Short-Term TSLA Price Movements - 2016

[Papafox]

I agree with your statement that most car buyers take delivery out of inventory.

I disagree that you do not give any credence to the 'D' issue. If it is not a problem why have so many 'D levers' been pulled in the last couple months.

Announcement of a 100+battery and AP 2.0 could very well reverse this and carry us to the model 3.

I want to be wrong on the 'D' issue. I am wrong as often as right but for the first time since joining this forum I believe demand is a genuine issue to discuss. I suggest it could be caused by multiple issues but I believe that Occam's Razor suggests Osborne is the most logical major force

Both sides are right. If demand levers aren't pulled, then production gains could outpace demand. This is the way things have been for over a year now. Fortunately, Tesla has a bevvy of demand levers to pull, and we will continue to see relatively-short wait times for Model S and eventually short wait times for Model X as demand levers are tweeked to keep demand just ahead of production capability. Thus, demand is not a problem, it is a variable that needs to be managed as well as it has been managed in the past.

Model X demand will grow, both with large shipments to China, where the vehicle is fine-tuned for the market, and with the presence of more Xs on the road coupled with no more talk of quality issues, which will lead to a nice buying spree by the uber soccer-moms. Tesla already knows when it will announce 100kwh batteries and AP 2.0. It has enough small levers to pull until the big levers are pulled. Two-year leasing will give Tesla the demand it needs to carry us though to the really big demand lever of AP 2.0. Once Model 3 is rolling off the assembly line(s) in high volume, the S and X demand is a minor issue compared with M3 ramp-up. Please relax and breath deeply.

 

[sdtslafan]

If Hilary becomes president, her plan is to raise capital gains taxes. You will only get the lowest rate of 20 percent if you hold for 6 years. Consider this when making any TSLA trades based on short term perturbations that do not affect the big picture.

 

[FredTMC]

Both sides are right. If demand levers aren't pulled, then production gains could outpace demand. This is the way things have been for over a year now. Fortunately, Tesla has a bevvy of demand levers to pull, and we will continue to see relatively-short wait times for Model S and eventually short wait times for Model X as demand levers are tweeked to keep demand just ahead of production capability. Thus, demand is not a problem, it is a variable that needs to be managed as well as it has been managed in the past.

Model X demand will grow, both with large shipments to China, where the vehicle is fine-tuned for the market, and with the presence of more Xs on the road coupled with no more talk of quality issues, which will lead to a nice buying spree by the uber soccer-moms. Tesla already knows when it will announce 100kwh batteries and AP 2.0. It has enough small levers to pull until the big levers are pulled. Two-year leasing will give Tesla the demand it needs to carry us though to the really big demand lever of AP 2.0. Once Model 3 is rolling off the assembly line(s) in high volume, the S and X demand is a minor issue compared with M3 ramp-up. Please relax and breath deeply.

Thx. In U.S, wait times for MX are currently "late September" (same as ModelS). Therefore, there's basically no backlog for MX in the U.S. Right?

Would be helpful to hear from Chinese folks on what's happening with deliveries and wait times in China

 

[FredTMC]

If Hilary becomes president, her plan is to raise capital gains taxes. You will only get the lowest rate of 20 percent if you hold for 6 years. Consider this when making any TSLA trades based on short term perturbations that do not affect the big picture.

Wow.

6 years for long term cap gain rate? That's crazy (IMO).
Seems to me that long term cap gains rate helps to spur investment in US equities. Stocks will drop with this tax code change.

Sounds like you're convinced congress will swing to democratic control and pass these long term cap gain changes

 

[TMSE]

I apologize if it is already mentioned before. What happens to Out-Of-The money call options of SCTY if the deal goes through? I believe someone posted a link to a detailed OIC article on it. Could anyone please share the link to that article?

All cash deal is simple to understand as options with strike price above offer price become worthless. However, what we have here is an all stock deal at 0.11 convertion rate.

For example, SCTY $35 Jan'2018 call option is out of the money. So, a holder of 1 SCTY contract (100 options), should get 11 TSLA Jan'2018 call options at $318.18 strike price. Is that right?

Math:
100 * 0.11 = 11 options;
$35/0.11 = $318.18 adjusted strike price.

 

[Fallenone]

May be.

But let me ask another question. Do you think that 2000/week of new confirmed orders do represent demand, but sales of the non-titled demo cars to the customers who did not place an order do not?

To put things in perspective, with 260 stores around the globe, if on average each store sells just one demo car per week, we have 260 cars/week sold to the customers that did not put an order in. Make it two cars per week, and there is total of 520 cars per week that are sold to the customers who did not put an order.

I do not know the answer to your question, but I think that the way it is put has potential to have rather large impact on the answer.

They sure can sell demo cars to push up delivery, but profit margin takes a big hit.

 

[sdtslafan]

Wow.

