Short-Term TSLA Price Movements - 2016

[stopcrazypp]

If Tesla Motors would restructure so they go in the black for 1 quarter, their stock would break 500.

What would it take?

Monetize the SC network. Lots of ways to do this.
Lobby and get more tax assist.
Drop the X.
License dealerships. Use Other People's Money to build infrastructure.
Move future production to a cheaper location.
Outsource MORE not vertical integration. Not even the cheapest companies use VI anymore. You can't be an expert at everything.
2 current Models: The Model S, nicely equipped, Under $79k. The GT-V - A high end Grand Touring / High Performance luxury car. You know the GT-V as the P90DL.
Adjust pricing to what the market will bear based on market studies of independent dealers.

But a lot of the damage was done by early decisions, Elon needs a scape goat to fall on their sword, then roll back.

The Roadster was actually going in the right direction from a business standpoint. After that, Tesla Motors acted like capital was free. It's not. It's a tool, but it has a cost.

It is going to be practically impossible to get 1 quarter in the black before Model 3 release while still pursuing the aggressive schedule for the Model 3. And the reason for the aggressive schedule is the tax credit. While Tesla has an impressive number of reservations, it is not in the bag yet. It might have been possible if Model X went completely smoothly, and following the original schedule, but we are past that point.

And a lot of your suggestions would be many steps back for Tesla and may even be a negative signal for the stock market (for example, why would you think canceling X would cause stock prices to rise rather than rapidly fall).

And your other suggestions are not only specious, but also require a longer time frame before any effects can be seen. For example, outsourcing requires Tesla to validate suppliers and supplier to set up their supply chain (which will cost time and money) and also subjects Tesla to third party uncertainties in price/availability. Moving production to another location (I presume you are referring to leaving California, not simply adding locations as they are already doing) and setting up dealers are the same. Even if there are advantages, they will not show up quick enough before the 3 is out.

 

[larmor]

Aren't all the Tesla killers "magical"? Powered by unicorn poop and sparkles. Hopefully it is a real competitor and not yet another ugly little compliance golf cart thing like the Bolt and i3.

Vapor ware is always more compelling than an actual product...

 

[techmaven]

Name 10 successful US manufacturing businesses in 2016 that use the Vertical Integration Model. They taught us that in the 1970's when the USA had the killer manufacturing infrastructure and huge numbers of middle class skilled workers. Today is is not 1977.

Not that simple. Tesla still has a lot of suppliers:

However, there are plenty of critical path items that Tesla chooses to do themselves because time to market, combined with relatively low volumes and cost are big issues. They aren't making altogether that many vehicles, even at declared Model 3 volumes. I don't think they choose parts to be vertically integrated or not based on some overriding desire to make everything themselves. After all, they originally felt that they could buy everything. Go view Marc Tarpenning's discussion on Tesla's early days:

They are being taught that various very large, well established companies have failed to live up to their reputations, especially on some very critical components. Right now, the gross margin is big enough to be pretty sloppy in the production process. I don't doubt that they have the highest level of scrap and the lowest initial quality of the mass production automakers which requires a lot more rework before vehicles leave the factory. But with such a high gross margin right now, the time to market factor, especially the rapid iteration model is much more valuable to them. The big risk to Tesla right now isn't the cost per component... it's getting enough of the components at the right quality level at the right time at all. So they choose to do more in-house when their suppliers fail them or try to price gauge them. Yeah, once they are making millions of vehicles in multiple plants, we can discuss the cost optimizations and the scrap. Right now, there are critical components that are unique to EVs and in some cases, BEVs that no one makes at high volume. Besides, Tesla has proven to be experts at taking high volume parts used in other industries and repurpose them so that they get most of the benefits of high volume without actually having high volume themselves.

 

[kenliles]

It's easier and faster to grow with profits than debt. And the risk is far less.
...
The number #2 is over capitalization.

Capital costs all the time.

Name 10 successful US manufacturing businesses in 2016 that use the Vertical Integration Model. They taught us that in the 1970's when the USA had the killer manufacturing infrastructure and huge numbers of middle class skilled workers. Today is is not 1977.

