TSLA Market Action: 2018 Investor Roundtable

[Cosmacelf]

Ok against my better judgement, I will respond. Tesla made commitment not to sell their cars at higher prices in China except for taxes/tariffs and exchange rates. Other car companies were marking up their prices/profit in China because they could. The price decrease reflects a decrease in tariffs not their gross margin

I agree. Even if this price change would reduce margins, Tesla was pretty much obligated to do it given their past pronouncements about foreign market pricing. Just as Tesla seemingly cut off their nose in China early on by stomping hard on early GMs who were selling at inflated prices into the gray market, Tesla here is similarly playing the long game in China making sure it has an honest brand. A positive brand image in China is worth A LOT.

Note that if they end up selling more in China because of this, it will allow them to either increase prices in the US or hold the line on price decreases given they have constant supply.

 

[jbcarioca]

Is the white interior exclusive to P? I’m Assuming a AWD with premium interior order white seats. But I could be wrong

Right now it is, because they have only 1,000 per week capacity. At my spouse's choice my P was ordered with black.

 

[jhm]

Why reduce prices if Model S and X are production limited?

New Because mission is to accelerate the worlds transition to sustainable energy.

See the difference is rent seeker v disruptive innovator.

It’s called real jobs, real products that benefit the world while being financially sustainable as well.

If the point is to transition quickly, then there is also value in keeping the prices as high as the competition will allow. It may seem counterintuitive, but higher prices are helpful for growing the supply of EVs. If Tesla prices their products high that leaves an opportunity to for competitors to step in an make EVs at profitable prices. If Tesla prices their products too low, it undermines the potential profitability of other auto makers seeking to enter the EV market.

If Tesla were demand constrained to sell more Model S and X, then we'd be in the opposite situation, where lowering prices would put more EVs on the road as opposed to idling factories. But in a supply constrained situation, higher prices signal to competitors to increase the supply of EVs. Right now, the overwhelming need in the EV industry is to grow the whole battery to EV supply chain. Prices will come down as competitors bring more supply to the market.

 

[ValueAnalyst]

Right now it is, because they have only 1,000 per week capacity. At my spouse's choice my P was ordered with black.

I've been thinking about if Elon's tweet means that P will be produced at the 1,000/wk rate, and if so, for how long Tesla can keep that rate up. This variable has significant implications on ASP and Model 3 gross margin. Further, if all goes well, how quickly Tesla has leveraged Model 3 platform to introduce P3D at such high volume could bode well for Semi/Pickup and Model Y production in the coming years. Exciting times!

 

[mongo]

Is the white interior exclusive to P? I’m Assuming a AWD with premium interior order white seats. But I could be wrong

For reference (Note: this are separate conversation chains)

 

[Krugerrand]

Seeing is believing... I will believe when I read the retest.
Retest that does not include some new excuse to piss over tesla.

Come on now. They’ve publicly said they’d retest if/when it gets fixed OTA. They have nothing to lose by retesting and everything to gain. Indeed, the fact they went out of their way to borrow a second car to repeat the brake testing to see if it was just an anomaly suggested they wanted to be able to recommend the car.

Tesla has become such a powerful brand, Elon Musk a household name, suffice it to say their power to influence grows exponentially worldwide. Only those with ulterior motives continue to purposely poke Tesla and they’ll get theirs soon enough.

I’m not a CR follower and I don’t know anyone personally who is. Neither I nor anyone I know has ever bought or not bought a product based on what CR has said. My circle of family and friends buy or don’t buy via word of mouth.

But clearly there is a segment of the population who places significance in what CR has to say. It behooves CR to maintain a particular level of whatever you want to call it to keep that base of support. Showing the willingness to allow such a powerful brand as Tesla to address a product inconsistency - that directly contradicts the brand’s #1 product concern, safety - and then retest the product simply solidifies CR’s public perception of looking out for the consumer and providing the most up to date, non-biased information in the market place. Win - win. To do otherwise is petty and rigid and going to piss off THE brand of the century (and its followers). Bad idea. ie., I no longer support Adidas because of their ridiculous logo BS against Tesla and I tell everyone I know not to support them and why. If CR renegs on retesting the 3’s braking, I’ll go out of my way to tell everyone I know - all who have test driven my 3 and LOVE it - that CR lacks integrity, to ensure there’s no future chance of them becoming a supporter. In the scheme of things I’m nobody, but I’m nobody of millions of Tesla and Elon nobody supporters.

