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

[traxila]

It sounds like you are actually agreeing with me!

I agree once the Gen3 line is built in Austin and ironed out, they can then "copy & paste" the line design in Mexico and any other future factories. However, that takes time to implement, and with these delays now I do not think there is enough time between now and 2030 to ramp total production to 20 million by then. I think something more like 13-15 million production by 2030 is far more likely, with 20 million happening a few years afterwards.

Let’s talk about something with a little more visibility: 2025.

I see max auto production around 2.5 million, maybe 2.7. Where would the additional production come from? Mexico will not be ramping until 2026. EM flat out told us we are stalling on the factory. He would like rates to come down first which makes no sense because one of the answers to high rates would be the cheaper model out of Mexico.

 

[Featsbeyond50]

Predictions on the low over the next 6 months?

I say 150. I don't think we will have another margin squeeze because interest rates are too high and the last squeeze was so recent, there hasn't been enough time to accumulate more victims. So, I don't think we will have new lows. At 150 we will have a very high PE of 40ish and I'm skeptical we can maintain a higher PE than that with the guidance provided yesterday.

 

[DTG_]

Kind of in line with what Elon has been predicting for a long time: H2 of 2024 is the earliest he sees improvement in the economy. Grain of salt, but seems plausible if the interest rates were to stay flat for the next couple of months and inflation cools.

The overall economy is doing pretty damn well already, even with "high" rates. Other manufacturers are doing quite well, at a higher average price. So no, the issue is tesla specific.

To be honest the mood in the call yesterday was the most somber ive seen yet, almost like "we know we have made big mistakes and they're slowly unraveling on our main business, but we can't say it out loud".

 

[Usain]

I wonder if Elon is pushing the lower >125K cap on Cybertruck production because it will never be profitable. Because maybe when he says it’s really hard to build he means it’s really expensive to build? And he’s not willing to raise the prices substantially because he's pledged to make ‘affordable’ vehicles. He has to make it a loss leader.

Elon said both. He said it was hard to build. He also said it was expensive to build by saying how hard it was to make it affordable.

But he never indicated that Cybertruck would be a loss leader indefinitely. He said that Cybertruck will make a profit but he thinks it will be 18 months:

It's a great product, but financially, it will take, I don't know, a year to 18 months before it is a significant positive cash flow contributor.

I think the rest of your post was spot on. Cybertruck will have an incredible halo effect that we have never seen before. If they can make sure every showroom has a Cybertruck then that will drive tremendous foot traffic. If they can make sure test drives are available, even better.

 

[Featsbeyond50]

I wonder if Elon is pushing the lower >125K cap on Cybertruck production because it will never be profitable. Because maybe when he says it’s really hard to build he means it’s really expensive to build? And he’s not willing to raise the prices substantially because he's pledged to make ‘affordable’ vehicles. He has to make it a loss leader.

This is exactly my take. Ford makes nearly a million F-150s, plus all the Rams and Tundras out there. Trucks are a huge market. Yet Tesla has decided not to pursue that market? That tells me it's not worth trying to pursue. Wish they had done a traditional truck, it would have been on the market over a year ago and it would have been kicking ass on performance/value.

 

[mongo]

This is exactly my take. Ford makes nearly a million F-150s, plus all the Rams and Tundras out there. Trucks are a huge market. Yet Tesla has decided not to pursue that market? That tells me it's not worth trying to pursue. Wish they had done a traditional truck, it would have been on the market over a year ago and it would have been kicking ass on performance/value.

With what battery pack? Built at what factory?

 

[Mengy]

I wonder if Elon is pushing the lower >125K cap on Cybertruck production because it will never be profitable. Because maybe when he says it’s really hard to build he means it’s really expensive to build? And he’s not willing to raise the prices substantially because he's pledged to make ‘affordable’ vehicles. He has to make it a loss leader.

I think the low CT production rate is much more likely due to:

1) The design being hard to manufacture and thus hard to ramp.
2) 4680 production being behind schedule which will limit CT production until 4680 production ramps fully.

 

[cliff harris]

Tesla will never accept selling a car at a loss. The cybertruck will absolutely be sold at a profit, and with gigacastings and 2nd gen 4680s will also be likely VERY profitable.
Elon cares about mass production, efficiency, and factories. He absolutely does not care about short production runs of products. Even when it comes to building a mars-capable rocket, he thinks of mass production.
This is likely the reason that he finds Cybertruck so hard. He doesnt want to build a few dozen a week. They are already building maybe 3 or 4 a day. He wants to build a thousand of these puppies a day.
Once the CT ramp is in full-swing, and interest rates are falling, people will forget about him being in a sombre mood on one earnings call. Nothing in the results or the call gives me any reason to sell my shares,

 

[Mengy]

Let’s talk about something with a little more visibility: 2025.

I see max auto production around 2.5 million, maybe 2.7. Where would the additional production come from? Mexico will not be ramping until 2026. EM flat out told us we are stalling on the factory. He would like rates to come down first which makes no sense because one of the answers to high rates would be the cheaper model out of Mexico.

