2017 Investor Roundtable:General Discussion

[AudubonB]

I regret that I have but one "disagree" to give!

Define *soon*.

or was I supposed to have written:

Define *friendly*.

 

[dennis]

Good point. I think they will not give FY guidance on the Model 3 with Elon reminding us that in an exponential ramp one week can make a 50% miss or beat. Guidance on Model S/X will be relatively sedate around 100k. Reason : focus on Model 3 growth instead.

I expect Model S/X guidance to be 115K-120K, i.e. 50% growth. With AP2.0, 100D and geographic expansion there should be sufficient demand to support that. On the production side they are already at a 25K/qtr run rate with 1-2 weeks downtime per quarter which would allow them to absorb quarterly factory disruptions due to M3. They only need minor improvements in S/X production efficiency to reach 120K deliveries for 2017.

 

[racer26]

Exclusive: Tesla is testing a Model 3 mule with a 70 kWh battery pack and dual motors (Model 3 70D)

Like some of the commenters on Electrek, I believe that a Model 3 70D is likely to become the most common configuration.

I expect the $35k variant to be ~55kWh.
I expect Elon's envisioned $42k ASP to be a 70D with AP+FSD.

Currently, the price delta between 60/60D MS and 75/75D MS is $5k for the extra motor.
AP is $5k, and FSD is $3k more.
Price delta between 60 and 75 batteries is $6.5k

So currently, price delta between bare bones S60 and an S75D with AP+FSD = $19.5k.

As it applies to Model 3, though:

We're expecting GF to chop the price of batteries by ~50%. Lets assume the 55->70 upgrade on a 3 is more like $3.5k.

AP+FSD are entirely software options. They have no cost-per-vehicle, and so with a total addressable audience of ~4x the production, it wouldn't be unreasonable to see them be 1/3 of the price they are on S/X. $8k/3 = ~$2.5k

That leaves the second motor. It doesn't need to be as big as MS's and its going to be produced in much higher quantities, so it too can be cheaper. I expect it to come in around the $3k mark instead of the $5k it is on MS.

3.5k + 2.5k + 3k = 9k + 35k base price = 44k. Not that far off from Elon's 42k estimate.

 

[doctoxics]

"Note that from the original Gigafactory announcement of 35 GWh of cell production and 50 GWh of pack production, the Gigafactory 1 is now roughly triple the size."

I'm unclear about the latest Tesla statements on how much the Gigafactory is now expected to produce when they are done and when.
Was 35/50 GWh the original plan? Was that upped once or twice? I think at one point Tesla said they'd figured out how to make much more cells per year in the amount of factory space they'd originally planned. Maybe two or three times the original GWh forecast.
Then perhaps more recently, did they revise the total size of GF higher than original plan, and did that then raise the target production by whatever year even higher? Thanks if anyone knows and can summarize.

Finally in the 35 GWh cell and 50 GWh pack production spit, does that mean they expected GF to make 35 GWh of cells and then in addition they planned to bring in 15 GWh of additional cells to then output 50 GWh in packs?

The original plan was to finish Gigafactory1 by 2020 with a production rate of 35 gwh cells/year for car battery packs and 15 gwh energy storage packs/year from cells made abroad. Elon and JB have suggested that Gigafactory1 may now be able to produce 3 times the original forecast. Completion of Gigafactory1 is now scheduled for 2020 or perhaps a little later. The goal of making 35 gwh of cells at Gigafactory1 has been moved up to the end of 2018. Although to my knowledge this has not been stated, we might now assume that the final production rate of cells from Gigafactory1 will be 105 gwh/year and 45 gwh/year of cells will be made abroad and shipped to Gigafactory1 for production of energy storage packs. Presumably, all of the 105 gwh/year cells would go into model 3 battery packs.

