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

[Hiline]

There are still 40 Model 3 RWD units in Greater LA inventory. What should Tesla do to clear this inventory, now that half the credit is gone?

I guess I got my answer. Another price cut. Why am I not surprised.

Any bets on whether the new starting price of $40k is going to clear this inventory?

 

[Gigapress]

Demand is way way way higher than say 2020 when Tesla price dropped the Y to 49,999 just a few months after introduction. We now move what, like 10x more Ys today?

Tesla reduces Model Y prices, now starts below $50,000

Tesla has reduced the price of the Model Y starting price below $50,000, and it has updated the Performance version....

electrek.co

There's been about 16% inflation since then. $50k in 2020 equals like $58k in 2023 dollars. Or inversely, today's price is like a $43k Y in 2020.

 

[Kenypowa]

This, combined with the fact that Tesla is already hinting they will stop mentioning automotive gross margins in earnings means, they really, really don't want us to know how much they dropped in Q1 or in future quarters.

https://twitter.com/x/status/1648469184349896704

Our lone hope preventing the stock from going to a PE of 30 is Energy boosting operating margins. I feel bad its come to this but still hopeful.

This reminds me of when Apple stopped reporting # of iPhone sold in 2019 and rather they will only report on iPhone revenue going forward. Wall Street didn't like it and stock took a huge hit. Of course it recovered and no one today really care how many iPhones are sold.

 

[MrMoo]

This reminds me of when Apple stopped reporting # of iPhone sold in 2019 and rather they will only report on iPhone revenue going forward. Wall Street didn't like it and stock took a huge hit. Of course it recovered and no one today really care how many iPhones are sold.

AAPL had a P/E Ratio of 12 in 2019. I'm pretty sure if TSLA was trading at $45 (P/E12) per share people would also learn to stop caring about some of the metrics.

 

[Gigapress]

No, you are missing the point. You all thought the $7500 credit would create an unspeakable demand rush for the cars. It didn't do enough, Tesla cuts the price of cars and barely reaches their own guidance only to cut the price of cars again 3 weeks into Q2.

The Tesla simps need to stop changing the narrative every single day. Repeat price cuts (after the $7500 credit introduction which you all hyped so much) every month is a sign of weakness not strength.

It is surprising to me and these continued cuts appear to contradict Tesla's statements earlier this year about how sensitive vehicle order rate is to pricing. Not long ago they insisted that demand is very strong and that the price cuts resulted in orders double the rate of production. They also said they don't want long order backlogs.

So what happened? Maybe the effect was short-lived. Maybe automotive market macros have deteriorated substantially since then. Maybe Tesla expects production is ready to ramp fast at Berlin and Texas. Quarterly reports from Tesla and other OEMs should help us understand more. I hope Tesla will discuss these pricing moves in depth on the call. Right now the only guidance we have was Elon saying a few days ago "Tom, we’re not 'starting a price war', we’re just lowering prices to enable affordability at scale". It would also be helpful if Tesla leaders explain more of their rationale for why they still aren't advertising and whether lack of awareness could be substantially improved with a paid campaign.

Two of the top-voted questions on Say are related to this:

What is the process to make auto pricing adjustments? What variables do you consider? How frequently do you review pricing?

Are your cost reductions and deflationary input prices on commodities outpacing auto MSRP reductions to your liking now and for the foreseeable future?

 

[Ogre]

The Model Y AWD LR is now selling for the same as it was when I bought it.

“Massive Price Drop”.

Teslas are finally entering into true price competition with ICE vehicles.

 

[Hiline]

The Model Y AWD LR is now selling for the same as it was when I bought it.

“Massive Price Drop”.

What was the gross margin on the car when you bought it?

 

[Singuy]

No, you are missing the point. You all thought the $7500 credit would create an unspeakable demand rush for the cars. It didn't do enough, Tesla cuts the price of cars and barely reaches their own guidance only to cut the price of cars again 3 weeks into Q2.

The Tesla simps need to stop changing the narrative every single day. Repeat price cuts (after the $7500 credit introduction which you all hyped so much) every month is a sign of weakness not strength.

7500 definitely gave Tesla a life line but it does not generate as much affordability as you think because it's backloaded. The loan you take today does not factor in the 7500 you get a year from today. So those who couldn't afford the monthly payment before still can't afford it today.

 

[JusRelax]

I guess I got my answer. Another price cut. Why am I not surprised.

Any bets on whether the new starting price of $40k is going to clear this inventory?

Aren't price cuts on MY, not M3?

Wow. More price cuts.

https://twitter.com/x/status/1648530671227523074

 

[Ogre]

What was the gross margin on the car when you bought it?

Mine has only a single Gigacasting, USS, radar, and many other cost cutting measures have happened since then. It also didn’t get $1,500 - $3,000 in battery subsidies, I find it difficult to imagine Gross Margins were higher then.

