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

[unk45]

Seems all normal though?
Warranty reserve increase should scale with sales.
Warranty payments should scale with fleet size and age.
Hertz hasn't purchased 100k Teslas yet, and the repair issues they had were likely non-warranty things like bodywork or other user induced damage. The data from that accelerated mileage rental fleet should provide Tesla guidance on the accuracy of their per-unit warranty reserve number.

"Seems all normal though?"
It did through 2022, but diverged in 2023. That is why reserve allocation per vehicle sold rose is 2023.
"Warranty reserve increase should scale with sales."
Yes, with reservations. The model mix is a material fact. Generally the least complex vehicles have much lower reserve allocation, so base model 3Y should be lower reserve. Clearly they are not.
Not really. It should typically scale with fleet under warranty, adjusted for time in service. Generally, most warranty claims happen in the first year of service, but claim severity increases with time in service. That means processing costs reduce over time, claim severity increases and claim number deciine. Sounds pedantic but is not.
As for Hertz, that is the only reply obvious departure from the norm, that I can find thus far anyway. There si not enough public information to judge its relevance, but claims history equivalents show the highest single correlation with warranty claims is vehicle care and condition. This assertion comes without data shown here, but rest assured it is true. Fleet use always has higher warranty claims than non-fleet use in every bit of data I have ever seen. It even works for aircraft as well as cars and trucks.

The proof that there is something wrong is found in that PWC note that i attached. Such a note NEVER happens without a significant concern. That the per vehicle charge to reserves rose could be innocuous, but not when that note was included. That this happened without a qualification meant there was some compromise and, probably, dissent. Undoubtably that was both within PWC and TSLA.

I do not want to blow this out of proportion, but it is significant. We'll soon see evidence when fleet Tesla buyers ahem more extensive support and end-user training begins to happen.

Past cases include some major ones, such as BMW 7 series iDrive in 2001, Cadillac V8-6-4an a litany of others. There is a distinction : The Cadillac was a technology mistake. The BMW actually had zero technical issues, but the first iDrive was so odd that they had to include instruction on starting the car.

Were I to guess I would think this Model 3 situation si comparable to that of the BMW. Their si nothing wrong with the car, it's just hard for 'civilian use. That ends out with a warranty problem, in bean-counter terms.

 

[hobbes]

What if the problem lasts longer than two weeks?

My take: They can´t go through the Red Sea, so they have to take a detour around South Africa. First ship that encounters this and has the additional delay causes a break in deliveries (interval from previous is longer), but all following ones come at the regular intervals again.

 

[SOULPEDL]

My take: They can´t go through the Red Sea, so they have to take a detour around South Africa. First ship that encounters this and has the additional delay causes a break in deliveries (interval from previous is longer), but all following ones come at the regular intervals again.

Downside is that inventory has increased slightly (it's on the water longer). And this part doesn't go away.

 

[Stretch2727]

I've taken one for the team on Friday by selling at the low.

That is, selling a few shares from one account to fund the max annual buy-in on the ROTH once the trade clears with the broker. (2 trading days)

So, my buddy Murphy has jumped in to help make sure I won't be able to buy back as many shares as I sold.

Just thought this might avoid any speculation regarding a rise in TSLA today and a flurry of postulations upon that topic.

I hope you all appreciate what I've done to help out.

I have both my Roth and IRA at the same brokerage with linked accounts. I can transfer the shares directly, and they will move intraday. Usually shows up within an hour. No pricing risk. I understand the price they use on the 1099 is the closing price for the day. Taxes are paid outside of the transfer.

 

[SOULPEDL]

i keep seeing that CT cannot be sold in China ??? forgive my ignorance ...why not ?

Oh, that's because the Chinese don't have dirt roads or any mountains.

 

[Drumheller]

i keep seeing that CT cannot be sold in China ??? forgive my ignorance ...why not ?

Seems to me that Tesla wouldn't ship and display a vehicle to the public if they didn't intend to generate interest and sell it at some point

 

[SOULPEDL]

Seems to me that Tesla wouldn't ship and display a vehicle to the public if they didn't intend to generate interest and sell it at some point

Possibly creating a new market from scratch.
As every industry believed there was no market for large trucks in China, Tesla decides to actually test that assumption. Check out that crowd!

If anything, they certainly increased social awareness here.

 

[Hock1]

Interview with Pierre Ferragu. I've only watched the first 10 minutes but it is very relevant content:

I highly recommend taking an hour to listen to Pierre. He has done some very in-depth research on Tesla. He has the most positive view on BESS that I've heard from any analyst or anyone else outside of Tesla Management. He does not see the same organizational structure for Robo taxi as many other Tesla super-bulls do. None the less, he has a very positive view of Tesla's future, all around. I'm not going to share all the Cliff Notes here. Best to watch.

 

[Usain]

i keep seeing that CT cannot be sold in China ??? forgive my ignorance ...why not ?

