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

[bkp_duke]

Regardless of what's in the fine print, please tell me why you don't think Tesla should grandfather FSD for the early adopters.

Simple, it was never promised as transferrable. Just like you can't take free supercharging from your old car to your new one.

Totally different argument if it was promised as transferrable, but it wasn't.


And no, I had very SANE expectations for FSD. I still don't expect it to be feature complete for a few more years. But if you drive a lot, even in the current incarnation, it's VERY helpful. Especially for distance driving.

 

[Thekiwi]

CATL has today announced a 500 Wh/kg battery, high enough for use in aviation.

CATL launches condensed battery with an energy density of up to 500 Wh/kg, enables electrification of passenger aircrafts

On April 19, CATL launched condensed battery, an innovative cutting-edge battery technology in Auto Shanghai. With an energy density of up to 500 Wh/kg, it can achieve high energy density and high level of safety at the same time in a creative manner, opening up a brand-new electrification...

www.catl.com

 

[EVNow]

Worst part of todays call for me is that these results didn’t seem to be a one time event.

Between Elon talking about selling cars at no profit and Zach not explaining how they are getting margins back to the mid 20s in the next quarter or two I didn’t get much hope for improved profitability vs 2022.

Selling more things for the same total profit is not a growth story that get me excited.

Wait … you are completely oblivious about the coming recession?

 

[30seconds]

Wait … you are completely oblivious about the coming recession?

The one Elon has been talking about for the last 4 or 5 quarters?

 

[Ogre]

It's also ambiguous whether Zach and Elon were including IRA tax incentives, installation, or long-term services revenue in the mid-20% estimate. Both of these constitute a substantial portion of ZSG's margin estimate.

All fair points.

Sometimes I get excited and dismissive when I shouldn't. I am seriously excited about Tesla Energy. 20% margins plus incentives is decent.

 

[Cosmacelf]

I think it’s safe to assume Tesla will navigate this credit the same way as the last - to the greatest benefit of both Tesla and the customer.

Come on people. Nothing new is going on here. Everything is literally rinse and repeat. Why are we asking the same questions year after year, quarter after quarter?

Tesla wants to sell as many cars as they can at a price that allows them to expand as fast as they can ‘safely’ (to keep the business financially healthy). That’s it. The whole enchilada.

Tesla will simply continue doing what they do, lower costs, improve efficiencies, pass those savings onto customers while trying to keep wait times for cars in a comfortable range. Not rocket science.

I agree 100%, it just would have been nice if the mgmt team showed care towards us beleaguered investors. Instead of Elon pretty much emphasizing that Tesla could very well reduce margins to zero, it would have been nice for them to remind Wall Street of the positive benefits IRA is going to do to margins. I can guarantee you GM and Ford will talk about this in their CC.

You and I know all is well, but geez, it would have been nice to convince Wall Street of the same.

 

[Gigapress]

I just realized that after inflation adjustment we’re now well below $35k for a base Model 3 relative to purchasing power in 2016 terms when it was promised. That was a FUD talking point for so long and it quietly happened without anyone noticing.

The 3 RWD price is $40k now, and with 25% inflation since 2016 the price is equivalent to $32k back then.

 

[EVNow]

The one Elon has been talking about for the last 4 or 5 quarters?

No, the one Fed is forecasting.

 

[geometro]

The razors and blades analogy for Tesla doesn’t make sense to me… I mean, I see what he’s saying but I still don’t want to see them bring margins to zero.

The “iPhone moment” for tesla also means that they can/should make money from the hardware. I’m confused about the strategy here.

Clearly the take-rate on FSD is low and I don’t think it will get materially higher in the next 2-3 years.

The big issue is macro— and the question about elasticity of demand was a good one.

Hard to see the point of todays call except that there is a lot of opaqueness as to what the rest of the year looks like from a delivery perspective.

 

[Sancho]

For those holding common shares for long term appreciation, nothing has changed. Tesla is executing very well, and has the cash, and cash flow, to achieve all of its long term objectives, which remain mind-bogglingly large and lucrative. But for those who, like me, are looking one year out with options, I don't see any catalysts left to make those profitable, except the hope that the economy will improve in the second half of this year and margins can finally level off or rise. Investments aside, I remain very impressed by everything Tesla is doing, and still believe it is the leading company of our generation.

