TSLA Market Action: 2018 Investor Roundtable

[neroden]

And what would they do with the half finished cars? Fremont is already tight.

It's also bad financially: building half cars ties up materials, parts, labor - and puts them into inventory, which is a drain on cash flow.

Tesla is generally following Just-In-Time manufacturing flow, minimizing inventory. So if they have a known battery pack bottleneck then they simply matched the supply chain and the Fremont rate to that - and also issued a 50-55k guidance which corresponds to a 3.8-4.2k/week rate.

I actually think they probably tried to keep the supply chain a bit above the production rate based on the known bottleneck (whereever it is). Two reasons. One, this means when one bottleneck is resolved, they can immediately increase production rateh than waiting for all their suppliers to spin up. Two, they have a shortage of parts to use at the service centers, so they need extra parts anyway.

But they would never build half-finished cars; they have nowhere to put them.

A larger stockpile of *car parts* in those two giant automated warehouses? Now that's a possibility.

 

[Dennisj00]

Sonnenfeld and TSLA short Jim Chanos are both members of faculty in the Yale School of Management.

Jeffrey A. Sonnenfeld
James Chanos

Sounds like a good degree from Wharton!

 

[mekberg]

At this point I find it hard to come up with a scenario where Tesla would miss profitability:

• They mentioned really good margins for Q2 which should generate quite a bit of cash flow,
• the restructuring cost savings should start kicking in in Q3,
• ZEV credits earned should be robust, they scale with units produced, not revenue.

Unless there's some significant complication the numbers are there I think.

Also higher ASP due to 3P and 3D car manufacturing priority.

 

[Fact Checking]

They will produce more in the 2nd half than the first. This is not a novel or contentious assertion.

While it's true that this was the historical pattern while Tesla was ramping up, and I don't claim this cannot happen, I am simply claiming:

• That it's contrary to current Tesla guidance,
• that a high rate of end of Q3 production generates more cash outflow, which makes it harder to meet the positive cash flow Q3 target,
• that Tesla didn't make a promise of dramatically higher rates EOQ other than the 6k by end of August which they could still meet.

Tesla might still surprise us - nobody but shorts will complain about better results, I'm just outlining guidance and expectations.

 

[Fact Checking]

Also higher ASP due to 3P and 3D car manufacturing priority.

Yeah, and probably also higher EAP+FSD take rates, due to the free HW3 upgrade to the Tesla AI chip.

 

[sundaymorning]

Nice commentary from Ross Gerber
www.bloomberg.com/news/videos/2018-08-27/musk-keeping-tesla-public-was-right-decision-ross-gerber-says-video

Now thats a deal analyst, Ross Gerber knows what he’s talking about. You can tell bloomberg was pushing their agendas through their typical cash burn questions, but Ross handled them well.

 

[jw934]

Really, people who expected 60k+ production for Q3 were being too optimistic, and it's time to correct those expectations before they turn into a negative surprise come Q3.

Exactly. I agree that the Q3 numbers on Oct 1 could be a SP risk due to the build-up of these expectations. One analyst is broadcasting even wilder numbers on Bloomberg. "This quarter we think Tesla is gonna produce around 65 to 70,000 model 3's." . Totally irresponsible, even if his views are entirely positive. Terms of Service Violation

 

[Zhelko Dimic]

I agree with your analysis. The point of sometimes paying a bit of attention is that some non-significant part of the bears actually build their case on these arguments. Since most here are bullish it's good for us to, from time to time, check and make sure that they still are wildly lost in their fantasy world echo chamber. That way we can keep riding the stock and feel pretty confident that the value it's trading at is lower than its intrinsic value, because the high short interest is constantly depressing it artificially - but as long as the short narrative is built on faulty presumtions we can discount its effects.

I don't feel Mark is useful listening to, though I just wasted 6min...
Useful bears: @YasB, @CuriousSunbird @Reciprocity as they have decent observations
I don't see them as bears, but many people do, and they get beat up pretty bad around here, more than worth checking their input: @brian45011 (star contributor to everything and anything legal/financial doc. and especially small print related) @phil0909 @electracity @beachbum19, probably couple others
And then, there are bunch of bears that bring no value, similar to Mark: mmd, firebird or something like it, recent priscila and probably bunch of others that I've blocked awhile back and have forgotten about
@Johan I'm mentioning this as I know you've been away for couple of years and landscape has changed

 

[jkirkwood001]

Are you kidding?

1. Problem 1: Elon said all he needed was a shareholder vote. We never got one. (Gee, I was waiting for Elon to phone me. Still waiting...)
2. Problem 2: Elon said funding was secured. It's apparent he didn't, although possibly VW and others came to bat after he tweeted. Still not trustworthy.
3. Problem 2: The stock has swung +/- 20% since the tweet - that's a lot of impact, even if we can't say how much of that is directly related to his tweet.

I'm long on Tesla, but I bought more at 360 in the belief Elon would execute as he said he intended, and there are many more who did the same. He didn't. Right now I'm out a lot that I wouldn't have been if Elon didn't tweet - simple as that.

That said, I'm sympathetic to Elon and the stress he's under. I don't think anyone here believes Elon deliberately misled people or tried to manipulate the stock for his own financial advantage. But that is not the way stock rules work. You don't get to say "oops, my bad, ignore previous tweet". There are penalties. Frankly, if Elon got hit with a $50 M fine (would some of that come back to compensate me??) I think it would be a reasonable deterrent for him to be more cautious in future, at least regarding the public markets. We generally like Elon breaking rules in auto manufacturing, energy systems and space exploration, but this is a different playing field. And don't say that's why he wants out of the public markets - they saved Tesla in the past, this is the price of admission.

