TSLA Market Action: 2018 Investor Roundtable

[ValueAnalyst]

Yes, they do, but they're not supply constrained. They're demand constrained, as in, the market needs only so many of them. And that's no where close to what you might assume to get to a Billion dollars in GAAP profits.

I know you know this @generalenthu, but I remind everyone that my prediction is for $1B GAAP profits in 2H18, not in any one quarter. I can see the wording easily being altered, as it usually happens.

$1B GAAP profits in 2H18, due to higher ASP/volumes, ZEV/GHG credits, recognition of some deferred Autopilot revenue and profits, as well as benefit from Q2 cost cutting measures. I'm not claiming that I have superior knowledge; I may be wrong, but this is my estimate. FWIW.

 

[EVNow]

So which homework was left undone before the Financial Times kicked off the SP run up at 12:18 pm EDT? Elon's tweet was at 12:48 pm EDT and was sent to be fair to small retail investors. If anything, that's what Wall St. is pissed about, they want their insider trades to be legal, to be exclusive, and to be private.

See the message EM posted on why taking private will not happen. Some of the reasons could have been anticipated if he had talked to experts - about how it would be difficult to let small investors be part of the private Tesla or how it would be difficult for some FIs to invest in a private company.

I couldn't care less about SP changes because of the tweet nor about why Wall St might be pissed. Infact I agree with what FDR said about Wall st.

I ask you to judge me by the enemies I have made.

 

[KarenRei]

The sales pitch on the Tesla solar panel vs competitors is

1) They are more attractive

2) Tesla can sell you a complete solution, installed and warrantied by one company.

Solar Panels, inverter, control unit, Battery Energy Storage, and EVSE ( electric vehicle service equipment), and BEV.

If one subsystem fails that manufacture can't blame another for the failure.

Anything goes wrong you just call Tesla and they take care of it.

I think it's much simpler... in the long term.

1) Solar panel prices are falling.
2) Labour costs are not (significantly) falling.
3) Consequently, labour will make an increasing share of the costs of a solar install.
4) Making a roof, and putting solar panels on it, is more labour than just making a solar roof.
5) Consequently, a solar roofing product becomes increasingly attractive for new and replacement roofs as costs go down over time.

It is, of course, all dependent on how well Tesla can bring down the costs on its solar roofing products. But I really think they will be able to over time, thus giving them an unbeatable advantage over solar products that have to be mounted atop an existing roof.

And bring costs down enough? Then all roofs go solar. A market worth trillions.

 

[hobbes]

IIRC chill mode and speed limit can be locked down with a PIN code? That would solve the "teen driver dilemma", right?

I'd absolutely go for the Model 3: beyond active and passive safety features the Prius only weighs 1.2-1.3 tons, while the Model 3 is 1.7 tons, which is a significant advantage in vehicle to vehicle collisions not captured in any of the safety ratings...

Selfish it may sound, but in a vehicle to vehicle collision, all other things equal, you want to sit in the heavier one.

And consequently posing a greater threat to everyone around you, especially as an unexperienced driver. Just saying (from the point of view of an everyday cyclist). I know I might act differently if this was regarding kids of mine, but this reminds me of parents around here driving their kids to school because cycling is too dangerous (because of all the car traffic). But enough off topic.

 

[SO16]

The more appropriate question is what other manufacturer is so pressed to meet a delivery target they need help from their customer base to get cars delivered?...There isn't one.

If Tesla is around a century like the other auto manufacturers and still needs help, I would agree. Tesla simply hasn’t been around long enough to have the infrastructure in place for such massive demand. During the Model 3 reveal, the demand ended up being over twice as much as the most optimistic estimate within Tesla. One cannot just snap their fingers and produce a half million cars and deliver them. Especially when only being around a bit over a decade.

Tesla always sets high targets. Something other companies should do but instead set expectations low and somehow Wall Street is impressed by that.

 

[Artful Dodger]

if he had talked to experts

Which experts would you trust not to leak the discussions thereby allowing trading on insider information?

Further, would would be legal responsible for those leaks? Elon avoided all that by going public and then outlining the process. And he did so at a time that preserved retail shareholders right to know information material to TSLA.

If you held shares, and did not trade on the rumors, you were not damaged. That is the end.

 

[EVNow]

The more appropriate question is what other manufacturer is so pressed to meet a delivery target they need help from their customer base to get cars delivered?...There isn't one.

