TSLA Market Action: 2018 Investor Roundtable

[Fact Checking]

So, price changes have been made.

MR went from 45k$ to 46k$
LR went from 54k$ to 53k$

To me the message seems clear: they are not maximizing cash flow here but are trying to maximize production capacity as the ramp-up continue:

• they want to shift some demand from Lemurs to Long Range battery packs.
• Also note the differential price reduction in the Long Range option: from $9k to $7k (!). This might suggest that the Gigafactory ramp-up of 2170 cell output is going well.

I'm pretty certain this indicates exceptionally high demand for the MR, and perhaps good Gigafactory 2170 cell ramp-up, which made Fremont assembly the bottleneck again.

I'd expect similar price adjustments as the end of the year (end of Q4) draws closer and they have a clearer notion of the exact trajectory of both ramp-up efforts, and how the order flow maps to them.

 

[Fact Checking]

NASDAQ pre-market now up to $299.79 in light volume trading - it appears some traders want to lock in a <$300 price.

Which is impressive, given that futures are still very bipolar and the dollar got stronger as well, which is usually a sign of risk-off (bear market).

 

[Ellec]

Was it mentioned on this thread that the LEMR has been raised to 46k$?

Premarket crashing again...

Where are you seeing that? Im seeing Tesla approaching $300

 

[BioSehnsucht]

It makes so much sense because I don't think going from 35GWh to 105GWh in the same facility is going to substantially improve scale benefits, but Tesla definitely could use a place to build more units for N.America and their stated model going forward is battery+auto co-located. I mean -- there really isn't another option for the semi as far as I can tell either. I'd say this is 60% likely.

105GWh is enough for a few millions of cars/year, but that's not including Semi and TE storage. If 100k semi/yr probably around 50-80GWh of cells depending on 300/500 mile range variant mix, just on it's own? Model 3 will eat up 30GWh+ on it's own as it ramps to full production. And TE can in theory do practically unlimited GWh if you can just scale up production and distribution to use the cells, so there'll be no such thing as not enough cell production.

Of course, I don't expect all TE storage to come out of GF1 alone, but likely all GF's in varying amounts (other than GF2, which would be TE solar not storage), so as long as the scraps it gets are sizable, no big deal.

But between 3 and Semi, not to mention an eventual model update for S/X to use 2170 cells, and something for TE to operate at a reasonable scale, there's nothing left for Y unless they expand cell capacity beyond currently planned 105GWh per year or build another GF for Model Y (considering Y should in theory sell more units than 3).

An interim option is of course to just keep Semi and TE scaled back a bit, and keep postponing the S/X transition, but at some point you need more cells than current plants for GF1 are going to provide.

 

[Fact Checking]

Where are you seeing that? Im seeing Tesla approaching $300

There was a brief print of $295 in the very first few trades on the NASDAQ premarket - possibly influenced by drops in futures prices. Got quickly driven up to new weekly highs, which is rare in the pre-market btw.

 

[ThereAre4Cars]

Guys I was unspecific and apologize I was referring to the market futures. Won't make that mistake again. lol. Only Fact Checking noticed the more relevant part of that post.

 

[Fact Checking]

But between 3 and Semi, not to mention an eventual model update for S/X to use 2170 cells, and something for TE to operate at a reasonable scale, there's nothing left for Y unless they expand cell capacity beyond currently planned 105GWh per year or build another GF for Model Y (considering Y should in theory sell more units than 3).

I think they'll continue to play it by ear and load-balance available supply of cells between the products to maximize cash flows but not starve any of the product categories too much.

I.e. I don't think the Semi will reach 100k/year at the expense of the Y - especially in the U.S. SUVs are totally important and many new EV entries are [Compact] SUVs, so Tesla absolutely doesn't want to starve the Y.

The Y also completes Tesla's automotive product line nicely, so I'm pretty sure the Y will get priority over the Semi.

Also, there's no reason the Gigafactory couldn't expand beyond 105 GWh/year - it's not like there's no space nearby - for example there's a new, huge parking lot near the Gigafactory, built this year:

That could free up the parking lots which are next to the Gigafactory right now, allowing for expansion.

This photo is also, I believe, the clearest indication yet that they are going to make the Model Y and the Semi at the Gigafactory (if you don't trust the various other hints they've been dropping), and this new parking lot is holding space for the new cars/trucks.

Gonna be some fantastic photos once that lot starts filling up.