 

[Carl Raymond]

I’m trying to imagine in what world they would cut prices the day before earnings if margins were suffering. The optics would be terrible. They’d be forced onto the back foot for the entire call.

I’m taking this as a bullish sign. All is well in the state of Denmark.

 

[CarpeDiem00]

I am not too sure what the actual game plan is here. I'm just left scratching my head. They either have some clarity that we do not have which we will hopefully see in the quarterly reports or it's just a clown fiesta. Or maybe it's somewhere in between.

I do know that if the earnings report is weaker than analysts expect, whatever they say in the earnings call will just be corporate BS and I would take it with a grain of salt. They'll definitely have an explanation, after all the cars have infinite demand and we'll be worth more than Apple and Saudi Aramco long term. Just hold onto your shares and believe.

What makes you think of this infinite demand? I just test drove some other electric vehicles and they are incredibly good vehicles, especially the Germans. You can’t say that about Apple’s competitors. When was the last time iPhone got two price cuts in a year?

 

[Singuy]

I am not too sure what the actual game plan is here. I'm just left scratching my head. They either have some clarity that we do not have which we will hopefully see in the quarterly reports or it's just a clown fiesta. Or maybe it's somewhere in between.

I do know that if the earnings report is weaker than analysts expect, whatever they say in the earnings call will just be corporate BS and I would take it with a grain of salt. They'll definitely have an explanation, after all the cars have infinite demand and we'll be worth more than Apple and Saudi Aramco long term. Just hold onto your shares and believe.

High chance after the leak new refresh, orders have slowed drastically as people are waiting for the new reveal. However Tesla has a plan on when it will come online in production so the price cut is here to clear current and future inventory in anticipation for the new face lift like what happened to the Model S 69420 price cut. Who knows, we may get the new Model 3 reveal tomorrow during earnings like what happened with the Model S.

 

[Singuy]

What makes you think of this infinite demand? I just test drove some other electric vehicles and they are incredibly good vehicles, especially the Germans. You can’t say that about Apple’s competitors. When was the last time iPhone got two price cuts in a year?

Who still pays for an iphone? There are so many incentives with iphones I just trade in my old and get a new one for no additional cost or 100 bucks. These promotions are a dime a dozen around black Friday, which is 2 months after release.

 

[Hiline]

Aren't price cuts on MY, not M3?

M3 RWD was cut too - went from $42k to $40k.

Mine has only a single Gigacasting, USS, radar, and many other cost cutting measures have happened since then. It also didn’t get $1,500 - $3,000 in battery subsidies, I find it difficult to imagine Gross Margins were higher then.

It'd be quite impressive if Tesla managed to make significant gross margins back then at the same price as today.

I’m trying to imagine in what world they would cut prices the day before earnings if margins were suffering. The optics would be terrible. They’d be forced onto the back foot for the entire call.

I’m taking this as a bullish sign. All is well in the state of Denmark.

They probably don't care about earnings. Their focus is on producing as many cars, at as low prices, as possible, and on selling all units they produce. The timing was probably a response to the changes to the federal tax rebate for EVs (not just Teslas')

I am not too sure what the actual game plan is here. I'm just left scratching my head. They either have some clarity that we do not have which we will hopefully see in the quarterly reports or it's just a clown fiesta. Or maybe it's somewhere in between.

I do know that if the earnings report is weaker than analysts expect, whatever they say in the earnings call will just be corporate BS and I would take it with a grain of salt. They'll definitely have an explanation, after all the cars have infinite demand and we'll be worth more than Apple and Saudi Aramco long term. Just hold onto your shares and believe.

You should always take corporate talk with a grain of salt, and try to read between the lines.

"enable affordability at scale" = "move down the demand curve because demand at current price levels is below supply"

 

[TSLA Siempre]

I’m trying to imagine in what world they would cut prices the day before earnings if margins were suffering. The optics would be terrible. They’d be forced onto the back foot for the entire call.

I’m taking this as a bullish sign. All is well in the state of Denmark.

Doing it right after the call would be even worse optics, so as much as I’d like to agree, I am not convinced by this argument.

 

[Gigapress]

I am not too sure what the actual game plan is here. I'm just left scratching my head. They either have some clarity that we do not have which we will hopefully see in the quarterly reports or it's just a clown fiesta. Or maybe it's somewhere in between.

I do know that if the earnings report is weaker than analysts expect, whatever they say in the earnings call will just be corporate BS and I would take it with a grain of salt. They'll definitely have an explanation, after all the cars have infinite demand and we'll be worth more than Apple and Saudi Aramco long term. Just hold onto your shares and believe.

Worth more than Apple and Aramco combined is approximately saying Tesla can sustainably earn as much as Apple and Aramco combined, or around $200B/year. The goal of 20M vehicles/year and 1.5 TWh/year of stationary batteries plus the other smaller business units could do it, if Tesla's competitive positioning continues to let them deliver better products with a superior cost structure. The TAM is enormous for both automotive and energy, so it's basically a question of scaling up and keeping margins decent.

