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

[NicoV]

From the transcript:

I could have sworn the answer was "No."? Which is correct?

I also remember ‘No’

 

[GhostSkater]

Something that I have to scratch my head a bit and would love some input

Why focusing on reducing the production cost of Robotaxi is so important? For a vehicle that will run 100's of thousand of miles, maybe over a million miles and bring revenues multiples of the cost it takes to build it, why going unboxed on it and not exclusively for the consumer one? This is the one low cost matters most no?

If a Robotaxi costs $50k or even $100k to build, with the projected revenues it will generate seems like a non issue

Maybe it's just a timing problem, making Robotaxi today makes no sense since the software isn't ready, and we need new consumer facing vehicles ASAP

Or I'm just overthinking since any vehicle can be a Robotaxi, specially removing the steering wheel and pedals, so the more expensive Robotaxi is just the current line up without driver interface

 

[cusetownusa]

I have to admit I feel better about Tesla's short term direction after the call (long term I wasn't too concerned). I just wanted clarification on the Model 2 situation and now we have it, and while the plan has changed as its now more of a Model 2.5, not fully unboxed but using existing lines, its a good logical plan and its even coming sooner than expected. Superlative news.

And the call itself was one of the best I've ever heard by Tesla. Clear audio, no big blunders, good questions answered competently, it just was very confident and positive.

Yeah, yesterday was a good day.

Same here...and to think I was this close to selling all my shares to load up on Truth Social.

 

[unk45]

There was positive free cash flow for the quarter from operations $250m before capex 0f $2.5b

Adjusted EBITDA of $3.3 b

Oops, you did not go to the bottom:
second to last line item: Free cash flow: -2531
you showed 'from operations', were that not have been negative it would have been catastrophic.

when including Capex, a crucial line item and the basis for future expectations, the reality is that for the first time in several years they do not now generate enough cash flow to support all their plans.

We now can see why Monterrey is seemingly delayed, what existing factories are about to build the new derivative models and why the revolutionary new processes planned are being somewhat curtailed.

Were this to be some other company that did not have revolutionary plans and a track record of making seeming impossible things happen this might not be a serious issue. This is Tesla, so they really need that large cushion, especially with interest rates as high as they are.

Without much doubt we understand the reasons for this:
-Suez canal;
-Giga Germany effects of terrorist attack;
-most desirable models and variants sometimes short supply while predicted choices less desired so inventories grew. Plethora of other reasons why demand suffered;
- Blew money on unproductive tactics (e.g. imprudent advertising choices, inadequate sales and delivery processes, etc);
- Distraction on 'shiny objects' rather than improving core businesses;
-slower than desirable rollout of Semi and storage products;
-and a few more.

Each of those resulted in either lower revenues or higher costs or both. These can be debated as can a number of others. The net results, however, cannot be debated. Those are facts!

I hoped never to write such a post. I hope they've awakened and will return to the core skills that brought TSLA so far. Shiny objects such as FSD and Optimus may happen soon enough. Will they eliminate the need to repair existing deficiencies? I do not think so.

 

[Zero CO2]

As a cyclist, love to see this, impressive. One advantage of AI over humans: It is always patient.

https://twitter.com/x/status/1782555812843688301

most of my disengagements are due to my "unsafe" impatience

 

[Mengy]

Something that I have to scratch my head a bit and would love some input

Why focusing on reducing the production cost of Robotaxi is so important? For a vehicle that will run 100's of thousand of miles, maybe over a million miles and bring revenues multiples of the cost it takes to build it, why going unboxed on it and not exclusively for the consumer one? This is the one low cost matters most no?

Think less about costs and more about volume manufacturing. The unboxed line will be able to build cars FAST. And easily compared to current lines. Plus the greater human access on the line will enable Optimus bots to be easily dropped on the line once they are ready, where humanoids would have a difficult time working many stations on the M3/MY lines right now.

I'm pretty sure the Model 2.5 will go unboxed eventually too, I think they're compromising in the short term by using existing lines just to utilize existing capex better and be more financially efficient in these hard times.

