TSLA Market Action: 2018 Investor Roundtable

[Fact Checking]

On a personal anecdote, and I know this is way off-topic for this thread, my wife was not on board the Tesla bandwagon - until she drove one. Instantly converted. Wants a Model X so badly -- and she is a frugal, no-nonsense individual.

BTW., just curious, what are the main factors of utility or taste that make her prefer the SUV form factor over the sedan form factor?

 

[omarsultan]

This is an important point. Tesla developed the most aerodynamic and efficient cars (lowest kwh/mile, only Hyundai comes close), and the cheapest batteries (lowest $/kwh). This was a lot of R&D. Other companies will have to reproduce that R&D to achieve the same pricing, and it's not going to be done quickly. So other companies will have structurally higher costs than Tesla -- for years. And since they don't have a Supercharger network, the cars will be perceived as inferior to Teslas so will command a lower sales price. Margin squeezed from both ends. This is not where they want to be during the Great Transition to EVs.

This is a huge point. One of my favorite gems in the shareholder letter was this illustration of the R&D advantage Tesla has:

The "Tesla killers" cannot match a 3-year-old drivetrain on the fundamental technology, let alone the price curve advantages from the GF investments.

 

[EVNow]

But maybe your right. The will tell, tough historically demand had increased for Tesla after reservations were filled early in the cycle, which is well another data point that Tesla is uniquely positioned to know and understand.

That was when the media loves Tesla & their cars and very few people knew about Tesla.

I'm not saying the demand will go down or up - just that we don't know. But, we do know that the demand will go up as lower priced options become available.

Traditionally, people don't reserve a car, they go to a dealer and buy one.

Apparently not so in other countries.

 

[SO16]

Interesting, is that we all say we want to improve the environment, but it has to be on our terms. A PHEV was to improve the environment, not to be able to say you owned one. I am just as guilty. I can afford any Tesla. But I am driving my MB's until I can buy the $35k model for a commuter car because as a former dealer I hate buying new cars (rapid depreciation). And like you I do not find the other EVs compelling. That is the challenge we face in turning the corner on ICE to EVs.

For the OEM's profits are job protectors since everyone works for the shareholders who love their dividends.

Seeing as how EVs we’re not that great, the only good reason people could come up with for having one, was the environment and maybe cost of operation. (But the cost of operation was offset by the possible battery replacement.). Now by having compelling EVs, people buy them for many other reasons. Performance, style, storage, range mostly on par, safety, etc.

For the OEM’s, they also need to make difficult decisions and investments. Their actions (or lack thereof) today could very well spell the end of them in the future. GM already made bad decisions in the past which required them to fall into bankruptcy not long ago.

I’m glad Tesla made the difficult decisions of investments over profits for the last decade. They could have just stuck with the original Roadster to reward their investors after streamlining that process.

 

[The Blue Owl]

Well, that didn't last long. The scorpion stung the frog again.

 

[EVNow]

BTW., just curious, what are the main factors of utility or taste that make her prefer the SUV form factor over the sedan form factor?

Not the person you asked the question … but … in my wife's case, she wants a higher car. That gives her better visibility & it's easier on her somewhat troubled knees.

 

[sauce]

This is an important point. Tesla developed the most aerodynamic and efficient cars (lowest kwh/mile, only Hyundai comes close), and the cheapest batteries (lowest $/kwh). This was a lot of R&D. Other companies will have to reproduce that R&D to achieve the same pricing, and it's not going to be done quickly. So other companies will have structurally higher costs than Tesla -- for years. And since they don't have a Supercharger network, the cars will be perceived as inferior to Teslas so will command a lower sales price. Margin squeezed from both ends. This is not where they want to be during the Great Transition to EVs.

THIS.

 

[neroden]

Wow, I hadn't looked at AMZN's P/E ratio. I had no clue it was that high, if someone asked I'd have guessed 40-50. No wonder the market is hammering them, any indicator of slowing (or reversing) revenue is a disaster for such a growth company. (Which is exactly why Donn's argument is ridiculous.)

