1/1/2015
guest This is a critical point. If Elon Musk and a bunch of the top people all walked away, Tesla would collapse in on itself. It would take a while for a reborn Tezla (or whatever the new company would be called) to come back to production, but they can and would do it.
There is one big difference though, Elon Musk is not making his wealth in the same way Rockerferller did. Rockerfeller was the king of the robber barons and made most of his money squeezing the competition out with dirty tricks. Elon Musk may become the biggest player in the car market, but if he does, he will do it the same way Steve Jobs became the biggest player in the phone market, by out innovating the competition, not by playing financial games.�
1/1/2015
guest Very helpful -- thank you. You have at least partly placated my concerns.
I agree with you and wdolson that the 'open source' patents are key and mean there is always another Tezla on the horizon if something happens to Tesla. That is especially true after March 31 -- if someone wanted to strangle Tesla's vision they needed to do it when it was in its crib, not a strapping teenager.
But I am not sure that there is no path to a takeover of Tesla by someone less motivated than Musk to accelerate adoption of EVs. I do think this is a low probability, at least as long as Musk is CEO. I believe Musk has something closer to 27% of the stock than 37%. Merger premiums are pretty low nowadays, the average is under 50% based on some quick net surfing. And I am always surprised by the short term time horizons of most investors. I wouldn't be surprised if the average investor wouldn't jump for joy at a 100% premium, and be happy with something less than that. And with a very volatile stock price that could mean 350 or 400 instead of 500.
And I also appreciate what you have to say about the SWFs. I don't know very much about them but I do know that most people tend not to bite the hand that feeds them. Tesla is about to inflict some serious pain on countries that are dependent on oil revenues. Solar and wind are not even close to the threat to oil that EVs are. So I would feel better if the SWFs stuck with the VWs of the world and steered clear of significant stakes in Tesla.
A takeover of Tesla would not stop the EV revolution, but it could sure slow it down. And from my selfish perspective as an investor, I would be very disappointed to be pushed out of TSLA for the price of a merger premium and miss out on the train ride I see coming for the next ten years.
I did read somewhere that Tesla's bylaws require a 2/3 vote to approve a takeover/buyout but have not been able to confirm yet. If so, Musk would still have the power to stop it as long as he doesn't get too diluted in upcoming cap raises. In any case, I do agree this is a low risk for the reasons you mention.�
1/1/2015
guest Well, I for one cannot refute your comment about most investors having short-term time horizons. You might be more tranquil if you surf the net to learn how quickly governments become chauvinistic when a keystone corporation gets nibbled at by a foreign entity. As I wrote in the initial post, nohownoway would China be permitted to take control of a robust Tesla; in my very considered opinion that also would be the case with a Petro-Sovereign Fund.�
1/1/2015
guest Hmm, pretty interesting point about capturing oil and gas revenues. In some respects that is what Solar City and Tesla Energy is about, but apply a $5 per charge to Model 3 use of the Superchargers and off you go. Would be very easy for tesla to do since the supercharger and car already do a handshake. All they would need to do is have your credit card on file and they could seemlessly do this in the background�
1/1/2015
guest Elon said Tesla will have the Market cap of Apple. If he is off by even a factor of 2 or so, and it gets to 300 Billion, I will retire that day, and will happily get my first and only Tattoo - The Tesla T logo.
�
1/1/2015
guest Sorry....that brand is taken
/OT�
1/1/2015
guest I will let this one go. I was a little grumpy because Virgin America was bought out despite Richard Branson still owning 25% of the stock and 20% of the voting shares (not much less than Elon's TSLA stake). It is by far my favorite airline and the only other deep and long stock I owned alongside TSLA (everything else is diversified). I thought both were good "10X in 10 years" bets which are tough to find, but had to settle for the merger premium on VA (first world problem if there ever was one).
But I'm over it now. Monday morning I sold all my VA and doubled down on TSLA. So far that's working out ok. Hopefully in a few years when the market cap hits $300B+, I'll be enjoying retirement like rdalcanto, preferably on a nice beach somewhere.�
1/1/2015
guest Got it....but...you might enjoy the new Alaska Airline-VirginAmerica tie up. AK Air is pretty good!
And...I won't moderate out this set of posts, but we're pretty off topic here....�
1/1/2015
guest Seems to me that Tesla will eventually have a market cap at least 3 times that of Apple.
Both companies are marketing to the same mid-to-high income segment of the world population, both have transformative products, customer loyalty and high brand value that will enable both to maintain price premiums and good margins, despite both having significant competitors. Tesla and Apple are remarkably similar consumer product companies going forward, although obviously Apple is much further along its growth curve.
But the big difference is that the revenue potential of Tesla is ultimately much higher than Apple (with respect to their core products of cars and phones/computers). The potential mid-to-high income customer base is about the same, but the annual spend of that customer base on cars is multiples of the annual spend on phones and computers.
If Apple really opts to manufacture its own electric car, then this gets more interesting. But Apple does everything at its own deliberate pace. Tesla will have a substantial first mover advantage in electric cars for Apple to contend with.�
1/1/2015
guest As many have pointed out, Apple is in a high margin market while Tesla is in a low margin market. Though Tesla makes a bigger profit per car than most auto makers do. I expect that to change at Tesla matures and the competition begins to catch up. Over the long haul Tesla will likely be a low margin product like other auto makers.
They are both disrupters in their market niche and both have a very strong and loyal following. Both also make good products. As much as I hate Apple's OSs, their hardware is some of the best made in the computing industry.�
1/1/2015
guest Rather, Apple is reaping high margins in a low margin market. It has the vast majority of profits in the market despite having a minority market share.�
1/1/2015
guest Respectfully disagree.
Consumer electronics (including the computing kind) was (and still is) a very low margin market. Apple 'disruption' was to create healthy margins within that market with Product lust on a massive scale.
Technologically induced disruption is by definition, a conversion of established low margin industries to higher margin; transformed via product price/performance with a craved value proposition, on a massive scale. That's Tesla by any definition.
Eventually of course the disruption gives way and as you say competitors absorb higher margins to return the industry to a candidate for the next disruption. Albeit with new players as dominant players (Apple vs Sony) (Tesla vs GM). The old companies may or may not survive it, but either way, investors in the disruptor make money on the transformation
JMHO�
1/1/2015
guest Your humble but oh so correct opinion.
What intrigues me even more with Tesla is I feel they're showing signs of not being afraid of keeping up the innovating even when they could slow down and reap the profits in the new market segment they've created for themselves. What I mean is whenever the inevitable transformation of the high-margin slice of the market in to a more competitive thus lower margin situation Tesla are already going to be two steps ahead in to new uncharted virgin territory, looking for the next disruption of an existing market or perhaps inventing a completely new industry. I know Jerome Guillen misspoke when he said reckless growth but the saying stuck with me.
Right now Tesla are doing what every economics professor would dissuade them from: going full throttle in to building a mass market (albeit upper mass market) car with half the ASP and liwer margins of what they're currently selling in a market without competion (the long range luxury BEV market that is). But I'm sure in retrospect it will prove to be a genius move, including strictly financially and for Tesla investors.�
1/1/2015
guest OK, good point that Apple is a high margin seller in a market with a lot of low margin players.
