TSLA Market Action: 2018 Investor Roundtable

[anticitizen13.7]

Call me ignorant but I don't see how time between RC and start of production correlate to speed of ramp. If they started production in mid 2018 then we would be even more behind and financially risky.

The only thing which this time can affect is quality of build which is fine from what we've seen.

It takes time to validate components, iterate on them, and re-validate. Tesla had discussed ways to shorten the cycle by working closely with suppliers (covered in previous conference calls back in 2016 from what I remember), but it still takes time. It takes time to set up and validate the manufacturing line itself. Changes in components might require changes in the line.

Note that I am not saying that mid-2018 is when they should start production. What I am saying is that mid-2018 was always realistically the earliest they could have started churning out Model 3's in the thousands/week volume.

Edit: I believe that early Model 3's were built on a production process that wasn't the final production line. Tesla has, as far as I know, been setting up and slowly running the finalized line over the past few months, or building "the machine that builds the machines".

 

[AlMc]

Um, so we aren’t allowed to be critical of the company when they make mistakes? Or should we just blindly be followers and cheerleaders no matter what?

Nope, didn’t say that.

You aren’t simply being critical of a mistake. You’re accusing Elon of not taking responsibility, which he did months ago and you know that. You’re piling on for the sake of piling on. You’re behaving as though you’re new to Tesla and don’t know how this goes based on historical data, common sense and the like. You’re working yourself and others up over spilled milk instead of offering an investment solution moving forward.

Secondarily there is a way to present criticism so it doesn’t sound like sour grapes. Let me give you an example from a generally positive soul, follower and cheerleader of Tesla and all those human beings involved; ‘Well crap! That sucks balls that Tesla hasn’t been able to resolve the ramp issues at Gigafactory yet. It’s too bad they didn’t babysit that supplier more closely as should be standard company procedure, because my options just took a kick in the (insert critter of correct size) nuts. It’s my hope they don’t drop that ball again, but I’ll be better prepared next time just in case they repeat the mistake. If they don’t resolve the issue in such and such period if time this is the effect it may have on the bottom line and SP etc...

I do not feel it is being overly critical suggesting that there was a better chance to catch the module pack production line problem sooner IF there had been a COO in place. This was one of the things that @DaveT suggested in the post that we have both quoted.

IMO, this is still a problem he has not addressed/taken responsibility for to date. He took responsibility for the battery module problem and took it upon himself to immerse himself in getting a fix, both by helping to write code and literally buying a company (Perbix). OK, that is *fixing* the bottleneck there. Why not look at ONE possibility to *prevent* these types of problems in the future by having a COO? He has one at SpaceX. I would be shocked if the board is denying him the opportunity to have one.

I know your answer will be: It is how he rolls, deal with it. But, it is still a valid constructive criticism IMO.

What is the downside? The COO experiment does not work and he/she leaves.

 

[Uptownman]

If the TSLA stock price affects your belief in Tesla as a company,

What should we take from the conference call, and more importantly, the financial statements that would justify Tesla being worth more than Ford today? If Tesla was on the plan as understood over the past two years the value would be based on the future. Given that they are nowhere near that plan, to say the market is valuing the future is not plausible. You need some positive results to extrapolate from. Seven months and a Billion $$$ in losses since the start of production in July and still not out of the woods? What letter grade would you give the product launch? "D" imo

 

[JRP3]

I do not feel it is being overly critical suggesting that there was a better chance to catch the module pack production line problem sooner IF there had been a COO in place.

Frankly I'm surprised that their CTO/battery expert JB Straubel didn't catch this, or someone directly under him. I'm not sure adding another layer on top of the situation is the answer.

 

[AlMc]

Frankly I'm surprised that their CTO/battery expert JB Straubel didn't catch this, or someone directly under him. I'm not sure adding another layer on top of the situation is the answer.

True, but I can't prove either way whether a COO would or would not have caught it/prevented it.

 

[Nakata]

I hope that you prove correct, because as far as I can tell, Tesla has not been getting as much attention from Elon as SpaceX.

Well as far as i know Elon assigns his time to where the problems are.
Lately Tesla has been the company with the most problems, so I bet that is where he has been working the most.

Remember the camping on the Gigafactory.

 

[Krugerrand]

I do not feel it is being overly critical suggesting that there was a better chance to catch the module pack production line problem sooner IF there had been a COO in place. This was one of the things that @DaveT suggested in the post that we have both quoted.

There’s no evidence that it would have been caught with a COO on board. I know you’re in support of a COO. I don’t care either way. I want Elon to run his company his way, all the way down to the mistakes.

What is the downside? The COO experiment does not work and he/she leaves.

The COO makes an even bigger mistake.
The criticism continues like has when new heads of sales and service don’t perform miracles for everyone.
Headlines like: And Another Top Level Exec Departs Forewarning Of Impending Doom

 

[Runarbt]

Frankly I'm surprised that their CTO/battery expert JB Straubel didn't catch this, or someone directly under him. I'm not sure adding another layer on top of the situation is the answer.

I do not think this is what they do? Which layer do they add, what should they do instead?

