Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[Fact Checking]

But it is not his job to be pro-Tesla (anti-net-negative) anyway.

I'd be glad if Fred was simply factual and more receptive of criticism. Instead he is trying to be sensational, often at the expense of Tesla, and he has a rather thin skin when people criticize his performance.

I have first hand experience with Fred: a couple of months ago I pointed out to him that a negative headline he wrote about Tesla production was based on a simple arithmetical error. I did this a few minutes after the article was published. He silently edited/updated the math within the article which changed the conclusion, but he didn't update the negative headline ...

I think @KarenRei got shadow-banned by Fred on Electrek?

We should also remember the recent 'Fred Tax' on Tesla: the -$5k per Model 3 Performance retroactive price cuts that his whining caused - that's an expense that is going to burden Q4'18 and Q1'19 profits.

Tesla should probably have done what every other carmaker does: 'sponsor' the darn blogger with $1m per year (explicitly tied to performance, not as Fred's already sizable referral bonus) and buy preferred status of influential media sites ... But Tesla does it the honest (hard) way.

 

[ReflexFunds]

The main Gigafactory thread has lots of detail but with GigaFactory 3 breaking ground, I was interested to look back at broad initial assumptions for GF1 back in Feb 2014 and compare to where we are now:
https://www.tesla.com/sites/default/files/blog_attachments/gigafactory.pdf

• Forecast was for 35 GWh of cells by 2020 (enough for 500k cars), with 50GWh of pack production. Depending upon your source, this looks like it's roughly been achieved about 2-years early. And with the footprint of the plant perhaps only a third complete? Should know more from Q1 forecasts and the next call.
• Forecast capex of $4-5bn to get there, including $2bn directly from Tesla. This doesn't look far off - the Fixed Asset section of the Balance Sheet at Q3 2018 indicated $4.47bn of capitalised Gigafactory 1 costs ($1.14bn of this was Panasonic).
  
• Cost reduction of 30%. Looks like a tick but who can say for sure...
• Forecast employees of 6,500. Last employee count of 3,000 though Musk indicated in Oct it was now up to 7,000.

Adjusted forecast since then of course talk about 150GWh of pack production. It's the 20,000 reported employees needed to get there that's the problem as much discussed.

At the end of June 2018, Tesla, Panasonic and other partners employed 7,059 people at GF1 and had spent $4bn on equipment and $2bn on construction according to Nevada.

Tesla's initial capex forecast was $5bn with $2bn direct and $3bn from partners. It planned $1bn construction cost and $4bn equipment cost. At somepoint (maybe around 2015 but i can't find the source), guidance was updated to c.$3.5bn Tesla capex and c.$1.5bn partner capex.

It looks like Tesla has overspent on the construction part, but has delivered ahead of schedule. Overspend is no real surprise as most professional construction companies have dramatically overspent on their large projects the past few years.

The numbers disclosed by Nevada make me think that the $4.47bn cumulative GF1 investment in Tesla's Q3 report is just Tesla's portion and does not include the separate $1.14bn spent by Panasonic.

 

[mongo]

I'd be glad if Fred was simply factual and more receptive of criticism. Instead he is trying to be sensational, often at the expense of Tesla, and he has a rather thin skin when people criticize his performance.

We should also remember the recent 'Fred Tax' on Tesla: the -$5k per Model 3 Performance retroactive price cuts that his whining caused - that's an expense that is going to burden Q4'18 and Q1'19 profits.

Tesla should probably have done what every other carmaker does: 'sponsor' the darn blogger with $1m per year (explicitly tied to performance, not as Fred's already sizable referral bonus) and buy preferred status of influential media sites ... But Tesla does it the honest (hard) way.

Oh I hear you and understand (disagree with the sponsor part though), there have just been a few case lately when he posts an article which is true (if old or unflattering) and gets piled on so I felt like giving a little push back when it was alluded to as a hit piece.

 

[EinSV]

• It's misleading: Tesla sales staff had been anti-selling the FSD option for years and the take-rate had been very low all along.
• It's a necessity to downplay the FSD option: a customer buying FSD must be absolutely clear that the timing is uncertain. Tesla sales staff must anti-sell the FSD option, otherwise they'd be exposed to false advertising charges and generally would piss off customers unnecessarily. The honesty of the Tesla sales experience extends to the FSD option, and that's good.
  
• It's also immaterial what Tesla sales staff says: it's very unlikely that they have some special channel of communications to the Autopilot group, being updated about FSD progress, right? They'll be notified of FSD capabilities the moment Tesla goes official with their first set of FSD features. In fact Fred will probably receive leaked FSD plans way before Tesla sales staff is informed ...
  
