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

[Musskiah]

Nothing may have scale to match MegaPack and larger derivatives.

Its tough to say which is the bigger opportunity when all this stuff really takes off.

Megapack revenue is on the order of a few $Ms per Megapack (not including recurrent rev, residuals, or energy arbitrage [autobidder]) eventually on the order of several 100k of units being produced annually. This certainly puts the revenue potential in the single $T, perhaps eventually tens of $T annually (assuming costs for Megapack don't decline 90% by mid century or something).

Optimus revenue is on the order of several $10k per unit, on the order of 10s of millions of units annually, eventually, perhaps even 100s of millions. This also puts the annual revenue opportunity in the single $T, if not tens of $T as well.

Optimus has endless recurrent revenue streams that can layer on top of base functionality...

I find it difficult to truly know which is the larger potential. Elon told energy companies to build rapidly because expects future energy needs to something like 5x. I would expect, similarly, bots won't just replace human labor, but will probably 5-10x by sort of mid century.

 

[powertoold]

This "regulatory approval" continues to Not Be A Thing that is actually preventing robotaxis.

As repeatedly pointed out, RTs are regulated by individual states- and it's legal right now as in today to put robotaxis on the roads of many US states. With no "regulatory approval" needed.

I feel like you keep going on about this tomato tomato thing. I haven't read too much into this, but it seems that California and New York both require some approval to deploy L3+ systems, so there is some regulatory approval process to deploy robotaxis in general (to a broad US market).

NY: Apply for an Autonomous Vehicle Technology Demonstration / Testing Permit

CA: California DMV Approves Mercedes-Benz Automated Driving System for Certain Highways and Conditions - California DMV

And even if a state doesn't explicitly require approval, it's prudent to give their regulators (and probably NHTSA) a heads-up as well:

TX: Texas Senate Unanimously Approves Bill to Create Self-Driving Vehicle Standards

 

[willow_hiller]

I feel like you keep going on about this tomato tomato thing. I haven't read too much into this, but it seems that California and New York both require some approval to deploy L3+ systems, so there is some regulatory approval process to deploy robotaxis in general (to a broad US market).

NY: Apply for an Autonomous Vehicle Technology Demonstration / Testing Permit

CA: California DMV Approves Mercedes-Benz Automated Driving System for Certain Highways and Conditions - California DMV

And even if a state doesn't explicitly require approval, it's prudent to give their regulators (and probably NHTSA) a heads-up as well:

TX: Texas Senate Unanimously Approves Bill to Create Self-Driving Vehicle Standards

I've always thought that even though there are some states that have absolutely no regulatory approval process now, most would act very quickly to put one in place if Tesla deployed a firmware version that turned over a million vehicles on the road into L4 AVs overnight.

Developers can't build a new shopping center without a vocal chorus of NIMBYs immediately protesting and throwing wrenches in the processes. Imagine how that same crowd would behave if they learned Tesla was suddenly operating robotaxis in their neighborhood.

 

[JusRelax]

BYD financial reports do not offer enough detail to tell profitability fo any given product line. Since they are so diverse, with trains, busses, trucks, cars, batteries and more, detailed product line information would be highly desirable. Notably, their financial condition does not reflect anything resembling TSLA-style conservatism. To simplify the results just glance at Yahoo Finance can flow statement:

BYD Company Limited (1211.HK) Cash Flow - Yahoo Finance - Yahoo Finance

Understand the cash flow statement for BYD Company Limited (1211.HK), learn where the money comes from and how the company spends it.

finance.yahoo.com

As that shows clearly, product line profitability is the least of the issues. The late Charlie Munger really ignored all the famed Berkshire financial acuity on this one! Much is positive about BYD, specifically their quite good batteries that Tesla buys and their very good electric busses, including their diverse cars. However, their financial structure shows good access to funding but minimal concern for cash flow or leverage. They'll thrive and survive so long as their access to funding continues unabated.

Every year end I do a BYD review as I do for several potential investments. Each time I realize that product line profitability or not is the least of the issues. BYD is pursuing new markets and geographies very aggressively, always with easy capital access but singly never with concern for conventional financial resilience.

FWIW, quite similar characteristics were present for Toyota in the 1960's and later, Hyundai in the 1970's and later, among others. The seemingly imprudent financial structure may not be any more an issue for BYD as it was for Toyota and Hyundai. In all three of those and others, because the financial and operating character of Japanese, Korean and Chinese conglomerates is fundamentally different than are those of the Western hemisphere the risks are themselves quite different.

