General Discussion: 2018 Investor Roundtable

[ValueAnalyst]

Here is what I dug up yesterday, as far as I can tell they should be running 7 days.

Thanks! That allows me to better appreciate the e-mail. 2Q18 bottom-line is all of a sudden looking better.

 

[Waiting4M3]

This is from the March 20 batch of VIN registrations, so lag time between registration and first report continues to drop (from 15 days for March 2 batch to 11 days for March 10 batch to 10 days for March 20 batch). I don't think it can go down much from here.

I think the time between VIN registration and assignment can go down more if robots speed up and cars spend less time in the line.

In this below example, a car goes through 2 steps, requiring 15 min of process time and 5 min of conveyor time, but in steady state due to the mismatch of slower step 2 that requires 5 extra minutes, the traffic will back up and a car will spend 45 min total to go through the production line. If that step 2 processing time is reduced by 5 min to match step 1, the car will go through the line in 20 min, a 25 min reduction.

[/QUOTE]

 

[Svetlin]

... initial goal of 0-->10k/week in 6 months (now it's 0-->5k/week in 1 year)....

The initial initial goal was 10k/week (500k cars) in 2020.

... Elon promised 10k Model 3s/week by the end of 2017. (SEC implications here)...

Elon didn't promise 10k/week by end of 2017. He "promised" 5k/week by end of 2017 and he guaranteed 10k/week by end of 2018... and has since reneged on that part though.

 

[MattEnth]

I like how @valuebuyer just hits "disagree" without responding.

The initial initial goal was 10k/week (500k cars) in 2020.

Elon didn't promise 10k/week by end of 2017. He "promised" 5k/week by end of 2017 and he guaranteed 10k/week by end of 2018... and has since reneged on that part though.

You're right, sorry. It was hard to keep track of all of Elon's extreme forecasts. I've updated the posts, but it doesn't change my overall point. I don't think I'd call this a "solid ramp," especially when compared to their competition.

 

[kbM3]

Not to be too much of a downer... but "cash flow positive" seems like a pretty big stretch.

I think the biggest data point investors will be looking at over the next month or so are not the number of Model 3sproduced, but the gross margin of the Model 3. It was negative in the Q4 report, which meant that Tesla lost money on every Model 3 produced, well short of the 18%+ gross margin it needs. There will also be questions of how much of the margin is dependent upon car add-ons and upgrades, which will give light to just how close (or how far) Tesla is from the promised $35,000 price point.

Trying to move the goalposts in light of favorable ramp indicators?

Good try, but most here can easily remember that Tesla has stated good gross margins would occur months after 5k/week, not 1month after 2.5k/week.

I guess moving the goalposts is all that’s left?

You’ll have to try among less informed readers. You didn’t really think that would work here?

 

[Cobos]

I like how @valuebuyer just hits "disagree" without responding.



You're right, sorry. It was hard to keep track of all of Elon's extreme forecasts. I've updated the posts, but it doesn't change my overall point. I don't think I'd call this a "solid ramp," especially when compared to their competition.

I'm not saying Teslas ramp is all unicorns, but it seems like they are around 250/day now or 250*330 days (- about 5 weeks of downtime per year) = about 80000 a year. They started producing these around july last year so 8 months for that.
Now compare this to their more experienced peers and EVs
Jaguar is making their I-Pace a new full-EV car. They can make cars but EVs are too difficult so they outsourced them to Magna Steyr which is wierd since Jaguar says they'll make EV versions of their entire lineup in 2 years so you'd think they should start getting some practise. Anyway take a look at this source which said in June 2017 that the I-Pace was already in production. Looking at Norwegian EV forums for I-Pace they will deliver cars maybe from August it seems. And keep in mind Norway is a major early release country. It seems it will take Jaguar Norway around 5-6 months to deliver the about 4000 preorders of the I-Pace. That doesn't sound like a very good ramp either, and keep in mind noone in Norway has recieved an actual production car yet, so I've got no idea if these estimates are realistic or not. Tesla IS handing over M3s in the thousands per month range.
I'd rather not get started on GMs ramp of the Bolt or how they screwed almost every Norwegian customer over, that's the definition of an unsolid ramp.

So yeah Tesla has issues with their ramp, but they are actually ramping towards 6 digit number of cars per year for their 3rd EV, while most of the competition seems to have issues with 10k to 30k yearly production. And if you say there aren't enough buyers keep in mind there where 40k pure EVs sold in Norway last year, and it looks like it might hit 50k this year.

