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

[anthonyj]

Strong price action considering the fudz

 

[mrmage]

How does lowering your margins without increasing your unit or $$$ sales help your business in any way? What sort of magical forest are you talking about?

I’m with you - Tesla expects production to be greater than demand at previous prices.

Tesla would not drop prices if demand is *greater* than supply because it would be *bad* for the mission, which is to save mankind and improve quality of life.

1. Bigger profit = building more EVs = save environment faster
2. Bigger profit = develop cheaper EVs sooner = save environment faster

The master plan is for people who can afford higher priced EVs to fund the EVs for people who can afford lower priced EVs. Then repeat. Or recurse if you’re more functional.

Going with Occam, what are the possibilities for production capacity > expected demand?

1. They’ve topped out demand at last quarter’s 1k per day.
2. Lower tax breaks have reduced demand at last quarter’s prices
3. They expect to increase production capacity, which may exceed demand
4. They wish to create a larger backlog to justify more production capacity

1/2 are two sides of the same coin, as are 3/4.

Hopefully they have reduced production costs in all scenarios. I’m going with increased capacity, which Tesla implied in a recent email.

 

[R1Bill]

Hello everyone !

I have been reading this forum for more than two years now (thank you for all your valuable information !) and I decided to post now because I am so excited I need to share it with you guys.

But before explaining why, let me introduce myself : I am 26 years old, from France, engineer. I had the opportunity to work in the US for a year for my company when I was 24. I come from a very (very) modest family, but my parents always taught me that with hard work I could achieve anything I want, no matter where we wome from. 2 years ago starting my career I had litteraly 0$ on my bank account but started to make good money from the good position I have in my job and logically for me, put almost all of my savings in Tesla.

I started investing in Tesla mid 2017 (I will not explain my personal reason why Tesla, you guys mostly know), bad timing some would say but it was my first try at investing and I don’t regret since I learned a lot about the psychology of it and I keep learning. Since then I added on every deep (last at 178$ I am really proud of) and reduced my average buying price of around 70$ (still in the red for now).

I identify a lot to Gali from HyperChange because we have the same age and almost as many shares, ridiculous amount compared to most of you guys but I don’t plan on selling for the next 15.. 20 years.. ever ? And as half of all my possession are Tesla shares, I am really confortable with that (althought I would have loved buying more under 200 but had no more dry pouder…)

ANYWAY, I am SO EXCITED today for something you already experienced a lot. I live in Paris, I am a Tesla investor and very vocal about it, explaining to everyone who wants to hear what you guys explain here for years, and I have been mocked a lot for that. Last month, I convinced one of my colleagues/friend to buy a model 3 (He drives A LOT and with the price of gas in France, it really is a no brainer for him). For the past year, another colleague (around 50years old, former military, love muscle cars) is mocking me calling me « the electric guy » in a bad way, mocking Tesla, etc… and mocking my friend with his Tesla for the past month (« don’t park your Tesla close to my car I don’t want it to burn », « you must have a long cable to drive home », etc…) . This guy spends 15000€ in gas every year so now WE were mocking him for that and for the first time he didn’t know what to answer.

The reason I AM SUPER EXCITED is because my friend gave him a test drive last Thursday at 1PM, at 1.30PM he was on Tesla website to configure his own. I was mind blown, if a guy like him can be so easily convinced with the economics and most importantly the car (I smile at him in a « I won » way and he told me « I knew it could be interesting economically but I really didn’t expect the car to be so good, fun and amazing to drive… »), it is definitely over, WE WON!!! I post a picture of my friend’s Tesla on a story Instagram the Friday (I almost never post so) I don’t get much answer usually but this time I got answer of (french) people saying they dream to have a Tesla, how it is, asking a lot of interested questions.

Sorry for this long post, I am just so so happy. So many people criticizing Tesla and mocking my investment saying I was just throwing money out of the window… It is just game over, we won. Everyone wants Tesla, in every parts of the world! I see one per day in Paris now (I don’t live in the rich sector) where I never saw any just 6 months ago.

Cheers to the long, thanks TMC posters, I love you guys !

You're very brave! It would be wiser to limit your exposure to one company to about 5% of your investable capital. But there's a lot of room for Tesla to succeed so you may get lucky. Last week I drove in Holland, Belgium, Germany and France. There are a ton of Tesla's all over Holland. As many or more than I see in the California Bay Area despite the very high cost of electricity. Chargers typically are .29 Euro per/KWH. I pay $.12/KWH in CA. Didn't see a single P100D but with all the cameras and traffic rules that was understandable. What surprised me was that the density of superchargers was higher in Holland than in California. And, driving from Holland to Paris, I only saw ONE Tesla in France. Hopefully you and converts like you can change that.

