TSLA Market Action: 2018 Investor Roundtable

[Johan]

Not surprising to anyone that’s lived in NY either. NY real estate is a Petri dish of the most corrupt people making deals with each other and paying off politicians. Almost everyone that’s made money in NY real estate is corrupt. Trump we’ve all that live in NY know is corrupt.

Those of us living in Europe know it too. Believe you me, you don't need any insider knowledge nor special skills apart from two eyes and one brain to see that he is the definition of a con man.

 

[Johan]

Based on luvb2b's numbers, cash increased by about $750 million and accounts payable increased by about $1.9 billion. So basically they've received payment for the cars but they haven't paid for the components yet.

I have to say I am a little surprised at the size of the AP increase - will take a closer look at that later.

Or could it be that they are actually trying to build some cars in Q4 as well, and in order to do that they need to buy parts? Who knows, they might even be aiming at a further increase in production? I know it's a crazy thought but maybe the didn't just close down the factory and send everyone home at midnight on Sept 30th?

 

[oneday]

Or could it be that they are actually trying to build some cars in Q4 as well, and in order to do that they need to buy parts? Who knows, they might even be aiming at a further increase in production? I know it's a crazy thought but maybe the didn't just close down the factory and send everyone home at midnight on Sept 30th?

Johan, I think you might be right! It’s shocking, even the media is picking up on this.
BREAKING NEWS:

 

[CuriousSunbird]

Or could it be that they are actually trying to build some cars in Q4 as well, and in order to do that they need to buy parts? Who knows, they might even be aiming at a further increase in production? I know it's a crazy thought but maybe the didn't just close down the factory and send everyone home at midnight on Sept 30th?

That is certainly part of it (although off-set by payments made on maturing obligations), but doesn't a 60% rise over a quarter sound high to you? If @luvb2b is reading, could you enlighten us?

 

[The Blue Owl]

That is certainly part of it (although off-set by payments made on maturing obligations), but doesn't a 60% rise over a quarter sound high to you? If @luvb2b is reading, could you enlighten us?

So, imagine you make and sell sausages. You buy X kilos of meat, and sell Y amount of sausages in Q3. Now imagine you want to sell twice as many sausages in Q4 (i.e., 2 * Y). Then, you have to buy twice as much meat (2 * X)! That, in turn, means you must pay twice as much for your meat than the previous quarter! Finally, imagine that you get your money for sausages sold right away, but you only have to pay for the meat months later, because the slaughterhouse likes you because you buy a lot of meat. That means you owe the slaughterhouse even more money, but that's okay, because you will sell even more sausages!

Even though I'm a rhino, you can tell I love sausages.

(I'm also sure you knew all this, but you're very polite, and I'm really hungry.)

 

[CuriousSunbird]

So, imagine you make and sell sausages. You buy X kilos of meat, and sell Y amount of sausages in Q3. Now imagine you want to sell twice as many sausages in Q4 (i.e., 2 * Y). Then, you have to buy twice as much meat (2 * X)! That, in turn, means you must pay twice as much for your meat than the previous quarter! Finally, imagine that you get your money for sausages sold right away, but you only have to pay for the meat months later, because the slaughterhouse likes you because you buy a lot of meat. That means you owe the slaughterhouse even more money, but that's okay, because you will sell even more sausages!

Even though I'm a rhino, you can tell I love sausages.

I agree on the principle, I just wonder about the quantum.

Of course, some of it will come from the increase in inventory.

 

[The Blue Owl]

I agree on the principle, I just wonder about the quantum.

Seriously. Production and deliveries increased even more than the 60%. What are you wondering about?

 

[dmckinstry]

Those of us living in Europe know it too. Believe you me, you don't need any insider knowledge nor special skills apart from two eyes and one brain to see that he is the definition of a con man.

Of course there is a significant fraction of voters in the U.S. that have two eyes and a brain, that apparently don't use them.

 

[Johan]

That is certainly part of it (although off-set by payments made on maturing obligations), but doesn't a 60% rise over a quarter sound high to you? If @luvb2b is reading, could you enlighten us?

Just read what the Rhino said. He explained it using sophisticated sausage math, which is beyond my event horizon but I'm sure someone as distinguished in the art of number twisting as yourself will surely understand the subtleties involved in salamification and chorizometrics. Me myself I'm only able to dimly glimpse the outlines of what he's describing (only the sausage casing as the sausiology lingo would call it) but I think he's on to something.

 

[AWDtsla]

So, imagine you make and sell sausages. You buy X kilos of meat, and sell Y amount of sausages in Q3. Now imagine you want to sell twice as many sausages in Q4 (i.e., 2 * Y). Then, you have to buy twice as much meat (2 * X)! That, in turn, means you must pay twice as much for your meat than the previous quarter! Finally, imagine that you get your money for sausages sold right away, but you only have to pay for the meat months later, because the slaughterhouse likes you because you buy a lot of meat. That means you owe the slaughterhouse even more money, but that's okay, because you will sell even more sausages!

Even though I'm a rhino, you can tell I love sausages.

(I'm also sure you knew all this, but you're very polite, and I'm really hungry.)

Can't believe we had to revert to sausage analogies. Anyway I would assume this means that's another $500m in positive cash flow (based on 40% of the car on favorable payment terms) from September, bringing current cash balance to ~$3.5b based on luvb2b's numbers. Wait for a surprise on ZEV credits ontop too.

In other words, totally bankwupt.

 

[Krugerrand]

If we close down, THEN i'll be shocked.

I tried to warn the exuberant crowd after the SEC settlement that nothing had changed. But alas...let me fan your face and offer some tea to calm your shock.