This is a good topic to ponder! In the slide deck Tesla listed current factory capacities:

Fremont: 650K
Shanghai: 950K
Berlin: 375K
Austin: 375K
TOTAL: 2,350,000

Now, regarding Austin, 125K of that capacity is the 125K CT production, which Elon himself said will take about 18 months to ramp up to. So for 2024 we can expect the CT line to NOT hit that 125K number, we are more likely to only see about 60K CT's in 2024.

This means for next year, 2024, we are looking at a probable production number of 2,285,000. This would only be about 27% above 2023 expected production of 1.8 million.

Now for 2025, we really don't have any new capacity coming online that we know of. Mexico's buildout is delayed and Berlin seems stalled in it's ramp, so for 2025 we're likely only going to see a bit more production than 2024 due to the CT ramp being mature. We might see some more line improvements to existing factories which might equal slightly higher run rates, but nothing extraordinary. Maybe Berlin will gain some production as well?

I'm expecting 2025 production to be barely above 2024 production. Maybe 2,500,000 or so? 10% above 2024 production numbers. I just don't see many possible paths to gain lots of production in that timeframe given the current production capacities and buildouts.

So yeah, I'm expecting the growth rate to slow for a year or two, until Gen3 production comes online in either late 2025 or 2026, and especially until Giga Mexico is built and producing.

 

[2daMoon]

Let’s talk about something with a little more visibility: 2025.

I see max auto production around 2.5 million, maybe 2.7. Where would the additional production come from? Mexico will not be ramping until 2026. EM flat out told us we are stalling on the factory. He would like rates to come down first which makes no sense because one of the answers to high rates would be the cheaper model out of Mexico.

It seemed to me like he emphasized how rates coming down is important for the buyers. For now Tesla is lowering prices to help offset high interest rates.

The stated reason for delaying GF Mexico is to have the engineering staff beside the pilot production line in Texas in order to fast-track development. This is a lesson they have already learned on existing models, and will duplicate with the Gen 2.

GF Mexico will be constructed to coincide with perfecting Gen 2 production to the point that it makes sense to have the line running there. They can start building the shell at any time, but won't be ready to install the actual lines inside until the bugs have been worked out on the pilot line. This avoids further delay in the long run.

As for increased production rates overall, Austin and Berlin have a lot of potential production to grow into. This is where additional production could come from. Particularly, if Texas can increase the Model Y rate to close in on matching the lines in Fremont and Shanghai, and also bring on CT line(s) as well as the unboxed Gen2 line(s) between now and 2025.

 

[traxila]

This is a good topic to ponder! In the slide deck Tesla listed current factory capacities:

Fremont: 650K
Shanghai: 950K
Berlin: 375K
Austin: 375K
TOTAL: 2,350,000

Now, regarding Austin, 125K of that capacity is the 125K CT production, which Elon himself said will take about 18 months to ramp up to. So for 2024 we can expect the CT line to NOT hit that 125K number, we are more likely to only see about 60K CT's in 2024.

This means for next year, 2024, we are looking at a probable production number of 2,285,000. This would only be about 27% above 2023 expected production of 1.8 million.

Now for 2025, we really don't have any new capacity coming online that we know of. Mexico's buildout is delayed and Berlin seems stalled in it's ramp, so for 2025 we're likely only going to see a bit more production than 2024 due to the CT ramp being mature. We might see some more line improvements to existing factories which might equal slightly higher run rates, but nothing extraordinary. Maybe Berlin will gain some production as well?

I'm expecting 2025 production to be barely above 2024 production. Maybe 2,500,000 or so? 10% above 2024 production numbers. I just don't see many possible paths to gain lots of production in that timeframe given the current production capacities and buildouts.

So yeah, I'm expecting the growth rate to slow for a year or two, until Gen3 production comes online in either late 2025 or 2026, and especially until Giga Mexico is built and producing.

Don’t expect the market to be agreeable on this.

The wild card that may come to the rescue for revenue growth and margin compression could be energy and semis. Semis in the end will probably not be significant enough, although great.

So we are left with energy. Based on ramping factories (we got a couple of 40 GW factories built out and did 4GW last quarter) and capacity we could see annual energy growth rates popping to 200% over the next two years. How about more battery factories as well?

Energy could definitely pick up the slack. And demand seems effectively infinite until we are in the multiple terawatt area globally.

 

[traxila]

It seemed to me like he emphasized how rates coming down is important for the buyers. For now Tesla is lowering prices to help offset high interest rates.

The stated reason for delaying GF Mexico is to have the engineering staff beside the pilot production line in Texas in order to fast-track development. This is a lesson they have already learned on existing models, and will duplicate with the Gen 2.

GF Mexico will be constructed to coincide with perfecting Gen 2 production to the point that it makes sense to have the line running there. They can start building the shell at any time, but won't be ready to install the actual lines inside until the bugs have been worked out on the pilot line. This avoids further delay in the long run.

