I've said it before and I'll say it again: margins on Model 3 are going to be superb, even after SR/non-PUP enter the mix. The other thing to think about, beyond the above, is scrap/rework rates. If scrap/rework rates are currently high, as the shorts insist, think about what that does to the margins when they're not. On top of this we've had multiple analysts touring the Tesla factory back up the notion that Tesla can up production rates significantly just through incremental process optimization, and we just today got confirmation from an investor touring Giga that Tesla is well en route to achieving cell prices under $100/kWh by the end of this year.
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I've said it before and I'll say it again: margins on Model 3 are going to be superb, even after SR/non-PUP enter the mix. The other thing to think about, beyond the above, is scrap/rework rates. If scrap/rework rates are currently high, as the shorts insist, think about what that does to the margins when they're not. On top of this we've had multiple analysts touring the Tesla factory back up the notion that Tesla can up production rates significantly just through incremental process optimization, and we just today got confirmation from an investor touring Giga that Tesla is well en route to achieving cell prices under $100/kWh by the end of this year.
Fact Checking
Well-Known Member
Indeed, you are right, I completely missed the '2019' qualifier. My apologies to @Wooloomooloo!
Let me quote the original argument again, and address it properly:
I agree with some of this, and it's certainly a fair argument to make (apologies again!), but I do not not agree with the conclusion, because it's missing so many details. There are various upsides missing I believe:
- I believe the potential negative demand effects of the next recession are overrated: it is quite probable at this stage that if a recession triggers it will be high-tech sector originated, which should have comparably small effect on new car demand (outside of the west coast - so Tesla isn't completely immune). A U.S. housing bubble isn't probable for another 5-10 years, and a fundamental financial crisis probably needs a housing crisis to begin with. (The only sufficiently global crisis would be an all-out trade war triggered by Trump - which is a possibility but which a possible Democratic win this November would have some powers to stop/mute.)
- Cash flow: right now Tesla is paying about $600m-$700m of cash per quarter for the Model 3 production lines. These payments will phase out in 2019 and improve cash flow directly and automatically.
- Gigafactory 2170 cell production lines will increase in capacity massively: the current guidance is end of Q3/beginning of Q4 for the new Grohmann lines, with one report saying that the machines were already tested in Germany and throughput would increase by about 3x. Panasonic is also ramping up 2170 cell manufacturing.
- This has massive implications of storage/energy revenue, Model 3 and Model S/X: right now storage is on life support due to shortage of 2170 cells, most cells go into Model 3.
- For Q2 Tesla reported record high new orders for Model S/X, which will probably keep up by end of Q4 due to the $7.5k federal tax credit. There's still $3.75k of tax credit up until end of Q2 2019, which some end of 2018 Model S/X orders going into Q1 2019.
- By that time 2170 cell production will be up and running. I'm pretty certain that Tesla already has a 2170 based Model S/X module design ready and tested, and it appears it's possible to squeeze the ~5mm taller 2170 cells into the current battery pack without having to touch the rest of the chassis. I.e. the moment there's any softening in S/X demand they'll announce the refresh: new interior, new modules, possibly a 120 kWh top S/X offering. I'd expect this by the end of 2019. (They'd want to do this anyway, to keep a healthy competitive edge over even the best competitors who already announced their 2020 models.)
- The Tesla AI chip seems to have taped out, seems to be working, and has working field test units on all of Tesla's vehicle platforms. FSD features will happen, which increases utility of Tesla's vehicles, increases the competitive edge and increases demand. It also generates $4k FSD sales which are near-100% software features that will directly improve gross margins on all models.
- I don't see Model 3 demand problems in 2019 at all: the moment they think the U.S. market is slowing they can open the European Model 3 market, maybe even the Chinese market, and certainly the 'rest of the world' market where the S/X is present, which is still about 25% of potential demand.
- I think they'll start offering the Model 3 Standard Range in the U.S., but with the new battery module design and the new Grohmann lines. The latest report on those lines suggested that module cost will drop to a third of its current cost. Given that module overhead is currently about 25% on top of cell cost, this means battery module overhead will decrease to below 10%, reducing the per kWh cost to around $110 in 2019. At those battery prices they could profitably make $25k compact cars, not just $35k sedans and the Y. As a side effect this should also improve gross margins on the $40k-$60k Model 3's by about 5%.