Often going against the experts can result in disaster, but major changes also happened because someone broke the rules. Amazon was an online book seller with dreams of becoming a major retailer of everything. Back in 1997 few people except Jeff Bezos thought that was possible, but look at them today.
IMO, Tesla's strategy has been brilliant. Not only do the Model S and X fund the development of the Model 3, but being priced out of the range of most people, there is a huge crowd outside staring in longingly. I got a taste of that last summer when we had a big weekend get together at our house. I made a point not to mention Tesla, but someone else did and suddenly all but one person was going on how they wanted a Tesla. One woman said it's either a brand new Tesla or her old beaten up Ford Focus and nothing else appeals.
A few weeks later I had to take a taxi ride and the driver mentioned something disparaging about electric cars. I commented that Teslas were nice and he spent the rest of the ride praising Teslas and telling me how much he lusted after one. He just hated all other electric cars.
Last weekend we went out to dinner with my SO's law partner and his family. When we pulled into the parking lot I spotted a brand new Model S P90DL with paper plates. His six year old daughter who has never shown the slightest interest in cars immediately blurted out "I want a Tesla!"
Those instances told me that Tesla has a massive potential market who's only reason they haven't bought is the price and once that barrier was gone, the floodgates were open and there was no going back. The entire public isn't ready yet, but enough to keep Tesla going for a long time to come once the Model 3 comes out.
There currently is no mass market for long range BEVs below $50K, but that's only because the Model 3 isn't there yet. The customers are lined up and waiting.
Some people are skeptical that a huge percentage of those who plopped down a deposit on a Model 3 are going to convert it into an order, but there are also people who are interested, but aren't going to do anything until they can actually experience the car first hand. I'm in the market for a Model S, but I have very long legs and long trips are agony for me if the seat doesn't go back far enough. I would never buy a car I couldn't sit in and see if it had enough leg room first. The Model S has plenty for me, but I don't know about the Model 3 and won't until I can sit in one. Every other car the size of a Model 3 I've sat in doesn't have enough legroom.�
1/1/2015
guest Interesting write-up detailing don't similarities between Tesla and Apple:
It's a Tesla - Stratechery by Ben Thompson�
1/1/2015
guest One way to consider the AAPL market cap is to wonder when tesla could do about $250B in revenue, with ~$100B in gross profit and $70B in net income before taxes.
Since Tesla is looking at a 20%-25% gross margin vs. AAPL's 40% they will need to have higher revenues than $250B. Let's say $400B. If the average car is ~$60,000 then you need about 6.5million cars a year.
In 2014 VW sold about 9.8m for the #1 spot. 6.5m is roughly #4 (GM) and well ahead of either Honda or Nissan (about 4-4.5m). For reference Mazda was #15 at 1.2m.
Of course Elon's mission to replace the ICE so this is well of the realm of possibility. However tesla will probably need 5-7 automotive plants and 5-7GF to get there. I believe Elon & JB have mentioned this multiple times.
This is why I am hoping for announcement of a new plant or GF this year. And next year, and the year after that, and then by 2018 or 2019 at least one of the larger automotive companies go bankrupt, are purchased by Tesla and refitted for EVs.
That's about the fastest way to AAPL market cap that I can think of�
1/1/2015
guest In fairness, when Apple first hit $700 in Sept. 2012, it had a "mere" $156.5B in net sales and $41.66B in Earnings. By the numbers: Apple�s fiscal 2012 annual report
If Tesla continues growing revenues at 50% per year or something approaching that it is reasonable to expect a P/E well above 20, so it could hit the same valuation at significantly lower revenues/EPS than Apple had in 2012.�
1/1/2015
guest GM Delivers its Second Consecutive Year of Record Global Sales
DETROIT � General Motors Co. (NYSE: GM) is reporting its second consecutive year of record global sales. In 2014, the company and its dealers delivered 9,924,880 vehicles around the world, surpassing by 2 percent the record set in 2013.
General Motors Reports Calendar Year 2014 Net Income Of $2.8 Billion
In 2014, revenue increased $0.5 billion to $155.9 billion, compared with $155.4 billion in 2013.
Full-year net income attributable to common stockholders dropped $1.0 billion to $2.8 billion, compared with $3.8 billion in 2013. In 2014, full-year net income was also impacted unfavorably by recall-related pre-tax costs of $2.8 billion, or $(1.07) per diluted share. Income tax expense in 2014 was favorably impacted by recall-related costs and special items.
The drop in net income caused earnings per share diluted to drop $0.73 to $1.65 from $2.38.
Full-year EBIT-adjusted was down $2.10 billion to $6.5 billion, compared with $8.6 billion in 2013. For 2014, full-year EBIT-adjusted includes the impact of $2.8 billion for recall-related costs and restructuring charges of $1.0 billion.�
1/1/2015
guest I don't understand the relevance of this 15-month-old article?�
1/1/2015
guest
�
1/1/2015
guest Good point. So maybe then when Telsa hits ~4m cars. Still would accelerate when they could buy an existing auto maker going/ gone bankrupt.�
1/1/2015
guest For those who don't spend time wandering into the other forums, I highly recommend having a look at this one to get a sense of the incredibly broad appeal of the Model 3. It's also a fun read.
If You're Reserving -what car are you coming from?�
1/1/2015
guest That's pretty great. When they add the Model Y, the pair will sell a million cars per year. Pretty certain.�
1/1/2015
guest A shortened version of the following was posted earlier on the Short-Term Investing Thread.
You might be interested in a Charlie Rose Interview with John Kerry. It is totally off topic so I will shortly post a more extended review on the long-term and macro threads.
John Kerry; Tina Brown
Despite nearly forty years teaching about foreign policy, with some direct practice at the microbe level within the Federal policy bureaucracy, I learned a lot from Kerry.
Rose often annoys me with his questions but most of the time in this program they are spot on. Rose asked what foreign leaders think of our elections today. Kerry reluctantly responded but gave one example of the dangers others perceive. One candidate suggested the North Korean problem could be solved if we gave the nuclear weapon to South Korea and Japan. �That can�t happen.�
The most interesting to an academic theorist was his observation in the last century most international politics was about state actors. Now with a few contrary examples, which he listed�Russian Ukrainian hotspots (I would add our aborted effort at nation building in Iraq)�non-state actors recently show they have and will continue to dominate the bulk of international relations problems in this century. He then launched into a very humane and civilized listing of the causes of terrorism, his concern about the widespread examples of poor governance, the ghettoizing of Muslims in the so-called advanced western countries, widespread corruption, and poverty. Social media coalesces this discontent with the status quo into very real threats almost everywhere.
Social media and international relations? That sounds like an interesting 21st century course in politics among nations.
Kerry was quite firm in support of Obama as Charlie Rose battered him unsuccessfully with questions the great-unwashed use to cut down the president. Nonetheless, he was not defensive.
For example, on the macro thread I have firmly criticized Obama for drawing a red line in Syria over use of chemical weapons. The president should never draw a red line and then not be prepared to go to war if necessary when it is violated. Without defensiveness, Kerry pointed out there were backchannel communications among the administration and both Russian and Iranian authorities on this issue, including direct communication between Obama and Putin over the problem, until they agreed upon an alternative which Putin could take credit for! There was a mutual interest of Iran, Russia, and the U.S. to see a broader reduction in all of Syria�s chemical arms lest they fall into terrorist hands.
