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

[Tslynk67]

A very simple FAQ page would solve a lot of problems...I could write the damn thing.

That's an idea - crowdsource it to some of us here. Many of us (not me, I hasten to add) have spent personal time to contribute good content to Clean Technica, we'd (maybe me too) be happy to help out Tesla, and implicitly our own investments.

 

[Tslynk67]

The "cat out of the bag" comment felt like they were hinting at complete vertical integration from mining to battery to car.
I have mixed feelings about this if true. I like having Panasonic on board making a product to Tesla specs. It reduces some risk but if they won't keep up that is a problem and obviously there is a cost to sub this out.
There was giddiness to the three on stage like we KNOW something you don't.

My take anyway- Nice to see Elon having fun and relaxed (no reefer in sight)

I think the "cat out of the bag" is a step-change increment in Tesla's battery technology: more durable, more range, faster charging, cheaper, game over.

 

[lascavarian]

I think it’s possible that others with higher end cars may be selling privately due to low trade in values. (Which is more noticeable on more expensive vehicles.)

I am doubtful of private sales at the higher end. Lots of leases in play. Private sales can be a hassle.

 

[Right_Said_Fred]

Too much time wasted on dumb

Went back and watched the shareholder presentation again. Have a pretty good feeling that things are moving solidly in the right direction on nearly all fronts. The weak spots I feel Elon is aware of. I would be very surprised if we ever come back to these stock price levels. Been buying on the way down and a little on the way up. Might buy more tmrw. Tempted to go bigger using margin (I know, I shouldn't, prob won't). I just haven't had this much conviction in a long time. I see so many upside catalysts, and not many downside. Is it my rose colored glasses?

I also came away with an overall positive feeling, but one thing is nagging and that is battery supply. The 24 GWh they are producing now covers about 350,000 Model 3 in Fremont per year. But in 2020-2021 we have coming up:

- GF3 at probably an average of 3000 to 5000 cars per week in 2020, which means 200,000 cars (10 GWh, only smaller SR+) and probably 300,000 to 400,000 in 2021 (15-20 GWh).
- Model Y starting mass production in the fall of 2020 and eventually going to outproduce Model S, 3, X. That could mean several hundred thousand cars in 2021 (although it might cannibalize Model 3 a bit), so 15 GWh.
- Semi starting production at the end of 2020, with each semi consuming a lot of batteries. 5,000 semi's at 800 KWh in 2021 would need 4 GWh.
- Pickup truck starting mass production probably somewhere at the end of 2021. It will likely not have a small battery. Cyber punk will be first, a more regular truck will have to wait for more batteries.
- Roadster in 2021: 10,000 x 200 KWh = 2 GWh.
- Energy storage ramping up. Expected to triple this year to 3 GWh, we were told yesterday. And growth will not slow down in 2020/2021, so 5 GWh and 8-10 GWh in those years maybe.

All in all this could mean a need for a steady state production of 70-75 GWh per year at the end of 2021. They expect to hit 35 GWh early next year and need to more than double that in less than two years time! If I remember well Elon yesterday said they would start physical expansion of GF1, although no timeline was given. It is definitely necessary, as there is a limit to what output improvement of existing lines can achieve. Hopefully they also manage to get a lot of GWh-capacity online in China to cover the 15-20 GWh needed there in the medium term (and more if they plan on reaching 1 million cars in China).

JB and Drew have their work cut out.

 

[X Fan]

Interesting. I don't read body language well. It seems that getting into mining is an "unavoidable", which would explain the body language.

Mining's a business full of shady characters -- I wouldn't want to get into it either. But there's some mineral where the supply chain just isn't building itself, even though there are plenty of deposits -- either lithium or cobalt, probably. They may simply flat out have to finance one or more of the mining operations, and I think Musk doesn't like it, but they'll do what they gotta do. The smallest one (Pure Energy) seems to only need $300 million in financing. Most of the others were half a billion to a billion.



Well, I listed off the known benefits.

Maxwell believes that they can, right now, increase gravimetric and volumetric density -- which essentially increases range and cuts cost per kwh. This is because the dry electrode techology avoids a certain sort of "waste" which is deposited in the cell during the solvent / drying process and is essentially deadweight -- I forget the details, someone else can remind us.

(Maxwell has demonstrated 300 Wh/kg, vs. Tesla's current 207 Wh/kg, but that is probably with a different or more expenisve chemistry -- if it isn't, then that's effectively a 50% range increase and 33% cost reduction per kWh.)

