TSLA Market Action: 2018 Investor Roundtable

[beachbum77]

And?

I'm not sure what you're not getting about this "demand far exceeds supply" issue. Unless you're trying to argue that Tesla doesn't actually plan to make unoptioned vehicles even after supply catches up to demand....

They have limited production capacity. Please explain why they should not utilize that capacity to its maximum gain so that they can improve their production rates as fast as possible, and thus work through the whole overall backlog as quickly as possible.

Karen you have read my production articles. I am sure you have double-checked my numbers. It is pretty easy since Tesla supplies the numbers each quarter that are used in my charts.

Supply already exceeds demand for certain Model 3 configurations here in the U.S. But no action seems to be happening to adjust. Just as they did in early 2017 Tesla has been building cars at full speed, ahead of actual orders. That results is imbalances. Many readers here and on my articles think Tesla builds only what has been ordered which is not the case and has never been the case since I began watching the numbers in 2016. I think it relates to issues with their paint process. They seem to be forced to build cars in batches by color. Then the ISA's do their best to match orders to produced units. It is the only way to explain why orders placed in April, May and June are still not filled, while others placed new orders earlier this month and have already taken delivery of their cars. You only need to spend a few minutes on Troy's spreadsheet or on the delivery threads to see what I am saying is true.

I do not expect Tesla to ever build an unoptioned Model 3 SR or LR. What we will see is an SR at about $39-$41,000 which will include PUP or AWD as standard equipment. Just as Tesla has done with the Model S and X where RWD is no longer an option. I say this because the Monroneys have already been altered. They no longer show a base $35,000 price plus options. They now shown a base of $49,000, $54,000 (recently increased to $55,000 or $64,000. As I said, that 2017 press kit link is the only place you will find any reference to a $35,000 Model 3. It has been completed removed anywhere else on the Tesla website.

 

[elasalle]

How about some examples? I was a Ford dealer. Never had anything I could not order unless a particular option was supplier backed up due to high demand. Even then it was just delayed, not "unavailable".

Any Ford dealers from the 1st 25 years of company startup around?

 

[Words of HABIT]

Car sales set to crash after dealers flood the market to beat new green tests
Interesting. Article states ICE manufacturers have been flooding their Dealer networks with cars before new emission standards come into effect due to VW Dieselgate. Since Tesla is the only auto manufacture that only reports figures once car is sold to individuals and all others report figures once cars are sold Dealers, last few months have of ICE auto sales have been exaggerated and soon they will need to reconcile the numbers, expecting a crash in sales. Perhaps this should make it to front back news as Tesla will certainly buck this trend.

 

[Artful Dodger]

Also I think the comments stating that Teslas capex requirements will be incremental are probably underestimating Elons ambition.

I hear you, but Elon's made his ambitions pretty clear during the 2018 Q2 Earnings Call:

James Albertine -- Consumer Edge Research -- Analyst

Good afternoon, and thank you for taking my question. And appreciate all the color you've been providing, wanted to dig a little bit deeper, though, in terms of capital spending plans. Considering your growth you've identified in China with the Model Y, we believe also in the EU, it's been discussed a factory there. How do you plan to fund all of this growth without going back to the capital markets to raise funds? And can you verify for us whether or not there is a notice from a regulator that would prevent you from raising outside capital? Thanks.

Elon Musk -- Chairman, Product Architect, and CEO

We do not ... we will not be raising any equity at any point, at least that's ... I have no expectation of doing so, do not plan to do so. For China, I think, our default plan will be to use essentially a loan from the local banks in China and fund the Gigafactory in Shanghai with local debt, essentially. And we certainly could raise money but I think we don't need to and we ... yeah, I think, it's better to ... it is better discipline not to.​

Elon has had his fill of Wall Street. If he can get the money he needs from Operations and low interest local loans, why would he expose Tesla to Wall Street shenanigans every again? Clearly, Elon estimates Tesla's CapEx requirements as deliberate and sustainable over the long term, w/o Wall St.

Cheers!