Cobos

 

[ZsoZso]

I like how @valuebuyer I don't think I'd call this a "solid ramp," especially when compared to their competition.

Remember, how the "competition" beat Tesla to the market by more than 6 month with an affordable long range EV ? Yeah, the GM Bolt released late 2016. How is that ramp going ? They sold about 25K in 2017, now selling less than 2K/month after more than a full year of ramping. Tesla Model 3 already caught up and beat that ramp in January and February (in just half year of ramp-up), we will soon see the March numbers, I expect it to be at least 4x that of the Bolt numbers. Or what other competitors did you have in mind, because it seems to me everyone else has even lower numbers:
Monthly Plug-In Sales Scorecard

 

[Waiting4M3]

All the talk about bankruptcy reminds me in early 2009 when I was looking at SIRI, there was talk of bankruptcy, and SIRI was down to ~$0.05 in early Feb, and once it was clear that they had the money to continue, it bounced back to $0.20 (4X) in 1 month, $0.50 (10X) in 3 months, and now it's >$6 (120X). It was one of my bigger regrets not to take a flyer on it.

Of course SIRI doesn't have much in common with TSLA. This only illustrates how big of a risk bankruptcy is for investors, and how much it can depress the stock price of a company, and how much the PPS can bounce back once the risk is removed. If the market really thinks that Tesla can go bankrupt in a few month and is still worth $266, imagine when they find out that Tesla can make money.

 

[MattEnth]

Trying to move the goalposts in light of favorable ramp indicators?

Good try, but most here can easily remember that Tesla has stated good gross margins would occur months after 5k/week, not 1month after 2.5k/week.

No. The goalposts were set by Elon Musk last year, and Value Analyst supported them in September. He supported the moved (now missed) goal posts in December. Those goal posts were 5k/week by the end of 2017, then 5k/week by the end of Q1 2018, and now 5k/week by the end of Q2.

They're missing the goal post of 2.5k/week this quarter. I imagine they will miss 5k/week next quarter, too (though am not including that in my bear thesis).

Point is, I don't need to "move the goalposts." Tesla has moved them so much it's hard to even tell what a goal post is anymore.

And to be clear, gross margins were always part of the "goal post." Production targets are only one part of the equation, but the "ultimate goalpost" is profitability.

It's great that Tesla can now product Model 3s in bulk - the next question is "can they do it profitably?" For the first 1.5k Model 3s produced, the answer was "no." Now we get to look at the next 10k. It will be interesting to see how much the gross margin improves.

 

[Waiting4M3]

Remember, how the "competition" beat Tesla to the market by more than 6 month with an affordable long range EV ? Yeah, the GM Bolt released late 2016. How is that ramp going ? They sold about 25K in 2017, now selling less than 2K/month after more than a full year of ramping. Tesla Model 3 already caught up and beat that ramp in January and February (in just half year of ramp-up), we will soon see the March numbers, I expect it to be at least 4x that of the Bolt numbers. Or what other competitors did you have in mind, because it seems to me everyone else has even lower numbers:
Monthly Plug-In Sales Scorecard

The longer you look out in the past and future, the clearer it is that Tesla is aiming higher, executing and winning.

I had a conversation with a friend who is not sold on Tesla. I pitched all the selling points on Tesla's EV lead, AP, gross margin, but he thought that hydrogen cars from Toyota will kill Tesla because it's a better technology than BEV because of quicker refueling, and Toyota has the muscle to beat Tesla. He didn't think Tesla's margin or their technology lead would hold up against Toyota.

Then in the end I asked him 1 question, "Tesla went from 0 (not even a factory) to 100K cars/yr in 10 years, what has Toyota done in 10 years on their hydrogen car?" and that got him thinking. Looking at the last few months Tesla look like a bunch of idiots running around unable to make cars, looking back 10 years, it's clear why they are just better than everyone else.

 

[Oil4AsphaultOnly]

I know this will be an unwelcome opinion here, but Tesla is behind in the autonomous vehicles race. When Tesla put autopilot on the road, it was magic. And Tesla looked like it was going to be a magical tech company. People were talking about how they'd start competing with Uber, Lyft, etc.

But that was 2014. It's 2018, and Tesla is way behind. They sure have highway miles driven, but when it comes to everyday driving, you're in a different ballpark.

If Tesla isn't the leader in autonomous vehicles, it's hard for me to see how you value them as a tech company and not a manufacturing company.

Ha Ha Ha Ha!

