TSLA Market Action: 2018 Investor Roundtable

[neroden]

Me too.

I firmly believe three to four base colors are enough for such a sought after car. Sprinkle in some exotic color every now and then and market those accordingly as Limited Editions. Let people pre-oder the next n Limited Editions in advance and determine the appropriate schedule by popularity.

Easy money, increased desire, reduced complexity.

Hell, they could even give it the hypercar treatment and sell primed-only cars as a standard tier.

If they sold primed-only cars, I'd get one and have it painted purple.

 

[winfield100]

remember, as of end of -->_August_ 2018<--, and mostly US and European data
I expect graph to get "Squeezier" when Sept data released (ie >84.7%)
(sweet Flying Spaghetti Monster, test drove a performance Tesla 3 w/auto steer)
(FSM is your brain and spinal cord)

 

[neroden]

I'd put it this way: Panasonic is going to extend Gigafactory cell manufacturing capacity up to an about 12,200 packs/week rate by the end of 2018, when measured in Standard Range battery packs.

The LR/SR mix is unknown at this point, and clearly Tesla did not expect such high demand for the LR version - and is, as we all are (including Panasonic), pleasantly surprised about it.

Eventually they'll reach steady state:

• If the long-term take rate between SR and LR is going to be a 50%/50% then the Gigafactory output of 35 GWh at the end of 2018 is going to be enough for about 9,950/week Model 3 battery packs,
• a split of 60%/40% of SR/LR will shift output to about 10,325/week,
• a split of 70%/30% makes it 10,740/week, etc.

I believe those calculations are roughly what Tesla made back in 2016 when they planned for 35 GWh output - but neither they, nor we can know what exact options mix consumers are going to opt for.

As for the Powerwall/Powerpack assembly line that was re-purposed to make Model 3 battery modules: once the new Grohmann machines are installed in the next 1-2 months this line can make Storage/Energy products again, to utilize any cell output that isn't used to make Model 3's. The introduction of the Standard Range version will reduce the average battery usage of every Model 3, so there should be more cell output by that time at the latest.

Until then, higher than expected demand for the Long Range version of the Model 3 is going to tie up Gigafactory output.

BTW., I'd not be surprised that once Tesla hits 6k-8k packs/week output that Panasonic would add another three lines in the first half of 2019, to extend from 35 GWh to 43 GWh, and then another 3 lines to get to ~50 GWh. There's clearly enough growth potential on the Storage/Energy side, plus there's the 2170 use of the Model S/X refresh that could happen in late 2019 ...

We learned these Gigafactory capacity and expansion details shortly before The Tweet, and I'm not sure whether the (positive) implications are fully priced in yet.

They're going to have to expand the factory footprint early next year. If we assume 2 LR cars for every 1 SR car (which I think is reasonable), it'll take 17 lines to get to 10,000 per week. With room for only 20 lines in the existing footprint, that leaves 3 lines for Powerwall/Powerpack, which is IMHO clearly not enough (it's only about 600 Powerpacks per week).

 

[Artful Dodger]

Mining more gold er, lithium...

"When complete GF1 is going to have 77 lines of cell making machines, with a 78th for training and will be producing more than 150 GWh of cells per year."

h/t carsonight on DISQUS, Sep 9, 2018

 

[mongo]

Mining more gold er, lithium...

"When complete GF1 is going to have 77 lines of cell making machines, with a 78th for training and will be producing more than 150 GWh of cells per year."

h/t carsonight on DISQUS, Sep 9, 2018

Super rough numbers:
150 GWh/ 10 hours a day /300 days a year = 50MW of solar needed just to charge them...
Good thing the roof will hold a 70 MW system.
500 MWh a day would be a daily $15,000 dollar electric bill at 3 cents per kWh.

 

[ggies07]

I have been told that the short range Model 3 was ready to go this September but was delayed because of the unexpected popularity of the long range and all wheel drive units.

