TSLA Market Action: 2018 Investor Roundtable

[Cobos]

Apples to oranges:

• NUMMI was a fine plant, but at their peak they mass assembled cheap cars: the highest unit count were Toyota Corollas that had an ASP of $15-$20k.
• They also made Hummers, but with a much lower unit count.
• Much of the ICE powertrain was made elsewhere: engine, transmission, differentials, axles, etc.
• Seat production was outsourced as well.

So the value-add of the NUMMI factory was probably less than $10k per unit.

Under Tesla they are making $40k-140k premium vehicles there. Seats and a whole lot of other components are vertically integrated.

Tesla also has R&D and their corporate headquarters at Fremont - while neither Toyota nor GM did that.

So the value created at Tesla's factory is already probably 10 times that of the peak value-add of the NUMMI plant.

Comparing the NUMMI plant to Tesla's factory on a unit count basis is perhaps one of the most dishonest arguments of Tesla shorts and bears.

In terms of paint shop, apples to oranges again: Tesla uses robotic arm powder coating with several complex layers of paint. Corollas had perhaps two layers, made with much cheaper technologies and the result was not nearly as premium - so painting took less time.

Are you sure about the HQ and R&D? I have to say I'm a bit confused myself on what exactly is made inside the one lot called the Tesla Freemont factory. They used to have an HQ some miles away, about 30mins by car I think. I thought the seats were made across the road or down the road in another lot? What are they using the old Solyndra lot for now? Does someone have a properly marked map with all the subassemblies or whatnot marked somewhere? I'm just confused I think

 

[Chickenlittle]

Do you know why NUMMI used to be able to paint 500k vehicles per year under GM/Toyota while tesla struggle to cover the current volume?

Perhaps because that plant never produced near that volume of cars in a year, but why let facts get in the way of a good post?

 

[neroden]

Do you know why NUMMI used to be able to paint 500k vehicles per year under GM/Toyota while tesla struggle to cover the current volume?

This is an interesting question. If Tesla is putting on more layers of paint, they may actually require more space in the paint shop per line.

If they *aren't* taking up more space per line... that may mean there's unused paint shop space, which will allow them to build additional paint shop lines without building more buildings. There were some hints in the filings that that was actually the case. They may not have converted *all* the old paint booths to new lines yet.

FWIW, NUMMI topped out at 430K/year.

 

[Fact Checking]

Are you sure about the HQ and R&D?

You are right, corporate HQ is in Palo Alto (I have edited my comment to fix this mistake), but I believe the whole second floor of the main Fremont factory building is R&D?

 

[brian45011]

Do you know why NUMMI used to be able to paint 500k vehicles per year under GM/Toyota while tesla struggle to cover the current volume?

CARB

 

[Zaxxon]

Thanks, your right, it was the Dubai conference.

 

[EVMeister]

Very clever. I see what they did there...

 

[Fact Checking]

This is definitely true. Treatment of workers in China is probably not that different from countries like Bangladesh.

That's not true for almost all of China.

The thing is, China went through a fantastic period of 50 years of sustained non-stop economic growth and is now a highly industrialized, modern society where everyday living standards improved amazingly.

Chinese workers are immensely proud of that, and were China to hold "free and fair" elections today the current ruling party would likely win in a landslide. It's not a dictatorship in the classic sense.

Where China fails is that they don't trust their own electorate: they control the media and the Internet, they don't have a high opinion of multiparty democracies, they routinely violate individual rights when they believe it to be in the public interest, etc.

The ruling elite in China is actually more constrained than the ruling elite in the U.S. - they routinely execute corrupt officials, which is unheard of in the U.S.: members of Congress are exempt from insider trading laws and there's very few forms of corruption that are illegal. Buy political influence and the laws you want with money? No problem.

In China there's also a big rural vs. urban divide, not fully under control and not fully resolved.

But don't underestimate the results China has achieved so far: in 30 years it's not inconceivable that China will take the place of the U.S. and is going to be the world's scientific, R&D, economic and finance center.

 

[Chickenlittle]

This is an interesting question. If Tesla is putting on more layers of paint, they may actually require more space in the paint shop per line.

If they *aren't* taking up more space per line... that may mean there's unused paint shop space, which will allow them to build additional paint shop lines without building more buildings. There were some hints in the filings that that was actually the case. They may not have converted *all* the old paint booths to new lines yet.

FWIW, NUMMI topped out at 430K/year.

Correct. Hard to compare tesla to traditional factories. They are vertically integrated where as traditional factories just assembled parts made elsewhere which would mean less factory volume needed

 

[FS_FRA]

But don't underestimate the results China has achieved so far: in 30 years it's not inconceivable that China will take the place of the U.S. and is going to be the world's scientific, R&D, economic and finance center.

Full ACK and agree on this! ....and what about India in a good decade or so later?

OT - sorry!

 

[MarcusMaximus]

But don't underestimate the results China has achieved so far: in 30 years it's not inconceivable that China will take the place of the U.S. and is going to be the world's scientific, R&D, economic and finance center.