That's not an unwelcome opinion, it's a farce. It also points to a huge misunderstanding from the general public. Autopilot is ADAS (Advanced Driver-Assist Systems), NOT autonomous driving. FSD (Full Self Driving) is autonomous driving.

Regardless of what the report says, the proof is in the eating. And although waymo and GM are listed as "ahead", neither of their systems are capable of driving across the nation. None of the systems are ready ... yet.

In the meantime, as far as ADAS goes, no one is even close to autopilot's capabilities. It's kind of like batteries - do you judge the tech leadership (aka sakti3, quantumScape, etc) by what a lab test shows, or by what's actually on the road today?

 

[MattEnth]

In the meantime, as far as ADAS goes, no one is even close to autopilot's capabilities. It's kind of like batteries - do you judge the tech leadership (aka sakti3, quantumScape, etc) by what a lab test shows, or by what's actually on the road today?

Well, considering that the big money in autonomous driving is in FSD vehicles, I would put my money on Google and GM. They are both way ahead, and they both have the capital to compete at scale

 

[bdy0627]

And to be clear, gross margins were always part of the "goal post." Production targets are only one part of the equation, but the "ultimate goalpost" is profitability.

It's great that Tesla can now product Model 3s in bulk - the next question is "can they do it profitably?" For the first 1.5k Model 3s produced, the answer was "no." Now we get to look at the next 10k. It will be interesting to see how much the gross margin improves.

The next 10K isn't going to be very helpful in determining that yet. There is no doubt that this is what Tesla needs to prove. High volume production and profitability. Tesla has indicated they expect positive margins on the model 3 once they reach volume production. Due to all of the difficulties with the ramp up to this point, and small overall number of model 3 produced, I don't expect to see much, if any, improvement in financials through Q1. I would imagine most expect a negative picture there. However, given how the ramp appears to be improving now, Q2 should definitely show major improvement in gross margins. If not, that would be concerning, assuming the ramp progresses to at least 3,000+/week by the end of Q2. Until then, it's all speculation.

 

[elasalle]

No. The goalposts were set by Elon Musk last year, and Value Analyst supported them in September. He supported the moved (now missed) goal posts in December. Those goal posts were 5k/week by the end of 2017, then 5k/week by the end of Q1 2018, and now 5k/week by the end of Q2.

They're missing the goal post of 2.5k/week this quarter. I imagine they will miss 5k/week next quarter, too (though am not including that in my bear thesis).

Point is, I don't need to "move the goalposts." Tesla has moved them so much it's hard to even tell what a goal post is anymore.

And to be clear, gross margins were always part of the "goal post." Production targets are only one part of the equation, but the "ultimate goalpost" is profitability.

It's great that Tesla can now product Model 3s in bulk - the next question is "can they do it profitably?" For the first 1.5k Model 3s produced, the answer was "no." Now we get to look at the next 10k. It will be interesting to see how much the gross margin improves.

So how come a new guy join just this Tue, and pull VA's stuff from Sept like rabbits out of a hat. I know there are search features etc. but one needs more time I think to even uncover them, and zone in on VA who hasn't been that excited recently ..

either VA has got bitter old enemies or new enamoured friends

 

[MattEnth]

So how come a new guy join just this Tue, and pull VA's stuff from Sept like rabbits out of a hat. I know there are search features etc. but one needs more time I think to even uncover them, and zone in on VA who hasn't been that excited recently ..

I've had a pretty large short position since November (and doubled it in January). I've been reading VA's stuff ever since I started considering the position. He's part of why I'm posting here - I prefer dialogue/engagement over just exchanging articles. Overall, I don't see how Tesla justifies a valuation on-par with companies like Ford and GM, especially given their cash position and weakness in the future level 4/5 autonomous vehicles market.

Due to all of the difficulties with the ramp up to this point, and small overall number of model 3 produced, I don't expect to see much, if any, improvement in financials through Q1. I would imagine most expect a negative picture there. However, given how the ramp appears to be improving now, Q2 should definitely show major improvement in gross margins. If not, that would be concerning, assuming the ramp progresses to at least 3,000+/week by the end of Q2. Until then, it's all speculation.

Yes, that's why the question of "how much" is significant. If the gross margin stays negative, it doesn't matter if they hit 5k/wk. 10k cars/quarter should be enough to see significant improvements to the abysmal Q1 gross margin. If we don't see that, investors are going to demand an explanation.

The overall question is how the Model 3 becomes a car produced for $26,250 and sold for $35,000. Right now, it's hard to see a viable path, especially given the bad debt rating and weak liquidity position.

The production numbers do matter, but at this point, they're producing enough cars each week that the focus will shift towards profitability.

