IRA, remember that a week ago, every competitor to Tesla Automotive other than GM, already had a $7,500 advantage the past 2 years. Are we really concerned that now we add GM to the opposing team? Granted, a few will have expired their allotment soon but did Tesla really struggle to compete here in the US against the seasoned veterans?

$7500 is 15% of $50k. A loss of $7500 brings Tesla's profitability down to that of Ford. Do you understand how much time / engineering / R&D / talents it takes to increase gross margin per vehicle by 15%? What's stopping them from launching another attack on TSLA like this? This alone is bigger than any miss in P&D. Yes, I'm calling this an attack. It might have been caused by sheer negligence, but the silence and refusal to rectify cannot be interpreted in any way other than an attack. They had months and months to write this guidance and somehow this one slipped through? They might be stupid, but no human is that stupid.

 

[bkp_duke]

Errr... not really no.

That contract is actually a revised version of the one they already had... since 2020...with Piedmont Lithium.

A company that is years late on delivering from the original contract due to their (Piedmonts) own incompetence.... (incompetence which has been detailed here numerous times)


The only thing the "new" deal appears to do is:

Move where Piedmont will be supplying from (because their original NC source still is years and years behind schedule with no end point in sight to actually produce anything).... and actually reduces the amount of Lithium "secured" by the deal from 160k tons in the original deal down to 125k tons....so Tesla will be getting LESS lithium over the next few years than they originally planned to get from this deal, not more.

You and I don't speak.

 

[Stormy24]

Okay I’m back lol.
Question. Is this the bottom? Want to buy more.

Nope

 

[elasalle]

Demand Concerns are Shortsighted - Zoom Out

The Model 3 and Y account for 95% of Tesla’s delivery volume these days. As far as most customers are concerned, the 3&Y are essentially the exact same car design with two slightly different options for size and shape. Indeed, when revealed in 2019 the Model Y was basically sold as “Here’s a bigger Model 3 that has 75% of the parts in common.” The differentiation was so minimal that in 2019 after the reveal most pundits thought that the Y would barely generate any additional demand because it was nothing new or special. 3&Y have exactly identical interiors, software, stereo systems and so on. A untrained eye can't even to tell the difference in the exteriors on sight unless the vehicles were parked right next to each other so the height difference is more obvious. Most customers deciding between the two models really are just deciding on whether the Y’s extra cargo capacity and higher roof justify the price premium.

Tesla just built 420k cars in the 3/Y platform in a single quarter, or almost 1.7M annualized. Berlin and Texas have “>250,000” per year nameplate production capacity. If they combine for 600k Ys per year production rate by the end of 2023, the 3/Y will be at a total annualized run rate of 2.3M.

This success is unprecedented, to say the least.

The Toyota Corolla’s best year ever was 2015 with 1.34M units sold, which still today stands as the all-time world record for most units sold of any vehicle model in a single year. The 3/Y family just nearly matched this record in 2022 with a combined 1.30M units made and 1.25M delivered, and without Shanghai shutdowns the Corolla’s record would have been surpassed. In 2023, the Y by itself will come close to the Corolla's 2015 record, and might actually beat it if production ramps go well; if not, in 2024 for sure. Even after adjusting for inflation, the Y is priced more than double the average Corolla price in 2015.

Tesla is achieving this with ~30% gross margins for 3/Y that no one else can come close to. At the latest factories with the latest tech reducing cost, Ys will be earning 40-50% margins for a while until prices come down. Tesla could eventually push drastically more volume of 3s and Ys by reducing prices further as costs improve and as margins are gradually leaned out. This has actually been the plan the entire time.