This all makes TSLA all the more amazingly unique. I choose that word, unique, purposefully. We all compare TSLA with other investment options. That is difficult because both Tesla and SpaceX have done things and are doing things that are unprecedented. When we try to see them in conventional eyes our eyes deceive us. One of the primary reasons for all that volatility and all that shorting is that conventionally Tesla should never have existed much less thrived.

Now, as I am doing my annual review I am struck by how little some of the more flamboyantly unconventional behavior by our CEO matters. Obviously much is distracting and some is offense to many of us. Then when examining in cold rationality what is happening I am astounded to realize that the innovation continues unabated. The operating environment in Tesla foments further innovation. Oddly, perhaps, I end this volatile and controversial year reaffirming my conviction that TSLA should remain as it is, one of my largest holdings.

The nearest OEM to Tesla's range is BYD, with perhaps BMW and Hyundai/Kia next for cars only, and VAG as a factor if they survive as is. Otherwise there only GWM, Geely and, in the EU at least, Stellantis. I posted a bit about BYD today. Each of those others have huge legacy impediments, including GWM which has a legacy as a Magna-style Tier One and contract manufacturer. All in all, none are really approaching Tesla overall.

Finally, Magna remains unremarked, mostly but they do have BEV technologies and are expanding those:

High Voltage Electrified Products

www.magna.com

It is easy to ignore Magna but they are very skilled at contract manufacturing and they are becoming adept at EV technology. Remember the IPace, built by Magna-Steyr and very successful initially although JLR left them static while others evolved. Still, we need to monitor Magna. Few may remember that long ago in 2015:

Magna sells automotive battery pack business to Samsung SDI

Deal includes production and development sites and contracts

www.theglobeandmail.com

Magna-Steyr and the Canadian operations have continued investments after that.
What devlopments are next? I fully expect that some (e.g. GM, Ford, Stelantis) will be using Magna for innovation and smaller volume production. Since Magna-Steyr already has made cars for nearly every EU OEM I fully expect the EV model ranges will have Magna products appearing soon.
With those developments and:
Magna Enhances ADAS Capabilities by Joining 5G Innovation Program
Magna remains regularly as a potential investment. I have been in and out of MGA from time to time, less deeply because fo continuing issues of corporate control.

So from year end perspective I once again decide the TSLA future is bright, so I'll stay as is, HODL.
MGA might well reappear in my sights depending on the next few months.

This was all is response to BYD, of which I had just completed my review and decided to remain a watcher, not an investor. Too much unmitigated risk for me!

Thank you so much for this comparison between BYD/Tesla, and Magna Steyr as well! I'm so glad that I happened to ask the right question at the right time for you to be able to respond to me so thoroughly. So, it we assume that your BYD review was quite thorough, it would seem that John McElroy either has inside info, has a bias that has created an unsupported 'truth' in his mind, or is blatantly lying regarding BYD's profitability specifically on EVs. I highly doubt it is the latter of the three.

 

[Paul_SF]

As it's the weekend, a bit OT but maybe not:

How probable is that Amazon will get into people transportation?

I have my ideas about how and why, but would like to hear if there's any that think of this also.

Keep in mind they are already moving more parcels than UPS and FedEx. This will not stop there.

 

[The Accountant]

. . . Tesla and SpaceX have done things and are doing things that are unprecedented. When we try to see them in conventional eyes our eyes deceive us

Reading your post, I froze right here . . . .probably one of the most profound comments on Tesla I've seen in print.
You've brought to light what I often see.
I have good friends who are well invested in Tesla and although Tesla is in the process of launching Semi and Cybertruck right after a successful Model Y launch and have Gen 3 (model 2) approaching and starting to ramp Energy nicely and have nice progress on Optimus and continue to improve on FSD and may leverage DOJO externally, etc., my good friends will look with conventional eyes and ask, "are you worried about the situation in Sweden?"

 

[unk45]

Is there an unk45 ETF I can invest in?

That might well be a step to ensure that my track record will end dismally.
My tax attorney in the US has copied me for the last few years but only admitted that to me a couple of months ago. Honestly it's been luck and an obsession with detail to make sure I do not repeat past errors.
I have had some serious busts too. Honest people admit that, I think. Luckily none in the last couple of decades. HODL. All of you at TMC have been helping with constant vigilance. I probably would not have had the resolve to stay in during the 'lean years' without your help.

Thank you all. I call out three specifically @

Thank you so much for this comparison between BYD/Tesla, and Magna Steyr as well! I'm so glad that I happened to ask the right question at the right time for you to be able to respond to me so thoroughly. So, it we assume that your BYD review was quite thorough, it would seem that John McElroy either has inside info, has a bias that has created an unsupported 'truth' in his mind, or is blatantly lying regarding BYD's profitability specifically on EVs. I highly doubt it is the latter of the three.

