TSLA Market Action: 2018 Investor Roundtable

[Silent Ludicrosy]

Tesla Could Be A Lone Success In 2019 As European Model 3 Sales Catch Fire

Shortsville times:
Tesla Could Be A Lone Success In 2019 As European Model 3 Sales Catch Fire

 

[avoigt]

Really impressive. From up to 130 to 200 steps down to 40 makes it 3-5 fold less steps.

It may sound like a technical detail to many but thats a magnitude we are talking here and steps translate in costs and with it competitiveness.

Usually an advantage like that does not have a large impact at beginning of a ramp and I call this still the early beginning.

The true cost advantages of the 3 will be more visible in 2019 to 2021 in particular with new production lines emerging e.g. China and EU where challenges Fremont has e.g. space will materialize in further costs advantages. Bright days ahead.

“We could see the Model 3 assembled, from an empty body to a fully functional car in a bit more than 40 steps and 90 minutes, on a line about 1,000 feet long,” Ferragu said in a note to clients. “Its simplicity is unbelievable.”

In contrast, “A comparable car by any traditional automaker could take anywhere from 130 to 200 steps, Ferragu says, easily setting the Model 3 apart. The findings are similar to what UBS’ Evidence Lab found when tearing down a Model 3 earlier this year, finding ‘next-gen, military grade’ tech below the finish.”

40 Steps & 90 Minutes To Produce Tesla Model 3 | CleanTechnica

 

[mongo]

Really impressive. From up to 130 to 200 steps down to 40 makes it 3-5 fold less steps.

It may sound like a technical detail to many but thats a magnitude we are talking here and steps translate in costs and with it competitiveness.

Usually an advantage like that does not have a large impact at beginning of a ramp and I call this still the early beginning.

The true cost advantages of the 3 will be more visible in 2019 to 2021 in particular with new production lines emerging e.g. China and EU where challenges Fremont has e.g. space will materialize in further costs advantages. Bright days ahead.

“We could see the Model 3 assembled, from an empty body to a fully functional car in a bit more than 40 steps and 90 minutes, on a line about 1,000 feet long,” Ferragu said in a note to clients. “Its simplicity is unbelievable.”

In contrast, “A comparable car by any traditional automaker could take anywhere from 130 to 200 steps, Ferragu says, easily setting the Model 3 apart. The findings are similar to what UBS’ Evidence Lab found when tearing down a Model 3 earlier this year, finding ‘next-gen, military grade’ tech below the finish.”

40 Steps & 90 Minutes To Produce Tesla Model 3 | CleanTechnica

Stepping back: the pack, suspension, and drive units come in as one pre-arranged module from a separate process. Same with door assembly. So GA is 40 steps, but there are more steps, along with people and floor space, that are needed.

Speaking of parts, concider that the drive unit takes many many many less steps and parts to build than an ICE and x-speed transmission.

 

[Fact Checking]

“We could see the Model 3 assembled, from an empty body to a fully functional car in a bit more than 40 steps and 90 minutes, on a line about 1,000 feet long,” Ferragu said in a note to clients. “Its simplicity is unbelievable.”

In contrast, “A comparable car by any traditional automaker could take anywhere from 130 to 200 steps, Ferragu says, easily setting the Model 3 apart. The findings are similar to what UBS’ Evidence Lab found when tearing down a Model 3 earlier this year, finding ‘next-gen, military grade’ tech below the finish.”

I'd like to note where this simplicity comes from:

• Competing ICE luxury cars have parts count of over 40,000, with thousands of moving parts.
• The Model 3 only has around 10,000 parts, with less than 100 moving parts.

@mongo noted it in another discussion that the Model 3 has high electrical complexity, and it also has a battery pack with thousands of cells - but very few moving parts there and cell management appears to be robust. Furthermore, as we know it from high-tech electronics, the complexity of computer chips and other electronics can be increased to literally billions of miniature 'parts', while still having manageable reliability - while taking advantage of incredible mass manufacturing economies of scale the car industry can only dream of.

The primary limit to car manufacturing efficiency and economies of scale is mechanical complexity - and the Model 3 has simplified mechanical complexity dramatically, in a revolutionary fashion, by shifting as much of the car's complexity into the electronics and software space as possible.

