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

[unk45]

Just saw the news of the price cuts. To me this is mismanaged. The price cuts a week or so ago shouldnt have happened. Should have waited unto the Tax Credit change occurred yesterday and then put in price changes today. Changing every week or so encourages people to delay purchase as long as possible. Just like raising prices encourages people to purchase as quickly as possible.

To be realistic, the effects on sales are only part the story.
Check the Renault reaction to glimpse the larger issue; driving the world auto kicking and screaming into the future.
These messages do serve the TSLA mission, whether or not they appeal to any of us at a given time.
OTOH, check out the plummeting prices of major cost categories for Tesla now:

Container freight index from Shanghai to Rotterdam 2023 | Statista

Container freight rates from Shanghai to Rotterdam oscillated dramatically between January 2019 and August 2023.

www.statista.com

Lithium Prices Slide As Surplus Of Key EV Battery Material Looms

The lithium price decline is accelerating. One firm sees new supply creating a surplus in 2023.

www.investors.com

Only refer to two major costs for Tesla, both dropping by roughly half since their peaks last year. There are other lists here and elsewhere that detail numerous categories.
Bluntly, the people who forecast earning catastrophe this afternoon are neglecting large cost tailwinds during the quarter, and that ignores scale benefits and manufacturing economies.

So, regardless of this afternoon's results, cutting prices everywhere is reflecting the quite huge cost reductions per unit for vehicles and stationary storage. Under these conditions price reductions seem obvious.

After that the US IRA and other such developments combine with services revenue to paint an interesting remainder of 2023. All this is making me go longer...

 

[Zaddy Daddy]

I don’t get this.

The whole time prices were in the $60k range Musk was talking about “Embarrassingly High Prices” and how they would lower them when they had the chance. The commodity bubble was exceedingly well plotted out with lithium, nickel, steel, and other commodities selling for 5-10 times what they have been.

Tesla has said the plan was to bring prices down so these cars are more affordable.

They are making good on their promises. Now people want to whine about it? Like suddenly they should ignore what they’ve said and do a huge money grab?

People are whining because they realize Tesla's earnings growth trajectory has fundamentally shifted from 50% YoY growth (and deserving of a 50-70 PE ratio) to 20% YoY earnings growth. That's the new reality that has been in set in slow motion since last fall.

Uberbulls suddenly stopped focusing on earnings and are now onto "affordability" as if stock investing were not in the title of this thread.

The fact is, if Tesla is now planning on growing earnings at say 20-30% a year, then they deserve maybe a PE ratio of 30, maybe 40 at best.

That means they will be stuck in the $100s doldrums for a few years.

I'm pretty sure that reality is what people are upset about.

 

[jerry33]

Incorrect. Check with your accountant, because I'm not one. Following is not advice.

Taxes are not some, wait until the end of year, then be surprised thing (well, they can be, but one would likely not like the surprise)
Taxes are paid as money is earned. W-2 employees and retirees have withholding, 1099 contractors and stock traders have quarterly estimated payments.

Anyone who benefits fully from the $7,500 credit will have a tax bill (meaning total for the year, not April 15th make up payment) of at least $7,500. They can adjust adjust their withholding/ payments now to avoid a $7,500 overpayment and refund at the end of the year.

Two options:
1) reduce withholding to $0 (or allowable minimum) until the difference reaches $7,500, then restore it. One can do this before buying the car to add to the down payment which reduces the monthly payment. Or, one can do this after purchase to reduce the loan (assuming favorable prepayment terms). After doesn't reduce the monthly payment going forward (unless refinanced), but does have the side effect of reducing overall interest because the monthly payment doesn't change, resulting in more principle paid each month.

2) reduce withholding by $7,500/months_left_in_year, then reset Jan 1st. This effectively reduces the monthly payments for the first year, but doesn't help payments after that unless applied as a loan prepayment (with favorable terms), see also refinance.