 

[Artful Dodger]

Share price doing well considering how it historically has interpreted price drops.

This one feels different. NOT a demand problem.

Well, the smart money started coming in just after Noon yesterday. Let's see if the big boys have an appetite for more cheap shares today.

P.S. There's 8K PUT volume at the $240 strike already today, but also 5K CALLS at the $260 strike, and 4K CALLS at $255.

So the tug of war continues...

 

[SO16]

And to lose everything, you bet 100% of every penny you have on a single stock as Frenchboy has done, when it moves against you.

There's a difference between investing and gambling. Similar to taking your life's savings to the roulette wheel at a casino and putting it all on red. Hero or zero.

Oh not quite the same as a casino. The odds of Tesla failing completely is not 50/50.

 

[Drax7]

And to lose everything, you bet 100% of every penny you have on a single stock as Frenchboy has done, when it moves against you.

There's a difference between investing and gambling. Similar to taking your life's savings to the roulette wheel at a casino and putting it all on red. Hero or zero.

Elon , took his gains from PayPal and went all in with space x and Tesla.
No diversification or diworsesification

Concentrated bets requires thorough knowledge to say the least,
Diversification implies no knowledge.

 

[Artful Dodger]

GF4 will be built off a generous donation from FCA honoring Tesla's large production of clean vehicles.

Indeed, that might be the single best explanation why Telsa wants to announce a location for GF4/EU by the end of 2019, with FCA C02 credits providing a reliable income stream in 2020/21.

 

[Pezpunk]

Oh not quite the same as a casino. The odds of Tesla failing completely is not 50/50.

Please direct me to this 50/50 casino you mention!

 

[TheGrimSweeper]

50/50 is amazing odds for a Casino, id go there!

Most are like 90/10.

 

[canoemore]

If you go on Twitter you will find a constant stream of replies to his posts about "please give me a Tesla". While Musk obviously cannot do that, he actually is doing everything he can to allow everyone to buy a Tesla. And this is costing Tesla in terms of unrealized profit. I'm okay with that.

Me too. Mostly because if the plan is to start selling various services associated with these cars as platforms (as others have pointed out) then whatever profits they fail to capture now should be more than made up for later. Whether this plan comes to fruition according to the planned timeline is another matter, but it's at least one possible rationale that explains the decisions we've been seeing.

 

[powertoold]

he was talking about production/delivery, not profits and cashflow. i think it's insane to expect record profits.

I agree with you, but it's also a vague statement by Elon. He could have easy just said record production and deliveries. But then again, Elon is prone to hyperbole. But then again again, we were expecting a small record of maybe 91,000 deliveries (when implied from the emails), not 95,200... Similarly, when Elon guided for a profit in Q3 2018, it was a sizeable profit rather than a small one everyone was anticipating.

 

[elasalle]

Indeed, that might be the single best explanation why Telsa wants to announce a location for GF4/EU by the end of 2019, with FCA C02 credits providing a reliable income stream in 2020/21.

Couldn't FCA just close one of it's facilities and give that to Tesla as payment for credits?

 

[thx1139]

I totally get that, it's just IMHO they would be able to achieve the Master Plan most quickly if they were able to profit more from the decreased cost without damaging demand and/or their reputation as a supplier of the best EVs at a reasonable cost. As a shareholder I'd like them to maximize profit (within reason). As a car owner, I'd like them to maximize profit so they can spend more (or spend the same without hampering growth) on service, Superchargers, etc.



Ultimately I believe Tesla knows what they're doing - I just wish I understood the reasoning better (as do we all). G̶o̶d̶ Tesla works in mysterious ways...

I believe that they want to increase the output which on a profitable product will increase product, and it also increases visibility which is perhaps the #1 advertising tool that Tesla has. Do you maximize profit on individual basis or do you maximize profit by selling more. Just back of the napkin. If they would have sold 100K at the higher price and margin is 21% (number I saw flying around today). Now to make the same amount with 110K sold because of lower price they need to improve margin by roughly $700 per car to make same amount.

 

[gluu]

Tesla's original forecast was for 500k units at 42k ASP. I imagine that is still their target and we should probably expect prices to continue to go lower as production improves.

 

[Sparky4life]

More cars on the road sooner also accellerates FSD by increasing the volume of fleet training data.

 

[Mars ☰mperor]

@SnazzyQ @tailosivetech Basic white adds too much to service repair complexity. Team convinced me better to go with pearl white.