I don't understand the question.
There are many Internationally; There are many in US in other industries- Aerospace is my experience-
Boeing, Pratt & Witney, Rosemount, Honeywell are some from that industry- highly vertical manufacturing

But I presume your really talking about higher volume, heavy manufacturing like auto industry;
So addressing that--
I'm invested in TSLA because they might fail at what others in the industry believe isn't plausible or even possible, creating the high risk, high reward, high growth potential investment. Both in auto and energy.

Vertical integrated structure is the only viable way to accomplish that in the US currently, I think to your point- but not sure--
Given the massive new reservations- How is the capitalization of new robotic workers different from the capitalization of human workers?
It's more up-front, amortized longer- but with less forward risk/cost of human capital training, turnover and massive on-going management costs.

But this is all pretty basic stuff- so I guess I'm confused as to the point--

bottom line for me-
I'm invested because most believe as you do, and I'm betting this is changing and will change rapidly, rewarding my investment.
I'm grateful for your disbelief- please continue...

 

[larmor]

Probably posted earlier, but germane to current topic of suppliers and hence, in house production of MX components and hence 'delay' in MX: (link at end of selected passage)

"Sergio’s statements and message:

He warned the adoption of electric technology risked continuing the process that he called “disintermediation”, under which carmakers have gradually lost control over elements of a vehicle’s contents to suppliers.

“It’s been a very steady, rigorous process of disintermediation,” said Mr Marchionne.

Having initially manufactured all their own components, carmakers currently retain primary control of making only vehicles’ powertrains — their engines and transmissions — he added.

“If we start losing any of that . . . we will not be able to hang on to any proprietary knowledge and control of that business,” said Mr Marchionne. “We won’t be manufacturing the batteries. We won’t be manufacturing the electric motors that are part of that powertrain.”

Sergio Marchionne Admits EV Revolution Would Crush Automakers

 

[Johan]

Don't forget that Mr Rat himself ran some kind of company that supplied some service or another to large industries and makes his argument from this perspective. A perspective that is of little value when thinking about how to run a rapidly growing high tech complex manufacturing company in an extremely capital intensive business.

His argument up thread that basically sums up to: "As armchair CEO of Tesla I'd easily make the company net profitable in one quarter" without mention of how this is supposed to occur while maintaining exponential growth should be enough to make any serious reader of this forum put him on the ignore list.

Also, I love Audis latest press release BEV "coming soonish". Let's hope they don't have to scrap the whole project like they did with the R8 e-tron in order to avoid embarrassment and public ridicule.

 

[electracity]

I don't understand the question.
There are many Internationally; There are many in US in other industries- Aerospace is my experience-
Boeing, Pratt & Witney, Rosemount, Honeywell are some from that industry- highly vertical manufacturing

But I presume your really talking about higher volume, heavy manufacturing like auto industry;
So addressing that--
I'm invested in TSLA because they might fail at what others in the industry believe isn't plausible or even possible, creating the high risk, high reward, high growth potential investment. Both in auto and energy.

Vertical integrated structure is the only viable way to accomplish that in the US currently, I think to your point- but not sure--
Given the massive new reservations- How is the capitalization of new robotic workers different from the capitalization of human workers?
It's more up-front, amortized longer- but with less forward risk/cost of human capital training, turnover and massive on-going management costs.

I don't understand how you are correlating Tesla's differentiation with physical goods. It seems to me that Tesla is differentiated by design and software. I doubt Tesla wants to make any physical component that they can reliably purchase at a good price. Not only do subcontractors parts go into Tesla's cars, but also their knowledge.

Probably posted earlier, but germane to current topic of suppliers and hence, in house production of MX components and hence 'delay' in MX: (link at end of selected passage)

"Sergio’s statements and message:

He warned the adoption of electric technology risked continuing the process that he called “disintermediation”, under which carmakers have gradually lost control over elements of a vehicle’s contents to suppliers.

............

Sergio doesn't seem to know the definition of disintermediation.

 

[McRat]

I don't understand the question.
There are many Internationally; There are many in US in other industries- Aerospace is my experience-
Boeing, Pratt & Witney, Rosemount, Honeywell are some from that industry- highly vertical manufacturing

...

I'm a Boeing, P&W, and Honeywell supplier. None of them are vertically integrated.

In fact, Boeing is mainly a design company today. They sold off over 90% of their corporate mfr'g, I used to work at both McDonnell Douglas and Rockwell International, which are now Boeing. All of it is gone.