People might be joking about the 'alien dreadnought' - but it's real and it's the Model 3. Now that Tesla has reached just a fraction of the economies of scale of the largest carmakers (who are churning out millions of cars per year), Tesla is already way ahead in terms of gross margins and production efficiencies. When Tesla reaches 1 million units per year and gains further economies of scale to materials and parts supplies it will be a bloodbath IMHO.

 

[avoigt]

5h5 hours ago
Alp Soycengiz Retweeted Reijer Kok

Worth retweeting.658 #teslas registered on the 27th of Dec in Holland. That is in 1 day. $tslaq shorts european delivery spreadsheets r way off the mark

Alp Soycengiz added,


Pedro Coelho Silva‏ @PedroCoSilva
Replying to @Alpsoy66
@ValueAnalyst1 Tesla seems on its way for 30k+ s&x

Pedro Coelho Silva on Twitter

 

[avoigt]

Stepping back: the pack, suspension, and drive units come in as one pre-arranged module from a separate process. Same with door assembly. So GA is 40 steps, but there are more steps, along with people and floor space, that are needed.

Speaking of parts, concider that the drive unit takes many many many less steps and parts to build than an ICE and x-speed transmission.

Putting it into perspective... there are more steps than 200 with other car manufacturers as well.

The relative advantage therefore remains.

 

[Fact Checking]

Stepping back: the pack, suspension, and drive units come in as one pre-arranged module from a separate process. Same with door assembly. So GA is 40 steps, but there are more steps, along with people and floor space, that are needed.

ICE manufacturers have sub-assemblies as well: the ICE powertrain comes pre-assembled in 100% of the cases. Even very low unit count firms like Ferrari builds their engines separately and it's installed in a single step when final assembly is done.

For example the NUMMI plant that was at Fremont which assembled Toyota Corollas and Hummers didn't do any ICE power-train production either: the engines, axles and gearboxes came from Toyota's or GM's separate plants.

 

[SebastianR]

OT

Today's edition of The Toronto Star, WHEELS section, included a full two-page write up on the 2019 Audi E-Tron. Author, Norris McDonald, was gushingly positive over this EV.

Thanks for sharing! The cynic in me is quite amazed how well this works for Audi: they sponsored a nice vacation ^H^H^H I mean "research trip" to warm and sunny Abu Dhabi and look at what amount of great publicity they got! I mean two full pages of advertisement that's quite well done. It is smart from several perspectives: of course it is the right climate for the eTron, it is also an exotic setting, great photo opportunity, plus it takes the journalist out of the office for at least 3 days (if not more), so you can be sure that you will get a long article in return... (remember these days journalists need to produce a ton of words every day to be paid).

 

[mongo]

Putting it into perspective... there are more steps than 200 with other car manufacturers as well.

The relative advantage therefore remains.

Fully agree, thus my drive unit simplisty note. Felt the need to add clarity to the article.

Teslas are way simpler, but still take more than 40 steps and 1000 feet of assembly line.

Minimal IP assembly, minimal drive unit assembly, zero engine prep, almost no switch banks, no center stack...

 

[Fact Checking]

The cynic in me is quite amazed how well this works for Audi: they sponsored a nice vacation ^H^H^H I mean "research trip" to warm and sunny Abu Dhabi and look at what amount of great publicity they got! I mean two full pages of advertisement that's quite well done.

It's more like an informecial and I think most readers will treat it as such and see the obvious product placement. If it was a larger publication then I doubt a bribe trip to Abu Dhabi would have been enough: Audi would also have to pay for their use of the advertising space.

But yeah, I think at least 50% of the negativity of traditional media towards Tesla is due to the 'no mass advertising' direct marketing stance of Tesla, which they see as an existential threat to them: Tesla's policy stabs straight through heart of MSM's business model ...

This creates a fertile ground that makes it easier for FUD to propagate.

 

[Fact Checking]

Tesla Could Be A Lone Success In 2019 As European Model 3 Sales Catch Fire

BTW., I definitely think that the Forbes headline to the otherwise positive article was not an accident, it was a not so subtle attempt to create a negative slant to a positive Tesla article, by linking it to the ongoing slander of Tesla via artificially hyped vehicle fires.