Is Trump that sophisticated at negotiation?
There are other examples woven into this interview of negotiations with adversaries over Syria.
My second exposure to education about international relations occurred when I took a graduate seminar in theories of international politics from the great �power theorist� Hans Morgenthau who was moonlighting at Harvard one summer.
IR wonks will remember Morgenthau, George Kennan, and other prominent practitioners and academics were writing about the need for a more confrontational �power� approach to international threats in the post World War II period. Their view was contrary to the focus during the interwar period on �idealism� or peace through international law and organization. However, professor Morgenthau always said there was a moral element to his theory: it must assure the outcome is expedient. Eventually at the height of the Vietnam War he held a press conference at the Pentagon announcing he would no longer consult for the Defense Department because the Vietnam War was inexpedient.
Somewhere in one of his books, or in the class, I can�t remember, he said something to the effect when monarch�s ruled countries dynastic ties between rivals had a moral characteristic. Relations between states headed by persons could have moral accountability. To illustrate, Barbara Tuchman says somewhere in The Guns of August that Kaiser Wilhelm cursed on hearing of Russian mobilization, �if grandmother were alive, this never would have happened.� Grandmother was Queen Victoria.
Just as social media has the deleterious effect of compounding terrorist ambitions, swift communication in our age can also make transparent, because secret, communication among world leaders more effective. My view of Obama went up because of this interview as the Syria/chemical weapons discussion shows. Kerry also hinted at personal communication channels in many negotiations underway with world leaders. His approach is very similar to what Roger Fisher and others have called getting to yes.
This familiarity adds at least a personal element to diplomacy redolent of the morality possible in the personal relations of monarchs in ages past. Kerry, for example, has spent hours talking with Putin. At one point Rose interrupted when he spoke about finally being able to negotiate with the Iranians. He clarified diplomatically, something to the effect; it was hard finding someone who had enough clout to be able to talk with us about a settlement.
Another point was asking Kerry to assess what was his most important accomplishment, �the Iran nuclear deal?� Kerry responded that was a matter for future historians. I�m not a historian but I have nodding acquaintance with diplomatic history. I would rank him with Jefferson and Charles Francis Adams, our �Minister� to the Court of St. James, not at the rank of Ambassador since we were such an unimportant country. (For you wonks: Adams kept the British neutral during our civil war.)
A prominent arms control theorist in academia lamented of his experience working in the White House, �I kept looking for the adults who were in charge. There were none.�
A patient viewer comes away after this interview confident that the adults are in charge. Perhaps even Putin is an adult on some issues and that�s an admission coming from a self-professed �extinguished professor of Soviet Government and Foreign Policy.��
1/1/2015
guest I agree -- and probably more if they can build them fast enough .....�
1/1/2015
guest Along with the Model S refresh, Tesla has introduced a new Wall Connector, with daisy chain capability for up to 4 chargers on a single circuit. This new charger supports up to 80 amps and is priced similarly ($500-550) to 32 amp J1772 chargers. Seems like a clue to Tesla's ambitions for L2 charging, and how they will go about meeting the goal Elon mentioned of greatly expanding the destination charger program in the Model 3 reveal. Cheaper units, and easier/cheaper shared wiring seems like they should heavily promote these units for parking garages and other locations in the destination charging program. Existing locations could potentially add additional chargers to their existing circuits, allowing more cars to charge. Do any other chargers have this capability?�
1/1/2015
guest My feeling is that we have hit a whole new level with regards to long term potential of tesla. A few years ago we should have been happy to be "competitive" with regards to EVs at the time of the model 3 launch, now it is clear that tesla has a massive, massive lead with regards to EVs in the 2016-2019 timeframe.
Beyond that the company is well ahead of any competitor with regards to GF or supercharger infrastructure and has established themselves as the leader in luxury and performance EVs.
To me the valuation question now becomes one of size of disruption of the current ICE marketplace vs. number of cars built.
I think model 3 launch has shown that the demand is basically limitless - question becomes one of who can supply.�
1/1/2015
guest Ticking off boxes:
Model S, X, and pending 3 to round out the fleet--check
(Promised future Y and possible P--pick up; future product line is expandable).
AutoPilot, OTA updates--check
(New software features and autonomy. Greater capacity for fleet learning, etc...)
Supercharging capacity (Highway, long trips)--check
(Obviously will continue to develop stations and improve charging capacity)
Additional daisy chaining HPWC capacity (Increased capacity for Destination charging, apartments, work, etc...)--chk
(Personally love this, as I believe depending on how this works, it will really boost capacity for local charging which will increase EV adoption and take the strain off the super chargers, hopefully).
Power wall back-up (provide stable dependable power irregardless of grid strain)--check
Needs:
Greater service center build outs in less urban areas...
(Possible franchise options?)
Overcome legislative hurdles to allow greater access to markets blocked by dealer franchise laws...
Increase spare parts availability...
Potential:
AutoPilot and Autonomous driving for potential taxi/ride share market. Additional "rental" income.
Greater partnership capability with other automakers can provide extra income/market capacity (Tesla powered Ford F-150, I can put this in TMC, I'm sure I'd get lynched in a Ford forum)...
Supercharger network can ultimately be "rentable" to other EV carmakers and provide additional revenue stream.
I'm sure there are other things I cannot think of right now, but in summary:
Long-term fundamentals are EXCELLENT.�
1/1/2015
guest Don't underestimate the value of having a very aggressive, agile and growth oriented organization that is behind all these actions. Even if Tesla had nothing but was what it is now from that perspective, they'd still be worth a lot.�
1/1/2015
guest "March Was The Most Abnormally Hot Month Ever Recorded On Earth" - BuzzFeed News
March Was The Most Abnormally Hot Month Ever Recorded On Earth�
1/1/2015
guest Saudi Arabia's Tesla Roadmap
This link has been floating around on a few other threads, and from an environmental perspective, it's great.
As a Tesla investor, it worries me. As much as I love Tesla and think they are leaps and bounds ahead of anyone else, I'm unsure how much *technological* edge they have over anyone else, at least with regard to Tesla Energy. I feel like a big chunk of Tesla's current position is first-mover advantage, and just being the farthest along in scaling things out.
But everyone in the world is working to make better batteries. Does tesla really have better ones? I doubt it, and they've stated that they're scraping together $5b to build a factory for an economy of scale play (with some money spent on battery R&D, but with not nearly as much emphasis).
Which to me means that someone like Saudi Arabia or Apple, both of which have $5b (or $100b) laying around ready to deploy, could play the scaling game much more aggressively than Tesla, and at the very least give them a run for their money if not beat them to the punch.�
1/1/2015
guest The way I see it (and what guides my investing decision in Tesla), the basis of what makes Tesla different and so much better than the other car makers isn't the particular technology they are using. It is generally the case that if you define your competitive advantage in terms of today's technology, then your advantage is fleeting at best.
And as you point out, if the advantage is defined in terms of capital being deployed to scale up cell and pack manufacturing - well then there are a lot of people with a lot more money they can deploy.
If either of these are what somebody sees and is using as the basis for investing in Tesla, then both of these look fleeting and easily replaced / available to others.
