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Short-Term TSLA Price Movements - 2015

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It is much simpler than an ICE... Because science. The problem with the CR reliability is there is no weighting scheme to each specific issue. For example, a screen freezing is a reliability issue that is weighted the same as an S class transmission failing. With the model S especially in the earlier years and for some reason a batch of 2014 models (made in 2013) had an issue with DU's making noises. The other problem is some of it is Tesla's fault for overzealous servicing. They'd replace a DU if they felt it was making noise.

Excellent point, the order of magnitude difference between a broken sunvisor versus a broken transmission is immense .
It seems to me the DU issue is forever behind them, any information on that?
Elon mentioned the objective of a 1 million mile drive train life.
 
A surprisingly accurate and fair analysis by the Motely Fool.

Look at the bottom of the article:

Daniel Sparks owns shares of Tesla Motors.

I find it highly amusing that every article written by someone who is short (or even just critical with no position) Tesla is usually trashed and disregarded, but articles written by TSLA shareholders are "accurate" and "fair".
 
It is much simpler than an ICE... Because science. The problem with the CR reliability is there is no weighting scheme to each specific issue. For example, a screen freezing is a reliability issue that is weighted the same as an S class transmission failing. With the model S especially in the earlier years and for some reason a batch of 2014 models (made in 2013) had an issue with DU's making noises. The other problem is some of it is Tesla's fault for overzealous servicing. They'd replace a DU if they felt it was making noise.

The model X is the most difficult car to build because Tesla threw everything but the kitchen sink in. They had to make parts that didn't exist which is why it is claimed most difficult. This has been worked out because the R&D is done already.

Tesla Bull Long term investors need not worry (1+ years). TSLA short term (3 months) can definitely make some money, but set your stops. This stock is bipolar and short interest is incredibly high for a large cap with a lot of institutional investors.

Also I'm fine with CR showing their survey results, what I take issue with is other car makers get a free pass and the press fails to circulate the "... But 97% of the owners would buy their Model S again"

This is just not true. The CR reliability ratings are both weighted and mileage normalized. The CR reliability ratings are the most independent, comprehensive and properly statistically analyzed ratings of any available out there. They are doing it for longer than we are alive. Let's stop knocking them down just because they conveyed something about Tesla that we do not like to see.

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Yeah right , whatever .

There is nothing about what is wrong with tesla that is what is right cannot fix. Elon is brilliant enough
to overcome all this trivial stuff you bring up, get real.

I would suggest not being so dismissive of the 'bear' arguments. They may or may not be material to how you view TM/TSLA but I, for one, want to know the arguments as they do affect the price of TSLA whether we agree with them or not. While I do not look at this poster as the enemy I think the phrase 'Keep your friends close but your enemy closer' applies here very well and as an investor I appreciate seeing the bear arguments.
 
+1! Took the words out of my... keyboard.
Also, beside the DU replacements all of the other issues have nothing to do with the EV design being more simple. Door handles, squeaking sunroof, entertainment system - nothing to do with EV drivetrain.

On the other hand I believe the DU failures are overstated as well. Reading these forums, sure there were a number of DU failures - even multiple ones - at the beginning, but they also pro-actively replaced hundreds (or more?) of DUs once they uncovered the source of a harmless, but irritating noise for example. I remember when we read here at TMC that they shipped so many DUs to Norway for that reason. Is that the equivalent of an S class engine going bust in the middle of the highway? Sounds like the CR statistics thinks so.

It's tricky to say if a DU failing is equivalent of an ICE failing. It is and it isn't. Not sure if you've seen the video of how the drive units are made but it's infinitely cheaper to ship because it's so compact and the reusabilty of it is incredible. It's literally a Tesla coil that is wound up like yarn. An S Class engine going bust is infinitely more difficult to fix and tricky to diagnose because it's like you break one part... something else gets affected. A DU failing is the equivalent of a full engine failure... because that's all it is. The problem that I mentioned is "over care" because the part would work but it would be noisy. Instead of Tesla opening the casing and inspecting it's far easier for them to drop a new watermelon sized motor in and be done with it.
 
I don't read SA, but you seem (to me, anyway) to see the market for electric cars as separate from the overall car market, and because it's a small market, the other makers will flood it and Tesla will get suffocated. But there is only one car market.

