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

[KBF]

I honestly had no expectations, other than a strong desire that Investors Day wouldn't tank the investment too badly the next day. Wishful thinking, I suppose.

I really don't understand this sentiment. As an investor, I was pumped to be able to buy more shares at a decent discount today because lemming speculators = shortsighted. The only people that this hurts are those that are somehow forced to sell today, and that means either options trading or using a margin account and getting called.

Or I guess those that have no cash to buy more... But if I was in that position, I wouldn't be staring at the stock price - in the past, I set an alert at a big price increase, and didn't pay attention for months at a time. Fluxuations are unnecessary distractions if you're not buying or selling anyway - and removing that stressful distraction = very healthy.

Speaking of health, I've typed too much today - time for a walk. Cheers, Longs!

 

[electracity]

Would have been nice for them to explicitly state that.

"We won't need 10-20 more factories. The actual number is TBD of course but we will be increasing capacity of current factories by X% through expansion, estimate Y% capacity increase through efficiency increases. Our current plan is 3 more factories over the next 5 years. Our assumptions are that this will get us to the capacity level to produce our 20 million target."

Controlling labor expense is far more critical than reducing factory space. That's why the original high density plan shown for Giga nevada never happened. Factory buildings are not expensive and the yearly depreciation that is expensed against each vehicle is almost trivial.

Labor availability is a reason new factories are built. Tesla has been conservative in adding additional types of manufacturing in Nevada due to the low population of that area. Tesla is probably now considered a safe enough bet in Sparks that their semi announcement will spur additional housing construction.

 

[growler23]

I was extremely pleased with this presentation last night, although it didn't cover everything I expected. Notably, the promised incorporation of SpaceX and Boring company to Master Plan Part 3 was nowhere to be found tonight, which makes me wonder if more is coming later. We were told to look forward to the Master Plan white paper, the next-gen vehicle reveal event, and the next Impact Report, so tonight definitely was only the first in a series of info dumps. Also, the president of Mexico in his announcement on Tuesday of Giga Mexico said to expect more information next week, though it’s not clear about what. Probably water.

The big story for the car business last night is that they explained how they’re going to cut $15k+ from the cost to produce each car while slashing billions of dollars from the CapEx investments needed for each incremental 1M cars/year of production capacity. The goal of cutting the cost in half isn’t news, as that was effectively announced in 2020 on Battery Day when Tesla first officially announced intentions of a $25k car. What was news is explaining how they’ll do this and showing, for the first time, actual data on cost trends for several of the major vehicle subsystems. Tesla showed us last night that they are the only company in the industry that can produce compelling affordable EVs for the masses. The demand for a good $25k Tesla would be plenty for selling 20M per year, if not more (spread across multiple models around this price, of course). The question for me has been whether Tesla can actually make such a car with COGS of under $20k, and after Investor Day my confidence in that happening has majorly increased. $5k per car and 20M cars per year is $100B gross profit, and that’s before piling on subsidies and high-margin recurring software and services revenue. $10k per car, $200B. And will they stop at 20? After last night I’m more skeptical of that than ever.

Tesla was very clear in saying that the price elasticity of demand for Tesla products is extreme. That is, the quantity of orders is exquisitely sensitive to price. The was a strong hypothesis, but it’s now been experimentally tested with the price cuts. This has important implications for the strength of Tesla’s margins and total addressable market as they drop lower-priced models onto the market and gradually reduce S3XY prices over time as well. Tesla appears poised to DOMINATE the $25-45k market segment, and this is where most of the money is, especially if you can make like $5k or $10k per car. Prototypes are fun and exciting but what we really needed to know was the plan for resources, logistics and production cost and that’s what Tesla delivered. Don’t get mad that they fed us veggies and brown rice instead of candy. As a long term investor, the core of my thesis has always been that Tesla can make more cars than anyone in history with low OpEx overhead and strong gross margins as the lowest-cost producer. This is how the auto business can hit $100 or $200 billion annual earnings in the 2030s conservatively assuming level 5 autonomy development will have totally failed. In conjunction with Battery Day, Investor Day greatly reduced my remaining doubt that Tesla can do this.

Toyota originated a useful eight wastes framework that basically is the first principles of efficient industrial engineering:

1. Overproduction
2. Inventory
3. Waiting
4. Motion
5. Transportation
6. Rework
7. Overprocessing
8. Underutilized human potential

The more you eliminate these wastes, the more you can improve safety, quality, throughput, morale and cost. I recommend rewatching the manufacturing sections of the presentation with this list of wastes and consider all the ways Tesla is deleting them throughout the value chain. Like Pete Bannon said, they’ve found all kinds of ways to shave the carrot.