6 years for long term cap gain rate? That's crazy (IMO).
Seems to me that long term cap gains rate helps to spur investment in US equities. Stocks will drop with this tax code change.

Sounds like you're convinced congress will swing to democratic control and pass these long term cap gain changes

Anything is possible with the election. Trump is a big wild card. Clinton victory will be huge win for renewable energy given her aggressive goals for solar installation. I wasn't trying to be political or predict Hilary will win. Just noting that is currently a slightly more probable outcome.

 

[vgrinshpun]

They sure can sell demo cars to push up delivery, but profit margin takes a big hit.

Are you sure about that? I think that depreciation of demo cars is included in the SG&A, as it is part of the expenses company incurs to sell the cars (have to have demo cars to sell the cars). I do not think that depreciation of demo cars affects GM.

 

[SebastianR]

To play 'devil's advocate'. Is TM pulling all these demand levers as we are at a point where daily production exceeds daily new confirmed/going to production daily orders?
Yes, there is a back log, especially internationally, but is Maoing finally correct that they are at a tipping point where TM is demand constrained ?

I am asking the question to you as I am finally at a point where I see that 2000+ a week production exceeds 2000+ a week of new confirmed weekly orders that are not being delayed waiting for AP 2.0 or 100+ battery

To play even more devil's advocate: would Tesla be able to sell any amount of Model S if they would only delivery the 2012 December version of the Model S? Or to be even more pointed: would Mercedes still be in business if the S-Class was at the same level as in 1975? I certainly don't think so (both for Tesla and for Mercedes).

I do believe that Tesla needs to constantly improve / finetune / modify its offering to stay relevant. To me that's not a demand issue but simply a fact of life.

Now to the question if they finally have more production capacity than willing buyers. To me the answer lies - to some extent - in the CPO market. We know that Tesla could - stubbornly - just sell fewer cars at the current price point and claim a supplier issue. If, however, the CPO market would collapse then I would start to listen to the demand debate. Private parties, desperate to get rid of their cars, to me are the most realistic indicator to where the "true" demand lies. For Europe, I haven't seen any movement in the pre-owned car market at all. I think in the US, there is a bit more movement but nothing that alarmed me.

My last point of reflection on demand is simply that Tesla is by far not in all markets that matter yet: I went for a business trip to Asia and while the hotel offered to pick me up from the airport in a 7-Series BMW, they couldn't offer a Tesla. I saw a Bentley dealer and lots of BMW advertisement, but nothing of Tesla in Bangkok. Same thing with many places in the Middle East and Africa / South America. In short, I don't see the global demand fulfilled at all. If Tesla could sell more Model S in the US or not, I wouldn't know about at this time but the fact that Tesla still can't sell everywhere in the US tells me that there is untapped demand there, too.

 

[Fallenone]

Are you sure about that? I think that depreciation of demo cars is included in the SG&A, as it is part of the expenses company incurs to sell the cars (have to have demo cars to sell the cars). I do not think that depreciation of demo cars affects GM.

Whether the depreciation/discount is taken doesn't matter. What matters is COGS for custom order and demo car is the same (given same specs of course). And revenue takes a big hit by selling demo cars, eventually leading to much less profit.

 

[dennis]

I want to be wrong on the 'D' issue. I am wrong as often as right but for the first time since joining this forum I believe demand is a genuine issue to discuss. I suggest it could be caused by multiple issues but I believe that Occam's Razor suggests Osborne is the most logical major force

I believe there is also another issue at work here, and it has to do with adoption curves and saturation. Most new car model demand curves look like a bit of a pyramid, with a rather quick ramp up of production to satisfy pent up demand and a peak at 18-24 months. Then demand declines since that model is no longer the "shiny new thing". The latest BMW 3 Series shows this in spades. Tesla has done a great job of countering this typical trend with geographic expansion, improvements like AWD and Autopilot, and more recently going down market with the upgradeable 60 and 2 year leasing. But without a major redesign of the body and interior demand for Model S will inevitably level off and decline.

Case in point: I live in town of 30,000 people in Silicon Valley. When I go to the grocery store 2 miles away I typically see 5 or more Model S's and 1 or 2 Model X's. There are at least 40 Tesla owners at my golf club. But I have not seen a SINGLE Model S with the refreshed nose in my town in the 4 months since it was introduced. Which leads me to believe that at least in this one place demand for Model S has been saturated.

 

[FredTMC]

Anything is possible with the election. Trump is a big wild card. Clinton victory will be huge win for renewable energy given her aggressive goals for solar installation. I wasn't trying to be political or predict Hilary will win. Just noting that is currently a slightly more probable outcome.

Thx. Yep. Not political at all. Thanks for letting us know about the proposed cap gains change. Fingers crossed that doesn't make it thru congress if Clinton wins.