I'd suggest most people don't adjust the W2 because they absolutely don't want to have a payment to the IRS due to some miscalculation on their part.

 

[hobbes]

China seems to be doing alright currently:

View attachment 929872

Of course the entry level model Y & 3 are already priced far lower in China than the USA.

For what it´s worth:

https://twitter.com/x/status/1648586293721411585

At least it is a well known twitter account..

 

[thx1139]

To be realistic, the effects on sales are only part the story.
Check the Renault reaction to glimpse the larger issue; driving the world auto kicking and screaming into the future.
These messages do serve the TSLA mission, whether or not they appeal to any of us at a given time.
OTOH, check out the plummeting prices of major cost categories for Tesla now:

Container freight index from Shanghai to Rotterdam 2023 | Statista

Container freight rates from Shanghai to Rotterdam oscillated dramatically between January 2019 and August 2023.

www.statista.com

Lithium Prices Slide As Surplus Of Key EV Battery Material Looms

The lithium price decline is accelerating. One firm sees new supply creating a surplus in 2023.

www.investors.com

Only refer to two major costs for Tesla, both dropping by roughly half since their peaks last year. There are other lists here and elsewhere that detail numerous categories.
Bluntly, the people who forecast earning catastrophe this afternoon are neglecting large cost tailwinds during the quarter, and that ignores scale benefits and manufacturing economies.

So, regardless of this afternoon's results, cutting prices everywhere is reflecting the quite huge cost reductions per unit for vehicles and stationary storage. Under these conditions price reductions seem obvious.

After that the US IRA and other such developments combine with services revenue to paint an interesting remainder of 2023. All this is making me go longer...

I dont think the cost of shipping from Shanghai to Rotterdam has much of an effect on the price to ship cars from Fremont or Texas to other locations in the USA. Someone earlier said the cost of Lithium at one point was up to $500 per car so even reducing to $0 doesnt cover the price cuts. Also again it isnt about the cuts themselves. It is about cuts being frequent which makes people hold off on buying, if they can, until the prices start to rise or stick at a constant price for awhile.

 

[jerry33]

All IRS cares about is that your withholding is within a certain threshold by January 15th after the end of the tax year. Need to at least withhold by that time at least as much as previous year taxes, or 90% of the tax year taxes. This is to avoid penalties. Remember refunds are bad. Even if you under withhold you can make an extra payment as long as IRS receives before January 15th to avoid penalties.

And how many people actually know before Jan 15? You're lucky if you get your information by Feb 15. Only self-employed people will likely know because if you're an employee you generally don't bother to figure it out.

 

[ZeApelido]

Lagacy OEMs and ICE media getting really desperate with these ricidulous claims.

Heavy EVs Could Collapse Old Parking Garages: Report

Cars keep getting heavier, and experts are worried that aging parking garages simply weren't built to cope.

www.thedrive.com

 

[traxila]

Lagacy OEMs and ICE media getting really desperate with these ricidulous claims.

Heavy EVs Could Collapse Old Parking Garages: Report

Cars keep getting heavier, and experts are worried that aging parking garages simply weren't built to cope.

www.thedrive.com

It is already happening! Those cars were almost all BEVs!/s

Parking garage collapses in NYC, killing 1; 5 injured

One person has been killed and five have been injured in a parking garage collapse in lower Manhattan’s Financial District. Officials say cars were crushed as concrete floors fell on top of each other like a stack of pancakes. Authorities believe everyone inside has been accounted for, but...

apnews.com

 

[Big Time]

Why does anyone buy a car? In the hopes of enjoying it. And I was. But when you realize you’ve purchased the car too early and maybe you should’ve waited and saved over $10k, it leaves a real shitty feeling inside.

When you also have a considerable amount invested in the stock, you want to make sure right decisions are made as that could derail the stock price. They might sell more cars but make less money, the markets don’t like to see profits drop. And the competition is getting started now, e.g the id7 has 700km of range.