View attachment 912875

This slide and the build sequence animation was great. In 2020 I was impressed with the Supertub (see image below). Last year I was impressed when Munro Live showed us the Model Y structural battery pack assembly with the seat and everything built up atop it. Now Tesla has revealed they’re taking that concept to a whole new level by completing almost all of the general assembly work before mating the major structural elements. This is revolutionary from an access, ergonomics and safety standpoint. The body in white itself has traditionally been an annoying obstruction to general assembly because it’s basically a big enclosed cage. Humans have to lean and contort into awkward postures to get work done, and robots have to slowly and carefully move in and out of the openings. No more of that with this new design, and as Tesla noted this will improve the density of value-added operations per square meter of floor space by about 40%, even as it also deletes traditional non-value-added operations like putting the doors on multiple times. Lars mentioned "tested subassemblies". This is also key. Fixing problems is also a lot easier before they’re covered up with other hardware. Further, with the old way, most of the mass is being moved around without added value. With this new method, there's much less wasted motion and force. This will also further reduce the energy embodied in the manufacturing of each car.

View attachment 912937

This new sequence is also much more parallelizable than the Model Y line and the smaller subassemblies allow 33% more people and robots to simultaneously operate on each vehicle.

My big question with respect to this new assembly sequence is exactly why no one else has done this before. Is it only feasible with an EV architecture? Are castings or structural battery packs required to make it practical?

After seeing what Tesla presented I think this plan is probably better than a complete full-body casting, which is really just a better way to complete the old design flow.

If you haven’t worked in manufacturing you might not realize just how terrible wire harnesses are from fabrication to assembly to troubleshooting to service. They are often one of the worst and most frustrating aspects of building products. Tesla showed last night a strong trend of reducing wiring in the vehicles and a path to reduce even more in Gen 3. I won’t rehash what they said but it’s a big deal for the low-voltage system.

Tesla has continually said manufacturing will be their long term competitive advantage and this event was mostly about manufacturing. They showed us how they'll make Gen 3, not the cabin design and sheet metal and shape. That stuff is relatively easy and everyone in the industry knows how to do it.

One aspect I think Tesla understated or maybe doesn't see…The beginning of the presentation covered what is needed to transition the world to sustainable energy, with an implied assumption that there will be a one-for-one replacement of current applications. I think this is a profoundly inaccurate assumption. My thesis remains that overall energy consumption is actually going to increase many times over, despite the greater efficiency of electric motors compared to any Carnot heat engine. Whenever supply of any fundamental factor of production increases such that it’s cheaper, better and more available, economies consume more of it. This will happen with clean energy, and it already has been happening with thermal energy sources since the beginning of the First Industrial Revolution. We consume far more joules of coal/oil/gas per capita than we ever did with less-efficient traditional biomass like wood. The long-term cumulative numbers presented last night should be viewed as a baseline scenario showing it’s technically and economically possible to get humanity off of fossil fuels by 2050, but it’s not presenting the magnitude of the true long-term opportunity of energy and the new ways we will use it.

What else we got that stood out to me:

• Hard historical data showing what we've thought and proving what the Munro team has been claiming all along: that Tesla's innovation has been aggressively reducing costs in every major vehicle subsystem.

• Digital twin and digital thread principles are deeply embedded in everything Tesla does, and the shift to using exclusively custom Tesla-designed microcontrollers is the final step to unleashing the full power of this strategy because Tesla engineers will now have total control over the brains of the car. Tesla showed a deeper glimpse than ever into their incredible data management and end-to-end software integration.

• FSD Beta collision rate finally revealed. Human-supervised FSD Beta has decidedly NOT increased risk for customers or others sharing the road. 6x lower collision rate. One could argue that even with fewer collisions there may be an elevated risk of catastrophic failure, but seeing as there have been zero reports of deaths or injuries, I’m inclined to believe that the collisions that have happened on FSD have not been especially serious compared to the statistical norm for human drivers.

• As far as I can remember, this is the first time we've heard any detail directly from Tesla about Factory Mode. Joe Justice has talked about it extensively but I still have some skepticism for stuff he claims because it seems like he tends to exaggerate. Hearing it straight from Tesla was great news. Tesla is basically using the car’s display as visual quality control, a new twist on the traditional Andon concept. Joe Justice has also talked a lot about Tesla’s software-style continuous integration testing in the factory and Tesla also mentioned this last night. It’s the right approach in my opinion.

