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

[SPadival]

Just when you think you have seen it all .. $TSLAQ comes up with a gem

Btw, I have two CT reservations, with plans to pick up whichever gets delivered first (in 5-10 years )

https://twitter.com/x/status/1704924698549915901

 

[Cosmacelf]

https://twitter.com/x/status/1705033949460959450

Tesla (http://TSLA.US) has decided to make and sell battery storage systems in India and has submitted a proposal to Indian officials seeking to get incentives to build the plant, according to people familiar with the matter.

Yes that’s interesting. I do wonder if Tesla is making moves to also diversify away from China. There are storm clouds appearing in the Chinese economy and it has nothing to do with geopolitics, but simple internal economic problems.

 

[Singuy]

The problem is that education takes time, people have thick heads, specially with something so political like EVs

Rob’s point is that from that survey, Tesla isn’t that far away from being demand limited if the public isn’t educated and results from pools like that change drastically

Maybe once it’s a problem Tesla will do the most awesome advertising campaign, but that seems like it could be under way for quite a while

The problem with advertising EVs/Tesla is that it's very difficult to tell a person X when we are all desensitized from the typical marketing BS. Tesla needs to show, not tell. This is why word of mouth IMO remains the correct way to advertise. The person needs to feel what an EV drivetrain feels like, needs to see how FSD works, and gets a run down of the Tesla ecosystem in the car. They also need to hear how this person haven't ran into many issues with the drivetrain, was never left stranded, and any service done by Tesla was quick and easy.

Yes, Tesla may be running out of people who are all Elon fanatics who live and breath all his companies. However I feel like we ran out of those people awhile back. Tesla is dumping hundreds of thousands of new cars on the road and now with a pretty competent FSDb, it has pretty decent organic demand via word of mouth.

You know what companies are lacking in organic demand? All the EVs purchased by people who just wanted something different or hates Elon. All sales of the Etron/Mach-E/Taycan/ID4 are going down. Some people hates their decision and are hoping that their car gets totaled so they can go back to gas. Their word of mouth is not strong when the purchase was based on being different or hating on someone who has a different political view.

 

[CorneliusXX]

The problem is that education takes time, people have thick heads, specially with something so political like EVs

Rob’s point is that from that survey, Tesla isn’t that far away from being demand limited if the public isn’t educated and results from pools like that change drastically

Maybe once it’s a problem Tesla will do the most awesome advertising campaign, but that seems like it could be under way for quite a while

That segment of ~20% of the market wanting an EV as their next vehicle will grow naturally as EVs become more common and people see their neighbours driving them. We already have evidence to the contrary that 20% is any sort of permanent upper bound as Norway has far higher EV purchase rates than this.

So the real question is Tesla production ramp vs change in public sentiment towards EVs - and will advertising change the later at a speed sufficient that the funds spent on advertising will be recouped by increased vehicle sales volume x price.

Its a hard one to know, but Tesla is profitable enough that spending a few $00m on advertising is a perfectly reasonable experiment.

Elon could knock out one of these ads for like $50. Come on down to Crazy Elon's Tesla Emporium. Half the country thinks he's nuts anyway so might as well make hay from it.

 

[insaneoctane]

Mods can delete this if they can't see the relevance, but having just read Bill Ackman's view on where inflation goes from here, I thought I'd share:

https://twitter.com/x/status/1705056634072863102

I believe that long-term rates, e.g, 30-year rates, will rise further from here. As such, we remain short bonds through the ownership of swaptions.

The world is a structurally different place than it was. The peace dividend is no more. The long-term deflationary effects of outsourcing production to China are no more. Workers and unions’ bargaining power continues to rise. Strikes abound, with more likely to come as successful walkouts achieve substantial wage gains.

Energy prices are rising rapidly. Not refilling the SPR was a misguided and dangerous mistake. Our strategic assets should never be used to achieve short-term political objectives. Now we must refill the SPR while OPEC and Russia cut production.

The green energy transition is and will remain incalculably expensive. And higher gas prices will raise inflationary expectations. Just ask your average American. They see the prices at the pump and in the grocery store and don’t believe inflation is moderating.

Our national debt is $33 trillion and rising rapidly. There is no sign of fiscal discipline by either party or by the presumptive presidential nominees. And each debt ceiling is an opportunity for our divided government and its most extreme actors to get media attention, and for our nation to threaten default. This is not a good way to recruit the many new buyers we need for our bonds.