So our Shortsville Times highlighted the FUD in the real-life Shortsville Times...

 

[brian45011]

connect the dots for me please ... that's a 311 page document, and i'm not sure which page the punchline is on.

SCTY acquisition was in 4Q16 not 4Q17.

Also 13G/As updating >5% holders will be filed in late January before SH letter. Ellison's first filing will be a form 3 then the form 4.

 

[brian45011]

Maybe instead of going straight for the Alien Dreadnaught, Elon should have automated all the accounting.

Ms. Denholm may bring some closer over sight. Two CAOs leaving in less than a year requires some recovery time.

 

[Fact Checking]

SCTY acquisition was in 4Q16 not 4Q17.

Yeah, I totally fat-fingered the year of the Solar City acquisition - the main impact of that was in early 2017, not early 2018.

So the 2017/Q4 timetable should be representative of the 2018/Q4 timetable:

• 8-K: Q4 delivery report, due around January 3. (it was a Monday in 2018 and is going to be a Tuesday in 2019)
  
• 8-K: Q4 update letter and earnings call, due around February 7. (Wednesday in 2018, Thursday in 2019)
  
• 10-K: 2018 annual report, due around February 23. (Friday in 2018 and Saturday in 2019)

There's no SCTY merger impact to those dates. January 1 was on a Monday in 2018 and it's on a Tuesday in 2019, so I think the release dates should be similar, except the 10-K which is on a Saturday in 2019 so might slip to a Monday: 25 February.

Plus there's the possibility of Tesla accelerating the earnings report like they did in Q3.

I don't know how much they'll be able to do that: they might be waiting for auditor feedback even for the Q4 results, to not have to change the numbers in the 10-K?

 

[scaesare]

“Turbo” is no longer the gimmicky marketing term of the 80s used for non-turbine things. Sir Mixalot legitimized the term in 1992 by rapping the line “got it goin like a turbo Vette.” Since then turbo has been used on only the most premium products.
View attachment 364596 View attachment 364597 View attachment 364598 View attachment 364599
I don’t know how Tesla will be able to compete.

You know... you almost had me replying to this seriously after a quick read.... only after I noticed your use of "premium" and what was in the accompanying pics did I then chuckle instead...

Well played sir...well played.

On a related note... it's nice to see Tesla has finally gotten other automakers to adopt Supercharging:

 

[ReflexFunds]

Ahead of Tesla Q4 forecasts, I’ve tried to estimate a more intuitive breakdown of Tesla Q3 cash flow. It excludes short term working capital items (payables, receivables, inventory & customer deposits) which are often driven by timing impacts and one off impacts as the business grows.

Model 3 $943m (Gross profit + depreciation + warranty reserve + deferred revenue reserve)
S/X $989m
GHG credits $137m ($114m 3, $24m S/X)
ZEV credits $52m
Direct Auto leasing $249m ($100m lease payments, $150m used car sales post lease)
Auto Service -$119m
Used car sales $0m (cars purchased from the auto sales/leasing divisions and sold at cost)
Solar sales $40m
Solar leasing $94m
Energy $0m

Warranty costs -$54m (scales roughly with size of overall fleet)
Deferred costs -$21m (scales roughly with size of overall fleet)

Total cash gross profit $2,311m

SG&A (ex $56m Elon bonus provision) -$674m
R&D -$351m
Other D&A add back +$17m
Stock comp add back +$149m

Total cash flow operations $1,453m

Capex -$510m
New solar leases -$50m
New auto leases -$151m
Cash Interest -$100m

Total Free Cash Flow $642m.

Anyone disagree with any of these numbers?

 

[Fact Checking]

Anyone disagree with any of these numbers?

Looks mostly good to me - with the added note that you added in warranty provisions but subtracted only current ongoing costs - while the future average cost of this newly sold fleet will probably cause more warranty costs down the road.

I.e. the quarterly warranty costs are always delayed by at least a few quarters and during such quick ramp-up this hides some of the future warranty costs.

So I'd estimate the true cash position in Q3 if we doubled the warranty costs - i.e. -$108m instead of -$54m. That would give it a rough lower bound of the 'timing-invariant true cash flow from operations' analysis you are trying to do here, agreed?