I doubt that was intentional. A careful examination into BYD suggests that it is possible that they had positive net margins on EV's in China when subsidies were at their peak. There is also some indication that battery manufacturing, specifically the Blade is also net profitable. None of that is directly in the financials and it is only inferred, not openly disclosed. My guess is that close BYD watchers believe those two products have been profitable in China. The only other line that probably is profitable is busses, where they are very well established and have modest distribution costs.

Even so BYD maintains negative cash flow, which they get away with when subsidies are flowing freely and financing sources bet on growth. What happens when the growth slows? Can they sustain high investments in places like Brazil where they're preparing to build not only busses and batteries but cars too. Those are mostly not being amortized now, but cash flow is not growing as quickly as they are and cash flow is negative. Maybe Mr. McElroy might be a trifle too superficial. I do not know, but I'm skeptical.

 

[Knightshade]

I feel like you keep going on about this tomato tomato thing. I haven't read too much into this, but it seems that California and New York both require some approval to deploy L3+ systems, so there is some regulatory approval process to deploy robotaxis in general (to a broad US market).

Yes, 2 states out of 50 (and one of them doesn't allow consumer RTs at all- they just allow test vehicles so not really the same thing). CA is very very much the outlier in BOTH allowing consumer-used RTs and actually regulating them.

There's a lot MORE states that require either NOTHING, or you just submitting a form that says "It's a robotaxi and we have insurance- trust us bro"

No "approval" needed in either case.

And even if a state doesn't explicitly require approval, it's prudent to give their regulators (and probably NHTSA) a heads-up as well

There are no regulators to approve this stuff my dude.

NHTSA does not regulate self driving. At all.

They explicitly leave that to individual states.

Nearly all of which have taken 1 of 3 paths:

1) If you think you have a safe robotaxi you can put it on the road. Today. Either just doing it, or filing a form nobody has to "approve"

2) They've passed something to "study" the issue and decide what the future rules in the state will be. Most often when they act they go down path 1 eventually. So either RTs aren't legal here at all, there's nobody to "approve" them, they're still figuring it out.... or they allow for "test" vehicles only operated by the maker of the RT under heavily regulated conditions for testing and NOT for normal people to use at all. (NY is an example of that last one)

3) They haven't done anything at all. Again RTs aren't legal here at all, there's nobody to "approve" them, they're still figuring it out.

A very few (CA primary among them) allows RTs to be used to serve regular people AND they regulate them. But again you can count the states set up like that on 1 hand and have fingers left over.

Most that allow them at all have no "regulatory approval" required. Tesla will not need to "wait" for it- it can just turn them on whatever day they decide they actually have a working >L2 system.

You can see this actually happened with Mercedes... they have an L3 system operating in Nevada-- the headlines sometimes misrepresented them being "approved" for it- but all that happened was they filed that self-certification form I mention. Nobody 'approved' anything- and there's no method or requirement to.

In CA on the other hand-being the outlier- there was.

I've always thought that even though there are some states that have absolutely no regulatory approval process now, most would act very quickly to put one in place if Tesla deployed a firmware version that turned over a million vehicles on the road into L4 AVs overnight.

Waymo has been operating RTs in Arizona for many years now with no "regulatory approval" and nobody's acted to do anything.

If they're safe why would they?

Generally the laws in those states that already allow RT require the people putting them on the road to certify they're safe, can obey all relevant normal driving laws, and that they have insurance in case there's a problem. Nobody needs to "approve" this stuff, you just say it's true and they believe you. If you lied that's a massive liability for the company of course (see what's happening with Cruise I suppose...)

It's certainly POSSIBLE states currently on path 2 or 3 will go CAs way in the future rather than the path 1 route most other states have taken.... It's even possible NHTSA will finally, actually, decide to propose some actual regulation on this. But the state of affairs today is Tesla (or anyone else) with an actual working RT can put it on the road right now, in a bunch of US states, without any 'regulatory approval'


So it's not regulators holding up RTs for any company- Tesla included- it's the lack of a working RT that is.

That's why Mercedes actually rolling out a >L2 system made headlines- even if it's highly limited in ODD.