 

[beachbum77]

I picked up my Model 3 in Vancouver today. It was quite well-organized and everything went smoothly. They did say that later in the day as the deliveries pile up, delays start to happen but for the most part everything has been going well.

The interesting fact I wanted to share was that my DS told me that originally they were planning to do 900 Model 3 deliveries in September in Vancouver. That was increased to 1,100 a week or so ago and now the plan is 1,300 for the month (almost 50% increase from original plan)! And this is with 1 week left so she thought that number may increase again. She expects they will be doing some 150 cars/day next week.

Good news. I take it the $5,000 tax rebate fund is still giving payouts? Did you reserve your spot?

 

[beachbum77]

In what timeframe?

LOL... "when the SR is introduced". Whenever that time comes.

 

[beachbum77]

Car sales set to crash after dealers flood the market to beat new green tests
Interesting. Article states ICE manufacturers have been flooding their Dealer networks with cars before new emission standards come into effect due to VW Dieselgate. Since Tesla is the only auto manufacture that only reports figures once car is sold to individuals and all others report figures once cars are sold Dealers, last few months have of ICE auto sales have been exaggerated and soon they will need to reconcile the numbers, expecting a crash in sales. Perhaps this should make it to front back news as Tesla will certainly buck this trend.

Now you know why Ford and GM have been reducing their footprints in the EU.

You are mistaken about OEM's reporting sales to dealers. Dealers do not buy cars. They are on consignment to dealers financed by flooring lines of credit. Sales reports are to actual buyers.

 

[KarenRei]

Supply already exceeds demand for certain Model 3 configurations here in the U.S.

Yes, we've been hearing "demand for their current production is running out" from shorts since June.

It's as wrong today as it was then.

I do not expect Tesla to ever build an unoptioned Model 3 SR or LR

Well, at least this is a simple case of disagreement between you and I, rather than the ever-annoying "Where's the $35k Model 3??" concern trolling that we only ever get from shorts.

It's simple: the base version will be profitable.

• Two of the three teardowns conducted thusfar concluded this. And the one that didn't had some hilariously bad errors in it. Musk, specifically asked about the first of the three teardowns, replied that it was accurate. I see no reason to disagree. Details were provided in both of the first two teardowns that make it clear how the vehicle is profitable. The logic presented is IMHO quite sound.
• We also now have the leaked "Tripp" info (that he was trying to attack Tesla with) which, if accurate, gives us the price of battery modules last summer (not cells, whole modules). And it was in the $140s. Meaning an industry-leading cell cost not that much over $100. This further backs up analyst claims, based on Giga inspections, that they're well on their way to under $100 by the end of the year.
• Margins were neutral in Q2, in the middle of a major production ramp, with very high scrap and rework rates, and without any P and AWD in the mix. It's funny how shorts keep bringing up the high scrap and rework rates, not realizing that this strongly argues for high profitability as the production process matures. How much do you think throwing away just a single battery pack hurts margins? A lot, that's how much.
• Analyst visits to Fremont and Giga are in agreement that production rates can be significantly scaled up without new lines or major capital investments. Better utilization of existing production infrastructure = lower depreciation.

If the base version is profitable, then it would be utter lunacy to simply stop scaling up production volumes. If you can sell to more people by having a more basic version on offer, you do so. Period. You of course do what Tesla and other automakers have always done - try to tempt people into spending every penny they can afford on options by making the options really exciting. But ultimately, you sell to everyone who can afford something from you.

What you don't do, however, is start selling your lowest margin vehicles when you're heavily supply limited. You satisfy the highest-margin portion of the demand first and pump that money into expanding production. Any other strategy would be incompetence.

(The only thing I personally would do differently is to make a trivial, nominal volume of non-PUP SRs every quarter just to shut people like you up about the issue)

 

[SOULPEDL]

My experience "volunteering" to help with deliveries.
My experience "volunteering" to help with deliveries. : teslamotors
From Reddit.

TLDR: The guy showed up at a Tesla Delivery centre, he was asked to chat with people

Thank you, Thank you, Thank you...