(Maybe @brian45011 wants to chime in as well.)

 

[ReflexFunds]

Looks mostly good to me - with the added note that you added in warranty provisions but subtracted only current ongoing costs - while the future average cost of this newly sold fleet will probably cause more warranty costs down the road.

I.e. the quarterly warranty costs are always delayed by at least a few quarters and during such quick ramp-up this hides some of the future warranty costs.

So I'd estimate the true cash position in Q3 if we doubled the warranty costs - i.e. -$108m instead of -$54m. That would give it a rough lower bound of the 'timing-invariant true cash flow from operations' analysis you are trying to do here, agreed?

(Maybe @brian45011 wants to chime in as well.)

The warranty cash costs and deferred cash costs should both be a relatively fixed $ amount per car per year (in fact warranty costs likely highest in the first few weeks post delivery), so each quarter the cash costs will scale roughly relative to average fleet size in the quarter. The warranty (c.$2k per 3) and deferred revenue reserve (c.$2k per 3) are similar to 4-8 year amortising debt. Its true they will consume more cash over the next few years, but i'd argue that gross profit before warranty and deferred revenue reserves is all long term quarterly cash flow. Perhaps the best adjustment is to scale the warranty costs by quarter end fleet size (450k) / quarter average fleet size (c.400k). So 54*450/400= $61m. Although S/X warranty is higher than 3, so this is an overestimate.

 

[Words of HABIT]

OT



Thanks for sharing! The cynic in me is quite amazed how well this works for Audi: they sponsored a nice vacation ^H^H^H I mean "research trip" to warm and sunny Abu Dhabi and look at what amount of great publicity they got! I mean two full pages of advertisement that's quite well done. It is smart from several perspectives: of course it is the right climate for the eTron, it is also an exotic setting, great photo opportunity, plus it takes the journalist out of the office for at least 3 days (if not more), so you can be sure that you will get a long article in return... (remember these days journalists need to produce a ton of words every day to be paid).

I agree the Toronto Star article is nothing more than advertising, bought and paid for by Audi. That is how most Media works. How can the writer be subjective. It's like being invited to diner party and criticizing the host on the meal. Don't bite the hand that feeds you mentality. However people will read it, and many people will take it to heart. This is exactly why Tesla gets 100X more negative press than they deserve (by not advertising) and why Tesla will never get a two page article in the Toronto Star. That should have happened with the release of the MS, MX and M3. It didn't.

Instead, the same Saturday's paper, last weekend edition of the year by Toronto Star, in the Business Section listed the greatest achievements of 2018. They included a blurb on Elon Musk. However no mention of revolutionizing the auto industry, space conquests, or Boring achievements. The article only included the lawsuit against Elon for name calling a certain character and insinuating Elon believes he is above the law, just regurgitating trash talk. Is this news? Perhaps Audi or one of the other OEM paid for that article as well.

Audi likely chose to unveil their E-Tron in United Arab Emerits due to their extreme high temperatures. A reveal in USA or Canada in December would likely have proven their range results not adding up.

 

[Krugerrand]

Tesla produced 53k model 3s in q3, and I think it is fairly certain they could blow that out of the water in q4 if they chose to. I am substantially unclear about why they did not pull more demand levers, particularly leasing, in order to produce and sell somewhere closer to 65k this quarter. If they come out under 60k I am going to be puzzled by the decision to do so.

My estimate is basically 4.5k * 8weeks + 6k * 4 weeks with the rest idle time, or 60k. While it makes for better quarterly numbers to deliberately reduce inventory it really isn't rational to optimize in such a manner, particularly since any excess inventory can fill in for demand early in q1 while they pipe all new production outside of n. America.

1. If they do it, it would be just another ‘fabricated’ quarter for the media to spin.
2. They appear to be trying to avoid the end of quarter pushes and smooth operations out - not entirely successful yet, due to a number of reasons. Please don’t make me list them - we’re repetitive enough around here.
3. They appear not to have to or want to for their own reasons (again don’t make me list them) and they don’t have to do it to appease you or me or short term stock holders or anyone.

Why can’t people just let them do their thing without the constant barrage of microscopic examination? That’s rhetorical. I’m merely hoping for some New Year resolutions for some.