 

[mongo]

I've been thinking about if Elon's tweet means that P will be produced at the 1,000/wk rate, and if so, for how long Tesla can keep that rate up. This variable has significant implications on ASP and Model 3 gross margin. Further, if all goes well, how quickly Tesla has leveraged Model 3 platform to introduce P3D at such high volume could bode well for Semi/Pickup and Model Y production in the coming years. Exciting times!

I think it means they have (at least) 3-4 months of white P backlog so 12-16k cars. As long at the drive unit lines keep up with P level versions (binned by efficiency for RW, AC FW), they should not be limited on black interior P production.

 

[Krugerrand]

Why reduce prices if Model S and X are production limited?

Because that’s what’s right and fair; a cornerstone of Tesla’s brand.

 

[jhm]

Two reasons. First, Tesla tries to make the price roughly the same everywhere, apart from tariffs, to avoid crazy private reimpprtation arbitrage. So they cut thre price by the amount by which the tariff was cut, to prevent Chinese imports of US spec vehicles. (Correction: they cut it by less than the tariff cut. Hmmm! Good marketing since I initially missed that.)

Second, increasing the deposit backlog is a good thing in China anyway.

Beyond level setting prices globally, I think the basic reason for cutting prices in China is to test response to lower prices. This is a prelude to making a significant investment in China Gigafactory. Specifically, should the China Gigafactory have its own line for Models S and X? If so, what production capacity it optimal? It seems to me this optimization problem depends on how China's demand for these products will respond to lower prices.

@Leo9 has asked an important question. The assumption that we must challenge is how long does it make sense for Model S/X to remain supply constrained to 100k/yr. Perhaps the China Gigafactory should double S/X production. Perhaps making 100k/y S/X in China could also cut manufacturing costs enough to lower these products not just for the Chinese market but for export to the rest of the world.

 

[bhtooefr]

To be fair, CR has had scandals where they made up problems or blew them out of proportion to get magazine sales in the past. (The Suzuki Samurai rollover scandal comes to mind.)

It is also worth noting that they buy all of the cars they test (which is laudable, it means they're getting the same car as everyone else, instead of a ringer that's had extra special QC and tuning to get a good review), so they're going to decline an offer to take a test car from Tesla.

 

[Dwdnjck]

Why reduce prices if Model S and X are production limited?

Because each model S sold in China will spawn 20 model 3’s when they are built there.

 

[ValueAnalyst]

I think it means they have (at least) 3-4 months of white P backlog so 12-16k cars. As long at the drive unit lines keep up with P level versions (binned by efficiency for RW, AC FW), they should not be limited on black interior P production.

Back in March, I had estimated P mix at 10% of 2H18 production, but given that backlog, this may be low. Conservative again!

 

[K_Dizzle]

And I guess there'll be some want a P with black interior...

Dude you’re right, I try to stay conservative with my estimate but I would prefer the black interior to the white myself. What % of production do you think the P can pull?

 

[JRP3]

I’m not a CR follower and I don’t know anyone personally who is. Neither I nor anyone I know has ever bought or not bought a product based on what CR has said. My circle of family and friends buy or don’t buy via word of mouth.

Before the internet my family found the testing and recommendations of CR quite useful.

 

[Tslynk67]

...behooves...

Impressive!

 

[Tslynk67]

Dude you’re right, I try to stay conservative with my estimate but I would prefer the black interior to the white myself. What % of production do you think the P can pull?

To be honest, mate, I have NFI! Maybe they'll only want to deliver white interior P's at first to keep things simple.

 

[MP3Mike]

so they're going to decline an offer to take a test car from Tesla.

Really? They are going to decline an offer that hasn't been made, and likely never will be made because Tesla knows it wouldn't be accepted?

 

[CuriousSunbird]

Why reduce prices if Model S and X are production limited?

I think they are only production limited because Tesla realized demand was at a plateau. Maybe demand is now falling.

 

[mongo]

I think they are only production limited because Tesla realized demand was at a plateau. Maybe demand is now falling.

@Leo9
This comment was in regards to the China price drop, which you informatively pointed out was due to the tariff lifting, not a drop in profit to Tesla.

 

[Unpilot]

So I could not resist and bought more at 275. Brings my total up to 333 shares...nice fung shway number I think.