 

[DurandalAI]

The original plan was to finish Gigafactory1 by 2020 with a production rate of 35 gwh cells/year for car battery packs and 15 gwh energy storage packs/year from cells made abroad. Elon and JB have suggested that Gigafactory1 may now be able to produce 3 times the original forecast. Completion of Gigafactory1 is now scheduled for 2020 or perhaps a little later. The goal of making 35 gwh of cells at Gigafactory1 has been moved up to the end of 2018. Although to my knowledge this has not been stated, we might now assume that the final production rate of cells from Gigafactory1 will be 105 gwh/year and 45 gwh/year of cells will be made abroad and shipped to Gigafactory1 for production of energy storage packs. Presumably, all of the 105 gwh/year cells would go into model 3 battery packs.

The question I'm interested in, is how many gwh they will be putting out in 2017? Can this be extrapolated from the estimates of 2018? I'm guessing 1/3 of the 2018 volume, if not less like 1/4. At even 1/4 of the anticipated rate of production for 2018, that should be enough for ~71,000 Model 3 vehicles at 70kWh if half of the capacity is used for Model 3. As such, I don't think that batteries will be a limiting factor for Model 3 rollout, unless I'm missing something.

I think Elon will be surprising us with Model 3 production this year to be much higher than the few hundred that the most generous of shorts are saying.

 

[farzyness]

I expect Elon's envisioned $42k ASP to be a 70D with AP+FSD.

I see this as super hard to believe - I would be shocked if 70D with AP and FSD is less than $55k.

 

[AcesDealt]

I see this as super hard to believe - I would be shocked if 70D with AP and FSD is less than $55k.

This is the problem. Gross margins and cost of production are THE question for Tesla, but yet we have crazy predictions here on the only subject that really matters (until\if TN takes off). 70kwH is a 9k$ nut alone.

 

[neroden]

I'm trying to figure out why the factory will be shutting down for 10 days. "Preparing for Model 3" is pretty vague.

Here's a completely out-there piece of blue sky speculation -- zero evidence.

Maybe they're rearranging the internals of the factory to move the cars faster. They've had recurrent problems with delivery logistics. Wouldn't it be better if the final cars coming off the line went straight into the correct queue to get on the train or truck which would take them to their next destination? Rearranging that might require a serious factory shutdown.

 

[neroden]

theory: The factory chokepoint isn't actually the final assembly line. It's the parking lot. It is so stuffed that any parking lot disruption brings the factory down. Since they need a bunch of room to get the press and possibly other stuff in they are just using the time to do a endo-of-year style retooling and keeping the rank and file home so they have physical space to do the work.

I actually believe this. They really should have built that bridge from the BART station by now.

 

[neroden]

Regarding taking profits
Many people are taking some profits after the excellent rise of the last 10 weeks. I certainly understand this, as prices above $250 are a historical natural high for TSLA, just like how $180 is a historical low. On hind site, a strategy of buy at $180 and sell at $250 would have been excellent over the last 2.5 years.

I do think this is a mistake now though, or rather a missed opportunity. Tesla has pushed through many obstacles from M3 design and Gigafactory production, to the SCTY acquisition, and now has more opportunity lined up in front of them then ever, by a large margin. The fruits of these efforts are just starting to come into focus.

So I don't think the next 2.5 years will be anything like the last. I think Tesla is heading much higher. Maybe not $2000, but much higher than $300. I'm sure there will be dips along the way, but the rise will be enough that I don't want to miss it. $260 might seem high in the context of the last several years, but I bet if you knew the next 2.5 years it would seem quite low.

I promised myself back on Jan 1 that I wouldn't sell any TSLA this year (the same time I predicted a Dec 31, 2017 price of $617). It's getting a little tempting to take some profits, but unless something major changes, I'm sticking to no selling until Dec 31 or $617, whichever comes first.

My profit-taking has been entirely in the form of selling puts which expired. When they execute instead of expiring, I end up with more TSLA.

 

[racer26]

I see this as super hard to believe - I would be shocked if 70D with AP and FSD is less than $55k.