 

[cliff harris]

Has anyone with accountancy skillz managed to decode the 10-q and work out how much, if any, of FSD revenue got recognised this quarter? I searched but I am not familiar with a lot of the terminology.

 

[Zero CO2]

I’ve been around EVs and relentlessly watching Tesla for 15 years now, so you may have missed this.

EV growth didn’t slow as a sector because OEMs suddenly realized in the last year that EVs don’t work. Anyone who’s owned one for the last few years already knows that EVs out on the roads are superior to ICE vehicles for the majority of drivers in nearly every way.

The reason other OEMs have basically abandoned EVs is because they realized they haven’t figured out how to make money on them like Tesla has.

When interest rates went up, and then Tesla lowered their prices, they basically gave up. Ford, VW, and the rest couldn’t make money at the higher price points. So how are they going to compete after Tesla lowered prices dramatically and is still making 18.5% gross margins on vehicles?

What we saw in the last year was capitulation by the traditional OEMs.

That won’t hurt Ford or VW yet. It actually improves their bottom line. They think short term, so this will help them continue to be profitable while interest rates are high.

But when rates come back down, and the cost of gas/petrol takes another leg up, the OEMs will get caught again with their pants down.

They will have wasted another X years not innovating in the EV space, while Tesla continues nose to the grindstone.

I actually see what’s happening right now with other OEMs as stage 3 of their own demise.

Stage 1 was “Ignore Tesla.” They pretended like Tesla was a fad.

Stage 2 was “The competition is coming.” OEMs gave their best shot, put out some EVs. But they were mediocre and unprofitable. Then interest rates shot up and Tesla dropped prices, so they want back to their core business (ICE) because that’s where they were profitable.

Stage 3 is “Ignore the elephant in the room.” Again pretend Tesla’s not there, focus on short term profits, and get past this period of higher interest rates.

Stage 4 is going to be ugly for them.

The winners are the ones who prepare for the future. The rest of the OEMs are doing a great job preparing for the now.

Innovators dilemma playing out for legacy OEMs in a slow motion train wreck... they deserve to fail at this point

 

[GhostSkater]

Think less about costs and more about volume manufacturing. The unboxed line will be able to build cars FAST. And easily compared to current lines. Plus the greater human access on the line will enable Optimus bots to be easily dropped on the line once they are ready, where humanoids would have a difficult time working many stations on the M3/MY lines right now.

I'm pretty sure the Model 2.5 will go unboxed eventually too, I think they're comprising in the short term by using existing lines just to utilize existing capex better and be more financially efficient in these hard times.

Completely ignored that part, good call

Need to keep in mind they want to put millions of them on the road, so plant footprint is important, specially in more densely populated regions where land for a huge factory isn't available

 

[hobbes]

Nice series of plots of data from the earnings report:

https://twitter.com/x/status/1782865274095481006

 

[growler23]

Something occurred to me when I woke up after this call...
Tesla's 'competitors' are currently doing three things to help Tesla:

• Switching away from EVs so Tesla can build even more market share
• Making hybrids so they have to give Tesla more money in regulatory credits
• Reducing demand for batteries, so that Tesla's COG per vehicle go down.

Big shout out to the ICE developers who are working around the clock to improve Tesla's financials .

Absolutely. Aren't the regulatory credits in the billions now? Or mere hundreds of millions?
The US government is forcing ICE to donate to Tesla like crazy. What happened to all the analysts who said "regulatory credits will dry up by 2020/21/22"? What is the gross margin on those credits

So, put these in your pipe and smoke 'em:

(SHORT TERM)
High Megapack growth AND margins.
Tesla models/expects a far better Q2 than Q1- likely assuming no ... additional ... terrorist attacks.
Labor cost reductions PLUS new productivity of new hires, hired into the new project directions announced yesterday
FSD social media interest provides a substitute for advertising, and possibly (don't know yet) net revenue gains with the lower prices

(MEDIUM TERM)
High Megapack growth AND margins.
Tesla (and the rest of us) expect a battery glut due to increases in production coming online coupled with OEM demand pullbacks, dropping the largest element of COGS for EVs - battery prices
Tesla will, in the short-medium term, reduce COGS even further with new modular/hybrid designs - WITHOUT building any new factories
Tesla expects 4680s to be more cost-efficient than competitors by EOY 2024, keeping a lid on future supply/demand prices swings for batteries.
Tesla's Lithium refinery adds to the hedge effect on future battery price swings.
FSD opens entirely new paradigms of value.

