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

[Usain]

I think part of what drove the price cuts was the success of the RWD Model Y. I suspect that orders started flooding in for that variant, which was priced very low relative to the Long Range and Performance. So RWD was cannibalizing the others and Tesla needed to re-balance the demand by cutting prices for Long Range and Performance.

That doesn't explain the price drop for Model 3, but note that the Model 3 price cuts were only $1250 as opposed to $2000 in cuts for the two Model Y variants. So my guess is that both MY and M3 were going to get cuts, but the MY cuts were larger because of the instant success of the RWD Model.

 

[jkirkwood001]

... More and more customers will do the math and realize how much better the option is. Taxi companies, rentals and other high milage customers will do the math. Yeah it will be a bit chaotic and lumpy, but soon those larger order will come in, waiting times will go up and prices will stabilize. Something has to give eventually.

That's a lot of conjecture and wishful thinking you got there. I hope you're right. Have people ever done illogical things before en masse? Naw ..

 

[cliff harris]

I know elon wont easily be convinced by advertising, but I do think he could be talked into marketing, which is advertisings much overshadowed smaller brother .
Superchargers are the obvious example. The ones that are open to non tesla owners should be turned into small automated showrooms. No reason why tesla cannot use marketing $ to, for example, have a brand new Tesla plaid, or eventually a cybertruck at the larger open superchargers, with big touchscreens and interactive displays to guide people to discover all the features of the car. You don't even need staff for this. Just a big glass box with a cybertruck, an optimus prototype, and some video screens. Powered by solar.

There is a captive audience of EV-owning but not Tesla-owning drivers at these sites.

If I was to be creative:
Cameras at the site could scan each supercharger stall, and identify the make and model. Then a screen next to the supercharger could highlight all the areas in which that car has worse performance or safety compared to a Tesla in the same price range.
Meanwhile there are free video games for the kids to play, with tesla car seats and a yoke, making it impossible for the parents to be dragged away to get a coffee.

Better still... the display model cybertruck should have optimus posed in the drivers seat,,,

Honestly Tesla are not being at all imaginative with their marketing yet. There is so much they can do. Cybertruck towing a raptor is great, but they need much, much more of that...

 

[ItsNotAboutTheMoney]

I know elon wont easily be convinced by advertising, but I do think he could be talked into marketing, which is advertisings much overshadowed smaller brother .
Superchargers are the obvious example. The ones that are open to non tesla owners should be turned into small automated showrooms. No reason why tesla cannot use marketing $ to, for example, have a brand new Tesla plaid, or eventually a cybertruck at the larger open superchargers, with big touchscreens and interactive displays to guide people to discover all the features of the car. You don't even need staff for this. Just a big glass box with a cybertruck, an optimus prototype, and some video screens. Powered by solar.

Well, they could, if the host gave them permission and they got the necessary permits from the state and municipality.

 

[UkNorthampton]

I thought this chart might be of interest showing Tesla's UK market share:
View attachment 980080

Source: UK EV Share At 23.4% — Tesla Leads - CleanTechnica

I think its interesting for the many US posters here, as I know that the share of BEVs in the US that Tesla has is MUCH bigger. This can blind investors to the situation in other markets where there actually is some real competition. I especially think the MG4 is a very cost-conscious competitor to the model 3 here.

Especially relevant today when discussing further 3/Y price cuts. Maybe not in the US, but here in the UK I can see Tesla being concerned about lower price rivals. The MG4 is also small, and more suited to UK roads. Still, the guy who I know who bought an MG4 would have definitely got model 3 if it was price-comparative!

I wanted to pull out some info from @cliff harris source at Cleantechnica (reporting on official UK/SMMT data released) - Tesla allocations to UK do seem small, I'm presuming they were clearing out showrooms prior to model changes. Unfortunate as September is normally a big month for UK sales (number plate changes make cars look younger on resale). UK Model Y/3 still comes from China, so different from Rest of Europe/EMEA (including Turkey & Israel).

Speculation on German Merc allocation being shifted to UK is interesting (incentives in Germany). I'm now wondering how Tesla sales in Germany are affected.

Tesla was again the best selling brand in September, with 14% of the UK’s BEV market. The Model Y was not in the overall UK top 10 this month, but remains the UK’s 4th best selling vehicle year to date.

In a surprise second place was Mercedes, just ahead of the MG Motor in 3rd spot.

