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

[insaneoctane]

Good point. However the other issue with your projection of QoQ decline is relying upon data from just four countries that happen to do daily registration updates as being precisely representative of the entire continent. With data so granular there’s a lot of room for logistics lumpiness to skew the overall trend.

We do know that Giga Berlin is producing cars at a higher rate than ever in Q1 and Giga Shanghai is still cranking out cars at full speed. So what’s your explanation of that? Are the cars from these two factories that are allocated to Europe not going to get sold?


Tesla did not experience a “small improvement in demand” after the price drops, unless you’re asserting that management is flat-out lying to shareholders. Listen to the comments on the Q4 earnings call and Investor Day. Look at how prospective customers stampeded Tesla showrooms and the spike in Google search interest too. Orders exploded after the price drop and now are far in excess of the production rate. In response, Tesla started tweaking the prices back up.

For example:

Elon Musk: “The most common question we've been getting from investors is about demand. Thus far -- so I want to put that concern to rest. Thus far in January, we've seen the strongest orders year-to-date than ever in our history. We currently are seeing orders at almost twice the rate of production. So I mean, that -- it's hard to say whether that will continue twice the rate of production, but the orders are high. And we've actually raised the Model Y price a little bit in response to that. So we think demand will be good despite probably a contraction in the automotive market as a whole. So basically, price really matters. I think there's just a vast number of people that want to buy a Tesla car but can't afford it.”

Tom Zhu: “…earlier this year we had a price adjustment. After that we generated huge demand, more than we can produce, really, and as Elon said, as long as you’re offering a product value at an affordable price you don’t have to worry about demand.”

Elon Musk: “The desire for people to own a Tesla is extremely high. The limiting factor is their ability to pay for a Tesla, not do they want a Tesla…For the vast majority of people it is affordability-driven…One of the things we weren’t sure about was the price elasticity of demand for Teslas. So, like, as we lower the price how much does demand increase? And we found that even small changes in the price have a big effect on demand. Very big. So that was a good thing to learn. … I mean, demand for our vehicles in terms of desire to own them may as well be infinite; it’s indistinguishable from infinite at this point…So as you make the car more affordable, we’ll have demand go crazy basically. … I cannot emphasize enough, the hard part is building the cars.”

I'd like to recommend this as a post of particular merit.

 

[M|S|M MYP]

I'd like to recommend this as a post of particular merit.

Along with pretty much every other post that @Gigapress posts

 

[jerry33]

We can do something of a sanity check on this by looking at price changes relative to inventory at that time while asking "would these price changes happen at that inventory level?" Would Tesla cut prices by $3750-7500 because there are 200-600 vehicles in stock?

I see inventory trending upwards as a sign of excess supply and that needs to be front-run to ensure supply is balanced with demand. What the numbers represent in terms of physical vehicles, who knows, but trending up = bad and trending down or staying stable = good.

Inventory would naturally increase with more store/gallery openings. Also each store or gallery should have at least one of each, which hasn’t been the case until very recently. If inventory is more than 4 to 8 cars per store, then it’s possible to think about excess inventory. Right now I doubt that’s the case. Also there is inventory in transit which shouldn’t count for excess because most will already be sold.

 

[AndrewZ]

Inventory would naturally increase with more store/gallery openings. Also each store or gallery should have at least one of each, which hasn’t been the case until very recently. If inventory is more than 4 to 8 cars per store, then it’s possible to think about excess inventory. Right now I doubt that’s the case. Also there is inventory in transit which shouldn’t count for excess because most will already be sold.

Yeah all of this is still detail only known by Tesla, more reasons why I think what really matters are the trends and what happens relative to those trends.

So far this has been a very good indicator of price changes, both up (for example in the case of the Model Y in the US) and down.

 

[unk45]

It turns out that it’s much more than “selecting a different credit card”: Tesla joins Gireve's platform to open its Superchargers - Gireve

Tesla integrated with the biggest roaming provider in Europe to enable this.
I would expect more charge cards to provide access to superchargers in the near future.

