TSLA Market Action: 2018 Investor Roundtable

[Reciprocity]

Agrred, and I think it might be even better: in this post I tried to estimate the addressable market of the Model 3 in the U.S. alone, about 600k units at $45k, 1,200k units at $39k and 1,800k units at $35k.

That's U.S. only and sustained - and if the Model 3 takes 30% of that it's huge.

But I do agree with Elon's approach of "measuring" demand by actually selling:

• No amount of market research would have told them the overwhelming preference for AWD (80% take rate initially) for example - reservation holder surveys didn't indicate this. Often customers don't know what they want, up to the point they click on "confirm order".
• Also, there was some early pushback against the minimalist interior - Tesla couldn't assume that it's such a hit with U.S. customers.
• The Model 3 was a "bet the farm" product, and the path to the summit of high-tech success is littered with the corpses of companies who assumed too much about what their customers wanted.

So I fully approve of Tesla's conservative approach, and I 110% approve of their low-latency, agile, feedback driven approach to vehicle options, bundling and pricing.



Yeah, I too think that Tesla owns the very lucrative, high-margin franchise/monopoly of premium EVs with no credible competition in sight, and such natural monopolies tend to be countercyclical and can grow even faster in recessions.

Now that Tesla doesn't depend on external sources of financing or equity sales anymore, because they are making 1.4 billion dollars of internally generated cash per quarter, their resilience to recessions has increased even more.

Tesla's oversight was not how many AWD vs rwd vs red vs anything at that level of detail. My point is that no one is getting a $35k car because demand for $50k eclipses what Tesla can make. MR is the result of trying to find a middle ground, which will inevitably be the bottom. To fulfill demand at $35k, Tesla needs to be able to make 2M cars per year, period. Maybe only 1.5M model 3s if model Y is also available.

People also forget, cars get more expensive every year. Not cheaper. My guess, Tesla night still 50k SR, WW by the end of next year, maybe more in China the year after.

 

[ThereAre4Cars]

Far forward looking? Tell that to Amazon and Google tonite. Tesla just had the best quarter in their history with a brighter future and look where the SP ended the day. I wish the markets were as smart as you make them out to be.

The markets are crazy but they aren't as crazy as using P/E like you are attempting to.

 

[The Blue Owl]

I was just at the Tesla delivery center yesterday. They have all three models available. Call your local showroom yourself.

Not because they can't move them. Not because the sales people prefer to steer buyers to other models. Not because they're compliance cars that the manufacturer doesn't really want to make. You know this, but you post true-but-irrelevant statements anyway, because you can't help yourself. That's why nobody takes your posts seriously around here; with regularity, they manage to insult readers' intelligence.

 

[beachbum77]

I think we’re largely saying the same thing, just with a different emphasis. Yes, Tesla can’t do this alone. It’s just a question of who is going to be able to turn in time, who won’t, and what new boats are going to be launched pointing away from the iceberg. Anyone who doesn’t will sink, and the new players(Tesla, but also others) will take their places.

For what it’s worth(and to make this interesting), based on current trajectory, I’d predict Ford is toast and GM will be a near miss. Mercedes and Audi are near misses, BMW is a toss up, Toyota is a goner and no idea about Honda or Hyundai. But, to be clear, this is going to be immensely painful for all of the above, and I see Tesla rapidly becoming the leader and keeping hold of that in the long term.

Have to disagree on Ford and GM. They have $billions in cash to weather the change in course. But the Japanese and Korean automakers could be in trouble.

But again it all boils down to consumer demand. Unless we can light a fire under the mass market nothing is going to change very quickly.

 

[Krugerrand]

Anyone know if/when we will get the Moody’s upgrade back to beginning of the year ratings?

Sometime between when pigs fly and Hell freezes over is my guess.

 

[ThereAre4Cars]

Agrred, and I think it might be even better: in this post I tried to estimate the addressable market of the Model 3 in the U.S. alone, about 600k units at $45k, 1,200k units at $39k and 1,800k units at $35k.

That's U.S. only and sustained - and if the Model 3 takes 30% of that it's huge.

But I do agree with Elon's approach of "measuring" demand by actually selling:

• No amount of market research would have told them the overwhelming preference for AWD (80% take rate initially) for example - reservation holder surveys didn't indicate this. Often customers don't know what they want, up to the point they click on "confirm order".
• Also, there was some early pushback against the minimalist interior - Tesla couldn't assume that it's such a hit with U.S. customers.
• The Model 3 was a "bet the farm" product, and the path to the summit of high-tech success is littered with the corpses of companies who assumed too much about what their customers wanted.

So I fully approve of Tesla's conservative approach, and I 110% approve of their low-latency, agile, feedback driven approach to vehicle options, bundling and pricing.



