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

[M|S|M MYP]

I had to sell two chairs at $US 196.351 (just now) because, via an error (over-contribution) on my part back in 2022, I had to pull $CAD 600 out of my Tax Free Savings Account because I'm over the contribution limit for 2023.

First world problems

 

[Hiline]

Trying to understand the trading volume of late. Trading 200M shares on a given day has become fairly common of late. According to a source:

Tesla has a total of 3.01bn shares outstanding, according to data from Nasdaq. Who are the stakeholders of Tesla?

Institutional investors accounted for the largest block of shares at around 1.36 billion, or 43.01%, as of 5 December, according to WallStreetZen. Retail investors accounted for 41.9% of stock ownership, totalling 1.32bn shares, up from a 39.8% share earlier this year. Company executives held 15.09% of the stock, or 476.4 million shares

So, I don’t think those insider shares are contributing to the 200M volume. ALL retail investors amounts to 15% of the 200M. It also amounts to 15% of the 200M for ALL institutional investors. Any theories of how much of a 200M day is retail vs institutional? The 200M volume seems inexplicable to me.

edited for clarity.

Trading volume double-counts shares. A quantitative trading shop can buy and sell the same shares multiple times a day to profit from volatility. The more volatile a stock is, the higher the volume is going to be - this is a huge money-making opportunity for quantitative trading. We have no idea how many actual shares change hands - it could be 1M, 10M, or 20M shares. I wouldn't read too much into trading volume.

 

[MP3Mike]

Smaller is not equal to less profitable.

First, I didn't say "more profitable". I said "higher profit." Two different things.

Second, people buying smaller less costly cars are less likely to buy EAP/FSD, lowering the overall profit for the vehicle line.

 

[2daMoon]

1. Wright’s Law is based on a CUMULATIVE increase. Not an increase in annual production.
2. He originally tweeted > 100% gross margins for Megapacks. Then backpedaled to cells.
3. The credits would NEVER remain in place after cell production decreased below that amount.
4. Wouldn‘t tax credits get accounted for as revenue and not under COGS reduction? If so, then the whole negative cost claim goes out the window.

1. Wright's Law, as presented, is in regard to a doubling of production resulting in a particular percentage of price reduction. The chart represents this as it has happened over a period of several doublings.

2. I agree about his mistake about Megapacks and later specifing cells. I worked through that and it didn't change things, just defined it more accurately. I appreciated that he made the correction.

3. It seems to me that the purpose of the credits is to stimulate domestic production. It is granted that the boon for this won't last forever. However, it has been discussed many times that mining, Lithium refinement, and battery production have a timeline of 5 to 10+ years from breaking ground to shipping product. His timeline was 6 years. That seems reasonable, unless politicians change things.

4. Tax credits as revenue or COGS is picking nits. If the result is lower overall cost for batteries, what is the difference in how the accountants deal with it? The net result is the same if the credits offset the cost of manufacturing the cells.

Edit: changed "cost" to "price" in 1 above.

 

[Nocturnal]

Elon stated bigger than Saudi Aramco + Apple in 5 years, so he’s not far behind her.

Ron Baron is in that ballpark too.

“I think in 2025 it (Tesla) will be $500 to $600 (per share). And in eight to ten years, we ought to be somewhere around $4.5 trillion.”

His $5-$600 a share is for EVs only, no autonomy, batteries etc.

 

[jw934]

Model 3 SR+ base now can be leased for 399/month after 4500 down.

That pricing may be set to try to match that of the current #1 car in the US - the Toyota Corella.

New article from CleanTechnica -

Tesla Model 3 Lease Price Slashed To Match The Toyota Corolla!​

 

[Artful Dodger]

Today is the first time in the past 12 trading sessions that TSLA may not touch it's Upper-BB: (at $201.50 it sits above the 'capping' level)



And it's not macros holding TSLA back (macros are the tools of the MMs, not their masters). It's the Technicals: (which are the Hedge Fund's lines in the sand)



I'm quite sure hedgies/wedgies will try to cap TSLA at this resistance level, which goes all the way back to May 2022 (hoping for a 'sell-the-news' opp. after Investor Day on Mar 1st).

