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

[SPadival]

Yep that would be significant if true. Link?

Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable

 

[Fact Checking]

I'm curious. Can anyone show me the post maybe in Q3 or Q4 2018 where FactChecking described the possibility of a negative outcome in Q1 and what that would look like?

Thanks for not referencing me so that I didn't get a notification, I only noticed your comment accidentally...

Here's an early Q1 (January) post where I warned about 12k-15k Q1 S/X delivery numbers if no S/X refresh is done in Q1:

So yes, falling S/X demand in Q1'19 was entirely predictable and @luvb2b predicted it a number of times.

If the 100D/P100D variants remain the only options for the rest of the quarter, and if China new orders do not make up for the shortfall, then I'd expect Q1 S/X deliveries to be as low as 12-15k units - 55-75% of the 22k deliveries in Q1'2018.

No such refresh was done.

I was overly optimistic about Model 3 deliveries based on VINology so the income from that didn't counter-act the S/X shortfall (now we know that there was a battery production bottleneck), and I was wrong about the impact it would have on cash flow.

Here's three comments where I warned about Q1 financials before they came out:

(Alas my revenue and cash flow shortfall estimates were optimistic: @Doggydogworld's and @luvb2b's latest should be believed instead.)

Here's the latest @luvb2b model from a couple of days ago, a -$611m loss:

Near-future quarterly financial projections​

Here's the @ReflexFunds model from earlier in Q1, with much higher S/X deliveries it's barely GAAP break-even:

Near-future quarterly financial projections​

@Doggydogworld also posted estimates, roughly agreeing with @luvb2b:

Near-future quarterly financial projections​

So yes, the pessimistic, rational me is expecting a Q1 bloodbath.

Note that there are a number of potentially big upsides:

• potential upfront FCA revenue and cash realized in Q1 already
• deferred revenue recognition could improve GAAP income, as most of the deferred revenue is 100% margin software income alike revenue
  
• we don't really know the efficiency of the S/X lines running at 50% capacity.

But the -$600m GAAP loss starting point is a big hurdle and Tesla might decide to call Q1 a loss and allow these factors benefit Q2 instead.

Not advice ...

I agree, and I'm afraid that @luvb2b's -$2 EPS, -$600m GAAP loss and significant cash burn rate to below $2b EoQ cash levels is probably closer to the truth than the easily gamed "Wall Street Q1 expectations" figure. Shorts also have a lot of dry powder now at these SP levels, and Implied Volatility expectations are around -$20.

While Tesla could in principle counter some of that Q1 loss via discretionary measures, if they consider Q1 a goner why would they waste any piggy bank funds like the FCA income or deferred revenue, if they can use them to improve Q2 results instead and secure S&P 500 inclusion in ~August?

Recent moves of releasing good news just before the ER are also consistent with a big Q1 miss. Releasing long term FSD plans and the S/X refresh just after bad Q1 results might have been portrayed as a "desperate", reactionary move - so it might be better to release them first.

The Tesla board down-sizing is also consistent with Q1 losses and taking responsibility, while the institutionals friendly governance moves would increase any buy-out interest and institutional dip-buying strength.

Most of the media is also likely to exaggerate and amplify the worst aspects of Q1 earnings - and this will be played on repeat non-stop with a gloom-and-doom narrative for another 2-3 months until Q2 results...

The only puzzling signal is why they moved the Q1 ER ahead by a week - the bearish reading is that maybe they wanted to get out the bad news ASAP and want to combine it with more layoffs...

While I could be wrong, I'd urge everyone with leverage to be super careful this week. Not advice.

While the sentiment in this thread turned understandably pessimistic given the multi-year lows TSLA is at currently, with all but the earliest investors being underwater, I do think Tesla's long term fundamentals are stronger than ever in the last 5 years.

I'd also like to warn that I have no crystal ball, I am wrong periodically, and the "not advice" disclaimers I sprinkle my financial posts with are not a joke...

