2017 Investor Roundtable:General Discussion

[neroden]

I will state outright that I simply wasn't expecting to get the $7500 tax credit, though I managed to get it by shuffling income around from one year to another (turns out you recognize wash-sale *gains* on investments...). (Worth noting: you have to pay the cash when you get the car, and you don't get the tax credit back until the next April.) And we didn't have rebates in NY. And no HOV lane access (no HOV lanes in fact). And at the time I paid full sales tax, so no break there either.

Seriously, whenever Musk is asked about the subsidies expiring at the investors/analysts meetings and phone calls -- and it happens *all the time*, to the point where it's actually getting annoying because they're repeating questions we know the answer to -- he practically rolls his eyes, and says that you can't build a business model on them because they don't scale up.

I should repeat that I'm not saying the stock is cheap or that it's going to go to $1000 (it might, it might not). I'm saying the current valuation is not outlandish if you believe Model 3 is on track for volume production sometime before the end of the year (which I do) The revenue model is clear, the cost structure is clear, the demand is clear, the production capacity is clear, there's enough of a cash cushion, the side businesses are better-than-breakeven (batteries) or close enough to breakeven (SolarCity), and the accounting is fundamentally transparent.

This is in contrast to, say, Facebook, whose business model is to force disliked advertising on people who are talking to their friends, which is a somewhat worse business model than a daily newspaper. There is no way that Facebook is, *long term*, worth as much as a company with *actual factories that make stuff which people want*.

 

[techmaven]

Last I checked, Tesla makes cars, electric cars that existed 100 years ago and billions exist in the world today. Tesla is not really ushering in a new age of smart phone.

This statement belies a fundamental lack of understanding of the EV technologies that exist today and the surrounding challenges. ICE vehicles have existed for over 100 years. It's actually easier to start a ICE vehicle company - and how many of those have started up and made 200,000+ vehicles in the past 50 years? The fueling infrastructure is already in place for such startups. As for Tesla, they are leveraging the new high energy lithium ion battery cells... cells that didn't exist 100 years ago. They are using IGBT's to invert the high power demands in an efficient manner... those didn't exist 100 years ago. From big things to small things, Tesla had to re-imagine the modern light passenger vehicle around modern power electronics, modern battery cells, and modern computers and connectivity. As well as all the hard parts of any street legal passenger vehicle startup. Not only that, they also had to help build the energy distribution infrastructure for their vehicles. All without all that much start up capital relative to the challenge.

 

[brian45011]

If you mean BEP, than yes. You are forgetting the role that Tesla Energy plays in allowing Tesla to commit to massive battery cell volume from Panasonic and possibly other companies.

I meant BES --Battery Energy Storage system; what is BEP? break even point?

 

[JRP3]

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No, I refuse, even though I can tell there is a full mental meltdown happening.

 

[Hogfighter]

Sometimes it's difficult to see the forest through the trees. Tesla has become mainstream. There's virtually no chance they'll go bankrupt at this point, and even critics such as Cramer admit it. Huge bear argument has been ripped to shreds.

There's no competition on the vehicle side right now, only promises from manufacturers that have been promising for years. And if they do build a compelling product, and get tons of batteries for cheap from God knows where, name a dealer that will aggressively sell them. I'll believe it when I see it.

On the TE side of the house, sure there's competition. But this won't make-or-break TSLA. People still buy Kleenex's even though there's facial tissues for much less, so I imagine there's a whole bunch of folks that will buy a Tesla Energy product even though it's more expensive. Mac's still sell for much more than PC's, all these years later.

They are selling 100k vehicles this year that average $100k, and they don't advertise. That's unprecedented in the history of the automobile.

This is still the beginning.

 

[brian45011]

It appears to be a PPA just like Tesla's in that regard:

http://www.hawaiienergypolicy.hawai...ve-briefings/_downloads/2017-march-Reeves.pdf

Mahalo! Thanks for the link.

 

[GoTslaGo]

I swear there should be a drinking game every time there is a form 4 filing by Kimbal.

 

[techmaven]

Yeah -- it remains to be seen how much of an advantage Tesla's aggressive vertical integration will give it over the "multi layer repackaging" business model with a "system integrator" buying parts from loads of suppliers each of which has their own profit margin and overhead.

I personally suspect it will be an advantage for Tesla, but it does have disadvantages too, so it could be the other way around. Whether vertical integration makes more money or less money has varied by industry and by decade, so it's not a sure thing either way. Complicated to look at.

