TSLA Market Action: 2018 Investor Roundtable

[mongo]

So I'm short, but please, please, please consider what Munro says.

Munro is a report on variable costs: suppliers + labor.

It is NOT a report on "gross margin" (which includes overhead, logistics costs, and inventory costs).

S/X production already covered the bulk of the plant/ company cost (see 2016 Q3). Model 3 is break even by 5k/ wk. Above that point, GM becomes highly equivalent to net profit.

When running properly, there is no inventory cost, it's actually negative since they sell the car before they pay the supplier.

 

[NicoV]

with enough vehicles on the road .. what kind of advantage do cameras that customer never plans to use and doesn't want to pay for .. give tesla? (cameras just example, and even 8 cameras are cheap these days, but may be the circuit boards etc can also be minimized) and save production cost and increase gross margin ...

It takes time and money to build and vaildate an alternative. Electronics is cheap enough these days not to bother with a cheaper alternative. And it gives Tesla the option to enable the feature when the car is resold second-hand.

 

[CorneliusXX]

I'd be happy to give up my car ... parking is a pain ... traffic is a pain ... sitting in the car and being able to relax/make calls etc ... sounds much better.

I don't expect the car to go away ... I just think there are plenty of times where it would make more sense to take a robotaxi. I also think where you live may play a big part in how willing you are to give up a car.

That's the real story here. While there are plenty of people who will want their own car, there is also a significant portion of the population that don't.

I grew up on a farm in Australia and would absolutely need a vehicle (and an ICE one at that) to travel the hundreds of kms in a day that are required on a semi-regular basis if i still lived there. I now live in central London and couldn't think of anything more annoying than owning a car. Hassles with parking, traffic, fines, fuel, registration, repairs...the list goes on. I can just get the tube or hire an uber if i want to get around town. Or rent a car if i want to drive out of town.

I can't wait for a cheap robo taxi. I'd take more trips above ground if that option were available. It would also become feasible to get away for the weekend where a robo taxi can pick me up outside the office and drive me to the countryside while i enjoy a Friday night tipple on the way. This is something which is prohibitively expensive using normal taxis. I'm sure there will be many cases like this for robo taxis where lower transportation costs will change the way we live our lives.

Another example would be the ease of living in a larger cheaper house on the outskirts of the city. With a robo taxi you could start working on a laptop when you get in the vehicle and be productive even if the commute was 1.5 hours to the office. The sorts of property I'm thinking of are a reasonable distance from a train station or other means of public transport and therefore currently prohibitively difficult to commute from. The other benefit is that you wouldn't have to worry about changing public transport or the walk from each end of the trip - so the lost time would be lower than any form of current commute.

 

[CorneliusXX]

You are correct. That problem hits them in January, when the credits expire. The current problem is burning through the reservations. Demand should be strong with the loss of tax credit looming. This "necessitated" a Musk Demand Tweet during the "quiet period". It appears the market does not believe...

Reservations are holding steady. And it's 400k more than any other vehicle on earth. Whining about demand is a dead end conversation.

 

[JRP3]

Reservations are holding steady. And it's 400k more than any other vehicle on earth. Whining about demand is a dead end conversation.

And we have a separate thread just for that topic. Feel free to report any posts about it so they can be moved. I'm guessing "show ignored content" must be the source of most of it.

 

[winfield100]

You are correct. That problem hits them in January, when the credits expire. The current problem is burning through the reservations. Demand should be strong with the loss of tax credit looming. This "necessitated" a Musk Demand Tweet during the "quiet period". It appears the market does not believe...

FALSE FALSE FALSE
I'm going thru the many comments here BUT the credits _START_TO_EXPIRE. "The credit will begin to be phased out for each manufacturer in the second quarter following the calendar quarter in which a minimum of 200,000 qualified PEVs have been sold by that manufacturer for use in the United States. " and from IRS Form 8936 "The phaseout begins in the second calendar quarter after the quarter in which the 200,000th vehicle was sold. Then the phaseout allows 50% of the full credit for 2 quarters, 25% of the full credit for 2 additional quarters, and no credit thereafter." Instructions for Form 8936 (2017) | Internal Revenue Service ---->18 FULL months of tax credits<--- declining.
It irks me when folks post incorrect information and the mods don't pounce upon it.
it's bad enough these falsehoods go unreproached and corrections are drowned in baseless noise and 'snide hoohah' as on SA and elsewhere,

 

[JRP3]

A smart investor will always listen to and consider all points of view, especially those he disagrees with. Confirmation bias can be very dangerous.

