Short-Term TSLA Price Movements - 2016

[sub]

Why does that follow? The factory isn't laid out in a way that is optimal for making Tesla cars; it wasn't originally laid out for that. Also, the fancy robot lines, while fancy, are optimized for flexibility (I assume) at the expense of straight efficiency. Add in the fact that they are building more of the car in Fremont than GM/Toyota attempted (drive trains for instance). Based on all this I always figured that it would be a challenge to do 500k. It's got to be easier to make Geo metros. Was Nummi not at 100%? Maybe it was a 1 million Geo factory but they just didn't need that capacity?

This was my line of thinking as well, however, like everything else technology has progressed and this also carries over to manufacturing speed and efficiency.

 

[mrdoubleb]

Austin TX. So I love BBQ, dealership protection laws, Big Oil and Ted Cruz. (One of those things is true)

Aaaah, Ted will be so happy to hear that.

 

[Lump]

There were at least 3 TMC members on a factory tour last year just before the stockholders meeting. Our TM guide indicated that the Freemont site was capable of far more than 500-600k we are discussing here.
Now....this was one person and they could be wrong. I and the other TMC posters just about fell over....combination of shock and disbelief.

I was with Al.

I wasn't sure if they would be capable of additional 100k production with the current space or if he was implying expanding the the factory into the parking lot.

 

[vgrinshpun]

Seeing is believing. If there really is a market to be had at that margin, Tesla would be mad not to do a capital raise pronto, finance themselves, charge the full price and do it today instead of over a period of 2 years. Cost of capital for Tesla is exceedingly cheap and certainly much cheaper than giving away half of a potential super margin on a product that's essentially in the bag. Also, if there really were these kind of players willing to drop a cool $1B of pure profit in Tesla's coffers then as a shareholder in the blink of an eye, I'd really like them to convince Panasonic to switch over the Japan production to the Powerpack chemistry and drop producing cars altogether.

I am willing to be convinced by facts but at this point I don't see the price hike as necessarily a sign of the market willing to bear that price (the bull case) rather than the costs of goods somehow is higher than expected (the bear case). Hopefully the analysts will once again ask for details on Tesla Energy and the executives will actually answer instead of remaining relatively vague as they did up till now.

Here is what I think : that the sunk costs of R&D, tooling setup, selling overhead and what not on their TE products is way higher than originally expected. So while their costs of goods may be $190/kWh and plummeting, they need to really charge a higher price to ever hope to recoup some of their investments on TE. The remarkable path of the powerwalls/packs as a commercial developement up to today supports this view. They were announced way out in front, originally suggested to be sold direct to consumers but in the end only to middle men, the product line up changed drastically a full year later without any proper explanation and even before any product was shipping outside of test setups Elon was talking about needing to do a 2.0 version for which the company never ever explained why that's actually needed. All that points to a reality that, once they got going developing for real, turned out to be completely different than from what they planned. Such diversions can be very costly in R&D or even tooling setup if your fast-firing boss decides to invest heavily for a product that's scrapped 12 months later without shipping a single unit like the backup Powerwall.

Full disclosure : I am a bear on Tesla Energy and I really would like Tesla to focus on cars only which is where I think they have so many more 'firewalls' towards their competitors in terms of features and technology that, in the end, it's going to guarantee the best return on investment for their money. For me energy storage through batteries and especially at utility scale is quickly going to become a commodity product in which all the big industrial players will launch themselves should it ever become the market it promises to turn out. There will be little to no advantage buying Tesla's solution over anyone else's. I also don't see such a market developing rapidly with the exceptions of some localities like Hawai. Germanies grid copes just fine with a lot more solar/wind than anyone else's so the technical need just is not there (yet).

Edit : sorry for the long post that in the end should have been placed in the long term market outlook thread. If a mod would like to move it, please do so.

The cautious points you've outlined are reasonable and prudent when situation with TE is analyzed from the general point of view, but they are really not plausible when looked at from the detailed, semi-professional angle.

Before elaborating few details on my background. I am not specializing in the area of the BES (yet) but have more than 2 decades of work experience designing and building fossil power plants (hopefully I will be still tolerated on this Forum after this revelation ), so my views are informed by significant experience in the industry, as well as by the fact that I was tasked with developing expertise in the BES, as the company I am working for is interested in this type of work. So I do a fair amount of research, have some access to data that is not publically available and prepared several presentations on the subject for the edification of our company's professional staff.

First, on pricing. The $470/kWh is undercutting competition by 20%-30%, the originally mentioned $250/kWh is undercutting competition by 2.5 to 2.2 times (!). The above information is not based on various surveys floating around, but rather on actual project quotations. Unless Elon is capable to flood the market with TE products (and we know that he is not because of production constraints which are likely to last for decades), I do not see $250 as being realistic price - this is just a useful lower limit boundary, but I am fairly confident that actual pricing will be much closer to $470/kWh than $250/kWh. The $250/kWh --> $470/kWh move most definitely is not driven by the "need to charge a higher price", it was a strategic move.