Hopefully it means the roaming integration will enable Tesla drivers to use their Tesla account to charge at non-Tesla chargers too in the future.

That is superb news. Were that to happen my EU 'wallet' could lose most, of not all, of my eleven distinct accounts. Now if they could add automatic carnet I'll be elated! The only remaining trick to to somehow have Sixt et al to allow the Tesla app for car and charging.

 

[Dreadnought]

Finally caught up with the thread. A few comments to noteworthy posts re Investor Day.

[...]
- Stationary storage is going to be big, but I don't need convincing on the scale aspect of that. However no special sauce observed that is not available in the other products in the market. So no reason to think margins will be anything particularly special. Demand far greater than supply - again I don't need telling that - everyone outside USA who wants a Powerwall is well aware.
[...]

Thanks for a great summary!
In the quoted paragraph, you're contradicting yourself and perhaps I can help to resolve the conundrum. Being able to fulfill such a humungous demand is the special sauce. Margins will be determined by the delta kWh price between discharging and charging (and storage lifetime capacity) for as long as there is a temporary surplus of renewables and demand peaks for electricity at other times. It will be interesting to see how this is going to develop over the next years as more and more storage goes online and shaves off the highest peak rates on one side while opportunities to charge at low or negative electricity prices grows with deployment of renewables.

I think they basically laid out what's going to happen in the future. Gigas in the future would take a much smaller footprint but also bringing the production of the whole thing, from battery cells to the final car under one roof.

Given that they can do so much within so little space, Gigas in the future is no longer constrained by how much land there is to offer as well as labor costs since it's in an efficiency that other carmakers cannot even begin to comprehend. Furthermore, by bringing everything in-house, down to every chip needed for the car, the need for suppliers goes down further. Tesla will no longer need to select a location considering logistic of their suppliers that much and only what Tesla itself needs to bring things in and out.

This is one of the most underappreciated takeaways from Investor Day IMO. Tesla already has an incredibly high level of vertical integration and yet their existing factories already produce more output per factory volume than incumbents'. And if that by itself wasn't mind-bending enough, now they announce that they will shrink their factory footprint by a staggering 40% while they further insource even more components!
And since first reaction when people hear "less factory", they think "less capex", it's more important and thus worth repeating that a reduced factory volume implies less wasted time for non-value-add transportation of material and workers / robots moving around.

 

[MP3Mike]

It turns out that it’s much more than “selecting a different credit card”: Tesla joins Gireve's platform to open its Superchargers - Gireve

Is it really though? At this point you still have to have the Tesla app, a Tesla account, and start the charge via the Tesla app. The only difference is it is billed to your "Chargemap Pass" instead of a credit card.

Sure, there is more on the back end, but as far as the user is concerned, the only difference is selecting a different payment method.

 

[Artful Dodger]

I follow troy on twitter and he seems to be suggesting a big build-up of inventory that can't be sold in Europe.

Why do you repeat such lame rhetoric? OF COURSE they will be sold: Prices are adjusted until supply = demand. Do you not get that, or are you reality challenged?

 

[TN Mtn Man]

Well, according to the NYT and Jalopnik, there will never be either a Cybertruck, or stainless steel vehicles. Apparently the DeLorean DMC-12 wasn't a real car.

Technically the Delorean didn't have "stainless body panels". They had plastic panels (or fiberglass, sources vary) with a thin SS foil for appearance. They certainly didn't have a SS unibody/structural exoskeleton.

 

[petit_bateau]

We can do something of a sanity check on this by looking at price changes relative to inventory at that time while asking "would these price changes happen at that inventory level?" Would Tesla cut prices by $3750-7500 because there are 200-600 vehicles in stock?

I see inventory trending upwards as a sign of excess supply and that needs to be front-run to ensure supply is balanced with demand. What the numbers represent in terms of physical vehicles, who knows, but trending up = bad and trending down or staying stable = good.