They also believe that they can cut the cost of the electrodes (per cell) by "10%-20%+" which is an additional cost reduction. (I'm not sure what percentage of the cell cost is the electrodes.)

Maxwell thinks they can reduce the area used for electrode production to 1/16 of what the "wet electrode" process uses, saving vast quantities of factory space. And the capital costs of new lines will be much lower than for wet electrode lines.

It's also supposed to double the battery lifetime (in terms of cycles).

In addition, because the line design is so much simpler and less time-consuming, it will definitely improve the cash flow cycle -- less time from "raw materials arrive" to "cell is ready to go in pack".

And it may even improve the line speed -- I'm not sure whether the electrode deposition was a bottleneck or not, but if it was, then it might improve the speed.

If Tesla can get this all up to factory scale in cylindricals (Maxwell's experimental batteries weren't cylinders) then it is a spectacular coup. It will enable 400 mile (or 450 mile) range vehicles which weigh less than the current vehicles, and cost less to produce, and have lower capital costs to set up the lines, and take up less space -- I mean, think about the effect on the cost structure. It's spectacular.

(BTW, if Maxwell's optimistic plans *all* come true, including the "path to 500 Wh/kg", they should be able to make the mythical $20K long-range electric car. But that is too optimistic.)

Superb post, thanks!

 

[Tslynk67]

Tesla and Elon don't have a decent web presence?

They're not actively pushing back against the daily drivel, this needs to be done over and over again.

And in some cases they should start litigation, IMO.

 

[Fact Checking]

I'm glad I'm not the only one who picked up on the two strong body language moments of the meeting:
1) Elon was extremely hesitant and somewhat uncomfortable talking about getting into mining and
2) regarding battery advancements and Maxwell, those guys were beyond giddi. They could barely contain themselves on stage. It was a strong confirmation that the Maxwell tech or whatever else they have cooking is HUGE and I would venture the guess: Soon!

Agreed, and I noticed the same giddiness and smugness when Elon was asked about battery cell costs at the Q4 earnings call end of January:

(Elon almost smugly declined to cite any battery production costs at the conference call, declared them proprietary information.)

Important raw material costs, such as lithium carbonate prices, have come down from bubble levels: in 2017 to much more reasonable current levels:

The price got almost cut in half. Cobalt dropped from above $40 to around $15.

I went back to find the exact question and answer:

Maynard Um: "Can you just update us on where battery costs are now and where you anticipate they'll be by year-end? I'm just trying to gauge how much of a factor this is to lowering costs and sustaining profitability."

Elon Musk: "That's a highly proprietary number. We cannot give it out, but I'd like to tell you but no. We do think we have the best costs in the world. We're - to the best of our knowledge, our costs are lower than anyone else right now and they're improving."​

Elon was clearly prepared in advance to give that reply to the cell level costs question - and that was before Maxwell.

This is a key cost they should stop updating, because it paints a target on their back and makes it IMO easier for competitors to anticipate Tesla's moves. For example Mercedes Benz tried to troll Elon into disclosing more details about the Semi and he declined - and that's the right approach.

 

[KarenRei]

Re, mining... it looks like two realistic possibilities:

• Lithium carbonate / chloride - the obvious one. Rather expensive, and while only needed in relatively small quantities, you can't eliminate it, and there's physical limits as to how far you can reduce it (can only reduce Li which doesn't take part in reversible intercalation, and even that is extremely difficult).
• Nickel sulfate - perhaps less obvious, but a quite realistic option, as nickel is ~80% of the metal mass in the cathodes. Metallurgic nickel production is already done en masse, but battery-grade nickel sulfate production is much more limited, and requires different starting materials and/or processes.

In both cases, it'd be very interesting to see what techs and feedstocks they'd be pursing (for example, HPAL extraction of laterites for the latter?)

As for others:

• Cobalt: They're phasing it out.
• Alumium, manganese: Too mass market, for all potential cathode feedstock forms.
• Graphite: I assume they're using synthetic, not mined. Just normal bulk hydrocarbon feedstocks.
• HF for electrolyte synthesis: Global market is nearly 2 million tonnes per year, and growing; they're not going to struggle to keep up with Tesla.
• Rare earths, etc - they were talking specifically about batteries when Musk mentioned mining.

 

[Zaxxon]

Name a well-known product/company that advertises any other way. As in not in a deceptive way of any kind. Just tells the unabashed truth about their great product and great pricing. Take your time.

