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

[dakh]

A few random thoughts:

1. I think there's something going on with battery production. There's gotta be some level of frustration at Tesla about battery supply. And we know how MobileEye and a number of other cases were handled: if some partner doesn't deliver, Tesla takes it in-house. I was pretty surprised the partnership worked at all since I expected big corp Japanese culture to be very incompatible with Tesla's. If Tesla already has plans to make their own batteries (and say Grohmann was working on that this whole time) at GF3, or if they already have a contract lined up with someone other than Panasonic for GF3, it would make sense for them to do what they did: avoid answering the question on where will the batteries come from for GF3. And not talk about GF1 specifics at all. If it was Panasonic, they'd just say yes it's them for GF3, there's no point hiding that. And there's no way they don't have at least one viable option for GF3 already set up, too much risk. So I expect some battery production shenanigans by EOY, likely earlier -- maybe that's what the investor event will be used for. Maybe that's one of the reasons for equity raise.

2. From short/medium investment perspective, getting info on demand situation is critical. I think Elon's answers during ER call were taken as one of the primary concerns, he was trying to be assertive that everything is cool but failed at that. I bet it's not that difficult for someone dedicated to the cause to find out what the real picture is. So I expect some share price fluctuation based on some non-public yet obtainable information on this during this quarter and maybe next.

3. We don't know how much exactly Model3 production was limited by battery supply. I find this situation to be fairly strange. If say they're under-utilizing Fremont/M3 line by even 10% due to battery shortage, I'd expect Elon to be all over that scrambling people from Japan, Fremot and Germany to GF to fix it. But we haven't heard any of that. A bit more confirmation to point #1, and also maybe some positive surprise here. If they had high battery scrap percentage or some problem with making packs at GF1, if they fix that, demand isn't an issue and M3 production line had some headroom, that can improve the financials by a lot because of better M3 line utilization at Fremont.

 

[Silent Ludicrosy]

A few random thoughts:

1. I think there's something going on with battery production. There's gotta be some level of frustration at Tesla about battery supply.

Could be worse Audi renews hydrogen powertrain development scheme | Autocar

 

[M3Rider]

To an extent I agree since the hype over near term colonization drives me crazy. It is a huge leap to go from early exploration, think early Antarctica, to actual colonization. I think Gwynne Shotwell's, CEO of SpaceX statement helps put into colonization into proper perspective. "Living on the surface of Mars will be like extreme camping, for a hundred years." Extreme camping certainly isn't colonization.
September 10th Gwynne Shotwell Q&A Session - 45min : spacex

Hindred? Couple generations is more like 50.
NASA Wants to Launch a Giant Magnetic Field to Make Mars Habitable

it's possible that, within the space of a couple of generations, Mars could regain some of its lost Earth-like habitability.

Easy peasy

 

[Maitri982]

same thing happened in Florida.
49 New Model S this morning, now 0. (51 last night)
5 model X this morning, now 1 (6 last night)
Also down to just 1 M3P.

Demand problem????

 

[Oil4AsphaultOnly]

Finally, one journalist (other than Peter Campbell of FT who broke the story), Tom Randall (Bloomberg) is discussing the FCA pooling

Tom Randall on Twitter

Just found the FCA earnings call: Edited Transcript of FCA.MI earnings conference call or presentation 3-May-19 12:00pm GMT

"And as mentioned by Mike, we're talking about or compliance strategy. We did enter into various agreements in the quarter to ensure that we have access to regulatory credits to complement our vehicle launch strategy towards meeting emissions compliance in EMEA and NAFTA going forward. So the total commitment under those contracts is about EUR 1.8 billion, which will be spent over the next 3 years. Last year, we had cash outlays between credits and compliance payments of about EUR 600 million included in our cash flow. We expect 2019 number to be moderately up from that. And we think it's important that we have managed to secure these credits, which we believe to be a very economic way of complementing our compliance strategy through the launch of the electric vehicles that Mike mentioned."