- In the U.S. every year disposable income increases by about ~2%. So the $35,000 family budget in 2016 will be around $37,000 - $2,000 more to spend, ~7% larger addressable market if they keep the $35k price constant. There's also population growth: every year there's about 4 million newborn babies in the U.S. that trigger purchases of a new, larger car, there's net growth of about 2 million more U.S. citizens, and about 4 million people enter the age where they can buy their first $35k car. This is part of a ~15-17m annual new car sales baseline. The U.S. market is a good place to bootstrap new car production and keep demand, better than say Europe.
- (There's more, but this is a quick list as a starter.)
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Dan Detweiler
Active Member
Day to now is still 3k shares traded. Look at the volume chart, it has a multiplyer of x0,001. Or am I wrong?
Edit:
3k at XTRA
32 at FRA
TESLA AKTIENKURS 243,69 | A1CX3T Realtime-Kurse | Xetra-Orderbuch
So a train just arrived full of dry powder...
Come on, Elon. Go back on Joe Rogan and this time do a line of coke
And Jerome, don't you want to take some leave to be with your family? Just for one day and then triumphantly announce your return the next day - you know you want to, don't you?
Come on, Elon. Go back on Joe Rogan and this time do a line of coke
And Jerome, don't you want to take some leave to be with your family? Just for one day and then triumphantly announce your return the next day - you know you want to, don't you?
Dan Detweiler
Active Member
NO!!!So a train just arrived full of dry powder...
Come on, Elon. Go back on Joe Rogan and this time do a line of coke
Give me two more days...just 2 more! A little more rebound and then you can reload as much as you want. LOL!
(You know why)
Dan
Some thoughts about FUD:
We are constantly bombarded with FUD by high frequency. I get used to it, so there is practically no effect on me. The target of FUD are weak investors. Are there any weak left after constantly bombardment?
New investor would probably study all about TSLA very deeply before any action is taken. So the result should be very solid long investors who know how to separate FUD from facts.
I get used to SP manipulation too once I understood it thx to @Papafox.
Under the line:I'm buying according to FUD+SP manipulation dip and I'm satisfied.
btw: I'm missing today's dip.
Fact Checking
Well-Known Member
Well, what Elon said comes with the usual qualifiers, but is pretty clear-cut otherwise:
Elon: "Yeah, our default plan is we pay – we start paying off our debts. I don't mean refi-ing them, I mean paying them off. For example, there's a convert that's coming due soon, a couple hundred million, $900 million, something like that. We expect to pay that off with internally generated cash flow."
He specifically mentions the $920m convertible bonds due in March 2019, which have a $359.87 conversion price which might as well be exercised by note holders. (There's other convertibles worth $230m up this November, but the conversion price is a lot higher at $560.64.)
The next convertible notes after that are due in March 2021. You are right that they could change their mind by then, Elon's promise is by no means binding, but it's still 2.5 years off, and by that time they'll likely have excess cash they have no idea what to do with - I expect them use the cash to pay for the notes.
I.e. what Elon announced in the CC is basically similar to a stock buyback program. All of this kind of got lost in the $420 going-private noise, but it's now their baseline policy with regarding to dilution.
Basically Elon announced that from now on Tesla will try to follow the 'Amazon model': expansion through internal cash generated. If they pull this off then this gives Tesla broad independence from Wall Street and from potentially hostile sources of financing.
You mean Europe... It's only Great Britain that drives on the wrong side of the road, and they're out on March 19th
Ireland also have left-hand traffic as do the non-Tesla island countries Cyprus and Malta. The set of European island countries that has right-hand-traffic is to my knowledge limited to Iceland (from 1968).
All of continental Europe has right-hand-traffic, this includes islands that are part of a country with a continental land border (e.g. Zealand, Corsica, Crete). Since Gibraltar has right-hand-traffic (adopted due to its land border with Spain), the UK is an exception to this observation. But its normal for the UK to be an exception, so that is kind of an expected exception.
The problem is that you tracked less liquid stock exchange and made conclusion.
Try others in Europe:
Fact Checking
Well-Known Member
So a train just arrived full of dry powder...
Come on, Elon. Go back on Joe Rogan and this time do a line of coke
Maybe a Moody's downgrade, one day before the October production and deliveries letter, or a SEC ruling against Elon? Because Jim Chanos might still have some strings to pull and might still have some influential Yale pals on quick-dial?