You mean I waited in line for hours and then 2 years and people with more money got to just buy one out right? Well:

 

[Fact Checking]

If we assume 2 LR cars for every 1 SR car (which I think is reasonable), it'll take 17 lines to get to 10,000 per week. With room for only 20 lines in the existing footprint, that leaves 3 lines for Powerwall/Powerpack, which is IMHO clearly not enough (it's only about 600 Powerpacks per week).

So for 10k/week Model 3 there's other constraints, fortunately with low capex:

• Here's a recent CleanTechnica article about Fremont constraints, when the factory was inspected by independent car industry experts: Tesla Model 3 Production Has 25-33% The Number Of Steps "Found In Traditional Auto":
  • "So, what do Galliers and Ellinghorst think about the big question: can Tesla sustain, and hopefully increase, its production rate? “Based off our tour and what we saw, we see no reason why Stamping and General Assembly should not be able to handle [seven to eight thousand cars per week] today, and even potentially 10k units, with very little incremental Capex. We believe the same is also true for the Paint Shop when it comes to reaching 8k units a week, with some incremental capex potentially required to get to 10k units."
  • "For Body, our understanding is that incremental capex is required (our impression is in the tens and not hundreds of millions) in order to get to both 8k units and eventually 10k units."
• I.e. Fremont paint shop capacity is somewhere around 8k/week total cars at the moment, and it requires a paint shop expansion to get to 10-12k/week of 8k-10k Model 3's plus 2k Model S/X per week: the so-called "South Paint Shop" expansion. It should be a low capex project according to both Tesla and Galliers and Ellinghorst.
  
• By reducing the color options temporarily I think they are certain that they can maintain 8k total sustained, maybe even more. Once they've got the south paint shop extension they'd be ready for 10k Model 3's/week - a 12k/week paint shop capacity.
  
• 2:1 LR:SR rate corresponds to 66%:33%, which would scale the 35 GWh 13-lines the cell output by end of 2018 to around 9,365 packs/week - comfortably 8,500/week with current constraints, possibly higher (9,000/week) with improved staffing.
• To get from 9,000/week to 10,000/week requires only two more lines I believe: with 15 lines the theoretical peak is 10,800/week, which should allow 10k/week even with capacity utilization inefficiencies.
• That leaves 5 lines for Storage/Energy, or about 13 GWh per year output - should be enough for some time, as they are only at the GWh level currently.
• Eventually both the Chinese and the European Gigafactory should start making batteries, which will help with smoothing global demand spikes.
• I also think that we shouldn't make overly narrow assumptions about the LR:SR mix, at least for 2019: AWD already saw much higher take rates than expected - people are clearly willing to pay for options they find useful, and for many use-cases LR has even higher utility than AWD, on a per dollar basis.
• There will be European and then world-wide rollout of the Model 3 as well, which will all give spikes that move demand towards more expensive options, for months at a time, maybe even more.

All of these snippets were released in the time frame of "The Tweet", "The Alleged Tears" and "The Puff Of Weed He Did Not Inhale" drama, so I think they got lost in the noise of those much bigger events, which are all now yesterday's boring news.

(These production capacity and capex disclosures are probably not priced in yet into $TSLA either, unless you consider big drops in the stock price as 'pricing in positive news'. )

Anyway, this all is probably a bit premature to speculate about - the current big question is Q3 deliveries and production: a negative surprise will reset a lot of the above assumptions and make them more conservative, a positive surprise would create room for faster capex for example.

Only about ~10 trading days left and we'll find out!

 

[Fact Checking]

Minor correction:
Panasonic's PW/PP cell line was converted to making cells for the 3.

Ok, I missed that detail, and that's very interesting - and it should make it easier for Tesla to ramp up Storage/Energy again, which was mothballed a bit in Q1/Q2 to help the Model 3 ramp-up.

The module assembly equipment is not compatible between the two types of products.