 

[Artful Dodger]

First world problems

Lol, have you BEEN to Eastern Ontario?

Cheers!

 

[Hock1]

Very well put. This was the point I was trying to make the other day in a post deleted by one of the moderators. My apology for the way I presented it.

In the SEC act of 1938, the SEC instituted the uptick rule in order to "protect investors from manipulative short sellers". The obvious thing here is that, then, the SEC did not (rightfully) recognize short sellers as investors. The Madoff Exemption and the removal of the uptick requirement by SEC Chairman Christopher Cox in 2007, aided and abetted the shorts in their pursuit of being recognized as "investors". The narrative has gradually changed, referring to short sellers as "market participants". The implication being that they have the same rights as investors, including the right to receive compensation in class actions brought by legitimate investors for illegitimate or unlawful actions taken by an officer and/or Director of a Company. I may be mistaken but, I did take a look at the parameters for participation in the proposed settlement of the Class Action and it seems that there was no distinction between "market participants" and investors. If a "participant" (long or short) had been harmed and could produce authentication of the loss incurred Irrespective of the chronological order of the purchase and sale of the stock, they were eligible. Please, someone correct me because, if this is true, it's further proof of the total destruction of our system of public company ownership.

 

[Electroman]

We should all understand that warranty reserves are actuarially derived in general. When a new product is introduced the warranty reserves must invariably be higher than if the product has had years fo experience. This process also applies to Lease and loan securitizations, which use over-collaterization to compensate for lack of experience.

Warranty Week publishes warranty reserve calculations for nearly all public data available.
Their data, as has been posted here several times, shows that even in the beginning which had numerous teething issues with Model S and X, the warranty reserves were consistently well above actual expenses. That data even included the titanium battery shielding of the first Model S, repeated common replacement of motors and batteries, plus problems with screens and other systems.

As experience has grown and actual warranty expenses have remained well below reserves Tesla has maintained highly conservative warranty reserves. That is wise, in part because of rapid evolution, changes in supply chains, adoption of new battery technology, manufacturing and so on.

The only major diversions of the downward trend in warranty claims related to the infamous 90 battery on S and X, and the falcon wing door. Those events did NOT alter the downward warranty expense trends.

The other fundamental elements in warranty expense that the actuarial estimates did not consider were all related to the Tesla business model:
First, traditional OEM highest warranty expenses are for dealer diagnosis;
For Tesla this category is nearly zero since OTA vehicle monitoring mostly simplifies or eliminates service center diagnosis, which anyway has no profit margin when it does happen.
Second, traditional OEM second highest warranty expense is dealer repair;
For Tesla, most 'repairs' are OTA updates, others are by mobile servicing, and there is no dealer profit margin
Third, traditional third highest warranty expense is recalls, mostly dealer expense.
For Tesla most recalls are OTA, others are mobile service and the Service Center is at cost.

Just to repeat, the actuaries are generally ignoring the business model effects.

From my own work with three OEMs warranty reserving and management I am acutely aware that OEM's have intense pressure from dealers to increase warranty revenues and also to increase required maintenance. The latter point is exemplified by a Hyundai required coolant change for battery pack. There are numerous other examples. That pressure is acute because warranty service is often the second highest income category for a dealer, following "Finance
and Insurance".
The net effect of all that is that Tesla is not only best in class for Warranty reserving but also on warranty expense and maintenance expense.

Much of the data is easily found in Warranty Week. For anyone who is interested that is an excellent source. What they generally do not emphasize are the business model issues, partly because they cover all industries and partly because they are typically not presenting much about causality unless there is something especially notable and notorious.

These warranty reserves pile might come in handy if Tesla were to decide (or forced to) to upgrade to FSD HW4 (only) for those bought FSD

 

[mongo]

These warranty reserves pile might come in handy if Tesla were to decide (or forced to) to upgrade to FSD HW4 (only) for those bought FSD

FSD sales/ deferred revenue should more than cover that.

 

[ggies07]

Found the vid of the clip that was posted here that is circulating Twitter:

 

[enslaved robot]

Lol, have you BEEN to Eastern Ontario?

