TSLA Market Action: 2018 Investor Roundtable

[jhm]

Fantastic post! Please allow me to expand on your reasoning, and then use that to kill thesis 3: Demand.

Your post talks about in order for any legacy carmaker to compete in the EV space, they have to release a car that is better than their own ICE model of similar price range. Therefore, each EV they produce will replace an ICE that they would have sold.

This actually puts the legacy carmakers in a lose lose situation.

Situation 1: Transition to EV. They would face the same huge capital expenditure as Tesla as they ramp up their EV production. That means they will face profit margins on EVs that is almost guaranteed to be lower than their equivalent price range ICE. Not only that, but because they lose an ICE sale for every EV sale, the gigantic fixed costs of ICE production is spread over fewer cars, which increases their costs for their ICE cars, which means their ICE profit margin decreases. Lower margin from EV + lower margins for their ICE = Lower profit margins overall.

Situation 2: Don't transition to EV. Since EVs are simply better than ICEs of the same price range, they will slowly lose ICE sales as EV production from other companies ramp up and steal sales away from their ICE's. That again means greater fixed costs per ICE sold, leading to lower margins, and even worse, no future.

Now let's see why Tesla will never have a demand problem.

Bears like to say once legacy carmakers start making and mass producing EV's, Tesla's demand is going to drop. Or more extreme, legacy carmakers are going to use their 100 year expertise in building cars to make EV's even better than Tesla's, and no one will want to buy Teslas.

Let's take the more extreme bear example, and see why that cannot be true by stretching the above bull argument to the extreme. Let's assume the best case bear scenario that every single legacy carmaker releases EV's that blow the M3 out of the water. What happens next? That means no one wants Teslas and they go bankwupt right?

No.

The Model 3 is still better than every ICE car in its price range. So unless the legacy carmakers can make enough EV's to fulfill all demand of new cars that no ICE cars are sold, there will still be people that will want a Model 3 since they're better than ICE's. Even if that extreme scenario becomes true, it would mean all ICE production of the Model 3's price range would be stopped, and the carmaker facing a write off of the century for all ICE production equipment.

Therefore, it is IMPOSSIBLE for Tesla to run out of demand. As long as there are still ICE cars sold in Model 3's price range, it cannot run out of demand. The only scenario that would cause Tesla to be demand limited would mean bankruptcy for all legacy carmakers from the complete elimination of all ICE production of Tesla car's price ranges.

Jaguar recently did market research in Australia. It indicated that 40% of Aussies would like to buy a battery electric vehicle.

Let's suppose for the time being that the other 60% could not be persuaded to buy a BEV. So Tesla's competitors would need to push out enough BEV to satisfy 40% of the market to attempt to squeeze Tesla out of the market. No competitor is anywhere close to pushing out that much BEV product. Demand is simply far ahead of the whole industry.

 

[gtrplyr1]

I think my model 3 review must have leaked ....

Cheers to the longs !

 

[lklundin]

FFS MODS. what purpose or value do these posters bring to the community here. I’m out. Good luck to everybody.

Well, I am just curious to learn whether actual bones go into the making of a bonefire.

 

[Todd Burch]

Wowsas, big buys there. Seems like some hedge fund managers just took a test drive.

 

[Unpilot]

Wowsas, big buys there. Seems like some hedge fund managers just took a test drive.

Had to be my major buy of 10 shares!

 

[NicoV]

Maybe it’s Montana’s farewell that caused rise: Farewell For Now - Montana Skeptic | Seeking Alpha
Not that I read SA anymore, but the Marketwatch article linking to this was at the top of the yahoo tsla page.
Nice to see Montana confirm that Elon called his boss.
Edit:corrected link, also link to marketwatch: Elon Musk allegedly silences one of his short-selling critics by calling his boss

 

[Earlian]

I think my model 3 review must have leaked ....

Cheers to the longs !

Then you can provide a link here, too

 

[arathald]

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

Well, on the one hand, I don't want to pretend to be a smarter investor than JP Morgan, but on the other hand, their main claim is that traditional manufacturers will sell EVs cheaply mainly for compliance/PR reasons, and not care that they're not making money on them. That's all well and good, but we already see that in the market with the (relative to Tesla) extremely low volume EVs like the Leaf and the Bolt. Compliance EVs will barely even push Tesla, much less cause it any real trouble.

