TSLA Market Action: 2018 Investor Roundtable

[bdy0627]

Nice little pop is SP in last few minutes

AWD and performance specs leaking???

 

[jelloslug]

Is it possible there were no fire trucks on the road today?

The next easter egg will be to turn all the semis to firetrucks when AP is on.

 

[SteveG3]

They do not have to catch up. The market is big enough for everyone and Tesla has brand cachet. Apple v. Android.

Seems obvious to me but so many seem to miss it. There is simply no possible demand issue until 90% of all new cars are electric... Then there may be a demand issue.

FWIW I figure that date is 2025-2030. Gives Tesla a few years before worrying about demand, I would say.

fwiw, having looked at this extensively, I view neroden's timeline for supply catching up to demand as tremendously aggressive. 50% of worldwide consumer vehicle supply being electric before 2030 looks doubtful to me, much less, 90%.

The Fractured Tipping Point Moat

 

[Motor Mouth]

fwiw, having looked at this extensively, I view neroden's timeline for supply catching up to demand as tremendously aggressive. 50% of worldwide consumer vehicle supply being electric before 2030 looks doubtful to me, much less, 90%.

The Fractured Tipping Point Moat

It's all pretty speculative at this point IMO, but I find the question of when mass adoption will occur to be endlessly fascinating. It it were 50% by 2025, I would be thrilled.

EDIT: I think the biggest factor will be PPB of oil.

 

[SteveG3]

It's all pretty speculative at this point IMO, but I find the question of when mass adoption will occur to be endlessly fascinating. It it were 50% by 2025, I would be thrilled.

you might want to take a look at the thread I linked. I think we are roughly 5 years from crossing 50% in demand... but over a decade from crossing 50% in supply. That split in the supply and demand aspects of the EV tipping point, is a MASSIVE moat for Tesla. Quite a bit of irony in this as 1) we've just heard how Elon Musk doesn't like moats, dismisses them as oligopolies, 2) it's effectively the incumbent ICE mfgs existing oligopoly (by which they can kick the can of switching to pure EVs down the road for years without it impacting current financials as they have and are all but certain to largely continue to do), not some oligopoly Tesla is a part of, that results in this massive moat for Tesla.

 

[jhm]

I dont know that study, would be great if you could give me a link to that if its not too much work, sounds interesting.

Like i said, i dont know about reducing bubbles and such, but shorts do add value to the discussion about a company. Shorts did help expose Enron and other frauds. Most put tremendous amounts of time and research into their positions, because you have to be right when youre going against the market that in average goes up not down. And helping to expose and shut down fradulent companies before they do more funding rounds and rack up more liabilities that cant be paid later on does indeed save capital. Nobody can say whats the net result for all of it, but i believe its positive.

Another good example would be Einhorns short against Allied Capital. They did hundreds of millions of fradulent loans, which got reimbursed by the government after they defaulted. Einhorn and other guys, motivated by their short position, worked for years to expose and shut down the company, which probably saved hundreds of millions because they would have continued with it if no one had shut them down.

Therefore i think the view of Short Sellers as "destroyers" is entirely wrong. And the ones that spread lies and misinformation certainly exist, but the do on both sides (penny stocks, and the aforementioned companies like enron, worldcom, allied capital and so on). Its important to have people that argue for the other side.

I don't recall which specific paper I had read previously, but this one seems pretty good, http://www.utdallas.edu/~eeh017200/papers/HaruvyNoussair2006.pdf

Generally loose restrictions on short selling reduces the price, likely simply by expanding the supply of shares available to be held long. This can reduce the time in bubble, but it does not lead to closer tracking of fundamental value. It simply increases the time at which market prices are below fundamental value and can extend periods of low prices. So the authors conclude that shorting can overcompensate for bubble and lead to capital misallocation.

Short selling is ubiquitous in the world’s financial markets. If restrictions on short sales are tight, investors who are bullish on a stock will buy it, but few who are bearish will sell it short.16 In the absence of short selling, the asset price will simply be the price offered by the most optimistic trader with sufficient funds. With short selling, pessimistic traders are able to drive down the price. In principle, if traders’ beliefs are distributed with a mean at the fundamental value of the asset, the price should closely track that fundamental value. However, our data suggest a possible shortcoming of short selling. It may overcompensate for bubbles and lead to prices lower than fundamental values. In financial asset markets, this could translate into a misallocation of capital.

