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

[ZsoZso]

Thank you for sharing that @redan - the first shoe just dropped........that being a request from one of the Not So Big 3 for another handout bailout. We all knew this was coming. This administration has already set the tone with their efforts to misinform the public about Tesla - often denying the very existence of Tesla - in an effort to empower the next dumping of funds on those who intentionally moved too slowly to protect the Old Paradigm. IMO what we are witnessing now is a very orchestrated effort by business and politics to misinform and rewrite history to once again facilitate biblical-level tax-payer funding to these companies. And from that perspective the claim that 'They Did It' has already been proven - they already showed us they could waste more money than the entire GDP of large nations without bringing any fundamental changes to their business or their products for over a decade after receiving those funds. Tesla - the company that must not be named - is the Achilles heel of their story, for Tesla made good on their promises and made good on their loan payment - with interest.

I have no doubt the government would bail out the "not so Big 3" if they were to go bankrupt (BK) at the current stage of production levels (while the 3 of them make about an order of magnitude more cars than Tesla, providing jobs in the process). However, timing is important for how it plays out. We know Tesla is growing exponentially, they will soon produce millions of vehicles out of their 4 US factories -- employing more and more Americans, while the fossils are shutting down factories year after year. If they survive long enough via downsizing so that Tesla is already producing significantly more vehicles than them AND employ significantly more people before they get to the BK stage, that could change the narrative. The administration may not be so willing to bail them out if they are not deemed essential for the US auto industry.

I see it as a paradoxical situation for them: the worse their business performs, the faster they run into BK, the more likely they will be saved by bailout. If they prolong their demise by cutting costs long enough, they will not be saved when the inevitable BK hits.

 

[Cosmacelf]

I still don't understand why a good number of this boards vocal scribes keep suggesting that Elon is sitting in front of his laptop actively selling shares or exercising options, or anything of that matter?

I'm 100% sure that the smartest guy in the world right now, and also one of the wealthiest, has an investment bank(s) tasked with executing his plan. I'm sure he was a part of defining the plan, but executing? Never.

He might call (or probably have his assistant call) his personal banker to - say - delay trades for a day so that he can meme-tweet (yes, I think he's that childish - which I love!). But I do not under any circumstances believe he's actually doing any selling / exercising.

He's busy saving the world.... not time for such earthly distractions.

I‘m pretty sure that by law, Elon had to set up a fixed plan of how and when to sell shares and he’s not allowed to monkey with that plan. The agreed to plan would be things like “sell X number of shares per week, and/or up to a % of daily volume” and things like that. After the plan has been set up, the stockbroker executes the trades and simply tells Elon the results. The SEC rightly does not allow public company executives to sell any other way, they know way too much non public information.

 

[Cosmacelf]

What is a Stellantis change consultant?

Probably this guy.

 

[Todd Burch]

Ah the classic TSLA massively outperforms the macros on a big down day only to then underperform the very next day on a big up day.

At least the the stock constantly keeps ya guessing

Underperforms on a big up day? Nasdaq, S&P, and TSLA are up almost identical amounts right now (about 1.45%).

 

[Webeevdrivers]

Indeed, but it will still be very bad for them on the whole. Tesla building a factory there just keeps it from potentially being apocalyptic.

Do not underestimate how dependent the German economy is on ICE. It’s not just factory workers but white collar engineering and management jobs as well which are disproportionately based in Germany. High paying jobs that purchase a lot of goods and services and pay a lot of taxes.

The revenues of the German big three are equal to ~15% of German GDP. The revenues for the major 5 Japanese firms are like 12% of Japanese GDP. For comparison, the revenues of the US “big” three are equal to around 1.5% of US GDP. Just shows you how much national resources will be needed for bailouts.

Note: this is why I think Ford and GM will potentially and paradoxically weather the EV transition better than the German and Japanese brands: it will be much easier for the US to bail them out. Ironically, the survival of many old brands during the transition is going to hinge on bailouts, and many of them will be tiny shells of their former selves.

The US has a big three? I would assume you mean Ford, GM and Tesla. Stellantis is a Dutch/French company.

