TSLA Market Action: 2018 Investor Roundtable

[sundaymorning]

@FirebirdAlpha
there, you happy?
no regulatory restriction/investigation preventing equity raise.

now once and for all, stop spreading that bullish!t. tell your friends too.
thanks.

@FirebirdAlpha, it’s time to pay up I’m counting on l your short position to finance my retirement. The longer you wait the faster I retire.

 

[sundaymorning]

Adam Jonas: What a doooofus!

Edit: (Just heard his 2nd question) Adam Jonas: What a DUM* A*S!

This idiot is on cocaine. Has to be, what kind of question was that, and to do it twice?

 

[neroden]

Wow. Custom neural network chip implementing the network in hardware. Full redundancy and failover. Nice.

So the technical term for this type of chip is "tensor processing unit". Frankly, if there are a lot of neural networks which have a similar structure to the Autopilot one (and I suspect there might be), this chip might be a *generically saleable product*, though I suppose they probably won't sell 'em to GM/Cruise or Waymo.

 

[neroden]

Q: What drove S&X GM to rise 5% in the quarter? Also makes the mistake of asking about Model 3 margins. Why can't these guys ask one question at a time?

Elon: rambles for 2 minutes, and gives apology for prior call. And talks generalities about challenges of production lines, but doesn't address the S&X GM change.

Deepak: Likewise.

8 minutes on this one Q that wasn't answered.

I kind of love this. It's a way of ignoring dumb and irrelevant questions without bothering the egos of the people who ask them. We actually got some useful information out of the rambling, and we would not have gotten much out of an answer to the question about the S&X GM change. (Though he did answer it: production efficiencies.)

 

[Cosmacelf]

Elon is pretty much saying “screw you guys for bashing us, we’re borrowing debt somewhere else where people don’t play games with my company and I’ll happily pay them interest instead thank you very much.”

Yes, but...

Did you note that Elon said they couldn’t build a Model Y, Semi or pickup truck right now anyways because they are cell supply constrained? And that they “haven’t figured out” where and how they will get cells for the Shanghai gigafactory?

My point being that battery cell supply seems to be their limiting factor for the next while, not capital. That begs the question, why? We know that Panasonic doesn’t like to move as fast as Tesla (what company does?), and they needed to be dragged across the finish line for the Gigafactory. Other than Panasonic’s reticence, the other issue could be raw materials supply. It is possible Tesla/Panasonic are reaching a point where they can’t source battery cell raw materials cheaply enough for the next while, until more mines get developed.

It would be interesting to pose these questions to Elon the next opportunity anyone has.

 

[Remus]

Elon is pretty much saying “screw you guys for bashing us, we’re borrowing debt somewhere else where people don’t play games with my company and I’ll happily pay them interest instead thank you very much.”

I kicked myself hard not seeing this before. This should be so obvious! In China state owned banks are tools for the government. Tesla GF getting support from the government means they have access to capital.

Oh my god how did I miss that?!

 

[Remus]

Yes, but...

Did you note that Elon said they couldn’t build a Model Y, Semi or pickup truck right now anyways because they are cell supply constrained? And that they “haven’t figured out” where and how they will get cells for the Shanghai gigafactory?

My point being that battery cell supply seems to be their limiting factor for the next while, not capital. That begs the question, why? We know that Panasonic doesn’t like to move as fast as Tesla (what company does?), and they needed to be dragged across the finish line for the Gigafactory. Other than Panasonic’s reticence, the other issue could be raw materials supply. It is possible Tesla/Panasonic are reaching a point where they can’t source battery cell raw materials cheaply enough for the next while, until more mines get developed.

It would be interesting to pose these questions to Elon the next opportunity anyone has.

I think they might be evaluating other sources of cell production.

 

[TheTalkingMule]

Bloomberg - "Musk's Apology to Analysts He Scorned Sends Tesla Stock Soaring"

Huh? It was the apology?

 

[bdy0627]

Well done Zach. Great questions.

My God, Adam Jonas. You are virtually GUARANTEED to get to ask Elon anything you want and the best you can come up with is dangerous AI, Amazon and BMW? Wow.

edit: And I apologize for calling him a d**** and a dum* a*s. But Geezus!

I feel like an idiot. For some reason, I thought he was one of the analysts with some good insight into Tesla. Those were the most bizarre questions possible. Comically stupid. I'm guessing maybe he was smoking weed. They seemed like some pretty stoney ideas to me.

 

[neroden]

Pay off $200M Q4 convertible bonds and $900M in Q1 2019 convertible bonds with internally generated cash.