 

[generalenthu]

I agree 100%, it just would have been nice if the mgmt team showed care towards us beleaguered investors. Instead of Elon pretty much emphasizing that Tesla could very well reduce margins to zero, it would have been nice for them to remind Wall Street of the positive benefits IRA is going to do to margins. I can guarantee you GM and Ford will talk about this in their CC.

You and I know all is well, but geez, it would have been nice to convince Wall Street of the same.

Totally agree, and the reason that wasn't said was that it goes against the subsidies are not needed narrative.

Also missed opportunity to point out the possible revenue streams from insurance, supercharger, premium connectivity, etc, while we wait for FSD, as they trade off margin for volumes. It's fundamentally the right thing to do, but Elon is just going to Elon.

I also wished Elon didn't say FSD this year, but that possibly keeps the fire under the FSD team to do more. If they look at a simple view of how disengagements are trending, I'd bet statistically there is no way they are asymptomatically approaching zero disengagements per mile in the next 8 months. I am not saying he is misrepresenting, but he truly believes that he can bend this curve. But I think it's unlikely from personal experience.

Anyways, this strategy is a setup for Tesla to conquer the world (ex-china at least). And who ever managed to conquer the world without going through some dark times and a lot a doubt?

Will get there in good time I guess. Likely before the end of this decade. Let's see.

 

[MC3OZ]

The one Elon has been talking about for the last 4 or 5 quarters?

The team study the order rate and the production rate on a regular basis, with essentially "real-time" data, especially when compared to the competition.

Prices are adjusted to ensure the order rate equals or exceeds production.

The "order rate" is a pretty good proxy for how the economy is tracking, and price reductions are the best way to lift the order rate.

Every Tesla sold is a form of advertising with a non-zero chance of some additional sales or revenue in future.

Every Tesla sold is a potential ICE sale that doesn't happen.

IMO Tesla should be aiming to get back to 20% margins if possible, during the current tricky economic environment, that is done mostly via cost reduction.

The fact that significant price drops have already happened means it is less likely more price drops will be needed in future.

The economic cycle is a cycle, when orders start to exceed production by a substantial margin and the backlog starts to grow, Tesla will probably increase prices again if needed, to keep a good balance between production and orders.

Tesla and others will continue to find ways to lower the cost of EVs. When there is more genuine competition in the EV market, there might also be some pressure of prices and margins, even in better economic times.

The best way to grow future profits is, build more factories, and deliver more cars and more energy products.

 

[Mengy]

There is no other strategy. Where have you been? This is the path. You don’t like the path, then get off it.

About time people realized this isn’t going to go in any sort of traditional way; FSD or bust. How many times do you need to be told that before you’ll accept it as the reality?

FSD or bust
FSD or bust
FSD or bust
FSD or bust
FSD or bust
FSD or bust
FSD or bust

Gosh some people are slow learners.

That was harsh even for you Krugerrand, are you out of cat food tonight?

I feel it is reasonable to wish for a better strategy than "wait for FSD to save the financials". I'd like the company to have a plan just in case FSD never gets solved. I think that is both a tenable and practical expectation to have. Aggressively price cutting to kill margins while planning for FSD to someday possibly save said margins is not a very reassuring strategy. What if FSD never pans out?

For the record I do think FSD will get solved someday, but I also think we are still many years away from that, let alone deploying the RoboTaxi fleet, and I'd prefer the stock to trade better than sideways for the next few years if at all possible.

In my honest opinion of course. Obviously you disagree, thus the insults. If I am a slow learner than you certainly are not helping the matter with posts like that.