 

[MrMoo]

What makes you think of this infinite demand? I just test drove some other electric vehicles and they are incredibly good vehicles, especially the Germans. You can’t say that about Apple’s competitors. When was the last time iPhone got two price cuts in a year?

I was just quoting what we have heard in previous earnings calls or interviews from Elon. I was just trying to point out that you shouldn't always believe what you are being told.

High chance after the leak new refresh, orders have slowed drastically as people are waiting for the new reveal. However Tesla has a plan on when it will come online in production so the price cut is here to clear current and future inventory in anticipation for the new face lift like what happened to the Model S 69420 price cut. Who knows, we may get the new Model 3 reveal tomorrow during earnings like what happened with the Model S.

Aren't the price cuts on Model Y? I was only looking at Sawyers tweets. I don't think there is a price cut on the 3.
Edit: I've just read it's for the Model 3 as well. But then one would need to ask the question why cut the Model Y?

Doing it right after the call would be even worse optics, so as much as I’d like to agree, I am not convinced by this argument.

Is the inventory problem and demand for the Model Y slowing at such a rate that they can already project the delivery numbers for Q2 and know they won't meet their goal based on current sales rate + production rate? How is it possible they need to urgently cut the prices by another 6% after cutting in January. It just seems really odd.

Worth more than Apple and Aramco combined is approximately saying Tesla can sustainably earn as much as Apple and Aramco combined, or around $200B/year. The goal of 20M vehicles/year and 1.5 TWh/year of stationary batteries plus the other smaller business units could do it, if Tesla's competitive positioning continues to let them deliver better products with a superior cost structure. The TAM is enormous for both automotive and energy, so it's basically a question of scaling up and keeping margins decent.

Time will tell. As we've seen from the price cuts, the auto market doesn't work like the smart phone market. Apple doesn't pull a demand lever by cutting the RRP of their products. They refresh their products every year. How often does Tesla refresh their models? To do 20M vehicles a year at a model refresh rate of 6 years would mean they need to sell 120M vehicles to 120M different families over 6 years. That is a lot. I'm simplifying things because they sell more than 1 model but you get the idea.

 

[Hiline]

How about all the people that bought these cars for significantly more? Some paid over ten thousand of dollars or more. We all knew Tesla had high margins but it feels like Elon has been screwing over his base to make us feel like Tesla is a luxury brand when in fact it competes with Toyota and VW at the most.

What did Tesla say to make you think Tesla is a luxury brand?

Mercedes sells fewer than 3 million cars a year worldwide. Toyota sells about 10. Tesla is selling 2 million this year, and 20 million in 7 years. It's pretty clear what market Tesla is targeting.

 

[AndrewZ]

Comments from last quarter’s call regarding commodity prices and input costs

Zach Kirkhorn
The Austin and Berlin ramp inefficiencies in 4680 will make a substantial amount of progress on that over the course of the year, and that's within Tesla's control. We're doing a lot of work on cost reduction outside of that. And we talked about supply chain costs, expedites, logistics, attacking everything. On the raw materials and inflation side, where lithium is the large driver there and this was a meaningful source of cost increase for us, we'll have to see where lithium prices go.

And we're not fully exposed to lithium prices, but I think in general, as what we've seen from our forecast here, cost per car of lithium in 2023 will be higher than 2022. So that's a headwind that would have to be overcome to return back to those levels. So I don't think we'll get there this year, but I think we'll make progress. And we'll continue to find ways to offset these raw material costs that we don't have control over.

Unknown speaker

Yes. Like on the non-cells raw material, we begin to capture benefits of indexes tapering out, but due to the length of various supply chains, it does take time before this is reflected in our financials. And while aluminum is down like 20% year over year, steel is about 30% down year over year, the global non-cells raw materials market continues to be influenced by geopolitical situations in Europe, high production cost due to labor cost increases and energy spikes and disruptions due to natural disasters like typhoon in Korea four months ago, pandemic lockdowns. So we believe that meaningful price corrections will ultimately come, but it remains uncertain exactly when.

In the meantime, we continue to redesign supply chain to make it more efficient and work with our supplier partners to find more efficiencies, streamline logistics and transportation to produce cars.

Martin Viecha


Sorry, do you want to go say something?

Andrew Baglino -- Senior Vice President, Powertrain and Energy Engineering

I was going to say, we're also -- our fleet is starting to mature, the 3, Y fleet. And we're gathering a lot of data out of that fleet to understand how we can sort of bring some margin that we didn't know we had out of the product. So over the course of 2023, on the powertrain side, we're actually going to go after sort of some materials where we're paying for more performance than we need or we have more content than we need without impacting reliability at all. And that will actually add up to a pretty significant cost reduction on the powertrain side over the course of 2023.

So we're not just sort of relying on supply. We're also doing design actions to bring cost out.