What is Tesla not doing thus far for accomplishing this with 3/Y:

• Paying for advertising
• Offering many customization options
  • 5 paint colors in most markets (7 in Europe)
  • 2 interior colors
  • 2 wheel styles
  • No typical bonus options like heads up displays or heated steering wheels
• Refreshing the cosmetic styling of 3/Y since launch 5 years ago
• Switching the paint colors available
• Offering the standard-range Y and long-range 3 anymore

So, the Model Y is by far the most economically successful vehicle model ever, and it’s not even close. The 3&Y put together as one very closely related family are even more dominant. The numbers don’t lie.

Thus, Tesla has a viable path to selling millions 3/Y cars each year at 20% gross margin or better.

Tesla crushed the high-end luxury market with the S&X. Then they crushed the medium-luxury mid-sized sedan and crossover SUV markets with 3&Y. They appear poised to crush the pickup truck and large SUV market with Cybertruck. Yet Tesla is still not even touching most of the overall vehicle market. For example, they don't sell any economy cars in any segment, nor any boxy crossovers like the RAV-4, coupes, vans, minivans, small hatchbacks, small sedans, or commercial trucks (except for a handful of full-sized semis). There’s an order of magnitude more opportunity out there for Tesla to claim. This is why the demand will probably be there for the goal of 20M units sold per year even without autonomous driving ever working out.

Will Tesla’s success extend to other vehicle shapes and sizes, or to cheaper cars with less luxury? I think all signs point towards a resounding “Yes”. The same reasons why 3/Y is so successful will apply equally to other segments. For example:

• Software, user experience, FSD/autopilot
• Efficient manufacturing methods
• Front and rear gigacastings
• Battery management systems
• Thermal management systems (octovalve, heat pump, super manifold, amazing software and hardware integration)
• Motors
• Structural battery pack
• Safety
• Fancy, beautiful paint coming from Berlin and soon to a gigafactory near you
• Glass roofs
• Dealership-free, haggle-free purchasing + Low inventory and high cash turnover rate
• Supercharger network
• 4680s for long-range variants
• EV market mindshare
• Tesla and Elon Musk accounts on Twitter generating tens of millions of impressions effortlessly and for $0

And so on. Tesla has an extensible, flexible platform for software, hardware, manufacturing and marketing that’s almost entirely independent of the shape, size and luxuriousness of the vehicle cabin. Competitors do not have the above list of advantages and might never catch up. Designing vehicles for different segments is a relatively routine and straightforward endeavor, and Franz Von Holzhausen has a stellar track record of leading design teams to make car artwork that millions of people love, not only during his career at Tesla but also at other companies like Mazda.

All of this is happening in the macro environment of humanity’s dawning awareness of the value of EVs and of the severe dangers, both geopolitical and environmental, of continued fossil fuel dependence. EV demand continues its unabated exponential growth and governments policies around the world are tilting the balance ever more in favor of EVs over ICEVs every year. That’s good news for the world’s largest and best producer of EVs.

Vegas Loop is then the dark horse. It is effectively a factory that mass produces first impressions of Tesla vehicles for people who are in an entertainment wonderland intentionally and expertly engineered to put them in the mood for openness to new experiences and for craving novelty and stimulation. This is exactly the psychological state you want potential customers to be in when introducing them to a new product they might be otherwise disinterested in or skeptical of. They need to have their mental guard down and be curious enough to, for example, ask the driver about the car while riding in it. Furthermore, at some point when the Teslas drive people autonomously through the tunnels as robotaxis, the experience is going to blow people’s minds. They’ll post about it on social media, tell everybody about it as a highlight of their trip when they get home, and probably remember it for the rest of their lives. If we look out to 2024 or however long it takes to get robotaxis going in this simplified, secured, closed-loop system, we must bear in mind that millions of people will have this robotaxi ride be their first ever experience in a Tesla. Most people remember losing their EV virginity but this is going to be a whole new level of astonishment and delight for the next wave of converts. All of this this is still deeply underappreciated by the market. The Vegas Loop is small now, but in a few years it will sprawl out across the entire heart of Las Vegas, the entertainment capitol of the Western Hemisphere with 42 million visitors per year and a strong long term tourism growth trend. Miami-Fort Lauderdale is close behind for both tourism and getting their own Loop. Construction and daily operation of existing segments is occurring right now and people keep forgetting about it, even TSLA investors who follow Tesla stuff daily. This project doesn’t generate daily news but it does generate thousands of first rides daily for people who have never even sat in any EV before.