 

[ZachF]

Agreed. Though Germany will at least have Giga Berlin to help the economic hit. Japan is just going to HURT later this decade.

Believe it or not, it gets potentially even worse…

The Japanese government has a lot of little “plausibly deniable” protectionism for its auto industry that makes it very hard for foreign brands to enter its market. (Death by 1000 cuts) Japanese brands are falling way behind in EVs and EVs are only less than 1% of Japan’s sales (!!!) even in 2021!

Now Japan also imports 90% of its total energy and 100% of it’s oil, and it basically pays for this with the 4-6 million ICE automobiles it net-exports every year.

(You can probably see where I’m going with this…)

Now, Japan could be in a position in the future where it’s ability to purchase the foreign energy it needs collapses with ICE exports (and the yen), and it’s protectionist laws locks out the foreign EV know how that could help them transition away from it!

I am really bearish on Japan…

 

[StarFoxisDown!]

Underperforms on a big up day? Nasdaq, S&P, and TSLA are up almost identical amounts right now (about 1.45%).

Tesla’s beta is 2X the macros. To be up the same as the Nasdaq is considered underperforming. It’s not even up as much as the Nasdaq anymore.

It’s a weak trading day that is following an exceptionally strong trading day. TSLA has done this before many times

 

[Knightshade]

I‘m pretty sure that by law, Elon had to set up a fixed plan of how and when to sell shares and he’s not allowed to monkey with that plan. The agreed to plan would be things like “sell X number of shares per week, and/or up to a % of daily volume” and things like that. After the plan has been set up, the stockbroker executes the trades and simply tells Elon the results. The SEC rightly does not allow public company executives to sell any other way, they know way too much non public information.

This is not correct on a couple of levels.

First- Elon can cancel any previously planned sales if he wishes. He can't change the plan after it's set, but he can tell the broker "don't execute this plan going forward" though there's potential questions raised by it, it's legal in and of itself to stop such sales.

Second- The SEC does allow company execs to sell other ways. Elon has, in fact, sold "normally" outside of such a plan in recent weeks... The company itself has SEPERATE rules about when employees are allowed to trade (which appear to be no sooner than ~2 days after ER, and no later than 2 weeks before EOQ based on what Bill Wright has posted as an employee)


tl;dr- Filing a plan is not REQUIRED for an insider to sell, it's just usually a "safer" way for them to do so, and they're free to cancel sales in a plan but again there's some SUS that can be associated with them doing so.

 

[ZachF]

What I don't yet understand is how a bailout could actually help.

Let's say ICE demand goes off a cliff in the next 5-10 years and GM applies for a bailout. The government gives them a bunch of cash, say, $50B. Maybe even $100B. Then what? They can keep the lights on a bit longer but they're still saddled with debts, unions, undesirable ICE models, unprofitable EV models, second-rate technology, limited battery supply... if they can't actually shrink their workforce and produce better EVs in a cheaper and more automated way, then what future do they actually have? There can be EV subsidies but they can't make Tesla's costs go up; given Tesla's mission you have to think Tesla will just go on and undercut the OEMs with better products cheaper and swamp the market with great, lower-cost EVs.

In the Tesla Daily interview with Alex Potter, Alex emphasized that a battery raw material supply crunch is coming. If there's not enough Lithium or Nickel or whatever available, even if an OEM builds a battery factory, what's going to feed into it? Alex noted that since Tesla never questioned their own future scale, they would have locked in supply contracts 5 years ago, while OEMs are just thinking about that now as they press-release their battery factory plans and maybe it occurs to them that the battery manufacturer/JV partner isn't just going to be able to materialize ore out of thin air.

Alex and Rob had apparently just come out of a "Battery Summit" event where the battery industry players repeated that a new mine takes 7-10 years to get running, so for all those without contracts in place, well, the phrase they actually used was "SOL".

Meanwhile, iron is cheap and plentiful, but nobody except Tesla has demonstrated the ability to get decent range out of an LFP pack. With $50B could GM engineer their way to a more efficient vehicle? Well, if they could, why wouldn't we have seen even basic steps in that direction by now? Every EV would benefit from the same range out of a smaller pack, but I don't see GM innovating on efficiency much, and Lucid has gotten a bit too pricey to acquire...

