2017 Investor Roundtable:General Discussion

[vgrinshpun]

I am not sure how that rains on my parade since you explicitly agree with me? It's @vgrinshpun who isn't going to be happy with your claim.

Just to set record straight - I am quite happy, but thanks for your concern.

 

[Yuri_G]

Autopilot update: 17.24.30

Edit: This is from an AP1 X.

Here's an AP2 X.

 

[scaesare]

Yep, can't get around the limitation of the speed of light. Geosync orbit is 35,786km - 120ms at the speed of light, about 250ms round trip.

LEO birds will be ~36x closer. Should mean ping times more down in the 7ms range.

I expect they'll do fine with weather - the problem with a geosync bird is you're firing a directional signal at a single thing a few tens of metres across, 35,786km away. Its a fixed point on the sky, and so any weather obstructing line of sight will tend to scatter the signal. When aiming at a target 36x closer, the scatter will matter less. The LEO birds will also be a multi-point target, much more like GPS than a traditional Geosync comsat. GPS service is sometimes degraded in bad weather (because its more difficult to find a good signal from >4 birds at the same time) but rarely does weather impact it to the point of unusability.

As a follow up to your comment about distance and target size...

I don't think the parabolic antennas on a satellite are "a few 10s of meters across", are they? Assuming a few means "at least 3", and with 10 meters being nearly 33 feet, you are talking about a dish on a sat being 100 feet in diameter. Unless they now unfold, I suspect it's significantly smaller than that... All of which to say that your point remains, its a small target very far away.

So that requires a carefully aimed parabolic at your ground location to hit it. And even with that setup, the signal strength up to the bird is just barely sufficient. It's typically the endpoints that can't cut it in the weather.

So what happens with non-geosync birds? It would seen unlikely the endpoints will have multiple-bird tracking parabolic dishes. To do multiple birds in-flight would require something different... planar array with beam steering? Whatever the case, while the birds will be much closer, it would seem you'd also have much less available antenna gain.

I wonder how that will work...

 

[Intl Professor]

love to see all the old people for whom driving was a big freedom get a chance to keep doing it

I resemble that.

 

[vgrinshpun]

First, I would like to know what did you base your $7,000 per each Bolt in *incremental EV* R&D on.

Please read my post again. It's R&D + depreciation (because of low volume). It's based on the UBS report of the Chevrolet physical breakdown.

May be you should stop throwing around numbers that are not only wrong, but irrelevant as well.

First, the $7000 ($7,143 to be precise) is **not** R&D+depreciatrion – just R&D.

Second, as I mentioned more than once, **total** R&D + depreciation is irrelevant as I am comparing MSRP of Chevy Sonic Hatchback to MSRP of Bolt minus what you think is the cost of the battery. Since both MSRP’s include the R&D + Depreciation for each car *minus* the cost of the battery (to Chevrolet), one need to look at the *incremental* R&D + Depreciation of the “batteryless” Bolt over Sonic Hatchback. What I am claiming is that it is a wash once the component that accounts for the bulk of the difference between the two – the battery – is taken out of the picture.

Taking into account 20K to 30K yearly Bolt production goal by Chevrolet, and assuming 5-year redesign cycle that works out to (assume average of 25k/year) 25K x $7K x 5 = $875M. For the comparison, WV estimates that $10B in R&D will cover 25 electric car models, or $400M per model - 55% less than the figure you used.

On the contrary that seems quite inline. Those 25 models by VW will include some that share a common platform which reduces R&D outlays drastically.

I hope you realize that Bolt is not a one of a kind, built from the scratch, ground up product? It is even built on the same line at the Orion plant, with the Sonics intermingled with the Bolts. So plenty of sharing, especially once the battery is taken out of the picture.

But this does not tell the whole story. Chevrolet farmed out the whole bunch of systems to LG. In fact LG "invested more than $250 million in an engineering and manufacturing facility in Incheon, Korea, to support the component development and manufacturing for Bolt components"

• Electric Drive Motor (built from GM design)
• Power Invertor Module (converts DC power to AC for the drive unit)
• On Board Charger
• Electric Climate Control System Compressor
• Battery Cells and Pack
• High Power Distribution Module (manages the flow of high voltage to various components)
• Battery Heater
• Accessory Power Module (maintains low-voltage power delivery to accessories)
• Power Line Communication Module (manages communication between vehicle and a DC charging station)
• Instrument Cluster
• Infotainment System

So lion's share of R&D associated with the traction battery system is actually borne by LG Chem and is seen by the Chevrolet as part of the cost of the battery - all packed in what you believe less than $200/kWh...

