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

[Singer3000]

What does Yoda know about Tesla? He lives in a completely different universe.

Sorry newbie, much to learn you have. Yoda lived in a galaxy far far away but the same universe. And Tesla have proven themselves quite capable of making missteps along their trail blazing path. I find it odd that you can’t recognise that when Musk is pretty open about it.

 

[mongo]

No it's not. That's already accounted for. The 11,000+ is cars that have been produced but not sold.

I may sound (and be) pedantic, depending on how they classify cars, inventory may exist even if there are more orders than cars. With the streamlined delivery logistics, Tesla is likely delaying assigning a car to a buyer until it is shipped (on directly in transit) to their region.

Car built -> inventory
VIN assigned to buyer -> in transit
Car delivered -> sold

So that total could be produced, but not assigned to a buyer (in transit are also not sold, yet).

Sorry newbie, much to learn you have. Yoda lived in a galaxy far far away but the same universe. And Tesla have proven themselves quite capable of making missteps along their trail blazing path. I find it odd that you can’t recognise that when Musk is pretty open about it.

He lived Long long ago in that galaxy far far away...
So Yoda predates Tesla, if see the future he did, very strange his actions were...

 

[Reciprocity]

Tesla gives Fiat a wake up call: ‘fake’ electric cars can still manipulate EU emissions standards

(Intentional?) Loopholes for ICE makers in Europe.

Riddle me this. How is a fake EV going to sell in a market with awesome EVs from Tesla? Hybrid is not free to develope either. They must be compelling to sell in any real numbers. Watch hybrid sales collapse as real EVs crush them, including Hyundai and will Porsche sell more pure electric vs their fancy hybrids? Time well tell, but it's going to be hard to sell crappy hybrids in a market with compelling EVs and making crappy hybrids good enough to compete will make them expensive.

 

[Carl Raymond]

if I only had street parking without elec power hookup at home, I would not have purchased my M3. Current EV offerings are not ideal for everyone/situation...yet.

Raises an interesting scenario. At least a year before self driving is approved coast to coast, it could well be approved in local traffic zones. One self plugging street charger could support dozens of street parked EVs. They just wander off during the night and return charged an hour later.

We do have to rid ourselves of the notion that EVs are not for everybody. By the time the low hanging fruit is picked, there will be solutions for the hold outs. (Words of habit did say “yet”. This is not criticism.)

 

[Antares Nebula]

If you want to talk about all the stars aligning in Tesla's favor in 2019-2020:

- Model 3 sales stabilize and continue to grow
- Model S refresh and S,X sales stabilize
- Signif improvement in Autopilot
- Tesla Energy growth spurt
- Solar Roof launch
- Pickup reveal
- Semi, Roadster, Model Y launch

>> And then the kickers:
- Hundreds of millions this year from EU emission req pools; signif increase next year (per @generalenthu and @SebastianR above), AND
- USA EV vehicle tax credit re-instated (bills have been introduced in Congress, but have to see given Trump)

How high do you think the stock will go in 2020? (Talk about a complete 180!)

People, that's why I talked about all the stars aligning. It's an outside possibility. Some things on that list are obviously more likely than others.

 

[HG Wells]

Any news on the west coast shipping front ?
IE anyone passed Pier 80 lately ?

 

[bhtooefr]

Riddle me this. How is a fake EV going to sell in a market with awesome EVs from Tesla? Hybrid is not free to develope either. They must be compelling to sell in any real numbers. Watch hybrid sales collapse as real EVs crush them, including Hyundai and will Porsche sell more pure electric vs their fancy hybrids? Time well tell, but it's going to be hard to sell crappy hybrids in a market with compelling EVs and making crappy hybrids good enough to compete will make them expensive.

So there's two kinds of PHEV buyers.

The first kind is the one that's actually interested in EVs, but has range anxiety. So, they buy a PHEV to dip their toe into the water, before they get a BEV. Good long-range EVs with good infrastructure will absolutely convert these buyers. Some of those may be rarely plugged due to costs/impracticality of installing an EVSE at home (and those buyers will be harder to convert to a BEV, but they want one), but they'll at least be opportunity-charged most likely.

The second kind is the one that's merely collecting incentives to minimize cost of operation. They don't care about EVs or the environment at all, but there's a governmental incentive to get by buying a PHEV, and a PHEV doesn't require that they change any of their behaviors.

In the US, this usually manifests as people buying PHEVs in California to get federal and $2500 state tax credits and a HOV sticker, in Colorado to get federal and $5000 state tax credits, and the like. When the tax credits make a PHEV cheaper than the hybrid or the ICE model, of course you're going to buy the PHEV, unless there's some significant drawback from doing it.

