TSLA Market Action: 2018 Investor Roundtable

[BETA1019]

My take on the letter and call is a little different than some. As much as I'd love Tesla to beat their ramp targets, at the end of the day I don't think a month or two here or there will matter that much in the long run, although obviously it could affect short term share price.

To me the main takeaways were:

• Model Y production target might be 1M per year -- details TBA in 6-9 months
  • Target of half the CapEx/vehicle as Model 3
  • CapEx for Model Y begins later this year
• Model 3 still on track for 25% GM
• Reasonable expectation (rough guesstimate) of 100K Semi/year in four years (2022ish)
  • I believe this is the first time we've heard a number from Tesla on initial Semi production targets
  • Semi specs may be exceeded
• Goal of tripling capacity of storage installs in 2018 over 2017
• Fully ramped GF2 will produce enough cells for 150K residential solar installs so WAG of ~100K solar roofs plus panels for 50K roofs
• 5K production goal by end of Q2 confirmed, with appropriate caveats
  • Two identified problems for Model 3 ramp to 5K thus far:
    • for one a new, validated battery module assembly is being shipped from Germany -- problem is already solved and just a timing issue
    • the other (automated parts conveyance) sounds manageable
• Cash position roughly the same at the end and beginning of Q4
• Positive earnings on a sustained basis expected starting later this year
• 1M vehicles in 2020 still in play
• Reiterates Tesla expected to grow 50% per year
• Current AP hardware still believed adequate for FSD; easy to swap out processor if needed
• As expected, any excess cash flow will be plowed back into Model 3, Y, storage, Superchargers, etc.

I think a part of the problem is that even Elon is now starting to doubt himself. Everything he says sounds tentative. I have to admire his ambitions (all of the above you've listed), but it's hard to have the same level of confidence I do now as I did before. That's not to say the long term vision isn't intact, it's just not the same.

Also, I think Elon is starting to realize that the calibre of people working with him on the manufacturing lines just don't match the calibre of people working with him at Space X.

I'm considering selling some of my core shares at some point this week, and waiting it out for a while. The market seems tentative as it is, so think I'm going to sit on the sidelines for a while with some powder dry.

 

[BETA1019]

The equipment is assembled and working at Grohmann. They just have to take it apart and move it to Nevada. It will outperform all of the current automation at the Gigafactory, and take up less space. At least that's what I understood.

I don't know a lot about setting up manufacturing lines, but 'just taking it apart and moving it over' seems to me like an immense over-simplification of the entire process. Does anyone have an idea of what kind of work is required to take down a line, ship it across (not to mention all the admin associated with it), and then setup and calibrate the new line in the existing factory?

Is achieving this by the end of march even remotely achievable?

 

[wnorris]

I think a part of the problem is that even Elon is now starting to doubt himself. Everything he says sounds tentative. I have to admire his ambitions (all of the above you've listed), but it's hard to have the same level of confidence I do now as I did before. That's not to say the long term vision isn't intact, it's just not the same.

Also, I think Elon is starting to realize that the calibre of people working with him on the manufacturing lines just don't match the calibre of people working with him at Space X.

I'm considering selling some of my core shares at some point this week, and waiting it out for a while. The market seems tentative as it is, so think I'm going to sit on the sidelines for a while with some powder dry.

I am listening to a replay of the call now and do not get the feeling that Elon is sounding tentative. It sounds as if they are dealing with the Model 3 issues which have taken longer than Elon would like. Elon voiced that the team has taken a lot of lessons learned from the Model 3 ramp (one would certainly hope this would be the case). The question will be will whether there be similar lessons learned from the Model Y, Semi, and Roadster or will they finally hit a stride on the manufacturing front.

We are approaching the tipping point where a lot of the core concerns with Tesla (cash flow, manufacturing capability) will soon be resolved. We may indeed stay in the current trading range, but pressure is building for a move upward. This will likely occur once it is evident that the Model 3 ramp has progressed to the range of 2,500-3,000 and 5k is within reach.

This call more than any prior do I feel that Tesla will eventually see a market cap comparable to Amazon or Apple. You are seeing the beginning of a significant revenue ramp where revenue streams are increasingly diverse.