I called sales earlier today, and they just took my contact info and said they'd get back (encouraging tone, but nothing). I couldn't get through service (delivery) at the time. Nice to have some direction now. Maybe I'll just show up tomorrow at service (Tempe Az). I'm a great talker and love to help people too. I'll go straight to the lounge now. I actually left my card with Scottsdale Sales months ago offering test drives (before M3's were avail) - not a single call so I don't expect a call on this either.

So now I'm thinking (for next quarter's bonus volume) I could help sell too. Thinking back as a potential buyer, I imagined if I were curious with lots of people waiting, I'd rather talk to an owner (or as well). Get the real scoop. I'd tell them they should get the 310 range because Supercharging from 1/3-2/3 is really fast. 100mi in 15 min (pics on my phone with $3.25 in the corner). That's all I need mostly in Az. By the way, that beach guy, quit feeding him... winfield, you won. It's kinda annoying just people arguing for the past 3 pages, he's raised on ice as a profession. Just sayin' (buried here).

I'd tell them EAP and FSD are worth it if you're curious or travel freeways and all about how Elon stands behind his products so FSD cars are getting a new AI chip and system... free next year. And every one of the M3 Premium options are worth it, even the glass roof here in Az when it's 120F. I know, I did it. That's what I'd want to know as a buyer. Then they can get the lowdown on financing and timing with sales.

I don't think I'll ask, I'll just do it then they can decide if I should leave or not. Unless someone tells me why not?

Let's go do this, people will know that owners are happy just being there... even if my summon still pisses me off!

 

[RobStark]

Car sales set to crash after dealers flood the market to beat new green tests
Interesting. Article states ICE manufacturers have been flooding their Dealer networks with cars before new emission standards come into effect due to VW Dieselgate. Since Tesla is the only auto manufacture that only reports figures once car is sold to individuals and all others report figures once cars are sold Dealers, last few months have of ICE auto sales have been exaggerated and soon they will need to reconcile the numbers, expecting a crash in sales. Perhaps this should make it to front back news as Tesla will certainly buck this trend.

Legacy automakers do not report sales to dealers as "sales"

Insideevs still reports sales of Cadillac ELRs that have been in inventory for years. That GM just recently reported as "sold."

They are sold once they are registered with local DMVs.

Sometimes, the OEMs push the dealer network to register and plate the cars while in inventory or to make them loaners in order to reach sales targets, sometimes to be the "number one selling X in Y region." But that is the exception rather than the rule.

 

[Sudre]

Really hasn't.

Tesla has to double the number of service centers in the US just to have geographic coverage. Service center problems are *nationwide*, in that people who live too far from a service center are finding service difficult, and no, mobile service doesn't solve the problem.

There is no plausible alternative to doubling the number of service centers. After that, they're close to done (a few big-city centers need to be larger, but really that's it). But they have to do the doubling.

I will add to this to say that my 2013 S has a clunk/crunch sound when I turn the wheel hard. Might be similar/same as the sound years ago that got a shim on a recall notice... still. What I want to say is I don't want to make an appointment because the one tiny little store/service department here in St. Louis is just swamped. I just feel guilty getting in their way. You can't even drive near the place without seeing Model 3's pouring out like there is a hole in the ocean. So I am waiting 'til after q3. The new much larger store should be opening any day now.

 

[CuriousSunbird]

That is not true! Please stop spreading wrong information:

VW did not deny and did not comment!

"Volkswagen selbst wollte das Angebot bisher nicht kommentieren. Daher lässt sich auch nur darüber spekulieren, welche Pläne die Manager des Konzerns mit ihrer Offerte verfolgten"
Musk lehnt dankend ab: Volkswagen wollte bei Tesla einsteigen!
[/QUOTE]

I don't think that Reality is spreading wrong information. You quote a no comment from an anonymous Volkswagen spokesman on Aug 28. However, on Sep 5 the Volkswagen CFO gave a specific denial. Here is the link (denial starts about 1:40):

 

[BenPrice]

I will add to this to say that my 2013 S has a clunk/crunch sound when I turn the wheel hard. Might be similar/same as the sound years ago that got a shim on a recall notice... still. What I want to say is I don't want to make an appointment because the one tiny little store/service department here in St. Louis is just swamped. I just feel guilty getting in their way. You can't even drive near the place without seeing Model 3's pouring out like there is a whole in the ocean. So I am waiting 'til after q3. The new much larger store should be opening any day now.

