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

[Artful Dodger]

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

Love it! Or, enter into an agreement to license Tesla tech so half of their factories can start to produce real EVs (the kind people want to buy), and potentially survive beyond 2025? Otherwise, Tesla buys FCA's idyled factories in bankrupcy.

Cheers!

P.S. Dodge/RAM needs to take a long, hard look at their pickup business, too. And Jeep. Electric rock crawlers will be unstoppable, both on the trail, and in the showroom.

 

[dc_h]

Jerome's email already told us they're increasing production. That will drop unit cost. Net profit will likely increase as a result, or they wouldn't do it until they're ready. That's the "as fast as possible" part of the Master Plan.

You're gonna be fine, just relax and let it happen.

Cheers!

The email said they will announce the production increase soon, so likely on earnings call. If this is a big deal, as stated, it won't happen without some advance notice.
I think the pricing adjustments are good and reflect production, demand, and margin management.

 

[dha]

Prediction: we will close green, macros permitting, as manipulations are unwound and reality sets in that yesterday's price cuts imply Q2 margins were strong af.

 

[StealthP3D]

The problem with this approach is that Tesla can't buy enough advertising to do that.

Buying advertising to pay off the FUD'sters would be like an exotic dancer changing careers to prostitution because she didn't like the stigma associated with dancing nude in front of strangers.

 

[StealthP3D]

Lora's article reeks of UAW PR involvement.

No, the union bosses aren't that dumb and clueless. This article came from Wall Street types who wanted to tarnish the Tesla brand.

They HATE the fact that demand appears unrelenting. It baffles them. I mean, who would want a car with whompy wheels?

 

[kbM3]

I believe that's a misreading of the Extended Master Plan, which is clearly centered around the idea that they want to maintain around 20% (non-GAAP) product margins going forward, because that and not profit extraction is maximizing growth.

Note how stable ~20% overall margins promote trust between owners and Tesla: owners can rely on always getting a good deal while not being price gauged by Tesla.

Having said that I don't know whether these latest price adjustments were done to generate more demand, or to adjust pricing to the 20% margin targets. I suspect it's a bit of both.

I seem to recall Tesla consistently guiding to 25% GM.

What are the odds Tesla will reduce this guidance during earnings?

My fear is that if they do, Wall St. will hammer them.

 

[MarcusMaximus]

Loving the headlines today. Pretty even mix of “Tesla raises prices” and “Tesla lowers prices”, all on the same day

 

[Doggydogworld]

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

Blackjack is very close to 50/50 with correct strategy. Card counting tilted the odds in favor of the player back in the day, but casinos developed ways to combat counting.

 

[Prunesquallor]

These leading edge manufacturers in 2019...lets see how they stack up. This is US Battery Electric sales from the InsideEVs scorecard. Took out the hybrids for this graph since they say "electric" and not "electrified".

View attachment 430229

Nice plot. Takeaway: In June, Tesla outsold ALL other BEVs COMBINED BY A FACTOR OF FIVE.

 

[KarenRei]

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.

So... if I understand you right, you're saying we should sell our TSLA and invest in salmon companies? Okay, that's unexpected but.. sure, you're probably right!

... and, the transaction went through. Thanks so much, I nearly missed out!

 

[Doggydogworld]

I seem to recall Tesla consistently guiding to 25% GM.

What are the odds Tesla will reduce this guidance during earnings?

My fear is that if they do, Wall St. will hammer them.

25% GM is still their long term aspiration. I see no reason to change that.

Investors are gradually adjusting to 20% on their own. Model Y growth story is about to become the shiny new toy.

 

[Yonki]

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.

You're assuming that the salable volume is elastic; that you will be able to sell more if you lower the price. My point has been that if it's not elastic (i.e. production has not increased over demand), it's not a great idea to lower the price (yes there may be some psychological benefits, but you won't sell more cars, you'll only make less money). If it is elastic, then yes, you should definitely optimize.

 

[KarenRei]

I seem to recall Tesla consistently guiding to 25% GM.

What are the odds Tesla will reduce this guidance during earnings?

My fear is that if they do, Wall St. will hammer them.

If Tesla delivers anywhere near 25% margins, they'll post a strong profit and the stock will surge.

Factset expectations imply something like 16-17% margins.