So Tesla pricing is not driven by the set margin, but rather by the pricing of the offerings from the competitors, with even Tesla "list" pricing being lower than competitors by a significant margin. On top of the solid pricing advantage, TE product has several significant technical advantages over the competition, which is completely overlooked on this Forum, so I should really summarize them in a separate thread dedicated to the Stationary Storage.

Regarding the R&D, you have to rember that Tesla treats R&D as a tech company, not a typical automobile company. Tesla R&D expenses are paid as they happen, they are not amortized over the life cycle of the product as is typical in auto industry. So whatever was spent on TE R&D was already paid for, it is water under the bridge.

As for your disappointment with the unpleasant sight of sausage being made (iterations of TE products, etc.), it is so typical of Tesla which is moving much faster than any legacy company in the automotive or energy storage field. We are most definitely very familiar with this on the automotive side (multiple issues with MS and MX, first adopters as beta - testers, etc.), but as we are so familiar with automobile products, we generally able to se it in the greater context, which is much more difficult to do with the TE products, hence is the nagging suspicion that something fishy is going on...

To the point you made about BES being a commodity, the addressable market is so huge (this includes both auto and BES markets) and combined world's manufacturing capability so tiny as compared to TAM, that we are perhaps decades away from the point in time when there will be typical commodity driven competition on price.

And finally, to your point about grid being able to handle renewables just fine, it is just not so now, and increasingly will not be so because massive increasing amounts of renewable non-dispatchable capacity is being added to the grid every year. Situation is becoming ominous with regulators mandating adding BES capacity to the grid to improve reliability and uninterruptibility.

My apologies for going off-topic ( sort of) but I feel that the above context is very important particularly now, when Tesla is clearly making an effort to communicate TE value to the Market.

 

[mrdoubleb]

F is up ... today.

i was about to answer "what do you mean, it's Apple dragging us down" when i realized i was reading your post wrong

BTW i was fearing worse because of Apple. Not that a spillover from that makes much sense, but the markets can be weird that way.

 

[anticitizen13.7]

Model X quality issues.

DVS is an obvious troll, but people here should be aware of Model X quality issues. Having obsessively followed the first few months of deliveries and user feedback, I have the following observations:

Production quality for the first few thousand units has been inconsistent. There are owners who receive their Model X and have no issues with it at all: everything is aligned and the doors work as expected. There are other owners who received cars with misaligned interior pieces and exterior chrome, and doors, both front and falcon, that do not behave. Some Model X have spent days or even weeks in repair.

I am watching closely at the experience of customer deliveries for the next month. If most of the cars are having few or zero issues, that will be a good sign that initial production problems have been resolved. If we continue to see repairs that require extensive warranty work, that's a signal that costs for Tesla on the Model X may be higher than we'd like. All of this has implications for deliveries and gross margins. Cars that arrive at the service center needing adjustment cost money to repair, and cause delays in deliveries. Cars that have to go back to the service center for repairs do the same.

What hasn't been an issue generally is powertrain and other "driving" related hardware. That seems solid. I expected as much, given the commonality with the Model S.

Tldr; Keep an eye on Model X Fit & Finish and Doors & Windows. Even if the factory is building 750 X/week, if quality problem persist, it may have an impact on delivery #'s and margins.

 

[FredLambert]

There were at least 3 TMC members on a factory tour last year just before the stockholders meeting. Our TM guide indicated that the Freemont site was capable of far more than 500-600k we are discussing here.
Now....this was one person and they could be wrong. I and the other TMC posters just about fell over....combination of shock and disbelief.

Tesla President talks about a factory in China and increasing production capacity to satisfy Model 3 demand

"Following McNeill’s comment, a Tesla spokesperson told us that “600,000 per year” was a mistake and that “there has been no change” to the factory’s planned capacity."

 

[hobbes]

i like how the german minister meets with Elon in public, and Elon tells him a carbon tax is the most effective way to
electrification, and then he goes and designs a program to incentivize only german evs. Same stupid
leadership there as elsewhere.

Before people misunderstand this - the incentives are *not* limited to German cars. They are limited to manufacturers that participate in the financing and to cars below 60,000 Euro. So it does exclude the current Teslas, which is not fair as the German government has been calling for leadership of the car industry on the way to electric mobility - and who, if not Tesla, has shown such leadership?

In the end, I think the Model 3 will still beat everyone else even if the incentives have run out by then and for a buyer of a Model S or X, the 4000 Euro won´t make that much of a difference. I think it will just support Teslas premium image if their cars stay competitive or superior even without an incentive.

