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

[Featsbeyond50]

I've been advocating this type of MY price cut for the purpose of breaking the IRA. My question now is, does this break the IRA?

 

[Todd Burch]

With all I mentioned earlier, I forgot the biggest thing that helps reduce Tesla’s margin decreases in the US with these price changes: the IRA tax credit for battery module and cell manufacturing.

It’s actually possible, with all these changes, that passing that on to the consumer as part of these cuts we will see only a few percentage points in margin drop while we see a massive increase in volume and demand.

Many here (myself included) were forgetting the IRA for battery pack/cell manufacturing, something which contributed $0 to margins in all past quarters.

 

[cusetownusa]

How did you get an estimate of $1B profit per quarter?

I don't really want to say because it's just the dumbest way ever. But if you must know, I literally just took their 3 billion from the previous quarter and cut it by 2/3 because that's how much their auto profit just dropped by.

I welcome anyone who actually is willing to put in the time to do the math. There are far smarter people than I with actual spreadsheets that I would like to take a look at.

So…you used a random number generator.

 

[MrMoo]

Where are you getting the $19.5k and $6.5k profit numbers from? When I bought my Model Y LR (May 2022) for $54k it was said that profit margins were close to 30% on that.

From the price drop? 30% on the price before the drop.

Model Y

$65,990

$52,990

-$13K (-20%)

 

[Cattledog]

What time yesterday do you think Elon said, "The time has come, execute Order 66?"

Execute Order 66 - Revenge of the Sith (Episode III)

As the Clone Wars draw to a fiery close, Chancellor Palpatine begins his endgame and brands the Jedi Knights enemies of the Republic.

www.starwars.com

I know, we're the good guys here, but the clinical, sweeping effect of this is similar.

 

[Unpilot]

If TSLA goes down tomorrow due to this news I will lose the remaining shards of respect I had.

You had any left??

 

[Thekiwi]

Most auto manufacturer stocks selling off in europe & US pre-market, presumably due to Tesla pricing action.

 

[OrthoSurg]

You had any left??

-5% loss of respect
lol

 

[CorneliusXX]

According to my records the following price changes have occurred in the UK, standard options:

Model 3 | £48,490 -- > £42,990 (-11.34%)
Model 3 LR | £57,490 -- > £50,990 (-11.31%)
Model 3 Performance | £61,490 --> £57,990 (-5.69%)

Model Y | £51,990 --> £44,990 (-14.43%)
Model Y LR | £57,990 --> £52,990 (-8.62%)
Model Y Performance | £67,990 --> £59,990 (-11.77%)

The YLR was £54k when first released in the UK in Oct-21 and is what I paid for it at delivery in Mar-22. There could only have been a few orders at the £58k mark that were delivered and they would have been in Q3/4-22.

So now it is only £1k lower than upon release, even though we know GigaShanghai has scaled production over the time period to cut out at least £1k in fixed costs.

 

[petit_bateau]

OK... the above contradiction aside, in your full reply to me you say:


A few points and/or questions...

Why would solar tile be relevant to a "minority of a minority" (people in countries)? There was some discussion of partnering with builders, and it would seem that in the lifetime of an average roof, there are also a LOT of houses built. I don't think Tesla is playing the short game here... we are talking an adressible market growing over the next several decades...

It would seem odd for such an intense copying effort to be mounted if it were a largely irrelevant product, no?

You mention "the rest of the solar industry took the other 99.9% of the market"... given the relatively low adoption rate currently, the total addressable market is HUGE, no?

Spoiler: Adoption Rates

According to This Article, the US is only 3%.. parts of the rest of the world are in the lower double digits. Places like Africa may not much at all.

1) In a lot of countries the bulk of the relevant housing stock (i.e. pitched roof low-rise) is already built out and has a considerable outstanding economic lifetime. Therefore the newbuild market is quite a small fraction of the total residential on-roof market. We will (we must) go through the majority of the solar adoption curve during the next twenty years. We must do that for climate change reasons, but we will do that for economic reasons, and history also shows us that most of these S-curves are 20-year affairs (and so does the theoretical modelling). So Tesla cannot afford to hang around and take a seventy-year view on that. Besides which the worst customer to have is a property developer's buying team.

2) If you go look at pitched roof low-rise roofs around the world you'll rapidly come to appreciate that most of them don't look like US-style fake (or real) shingles. So going after a fake-shingle market that is only a small subset of the overall global roof style market is boxing oneself unnecessarily into a small corner. But the sheer complexity of trying to develop tile-sets to cater for all the global markets seems unlikely, especially as some have geometrical challenges that don't exist on fake shingles to anywhere near the same extent. (There were US/French/Swiss/etc experiments along these lines one or two decades ago : now I'm showing my age go look at the sheeting bonding/encapsulation experiements for single and triple junction by variously UniSolar and Flexcell back in history. There is a long line of "printed solar" experimentation which continues to this day, I noted recently that MIT are still going after it).