All of this is in the context of an experimental market concocted to reliably induce bubbles both among human traders and computer simulated agents. Specifically the stock being traded is known to pay 16 dividends of the same amount and zero after that. So fundamental value is known with complete certainty and declining to zero. One wonders what shorting behavior they might observer in the case of a stock that has increasing fundamental value. I would suspect that shorting would still have the tendency to reduce share prices and extend the duration of prices trading well below fundamental value. It would be nice at least to have agent based simulation of this to confirm this. Perhaps someone can to a more thorough literature review to see if this has been published.

 

[elasalle]

Hedge funds often buy the convertible to hedge a short position in the stock and usually don't disclose the short position.

One more tweetbite
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[slipnslider]

I went from a 2nd-hand Renault Espace (in 2010) - €14k, to a Volvo XC-90 (2011) - €53k, which I thought was outrageously expensive.

Next step was a MS P85 (2014 delivery) - €111,540, to be precise, and now I'm driving a MXP100D (2017), inventory car which cost me €154k - that's with a very generous showroom discount, price as new was around €190k

OK, I'm not doing too badly for myself, but I'm certainly not rich by any stretch of the imagination. But you know what, despite the high cost, the Teslas never felt over-priced. Next planned car is a Roadster 2.

If I'm doing this, others are doing it too and further down the price-brackets as well.

Sure, people who are prospering in the current economy (a minority of the world) are definitely spending more on cars than they used to. But that does not mean the middle class will be able to step up in car expense on a mass scale like they did for smartphones. A $20,000 splurge is not going to occur on the widespread scale that a $500 splurge did. If you don't have the money, you don't have the money. Wanting something real bad doesn't make it affordable for you.

 

[Pete_Lee]

I went from a 2nd-hand Renault Espace (in 2010) - €14k, to a Volvo XC-90 (2011) - €53k, which I thought was outrageously expensive.

Next step was a MS P85 (2014 delivery) - €111,540, to be precise, and now I'm driving a MXP100D (2017), inventory car which cost me €154k - that's with a very generous showroom discount, price as new was around €190k

OK, I'm not doing too badly for myself, but I'm certainly not rich by any stretch of the imagination. But you know what, despite the high cost, the Teslas never felt over-priced. Next planned car is a Roadster 2.

If I'm doing this, others are doing it too and further down the price-brackets as well.

Absolutely. After a foray into cars that I simply should not have bought in my early 20s and 30s (Toyota 4Runner, Mercedes C class), I embraced the philosophy that the cars I purchased simply needed to fill my most minimum requirements adequately. After that, I never spent more than $19K on a car--ever. After that, I owned a beater Chevy ($800), a Volvo wagon ($900), and a couple of Subaru Outbacks ($19K, plus the $4K you'll blow later to rebuild the engine at 110K miles).

The total cost of my Tesla M3 will be about $40K (after Fed/state credits). I would NEVER have dreamed of owning a car that expensive--much less a performance car--but I've got reasons...

• I am absolutely sick and tired of taking my car to the mechanic. Oil changes, "another thing broke", regular maintenance. I hate it. HATE. IT. (BTW, I absolutely love my mechanic: a hero and a saint.)
• I want to be on the right side of history. I want to help fight climate change in ways I can control AND support EV development.
• I want help firmly break the narrative that EVs aren't great, nice, and convenient. Even among well-meaning, knowledgable and fairly liberal friends, I hear the same stuff regularly: "range anxiety" (you know, for the one percent of the year that they might actually have that problem), "too expensive" (until you factor total cost of ownership for ICE cars), "I don't have a home charging" (neither do I), "I don't have workplace charging" (neither do I), "it takes too long to charge" (how much cumulative time do we spend at gas stations a year?), blah blah blah blah BLAH blah blah. #StopTheBlah

 

[generalenthu]

One more tweetbite
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Not widely reported, but even Seth Klarman of baupost group took a small stake in Tesla notes.