One thing I saw was that pickup trucks are not allowed inside the cities in China. That's why they are not calling it a truck in China right now. But I doubt that changing the name will fool regulators.

So it might be hard to sell a vehicle that's restricted to rural areas.

 

[ItsNotAboutTheMoney]

Oh, that's because the Chinese don't have dirt roads or any mountains.

Given some of the recent test videos, maybe because they do.

 

[lafrisbee]

"Kept the truth from you"?

How so?

There was NO indication they were having an issue meeting any of the metrics they state for four years. All we heard was "we are really filling the vehicle with amazing blah blah blah."
Even when they had the rendition that was sent to manufacturing they never said that the metrics they stated were not going to be met. They act like incompetent people by not owning up to their failure on so many levels. Their behavior is similar to those that consistently under-perform. It is similar to how Nokia represented itself.

 

[EQC_]

Not sure where the reply to this went, but in that story I found this inflation chart since 2000.

Assuming this is accurate, any young couple (with a new home and kids) is in economic shock. This is where the hospital trip can knock them out of house and home. OTOH, if you're house is paid off, kids are on their way, and you're healthy... no change really. So it's quite different depending on each situation.

Seniors Adults hooked on meds are gonna (try to) vote accordingly - not that medical expenses will ever change. 63% of all adults in the USA use prescription drugs. (I prefer non-prescription personally, at least I know what I'm getting! )

View attachment 1013202

Dang...

More expensive: Every expensive thing that most people consider a need (housing, childcare so you can go to your job, college so your kids have a better chance, and hospital expenses so you can survive illnesses and injuries).

Less expensive: less costly items that you don't really need (Toys and TV's), or can probably put off buying and/or buy used (furniture, appliances, cars).


In other words, for many people, life has become:
We can't afford to buy a house, so we're stuck paying ever-increasing rent for a few more years...and we'll be going into huge debt for our kids to go to college...and we gotta help gramma with her hip replacement and recovery costs....but hey, at least we can get an 80" TV for pretty cheap, and move the 55" screen into another room, and get the younger kids a new remote control car.

And the people who love the status-quo will continue to say things like: "you could totally afford a house and college if you stopped buying Starbucks Coffee, Avocado Toast and giant TV's!!!!" As if a few dollars a day or a $900 TV every few years is going to make a dent as college costs are several $10's of thousand per year (which University will be first to hit total costs of $100K per year?!?!) and in many areas a $1,000,000+ house is 1300 square feet, 70 years old, and on a small lot...

 

[lafrisbee]

I think you are missing my point... the comment I was replying to was in the context of the assertion that Elon & Co. were counting on the CT being a "growth story".

My response providing that quote was to illustrate that, no, they weren't. They had no real idea if it would be a hit, with styling (before they determined if it was practical to do production with the target specs), being the thing they were the most unsure about.

IF they would have produced the vehicle they stated they would then the "growth" story would still be in play because they would have created a "class-leading" vehicle. Even if it is not in the Pick-up class. But by creating a unique hull with less range, less payload, less towing, and much more expensive they have a "boy toy" on their hands.
And yes, I will say it again, All the improvements regarding wiring and steering are great, and will be used in further models. But those improvements are for ALL the future vehicles. Tesla failed to deliver on what they said they would do. And they had much longer to do it than they originally told us. SO they were "late" as well.

 

[mongo]

The proof that there is something wrong is found in that PWC note that i attached. Such a note NEVER happens without a significant concern. That the per vehicle charge to reserves rose could be innocuous, but not when that note was included. That this happened without a qualification meant there was some compromise and, probably, dissent. Undoubtably that was both within PWC and TSLA.

The note in the 2023 10K is identical to the note in the 2022 10K other than dollar amount and date. Both are similar to 2021's with some phrasing changes.

Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Automotive Warranty Reserve As described in Note 2 to the consolidated financial statements, total accrued warranty, which primarily relates to the automotive segment, was $3,505 million as of December 31, 2022. The Company provides a manufacturer’s warranty on all new and used Tesla vehicles. A warranty reserve is accrued for these products sold, which includes management’s best estimate of the projected costs to repair or replace items under warranty and recalls if identified. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. The principal considerations for our determination that performing procedures relating to the automotive warranty reserve is a critical audit matter are the significant judgment by management in determining the automotive warranty reserve for certain Tesla vehicle models; this in turn led to significant auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumptions related to the nature, frequency and costs of future claims for certain Tesla vehicle models, and the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimate of the automotive warranty reserve for certain Tesla vehicle models, including controls over management’s significant assumptions related to the nature, frequency and costs of future claims as well as the completeness and accuracy of actual claims incurred to date. These procedures also included, among others, performing one of the following: (i) testing management’s process for determining the automotive warranty reserve for certain Tesla vehicle models or (ii) developing an independent estimate of the automotive warranty reserve for certain Tesla vehicle models and comparing the independent estimate to management’s estimate to evaluate the reasonableness of the estimate. Testing management’s process involved evaluating the reasonableness of significant assumptions related to the nature and frequency of future claims and the related costs to repair or replace items under warranty. Evaluating the assumptions related to the nature and frequency of future claims and the related costs to repair or replace items under warranty involved evaluating whether the assumptions used were reasonable by performing a lookback analysis comparing prior period forecasted claims to actual claims incurred. Developing the independent estimate involved testing the completeness and accuracy of historical vehicle claims processed and testing that such claims were appropriately used by management in the estimation of future claims. Professionals with specialized skill and knowledge were used to assist in developing an independent estimate of the automotive warranty reserve for certain Tesla vehicle models and in evaluating the appropriateness of certain aspects of management’s significant assumptions related to the nature and frequency of future claims.