 

[schonelucht]

Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable

That's way after the official Q1 delivery numbers came out. Question was 2018 dated predictions.

But I must say : the only way to never make a mistake is to never make a guess. If we all knew it perfectly well two quarters in advance, none of us would be posting on here but rather in discussion with Elon about the particulars of our down payment for a ride to the moon.

 

[jbcarioca]

Yes, new engine design has become so expensive, they are cost sharing. But this is generally not what some people might think of when we say "outsourcing". Merc is not getting their engine from an unknown Chinese company. Neither is BMW. Magna is probably the only company that doesn't make branded cars themselves but supplies high value parts and assemblies to a lot of OEMs.

Magna is definitely the stellar example, but there are several others, such as Valmet. Still these are assemblers for the most part, although they do make specialist types too. FWIW Magna Steyr, their Austrian operation, makes the Jaguar BEV. Although the majors engine operations mostly don’t involve names unknown to Western buyers Daimler-Benz, VAG, BMW, GM and others are making joint developments with Chinese manufacturers including engines, but much more so for BEV’s.

Since BEV is our major interest we might think about the Chinese technical leadership and raw material supplies. Only Tesla, of non-Chinese producers, has ensured adequate supplies of lithium and cobalt. Only Tesla has invested their own resources to develop chemistries less diffuse than is lithium. Before the rest of the world other than Tesla considered the issue Chinese entities contracted for most of the world’s supplies.

In context, OEM’s largest single problem in rapid BEV production is adequate battery supplies, followed by motor/drivetrain and design. Love them, hate them or try to impede them : Chinese companies are absolutely the global leaders in BEV technology. Tesla is bringing them to the next level of excellence.

Contrast that with the US and much if the EU, which is trying to stop Tesla more than encourage them.

Discussion of ICE technical issues, cooperation, joint developments is more evidence that ICE builders have lost the plot.

 

[Chocochip]

Slightly off-topic - meaning I will gladly move this to a more appropriate thread if asked to do so, and told how - earlier this morning I listened to the Call You and Yours podcast on BBC Radio 4, originally broadcast yesterday. The topic - and my reason for listening to it: What's it like to buy and run an EV in the UK? So here's a quick synopsis of this 40-minute broadcast (note: much of this is strictly relevant to the UK market):

• listeners would call in to describe their experience owning an EV in the UK; without exception they all love driving an EV vs. a petrol car... mmm, ok, great! But...
• most of them complained about the limited range, and their reaction varied from "not for long drives, city driving only, it's a commuter car really; they're not there yet with the technology / not ready to become your only driver" to "well you just need to plan ahead, and I now know exactly how many miles there are to my office, my kid's school, etc."
• it quickly emerges that many of the callers own either 1st gen. Leafs (my grammar-loving brain wants me to type Leaves, but I know I shouldn't) or Zoes, or a Mitsubishi PHEV, or various other hybrids with very low electric range, up to 100 miles;
• on the topic of hybrids: funny / cringey comment from a guy who just bought a Toyota Auris hybrid this March and, when asked how often he needs to charge, he replies "oh, no, mine is what's known as a self-charging hybrid" - completely unchallenged, in spite of him admitting seconds earlier that the petrol engine charges the battery! So many things wrong here, but moving on...
• the real barrier to a smooth transition to EVs is the insufficient charging infrastructure in cities and on motorways, the fact that many charging points are either not working or are ICEd (although nobody actually used that word) and also the multiple charging networks, each requiring a separate membership and its own card or phone app, and it should be more straightforward, be able to pay with your debit / credit card
• prices are still too high, it is expected that by 2025 there will be price parity with ICEVs as battery technology improves
• living in a flat is a non-starter for owning an EV if there is insufficient public charging in a city, says a fellow who lives in a flat in London and owns an EV, admitting he paid £2000 for getting a connection to a charging system installed in his building by the management company, which charging system cost £3000 to install (and for which he had to also pay his share)
• it occurred to me that any person interested in the actual practical benefits of buying or owning an EV in the UK and listening to this would get the impression that it's just a bunch of weird tree-huggers buying these cars in spite of how difficult it is to own one (most owners mentioned buying an EV because they wanted to "go green" and they enjoyed the "silence", and diesels stink, literally): EVs are expensive to buy, difficult to charge due to poor or inexistent infrastructure, and they have limited range, according to owners!
• I kept waiting to hear someone mention Tesla, not because I'm an investor, but because I would have thought that one of the world's largest EV-only car companies, making the EVs with the longest range and the best performance, is relevant to this topic... the word was only uttered once, in the absolute final minute of the show, in connection to the moral implications of Li-ion batteries requiring cobalt, which is mined by child labor in the DR Congo (yeah... that came up!), and the expert invited on the show, Prof. David Bailey from Birmingham Business School, said that Tesla is "looking at alternative options" to reduce Co content in the batteries, and BMW has made a big effort on this!
• there's clearly a lot of demand for EVs, because VW just took 10,000 preorders in the first 24h for the ID3 "which costs £26,000", and the Opel Ampera (?) has 4000 preorders! Wow! Any other... car company or model you might... want to mention on the topic of large preorder numbers? No? Mmmkay then...
• things like the large EV ownership in Norway were mentioned, along with the benefits the local government provided for increased adoption, although it might have been relevant to mention that more than half of new cars purchased there are now EVs... but no.

