TSLA Market Action: 2018 Investor Roundtable

[Krugerrand]

One of the things that make Tesla a fun stock to watch/debate, is that a surprising amount of the retail is in it (or out of it) for emotional reasons. Many of them have never read the financials. That gives interesting volatility and unpredictability.

So now it’s the minuscule retail investors that are causing volatility and unpredictability in TSLA and not the institutional investors who own the majority of TSLA, the analysts putting out ridiculous reports, the media straight up lying and turning everything into a negative...

You are so full of it, you need a cannoli.

 

[RobStark]

Or for other reasons than emotion/ economic such as environmental. I would love for Tesla's mission to get us off coal, CH4, petrol, diesel to reach fruition. AMD vs Intel or Apple vs Android have no real world positive impact either way (other than general progress of technology). Reduced CO2 does.
Some of us are willing to pay to have Tesla succeed even if there are no short or long term net gains (thus our not-an-advice % of TSLA). (and yes, post IPO, neglecting a cap raise, stock ownership does not directly fund Tesla...).

And yet it seems this is only from a few retail investors.

"Ethical Funds" refuse to invest in Tesla.

I suppose because Elon gets too much TSLA and doesn't welcome the Mafiosi of the UAW into his house.

As far as the large institutional investors it is the greedy bastards that invest in TSLA.

I guess the Norwegian Sovereign Wealth Fund has a small position on TSLA. So they can vote against Elon's compensation package.

 

[Krugerrand]

Until you switch position.

In which case you are still ‘on a side’.

 

[Unpilot]

The short Thesis has very few legs left. 1) Competition. 2) Cash Flow/Cash on Hand. 3) Demand Fears

For number 1 above I am going to coin a new phrase based on a scientific theory:

The Competition Paradox, based on the Fermi Paradox which states that if Advanced civilization existed in the the galaxy, we would have seen some evidence, or they wiped themselves out long ago, which is scary because it could mean that civilization tend to grow to a certain point and destroy themselves. So my theory is the Competition Paradox.

The math math is simple:

If the Model 3 is arguably the best car on the road for the money. Meaning it's better then most if not all comparable cars at the same price point.
And If competitors could make a better EV, it would mean that the car they made would be better then every other ICE car they make.

Don't you see.. It's a paradox. If this happened, traditional autos would collapse in on themselves like a dying star collapsing into a black hole.

The real point that always gets lost on bears is that If BMW could make a dramatically better car for the price, they would have done so year ago to crush Daimler and vice versa.

Another way to look at this is compare Model S 2012 to Model X 2015 and Model 3 in 2017. Some basic metrics like range, rate of growth, AP features from none to today, sales from 0 to 50k and so on. Then take the same approach when looking BMW for example. I think a lot of people have a hard time understanding complex ideas like Tesla is better than everyone else. They just cant understand it if they have never driven a Tesla and did not experience a 2012 S vs a Model 3P today.

Your average BMW 3 or 5 or even 7 Series has not materially changed in the last 6 years. Small refinements and improvements to tech as well as some better fuel economy when not cheating. Now compare that to a Model S 60 from 2012 vs a Model 3P today. Similar price. Similar cabin space, though definitely a smaller package. Tesla does not have the luxury have having 10 different platforms yet, so they are now at 3, which covers a large portion of the market, but I still think its fair to map the improvements from model to model to show the progress even though there is not a direct correlation to BMW.

The 2012 Model S 60 had these specs, roughly:

210 mi range, 382 hp, 5.5 0-60 22KWh/100km
Production volume around 20k/year, eventually topping out around 60k/year
No AP. Single motor.
Tesla Model S - Wikipedia

The 2018 Model 3P specs:

310 mi range, 283+197hp or 480hp, 3.5 sec 0-60 18KWh/100km
Production volume around 300k/year pace at 6k/w and 500k sometime next year.
Tesla Model 3 - Wikipedia

This is not meant to directly compare cars, only the progress over the last 6 years.

For BMW, the cars are fairly indistinguishable over the last 6 years in terms of styling. The interior is a bit more refined with a larger screen in 2018:
BMW 5 Series (F10) - Wikipedia
BMW 5 Series 2010 - 2017
BMW 5 Series (G30) - Wikipedia
BMW 5 Series 2018

With the exception of the $100k+ M5 which is at 3.4s 0-60, the performance is mundane at best.

For 3 series it doesnt get much better:
BMW 3 Series (F30) - Wikipedia

BMW M3 - Wikipedia

• 248 kW; 338 PS (333 hp)
• Torque: 355 N⋅m (262 lb⋅ft)
• 0-60 mph (97 km/h) – 4.8 s for manual and SMG

However they do have some limited edition versions that perform in 3.9 0-60 range. The E92.