(LONG TERM)
High Megapack growth AND margins.
Tesla Network in autonomous operation in some form or forms.
Autonomous tech creating yearly revenues as licensed to other OEM's.
Tesla is not training compute constrained, and has the best real world AI inference engine in the solar system.
Tesla owns a massive charging network that can power (recharge) that compute. This network actually pays Tesla to exist, including with money from Tesla's competitors.
Tesla has access to a distributed compute network that is already liquid cooled and appropriately powered.
This compute network grows (and pays Tesla to do so) every quarter (Q1 2024 notwithstanding )
Tesla has low-bandwidth access to most of those compute nodes, most of the time, and high bandwidth access some of the time as well.
(this all strikes me as a fallow field ready to sprout a harvest we can barely envision right now)

Forget HODL. Need MOAR chairz

 

[2daMoon]

Something that I have to scratch my head a bit and would love some input

Why focusing on reducing the production cost of Robotaxi is so important? For a vehicle that will run 100's of thousand of miles, maybe over a million miles and bring revenues multiples of the cost it takes to build it, why going unboxed on it and not exclusively for the consumer one? This is the one low cost matters most no?

If a Robotaxi costs $50k or even $100k to build, with the projected revenues it will generate seems like a non issue

Maybe it's just a timing problem, making Robotaxi today makes no sense since the software isn't ready, and we need new consumer facing vehicles ASAP

Or I'm just overthinking since any vehicle can be a Robotaxi, specially removing the steering wheel and pedals, so the more expensive Robotaxi is just the current line up without driver interface

Having a Robotaxi designed, with suppliers lined up, and with a production line producing prototypes ready to ramp, might be advantageous. Considering that once they feel FSD is ready, the line will be ready too.

Robotaxi will be the biggest game changer Tesla has ever introduced and it has reached the point where it is only a matter of when, not if.

 

[bubb]

Are we certain that "new" models on existing lines means truly new body styles? If anybody has seen any analysis of this question today please share, TIA.

 

[ItsNotAboutTheMoney]

Something that I have to scratch my head a bit and would love some input

Why focusing on reducing the production cost of Robotaxi is so important? For a vehicle that will run 100's of thousand of miles, maybe over a million miles and bring revenues multiples of the cost it takes to build it, why going unboxed on it and not exclusively for the consumer one? This is the one low cost matters most no?

If a Robotaxi costs $50k or even $100k to build, with the projected revenues it will generate seems like a non issue

Maybe it's just a timing problem, making Robotaxi today makes no sense since the software isn't ready, and we need new consumer facing vehicles ASAP

Or I'm just overthinking since any vehicle can be a Robotaxi, specially removing the steering wheel and pedals, so the more expensive Robotaxi is just the current line up without driver interface

1) Market size: lower cost means lower prices, making it more than a cheaper taxi. A _lot_ more revenue is available if you can replace private ownership and rental.
2) Profit: lower cost, more profit
3) Competitiveness:
a) Lower cost means lower prices allowing better competition in markets with lower labor cost.
b) Other companies will have AVs as well. Need to beat the competition
c) A larger fleet is a better fleet. Cheaper vehicles allow for a larger fleet, as necessary.

Lots of reasons to drive down cost of AVs.

 

[unk45]

Same goes for “Grab”; we’re in Thailand atm and it is great for ride hailing, but has several other services too… not everywhere, but in most population centres and growing.

These offerings are proving to be very popular in many countries, by observations only, it seems these are much more prevalent in middle income countries where delivery became ubiquitous during the Covid-19 crisis. One of my nephews invested in one of those in 2020, and it has been highly successful. Another acquaintance did the same thing in Shenzen and is now very prosperous.

