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

[dl003]

I also realized Tesla was fine without the one time FX gain in Q3.

 

[Bobfitz1]

There are a lot of things that are different this Q1 than last Q1. Q1 2019:
. S/X were converting to Raven configuration, so production was down
. Model 3 production was still ramping up.
. Model 3 organic demand was still ramping up.
. Tesla said they were "stopping the wave" (but it appears we're back to doing it again...) so lots of vehicles in transit
. Still hadn't sorted out deliveries even in the US, Europe and China were a total mess
. Lot of spending on GF3 (I guess some spending on GF4 instead this quarter)
. (Edit) US and Denmark subsidies reducing.

One more possible boost to Q1 profits might be end of quarter sales of performance MYs. Based on the call it sounded like only a trickle of MYs will be delivered in Q1. My suspicion is this too is understating how many will be delivered. If production has already begun and MY line fine tuning continues at a good pace, we may see several thousand loaded PYDs delivered in Q1.
Just as prioritizing P3Ds when M3 line ramp began going well helped Q3 & Q4 2018, enough high ASP PYD could be one more factor lifting Q1 profits.

 

[mongo]

Paging @mongo. Real engineers can tell you more about how project planning actually works on the bleeding edge of manufacturing technology. "I am but a poor, lost circus performers, looking for a nearby village..."

I almost gave a you a 'funny' for both the real engineer and planning parts. I have two modes: figure it out on the fly vs over optimize and never get anything done.
Tesla/ Elon plan plus expect a level of failure. Find the failure faster and fail toward the goal. As long as everyone is moving in the average direction of the goal, progress is made.

But more on topic of financal impacts, did you see that casting? Of course you did. Can't tell which iteration it is, but what an optimization. I think the consistency of the part will also improve alignment issues as the suspension hardpoints are cast in Al as opposed to the end result of multiple stamps, welds, and alignment jigs. We may also be seeing the Y's heat dissipation device (radiator).

And did we all pick up on the new way to eliminate panel gaps? Make the entire Class A surface as one piece (made from a very small number of stampings)! What about welds showing you ask? Ha, we adhesive bond the panels together. What about edges? Ha ha, we attach trim later.

That's right classic OEMs, Tesla makes the visible surface on one line, the structural body on another and marries them at the end. This is great from a space usage point of view as those assemblies can be made in parallel with the main vehicle, just like doors, trucks, and hoods. Those are made on their own space optimized lines and combined just before paint. No rejects due to door dings on our body line! Also gives the adhesive time to out gas (if needed) by buffering these thin assemblies.

View from interior of the pretty surfaces:

View from exterior of the structural features:
Last thought, in a minor accident, how many pieces/ assemblies will need replaced?

 

[FrankSG]

I just re-listened to the conference call more closely, and made notes of everything I found noteworthy:

Elon's opening remarks:

• The Fremont factory has the potential to "significantly exceed" its current production rate.
• Model Y is already in production.
• We're surprised with Cybertruck demand. It's off the charts, and we don't think they'll be able to fulfill all demand for at least the first 3-4 years.

Zachary's opening remarks:

• M3 ASP increased slightly in Q4. (This is not a surprise, because of price increases.)
• MS and MX ASPs have increased since the launch of Raven powertrain in Q2.
• Progress is being made on recurring and software based revenue with premium connectivity and "the beginning of upgrades available in the Tesla app". (Sounds like the performance boost is just the beginning. Games? Movies? Let the speculation begin.)
• The $82M increase in SBC (Stock Based Compensation) was almost entirely due to the CEO Grant. (Sounds like at least ~$70M of the increase in OPEX was related to this.)
• OPEX will increase in 2020, but at a lower rate than top line revenue.
• Zachary guided for lower gross margins in Q1 due to Giga Shanghai and MY ramps.

