TSLA Market Action: 2018 Investor Roundtable

[mongo]

Would the slowdown in Model 3 production be related to installing the new line equipment or should they be continuing the old line in parallel? Or has that already been completed? Has anyone done a factory tour recently?

8-K:

“[We] expect the new automated lines to arrive next month in March. And then it's already working in Germany so that’s going to be disassembled, brought out to the Gigafactory and reassembled and then go into operation at the Gigafactory. It's not a question whether it works or not. It's just a question of disassembly, transport and reassembly. So we expect to alleviate that constraint. With alleviating that constraint, that's what gets us to the roughly 2,000 to 2,500 unit per week production rate.”

The “2,000 to 2,500” units per week cited in this comment refers solely to the capacity of the additional automated battery module manufacturing equipment that is currently located in Germany, and not to Tesla’s total Model 3 production run rate or to the capacity of the automated battery module equipment that is already present at Gigafactory 1. Tesla’s ability to meet its target of 2,500 per week by end of Q1 2018 is not dependent on the additional equipment that is currently located in Germany, as that equipment is expected to start ramping production during Q2 2018. With respect to battery module production, Tesla’s ability to meet its target of 2,500 per week by end of Q1 2018 is dependent only on the equipment that is already present at Gigafactory 1, as well as the incremental capacity that is currently being added through the semi-automated lines that were also discussed during the conference call.



As stated in Tesla’s Fourth Quarter and Full Year 2017 Update Letter:


“We continue to target weekly Model 3 production rates of 2,500 by the end of Q1 and 5,000 by the end of Q2. It is important to note that while these are the levels we are focused on hitting and we have plans in place to achieve them, our prior experience on the Model 3 ramp has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time. What we can say with confidence is that we are taking many actions to systematically address bottlenecks and add capacity in places like the battery module line where we have experienced constraints, and these actions should result in our production rate significantly increasing during the rest of Q1 and through Q2.”

2,500 by end of Q1 via semi-automated line. Get stuff from Germany in March, set that up, hit 5k by end of Q2. I expect that is the Q1 2.5k + new line.
Assuming sufficient space, I expect the semi-autonomous line will not be discontinued until a second set of German fully autonomous equipment is up and running and the 3rd and 4th stages of pack manufacturing become the bottleneck.

Meanwhile, Fremont progresses in eliminating any speed limitations present there...

 

[koolkool]

What news is causing the stock price to tank?

 

[Big Earl]

What news is causing the stock price to tank?

The apparent Model 3 production halt or slowdown that has been going on for the past few days combined with expected low Model 3 production numbers from InsideEVs later this week. Also, shorts getting back in the game after being mostly absent last week.

 

[bdy0627]

This last climb lasted 11 trading days, which is just a little over average for TSLA over the last year. Here are some interesting stats on the price action looking at climbs and dips dating back to May 2017:
Average trading days to lose/gain 10%: 5
Average trading days between local high/low: 9
Least trading days between local high/low: 2
Most trading days between local high/low: 23
Average loss/gain: 14%

I think you can trade this volatility somewhat like the BFPT. It's nearly impossible to profit from the entire move but you can catch a good portion of it.

 

[jhm]

The blessed buy range is $293 to $336. So we may get new blessings soon if the price keeps falling. By all means, let's freak out over shadowy VIN counts. It's like pennies from heaven.

 

[Zhelko Dimic]

I'm with you here, sort off.
I sold large chunk of my leverage (added on the way down $320-$300) last couple of days and today.

I am tempted to buy back some between low $340 and $350, yet, I don't see any proof of ramp happening. Hence, I'm concerned current optimism has played out a bit too early, and that we will see $330 and possibly lower.

Technically though, it's very likely we don't see anything under $340, hence my temptation to load up again in low 340s, if we even see it...

To summarize, I expect disappointment short term, but I doubt it will change outcome for '19 leaps, and even less so for '20 leaps, and I have FOMO, so I'm torn.
Just thinking aloud...