If you talk about the current half manual batterypack vs. the new automatic.
One layer will replace the other when it is ready to be replaced. They work towards optimization all the time.

 

[Words of HABIT]

There was a detailed discussion just a few weeks ago. I tried to find it but there's a lot happening in this forum, so I couldn't. Perhaps one of the people who posted the marked-up table of InsideEVs numbers could chime in again.

grr, I believe you were referencing one of my earlier posts regarding InsideEVs numbers:

I stand by my position and will report on March '18 that the InsideEVs trend of DOWN, DOWN, WAY UP months will continue for MS, MX and M3 with little impact to international deliveries. Inside EVs has most recently show January '18 MS (800), MX (700) and M3 (1875). IMO significantly low estimates on all three models. Would January '18 be the lowest volume for MS and MX than any month in 2017, I think not. I'm beginning to believe their significantly low estimates first two months of each financial quarter are done on purpose. Why would they want to do that?
Daniel

 

[Nakata]

You mean the drinking, dancing, and the ambiguous tweets, just before another three-month delay? Yea, I remember it like yesterday.

Yes. He was there to drink and enjoy the sunset.

 

[ValueAnalyst]

Yes. He was there to drink and enjoy the sunset.

I am under no illusion that all of a sudden the faithful shareholders will realize how unfair this comp plan is, but I really hope that it gets voted down, or the vote gets delayed until after 5,000/week SUSTAINABLY is achieved, with that market cap ($80B to $90B) being the starting point.

 

[AlMc]

There’s no evidence that it would have been caught with a COO on board. I know you’re in support of a COO. I don’t care either way. I want Elon to run his company his way, all the way down to the mistakes.



The COO makes an even bigger mistake.
The criticism continues like has when new heads of sales and service don’t perform miracles for everyone.
Headlines like: And Another Top Level Exec Departs Forewarning Of Impending Doom

You are correct about that could be the downside and that it is one of my persistent wishes/requests of Tesla/EM. IMO, it is worth the risk as I feel the upside outweighs the downside. The one at SpaceX seems to be working out pretty well.


Elon's solution to problems (he is a great problem solver, I agree) is take on more responsibility. Not sure that is helpful when it comes to preventing problems in the first place.

 

[Cobos]

You mean the drinking, dancing, and the ambiguous tweets, just before another three-month delay? Yea, I remember it like yesterday.

You know what, that's an essential part of Elon. Yes sometimes he is slightly "crazy" or nerdy, like the camping on the gigafactory, or the flamethrower product. That is not your regular CEO. I'm betting the CEO of GM doesn't do any of those kind of things. But she does kill a few people to save a few cents on ignition switches and she does release a competent but very tiny and boring EV with the Bolt. Not to mention royally screw every Ampera customer in Norway making sure noone in the worlds most advanced EV market will even consider GM/Opel again.
So Valueanalyst you've got to choose, the mundane, but predictable quarter results with, what 3% growth or the crazy one with 50+% growth per year. You can't get 50% smooth predictable growth in revenue for any company the size of Tesla. Looking at SpaceX I'm guessing their growth rate is a lot lower over the last 10 years.
So if that is not the Elon you signed up for I'm pretty sure someone will buy your shares and options. I've been holding for almost 7 years, and I've seen fumbles like the X and getting the Model S out. Not to mention all the issues with the Roadster. You do need a level of faith with Elon and Tesla not to mention patience.

Cobos

 

[Zhelko Dimic]

Thank you for the kind words! I have been pretty much reading this forum since early last year, and finally decided I should contribute a bit the last day or two.

By the way, I believe you were one of those that were burned in the past by over leveraging either on options or just in general, right? I believe you have written about that in the forum, I should've heeded your advice, but human nature being what they are, you throw caution to the wind when times were good, and then double down when they go bad, right... I have probably lost about 10% of my net worth in real money, and about 20% on paper in the last year chasing the stock. Was an incredibly humbling experience, but I have no one to blame but myself. Hopefully those who read this and my earlier lessons learnt post would not make the same mistake.

Yeah, that's me. I lost peak to through 90%+ or real money, multiples of my yearly salary, and since have recovered everything, but I don't know that would be the case for many others. I've seen people fold, sell everything that was left and leave, to never come back to this forum.

I really wanted to explain dangers of over-leveraging, but human nature what it is, I doubt it's possible. it feels no-one can truly internalize lessons for good, until they get properly scared.

BTW, please don't mistake my recent comments about leveraging to mean this is anything similar to what I've done in the past. My current horizon is at least 12-20 months, and truth be told, I can carry my current position indefinitely with a bit of fresh money, should it come to that. In the past, my time-horizons were shorter, and I was very sensitive to 20-40% drop, where nowadays my position can withstand 50% for two years... If anything, this is the best advice I can get: Think how would you behave if stock went down much more than you think possible, and stay there much longer than you think possible. For me, magic numbers are 50% down, 2 years. I'll never again build position that can't survive that...

 

[Krugerrand]

You are correct about that could be the downside and that it is one of my persistent wishes/requests of Tesla/EM. IMO, it is worth the risk as I feel the upside outweighs the downside. The one at SpaceX seems to be working out pretty well.