• Yet selecting FSD is a valid way to future-proof your Tesla and increase resale value. We don't know how much the HW3 upgrade is going to cost.
• Buying FSD is also a valid way to help Tesla - with the future-proofing a small bonus. Anecdotally a number of TMC members indicated that they bought the FSD option for such reasons.

Fred's click-bait articles, which almost invariably do the baiting at the expense of Tesla, are starting to become a net negative.

I agree. Also, Fred doesn't cite a source for his article but the email he quotes (from an inside service advisor) was posted on M3OC by a member from Norway.

Another member from the Netherlands who posted in the same thread had a more benignly worded caution that the timing for FSD regulatory approval is unknown:

"The employee asked me about my interest in FSD and added that it could be 3 months or maybe 5 years when FSD is allowed in the Netherlands." Is it still possible to buy FSD for Model 3 off the menu now?

So of course Fred chose the more pessimistic sounding, click-bait worthy language and incorrectly reports that was what is being told to all customers.

I'm glad Tesla is making sure that people who order FSD off-menu understand the risks before they buy. Good for Tesla.

 

[Fact Checking]

Tesla's initial capex forecast was $5bn with $2bn direct and $3bn from partners. It planned $1bn construction cost and $4bn equipment cost. At somepoint (maybe around 2015 but i can't find the source), guidance was updated to c.$3.5bn Tesla capex and c.$1.5bn partner capex.

BTW., regarding the Nevada Gigafactory, I'm wondering about a piece of the puzzle: Tesla is paying significant amounts to Panasonic for the use of their cell making equipment. @brian45011, in a discussion with @neroden, pointed out these two SEC filings which are (originally confidential) contracts between Tesla and Panasonic, related to the Gigafactory:

EX-10.1

EX-10.2
​

I don't see any lease-to-own language, but I might be misreading it, and there might be additional confidential agreements ... Also note that portions of these SEC-filed agreements are omitted/redacted.

@hacer pointed out the following:

I read that to mean that even though Tesla did not provide the capital for the equipment, nor does it lease the equipment, GAAP rules in ASC 840 nevertheless require that because they agreed to purchase all production from said equipment they must, for accounting purposes, pretend that they have leased the equipment even though they have not. IANAA so I could be totally wrong.​

So I'm wondering, is Panasonic owning their equipment - or does Tesla end up owning it via lease-to-own?

Logic would dictate that Panasonic retained ownership, for obvious business model reasons.

 

[ReflexFunds]

BTW., regarding the Nevada Gigafactory, I'm wondering about a piece of the puzzle: Tesla is paying significant amounts to Panasonic for the use of their cell making equipment. @brian45011, in a discussion with @neroden, pointed out these two SEC filings which are (originally confidential) contracts between Tesla and Panasonic, related to the Gigafactory:

EX-10.1

EX-10.2
​

I don't see any lease-to-own language, but I might be misreading it, and there might be additional confidential agreements ... Also note that portions of these SEC-filed agreements are omitted/redacted.

@hacer pointed out the following:

I read that to mean that even though Tesla did not provide the capital for the equipment, nor does it lease the equipment, GAAP rules in ASC 840 nevertheless require that because they agreed to purchase all production from said equipment they must, for accounting purposes, pretend that they have leased the equipment even though they have not. IANAA so I could be totally wrong.​

So I'm wondering, is Panasonic owning their equipment - or does Tesla end up owning it via lease-to-own?

Logic would dictate that Panasonic retained ownership, for obvious business model reasons.

I agree, I think it most likely Panasonic fully owns the equipment and Tesla's accounting treatment is just an accounting technicality.

Panasonic's investment at GF1 isn't included in Tesla reported capex numbers, but it does add to Tesla's PP&E assets, with a corresponding capital lease liability added to Tesla's balance sheet.

Panasonic's equipment is definitely included in Tesla's $13.6bn gross PP&E, but i don't think it is included in the $4.47bn GF1 investment balance disclosed by Tesla.

 

[cheshire cat]

OT:



That's a myth. The fact is that:

• Ripping off the band-aid from a serious or partially healed wound can cause injuries, cause infection, prolong healing and cause extra scabbing.
• The pain is actually not mandatory. The best method to remove the band-aid is pain-free, i.e. when removing a band-aid from a child do it with some planning and intelligence applied: medical alcohol will dissolve the adhesive and will also help disinfect, but simply taking a warm bath will also weaken the adhesive and the band-aid will peel off.

Ripping off the band-aid is the lazy, painful, harmful solution.

Nor is the analogy even remotely accurate: the better analogy for Brexit would be for example to unilaterally take the Netflix or Spotify apps out of the iOS single market. It sure won't increase Netflix and Spotify sales and revenue, right?

(And that would be a more justified move, because the iOS tax is 30% of revenue - while the 'EU tax' is only 1% of revenue (GDP), a good deal of which is recycled back into the UK.)