I actually hope they're wrong in that more traditional manufacturers will embrace EVs as a regular part of their product line, not just as an afterthought to make regulators and enthusiasts happy. Ultimately, this is a key part of Tesla's goals and as both an owner and an investor, I believe that real competition is heathy, even necessary.

 

[shlokavica22]

Let's suppose for the time being that the other 60% could not be persuaded to buy a BEV. So Tesla's competitors would need to push out enough BEV to satisfy 40% of the market to attempt to squeeze Tesla out of the market. No competitor is anywhere close to pushing out that much BEV product. Demand is simply far ahead of the whole industry.

In fact- Tesla is much more likely to satisfy this demand before the Big Auto.
Once it becomes abundantly clear what people want (by sharp decrease in purchase of new ICE vehicles), the smart money will float towards the companies most likely to satisfy this needs.

 

[hobbes]

That is a forum post from 2017.
Online version: Vehicle Warranty | Model 3

only references to commercial/ business (note, free supercharging is not for commercial use)


Real world report:
The Tesla Warranty is Ludicrous

The important takeaway from the two sections you quoted from the warranty is that they don´t refer to damages from commercial/car sharing use (but special cases like loss of income from a damage or arbitration). "Business" and "commercial" don´t appear anywhere else in the document. "Sharing" does not appear at all. Nothing to this end in the Limitations sections. So Business use is consequently covered by the warranty if I didn´t miss anything.

That´s a lot of work to correct your faulty post - better check your source next time, @CuriousSunbird !

 

[Tslynk67]

Well, on the one hand, I don't want to pretend to be a smarter investor than JP Morgan, but on the other hand, their main claim is that traditional manufacturers will sell EVs cheaply mainly for compliance/PR reasons, and not care that they're not making money on them. That's all well and good, but we already see that in the market with the (relative to Tesla) extremely low volume EVs like the Leaf and the Bolt. Compliance EVs will barely even push Tesla, much less cause it any real trouble.

I actually hope they're wrong in that more traditional manufacturers will embrace EVs as a regular part of their product line, not just as an afterthought to make regulators and enthusiasts happy. Ultimately, this is a key part of Tesla's goals and as both a consumer and an investor, I believe that real competition is heathy, even necessary.

If you have, for instance, a Ford C-Max petrol and a Ford C-Max BEV side-by side and they both test-drive, the BEV will be the car of choice every time. But there are no BEV's in these dealerships to even try out, good job too, for them, because people won't buy the ICE any more.

So what's against the incumbents?
- no will to switch to EV's, ICE is too profitable and they'll lose decades of investment and cannibalise their own sales for less margin
- pressure from Big Oil not to change
- no simple charging infrastructure
- dealer network that doesn't want
- no batteries to produce in cars volume, no scaling
- all batteries sourced from 3rd parties, as well as other major components = little or negative margins (see i-Pace as example)
- old battery tech too
- unions are against

I'm sure there're more...

But I want them to succeed, I want all incumbents to sell more BEV's than Tesla - this will be the signal that Tesla have really succeeded.

As it stands, we need Tesla to build a GF in every country on the planet, the incumbents will all go bankwupt and each of us will own an island in the Caribbean (several in the case of 007)

 

[PaulusdB]

Wowsas, big buys there. Seems like some hedge fund managers just took a test drive.

Or whatever other sound reasoning led them to rebalance their automotive portfolio.

 

[madodel]

This was in the context of donating money to Tesla. I am not suggesting this is a good business idea— for one, most Tesla owners have more financially rewarding things to do with their time than driving people around.

But if you’re doing it to help Tesla, they get immediate profits & long-term increased awareness. And you get an amazing car as a side effect.

Honestly I think the GoFundMe idea will work best for GM, Ford and FCA. Tesla makes vehicles people want. Those others will just dig themselves deeper pits especially when the Y and pickup come out in a couple years.

 

[TradingInvest]

Legacy carmakers will see huge troubles in the near future. Use BMW as an example. In two years they will see their demand drop in free fall. This is like Nokia in the car world. Most of the legacy car makers will bankrupt in this transition.

Although shorts constantly spread FUD against Tesla, the market knows better. That's why BMW's valuation is so low relative to their current P/E. Other carmakers are in similar situation.

