TSLA Market Action: 2018 Investor Roundtable

[beachbum77]

You say confused, I say agile. It's impossible to perfectly predict interest of a new product.

But Tesla is not Walmart or a grocery store doing weekly markdowns. They also just dropped the LR $1,000. So is that indicating a reduction in orders/interest?

Being too transparent in setting prices can have ramifications. The MR is only a week old and this tells us the pricing was initially too low. So now Tesla has closed the gap with LR by $2,000. Some would say they are trying to push buyers away from the MR. Why? This makes it appear that the cost savings of the smaller battery pack are not as much as expected, and raises doubts about the SR profitability. If it is going to take the lower labor costs of China to produce the SR that raises the question of Model 3 sales levels until 2022-23. There is no reason Tesla could not export SR's from China to the rest of the world. How does Tesla satisfy $35,000 reservations until then?

 

[jeffro01]

But Tesla is not Walmart or a grocery store doing weekly markdowns. They also just dropped the LR $1,000. So is that indicating a reduction in orders/interest?

Being too transparent in setting prices can have ramifications. The MR is only a week old and this tells us the pricing was initially too low. So now Tesla has closed the gap with LR by $2,000. Some would say they are trying to push buyers away from the MR. Why? This makes it appear that the cost savings of the smaller battery pack are not as much as expected, and raises doubts about the SR profitability. If it is going to take the lower labor costs of China to produce the SR that raises the question of Model 3 sales levels until 2022-23. There is no reason Tesla could not export SR's from China to the rest of the world. How does Tesla satisfy $35,000 reservations until then?

Do you people scrutinize every other auto manufacturers price adjustments like this? No. You don't. Why do you do it to Tesla? Oh yeah, I remember... Because you desperately want Tesla to fail for some weird and twisted reason...

Jeff

 

[Right_Said_Fred]

But Tesla is not Walmart or a grocery store doing weekly markdowns. They also just dropped the LR $1,000. So is that indicating a reduction in orders/interest?

Being too transparent in setting prices can have ramifications. The MR is only a week old and this tells us the pricing was initially too low. So now Tesla has closed the gap with LR by $2,000. Some would say they are trying to push buyers away from the MR. Why? This makes it appear that the cost savings of the smaller battery pack are not as much as expected, and raises doubts about the SR profitability. If it is going to take the lower labor costs of China to produce the SR that raises the question of Model 3 sales levels until 2022-23. There is no reason Tesla could not export SR's from China to the rest of the world. How does Tesla satisfy $35,000 reservations until then?

I think you’re looking at this the wrong way, the skeptics way, which is that they must have a problem with pricing/margin. Why don’t you try to look at it the other way: they have bottlenecks in battery and motors, and they are finetuning (trying to steer buyers) to get to the optimal mix of MR and LR to be able to produce as many cars as possible this quarter. This will help those buyers (tax credit) and it will help Tesla.

 

[Zaxxon]

I think you’re looking at this the wrong way, the skeptics way, which is that they must have a problem with pricing/margin. Why don’t you try to look at it the other way: they have bottlenecks in battery and motors, and they are finetuning (trying to steer buyers) to get to the optimal mix of MR and LR to be able to produce as many cars as possible this quarter. This will help those buyers (tax credit) and it will help Tesla.

Exactly. @beachbum77 is taking an incomplete view into the data and extrapolating lots of things that don't necessarily follow. The short answer is 'they're making pricing changes because they believe it makes business sense to do so.' We plebes don't have access to enough info to know the core reasoning with any degree of certainty.

I agree with part of Mr. Bum's point, which is that price changes too often is not a good look from a customer's perspective. If they're still tweaking this way at steady-state production, let's reconvene then and summon the waaambulance. Today, when they're relatively close to the profitable/loss-making line, introducing new options at a rapid clip, and working to balance product mix, I'll assume that they have some semblance of a clue as to their strategy rather than assuming that each change indicates a problem.

 

[Artful Dodger]

TSLA be like "The Red Green Show"

...

 

[theschnell]

But it can cause hesitation with buyers. "If we wait another week the LR could drop again". This weekly tweaking points to a confused pricing strategy. That is not the position of strength investors want to see.

I thought the same at first, but then I realized $1k on a purchase of this size is generally not a deal breaker in either direction.

Still a ton better than going into a traditional dealer and having no idea whether you're getting a similar deal as the next guy, or getting taken for many thousands...

 

[tivoboy]

Do you people scrutinize every other auto manufacturers price adjustments like this? No. You don't. Why do you do it to Tesla? Oh yeah, I remember... Because you desperately want Tesla to fail for some weird and twisted reason...

Jeff

For one reason though, most manufacturers don't change their pricing like this at all. Significant duration exogenous events like currency fluctuations due to major macro changes, or possibly new stupid tariffs on raw materials, can and WILL get incorporated into new retail pricing, but usually its annual at best. There is too much collateral, pricing modeling, market communication for price changes like this to occur for most OEM's. So, yeah it's a thing.

Tesla does, however, have a significant advantage in this area. Since ALL sales are done through the website in one way or another, they can easily make changes in real time based on costs, or demand, etc. Since there is essentially no collateral, no marketing, no ads, nothing, there isn't much to change.

 

[MarcusMaximus]

But it can cause hesitation with buyers. "If we wait another week the LR could drop again". This weekly tweaking points to a confused pricing strategy. That is not the position of strength investors want to see.

Or, you know, it could go up again. And, given the SP movement today, investors don’t seem to mind.

 

[jhm]

Agreed, although we are taking about a ~2% price shift.

It isn’t changing my buying approach for sure

Right, it is slight. It only needs to tilt a few choices that were on the fence between MR RWD and LR AWD. If you were really undecided before, then the net $2k price shift probably pushes you up to the LR AWD. But anyone that was clearly set on either option is likely not moved.