Demand for 3/Y will experience short-term fluctuations, and Tesla may offer temporary discounts for end-of-quarter inventory clearance or to build good will, but the trajectory over the long term is incredibly favorable. Myopic focus on quarterly results and Elon’s politics causes investors, especially institutional folks who control most of the float, to miss the bigger picture.

my 2 cents ..

Q4: Demand Concerns
Recession fears, IRA and China covid all caused demand concerns. .

Short-term: Demand Concerns
recession fears, IRA rules excluding bestselling MY (Fremont only produces MY), China zero covid unwinding ("the wave"), price points in China still cause for demand concern.

Long term: (No Demand Concern - the trend is your friend)
ICE is done, everyone's transitioning to EVs, IRA 7.5K credits, EU vehicle mandates, China policy for EV transition, more countries etc all says pie getting bigger.
However TAM and lower price models still need to expand. Tesla needs to create more demand.
Once in Tesla eco-system:
+ premium connectivity
+ insurance
+ super charging
+ AP/FSD

cheers!!

 

[Favguy]

Okay I’m back lol.
Question. Is this the bottom? Want to buy more.

Lol! How long is a piece of string? Maybe, for today, or maybe for all time. Or we might be down at $60 in 3 months...

 

[OrthoSurg]

Okay I’m back lol.
Question. Is this the bottom? Want to buy more.

We are surely on our way to retest de $106 premarket low of the 28th of December.

 

[Drumheller]

Okay I’m back lol.
Question. Is this the bottom? Want to buy more.

I don't know if it is the bottom but my opinion is that anyone buying at these prices and intending to hold for years will likely be happy with the outcome. No guarantees, of course, as I do not have a time machine.


As for those defending the govt policies: if the govt actually cared about climate change and wanted to incentivize moving off of fossil fuels, they could simply start a policy that buying an EV results in a tax credit. No hybrids. No layers of qualifications. The govt could also give notice of intent to start phasing out fossil fuel subsidies

Yes, it really is that simple.

Unfortunately, it seems to me the majority of adults are STILL struggling to accept the ideas of govt and media they were indoctrinated to believe are not real. I see the mental gymnastics and shocked piccachu posts on here regularly, still. Think about what kind of people are attracted to job postings. Politician job listing: create your own rules, set your own pay and benefits, you are above the law. What kind of people will seek those jobs?

People aren't spending money, out of the goodness of their hearts, to pay reporters to tell strangers of truth. People pay reporters to spread an agenda that helps them make money.

Follow the money trail.

 

[GOVA]

Okay I’m back lol.
Question. Is this the bottom? Want to buy more.

I'd say no.

'The world of organized crime' will do their best to at least trigger $100. Can be even worse.

 

[unk45]

Even better, just make them removable as a feature. I've driven several vehicles over the years with removable seats. It's common in minivans.

Long ago there was the Subaru Brat, a pickup with removable seats in the bed so it could be ckassedbasva sedan and beat the dreaded ‘pickup tax’

Subaru BRAT - Wikipedia

en.wikipedia.org

If this is an eligibility issue only it would not be a huge issue to make an easily removable 3rd seat, with the present 3rd seat, with the USB ports and movable headrest an option as it is now. Of course the seat belt attachments must be removable also. Practically they’d need the bottom storage cover included too.

Practically all this would not be a trivial excercise. It might even be better to make the clearance and AWD adjustments to make the 5 seaterbqualify.

These regulatory and tax alterations are a long time issue for every OEM, including Tesla.
Both Ford and Tesla will figure out optimal solutions. We need not agonize overmuch.