In Europe, where company cars (complete with prepaid fuel cards) are a common perk for employees of various companies, this usually manifests as fleets buying German PHEVs that have vastly lower registration costs (due to their on-paper low CO2 emissions) for their employees to drive, instead of the diesels that they used to buy.

In both cases, the cars are rarely plugged in - why pay for an expensive EVSE install, when (for the US) the car's probably already more efficient on fuel than your old gasoline car and/or (especially in California) cheaper to fuel than to charge, or (for Europe) your employer's paying for the fuel?

 

[schonelucht]

Any news on the west coast shipping front ?
IE anyone passed Pier 80 lately ?

Glovis Sonic was a dud. If it's carrying any Teslas it can't be much and it is heading for Japan anyway. We are waiting for the Morning Cornelia to reach Pier 80 tomorrow and that's hopefully the start of international shipping. Norway is the most urgent destination in my book. I'd be good to have a healthy number of Model 3s arriving there in May, which means Tesla needs to get cracking.

 

[Prunesquallor]

Thanks @Prunesquallor !

I did some digging into this, and was surprised at the conclusion. I posted this on the quarterly results discussion thread, but probably should be elsewhere, or its own thread. I am x-posting here as the feedback is quicker.
_____________________
Did a deep-dive into what FCA would have paid for pooling with Tesla, and the issue here is pretty involved relative to anything I read on MSM.

To set the stage, here are the targets that automakers have to hit in 2019, and where they are, as of 2017. The targets for 2019 are the same as 2015. They effectively go up in 2020 (ignoring worst 5%), and full compliance by 2021

Source: https://www.theicct.org/sites/default/files/publications/EU-LCV-CO2-2030_ICCTupdate_20190123.pdf

On the surface, 2019 doesn't seem like an issue as everyone is below target. But the devil is in the footnotes. Beginning 1/1/2019, EU mandated WLTP to replace NEDC, which is more realistic. This caused about a 25% increase in CO2 g/km of emissions on paper. So the bureaucrats came up with a NEDC-Correlated (NEDC-c) measure that converts back the WLTP numbers to NEDC-c. There is a good bit to read here, but effectively, the NEDC-c numbers are about 8% (10g/km) more than the old NEDC numbers.

Source: JATO Warns of Widening Disparity between WLTP Correlated NEDC Values and existing NEDC Data - JATO


So, this delta pushes FCA over the edge. Assuming the 10 g/km penalty, FCA ends up at 130 against a target of 124. Assuming some optimizations, they probably can optimize to 5 g/km in the hole. Now they sell around 900k per year in EU, which translates to roughly 95 Euro per g/km times 900k vehicles. That is 95*5*900,000 which is roughly 430 million Euro in fines for 2019.

This market gets pretty tight for everyone in 2019, except for Toyota. That doesn't leave a lot of options for FCA, leaving Tesla in a fairly decent negotiating position. Given this, I think ARK's $0.5B estimate is unlikely. I'd reckon they went roughly 50-50 for about a 200-250 million Euro deal. Interestingly, Tesla only needs about 45K deliveries to pull FCA into compliance. This explains them leaving the pool open, potentially for Ford. Ford probably decided to pass purely for reputational reasons or didn't want to help Tesla.

The real fun starts in 2020 though, where these 0 g/km EVs are pure gold. EU is on track to levy 95*30*15million (95Euro/g * 30 g/km shortfall * 15 million sales) in fines - Or a mindboggling 40 Billion every year. An EV at 0 g/km is worth 9k Euro (95*95) in avoided fines. Tesla could easily sell these credits for a small 10% haircut until it gets to 15-20% market share. And it gets progressively worse for the legacy manufacturers as the limits keep going down. No wonder the likes of LG Chem are playing hardball because next year, the European manufacturers don't have an option to not try building EVs.

Where the eff is the European Gigafactory?

Here's a link to my 2020 analysis:
Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable

With a correction to the second example here:
Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable

My takeaway: pretty much same as yours - each Tesla added to Fiat-Chrysler’s pool is worth ~€10,000 in penalty avoidance (assuming FCA doesn’t clean up their emissions). Multiply that by Tesla's "bounty" (e.g. 50% in my example) and that's Tesla's additional profit per vehicle sold in the EU. And they could sell more than 230,000 per year and STILL barely get FCA out of the hole.

 

[bdy0627]

I may sound (and be) pedantic, depending on how they classify cars, inventory may exist even if there are more orders than cars. With the streamlined delivery logistics, Tesla is likely delaying assigning a car to a buyer until it is shipped (on directly in transit) to their region.

