TSLA Market Action: 2018 Investor Roundtable

[neroden]

Only if they are cell constrained. Considering Tesla is way behind M3 production forecast made late last year, they are unlikely to be cell constrained.

Dude, we were told outright by Panasonic that Tesla was cell constrained.

 

[bdy0627]

Baring truly clearly NEGATIVE or positive news, we have systematically seen PRE and early market trading up, and then the selling begins - and fall.

Yes - with TSLA down at these levels that's been a pretty consistent pattern. My emphasis was that this news was ambiguous rather than clearly positive or negative.

 

[Ulmo]

$TSLA is following the macro market:


There's lots of FUD food for today, but the business fundamentals are sound.

We just got another ~$25 million for the quarter with the Mid-Range battery push: 500 more Model 3's sold per week, 13% of $45,000 = $5,850, 10 weeks left in quarter * 500 * $5,850 = $30,000,000, but with ramp-up of the mid range model plus holidays, let's say 8 weeks to 9 weeks = $23,400,000 to $26,325,000. Either way, the annualized increase is $120 million per year; this isn't a one hit wonder to pump the quarterly profits; this model will be available long term, either through expression of a higher volume of buyers getting the less expensive Standard Range, or the higher margin Long Range, or whatever mix Tesla sells. Plus, more people will experience the Model 3 nationwide, which will increase those interested in purchasing a Model 3, but we hardly need more demand right now. Oh well!

Yes, I know that long term, the Mid Range may no longer be available, but the price points and volumes will be (out of whatever mix Tesla offers), which is what matters for revenue and profit.

 

[wipster]

That depends on what supplier.

It really depends on how difficult it would be finding a quick replacement for that supplier. I should hope that few, if any, of Tesla's suppliers are single or sole source as that presents a big risk to the supply chain. I would think Tesla would vertically integrate if that were the case.

 

[Chocochip]

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 apologise if this has been discussed already, I couldn't follow the thread today as much as I wanted mainly due to having things to do in the real world (I know, right?).

It really depends what you consider a demand problem. Tesla currently produces the Model 3 at an average rate of just over 5k/week (I'll assume this is correct). If they don't have matching demand at the same rate for the vehicles they produce at the prices those vehicles demand, they are forced to introduce cheaper versions into the mix. It's really that simple. Demand for 4k/week is insufficient at the moment to absorb the production volume.

This in no way means that demand for the premium versions has "dried up", as Anton decided to conclude and thus reveal either his strong bearish bias or his ineptitude as an analyst, or both. The production mix has to be adjusted to meet demand. Tesla is not trying to starve the market for its premium products by limiting production, quite the contrary. They plan to flood the mid-size luxury sedan market with as many cars as they can make, and once they reach temporary saturation they change the mix.

Another aspect to consider is that some of the initial reservation holders will NOT purchase a top-end version of the M3 no matter how long they're forced to wait, simply because it doesn't make sense to them financially. If a cheaper M3 doesn't become available, they simply move on. That would translate in Tesla missing revenue opportunity, and it needs to be avoided.

tl;dr: Demand for the LR+PUP versions (and up) has not dried up, it simply can't keep up with current high production volumes. Also, Anton doesn't understand again.

 

[KarenRei]

It really depends on how difficult it would be finding a quick replacement for that supplier. I should hope that few, if any, of Tesla's suppliers are single or sole source as that presents a big risk to the supply chain. I would think Tesla would vertically integrate if that were the case.

Isn't that Tesla's go-to solution for trouble with any third party?

 

[wipster]

Come on 3rd quarter results... wipster needs a bigger birthday present than just a blue wave (although blue House AND Senate would be nice too)...

 

[neroden]

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.

We're working from guesswork on several things:
1 -- US / Rest-of-World split in reservations
2 -- new reservation rate (did the "we guarantee delivery by end of year if you order by Oct 15" get many more?)
3 -- cancellation rate (did the Q3 end-of-quarter delivery hell tick off a lot of people and make them cancel? Honestly, probably. Might have been enough to be material)
4 -- number of people waiting for SR (I guessed 1/3, but others guessed 1/2)

This is a lot of unknowns, and my estimate still had them finishing the LR reservation list in MID-December. I It could easily be filled in mid-November instead.

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.

 

[Unpilot]

It really depends on how difficult it would be finding a quick replacement for that supplier. I should hope that few, if any, of Tesla's suppliers are single or sole source as that presents a big risk to the supply chain. I would think Tesla would vertically integrate if that were the case.

I agree...of course there could be a supplier who is sole source AND an quick replacement could not be found...but let's hope Tesla has considered that contingency.

 

[wipster]

Isn't that Tesla's go-to solution for trouble with any third party?

Yep, and in their case, probably a good strategy... you can't let a single source hold you hostage.

 

[neroden]

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.

Dude, that's just normal (i.e. very high) volatility for TSLA. The market hasn't decided *anything*. TSLA has a R^2 so low that it doesn't really move with the market at all -- it does its own thing. But it has high volatility.

I haunt the Model 3 forums. Tesla's finally starting to catch up on the old reservation holders. Referring to a "demand problem" remains total brain-damaged lunacy.

 

[Unpilot]

This in no way means that demand for the premium versions has "dried up", as Anton decided to conclude and thus reveal either his strong bearish bias or his ineptitude as an analyst, or both

Actually he is both...and a lousy writer.