As for increased production rates overall, Austin and Berlin have a lot of potential production to grow into. This is where additional production could come from.

Does not seem the plan is to crazy ramp Austin and Berlin. May change in the next six months but they went out of there way to emphasize the SLOW ramp on the deck.

Would love to see them double capacity but that is not happening right now, and of course that takes time, especially in Berlin.

I don’t think they want to hire the people. Maybe banking on Optimus providing some labor in about 18 months?

 

[Mengy]

Don’t expect the market to be agreeable on this.

The wild card that may come to the rescue for revenue growth and margin compression could be energy and semis. Semis in the end will probably not be significant enough, although great.

So we are left with energy. Based on ramping factories (we got a couple of 40 GW factories built out and did 4GW last quarter) and capacity we could see annual energy growth rates popping to 200% over the next two years. How about more battery factories as well?

Energy could definitely pick up the slack. And demand seems effectively infinite until we are in the multiple terawatt area globally.

Yep. As Tesla auto production slows down quite a bit over the next two years Tesla energy will be ramping very nicely. Megapack margins are very good too, so I do expect this to offset and greatly improve revenues and overall margins.

Just imagine how big Megapack sales will be in a few years once Gen3 goes into production!

 

[2daMoon]

Does not seem the plan is to crazy ramp Austin and Berlin. May change in the next six months but they went out of there way to emphasize the SLOW ramp on the deck.

Would love to see them double capacity but that is not happening right now, and of course that takes time, especially in Berlin.

I don’t think they want to hire the people. Maybe banking on Optimus providing some labor in about 18 months?

Perhaps they are embracing the idea of "slow and steady wins the race" to some degree, while maintaining the flexibility to iterate quickly and often.

Optimus is a wild card that could unlock increased production by bringing more consistency for the repetitive and boring steps.

 

[Right_Said_Fred]

I find it amazing that there was no (or hardly any) mention of one important car in yesterday's earnings call and in the gazillion comments here: Highland. I think that for the next quarters it will be much more of a savior than Cybertruck.

The updated Model 3 is so (visually) different - when compared to Tesla's usual updates - that it will likely entice hundreds of thousands of current Model 3 owners in Europe and China, and early next year in the US, to trade up. Tesla should be able to sell all of its Model 3 production for at least several quarters at current prices, with no need for price reductions. That means good margins.

If Model Y were to get a similar update next year, the same would happen to that car.

On another note: there were some complaints here about Musk saying the next generation smaller car will not be very special. I believe it will be and that he was simply trying not to osbourne Model 3 and Y for the whole of 2024. Would the complainers have preferred that?

 

[JupiterMan]

Optimus is a wild card that could unlock increased production by bringing more consistency for the repetitive and boring steps.

other than speaking of Ballet, it does seem the Tesla team were very quiet about Optimus, which is surprising given recent job postings.

I suspect Tesla are being extra careful here, as should it become the case that Optimus Factory roll out will begin soon, then there are implications for the Tesla workforce, and even the possible adoption of UAW by employees to protect their jobs.

Quite possible the closer we get to Optimus deployment the more careful they will need to be on the messaging.

 

[hobbes]

All the delays that have actually happened so far have to do with Mexican bureaucracy. (Not to say that there won't be delays by Tesla, but that hasn't happened so far.)

On the call, Elon said

And in Mexico, we're laying the groundwork to begin construction and doing all the long lead items, but I think we want to just get a sense for the global economy is like before we go full tilt on the Mexico factory.

This does sound very much like they are voluntarily holding back, no? At least from here on, so technically you might be correct for what has happened so far.

 

[EXOTIC1]

Predictions on the low over the next 6 months?

I say 150. I don't think we will have another margin squeeze because interest rates are too high and the last squeeze was so recent, there hasn't been enough time to accumulate more victims. So, I don't think we will have new lows. At 150 we will have a very high PE of 40ish and I'm skeptical we can maintain a higher PE than that with the guidance provided yesterday.

I don’t see 150 at all. In fact, I think you have a better chance of seeing 300 May 24’

 

[FastEddieB]

The only thing on TSLA conference calls that doesn't inspire much confidence is the sound quality. It's worse than a phone call. Please use some SpaceX production values/magic to fix this!

We tried to listen to it in the car on the way home from the dog park. Horrible sound quality. A heavily accented fellow came on and with the poor audio could barely discern he was speaking English. Got home and found it on YouTube on our flat screen with soundbar - still awful. Gave up and figured I’d get the highlights here - which is what I’m doing now.

 

[Mengy]

I don’t see 150 at all. In fact, I think you have a better chance of seeing 300 May 24’

Yeah $150 for TSLA is far too low. The call was bad, but not THAT bad. The financials, while lower than expected, are still rather strong compared to the rest of the auto market.

Tesla is doing good, but the growth story is going to slow down for awhile now, and that will hurt TSLA. I'd say the floor is $200 though, and I think it's unlikely it goes even that far down.