The government is selling hundreds of billions of bills, notes and bonds weekly. China and other foreign nations, historically major buyers of our debt, are now selling. And the QT unwind experiment has barely begun. Imagine trying to do a massive IPO where the underwriter, insiders and short sellers are all selling at once, competing to hit every bid on the way down while the analysts downgrade their ratings to ‘Sell.’

Our economy is outperforming expectations. Major infrastructure spending is beginning to contribute to economic growth and the supply of additional debt. Recession predictions have been pushed out beyond 2024.

The long-term inflation rate is not going back to 2% no matter how many times Chairman Powell reiterates it as his target. It was arbitrarily set at 2% after the financial crisis in a world very different from the one we live in now.

I bumped into the CIO of one of the world’s largest fixed income asset managers the other night and asked him how it was going. He looked like he had had a tough day. He greeted me by saying: ‘There are just too many bonds’ — a veritable tsunami of new issuance each week. I asked him what he was going to do about it. He said: ‘The only thing you can do is step away.’

I have been surprised at how low long-term rates are. I think the best explanation is that bond investors thought of 4% as a high rate of interest because rates hadn’t breached 4% for nearly 15 years. When investors saw the ‘opportunity’ to lock in 4% for 30 years, they grabbed it as a ‘once-in-their-career opportunity,’ but today’s world is very different from the one they have experienced up until now.

The long-term inflation rate plus the real rate of interest plus term premium suggests that 5.5% is an appropriate yield for 30-year Treasurys. And query whether 0.5% is a sufficient real long term rate in an increasingly risky world.

And the technicals could cause yields to go even higher, particularly in the short term. We saw the beginnings of that today.

It wasn’t that long ago that a previous generation thought five percent was a low rate of interest for a long-term, fixed-rate obligation.

But I could be wrong. AI might save us.

 

[BitJam]

Regardless of the general public's knowledge of EVs, Tesla is selling every car they can produce. Advertising in such a scenario will lead to longer waits for the car and people complaining about it.

Once Tesla gets production to the point that they have significantly more cars coming off the line than they have buyers, then, you will see Tesla ads. Not before.

I vehemently disagree. We know Tesla adjusts prices to clear inventory. If demand increases then the prices and thus the margins will also increase. The only reason to not advertise would be to try to keep the stock price as low as possible.

This may be why the crowd cheered wildly when Elon said they would try advertising. The stock had recently gotten hammered due to low margins.

 

[UkNorthampton]

I like this opinion on Tesla... never give up, never surrender

Tesla Owners UK @TeslaOwnersUK

We just did the maths, 2191 days from start to finish for Fleet Southbound Superchargers. Well done
@TeslaCharging
for not giving up on this site, when the issues were clearly out of your hands! Where next?

https://twitter.com/x/status/1705143185301709056

Edit: Hopefully not too many of these problem sites, but UK particularly prone due to "ransom strips" - asking stupid money to cross small strips of land (even just cm) and queue for grid connections. More info from Fleet - motorway services "Tesla Superchargers were added to Fleet in 2018. However, as of 2023, the chargers on the south-westbound side still haven't been activated, due to technical problems with the electricity connection." (now seemingly fixed). So 5 years of Superchargers waiting for connection (unless they were redeployed elsewhere). Might need the cobwebs tidied.

 

[Max Plaid]

Regardless of the general public's knowledge of EVs, Tesla is selling every car they can produce. Advertising in such a scenario will lead to longer waits for the car and people complaining about it.

Once Tesla gets production to the point that they have significantly more cars coming off the line than they have buyers, then, you will see Tesla ads. Not before.

Yes, but... Tesla is selling every car thanks to reducing prices every time they feel they need to. What if there's a huge, untapped demographic willing to pay more, but are just ignorant. What if the cost to effective "advertise" was $500 per vehicle rather than a $500 price-drop?

I say this as an ad-sceptic...

Perhaps there's scope for both and allow a wider range of prices, keep the base models low, up the premium a bit, win/win

In other news, Norway deliveries picked up this week and they're almost ALL Model Y, very few M3's in the mix, which strongly implies inventory got depleted pending Highland arrival

 

[winfield100]

Rob delves into survey results which really point to needing to advertise. It's surprising to me how unknowledgeable most people are about EVs in general and Tesla specifically. Clearly, we here on TMC are a small minority.