For people who care about the car, the performance, handling, convenience, technology, environment, ...... Tesla's cars are so much better than BMW's. Once people have a chance to test drive the Model 3, most of them won't consider ICE cars anymore.

Shorts assume it will be easy for legacy companies to produce great EVs. They will be surprised.

 

[Lhan]

Well, on the one hand, I don't want to pretend to be a smarter investor than JP Morgan, but on the other hand, their main claim is that traditional manufacturers will sell EVs cheaply mainly for compliance/PR reasons, and not care that they're not making money on them. That's all well and good, but we already see that in the market with the (relative to Tesla) extremely low volume EVs like the Leaf and the Bolt. Compliance EVs will barely even push Tesla, much less cause it any real trouble.

I actually hope they're wrong in that more traditional manufacturers will embrace EVs as a regular part of their product line, not just as an afterthought to make regulators and enthusiasts happy. Ultimately, this is a key part of Tesla's goals and as both an owner and an investor, I believe that real competition is heathy, even necessary.

It's becoming rather clear that whatever the big OEM's are trying to do, is just enough to give the impression of change, but they are simply not able to change their ICE business model.

 

[Curt Renz]

agreed
and they are blaming tariffs for the gm/ford/fiat
Terms of Service Violation

The Ford share price sank to a 5-year intraday low today.

 

[arathald]

Legacy carmakers will see huge troubles in the near future. Use BMW as an example. In two years they will see their demand drop in free fall. This is like Nokia in the car world. Most of the legacy car makers will bankrupt in this transition.

Although shorts constantly spread FUD against Tesla, the market knows better. That's why BMW's valuation is so low relative to their current P/E. Other carmakers are in similar situation.

For people who care about the car, the performance, handling, convenience, technology, environment, ...... Tesla's cars are so much better than BMW's. Once people have a chance to test drive the Model 3, most of them won't consider ICE cars anymore.

Shorts assume it will be easy for legacy companies to produce great EVs. They will be surprised.

I'll be honest, I never was terribly interested in BMWs - the way people who own them drive is frankly really offputting to me, and I know that's petty, but there you go. I know some people say the same of Tesla owners, but I see Teslas around here driving more like sane reasonable people that love to drive and have some fun with their cars.

That said, just from what I see in passing, it feels like BMW has been doing a better job than most ICE makers at getting electric cars or electric cars with a range extender on the road. But maybe that's the Seattle bubble I live in.

I'm genuinely interested in which traditional auto makers are actually investing in EV technology, more than just as a compliance vehicle. Does anyone know of a good recent analysis of the EV manufacturing landscape outside of Tesla?

 

[SteveG3]

Jaguar recently did market research in Australia. It indicated that 40% of Aussies would like to buy a battery electric vehicle.

Let's suppose for the time being that the other 60% could not be persuaded to buy a BEV. So Tesla's competitors would need to push out enough BEV to satisfy 40% of the market to attempt to squeeze Tesla out of the market. No competitor is anywhere close to pushing out that much BEV product. Demand is simply far ahead of the whole industry.

Yes. Do you see that extrapolating on something like 50% growth of EVs sold per year worldwide the past few years (driven predominantly by Chinese made vehicles most Westerners would find less appealing than a Mitsubishi I-miev) to what the future supply of EVs will be is off target?

Near certain that there will be a massive gap between the tipping point of long range EVs crossing 50% of consumer demand and crossing 50% tipping point of manufactured supply. Probably at least a decade gap.

 

[MP3Mike]

If you have, for instance, a Ford C-Max petrol and a Ford C-Max BEV side-by side and they both test-drive, the BEV will be the car of choice every time.

I have to disagree with that. The Ford C-MAX BEV wouldn't be the choice if you need to make a lot of long distance trips as there isn't sufficient fast charging available for the Ford C-MAX BEV. It also wouldn't be the choice if you needed/wanted to take a long trip out to a remote cabin with no electricity.

Petrol cars will still have a future for a long time, just a diminishing one.

 

[lklundin]

Not that I read SA anymore

As a TSLA investor, I always read SA in the days prior to expanding my position. After I read each short thesis presented there and conclude that they make no sense at all, I feel convinced that the dip in share price is momentary.

I have yet to come up with a similarly safe strategy for selling, but am in no hurry with that.