 

[lafrisbee]

Dang...

More expensive: Every expensive thing that most people consider a need (housing, childcare so you can go to your job, college so your kids have a better chance, and hospital expenses so you can survive illnesses and injuries).

Less expensive: less costly items that you don't really need (Toys and TV's), or can probably put off buying and/or buy used (furniture, appliances, cars).


In other words, for many people, life has become:
We can't afford to buy a house, so we're stuck paying ever-increasing rent for a few more years...and we'll be going into huge debt for our kids to go to college...and we gotta help gramma with her hip replacement and recovery costs....but hey, at least we can get an 80" TV for pretty cheap, and move the 55" screen into another room, and get the younger kids a new remote control car.

And the people who love the status-quo will continue to say things like: "you could totally afford a house and college if you stopped buying Starbucks Coffee, Avocado Toast and giant TV's!!!!" As if a few dollars a day or a $900 TV every few years is going to make a dent as college costs are several $10's of thousand per year (which University will be first to hit total costs of $100K per year?!?!) and in many areas a $1,000,000+ house is 1300 square feet, 70 years old, and on a small lot...

Makes sense. The only thing I have e bought in the last couple of years is a big azz Bravia TV.

 

[jerry33]

The note in the 2023 10K is identical to the note in the 2022 10K other than dollar amount and date. Both are similar to 2021's with some phrasing changes.

Text in accounting documents tends to read the same from year to year, differences are typical minor because that is the safe thing to do (also the easiest, but let's not go there). Only the numbers change.

 

[Artful Dodger]

I don’t remember who came up with this, but I bet they’d sell like hotcakes!

 

[SOULPEDL]

Dang...

More expensive: Every expensive thing that most people consider a need (housing, childcare so you can go to your job, college so your kids have a better chance, and hospital expenses so you can survive illnesses and injuries).

Less expensive: less costly items that you don't really need (Toys and TV's), or can probably put off buying and/or buy used (furniture, appliances, cars).


In other words, for many people, life has become:
We can't afford to buy a house, so we're stuck paying ever-increasing rent for a few more years...and we'll be going into huge debt for our kids to go to college...and we gotta help gramma with her hip replacement and recovery costs....but hey, at least we can get an 80" TV for pretty cheap, and move the 55" screen into another room, and get the younger kids a new remote control car.

And the people who love the status-quo will continue to say things like: "you could totally afford a house and college if you stopped buying Starbucks Coffee, Avocado Toast and giant TV's!!!!" As if a few dollars a day or a $900 TV every few years is going to make a dent as college costs are several $10's of thousand per year (which University will be first to hit total costs of $100K per year?!?!) and in many areas a $1,000,000+ house is 1300 square feet, 70 years old, and on a small lot...

Sadly, it's almost a given today that dual income families are required in order to maintain status quo. I actually hear people say this now, as if a matter of fact.

Meanwhile, I think (hope) Universities have peaked and will need to compete for students soon. Especially when many kids realize their dream job is disappearing.

 

[scaesare]

IF they would have produced the vehicle they stated they would then the "growth" story would still be in play because they would have created a "class-leading" vehicle. Even if it is not in the Pick-up class. But by creating a unique hull with less range, less payload, less towing, and much more expensive they have a "boy toy" on their hands.
And yes, I will say it again, All the improvements regarding wiring and steering are great, and will be used in further models. But those improvements are for ALL the future vehicles. Tesla failed to deliver on what they said they would do. And they had much longer to do it than they originally told us. SO they were "late" as well.

I don't think anybody is debating that if they had gotten even closer to their target price/performance specs it would be even more popular.

What is being contended is that there was a "growth story" that Elon/Tesla was touting. As has been posted a number of times, Elon & Co. actually stated they didn't know if the radical design would get traction, and that they'd do a more conventional vehicle it generally didn't fly.

How is that a growth story they told us?

 

[Artful Dodger]

what Elon calls "Fist Principles"

I believe that was Elon Balboa.