 

[ThereAre4Cars]

To me the message seems clear: they are not maximizing cash flow here but are trying to maximize production capacity as the ramp-up continue:

• they want to shift some demand from Lemurs to Long Range battery packs.
• Also note the differential price reduction in the Long Range option: from $9k to $7k (!). This might suggest that the Gigafactory ramp-up of 2170 cell output is going well.

I'm pretty certain this indicates exceptionally high demand for the MR, and perhaps good Gigafactory 2170 cell ramp-up, which made Fremont assembly the bottleneck again.

I'd expect similar price adjustments as the end of the year (end of Q4) draws closer and they have a clearer notion of the exact trajectory of both ramp-up efforts, and how the order flow maps to them.

I'm gonna have to chew on it. There's a lot of variables. In particular long-run vs. short-run motivations in regard to temporary production constraint. I think I agree that this overall is intended to throttle demand (or -- raise margin under production constraint). In the long-run any of the lower price configs should generally sell more.

Let me riddle you this though: subtract PUP and the remaining battery and you aren't getting down to 35k$ any more...

I have been holding on to the theory that the 35k$, at least under known definition, would end up priced higher. Your theory about creating an even lower sized battery (and maybe cutting some other features) I find likely in order to hit 35k$.

 

[ThereAre4Cars]

105GWh is enough for a few millions of cars/year, but that's not including Semi and TE storage. If 100k semi/yr probably around 50-80GWh of cells depending on 300/500 mile range variant mix, just on it's own? Model 3 will eat up 30GWh+ on it's own as it ramps to full production. And TE can in theory do practically unlimited GWh if you can just scale up production and distribution to use the cells, so there'll be no such thing as not enough cell production.

Of course, I don't expect all TE storage to come out of GF1 alone, but likely all GF's in varying amounts (other than GF2, which would be TE solar not storage), so as long as the scraps it gets are sizable, no big deal.

But between 3 and Semi, not to mention an eventual model update for S/X to use 2170 cells, and something for TE to operate at a reasonable scale, there's nothing left for Y unless they expand cell capacity beyond currently planned 105GWh per year or build another GF for Model Y (considering Y should in theory sell more units than 3).

An interim option is of course to just keep Semi and TE scaled back a bit, and keep postponing the S/X transition, but at some point you need more cells than current plants for GF1 are going to provide.

In general I would expect GF1 to produce enough batteries to support the expected size of TE 2-3 years from now + Fremont auto production + GF1 Auto Production. Ultimately N.American production will go to N.America and China will take China and Europe will take Europe, etc. so that figures into the math as well, but all new factories have battery support (and maybe continental TE support).

 

[Fact Checking]

Let me riddle you this though: subtract PUP and the remaining battery and you aren't getting down to 35k$ any more...

I think the math is working out perfectly almost perfectly, assuming the following range options:

• Standard Range: 210 miles, $35k base price
• Medium Range: 260 miles (+$5k for +50 miles range)
  
• Long Range: 310 miles (+$5k for another +50 miles of range)

This would give the following prices if AWD is back to $4k and PUP is $5k:

• SR: $35k
• MR+PUP: $45k (current price: $46k)
  
• LR+PUP+AWD: $54k (current price: $53k)

I fully expect Tesla to do this: +100 miles for Long Range sounds nice, and the 50 miles step-up in each range option is predictable and easy to communicate and think about. The pricing table they'll keep adjusting ...

edit x2: Fixed the math error(s) pointed out by @generalenthu.

 

[generalenthu]

I think the math is working out perfectly, assuming the following range options:

• Standard Range: 210 miles, $35k base price
• Medium Range: 260 miles (+$7k for +50 miles range)
  
• Long Range: 310 miles (+$7k for another +50 miles of range)

$46,000-$7,000-$5,000 = $35,000.

I fully expect Tesla to do this: +100 miles for Long Range sounds nice, and the 50 miles step-up in each range option is predictable and easy to communicate and think about.

You need a coffee. Math error + you forgot about dual motor.

 

[heltok]

I think 10k Model 3/week from Freemont for 1-2 years to fill preorders and new demand. Then Model 3 production in China and Europe around 2020-2021, maybe 5k/week from each plant. At that time they can Freemont from solely 3 to 3+Y, 5k/week of each. Then add 2.5k/week of Y in both China and Europe. Around 2023 they launch the Alien Dreadnaught which does 50k/week cars of a totally redesigned 3+Y with new cabling etc.