After all of that, do we think that BMW can come out with an EV that matches or surpasses their ICEv specs and do we think they would do that if they could? Would BMW come out with a Series 3ev and M3ev that had specs better than those listed above? If they dont, then they cannot compete with the Model 3. Since the model 3 is a mass produced product, it can consume the sales of the 3/4 series which in 2016 was:

WW: 411,844
Sold in the US: 106,221

Or even eat into the 5 series sales: (notice the drop in the US specifically but also WW:

2012
WW: 359,016
US: 56,798

2013
WW: 366,992
US: 56,863

2014
WW: 373,053
US: 52,704

2015
WW: 347,096
US: 44,162

2016
WW: 331,410
US: 32,408

I am sure there is more up to date sales data, but those numbers above were from the Wikipedia pages linked originally.

So there it is, the Competition Paradox. If they could compete, they would have done it long ago to spite each other. Why are they doing it now? They are being forced to by Tesla who is eating into their market share from the Top Margin down. 7 Series, S class first, X5, GLX and now 3 Series/C Class but also lower end 5 Series and E Class. Not to mention the Audi and Porsche that have been displaced.

I wont go into demand here, but needless to say, when you look at the market as a whole, the Demand for Tesla's is nearly infinite and the competition is lacking. Its lacking the will and the capability. They can make a lot of cars at very high quality, but they cannot make a better car, or they would have by now. Its a simple fact of nature. Tesla is forcing them to make hard decisions and eventually they will make progress and those that survive might even catch up. But by then, Tesla will be a 500B company with a dozen models and manufacturing world wide.

Lastly, the Cash on Hand/Cash Flow. I know there are those who disagree, but I think this is something that should be improving from July 1 going forward. I think Tesla has cut back dramatically on Capex and pulled all the deposits forward as a mini/interest free cap raise that will bridge them until Q4 when the real profitability and FCF occurs. Lastly, dont forget that most of the cars being delivered in the next 6 months will be in the US, this will create pent up demand world wide. While Tesla is delivering the $35k Version in the US, they will be delivering the $80k vs in the rest of the world and all with 10k/w efficiency. After that, I assume Tesla will duplicate Fremont and GF1 in China and Europe at the same time while piloting the Model Y production in the US. As soon as production for Europe and China is shifted to those countries, the Y can start rolling off the line in Fremont and a new East Coast factory can be built to focus on Model Y in the US. Once that vehicle is being produced in China, Europe and the East coast, then Tesla can pilot the Pickup in Fremont.

Great post! The missing piece for most bears is the fact they CAN'T produce a better EV. All their talent is in refining the current ICE technology. Not in a completely new system of propulsion. As has been stated here many times it take gut's to make that radical a change. It takes a ton of cash if your a big Auto company. It also means retraining your entire dealer network. All in all the odds are stacked against the legacy auto company's

 

[Krugerrand]

Wouldn't it be more effective to give to an appropriate charity?

Is there a charity out there doing more for the planet and humanity than Tesla?

 

[Krugerrand]

OK, but, if I follow Mongo's thought to its logical conclusion, wouldn't it be better for Tesla's mission if the company could stride into the future, unencumbered by liens or liabilities, looking purely to maximum penetration of the auto/solar market.

 

[adaptabl]

Fremont was always ready for a tent, whenever the battery issue was resolved.

They wouldn't need it if the regular line was able to produce the volume planned.

 

[Boomer19]

legacy automakers innovation still focused on beating emissions

i don’t have FT subscription but was able to read a paragraph. they are already finding ways to cheat standards not even in place until 2020

Financial Times on Twitter

 

[CuriousSunbird]

So now it’s the minuscule retail investors that are causing volatility and unpredictability in TSLA and not the institutional investors who own the majority of TSLA, the analysts putting out ridiculous reports, the media straight up lying and turning everything into a negative...

You are so full of it, you need a cannoli.

Seriously, man, chill. We're just stock picking.

 

[Unpilot]

Seriously, man, chill. We're just stock picking.

Yep the old misdirect. You state it is tiny investors making the SP move...get called out...and there it is misdirect.

 

[Krugerrand]

This is where I have a little difficulty. I don't regard my self as "against" Tesla. I think Tesla is over-valued, so I am short. Once it falls to a level which I regard as under-valued, I will go long. So am I for and against simultaneously?

Sorry, that was intended as a reply to Krugerrand - not sure why it didn't show as such.

There’s a little exercise that people can do to get a better picture of how truthful they are being about and with themselves. Write down what you think people think of you and then ask those people what they think about you. Here’s a hint; most people have a distorted view of themselves (good and/or bad).

 

[adaptabl]

This seems to be the negotiating technique, threaten to nuke, then become best-friends? Crazy times...

It seems to be working.