I think it isn't so much vertical integration per se, but having control over very specific strategic elements. That includes the ability to drive demand through direct sales and marketing. It includes controlling the production of critical elements where partners/suppliers have proven to be either not-cost effective or unreliable. I don't think they set out to have vertical integration, and likely look to farm out if necessary. In other words, it's not ideological to have vertical integration. But with the highest level of gambles, in-house may give you better control if you think you can pull it off.

If you have the ability to create lots of high quality battery cells, but you lack the ability to get other people to buy them, just how much capacity can you build? Panasonic definitely faced this issue. And some companies/people cannot be the ones that actually create/drive consumer demand.

 

[anticitizen13.7]

I am sure, if you called Wedbush 2 years ago, they would have told you a story more interesting than yours, why GPRO would go to those lofty PTs. When you are in the hype, how can you tell if it is hype or not?

Anyone who is calling Wedbush for investment advice and not looking into the investment themselves is asking to get screwed.

Asking about "hype" is the wrong question.

The correct question is whether the investor can afford to have their position go to $0, or 100% loss, on a high risk venture. I've said numerous times before, that no one should be investing $ in TSLA if going to $0 would affect their daily finances or endanger retirement.

Elon seems fascinated with buying expensive properties instead. Is he colonizing Bel Aire first?
Elon Musk Picks Up Fifth Multi-Million Dollar Property in Bel Air (EXCLUSIVE)

Which completely misses my point about "cashing out and phoning it in".

 

[mmd]

Roughly 0%.

Anyone with less than a certain taxable income in most states in the US gets nothing.
In China, no subsidies and a giant tarriff.
No subsidies in Australia or New Zealand or most of Europe.

The base price of Model S has actually been increased by more than the US federal tax credit value since it was initially released.

Oil gets bigger US subsidies as a percentage of the price of the product, from the submarket lease rates on federal land alone.

Military contractors who produce equipment that doesn't work are getting >100% subsidies on "cost plus" contracts.

You can't just look at countries which suddenly eliminated their car subsidy, because *obviously* people who were going to buy next month, or two months from now, will accelerate their purchases and buy this month instead. This has nothing at all to do with the long-run trendline; you just get six months or a year of sales crunched in all at once before the deadline. Then you go back to the trend. Denmark Tesla sales are back, you know.

We've had *multiple rounds of this* with the pending expirations of tax breaks for solar panels (which were always cancelled at the last minute). Vast amounts of demand was pulled forward into the year before expiration, the year after the planned (cancelled) expiration was low, and then the year after that -- right back to trend.

Next question? I don't think I'm going to get through your totally closed mind, but it's sort of fun demolishing your silliness.

My mistake. I thought, you a long term investor and frequent poster knew all these. Incentives doesn't need to be only in the form of cash-back. It can range from ZEV credits, free toll, free ferry, free parking, waived registration fees, etc. etc.. I don't want to spend too much time rewriting what's already out there. Interested people can read it in the link below. If the incentives weren't important for $80k-$160k Tesla cars, Tesla won't be gaming the system in Denmark and now Germany.

Government incentives for plug-in electric vehicles - Wikipedia

Honestly, 7500 on an 80k helped but wasn't the decision point.

It's $7500 + state rebates, anywhere from $2500 to $6k (Colorado). Let's say it is $10k. That is just 12.5% of $80k, right?
Now do the same math for Model 3 with ASP of (est) $42K. What's the rebate/tax credit ratio now?

 

[neroden]

The correct question is whether the investor can afford to have their position go to $0, or 100% loss, on a high risk venture. I've said numerous times before, that no one should be investing $ in TSLA if going to $0 would affect their daily finances or endanger retirement.

I tend to believe that this is literally true of all stocks, corporate bonds, mutual funds, commodities, etc. etc. etc. I tell people not to start investing unless they have a secure emergency fund which will last them long enough to find another source of income. Remember what happened to the S&P 500 in 1929!

I understand that some people may think it's worth the gamble -- as in "either I'm homeless or I'm rich, and I'm OK with that" -- and for those who think it's worth it and that this may be their only opportunity to advance, I'm not going to tell them *not* to. But that's not for most people (certainly not me).

 

[neroden]

My mistake. I thought, you a long term investor and frequent poster knew all these. Incentives doesn't need to be only in the form of cash-back. It can range from ZEV credits, free toll, free ferry, free parking, waived registration fees, etc. etc..

First of all, ZEV credits are currently, to quote Musk, "mouse nuts".

Secondly, regarding customer-facing incentives: I got NONE of these. NONE of them existed in NY until, IIRC, this year. Go ahead, look up the sales figures for Tesla in NY. Pretty good, you know...

