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

[verystandard]

I guess with these price cuts we can assume no refresh is coming in the very near future? Unless the project highland is something that is all behind behind the scenes and helping reduce manufacturing costs that would enable these price cuts?

My humble opinion is that, price cut absolutely making sense because Model 3/Y/S/X design are dated, more new EV selection comes in every year and most importantly the "3rd generation/Cybertruck/Project Highland/sub $30k compact" is coming sooner than we think.

I would also imagine the price cut of 3/Y will continue as we hear more about the 3rd generation/project highland/sub $30k later this year as people are trying to held off the purchase if the wait is not long (Seriously who wants to buy a old model for same price if the new one is coming up within half a year). and when the new model release there would probably be $15k price difference between them. This way Tesla able to maintain the production/delivery increases even when the new model slowly ramp up.

Example: Dell/HP/Lenovo putting up their 12th gen Intel equipped laptop for sale while ramping up it's 13th gen computer on the production line. This way everyone will not be pile up onto the newest and greatest and for those who don't mind a slightly older gen computer can have a better price and able to deliver instantly.


But of course wall street can paint it in whole different way and say demand falls off the cliff/bankruptcy imminent/etc sugar stuff

 

[ShareLofty]

Rumor, but nice if true

https://twitter.com/x/status/1606306887837749248

Gary Black concludes that delivery miss was due to China. And he dresses down those that called him mean names three months ago when he was warning of this. Worth reading the thread anyways.

https://twitter.com/x/status/1611004143484682240

So that rumor by the bird account teslashanghai was off by 45k cars. Noted for next time he posts a rumor

 

[SOULPEDL]

I expect us to get hammered on this "great news" tomorrow.

Y'all laugh, but watch. Demand signals lower margins, blah blah blah. 20M vehicles at zero margin. Mission accomplished!

 

[traxila]

So that rumor by the bird account teslashanghai was off by 45k cars. Noted for next time he posts a rumor

No one believed it.

 

[Artful Dodger]

an example of how to structure a trade . . .

... gues well kno buy toosdey.

 

[⚡️ELECTROMAN⚡️]

Model Y/3's price was increased by 12-15k however only 3k was booked and still had a 30% margin

What's this mean?

 

[kermit1492]

So that rumor by the bird account teslashanghai was off by 45k cars. Noted for next time he posts a rumor

actually he corrected himself several days prior to q4 results

 

[StealthP3D]

We, as a forum, as this thread is home to great discussion, need to continue to discuss and discern what is happening with demand.

It could be for several reasons that prices are being cut.

Traditionally it is due to demand for normal products in a normal market.

We are NOT in a normal market and the gov's of many countries are doing different things to either make their homegrown auto makers happy (GM, F, Stellantis as well as BYD and others).

Please think before you post considering these and other variables.

Some thoughts are:

• ICE is being phased out in 10/15 years
• Hybrid is being lumped in with BEV as the next step through gov incentives.
• Recession is coming
• Fed is pushing for lower inflation, prices and, unfortunately, lower employment which leads to less demand for new vehicles
• Leading indicators suggest lower prices for supply chain, logistics and materials

Probably the largest impact on demand will be due to the higher car loan rates. 80% of new car purchases are financed one way or another and higher interest rates probably adds more to the actual cash outlay over the life of the loan than any cuts I've seen Tesla make to date. This is the most fundamental reason Tesla has to cut prices.

I also think Tesla is getting ready to crank out unprecedented volumes of cars, even if the recession deepens. Recessions bring better prices to people with stable employment. I've been waiting for EV's to become available to a wider swath of people for a long time and even feeling a little sorry for all the people who had to do the "Tesla stretch" just to drive a good EV that wasn't a Bolt or a Leaf, etc. with all the issues charging on the road, etc. That said, I think Tesla did absolutely the right thing by repeatedly raising prices last year to prevent the order backlog from growing to even more ridiculous wait times than we saw. I had actually expected prices to drop in 2022 but record demand prevented that.

We need even better prices to move record numbers of cars if the recession lingers or gets worse and this will pay big dividends as FSD matures and people start feeling more financially comfortable as the economy strengthens. Software upgrades, more cars Supercharging leads to revenue to expand the charging network and also allows it to extend into more rural areas. And the production capacity build up will be creating the potential for record profits as the cost to produce continues to decline. People focused on profit per car are being short-sighted. Nothing will make Tesla worth more than being able to manufacture and sell at larger scale and reaching more customers budgets. Car manufacturing profits are cyclic, with the economy, and the ability to continue to grow during a recession is a huge advantage over manufacturers who have to scale back production and lay off workers. Even if margins are sacrificed for the sake of that growth, the value of the business continues to grow. When the economy rebounds, look out!

2022 was the most recent year that all the new models entering the market were supposed to stop Tesla's growth dead in their tracks, at least according to all the Tesla naysayers. That didn't happen, quite the opposite actually, Tesla had a record year, even with the COVID shutdowns. And it won't happen in 2023 either, because Tesla has pricing power, the rest do not.