What? That's absurd and I never claimed it. Obviously R&D done by LG for things like the infotainment system or the electric drive motor is not seen by Chevrolet in the battery pack costs. It's part of the entertainment costs and electric drive motor costs respectively. Same for the inverter, etc. I am strictly speaking about the battery pack here. Those are at best two things in your list (battery cells and pack + battery heater) All the rest is obviously not part of their battery costs but 'other parts costs'. Honestly I am totally at loss why you seem to imply here that someone LG R&D costs with the instrument cluster is in reality a cost of the battery and not simply of that instrument cluster? I mean at that point you might as well say that the surround cameras are free on the Bolt, they get included in the battery cost.

The point I was making is that cost of the battery to Chevy got to include R&D and depreciation, because it is borne by LG, unless, of course, LG decided to eat it by providing the “package discount”. I was only speaking about the battery pack. I included all the other stuff in the quote from the Chevrolet Press Release to emphasize the size of the package, as LG discount obviously depends on it.

You “are totally at loss” about what I “seem to imply here” because there were no such implication to begin with.

Once again Bolt MSRP net of what you think the Chevrolet cost for the battery is $37,495 - $11,895 = 25,600, which is $7,145 more than $18,455 MSRP of Chevy Sonic Hatchback.

So your position is that there was no additional R&D at all needed for Chevrolet (and LG) to go from the Sonic to the Bolt? New drivetrain, doesn't matter, it's all the same? Producing at least twice as many a year has no impact at all on how fixed costs add to the MSRP? Producing a frame that must hold 30% more weight introduces no costs at all? After all, just subtract the battery and that is IT?

Yes, it is my position. Additional R&D for the Bolt (based on previous EV designs by Chevrolet) is comparable to additional R&D for the Sonic (based on previous designs by Chevrolet). There are obviously some differences – ICE vs electric motor, engine control and emission system vs. power electronics unit – but overall expenses are in line once the major component that differentiates the two cars – battery – is taken out of the comparison.

Regarding the volume, as I mentioned, both cars produced at the same plant and come out of the assembly line intermingled, so there are a lot of cost that **are** shared between the two cars.

So once again, Bolt minus the cost of the battery is $7,145 more expensive than comparable Sonic Hatchback. There is no way to justify this difference except to assume that the official communication from Chevy is bogus (aka PR stint), and actual cost of the battery is about $7k more than they claim.

This is even before one considers the effects of the huge packaged deal discount that was likely offered by LG, i.e. the true cost is likely higher.

A discount is a discount. When Panasonic gave Tesla a discount because it ordered a huge number of batteries under one agreement, we don't add that one back to the cost of the batteries either.

The difference, of course, that there is no evidence that Panasonic is selling their cells to Tesla below cost, while there are indications that LG does just that. In fact, the analysis I am presenting here for the umpteenth time can imply this as well

BTW. Care to comment on the 'fiscale waarde' as specified by Renault (7 900 EUR for 41kWh, VAT included)?

I did. Once again, take the MSRP of Evo minus what Renault is claiming the cost of the battery and compare it to the MSRP of Clio and you will find that the difference is even greater that for Bolt vs Sonic, although Renault’s are smaller cars. The numbers just do not add up.

 

[vgrinshpun]

Fatal Tesla Crash: That’s Not All, Folks

Given Tesla’s ability to link up with its servers and to store data in the car that expands the information contained on the servers, VSI’s Magney was most impressed with Tesla’s Over-the-Air (OTA) capabilities. He noted, “Based on our examinations, it is my opinion that the Tesla vehicle architecture is a proxy for future vehicle platforms.” He noted, “Albeit Tesla is a maverick in this space, their OTA architecture plus event handling and data recording is vital for proper Autonomous Vehicle management.”

Magney added, “Frankly, I am little bit surprised other OEMs are nowhere near as advanced as Tesla in terms of their ability to manage their vehicle remotely. This industry has been talking about this for years but only Tesla manages their vehicles as a proper digital device.”

 

[SteveG3]

The M3 will eat into the 3-series sales, but there will be loyal BMW buyers who will hold out. But if this supposed Tesla-killer ever comes as planned, and is better than the M3, BMW better add some plan to handle the cannibalizing effect it will have on the ICE 3-series

Indeed, until BMW is willing to fully switch to EVs they are between a rock and a hard place... releasing an EV 3 series less appealing than the Model 3 is like direct depositing "brand value" from BMW to Tesla (i.e., it advertises that BMW cannot do an EV as well as Tesla), releasing an EV 3 series more appealing than a gasoline 3 series effectively means losing the brake peddle in unwinding their ICE business.