Amazon is... pretty weird. It's basically got two components: a barely-profitable retail company and a highly profitable web services company. The web services company is booming, as it should be, justifying high valuations (though maybe not *this* high). Amazon is trying to use Prime to shift the retail company to being slightly more profitable, and it's working. Revenue for the retail company is misleading because Amazon never made much of any money off it, and drops in retail revenue are probably just as well.

I think most people haven't analyzed Amazon correctly, so probably most people don't know this. Anyway

 

[BornToFly]

Yet in the meantime you will continue to drive your two ICE vehicles even though a Volt, Bolt, Leaf or Prius are affordable on a budget but you are not willing to compromise (on range?) for the benefit of the environment. Welcome to the majority of car buying consumers. This is precisely why the OEM's have no incentive to move any quicker than they are on EVs. Not enough people are demanding a change right now.

What would you buy/lease if one of your cars was stolen tonight?

I test drove a Volt before I got my Model S. It drove like crap. The Bolt is ugly as hell. Prius is tiny. We leased a Leaf waiting for the Model X but it drove like crap on the highway, etc. Most people aren't willing to get an EV if it is a crappy car! I bought a Model S because it was better than my Porsche. Why can't you understand this Donn?!? This is not complicated and obvious to 99.9% of the population. Yet you continue to argue. WHY DONN?!?

 

[mongo]

And you have no indication that they can produce 3k parts for an extra per week because it’s NOT 3k. It’s 3k of EVERY body panel they make for that vehicle. That’s 33,000 for an 11 body panel vehicle.

That requires revamping of production scheduling, maintenance scheduling, die repair and maintenance, additional racking etc., etc...

If we believe Tesla was planning to build 10k/wk of 3 from Fremont and that the ramp from now to 10k is possible in a sub year time frame for lower CapEx, it is reasonable to conclude they do not need another high cost long lead stamping line to achieve that rate. Based on that, the capacity difference between 10k and present production could be manufactured based on the previously determined 10k/wk plan and shipped to China.

And yeah, more racking and more frequent PM would be needed, but the racks will be needed anyway. And PM is proportional to production. No biggie.

 

[neroden]

I recently had a similar discussion with another EV owner in WV, a state that recently adopted a $200/year annual EV "tax". He was of the mindset that EV owners shouldn't have to pay extra and that it was punitive. I argued that we should have to pay and ran the numbers. Using average annual driving miles and average fleet economy, the annual amount paid in state fuel taxes by ICE drivers was basically the same as the state EV tax. This breakeven did not include federal fuel taxes, so we're technically still ahead on fuel taxes. We are both EV adopters and promoters and my opinion was that if we fought the tax, the opposition would spin it as "EV owners think they're entitled to use the roads without paying their fair share" and they wouldn't be wrong. I argued that it would be better to not fight the tax and lobby for better EV services funded with those dollars. The state could use those funds to install charging stations at state maintained rest areas on the interstates, install charging for the public at convenient state facilities frequented by the public (DMV locations, etc.), or use the funds to provide tax breaks to businesses that install charging infrastructure. I think that would be a more positive way to go about and not provide free ammunition to the opposition.

The reason I strongly disagree with you is the following.

Gas taxes charge people more for driving a lot.
Flat fees on EVs charge people the same amount no matter how much they drive.
So *even in Washington* anyone who drives less than average is incentivized to buy a gas car. That's just wrong. Only high-mileage drivers come out ahead by driving an EV -- specifically the drivers who are doing the most damage to the road.

This is a totally unfair way to pay for roads: soak the people who drive the least for choosing EVs.

Anything proportional to miles driven would be tolerable.

 

[sauce]

Yet in the meantime you will continue to drive your two ICE vehicles even though a Volt, Bolt, Leaf or Prius are affordable on a budget but you are not willing to compromise (on range?) for the benefit of the environment. Welcome to the majority of car buying consumers. This is precisely why the OEM's have no incentive to move any quicker than they are on EVs. Not enough people are demanding a change right now.