Not sure how 1.8B translated into the 2.3B that I saw on electrek (which referenced FT).

So straight from the horse's mouth, FCA spent 600 million EUR on credit payments and compliance penalties (Richard Palmer clarified it was 390 million EURO later on) for 2018. Meaning 210 million EUR for the credits. And they expect 2019 to be slightly more than the 600 million (corresponding to an increased compliance requirement). As the point of the pooling was to reduce the compliance penalty, this means that the 2019 credit payments should be much more than 210 million EUR.

Later on in the call, they point out that regulatory credits will only make up 15% of their compliance efforts for 2021, while 45% would come from their own EV efforts. Not sure how realistic this goal would be, but it points to most of the credits coming in the 2020 year. Or a serious under-estimation of their credit needs.

 

[SPadival]

Not sure how 1.8B translated into the 2.3B that I saw on electrek (which referenced FT).

Yuck.. Electrek. As per his usual journalistic standards, Fwed probably took out his calculator and quickly converted from EUR to USD.

 

[Doggydogworld]

Not sure how 1.8B translated into the 2.3B that I saw on electrek (which referenced FT).

Euro -> USD?

So straight from the horse's mouth, FCA spent 600 million EUR on credit payments and compliance penalties (Richard Palmer clarified it was 390 million EURO later on) for 2018. Meaning 210 million EUR for the credits.

EUR390m was the (hypothetical) 2019 EU penalty with their existing fleet.

FCA paid Tesla $300m+ for US GHG credits in 2018 and may have also bought some of their ZEV credits.​

 

[dakh]

Could be worse Audi renews hydrogen powertrain development scheme | Autocar

Yeah, it's gonna be a hydrogen self-driving car with 8 LIDARs and a cell phone based computer. Hydrogen fueling automatic snake here we come!

One more thing: they haven't mentioned anything about ModelY battery supply either. Together with the announcement that Panasonic isn't investing any more into GF1 and rumors about production issues there... I wouldn't be surprised if both GF3 and MY side of GF1 will be making batteries using mostly in-house battery making tech without Panasonic involvement. They can still supply Model3 cells and older format for X and Y for now.

Even if this prediction is correct, it's hard to tell what the share price impact is going to be. Will largely depend on how the events unfold exactly. If Tesla shows a working high-speed line all of a sudden and reports that X% of Model3 batteries are no longer from Panasonic, that might be a positive catalyst. If Elon comes out and yells from the rooftops how what they are building is 10x better than anyone else and then they fire-fight issues for half a year to get anything working, I think we'd be in 1??'s.

 

[Carl Raymond]

If Elon comes out and yells from the rooftops how what they are building is 10x better than anyone else and then they fire-fight issues for half a year to get anything working, I think we'd be in 1??'s.

This year we have seen
$35K model 3. On time.
Model Y reveal. On time.
Faster supercharging. On time.
China Gigafactory* construction. Ahead of schedule.

Elon always said his goal was to be less wrong over time. I think he learned a little about real time v Elon time in 2018.

*Easy to give all credit to Chinese here, but nothing starts without working drawings. Tesla gets some credit for being ready to go.

As far as I can tell, we’ve seen just one small mistake. If project raven had been completed 10 weeks earlier...** And one problem where we don’t yet know the details. Cell output. These too shall pass.

**Likely impossible because the lines were maxed till end of Q4 to take advantage of the end of full tax credit demand pull forward.

 

[M3Rider]

Just found the FCA earnings call: Edited Transcript of FCA.MI earnings conference call or presentation 3-May-19 12:00pm GMT

"And as mentioned by Mike, we're talking about or compliance strategy. We did enter into various agreements in the quarter to ensure that we have access to regulatory credits to complement our vehicle launch strategy towards meeting emissions compliance in EMEA and NAFTA going forward. So the total commitment under those contracts is about EUR 1.8 billion, which will be spent over the next 3 years. Last year, we had cash outlays between credits and compliance payments of about EUR 600 million included in our cash flow. We expect 2019 number to be moderately up from that. And we think it's important that we have managed to secure these credits, which we believe to be a very economic way of complementing our compliance strategy through the launch of the electric vehicles that Mike mentioned."