Fun times ahead...

 

[Tslynk67]

Did I hear "10000 plus"?

You referring to the semi estimate in 4 years time? It was 100k+

 

[Tslynk67]

My take on the letter and call is a little different than some. As much as I'd love Tesla to beat their ramp targets, at the end of the day I don't think a month or two here or there will matter that much in the long run, although obviously it could affect short term share price.

To me the main takeaways were:

• Model Y production target might be 1M per year -- details TBA in 6-9 months
  • Target of half the CapEx/vehicle as Model 3
  • CapEx for Model Y begins later this year
• Model 3 still on track for 25% GM
• Reasonable expectation (rough guesstimate) of 100K Semi/year in four years (2022ish)
  • I believe this is the first time we've heard a number from Tesla on initial Semi production targets
  • Semi specs may be exceeded
• Goal of tripling capacity of storage installs in 2018 over 2017
• Fully ramped GF2 will produce enough cells for 150K residential solar installs so WAG of ~100K solar roofs plus panels for 50K roofs
• 5K production goal by end of Q2 confirmed, with appropriate caveats
  • Two identified problems for Model 3 ramp to 5K thus far:
    • for one a new, validated battery module assembly is being shipped from Germany -- problem is already solved and just a timing issue
    • the other (automated parts conveyance) sounds manageable
• Cash position roughly the same at the end and beginning of Q4
• Positive earnings on a sustained basis expected starting later this year
• 1M vehicles in 2020 still in play
• Reiterates Tesla expected to grow 50% per year
• Current AP hardware still believed adequate for FSD; easy to swap out processor if needed
• As expected, any excess cash flow will be plowed back into Model 3, Y, storage, Superchargers, etc.

This summarises my pov too. I thought it was by far the best ECall since I've been in vested in $TSLA (Feb 2016), re-iteration of most recent guidance and bigly stuff on the horizon.

Unlike others, I enjoyed the Q&A - although I wouldn't have taken Tambourino's question, he can get stuffed... I found Elon's answers extremely thoughtful and packed with info. How many CEO's could have rebutted the LIDAR question with that level of understanding and detail?

Market may say "meh", but I re-iterate my long-bull position and will add stock as soon as I get some cash to spare.

P.S. I didn't hear any news on the vote for Elon's comp package...?

 

[Todd Burch]

I second this sentiment exactly. And I am a huge Tesla/Elon Musk fan, but I didn't like the way he was answering all of these questions. I get that he just launched a Roadster into space, but (1) he waffled on far too much, and (2) his tone was rather condescending. Granted, some of the analysts deserved it, but its almost like he's high on himself and he's trying to out 'smart talk' everyone. Or maybe just bore them to death. This ER call will be received negatively in my view.

I’ve listened to every quarterly call since the IPO. He’s sounded like that on virtually all of them. That’s just Elon.

 

[bambam4171]

Show me.

Timemark 8:10

 

[Reciprocity]

I have not read every post, but two things that jumped out at me... The semi is is very likely to have specs that exceed the ridiculous specs already put out last year and that Tesla is going to let investors see the semi automatic line at the gigafactory. You don't invite the foxes into the hen house unless you are sure they can't eat your chickens. If the semi specs are better, then there must be a battery improvement on the scale of more then what we are expecting with just 2170. The price and and range are indicative of higher density and cheaper and faster charging and... And.. more cycles. Am I crazy to extrapolate that from the specs and price and million mile guarantee?

The fsd stuff was a bit depressing with an additional 6 months to maybe see it, but the best part of that was what I had assumed and I thought I heard before which is that it would be available for customers soon after. It either works or you can't demo it. It would have to high a chance to fail if it was not fully baked and failure if that demo would be catastrophic. I realize this is not full fsd but more EAP features but it would go a long way to re-establish Tesla as the leader in automated driving. I do not consider waymo competition until lidar is miniaturized and under $100 a lidar. I think that mountain and Tesla's neutral network/vision mountain are similar sized problems but one gets you closer to a real solution and the other is a crutch and Elon explained it better then I could ever have hoped. Without vision that works lidar is pointless. The best value lidar actually had is that it can help find your position more accurately in your environment, but radar and vision are good enough for self driving and better then the best precision drivers at <10cm where lidar is ~5cm.

