TSLA Market Action: 2018 Investor Roundtable

[Waiting4M3]

1) Cannibalization: Yes. Daimler already warned investors that, during the first years of EV production, their EBIT margin may shrink to 7% or 8% from currently ~9.5%. Here is hope they'll survive with only $10-12 billion profit a year. I mean, looking at worldwide sales they are building the best selling luxury sedan (and a lot more models except that certain sedan) That may help.

2) Timeframe: VW started to develop their MEB in 2015. The first cars will hit the market in early 2020. It's not like they start now and cars will arrive in 2024 or later.

3) Investors: Some seem sceptical but most are aware that those steps are necessary to compete with the upstarts, meet emission targets and regulations. Also: See 1)

4) CapEx: With an equipment lifetime of maybe 10 years and owning dozens of factories, you have to retool some each year. Usually they do not have to burn them down and rebuild them from scratch. One might assume the drive train and battery pack could be major hurdles and the other stuff stays mostly the same.

5) Battery sourcing: Teslas known purchase obligations with Panasonic until 2022 are about $15 billion. We already know that VW sourced batteries for $25 billion and plans for another $30-40 billion until 2025. I do not know much about other manufacturers, which could be because ...

1. They didn't announce them yet.
   
2. They planned investements of a few billions and simply forgot about the batteries.
   
3. They are not able to buy any, despite billions of cash, while Tesla has no problem at all to source 150 GWh.
   
4. They all lied and won't build any EVs.

Personally i'd go with option 1.

6) Battery performance: Why do you assume the new battery packs in cars like the I-Pace, E-Tron or the newer Leafs are performing worse? Is there any provable advantage Tesla has? That is, if we leave aside all the assumptions about the amazing things Jeff Dahn is supposed to have done. IP on Panasonics side will probably be used for whomever they produce cells.

7) Dealerships: I ... uhm .... *mumbles* ... i agree. The current dealership structure may become more of a problem.



Question: If you calculate ROIC as "(Net Income - Dividends) / Total Capital" and you have always had a negative net income, how can your ROIC be extremely high? Is there another definition that i'm not aware of? Are you talking about a certain part of Teslas business or are you talking about potential future ROIC? I'm a bit lost with this fact.

Return On Invested Capital - ROIC

Regarding cells, Tesla uses cylindrical cells, so far all the other major EV makers chose to use pouch cells. Here is a good comparison using Bolt as example. Basically pouch cells are easier to assemble but has lower energy density by weight. Tesla uses active liquid cooling in between cells, vs the Bolt pack has passive thermal plates between cells, and is liquid cooled only on the outside of the whole battery module. Energy density and thermal cooling management are two of the biggest technical challenges in battery technology, and all Tesla's competitions have all chosen a technically inferior one due to lower assembly cost. IMO it's not safe to assume that others can just utilize the same cell sourcing as Tesla, and achieve the same performance.

The bottom line is your thinking seems to over-simplify how complex and difficult battery technology and related sourcing is. It may be a mistake for Tesla fans to assume that Tesla can reinvent manufacturing quickly, but it's an equally big mistake to assume that traditional automakers can catch up on battery technology quickly. Regarding battery sourcing and performance, and related CapEx, I think you may want to take a "I'll believe it when I see it" approach, just as Tesla skeptics have taken to their ability to make cars.

 

[Esme Es Mejor]

Looks like the overall market crapped out on us.

I’ve made so much money buying shares in the low 290s & selling in the high 290s. Usually within 24 hours, but even when the SP dropped into the 240s, the shares I bought in the low 290s were profitable within a couple weeks.

Meanwhile, my core holdings remain intact, a hedge against FOMO.

 

[jeewee3000]

Regarding cells, Tesla uses cylindrical cells, so far all the other major EV makers chose to use pouch cells. Here is a good comparison using Bolt as example. Basically pouch cells are easier to assemble but has lower energy density by weight. Tesla uses active liquid cooling in between cells, vs the Bolt pack has passive thermal plates between cells, and is liquid cooled only on the outside of the whole battery module. Energy density and thermal cooling management are two of the biggest technical challenges in battery technology, and all Tesla's competitions have all chosen a technically inferior one due to lower assembly cost. IMO it's not safe to assume that others can just utilize the same cell sourcing as Tesla, and achieve the same performance.