 

[StealthP3D]

Regardless of cause we need to conclude that price cuts are being made to spur up demand …
(Let’s face it- the majority here have been saying no demand issues)
cheers!!
+ wish Tesla provided some explanation that mentioned all the reasons, that included reduced commodity prices and manufacturing improvements

You and I have a different understanding of what "demand issues" means. The Tesla naysayers were saying lack of demand would collapse sales and stop Tesla's growth dead in its tracks. But that's not going to happen because Tesla has unmatched pricing power and their cost to produce continues to decline. I've been very consistent on this issue from the beginning.

It's not a demand problem if you can keep growing production and sales. No one said Tesla would not have to lower prices to continue to make inroads into increasingly larger market segments, that's a given even if you ignore how much Tesla has added onto the prices since they introduced the Model 3 and Model Y. Businesses scale to unimaginable size and profitability by becoming more dominant and increasing production and sales. It's also how we drive the mission forward.

Lowering the prices was built into the business plan from the beginning. The anomaly was the price raises in 2021 and 2022 caused by unprecedented demand which was due, in turn, to legacy auto's supply chains being less resilient than Tesla's. Tesla had to raise their prices because legacy auto's supply chains broke. Tesla had supply chain pressures, but they managed to continue to grow production through this period leading to record profits. That Tesla is now lowering prices back down only surprises people who haven't been paying attention to the business plan and events over the last couple of years.

I'll say it again: There is no demand problem!

 

[15Peter20]

As far as I can tell from Tesla.com, here in the UK wait times and inventory levels for M3 are about the same as when I ordered my M3LR late October 2020. Since then production capacity has quadrupled and the price has increased by 15% or so.
The pricing and demand situation has been extremely fluid over the last couple of years and is, hopefully, now beginning to get back to ‘normal’, which I believe Elon alluded to when he said he observed deflationary effects creeping in to in the supply chain.

 

[StealthP3D]

"Global economy is a little shaky so it makes sense to cut prices to ensure demand keeps up with our impressively increasing supply. However, our input prices have steadily decreased and price cuts allow us to continue to expand production bringing in economies of scale. This will offset the majority of price cuts and result in only a slight decrease in margins."

I'm expecting margins to drop to somewhere around 12%-18% through 2023. I don't think it would be problematic if they went below that either. That's the benefit of having scale - gross margins can drop quite low during a weak economy without it causing the kind of economic hardship you might see in a smaller business.

 

[chrsk]

108$ in early per market Frankfurt. All though the price cuts might not be that bad in the long run, I suspect the stock market will have a different take on it.

 

[Artful Dodger]

It’s been almost 7(!!) years since the Model 3 unveiling event, and probably more like 8 since most of the design work was done.

Time for a serious upgrade to the 3

The largest volume car every produced was the VW Beetle, which was largely unchanged visually from 1949 to 1979. Changes were all under the hood with updated mechanicals. Those engineers were serious, not frivolous.

The Tesla Model 3 just surpassed the VW Beettle's sales record set in Norway in 1969.

 

[chrsk]

The largest volume car every produced was the VW Beetle, which was largely unchanged visually from 1949 to 1979. Changes were all under the hood with updated mechanicals. Those engineers were serious, not frivolous.

The Tesla Model 3 just surpassed the VW Beettle's sales record set in Norway in 1969.

To be fair, its the Tesla Model Y that did it.

 

[verystandard]

108$ in early per market Frankfurt. All though the price cuts might not be that bad in the long run, I suspect the stock market will have a different take on it.

Let's see who's winning tomorrow

 

[Criscmt]

I'm expecting margins to drop to somewhere around 12%-18% through 2023. I don't think it would be problematic if they went below that either. That's the benefit of having scale - gross margins can drop quite low during a weak economy without it causing the kind of economic hardship you might see in a smaller business.

Margins to 12%-18%, and demand to 1.5x (of 2022)?
I am trying to figure your estimate on earnings here.

 

[Xepa777]

Let's see who's winning tomorrow

View attachment 892919

It’ll be the guy on the left lol

 

[15Peter20]

108$ in early per market Frankfurt. All though the price cuts might not be that bad in the long run, I suspect the stock market will have a different take on it.

€103 now with volume of 98!

 

[StealthP3D]

The financial math does not support this "foregone conclusion". The earnings growth will certainly slow down a bit, but margins have plenty of room to lower some during a recession, and with production up over 2,000,000 for 2023 the earnings (even with lower margins) will still be quite a bit more than $4 per share.

In the short-term, I don't see how earnings growth will not go negative on a quarter over quarter basis due to seasonal effects (Chinese New Year, etc) and lower margins. Earnings growth might even go negative when comparing against the year ago quarter, but the important thing to remember is that recessions are not normal and, as long as Tesla continues growing production capacity, that will eventually turn earnings growth positive again. Probably very strongly positive.

When you look at people's financial projections, you just see smooth upward growth but that's only because they cannot know what interest rates, supply chains, consumer sentiment, Cybertruck ramp, etc. will do. The projections try to average all those things out. What happens in the real world is more sporadic.

 

[samppa]

Model S prices for LR have finally been set for EU, and they're available to order.

119k€. Also possible to choose between yoke or regular steering wheel. Delivery estimate jan-mar 2023.