My guess as to how they try to deal with this: announce shortly that the car will be out in 2019, actually deliver in low volumes in 2020 something about as good as the lowest range Model 3, so that in roughly 2022/23 they can move to offering such a car with ranges as long as Tesla, and start transitioning earnestly to EVs. Pretty confident the ICE makers are looking to kick the can down the road as long as possible re transitioning to long range EVs (I started a whole thread exploring this in considerable detail if anyone's interested), but, the luxury automakers are the first to really feel Tesla's impact, so they have the smallest window to kick that can down the road.

 

[Ameliorate]

*groan* I hope Elon isn't sleeping on floors again. (read bottom up)

 

[MP3Mike]

Do you think Elon is trying to say that the current stock price is a floor?

 

[MXWing]

I value each Elon tweet adding 1 billion to market cap.

8 tweets puts us at about 420 SP.

 

[schonelucht]

Just to set record straight - I am quite happy, but thanks for your concern.

The 'being happy' colloquialism seems to not work in English as it does in Dutch, apologies. So for the record : do you agree with the claim that LG Chem is producing packs at $145/kWh?

 

[schonelucht]

I did. Once again, take the MSRP of Evo minus what Renault is claiming the cost of the battery and compare it to the MSRP of Clio and you will find that the difference is even greater that for Bolt vs Sonic, although Renault’s are smaller cars. The numbers just do not add up.

I think we will have to agree to disagree. If you are willing to assert that Renault is commiting tax fraud based solely on your hunch what R&D and other components should cost in cars that you claim are comparable, then I guess I am out.

 

[vgrinshpun]

In TE news, Tesla install to bring Europe’s largest community battery to Nottingham. Of note is that total battery energy capacity is 5.333 times greater than the installed solar energy power rating (2MWh battery, 375kW solar)

What is expected to be Europe’s largest community battery is set to be installed at an innovative regeneration scheme in Nottingham, with a 2MWh Tesla battery to be deployed in September as part of a housing scheme alongside community solar.

With the addition of the battery storage facility and ground source heat pumps which will also be used on site, Trent Basin is intended to provide a new way to use renewable energy sources by generating, storing and distributing all at a neighbourhood level. A local energy company, Trent Basin ESCO, has already been set up to facilitate the local energy services.

 

[Jonathan Hewitt]

Welcome to the 600 club! It was getting lonely in 500 to 600 calls. I think your probability of making money on these calls is high.

Can I join the club, too? I bought Jan 19 $500s at $4.95, up 515% right now, and Jan 19 $600s at $7.5, up 99%. Though I don't think they are high probability of going ITM (just very possible) so maybe I don't belong in the club...

 

[Mike Smith]

"Overall, I'm very proud of Tesla for our accomplishments in the first quarter, and I think second quarter is going to be great too."
-Elon Musk
May 04 2017

 

[ValueAnalyst]

Tesla Semi

WARNING: THESE ARE BACK-OF-THE-ENVELOPE ESTIMATES THAT WILL MOST CERTAINLY PROVE WRONG. USE WITH CAUTION!!!

• ASP = $250k
• Units: 10k in 2018, 40k in 2019; 80k in 2020; 150k in 2021; 350k in 2022; 800k in 2023 and thereafter for ~50% market share.
• Battery capacity: Some say 1,000 to 1,200 kWh (~20 Model 3's), but I estimate lower around 800 kWh (~15 Model 3's)
  • It makes more sense for Tesla Semi to have a smaller battery and charge more frequently with multi Supercharger v3 connections
• Gross margin: 0% in 3Q18, increasing by 5% each quarter to 30% by end-2019
• ICE Semi maintenance: ~$20k per year ($7k parts, $3k tires, $10k service); Tesla Semi $10k per year
• ICE fueling cost: 120k miles/y / 6 mpg x $2.50 per gallon = ~$50k per year; Tesla Semi $20k per year
• Average life: 10-15 years
• Total after-purchase savings due to lower Maintenance & Fuel costs = ~$500k

$500k after-purchase savings over ICE Semi provide Tesla with two options:

1. Set ASP near $250k and charge for electricity powered by solar (essentially free to Tesla)
2. Set ASP higher ($500k?) and pass on fueling savings to customer

After my discussion with @EinSV yesterday, I now believe Tesla will go with option #1, which allows for flexible TCO based on customer needs.

I'm adjusting my DCF to incorporate a charging network that will serve as a profit center for Tesla.