 

[CButterK]

Name 10 successful US manufacturing businesses in 2016 that use the Vertical Integration Model. They taught us that in the 1970's when the USA had the killer manufacturing infrastructure and huge numbers of middle class skilled workers. Today is is not 1977.

You are correct in a sense that a company would want to outsource, for a cost benefit. And from the 70s to recently, it was fashionable and cost effective to outsource to offshore(lower labor rates), and component OEM Manufacturers(economy of scale, core competency). However, if there was no cost benefit, would a company still outsource when you are at the mercy of your suppliers for their "Perfect Execution" for your Business plan? And what if your company is not their "high priority" customer. and their quality/delivery is subpar, causing you delays and costs associated with the supplier? The true cost of Outsourcing is the Product cost+Supplier management cost+Supplier Performance cost.

Very recently though, due to advancement in 3D printing, next level(more sophisticated) Automation, and DFM strategy(Design for manufacturing), it has become much simpler to design parts that are easier and faster to produce. So, if a company already has the infrastructure(skilled staff, equipment & space) as a fixed cost(Tesla does), for the same cost or higher, do you deal with the supplier issues as above, or do you do it yourself and control your own destiny? I believe Tesla has already figured out the true component cost of outsourcing and came to a conclusion that it costs them less to build and control quality/timing in house. I mean, if Musk & Team can build a reusable rocket from scratch, I think Tesla can make every aspect of their cars, become their core competency....

 

[McRat]

Don't forget that Mr Rat himself ran some kind of company that supplied some service or another to large industries and makes his argument from this perspective. A perspective that is of little value when thinking about how to run a rapidly growing high tech complex manufacturing company in an extremely capital intensive business.

His argument up thread that basically sums up to: "As armchair CEO of Tesla I'd easily make the company net profitable in one quarter" without mention of how this is supposed to occur while maintaining exponential growth should be enough to make any serious reader of this forum put him on the ignore list.

Also, I love Audis latest press release BEV "coming soonish". Let's hope they don't have to scrap the whole project like they did with the R8 e-tron in order to avoid embarrassment and public ridicule.

I'm not unique or special. I've just watched the parade. I've worked in manufacturing my entire life, and will die working in mfg'g.

I do hold TSLA. Not because I think I'll make money, but because it's a great concept. We have 2 EVs and a EV MC.

Audi's suck hind teat as does BMW and MB. They are yesterday's technology at today's prices. Garbage. Only an idiot would buy an Audi in the US. Or a Fashion God.

 

[McRat]

You are correct in a sense that a company would want to outsource, for a cost benefit. And from the 70s to recently, it was fashionable and cost effective to outsource to offshore(lower labor rates), and component OEM Manufacturers(economy of scale, core competency). However, if there was no cost benefit, would a company still outsource when you are at the mercy of your suppliers for their "Perfect Execution" for your Business plan? And what if your company is not their "high priority" customer. and their quality/delivery is subpar, causing you delays and costs associated with the supplier? The true cost of Outsourcing is the Product cost+Supplier management cost+Supplier Performance cost.

Very recently though, due to advancement in 3D printing, next level(more sophisticated) Automation, and DFM strategy(Design for manufacturing), it has become much simpler to design parts that are easier and faster to produce. So, if a company already has the infrastructure(skilled staff, equipment & space) as a fixed cost(Tesla does), for the same cost or higher, do you deal with the supplier issues as above, or do you do it yourself and control your own destiny? I believe Tesla has already figured out the true component cost of outsourcing and came to a conclusion that it costs them less to build and control quality/timing in house. I mean, if Musk & Team can build a reusable rocket from scratch, I think Tesla can make every aspect of their cars, become their core competency....

3D printing is not viable due to parts per hour and capital costs.

Give it 20 more years. I love my SLA machines (the non-fashion name for 3D printers) but they cannot do 1000 parts per hour.

 

[colettimj]

Probably posted earlier, but germane to current topic of suppliers and hence, in house production of MX components and hence 'delay' in MX: (link at end of selected passage)

"Sergio’s statements and message:

He warned the adoption of electric technology risked continuing the process that he called “disintermediation”, under which carmakers have gradually lost control over elements of a vehicle’s contents to suppliers.

“It’s been a very steady, rigorous process of disintermediation,” said Mr Marchionne.