My dad told me something when I was a little boy. He told me the instant you drive a new car off the lot it drops 25% in value and it’s all downhill from there. I’ll be your daddy for a day, now go to your room!

 

[Artful Dodger]

And they will learn by everyone saying they can only get the credit when they file taxes next year?
Why not be accurate and say it requires a calculation and submitting two forms to one's employer? No forms needed if self employed. FUDnancials don't help anyone, education does.

Nominated for "Posts of Merit" because you said "FUDnancials".

Cheers to the Longs!

 

[mongo]

I'd suggest most people don't adjust the W2 because they absolutely don't want to have a payment to the IRS due to some miscalculation on their part.

And how many people actually know before Jan 15? You're lucky if you get your information by Feb 15. Only self-employed people will likely know because if you're an employee you generally don't bother to figure it out.

Again, not advice, but it can be as simple as putting the credit in box 4(b) of the W-4 form. This may not be retroactive though, in which case other adjustments are needed to maximize take home pay, but it's pretty darn fool proof (if you remember to revert next year (or buy another EV))

This also applys to people trading stocks with quarterly payments... You know who you are...

 

[cusetownusa]

This new price cut makes me want to get another Y

had this discussion with my wife. I already have a LR Y so the base AWD Y would be perfect for her. Still hesitant giving up her 3 row Telluride though for the space. Really wish the X was more affordable instead of getting 2 Y's. But the Value of the Y at this price point is very tempting.

 

[thx1139]

And how many people actually know before Jan 15? You're lucky if you get your information by Feb 15. Only self-employed people will likely know because if you're an employee you generally don't bother to figure it out.

You dont know if you what you paid in taxes the previous year? It is rather simple to look at your last paycheck and see if that number is 90% or more of the total tax bill you paid the previous April.

 

[JRP3]

Really wish the X was more affordable instead of getting 2 Y's.

Wait a week...

 

[unk45]

I dont think the cost of shipping from Shanghai to Rotterdam has much of an effect on the price to ship cars from Fremont or Texas to other locations in the USA. Someone earlier said the cost of Lithium at one point was up to $500 per car so even reducing to $0 doesnt cover the price cuts. Also again it isnt about the cuts themselves. It is about cuts being frequent which makes people hold off on buying, if they can, until the prices start to rise or stick at a constant price for awhile.

OK, I might have shown several Tesla specific destinations. I chose Shanghai-Rotterdam just because it is one very large volume route not dominated by a small number of carriers or shippers, thus reflecting industry patterns. As for 'not much effect' in this world major pairs quickly transfer effects to less major pairs. Were that to be argued, you might have criticized my failure to use only roro or car carrier rates. Those and Hyundai Glovis, a Tesla shipper, rarely disclose actual pricing. Hence a generic comparison. Tesla also uses gigantic number of container shipping both contracted and spot, including Megapacks, cells, and numerous parts.

Of course the cuts themselves are controversial. I understand all of us are experts so all of us understand the basis for pricing changes /s

From my very limited perspective I admit being a trifle gleeful. Just think of all the free publicity globally because Tesla is 'stupidly reducing prices'. How awful! Customers are so peeved that they paid more! Just insane. /s I suppose that since the Model S Plaid I just priced would be 9.6% cheaper than the one I bought in September 2021 maybe I might be peeved. I'm not, just as most people who buy ICE cars know that the price for a car they buy will certainly be lower if they buy after a promotion appears.

I suppose the people who buy the week a price becomes lower might feel bad. Would it be better to keep the MSRP the same and give undisclosed store incentives just like traditional car dealers? Is not the basis for your ire that Tesla openly disclosed what they're doing?

 

[Artful Dodger]

Really wish the X was more affordable instead of getting 2 Y's.

Maybe stick around til the end of the year. That $80K IRA ceiling on SUVs and the NEW trade deal with Japan for 18650 cells must be making Elon twitch...

... of course, she CAN order a 3-row 7-seat Model Y now (I think it's still under the IRA cap)

Cheers!