Cant remember where I heard it but believe chesterfield is late oct early November.

 

[CuriousSunbird]

I don't think that Reality is spreading wrong information. You quote a no comment from an anonymous Volkswagen spokesman on Aug 28. However, on Sep 5 the Volkswagen CFO gave a specific denial. Here is the link (denial starts about 1:40):

[/QUOTE]

Tat was a reply to avoigt's comment of Tuesday 8:03 am. Not sure why it didn't link properly.

 

[SOULPEDL]

She expects they will be doing some 150 cars/day next week.

That's about 1K/week in one city. How many cities are there?

Canadians rock! "...my home and native land." From Blind Bay, near Salmon Arm, Shuswap Lake myself.

 

[beachbum77]

Yes, we've been hearing "demand for their current production is running out" from shorts since June.

It's as wrong today as it was then.



Well, at least this is a simple case of disagreement between you and I, rather than the ever-annoying "Where's the $35k Model 3??" concern trolling that we only ever get from shorts.

It's simple: the base version will be profitable.

• Two of the three teardowns conducted thusfar concluded this. And the one that didn't had some hilariously bad errors in it. Musk, specifically asked about the first of the three teardowns, replied that it was accurate. I see no reason to disagree. Details were provided in both of the first two teardowns that make it clear how the vehicle is profitable. The logic presented is IMHO quite sound.
• We also now have the leaked "Tripp" info (that he was trying to attack Tesla with) which, if accurate, gives us the price of battery modules last summer (not cells, whole modules). And it was in the $140s. Meaning an industry-leading cell cost not that much over $100. This further backs up analyst claims, based on Giga inspections, that they're well on their way to under $100 by the end of the year.
• Margins were neutral in Q2, in the middle of a major production ramp, with very high scrap and rework rates, and without any P and AWD in the mix. It's funny how shorts keep bringing up the high scrap and rework rates, not realizing that this strongly argues for high profitability as the production process matures. How much do you think throwing away just a single battery pack hurts margins? A lot, that's how much.
• Analyst visits to Fremont and Giga are in agreement that production rates can be significantly scaled up without new lines or major capital investments. Better utilization of existing production infrastructure = lower depreciation.

If the base version is profitable, then it would be utter lunacy to simply stop scaling up production volumes. If you can sell to more people by having a more basic version on offer, you do so. Period. You of course do what Tesla and other automakers have always done - try to tempt people into spending every penny they can afford on options by making the options really exciting. But ultimately, you sell to everyone who can afford something from you.

What you don't do, however, is start selling your lowest margin vehicles when you're heavily supply limited. You satisfy the highest-margin portion of the demand first and pump that money into expanding production. Any other strategy would be incompetence.

(The only thing I personally would do differently is to make a trivial, nominal volume of non-PUP SRs every quarter just to shut people like you up about the issue)

It seems you are saying that if Tesla can keep selling heavily optioned LR cars they should hold off on SR units unless they generate a greater profit? That is a horrible idea. Every other automaker builds a full line of cars, trucks or SUVs. Each model can be ordered in a variety of price points.

Do you really think Tesla SR buyers are willing to wait until all demand is exhausted for LR? If that is the case Tesla should come out and say so that people can either cancel their SR reservations or settle in for a LONG wait. Every original program point has gradually faded away. Existing owners no longer get preferential treatment. The date of your order no longer matters either. Look at Troy's spreadsheet. Why are orders still open for cars from April and May? What has not been built since then? It's chaos at Tesla right now. The only customer that seems to matter is the one willing to take delivery right now who is paying cash or has a loan approved.