• Lots of miscellaneous bits of technical info that the people who insist on negativity seem to have completely missed

• Specifics on just how cheap superchargers are

• Clear guidance that the crazy OpEx cost control we’ve seen is likely to continue as business scales, implying amazing leverage is coming

• Powertrain: No rare-earth metals, $1k cost, agnostic to battery chemistry, 75% less SiC

• 48V for all low-voltage components, completely leaving 12V behind

• Zero cross-car power wires by moving away from centralized control to local controllers (edge computing). Ethernet (much lighter weight than the old wires) will route data between microprocessors.

• Advanced in-house electromagnetic physics simulation software that is faster and more accurate than any commercially available options

I was hoping to see @Gigapress 's take on last night's festivities --
Dang, dude, you did not disappoint! Folks, if you didn't spend at least 5 minutes reading the above, you owe it to yourself to do so.

On the presentations overall, I was a bit worn down by the length - but not the content.
The disappointment about "no new model revealed", in a thinking world, would be outweighed by "we don't need to show a new model because we are showing you how we will build ALL our new models faster and cheaper than our industry-leading models now: by literally blowing the doors off (unboxing) our industry-efficiency-leading manufacturing process." And anyway, they even hinted the next 2 models (post Cybertruck) are mostly done. And obviously the new manufacturing process will apply to any form factor their market penetration plans demand. But whatever, Wall Street.

If I hadn't blown all my spare coin on the way down in Q4/Q1, I would certainly acquire some shares now (not advice btw).

There is now a non-negligible chance (I would say greater than that of facing a cat-driven tank) that Tesla shares will be the only valued currency - the "petrodollar" of the renewed energy world - by 2030. 2040 at the latest. Damn! Hope I am around to see it.

 

[Ogre]

This is where I think Tesla really is missing the mark on what they’ve publicly presented for scale ambitions. I’m not just looking at solar, wind and batteries to merely replace; I’m talking about abundance orders of magnitude beyond what we have now with fossils, hydro and nukes. This planet is bathing nonstop in immense amounts of electromagnetic radiation from the Sun just waiting to be harvested. I mean let’s consider the 0.2% of earth’s land area estimate they gave last night. That’s just for replacement of existing energy consumption. Why not more? Humanity will want more. Industrial civilization seems to have an insatiable appetite for cheap energy.

I think Musk was thinking in these terms, but his presentation was only about satisfying the essentials. He even referred to the idea that it’s not just the bare minimum and I think he used the term abundance.

The initial goal is to make it unviable to mine fossil fuels. That is what MP3 is about.

We don’t stop there though. By that time we’ll have massive capacity to produce solar and battery capacity. We aren’t going to retire that capacity, as you suggest, demand continues… very likely infinitely. By that time, it’s very likely we’ll need to start thinking about large scale environmental reparations and even terraforming. Massive desalination and forest regeneration and biodiversity projects. We’re going to have to get good at that stuff and it’s going to take power.

 

[electracity]

I’m wondering to what extent Tesla could overcome this with brute force financial power by either offering high prices per ton or offering to acquire the mine outright. In the end the mining companies are just trying to get the biggest lifetime earnings out of the mine, so I imagine that if Tesla made an offer that’s more lucrative than the alternatives are expected to be then the mining companies would go for it.

Tesla’s cost reductions could help enable significantly better negotiating leverage for securing mineral supply, because they have more margin to give.

Can Tesla buy a lithium mine in a stable country? Or would that mine be considered a strategic asset? I doubt BYD can buy a mineral mine in North America, but I'm not sure.

Also, an existing mine would have contracts that likely don't go away. It would really take game theory and a deep understanding of these scarce commodity markets to understand what is rational. There may be no practical difference between buying a mine and contracts for purchase.

 

[MP3Mike]

Wireless will be slow L2- terrible for robotaxi fleets unless you're ok with your cars being out of service for half the day every day charging (or a majority of the day if your fleet averages more than 20-25 mph, since that'll be your max charge rate to add range wirelessly- probably less)- so pretty useless for this purpose.

It doesn't have to be slow. There is a company that has at least 150kW deployed if I recall correctly.

Edit: They have solutions up to 450kW, though that it most likely for busses/Semis/etc:

Induct EV

High-powered wireless made easy. Helping private and public operators of transit and commercial vehicles power their fleets of the future by providing proven, reliable and efficient wireless charging and seamless solutions and support.

www.inductev.com

Here is a video charging an iPace at ~50kW.

 

[ItsNotAboutTheMoney]

FWIW US Bank and PenFed have several cards for a while with EV charging as a bonus category in the 4-5% reward range.