Having initially manufactured all their own components, carmakers currently retain primary control of making only vehicles’ powertrains — their engines and transmissions — he added.

“If we start losing any of that . . . we will not be able to hang on to any proprietary knowledge and control of that business,” said Mr Marchionne. “We won’t be manufacturing the batteries. We won’t be manufacturing the electric motors that are part of that powertrain.”

Sergio Marchionne Admits EV Revolution Would Crush Automakers

So he's saying not to do what GM is doing with the Bolt.

 

[kenliles]

I don't understand how you are correlating Tesla's differentiation with physical goods. It seems to me that Tesla is differentiated by design and software. I doubt Tesla wants to make any physical component that they can reliably purchase at a good price. Not only do subcontractors parts go into Tesla's cars, but also their knowledge.

The vertical integration provides an advantage of quality-cost. The goal to integrate from the customer order to finished product with minimal cost (and time) for auto industry is the differentiator - On top of design differentiation.
What Tesla is attempting here is beyond the scope (but not desires) of the current auto manufacturers. Extreme advancement in robotics, AI, 3D printing, and newer material processes etc. now make advanced designs manufacturable rapidly and in high volume. This differentiation is what drive much of the capital investment (and long term competitive advantage imo)

I'm a Boeing, P&W, and Honeywell supplier. None of them are vertically integrated.

In fact, Boeing is mainly a design company today. They sold off over 90% of their corporate mfr'g, I used to work at both McDonnell Douglas and Rockwell International, which are now Boeing. All of it is gone.

They have all lost some of their vertical integration over the years- at a cost of future business. They remain relatively vertically integrated though for a US company. I'm familiar with their current operations as well. It's a question of degree- but I agree with your basic point that US has lost much of the capability to vertical integrate manufacturing- I believe Tesla can and will demonstrate a reversal- to their advantage

 

[kenliles]

3D printing is not viable due to parts per hour and capital costs.

Give it 20 more years. I love my SLA machines (the non-fashion name for 3D printers) but they cannot do 1000 parts per hour.

that's changing VERY rapidly now- High volume printing will be viable much sooner that 20 years imo

 

[vgrinshpun]

I'm a Boeing, P&W, and Honeywell supplier. None of them are vertically integrated.

In fact, Boeing is mainly a design company today. They sold off over 90% of their corporate mfr'g, I used to work at both McDonnell Douglas and Rockwell International, which are now Boeing. All of it is gone.

That explains their trouble with Li Ion battery fires.

It is very hard to design properly operating and optimized system, while subcontracting parts of it and treating each part as a black box for the supplier to figure out.

Tesla is all about optimization, which, at the level they demonstrated, is not possible with outsourcing.

That is one of the reasons they were able to build compelling EV, while common wisdom at the major auto manufacturers (amazingly even now) that it is not really possible. They know their s... it indeed is not possible with the approaches they are taking!

 

[kenliles]

That explains their trouble with Li Ion battery fires.

that's an excellent example- both in design differentiation and the vertical manufacturing to produce it quickly, with precision, and in volume

 

[Fallenone]

On the topic of vertical integration. I do not think Tesla really wants to be fully vertical integrated, from battery to the seals. That would require them to have their own modern industry system which is just stupid. What they want to be more vertical are the core drive train parts where their core competence are. I would even say the battery doesn't need to be vertically integrated if it wouldn't cut their cost for 30%. But the battery management system (battery pack minus the cells), the inverter system (both hardware and software), and the interface between battery, inverter, and motor, are critical. For the rest, I would love to see them outsource as much as possible. They are currently not outsourcing that much partly due to their low volume, which prohibits them to get an advantageous cost compared to doing it in-house. And/Or due to some supplier not up to par so they have to do it themselves.

And for the case of SpaceX being highly vertical integrated, that's because the volume for the parts used to build rockets are just so low so they have to pay outrageous premium to outside suppliers (per Vance's book). Suppliers for car parts are a total different thing.

 

[austinEV]

I'll give you two: Tesla Motors and Space X.

Do not feed the rodent...

 

[vgrinshpun]

Do not feed the rodent...

Strictly from humanitarian considerations...

 

[madodel]

And a lot of your suggestions would be many steps back for Tesla and may even be a negative signal for the stock market (for example, why would you think canceling X would cause stock prices to rise rather than rapidly fall).

I do believe that is his/her entire point.