The internal financial position of a company should not dictate how they treat their customers. That kills customer loyalty in the long run. You can read today of groups of angry recent buyers over the sudden decision to offer free SC use for a year to people taking delivery before 10/1. While I understand the nature and timeframes of incentives, buyers do not always see it that way.

 

[SOULPEDL]

I'm guessing no one saw my secret msg...

 

[beachbum77]

List of things Tesla needs capital for:

1) Finishing Fremont scaleup for Model 3
2) Finishing Giga 1 scaleup for Model 3 and other battery devices
3) Getting Giga 2 up to meeting its obligations
4) Giga 2 scaleup
5) Giga 3 (Shanghai)
6) Giga 4 (Europe)
7) Model Y
8) Semi
9) Roadster
10) Increasing density of stores
11) Increasing density of service centres
12) Converting service centres to also be body shops
13) Major expansion of the mobile service fleet
14) Massive expansions to the supercharger network in its current locations, which will increasingly outgrow its capacity as the flood of vehicles continues
15) Expanding stores, service centres and superchargers into new markets all over the world.
16) Lowering margins (for example, undoing some of their recent Model 3 options price hikes)
17) Opening up lower margin Model 3 variants
18) Eventually, advertizing
19) "The $25k Tesla"
20) "Future products" (smart home integration hardware, electric aircraft, etc)
21) More gigafactories
22) Dramatically expanded production of grid products

But oh no, we're supposed to support dumping cash in order to make options traders happy...

Something we agree on! A stock buyback is a really idiotic idea.

That's quite a list. Do you really believe all of this cash can be internally generated? My rough guess is $20 billion for what you listed. Obviously this can be done over time but still, I do not see much of this coming from internal cash generation.

 

[gene]

Thank you, Thank you, Thank you...

I called sales earlier today, and they just took my contact info and said they'd get back (encouraging tone, but nothing). I couldn't get through service (delivery) at the time. Nice to have some direction now. Maybe I'll just show up tomorrow at service (Tempe Az). I'm a great talker and love to help people too. I'll go straight to the lounge now. I actually left my card with Scottsdale Sales months ago offering test drives (before M3's were avail) - not a single call so I don't expect a call on this either.

So now I'm thinking (for next quarter's bonus volume) I could help sell too. Thinking back as a potential buyer, I imagined if I were curious with lots of people waiting, I'd rather talk to an owner (or as well). Get the real scoop. I'd tell them they should get the 310 range because Supercharging from 1/3-2/3 is really fast. 100mi in 15 min (pics on my phone with $3.25 in the corner). That's all I need mostly in Az. By the way, that beach guy, quit feeding him... winfield, you won. It's kinda annoying just people arguing for the past 3 pages, he's raised on ice as a profession. Just sayin' (buried here).

I'd tell them EAP and FSD are worth it if you're curious or travel freeways and all about how Elon stands behind his products so FSD cars are getting a new AI chip and system... free next year. And every one of the M3 Premium options are worth it, even the glass roof here in Az when it's 120F. I know, I did it. That's what I'd want to know as a buyer. Then they can get the lowdown on financing and timing with sales.

I don't think I'll ask, I'll just do it then they can decide if I should leave or not. Unless someone tells me why not?

Let's go do this, people will know that owners are happy just being there... even if my summon still pisses me off!

I checked with Santa Barbara. They had a couple of owners helping familiarize new buyers with their Model 3's the last 2 days.. I already did this a few months ago for the better part of a day at Santa Barbara as my car was being serviced and they had a lot of deliveries. I called Santa Barbara today, they told me to just come down. Wednesday and then the next weekend. So...guys.....if the stock price goes through the roof on delivery numbers, someone owes me a beer!

 

[beachbum77]

That's about 1K/week in one city. How many cities are there?

Canadians rock! "...my home and native land." From Blind Bay, near Salmon Arm, Shuswap Lake myself.

British Columbia is going through what Ontario did in June: Rushing to beat a fund running out of money for EV rebates. That is the reason for the Vancouver push (along with EOQ).