For me, what I see that is so different about Tesla is their vision and approach to this market. It's squishy, but I would say it's the vision and the culture of the company - the vision to accelerate the advent of sustainable transportation, and the focus on building great cars that happen to be electric that vision requires. The vision and the culture makes it nearly impossible for Tesla to NOT build the Gigafactory in Nevada, while the other visions / culture in the car industry make it nearly impossible for other car manufacturers TO build their own Gigafactory.
The day I click into an article talking about how BMW (or Mercedes, or Toyota, or GM, or whoever) is talking about how the company is selling out on full function, excellent EVs, including excellent utility for the individual vehicle markets, huge quantities of battery production capacity, and a clear and deep commitment to obsolete their ICE technology in favor of this new thing - that is the day that Tesla's differentiation may be coming to an end (at least for me).
More precisely, that is the day when Tesla may be matched competitively, and then I have something to compare with Tesla to decide which investment (if either), I prefer.
I'm excited GM is planning to build 30k Bolts - but it doesn't change my view of GM as a competitor of Tesla (I see them today as a dead dinosaur that hasn't realized its dead, and fallen over yet).
In my view of the world, the only enduring source of competitive advantage is the culture you have. Or enduring source of competitive disadvantage
Evidence they are serious would include:
- what they say publicly (something like "EV is the future, and we are selling out internally in our organization structure, R&D, and capital deployment plans on that future").
- the vehicle concept designs they show (are they weird mobiles intended to be built in small numbers)
- the vehicles they make available for sale. Are EV's they sell available broadly in the US, or in the CARB states? (Serious vs. compliance)
I see evidence today of growing discomfort in the auto industry. I don't yet see evidence that companies have deeply internalized how the world is changed, and how they can leap ahead and push that change along even faster. Today I only see evidence of how they will catch up with Tesla-5-years-ago, and how they will drag their feet as slow as possible to continue milking their current business.
Interestingly - Innovator's Dilemma suggests that the other car makers may even experience a local peak in profitability while their business is disappearing underneath them, further diminishing their desire to make the big changes they need to be making. Further delaying the start of the big changes, and increasing the likelihood that the big changes will come too late and result in bankruptcy. I expect a lot of auto manufacturer bankruptcy over the next 10 years.
-�
1/1/2015
guest Because of the rate of change in heavy industry, Tesla has years of advance notice any potential competitor is coming along. It takes 3-5 years to build a Gigafactory, or equivalent. An established auto maker can repurpose an existing plant, but there would be rumors swirling when the plant closes down for an extended period and auto makers are generally open about what they are building in what plants. A new start up would have to build their own factory which is also lilely to take 3-5 years.
I think one of the reasons the big automakers aren't jumping into EVs with both feet is they are waiting for the perfect battery chemistry to come along. Or at least that's a convenient excuse they can use while dragging their feet.
I'm sure the Gigafactory is built with evolving battery chemistry in mind. I'm sure Tesla is planning to retool the factory as needed. Additionally, any major advancements in battery chemistry are going to have a 10 year lead time from breakthrough to production. The only scenarios where Tesla doesn't get its hands on this new technology first or about the time many other car makers can are the slim cases where a car maker invents it themselves and keeps it from everyone else. Car makers are putting R&D money into battery research, but 90%+ of new battery technology research is done outside the car makers' control.
Tesla also has another advantage to rely on. They have built up a huge base of institutional knowledge around EVs nobody else has. These are things the company does that aren't written down, it's just the community of people doing it knows it and passes it on to newer employees from working with them. One of these things Tesla knows is battery management technology (software and hardware). Other companies are working on it, but Tesla appears to be the leader and they are just getting better.
Tesla is better poised to take advantage of a new advancement in battery tech. Their battery support engineering team know all the upsides and downsides of battery tech and know how to the get the most out of a battery without damaging it. They may have to formulate a new approach with an all new battery tech, but knowing more about the ins and outs of the previous generation gives them a leg up in developing something for the next generation. Especially at Tesla where the corporate culture is all based on revolutions as opposed to a well established company where people get rewarded to doing things the GM Way or the VW Way rather than thinking outside the box.�
1/1/2015
guest Yeah, the EV side of things I'm not so worried about. Competitor car makers are screwed in several ways and totally Tesla should be building the gigafactory regardless of if others are building similar factories. And they'd be fools not to plan for chemistry changes, of course.
The Tesla Energy side of things though is what looks more precarious to me. I think they have a far less defensible position with it, especially because Apple already needs lots of batteries and by all indications is about to need a lot more for their car. Saudi-Aramco knows the writing is on the wall, is accustomed to being a huge energy supplier to the world, and is accustomed to mobilizing lots of highly trained engineers on huge infrastructure projects. Both have the financial resources to significantly out-scale Tesla and undercut them on battery price with GFs of their own.
Of course, we currently know very little about Tesla Energy. But we know that renewables installations are increasing at a rapid pace and bypassing the development of traditional grid infrastructure in many places. Energy storage could end up being the bigger story that comes out of EVs, and I think it's far from certain that Tesla will be a leader in it. I'm honestly unsure how Tesla plans to support a battery storage business -- it seems like the GF's capacity is already spoken for with the Model 3, so it seems like storage would be a side project for them for a while.�
1/1/2015
guest US Steel could, or should have seen plastics replacing steel forms and had decades to respond. They blamed the Japanese mills they built. I doubt hydrocarbon producers will translate their skills to battery chemistry and production.�
1/1/2015
guest The oil industry is a very, very different business from the battery business. The oil biz is mostly a mining and refining business whereas the battery business is a major manufacturing business with many steps from raw material to final product.
The oil biz is also very capital intensive with very few employees where any kind of manufacturing requires more employees. If you look at some of the top companies on the Fortune 500 big manufacturing companies like Boeing and GE have over 100,000 employees where oil companies like Exxon-Mobil and Standard Oil have about 15,000 to 20,000 worldwide. The oil business had billions invested in infrastructure, but a very small number of people maintaining that infrastructure. One of the criticisms of the Keystone Pipeline is that it would only create about 20 long term jobs once it was built.
Saudi Arabia has a very small population of native Saudis. Most of the people doing the grunt work there are contract labor from other countries. They have trained a cadre of highly skilled oil professionals to run Aramco's operations, but very few native Saudis would do manufacturing work. If the Saudis invest in a battery factory, it's going to be somewhere other than Saudi Arabia. They aren't fans of China, so likely locations would be South Korea, Japan, or the US.
If they start an electric car company they would probably place it in California like a lot of the other start ups. If they do move in that direction, they are starting from scratch at least 5 years behind Apple and at least 10 years behind Tesla. They have the cash to throw at it and it might be a good investment for them, but it would likely help the US economy in the long run. There would be little overlap between Aramco and the Saudi car company though beyond Aramco being a potential investor.�
1/1/2015
guest I posted some stuff after having seen DaveT's talk with jesselivenomore and I thought I would post it as a more coherent post here, and if there's maybe some of the points that warrant discussion further it could be done here in this thread.
1. Everyone waiting in lines were really early adopters. No main stream adopter, however early in the main stream, takes day off work to stand in line in the cold. Everyone acknowledges this, bulls and bears. So if we can all agree that there are "early adopters" well then guess what, we have also agreed that the while be a huge future demand boom as the main stream adopters kick in.