My take: this is a good cross-section of how the general population (again, in the UK) views the experience of owning and driving an EV. People who own old-ish non-Tesla EVs will complain about range, people looking into buying new EVs will complain about price, and everyone will complain about the charging infrastructure. The big take-away is that it's a big headache and you'd better be prepared to completely change your driving habits!

And there's your lack of demand! People may hear about new EV models and performance numbers, but unless they really decide to start reading into the whole experience of owning one and trying to get as much info on the topic, they will just live with prejudiced views and stupid soundbites and won't consider it.

Demand will grow organically as more people understand that these barriers are being knocked down one after another - and most of these barriers don't even exist anymore! I believe Europe will be a HUGE market for EVs, and the transition will be fairly sudden, but it's people's awareness and attitudes that will first need to change.

 

[Reciprocity]

I'm sure Tesla has already done all the accelerated aging tests etc. There have been so many battery improvement claims over the years and they haven't fallen for any of them. No reason to think they'll start now.

Agreed. Every battery improvement to date comes with trade offs. You can sacrifice charge rates for density or cycle life or any combo. You usually must give up something to get something. That extends to manufacturability as well, goodenough already invented the nearly perfect solid state battery that actually gains capacity for the first year or so and cycles 5k times, charges fast and has no flammable liquids. The problem then? How to make a sandwich of glass without cracking the glass.

To me Maxwell is a stepping stone to solid-state that is highly manufacturable. It adds density, cycle rates and the more stable materials allows for higher charge rates and less cooling. It's solid-state light. Only Tesla has the scale and demand to move this from the labs to cars in a hurry. Jeff Dahn can do accelerated testing and Cassie
Validate the cells, Ghromann and Perbix can build the machines to automate the process. The best part to me is that the material is compatible with the current manufacturing process, past the ovens. So it replaces everything up to the ovens and works with everything past that point while saving massive capex and space on future Gigafactories. The current ovens are about a city block long and 3 stories tall and require massive amounts of energy to cook and recycle the solvents used today.

My guess is that once the deal closes, Tesla can have these machines in place and contributing in months, not years. My thought is that it's required to hit the densities and cycle rates needed for the semi. People assume some type of NMC 811 would be required for 5k cycles but the energy density is too low and the batteries would be too heavy, thus the physics jokes by Daimler. Maxwell would allow a zero Cobalt NCA battery.. haha.. NNoCA battery that can cycle 2500+ times with 300+wh/kg of density. BTW, 2500 cycles times 400 miles per cycle is a million miles. At 800KWh and .5m/KWh fully loaded should be possible. Enough buffer to allow for degradation and weather conditions, assume a pretty good sized buffer, maybe 10% on the top 4% on the bottom, so 912KWh pack with 800 usable, more in bad weather, that's less than 7000lbs for the batteries. Curb weight of your average semi is 17,000lbs (25% is drive train) so Tesla would have to get creative with weight given the weight of the batteries. The smaller pack would be very close to parity but only 300mi range. My point is the Maxwell deal answers a lot of questions. Assume it's required for the semi and assume cells are being tested in the semi now.