Yeah, I too think that Tesla owns the very lucrative, high-margin franchise/monopoly of premium EVs with no credible competition in sight, and such natural monopolies tend to be countercyclical and can grow even faster in recessions.

Now that Tesla doesn't depend on external sources of financing or equity sales anymore, because they are making 1.4 billion dollars of internally generated cash per quarter, their resilience to recessions has increased even more.

Yes that's it, measuring demand is critical. I honestly don't think he has a clear plan to get the 35k$ model profitable and is winging it. It may not end up mattering.

On the 50/50 domestic/international split of S/X (how am I doing with my slashes ggr?), I would point out that it is a fairly convincing argument that the lower income required to purchase the model 3 favors a higher international split. Strategically they should continue to sell upper configs globally before lower configs locally which means they may take 18 months to even need to think about that 35k$. I'd put low probability on seeing that before Q3 next year.

 

[roblab]

I was just at the Tesla delivery center Tuesday. They have all three models available. Call your local showroom yourself. At the end of September you could buy the showroom floor Model 3s. You can find that on the threads here on TMC.

You cannot ban someone for telling the truth. Good grief.

Delivery Center? As in Fremont? Or are you talking Service Centers? To my understanding, they try to keep models for people to try out. If a person wants to buy, they are directed to a computer and the online ordering forms. Some Service Centers/showrooms will sell a demo car with a discount, but what I see on Tesla is they are oversold by several hundred thousand cars and don't have to sell to walk-ins. Not saying they don't, though. But why should they? Even getting a new demo takes time.

I wonder if these are cars that were damaged and the potential owners refused them. That's what I read on this forum.

 

[Fact Checking]

Quit blaming the OEMs and put the blame where it belongs; on the consumer.

That is Donn Bailey, former Ford dealer and author of low quality and self-serving Seeking Alpha hit pieces against Tesla when he was short TSLA, in a nutshell, blaming the customer.

BTW., your SA Article in April 2018, which made misleading and false claims about Tesla's inventory numbers, looks even more ridiculous today.

You never apologized to Tesla and Tesla investors for trying to harm them through misinformation in a crucial, critical moment of Tesla's corporate history.

 

[omarsultan]

Because the darn consumer (at least here in the U.S.) is not motivated enough to care to buy BEVs yet in large numbers.

I dunno, 360K+ remaining reservations and this chart might belie that statement.

Instead of blaming the consumer you can validly argue that lack of adoption lies at the feet of manufacturers for not being motivated enough to deliver a compelling product.

 

[M3Rider]

No amount of market research would have told them the overwhelming preference for AWD (80% take rate initially) for example - reservation holder surveys didn't indicate this. Often customers don't know what they want, up to the point they click on "confirm order".

I have my doubts about 80%. Don't forget that a lot of RWDs were delivered prior to AWD becoming available. I don't recall the exact number, but I think about 40k RWDs were delivered. So, naturally, many of those still in line were waiting for AWD(not all though, b/c ~50%+ still haven't gotten an invite at all prior to AWD becoming available). I think 80% is an incorrect and skewed number considering prior RWD deliveries.

 

[Krugerrand]

You are missing the bigger picture.

The legacy OEM's answer to their shareholders. The legacy group are mostly all profitable. To do a major about face and go all EV would produce HUGE losses and cost many $billions. Tesla has racked up $11 billion in debt to get where they are but their shareholders expected that going in. The legacy shareholders would revolt if management tried this abruptly and all the CEO's would get canned. Then they have their global dealer networks to wrangle with.

You have to recognize their operating constraints. The fact Ford is committing $11 billion along with big changes at GM and Volvo is HUGE. Give them some credit for working towards EVs in their heavily shackled environments.

Tesla is like a 100 ft yacht surrounded by cruise ships. Tesla can be much more maneuverable since shareholders are along for the ride at this point solidly behind management.

While true, my heart is not softened by the argument. They should have started 10 years ago and didn’t. They can all burn now for all I care and I expect them to.

 

[BioSehnsucht]

Ok, how about a commercial funded by Customers? ~$300K for a slot on Big Bang. Get Hollywood to match, then watch it re-run on every news station as the real story and then watch it again and again. $300 each x 500 people = $150K? Do you realize how many people would sponsor this to help save the planet? I bet Micheal Moore would eat it up! "Paid for by the Customers" in bold at the end.

Hello, anybody out there? Maybe wrong crowd...

Please, not Big Bang, ugh. Run the add on Facebook and Youtube instead, you'll get more bang for your buck anyways.

 

[beachbum77]

Motivation is not there because of
. unappealing EVs until Tesla came along
. FUD from existing car and oil etc etc spinning the narrative that EVs are bad etc.