Mercedes is more usually in the lower half of the top 10, so second place is a great result. The brand’s September volume was some 4.4x higher than recent monthly averages, at close to 5,000 units, and 11.2% of the market, not far from Tesla. Again, this was likely a temporary allocation decision, albeit in the opposite direct to Tesla, probably because the home market in Germany was due for a hangover in September (report coming soon) following incentive changes.

 

[CatB]

not sure if posted already, but another hit piece from Faiz &Co at WaPo:

https://wapo.st/45i7naQ

In theory, this link gifts it to you.
But in case that doesn’t work or you don’t want to patronize the publisher, TL;DR - he’s regurgitating the 2019 fatality (doesn’t mention the date until the third paragraph. Fancy recreation of the crash using exclusive video from a farm’s surveillance camera. 2/3 of the article is a rehash.
‘A Washington Post analysis of federal data found that vehicles guided by Autopilot have been involved in more than 700 crashes, at least 19 of them fatal, since its introduction in 2014, including the Banner crash’

No mention of how many accidents avoided.

 

[brantse]

The price cuts shouldn't be a surprise to anyone paying attention. They were quietly discounting a lot of cars last quarter and even continued with "inventory" discounts at the start of Q4. I got a LR MY last week for just over $45k.

That said I really wish Tesla would give advertising a shot and stop resorting to price cuts to move cars. Every single person that I've told what I've paid for my car was shocked. They all thought these cars can't be had for under $60 or $70k, let alone sub $40k with the tax credit. Despite what Elon has said, affordability isn't the only issue. People just don't even consider them because of perceived affordability.

 

[unk45]

How about the guy who was smuggled out of a country in a suitcase? (No, not the Saudi journalist... ... but Rawlinson should be nervous). I'm thinking about the guy who allegedly committed fraud before he permanently scuttled Nissan? That guy! He'd be perfect!

Back on topic: Tesla lithium production next year!

https://twitter.com/x/status/1710071369155686606

Carlos Ghosn is enormously talented, has an ego to match, and ended out thinking he could completely demolish Japanese industrial practices. He came very close and did accomplish much. Unlike Elon, Carlos emphasized cost reduction beyond technical advance and always remained a very corporate stance from Michelin to Renault to Nissan and Renault-Nissan-Mitsubishi plus the tenants of Samsung Motiors. It is, IMHO, instructive to reflect on somilarities and differences between Elon and Carlos, which can help understand better the reasons why Elon succeeds and eventually Carlos did not. After all, both share many characteristics even though Elon masters the entire product array and Carlos mastered only production efficiency.

Carlos chose, for example, air-cooled batteries for the original Leaf because they were cheaper, ignore efficiency and longevity. Elon never would make such a choice.

I apologize by taking this joke seriously. As it happens I learned a great deal from Carlos Ghosn and some of his lieutenants. It was only after seeing the original Model S that I really began to understand the core difference between Deming-centric efficiency, a Ghosn speciality, and First Principles, the Musk approach.

From original Deming to current Five Sigma etc the missing component has always been assuming evolutionary process has the Holy Grail.
First Principles leads to revolution, not evolution. In short, doing the wrong things faster is not a long term solution.

The best part is no part, but leaving out a battery management system obviously is not the part to leave out! Inventing an Octovalve suddenly provides both cost reduction, part elimination and improved function.

Corrolary: being the best Cost Accountant is NOT enough!

 

[Christine69420]

In Norway Tesla increased the price of the Model Y with $2,500 today.

 

[Artful Dodger]

Every single person that I've told what I've paid for my car was shocked.

How helpful! How many people do you reckon you've told about cheap Tesla's now? Are you getting referral pts?

"BCG reported that word-of-mouth was 2-10 times more effective than paid ads. Nielsen found that consumers were 77% more likely to buy a product if their friends recommended it." - Feb 11, 2023 88% of Consumers Trust Word of Mouth - Buyapowa www.buyapowa.com › Blog​

"Word of mouth can generate up to five times as many sales as paid ads. 64% of marketers say they find word-of-mouth advertising more effective than other tactics." Why Word of Mouth Beats Advertising - businessnewsdaily.com​

​

Cheers!

 

[Skryll]

In Norway Tesla increased the price of the Model Y with $2,500 today.

