TSLA Market Action: 2018 Investor Roundtable

[SO16]

I am pretty sure, that if I ask the question "is it just me", that everyone will certainly pile on and says "YES!",, but

Is it just me that doesn't think that this latest announcement about the "31K$ Mid Range Model 3" is a good thing.?

As I look at it, we weren't expecting ANY lower cost car for many months, because the demand and delivery of the HIGHER priced cars was strong enough to fill ALL that Tesla could produce. And, why wouldn't you just sell those cars to at least DOMESTIC buyers, when the tax credit is the highest for at least the next couple months? It's same vehicle deliveries - hopefully, MAX production and it's going to be higher revenue and margin overall.

Now, we get the announcement that one can order NOW and GET that new CHEAPER car with the FULL tax credit (and the funky/fuzzy math they use to indicate the price is only 31K ((IN CA mind you and IF you factor in five years or gas savings - I've ALWAYS hated how they present pricing that way))..

Add to that that it is IMHO MOST likely that this is the same battery pack, not just the same size and shape but with the same cells. They have done this before its fine, but the input costs are the SAME. They just turn off access to some capacity. Like they are turning off access to some performance as well. And yet, it's COSTS them the same so the margin on these vehicles will be compressed a bit. Small bit, but every bit counts.

So, again - most likely JUST ME but I see this as a DEMAND problem for now. At least seasonally, if not overall. If they already have to somehow lower market pricing to move vehicles at the production rate they have risen to or the supply they have produced, well then we have a much bigger problem. Not one that can't be fixed, but in the near term - it would be a problem.

Let the flames begin.

Chanos was recently spouting that the 35k should be available now. And you say by lowering the price, it is considered a demand problem.

My god. It TRULY is a “damned if you do, damned if you don’t” situation.

 

[ValueAnalyst]

VW is building an all-electric vehicle factory for 300,000 cars per year in China

 

[bdy0627]

I am pretty sure, that if I ask the question "is it just me", that everyone will certainly pile on and says "YES!",, but

Is it just me that doesn't think that this latest announcement about the "31K$ Mid Range Model 3" is a good thing.?

As I look at it, we weren't expecting ANY lower cost car for many months, because the demand and delivery of the HIGHER priced cars was strong enough to fill ALL that Tesla could produce. And, why wouldn't you just sell those cars to at least DOMESTIC buyers, when the tax credit is the highest for at least the next couple months? It's same vehicle deliveries - hopefully, MAX production and it's going to be higher revenue and margin overall.

Now, we get the announcement that one can order NOW and GET that new CHEAPER car with the FULL tax credit (and the funky/fuzzy math they use to indicate the price is only 31K ((IN CA mind you and IF you factor in five years or gas savings - I've ALWAYS hated how they present pricing that way))..

Add to that that it is IMHO MOST likely that this is the same battery pack, not just the same size and shape but with the same cells. They have done this before its fine, but the input costs are the SAME. They just turn off access to some capacity. Like they are turning off access to some performance as well. And yet, it's COSTS them the same so the margin on these vehicles will be compressed a bit. Small bit, but every bit counts.

So, again - most likely JUST ME but I see this as a DEMAND problem for now. At least seasonally, if not overall. If they already have to somehow lower market pricing to move vehicles at the production rate they have risen to or the supply they have produced, well then we have a much bigger problem. Not one that can't be fixed, but in the near term - it would be a problem.

Let the flames begin.

I think long term this is a positive development. I would expect it to improve the overall model 3 ASP. In the short term, I understand the negative take on it. The one particular thing that I don't currently understand is that I thought Tesla was all sold out through the end of 2018. Now, with the delivery estimate of 6-10 weeks for the mid range 3, Tesla is indicating they are not. Did they not get enough orders for the long range vehicles to take them through the end of Q4? On the other hand, 6 weeks is the soonest someone could receive the mid range 3. In reality, it may well be that these are not delivered until 10 weeks, after the end of Q4. I'm guessing the 6 week timeline is a little optimistic and it will be closer to 10 weeks than 6. I don't think Tesla is guaranteeing anyone ordering the mid range 3 that they will receive it by the end of the year. There is a valid argument to be made about short term cell supply constraints that this move addresses in a positive way.

 

[mongo]

My posit is that they are trying to aggressively deplete the excess RWD units and the LR RWD simply wasn't doing it fast enough. By knocking $5k off the price I think they are expecting to deplete their stocks more quickly -- turning stock into sold inventory is going to be needed to maximize earnings.

Naturally, I'm quite possibly wrong. It is just a supposition and I'm fully aware of that. But any alternate should account for known factors.

MR is a reduced cell LR pack, it is not a software limited LR.
Elon Musk on Twitter
LR RWD still available this week
Elon Musk on Twitter

 

[TradingInvest]

Only thing I can think of is that some might be worried that the smaller margins on this lower-priced version will hurt the bottom line.