 

[mmd]

Yup... note that the SolarCity PPA was signed before February, 2016. The AES project was signed in January, 2017. The SolarCity Kauai Project was delivered in Q3/Q4 2016 using PowerPack 2 with cells made in Japan. We also don't know the actual costs to SolarCity, Tesla, or AES. We do know that the PPA rate from Q1, 2016 isn't really relevant to projects in 2017. We know that battery storage costs have been dropping. We know that Gigafactory sourced cells will be cheaper. And Tesla's own inverters are cheaper. It may very well even be that the cost estimates from Q1, 2016 for the costing of the PPA were significantly changed by the time the project was actually delivered (ie. more margin for Tesla) since the original cost may have reflected PowerPack 1 and 3rd party inverters. Finally, there was likely a double mark up (SolarCity and Tesla) since the two company's were not combined at that point.

I think you and everyone else missed @brian45011 's point. Intentional? I think, his point is this.
* KIUC didn't pay Tesla a penny yet, but has agreed to purchase power at 13.9c/kwh. Tesla can supply 52 MWh daily at most.
* Now comes AES, with a 100 MWh system. They offer to sell power to KIUC at 11c/kwh.
* So, everyday, when KIUC needs more power, which one will it choose first?
My hunch says, you guys are smart enough to figure out that KIUC will exhaust 100 MWh @11c/kwh from AES. Then, if it needs more, it will buy some more from Tesla. So, the Tesla system may end up selling very little power over a year, while AES will be selling quite a lot of power. If there is another project offering power at 11c/kwh or lower price, Tesla generated power will be purchased even less.

So, how long will it take Tesla to monetize the upfront costs and fixed costs if Tesla's power is never purchased? Or only 13 MWh is sold per day on average? 3 MWh a day?

If Tesla's BES power is not utilized enough, Tesla probably has an option to re-negotiate the price down, to be competitive with the current electricity pricing. But that leads to even lower margins.

 

[neroden]

It's $7500 + state rebates, anywhere from $2500 to $6k (Colorado). Let's say it is $10k. That is just 12.5% of $80k, right?
Now do the same math for Model 3 with ASP of (est) $42K. What's the rebate/tax credit ratio now?

$0 if you reserve your Model 3 today!

Most Model 3 buyers won't make enough income to take the full credit anyway. Those who do? Well, it's phasing out anyway. Most people who made reservations after the first *day* were expecting that they aren't going to get the full credit -- I've read this on dozens and dozens of other discussion forums.

 

[neroden]

* KIUC didn't pay Tesla a penny yet, but have agreed to purchase power at 13.9c/kwh. Tesla can supply 52 MWh daily ta most.
* Now comes AES, with a 100 MWh system. They offer to sell power to KIUC at 11c/kwh.
* So, everyday, when KIUC needs more power, which one will it choose first?

Both, you dork. This was pointed out by three people already. Bottom of the dispatch is diesel-powered, second from bottom is biomass, third-from-bottom is the pumped-storage hydro (which they'll keep for "rainy weeks").

The other point is that PPAs aren't just price contracts. They're also, typically, agreements to purchase a certain guaranteed *quantity* of power, sooner or later.

You used to be entertaining -- are you trying to get on my block list?

 

[myusername]

Taking out a loan (which has to be paid back), is different than cashing out and phoning it in.

Seriously?

I agree with you... it's not the same... what happened with GPRO should have been considered criminal... and what Elon's done is not close to that... regardless... it's one of the many similarities... and while Elon does have 100s of millions of dollars from Tesla... a profitless company driving on hope... it's not the same.

I sincerely believe that Elon's not (entirely) in it for the money like many are... that is most certainly a positive... but I do believe that the same type of story telling is in play.

 

[mmd]

Both, you dork. This was pointed out by three people already. Bottom of the dispatch is diesel-powered, second from bottom is biomass, third-from-bottom is the pumped-storage hydro (which they'll keep for "rainy weeks").

The other point is that PPAs aren't just price contracts. They're also, typically, agreements to purchase a certain guaranteed *quantity* of power, sooner or later.

You used to be entertaining -- are you trying to get on my block list?

Dude, calm down Have you been drinking heavily because stock went down by $9 today?
Yes, put me on your ignore list. That way I have to post less replies.

 

[koolkool]

"Elon Musk will reveal new details about Tesla’s Model Y next week"

^ from last week. Anything on this yet?

 

[kenliles]

Tesla Model 3: first video of a release candidate testing in the wild

 

[kenliles]

"Elon Musk will reveal new details about Tesla’s Model Y next week"

^ from last week. Anything on this yet?

That was a misinterpretation of tweet, a twit-tweet if you will
He was referring to info on Neuralink not MY. Corrected later. MY info won't happen until next year.