Cheers!

Good Ottawa Boy (GOB) reporting in. Can confirm the development index of the region is difficult to nail down.

 

[M|S|M MYP]

Lol, have you BEEN to Eastern Ontario?

Cheers!

No,

But i have been to Thunder Bay.

 

[Gigapress]

That pricing may be set to try to match that of the current #1 car in the US - the Toyota Corella.

New article from CleanTechnica -

Tesla Model 3 Lease Price Slashed To Match The Toyota Corolla!​

Wow. They actually are the same lease price now, in the US at least which is what the article shows.

M3 and Corolla both going for $477/month for 36 months, 10k miles per year and $1.1k due at signing.

 

[Hiline]

That pricing may be set to try to match that of the current #1 car in the US - the Toyota Corella.

New article from CleanTechnica -

Tesla Model 3 Lease Price Slashed To Match The Toyota Corolla!​

This must be because Tesla is so confident about the model's residual value that it can offer the lease on the cheap despite the still significant difference in purchase price.

A little bit surprising given that Tesla is trying to bring production costs and prices down further, and this if successful should make used Model 3s even cheaper in the future.

The only plausible explanation is that Tesla is planning to either use the lease returns as robotaxis or add significant value to them with FSD.

Positive sign, but then again Tesla does have a tendency to be just a little bit over-optimistic about their future technologies...

 

[Stretch2727]

This must be because Tesla is so confident about the model's residual value that it can offer the lease on the cheap despite the still significant difference in purchase price.

A little bit surprising given that Tesla is trying to bring production costs and prices down further, and this if successful should make used Model 3s even cheaper in the future.

The only plausible explanation is that Tesla is planning to either use the lease returns as robotaxis or add significant value to them with FSD.

Positive sign, but then again Tesla does have a tendency to be just a little bit over-optimistic about their future technologies...

Tesla gets the $7500 tax credit. A few people have done the analysis and it looks like they are giving about $3500 to the customer.

Keep in mind Tesla will get the $7500 tax credit for all leased cars including the S and X. They are not discounting leases on the other cars, only the standard range 3.

 

[unk45]

These warranty reserves pile might come in handy if Tesla were to decide (or forced to) to upgrade to FSD HW4 (only) for those bought FSD

That would not be a warranty item, unless there were a technical malfunction forcing the replacement.

 

[Hiline]

Tesla gets the $7500 tax credit. A few people have done the analysis and it looks like they are giving about $3500 to the customer.

Keep in mind Tesla will get the $7500 tax credit for all leased cars including the S and X. They are not discounting leases on the other cars, only the standard range 3.

Even after the tax credit, the Model 3 SR is still much more expensive than the Corolla. If we assume Tesla doesn't have an issue with demand, there must be something else going on with Tesla's future vision for this baseline model. E.g. common use as robotaxi or re-selling lease returns with added software.

 

[unk45]

Tesla gets the $7500 tax credit. A few people have done the analysis and it looks like they are giving about $3500 to the customer.

Keep in mind Tesla will get the $7500 tax credit for all leased cars including the S and X. They are not discounting leases on the other cars, only the standard range 3.

This must be because Tesla is so confident about the model's residual value that it can offer the lease on the cheap despite the still significant difference in purchase price.

A little bit surprising given that Tesla is trying to bring production costs and prices down further, and this if successful should make used Model 3s even cheaper in the future.

The only plausible explanation is that Tesla is planning to either use the lease returns as robotaxis or add significant value to them with FSD.

Positive sign, but then again Tesla does have a tendency to be just a little bit over-optimistic about their future technologies...

AFAIK we do not know what residual value they have established since the price reductions. Chances are that they will expect little change in percentage of MSRP since the percentage is based on the origination price. As for resale values, that is clearly a question mark now but probably not going to be worse in percentage terms than it has been. OTOH, they've just gone through a couple fo years during which resale prices were higher than residual value. That most likely will not be happening again anytime soon.

Anyway, their tax credit suddenly makes leasing a really good deal for those people who would otherwise not qualify for the incentive, i.e. higher income people.