No a smart investor will ignore nonsense so as not to waste their time when searching for actual data.

 

[madodel]

You're so right. I'm now enlightened, I'm going to take Brinkmans advice, sell TSLA and buy GM and Ford. You can find me over at the GM motors club site if you need me.

Did you put in your reservation for the GM Tesla killer yet?

 

[Reciprocity]

Munro estimates 18% gross margin on the 35K model. Tesla hasn’t broken out their target GM for the bare bones model, but it seems safe to assume it’s more than 10%.

When they start producing the SR version in volume, they should be able to ship high-end versions to Europe & Asia at the same time, so even then their overall GM should still be strong.

Agreed, you can also back into that number using the LR margins of 30%. The battery pack is the biggest cost but only adds up to about $120 x 25KWh of cells since they right share the same pack cost, the smaller pack just won't be filled. The other savings would be interior materials. Margins will be generally depressed until they get into full production at 10k/w because there is a fairly large chunk depreciation applied to cogs for each unit produced. Another interesting thing to note is that the purely base model with no options is offset by 1/2 as many 3PLRDs. If Tesla can sell 10% performance cars, then that would offset 20% zero option base models. Not all SR will be bare bones. Many will have dual motor, EAP, FSD, wheels and paint. In fact less than 10% should be zero options with black paint and aero wheels. The average order jumps above $40k quickly. FSD only features will start to drive demand for that as well. Since FSD requires $10,000 from base, that is a huge store of post sale margin that will eventually be cashed in by the current owner or subsequent owners. Don't forget ludicrous which could be $10k. A half million 3s could have nearly $2.5B in software updates that will get cashed in over the next 5 years as FSD features roll out and cars change owners. For those what are math challenged, that is an extra 10% gross margin post sale. Call it 9% if Tesla has to update the computers for FSD.

A lot of this depends on the FSD features and the Tesla network. But I could see fleet owners buying up model 3s for FSD features as cabs.

 

[Reciprocity]

Demand drop from credit phase out is not well thought out. First off, there is a very good chance it gets changed before then. The issue is that American companies like GM and Tesla will phase out first and German and Japanese companies will have a tax payer funded advantage over GM and Tesla. Dems will support an extension for obvious reasons. The maga crowd should be agreeable to at the very worst case to start the phase out for all at the same time or best case, extend all to a set date phase out that is similar to solar. Syncing up with the solar credit phase out and actually making it a credit that can be carried forward would be ideal. The maga crowd could also require manufacturing in the US to get the credit, this wouldn't help Tesla or GM unless the credit was extended as well, but would help with competitiveness.

I'm not going to down play tax credits as they have been beneficial. But Tesla is the only company that can build EVs without them. Credits are a demand lever. Tesla has many it can pull to spur demand. This is a company that is supply constrained BTW, so pulling demand levers may not be required. She examples; free SC for life, 2170, refresh, 30% GM means they can cut prices, 120KWh pack. Just to name a few that none can counter.

 

[scaesare]

So I'm short, but please, please, please consider what Munro says.

Munro is a report on variable costs: suppliers + labor.

It is NOT a report on "gross margin" (which includes overhead, logistics costs, and inventory costs).

"says".

So... I'm not sure that word means what you think it means.

He literally says what his gross margin estimates are. It's on video. You can watch it. With your own eyes. And listen to it. Heck, go all-in and turned on closed captioning too.

I have to say... you aren't really trying. Or paying attention to details... or something.

Whatever it is, you aren't representing the bears very well. If you don't improve your game, the coach may bench you.

 

[Tslynk67]

It's not just you! @danneiwsj looks down from here.

It's odd.

Hi Folks!

Just to say that I emailed Dan to thank him for the excellent review and to apologise on behalf of the rabid $TSLAQ brigade that made him decide to shut-down his account. He was kind enough to write back to say he's safe and well, and enjoying a troll-free weekend.

I think Marky-mark and Larry F just opened one reporter’s eyes to the total BS Tesla has to endure on a daily basis, and I hope he'll spread the word amongst his colleagues.

 

[sweter]

I can't wait for a cheap robo taxi. I'd take more trips above ground if that option were available. It would also become feasible to get away for the weekend where a robo taxi can pick me up outside the office and drive me to the countryside while i enjoy a Friday night tipple on the way. This is something which is prohibitively expensive using normal taxis. I'm sure there will be many cases like this for robo taxis where lower transportation costs will change the way we live our lives.