3) And in any case doing roof-integrated solar (BIPV) is an added complexity in terms of function-sharing that most home-owners have concluded that they would rather not have. The purpose of an external roof layer is to provide weather/sun protection; retain heat/cold; keep out varmints; and be a firebreak (it may also be a structural element in some roof types). Adding into this the functions of energy capture & transformation & delivery is - as the uptake data shows - a step too far. Hence the prevalence of above-roof modules on mounting bars and brackets. These days typically in the 400-700W range, i.e. the amount of field-install wiring and fixing is minimal and most of the system manufacture stages are conducted in a factory environment where economies of scale come into play; plus higher quality outcomes. (The one exception is carport-style roofs where there are very interesting solutions, but these always go down the module pathway, not the shingle pathway). Even where subsidy schemes and permitting constraints have hugely tilted the playing field towards roof-integrated the uptake results have been a fail (examples of these schemes/constraints are evident in various histories in UK, France, and some US permitting areas).

4) Then of course residential solar on low-rise pitched roofs is of course only a small subset of the overall solar market. There is residential solar that is ground mounted, i.e. no interest in shingles, will always go modules. Or they are flat roofs, again using modules on stands, and again no interest in shingle-style. But even if all residential installs were to be amenable to shingle style, they would still only be a fraction of the overall global solar market which is dominated by utility scale and commercial/industrial scale. The residential market is only 28% of the overall on an annual basis, or 16% on a cumulative basis.

So if you add all this together the maximum accessible market for a shingle-style tile is only a very small fraction of the overall market; and that fraction is still a minority even in the countries where the demand is primarily located.

(BIPV may have more traction in the commercial space as curtain walls, often semi-transparent, but they will be modules rather than shingles. Architects love doing these curtain walls and they do make better sense in that context.)

(Someone was asking about the significance of the Chinese shingles. I think they are manufactured almost exclusively for the export market, not the Chinese market. Furthermore my personal opinion is that the technology is more likely to find application in sheet roofing form if it ever becomes competitive, rather than shingle form. ?? Maybe in twenty years time, i.e. after we have done the heavy lift in S-curve terms ?? I was sure I had posted a news item recently re China shingle progress but I can't find it - so if anyone wants to dig further try this for starters : Solar Roof tiles Continue to make slow, steady progress )

- all imho of course

There are apparently many people posting here who simply do not understand what marketing is, thinking it is a synonym for hype All the names you mention, plus nearly all products of LVMH (the new richest person in the world), and many more achieve stellar margins year after year through superior product position, placement, production and pricing. They also all provide unusually good customer service. All of them share those, all components of marketing. In short, quoting from a thesis I wrote decades ago, “marketing is what you do if you’re too large to personally know all your customers”.

@petit_bateau , for example, provides excellent information, but forgets or does not know that price simply never if the prime driver in decision making, despite quite consistently being described as such by purchasers. That is to say people do change purchase timing based on price and they will often nit make purchases they cannot afford. Neither of those precludes very high margins.

Many of us and most analysts assume that low market share reflects poor performance. That may be true, but in the Tesla case for cars and TE, the entire market is nascent, but growing very quickly. Thus market share is titillating, but not terribly relevant.

About three or four years from now we will know whether Tesla can deliver high market share with consistent high profit and high quality. Before that we have only clues. Right now we cannot know whether Tesla will be similar to LVMH, Apple or Amazon. It even could turn out more like Kodak or Xerox.

in the meantime we need intelligent critical analysis, including understand Impediments to success. Examining carefully helps us to be more nearly rational in our decidions.

One good result probably is that most sane investors now know how ridiculous it is to use much margin, less so any derivative. Strangely some seeming wise investors are viewing Tesla as a generic car company so is overpriced. Such a decision is only possible if one does ignore product, design, placement and positioning.

A white paper of this nature is fair and square in the middle of marketing, indeed it is practically advertising, obviously aimed at installers but also aimed at the Federal level. To be honest at this point I think almost the only people who buy Tesla solar in the residential segment are the equivalent of the Mercedes/BMW/Audi buyers. We know (i.e. have very good reasons for believing) that Tesla has been throttling growth of residential solar sales because it was loss-making (i.e. very poor performance), with storage being what was assisting the Tesla Energy division towards profitability. Meanwhile global residential solar sales have been very profitably roaring ahead, and Tesla's repeated headbutting of a dead-end path is quite obvious in the data.

That 0.5% of the residential market is of course 0.1% of the total market.

I sincerely hope that folk will look a little bit more carefully at Tesla Energy in the future and demand better quality data be consistently provided in the quarterllies on a level playing field basis for all investors, at a meaningful level of breakdown, so that we may form rational views as to what is going on.