That´s why I don´t think Tesla should make Ss or Xs that start below 60,000 just to get the incentives. The only thing they might think about is make the 3 happen sooner, but I think they´ll be doing that as fast as possible anyway.

 

[willowspuppy]

Tesla President talks about a factory in China and increasing production capacity to satisfy Model 3 demand

"Following McNeill’s comment, a Tesla spokesperson told us that “600,000 per year” was a mistake and that “there has been no change” to the factory’s planned capacity."

How do you make a mistake like that??

 

[FredLambert]

How do you make a mistake like that??

The mistake could very well be from PR too. I wouldn't take either comment as the absolute truth.

 

[Lump]

How do you make a mistake like that??

#1637

 

[drinkerofkoolaid]

BB tightening and 50dma crossed 200dma. (Golden cross). Big move up or down will likely happen soon. All big money is preoccupied with accumulating Apple today. News about German EV incentives and Tesla in China is receiving very little coverage.

 

[SBenson]

The cautious points you've outlined are reasonable and prudent when situation with TE is analyzed from the general point of view, but they are really not plausible when looked at from the detailed, semi-professional angle.

Before elaborating few details on my background. I am not specializing in the area of the BES (yet) but have more than 2 decades of work experience designing and building fossil power plants (hopefully I will be still tolerated on this Forum after this revelation ), so my views are informed by significant experience in the industry, as well as by the fact that I was tasked with developing expertise in the BES, as the company I am working for is interested in this type of work. So I do a fair amount of research, have some access to data that is not publically available and prepared several presentations on the subject for the edification of our company's professional staff.

First, on pricing. The $470/kWh is undercutting competition by 20%-30%, the originally mentioned $250/kWh is undercutting competition by 2.5 to 2.2 times (!). The above information is not based on various surveys floating around, but rather on actual project quotations. Unless Elon is capable to flood the market with TE products (and we know that he is not because of production constraints which are likely to last for decades), I do not see $250 as being realistic price - this is just a useful lower limit boundary, but I am fairly confident that actual pricing will be much closer to $470/kWh than $250/kWh. The $250/kWh --> $470/kWh move most definitely is not driven by the "need to charge a higher price", it was a strategic move.

So Tesla pricing is not driven by the set margin, but rather by the pricing of the offerings from the competitors, with even Tesla "list" pricing being lower than competitors by a significant margin. On top of the solid pricing advantage, TE product has several significant technical advantages over the competition, which is completely overlooked on this Forum, so I should really summarize them in a separate thread dedicated to the Stationary Storage.

Regarding the R&D, you have to rember that Tesla treats R&D as a tech company, not a typical automobile company. Tesla R&D expenses are paid as they happen, they are not amortized over the life cycle of the product as is typical in auto industry. So whatever was spent on TE R&D was already paid for, it is water under the bridge.

As for your disappointment with the unpleasant sight of sausage being made (iterations of TE products, etc.), it is so typical of Tesla which is moving much faster than any legacy company in the automotive or energy storage field. We are most definitely very familiar with this on the automotive side (multiple issues with MS and MX, first adopters as beta - testers, etc.), but as we are so familiar with automobile products, we generally able to se it in the greater context, which is much more difficult to do with the TE products, hence is the nagging suspicion that something fishy is going on...

To the point you made about BES being a commodity, the addressable market is so huge (this includes both auto and BES markets) and combined world's manufacturing capability so tiny as compared to TAM, that we are perhaps decades away from the point in time when there will be typical commodity driven competition on price.

And finally, to your point about grid being able to handle renewables just fine, it is just not so now, and increasingly will not be so because massive increasing amounts of renewable non-dispatchable capacity is being added to the grid every year. Situation is becoming ominous with regulators mandating adding BES capacity to the grid to improve reliability and uninterruptibility.

My apologies for going off-topic ( sort of) but I feel that the above context is very important particularly now, when Tesla is clearly making an effort to communicate TE value to the Market.

Very information. Thank you very much.

Please drop a line in this thread with a link to the stationary storage post when you have it. It's impossible to comb through every thread in the forum everyday. As much as our mods don't like it, I really like to see valuable info like this posted in this thread. Or else how would I ever come across this??

 

[schonelucht]

First, on pricing. The $470/kWh is undercutting competition by 20%-30%, the originally mentioned $250/kWh is undercutting competition by 2.5 to 2.2 times (!).

How is that a counter argument to my belief that the original price was not based on the full financial picture?

So Tesla pricing is not driven by the set margin, but rather by the pricing of the offerings from the competitors, with even Tesla "list" pricing being lower than competitors by a significant margin. On top of the solid pricing advantage, TE product has several significant technical advantages over the competition, which is completely overlooked on this Forum, so I should really summarize them in a separate thread dedicated to the Stationary Storage.

Please do!