That's because they employ upward of 50,000 people (a.k.a. dealerships), pay them tons of money to sell/deliver vehicles to the customers. If they could get volunteers to do some of this, which other manufacturer wouldn't use the help ?

 

[EVNow]

Which experts would you trust not to leak the discussions thereby allowing trading on insider information?

Not everyone leaks information and trades illegally. Infact, most don't. That's who companies use when they are preparing for M&A.

 

[beachbum77]

If Tesla is around a century like the other auto manufacturers and still needs help, I would agree. Tesla simply hasn’t been around long enough to have the infrastructure in place for such massive demand. During the Model 3 reveal, the demand ended up being over twice as much as the most optimistic estimate within Tesla. One cannot just snap their fingers and produce a half million cars and deliver them. Especially when only being around a bit over a decade.

Tesla always sets high targets. Something other companies should do but instead set expectations low and somehow Wall Street is impressed by that.

We all know "demand" was twice as much because they promised a very stylish $35,000 BEV with a $7,500 U.S. tax credit. A car that will never exist unless they start delivering them in Q4. A $35,000 starting price is no longer on the website except in an old press release. "Bait and switch" comes to mind.

I have better odds of being the first man on Mars than I have of ever being able to buy a new $35,000 Model 3 plus tax and license (even in black with aeros).

 

[beachbum77]

That's because they employ upward of 50,000 people (a.k.a. dealerships), pay them tons of money to sell/deliver vehicles to the customers. If they could get volunteers to do some of this, which other manufacturer wouldn't use the help ?

For liability reasons, none of the dealers would allow it. I know I would not have done it. I would also want control of the narrative. You lose that with volunteers without proper training.

 

[ValueAnalyst]

I also observe that the Supercharger roll-out has all but stopped for the moment, so I would assume they've stopped most discretionary capex expenditure.

I expect Supercharger *location* roll-out to slowdown, since V3 at existing locations alone will more than double the fleet size that the same number of locations can support. Note that 99% of Americans already live within 150 miles of a Supercharger, and 95% of charging is done at home. Tesla's CapEx need on this front is, in my opinion, overestimated by both bears and bulls alike.

 

[CorneliusXX]

If Tesla had $330M in cash handy, they could have bought 860,000 shares on Tuesday out from under those that would harm them. And put a body slam on those blighters.

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It would feel good but not make much difference when we see short interest bouncing around by 5+ million over the course of the Tesla price cycle. If they could throw $3bn at the shorts then supply might decrease meaningfully but if they had that much it should go into another gigafactory and make 20x the initial investment.

Also I think the comments stating that Teslas capex requirements will be incremental are probably underestimating Elons ambition. If he has a spare few billion of profit from the current plan in a few years he can easily find things to spend it on. Buying additional battery r&d to accelerate the energy density of batteries to a point where they can be used in planes could soak up as much money as you would want to spend. Then he could spend billions more designing and building out manufacturing for said planes. Then he can move on to cargo ships which will also require prodigious sums of R&D.

His goal is to accelerate the transition to sustainable transport for everything but rockets.

Other equipment that needs to be replaced with battery power. Agricultural equipment, road construction equipment, mining trucks, diesel locomotives.

 

[MarcusMaximus]

The more appropriate question is what other manufacturer is so pressed to meet a delivery target they need help from their customer base to get cars delivered?...There isn't one.

No other manufacturer delivers directly to customers, so that question isn’t really applicable. You may as well ask “What other auto manufacturer is facing delays on their solar panels?”

 

[neroden]

To address your and @neroden's arguments, I believe an important observation is that Tesla is using the density of Stores and Service Centers to manage demand, in part.

The location of service centers is not a secret, and owners self-select depending of whether the nearest service center is close enough.

In that sense I think the primary parameter that Tesla "has" to scale up is not density primarily, but capacity and waiting time. Those are mostly opex and not capex costs.

Once Tesla thinks they want to scale up the addressable market, they'll increase service center density as well - but until demand is so strong this is an optional thing to do.

It will happen eventually, I'm sure - I'd expect a big expansion push in mid 2019, but I wanted to point out the significant difference between service center "capacity" and "density".

I hope they do it by mid-2019. It's actually suppressing demand *nationwide* because of the "what if I break down in Buffalo" problem. I wouldn't worry so much about suppressing demand except that it's starting to become a *reputation* for Tesla. Even aftrer they have enough service centers, people will think of them as "the car you can't get serviced".