Lastly, i think people assumed the model 3 would be easier to build, myself included. But what I have come to realize is that they meant it was easier to mass produce. Meaning easier to automate. S/X are impossible to automate the way model 3 is, so in that way model 3 is easier to manufacture. Now automation that can go 10x faster then current auto lines seems to be hard. I'm shocked... I'm not shocked. I was stupid to think it would be easier as well, it's not. But one thing is impossible and one is possible so it is easier to mass produce but still very hard.

And really lastly... Ghromann built a completely new automated module system from nothing to working in Germany in 6 months and it's 3-4 times faster and smaller then the original solution. This company used to do these things for other companies and now they only do it for Tesla. This is huge as it represents the value and commitment of Tesla to build the machine.

Edit: and, Elon said they where quickly exciting hell. This is a positive I think.

 

[Intl Professor]

It would probably be a good idea to use your cash to buy TSLA and sell it in a few months to buy your M3.

I'm am always touched by your kindness in trying to help me out. We got the recent notice our reservation for AWD M3 is pushed out to late 2018. Unfortunately, we have little in the piggy bank, but if the stock does perform well I will be more confident in saddling my much younger wife with a substantially more expensive loan for a MS before the federal tax credit runs out. I'm really hooked on an all wheel drive model. Being an old dog and with an average price of purchase for TSLA of $73 or so, I really have a strong drive to keep the stock forever. Unfortunately for me forever is likely less than five years, Two years ago my mom died at 99, but she was healthier at my age. For some reason I've forgotten I don't think a D and C is in my future as it was hers.

 

[Reciprocity]

Then they should not have advertised it as a 35K car. Theyve harped on that for 3 years now. **** that. Ive kept my emotiins at bay until now. Dont tell the world you have a 35k for people. You answer is a tired excuse.

Yes they should build the 35k car now, even if it causes the company to go into bankruptcy because they said they would build a 35k car. Of course I am being sarcastic. Could Tesla prioritize the SR? Yes of course they could. Do they hate the poor? I doubt it, but who knows. It's clear their reasoning is margin. It matters to the long term mission more then a $35k car that pulls down margins for Q2/Q3 earnings when they will need money for model Y. I believe @Troy posted the other day iirc that only 16% or so if reservation holders are SR. It was the smallest group. Duel motor SR and LR and P models where all larger groups and I was shocked that the P was the biggest group. So take it with a grain of salt, but no one has done the work on this like @Troy.

 

[Yggdrasill]

I don't know a lot about setting up manufacturing lines, but 'just taking it apart and moving it over' seems to me like an immense over-simplification of the entire process. Does anyone have an idea of what kind of work is required to take down a line, ship it across (not to mention all the admin associated with it), and then setup and calibrate the new line in the existing factory?

Is achieving this by the end of march even remotely achievable?

I don't have a huge amount of experience with it either, but I have experience with things that are somewhat equivalent. It seems plusible enough for me, assuming they've planned the move ahead of time, and the production line isn't hugely complex.

It could simply be a matter of removing some bolts and breaking the production line apart into sections, putting each section into a crate, loading the crates into a truck bound for the airport, load them onto a cargo plane for the USA, load them back onto a truck and drive them to nevada, then take them out of the crates and bolt the sections back together.

Or it could be a lot more complex. If there are huge machines that have to be dismantled into much smaller bits, you might need months to move the production line.

I would think Tesla has a pretty good idea about the time required for the move, maybe something like 1 week for disassembly, 1 week for shipping, 2 weeks for reassembly and 1 week for testing. That would put us in mid-March.

 

[Reciprocity]

I hope shorts pound this thing in the morning. I want a nice dip to buy. Might not get it as the stock appears to be recovering I'm pre market along with the rest of markets. Good thing I have Twitter too, just love that app. It's far superior to any other social networking tool. They will figure out advertising and spam and will be huge. Not an advice.. but there are some great follows on Twitter and Facebook should be lit on fire.

Edit: let's see if they can get rid of Mark BS's fake bought and paid for followers. Then it's a serious buy!