 

[KarenRei]

Do you people scrutinize every other auto manufacturers price adjustments like this? No. You don't. Why do you do it to Tesla? Oh yeah, I remember... Because you desperately want Tesla to fail for some weird and twisted reason...

Jeff

Be nice. I disagree with BeachBum's view; I see it as agile pricing, testing real-world market sensitivity - something Tesla has done throughout its history, and because it's not something "unusual" for them, I don't think it's realistic to read some sort of non-obvious "motive" into the change. But just because I disagree with him, that doesn't mean I think it's fair to ascribe negative motives to him having that view. Agile pricing has some negatives (market confusion, frustrating people who were planning for a given price), so it's fine to criticize it. People can differ on whether the benefits outweigh the costs.

 

[MarcusMaximus]

For one reason though, most manufacturers don't change their pricing like this at all. Significant duration exogenous events like currency fluctuations due to major macro changes, WILL get incorporated into new retail pricing, but usually its annual at best. There is too much collateral, pricing modeling, market communication for price changes like this to occur for most OEM's. So, yeah it's a thing.

Sure they do. There are ads for such adjustments all the time. Every time you see an ad talking about a rebate/discount/whatever on a new car, that’s them tweaking demand in exactly the same way.

 

[Cherry Wine]

Nice steady climb here. Closed out a 10/26 call to lock in some profits and rolled them over into some January 2019 OTM calls. I didn't win the lottery yesterday, so thought I'd take another crack at this one.

EDIT: Taking a look at the indices, this is probably in keeping pace with the NASDAQ climbing off its lows?

 

[SW2Fiddler]

going into a traditional dealer and having no idea whether you're getting a similar deal as the next guy, or getting taken for many thousands...

Maybe both? I have a pretty good idea I am “getting taken” at the traditional dealers. The price tweaking I have learned to do is helpful but incremental. (Their knuckles haven’t turned white yet either)

 

[tivoboy]

Sure they do. There are ads for such adjustments all the time. Every time you see an ad talking about a rebate/discount/whatever on a new car, that’s them tweaking demand in exactly the same way.

Rebates and discounts are different than established retail pricing levels. Rebates and discounts have been rising now for several years. We're almost now at peak incentive on the domestic ICE front, which is one of the market timing tells I monitor. We're actually AT peak, but not adjusted for inflation.

Since tesla doesn't offer any regular standard discounts or incentives I guess they just have to adjust their retail price.

I have seen incentives from 1000$ to 10000$ for various P-S/X models with some limited amount of miles on them. And of course, CPO pricing is always negotiable.

 

[Fobble]

Or, you know, it could go up again. And, given the SP movement today, investors don’t seem to mind.

It's up right now ... It will be side way before the earnings call, especially after yesterday's big jump. Don't expect too much, and don't freak out at the same time.

 

[KarenRei]

BTW, I don't know how other people have been interpreting the prices, but I interpreted the initial prices as:

MR: $40k + $5k PUP
LR: $44k + $5k PUP + $5k AWD

Hence, it was as if they lowered AWD back to the $5k range (started at $5k, then $4k, then $5k, then $6k, now back to $5k). Now I see it as:

MR: $41k + $5k PUP
LR: $44k + $5k PUP + $4k AWD

Aka, AWD is back down to $4k, and MR increased in base price by $1k.

 

[SO16]

But it can cause hesitation with buyers. "If we wait another week the LR could drop again". This weekly tweaking points to a confused pricing strategy. That is not the position of strength investors want to see.

And if we wait another week, it could go up, a paint color could drop or AP cost more, etc.

I care more about overall sales and demand which appears to be quite significant with room to grow.

I figured some investors are a fickle bunch but my goodness..... Worse than I thought.

 

[tivoboy]

Maybe both? I have a pretty good idea I am “getting taken” at the traditional dealers. The price tweaking I have learned to do is helpful but incremental. (Their knuckles haven’t turned white yet either)

It's been pretty easy for many years (decades now if you had the time for it) to know EXACTLY what price others had paid for the same car. For me, that was always a starting point for an ICE negotiation. What was the lowest price paid for that exact model in that general area (a mix of zip codes near to the purchase location). From there, it was a negotiation down and around. Then I would usually be the lowest price paid buyer. ;-)

 

[SO16]

For one reason though, most manufacturers don't change their pricing like this at all. Significant duration exogenous events like currency fluctuations due to major macro changes, or possibly new stupid tariffs on raw materials, can and WILL get incorporated into new retail pricing, but usually its annual at best. There is too much collateral, pricing modeling, market communication for price changes like this to occur for most OEM's. So, yeah it's a thing.

Tesla does, however, have a significant advantage in this area. Since ALL sales are done through the website in one way or another, they can easily make changes in real time based on costs, or demand, etc. Since there is essentially no collateral, no marketing, no ads, nothing, there isn't much to change.

Most other manufacturers move at a snails pace when it comes to changes. Elon is not going to wait for some arbitrary period of time to make a change just because it might “look bad” to day traders or shorts. He doesn’t give a *sugar* about them and rightly so.

As far as looking bad to customers, there again, things change. If a potential customer is going to wait for some possible price change, they should just buy a used vehicle. Well....people should anyway but that’s besides the point.

 

[EinSV]

Do you people scrutinize every other auto manufacturers price adjustments like this? No. You don't. Why do you do it to Tesla? Oh yeah, I remember... Because you desperately want Tesla to fail for some weird and twisted reason...

Jeff

beachbum77 is Donn Bailey, a short seller and prolific anti-Tesla author on Seeking Alpha.

@beachbum77 thread (out of Market Action)
Grumpiness and off topic discussion from the configuration thread