 

[neroden]

So my guess on SP movement today is that the market views the mid-range release as a sign of weak demand, views the removal of FSD from the ordering process as a sign that Tesla is scrapping FSD plans, coupled with some classic shorting. That sound about right to others?

Never attribute meaning to short-term stock movements.

If you're an expert like Papafox and can spot the telltale signs of manipulative trading, then, OK, you can attribute meaning to it. He was convincing.

But in generaly, 99% of the time someone says "The stock moved because WHATEVER", it is wrong. Stocks wiggle around for emergent reasons which are untrackable most of the time.

 

[Carl Raymond]

Special Circumstances...
Election and all, call for an advanced earnings call date without notice.
Catch the shorts napping, thinking they can short at $255 - the hide of them.
Go on Elon. You know you want to.

Or maybe just drop into a tweet how many thousand orders you've received for the Mid Range model 3, and your plans to make it the USA's top selling sedan by December. That would probably do it. Cheers.

 

[Ulmo]

I apologise if this has been discussed already, I couldn't follow the thread today as much as I wanted mainly due to having things to do in the real world (I know, right?).

It really depends what you consider a demand problem. Tesla currently produces the Model 3 at an average rate of just over 5k/week (I'll assume this is correct). If they don't have matching demand at the same rate for the vehicles they produce at the prices those vehicles demand, they are forced to introduce cheaper versions into the mix. It's really that simple. Demand for 4k/week is insufficient at the moment to absorb the production volume.

This in no way means that demand for the premium versions has "dried up", as Anton decided to conclude and thus reveal either his strong bearish bias or his ineptitude as an analyst, or both. The production mix has to be adjusted to meet demand. Tesla is not trying to starve the market for its premium products by limiting production, quite the contrary. They plan to flood the mid-size luxury sedan market with as many cars as they can make, and once they reach temporary saturation they change the mix.

Another aspect to consider is that some of the initial reservation holders will NOT purchase a top-end version of the M3 no matter how long they're forced to wait, simply because it doesn't make sense to them financially. If a cheaper M3 doesn't become available, they simply move on. That would translate in Tesla missing revenue opportunity, and it needs to be avoided.

tl;dr: Demand for the LR+PUP versions (and up) has not dried up, it simply can't keep up with current high production volumes. Also, Anton doesn't understand again.

All of your calculus has to happen after considering battery cell supply constraints. I.e., Tesla is selling mid-range batteries in order to make more cars because they can't make the battery cells fast enough to keep up with demand and the speed of the rest of their manufacturing. Tesla can make battery packs and cars faster than they can make the cells that go into those battery packs and cars, thus they are reducing the number of cells per pack and reducing the price, picking up a new piece of market share. Win win. Eventually, this will be baked into the product mix with the Standard Range and Long Range, but for now, ramp up is still in effect, so Mid Range is a good compromise. Mid Range is also a compelling product for the majority of Tesla buyers (who do not have mountainous driving needs/behavior).

 

[M3Rider]

Oh. Yeah, of course they are. Traditionally, the way really big, really good day traders got out of this trap was to buy a seat on the stock exchange, and then trade as much as they liked without commissions.

@Carl Raymond
There's another way if commissions are a concern

I'm not sure how they do that, but they recently stated they would like to pass on savings to their customers, so did not look like temp action.
But what do I know.

 

[gtrplyr1]

Traditional automakers cutting forecasts ... hmmm ... could this have ANYTHING to do with pressure from so upstart car companies ?

CNBC reporting the $45k Tesla as if they lied about the 35k version .... Phil Lebeau mentioning tax credits as if that is the $35k version they promised ... it's NOT. How stupid are these reporters ?

According to Lebeau , Daimler was cutting forecasts citing tougher emissions standards by the EU .... wow what does it take for people to put 2 and 2 together ?

Cheers to the longs

 

[EVMeister]

The stupidity of said reporters really is baffling. Either that or they know they're lying. Either way, it's trash.

 

[tivoboy]

Come on 3rd quarter results... wipster needs a bigger birthday present than just a blue wave (although blue House AND Senate would be nice too)...

;-).. I think many of us would just PEE! And I'm already missing a prostate!

 

[neroden]

The leaf, bolt, and model 3 are readily available in the U.S.

Not really. I'll give you "readily available in parts of the US". (I check on local Leaf and Bolt availability every so often. It's... poor.)

I agree that model 3 demand is fine and will likely remain so for at least a couple of years. That doesn't mean that Tesla won't continue to pull modest demand levels to assure smooth demand across markets.

That's fair enough, but the most important levers here IMO are actually to smooth out deliveries across different markets *within the US*, which has been a total cluster**** of logistics failures so far.

Also, part of the reason Model 3 demand will remain good is Tesla's inability to meet projected production volume.

Certainly true.

In 2017 I predicted Tesla would make 250,000 total vehicles in 2018. I also predicted last year that Tesla will make a half million vehicles in 2019. That was pre-tent, and is now looking overly optimistic. I can't believe that a car company in the 21st century could fail at building a GA line.

Yeah, they did ***** up the construction of the assembly line, didn't they? There was some warning of that, and I saw the warning (I knew you shouldn't pack all the stations together supertight like Musk was planning to, as it incurs massive expense if you need to replace one station) and I blithely figured that they'd work it out, which I guess they did.