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

[mongo]

$7500 is 15% of $50k. A loss of $7500 brings Tesla's profitability down to that of Ford. Do you understand how long and how much engineering / R&D / talents it takes to increase gross margin per vehicle by 15%? What's stopping them from launching another attack on TSLA like this? This alone is bigger than any miss in P&D.

How so?
If all of Fremont/ Austin's production took a $7,500 hit in ASP, at 150k units a quarter, that would be a $1.125B shift in profit dropping global GM to 21% and operating margin to 13.7%
Ford is 13% GM and 4.3% Operating Margin.

Tesla's operating margin would still be better than Ford's gross margin.

 

[OrthoSurg]

I'd say no.

'The world of organized crime' will do their best to at least trigger $100. Can be even worse.

As per Elon we still have a long way to go before reaching -97.5% when comparing to another good company during last recession. Still, -73% in one year for a 39% YoY growth company is a feat I did not expect.

 

[StealthP3D]

Yes of course if the price of the Y is lower by $7800 more buyers happen. We knew some buyers would wait (right or wrong) for the credit. Along the way we hoped that enough would realize they didn't qualify etc. That didn't happen and Tesla had to cut prices this Q. I'm expecting prices to return to normal or very close myself and for the IRA to increase demand above what Q4 would have been naturally.

You want prices to return to "normal"? What do you consider a "normal" price for an unsubsidized AWD Model Y that probably costs about $40K to manufacture? And what happened to all the people that said Tesla needs to sell cars for less money or the mission is at risk?

The whole IRA business has been very shady and I think people who claim Tesla wasn't unfairly targeted along the way are being naive.

People are naive, that's how situations like this are allowed to happen. Whenever large sums of money are involved, people will game the system. It's not the exception, it's the rule. The people who say it's not happening are the same people whose naivety allows it to happen.

This is why I've always said the EV purchase tax credits should simply be allowed to expire as each manufacturer reaches their limit of 200,000 units.

 

[MABMAB]

Fox biz headline on my stock app

“Tesla becomes long term hold”

Lol

They trying to convince us to not sell yet?

 

[Artful Dodger]

It's utterly ridiculous to watch so many people melt like the witch in the Wizard of Oz. Oh, no! I'm scared!

 

[JRP3]

Practically all this would not be a trivial excercise. It might even be better to make the clearance and AWD adjustments to make the 5 seaterbqualify.

Clearance and suspension adjustments, i.e. redesign, seem a lot more complex. Seats and belts are already removable with some work if one is so motivated. They were bolted into place and can be unbolted.

 

[betstarship]

I'm legitimately pissed about this, didnt realize it was this bad.

https://twitter.com/x/status/1609651117356351488

 

[Artful Dodger]

We are surely on our way to retest de $106 premarket low of the 28th of December.

104.25

 

[Mengy]

I'm legitimately pissed about this, didnt realize it was this bad.

https://twitter.com/x/status/1609651117356351488

It is.

Now, is it by accident, or purposeful? I think it's by design, but many disagree. We can't know the truth unfortunately, but the fact remains that hybrids (most built by the UAW) won out in the IRA and many efficient well designed EV's lost. That's just fact.

 

[OrthoSurg]

104.25

View attachment 891822

I call 106.63 for todays low and the SP can now recover to $120

 

[thx1139]

It is.

Now, is it by accident, or purposeful? I think it's by design, but many disagree. We can't know the truth unfortunately, but the fact remains that hybrids won out in the IRA and many efficient well designed EV's lost. That's just fact.

Fact is those hybrids had the $7500 tax credit in 2022. Those cars dont compete with the Model Y. Yes it is dumb, but that cars getting the tax credit is nothing new.

 

[UkNorthampton]

Even Chinese EV manufacturers don't have the volume of manufacturing capability and cost structure to be able to import enough quality EV's to flood the N. American market, not in the next two years and probably not in the following two years.

Since you think the BYD ATTO 3 would be a serious competitor in N. America, I have three important questions for you:

1) What do you think the longest-range version would rate on the EPA combined drive cycle range test?
2) How low could BYD price that version in the U.S. market and still break-even after building to US safety standards and covering import costs and duties?
3) What would BYD do for sales, distribution and servicing network and how long do you think it would take to establish these networks sufficiently to "flood the market" here?

Best guesses are good enough. I'm unable to see the same threat you see but maybe you can help me out here.

Good points. BYD prices seem high in other markets.

I'd also see BYD as a replacement for ICE primarily and as competition for non-Tesla EVs.

You didn't mention charging network. I'm ok with CCS2 for Europe, but if I was responsible for Chinese/BYD imports into the USA, I'd work with Tesla/use Tesla standard (NACS) or indeed see if CCS1 and NACS could both be available on the same car. VW, GM, Ford, Hyundai/Kia would really be affected, put at a competitive disadvantage, by having only CCS1.

