TSLA Market Action: 2018 Investor Roundtable

[SOULPEDL]

Did you notice today that Tesla closed up (a bit)... again? (Oops, guess it didn't afterall)
I get the feeling that with GM re-tooling, it's a huge admission that the EV and self-drive battle is on - for real now.
They pill just got swallowed (hopefully Trump doesn't force them to puke it up).

 

[AlexS]

Trump cannot unilaterally rescind the electric car buyer income tax credit (subsidy). That must first be voted by the House of Representatives, then sent to the Senate.

Meanwhile, Tesla has already surpassed the 200,000-car threshold that begins the phase-out of the credit, and General Motors is nearly there.

Today I emailed those who represent me in Congress, and asked them to rewrite the law. My suggestion was that the credit should only be allowed for buyers of electric cars made in the USA, and with a common sunset date for all manufacturers rather than a set number of cars. Those Americans here who agree may also want to contact Congress.

It's not the income tax credit Trump is referring, it is ZEV credits from their electric cars

 

[Artful Dodger]

I imagine CNBC regurgitating the China story a few minutes before the close did not help.

Nawh, we closed 16 cents above the Bollinger Band mid-point, $343.77

There was normal selling pressure when the SP went over $346 today (yesterday's close). This resulted in reversion to the mean on a low volume day (5.2M shares).

That's how Technical Traders do it: sell when above, buy when below. Unless there's big news to move the SP, equities on NASDAQ trade on the technicals.

Overall, today was a positive day for TSLA as the Market shrugged off bad news on China tariffs and we consolidated gains from Monday.

CH3ERS!

 

[mrdoubleb]

We are talking battery prices 2-3 years from now. LG Chem is behind Tesla/Panasonic but I doubt massively so.

Plymouth,MI and Normal,IL is a lot less expensive than Palo Alto and Fremont CA.

Rivian is not the the conglomerate Tesla Inc is. It will not be as vertically integrated and will not have such a heavy capex burden.

So what, Tesla's cost per kWh will stagnate as they ramp production for the next 3 years while LG catches up? The 20% figure came from UBS and it was in comparison with LG.

Not sure about the cost advantage of cheaper labor per car. Could be significant, but maybe not. Also depends on level of automation vs. manual labor.

As for not being that vertically integrated, again, could be an advantage, but not necessarily. If they build their car from standard parts they can take advantage of the supplier's low prices. But in reality, how many common parts would they have with other customers of these suppliers? Hard to tell. That model works well for companies who already produce millions of cars and have common parts among their own models. So VW may get a good price as the same part goes into a Skoda, a Seat, a VW and an Audi so they order 5 million of the thing. But It would be unlikely Mercedes would get a discount because it needs the same part VW uses.

So does this all add up to 30k of price advantage to a 2021 Model X?

 

[Foghat]

You do realize there is a huge negative correlation between the dollar and oil prices, right? A sustained drop in oil will be dollar positive, and massively positive for the US economy.

Check your timeline of analysis. Variables are much different now.

Renewable energy, right now, is the vast majority of new energy capacity be built out today and rolling into the future.

Electric car growth is exponential right now, new gas car sales are in decline and into the foreseeable future.

The variables are much different now.

Oil and gas will not sustain value as transition to more valuable energy sources take over. Your analysis is based control over energy production which manipulates supply into the market. In such a system, when supply is pleantiful, oil is cheaper, this the dollar is cheaper. Supply restricted, oil more valuable, dollar is more valuable. But that changes of new energy source takes share and upsets the controlled supply and demand.

Like I said before, regardless of restricted output or non restricted output, oil and gas will lose real value as new energy system (consumption and production) rapidly grows. Since US dollar is backed by oil and gas energy, it will lose real value in relation to it.

I think an interesting analysis would be to watch the dollar in relation to solar+storage growth, specifically distributed solar+storage and the electricifcation of transport.

It is clearly apparent a larger scale strategy is required to make this transition effectively.

 

[mrdoubleb]

Allow me to have a different opinion:

The capex burden comes with lower costs per unit produced and higher profits and this gets even better with scale. A smaller company does not have all of that and has to pay for the profit of all suppliers on top off their own costs. If you are small you pay more per unit to suppliers as if you are large.

Talking about large companies: If the vertical integration would not be superior then GM, VW and BMW would be able to produce an EV with the same specs cheaper. All what we know from the market is that this is not the case.