Yeah, I was wondering about that, and brushed it aside with: "they reprogrammed the lines creatively" - but that was way too naive, flawed logic on my part: the modules/packs are way different...

Yes, Panasonic re-purposing cylindrical cell lines for the different automotive chemistry makes total sense.

(BTW., also bravo for Panasonic operational security: nothing of that leaked over the months, until they decided to disclose it when they announced the expansion plans.)

 

[KarenRei]

So for 10k/week Model 3 there's other constraints, fortunately with low capex:

• Here's a recent CleanTechnica article about Fremont constraints, when the factory was inspected by independent car industry experts: Tesla Model 3 Production Has 25-33% The Number Of Steps "Found In Traditional Auto":
  • "So, what do Galliers and Ellinghorst think about the big question: can Tesla sustain, and hopefully increase, its production rate? “Based off our tour and what we saw, we see no reason why Stamping and General Assembly should not be able to handle [seven to eight thousand cars per week] today, and even potentially 10k units, with very little incremental Capex. We believe the same is also true for the Paint Shop when it comes to reaching 8k units a week, with some incremental capex potentially required to get to 10k units."
  • "For Body, our understanding is that incremental capex is required (our impression is in the tens and not hundreds of millions) in order to get to both 8k units and eventually 10k units."
• I.e. Fremont paint shop capacity is somewhere around 8k/week total cars at the moment, and it requires a paint shop expansion to get to 10-12k/week of 8k-10k Model 3's plus 2k Model S/X per week: the so-called "South Paint Shop" expansion. It should be a low capex project according to both Tesla and Galliers and Ellinghorst.
  
• By reducing the color options temporarily I think they are certain that they can maintain 8k total sustained, maybe even more. Once they've got the south paint shop extension they'd be ready for 10k Model 3's/week - a 12k/week paint shop capacity.
  
• 2:1 LR:SR rate corresponds to 66%:33%, which would scale the 35 GWh 13-lines the cell output by end of 2018 to around 9,365 packs/week - comfortably 8,500/week with current constraints, possibly higher (9,000/week) with improved staffing.
• To get from 9,000/week to 10,000/week requires only two more lines I believe: with 15 lines the theoretical peak is 10,800/week, which should allow 10k/week even with capacity utilization inefficiencies.
• That leaves 5 lines for Storage/Energy, or about 13 GWh per year output - should be enough for some time, as they are only at the GWh level currently.
• Eventually both the Chinese and the European Gigafactory should start making batteries, which will help with smoothing global demand spikes.
• I also think that we shouldn't make overly narrow assumptions about the LR:SR mix, at least for 2019: AWD already saw much higher take rates than expected - people are clearly willing to pay for options they find useful, and for many use-cases LR has even higher utility than AWD, on a per dollar basis.
• There will be European and then world-wide rollout of the Model 3 as well, which will all give spikes that move demand towards more expensive options, for months at a time, maybe even more.

All of these snippets were released in the time frame of "The Tweet", "The Alleged Tears" and "The Puff Of Weed He Did Not Inhale" drama, so I think they got lost in the noise of those much bigger events, which are all now yesterday's boring news.

(These production capacity and capex disclosures are probably not priced in yet into $TSLA either, unless you consider big drops in the stock price as 'pricing in positive news'. )

Anyway, this all is probably a bit premature to speculate about - the current big question is Q3 deliveries and production: a negative surprise will reset a lot of the above assumptions and make them more conservative, a positive surprise would create room for faster capex for example.

Only about ~10 trading days left and we'll find out!

Yes, but we don't find out margins or SG&A in ~10 trading days :Þ

 

[ggr]

If they sold primed-only cars, I'd get one and have it painted purple.

Excellent taste.

 

[Fact Checking]

Yes, but we don't find out margins or SG&A in ~10 trading days :Þ

Yeah, but the delivery numbers will already give a nice preview about how the Q3 financials might look like.