 

[Tslynk67]

It’s Time to Wait for Lower Prices on Tesla Stock
"With comparable vehicles from Ford, General Motors and Nio (NYSE:NIO), Motor Trend is behaving as if Tesla were still the only leading-edge electric vehicle manufacturer around, which is absolutely not the case in 2019."

Final Update: Monthly Plug-In EV Sales Scorecard: June 2019
June US EV Sales Estimates:
Tesla (3+S+X): 25,700
GM (Volt+Bolt+CT6): 1994
Ford (Energi): 675
NIO: 0

Scratching my head at which "comparable vehicles" they might be, doubly so from Ford!

 

[Prunesquallor]

...
P.S. Dodge/RAM needs to take a long, hard look at their pickup business, too. And Jeep. Electric rock crawlers will be unstoppable, both on the trail, and in the showroom.

I thought I read in Electrek about a year ago that FCA was going to electrify Jeeps, but only sell them in China.

 

[EVNow]

If Tesla delivers anywhere near 25% margins, they'll post a strong profit and the stock will surge.

Factset expectations imply something like 16-17% margins.

I'd say 19%, including regulatory credits. They are expecting S&X ASP of 100k and Model 3 ASP of 53k.

 

[humbaba]

You're assuming that the salable volume is elastic; that you will be able to sell more if you lower the price. My point has been that if it's not elastic (i.e. production has not increased over demand), it's not a great idea to lower the price (yes there may be some psychological benefits, but you won't sell more cars, you'll only make less money). If it is elastic, then yes, you should definitely optimize.

And this is where I argue that the reason for the lower price is because Elon wants the car to be more affordable. As long as the price drops are in line with cost efficiency improvements so as to maintain margins this works out. Meaning, sure lower profits, but penetration into new demographics. Which, as I've said before, I believe is important to Elon. Listen to the Q1 earnings call. Sure, he never says that he would do that, but it is the tone and emotion. That some people really can't afford to buy his car.

In a prior post I made the point that I made the mistake of not seeing this and missed the consequence. I try to learn from my mistakes, hence the revision to my position.

In short, it appears that Elon prioritizes affordability over profits. No, that doesn't make financial sense, but I believe it makes Elon sense.

 

[Drax7]

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

Most are like 90/10.

It’s more about the odds of you going bankrupt before they do, as
The casino has more money.

 

[Cherry Wine]

And this is where I argue that the reason for the lower price is because Elon wants the car to be more affordable. As long as the price drops are in line with cost efficiency improvements so as to maintain margins this works out. Meaning, sure lower profits, but penetration into new demographics. Which, as I've said before, I believe is important to Elon. Listen to the Q1 earnings call. Sure, he never says that he would do that, but it is the tone and emotion. That some people really can't afford to buy his car.

In a prior post I made the point that I made the mistake of not seeing this and missed the consequence. I try to learn from my mistakes, hence the revision to my position.

In short, it appears that Elon prioritizes affordability over profits. No, that doesn't make financial sense, but I believe it makes Elon sense.

Exhibit A: the top comment on the top post of r/teslamotors: (emphasis added)

Model 3 now starts $1000 less

I know you said "starts at," but:

• SR+ is $1k cheaper
  
  
• LR AWD is $2k less
  
  
• Performance is $5k less!

I was strongly considering a LR AWD, or even a used S, but may have to go for a Performance at these prices... holy crap.

EDIT: I honestly cannot think of a gasoline sedan that offers the same level of performance as the P3D for $55k. Can anyone else?

 

[NakedLong]

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.

Tesla doesn't need to partner up any more... doing so would only relinquish control which Elon would rightly never do. One caveat is possibly on battery cell supply or raw materials supply, but only in the short term. Long term I would expect Tesla to become a player in these spaces too. However, Tesla (like Apple) owe a lot of their success to avoiding collaboration and brining as much as possible in house. Vertical integration means they have less middle men to pay and more control over design iterations, pricing, logistics, etc. I am sure they want to cut out Panasonic and probably will as soon as they realistically can, as evident by their battery cell research lab.

If you notice the type of collaboration they are doing now days it is things which bring very specific skills into Tesla via acquisitions, such as Grohmann, Maxwell, trucking companies, insurance company, etc. Perhaps there will be some collab on Supercharging, or a specific model with another OEM like the VW van Elon tweeted about, but nothing major which will get in the way of Tesla ramping up.