TSLA Market Action: 2018 Investor Roundtable

[alloverx]

As for Murdoch getting Elon's old job, he might be perfect but everyone here is looking at politics. Its actually good for the board to have a wide selection of views but obviously have some common goals.

 

[Fact Checking]

Well... this is... something...

https://jalopnik.com/kanye-west-jumps-on-table-at-detroit-college-to-rant-ab-1829489198

Elon Musk Twitter followers: 22M
Kanye West Twitter followers: 28M

"+5 years of Tesla demand secured. Not contingent on a shareholder vote."

 

[beachbum77]

So now the narrative is not "hugely" profitable?

Anybody who was paying attention guidance shouldn't have been expecting hugely profitable for Q3...

If after burning up a huge portion of the pent-up demand only produces a small profit through some creative engineering of the levers, where is the sustainability? THAT is what is holding down the SP.

Does that language sound better to you?

 

[beachbum77]

What you are calling surplus inventory is not surplus at all. Many represent multiple use cars including testing cars [abuse to determine life span], demo drive cars for use in all stores around the world, crash testing cars, cars damaged in transport, cars used for purposes of training mechanics to fix, cars for all show room flores etc

You can call and use these cars for whatever purposes you want. They still represent an unrecovered cost to Tesla, will sit on the books as FGI, and represent unrealized profits.

 

[KarenRei]

What you are pointing out is pulling levers for an engineered profit. That does not point to a sustainable profit

Nor is it supposed to... on its own. Q3 is a snapshot in time on an upslope. Deliveries are on an upslope. Margins are on an upslope. Every quarter you go forward, things get easier for Tesla to turn a profit. Wherein significant efforts need to be made in Q3 to turn a profit, that doesn't mean the same needs to happen in Q4 or beyond.

Production rates on Model 3 will of course eventually settle down into their design steady state, and not only will future margins on Model 3 improvements slow, but said improvements will be eaten away by growing fraction of lower margin vehicles (only partially offset by adding in new options like air suspension and a tow package). But the short of it is, what's "engineering" to get that number greater than zero this quarter becomes business as usual down the road.

 

[CuriousSunbird]

Man, shorties have short fuses.

Let's not over-generalize. I never block or ignore-list anyone. Nor do I recall having lost my temper on this forum (restraining myself to a gentle admonishment of some of the more rabid denizens when necessary).

 

[MXWing]

If after burning up a huge portion of the pent-up demand only produces a small profit through some creative engineering of the levers, where is the sustainability? THAT is what is holding down the SP.

Does that language sound better to you?

Is there a ban on export of Model 3 worldwide that I didn't know or something?!?!

It needs to be programmed into peoples heads that MODEL 3 ONLY FOR SALE IN UNITED STATES AND CANADA (presently).

 

[scaesare]

If after burning up a huge portion of the pent-up demand only produces a small profit through some creative engineering of the levers, where is the sustainability? THAT is what is holding down the SP.

Does that language sound better to you?

I agree they won't sustain the current rate.

It will likely double in the next 12-18 months.

So, given the fact that you ignored my point about guidance, we can only assume what you are saying means:

1) You are attributing the current SP to ignoring guidance and instead expecting huge profitability

2) The actual guidance for deliveries was met

3) The guidance for the following year is for 2X Model 3'

4) Shorts apparently are pretending that guidance ALSO doesn't exist, and instead are short-sightedly assuming that current preduction dictates future profitability


Brilliant!

 

[KarenRei]

If after burning up a huge portion of the pent-up demand

[Insert reminder #389182 to Americans that there exists a world outside of America]

In Tesla's case, about 2/3rds of their market.

Also a reminder that Tesla is not yet offering vehicle leases, maintains only a sparse store network, does zero advertising, that word-of-mouth (which has worked brilliantly for Model 3) spreads proportional to the number of cars on the road, that many people prefer not to get a car that's in its first 1-2 model years, and about a dozen other things.

 

[CuriousSunbird]

And yet, this "reputable news organization" got the date of the settlement wrong. They said Saturday, Musk settled on Friday. What else did they get wrong?

And are they lying or just incompetent?

Trump says lying.

 

[beachbum77]

Cool, thanks, that's really useful - that table is what @avoigt should tweet out: at 5k/week rate the end of Q3 Model 3 inventory was 1,985 cars, which at a 5k/week run-rate is less than 3 days worth of inventory - and that includes all show room cars and test drive cars. (!)

Impressive end of Q3 Model 3 "inventory flush" done by Tesla: this should help cash flow as well.

Powerfully destroys the "unsold Model 3s" narrative.