I know Farzed earlier pointed to this survey as evidence that price cuts were more important than advertising to sell more cars. But I side with Rob on this topic. It seems obvious to me some informational advertising would go a long way to opening up the market to many more potential buyers. I hope the folks at Tesla (and Elon in particular) watch this.

may I remind you of a grassroots EV advertising that has been going on a long time, years (decades) in fact, with miniscule costs to manufacturers and self selected crowds of potential and future owners

National Drive Electric Week

National Drive Electric Week events feature plug-in electric vehicle owners sharing their experience with others interested in driving electric. #NDEW2024

driveelectricweek.org

 

[winfield100]

additionally, the "Solar butterfly" around the world tour, A Tesla X towing a trailer covered in PV panels done by Louis Palmer (Swiss) who did Solar Taxi about 20 years ago (same thing, newer technology

Start - SOLAR BUTTERFLY

solarbutterfly.org

 

[JoRoMo]

The only reason to not advertise would be to try to keep the stock price as low as possible.

…or, more likely, to make available more affordable cars, as secretly stated in Tesla’s Masterplan part 2 from 2016 already?

 

[cliff harris]

I like this opinion on Tesla... never give up, never surrender

https://twitter.com/x/status/1705143185301709056

Edit: Hopefully not too many of these problem sites, but UK particularly prone due to "ransom strips" - asking stupid money to cross small strips of land (even just cm) and queue for grid connections. More info from Fleet - motorway services "Tesla Superchargers were added to Fleet in 2018. However, as of 2023, the chargers on the south-westbound side still haven't been activated, due to technical problems with the electricity connection." (now seemingly fixed). So 5 years of Superchargers waiting for connection (unless they were redeployed elsewhere). Might need the cobwebs tidied.

There is a wider point here. I am currently waiting to get a grid connection (900kw), having paid in full, and it drags on like crazy. What this means is that even if rival companies had an INFINITE budget, and skills, and patience, they simply cannot reproduce the supercharger network overnight, or even within 5 years. People think you can order a high voltage connection for a fast charger like getting an uber. No. It costs staggering amounts, and even then you may wait 5, or even 10 years for it.

 

[Tronguy]

Your Tesla trade-in offer was better than CarMax? First I’ve heard of that!

CarMax was $17k, Tesla says $20.9k. So, yeah.

FWIW, I got a CarMax estimate in early July and at that time they offered $21k. Vagaries of the market, I guess. Other people doing the same thing I’m doing, maybe?

 

[BitJam]

…or, more likely, to make available more affordable cars, as secretly stated in Tesla’s Masterplan part 2 from 2016 already?

Making less money now is not a good way to bring more affordable EVs to the masses more quickly. You want high profits now so you can invest more money into building more factories. This is why Tesla started out making high margin low volume cars.

OTOH when less than 20% of the public want an EV regardless of price, there is a massive information gap you will need to bridge before there is mass adoption of EVs. Ignoring this problem while minimizing current profits works against Tesla's master plan.

 

[JoRoMo]

Making less money now is not a good way to bring more affordable EVs to the masses more quickly. You want high profits now so you can invest more money into building more factories. This is why Tesla started out making high margin low volume cars.

OTOH when less than 20% of the public want an EV regardless of price, there is a massive information gap you will need to bridge before there is mass adoption of EVs. Ignoring this problem while minimizing current profits works against Tesla's master plan.

With factory cost @ ~1 Billion+ per pop (granted, probably a bit more now), and north of 20 Biilion cash-on-hand, liquidity and «high profits» is hardly their main concern currently, though…

 

[2daMoon]

Yes, but... Tesla is selling every car thanks to reducing prices every time they feel they need to. What if there's a huge, untapped demographic willing to pay more, but are just ignorant. What if the cost to effective "advertise" was $500 per vehicle rather than a $500 price-drop?

I say this as an ad-sceptic...

Perhaps there's scope for both and allow a wider range of prices, keep the base models low, up the premium a bit, win/win

In other news, Norway deliveries picked up this week and they're almost ALL Model Y, very few M3's in the mix, which strongly implies inventory got depleted pending Highland arrival

View attachment 976181

My guess is that Tesla decision-makers weigh their superior data against the mission and choose whether lowering prices, or, paying for advertising and raising prices best meets their goal to accelerate the transition.