I wish they would stop advertising in Norway already



/s

 

[Zaddy Daddy]

I think Gary Black's stance is that price drops have not led to enough volume growth to offset the loss on margins, so why not at least try some level of investment in an education campaign.

There has already been a meaningful reduction in ASP. Where does it end?

And, for sure, two things can be right. Lower prices will sell more cars and this is a good thing for the world and maybe it's even good for the company in the long run. But it is likely to slow earnings growth unless Tesla can offset the loss in revenue through other means, and if you have several quarters in a row of flat earnings, it's going to bring down the share price.

Tesla made a decision to continue ramping as fast as possible into the headwind of a possible recession and increasing interest rates. I think commitment to the mission made Tesla wiling to do this because if things didn't turn around soon, they were ultimately willing to sell at low/zero margin with the possibility of a future play on FSD revenue. I believe that the 4680 ramp hasn't gone as quickly as hoped and therefore Tesla's battery COGS hasn't dropped as quickly as hoped. Feels to me that Tesla might have even taken their foot off the gas at least a little at Austin & Berlin due to 4680 availability. Interest rates are, somehow, still going up. I think Tesla is simply cutting prices to keep demand in check with production and while I am sure there have been some COGS reductions and enhanced efficiencies as production continues to ramp, I suspect that margins will still take a hit from this latest reduction. I don't think Tesla planned to be here, but they knew it was possible. The unintended side effect of Tesla having to do this is the collateral damage to legacy automotive. They are in no way prepared to deal with this and they'll be hitting up the US taxpayers much sooner than previously expected. I do wonder just how long it will take to see interest rates drop and the market to firm back up? The good news is Tesla is in a strong position to be able to survive quite a bit.

These two comments hit the nail on the head - these price cuts are both very bad for legacy auto, but also continue to cut into Tesla's margins in the short term. This entire year people have rationalized that "COGs are declining!" will more than cover the price cuts - but that simply has not been true. Yes COGs have gone down, but not as much as average selling prices. There is no reason to think this is magically going to change over the next few quarters.

So margins are down. These drops are smoothed over the last 4 quarters, the most recent quarters are actually lower. I think a base case would be that with increased volume in Q4, total gross profit in Q4 might be similar to Q3. Which probably is a bit below Q2 (or same? Not sure).

With interest rates seemingly staying higher for longer, this signals slower earnings growth for longer.

I've decided to no longer sync my phone to the atomic clock, but to you guys showing up in this thread when there is perceived 'bad news'. Much more accurate.

Why not also join us when there's 'good news' to celebrate?!

I've stated my motivations for signing up for this forum - 1 year ago there was massive red warning signs (Tesla used car prices & backlog began tanking) that were almost totally ignored by this thread. My intention was to contribute to information I thought was being ignored by the overly optimistic.

I know some of you understand my position of being long term very bullish, but lukewarm if not slightly bearish in the shorter term, just based on the data I see. I provide data to back up those points. What's the problem with that?

Is it really that offputting that I said I think share price might dip to $200? TSLA PE ratio at $200 would be 58, but after Q3 EPS likely come in lower than 2022 Q3 ($0.95), the updated TTM PE ratio would still be over 60.

Is it that unreasonable a thought to think (in the short term) a company with flat earnings could have a PE ratio of 60?

 

[SOULPEDL]

I think part of what drove the price cuts was the success of the RWD Model Y. I suspect that orders started flooding in for that variant, which was priced very low relative to the Long Range and Performance. So RWD was cannibalizing the others and Tesla needed to re-balance the demand by cutting prices for Long Range and Performance.

That doesn't explain the price drop for Model 3, but note that the Model 3 price cuts were only $1250 as opposed to $2000 in cuts for the two Model Y variants. So my guess is that both MY and M3 were going to get cuts, but the MY cuts were larger because of the instant success of the RWD Model.

Price cuts are partly what accelerates the elimination of the ICE competition and gets the EV sides of them cracking the whips. It is the mission. Ads help with sales, but price drops are kicking them at their knees and slightly above.

 

[thx1139]

I wish they would stop advertising in Norway already



/s

Norwegians understand the FUD about EVs is just that. In North America you have pseudo media outlets, and even some media outlets publishing EV FUD daily produced by the petroleum and legacy manufacturers to slow EV adoption. Like I said before the type of advertising Tesla should be doing isnt glamour shots, or driving cars on mountains, or celebrities driving Teslas. Tesla should be putting out advertisements that educate so the FUD is far less effective. That would require a CEO interested in EVs again.