 

[TheMrX]

Tesla is also no longer including the 14-50 NEMA adapter and USB cables in the Model 3. While I understand the 14-50 NEMA adapter is probably seldomly used, no longer including USB cables is just a dumb decision that creates negative PR and customer experience that far outweighs the savings.

I just took delivery of my M3 last Saturday and I had the 2 USB cables and the NEMA 14-50 included. I don't know where did you get that information but it is just false.

 

[CorneliusXX]

I don't understand your confusion. If the 2 available countries are bad that's negative, right?

The sample size is too small to draw a meaningful conclusion

 

[Pras]

I just took delivery of my M3 last Saturday and I had the 2 USB cables and the NEMA 14-50 included. I don't know where did you get that information but it is just false.

This should be posted on Reddit. Even I was assuming, after reading Reddit posts, that they stopped giving these items.

On the usb cable, the design has a slight flaw (the tip needs to stick out longer to attach to my iPhone sitting in a phone case), and I don’t use it anyway. But the NEMA adapter is very important.

 

[Reciprocity]

I have a close friend, graduated in chemistry studying batteries and then for the last 20 years has managed over 200 research projects for the EC, some of which were the amongst the first Li-ion battery projects. In his experience, a technology development cycle is 6-10 years in this field and he reckons it's 2-3 years from here that Tesla could advance to (what he terms) TRL - technology readiness level.

Now I'd add that he's very pessimistic on timescales and on Tesla in general, he just doesn't believe that battery packs have enough charge cycles to be viable and that Tesla are somehow gaming the system to show such good degradation over time.

I suppose it all depends ho far the joint research between Tesla and Maxwell has progressed. We have no idea on this. Maybe they have actually working batteries, maybe they just have something in the lab still - too many unknowns I think. But it's fanciful IMO to hope they will begin the MY, at least at the beginning. Roadster looks like the first potential candidate, low volume, easier and cheaper to remedy any issues seen in the wild.

No offense to your friend, but Maxwell is not a new battery chemistry, it's a new process for creating an material used in a current battery chemistry. It's evolutionary not revolutionary. Maxwell isn't even a battery company, they see a capacitor company. A leader in capacitors, but none the less, only a capacitor company. What they created was really stolen from their capacitor manufacturing process.

Certainly testing has to done and machines must be invented.. this is why Maxwell only appeals to Tesla. Tesla has the scale, has the manufacturing expertise with Ghromann and Perbix. And Tesla is not afraid to move quickly. Most importantly, Tesla has the demand, which drivers the scale.

 

[CorneliusXX]

Thanks.

For us the headline should be “sales of new energy vehicles (NEV) have been a bright spot, rising 18.1% in April to 97,000 vehicles, CAAM said. NEV sales jumped almost 62 percent last year even as the broader auto market contracted.”

China is going to be big after GF3. Imagine when they can sell car for same ASP as in US. The demand will be great.

Welcome to the fractured tipping point

 

[CorneliusXX]

These are the numbers I back out of the financials and disclosures, together with options cost estimates:

View attachment 407902

It's difficult to estimate Q1 given so many moving parts, pricing changes and exceptional costs - but these numbers appear to be consistent with all the information I can find.

The largest margin hit in Q1 was likely on Model S/X - a 50% cut in volume has a huge margin hit due to operating leverage, together with the price cuts. This was particularly significant because it doesn't sound like Tesla made many long term layoffs to S/X production staff - instead they moved staff to new shifts and elsewhere in the business. This is because they plan to quickly ramp S/X production back up again once the refresh is launched, but it meant particularly large short term impact while production/sales volume was low.