 

[NikeWings]

The more appropriate question is what other manufacturer is so pressed to meet a delivery target they need help from their customer base to get cars delivered?...There isn't one.

What about Amazon turning to its customers to help deliver packages to support its overwhelming order demand?

 

[KarenRei]

We all know "demand" was twice as much because they promised a very stylish $35,000 BEV with a $7,500 U.S. tax credit. A car that will never exist unless they start delivering them in Q4. A $35,000 starting price is no longer on the website except in an old press release. "Bait and switch" comes to mind.

I have better odds of being the first man on Mars than I have of ever being able to buy a new $35,000 Model 3 plus tax and license (even in black with aeros).

I'm sorry, could you clarify... since they can sell every last higher margin Model 3 they can make, with only a third of their global market even able to order, despite them trying to scale up production as fast as possible.... exactly why should they switch focus to their lowest margin configuration?

This sort of concern trolling gets old fast. Because if someone on the net says "Where's the $35k Model 3??", 99% of the time it's a person who doesn't personally give a rat's arse about getting a $35k Model 3, they just want something to criticize Tesla for (almost nobody buys a completely unoptioned vehicle regardless, of any brand). But it's especially glaring because Tesla is making Model 3s as fast as they can. They're highly supply limited, yet you seem to think they should address the lowest-margin portion of the demand with their limited supply. It's absurdity to the highest order.

 

[neroden]

Really? In the last 2 months: 8 have started construction, 10 have gotten permits, and ~30 new locations have opened. I don't call that all but stopped.

That's "all but stopped". The crucial North Dakota route has been postponed until Spring, apparently (it can't be constructed during the winter), disappointing many and leaving a major gap. I'd expect the permitting to start up again in Q4, but they won't be digging in the ground until Spring up there.

 

[neroden]

That's because they employ upward of 50,000 people (a.k.a. dealerships), pay them tons of money to sell/deliver vehicles to the customers. If they could get volunteers to do some of this, which other manufacturer wouldn't use the help ?

Actually, more accurately, all the dealerships are "volunteers", except they're "volunteers" who are allowed to mark the cars up, mark the cars down, profiteer, and talk to customers about pricing and contracts, not just about the car features.

*This is actually one of the problems* which the traditional car companies have. The dealerships often spread misinformation. The car companies don't own them so they don't have that much control.

 

[beachbum77]

I'm sorry, could you clarify... since they can sell every last higher margin Model 3 they can make, with only a third of their global market even able to order, despite them trying to scale up production as fast as possible.... exactly why should they switch focus to their lowest margin configuration?

This sort of concern trolling gets old fast. Because if someone on the net says "Where's the $35k Model 3??", 99% of the time it's a person who doesn't personally give a rat's arse about getting a $35k Model 3, they just want something to criticize Tesla for (almost nobody buys a completely unoptioned vehicle regardless, of any brand). But it's especially glaring because Tesla is making Model 3s as fast as they can. They're highly supply limited, yet you seem to think they should address the lowest-margin portion of the demand with their limited supply. It's absurdity to the highest order.

When other manufacturers introduce a new model you can order any configuration you want from a "strippee" to a fully loaded unit with every option. No restrictions. Most dealers stock units across the board for different types of buyers.

That is not how Tesla has done business. When they began taking reservations there was no explanation that the $35,000 model would not appear in time for U.S. buyers to take advantage of the full FITC. Tesla made no effort to correct articles in the press that espoused a $27,500 Model 3 after the FITC. Of course at that point they also said they would build 200,000 Model 3's in 2017. It does not matter that it may not make economic sense for Tesla to build it. You promised it, you build it in at least small quantities.

How many reservations do you think Tesla would have received if they had correctly stated the starting selling price would be $50,000? Tesla knew exactly what the response would be to $35k vs.$50k.

Inventory of U.S. spec units are accumulating. People are being told to contact their local delivery centers to find out what units are available for immediate delivery. Does that sound supply limited to you? Read the threads Karen.

Should Tesla have been prepared to start shipping units to Europe by now? Absolutely. It appears they miscalculated U.S. demand for LR RWD and P units. A simple review of Troy's spreadsheet makes that pretty obvious.

 

[neroden]

When other manufacturers introduce a new model you can order any configuration you want from a "strippee" to a fully loaded unit with every option. No restrictions.

This simply isn't true. Certain combinations of options appear to be available but aren't actually manufactured at all. Been there, dealt with that with mutiple brands.