2. The current valuation of TSLA is based on models that look in to the future. To do this the models take in to account mainly information from Tesla about how they see their future growth, revenue and profit. Then the model discounts/modifies Tesla's own valuation of its future based on other inputs (such as the level of faith in that Tesla will be able to do what they are setting out to, based on the macro environment, politics etc.) and calculates a valuation of the future. And the valuation of the future becomes exactly the valuation of today as shown in the stock price. The stock market in total is the ultimate sum of all the valuation models out there.
3. A capital raise would be a very, very bullish signal and will of course change our future valuation of Tesla, thus also our current valuation (which is a direct result of the valuation of the future). A capital raise going mainly toward increasing Model 3 production is very bullish. It will increase reservations in Model 3 - a lot more adopters will come in when they understand that they can get a Model 3 earlier. It feels better getting in line at number 400k when you know that there was just an increase in production volume which, even if the launch of Model 3 can't be moved closer, means you will get your particular car faster now than before the production increase was announced.
4. If someone on this forum, looking backwards in time, has been able to confidently out-trade a buy-and-hold strategy then you have just proven that you up until now have been able to take all the information about Tesla and incorporate it in to your price model (I'll call this your "weighing" of the stock) better than the stock market as a whole during this time period. The only way you can beat the market is to outsmart it, if we're not talking about one lucky trade or something. So there's no reason for you to stop trading TSLAif the results are still showing that you're good at trading TSLA. If you get bad results in your trading repeatedly, well then you probably stop trading since it would imply you've lost your edge with TSLA.
5. Short interest is definitely a technical variable, part of TA and not value investing. The fundamental valuation of TSLA isn't changed by the short interest. But the short interest figure does tell us a lot about the psychology surrounding TSLA, the cultural influences, political etc. And it's an important technical indicator when understood, i.e. as long as we are sure that the shorts are wrong in the way they're understanding TSLA (i.e. we the longs are still understanding them better), we should be happy the short interest is high as it signals we still have the information advantage arbitrage.
6. Model X is for China! The air filter! The flashy doors! The newly rich mainland Chinese love to show off their riches. This is a different culture than in the EU and US. This is also the reason for the somewhat lukewarm reception of the Model X among Americans and European long time Tesla bulls here on TMC. I myself for example cancelled my reservation because of the seating arrangements in the 2nd and 3rd row, lack of folding 2nd row, problems with transporting skis, and an understanding that the doors are overengineered. That's OK though: the car isn't meant for me. It's meant for newly rich mainland Chinese people. It has barely started to impact China. It could impact China heavily over the next 12 months or so. To conclude that the X has been a semi-failure to Tesla is to jump the gun. We must be patient.
7. When it comes to downside one would think TSLA would be more vulnerable to a recession than your average stock, because it's value is highly dependent on future growth. So traditionally one would think that TSLA would drop more in a recession where future outlook suddenly bleaks. However the already 400.000 pre-orders to Model 3 is a huge protection against this, it's "something tangeable" rather than something fuzzy and it should help Tesla greatly to keep getting access to capital even in a recession.
8. Regarding short squeeze dynamics: Those of us who have been in the stock since early (2012-2013) and rode it up from the $20s or $30s we have already experienced a major major bull run, so it's hard for us to zoom out and see that those days for us, where we were super exited for a bull run from $27 to $38 is just a little blip all the way to the left of the curve, some noise, to most of the market and traders who all got in to Tesla in 2014 and 2015, after it had become an established higher-cap stock. This is why we have a hard time having faith in yet another short squeeze coming, only this one starting from a much higher valuation. But it's coming. One important dynamic in this is that the shorts are misunderstanding the company, thus seeing any further raise in stock price as unwarranted and makes them want to wait for "that unevitable pullback". Well guess what, it's not coming - your (the short's) valuation model is wrong.�
1/1/2015
guest Thanks again to @DaveT and @jesselivenomore for a great discussion.
Since sometimes we lose the forest for the trees, one of the most significant points to me in the discussion was that the 2020 target of 500,000 vehicles will need to be changed to support a capital raise. Assuming the target is raised to 1,000,000 vehicles per year by 2020, which frankly seems conservative since some Model Ys should be in the mix by then, that will obviously dramatically increase the long-term valuation model.
For what it's worth, in addition to underestimating demand for the Model 3, I believe my own expectations on Models X and S have been far too conservative. I believe 200K+ combined X and S units by 2020 is more likely than the 150K estimate I've had in mind and seen others use. In addition to the potential in China highlighted in the discussion, I believe the X is likely to be a huge hit in the US once it gets past its growing pains, and S demand is still experiencing strong growth.
My personal price targets have been for Tesla to increase 5-fold or more by 2020 and 10-20 fold by 2025. I think that would make me an uber-bull by any definition. But oddly enough, the assumptions underlying my thesis so far have proven to be far too conservative. The significant long-term surprises have been to the upside. Interesting times ....
As mentioned in another post, I hope that full autonomy is decoupled from the Model 3 launch entirely. It is completely irrelevant to the success of the Model 3 launch and creates nothing but unnecessary risk. Hubris needs to stay in a timeout : )�
1/1/2015
guest I wanted to mention something Chris (jesselivenomore) said in the Google hangout yesterday. He explained that he is a trader who knew next to nothing about Tesla in 2012 and 2013. It wasn't until after the stock had gone up from the 30s to 70 in more or less a straight line that he got interested. Initially, like most traders and fund managers, the thought is to short such a stock since, there's gotta be a pullback right? It has to be overbought, right? Well here is where most investors stopped and have been trading it since, i.e. shorting. While some, including jesselivenomore, took a good look and saw the potential. Chris said the one thing that really caught his attention was when he understood the Supercharging network. The concept of solar powered supercharging included in the price means, in its most distillled essence, that you can drive a Tesla free forever. Just think about it: disregarding wear and tear the car can be driven without fuel cost for an unlimited number of miles. And this is not a scam or a Ponzi scheme - it makes perfect sense through the mechanism of the network being solar powered and through the financial concept of front loading the investment costs (build the network aggressively to drive sales, make everyone pay in advance i.e. include the cost of building the network in to the price of the car thus pass the burden of the investment on to the consumer in advance. It is just such a brilliant concept that too many people are still underestimating.
It took me a little while to get this but I've been saying since 2014 that the SC network and concept is Tesla's most undervalued asset.�
1/1/2015
guest Even with all the current accolades, I think Musk remains the most undervalued asset.
In fairness that's a different level of asset from your discussion. I agree Solar based fuel (SC and otherwise) is perhaps the most undervalued asset. The enormous reduction in maintenance and longevity costs is a close second. The combination is killer!�
1/1/2015
guest Considering his salary, definitely!�
1/1/2015
guest Not so sure about that, plenty here in the US seem to love to show off their riches, even if they don't really have them. There is a whole culture of living beyond their means that's entirely based on showing off. The phrase "keeping up with the Joneses" comes to mind.�
1/1/2015
guest There are two types of rich, the neuvo riche and the old money. Old money is a lot less likely to flash their wealth than new money. I grew up near San Marino, CA in the Los Angeles area and then there was Beverly Hills on the other side of town. San Marino's wealth per capita was much higher than Beverly Hills, but you wouldn't believe it if you didn't know what to look for. The most common car was a Cadillac and the houses were on large lots, but they were set back from the street with lots of screening trees. In many cases even seeing the house from the street was difficult. The main shopping area in San Marino is upscale, but far from lavish.