Autonomy:

• A lot of work has been going on on autopilot behind the scenes that may not be directly noticeable to the general public. Elon stated they're working on a three orders of magnitude improvement in labeling efficiency. (This is likely related to Project Dojo.)
• "The average passengers per vehicle is 1.2, maaaybe it will go to 1.4 with autonomy. People like to be in vehicles alone." (I've been saying this for a while, but expect Tesla to come out with a 2-seater vehicle to serve as a future robotaxi.)

Giga Shanghai:

• Zachary said that if you go through the entire line of CoGS of MiC M3, everything is lower compared to Fremont. Material costs (due to localization), labor costs, capex per unit of production capacity costs, factory efficiencies, etc.
• "A significant reduction in cost of MiC M3 relative to Fremont".
• "Price of M3 SR+ coming out of Shanghai is lower than that of a similar vehicle coming out of Fremont."
• "Margin of MiC M3 coming out of the Shanghai facility is the same as that of one coming out of Fremont."
• Gross margins on MiC M3s built in Q4 were negative.

Growth:

• Elon: "We can't spend money faster efficiently. If I see anything that is good value for money, I say yes immediately." (This is an amazing sign for how financially healthy the company is.)
• "We're aiming for more than 30% CAGR."
• Elon: "I believe we'll maintain a more than 50% CAGR".
• There will be additional detail on Capex in the 10-K.
• Zachary: "Increased production volumes -> more cash flow -> fund additional factories".

Batteries:

• They were VERY adamant about increasing battery cell, module, and pack production ASAP.
• "We need a very steep ramp and continued improvement in cost per kWh."
• "We need to scale battery production to crazy levels that people cannot even fathom today. To a couple thousand GWh per year or something."
• The advancements that will be unveiled during Battery & Powertrain Investor Day blow Elon's mind, and they will blow ours as well.
• "We're going SUPER deep on battery cells, modules, and packs. We REALLY know a LOT about batteries."

Model Y:

• "People will be impressed when they tear down Model Y."
• "There is more change happening to the Model Y than a 10% increase in size. Changes noticeable to the customer as well."

Miscellaneous:

• The "Mind-blowing" Plaid powertrain is coming at the end of the year. It will be "Alien Technology", and it is "insane".
• Q1'20 will be an intense EoQ just like last quarter. (This is an extremely good sign for Q1 deliveries and revenues. Sounds like they'll be scrambling to deliver as many cars as possible once again.)
• "There may be ups and downs in production levels at various factories as we make sure we have production on every continent."

Additional observations from me:

• Demand really is off the charts. As of late there have been price increases, and no discounting, no incentives, and not much of a referral program.
• I found the statements from Zachary about MiC M3 costs/prices/margins very confusing. M3 SR+ is being sold for more in China than in the USA, and there are government subsidies that should make margins significantly better. I wonder if he was comparing the MiC M3 to the M3 SR+ they used to ship from US to sell in China, instead of to the M3 SR+ built and sold in the US.
  
• The MiC M3 and Model Y programs do increase OPEX slightly, in contrast to some people whom assumed that this would all go into CoGS.
• When you combine Elon's statement of more than 50% CAGR and Zachary's statement of increases in production leading to increased cash flow with which they'll fund additional factories, that sounds exactly like my blog yesterday about increased leverage and 5-10M annual production rate in 2050.

 

[AlexS]

On Jan. 9. and 10. my father was calling me and asking about his idea to short Tesla, it was trading around 470. I explained him why it is so dangerous and it can gap up to 700 after ER. He was convinced it will drop to 300 before talking to me. I finally got to talk him out of it and also had to make a bet if Tesla will fall to 350 I pay him 1k or if it reach 700 he pays me 1k. So can we please touch 700 before first profit taking. I hope he didn't short secretly mean while.

 

[CorneliusXX]

I am almost certainly such a person. I ordered one of each trim level the moment Elon said "You can order now if you want." ...and I don't have room for even one. I did this because the deposit was small and refundable, and I thought maybe I could somehow sell my place in line, or that I might acquire an "early and rare" unit and sell it profitably.