The bottom line is your thinking seems to over-simplify how complex and difficult battery technology and related sourcing is. It may be a mistake for Tesla fans to assume that Tesla can reinvent manufacturing quickly, but it's an equally big mistake to assume that traditional automakers can catch up on battery technology quickly. Regarding battery sourcing and performance, and related CapEx, I think you may want to take a "I'll believe it when I see it" approach, just as Tesla skeptics have taken to their ability to make cars.

Very good post, to which I would like to add another (current) advantage of Tesla regarding batteries.

Battery packs are not just hardware, but also software in how the cells are linked, how the cells are depleted/charged, et cetera.

Tesla has optimized its software so that the battery packs last longer and provide better range/performance. To do this a company needs years of experience, experience that the competition does not have at the moment.

Will others catch up? Definitely. But I don't see it happening in the first ten years.

 

[corduroy]

I can also vouch for Robinhood. Works great and love the no commission fees. Although being able to make trades on my phone has proven to be dangerously easy, and ill advised a few times.

 

[JRP3]

Regarding cells, Tesla uses cylindrical cells, so far all the other major EV makers chose to use pouch cells. Here is a good comparison using Bolt as example. Basically pouch cells are easier to assemble but has lower energy density by weight.

Actually all things being equal, i.e. the same chemistry, cylindrical cells would have lower energy density because of the empty space between cells. Tesla's energy density advantage is because of it's use of NCA chemistry, which can't be used in large pouch cells because of the need for better cooling. So the Bolt has "less effective" cooling but that should be fine because it doesn't need better cooling. If other OEM's can increase the energy density of their cell chemistry they would gain an advantage in pack density if Tesla were not able to also increase their density to keep pace. At some point in time the cylindrical cell format could put Tesla at a slight disadvantage.

 

[jeewee3000]

I can also vouch for Robinhood. Works great and love the no commission fees. Although being able to make trades on my phone has proven to be dangerously easy, and ill advised a few times.

So jealous of that Robinhood app. Can't access it from Belgium.

Oh well, I'll just be a long term investor and enjoy my almost free health care.

 

[JRP3]

Will others catch up? Definitely. But I don't see it happening in the first ten years.

I do, because most of the other OEM's are using an inherently more stable and longer lasting NMC cell chemistry, similar to what Tesla uses for grid storage. There is no real magic in properly balancing cells. I expect the Bolt packs to last quite well.

 

[Yggdrasill]

I do, because most of the other OEM's are using an inherently more stable and longer lasting NMC cell chemistry, similar to what Tesla uses for grid storage. There is no real magic in properly balancing cells. I expect the Bolt packs to last quite well.

Lower energy density and more costly, though.

They are working on the energy density and cost (NMC 811), but they'll likely have to sacrifice some of that durability.

 

[JRP3]

Lower energy density and more costly, though.

Sure, but as I stated above the prismatic format can make up for some of the density compared to cylindrical, plus the less volatile chemistry may need a less robust pack structure which also saves some weight. That comparison of the Bolt modules and Tesla modules calculated an 11% difference. That difference might decrease further at the pack level.

 

[Yggdrasill]

Sure, but as I stated above the prismatic format can make up for some of the density compared to cylindrical, plus the less volatile chemistry may need a less robust pack structure which also saves some weight. That comparison of the Bolt modules and Tesla modules calculated an 11% difference. That difference might decrease further at the pack level.

I don't particularly disagree. There are pros and cons to both approaches.

This discussion is a bit beside the point, anyway, because Teslas competitors are the ICE vehicles. Electric cars will go from under 1% to close to 100% over a few years. All batteries are needed, and those who happen to have the largest battery factory in the world stand to profit. Tesla/Panansonic will profit, LG Chem will profit, Samsung SDI will profit, BYD will profit, SK Innovation will profit, etc.