Beverly Hills is all about flash and making everyone seeing your wealth.�
1/1/2015
guest It is all about proportions. New money everywhere wants to show off wealth whereas old money wants to hide it. Almost all Chinese money is new money. And large portions of new money in the West from the Mandarin Class wants to pretend they are old money.
So we get the constant harping on TMC about people not wanting to drop off their kids at school opening up their falcon wing doors. Or at least we used to until Tesla made in very clear there will be no conventional doors on the Model X.
The disdain implicit in the phrase "keeping up with the Joneses" and rants against "American Consumerism" is old money culture scolding the nouveau riche about being flashy. You don't see this in China or India. In India the desire for gold jewelry is so high the government has gotten involved because it impacts balance of payments.
Rappers, Ballers and $50k/year salarymen pretending to be rappers and ballers not withstanding.�
1/1/2015
guest plenty of S class MB and 7 series rolling around San Marino. I haven't been there in a while but I would bet there are plenty of Model S now as well.�
1/1/2015
guest I wouldn't be surprised that the favorite car in San Marino is different now. I moved away from the San Gabriel Valley in 1984 and never looked back.
Bill Maher last Friday commented in his New Rules about people talk about rare and exotic cars in Beverly Hills like Maseratis and Lamborghinis and that those cars aren't rare or exotic and if someone really wanted to drive a rare and exotic car in Beverly Hills, drive a 1984 Buick Electra station wagon.
The cars in San Marino aren't all that cheap, but they don't scream "I'm loaded, look at me!" Upper end German cars would fit with the San Marino esthetic as would the Model S.�
1/1/2015
guest I don't think Tesla ever had much of a technological edge. What I think Tesla has is a *psychological* edge.
Technologically speaking, any carmaker could have made a battery-elecrtric car with 200+-mile range and fast charging, and built a Supercharger network. Any carmaker could have done this using Tesla's "Secret Master Plan" business model, which Tesla actually *published*. Any carmaker could have thermally managed the batteries; any carmaker could have used the "skateboard" design with the batteries on the bottom of the car; any carmaker could have had a frunk; any carmaker could have put 100% of the regenerative braking on the accelerator pedal. Any carmaker could have made this car look cool.
*But they didn't*, and *they still aren't doing so*. Because they are psychologically trapped. They are just now starting to make potential competitors to the Model S, years too late; GM and Nissan may finally be making potential competitors to the Model 3, but they're still making mistakes and they seem to be late (Nissan: thermal management and fast charging; GM: fast charging and charging network). Meanwhile, Tesla is already talking about an all-electric pickup truck and it appears none of the other carmakers are even thinking about that. Tesla's psychological advantage has them staying several years ahead. The only serious competition comes from the Chinese carmakers, who are not psychologically trapped in an old business paradigm, but they're having trouble moving into the EU and US markets.
What's brilliant about Musk from a business perspective is that he didn't finance Tesla until it was *clear* that the other carmakers were not going to compete with him -- he waited until *after* GM crushed the EV1 and Toyota recalled the RAV4-EV.
Tesla Energy doesn't have the same psychological advantages, but it does have *some* psychological advantages. All the other battery companies have been saying "How did Musk get so much attention"? He's created massive brand value for Tesla Energy while providing a competitive product. The turnkey nature of the PowerPack, and its easy size-expansion, is extremely valuable from a marketing perspective. I'm not sure how long it'll take a competitor to make something similar.
Musk has also been brilliant in business in a subtle way which few have recognized. Rather than doing market research, he announces several variants of a product (Powerwall daily-cycle and Powerwall weekly-cycle, or Model S 40, 60, and 85), and then counts reservations to figure out where the demand is. This is how Tesla figured out how much range people want in in their cars -- it's the best possible market research *and it cost Tesla nothing*. Amazingly, other car companies are still not paying attention to the lessons from Tesla's market research, even though the results are not at all confidential!
In the Energy business, Musk figured out by exactly this method -- experimentation by a publicity blitz and counting reservations -- that the big-money applications for batteries were utility, industrial, and large commercial. Apparently the competitors have not managed to make a solid turnkey product in these markets yet. Another thing about the PowerPack is that the R&D was already paid for: they did the R&D and debugging already in order to put batteries at the Supercharger sites. A competitor would probably not have that synergy.�
1/1/2015
guest I was thinking about automation of the production line the other day. We know Tesla's automated as much as they can. I wonder which parts are still non-automated?
I'm guessing wire runs and trim. There's *got* to be some way to automate wire runs -- some equivalent of replacing wire-wrapped breadboards with printed circuit boards. I wonder if Tesla is working on this, because it would be a big deal for cost and production line speed.
Trim is theoretically automatable, but as far as I know, you don't get the quality of a human without slowing it down to be as slow as a human, so it may not be worth the effort. However, for wire runs, automatic attachments could be *more consistent and reliable* than a human while being quite fast...�
1/1/2015
guest All technology is built on top of existing technology. Tesla did nudge the tech a bit, but I largely agree that most of what they did was available and their brilliance was putting it together in a novel way.�
1/1/2015
guest My favorite part of today's Conf call
1. Elon describing the goal of Tesla becoming world leading manufacturer of large complex object. He specifically did not use the word car.
2. Elon saying that SpaceX is less complicated to run than Tesla!
I think we have only seen the first three or four chapters of Tesla�
1/1/2015
guest I agree that the first point above in particular was very important. And Elon emphasized that theme in various ways throughout the discussion -- from his desk and sleeping bag on the assembly line, to distinguishing Tesla from Apple and Google because Tesla likes to build things and they don't, to emphasizing that manufacturing IP is very important to Tesla and will give it an edge.
Tesla has so many strengths but manufacturing has not been one of them. Elon sounds like he has put his mind to transforming Tesla into the best manufacturing company in the world. Given the inherent advantages EVs have due to fewer moving parts, this could be the final piece of the puzzle for the EV business. And then, on to other "large complex objects" ....�
1/1/2015
guest I was very encouraged to hear Elon's comments on the conference call yesterday. Specifically that Tesla is taking manufacturing very seriously, has set a goal of becoming the best company at manufacturing prowess in the world, and is hiring the top people in the field. Elon even said that manufacturing prowess is even more important than product design, and the Model 3 will be strictly designed for manufacturing, as well as to be a highly desirable car.
I strongly believe this is exactly where Tesla's focus needs to be at this time. To hear they are doing exactly what I think is needed to for them to survive and to thrive is hugely encouraging to me. I am so glad I stood in line at Tesla's store before they opened on March 31st. They will make excellent use of my deposit, much better use than the bank!
GSP�
1/1/2015
guest Elon's focus on manufacturing, both efficiency and the ability to ramp quickly/scale the process ties in to his over arching goal: to accelerate the process of moving humanity from a single planet to a multi planetary species. In order to do this one must master the process of assembling large amounts of matter in to complex organization. The other main concept that must be mastered is that of capturing/controlling/harvesting as much energy as possible from our star (the sun). Elon has his eyes on the price when it comes to this objective as well, with solar + storage.