I can quote my answer here. Your original point was about margins and Apple being able to "disrupt" (music, smartphones, tablets, maybe watches soon...) sectors and/or extract high margins with a relatively small market share (Macs vs PCs..).

I maintain that the CE and other tech sectors are very different from the car sector. Let's use the Apple-Tesla analogy:

Both Apple (iPhone 6S family) and Tesla (Model X SUV) each started "shipping" important new products within the past few weeks.

I put shipping in parenthesis on purpose since the difference between the two companies is stark:

While Apple shipped millions of iPhones at launch, Tesla so far delivered only 6 cars to insiders and friends of the CEO:

How many again? S-I-X cars. (And that's for a car model that was once supposed to ship in late 2013. The initial unveiling of the Model X already took place in February of 2012!).

Imagine Apple only being able to produce 60k or 600k new iPhone 6s units by launch day instead of 6 or 16 million. The stock would tank hard the next day - and rightly so.

Ramping up is very cap-ex intensive in the car industry. Market share shifts beyond single digits take DECADES, not years or months, in the car sector.


At the same time, battery technology will evolve a lot until 2025 or 2035 - resulting in likely write-downs of current equipment (Exhibit 1: Tesla's Gigafactory battery plant).

That's the main issue for Tesla as large incumbent competitors prepare many PHEV and pure EV models for 2018-2020.

The market will be very crowded soon while Tesla has issues ramping up against the giants and bets billions on current battery tech.

One simply can't disrupt the car sector within a few months or even years (as is common in tech sectors, e.g. in smartphones, to use a popular recent category example so often quoted by bullish analysts).

The car sector is fundamentally different on a timeline scale (car replacement cycles, used car market...) and in terms of required cap-ex per unit of revenue and operating profit.

It will take TSLA another decade to just reach a market share of about 1% in the passenger car sector - and that's assuming an absolute best-case scenario for TSLA and EVs in general.
 
As to the CR and weighing criteria. Just as CR may need to make a new rating system because of the S scoring 103 on a 100 point scale they may need to adjust the weight given to drive train failures/etc. as I agree that popping out/in a new DU is much simpler than a new transmission/engine.
 
I find it highly amusing that every article written by someone who is short (or even just critical with no position) Tesla is usually trashed and disregarded, but articles written by TSLA shareholders are "accurate" and "fair".

Much of the bear thesis is based on factually incorrect arguments, and always has been, which is why most of the bears have been completely wrong about the company all along. Please point out the factual errors in that article.
 
As to the CR and weighing criteria. Just as CR may need to make a new rating system because of the S scoring 103 on a 100 point scale they may need to adjust the weight given to drive train failures/etc. as I agree that popping out/in a new DU is much simpler than a new transmission/engine.
I am an X professional mechanic for VW and Porsche. Engine rebuilds was my specialty. To compare an ICE failure to an EV drive unit failure, the differences are extreme. In the case of the failures within the Tesla drive units, there was only thrust washers that needed replacement. Tesla was swapping complete units as it was the fastest remedy to get the customer back on the road. These defective units were then repaired back in Fremont, cleanly and quickly. The labor involved in repairing the DU's was a fraction of that of an ICE rebuild. The amount of parts for the DU is a tiny fraction of a fraction of what goes into an ICE rebuild. With an EV DU defect, only the part(s) that fail require replacement. In a typical ICE, any failure generally takes out most of the rest of the engine. We are talking broken connecting rods, pistons with holes, burned up valves, worn cams and lifters, on and on and on. In almost all ICE failures, all major parts must be replaced at great expense, oily mess, and huge labor costs. The nature of an ICE is to explode (that's what makes it go), an ICE is basically "self destructing" from the moment it is started as a new engine. Wear is so rapid that even a small problem that requires take down, even on a relatively new motor requires replacement of many very expensive parts already showing wear and heat destruction.

I still repair from time to time failures on friend's ICE's. Now , after driving an EV for almost three years, every time I lift the hood of a car and look at the mess of what an ICE really is, I gasp at what a Rube Goldberg it all is.
 
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This is just not true. The CR reliability ratings are both weighted and mileage normalized. The CR reliability ratings are the most independent, comprehensive and properly statistically analyzed ratings of any available out there. They are doing it for longer than we are alive. Let's stop knocking them down just because they conveyed something about Tesla that we do not like to see.