Anyway, March 29 is only 2.5 months away, so we'll all see the negative effects of Brexit.

Shall I get your coat?

 

[shlokavica22]

Very heavy volume on MU (one of the beneficiaries of good trade deal). 1/4 of the daily volume already passed.

 

[Pezpunk]

i don't know why anyone would listen to me, but i think we're headed north today, folks.

 

[EVMeister]

It's just an inverted MMD so far.

 

[⚡️ELECTROMAN⚡️]

• It's misleading: Tesla sales staff had been anti-selling the FSD option for years and the take-rate had been very low all along.
• It's a necessity to downplay the FSD option: a customer buying FSD must be absolutely clear that the timing is uncertain. Tesla sales staff must anti-sell the FSD option, otherwise they'd be exposed to false advertising charges and generally would piss off customers unnecessarily. The honesty of the Tesla sales experience extends to the FSD option, and that's good.
  
• It's also immaterial what Tesla sales staff says: it's very unlikely that they have some special channel of communications to the Autopilot group, being updated about FSD progress, right? They'll be notified of FSD capabilities the moment Tesla goes official with their first set of FSD features. In fact Fred will probably receive leaked FSD plans way before Tesla sales staff is informed ...
  
• Yet selecting FSD is a valid way to future-proof your Tesla and increase resale value. We don't know how much the HW3 upgrade is going to cost.
• Buying FSD is also a valid way to help Tesla - with the future-proofing a small bonus. Anecdotally a number of TMC members indicated that they bought the FSD option for such reasons.

Fred's click-bait articles, which almost invariably do the baiting at the expense of Tesla, are starting to become a net negative.

I wish someone else would use the same format but be a more honest journalist. Just think if Fact Checking started his own Tesla news website. I see a free Tesla roadster in his future.

 

[KarenRei]

Oil's up over 3% now, back to trading in the lower $50s. Still a long way to go, but it's a start

 

[Chocochip]

Tesla should probably have done what every other carmaker does: 'sponsor' the darn blogger with $1m per year (explicitly tied to performance, not as Fred's already sizable referral bonus) and buy preferred status of influential media sites ...

So that explains why you're so prolific here!

I kid, I kid!

 

[AlexS]

I wish someone else would use the same format but be a more honest journalist. Just think if Fact Checking started his own Tesla news website. I see a free Tesla roadster in his future.

Tesla soon will be giving away billion $ worth of roadsters, its not good for the profit.

 

[Nocturnal]

https://electrek.co/2019/01/08/tesla-crash-robot-pr-stunt-media/

Tesla should sue these guys.

Tesla soon will be giving away billion $ worth of roadsters, its not good for the profit.

They really screwed up the program IMO. Not sure how they didn't foresee YouTubers just spamming their codes.

 

[KarenRei]

Oil supply data out at 10:30 AM ET (12 minutes from now)
Federal reserve minutes out at 2 PM ET

 

[Curt Renz]

Today at 11:00 am EST, CFRA will host a webinar titled, “Is it Time to Buy or Bail?” It will be led by my friend Sam Stovall, who is their chief investment strategist. Don’t be surprised if their answer is the first “B”.

Link to webinar registration: Is it Time to Buy or Bail?

On December 4 (my birthday!), CFRA analyst Garrett Nelson raised his price target on TSLA to $420 from $375. He replaced their retired analyst Efraim Levy who was almost always bearish on TSLA.

Sam and his father Bob were regular guests on my TV show. Bob once let me know that Sam was a placekicker in college. Earlier this NFL season when the Chicago Bears’ placekicker Cody Parkey bounced the ball off of the upright four times during a single game, with tongue in cheek I implored Sam to join the Bears. He was surprised that I or anyone still knows he was a placekicker. We’ve been having fun about that. Then on Sunday evening immediately following Parkey’s “double boink” that eliminated the Bears from the rest of the postseason, Sam sent me the following email:

Subject: My condolences

I know how that kicker feels.

 

[Thumper]

Thé roadster give-away program is not %100 total loss. Tesla will derive some significant publicity value as those proven brand boosters post many glowing vids on the internet. Whether that's sufficient compensation is a worthy question.

 

[Buckminster]

Not off topic Brexit.

Teresa May has lost 2 votes in Parliament in 24 hrs. This is the second:
Fresh Brexit setback for May in MPs' vote
The first was tying her hands on a no deal.

By my calculation, May has to provide an alternative plan by Friday 18th - sameday as options fireworks day...
Popcorn & Ambien mandatory.

 

[Lucky_Man]

@Lucky_Man
That appears to be a conversation, not a thread. Must be invited to those (5 peeps max, I think)

Oops. My rookie mistake. I got distracted by needing to take my dog in for a surgical follow-up. Fixed it.

Anti-ICEing Legislation