Model 3 Q1 margin of 13.7% corresponds to c.19% after GHG credits, which is in-line with Tesla's comments that it averaged c.20% in 1Q19.
The implied base Model 3 cost of c.$37k is for a theoretical SR model 3 with the smaller battery which was never produced. The actual $35k off menu car they have been selling has the same costs as the SR+ car - or c.$38k. I expect this is where the $38k cost Elon mentioned on the investor call came from.
This $38.5k to $37k QoQ cost improvement also aligns with the double digit quarter on quarter improvements to Model 3 labour content, warehousing and scrap disclosed on the Q1 call.

Two things which likely significantly impacted Model 3 margin in Q1 were the cell supply constraints and SR+ battery pack ramp. Cell supply constraints meant they couldn't ramp production further, better leveraging fixed depreciation expenses and largely fixed staff costs - this significant cost reduction will have to wait for Q2/Q3. The SR+ battery ramp means significant numbers of staff working on a new production line with very low production rates
So there should be significant further reduction in the base cost of the Model 3 this year without requiring any fundamental change to the manufacturing processes or supplier prices.

Of the 37k cost, how much do you attribute to fixed costs?

 

[Pras]

Welcome to the fractured tipping point

Fractured tipping point? Like EV breaking from the ICE trend?

 

[jerry33]

Tesla is also no longer including the 14-50 NEMA adapter and USB cables in the Model 3. While I understand the 14-50 NEMA adapter is probably seldomly used

You're kidding, right? I use the 14-50 to charge every day at home, I use it when I go camping, and I use it at Bed and Breakfasts that have kindly put in a 14-50 so that EVs can charge. Eliminating the 14-50 is just a bad policy.

 

[AndyH]

Lots of good reviews of Teslas lately like this Canadian one. An old Model S gets a slow clap of appreciation for doing the basics of an electric car so much better than anyone else. Much deserved.

 

[AlexS]

If this is true, lidar makers and users will face big lawsuits.

You have to sue FDA they gave the approval as safe. But fact is that LiDAR wavelength can damage your eyes permanently. Chances are not big that it will happen, but it can happen.

eg. rotating mechanism gets stuck after accident and you are looking at it or multiple lidars are shooting in to your eye from several cars.

 

[JBRR]

Renaissance Technologies LLC - James Simons - Latest 13F Holdings - Fintel.io

Renaissance increased their stake in TSLA in the last quarter so you are all in good company.

 

[CyberDutchie]

Equipping cars that collect 360 video and car speed, steering, acceleration and braking input, and uploading all those data reliability is hard, and you have to pay wireless carrier.

We haven't got into Tesla's secret source: an onboard computer that does data filtering and some labelling, all by its own.

Good luck manually digging through those data you collected.

I’ve heard the number of 1,500 workers in India needed to manually sort through about 1 billion frames to end up with 3 million labeled images. This is per year and not low-skilled workers so at a significant cost.

 

[pnungesser]

The Grand Phoenix is leaving Pier 80 enroute to Panama. Is there any chance it is headed to the UK?

 

[Unpilot]

The biggest problem with Q1 isn't the model 3 it was the S/X. Most of the financial damage is from S/X collapse. Here we are in Q2 and the only data we have on sales for S/X is norway and netherlands and both of them are GODAWFUL.

I'm nervous as f'''''''''

It doesn't help that Elon is claiming robotaxi timelines that are impossible. I have a lot of complaints about Neroden, because he for no logical reason thinks buying solarcity was a good idea, but he is perfectly spot on when he talks about autopilot. I was writing deep learning code 10 years ago. I know far better than rationalizing robots like FC don't. The lidar v. vision subject is dead. Tesla wins that. The subject of planning and logic is not solved. Tesla has no idea and is nowhere close to solving that.

Your going on "skim"mode.....yes I know I'm an idiot investor who can't do math and will ...blah..blah..blah..skim mode it is.