Its true that Plymouth is less expensive than Palo Alto but the question you have to ask is how many men-hours go into a car from Tesla versus a car from GM and how that related to the overall costs of the car produced versus the sales price. Tesla is highly automated with lots of robots you do not pay labour costs but buy them one time.

The economic model of Tesla is very different to any automaker in the world.

OK so I am not crazy. Or just as crazy as you are.

 

[capster]

I believe what is happening right now in the U.S. is internal migration of young people from cities with crazy real-estate prices, to cities with lower cost of living: Colorado (Denver area), Texas (Austin, Houston, Denver areas).

If you check the county level maps you'll see that even in the cheap cost of living states the rural counties are depopulating:

Colorado Population Growth Rate (2010 - 2014) by County
Texas Population Growth Rate (2010 - 2014) by County​

(Caveat: these are 2010-2014 trends, i.e. ~4 years old. Some of the trends have changed, although not significantly.)

Note that with the exception of ridiculously high cost of living super-city-centers, even relatively high cost of living city centers are registering population growth: the self-reinforcing cycle of jobs creating prosperity which is creating higher
population density which improves economic efficiency, which attracts more young people, etc.

A good example is California:

California Population Growth Rate (2010 - 2014) by County​

Note how even the Bay area and San Diego metropolitan area is registering growth, despite very high housing prices - while LA is already showing signs of slowdown.

The biggest loser of this process is the Rust Belt and Michigan in particular:

Michigan Population Growth Rate (2010 - 2014) by County​

Ohio is struggling too, with the exception of the Columbus area that is seeing population growth:

Ohio Population Growth Rate (2010 - 2014) by County​

Checking those maps will explain a lot about the rise of Trump politics and U.S. politics in particular:

• explains why Texas has turned purple in 2018 and could turn blue in 2020 and could be more and more blue from there on, like California is today,
• it also explains why Kentucky, rather unexpectedly, turned blue in a number of key areas.
• Democratic-leaning demographies are moving into urban counties, making rural areas redder and urban areas bluer. (Often these migratory patterns are not properly re-weighted through redistricting, which process was ~80% controlled by Republicans in the last ~20 years, making "natural looking" gerrymandering easier.)

These demographic trends, which are unstoppable like the tide, are also predicting a cataclysmic event in the near future (2020 or 2024), when Democrats will rise to power on all levels of the federal government and won't lose it for 10-20 years, until the Republican party gets rid of the racist aspects of its politics and remakes itself as a party not based in resisting change/progress.

It's possible that saying there is no migration problem and calling those who think it might be 'racist' is likely to be an even poorer election strategy in the future than it is now. Global population growth, disruptions due to climate changes (viz. the drivers of the Arab Spring), lowered barriers to movement will continue to exacerbate the migration challenge. Managing migration is a profound rates-of-change problem for the first world to which neither the progressives in the US nor those in Europe even suggest needs an answer.

It's also possible that some of those young people you mention may change their politics as they experience life.

TL;DR Don't count your chickens before they're hatched.

[edit small additions]

 

[neroden]

Anyone thinking about the Canadian plant that Tesla could pickup - lookout for what Canadian government & union decide to do. Unions are gearing to fight. There are calls to nationalize GM in Canada.

Anger, sadness and uncertainty for GM workers as Oshawa plant closure announced | The Star

It’s time for a truly Canadian automaker | The Star

This isn't going to happen. Trudeau won't do it, and Ford *certainly* won't do it.

The thing for Tesla to do is to wait until the plant is actually closed, and has been closed for some time, and then come in as a white knight, much like they did at Fremont.

 

[ZachF]

Check your timeline of analysis. Variables are much different now.

Renewable energy, right now, is the vast majority of new energy capacity be built out today and rolling into the future.

Electric car growth is exponential right now, new gas car sales are in decline and into the foreseeable future.

The variables are much different now.

Oil and gas will not sustain value as transition to more valuable energy sources take over. Your analysis is based control over energy production which manipulates supply into the market.

Like I said before, regardless of restricted output or non restricted output, oil and gas will lose real value as new energy system (consumption and production) rapidly grows. Since US dollar is backed by oil and gas energy, it will lose real value in relation to it.

I think an interesting analysis would be to watch the dollar in relation to solar+storage growth, specifically distributed solar+storage and the electricifcation of transport.

It is clearly apparent a larger scale strategy is required to make this transition effectively.

I agree with pretty much everything you said but the bolded, which is what I was taking exception to.

The US dollar is not backed by oil. If it was backed by oil it would rise in value with oil, instead of having a near-perfect negative correlation.