By “help” I mean continuing to exist.

As I said, they would all be tiny shells of their former selves.

 

[Chunky Jr.]

I recently talked to a Stellantis change consultant who was still downplaying EV's and peddling hydrogen cars as the future.

In other words "we hope someone miraculously figures out how to make hydrogen work because we have no clue about how to build EVs"

 

[wooter]

The US has a big three? I would assume you mean Ford, GM and Tesla. Stellantis is a Dutch/French company.

For tax reasons it's in Amsterdam, but it's a merger of FCA and PSA. FCA was a merger between Chrysler group and Fiat, and we know Chrysler as one of the Big Three automobile manufacturers in the US. So in essence, it's a Dutch located company, with French, Italian, German and American brands.

Interesting to know is that GM used to own German brand Opel, sold it to PSA, and now with the merger with FCA is under Chrysler ownership. And don't forget the DaimlerChrysler era, in which the Chrysler 300 shared a platform with Mercedes-Benz. And Chrysler once owned Lamborghini, which is now under VW/Audi ownership.

Car brands merging and splitting reads like a soap opera.

 

[ZachF]

The US has a big three? I would assume you mean Ford, GM and Tesla. Stellantis is a Dutch/French company.

Yeah I counted Chrysler even though it’s foreign owned now, and even then it’s only 1.5% of GDP. I should have put “three” in quotations too. The Chrysler portion of Stellantis revenues is about $70b and GM and Ford ~$130b each.

 

[ammulder]

By “help” I mean continuing to exist.

As I said, they would all be tiny shells of their former selves.

But then what has the bailout accomplished? It's neither preserved the GDP nor the workforce. At that point you'd have to think the government would be better off giving the bailout money to Lucid or Rivian so they could scale up their workforce to keep auto industry employees employed.

 

[ZachF]

But then what has the bailout accomplished? It's neither preserved the GDP nor the workforce. At that point you'd have to think the government would be better off giving the bailout money to Lucid or Rivian so they could scale up their workforce to keep auto industry employees employed.

The problem is that you’re looking at this from a standpoint of reason and logic instead of politics and special interests protecting their golden parachutes.

 

[Prunesquallor]

Agreed. Though Germany will at least have Giga Berlin to help the economic hit. Japan is just going to HURT later this decade.

Japan should be begging for a Giga in the next round of factory construction.

 

[MABMAB]

Can someone start a sub forum for Elon's investments roundtable discussions?

 

[canoemore]

Germany and Japan facing economic hardship and squeezed for access to critical natural resources? What could possibly go wrong?

 

[StealthP3D]

The innovator’s dilemma is real, and creative destruction is ruthlessly unforgiving.

The capital requirements for the technology transition will rise just as profits from obsolete ICE turn negative. Much of these companies will probably eventually BK and ask their host governments for bailouts.

Yep, the automakers are already telling us they are going to ask for bailouts if you read between the lines. Of course, it will be couched as necessary to help the workers and save the pensions of the retired autoworkers.

In 2008 GM made the case that the American automakers were worthy of government guaranteed loans so they could re-tool to make fuel efficient cars. They got the money and proceeded to make bigger trucks than ever, bigger SUV's and stopped making smaller sedans and passenger cars, saying they couldn't make them at a profit. But they didn't say it like that, they said the American consumer doesn't want smaller more efficient cars, there is no demand. And, of course, if they can't make them efficiently, there is no demand because they cost too much. It's a manufacturing problem, not a demand problem. A much smaller car should cost much less to make.

This problem is compounded by the wealth divide. If all the profits flow to the top 20%, then new car buyers will have a surplus of money and will be able to easily afford big, fuel guzzling cars. Then the trickle-down autos will be used fuel guzzling vehicles for the lower-middle class to buy when the top 20% decides to upgrade to the latest and greatest. When I was young there was a surplus of used, efficient cars on the market. The used car buyer in America today has no such choice. For the same amount of money they can buy a big powerful guzzler or an old, sacked out Honda Accord. This is a direct result of the wealth divide and it benefits oil companies by keeping new car production focused on supplying the market with gas guzzlers. The automakers and the oil companies with their big refineries are almost one and the same - they are co-dependent. It's time to break that co-dependency.