My apologies to any who feel this is dastardly. I just figured "why not" and got caught up in the moment.

On-topic, I think it's likely there are a lot of folks like me. The 250K+ orders surely won't result in as many actual deliveries. I hope they are doing their best to determine how many of those who ordered actually want one, and planning accordingly.

Off-topic, since I am unlikely to actually be able to keep a Cybertruck, any advice on what should I do with these 3 orders?

I also ordered one and I live in central London.

If I even attempted to drive it home the din of tuts would likely break the windows.

 

[Mike Smith]

 

[hacer]

I love that Zach Kirkhorn is really coming into his own as CFO. He's asserting himself a bit more and brings a great presence to the numbers side of the business. Bright mind.

Think about how derisive the main stream media was when Zach became CFO. Doesn't matter what aspect of the business they report on, they usually get it totally wrong.

 

[jeewee3000]

Elon stated a three orders of magnitude improvement in labeling efficiency. (This is likely related to Project Dojo.)

Elon said:

Well, I mean, to be precise, I said I was hoping would be feature complete with both FSD by the end of last year. We got pretty close, it's looking like we might be feature complete in a few months. The feature complete just means like it has some chance of going from your home to work let's say with no interventions. So, that's -- it does mean the features are working well, but it means it has above zero chance. So I think that's looking like maybe it's going to be couple of months for now. And what isn't obvious regarding Autopilot and full self-driving is just how much work has been going into improving the foundational elements of autonomy. The -- like the core autopilot in Tesla or Autopilot software and AI team is just is I think very, very strong in making great progress. And we're really only getting to take full advantage of the Autopilot hardware and the FSD hardware.

So, I think it's -- the apparent progress as seen by consumer as well seems to be extremely rapid, but actually what's really going on my head it seems like I said having the foundational software be very strong and with really strong foundation. And then really fundamental thing is moving to video training. So in terms of labeling, labeling with video in all eight cameras simultaneously. This is a really, I mean in terms of labeling efficiency arguably like a three order of magnitude improvement in labeling efficiency. For those who know about this it's extremely fundamental, so that's really great progress on that.

Seems to me they are about to move to video training or have just begun doing so, and that video labelling could - if succesful - be three orders of magnitute more efficient.

I don't think Elon is saying that point of efficiency has already been reached. (Which you imply, if I read your post correctly)

(His last sentence "really great progress on that" is kinda vague, I'm being conservative and saying it's about FSD/Autopilot software foundation as a whole, not the video labelling in itself.)

 

[Alphacrux]

Vehicle in garage ignites house fire in Northwest Austin

And it wasn’t even a Tesla (I know that area and there are none on that road).

 

[Artful Dodger]

531,040 shares of TSLA traded in the Pre-Market by 08:00 EST

 

[Tslynk67]

TAs for the surge in After Hours, I read the report before checking the price and was pretty surprised to be honest, as the results and guidance were largely par versus my expectations. The price rally (and Elon's big up to Retail) are a timely reminder that there remains a profound lack of understanding of Tesla by the market at large.

In-line with our expectations, but not inline with the media-fed rest-of-the-world.

 

[fdutra1]

531,040 shares of TSLA traded in the Pre-Market by 08:00 EST

I've never seen this much volume pre-market,,, might be an interesting day,,,

 

[FrankSG]

Elon said:

Well, I mean, to be precise, I said I was hoping would be feature complete with both FSD by the end of last year. We got pretty close, it's looking like we might be feature complete in a few months. The feature complete just means like it has some chance of going from your home to work let's say with no interventions. So, that's -- it does mean the features are working well, but it means it has above zero chance. So I think that's looking like maybe it's going to be couple of months for now. And what isn't obvious regarding Autopilot and full self-driving is just how much work has been going into improving the foundational elements of autonomy. The -- like the core autopilot in Tesla or Autopilot software and AI team is just is I think very, very strong in making great progress. And we're really only getting to take full advantage of the Autopilot hardware and the FSD hardware.