Not sure how 1.8B translated into the 2.3B that I saw on electrek (which referenced FT).

So straight from the horse's mouth, FCA spent 600 million EUR on credit payments and compliance penalties (Richard Palmer clarified it was 390 million EURO later on) for 2018. Meaning 210 million EUR for the credits. And they expect 2019 to be slightly more than the 600 million (corresponding to an increased compliance requirement). As the point of the pooling was to reduce the compliance penalty, this means that the 2019 credit payments should be much more than 210 million EUR.

Later on in the call, they point out that regulatory credits will only make up 15% of their compliance efforts for 2021, while 45% would come from their own EV efforts. Not sure how realistic this goal would be, but it points to most of the credits coming in the 2020 year. Or a serious under-estimation of their credit needs.

I think anybody getting caught up in the 1.8B needs to realize that over 3 years that is ~150m/quarter on average. And given Q1 with some unexplained 200m credits it still resulted in 700m loss. So, while 150m is nice it is not a solution to Q1-like problems. We need to see a decisive departure from the Q1-like results.

I think getting to 7k/week production vs 5k/week(if Q2 estimates hold) would go a long way towards this.

 

[Maitri982]

For the first few tweets the new tesla twitter person was funny...but now I find it a little childish and not representative of the type of image they should be putting forth.

I am all for having fun...see my earlier post today. But when i represent my company its all business with a few exceptions where levity is OK. They should be the same. Occasional humor OK...non-stop tweeting about silly stuff not OK.

 

[schonelucht]

I’d bet the new Tesla Twitter person is EM.

 

[Pezpunk]

For the first few tweets the new tesla twitter person was funny...but now I find it a little childish and not representative of the type of image they should be putting forth.

I am all for having fun...see my earlier post today. But when i represent my company its all business with a few exceptions where levity is OK. They should be the same. Occasional humor OK...non-stop tweeting about silly stuff not OK.

it's twitter. who cares.

this is a company whose cars feature a "fart mode", And you're mad that their Twitter handle is being silly?

 

[T@oo]

Next demand lever. Tow hitch option now available for us Europeans. Up to 910 Kg. No retrofit possible because of EU regulation, only option is to order it from the go. Not available for the performance version (because of tire limits).

Includes special tow mode software to prevent side motion.

 

[Right_Said_Fred]

The OT discussion about intercontinental ballistic missiles was just launched into space.

That this thread has turned into a FSD and Robotaxi thread is one thing (at least that subject is still related to Tesla/TSLA). An ICBM discussion is really taking it too far.

Mod

 

[Sancho]

Based on your belief of the likelihood of Tesla Network happening as Musk has outlined, how much of the value of each Tesla car should be ascribed to its potential right to participate in the Tesla Network?

Or to put it another way, if you owned a Tesla car, for how much would you sell your rights to participate in the Tesla Network?

I started a poll in the Normal Threads on this.

Right now, I might sell my rights for less than $2500, but if improvements to FSD start to accelerate it will soon become reasonable to attach much more value to this potential income stream.

 

[lklundin]

Domesticating the house cat was way harder, we have been working at that for 10k years and still aren't quite there.

Consider also though, Manhattan project and going to the Moon when computers could work only slightly faster than humans with pen and paper.

Also worth considering is how much more wealthy the World as a whole and a few single individuals have become.

I believe Jeff "Who" Bezos could personally finance a project as expensive as the Apollo one.

 

[KarenRei]

Tow hitch option added in Europe. About $1k.