It may sound grandiose but thinking about it it's obvious that everything he does in the longer perspective converge toward these goals.�
1/1/2015
guest I just had another one of my "but what the hell ..." questions answered today when I realized a company selling new shares of an existing company to raise capital dilutes existing shares. So, in other words, when a company sells more shares, they're taking people who already owned shares in the company and saying that they hadn't invested enough yet, and therefore they shouldn't get as much return as they would have if they had invested more. To peg this down, so I know where my score card is and what my planning should be for the future, what is the history of capital raises by Tesla? Does SEC have a nice graph or bar char or something, or is it all buried in verbose filings?
Is this right?
That looks very healthy to me.
I'm Googling "capital raise Tesla", and found one around August 25, 2015, and that corresponds to a document on the SEC web site named "Prospectus". It was a very clear document explaining what they were about to do. But, then, when I continued to look for other documents named "Prospectus", they were very confusing, talking about notes for amounts with blank quantities. Are those shares sold at current price to meet those amounts?
Here's the list I see:
Aug 14, 2015
Prospectus Supplement to Prospectus dated May 15, 2013
2,694,934 Shares
Aug 13, 2015
SUBJECT TO COMPLETION, DATED AUGUST 13, 2015
Prospectus Supplement to Prospectus dated May 15, 2013
2,100,000 Shares
Feb 28, 2014
0.25% Convertible Senior Notes due 2019 $920,000,000
1.25% Convertible Senior Notes due 2021 $1,380,000,000
Common Stock, $0.001 par value per share
Feb 26, 2014
Tesla Motors, Inc.
$800,000,000 Convertible Senior Notes due 2019
$800,000,000 Convertible Senior Notes due 2021
Interest payable March 1 and September 1
May 17, 2013
1.50% Convertible Senior Notes due 2018 $660,000,000
Common Stock, $0.001 par value per share
May 17, 2013
Common Stock, $0.001 par value per share
3,902,862 $92.24 $359,999,990.88
---
Wait, so am I reading this right? If they don't pay their loan, they give the banks, for instance, in that last one due 2018, 660,000,000,000 shares in the company, diluting the current stock to basically nothing and giving the bank full control of the company through voting rights? Is that the definition of bankrupt?
---
May 15, 2013
SUBJECT TO COMPLETION, DATED MAY 15, 2013
Prospectus Supplement to Prospectus dated May 15, 2013
$450,000,000
% Convertible Senior Notes due 2018
Interest payable June 1 and December 1
May 15, 2013
SUBJECT TO COMPLETION, DATED MAY 15, 2013
Prospectus Supplement to Prospectus dated May 15, 2013
2,703,027 Shares
This is a public offering of shares of common stock of Tesla Motors, Inc.
Tesla is offering all of the shares to be sold in the offering.
Our common stock is traded on the Nasdaq Global Select Market under the symbol �TSLA.� The last reported sale price of our common stock on May 14, 2013, as reported on Nasdaq, was $83.24 per share.
Mr. Elon Musk, our Chief Executive Officer and Chairman of our Board of Directors, has indicated his preliminary interest in purchasing up to an aggregate of 1,201,345 shares of our common stock for an aggregate purchase price of approximately $100 million, of which 540,605 shares of our common stock would be purchased in this offering at the public offering price, for a purchase price of approximately $45 million, and of which 660,740 shares of our common stock would be purchased directly from us at the public offering price in a subsequent private placement, subject only to necessary regulatory approvals, for an additional purchase price of approximately $55 million.
Concurrently with this offering of common stock and pursuant to a separate prospectus supplement, we are offering % convertible senior notes due 2018, or the notes, to the public in the aggregate principal amount of $450,000,000 (or $517,500,000 if the underwriters for the concurrent notes offering exercise in full their over-allotment option to purchase additional notes). The closing of this offering of common stock is not contingent upon the closing of the concurrent offering of notes, and the closing of the concurrent offering of notes is not contingent upon the closing of this offering of common stock.
---
What all this tells me is that there is a LOT of detail in each one of those filings.
---
Sep 28, 2012
6,925,740 Shares
Sep 25, 2012
4,344,930 Shares
Jun 3, 2011
5,300,000 Shares
Jun 29, 2010
13,300,000 Shares
Common Stock
This is an initial public offering of shares of common stock of Tesla Motors, Inc.
Tesla Motors is offering 11,880,600 of the shares to be sold in the offering. The selling stockholders identified in this prospectus are offering an additional 1,419,400 shares. Tesla Motors will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders.
Prior to this offering, there has been no public market for the common stock. The initial public offering price per share is $17.00.
===
I put the above in a spreadsheet and got 41,271,493 shares. According to other sources, $TSLA has ... ok, I finally found the right way to search. "Outstanding Shares", which shows around 132 million:
Tesla Motors Shares Outstanding (TSLA)
According to that graph, it steadily rises. So, do they pay off executives, who then buy homes with money and cash it in by liquidating the stock into the stock market, and that's the capital raises, basically discounting their payroll as the capital raise? That's a drop in the bucket ... or should be. Hmm
Now, I'm finally getting better Google foo. I read about "authorized shares" vs "outstanding shares". How many shares were Authorized for Tesla? If it's more than the outstanding, then Tesla can just willy nilly raise cap whenever it feels like it, in dribs and drabs, here and there, or in huge chunks, too.�
![[?IMG]](https://upload.wikimedia.org/wikipedia/commons/a/a7/Tesla_Financial_Performance.svg)
1/1/2015
guest Any company that does an offering of shares changes the stock price very little. Yes, there's dilution in the percentage of the company that you own, but the company just brought in more cash at a price comparable to the current market price, so the price will change very little. If anything, the investors will believe that the extra cash is going to be put to good use, and this should be reflected in the stock price going up!�
1/1/2015
guest Exactly. Essentially you now own a smaller piece of a larger pie, with better growth conditions.�
1/1/2015
guest A long term investment concern is one of service centers. Before this forum grew, I knew what latches were having problems on the model s , and all the minutiae around Tesla. Now I am lucky if I can read the short-term investment thread at the end of my day. Point being I find 'non-investment' threads, equally as important as investment ones, and there are people who are not satisfied with service. Also the wait list for service seems to be growing (albeit hard to thrash out effect of model x recall). Even if Tesla puts out 500 000 vehicles on time, If there is a major recall, or major problem, I fear they will woefully in addressing it timely. A few grumblings, turn into a lot, and next thing you know is people (non-Tesla addicts like ourselves) saying they will never buy another Tesla as they are renting a car for 2 weeks to get it serviced! A persistent negative service experience can drastically hurt a company for years, and the less service centers you have, the higher chance of this scenario playing out.
Another concern I have is the exodus of VP's . I think that is four in four months. I still prefer to see long-term 'entrenched' employees who know the ins and outs of a company, rather than the Silicon Valley Shuffle. If someone slept beside me to monitor me though, I probably would get up and go as well. Hopefully Tesla is 'grooming' some people from the inside for more vertical alignment and growth from within, than horizontal patch filling.�
1/1/2015
guest
A long time ago I had the opportunity to chat with George Blankenship, a tesla executive. He explained that launching and landing rockets are challenging, but it's not as challenging as starting a car company. He explained his logic this way: when dealing with space, there are set laws that are constant, so long as you know what those laws are, you can solve them. Nature, to a certain extent, is predictable.�
1/1/2015
guest My SO has a Masters in Psych and is an attorney. She wrote lots of papers in college. We were talking about the difference between science and engineering classes and other classes the other day. I pointed out that most of what you do in the hard sciences and engineering classes has an objectively provable right answer. If you get the right answer and show your work, even if the professor hates you, you still get the A. With classes that require papers, the professor's opinion of you can affect your grade, no matter how well you know the subject.