They usually also add a nice list useful disclosures to the delivery/production letter. For example in the Q1 delivery letter they added this guidance:

"Tesla continues to target a production rate of approximately 5,000 units per week in about three months, laying the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow. As a result, Tesla does not require an equity or debt raise this year, apart from standard credit lines."​

The Q2 delivery letter disclosed:

"Both orders and deliveries for Model S and X were higher in Q2 than a year ago."

"We also reaffirm our guidance for positive GAAP net income and cash flow in Q3 and Q4, despite negative pressures from a weaker USD and likely higher tariffs for vehicles imported into China as well as components procured from China."​

So I think/hope the Q3 vehicle production and deliveries letter is going to be interesting too, and hopefully it won't set the stage for a bear attack, like the Q2 letter did.

 

[ggr]

Utterly off topic, but so nice to see a positive Tesla article on BBC:

This woman drove her Tesla 20,396km around Australia

“The concern about the environment was front and centre. These cars are bloody expensive. But once you’ve paid for the car, your running costs are bugger all.” You tell ‘em Sylvia.

A short thread with a few photos is here on TMC:
Sylvia Round Australia in Bluey !
@wilsilly

 

[Zhelko Dimic]

I'd put it this way: Panasonic is going to extend Gigafactory cell manufacturing capacity up to an about 12,200 packs/week rate by the end of 2018, when measured in Standard Range battery packs.

Remember this same capacity is shared with Tesla Energy

 

[Brian121]

You mean I waited in line for hours and then 2 years and people with more money got to just buy one out right? Well:

Patience, my friend, patience. If they make SR now, they die. If they make LR, Performance now, they live. And with so many shorts want Tesla to die, we certainly want Tesla to live, right?

 

[Brian121]

Patience, my friend, patience. If they make SR now, they die. If they make LR, Performance now, they live. And with so many shorts want Tesla to die, we certainly want Tesla to live, right?

I stood in Boston stored for 1 hours on 3/31 (??), and am still waiting, patiently, for my SR. But if I had to choose between Tesla being dead or delay delivery of SR, the choice is obvious.

 

[winfield100]

I stood in Boston stored for 1 hours on 3/31 (??), and am still waiting, patiently, for my SR. But if I had to choose between Tesla being dead or delay delivery of SR, the choice is obvious.

1 hour? I got to mall in Bethesda, Md @8:30 am (i'll be early, nope, already several hundred there) so i waited till end of line @ 12:39pm to register, chatting with folks in line. (excellent fun for very last day at work before retirement)

 

[Rammstein]

I've been noticing this trend amongst my friends. The ones that have always been into cars are not into Teslas. Anyone else notice this trend? I've never been much of a car guy until Tesla came around.

 

[Hogfighter]

Lots of negative delivery experiences will hit the headlines eventually. It’s important to keep in mind that these are growing pains. I’d be shocked if any significant # decide to not get a Tesla due to a bad delivery experience. Plus, we don’t hear of the thousands of good experiences each week.

Next will be the service centers. I can’t imagine Tesla is going to be able to keep up with the service demand, not to mention parts availability for the body shops.

With TSLA, it’s so crucial to decipher what is fundamentally material to the company, and what is not. Complexities with the X ramp was.....Elon taking a toke is not.

 

[K_Dizzle]

I've been noticing this trend amongst my friends. The ones that have always been into cars are not into Teslas. Anyone else notice this trend? I've never been much of a car guy until Tesla came around.

I’m noticing more and more car guys coming around actually. Also, obvisouly plenty of non motor heads love what Tesla represents are bing drawn in

 

[Hogfighter]

I've been noticing this trend amongst my friends. The ones that have always been into cars are not into Teslas. Anyone else notice this trend? I've never been much of a car guy until Tesla came around.

Over the years, I've noticed 10x more ‘non-car guys’ becoming Tesla guys, than ‘car guys’ not becoming Tesla fans.