BAUPOST GROUP LLC Top Holdings

 

[RobStark]

Sure, people who are prospering in the current economy (a minority of the world) are definitely spending more on cars than they used to. But that does not mean the middle class will be able to step up in car expense on a mass scale like they did for smartphones. A $20,000 splurge is not going to occur on the widespread scale that a $500 splurge did. If you don't have the money, you don't have the money. Wanting something real bad doesn't make it affordable for you.

Tesla does not need 4 Billion people to be able to afford the Model 3, a majority of the world population.

10M per year from the almost 8 Billion people actually buying the car is more than sufficient.

Right now in Los Angeles I can lease a BMW 320i with an MSRP of 37k for $2.9k down and $249 per month for 36 months.

In a few years deals like this will be available for Model 3 and affordable to the global middle class.

 

[Pete_Lee]

Not widely reported, but even Seth Klarman of baupost group took a small stake in Tesla notes.
BAUPOST GROUP LLC Top Holdings

I'd say that 0.49% of a $10B portfolio is still not trivial.

 

[Pete_Lee]

Right now in Los Angeles I can lease a BMW 320i with an MSRP of 37k for $2.9k down and $249 per month for 36 months. In a few years deals like this will be available for Model 3 and affordable to the global middle class.

That's right--and the used market will absolutely help. Portland, Oregon was a test market for Nissan Leafs: it's not unheard of to snag a perfectly good older-ish used Leaf for $5K right now.

There's also this: which would you rather buy, a Tesla Model 3 with 120K miles or any ICE car with 120K miles?

 

[CuriousSunbird]

Tesla does not need 4 Billion people to be able to afford the Model 3, a majority of the world population.

10M per year from the almost 8 Billion people actually buying the car is more than sufficient.

Right now in Los Angeles I can lease a BMW 320i with an MSRP of 37k for $2.9k down and $249 per month for 36 months.

In a few years deals like this will be available for Model 3 and affordable to the global middle class.

I certainly think that a leasing program is vital for the M3. I just wonder who will take the metal risk.

 

[skitown]

I wonder who's going to want to hold ICE leases in the coming years. Talk about risk.

Edit: Starting to see more articles like this: Smaller Subprime Auto Lenders Are Starting to Fold

 

[Pete_Lee]

I wonder who's going to want to hold ICE leases in the coming years. Talk about risk.

Edit: Starting to see more articles like this: Smaller Subprime Auto Lenders Are Starting to Fold

And there's this looming thing...
Electric Cars to Reach Price Parity by 2025 | Bloomberg New Energy Finance

 

[Krugerrand]

I assume Tesla would like to keep the S/X numbers flattish, with X taking a larger portion of the ~100k sales. I also assume they’d like the remaining Model S sales to be almost entirely 100D and P100D. I don’t think they’re getting rid of the 75D—at least, not anytime soon— but minimizing its numbers. They’d prefer sales in that price range to be a high-end Model 3 rather than a low-end Model S.

You don’t have to assume anything. They flat out said they will only be producing 100k combined of S and X going forward per year because they can’t justify the huge amount of resources (time and money) required for the significant redesign of both to put the new battery cells into S and X.

 

[Dennisj00]

And there's this looming thing...
Electric Cars to Reach Price Parity by 2025 | Bloomberg New Energy Finance

They’re already at price parity if you consider Total Cost of Ownership!

 

[RobStark]

You don’t have to assume anything. They flat out said they will only be producing 100k combined of S and X going forward per year because they can’t justify the huge amount of resources (time and money) required for the significant redesign of both to put the new battery cells into S and X.

No, they said going forward they will only make 100k (S&X) per year because they will not invest in expanding Fremont S&X production line. And getting the entire supply chain to move in step is required to significantly expand production, which is tricky. Instead, they will focus on increasing efficiency and margins on S&X.

 

[Krugerrand]

No, they said going forward they will only make 100k (S&X) per year because they will not invest in expanding Fremont S&X production line. And getting the entire supply chain to move in step is required to significantly expand production, which is tricky. Instead, they will focus on increasing efficiency and margins on S&X.

You’re wrong. Go back two ERs - 4Q17. JB was VERY clear about S and X being held to100k and it was all about the 18s versus the 21s and the resources needed to heavily redesign S and X.