Then you're either suggesting you expect the options on a Model 3 to be more expensive than they are on a Model S, or that you don't believe a $35k base price.

As I showed - bare bones S60 -> S75D w/AP+FSD = $19.5k. $19.5k + $35k base price = $54,500.

This is crazy - you're suggesting that despite selling 4x as many Model 3's as S/X, Tesla will demand the same price on AP+FSD, which have no incremental cost per vehicle. They would be crazy to keep the cost the same - $8k in options on a $70k car is one thing - on a $35k car its a very different animal, and the take rate would suffer for it.

You're also suggesting that 21-70s from the GF are achieving zero price/kWh benefit on batteries over the 18650's from Osaka in MS/MX, or else that Tesla will keep 100% of the savings as extra profit.

 

[farzyness]

Then you're either suggesting you expect the options on a Model 3 to be more expensive than they are on a Model S, or that you don't believe a $35k base price.

As I showed - bare bones S60 -> S75D w/AP+FSD = $19.5k. $19.5k + $35k base price = $54,500.

This is crazy - you're suggesting that despite selling 4x as many Model 3's as S/X, Tesla will demand the same price on AP+FSD, which have no incremental cost per vehicle. They would be crazy to keep the cost the same - $8k in options on a $70k car is one thing - on a $35k car its a very different animal, and the take rate would suffer for it.

You're also suggesting that 21-70s from the GF are achieving zero price/kWh benefit on batteries over the 18650's from Osaka in MS/MX, or else that Tesla will keep 100% of the savings as extra profit.

Your math proves my point - we'll just round it by $500.

I strongly believe that they will keep the same incremental cost especially due to the fact that Model 3 at $35k will generate little to no profit for Tesla. They will leverage their brand recognition and reputation to drive margin thru high-cost options.

The savings from 21-70s are already accounted for with the fact that Tesla is able to offer the car at a base of $35k. Without that savings they would've needed to price base higher (i.e. $42k or whatever it may be).

 

[racer26]

Your math proves my point - we'll just round it by $500.

I strongly believe that they will keep the same incremental cost especially due to the fact that Model 3 at $35k will generate little to no profit for Tesla. They will leverage their brand recognition and reputation to drive margin thru high-cost options.

The savings from 21-70s are already accounted for with the fact that Tesla is able to offer the car at a base of $35k. Without that savings they would've needed to price base higher (i.e. $42k or whatever it may be).

Then you're asserting Elon is a liar.

Elon said that the options (in particular AP and D) would be cheaper on Model 3 than they are on Model S. (Anybody able to find the twitter quote for this? It was a while ago)

Also - yes, the differential cost between the S60's 60kWh base configuration and the 3's (55kWh?) base configuration will be accounted for in the base price of the car.

The differential cost from there through the battery upgrades however will be different due to 21-70 savings as well.

Of course big options will drive margin - but I also reject the notion that a 35k Model 3 is a laggard on margin. I expect a base configuration $35k Model 3 will still have gross margin in excess of 10%. ASP Model 3 will have GM in excess of 20% at full-production (ie. Where Model S is today).

 

[kenliles]

"Targeting Feb. 18 for Dragon's next resupply mission to the @Space_Station — our 1st launch from LC-39A at @NASA's Kennedy Space Center."

SpaceX on Twitter

 

[farzyness]

Then you're asserting Elon is a liar.

Elon said that the options (in particular AP and D) would be cheaper on Model 3 than they are on Model S. (Anybody able to find the twitter quote for this? It was a while ago)

Also - yes, the differential cost between the S60's 60kWh base configuration and the 3's (55kWh?) base configuration will be accounted for in the base price of the car.

The differential cost from there through the battery upgrades however will be different due to 21-70 savings as well.

Of course big options will drive margin - but I also reject the notion that a 35k Model 3 is a laggard on margin. I expect a base configuration $35k Model 3 will still have gross margin in excess of 10%. ASP Model 3 will have GM in excess of 20% at full-production (ie. Where Model S is today).