Wireless will be slow L2- terrible for robotaxi fleets unless you're ok with your cars being out of service for half the day every day charging (or a majority of the day if your fleet averages more than 20-25 mph, since that'll be your max charge rate to add range wirelessly- probably less)- so pretty useless for this purpose.

There's a 75kW wireless charging pilot in Oslo.

 

[2101Guy]

It doesn't have to be slow. There is a company that has at least 150kW deployed if I recall correctly.

Actually you can get up to 250kw+, depending on # of coils

 

[Carl Raymond]

People keep saying that with no evidence. One new GF a year can easily do that, although they'll probably open two a year some years. Obviously there are many challenges along the way, and thus many people will hope it does not happen.

Tesla has been specializing in the impossible since Roadster and Model S.

Also, the sub assembly approach isn’t just about floor space efficiency, it’s about delaying (eliminating) the point at which humans are required and thus removing the 45s cadence restraint. Once removed, what’s the new period? Elon likes to think in orders of magnitude, so I’ll take a stab at 4.5 seconds.

 

[GhostSkater]

But that is going to be some magic ferrite ? We can see in their slide that the ferrite package is about the same size as a neo package. So they've made a breakthrough and kept it secret if they are going to use ferrites like this. So is it ferrite2 or is it something else ? I can't think what it might be other than a magic ferrite.

They can just swap for ferrite and have a lower power motor, but again, I think they will do more than that, because the savings can be much greater that way

You size a motor with the field strength you plan to run through it, if your field strength is lower due to weaker magnets, you can have less iron, way less iron, it's a linear relationship, so if you magnet is half of the strength and same size, and have half of the magnetic field density, so you can have half of the iron without driving it into saturation

If you just replace the magnets in the same motor, now you have double the necessary iron

 

[keydiver]

Dave Lee with a good tweet:
“What’s the rationale from Tesla in choosing Monterrey, Mexico as the site of the next Gigafactory? Why not just double the footprint of Austin instead?” Dave asks a Tesla exec yesterday.

2. Mexico Gigafactory is for new markets, not the U.S. The idea is to build cars in Mexico for Mexico, Latin America, etc.

This makes a lot of sense to me. Tesla is not moving US production to Mexico, which I'm sure will be the next FUD we hear from TeslaQ. Am I the only one who noticed that Lars said they will also be manufacturing the Gen3 vehicle at their other factories? What is there to stop Tesla from first fleshing out the Gen3 design at Austin before Monterrey is finished?
Check out 03:26:13

2023 Investor Day

We plan to host Tesla's 2023 Investor Day on March 1, 2023. Our investors will be able to see our most advanced production line as well as discuss long term ...

www.youtube.com

 

[SmokyPeat]

I'm surprised that I got so many disagrees for suggesting that the Tesla bot demo last night was CGI. Over two thirds of the Swedes over at Tesla Club Sweden share my view.

Var Investor Day videon på Optimus verklig? - Tesla Club Sweden

teslaclubsweden.se

 

[unk45]

You got me curious so I googled a little. The 90th percentile is 100k PPP Euros in Mexico

Income by percentile Mexico 2021 | Statista

In Mexico, as of 2021, the bottom 50 percent, which represents the population whose income lied below the median, earned on average 3,200 euros at purchasing power parity (PPP) before income taxes.

www.statista.com

One answer for why a GF in Mexico is to bring cost of production down to local PPP levels

Of course I'm in Rio de Janeiro, not Mexico. As with all middle and low income countries the median income isn't very useful since the GINI coefficients are rather extreme. As a result there are normally quite healthy markets for expensive vehicles, pretty good ones for Model 3 sized vehicles for taxis and government use, and large markets for cheap small cars too. Every one fo these is different. Brazil, for instance, has had various Mercedes models, Land Rover, Peugeot, Chevrolet, Hyundai etc manufactured in large volumes.

Countries such as Morocco, South Africa, Malaysia, Thailand to name a few, often have larger markets for, say, Model 3 sized vehicles and larger ones than seems obvious. Even typical import data often misses these because in many places gray market is as large as is the normal imports.

Tesla is now at the point that many of these countries are logical places for Tesla. The problem comes when the assumption is that these places want cheap and basic. In such countries OEM such as Toyota and Peugeot often have outsized success because they send several models but also send their smaller ones (Typota Corolla and Peugeot 208/308 for example, but send them loaded with GPS, upscale upholstery, lots of navigation aids and everything else. That ends out rather expensive but sells well to prosperous urbanites. More recently others like Hyundai and Chery have had great success by building locally and having lots of upscale features.