The only problem there is to really take the lead across the board, the party is going to need to loosen its hold on public opinion and speech. Their policies lead to promotion of rote learning, resulting in their people not gaining skills in creative and critical thinking.

 

[Chickenlittle]

Do you know why NUMMI used to be able to paint 500k vehicles per year under GM/Toyota while tesla struggle to cover the current volume?

Average production of NUMMI plant was 6000 cars a week over 25 years. 430 thousand was their record for a year

 

[traxila]

I'm fine with deals to sell them good projects like solar power. But we should probably stop selling *weapons* to the Saudi monarchy/theocracy.

We should have never sold a single weapon to any entity in the entire world. Unless of course our end game is endless war and relentless arms races.

The idea that we spend trillions developing the most advanced weapons by far and then give away our overwhelming superiority for a few billion is too asinine to be understood as anything but intentional.

 

[BenPrice]

Do you know why NUMMI used to be able to paint 500k vehicles per year under GM/Toyota while tesla struggle to cover the current volume?

It was open over 25 years and funded by the 2 of the top 3 auto manufacturers. It was not also the global HQ of any company. You manufacture to demand, but the growth expected out of Tesla is absurd and the growth they’ve already shown is literally the most impressive engineering feat of the entire ordeal.

The hardest part of this for Tesla is predicting future manufacturing needs at these scales.

You don’t want to buy paint equipment for 20,000 units a month if you’re only making 10,000. But that type of equipment has long Engineering and acquisition lead times. And it isn’t just paint booths, it’s thousands of very expensive and custom pieces of equipment throughout the entire supply chain itself. It’s an absurd macro and micro level planning event involving dozens of teams of engineers. This is way more complicated than you understand, given the statement made.

 

[30seconds]

Tesla killer incoming!

Or maybe not

Audi's electric SUV faces four-week delay because of software bug | Reuters

 

[dc_h]

Are you sure about the HQ and R&D? I have to say I'm a bit confused myself on what exactly is made inside the one lot called the Tesla Freemont factory. They used to have an HQ some miles away, about 30mins by car I think. I thought the seats were made across the road or down the road in another lot? What are they using the old Solyndra lot for now? Does someone have a properly marked map with all the subassemblies or whatnot marked somewhere? I'm just confused I think

I think a lot of subcomponent work has moved to Lathrop and the Solyndra plant, where they make the seats. If the S and X get a redesign I hope they get more common components and can get more done on a single line. I think more HQ work, including R&D is moving out of Fremont.

Agreed on other comments about paint, much higher quality paint.

 

[CorneliusXX]

This is an interesting question. If Tesla is putting on more layers of paint, they may actually require more space in the paint shop per line.

If they *aren't* taking up more space per line... that may mean there's unused paint shop space, which will allow them to build additional paint shop lines without building more buildings. There were some hints in the filings that that was actually the case. They may not have converted *all* the old paint booths to new lines yet.

FWIW, NUMMI topped out at 430K/year.

Makes sense. 430k per year is only about 8600 per week assuming 2 weeks of downtime per year. If Tesla are already at 7k per week and lemur allows about 1k more to be produced with current battery cell constraints we may well see Tesla approaching GM/T weekly volume by the end of the year.

Perhaps there isn't too much difference after all.

 

[wipster]

Tesla killer incoming!

Or maybe not

Audi's electric SUV faces four-week delay because of software bug | Reuters

And just wait until the recalls start...

 

[NikeWings]

You are right, corporate HQ is in Palo Alto (I have edited my comment to fix this mistake), but I believe the whole second floor of the main Fremont factory building is R&D?

That's likely plus manufacturing mgmt, but 100% of R&D isn't at the main factory. The areas with a second floor are minimal and chopped up; t's mostly a one story facility. The power train team is over by the Solyndra location and the auto design team is in Hawthorne. With admin, finance, marketing and Energy teams already at Dumbarton and having significant room for growth, it wouldn't be a surprise to see HQ officially depart Palo Alto for more centralized/integrated facilities at Dumbarton. Then you'd be correct again.....Fremont becomes HQ.

 

[Buckminster]

Stupid and probably unrealistic thought I’ve been entertaining for a while now: can’t a person, company, fund or institution with very deep pockets gobble up all those 40 million free shares (and any more that come available)?

Slowly over a period of several months, so as not to push up SP too much. And preferably timed so that it takes the longest time before the stake has to be announced.

At current SP it would cost 10 billion, but if SP slowly goes up maybe 15 billion. A lot of money, but not out of reach for some parties in this world. More money would have been involved in the going private venture.

At the end of the buying liquidity would dry up and the short squeeze would happen for sure. And fhe ownership situation would be comparable to what it would be under a private Tesla.

Fire away! (paraphrasing another poster)

I have thought the same, there are hundreds of investors, funds, pension funds, and billionaires that could and should be plugging this gap. There is the environmental angle as well as making loadsa money.