Elon's solution to problems (he is a great problem solver, I agree) is take on more responsibility. Not sure that is helpful when it comes to preventing problems in the first place.

There must be a reason why he’s chosen not to have a COO at Tesla since as you say he’s got one at SpaceX - so he’s not against the idea.

I can’t come up with a why, but I suspect something is different with a rocket company vs a car/energy company that requires one for SpaceX but not Tesla. Perhaps if I knew as much about rocket companies as I do car companies I could offer you a reasonable explanation. But Elon doesn’t make important decisions willy nilly. He’s got a reason. Somebody should ask him.

 

[phil0909]

grr, I believe you were referencing one of my earlier posts regarding InsideEVs numbers:

Thanks for the reply, Words (and grr). But I have to observe, you provided ZERO evidence for your position. Other posters noted that Tesla is believed to make US deliveries disproportionately in the last month of each calendar quarter - this is widely believed to be true, and totally consistent with insideevs estimates.

Your hunch could possibly be right and you are entitled to it, but it is only a hunch, nothing more. We can not consider it a 'proven' fact without seeing evidence. Unfortunately, Tesla does not provide any. So insideevs is apparently still our best source for monthly data.

 

[Krugerrand]

I’m done with this conversation. I am under no illusion that all of a sudden the faithful shareholders will realize how unfair this comp plan is, but I really hope that it gets voted down, or the vote gets delayed until after 5,000/week SUSTAINBLY is achieved, with that market cap being the starting point.

It’ll pass. No doubt. But maybe a poll?

 

[JRP3]

I do not think this is what they do? Which layer do they add, what should they do instead?

If you talk about the current half manual batterypack vs. the new automatic.
One layer will replace the other when it is ready to be replaced. They work towards optimization all the time.

By "layer" I meant another level of management, as in personnel, not equipment.

 

[Zhelko Dimic]

In the conf call yesterday, the term "product" was used at least once to describe building factories. Before I just took this to mean they are trying to look at the factory as a product, in order to make it work really well. But for some reason yesterday I got to wondering if they are thinking of licensing the factories themselves. It sounds kind of crazy, but if you think back to Tesla's mission "to accelerate sustainable transport" and you think about how Tesla wants competition, not a monopoly, it kind of seems like it might make sense. Like maybe Tesla doesn't want a battery plant in South Africa, but they want to go electric, so Tesla just licenses out a factory to them for batteries and maybe help them design some cars for their market, and bingo you're accelerating sustainable transport, keeping the global auto market from going too much towards a monopoly, and Tesla is preserving the brand and making money+ saving money at the same time by doing it. Or a better example might be with Fiat/Chrysler that just plain needs help getting with the times. Maybe this idea is nonsense or common sense to people already but it just kind of dawned on me that may be what they are talking about, or maybe not.

Your thinking resembles some of the thoughts I had in the past. I strongly believe that one of the big manufacturers can work out a deal with Tesla for factory/batteries/chemistry/motors, whatever, and get a jump on everyone else that would almost ensure they and Tesla thrive while others fight for dear life. Such deal wasn't possible in the past because no one wanted to give legitimacy to Tesla, and Tesla was considered midget, unworthy of seating at the same table. Perception of shareholders would have been a problem too. Now, that perception of 'midget Tesla' has already changed to a significant degree, and will be completely shattered once M3s have few months of 5K/week production. Tesla is already mentioned in the same breath with other manufacturers more and more often.

To conclude, I believe deal is possible and would create significant advantage for the first mover and Tesla, but will it happen? Could industry executives swallow pride and negotiate with Musk from the position of weakness? Would Musk get stubborn and condescending and want nothing to do with them? Who knows...

 

[schonelucht]

Frankly I'm surprised that their CTO/battery expert JB Straubel didn't catch this, or someone directly under him. I'm not sure adding another layer on top of the situation is the answer.

Are we really going to continue to pretend Tesla was totally blindsided by this? This is their core competence : building the machine that builds what makes their products unique. You don't just order that from a supplier and then let go until the day you switch it on to find out it doesn't work. There was plenty of back and forth at the engineering level between the supplier and Tesla. It is impossible for Tesla engineers and factory management not to have known that this was going to be an unlucky supplier long before they took action.

There are two possibilities. Either the message didn't percolate up the management chain as it should. In my experience when bad news doesn't travel up it's nearly always due to a breakdown in culture making people afraid to speak up for fear of getting blamed and axed. Or information did travel up, but top management failed to intervene in a timely manner because they just assumed their teams would handle the impossible anyway.

Whatever it was, the blame is squarely at top management. After Model X self-inflicted wounds due to its design of the doors, this battery module is management's second strike of severe shortcomings. If the conveyor system in the Fremont factory turns out to be of the same problematic order, it may be time to assess if replacing the top management structure isn't the better answer.

PS I am giving Tesla management a pass on the FSD failures because that task is so out of the world difficult that failure is an option. For ordinary factory automation, failure on this level is not an option without top heads rolling. And despite all Elon's hoopla about the machine that builds the machine being limited by aero drag, ordinary factory automation is exactly the level Tesla is currently operating at.