 

[thx1139]

Price cuts are partly what accelerates the elimination of the ICE competition and gets the EV sides of them cracking the whips. It is the mission. Ads help with sales, but price drops are kicking them at their knees and slightly above.

Who knows about the price cuts other than Tesla enthusiasts and Wall Street analysts? How would they know? I still have people I run into thinking EVs are $100K autos. How many people this weekend that go out and look for a possible new car will know that Tesla just cut the prices of the Model 3 and Model Y by $2000. How many more in a week? In a month?

 

[JoRoMo]

I thought this chart might be of interest showing Tesla's UK market share:
View attachment 980080

Source: UK EV Share At 23.4% — Tesla Leads - CleanTechnica

I think its interesting for the many US posters here, as I know that the share of BEVs in the US that Tesla has is MUCH bigger. This can blind investors to the situation in other markets where there actually is some real competition. I especially think the MG4 is a very cost-conscious competitor to the model 3 here.

Especially relevant today when discussing further 3/Y price cuts. Maybe not in the US, but here in the UK I can see Tesla being concerned about lower price rivals. The MG4 is also small, and more suited to UK roads. Still, the guy who I know who bought an MG4 would have definitely got model 3 if it was price-comparative!

I think, due to delivery/transport waves etc, that single-month results may be misleading without context, trailing 3 months is much more robust IMO (but still indicates some of your point):

 

[SOULPEDL]

Who knows about the price cuts other than Tesla enthusiasts and Wall Street analysts?

The OEMs.

 

[2daMoon]

I know elon wont easily be convinced by advertising, but I do think he could be talked into marketing, which is advertisings much overshadowed smaller brother .
Superchargers are the obvious example. The ones that are open to non tesla owners should be turned into small automated showrooms. No reason why tesla cannot use marketing $ to, for example, have a brand new Tesla plaid, or eventually a cybertruck at the larger open superchargers, with big touchscreens and interactive displays to guide people to discover all the features of the car. You don't even need staff for this. Just a big glass box with a cybertruck, an optimus prototype, and some video screens. Powered by solar.

There is a captive audience of EV-owning but not Tesla-owning drivers at these sites.

If I was to be creative:
Cameras at the site could scan each supercharger stall, and identify the make and model. Then a screen next to the supercharger could highlight all the areas in which that car has worse performance or safety compared to a Tesla in the same price range.
Meanwhile there are free video games for the kids to play, with tesla car seats and a yoke, making it impossible for the parents to be dragged away to get a coffee.

Better still... the display model cybertruck should have optimus posed in the drivers seat,,,

Honestly Tesla are not being at all imaginative with their marketing yet. There is so much they can do. Cybertruck towing a raptor is great, but they need much, much more of that...

They have already gone one better than what you describe.

I posted some time ago about how Tesla had placed a selection of actual products at a (gigantic) Buc-ee's convenience store with Superchargers and let potential customers arrange a test drive using their phone, while on site. No Tesla employee present. Just point the phone's camera at the signboard and it sets up the demo ride.

Who needs point of sale ads running on the Supercharger when there is a sign at every entrance to the store offering all who are going in to take a test drive in a Tesla while they are there?

This is a brilliant way of targeting BEV-curious ICE vehicle owners who would never have seen the add on the Supercharger, thus, accelerating the transition by focusing on those who haven't bought an EV, rather than those who already have.

People at Tesla have consistently pointed out how the other EV manufacturers are considered part of the mission by Tesla, so targeting them to buy a Tesla would be a lower priority than would be getting an ICE driver into one.

 

[BornToFly]

In Norway Tesla increased the price of the Model Y with $2,500 today.

China/Europe have the new 2024 model. The US is still selling the old model. I'm not buying the old 3/Y without a discount.

 

[thx1139]

The OEMs.

Yeah that stops someone from purchasing another vehicle this next week and purchase a Tesla this week.

Been thinking this how much cheaper do Tesla's have to be compared to competitors EVs, especially with the Tax Credit, for competitors EVs to not even be part of conversation when someone is purchasing a car and open to an EV. What EV is cheaper than a Model 3 today? Chevy Bolt? Anything else? Whats cheaper than a Model Y? Anything else? Even more expensive EVs are inferior than the Model 3 and Model Y. Is the general public even aware at all?