 

[cusetownusa]

Incorrect. Check with your accountant, because I'm not one. Following is not advice.

Taxes are not some, wait until the end of year, then be surprised thing (well, they can be, but one would likely not like the surprise)
Taxes are paid as money is earned. W-2 employees and retirees have withholding, 1099 contractors and stock traders have quarterly estimated payments.

Anyone who benefits fully from the $7,500 credit will have a tax bill (meaning total for the year, not April 15th make up payment) of at least $7,500. They can adjust adjust their withholding/ payments now to avoid a $7,500 overpayment and refund at the end of the year.

Two options:
1) reduce withholding to $0 (or allowable minimum) until the difference reaches $7,500, then restore it. One can do this before buying the car to add to the down payment which reduces the monthly payment. Or, one can do this after purchase to reduce the loan (assuming favorable prepayment terms). After doesn't reduce the monthly payment going forward (unless refinanced), but does have the side effect of reducing overall interest because the monthly payment doesn't change, resulting in more principle paid each month.

2) reduce withholding by $7,500/months_left_in_year, then reset Jan 1st. This effectively reduces the monthly payments for the first year, but doesn't help payments after that unless applied as a loan prepayment (with favorable terms), see also refinance.

Tried to explain this to 2 people I know getting a Y this year. Both get over $10,000 in taxes returned on april 15th, and now with the $7500 is will be close to $17,500. At the current interest rates, they could save $1,000 in interest just in the first year by taking that $17,500 now and putting it towards a down payment. Both said they like the big checks on April 15th so didn't take my advice.

 

[Etna]

No price cuts in Canada…yet.

I am reading many comments in online groups in Canada from people who ordered a plain vanilla Model Y LR and are disappointed to receive a September delivery, even though Tesla website still says April-June.

 

[GOVA]

If somebody calls it a "miss" for a company that produces and sells around 2,000,000 greatest EV cars a year and rising while developing several other profitable products and building several giga factories and has lots of money in the pocket is simply joking.

A "miss" is a WS term. Tesla is killing ICE and coal very well. It will only get better from here.

Once ICE, oil and coal survival thresholds get below the limit, their operations will implode quick. There is not enough imaginary money to bail out all of those terrible firms that have been riding on fossils until now. It is far from over unfortunately, but 39K model Y is the sugar no sane people want to miss.

Last, in case it escaped your mind, auto will eventually be ~20% of Tesla operations. Let that sink in.

"miss" LOL.

 

[growler23]

No one ever said the disruption was not going to be bloody. The catastrophe is always in the future but then suddenly arrives, much like bankruptcy. And EM doesn’t care if it is coming up too fast and messing with your SP projections. He certainly didn’t ask me.

Tesla is insulated in a fortress balance sheet and ready to tread water while expanding production for years to sell cars at any price (almost) necessary. People will buy other car companies to be different or for brand loyalty, and I understand that. But the plan is to arrive at the point where anyone deciding to buy a new car based on best value and utility will always choose Tesla and most importantly, will always choose a BEV.

Agreed 100%.
Will reiterate two of my apropos themes in light of rapidly changing events now.

1) Switching off of fossil fuels is going to be proving to be like ripping our own guts out. Transport is only a small part of this, and look how much true angst/pain/disruption is happening... this with EV's at a mere 7%? of vehicle sales so far? Buckle up, Buttercup.

2) Tesla's stealth army, the Model Y Brigade, has arrived in force on enough shores now that Tesla feels ready to reveal its secret weapon ... price. Synchronistically, the lowly but venerable ICE Toyota Corolla, long at the top worldwide spot, finds its feet beginning to lose purchase. (I thought the ol' chap would hold the top of the hill through the end of '23 but that may well not happen).
As The Y Brigade completes the breach of all frontline defenses, the Monterrey Millions will follow close behind in a cleanup action. Resistance, as they say, is futile.