 

[SpaceCash]

It's possible that saying there is no migration problem and calling those who think it might be 'racist' is likely to be an even poorer election strategy in the future than it is now.
[edit small additions]

+1

Calling normal border control and sane immigration policy "racist" will only radicalize gen z further into conservatism.
America isn't racist. At all. The state religion is capitalism at the expense of all else.

 

[dmunjal]

You do realize there is a huge negative correlation between the dollar and oil prices, right? A sustained drop in oil will be dollar positive, and massively positive for the US economy.

The dollar is tied to oil using the petrodollar standard since we went off the gold standard in 1971. If oil is no longer a global commodity that we can use to tie to the dollar, then the Powers That Be will have to come up with a new one. Bretton Woods 3?

 

[dmunjal]

I agree with pretty much everything you said but the bolded, which is what I was taking exception to.

The US dollar is not backed by oil. If it was backed by oil it would rise in value with oil, instead of having a near-perfect negative correlation.

Petrodollar recycling - Wikipedia

How Petrodollars Affect The U.S. Dollar

 

[neroden]

Surely eventually the republican party bigwigs who actually have money in the stock market will kick trumps ass and make him settle this trade nonsense.

They have no ability to. He doesn't listen to anyone.

What the *formerly* Republican corporate bigwigs have done is, they've started backing and funding Democrats. The exception is the oil/gas/coal bigwigs, plus a couple of Israel-Firsters like Sheldon Adelson. (Who are the reason for the nutzoid proposal to move the US Embassy to Jerusalem.)

I don't care how much some of them love trump, they don't want to see their net worth crater because he wants to yell at the Chinese indefinitely. There has to be a point where the grown up step in and things go back to some vague semblance of sensible international trade.

Sure. When the Republican Party gets thrown out of office. Unfortunately the Senate is currently a major obstacle to this.

 

[elasalle]

When TSLA got NUMMI, it was a nobody and we were in the initial phase of recession (2010).
This time around I don't think anyone will sell assets that cheap (unless it is forced bankruptcy)-
Also might just be better for Tesla to build something new based on lessons learnt(e.g. from the tent) ...cheers

 

[ZachF]

The dollar is tied to oil using the petrodollar standard since we went off the gold standard in 1971. If oil is no longer a global commodity that we can use to tie to the dollar, then the Powers That Be will have to come up with a new one. Bretton Woods 3?

The "petrodollar" narrative as told is pretty much nonsense used by gold bugs to peddle their "hyperinflation is just around the corner... BUY GOLD!" crap.

Hell, counterintuitively, the dollar being the world reserve currency is actually a net negative for the US economy since it mathematically forces us to run large capital account surpluses and therefore trade/current account deficits.

 

[neroden]

There was also the patent for those cables that would retain their 3D position when moved/bent such as to be easily manipulated by automated arms. It is expected those would be implemented in the Y.

Many people have underestimated the value of that patent to worldwide automation. If it really works, it's worth billions, easily. Tesla will retool everything to use it, but other companies will also be licensing it as fast as possible. (Being a new patent, I think this one isn't covered by the "all our patents are belong to you" deal, or is it?)

 

[neroden]

Trump is going crazy Trump may impose tariffs on imported cars from next week: report | Reuters

I don't think we should import cars from next week; it might disrupt the space-time continuum. (Sorry...)

 

[ZachF]

Petrodollar recycling - Wikipedia

How Petrodollars Affect The U.S. Dollar

All garbage theory that has not been born out by reality.

Are We Starting to See Why It’s Really the Exorbitant “Burden”

 

[AWDtsla]

So what, Tesla's cost per kWh will stagnate as they ramp production for the next 3 years while LG catches up? The 20% figure came from UBS and it was in comparison with LG.

Does anyone have the material costs of Tesla's cells? They must be logarithmically approaching a floor value of raw materials cost. Maybe that's $50/kWh. However it does get exponentially harder to go lower without chemistry changes, like removing cobalt.

I think around $100/kWh you can build many compelling EV's. Decreasing returns under than unless you're trying to build cars that compete at the $15k level.

 

[ZachF]

It’s about supply. You have to pay in dollars to receive OPEC oil. If supply up, dollar down. Supply down, dollar up.

If they have to horde dollars that increases our capital account surplus and therefor our current account deficit. The two must always equal zero.

This is why the US has such large, persistent current account deficits.

We get to borrow money in exchange for an equivalent shrinking of our tradable goods sector. It's a net cost for the US economy. It's basically a way for other economies to "export" unemployment.