Highly doubt I'm asserting that Elon is a liar - but I sure hope your assumptions are correct.

 

[Tslynk67]

I'm seeing reports that in some regions, Supercharger occupancy is being reported in cars:

Realtime Supercharger occupancy available now! • /r/teslamotors

 

[racer26]

Highly doubt I'm asserting that Elon is a liar - but I sure hope your assumptions are correct.

Found it:

Tesla CEO Elon Musk Confirms Model 3 AWD Option Will Cost Less Than $5,000

I might have imagined him saying that AP/FSD would be cheaper on Model3, but I think it would be extremely foolish for Tesla to not reduce the price on them at least somewhat. AFAIK, AP has a nearly 100% take rate, and FSD has something like an 80% take rate. I don't believe that will continue on Model 3 unless their price tag drops proportionally to the base price of the car (ie. by half). I can't imagine very many people being willing to spend 1/4 of the price of the car on options.

Getting AP+FSD into the hands of as many consumers as possible is the single biggest thing Tesla can do to improve road safety.

I could concede that the 42k ASP configuration might be a 55D w/AP+FSD, rather than the 70D.

 

[farzyness]

Found it:

Tesla CEO Elon Musk Confirms Model 3 AWD Option Will Cost Less Than $5,000

I might have imagined him saying that AP/FSD would be cheaper on Model3, but I think it would be extremely foolish for Tesla to not reduce the price on them at least somewhat. AFAIK, AP has a nearly 100% take rate, and FSD has something like an 80% take rate. I don't believe that will continue on Model 3 unless their price tag drops proportionally to the base price of the car (ie. by half). I can't imagine very many people being willing to spend 1/4 of the price of the car on options.

Getting AP+FSD into the hands of as many consumers as possible is the single biggest thing Tesla can do to improve road safety.

I could concede that the 42k ASP configuration might be a 55D w/AP+FSD, rather than the 70D.

In my eyes that's more realistic - however I think the savings might be in the $500 to $1k range for the dual motor, which would still place a 70D with AP+FSD at ~$54k. I hold firmly on AP and FSD costing the same across all cars - the capabilities are exactly the same between trims and thus the value from the suite is the same, so a cheaper acquisition cost in Model 3 makes no sense.

In theory Tesla is already getting AP and FSD into everyone's hands already by simply having the Hardware available and offering an upgrade if someone doesn't choose to take the option right away. What I foresee with Model 3 is the ability to temporarily enable AP+FSD on a per-hour basis without having to purchase the suite from the get go (i.e. turn on AP+FSD for $100/hr). This would be beneficial for people who seldom drive on highways, take long trips very few times a year, or simply enjoy driving their car and see no value in FSD.

 

[Fallenone]

Found it:

Tesla CEO Elon Musk Confirms Model 3 AWD Option Will Cost Less Than $5,000

I might have imagined him saying that AP/FSD would be cheaper on Model3, but I think it would be extremely foolish for Tesla to not reduce the price on them at least somewhat. AFAIK, AP has a nearly 100% take rate, and FSD has something like an 80% take rate. I don't believe that will continue on Model 3 unless their price tag drops proportionally to the base price of the car (ie. by half). I can't imagine very many people being willing to spend 1/4 of the price of the car on options.

Getting AP+FSD into the hands of as many consumers as possible is the single biggest thing Tesla can do to improve road safety.

I could concede that the 42k ASP configuration might be a 55D w/AP+FSD, rather than the 70D.

It would be foolish for any company to cut any of their products gross margin by half without any competitors in sight and a full year or more of backlog to fill in.

 

[kenliles]

(No one hurt or injured from reports)

Fire sale on Samsung Li batteries
And a factory that makes 'em
Makes you appreciate the diligence of Tesla

Fire breaks out at Samsung factory responsible for Note 7 battery production