Agree. Tesla was able to cut the quarterly surplus in half vs Q2 while achieving record production. They were also able to reduce the S & X global inventory as well by 641 units even with Chinese sales falling off a cliff. That took some serious effort.

 

[CuriousSunbird]

@CuriousSunbird When you get a chance. Could you watch this video and give thoughts (in it's entirety)? thanks

Out today but will try to get to it tomorrow (pls remind me if I forget).

 

[Remus]

What you are pointing out is pulling levers for an engineered profit. That does not point to a sustainable profit and I think the recent SP movement points to that uneasiness.

A profit similar to 3Q16 of $100-$150 million, when such a large portion of the pent-up demand was exhausted in Q3, will not drive the SP much higher. In fact, it could drive it down with an overall attitude of "is that all there is?". For a real SP bounce we need to see $500 MM to $1B, and based on Musk's email to employees that does not seem to be in the cards.

I believe Q3 may have suffered from the "law of diminishing returns". Where the extra push for 55,000 versus 50,000 or 48,000 deliveries actually cost so much it reduced the average profit per car once all expenses are tabulated. I also think the Model S & X deliveries were achieved with a high degree of discounting. We will see what the numbers show in a few weeks.

The overall report was not as good as I was hoping for. So we are now on the sidelines. We closed the remaining 50% of our Oct 5 calls yesterday morning on the early bump.

Thanks for providing the sentiment from there. If I am understanding it correctly it seems to be that Q3 is the best it's gonna get. Q4 and onwards they will get crushed because they can't make a profit on low margin models. What do you think about the demand of high margin cars from rest of the world? Is it too small to be considered relevant?

 

[davecolene0606]

As for Murdoch getting Elon's old job, he might be perfect but everyone here is looking at politics. Its actually good for the board to have a wide selection of views but obviously have some common goals.

If any candidates for Chair or the Board don't fully understand and fully embrace this...

Fire Away!

 

[CuriousSunbird]

The SEC stopped Elon tweeting anything yesterday..

Did Darth just switch sides? I am sure he was Tesla a couple of days back.

 

[tander]

The problem with the Model T scenario as you described above is that producing Model 3 SR is a zero sum game proposition.

Batteries that go into the Model 3 SR are batteries that don't go into 3P+ overseas or Powerwalls which are severely backlogged.

Yeah, I guess there is still a battery supply problem, but it probably won't always be that way. Kind of wonder how things are going with Panasonic? The long-term equation is basically do they want to go higher volume lower margin like Amazon, or lower volume higher margin like a traditional bookstore. Eventually they'll end up crushing most of the competition that doesn't adapt, and then start bumping margins back up once they are the 800lb gorilla.

 

[beachbum77]

[Insert reminder #389182 to Americans that there exists a world outside of America]

In Tesla's case, about 2/3rds of their market.

Also a reminder that Tesla is not yet offering vehicle leases, maintains only a sparse store network, does zero advertising, that word-of-mouth (which has worked brilliantly for Model 3) spreads proportional to the number of cars on the road, that many people prefer not to get a car that's in its first 1-2 model years, and about a dozen other things.

LOL... Yes, we know the rest of the world is out there. But we also know that U.S. sales represent half of all Tesla revenue.

Karen, I still expect to see Tesla open configurations for Europe this month (including Iceland). It makes a lot more sense to keep pumping out LR AWD and P models to other markets before introducing the SR version here in the U.S. What none of us have the visibility to see is how much of the remaining demand is waiting for either the LR or SR. Only Tesla has that data and no one has leaked it...yet. Troy last reported he does not want to include the SR waiters on his spreadsheet until the configuration can be ordered.

I still believe once the SR is introduced it will require the ordering of other options as well. The true $35,000 model is still a long time away IMHO.

 

[SO16]

So now the narrative is not "hugely" profitable?

Anybody who was paying attention guidance shouldn't have been expecting hugely profitable for Q3...

Why do you act shocked? The typical move the goal posts tactic.

 

[scaesare]

Why do you act shocked? The typical move the goal posts tactic.

Oh, I'm not shocked... I'm challenging the assertion because that's exactly what it is.

 

[CuriousSunbird]

Would using that $920 million to pay off an obligation before it is due violate any of the financial covenants (minimum cash balance, no preferential payments to 3rd parties, etc) in the Asset Based Credit Agreement and possibly accelerate repayment of that $1.6 billion debt?

I don't think it would be a preference (presumably the BoD is not anticipating a near-term bankruptcy) and as I recall the minimum cash requirement triggers off, inter alia, current debt, so it shouldn't hit that either.