Car built -> inventory
VIN assigned to buyer -> in transit
Car delivered -> sold

So that total could be produced, but not assigned to a buyer (in transit are also not sold, yet).


He lived Long long ago in that galaxy far far away...
So Yoda predates Tesla, if see the future he did, very strange his actions were...

Yeah, I think logistics is one reasonable possibility for the number of cars not categorized as in transit or delivered at the end of Q1. Suggesting against that idea is that in the past, such as in Q2, when there was a very late surge in production, in transit was high but inventory was low at 1,468. Production in Q3 was about double Q2 yet ending inventory was just 1,760. Production in Q1 appeared generally steady without a late big surge, so there is no reason to expect inventory to climb so high. It essentially doubled from Q4, which already had much higher inventory than Q3 at 6,833. It can't be explained by massively increasing production since that has not happened since Q3. My best guess is Tesla produced thousands of cars for the U.S. market, guessing at demand for various trims, but they have not been able to sell many of those yet. They can't just shift them to Europe or China, so they must sit on them until they sell. It doesn't indicate a serious demand issue, just a temporary oops in trim prediction for the U.S.

 

[generalenthu]

@Prunesquallor Very similar analysis from JATO from last week

2021 CO2 targets would generate €34 billion euros in penalty payments within Europe - JATO

 

[FS_FRA]

Here where I live gas is already $4.

Where I live (Germany), current average is:

Diesel: $5.34/gal
Gas: $6.03/gal - $6.12/gal

 

[FS_FRA]

Good God, can't Tesla sue for something like that?

I think a suit would entail discovery by whomever they are suing, and maybe Tesla - for what ever reason - will prefer to let sleeping dogs lie....

Also...don’t poke the bear.

 

[Chickenlittle]

Glovis Sonic was a dud. If it's carrying any Teslas it can't be much and it is heading for Japan anyway. We are waiting for the Morning Cornelia to reach Pier 80 tomorrow and that's hopefully the start of international shipping. Norway is the most urgent destination in my book. I'd be good to have a healthy number of Model 3s arriving there in May, which means Tesla needs to get cracking.

Are you aware tesla sells cars in Japan?

 

[Prunesquallor]

Great analysis thanks a lot! I finally understand the urgency around the 2019 deal.

The story around 2020 gets even better if you consider the "Supercredits"

Reducing CO2 emissions from passenger cars - Climate Action - European Commission



I.e. Tesla's contribution will be EVEN MORE valuable in 2020.

Tl;dr: For 2019 I expect max 220 Mio contributions from FCA to Tesla.
For 2020 all bets are off and more car makers may join the pool (depending on how many Model 3 Tesla can deliver in EU).
I concur with your take: where the heck is the European Gigafactory?!?

I suspect FCA may try to lock its deal with Tesla in future years. That may be part of the deal (or maybe not, Tesla may go free agent). The larger the number of cars in the pool the less emission "dilution" (and penalty avoidance) a fixed number of ZEVs can provide. The ideal value proposition for Tesla would be to pool with a carmaker with a relatively small market share that is badly out of compliance with no in-house ZEV prospects. Like FCA.

 

[HG Wells]

As to ship headed to Japan.

Are you aware tesla sells cars in Japan?

But they do drive on the other side of the road.
S & X are available but Model 3 is just finishing testing for right side steering.

 

[Etna]

It doesn't indicate a serious demand issue, just a temporary oops in trim prediction for the U.S.

I think you're being too harsh. Tesla produces the Model 3 in batches rather than build to order, therefore it is unavoidable that one batch takes a couple of weeks to distribute and sell out (not talking about in transit). Reasonably I don't see how you could shorten this any further. If demand was ten times higher with the same production rate, these two weeks would not be changed by much.

 

[KarenRei]

Glovis Sonic took on about 500 cars, according to reports. Probably a secondary payload for a second destination?

 

[ItsNotAboutTheMoney]

As to ship headed to Japan.



But they do drive on the other side of the road.
S & X are available but Model 3 is just finishing testing for right side steering.

It's just about conceivable that they want to get some RHD cars to Japan early for CHAdeMO adapter testing. But I think that the main RHD emphasis would be on delivering to the UK. There's going to be an electric company car wave there.

 

[schonelucht]

Are you aware tesla sells cars in Japan?

Yes. Hence, as I wrote, not much. A few 100 model S or X are not moving the needle. Tesla needs to ship tens of 1000's of Model 3s overseas this quarter.