I don't think so. For Q4, the likely impact is 10,000 LR switch to 10,000 MR, reduce revenue by 40 million, but also reduce cost by 20 million. On the other hand, the saved battery will allow more cars be built. The overall bottom line impact should be positive 20 million.

 

[Right_Said_Fred]

where's the "sad, but true" pessimist rating? I won't call you a troll, but I agree with pessimist. I feel like that quite a lot. I think in the 5 to 20 year time frame $TSLA will do well. Not so sure about the next few years though.

Which is a reminder that I'm not really investing in $TSLA for the money. I'm doing it because I believe it is seriously undervalued (note my expectation in long term) and I think it is an amazing company that I want to have an interest in. If I was just in it for the money I would look for companies without ethics, morals or any concern about legalities.

Definitely right about Tesla being undervalued. Look at Netflix. Less turnover than Tesla, slower growth than Tesla, not hugely profitable ($400 mln last quarter), but a market capitalisation that is almost 3.5 times as high (153 bln versus 45 bln). Ofcourse, if Netflix continues growing its fixed costs for productions will be divided over many more customers. But still.

 

[bdy0627]

Honestly though it feels as if some large institution is suppressing the price to gobble up more. The price action is almost predictable. Sell at open, buy 3 hours later. Every single day.

Also, as @FactChecking posted earlier, there are a huge number of puts expiring today. Many hedge funds want this stock lower. There is a lot of money riding on it. If they are able to keep it down today, my WAG is that the heavy selling pressure may well let up early next week.

 

[bdy0627]

Only thing I can think of is that some might be worried that the smaller margins on this lower-priced version will hurt the bottom line.

Keep in mind the narrative on the bear side regarding Tesla deciding to "give up" on FSD as an option. That's likely providing some selling pressure on the stock today.

 

[Ulmo]

I don't think so. For Q4, the likely impact is 10,000 LR switch to 10,000 MR, reduce revenue by 40 million, but also reduce cost by 20 million. On the other hand, the saved battery will allow more cars be built. The overall bottom line impact should be positive 20 million.

How many cells do they need to make a Medium Range vs a Long Range? We can calculate how many more vehicles this allows them to sell. At first I was going to say we can also guess how much of these cells will be sent to Tesla Energy instead of Long Range Model 3's, until I reminded myself that they use a different chemistry and dedicate whole cell manufacturing lines to each chemistry, so that probably isn't shifting; we can presume that the cells being made will go into Model 3's.

 

[Singuy]

Chanos was recently spouting that the 35k should be available now. And you say by lowering the price, it is considered a demand problem.

My god. It TRULY is a “damned if you do, damned if you don’t” situation.

Oh just wait until Tesla opens up orders for overseas. "Demand exhausted in the U.S! Tesla Now Looking Overseas To Squeeze Out Every Last Drop Of Order For All The Unsold Piles Of Cars In Abandoned Parking Lots"

Shorts can blow me.

 

[Freder Reeve]

Keep in mind the narrative ..likely providing some selling pressure on the stock today.

maybe, but this price is providing some buying pressure on me : O

 

[humbaba]

I think long term this is a positive development. I would expect it to improve the overall model 3 ASP. In the short term, I understand the negative take on it. The one particular thing that I don't currently understand is that I thought Tesla was all sold out through the end of 2018. Now, with the delivery estimate of 6-10 weeks for the mid range 3, Tesla is indicating they are not. Did they not get enough orders for the long range vehicles to take them through the end of Q4? On the other hand, 6 weeks is the soonest someone could receive the mid range 3. In reality, it may well be that these are not delivered until 10 weeks, after the end of Q4. I'm guessing the 6 week timeline is a little optimistic and it will be closer to 10 weeks than 6. I don't think Tesla is guaranteeing anyone ordering the mid range 3 that they will receive it by the end of the year. There is a valid argument to be made about short term cell supply constraints that this move addresses in a positive way.

Keep in mind that the LR RWD was still 4 week delivery. They were only (potentially) sold out for the year on AWD. Again, this comes back to my thesis that they wanted to accelerate depleting inventory of RWD motors and felt that the MR would 1) lower price and thus increase demand, and 2) enable greater output despite the battery bottleneck.

 

[AndyH]

So Tesla moves closer to the goal of a cheap mass-produced car for the masses and the market rewards it with a drop based on some fud about fsd. All will be well in the long run but I'm beginning to think that the stronger pr-department some people have been whishing for could be good thing.

It doesn't have to work lika at other carmakers. It can focus on information about environmental issues and the bigger picture. Showing off Teslas advancements in technology would be benifital aswell.

 

[humbaba]

MR is a reduced cell LR pack, it is not a software limited LR.
Elon Musk on Twitter
LR RWD still available this week
Elon Musk on Twitter

Exactly.