I trust that they are not going to do anything that does not align with that.

The very discussion about advertising is in itself spreading the word about Tesla, to some degree.

Further consideration of the fact that Tesla is only a mediocre car company with a minuscule market cap and microscopic growth trajectory, when compared to the (ahem) competition, and it may become clear how they are doing just fine dominating the world without the use of advertising.

Granted, advertising could very well help TSLA's SP by raising awareness of the continued growth potential of the company. We would all like to see that. But this is not likely to be something that will take precedence for those decision-makers in achieving their long-term goal.

 

[UkNorthampton]

Driving school Tesla Model Y in my town is a nice rolling advert. I'd imagine by far the biggest car any UK driving school has ever used.

 

[unk45]

I vehemently disagree. We know Tesla adjusts prices to clear inventory. If demand increases then the prices and thus the margins will also increase. The only reason to not advertise would be to try to keep the stock price as low as possible.

This may be why the crowd cheered wildly when Elon said they would try advertising. The stock had recently gotten hammered due to low margins.

Simplistic statements and superficial reasoning do not help evaluate sales and promotion strategy. Discussions of ‘advertising’ rarely consider all the subtleties of effective promotional strategy. Bluntly, Tesla uses the ‘holy grail of promotion’, Word of Mouth, in a 21st century manner through social media, customer referrals and highly effective promotion of NACS and Supercharger access that reach most of the entire BEV markets in NA and EU at negative cost. Can any other OEM do that? The list of such techniques grows.

Fundamentally conventional wide media advertising is ONLY effective when promoting universally used product classes, such as soap, personal care and generic food P&G, Nestle etc are obvious ones. For less universal ones the use of advertising reduces margins. Uninformed and self-serving people (advertising agencies and corporate beneficiaries) often use the infamous pair of metrics, ‘cost per reach’ and ‘unaided recall’ as proof of effectiveness. Frankly, statistics can be used to make these logical. Those are exacerbated by the auto dealers, whose attention span is limited to learning how to game OEM policies and close individual deals.

Tesla awareness is high, as is FUD from all those whose interests are harmed by the Tesla distribution system. All of us need to learn that the Tesla distribution system is vastly more efficient than is indirect sales. Similarly, we all need to understand that a frightening collateral effect of direct sakes is transparency in pricing. Nobody here blinks an eye when Mercedes-Benz or BMW gives dealer incentives and/or consumer rebates, subvened leases and loans, but scream loudly when Tesla reduces prices or gives referral perks . Both have similar effects on resale values, but superficial examination shows nothing for the others, but direct clarity fir Tesla.

Those who are frustrated and fearful about these things need to understand the fundamentals:
-Tesla cost per sale is a far below any dealer distribution model. Precise comparisons are difficult because apples to apples comparisons cannot be made due to accounting convention treatments. As a general rule the dealer model costs between 20 and 30 percent of retail sales, depending on country (that includes sales, F&I, warranty profit, service profit.). The equivalent for Tesla is around 15%.
FWIW, these generalizations are extracted from a comprehensive direct/indirect comparison made by my firm fir a major OEM that rued unsuccessfully to establish direct sakes for a new brand.

In short, nobody arguing for “advertising” to increase profitability or sales seems to understand 21st century marketing. More specifically, 21st century promotion including AÍ aided targeting. In this world nobody cares if non-prospects even recognize the name. In this world BEV adoption is similar to that of telephones, refrigerators, household electricity, cellular phones, automobiles , commercial airplane travel and all those other revolutionary products.

Just think about this. Model Y as the best selling car model in the world. Tesla still is barely scratching the surface of geographic markets, much less storage products. Adopting old-fashioned advertising is a horrible mistake! Tesla is humoring the enthusiasts who don’t understand, but they’ll not make stupid moves.

 

[H Mak]

I've recently returned from the annual sailing holiday in the Greek islands with 5 of my friends I've known since school. Three years ago I was the only Tesla owner. Now it's three out of the six. One of them owned his car repair garage all his working life, so if anyone knows the best car to buy, it's him.

 

[2daMoon]

For an example of an EV company that has focused on advertising and spreading themselves thin in an attempt to grow market share by appealing to a wide variety of feel-good interests, look at NIO.

Here's SMR hitting the bullet points regarding how effective this sort of short-sighted strategy has paid off for NIO.