Are any of the price drops or special offers associated with a significant specification change (e.g. HW3 > HW4) ? We'd typically expect short-term offers to be used to clear out excess inventory prior to a spec change (or to manage a political change, such as to peak shave demand interruptions from a political tax/grant/etc incentive). Whereas longer term price changes would tend to be associated with significant longer term production capacity changes (or say, longer term demand environment changes, if we have evidence for such a thing yet).

(I don't follow those aspects that closely so I can't myself answer that. I just assume Tesla knows enough to do this right).

 

[jerry33]

Well, according to the NYT and Jalopnik, there will never be either a Cybertruck, or stainless steel vehicles. Apparently the DeLorean DMC-12 wasn't a real car.

Jalopnik also said the Model S could never be built, and the NYT spews all manner of Tesla FUD. Silly to even reference them.

 

[TN Mtn Man]

Why do you repeat such lame rhetoric? OF COURSE they will be sold: Prices are adjusted until supply = demand. Do you not get that, or are you reality challenged?

I think the question is are the unsold Shanghai cars built to European specifications and can they be sold in Europe? I'm not sure if China and European countries have the same specs on lighting, crash protection, mirrors, license plate cutouts, charging plugs, etc. Not saying they don't, I simply don't know if the cars built in Shanghai for the China/SEA market are identical do ones destined for Europe.

 

[petit_bateau]

It turns out that it’s much more than “selecting a different credit card”: Tesla joins Gireve's platform to open its Superchargers - Gireve

Tesla integrated with the biggest roaming provider in Europe to enable this.
I would expect more charge cards to provide access to superchargers in the near future.

Hopefully it means the roaming integration will enable Tesla drivers to use their Tesla account to charge at non-Tesla chargers too in the future.

Nico - That is great news, especially if it opens up the non-Tesla chargers to fill in the black holes. Please keep us posted if you see any changes in that respect.

 

[wws]

The more I learn about Tesla, the more I confirm my suspicions as I looked at technology growth and pondered as to why legacy automakers seemed to always lag decades behind, failing to implement widely used technologies we saw appear in so many other consumer products.

It was frustrating for me owning cars over the years and being so consistently disappointed, while working in tech industries and knowing they could do this or that much better. Granted, finally, they began including many up-charge items, like cruise control, AC, power locks/windows, etc. as standard features. They could have done so much earlier, and brought more innovation to their products as well. Seeing Tesla do this as a matter of course is the proof that it can happen in the auto sector as easily as it did in computers, entertainment products, etc.

Looking back with a perspective now based upon what Tesla has done, and is doing, in regard to actually keeping their product on the cutting edge of tech it seems almost disrespectful to a consumer the way the legacy OEMs have dragged their feet, unable to innovate and improve both the product and the manufacturing process.

Tesla has demonstrated that not only can it be done, but, it can be done quickly enough to completely disrupt the entire sector. In doing so they have pulled back the curtain on the "wizards" of legacy auto to show how they only made improvements when they had to, rather than doing so as a matter of pride in their work. They have been resting on their laurels since sometime shortly after the transition from horse and buggy. Is it any wonder that so many of them, and the ideology from top management down to union workers on the line, will at best struggle to remain relevant in the least degree if they don't go away completely...

Look up the word "oligopoly". It is a term economists use to describe a market where the costs of entry are so high, there are only a handful of competitive players. As long as each of them is making some money, there is no huge push to make a major technological change. However when one eventually rocks the boat and makes a significant change, the others quickly follow suit. The US car industry has been like this since the shakeouts of the Great Depression (hundreds of automakers down to a couple dozen), and also post WWII (couple dozen down to four, then three).

The relationship between the car companies and the unions certainly didn't help. I recall reading about many battles where the unions fought tooth and nail against any form of factory automation. The invasion of the Japanese automakers, and resultant loss of market share for the domestics, helped turn some of this.

 

[TN Mtn Man]

If you haven't noticed, their burn rate is accelerating as they are delivering more cars. Why? Because they have a massive negative gross margin, something Tesla didn't have. As you scale production, every car you sell at a loss just multiply more while the operating expenses scales up as well.