Country by country this varies greatly. Invariably those who aren't familiar with such markets fail without ever knowing why. Others like Porsche, Mercedes Benz, BMW know how to position themselves.

We all should keep in mind that Elon Musk intuitively understands such markets, in part because he grew up in a classic example, South Africa.

 

[JRP3]

I'm surprised that I got so many disagrees for suggesting that the Tesla bot demo last night was CGI. Over two thirds of the Swedes over at Tesla Club Sweden share my view.

Var Investor Day videon på Optimus verklig? - Tesla Club Sweden

teslaclubsweden.se

Elon certainly presented it as if it was real, if it was CGI then I'd say that's rather deceptive of them.

 

[philw1776]

I'm surprised that I got so many disagrees for suggesting that the Tesla bot demo last night was CGI. Over two thirds of the Swedes over at Tesla Club Sweden share my view.

Var Investor Day videon på Optimus verklig? - Tesla Club Sweden

teslaclubsweden.se

Why be butthurt? It simply means that so many here simply disagreed with your opinion. This is not middle school.

 

[GhostSkater]

Of course I'm in Rio de Janeiro, not Mexico. As with all middle and low income countries the median income isn't very useful since the GINI coefficients are rather extreme. As a result there are normally quite healthy markets for expensive vehicles, pretty good ones for Model 3 sized vehicles for taxis and government use, and large markets for cheap small cars too. Every one fo these is different. Brazil, for instance, has had various Mercedes models, Land Rover, Peugeot, Chevrolet, Hyundai etc manufactured in large volumes.

Countries such as Morocco, South Africa, Malaysia, Thailand to name a few, often have larger markets for, say, Model 3 sized vehicles and larger ones than seems obvious. Even typical import data often misses these because in many places gray market is as large as is the normal imports.

Tesla is now at the point that many of these countries are logical places for Tesla. The problem comes when the assumption is that these places want cheap and basic. In such countries OEM such as Toyota and Peugeot often have outsized success because they send several models but also send their smaller ones (Typota Corolla and Peugeot 208/308 for example, but send them loaded with GPS, upscale upholstery, lots of navigation aids and everything else. That ends out rather expensive but sells well to prosperous urbanites. More recently others like Hyundai and Chery have had great success by building locally and having lots of upscale features.

Country by country this varies greatly. Invariably those who aren't familiar with such markets fail without ever knowing why. Others like Porsche, Mercedes Benz, BMW know how to position themselves.

We all should keep in mind that Elon Musk intuitively understands such markets, in part because he grew up in a classic example, South Africa.

I visited a BYD dealer last week here in Brazil to do some market research, they completely miss what the Brazilian market needs and wants

Ultra luxury price for something that isn't

Cheapest BYD, Yuan I think, always make a mess of their names, is double the price of a Corolla, the Han which is the Model 3 competitor is more expensive than a Model 3 grey import and around 5 times a Corolla

Even the $25k car is too much for here at volume, Corolla is luxury around here, need something way cheaper than that

 

[SmokyPeat]

Why be butthurt? It simply means that so many here simply disagreed with your opinion. This is not middle school.

Not "butthurt" in the least. I could care less what anonymous people I'll never meet think of my posts. I'm just surprised that so many here think that demo was actually a real recording of actual Optimus bots. I could tell it was CGI almost immediately.

 

[SageBrush]

As with all middle and low income countries the median income isn't very useful since the GINI coefficients are rather extreme.

I don't think GINI affects the median. Perhaps you were thinking of the average (mean) ?
In any case though, I posted the 90th percentile adjusted for PPP

 

[insaneoctane]

Retired service manager here. Yep, seems a nightmare to me. My experience on my 3 has been in support that it is a nightmare for Tesla as well. This means waiting for parts.

I note that Tesla still does not have an identified service position (VP level) Did I miss him/her on the stage?

Mitigating the problem is that Tesla has so few product lines and also seems to use predictive service to help. Big plus! Moving to 48v means that getting unique 12v components 5 years or so after that transition might be dicey. However 3rd parties are incentivized to address this as the installed base expands. YMMV

I'm thinking with 4M 12V Tesla's today and that number will continue to grow until MS/MX/M3/MY switch to 48V architecture...There's enough vehicles in service to justify supplying components well beyond 10 years...

 

[SmokyPeat]

Elon certainly presented it as if it was real, if it was CGI then I'd say that's rather deceptive of them.

He did to an extent, but I don't think it was that deceptive. It's just a matter of time before somebody asks him and I'm sure he'll say it was just for demonstration purposes.