TSLA Market Action: 2018 Investor Roundtable

[neroden]

I'm looking at where/how car production will continue to increase beyond 2019. I don't expect Tesla to hit 40,000 M3 per month until later next year. But capital should have been invested several years ago in China and Europe to continue to grow cars.

I don't know why making 5000 M3 a week would be impressive.

It makes Tesla the largest manufacturer of electric vehicles in the world and will bring the Model 3 to over 10% of the entire BEV+PHEV world production in 2019. The only manufacturers expected to be anywhere close are Renault-Nissan-Mitsubishi (if you add them all together), BAIC, BYD, and Geely.

Did you know that GM makes and sells over 100K Buick's a month in China? Did you know that Buick is not GMs largest China brand. Is that impressive?

No. Do you know how long it took them to do that?

 

[electracity]

And yet, instead, they invested over a billion dollars in Sparks.

Yeah, a billion dollars that is collateralized.

Do you understand a secured position?

 

[neroden]

I guess I'm missing your logic here. We (presumably) agree that EVs are better than ICEs. But companies like Cadillac and Volvo have been doing research in autonomy in ICE cars. What do you think it is about EVs that make them better for autonomy than ICEs? Other than just being generically better, that is.

Mostly just that EVs are generically better than ICEs.

But some extra details of my view:
-- Autonomy is actually harder to implement on ICEs, because of their screwy control systems and lag time.
-- I believe EV advantages will be more popular than partial-autonomy advantages.
-- For "full autonomy" robotaxis I think it will first happen in cities and will only be in big cities for a long time. (There are all kinds of reasons why it's very hard in rural areas.) Big cities are *really eager* to get rid of tailpipe pollution, and will really push EV autonomous cars over smoke-spewers, by regulation if necessary.

 

[scaesare]

Sure:
NASDAQ | SEC Filing

Tesla owns the land and building and leases to Panasonic. Any other arrangement would be insane from Panasonic's perspective.

But that's not the assertion you made, now is it?

 

[Remus]

Fully automic refueling, longer maintenance intervals, lower 'fuel' cost.

I guess I'm missing your logic here. We (presumably) agree that EVs are better than ICEs. But companies like Cadillac and Volvo have been doing research in autonomy in ICE cars. What do you think it is about EVs that make them better for autonomy than ICEs? Other than just being generically better, that is.

 

[neroden]

It might have. I personally think Elon deferred a lot of work on future vehicles this year in order to get the cash profitability. I think work on Semi, Roadster 2, Y, and pickup truck were all deferred if not cut back.

We are already hearing, unfortunately, that a bunch of Supercharger sites (badly needed ones) are delayed, and one is actually cancelled. Hopefully this'll crank back up in Q4, when profit is going to be a lot easier to achieve than Q3.

I suspect R&D did see cutbacks but there's going to be a lot of steady-state, salaried-worker, pencils-and-computer R&D which would continue. I just wouldn't expect authorization to build any more prototypes until Q4!

 

[electracity]

So Panasonic has tied most of their internal capex the last 5?years and made EV production their strategic focus so they could pick up Tesla’s plant in bankruptcy? That’s really smart. Dang, the car company would go bankrupt too though. Would Panasonic takebthat over also?

This is the most amazing long term plan I’ve ever heard of. Spend billions in a sure thing requiring years of planning knowing that Tesla will flame out and the bankruptcy will gonyour way and you’ll get it all. The odds are like a million to one this would work out, if you weren’t in a movie plot.

You really don't deserve a reply. But try to concentrate on some basic business concepts and terms.

Panasonic would have a net loss of probably hundreds of millions in a Tesla bankruptcy. Without securing their investment as an ongoing battery operation in Sparks without Tesla that loss would be much higher. This should be obvious.

Panasonic has secured an ongoing battery operation in Sparks by being a tenant that uses equipment that is a capital lease on Tesla's balance sheet. In a Tesla default Panasonic returns that equipment to their balance sheet and tries to find new customers.

Panasonic's investment in Tesla is the equipment showing as a capital lease. Equipment they get back in default. This is a secured position. Before the bondholders. Before shareholders.

 

[neroden]

We got our VIN assignment for delivery in 10 days for our AWD Model 3! Vin just under 66,000. Seems like production is humming. Hopefully SP rebounds nicely on Monday, because I get a margin call when it dips below 300, which I'm NOT happy about this far into the promised "short burn."

This is one of a dozen reasons why I don't use margin. Got outside cash to put into your account? Because that's what I'd do in that situation if possible.

 

[ggr]

Fully automic refueling, longer maintenance intervals, lower 'fuel' cost.

I'll give you automatic refueling, and hadn't thought of that one! The others are generic advantages and have nothing to do with autonomy.

 

[neroden]

Can you clarify this to a layman like me? Are you referring to Fractional reserve banking?

Ah. "Loans precede deposits".

What this means is that when you go to the loan officer at the bank, and they decide whether or not to give you a mortgage (or business loan, or line of credit, or whatever), they *don't actually check whether they have the money*.

So, sometimes they find a lot of people walking through the door who they think are creditworthy. They give loans to all of them! So sometimes, at the end of the day, the accounting people say "Uh, you loaned out $20 million more than we actually had." They phone up the Federal Reserve and get a quick loan for $20 million immediately.

The next day, the bank tells its deposit department to start running ads and trying to chase up depositors, so that they can pay back the Federal reserve loan. If they're lucky, after a few weeks they manage to chase up those deposits. Possibly by *offering higher interest rates on CDs and savings accounts*, which costs them money in the future. This can drive them into a loss-making position. They prefer to fund the loans with longer-maturity stuff like CDs, to reduce the risk of bank runs.