So, I think it's -- the apparent progress as seen by consumer as well seems to be extremely rapid, but actually what's really going on my head it seems like I said having the foundational software be very strong and with really strong foundation. And then really fundamental thing is moving to video training. So in terms of labeling, labeling with video in all eight cameras simultaneously. This is a really, I mean in terms of labeling efficiency arguably like a three order of magnitude improvement in labeling efficiency. For those who know about this it's extremely fundamental, so that's really great progress on that.

Seems to me they are about to move to video training or have just begun doing so, and that video labelling could - if succesful - be three orders of magnitute more efficient.

I don't think Elon is saying that point of efficiency has already been reached. (Which you imply, if I read your post correctly)

(His last sentence "really great progress on that" is kinda vague, I'm being conservative and saying it's about FSD/Autopilot software foundation as a whole, not the video labelling in itself.)

"Moving to", so yes you're correct. Sounds like it's not a done deal yet.

 

[jerry33]

From existing OEM's, I believe at least Volkswagen has a good shot of joining the EV party. (Late, but succesfully)

Not with cars that will have sat for a year before being sold due to no software.

 

[The Accountant]

CEO Performance Award Impact on P&L and Dilution

@Cosmacelf @M3Rider @mongo traded comments on this topic.
Although their conclusions were correct, I thought I would summarize it here:

P&L Impact
Telsa records to the P&L an expense for the CEO Award benefit when it is considered probable of being met. There are 12 different tranches of award levels and as each level becomes probable, an expense is recorded (in SG&A for the CEO award). See excerpt from the 2018 10k:

Stock-based compensation expense associated with the 2018 CEO Performance Award is recognized .........beginning at the point in time when the relevant operational milestone is considered probable of being met​

The 12 tranches have Revenue, EBITDA and Market Capitalization targets. The Q4 SG&A increase was driven by an expense for the CEO Award as it became more probably that Elon will meet higher levels of the Revenue and EBITDA tranches (targets).

Dilution
Although there is a P&L charge, no dilution has occurred at this time because the award is not yet granted (no options or shares issued)

Upon Issuance of Options
Once Elon achieves the award, options will be granted.
At this time there should not be much of a P&L impact because the company has been recording expenses already as the awards became probable. However, earnings per share will decline because the options will likely be considered dilutive. So when they compute the "Dilutive" EPS number, there will be more shares in the denominator. (Earnings/Shares = EPS)

 

[Tslynk67]

3 words: ITS THE BATTERIES

Aaargh, fighting my inner grammar-Nazi...

 

[Tslynk67]

Settlement secured?

All Tesla Directors But Musk Settle Investors’ SolarCity Suits

Given where the SP is now, seems a bit petty to pursue this further. Shorty nonsense I'm assuming.

 

[Krugerrand]

Well, VWAG and TM, obviously!
*then delete them
Cheers!

I think the reason Tesla found the question laughable was simply because ignorantly unbeknownst to the questioner (and almost everyone else of his ilk and some here) the assumption by the questioner is that Tesla is just sitting around doing nothing future and forward thinking and stupid.

No, doing something stupid is not the same as being stupid. Tesla has occasionally done the former but isn’t the latter.

Of course Tesla wouldn’t have thought of purchasing a company to help advance themselves or speed up development in any area. Thanks for the brilliant idea, Buddy.

In this case, I’m going to just assume the guy is new to covering Tesla and simply ignorant.

 

[jerry33]

But I'm wondering... if there's no place in line... Is there any reason at all to place an online order? Surely there must be.

1. The FSD price is locked in. I expect that to go up between $1K and $3K this year.
2. You'll get the configure your Cybertruck email first. (This might very well be done in RN order).