Regarding the R&D, you have to rember that Tesla treats R&D as a tech company, not a typical automobile company. Tesla R&D expenses are paid as they happen, they are not amortized over the life cycle of the product as is typical in auto industry. So whatever was spent on TE R&D was already paid for, it is water under the bridge.

While that works for the Model S/X because they will eventually earn it back with the 3, no such thing is there for energy storage. It's my belief the new CFO actually put his foot down and said : guys, we need to roll all our costs related to this product in the price, not just cost of goods.

To the point you made about BES being a commodity, the addressable market is so huge (this includes both auto and BES markets) and combined world's manufacturing capability so tiny as compared to TAM, that we are perhaps decades away from the point in time when there will be typical commodity driven competition on price.

Many said the same about oil and then shale happened basically overnight. Never underestimate the capability of the market to literally move mountains if a profit is actually there to be made.

 

[sunhelm]

TSLA holding up well, all things considered (AAPL, TWTR).

Not directly TSLA related but could have positive spill over effect:

View attachment 174156

I think it will be a negative spillover effect. If SpaceX employees got to reserve early for Model 3, it is possible Tesla employees get to ride on them Red Dragons too. Who's gonna build my 3?

 

[sunhelm]

Aha! Don't worry, your valuable contributions have more than made up for your sins.

have more than 2 decades of work experience designing and building fossil power plants (hopefully I will be still tolerated on this Forum after this revelation )

Any insight on Tesla pricing from an ROI perspective for a utility customer? If they list $470/kwh pricing, for sure they have done the study to justify a relatively quick ROI vs the cost for using Peaker plant power? I was looking around and back in 2010, saw an article that in California, a levelized cost of generation for the simple cycle gas-fired peaker plant is $492 per megawatt-hour (MWh). Reason for this question is, put another way, TE can justify what may seem to be high prices if the customer can quickly get payback. So maybe the pricing was approached this way instead of cost+mark-up?

So Tesla pricing is not driven by the set margin, but rather by the pricing of the offerings from the competitors, with even Tesla "list" pricing being lower than competitors by a significant margin.

 

[The Blue Owl]

This WSJ article (click on the first link to read it) is insinuating, although not stating it outright, that there is something fishy in the way billionaire Elon Musk "supports his business empire with unusual financial moves".

A significant quote:

"SpaceX has received $3.2 billion for its rocket program from government contracts, according to a person familiar with the matter. The lawmakers want to make sure none of that money winds up at SolarCity.

Rep. Doug Lamborn (R., Colo.) this week proposed an amendment that would prohibit Mr. Musk from using SpaceX money to buy SolarCity bonds. The provision is intended to send a message to Mr. Musk that congressional Republicans are watching him."

Gotta love the independent press and the principled politicians.

 

[lango]

Before people misunderstand this - the incentives are *not* limited to German cars. They are limited to manufacturers that participate in the financing and to cars below 60,000 Euro. So it does exclude the current Teslas, which is not fair as the German government has been calling for leadership of the car industry on the way to electric mobility - and who, if not Tesla, has shown such leadership?

In the end, I think the Model 3 will still beat everyone else even if the incentives have run out by then and for a buyer of a Model S or X, the 4000 Euro won´t make that much of a difference. I think it will just support Teslas premium image if their cars stay competitive or superior even without an incentive.

That´s why I don´t think Tesla should make Ss or Xs that start below 60,000 just to get the incentives. The only thing they might think about is make the 3 happen sooner, but I think they´ll be doing that as fast as possible anyway.

To add to this keep in mind that this is mainly a PHEV subsidy. That has been the plan all along from ICE manufacturers, to get emissions down and electrify with PHEV and have the government to subsidy the extra drive-train. Since the government wanted the industry to bear some cost then the industry could also steer it into this direction. PHEV sales will soon gobble up the total number because the next generation of ICE platforms will all have PHEV alternatives, there would not be that much left for Tesla even if they were allowed to get it.

I think this is actually positive news for Tesla and not negative as it once again confirms the German auto industry are mainly focused on PHEV and not BEV.

 

[RobStark]

They are limited to manufacturers that participate in the financing and to cars below 60,000 Euro.

Does the 60k Euro figure include VAT that is included when OEMs quote prices online?

 

[RobStark]

This WSJ article (click on the first link to read it) is insinuating, although not stating it outright, that there is something fishy in the way billionaire Elon Musk "supports his business empire with unusual financial moves".

A significant quote:

"SpaceX has received $3.2 billion for its rocket program from government contracts, according to a person familiar with the matter. The lawmakers want to make sure none of that money winds up at SolarCity.

Rep. Doug Lamborn (R., Colo.) this week proposed an amendment that would prohibit Mr. Musk from using SpaceX money to buy SolarCity bonds. The provision is intended to send a message to Mr. Musk that congressional Republicans are watching him."

Gotta love the independent press and the principled politicians.

So Boeing can't use proceeds from sales to NASA on whatever it wants?