Name another company that's building electric vehicles at scale and is led by Elon Musk. Take your time.

Hint: this is irrelevant to the question at hand.

Of course Tesla can advertise in a way they feel is honest. It doesn’t for a second mean they’ll be believed.

For instance, raise your hand if you felt Tesla was being even a teeny, tiny bit sleazy

...

.. Designer clothing/shoe brands made in third world countries because labor is cheap? ...

... Ambulance chasers....

...

A whole bunch more stuff not relevant. Similar to suggesting that just because all prior major automakers have relied on ICE engines, so must Tesla. Fallacy on its face.

Nobody that believes the FUD about Tesla right now is going to be convinced otherwise by some advertising no matter how honest it is. They just aren’t.

And here we again arrive at what I think is the heart of the missed point from those against improved advertising: that it has to impact everyone, or that no one who has swallowed the FUD would be impacted.

Of course advertising won't cure all the FUD. Of course some would continue to be unconvinced, and will remain that way until trusted family/friends are telling them what they're missing.

That's fine. Tesla currently is faced with a massive pit of folks who either do not know WTF Tesla is, or why they're worth looking at, or what their future plans are, etc.

To put some variables to it: Tesla currently has X people who have bought Tesla products, or plan to soon, or at least are well-informed about the company. They have Y people who are totally unaware of the company, and Z people who hate or have major misconceptions about the company.

X is small. Z is small. Y is absolutely massive compared to the sum of X and Z. This is the point that you and others miss. Advertising's goal isn't (at least at this stage) to change all of Z into X. It's to move some portion of Y and a sliver of Z into being X. That's a very low-hanging fruit for a small advertising budget to exhibit a high ROI.

Once Tesla reaches the point where they are known across the world, that's when advertising dollars become a trickier cost-benefit calculation. Today it's not even a calculation--it's simply an obvious missed opportunity.

When they need to, they will.

They need to. I demonstrated this above with the Q1 S/X debacle. That's a given, and would have objectively returned a high ROI had Tesla done a better job addressing it.

Again, do not fall for the spin Tesla puts on demand--as others have pointed out, pure total vehicle volume is not a sufficient metric to judge demand health.

Is demand overall in a solid place? I believe so. Is it where Tesla wants it to be, across all products? Absolutely not. One need only look at all the pricing changes and demand levers pulled in the past few months to see that plainly.

Yes, [neroden] sometimes disagrees with me and I sometimes with him. Statistically we agree with each other more than we disagree.

Important to point out that we're all on the same team here. (Well, most of us, anyway.)

I bitch about Tesla's terrible misunderstanding of its marketing/advertising position and how it resulted in the S/X losing some of their impenetrable armor, but I just bought an X. As I knew when placing the order, it's ridiculously awesome.

I love the company's products and I'm grateful that this pricing slide has enabled me to finally own an X. But the rational piece of me knows the company would be better off today if they'd sold 5k more of their most profit-making products in Q1 and were still selling them for thousands of dollars more per unit today.

It's an own-goal, and I don't like it even when I personally benefit from it.

This too shall pass.

And this advertising horse that I've been riding today shall also pass. I'm putting him back in the stable now. Here's hoping the aftermarket jump withstands the day, as yesterday's shareholder meeting was, IMO... How would one particular poster put it?

Bullish AF.

 

[Fact Checking]

I would be very surprised if we ever come back to these stock price levels. Been buying on the way down and a little on the way up. Might buy more tmrw. Tempted to go bigger using margin (I know, I shouldn't, prob won't). I just haven't had this much conviction in a long time. I see so many upside catalysts, and not many downside. Is it my rose colored glasses?

Yes, it's your rose colored glasses - things can always get worse, sometimes much worse: high-tech human civilization is a marvel of defying entropy.

If you feel the urge to roll the dice I'd advise against using margin and would suggest using vanilla call options instead, as far out dated as possible.

If we are indeed around +20% from the bottom it's still a good moment to buy 1-2 years out LEAPs. You can leverage your money up to 1:100 that way, by buying increasingly less likely strike prices. (Once we are above $300 again don't forget those protective PUTs either for your vanilla shares position.)

If you are right you'll also have the help of ~45 million shares worth of shorts who sold on the way down and who will be covering, helping the stock price on the way up.

If you are right you can earn much more than with margin - but if you are wrong you'll know in advance the amount of money you have lost. With margin and a black swan event you can end up not just losing 100% of your investment but you can lose more and can end up being in serious debt.