What would you buy/lease if one of your cars was stolen tonight?

I disagree. You don't necessarily throw away an ICE car that hasn't reached the end of its shelf life. But you don't buy another ICE car either once you've understood. So the demand for a legacy ICE car remains at 0. The purchase of an EV is delayed to an opportune time. But the demand is still there for the EV.

If legacy OEMs can't see this simple reality and plan ahead they are dead men walking plain and simple.

 

[neroden]

Sadly this type of value creation won’t be happening to tesla.

So you're lunatic enough to believe that Tesla will not have the sort of massive value creation which Apple had?

Apple's making a toy, albeit a nice toy. Tesla's replacing a third of the energy infrastructure of the world and half the transportation infrastructure. Which business is likely to create more value? I'll let you think about it for a few years....

 

[Krugerrand]

Temporary protective coatings (an option in addition to dry packaging) are much cheaper than consumer-grade paint jobs. And the reason "why not just finish painting the body" is the simple reason, "Tesla does not have the paint shop capacity to finish painting the body". And if they're going to build a new paint shop somewhere, it ought to be in China where they're going to need one.

They do if they simply hold production at their max and send a portion of those bodies to China. So they make 7k/wk, send 2k to China, and divide the other 5k between North American market and Europe.

That wouldn’t be the end if the world. Then as GF3 comes online completely in 2020 they stop sending the 2k and all 7k are for NA and Europe.

At that point in time I’d expect GF4 to have been announced for Europe etc., etc...

At some point along the way Tesla decides to soend the capex on expanding to 10k/wk for Fremont or not depending on announcement of GF5 in the US.

Point being, this can go a lot of different ways than what you’re thinking.

 

[SO16]

Interesting, is that we all say we want to improve the environment, but it has to be on our terms. A PHEV was to improve the environment, not to be able to say you owned one. I am just as guilty. I can afford any Tesla. But I am driving my MB's until I can buy the $35k model for a commuter car because as a former dealer I hate buying new cars (rapid depreciation). And like you I do not find the other EVs compelling. That is the challenge we face in turning the corner on ICE to EVs.

For the OEM's profits are job protectors since everyone works for the shareholders who love their dividends.

BTW, I only purchased a new Tesla to help the company. And TSLA was good to me. That was the first new car I have ever purchased. New cars are a terrible investment as you know. It also fit perfectly with my early/mid life crisis (40) at the time. Haha. I ordered it on election night 2016. I basically said “ah f’it”, click.

 

[Artful Dodger]

I hope the stock ends the day at $314.15

$(100π)

Oh, good Pi!

 

[SO16]

THIS.

Since Tesla has their patents available for others to use, does that mean other companies can use Tesla’s technology without the R&D?

 

[neroden]

Since Tesla has their patents available for others to use, does that mean other companies can use Tesla’s technology without the R&D?

A lot of it seems to be "know-how" and trade secrets rather than patents...

 

[Zhelko Dimic]

The reason I strongly disagree with you is the following.

Gas taxes charge people more for driving a lot.
Flat fees on EVs charge people the same amount no matter how much they drive.
So *even in Washington* anyone who drives less than average is incentivized to buy a gas car. That's just wrong. Only high-mileage drivers come out ahead by driving an EV -- specifically the drivers who are doing the most damage to the road.

This is a totally unfair way to pay for roads: soak the people who drive the least for choosing EVs.

Anything proportional to miles driven would be tolerable.

I think you're expecting law and rules to be fair, but the best you can expect is that they're reasonable..

 

[Krugerrand]

This is market related because, umm...

I was on Twitter, scared that Elon would say something to tank the SP, and I saw this instead. Hilarious.

Product Haunt on Twitter

I hadn’t see that one before. Thanks for resharing.

It makes my heart swell to see such pure joy especially given the circumstances. So much good has happened and will happen because of that human being and those who work along side him. All of them going to heaven.