This is going to be very popular - and that $1k is surely overwhelmingly profit. Might add $200 or so to European ASPs? With that I estimate a 2-3% increase in Model 3 profits in Europe and a 0,15-0,2% increase in European Model 3 margins.

I for one will be getting it Need to downsize my trailer, though, but I had planned on that regardless.

 

[Carl Raymond]

Right now, I might sell my rights for less than $2500, but if improvements to FSD start to accelerate it will soon become reasonable to attach much more value to this potential income stream.

And there’s the funny thing. We know all about the march of nines. Regardless of readiness for the cars to ‘go it alone’, a year from now the cars will have an amazing array of party tricks. e.g. 4000 cars driving on and off boats, cars coming off the assembly line and performing their own stage one track test, cars in open spaces doing weaving manoeuvres, etc. Some vids will go viral.

Joe Average (who may not know the diff between mean and median) will be convinced that FSD is imminent. Neroden will be adamant it’s still years away and I imagine he’s right. What I can’t imagine is Joe Average reading or accepting anything written by Neroden.

With respect to the value of FSD and its effect on TSLA, perception is reality.

 

[Sean Wagner]

It's been a stretch keeping up, but worth it. Especially nice to learn new things, read cogent analysis, or being able to nod affirmatively. I'd like to reiterate some aspects of FSD that frame the effort in my mind:

> It will happen.
> Tesla has good chances of getting there first with a viable solution.
> Smarts & expertise & massive industry backing exist elsewhere too.
> Useful scenarios: 2020/21 and 2025 and pre-2030. The latter two still being extremely disruptive.

> Neither China nor the EU will readily allow a US firm to significantly expand upon a perceived or real first-mover advantage.
It would be self-defeating to run a big manufacturing company without keeping this in mind. Is there a test or early indicator to watch? Maybe how far the EU allows Tesla to "go" in Estonia when they set up shop there? The EU is very attuned to these sovereignty-challenging "border" cases... [viz Ireland]. And of course, how the pooling with FCA goes.

> Autonomy in increments is the best way for Tesla to communicate and immediately benefit from its efforts.
> A shoutout to the notions of drivable space and adaptive speed as a function of uncertainty.
> Parsing a vehicle's surroundings has to spill over from 2D frames and individual slices of time.

Karpathy even appeared to wince when Musk started making his grandiose timeline claims.

And Karpathy doesn't even understand the full scope of the problem yet, because the cases he presented as "very unusual" are what I call "normal, everyday driving". In a couple of years they may start looking at the unusual cases.

...
As a result, (and this is reeaally difficult to over-emphasize) a “fast and furious” approach to training neural networks does not work and only leads to suffering. Now, suffering is a perfectly natural part of getting a neural network to work well, but it can be mitigated by being thorough, defensive, paranoid, and obsessed with visualizations of basically every possible thing. The qualities that in my experience correlate most strongly to success in deep learning are patience and attention to detail.
...
A Recipe for Training Neural Networks [ Karpathy Blog ]

So far it appears that the market gives Tesla $0 value for the robotaxi business, and it just doesn't mean much if this gets cut in half.

Yes, I think that's the correct perspective. Tesla does have a 2-3 lead right now, and they have a chance to be the winner in a huge autonomous transport market. However, there are many scenarios that can play out. And I think it's far from guaranteed that Tesla has the largest autonomous transport platform in 10 years.

That said, I'm long and will just stay that way. I think I know how the story ends. So whatev.

It's actually when he's diffident that he's probably right. Super confident means he's on the peak of Mt. Stupid. Diffident means he knows so much that he's hedging his statements, and that means he knows enough to be right.

He hedged his statements about reusable rockets and landing them so massively that... well, I believed he knew what he was doing, which he did in that case.

It's just someone new within the comms department, according to a source I checked with.

It's that guy who sleeps on the floor again. Next thing you know he'll be referring to himself as Chief Jocularity Janitor.