If they're unlucky, they can't chase up the deposits, the Federal Reserve orders them to recapitalize, and they have to issue stock or long-term bonds or something similar.

So, SolarCity was running the same business model -- making leases (which are a lot like loans in this regard) willy-nilly, buying and installing the solar panels using very-short-term lines of credit (stuff payable in weeks or months) without really lining up the long-term financing first -- and then they tried to finance the installs afterwards. But they couldn't just get a loan from the Federal Reserve to cover the shortfall, because they weren't a bank!

 

[neroden]

Possibly. But AFAIK he has not had depression?

This is not a medical diagnosis.

No, it's not, but I remember reading articles about what sounded like serious bouts of depression as well as what looks like hypomania.

Bipolar II is often manageable without medication.

Mod: we would prefer to discuss this elsewhere (Elon has his own thread), or not at all. In fact, moved subsequent posts to Elon's Mental Health (out of Market Action) --ggr.

 

[neroden]

Sounds like you are as frustrated with the callers on the conference calls as the rest of us and Elon.
I doubt those questions will get asked unless Elon cuts off the.... "professionals".

Yeah, they're asking SUPER dumb questions. What I want to hear is:
"What are the bottlenecks preventing increased Solar Roof deliveries? Is the product being redesigned, is it manufacturing, what?"
"Powerwall and Powerpack backlog is huge. What is preventing you from increasing deliveries?"
"Do you have some more clarity on what you need to do to get to 10,000 Model 3/week?"
"Are you going to fix the media player for USB playback? Bugs have been reported for 5 years without fixes."
"How are you addressing service center backlogs for parts and labor?"
"What happened to the Supercharger in Bethany, MO?"
"When will we be able to drive a Tesla to North Dakota using Superchargers?"

Their questions are going to be about reservation cancellations, cash burn and a bit of color on stuff already in the letter.

Rather than cut them off I wish Elon would just give a quick answer like, "this and that as it says on page 4 paragraph 2. Next caller."

I wouldn't even invite them.

 

[neroden]

booshka is definitely the only bear bulls wanna believe. If this guy has been providing accurate numbers, I wonder if Tesla has taken action to try and prevent this leak?

I suspect Tesla decided (correctly) that it isn't worth preventing the leak. Apparently so many workers see the whiteboard that it would be very hard to figure out who's taking the numbers home and emailing them to skabooshka.

 

[neroden]

I thought boats and planes held their values better than cars.

Oh, *hell* no. The market's small and picky so the pricing can be very volatile and hard to predict.

 

[defc0n]

Ah. "Loans precede deposits".

What this means is that when you go to the loan officer at the bank, and they decide whether or not to give you a mortgage (or business loan, or line of credit, or whatever), they *don't actually check whether they have the money*.

So, sometimes they find a lot of people walking through the door who they think are creditworthy. They give loans to all of them! So sometimes, at the end of the day, the accounting people say "Uh, you loaned out $20 million more than we actually had." They phone up the Federal Reserve and get a quick loan for $20 million immediately.

The next day, the bank tells its deposit department to start running ads and trying to chase up depositors, so that they can pay back the Federal reserve loan. If they're lucky, after a few weeks they manage to chase up those deposits. Possibly by *offering higher interest rates on CDs and savings accounts*, which costs them money in the future. This can drive them into a loss-making position. They prefer to fund the loans with longer-maturity stuff like CDs, to reduce the risk of bank runs.

If they're unlucky, they can't chase up the deposits, the Federal Reserve orders them to recapitalize, and they have to issue stock or long-term bonds or something similar.

So, SolarCity was running the same business model -- making leases (which are a lot like loans in this regard) willy-nilly, buying and installing the solar panels using very-short-term lines of credit (stuff payable in weeks or months) without really lining up the long-term financing first -- and then they tried to finance the installs afterwards. But they couldn't just get a loan from the Federal Reserve to cover the shortfall, because they weren't a bank!

I wish I could call up the federal reserve and get a loan

 

[Todd Burch]

Jul 27:

Model 3: 690
Model S: 150
Model X: 150

4,830/wk rate for Friday.

skabooshka on Twitter

 

[dc_h]

Yeah, a billion dollars that is collateralized.

Do you understand a secured position?

What are you talking about? It’s Panasonic’s investments, not Tesla. Panasonic is not loaning Tesla anything. Are you on the daily discord bear conference call? You used to have some salient skeptical discussion points. This bizarre conspiracy stuff is disappointing. Not sure where you are getting these new talking points. Step back and start thinking for yourself again, whoever your channeling is not up to your prior standards.


Your point seems to be that any investment Panasonic makes is secured a second time by Tesla, so if Panasonic spends 1bn on machinery in Sparks, Tesla has to provide collateral for Panasonic’s investment?

Can you document this practice? Seems unusual for a general contractor to collateralize all investments of junior partners. Why include partners at all at that point?

 

[KarenRei]

BTW; back to an earlier topic, but remember Martin Tripp and his lawyer, Saul Goodman.... er, I mean Stuart Meissner?

He's apparently hoping to destroy Electrek:

Stuart D. Meissner on Twitter

 

[Cosmacelf]

We are already hearing, unfortunately, that a bunch of Supercharger sites (badly needed ones) are delayed, and one is actually cancelled. Hopefully this'll crank back up in Q4, when profit is going to be a lot easier to achieve than Q3.

I hadn’t heard that, not that I’m doubting you. Which ones have been delayed/cancelled? And do you know for sure it was done for capex reasons as opposed to permitting/landlord issues?

 

[KarenRei]

I don't know about any specific cases, but as someone who watches supercharger.info daily, supercharger construction has seriously ramped down this quarter so far.