 

[ThereAre4Cars]

I think the math is working out perfectly, assuming the following range options:

• Standard Range: 210 miles, $35k base price
• Medium Range: 260 miles (+$7k for +50 miles range)
  
• Long Range: 310 miles (+$7k for another +50 miles of range)

$46,000-$7,000-$5,000 = $35,000.

I fully expect Tesla to do this: +100 miles for Long Range sounds nice, and the 50 miles step-up in each range option is predictable and easy to communicate and think about.

Minor math error in there and I'm skeptical of this interpretation. AWD and performance changes are involved and generally you pay more for equivalent increases as you go up in price, as we see with performance model.

The deal with the 35k$-40k$ range is it doesn't just have to be profitable but it has to be sufficiently profitable to maximize gross margin (ed: gross profit) on the demand curve. It's very likely that Tesla themselves doesn't really know where all this falls just yet though particularly since the math is cost AND demand relative. I certainly don't think we can determine. So I'm just putting my finger down on the prediction that the current base as conceived will be priced higher than we think and then the options are populated over a narrower price range, OR they find ways to strip down the car even further for a token but largely undesirable 35k$ configuration.

 

[neroden]

So Elon pulling earnings forward a week has caught me in the unfortunate position of having sold 295 weeklies on my 4000 shares this week for some cash flow..

That's why I don't sell calls against Tesla; I fear missing a major runup, since apparently 90% of the gains in any given stock in any given years tend to be on only 3 specific days, if I remember a study correctly. (I sell puts on Tesla against my cash/other stocks instead; worst case, I have to buy more Tesla.)

not expecting any runup this early (wasnt going to take any covered call risks on the actual earnings report). Anyone have suggestions for recovering from this predicament?

Suggestion: Close your calls. Buy 'em back this morning. The stock's still below $295 as of now. Take your losses from the call trade, at least you can deduct them from your taxes. (I hope you have the cash to close the position.)

Im going to be kicking myself pretty hard for holding steady the last 8 years and blowing all the gains missing this earnings ==(

 

[Fact Checking]

You need a coffee. Math error + you forgot about dual motor.

Indeed, two math errors in a single comment that proudly claims that the math lines up 'perfectly' ... !

See my updated comment. I think a ... slightly modified math still lines up pretty well, with a fuzz of $1k-$2k.

 

[neroden]

Wow that's really a bummer. Can you buyback the calls on margin or anything? I've considered selling weekly OTM calls for some cash flow during anticipated slow times, but having only 100 shares, the thought of a "white swan" event getting my shares called away is pretty horrifying.

Yeah. I considered selling calls which were *deep* out of the money, but it just didn't seem worth it to sell call which were more than $100 OTM -- the premium was so small.

 

[neroden]

I'm less concerned with the legacy OEM's ramping much more modest BEV vehicle numbers into their pipeline

Given the extreme modesty of their planned vehicle numbers, they're pretty much toast; by the time they have meaningful production the new electric car makers will have cornered the car market. I suppose you could be unconcerned simply becaue you don't invest in them, and don't consider them competition,, so don't care about them....

than I am about Teslas balance sheet and cash flow situation.

Yeah, I don't see any reason to be concerned about that. I think we have a good handle on it. They're not going to grow as fast as they want to due to lack of Wall Street financing, but they'll be fine.

 

[Fact Checking]

Minor math error in there and I'm skeptical of this interpretation. AWD and performance changes are involved and generally you pay more for equivalent increases as you go up in price, as we see with performance model.

Fixed the (not so minor...) math errors in my original comment, I think the options are still lining up pretty well, if +50 miles of range is +$5k, AWD is +$4k and PUP is +$5k:

• SR: $35k
• MR+PUP: $35k+$5k+$5k=$45k (current price: $46k)
  
• LR+PUP+AWD: $35k+$5k+$5k+$4k=$54k (current price: $53k)

But until they reach 10k/week I'd expect Tesla to tweak pricing, option bundling and various service bundles as well, such as free SuperCharging.

 

[Ulmo]

I think they'll continue to play it by ear and load-balance available supply of cells between the products to maximize cash flows but not starve any of the product categories too much.

More like "but try not to starve any of the product categories too much". PowerWall and PowerPack are woefully starved now, and already the only other product line using those cells is also wobbling its battery size configs around the limited cell supply. Put another way, it will be a good day when Tesla satiates Model 3 demand.

 

[ThereAre4Cars]

Selling calls on top of a share position is the same as selling calls. You are taking out a leveraged bearish position. I'm suspicious people think a low probability of failure means free money. That needs to be disabused. If you wouldn't even think of lowering your share count, you shouldn't think of selling calls imo.