Elon Musk on Twitter

So multi-coat white it is!

 

[dc_h]

Agree. If they'd announced this after earnings, anything positive from the earnings call would be discounted/discarded.

Exactly!

I would expect some pricing adjustments at the end of every quarter to adjust demand to production constraints and maximize overall production and margins. Doing this after earnings would have tarnished any good news from the earnings call. This way they can explain the logic next week.
SX cars using 18650 cells. 18650 capacity not constrained. Fremont capacity total constrained. Focus SX production on 30% margin LR & Performance cars. Lose 50% margin sales, but eliminate 20% margin sales and keep margins ~30% overall. 5000 fewer overall sales frees up plant floor and paint shop capacity for Model 3.
Model 3 SR price reduction limits price increase in US where tax incentive declined by $1875 and keeps SR demand high. SR packs are possibly most production efficient, due to latest Grohmann updates. Eliminate LR with AWD and Perf only at high end. Drop prices again, but keep margins up by pushing higher option packages.
Overall impact is to optimize product mix against complex demand levers and production capacity constraint model. The implication to me is that Tesla has a very good handle on the math behind profit optimization. They can optimize these levers frequently and manage these levers prior to production, versus dealer model, where levers are pulled weeks and months after production.

 

[StarFoxisDown!]

I believe the price reductions for Model 3 are indeed related to the production ramp-up. So far, the Model 3 order rate has been higher than the production rate; but they are about to increase the production rate, and I bet they know that they're increasing it to a rate higher than the current order rate. So they're preemptively cutting prices to increase demand because they know there's a huge production boost coming.

This is the case, it's so obvious that just maybe.....the stock isn't going to crater this time round. The cries of "No demand" are noticeably quieter this time. I think everyone knows Tesla's about to greatly increase production.

 

[StealthP3D]

I do. If they lowered prices they need to show a profit.

We need a rising SP and to do that now we need to show a profit. A lower SP makes borrowing more expensive, it makes expansion harder, it makes selling cars harder and it slows the overall mission. .

I think that's a very short-sighted way to look at it (and it might explain why Musk is a successful billionaire and you are not).

People that have more money than they need think of money differently than those who always feel like they could use more. Even if they are running a business that could always use more. It's called looking at the bigger picture. Seeing the forest, not the individual trees.

I would caution those of you who's first instinct is to sell when it seems like you have made a decent profit to not act with such short-sightedness. I have been investing since I was 25 years old and here's my biggest take-away:

You can count unit volumes, profit margins, dollars of profit and daily share price gains or losses till the cows come home. It's all just mental masturbation. Right when you think you have it all figured out, there will be a big announcement or other development that changes everything. The share price will gap up and no one will have seen it coming.

I suspect Tesla will, at some point, announce a huge partnership, one that vastly expands their access to expansion capital. I have no idea what form it will take, or who it will be with (please don't let it be Apple), but it will be a huge and unexpected development that no one sees coming, least of all the short-sellers. They will be burned so badly it will make an ICE fire look like a family wiener roast. And this is why it is short-sighted to fret over profits. That's not what the current game is really about (regardless of what the detractors would have you believe). Enviable profits, wide and deep, will be a given at the proper time. Trying to make as much profit, as soon as possible, would be a huge tactical error.

I'm an ex Alaskan salmon seiner and it's the same way, there will be no fish, the waters calm, catching only 100-200 salmon/hour, it looks to be a bust. Then the tide changes or a breeze picks up, you never know exactly WHEN it will happen, but you know it will. Before you know it, there are millions of fish swimming into your net, everywhere you look, there are fish. You scoop them out of the water into your fish hold, filled with -1C brine, as fast as the equipment allows. And you do it again and again, as efficiently and quickly as possible, until the boat is full and can hold no more. This is where it pays to have well-designed hydraulics and reliable electrics that can move fast when needed and a net that is built by a master to handle the speed and the volume without breaking.

Investing in a company like Telsa is the same way. You don't know exactly when it will surprise you and take off but if the company doesn't have the proper infrastructure in place or you aren't ready for the big news, you can't capitalize on it.

 

[MarcusMaximus]

...but many people think it's voodoo.

Yes, but. Since the whole market is just essentially how people feel about the companies being traded, technical analysis is a self-fulfilling prophecy. Even if it’s complete nonsense, if enough people believe in it, it can effect the prices. Get enough people to believe that every third Wednesday TSLA will drop significantly and you’ll start seeing a big drop starting late Tuesday and carrying into most of the day Wednesday as people try to sell their way out of it.