******************

Meanwhile back on the auto side, the really good news is that these significant price moves have come in early enough in January as to make it easier to incorporate the effects in all our many & varied spreadsheets. Analysts and forecasters of the world, celebrate.

 

[traxila]

So far TSLA bounced off of yesterday’s lows. This is with macro futures down. About 3M shares traded.

We may still end up down on the day, but doesn’t look like WS has decided this is the end of Tesla yet. Maybe they are finally coming around to the idea that this is the end of OEMs.

Do any other car manufacturers outside of China make money selling BEVs?

 

[bkp_duke]

The waiting list for LRs is going to get very long, very fast. Tesla will surely want to prioritize Performance Ys. 7 Seat performance Y will dominate for a while.

1813 in inventory currently. I wonder how fast that drops tomorrow. Will be fun to watch. I know 2 people personally who are now considering jumping on it.

United States Tesla All inventory

This is the All inventory for cars in United States. The inventory is taken from Tesla directly and refreshed every few minutes, we also explicitly differentiate between New and Demo cars both of which Tesla list as New. In many countries we also gather used cars from various sources. We allow...

tesla-info.com

1126 in inventory as of this post, from your link.

Massive drop in just hours. At this rate, by the end of the long weekend, we'll start seeing wait times bump on the site.

 

[jerry33]

Remember, GM is going to sell more EVs than Tesla in 2025.

If you have 100 models (isn't that what was said) and sell two of each, that's technically more than Tesla.

 

[Mengy]

I've been advocating this type of MY price cut for the purpose of breaking the IRA. My question now is, does this break the IRA?

I have a hunch the IRA was written to exclude Tesla mainly because the government didn't want to shell out all that money for rebates on Tesla's huge sales volume compared to other EV manufacturers.

NOW, they will have to pay those rebates anyway!

I don't know if that "breaks" the IRA, but I'm betting the people who wrote the IRA bill are now slapping their heads wondering how they can amend it to once again exclude Tesla....

 

[Paracelsus]

OK the CNBC hit piece is out, loaded with inaccurate claims and a headline that is straight from fantasy-land. Apparently Q4 deliveries were "lackluster"

Tesla announces World-wide price cuts on a Thursday evening after Thursday’s closing share price has already run above Friday’s Max Pain of 120, and after the Market already accepted China price cuts as a Good Thing earlier in the week. So WS calls out the B Team to run damage control for the incoming short burn. If Elon and Tesla would have only waited until the weekend for this news then MM’s wouldn’t have to drop the price at their expense. I can’t imagine any reason Elon would want to release this news a day early <s>

 

[NicoV]

Very interesting article about the Belgian car market: https://www.tijd.be/dossiers/de-ver...erlammen-particuliere-autokoper/10440053.html

In Belgium 2 thirds of the new cars are now bought by companies. The other third is bought by private persons. Private persons only buy cheap new cars. They are scared to buy a new car because they don’t know what to buy due to aggressive phase-out of ICE (sometimes even more aggressive phase-outs by cities).
There’s a table with the distribution of private buyers per brand: E.g. Dacia 87%, Tesla 14% private buyers.
Companies keep buying cars, while private buyers try to drive as long as possible with the car they have. This is very bad for the volume manufacturers that rely on the low end of the market.
It’s really worthwhile to read the whole article (search it on google to avoid the paywall). It is very consistent with the ‘valley of death’ theory.

 

[cliff harris]

I'm very excited by what these price cuts represent: a faith in MASSIVELY higher production in 2023.
The numbers for the UK are amazing. For just £400 more than the Hyundai Ioniq 5, you can now get a Tesla model 3.
There is just NO COMPARISON. You get a faster car, better acceleration, WAY better charging network, better charging speed, a much much better user-experience in terms of in-car streaming/netflix etc, plus a path to full autonomy should you opt for it later.

A friend of mine just bought a new ioniq 5. He likes it but... holy cow, its not a model 3.

This is going to be a massive massive blow to a bunch of legacy auto companies who are making baby steps into the EV world. Nissan and Hyundai and VW shareholders should be very, very worried.

Obviously the media will spijn it as low demand (lolz), and wall street will try and hold things back. I think Q4 financials will be pretty good, but the real trigger will be 2023 Q1 P&D. I don't think people have any idea how fast production is going to be accelerating. Legacy auto's honeymoon is over as of today.

 

[H Mak]

Your move OEM's

 

[Unpilot]

Good to see they are "Mulling" the move.

Toyota mulls new manufacturing platform just for EVs

Toyota is looking at rolling out an EV-dedicated manufacturing platform as it looks for the formula for making EVs profitably.

www.marketwatch.com

 

[saniflash]

In other news, the "Fair Fund" seems to make progress: