TSLA Market Action: 2018 Investor Roundtable

[ThereAre4Cars]

It will go up more in the rest of the world than the US.

Part of the reason the US has around half the S&X demand is that the US is also home to 41% of the worlds $1m+ net worth individuals (I'd bet most S/X owners a classify as such). The US however is home to only 20% of it's $100,000+ net worth club:

Credit Suisse Publikationen

Worldwide, the number of people worth $1m+ (potential Model S/X owners) is ~40 million. The number of people worth $100k+ (potential Model 3 owners) is ~500 million.

This is why worldwide Model 3 demand should be 2-3x US demand, IMHO. China is number 2 in $100k net worth individuals which is why it was likely #2 for a Gigafactory. Europe is probably equal to US/China hence then getting a GF too.

Thanks for that. I had been kind of modelling in my head that model 3 would follow the distribution of sales of S/X, but this is a convincing approach to me in general and moves me more towards this direction. It will be interesting to see what the split is. They really are gonna end up spending a lot covering the service geography.

 

[Words of HABIT]

It will go up more in the rest of the world than the US.

Part of the reason the US has around half the S&X demand is that the US is also home to 41% of the worlds $1m+ net worth individuals (I'd bet most S/X owners a classify as such). The US however is home to only 20% of it's $100,000+ net worth club:

Credit Suisse Publikationen

Worldwide, the number of people worth $1m+ (potential Model S/X owners) is ~40 million. The number of people worth $100k+ (potential Model 3 owners) is ~500 million.

This is why worldwide Model 3 demand should be 2-3x US demand, IMHO. China is number 2 in $100k net worth individuals which is why it was likely #2 for a Gigafactory. Europe is probably equal to US/China hence then getting a GF too.

IMO next to no one with a net worth of $100k is buying is buying a M3. If we use net worth of $1M as starting point, then from the chart provided there is an addressable market of 17,350,000 M3 in USA alone.

 

[Intl Professor]

Fairly sure it would also be illegal in CA. Maybe they could dig a pit?

Shazam! This is a job for the boring company. But what if they find oil? Or, better yet, learn how to relieve the stress of earthquakes without the surface twitches? Or...?

 

[RobStark]

. Making a car more manufacturable doesn’t mean less safe. I think the Munro critique was entirely constructive, even if not entirely correct.

You think Tesla engineers have never heard of/never seen 1 piece wheel wells?

Never considered it? Made a 3 piece wheel well for no good reason?

 

[Intl Professor]

There may be growth seen in ‘classic’ cars for some of todays ICEs.

Our M3 is already a classic car.

 

[RobStark]

Does this mean the watermelon supply will decrease? Will we see an increase in watermelon prices?

In Shanghai? Yes.

 

[UrsS]

They have made the safest car, but each car has been difficult to manufacture, especially ramping up. Making a car more manufacturable doesn’t mean less safe. I think the Munro critique was entirely constructive, even if not entirely correct. Throwing all criticism into the same bin with the haters is not helpful. It can be hard when there is so much made up or hyperbolic criticism, but soothe consumer reports braking issue and Grohmann’s early work was eye opening to Elon.
Not all of the Munro critique was on target, but some issues like the trunk assembly or the wheel well assembly sound like opportunities to reduce construction steps and increase production rates and increase productivity while improving quality.

Deducting from what Tesla has put out over time (4- 5 years of development) about Model 3 production they thought about ease of manufacturing a whole big lot. But the safety of the car - more precise of the people inside - was always top priority. So what makes you think that Model 3 should be re-designed for better safety by some outsider?
I'm sure that the 'complicated' assembly of the rear wheel well for example is fully justified by the 2 criteria above, followed by the first. The suggested single stamp version would not fit the second (safety) criteria. And the entire car is designed and manufactured like that - no compromises on safety.
I could point out many ways to cut cost of manufacturing - but most likely every one of them would cut into safety or reliability. I did not develop or design the car - Tesla did.
Don't get me wrong, there is always ways to improve even the best of designs. Just the folks of traditional car manufacturing seem to me the wrong ones to improve something way beyond their 'comprehension'. Thinking out of the box, like Elon does, is needed here. And they did, and they will

 

[KarenRei]

Luckily, Elon might know a guy (himself) who knows a guy (SpaceX facility engineers) about building in marshlands and similar environments in places near water that have the potential for high winds (Boca Chica and KSC/CCAFS launch pads)...

Not in any way demeaning them, but what buildings exactly has SpaceX built at Boca Chica and KSC/CCAFS? Not that either site is reclaimed land in a polder in a subsiding city famous for its increasing rate of floods... but regardless, what buildings exactly have they built even ignoring that? They've only installed a few pieces of outdoor hardware at Boca Chica, and they retrofitted the pads (but not buildings) at 39A and SLC-40. The sites were built by the US government in the 1960s.

Again, don't interpret this as "Tesla / SpaceX don't know how to build buildings". I don't mean this in any way, shape, or form. I'm only bringing up that there are risk factors beyond their control at the Shanghai site. E.g. if there's a levee overtopping, that's not a condemnation of Tesla's design and construction work - but having several meters of water flow into their site certainly would affect them greatly.

Having helped with both flood evacuations and flood cleanups, I have a healthy level of respect for the power of water.

 

[JRP3]

Electrolyte is applied in a manner pretty similar to lime on wallpapers, and it should never dry!

I'm not sure how lime is applied to wallpaper but I doubt it's injected into a cylinder or pouch in a sealed environment.

 

[Artful Dodger]

That second one's a rumor coming from a guy (carsonight) who has contacts inside the Gigafactory.

Lol, so is the first rumor. Cheers!

 

[AZRI11]

I think I know who Fact Checking is. While he is not Elon, he is brilliant in his own way. And No, I will not reveal my guess here or via PM.

If he is not Elon then he must be Robert Downey jr.

 

[Artful Dodger]

I think I know who Fact Checking is. While he is not Elon, he is brilliant in his own way. And No, I will not reveal my guess here or via PM.

I too have recently updated my take:

 

[ggr]

In all seriousness though, painting is one of those things that is pretty much entirely automated... Is there a reason it couldn't be done in tunnels underneath the factory?

Bear in mind that the Fremont factory is only a few feet above sea level and quite close to San Francisco Bay. I know people weren't necessarily serious, but digging in permeable ground beneath an operating factory seems a bit daring.

 

[brian45011]

Tesla's "Impossible" Task #9: Paying Off Debt In 2018 & 2019 | CleanTechnica
Nice run down of debt repayment options. I'd quibble with the ordering. I think payment from operating cash should be first.

At any rate, I do think that this debt repayment issue is a major issue suppressing share prices. Moreover, suppressing share price make at least 3 of the 5 repayment options less desirable or less feasible. Two involve issuing stock while a third, taking out debt to refinance, is less workable when equity is weak. So that leaves cash from operations or from savings.

So Tesla does have many ways out, but the market doesn't seem to like the uncertainty of how this could play out.

The author missed some basic fundamentals that the market could be cognizant of:

• Did not understand (until corrected by a commentor) the distinction between market price of the 2018 notes versus market price of the common shares thus invalidating and rendering meaningless his first, and most favored, option.
• Did not mention that the BoD has the option of increasing the conversion factor from 2.7788 shares/note (~$359.87) to 3.9597 shares/note (~$252.54). Anyone notice the share price has been bouncing around the latter level recently?
• Ignored completely the non-recourse debt of $158.5 million in a term loan that matures in December,2018:

The VIE "Balance Sheet" detail on p31 of the 2Q18 shows (in $k):

Cash and cash equivalents $ 73,423
Current portion of long-term debt and capital leases $548,274​

• Did not mention that $82.5 million in related party promissory notes were due in August,2018. (It's likely Elon extended his $65 million, but Peter Rive could have followed his brother and taken his $17.5 million, plus interest at 6.5%/pa for the last six months.)

Elon has averred he will repay, not re-finance, the maturing notes/debt.

The Financial Times, which broke the story on KSA's PIF <5% investment precipitating the "go private at $420" tweet, reports:

Tesla, the US electric car company, has paid Rmb973m ($140 MM) to lease an 860,000 square metre plot of land near Shanghai’s port...

Funding for the Shanghai plant will mostly come from Chinese banks and Tesla’s own investment “will not start in any significant way until 2019”, company founder Elon Musk said in an August conference call with investors.
​

ft.com/content/c410875a-d296-11e8-a9f2-7574db66bcd5



It's unlikely the Chinese banks funded the entire Rmb973m ($140 MM) without some contribution from Tesla. (As of June 30, 2018, we had $2.24 billion of cash and cash equivalents. Balances held in foreign currencies had a U.S. dollar equivalent of $440.3 million and consisted primarily of Chinese yuan, euros and Canadian dollars)

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[KarenRei]

Bear in mind that the Fremont factory is only a few feet above sea level and quite close to San Francisco Bay. I know people weren't necessarily serious, but digging in permeable ground beneath an operating factory seems a bit daring.

Well, it's not like nobody has ever tunneled under water before But according to the DaftLogic atltitude map, the Fremont factory ranges from 4 to 13 meters above sea level.

 

[KarenRei]

Tesla, the US electric car company, has paid Rmb973m ($140 MM) to lease an 860,000 square metre plot of land near Shanghai’s port..

Given that foreign purchases of land are illegal in China, well, duh.

My issue with that CleanTechnica article was how focused they were on "paying down" accounts payable, as if it represents long-term debt. As Tesla grows, accounts payable should be expected to grow, not decline. It'll only decline if suppliers get the upper hand in negotiations with the company and can force shorter repayment terms on it - and do so at a rate faster than Tesla is growing.

 

[sub]

I'm pretty sure they can speed up the body shop stuff.

I am not at all sure that they can speed up the paint. Even with baking, you can't make paint dry faster than a certain speed (without damaging it) and you can't spray it faster than a certain speed (without getting bad results).

I think they may have to bite the bullet and build additional paint shop, which is both expensive and slow -- and worse, where the heck will they put it? I don't think they'll admit this need until Q1.

You’re assuming the bottleneck is spraying or baking though, what if it is getting cars prepped for paint and/or arranging cars after they are painted? The spray robots could be idle waiting for the next car. Not claiming to know, just pointing out a possibility.

 

[Artful Dodger]

I guess I missed the change to the 75 packs. Do you know when that happened?

Hi JRP3.

The software limited 60/75 KWh pack was introduced for the Model S on Jun 9, 2016 (and I lusted after it ;^)

Tesla’s new 60kWh pricing option is a software revolution, here are the exclusive details

 

[AWDtsla]

IMO next to no one with a net worth of $100k is buying is buying a M3. If we use net worth of $1M as starting point, then from the chart provided there is an addressable market of 17,350,000 M3 in USA alone.

Uhh, plenty of people with negative net worth are aiming for cars in the 35-45k range. 100k would be a small fortune to them. That describes many people graduating from college in the past few years.

 

[JRP3]

Hi JRP3.

The software limited 60/75 KWh pack was introduced for the Model S on Jun 9, 2016 (and I lusted after it ;^)

Tesla’s new 60kWh pricing option is a software revolution, here are the exclusive details

Sure I remember that, I don't remember nor can I find a reference to the 75kWh pack at the same voltage as the 100kWh packs.