My $0.02 worth.

Wow. 7 Likes and 6 Disagrees - pretty divided. And my post is half complaining and half giving Elon due respect (being equivocal is my way!), so I'm not even sure which part everyone's on about!

Somebody replied that as long as the speaker believed their funding is secured, then that complies with SEC. In which case, I believe Elon had that assurance, we've just never seen the Saudis corroborate his side of the story.

 

[elasalle]

skabooshka on Twitter

If this is true I assume that this can fixed and production here can be temporarily increased to catch up with the backlog. Assuming GF1 is still pumping out batteries they will have a backlog of batteries. As soon as they get the new batch of MOSFETs they can increase the production to 6000-8000cars per week until they run out of batteries. So last week GA got to take some rest, they did some upgrades and once they get the MOSFETs it is back to the tent to clear up the battery backlog and Tesla will finish the quarter with 8000cars per week for one week. Then back to 6000 per week at the start of Q4 scaling up to 10k at the last week of Q4.

It must have been for issues like this that Q3 guidance was 50-55K, i.e. Mgmt already knew (things could go wrong) and gave low guidance.
55K in 13weeks is basically 4230/week ...

if we went with 5K/week we should have got guidance of 65K ..

 

[Skryll]

Wow. 7 Likes and 6 Disagrees - pretty divided. And my post is half complaining and half giving Elon due respect (being equivocal is my way!), so I'm not even sure which part everyone's on about!

Somebody replied that as long as the speaker believed their funding is secured, then that complies with SEC. In which case, I believe Elon had that assurance, we've just never seen the Saudis corroborate his side of the story.

360 is a bargain compared to where it's going soon... just do what the rest of us do. Accumulate and don't sell below $1k

 

[Singuy]

Wow. 7 Likes and 6 Disagrees - pretty divided. And my post is half complaining and half giving Elon due respect (being equivocal is my way!), so I'm not even sure which part everyone's on about!

Somebody replied that as long as the speaker believed their funding is secured, then that complies with SEC. In which case, I believe Elon had that assurance, we've just never seen the Saudis corroborate his side of the story.

It's complicated...

1. He surveyed shareholders and saw most told him not go private. He will mostly likely cannot get enough support or not want to force shareholder's hand by going private. Also many long term institution bulls will vote no because they can't take their shares private.

2. You think Silver Lake worked some kind of magic in 5 days time and got Elon 30 billion dollars worth of funding because you think Elon had no funding when he tweeted?

3. Stock went up and down because people were placing their bets. His initial tweet was "considering taking Tesla private" so a 50/50 chance was priced into the sp.

 

[tivoboy]

It must have been for issues like this that Q3 guidance was 50-55K, i.e. Mgmt already knew (things could go wrong) and gave low guidance.
55K in 13weeks is basically 4230/week ...

if we went with 5K/week we should have got guidance of 65K ..

Well it’s not really 13 weeks. There was the July 4 week holiday and there will be another time off either for labor day and some days or another time

 

[Krugerrand]

It’s going green today! I’ll bet my left nut!

So...um...yeah.

 

[UnknownSoldier]

It’s going green today! I’ll bet my left nut!

The good news is, God gave you two.

 

[Electroman]

I don't feel Mark is useful listening to, though I just wasted 6min...
Useful bears: @YasB, @CuriousSunbird @Reciprocity as they have decent observations
I don't see them as bears, but many people do, and they get beat up pretty bad around here, more than worth checking their input: @brian45011 (star contributor to everything and anything legal/financial doc. and especially small print related) @phil0909 @electracity @beachbum19, probably couple others
And then, there are bunch of bears that bring no value, similar to Mark: mmd, firebird or something like it, recent priscila and probably bunch of others that I've blocked awhile back and have forgotten about
@Johan I'm mentioning this as I know you've been away for couple of years and landscape has changed

What?? Reciprocty is a bear? in which universe?

 

[Krugerrand]

Okay, he took one for the team. Who's willing to step up for tomorrow? Anyone.... Hello....

I got an extra toe on my right foot I’ve been trying to get rid of for years...

 

[Artful Dodger]

if we went with 5K/week we should have got guidance of 65K ..

50-55K est'd production in Q3 assumes 10 or 11 weeks of production at 5K per week. No production planner assumes 13 weeks of production per quarter.

The two Stat. holidays in Q3 alone remove a week's worth of production. Then unplanned but inevitable line stoppages and supply constraints remove addtional days of production here and there throughout the quarter.

 

[Electroman]

50-55K est'd production in Q3 assumes 10 or 11 weeks of production at 5K per week. No production planner assumes 13 weeks of production per quarter.

The two Stat. holidays in Q3 alone remove a week's worth of production. Then unplanned but inevitable line stoppages and supply constraints remove addtional days of production here and there throughout the quarter.

Amen. This is basic manufacturing-ramping 101 for any new assembly line - especially for a new technology like mass battery and EV drive train production. It starts slowly and ramps up with fits and hiccups before they reach a steady state max rate.

Interestingly the institutional investors all understand this. And so are the retail investors. It is the scumbag shorts who make noise

 

[Zhelko Dimic]

What?? Reciprocty is a bear? in which universe?

You're right. It was @Reality I was thinking about. And I wasn''t too crazy about S/N from him, but since pickings are slim...

I am unfamiliar with Reciprocity's work, for some reason I don't seem to see it ever...