 

[Reciprocity]

Voting makes winners and losers. Losers leave.

The stock ownership is rolling based on Elon's compensation package.

There is some question if Elon's package makes it harder for Tesla to raise money.

Did the compensation plan convert a story stock into a speculative financial stock with a highly compensated CEO, where all the metrics are about money, and none about product?

Is there a "time to ship the millionth Tesla metric" explicitly called out?

Did the compensation plan over state Key man or whatever?

The Boring Company is not Tesla.
Space-X is not Tesla.

It's impossible to meet those goals without home run products on the scale of an iPhone and iPad. Apple was pretty mediocre until the iPhone.

 

[ls7corvete]

I've had a pretty large short position since November (and doubled it in January). I've been reading VA's stuff ever since I started considering the position. He's part of why I'm posting here - I prefer dialogue/engagement over just exchanging articles. Overall, I don't see how Tesla justifies a valuation on-par with companies like Ford and GM, especially given their cash position and weakness in the future level 4/5 autonomous vehicles market.



Yes, that's why the question of "how much" is significant. If the gross margin stays negative, it doesn't matter if they hit 5k/wk. 10k cars/quarter should be enough to see significant improvements to the abysmal Q1 gross margin. If we don't see that, investors are going to demand an explanation.

The overall question is how the Model 3 becomes a car produced for $26,250 and sold for $35,000. Right now, it's hard to see a viable path, especially given the bad debt rating and weak liquidity position.

The production numbers do matter, but at this point, they're producing enough cars each week that the focus will shift towards profitability.

I am not sure what the debt rating has to do with the GM of the M3.

 

[MattEnth]

I am not sure what the debt rating has to do with the GM of the M3.

Tesla needs cash. Gross margin/profit is "how much cash can Tesla get from each Model 3 it makes?" It affects their ability to raise more money on equity markets - the higher the gross margin, the more willing new investors will be to give them money. The debt rating also affects their ability to raise cash via debt.


The entire short/bear thesis centers on Tesla's current cash position and burn rate in a capitally intense industry.

Everything else is secondary. The datapoint that matters is Tesla lost $675 million in Q4 last year. They're forecasted to lose $750 million or more in Q1. Turning around that level of cash burn is very hard to do, especially with high turnover in your finance department.


As an example investors realize Tesla is behind level 4/5 AVs, they might knock down the stock price by valuing them as an automobile company rather than a tech company. Which makes Tesla's inevitable equity raise more dilutive. My focus is on that inevitable equity raise and the degree-of-dilution it will bring.

Or... take the Semi. The Semi is going to require a huge investment to start manufacturing. They have to build new chargers that are capable of charging it in 30 minutes. They have to build new production lines. They have to build new batteries. That investment has to come from somewhere. Again, we're back to cash.

The Model 3 is also secondary to my bear thesis. I don't care how many Model 3s/week they can make - I care how much cash each Model 3 production line can generate each week. A negative gross margin means that these lines are burning cash rather than generating cash.

 

[ValueAnalyst]

So how come a new guy join just this Tue, and pull VA's stuff from Sept like rabbits out of a hat. I know there are search features etc. but one needs more time I think to even uncover them, and zone in on VA who hasn't been that excited recently ..

either VA has got bitter old enemies or new enamoured friends

Bears keep better track of my articles than I do. They only talk about the things I got wrong, and no one is perfect, so it seems like I got everything wrong. This isn’t anything new. I know the truth, and that’s all it matters.

 

[K_Dizzle]

I've had a pretty large short position since November (and doubled it in January). I've been reading VA's stuff ever since I started considering the position. He's part of why I'm posting here - I prefer dialogue/engagement over just exchanging articles. Overall, I don't see how Tesla justifies a valuation on-par with companies like Ford and GM, especially given their cash position and weakness in the future level 4/5 autonomous vehicles market.



Yes, that's why the question of "how much" is significant. If the gross margin stays negative, it doesn't matter if they hit 5k/wk. 10k cars/quarter should be enough to see significant improvements to the abysmal Q1 gross margin. If we don't see that, investors are going to demand an explanation.

The overall question is how the Model 3 becomes a car produced for $26,250 and sold for $35,000. Right now, it's hard to see a viable path, especially given the bad debt rating and weak liquidity position.

The production numbers do matter, but at this point, they're producing enough cars each week that the focus will shift towards profitability.

When you look at the sale of a vehicle from any other OEM do you also look at the lowest advertised price or an average sale price and work out margins from there?