Lastly since the mods generally don't like long RT discussion here--- and this has been rehashed 79 times elsewhere- I'd suggest discussion further go here:

AI, Autopilot, & Autonomous/FSD

Discussion about AI, Tesla Bot, Tesla Autopilot (AP), the promise of Full Self Driving (FSD), as well as other Autonomous Vehicles.

teslamotorsclub.com

 

[unk45]

Reading your post, I froze right here . . . .probably one of the most profound comment on Tesla I've seen in print.
You've brought to light what I often see.
I have good friends who are well invested in Tesla and although Tesla is in the process of launching Semi and Cybertruck right after a successful Model Y launch and have Gen 3 (model 2) approaching and starting to ramp Energy nicely and have nice progress on Optimus and continue to improve on FSD and may leverage DOJO externally, etc., my good friends will look with conventional eyes and ask, "are you worried about the situation in Sweden?"

Thanks for the comment. In fairness I must say you're been very influential for me, especially in helping us all to really understand the Free Cash Flow italics and bold because that really si the Holy Grail of credibility for me, and you keep reminding us.
In the early days both Tesla and SpaceX nearly failed, as Elon regularly has reminded us. A large part of that confidence in TSLA as a core investment is that financial discipline that allows many of those breakthroughs.
Were it not for @The Accountant constantly assessing the multiple components of that I'm not certain I'd have been sure enough to keep those bets going.

Just in case any of us do not remember, a crucial aspect of Tesla's success is a positive cash conversion cycle, which would be improbable without direct distribution, an obsessive supply chain logistics operation, and equally obsessive attention to efficiency and cost reduction.

That last runoff sentence is at the core of what we've been learning from careful evaluation of finances and accounting policy. It is only that which proves how truly unprecedented TSLA really is.

In sum, Portuguese success in global expansion happened because of devotion to new technology and risk management. Hence modern accounting expertise.

 

[Singuy]

In addition to Tesla killing it, there are a number of macros that could help TSLA in the next year or so:

• Non-index funds remain light on TSLA
• Reducing interest rates just 3 months off
• Private equity going out of fashion from a VC perspective. Investors might put their money to work elsewhere. Joining the dots...
  • M&A difficult - All-in pod starting 36 mins in
  • Cost of IPO will increase due to above
  • AI is deflationary meaning less investment required
  • Elon advised against IPO in discussion with Cathy meaning it's harder for private equity to get their money out
  • These mean there will be fewer public companies with more investment
• etc.

The question I am pondering is how come the market is at ATH while money market funds are also at ATH? Now with interest rates dumping pretty fast, where will a portion of that 6 TRILLION MMF go? Exciting times ahead!

 

[Unpilot]

I'm on a scuba vacation in Cozumel with my family.
Weather is as expected... awesome.

I am here in large part because of all the nonsense printed over the years that allows me to pick up shares on the cheap.

So first thank all you fine folks for helping me keep the faith.

And second thanks to the GoJo's of the world for enriching me.

Merry December all!

 

[Musskiah]

Again I preface:TA isn't everything...BUT it IS something!

The SPY 50:100 final golden cross occured on Dec 14. All crosses are golden and the 20:50:100:200 DMA are stacked in bullish confirmation. It is probable that TSLA follows suit in late Jan.

 

[powertoold]

NHTSA does not regulate self driving. At all.

Well, it seems they regulated 0mph stops for fsdb

That's enough for me

Maybe you're right technically, but any company that wants to deploy robotaxis at scale should talk it over with NHTSA first

And Texas' regulation says that AVs must follow all traffic laws, do any robotaxi company should discuss going over the speed limit with the Texas regulators, in essence getting their approval

 

[mongo]

Well, it seems they regulated 0mph stops for fsdb

That's enough for me

Maybe you're right technically, but any company that wants to deploy robotaxis at scale should talk it over with NHTSA first

I'll pedantic:
Rolling out a Level 3+ system is a different thing than the behavior of the Level 3+ system you roll out.
(Not that the FSD which had stopping behavior recalled is Level 3+, mind you)

 

[jhm]

I am becoming bullish on Optimus 2. This appears ready for production. Naturally, the first tasks for O2 will be to build O2. The ramp could be slow because it is more than just ramping up production but training and advancing the product itself, so that human participation in production is minimal.

Critically in this ramp up process, Tesla will gain massive real-world data for training bots and human experience as well. This also means that finding the shortest path to scale is not the highest priority.

For example, in training a bot to install a hand on another bot, it may be instructive to feed some used and broken hands into the process. This is not something you'd do to optimize new assembly. Rather, it would challenge a bot to work with defective, worn-out parts, installing, test, diagnosing problems, and repair. We're training bots to be technicians that can keep each other in good repair.