I say, enough with bailing out the big automakers who always promise to make smaller, more efficient vehicles but, as soon as they get the money, then turn around and say "There is no demand for smaller, fuel efficient vehicles, we make what the market wants or we go out of business". This distortion of capitalism has gone on long enough, let them eat their own words - don't give them money to build smaller, more efficient vehicles because they have already told us there is no demand for that! Let's take them at their word. No more money to make EV's, there is no demand for EV's. They will take the money and continue to make big gas-guzzling trucks and SUV's.

How many times will the American tax payer be fooled? We can't blame this on politicians because we are the ones who let them do it. Let's let capitalism work!

 

[Paracelsus]

I have no doubt the government would bail out the "not so Big 3" if they were to go bankrupt (BK) at the current stage of production levels (while the 3 of them make about an order of magnitude more cars than Tesla, providing jobs in the process). However, timing is important for how it plays out. We know Tesla is growing exponentially, they will soon produce millions of vehicles out of their 4 US factories -- employing more and more Americans, while the fossils are shutting down factories year after year. If they survive long enough via downsizing so that Tesla is already producing significantly more vehicles than them AND employ significantly more people before they get to the BK stage, that could change the narrative. The administration may not be so willing to bail them out if they are not deemed essential for the US auto industry.

I see it as a paradoxical situation for them: the worse their business performs, the faster they run into BK, the more likely they will be saved by bailout. If they prolong their demise by cutting costs long enough, they will not be saved when the inevitable BK hits.

Fully agree @ZsoZso that if we look at the benefits of a Bailout through only the lens of the Bailout that it could (and should) play out just as you have stated.

But I would suggest to everyone here that an automotive Bailout serves greater purpose to DC and its special interests than simply handing out very expensive Participation Ribbons to Detroit automakers. Lets not look at the Bailout as a silo effort, but as a single chess play in a larger game. That game in my opinion is to further dismantle the once-great vision of the Green New Deal by redirecting a similar amount of funding to special interests in a manner that keeps as much power in the hands of the existing Paradigm as possible.

I expect the Bailout will come as an appetizer and not the main course when it is presented. My crystal ball says that we may see 'Bailout 2 - The Sequel' introduced as part of the ongoing BBB/Infrastructure discussions with claims it will create a cleaner future. And it will thus become part a $2T package that will have done little more than ensure the Old Grid operators are the New Grid operators, that the Old Auto mfgs are the New Auto mfgs, that the distributed grid is grown more slowly and thus the nations grids (plural) remain the nations grids - instead of single, robust, publicly managed renewable-based grid sourced in-part from localized distributed grids, providing the nation with almost free power.

So when the Bailout 2 discussions formally begin - and they will - I would encourage everyone to be reminded of what those funds could have been a part of, and what they should have accomplished.............and why some of our nations 'leaders' would not even hear of this concept when it was first presented to them. Here is a high level summary of what gained the backing of our brightest minds - most importantly IMO was Mark Jacobson of Stanford:

Let's never forget that the very core of The Green New Deal was erased from history before any bill ever went to the Senate. And there is still a large enough portion of the original $2T+ earmarked by The Green New Deal to transform this nation's energy grid remaining in the watered-down, special interest Infrastructure/BBB debacle to buy new dresses for the old auto industry. That is going to be one scary Halloween Ball.

 

[ammulder]

The problem is that you’re looking at this from a standpoint of reason and logic instead of politics and special interests protecting their golden parachutes.

At the end of the day, though, I think the purpose of a bailout is to protect employees and investors and to keep desirable products in the economy. For instance, here's some logic on the AIG bailout:

AIG was considered too big to fail. A huge number of mutual funds, pension funds, and hedge funds invested in AIG or were insured by it, or both.​

If the company you bail out is going to dwindle away to nothing, or at least to a shadow if its former self, then it's hard to argue that the bailout will protect either the employees or the investors, and there won't be a meaningful number of its important products on the market. Even Congress can't bail out GM just to save the GM executives for a few years. There would have to be some benefit to others.