 

[myusername]

Then they should not have advertised it as a 35K car. Theyve harped on that for 3 years now. **** that. Ive kept my emotiins at bay until now. Dont tell the world you have a 35k for people. You answer is a tired excuse.

And more importantly... do not take $500 million of real people's money and spend it the next week after you've told people this. Then two years later say, "well, you know, we were just trying to get the industry to change". If Tesla does not produce a profitable $35k car, then EVERYTHING those on this board have been talking about is VOID. There will be no 500k/yr this year, or next. There will never be a 1m year. Tesla will never grow beyond 1/5th of BMW today (mkt cap: $70b / 5 = $14b = $83 SP).

If anyone here really thinks a $35k car is not possible this decade, then you need to throw out all that "research" you've done and do the math all over again.

 

[Dynastar]

Canadians are reporting that their Model 3 estimates actually got better. This could be an indication that the full $7,500 will last though q3.

 

[HG Wells]

NOTE ITS AUSTRALIA SEE QUOTE !

One data point- M3 First production and AWD delivery estimate for Australia changed from early 2019 to late 2018. Only SR RWD remains at early 2019

RIGHT HAND DRIVE in 2018 ? Thats before Europe gets it!

Any one from England who reserved on 31st check delivery of AWD ?

 

[avoigt]

Show me.

Well understand your doubts but allow me to say, as a German engineer talking about German engineers, if Gromann confirmed it works you can be damm certain that it does. Lets not forget that this company is highly recognized as an Expert in automation from leading German automakers (previous customers) who are customers which are more than critical if it comes to performance, quality and time schedule. Risk is they don't reassemble as in Pruen (Gromann HQ) which would surprise me.

Correct me if I am wrong but I heard in the CC the automation works and will be shipped over and installed in the next weeks. If thats true I expect this line to be up an running early/mid March. You can bet they don't put it on a ship to wait 3 weeks to make it over the ocean...

 

[Starno]

There has been numerous times where this forum thought the ER was great and the SP tanked, and vice versa.

I never relate how the ER is with how the SP behave. The market is irrational.

As a long term investor, I thought the ER was ok. Not great, but not bad either.

For me, the ER would have been bad if Elon would have said they have no idea when will they get out of production hell, they're just putting all their effort toward it. And that's it.

 

[avoigt]

You referring to the semi estimate in 4 years time? It was 100k+

I believed he referred to a commend from Deepak about M3 production ramp and can confirmed he said 10k+ indeed.

 

[ggies07]

Yes they should build the 35k car now, even if it causes the company to go into bankruptcy because they said they would build a 35k car. Of course I am being sarcastic. Could Tesla prioritize the SR? Yes of course they could. Do they hate the poor? I doubt it, but who knows. It's clear their reasoning is margin. It matters to the long term mission more then a $35k car that pulls down margins for Q2/Q3 earnings when they will need money for model Y. I believe @Troy posted the other day iirc that only 16% or so if reservation holders are SR. It was the smallest group. Duel motor SR and LR and P models where all larger groups and I was shocked that the P was the biggest group. So take it with a grain of salt, but no one has done the work on this like @Troy.

I've said this before, but they have been doing this with the S and X for a few years now, this should be able to hold them steady while slowly cranking out the 3. It's obvious that they can't afford to produce a base 3 yet, all the while they have been touting to the world when production started last year that they were. I have been one of the most positive longs on here and in my life around family and friends, but how they are arranging this is ridiculous.

Paraphrasing Elon on the call last night about the battery modules "we were over confident over complacent....and got too comfortable." They f'ed up and the least they can do is go by the reservation number (fulfill the first day line-waiters) and not let new owners skip ahead of us. They are choosing profit over reservation number plain and simple.

 

[jelloslug]

I don't know a lot about setting up manufacturing lines, but 'just taking it apart and moving it over' seems to me like an immense over-simplification of the entire process. Does anyone have an idea of what kind of work is required to take down a line, ship it across (not to mention all the admin associated with it), and then setup and calibrate the new line in the existing factory?

Is achieving this by the end of march even remotely achievable?

That's actually a fairly common practice.