 

[Waiting4M3]

Actually all things being equal, i.e. the same chemistry, cylindrical cells would have lower energy density because of the empty space between cells. Tesla's energy density advantage is because of it's use of NCA chemistry, which can't be used in large pouch cells because of the need for better cooling. So the Bolt has "less effective" cooling but that should be fine because it doesn't need better cooling. If other OEM's can increase the energy density of their cell chemistry they would gain an advantage in pack density if Tesla were not able to also increase their density to keep pace. At some point in time the cylindrical cell format could put Tesla at a slight disadvantage.

I disagree that the cylindrical cell format will eventually be a disadvantage. It's a design choice along with NCA chemistry to provide the performance that Tesla needs. Bolt can use pouch for lower performance/cooling requirement, and they can optimize around that, and gain pack (volumetric) density. But it doesn't make up the performance difference.

I'd be interested in seeing the battery pack comparison vs the I-Pace. Fully Charged just had a video a few days ago and they showed the interior of the battery pack, looks similar to the Bolt, with a bunch of pouch cells all stacked next to each other and no active cooling between them. The I-Pace is supposed to be higher performance so curious to see how Jaguar does thermal management.

 

[bdy0627]

I’ve made so much money buying shares in the low 290s & selling in the high 290s. Usually within 24 hours, but even when the SP dropped into the 240s, the shares I bought in the low 290s were profitable within a couple weeks.

Meanwhile, my core holdings remain intact, a hedge against FOMO.

Yeah, I've tried exiting almost entirely when I think we are headed down but FOMO is seriously powerful. I can't usually hold out for more than a few days before I'm back in because of it. Much better to keep a core long term holding and trade the ups and downs alongside it.

 

[Time]

BREAKING NEWS

Dana Hull, of Bloomberg News, saw a Tesla run a stop sign. Is this the end for Tesla? Will Musk be prosecuted for allowing the stop sign to be run by?

BREAKING NEWS

Dana Hull, of Bloomberg News, says someone at Tesla was told they cannot have next weekend off. Is Tesla becoming a slave plantation?

 

[aznt1217]

This is pretty crazy. We're really going to need catalyst's from the call in May

 

[Big Earl]

Just got that limit buy filled at $292.52. Doin' the best I can!

 

[K_Dizzle]

This is pretty crazy. We're really going to need catalyst's from the call in May

I hope 4K a week run rate is announced

 

[Richgoogol]

CNBC is speculating that the SP drop is due to a new probe into workplace injury
Tesla shares fall on news of new probe into workplace injury

 

[viridi]

CNBC is speculating that the SP drop is due to a new probe into workplace injury
Tesla shares fall on news of new probe into workplace injury

FUD machine at work - this would be a non-event for any other company.

 

[bdy0627]

This drop is market-wide. It looks to me like the stock hit hard resistance at $300 and then dropped with the market. There's probably nothing more to it.

 

[Curt Renz]

I have noticed that Slate had three negative articles in the past week or so on Tesla. This is a progressive news outlet that is anti-Koch, global warming, etc. but these articles could've just as easily been from the WSJ or Kolodny. I think it has to be due to the UAW union push. Getting it from both sides now, I can see why Elon said he is half-Democrat, half-Republican.

Dana Hull and her "neutral" reporting again Another Safety Probe Hits Tesla After Subcontractor Breaks Jaw

CNBC is speculating that the SP drop is due to a new probe into workplace injury
Tesla shares fall on news of new probe into workplace injury

FUD machine at work - this would be a non-event for any other company.

I posted this in the general forum today, but it may bear repeating here:
_________________

Indeed, inspiration by the UAW is likely behind many of these reports of relatively unnoteworthy Tesla workplace incidents by CNBC's Kolodny and Bloomberg's Hull. CNBC TV today announced a "Market Flash" about the California OSHA investigating safety at the Fremont plant, without mention that it involved an injured worker of an independent contractor performing a procedure developed by the contractor and under its supervision. The contractor reported the injury to the state, apparently leaving Tesla feeling it was unnecessary to also do so. At worst, we're talking about a fine of a few thousand dollars.

Countless workplace incidents like this happen across America every day that we never hear about. Yet it appears that the UAW wants to make sure that the media cover every one involving Tesla. Their motive is to influence Tesla workers into supporting UAW unionization, but it affects the share price to a degree far beyond what is rational. In any event, I doubt Tesla employees will vote for a union.