 

[MarcusMaximus]

Add to that that it is IMHO MOST likely that this is the same battery pack

Given Tesla’s official statements on the matter, the only problem with that is that it’s false.

And, with that being false, some more interesting possibilities open up. Like, for example, how we know that production is currently battery cell constrained(at a max 5500 LR battery packs per week). If you reduce the number of cells per pack, then you increase the number of cars you can make.

 

[Nocturnal]

If it was lagging in sales it was only because they missed the appetite for AWD. You could get an LR RWD with 4 week delivery time, unlike any AWD vehicle. They clearly were able to supply them readily to any buyer.

However, the L3MR allows them to pump out even more units thanks to the reduced cell count in the pack. Obviously, Tesla is expecting there to be higher demand. One can argue that this is about price (LR RWD was too expensive) or more rapidly consuming the excess rear wheel drive units, or whatever else, but at the end of the day we don't actually know anything other than:

1) L3MR output should be greater than LR RWD
2) Tesla expects to sell them

[edit: stupid typos]

That's what I meant. Their capacity for LRD was greater than purchase demand. (whether due to underestimating AWD demand or overestimating LRD demand) I see lots of people poo pooing the price difference between MR and LR RWD, $4k is not insignificant to many car buyers, especially in the 35-40k range.

 

[humbaba]

How many cells do they need to make a Medium Range? We can calculate how many more vehicles this allows them to sell. At first I was going to say we can also guess how much of these cells will be sent to Tesla Energy instead of Long Range Model 3's, until I reminded myself that they use a different chemistry and dedicate whole cell manufacturing lines to each chemistry, so that probably isn't shifting; we can presume that the cells being made will go into Model 3's.

It isn't going to be quite right, but simply using range ratios should be good enough for this sort of speculation. That gives ~19% throughput increase

 

[bdy0627]

@GerberKawasaki
Maybe I read this wrong. But Jonas at MS just put out a note that Tesla will do over $700 mil in cash flow Q4. That’s huge. The tide has turned folks. $tsla

Once this gets out there more and more, I would think we will see quite a bit of covering heading into the ER.

 

[tivoboy]

I think long term this is a positive development. I would expect it to improve the overall model 3 ASP. In the short term, I understand the negative take on it. The one particular thing that I don't currently understand is that I thought Tesla was all sold out through the end of 2018. Now, with the delivery estimate of 6-10 weeks for the mid range 3, Tesla is indicating they are not. Did they not get enough orders for the long range vehicles to take them through the end of Q4? On the other hand, 6 weeks is the soonest someone could receive the mid range 3. In reality, it may well be that these are not delivered until 10 weeks, after the end of Q4. I'm guessing the 6 week timeline is a little optimistic and it will be closer to 10 weeks than 6. I don't think Tesla is guaranteeing anyone ordering the mid range 3 that they will receive it by the end of the year. There is a valid argument to be made about short term cell supply constraints that this move addresses in a positive way.

At this point, we have more than just anecdotal reports that the delivery estimates, and the actual delivery dates can be significantly different-delivery date being much sooner. I doubt at this point that Tesla would put out there that this new MR3 only costs "31K after federal and CA tax credits/rebate" that they aren't prepared to deliver it by EOY.

I've noted actual people whom I've met and discussed their delivery with (both on the street and at the Fremont delivery center) that in the past 3-5 weeks, they have ordered and received the car sometimes in DAYS if not a couple weeks only. Granted that is HERE in the bay area, so easiest to connect a produced car with a local buyer. Faster and FASTER receipt of funds.

Again, I think we have an at least SHORT TERM demand problem DOMESTICALLY related to either seasonal or economic reasons. But, it may present in earnings and forecasts (still no date yet) and market expectations.

At the moment, the market DOES seem to have decided. NSDQ was up nearly 1%, TSLA down 2.3%, and I remind ya'll we're now down 25$ from 283 where we were WEDNESDAY - 2 days ago.

 

[Remus]

No. I said it's not necessary to build a Model 3 like car, to prove that you can build compelling cars. That's a drive-train independent statement. I also said, that others have started to prepare for the production of compelling EVs, but are not there yet. One might suppose this is partially, because they are not ok with others eating their lunch. It's easy to undestand, if you read what i wrote and not try to interpret the things between the lines, that have not been said. ;-)

Totally, because nobody is interested in maybe offering a competor to the best selling cars in terms revenue in the biggest car market in the world. And that's because they don't need to, since they are already building compelling cars making perfect good profits.

I mean you see when GM saw Ford's first mustang made a killing they never even thought about building a mustang like car to prove they can build cars, because they were already profitable.

And Intel has never showed any interest in building an ARM competitor because Intel is perfectly OK with their vastly profitable business.