The obvious question is how effective a RoboTaxi can be at this business. Robots and drones have been used with some local successes but seem to be having limitations. Will or can Robotaxi correct those problems.

FSD 12xx thus far has shown, if my perceptions are correct, little propensity to solve the 'last mile' problem in urban settings, although there seems to be evidence of some success in suburban settings. The 'door dash' and others, do manage to delivery in urban places, to MFD apartment numbers etc. On the face of it, RoboTaxi seems likely to be unequipped for such markets.

Probably we all want RoboTaxi to work. It seems to me that FSD even at L5, is only part of the story.
Hopefully I'm wrong about that. It would be wonderful were I to be proven wrong!

 

[Krugerrand]

Me too.

It is fascinating how after this conference call it seems like a cloud has been lifted.

While these past few weeks have been trying, nobody has been more steady and reassuring than @Krugerrand. He is one cool cat.

Thank you for the shout out and acknowledgment. It’s appreciated.

Let’s try and remember next time not to lose our cool when everything Tesla is being systematically attacked. I hold out no hope, having seen this circus dozens of times, but maybe one day I’ll be pleasantly surprised.

I have thusly changed my avatar as a reminder. And so people don’t have to try and guess where I am; that’s me watching @Unpilot on his beach.

Edit: Hey @anthonyj got my VIN.

 

[Gigapress]

Something that I have to scratch my head a bit and would love some input

Why focusing on reducing the production cost of Robotaxi is so important? For a vehicle that will run 100's of thousand of miles, maybe over a million miles and bring revenues multiples of the cost it takes to build it, why going unboxed on it and not exclusively for the consumer one? This is the one low cost matters most no?

If a Robotaxi costs $50k or even $100k to build, with the projected revenues it will generate seems like a non issue

Maybe it's just a timing problem, making Robotaxi today makes no sense since the software isn't ready, and we need new consumer facing vehicles ASAP

Or I'm just overthinking since any vehicle can be a Robotaxi, specially removing the steering wheel and pedals, so the more expensive Robotaxi is just the current line up without driver interface

1. Production cost and scalability are closely connected.
2. Most of the potential demand would come from the majority of people in middle-income countries earning on the order of US$10k per capita at purchasing power parity
3. Robotaxi needs to be as dominant as possible to maximize rate of transition from fossil fuels

 

[hobbes]

Liftoff... TSLA now at 15% up

 

[MP3Mike]

Absolutely. Aren't the regulatory credits in the billions now? Or mere hundreds of millions?
The US government is forcing ICE to donate to Tesla like crazy. What happened to all the analysts who said "regulatory credits will dry up by 2020/21/22"? What is the gross margin on those credits

Only $442M for Q1. (Higher than Q4 on fewer delivered vehicles.)

 

[chinney]

[…]

The reason other OEMs have basically abandoned EVs is because they realized they haven’t figured out how to make money on them like Tesla has.

When interest rates went up, and then Tesla lowered their prices, they basically gave up. Ford, VW, and the rest couldn’t make money at the higher price points. So how are they going to compete after Tesla lowered prices dramatically and is still making 18.5% gross margins on vehicles?

What we saw in the last year was capitulation by the traditional OEMs.

[…]

I agree with this. That position by traditional auto manufacturers is why you can now read the same thing, over and over, in media columns from 'independent' auto industry commentators that EV sales are on the 'decline', that people are not buying EVs because of concerns about EV expense, range, reliability, and the insufficiency of charging networks, that consequently EVs are just 'not ready' yet, and that if you feel you have to go electric you are better off in a hybrid from the traditional manufacturers. Clearly all those 'independent' commentators received those talking points last year and are busy getting the message across on behalf of the traditional manufacturers that are actually paying their bills. It is almost comical how consistent and strident the message has become. And I do think that messaging is having some effect, and that Tesla and other EV advocates recently have done a mediocre job in countering it. But I doubt that messaging will ultimately prevail because it is based on distortions and, sometimes, outright falsehoods. In the meantime, however, stay tuned for more of the same talking points from and on behalf of traditional manufacturers as they desperately try to protect their turf by undermining and delaying the EV transition.