It seems to me that this self-maintenance capability is worth developing before the bot are highly deployed in high volume production environments. Otherwise, a large fleet could require a lot of human technicians doing routine tasks like replacing a broken hand. In a high-volume environment, you want two stand-by bots at the ready one bot suffers a hand injury. One immediately steps into the line to replace the injured bot, and the other evaluates the workspace to identify problems and hazards and begins to repair the injured bot. A human technician should not have to be a first responder to such an incident.

Tesla has little interest in hyping this product. Indeed, I expect Tesla to continue to hold cards close to chest. Tesla is poised to explode into this space in 2024, but there is so much value that can be created out of public sight. I'm not sure if investors will have a whole lot of visibility into the contribution of O2 to FY2024 financials or even FY2025. But the convergence of critical technologies are making organic growth unstoppable.

 

[dhanson865]

A little bit of free advertising on how well a Tesla can tow. This has gone viral on all the social media

Tesla Model Y Tows Semi Trailer Until It Can’t Anymore, Driver Flees

The EV was spotted dragging the 53-foot trailer all over town before the driver ditched it near a gas station.

www.thedrive.com

 

[UkNorthampton]

Apologies if posted before or elsewhere, but it may be of interest

 

[jerry33]

Well, it seems they regulated 0mph stops for fsdb

That's enough for me

Maybe you're right technically, but any company that wants to deploy robotaxis at scale should talk it over with NHTSA first

And Texas' regulation says that AVs must follow all traffic laws, do any robotaxi company should discuss going over the speed limit with the Texas regulators, in essence getting their approval

With a real self-driving car, speeding is irrelevant because the subjective part of driving is removed. You'll be on your phone, watching a video, or even working so speed really won't matter. Of course most people speed currently when using FSD because they are still part of the driving process.

 

[2daMoon]

Well, it seems they regulated 0mph stops for fsdb

That's enough for me

Maybe you're right technically, but any company that wants to deploy robotaxis at scale should talk it over with NHTSA first

And Texas' regulation says that AVs must follow all traffic laws, do any robotaxi company should discuss going over the speed limit with the Texas regulators, in essence getting their approval

The actual speed law on the books in Texas is something like "must maintain a reasonable and prudent speed for the conditions"

The signs posted on the highway are defined as "prima facie reasonable and prudent speed limit signs" in the statutes. More detail on this in the Spoiler.

So, there should be little problem there. Studies have demonstrated that the safest drivers maintain a speed slightly faster than the flow of traffic, and, that going with the flow of traffic is safer than maintaining the posted speed limit when traffic is flowing faster.

Safety should be the goal in any regulation being considered regarding autonomy. Though those dependent upon speeding fines to line their coffers will likely pitch a fit.

Spoiler: Legal Mumbo Jumbo

Prima facie means "on the face" and indicates that in the absence of actual evidence to the contrary it will be accepted as evidence. Any actual evidence will trump prima facie evidence.

Evidence to support a charge of speeding would have to include an injured party. The injured party claimed on a speeding charge is often styled as "against the peace and dignity of the state."

What most people don't know is that the "state" is a "body politic" and is not a "legal person" with standing in court. If this is pointed out in an affidavit filed during arraignment in a court of record, they cannot bring the "speeding violation" case further without producing an injured party.

The "body politic" includes the citizens of the state, so, speeding charges are claiming that you injured yourself (and everyone else) by speeding. Which is absurd, unless some actual damage to person or property was the result.

Here's the twist, if this isn't challenged at arraignment the rules of court allow the presumption to stand that the plaintiff (the state) IS a legal person and the court is not compelled to correct this. After which the defendant is found guilty and the fine is collected.

Disclaimer: This is provided as informational and for entertainment purposes exclusively. It does not constitute legal advice.

 

[Krugerrand]

Well, it seems they regulated 0mph stops for fsdb

That's enough for me

Maybe you're right technically, but any company that wants to deploy robotaxis at scale should talk it over with NHTSA first

And Texas' regulation says that AVs must follow all traffic laws, do any robotaxi company should discuss going over the speed limit with the Texas regulators, in essence getting their approval

And they’ve now regulated additional nagging and 1 week detentions.

Not having anyone in a position doesn’t mean regulation can’t or won’t happen. It’s happening. NHSTA et al have known FSD is coming and because it’s been coming for years, they’ve had time to discuss at length behind the scenes. They’ve got regulatory ideas at least and quite likely a regulatory plan. They’ve just dropped Tesla owners a little taste of what’s to come and frankly, I don’t like it. It’s why we can’t have nice things and why stupid people continue to exist beyond their stupidity. All hail Darwin!