 

[cziegler]

To clarify: That was the cost of that 1 project and the author admits he did not seek to reduce costs on the installation - I was left with the impression the author has a personal value of, 'paying workers well'. As you can see by the math this was a standard $4 a KW install so a 25% reduction would only take a savvy customer saying, "How about $3 a KW?". Although, I support and encourage paying workers well, if you of means.

In general, residential solar projects are pretty darn simple projects and potentially, could easily become DIY projects for many. The State of California publishes guidance for local governments and encourages the adoption of pre-approved plans, while few local governments (in my neck of the woods) have responded to the guidance, if/when they do we could see a surge of solar installations when the word gets out.

Additionally, that thread contained numerous comments which share the advice of, 'manage your installation by hiring trades directly and cut costs dramatically' - 6 cents a KWh (assuming a 30 lifespan of the panels) is becoming increasingly common and 30 years is probably cutting short the life of the panels.

Relationship to short term price: Slowly the investing public is learning the truth of solar's potential and the demand for Powerwall is building. The local distributors that I have queried, 5 in total, report very strong interest with Powerwall as it is 30% the cost of currently available products. I was ecstatic to read the author confirm a price of $3,500.00 retail as my greatest fear was that TE wouldn't make that target or would adjust up due to demand.

EDIT: "KW" should read "W" in the first paragraph pertaining to solar PV install cost.

 

[hobbes]

The website of German automotive supplier Dürr (that´s where the new paint shop now in operation came from)
has a press release (for Q2/H1 2016) which might be completely unrelated to Tesla:

Order receipts in North America rose by 51% in the first half of the year, reaching
€ 611.1 million. In June, Dürr received from a US automotive OEM one of the largest orders in its history for the construction of a final assembly plant.[/QUOTE]
Press Releases - Dürr

IF (BIG if) it is related to Tesla, my guess would be for a larger European final assembly plant (compared to the one in Tilburg right now) in preparation for Model 3.

What do you think of the chances it is an order of Tesla?

PRO: What other US manufacturer would be building a final assembly plant? I guess the old companies have enough plants and would be only reconfiguring them for another model, also it is to late to be for the Bolt. Timing seems to fit for Model 3.

CON: Tesla has a tendency to build plants themselves.

 

[Gerardf]

Some more positive press

Tesla Motors, Inc. Model X Deliveries Likely to Soar This Quarter -- The Motley Fool

He estimates 20k to 23k deliveries, but IIRC he is known to publish positive about Tesla.
Would be nice if he is correct on the Model-X figures.

Also from him : Forecasting Tesla Motors, Inc.'s Q3 Deliveries: Expect a Huge Jump -- The Motley Fool

 

[Papafox]

Tesla is about 40 days away from releasing Q3 delivery numbers. They will be a big jump up from previous quarters, it's only a question of how big a jump. The 2 year leasing option for Models S and X will appeal not only to Model 3 reservation holders, it'll appeal to buyers on the fence about AP 2.0 and other upgrades. If you can turn in your lease in 2 years, missing AP 2.0 isn't a big deal.

So, if Tesla's 3Q and 4Q output is determined by production ramp, and 2K/week is already a milestone in the rearview mirror, how soon does the SP ascend in anticipation of 3Q delivery numbers?

 

[vgrinshpun]

Whether the depreciation/discount is taken doesn't matter. What matters is COGS for custom order and demo car is the same (given same specs of course). And revenue takes a big hit by selling demo cars, eventually leading to much less profit.

What do you mean a big hit? When somebody says a hit, my understanding is that something (revenue per car in this case) goes down a lot as compared to what it was before. Are you suggesting that Tesla did not sell demo cars before, and now, since it does, the revenue will go down by a lot?

 

[Thumper]

A demand lever that should become possible sometime is the expansion into unserved markets in states that are fighting TM. This ridiculous state of affairs can't go on for ever. There is a lot of territory where it is difficult to buy/own a Tesla.

 

[RobStark]

A demand lever that should become possible sometime is the expansion into unserved markets in states that are fighting TM. This ridiculous state of affairs can't go on for ever. There is a lot of territory where it is difficult to buy/own a Tesla.

Tesla can also wholesale lease returns to high end used car dealers in States that ban Tesla stores.

That is one kinda sorta way to balance American supply and demand at the same time backdoor get around the the sales ban.

 

[vgrinshpun]

The website of German automotive supplier Dürr (that´s where the new paint shop now in operation came from)
has a press release (for Q2/H1 2016) which might be completely unrelated to Tesla:

Thanks a lot, an excellent find!

Looking at the Dürr Site, they provide assembly technology systems, among other services and systems. I think that this big NA order could be an order for the Model 3 final assembly line for the Fremont factory. Good timing, as reading through this thread lately I was starting to have this nagging feeling that Model 3 is a hoax...