Because when Moody's did a downgrade back in March, four days before the delivery letter it wasn't ridiculous enough, and the Moody's analysts covering Tesla want to establish the dubious career-limiting track record of having downgraded the third ever trillion dollar U.S. company right before one of their best quarters, with ominous warnings about bankwuptcy, twice?
My imagination is quite lively when it comes to potential negatives influential shorts might be able to come up with!
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Fact Checking
Well-Known Member
I'm wondering, how do market makers on these exchanges maintain their inventory of TSLA shares, do they immediately go over into the NASDAQ pre-market? That doesn't appear to be the case as the NASDAQ pre-market volume is only around 2k shares, but maybe it was $TLSA purchases/sales of European customers to European customers, clearing locally?
Come 2019H2, the current German EV incentive drops 4k€ (to 0), a drop more than twice that of the US incentive at the same time (i.e. 3750$ - 1875$ = 1875$). So from an incentive maximizing point of view, it would make sense for Tesla to make good on their prediction to start delivering Model 3 to Germany in 'Early 2019'.
Full disclosure: As a day 1 (or 2?) Model 3 reservation holder in Germany, I have a delivery prediction of 'Early 2019'.
However, once 2170 is no longer production constrained, it would make sense to switch due to higher margins. Maybe they`ll come out with a more significant S/X update in 2019 which includes the interior refresh as well.
So a train just arrived full of dry powder...
Come on, Elon. Go back on Joe Rogan and this time do a line of coke
My train is coming on Friday. I'm counting too on BS and market irrationality.
Fact Checking
Well-Known Member
Well, I think it makes sense to carefully parse what Elon and JB said about this in the 2017/Q4 conference call:
Analyst: "Yes. Thank you. It sounds like from the letter that you could do more than 100,000 S and X in 2018, but you're constrained by the 18650s. And I'm just curious what would it take to see the 2170 cells in these vehicles?"
Elon: "Yeah."
Jeffrey B. Straubel: "Well, this is JB. It's something we've of course contemplated, but it's quite a large change to the architecture of the module and the battery pack overall. And while the 18650 supply is somewhat of a cap at about 100,000 units per year, even just a few months ago we didn't feel that expanding and making some long-term bets on expanding that supply with Panasonic in Japan was really the right risk. It's something we could consider, but right now we're pretty happy with that balance and it matches our other production capabilities and our other investments."
Elon: "Yeah."
Jeffrey B. Straubel: "Well, this is JB. It's something we've of course contemplated, but it's quite a large change to the architecture of the module and the battery pack overall. And while the 18650 supply is somewhat of a cap at about 100,000 units per year, even just a few months ago we didn't feel that expanding and making some long-term bets on expanding that supply with Panasonic in Japan was really the right risk. It's something we could consider, but right now we're pretty happy with that balance and it matches our other production capabilities and our other investments."
I believe JB would have mentioned it if the changes went beyond the battery pack. Changing the battery pack is of course still a major change, but it's still a lot better than significant changes to the chassis - which would basically require a re-design and re-qualification of the whole car and would require major tooling changes as well in Fremont, because chassis and interior dimensions would change as well.
Given that 2170 has lower mass per kWh, I believe their plan is to fit it into the form factor of the existing battery pack with very few changes required on the chassis and elsewhere (beyond battery pack integration and maybe the cooling compressor: increasing the cooling compressor's capacity would make sense anyway).
Plus Occam's Razor: I'm pretty sure they already knew that 2170 would fit when they picked 21700 as their form factor back in 2016. I mean, killing the 'easy' expansion path for the Model S/X would have been an unforced error of epic proportions...
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My train is coming on Friday. I'm counting too on BS and market irrationality.
Okay, based on the feedback so far, let's request that the universe schedule the "highly negative Tesla market event" for Monday
I'm buying always in Europe because it is cheaper for me. I think that you are right about local clearing. When the NASDAQ is open then always prevail the exchange with higher volume which is Nasdaq in this case.
Fact Checking
Well-Known Member
Okay, based on the feedback so far, let's request that the universe schedule the "highly negative Tesla market event" for Monday
I think it's enough if it's a big Tesla event: business media will find a clever way to spin it into a highly negative event, they are quite resourceful when it comes to that!
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