As I have mentioned before, the most Tesla have ever loss in a Ebitda bases in 1 year was less than half a billion dollars. Rivian is at -5 billion plus. Tesla has managed cost like a boss. When Tesla made 20k deliveries in 2013 and had the same marketcap as Rivian, tesla lost 6.2 million in free cash flow. Rivian lost 6.4 BILLION. YES, NOT A TYPO! 1000X!

This is not a problem "they will make it up with scale" can solve. Restructuring, laying off massive amounts of people, redesigning their entire production line, need another 5-10B in cash injection, and holding their engineers as hostages until they can figure out how to break even in a gross margin standpoint delivering under 5-10k car are their ONLY HOPE.

Warren did a nice video today as a frame of reference. He still believes in Rivian but with those numbers, I don't know what kind of hopium these people have.

All of which points out how exceptional Tesla and the team they put together actually are. Forgetting the EV aspect for a moment, vehicle manufacturing (and design/engineering) is perhaps the most challenging business on the planet. Massive investments in tooling, equipment, design and development, even on an evolutionary ICE vehicle-any one of which can bankrupt the company if the vehicle doesn't meet consumer expectations and sell well. Huge number of products in the supply chain to manage. Large variety of manufacturing processes. Simply managing a supply chain during "normal" times is choreography. Tesla managed to do all that-including managing supply chains, better than companies with a century of manufacturing experience. Oh, and while developing and implementing brand-new technology in the form of EV. All at a time when EVs were an extreme novelty with limited consumer demand.

Tesla has paved the way for others, with technology and developing consumer awareness and demand. In spite of this-entering that industry is still a tremendous challenge, most that try won't survive, no more now than in the last century.

Back to my basic philosophy-don't bet against Elon.

 

[Artful Dodger]

I think the question is are the unsold Shanghai cars built to European specifications and can they be sold in Europe? I'm not sure if China and European countries have the same specs on lighting, crash protection, mirrors, license plate cutouts, charging plugs, etc. Not saying they don't, I simply don't know if the cars built in Shanghai for the China/SEA market are identical do ones destined for Europe.

That's not a question, that's repeating FUD. Tesla is way ahead of this issue. The people you're quoting from twitter are bottom-feeders. When someone spreads fear of the latest 'concern-of-the-day' that can' be disproven for month or years, that's a disinformation campaign. (China? What? No! Europe!) Add in a PATREON account, and ur golden, right?

 

[TN Mtn Man]

Is it me, or is it getting hot in here?

https://twitter.com/x/status/1632780014386135041

That's a lot of WIP inventory.

 

[Artful Dodger]

Sandy got to step into a Tesla Semi while recording. I don't know much about Semis, do we have anyone on TMC that is a trucker or knows about it?

@Carsonight is a former truck driver, and is active on Twitter and DISQUS (comments engine for blogs IE: teslarati.com)

• carsonight · Profile · Disqus
• Tweets with replies by Carsonight (@carsonight) / Twitter

 

[SmokyPeat]

Jalopnik also said the Model S could never be built, and the NYT spews all manner of Tesla FUD. Silly to even reference them.

Yes, it was. But a little silly, light-hearted fun once in a while is good for the ol' blood pressure.

 

[Zero CO2]

I say bring the MM's up and downs, the shorties plays, and lay down the FUD as thick as possible, Tesla has already reached escape velocity and is comfortably in orbit looking down upon all the players so desperate to maintain their status quo. Whatever they are trying to preserve from the past, whether it be fossil fuels, century-old manufacturing processes, or playing fast and loose within the bounds of a rigged stock market, the effects upon Tesla have been minimal and temporary.

Was true in 2017 and is still true over 5 1/2 years later

Tesla Q2 Earnings: 'You Need A Telescope To See Who's In Second Place' (NASDAQ:TSLA)

Contrary to earlier fears, Model S and X demand is growing even as Model 3 deliveries begin. Model 3 production is on track.

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