That's his plan. But what is he going to do if the stock price is over $1200 in November, so that the convertible bond from SolarCity gets converted, and the capped call doesn't cover the dilution? ;-)

 

[Boomer19]

So the technical term for this type of chip is "tensor processing unit". Frankly, if there are a lot of neural networks which have a similar structure to the Autopilot one (and I suspect there might be), this chip might be a *generically saleable product*, though I suppose they probably won't sell 'em to GM/Cruise or Waymo.

yup, many of the tech big boys are making their own custom TPUs now

 

[neroden]

understatement of the week,

“we’re really quite good at software, relative to other car companies”

You don't have to run faster than the bear.

I'm not really impressed by Tesla's software team, but I keep comparing them to *software* companies, and to the absolute best software engineering companies at that. They are so far ahead of other *car* companies it isn't funny.

 

[bdy0627]

Sprung?

They may use some ideas from it, but it sounds like the structure will be more conventional I think. I don't think we actually know. How long does it take to build a conventional factory structure in Shanghai? A year and a half probably at least? Maybe they can be producing some cars within 2 years, probably closer to 2 1/2. The interesting thing with Elon about the China factory is that isn't a timeline where he needs to motivate his workers to achieve the impossible. It's really not about that at this point. It's regulations, licensing, and then building a factory structure with Chinese labor. The smaller component is getting the equipment duplicated and set up for production. That's just Elon's timeline distortion field. I'm going to predict 2021, which I'm fine with.

 

[2virgule5]

So the technical term for this type of chip is "tensor processing unit". Frankly, if there are a lot of neural networks which have a similar structure to the Autopilot one (and I suspect there might be), this chip might be a *generically saleable product*, though I suppose they probably won't sell 'em to GM/Cruise or Waymo.

Interesting idea, they need to make half a million to a million of these chips per year and if I’ve understood correctly the price to do so is similar to the current nVidia hardware - so basically a ten fold increase in processing power for the same price. If that does not requires a lot of exotic cooling that is a real breakthrough and other manufacturers/customers may line up for it - nVidia and Intel/mobileEye solutions won’t come cheap or as power efficient anytime soon. But it would only make sense if they license their AI software stack as well.

 

[GBleck]

yup, many of the tech big boys are making their own custom TPUs now

Off hand I recall Google and maybe Facebook are?

 

[neroden]

it was a good one. still some questions. still hurdles to overcome.
for stock, i think it’s reasonable to be optimistic. but i don’t doubt for a second that it will continue to be picked on and manipulated at any opportunity until all convertible debt is off the books (mar 19 and mar 21)

It's important to note that one possible use of internally generated capital is to *buy back the 2021/2022 convertibles on the open market*. Obviously some will hang onto them, but it may be a lot cheaper for Tesla to buy 'em back during 2019 than to wait and have them convert when the stock price exceeds $1000. This is not exactly a stock buyback, but similar, and may be sound.

 

[bdy0627]

I disagree. Low $400s is more appropriate. Ambitions are clearly tempered. This is heads down, make more batteries time.

Yes, TSLA the story stock is hunkering down to actually focus on production, gross margins and profits. They put it off as long as they could, but WS tried to put the squeeze on them. This is the right response right now even though it means perhaps a bit more subdued growth for now.

 

[neroden]

The two WSJ articles out now manage to be negative. I won’t fisk their contents, but they take selective fact reporting to new levels and report good news as bad news. For instance, a reduced need for capex is reported as a required pull back which might jeopardize future earnings. Sad really.

Geez, and Galli even *specifically asked about that* at the end of the call, with Musk saying that they basically couldn't grow faster just by throwing money at the problem any more.

 

[Moderatefan]

It is possible Tesla/Panasonic are reaching a point where they can’t source battery cell raw materials cheaply enough for the next while, until more mines get developed.

It would be interesting to pose these questions to Elon the next opportunity anyone has.

Elon already commented on their direction re: cobalt
Panasonic Planning Cobalt-Free Batteries Due to Rising Prices - HybridCars.com
Panasonic to Halve Cobalt in Car Batteries | 2018-07-13 | FenderBender
but currently

they are still using a few kilograms of cobalt in their vehicles.

Panasonic suspends link with cobalt supplier for Tesla Model S/X batteries due to Cuba connection

 

[UnknownSoldier]

Off hand I recall Google and maybe Facebook are?

Google has been using custom silicon for awhile now. I'm betting all of Waymo is already on their own proprietary TPU's.