I was thinking to myself this morning that Tesla could have just skipped the Model 3 altogether and concentrated on the premium S and X market. They would probably have a new S just about to come out and they would have been profitable for the last 6 quarters. They also would be stuck as a niche manufacturer and the likelyhood of them really growing much will have passed. The other car makers also would not have made any real strides to introduce any new EVs and the existing products that came out a few years ago would just wither and die off.

There is so much competition coming for that market, I doubt any of them will make a profit. They had to move the much harder upper mid range market. They will soon have to move to the mid/low range market.

 

[Reciprocity]

Great post! The missing piece for most bears is the fact they CAN'T produce a better EV. All their talent is in refining the current ICE technology. Not in a completely new system of propulsion. As has been stated here many times it take gut's to make that radical a change. It takes a ton of cash if your a big Auto company. It also means retraining your entire dealer network. All in all the odds are stacked against the legacy auto company's

Why thank you. The idea of competition eating its own has been rolling around in my head for a bit but the paradox analogy seems so fitting. If they could, they would have by now.

The ability to make the car is only their first problem. Its actually the easiest. The bigger problem is that since they are Legacy autos, they have a lot of legacy issues like Pensions, Debt, Engine Tech and engineers that are expensive and useless. The average Tesla stockholder is fine with Cash burn to build factories and capacity as long as Tesla is grown revenues 50-60% a year decade after decade. The ICE stockholder wants Dividends and profits. Anything else would be an affront to their sensibilities. This is partially why you see so much vitriol from the traditional auto investor or Oil investor. Those companies make a lot of money, consistently, but they do not grow very fast. They pay nice Dividends, because they have nothing else to do with the money. The Cash burn required to build EVs will cause a stockholder revolt from those companies. Hell the employees/unions now own GM because of the bailout. These are not the kinds of investors that like risk and grow at all cost mentality of a Tech company like Tesla and like GM would need to become to catch up.

We havnt even gotten into the dealership model boat anchor. They wont sell EVs and it is illegal for GM or any other auto to sell directly. They had made sure of that. Tesla has the ability in most places because they never had independent franchise dealers but it is still illegal in some places. The irony is that if Tesla is successful and this lands in the supreme court, that might actually save GM and the like and allow them to come up with their own EV stores. The dealerships can still service the cars, but they wont sell them. It could work out as a band-aid until EVs take over completely. Some dealers will survive by adapting to sell and service EVs.

 

[Krugerrand]

They wouldn't need it if the regular line was able to produce the volume planned.

I wouldn’t need to eat if I was a robot.

 

[Krugerrand]

Seriously, man, chill. We're just stock picking.

Sure we are.

 

[Todd Burch]

Where is the MMD?

You must be new here. The first M stands for 'maybe?'.

 

[Unpilot]

On the union angle it is tough for me as I believe union's have a place WHEN the Co/employer is abusive.
It may come to that when Tesla is huge. Of course the UAW has become a parody of what a union is about.

 

[SteveG3]

Within days, same media outlet, same author, reporting on mirror image events,

one analyst reiterating a target price 40% below current share price, another reiterating a target price 50% above current share price,

and these headlines, lols,

JP Morgan predicts Tesla shares will plunge more than 40% before the end of the year


Buy Tesla shares for the coming 'step-function up' in sales: Instinet

 

[jhm]

Wouldn't it be more effective to give to an appropriate charity?

Name a charity that is accelerating the transition to sustainable energy and sustainable transport at near the scale that Tesla is. Tesla's mission that is better served as a for profit company than as an NFP.

Of course, there are NFPs that are bringing solar and batteries to impoverished communities. These may be worthy of philanthropic support, but the effectiveness of such missions depend critically on for profit solar and battery makers that can bring cost effective products to market.

I would also point out that many charitable foundations invest their endowments and harvest the proceeds for charitable works. Thus, even charities need good for profit companies to invest in. An endowment that wanted to support a transition to clean energy might well invest in Tesla stock or bonds, knowing that both the investment and return on investment serve their foundation's mission well.

So by all means let's support charities, but the transition to sustainable energy requires massive investment of capital, almost as much as the fossil fuel industries require just to maintain production. NFPs alone cannot do it.

 

[Matias]

The two are not mutually exclusive as in they can be against Tesla AND make money short selling TSLA. How do you not know that? I was under the impression you’d been following both Tesla and TSLA all this time.

Perhaps it’s that you are grossly mistaken about human nature. Being all about money does in fact cause people to do things they might not ordinarily do like tells lies on national news networks to support their general bias/dislike for a single person or company (like a CEO of a certain company) AND bet against that company ticker.

In other words, being all about money tends to destroy one’s moral and ethical compass. So yeah, absolutely there are people/companies on Wallstreet against Tesla and short selling TSLA. To think otherwise is grossly mistaken.

Of course, if you put too big share of your investments in one stock (whether long or short), that causes emotional relationship with the company. But to my understanding (and what I’ve read), institutional investors rarely put more than two percent of their portfolio to one stock.