 

[SarahsDad]

Given the Henry Ford shoutout during the earnings call, it's worth reviewing the Model T story. Nice summary here:

How Ford Created a Huge Market by Lowering its Prices | Entrepreneur

By creating cars cheap enough for almost anyone to buy, Henry Ford built a billion-dollar company.

www.entrepreneur.com

Notable section:

The real breakthrough came in 1913 with a proprietary innovation, designed by his production managers: the move from batch production to a continuously moving assembly line. The effect of simplification and scale was to move the price of a Model T down to $550 by 1914, when 248,307 of them were sold. By 1917, the price had fallen even further, to $360, with the result that sales soared to 785,432. In 1920, Ford sold 1.25 million Model T's. Compared to 1909, a price reduction of 63 percent -- to almost a third of the original price of the Model T, which was itself a good fifth cheaper than comparable cars -- had resulted in a sixty-sevenfold increase in the number of cars Ford sold.

Simplifying made the company's cars both easier and cheaper to make. And the price reduction was enormously effective in boosting the whole market as well as Ford's share of it. By 1920, his share had soared to 56 percent, three times larger than that of his nearest rival, General Motors, which was an agglomeration of five different car brands. Ford was by far the most profitable car company in the world, both absolutely -- relative to sales -- and relative to capital employed.

Even Henry Ford himself was surprised by how much demand responded to the lower price. A price reduction to 35-40 percent of the original price boosted sales by more than 700 times. The fact is, the relationship between price reduction and demand expansion is asymmetrical. If you cut price by half or more, demand rises exponentially -- by tens or hundreds or thousands of times.

Henry Ford's example perfectly illustrates how cost and price reduction isn't a one-off affair, but a gradual, continual process, fueled by a few big innovations -- in Ford's case a simplified car model, standardizing on one model and the moving assembly line -- and a mass of smaller ones. Prices don't have to be slashed in half immediately. Instead, a virtuous circle can be created, where the first cost reductions create a larger market and greater market share, with the benefits of greater scale subsequently lowering costs and prices and raising demand further. What's essential, however, is a dogged commitment to achieve the lowest possible cost and price.

Sound familiar?

 

[DarkandStormy]

FCF is +$700m if you then back out foreign exchange headwind.

Foreign exchange should have been a tailwind this quarter. Apparently Zach has never heard of hedging.

 

[MC3OZ]

Apparently Zach has never heard of hedging.

Is that is zero cost, risk free, guaranteed to work hedging?

Often hedging has a cost and that cost has to allow those providing the hedging to make a profit on their operations, or they soon exit the business of providing hedging.

 

[JRP3]

CATL has today announced a 500 Wh/kg battery, high enough for use in aviation.

Yes, they announced it, with no proof, or mention of cost, cycle life, or volumetric energy density.

 

[Singuy]

Foreign exchange should have been a tailwind this quarter. Apparently Zach has never heard of hedging.

Isn't this just accounting? It's not like Tesla converted foreign currency into USD.

 

[growler23]

CATL has today announced a 500 Wh/kg battery, high enough for use in aviation.

CATL launches condensed battery with an energy density of up to 500 Wh/kg, enables electrification of passenger aircrafts

On April 19, CATL launched condensed battery, an innovative cutting-edge battery technology in Auto Shanghai. With an energy density of up to 500 Wh/kg, it can achieve high energy density and high level of safety at the same time in a creative manner, opening up a brand-new electrification...

www.catl.com

Holy guacamole, that's CATL, not some University lab.
That density would match aviation requirements indeed.
They mentioned automotive applications as well, implying cost isn't through the roof.
Intriguing to say the least!

 

[kabin]

You can pretty much bank on the share price not doing anything for the remainder of 2023. This earnings call pretty much cemented that. Seems be quite a delay between cost of commodities coming down and Tesla recognizing the lower cost of goods. Based on how they’re treating currency FX’s, thats going to be headwind for most of this year.

Btw I do fully agree with their assessment of the Feds impact on demand and that they’re adjusting in real-time whereas legacy auto isn’t. Legacy auto is filling dealership lots right now. Those dealership lots will be filling up the longer rates stay this high. Legacy auto in for a ride awakening in a few months

And sounds like the never ending 4680 saga will put a damper on CT ramp up.

Regarding demand, EM said they have more orders than production can keep up with. That might be the case after yesterday's price drop but I have doubts given interest rates plus many TLSA owners are underwater with these price drops so good luck with trades ins.

TSLA really needs the next gen vehicle to compete in the entry level car buyer market.