 

[Tslynk67]

Somewhat OT, but a good rebuttal and good information to have in your back pocket: No, diesel is not better for the environment than electric

 

[Chickenlittle]

FWIW, I'm a vegetarian, and I agree completely. There are MANY other more impactful things that PETA would and should focus on. Not a Tesla steering wheel.

Especially since not a single cow is killed for a steering wheel. The leather is a byproduct of the meat industry. If they really wanted to have an impact they need to start with the meat industry

 

[Chickenlittle]

I missed beginning of meeting. Was any mention made of how they plan to use maxwell company and when we can see products with that

 

[Fact Checking]

Of course advertising won't cure all the FUD. Of course some would continue to be unconvinced, and will remain that way until trusted family/friends are telling them what they're missing.

Yeah, so I mostly agree with @Krugerrand here:

• You are right that "promotion" of a product can be highly effective, but this is mostly true only in the case when the product is not known, i.e. when the customer is undecided, curious and not informed.
• But that is not the case here: there is a highly systematic, decade long disinformation campaign that literally trained customers against Tesla and EVs. There's a barrage of disinformation that is confusing consumers and investors about EVs. "Merchants of doubts" is a profession who successfully managed to delay lead and tobacco regulation by half a century, and who managed to snooker and mislead half of the U.S. regarding global warming to the extent that they are now actively voting against their own survival...
  
• Such barrage of disinformation can IMO only be fought effectively with a similar magnitude of information. An ad campaign by Tesla would have to have at least have the quality of the "I am a Mac" campaign of Apple - which was anything but cheap.
• Also note that Tesla is in a significantly worse tactical situation than Apple was: Apple basically only had Microsoft as a major source of FUD, so their ad campaign could single out Windows as the antagonist and defuse much of the FUD. Tesla on the other hand has ICE incumbents (the largest advertisers in the world), old energy companies, wide swathes of Wall Street and the mainstream media against them. There are Twitter feeds of New York Freaking Times journalists that read like TSLAQ parody accounts ...

I do think Tesla advertisements would have a snowflake's chance in hell of working, in fact it's worse:

• It's a waste of money.
• Tesla's silence is deafening, and is a signal in itself. Millennials and Gen Z have definitely noticed this deafening silence and are reacting to it positively. 'Some' advertising would possibly destroy this.

I believe the most effective way to combat FUD is to use the only major channel of communication Tesla has control over: truth known to Tesla owners and interpersonal network effects.

Also, as I said it before, "legendary", meme-worthy advertisements would be fine: for example the next Super Bowl should feature a Tesla ad that isn't an ad. In hindsight, had Tesla launched a Super Bowl ad this winter and had they posted spectacular losses after that, it would have been very bad optics - so I'm glad they didn't. But the time might come.

Once a trillionaire Elon should buy the NYT and delete it.

 

[anon]

I missed beginning of meeting. Was any mention made of how they plan to use maxwell company and when we can see products with that

Musk said to wait for a battery and powertrain investor day later in the year - sounds like it will be a little earlier than previously indicated at Autonomy Day.

 

[heltok]

Premarket back in the +4% range again, meanwhile FAANG around -0.5%.

 

[UncaNed]

Who are we fooling here? Folks?!

Ads is to pay the Media thugs! As a business owner you pay the gangsters so that they don't kill you and your employees.

So it doesn't matter a tiny bit what you say in the ads!!!

This is "manufactured consensus" on clear display here folks!!

Tesla should partner with Amy Goodman and Noam Chomsky to develop a in-depth story of this sugar.

Slightly more OT-
Ads, IMHO, should be an obligation for businesses to contribute to what's left of our democracy by supporting the free press and investigative reporting. Yeah, there are thugs, but there are also a few good reporters digging up the dirt we all need to know about.

Sigh.

If only.

 

[UncaNed]

And how much lead time is there to convince people to buy a new technology from a company they are either unaware of or completely swayed by all the FUD?
"I've never heard of Tesla, other than that they are going bankrupt and their cars explode, but this ad makes me want to spend $80K+ in Q1 and buy one"

Less lead time than it will take Tesla to catch up with production, IMHO.

 

[Tslynk67]

So, Oliver Stone?

David Lynch or if you really want to go for it, Guy Maddin!

 

[KarenRei]

The main thing that advertising would do would be to let them raise prices (for a constant number of sales), and thus margins, to offset the advertising costs. But this runs counter to Tesla's goal of lowering prices, so...

I agree with the Tesla team. I don't want to see it now.