I bought some back today around $343...

 

[pz1975]

I bought some back today around $343...

I'm waiting until $330-335.

 

[Reciprocity]

The blessed buy range is $293 to $336. So we may get new blessings soon if the price keeps falling. By all means, let's freak out over shadowy VIN counts. It's like pennies from heaven.

I agree. I already have a buy order at 335, dont care if it goes lower. The more I think about the more it seems odd to me. What has been eating at me is that Tesla just sent out a larger then normal group of invites, by about 50%, to non-owners. The larger then normal comes from the spreadsheet that has been tracking invites. Why would Tesla do that if you had production problems?

My guess is that Tesla is re-tooling for Dual motor and P variations with the understanding that when that tooling is complete, they can and will ramp to 2500/w quickly. This is because the packs are still being built at the Gigafactory and so are motors. The new pack automation equipment should get there as early as next week and who knows how long it will take to be installed, and once it is, no one knows how long it will take to ramp up. But that shouldn't matter much because the 2500/w is attainable without the new hardware. If I am right, you will start to see those parking lots fill up with batches of model 3s ready for shipment. My guess is that they are still batching the first production vehicles and once tooling is complete and they start offering dual and P and potentially interior options, they will need to switch to building more based on what is ordered. Now they will still queue up orders by color, but they wont be building batches and assigning Vins to orders like they are now. I want to be clear that just because they are tooling up now, doesnt mean that they will start P and Dual next month. It still could take some time to validate the new tooling. My guess is that you will see some more VIN batches that include P and Dual in large enough numbers for testing. Then a batch for employees. Then finally a batch for owners. they shouldnt need more retooling of the line for the smaller pack as it should be the same as installing the larger pack. Same goes for the automated pack lines as they can just band less cells. Some kind of spacer would just be inserted to take up the extra space. That is a huge assumption on my part though, I have no clue.

Again, the question I have is why send out invites if you cannot build the cars? Its clear to me there has been a slow down on production and if you combine the two, it screams re-tooling in anticipation for more options. If true, this leads me to believe they are confident in Fremont being able to do the 2500/w as long as the packs are keeping pace. It should be fairly obvious if its true. The lots will fill up and the Vins will be registered in larger batches in the next week or two.

 

[mongo]

I agree. I already have a buy order at 335, dont care if it goes lower. The more I think about the more it seems odd to me. What has been eating at me is that Tesla just sent out a larger then normal group of invites, by about 50%, to non-owners. The larger then normal comes from the spreadsheet that has been tracking invites. Why would Tesla do that if you had production problems?

My guess is that Tesla is re-tooling for Dual motor and P variations with the understanding that when that tooling is complete, they can and will ramp to 2500/w quickly. This is because the packs are still being built at the Gigafactory and so are motors. The new pack automation equipment should get there as early as next week and who knows how long it will take to be installed, and once it is, no one knows how long it will take to ramp up. But that shouldn't matter much because the 2500/w is attainable without the new hardware. If I am right, you will start to see those parking lots fill up with batches of model 3s ready for shipment. My guess is that they are still batching the first production vehicles and once tooling is complete and they start offering dual and P and potentially interior options, they will need to switch to building more based on what is ordered. Now they will still queue up orders by color, but they wont be building batches and assigning Vins to orders like they are now. I want to be clear that just because they are tooling up now, doesnt mean that they will start P and Dual next month. It still could take some time to validate the new tooling. My guess is that you will see some more VIN batches that include P and Dual in large enough numbers for testing. Then a batch for employees. Then finally a batch for owners. they shouldnt need more retooling of the line for the smaller pack as it should be the same as installing the larger pack. Same goes for the automated pack lines as they can just band less cells. Some kind of spacer would just be inserted to take up the extra space. That is a huge assumption on my part though, I have no clue.