 

[22522]

Tesla Semi

• ASP = $250k
• Units: 10k in 2018, 40k in 2019; 80k in 2020; 150k in 2021; 350k in 2022; 800k in 2023 and thereafter for ~50% market share.
• Battery capacity: Some say 1,000 to 1,200 kWh (~20 Model 3's), but I estimate lower around 800 kWh (~15 Model 3's)
  • It makes more sense for Tesla Semi to have a smaller battery and charge more frequently with multi Supercharger v3 connections
• Gross margin: 0% in 3Q18, increasing by 5% each quarter to 30% by end-2019
• ICE Semi maintenance: ~$20k per year ($7k parts, $3k tires, $10k service); Tesla Semi $10k per year
• ICE fueling cost: 120k miles/y / 6 mpg x $2.50 per gallon = ~$50k per year; Tesla Semi $20k per year
• Average life: 10-15 years
• Total after-purchase savings due to lower Maintenance & Fuel costs = ~$500k

$500k savings over ICE Semi is HUGE, so Tesla has two options:

1. Set ASP near $250k and charge for electricity powered by solar (essentially free to Tesla)
2. Set ASP higher ($500k?) and pass on fueling savings to the trucker

After my discussion with @EinSV yesterday, I now believe Tesla will go with option #1, which allows for flexible TCO based on customer needs.

I'm adjusting my DCF to incorporate a charging network that will serve as a profit center for Tesla.

I think a goal/reference adjustment might be in order.

Here is the precept.

The company valuation will be what Elon wants it to be.

Some want to convert to sustainable energy.
Others want to make money.

Tesla will trade margin for share, as long as there is enough margin to accelerate the conversation to sustainable energy.

Could you state your valuation relative to Elon's "path to" valuation from the last analyst call?

Right now I don't know if you are saying that it is worth more, or less. There may be a backed out expected stock price in the history, but if someone will point to a relationship (with expected dilution) to see where we stand with respect to today's stock price compared to the path destination, that would provide context.

I may have missed a foundation. There was the video that morphed Elon into Warren (financially)...

 

[ValueAnalyst]

I think a goal/reference adjustment might be in order.

Here is the precept.

The company valuation will be what Elon wants it to be.

Some want to convert to sustainable energy.
Others want to make money.

Tesla will trade margin for share, as long as there is enough margin to accelerate the conversation to sustainable energy.

Could you state your valuation relative to Elon's "path to" valuation from the last analyst call?

Right now I don't know if you are saying that it is worth more, or less. There may be a backed out expected stock price in the history, but if someone will point to a relationship (with expected dilution) to see where we stand with respect to today's stock price compared to the path destination, that would provide context.

I may have missed a foundation. There was the video that morphed Elon into Warren (financially)...

I estimate Tesla's intrinsic value at more than $1T, so more than Elon's "path to" valuation from the last analyst call.

I would caution you against taking Elon's publicly stated words as a definite indication of what he actually thinks/believes. Most analysts already think he's crazy for valuing Tesla at Apple's market cap, and he has nothing extra to gain from stating Tesla is actually worth more than the level he already stated publicly. Elon does have a history of upwardly adjusting his estimates (e.g. Gigafactory 1 output, Model S unit sales etc.)

I agree that Tesla will trade margin for share, in-line with their mission statement, but I would also caution you against jumping to the conclusion that less margin and more market share will necessarily mean less market cap. See Amazon.

I'm going by what I believe are reasonable assumptions plugged into a 8-year DCF with reasonable terminal value assumptions. Some look at the output and say "this is crazy." I study the assumptions, try to make reasonable assumptions, make sure the model runs fine, and accept the output as reasonable as long as the output is possible.

 

[TrendTrader007]

Can I join the club, too? I bought Jan 19 $500s at $4.95, up 515% right now, and Jan 19 $600s at $7.5, up 99%. Though I don't think they are high probability of going ITM (just very possible) so maybe I don't belong in the club...

Your profits in $500s far exceed mine and are highly impressive
I'm only up 125% in those and 97% in $600s
I wish I had the perspicacity to buy those calls at the levels you bought

 

[ValueAnalyst]

Yes, Tesla is severy capital constrained relative to Musk's ambition. The answer for shareholders is licensing and joint venture to maximize the return on Tesla's IP and brand.

Tesla would need massive capital raises this decade to reach 8 million cars by 2024. The idea that much of this growth will be internally funded is fantasy.

Capital raise does not necessarily mean equity secondaries. Tesla can now start taking on non-dilutive debt.