 

[Fact Checking]

Does this take into account the 60 day (or was is 90, I don’t remeber?) payment period for suppliers, while custumers pay on delivery?

Yes, 'days payable outstanding' is modeled by @luvb2b, it's abbreviated as 'dpo' in the table and is at ~81 days for Q3. Inventory effects are modeled as well, via the 'dio' (days inventory outstanding) field.

This is why you can see a slight drop in Q4, despite higher deliveries: the accounts payable extension effect forward loaded some of the cash flow to Q3, which is helpful as long as production is expanding, but causes a single quarter with a slight outlier when the rate slows down - but that's OK, as the rate is at a much higher level at that point, so there's enough buffer space for the production-growth slowdown. (At least that's my understanding - @luvb2b might be able to tell more.)

luvb2b's model is pretty accurate yet conservative, these were his Q2 predictions posted 7 days before the Q2 report:

• Q2 revenue prediction: $4,007m, the real Q2 result: $4,002, a prediction accuracy of 99.9%
• Q2 gross profit prediction: $555m, the real Q2 result: $619m, accuracy of 90%, better than all street analysts
• Q2 net income prediction: -$740m, the real Q2 result: -$742m, accuracy of 99.8%
• Q2 diluted GAAP EPS prediction: -$4.36, the real Q2 result: -$4.22, accuracy of 96.8%

So I think his Q3 numbers, now refined with the real Q2 results and the Q3 delivery report, should be fairly accurate - well above 90% accurate, by track record. Unless something unexpected happens shorts are possibly in for a treat, in about 4 weeks time.

(Of course there's always a residual risk, a chance for some error, as with everything we see on the Internets ... so this is not advice.)

 

[FirebirdAlpha]

See that 35k*60k*15% calculation? Yeah, that's unit count times ASP times Model 3 gross margin.

No, it's not.

What is the difference between gross margin and contribution margin? | AccountingCoach

Gross margin includes fixed costs.

Contribution margin does not.

This is why this sentence in the Q2 report is key:

Model 3 gross profit excluding non-cash items shifted from negative in Q1 to positive in Q2, driving significant improvement in cash profitability.​

This is why you're going back on ignore

 

[mongo]

See that 35k*60k*15% calculation? Yeah, that's unit count times ASP times Model 3 gross margin.

No, it's not.

What is the difference between gross margin and contribution margin? | AccountingCoach

Gross margin includes fixed costs.

Contribution margin does not.

This is why you're going back on ignore

Are you claiming the 3 produces 15% profit before amortized fixed costs?
If so, what number are you using for GM?

15% for GM is the number provided by Tesla (possibly the source of confusion)

 

[FirebirdAlpha]

15% for GM is the number provided by Tesla (possibly the source of confusion)

Oh? I've never seen Tesla break out gross margin per individual model. All I've seen is that sentence where it's "slightly positive when excluding non-cash"

Care to provide a source?

I've seen them give guidance for 15% gross margin, but I've also seen them give guidance for 20k Model 3s in December 2017. Forgive me for not trusting their guidance.

 

[supratachophobia]

I don't think so, supercharger installation cost seems almost immaterial. They're probably paying 300k per station these days? Probably much less if using gen3 chargers? If we wait 4 more days without a new opening though I'm sure we can get another article on how supercharger expansion has stalled

You just wait.... Profitable Q3 = Scaled Back Supercharger Deployments

Edit: I should say on a more serious note, that when they've scaled back supercharger build-out, I've seen other attempts at reductions in cost as well. It's almost like they go into this "super-save" mode where there are less rentals/loaners available, less test drive cars, less overtime, less free coffee, less construction for service centers, etc. Again, this is all anecdotal; yet I do tend to notice these things.

 

[ZachF]

Johan, I think you might be right! It’s shocking, even the media is picking up on this.
BREAKING NEWS:

Something interesting to think about, Tesla at 80,000 cars manufactured per quarter is a 320,000 unit annual rate. The US makes roughly 12 million motor vehicles a year, so Tesla is now 2.7% of US car manufacturing. In dollar/value added terms it's probably over 5% of the US auto industry now... They are no longer a small fry.

Tesla next year at ~10,000/week will be 4.2% of US auto manufacturing in units and probably 7-8% in value added terms.

 

[Fact Checking]

No, it's not.

Hey, I'm supposed to be on your ignore list - or was that a lie too?

Apropos lies, you wrote another big one here:

What is the difference between gross margin and contribution margin? | AccountingCoach

Gross margin includes fixed costs.

Contribution margin does not.

Huh? Gross margin very much does not include fixed costs.

The link you googled doesn't explain it properly, but this one does:

Here Are the Reasons Why Gross and Contribution Margins Are Different​

Reasons Why Gross and Contribution Margins Are Different

[...]

"Excluded from both ratios are a company's fixed costs -- among them costs associated with salaried employees and executives and other costs associated with its physical plant."​

Another piece of incontrovertible evidence that you are just bullshitting in this thread.

 

[Buddyroe]

He's referring to charging networks. It's actually BS. The problem is currently the supply of vehicles.

It's so funny that, at first, it was "they'll never sell 5000 cars". Now suddenly, it's "they're selling so many cars that the infrastructure will not support them."

What will the losers come up with next?

 

[Ulmo]

What’s the market cap of two car companies plus two electric utilities plus one software company divided by about (170 million shares times three)? (I’m thinking roughly equivalent of in 3-4 years Tesla does a copy-paste-deselect-paste.)

Or 300 million shares total, $600 billion cap, $2,000 per share. It’s my optimistic projection, but realistic if what I said earlier today comes true.