Again, the question I have is why send out invites if you cannot build the cars? Its clear to me there has been a slow down on production and if you combine the two, it screams re-tooling in anticipation for more options. If true, this leads me to believe they are confident in Fremont being able to do the 2500/w as long as the packs are keeping pace. It should be fairly obvious if its true. The lots will fill up and the Vins will be registered in larger batches in the next week or two.

I'm probably being picky, but I think re-tooling is too strong of a word. They had always planned to build AWD 3's, so the line was built with the the needed stations. The recent videos of the 3 show that the current frame has AWD mount points. So I do not think there is any re-tooling needed. They do need to get the GF front drive unit production running along with the additional Fremont assembly cells (additional setup, not change in existing line).

Regarding invites, they need to know how many more RWD/LR/Premium to build. Based on take rate from previous invites, they may have increased the invite size to ensure a sufficient amount of people who want the current configuration.

Agree that Fremont is likely geared up for at least the 2,500/ wk rate.

 

[madodel]

New Line if we are referring to battery module coming in from Grohmann is slated for March ?

I forgot that was for battery packs. So nothing to do with Model 3 production. So it just remains a mystery.

 

[Curt Renz]

The apparent Model 3 production halt or slowdown that has been going on for the past few days combined with expected low Model 3 production numbers from InsideEVs later this week. Also, shorts getting back in the game after being mostly absent last week.

Indeed, Tesla shareholders appear fearful and short sellers hopeful of disappointing February delivery numbers being reported by InsideEVs, possibly as soon as tomorrow. As you imply, those numbers have already been hashed out here at TMC, at Bloomberg and elsewhere. There should be no surprises, unless to the upside.

Apprehension presents buying opportunities. Once InsideEVs reports its Tesla guestimates, I would expect a relief rally. If so, technically that would confirm a bullish Inverse Head-And-Shoulders pattern. A few minutes ago I uncharacteristically added some near-term call options to my core Tesla stock holding.

 

[jhm]

@Reciprocity, I like your re-tooling conjecture. If that's what they're up to, I do think it reflects confidence about resolving other bottlenecks. It also makes sense that they need the D and P before they go deep into the non-owner list.

I hope you're right. Are there objections or alternatives to this conjecture that we should consider?

 

[Big Earl]

I agree. I already have a buy order at 335, dont care if it goes lower. The more I think about the more it seems odd to me. What has been eating at me is that Tesla just sent out a larger then normal group of invites, by about 50%, to non-owners. The larger then normal comes from the spreadsheet that has been tracking invites. Why would Tesla do that if you had production problems?

My guess is that Tesla is re-tooling for Dual motor and P variations with the understanding that when that tooling is complete, they can and will ramp to 2500/w quickly. This is because the packs are still being built at the Gigafactory and so are motors. The new pack automation equipment should get there as early as next week and who knows how long it will take to be installed, and once it is, no one knows how long it will take to ramp up. But that shouldn't matter much because the 2500/w is attainable without the new hardware. If I am right, you will start to see those parking lots fill up with batches of model 3s ready for shipment. My guess is that they are still batching the first production vehicles and once tooling is complete and they start offering dual and P and potentially interior options, they will need to switch to building more based on what is ordered. Now they will still queue up orders by color, but they wont be building batches and assigning Vins to orders like they are now. I want to be clear that just because they are tooling up now, doesnt mean that they will start P and Dual next month. It still could take some time to validate the new tooling. My guess is that you will see some more VIN batches that include P and Dual in large enough numbers for testing. Then a batch for employees. Then finally a batch for owners. they shouldnt need more retooling of the line for the smaller pack as it should be the same as installing the larger pack. Same goes for the automated pack lines as they can just band less cells. Some kind of spacer would just be inserted to take up the extra space. That is a huge assumption on my part though, I have no clue.

Again, the question I have is why send out invites if you cannot build the cars? Its clear to me there has been a slow down on production and if you combine the two, it screams re-tooling in anticipation for more options. If true, this leads me to believe they are confident in Fremont being able to do the 2500/w as long as the packs are keeping pace. It should be fairly obvious if its true. The lots will fill up and the Vins will be registered in larger batches in the next week or two.