Another example would be the ease of living in a larger cheaper house on the outskirts of the city. With a robo taxi you could start working on a laptop when you get in the vehicle and be productive even if the commute was 1.5 hours to the office. The sorts of property I'm thinking of are a reasonable distance from a train station or other means of public transport and therefore currently prohibitively difficult to commute from. The other benefit is that you wouldn't have to worry about changing public transport or the walk from each end of the trip - so the lost time would be lower than any form of current commute.

A robo taxi will still be stuck in traffic though. So train/tube will still win on time. Commute from outside of London to Central London will always be faster (and probably cheaper) by train/tube. Also more efficient on congestion. If a lot of people (maybe even not that many) switched from public transport to taxis then everyone would end up stuck. I think this will always stay true for metro areas. In smaller cities the taxis will be better than public transport.

Also, you can be productive on your 1.5h commute to the office by train already.

 

[Mokuzai]

A robo taxi will still be stuck in traffic though.

There was a TED talk on how this could improve. He has a cool animation in there. One thing I don't see the animation addressing is if a pedestrian needs to cross one of these roads.

What a driverless world could look like

 

[winfield100]

There was a TED talk on how this could improve. He has a cool animation in there. One thing I don't see the animation addressing is if a pedestrian needs to cross one of these roads.

What a driverless world could look like

perhaps this is complimentary, a country without fossil fuels, running on EV's and renewables
A small country with big ideas to get rid of fossil fuels

perhaps Puerto Rico can jump to a distributed grid with 11,000 renewable projects..............

 

[traxila]

Listen to & consider does not necessarily mean accept.

Just wondering. Were you bearish on AMZN in late 90s and early aughts as well?

If you were, was your argument that they would go bankrupt based on cash flow problems?

 

[CorneliusXX]

A robo taxi will still be stuck in traffic though. So train/tube will still win on time. Commute from outside of London to Central London will always be faster (and probably cheaper) by train/tube. Also more efficient on congestion. If a lot of people (maybe even not that many) switched from public transport to taxis then everyone would end up stuck. I think this will always stay true for metro areas. In smaller cities the taxis will be better than public transport.

Also, you can be productive on your 1.5h commute to the office by train already.

That's the thing. Commute time from a nice house with an acre or two at the moment is virtually impossible as there is always a long commute to a train station, then the wait for the train, then the train commute, then switching to the tube, then walking from the tube station to the office. The vast majority of that time is dead time - you are either driving or walking or in a transitional situation where you can't work.

The difference with a robo taxi is that you get in and can work uninterrupted the entire way to work. It doesn't matter if the journey is half an hour longer than the current version because you are more productive throughout the journey.

 

[ZsoZso]

There was a TED talk on how this could improve. He has a cool animation in there. One thing I don't see the animation addressing is if a pedestrian needs to cross one of these roads.

What a driverless world could look like

Yes pedestrian crossing is a major source of the jams in cities. If there is only 1 lane in a direction and a car wants to turn, it blocks the traffic for the whole duration of the green light, because of pedestrian crossing parallel also has green light. If there are 2 lanes, 1 lane is still blocked reducing throughput to half, if 1 car wants to turn left another right then even 2 lanes get fully blocked. Happens very often in Toronto downtown rush-hour traffic.

 

[rameshbende]

Bears have only two weeks left to spread FUD before 5k sustainablity and new found demand problem gets Debunked. I guess bears have last chance to push stock down and they know it well and FUD will only get louder in next two weeks with lots of downgrades reiterated by same short side analysts.

Post earnings we will move onto profitability and cash raise FUD. When that is Debunked in October it will be profit sustainability and valuation. That will require another 3 to 6 months to silence.
Gosh can we move fast forward a year, getting tired of all this FUD.

 

[commasign]

So this just changed my view about Business Insider. Two articles from Matthew DeBord at Business Insider in the last 24 hours:

A Tsunami of money could be headed Tesla's way in the next year — and that’s bad news for the bears

Thousands of Tesla Model 3 cars are sitting in giant parking lots in California — here's why

Overall, his coverage has been quite reasonable and balanced. Clearly a car guy and knowledgeable about the industry. Not a Tesla cheerleader/fanboy by any means, but isn’t spreading FUD like others.

Matthew DeBord

Now, compare his headlines to Lopez’s...

Linette Lopez

I guess the moral of the story is there’s good apples and bad apples at every organization.