BYD/Tesla prices sorted low to high - EV Database

 

[Mengy]

Fact is those hybrids had the $7500 tax credit in 2022. Those cars dont compete with the Model Y. Yes it is dumb, but that cars getting the tax credit is nothing new.

What's new is those hybrids will keep getting that $7500 credit now no matter how many they make, whereas before the credits would expire soon due to production amounts.

It's essentially a handout to the UAW for making gas-EV hybrids for as long as they want to, while completely excluding Tesla's highest volume cars.


Wanna bet how much we see Ford and GM push hybrids after the IRA?

 

[generalenthu]

A lot of talking heads (e.g. Gary Black) pooh poohed Musk when he said that fed is causing this issue. I was in Gary's camp for a while too. But then whatever the Fed is doing to slowdown the economy ends up totally disadvantaging high capex, low opex technologies, including Solar, Storage, and EVs. This is just like the home purchases impact, though a bit smaller, as a vast majority of cars are financed or leased.

A back of the napkin calc shows that the impact of higher monthly payments from ~4.5% higher rates fully offsets the IRA credit, with a 3 year weighted average loan life on a 65k ASP vehicle. This dynamic doesn't exist for other tech companies, making Tesla unique in bearing the brunt of the rate hikes.

And we all see how the IRA incentives are playing out in the very short term. Not the certainty we would all have liked.

 

[TrendTrader007]

wow! what a meltdown! truly, a sight to behold. let's hope the subsequent melt up is equally spectacular

 

[StealthP3D]

I don't see them dropping MY5 prices in the US to meet the IRA's $55K bar. Taking options into account they'd need to drop the price to something like $52K and that's just too drastic a cut IMHO.

Maybe the new Highland version of the M3 could be affordable enough to qualify for the IRA, that would be nice. And Tesla might re-introduce the MY standard, a RWD with slightly less range, maybe. Raising the suspension height of the MY5 could qualify it but I don't think Tesla will go that route, my hunch is they'd rather keep the car's efficiency than qualify for the IRA.

I think Tesla might simply ignore the IRA and lower prices very incrementally when needed during 2023 to keep deliveries going. They've been selling without subsidies for years, and yes that will be more difficult now since many more cars get subsidies, but Tesla has the margin room to control demand and supply to a large degree. It will likely mean our margins will fall in 2023, potentially by quite a lot, and that won't be good for TSLA, but it might be good for Tesla.

My hunch is we are in for a rough & unpleasant year, but a good one for the company in the long term scope. Just my opinion though.

I'll predict if the IRA rulemaking is not fixed by the administration relatively quickly, that Tesla releases at least two versions of the Model Y:

1) An edgy "adventure" version with 15% less range and bigger tires and suspension
2) An efficient, range-leading version seating 5 adults and 2 children.
3) Possibly the standard version for people who want a good price and can't take advantage of the IRA credits anyway.

Both 1&2 will qualify for the credits and both versions will outstrip supply for years to come at margins that shock auto industry veterans. The call will be put out to end the tax credits but politics move slowly so it will take years to do so. Model Y will break all kinds of historical annual sales records for any vehicle in any class.

 

[AndrewZ]

Fact is those hybrids had the $7500 tax credit in 2022. Those cars dont compete with the Model Y. Yes it is dumb, but that cars getting the tax credit is nothing new.

Unless the battery sourcing requirements don’t apply, I highly doubt the vehicles will get $7500 under the new rules. Fitting under the MSRP cap does not mean it gets $7500.

Looks to me that the batteries used by Jeep are likely manufactured in Malaysia and Thailand

 

[chrsk]

I call 106.63 for todays low and the SP can now recover to $120

Well, still falling.. Don't want to know the number of stop-loss that gets triggered if we get below 100

 

[Mengy]

I'll predict if the IRA rulemaking is not fixed by the administration relatively quickly, that Tesla releases at least two versions of the Model Y:

1) An edgy "adventure" version with 15% less range and bigger tires and suspension
2) An efficient, range-leading version seating 5 adults and 2 children.
3) Possibly the standard version for people who want a good price and can't take advantage of the IRA credits anyway.

Both 1&2 will qualify for the credits and both versions will outstrip supply for years to come at margins that shock auto industry veterans. The call will be put out to end the tax credits but politics move slowly so it will take years to do so. Model Y will break all kinds of historical annual sales records for any vehicle in any class.

I think Tesla might do something like this too. Build a version of the MY5 which is basically a "Tesla Crosstrek", a MY with higher suspension, larger tires, and a bit less range. I think such a variant would sell like bonkers with the IRA credit. And it wouldn't take much design changes to build it either.

 

[StealthP3D]

It's bad wording, maybe deliberate. The range doesn't "plunge" to half of advertised, but could be 1/2 compared to advertised there.

The small amount of the fine, only $2.2 million, is all the proof you need that they know this is nothing more than a "shakedown" fine. They happen all the time, it's hardly worth it for Tesla to fight it to the end. Cheaper to just pay it and that's why the amount is so low.