I agree. I think something is happening at the factory that is in preparation for greater production volume. Dual motor configuration is an interesting theory. Whatever it is, I’m fine with it happening now in these early stages when production is already slow. This also helps delay the 200,000th vehicle mark until Q3, which is good for everyone.

 

[jhm]

I'm probably being picky, but I think re-tooling is too strong of a word. They had always planned to build AWD 3's, so the line was built with the the needed stations. The recent videos of the 3 show that the current frame has AWD mount points. So I do not think there is any re-tooling needed. They do need to get the GF front drive unit production running along with the additional Fremont assembly cells (additional setup, not change in existing line).

Regarding invites, they need to know how many more RWD/LR/Premium to build. Based on take rate from previous invites, they may have increased the invite size to ensure a sufficient amount of people who want the current configuration.

Agree that Fremont is likely geared up for at least the 2,500/ wk rate.

Re-tooling may be too strong a term here. The conjecture still stands as a transition to adding P & D configurations. It seems there are steps to test out and experience to gain that could slow up production momentarily. Maybe someone with manufacturing experience could clarify this potential issues here.

 

[jhm]

The big worry in a production lull is if some unexpected problem was discovered. An intentional lull for some upgrade is not a problem, but an indication of progress. Given that we are coincidentally at the end of the owners list for the current configuration suggests an intentional upgrade is plausible if not likely.

 

[mongo]

I agree. I think something is happening at the factory that is in preparation for greater production volume. Dual motor configuration is an interesting theory. Whatever it is, I’m fine with it happening now in these early stages when production is already slow. Delays now also help delay the 200,000th vehicle mark until Q3, which is good for everyone.

IT could disruption due to increasing the efficiency of the internal material movement system they referred to.

Re-tooling may be too strong a term here. The conjecture still stands as a transition to adding P & D configurations. It seems there are steps to test out and experience to gain that could slow up production momentarily. Maybe someone with manufacturing experience could clarify this potential issues here.

They could be running batches of AWD and slowly walking through the assembly operations needed, along with tuning the automated equipment required (such as robots for moving the front drive unit). While that is going on, normal line production upstream can't progress. Same thing for the different suspension required due to front drive shaft interference. They would have work instructions prepared, but any new task has a learning curving, along with shaking out the documentation errors.

Then, they need to update the end of line test systems to verify proper functioning of the the new DU and other systems impacted by the changes. If SAS is part of AWD, the rear suspension assembly process also changes and a test for that system gets implemented/ vetted.

Once they have a decent number of cars built, they can set the tolerance on the parameters they measure (along with finding SW bugs that happen less often).

 

[jhm]

Dangit! I was hoping for a lower price, but now its going back up. C'mon, shorts, you know you want it.

 

[Reciprocity]

Re-tooling may be too strong a term here. The conjecture still stands as a transition to adding P & D configurations. It seems there are steps to test out and experience to gain that could slow up production momentarily. Maybe someone with manufacturing experience could clarify this potential issues here.

I am thinking interiors as well. There are as many people waiting for non pup and other interior options. The timing would be interesting as it would signify a new confidence in the production ramp. You dont add that mess on top of a production system that has issues. You wait until you feel confident. The alternative is that some supplier issue just cropped up out of no where after invites went out.

 

[Reciprocity]

Dangit! I was hoping for a lower price, but now its going back up. C'mon, shorts, you know you want it.

I still think you will have an opportunity on Friday or Monday.

 

[mongo]

I am thinking interiors as well. There are as many people waiting for non pup and other interior options. The timing would be interesting as it would signify a new confidence in the production ramp. You dont add that mess on top of a production system that has issues. You wait until you feel confident. The alternative is that some supplier issue just cropped up out of no where after invites went out.

Non-glass roof (is that still a thing?) would take some welding downtime to implement.

Edit: followed by paint booth update