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I was using Hyperbole to illustrate my point. I understand how the ratings and models work but if you look at the metrics. engine: major/Minor, transmission: major/minor, etc. Tesla doesn't have enough parts to spread out while other manufacturers do. I don't actually see the data because I didn't subscribe and looking online has led me nowhere but they cited touch screen freezes as a highlight. Ok, so where does that fall under? Climate control? Electrical System? Suspension? because the bloody thing controls everything.

I believe Consumer Reports is super objective but like I said, the muck raking blows it way out of proportion.
 
It's tricky to say if a DU failing is equivalent of an ICE failing. It is and it isn't. Not sure if you've seen the video of how the drive units are made but it's infinitely cheaper to ship because it's so compact and the reusabilty of it is incredible. It's literally a Tesla coil that is wound up like yarn. An S Class engine going bust is infinitely more difficult to fix and tricky to diagnose because it's like you break one part... something else gets affected. A DU failing is the equivalent of a full engine failure... because that's all it is. The problem that I mentioned is "over care" because the part would work but it would be noisy. Instead of Tesla opening the casing and inspecting it's far easier for them to drop a new watermelon sized motor in and be done with it.

Its not just DU failing. It is the perception that it keeps failing. There have been many reports where people have been on their 3rd or even 5th DU. If the issue has been fixed by Tesla, why are people seeing multiple replacements even now. It is certainly a good thing that DU is covered for 8 years, but if the most important part of the EV keeps failing, it does not give a lot of goodwill.

I know Elon talked about a simple change to fix DU issues about 3 quarters ago and it's still lingering meaning the issue has not been addressed fully. The man hours the SCs put here is enormous and may contribute to current displeasure in Norway and other parts.

Another note, Tesla sweetened the referral program a few days ago by offering powerwall for free for users with 5 or more recommendations. I think the initial reality distortion Elon used for referral program is waning and reasoning looks more and more likely towards demand generation. This does not give me a lot of confidence.
 
EV is supposed to be much mechanically simpler than ICE. The TSLA LONG investors should really get concerned about reliability issue in the 4th year after Model S introduction and "most difficult car to build" comments for Model X.

I'd be concerned if Tesla wasn't addressing issues and leaving customers stranded on the side of the road, which they are not. I'd also be concerned if instead of 97% of those surveyed on the reliability issues saying they'd buy a Tesla again, it was 9.7%, which it is not. I prefer context and reality over always looking around the next corner expecting/wishing/wanting/assuming there's something to be concerned about.
 
Another note, Tesla sweetened the referral program a few days ago by offering powerwall for free for users with 5 or more recommendations. I think the initial reality distortion Elon used for referral program is waning and reasoning looks more and more likely towards demand generation. This does not give me a lot of confidence.

Could that simply be a way to get around the referral law violation?
 
Could that simply be a way to get around the referral law violation?

It could be, but realize this was done weeks ago just went unnoticed. We need to realize this program in itself is a beta to understand cash outlay for the next couple of years for stores, so Tesla will pull whatever levers to see the effects and how it can be implemented better.

pGo, while I appreciate the views you bring, at the risk of sounding like a broken record... demand is not an issue. If you feel it is, go ahead and short Tesla because with that argument there won't be revenue to support the capex and investments required for Model 3.

- - - Updated - - -

I am not an expert, but I don't see it that way. So, what happens to people who have less than 5 referrals?

They get their $1,000 store credit per car.
 
You may want to throw an 'IMHO' in there.

Adam Jonas, Morgan Stanley, arguably the biggest TSLA bull among all sell-side analysts has a lower market share estimate for Tesla in the same timescale (even 3 years later, to be exact):

“We reflect the potential for lower battery costs through higher sales volume nearly doubling Tesla’s share of the global car market to 90bps by 2028, driving our target increase.

I used 1% by 2025.

In the end, the exact number is not relevant in comparison to the general observation that tech and other sectors where "disruption" is possible are very different from the car sector. See my previous post on the Apple-Tesla analogy for details on required cap-ex per unit of revenue/operating profits and market share shifts over time:

Short-Term TSLA Price Movements - 2015 - Page 1519
 
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