Also, right now Tesla doesn't have leasing options. If folks can do lease, the number of people in US who will buy Tesla I think will go up at least 100% for M3.
+ Mazda etc are also offering very low interest loans as compared to Tesla. This is another financial decision that folks are taking into account

In CA you can lease a Bolt or Leaf for around $300 a month and still the cars are sitting. I just do not get it. That is a HELL of a bargain. People are buying uglier ICE cars every day. The mass market just does not get the EV necessity yet. Let's hope they wake up soon.

 

[SO16]

I was just at the Tesla delivery center Tuesday. They have all three models available. Call your local showroom yourself. At the end of September you could buy the showroom floor Model 3s. You can find that on the threads here on TMC..

Purchasing a floor model is a bit different than new product just sitting in a parking lot or on a shelf. One is new and the other isn’t.

On another post you say you can’t compare numbers because one sells direct and the other companies don’t. It seems odd why you would then try to compare floor models of cars as the same type of stock as new vehicles sitting on a car lot.

 

[elasalle]

In CA you can lease a Bolt or Leaf for around $300 a month and still the cars are sitting. I just do not get it. That is a HELL of a bargain. People are buying uglier ICE cars every day. The mass market just does not get the EV necessity yet. Let's hope they wake up soon.

Reread ..
Motivation is not there because of
. unappealing EVs until Tesla came along

Why am I getting feeling you working OT, almost every alternate post is yours ...

 

[ggr]

Revenues would be gamed with Tesla since they are the only OEM that sells at retail. All the others sell wholesale to dealers. So using revenue is apples and oranges.

Non sequitur, again, because the numbers in question were the price to the purchaser, not the revenue to the manufacturer.

 

[Ludalicious]

Quit blaming the OEMs and put the blame where it belongs; on the consumer. I can go to my local stores and find unsold inventory of Bolts, Volts, and a selection of Tesla products ready for immediate sale. Why is that? Because the darn consumer (at least here in the U.S.) is not motivated enough to care to buy BEVs yet in large numbers. Until $10/gal gasoline changes that attitude the big OEM's have little incentive to build a radically different product that not enough people want. That is just the sad reality. So they are going to steer the ship slowly in the EV direction.

If millions of buyers turned their backs on ICE units, the OEM's would be falling all over themselves to build EVs. But sadly, that is not the case is it? I tried to get two of my relatives interested in BEVs in September. One, who can well afford any car out there did test drive a Model S and Model 3. She was impressed, but not enough to buy. So she leased a new Mazda CX-5 for 36 months, after turning in her leased MB S550. (She now thinks MB is too ostentatious and draws too much negative attention.) My other relative and her boyfriend have zero interest in any type of plug-in vehicle. That is the mass-market buyer today. Frustrating I know.

I don't disagree with this post. But since you already received 8 I helped you reach that goal of 10+

 

[sdtslafan]

I still can't believe what a difference a day makes.

Yesterday before earnings, analysis consensus was for a small loss for the quarter.

Not only Tesla make profit but we got a big beat with profit of $2.90. If you extrapolate for the year, that's $11.60 and so the P/E ratio today is $310/11.6 = 26.7.

So we went from having no PE ratio, entirely skipped the part in the evolutionary cycle of a growth company where we have an astronomical PE ratio, and landed at the average PE ratio for the market.

MEANWHILE TESLA IS GROWING FASTER THAN ANY OTHER COMPANY. IT IS THE ULTIMATE GROWTH COMPANY.
AMZN and NFLX MASSIV PE ratios.

If you give TSLA AMZN's PE ratio of 141, then TSLA will be $1600. Couldn't you argue that Tesla deserves a higher PE ratio than AMZN because its growing faster.

What am I missing? I appreciate your input in helping me to wrap my head around this...To me it seems like TSLA is now massively undervalued with these new numbers. Why are we only seeing price targets in the 400s?

 

[MarcusMaximus]

In CA you can lease a Bolt or Leaf for around $300 a month and still the cars are sitting. I just do not get it. That is a HELL of a bargain. People are buying uglier ICE cars every day. The mass market just does not get the EV necessity yet. Let's hope they wake up soon.

LEAF and Bolt both have their associated problems. LEAF is worse, with low range and awful thermal management leading to rapid battery degradation and plummeting residual value(though buying one used is great if it works for your commute. I got a 2011 LEAF last year for $5500 and my commute costs me $0.02/mile).

The Bolt is OK, but lack of quick charging capability and infrastructure makes it pretty undesireable. It’s essentially a $20-25k car with limited range for $35k.

 

[Beltsbear]

In CA you can lease a Bolt or Leaf for around $300 a month and still the cars are sitting. I just do not get it. That is a HELL of a bargain. People are buying uglier ICE cars every day. The mass market just does not get the EV necessity yet. Let's hope they wake up soon.

$300 a month with a large up front payment. The terms are not good. Really the bolt needs faster charging in more locations.