Going up against the laws of Physics is much more predictable than going up against the rules/laws of humans. With the latter, the goalposts can constantly move. With the former, you may get to a point where what you're trying to do is beyond the technology available, or you may learn that we misunderstood the science, but ultimately the goalposts are fixed.
It's the nature of the different subjects. Tesla is a tech company, but they are building technology that has to fit into a web of existing laws and regulations. SpaceX is operating on the frontiers where there are few laws and the challenges have much more to do advancing the technology to new levels than working within any framework created by humans, though there are some laws they need to deal with.�
1/1/2015
guest Many congrats to the SpaceX team for the ultimate 1st stage recovery-
[nighttime Geo orbit- 1st stage re-entry 3 times faster and much higher requiring 3 burns-
even so twice the speed at Of-Course-I-HEART-U -
Saving NASA (tax payers) millions with data share on super-sonic entry program. Mars ever closer]
U-S-A Go SpaceX
Meantime Elon catching flak for audaciously advancing the effort to save the planetary habitat we're currently stuck with. For less $s than we each spend on our current ICE-machines. Now with Coal eliminated moving to Oil. So needing to raise all of a $1B to effectively double the size of our return and value of our stock. Damn him.
All the while, our newly formed Republican party leader hiring a new national finance chair, (Steven Mnuchin of 2008 IndyMac fame), to raise the same $1B in an effort to install said new leader of the free world- who is currently promising to return Coal to it's former glory and put the miners back into the coal mines where they belong- 'Trump Digs Coal'.
In fairness, he didn't say what they would be doing down there-
trolling for diamonds perhaps.
Ya gotta admit- if nothin' else, the human race loves a good party;
I can see why Elon wants to die on Mars...�
1/1/2015
guest Even my most intelligent, thoughtful friends think I'm crazy investing heavily in TSLA. A vast percentage of the investing public just can't see a few chess moves into the future. In order to refute signals to the contrary (like 400,000 reservations) their minds are open to ideas that are barely rational (e.g the number must be inflated by people with multiple preorders and no intention to buy).
The talking head financial media amplify and reinforce this thinking, partly because they themselves see things like the vast majority, and partly because feeding the delusion helps ratings.
And so, when Musk advances the mass production goal by two years, instead of seeing this as a huge positive for the stock price, they view it as a huge negative, confirming their denial theory that Musk is a liar or wildly delusional.
I have been investing (successfully, thankfully) for 20 years. This is the best opportunity I have ever seen to profit from something about to happen so soon, that so few people seem to accept as plausible.�
1/1/2015
guest American corporations are mostly run by people with poor imaginations and they focus only on quarterly profits with little view beyond that. And most investors are have drunk that Kool Aid. Tech companies are largely younger and think further ahead. Tesla thinks like a tech company and it tends to think even further ahead than most tech companies.�
1/1/2015
guest Very true @Sancho and @wdolson.
All the really poor bear stories are the result of cognitive dissonance in a high percentage of the investment community. When you fail to understand what is going on you need to create more (if possible) plausible or less plausible (when that's all you can come up with) stories to support your position.�
1/1/2015
guest Since the analysts are apparently afraid to make any forecasts using Tesla's latest projections, I thought it would be great if any forum members who were interested wanted to take a shot at it.
To get the ball rolling, I put together some high level projections using the 1M vehicles in 2020 estimate. I assumed that in addition to the S/3/X, by 2020 the Y will be in volume production and that some next-gen Roadsters will be sold.
I tried to err on the conservative side including for some potential big ticket items like Tesla Energy. I did not attribute any contribution from a driver-less car service that has been suggested. I used what I think is a conservative mix of S/X v. 3/Y. In reality, I expect S and X sales to continue to grow rapidly as markets open up and more customers are introduced to Tesla and get comfortable with EVs. Since the S and X are much higher margin than the Model 3, I think there is a fair amount of upside potential here.
I also (conservatively) ignored revenue from pre-owned vehicles and other services, ZEV credits etc. The one area where I may be less conservative are gross margins on the Model 3/Y -- my SWAG is 15%. I think that is achievable by 2020 as Tesla moves up the learning curve on production but is by no means a given.
FWIW, call me crazy but I do think the 1M projection is achievable with a fairly straightforward path of a successful Model 3 ramp, continued growth in S/X sales and launching the Y in 2019. In fact, I wouldn't be at all surprised if Tesla exceeded this target.
If anyone else wants to weigh in with their own estimates or any suggestions for improving mine, that would be great.
(PS Sorry you have to click on the attachment -- could not figure out how to post the image directly as others have done and it looked pretty messy when I just pasted the data).�
1/1/2015
guest I doubt the next gen Roadster will be out by 2020. The Model Y (or whatever they call the CUV based on the Model 3 chassis) may not be out by 2020, though it probably would.
I would expect the S/X sales will start to flatten out. The margin on the S/X today is about 20%, it may go up a little, but I don't expect it to go up by much. I expect the margin on the Model 3 platform cars will be around 10-15%. Elon Musk has indicated that Tesla Energy could end up being a bigger profit center for Tesla than the cars ever were. I expect the Tesla Energy ramp up will be faster than the car ramp up has been/will be. The revenue from Tesla Energy could be quite significant by 2020.�
1/1/2015
guest The S has been consistently above 25%, if not for FX, much closer to 30%. The only reason why the overall GM on the car business in the last two quarters were at 20% was because of the difficulties in rampping up X�
1/1/2015
guest Just crunched a few numbers and you're mostly right. Profit per vehicle has ranged from a low of 18% Q4 2015 to a high of 29.57% Q2 2014. The profit margin per vehicle has been closer to 20% for the last year. Another thing I found when I crunched the numbers is the average revenue per car has been declining. The high was $109K in Q3 2014 which was fueled by people buying the P85D. In Q4 2015 it was $69,540 a car and in Q1 2016 it was $77,597 a car. I can understand some cars are en route for delivery at the end of a quarter, but the numbers should be made up the following quarter when those cars are delivered.
From looking at the delivery thread it looks like a lot of 70s and 70Ds are being delivered of late and more orders for the 70 might contribute to the lower average price, but $69K is cheaper than Tesla's cheapest car.�
1/1/2015
guest I made some assumptions about the mix of cars partly to understand how the mix impacted revenues and profitability, but even if they ended up selling 850,000 Model 3s and 150,000 Model S/X and margins are lower than I projected the numbers would still look good. I don't think they'll wait past 2020 to launch the Model Y especially since they are predicting about 1,000,000 cars sold in 2020.
I agree with you completely on TE -- my revenue and margin projections are much lower than what I think will most likely happen. But since Tesla is playing it close to the vest with their projections I thought I'd err on the side of caution.�
1/1/2015
guest If Tesla Energy ramps up fast, it's possible that may be their biggest profit center by 2020. It would be ironic if TE was funding all the car development. The key there is battery supply and how fast they can expand the Gigafactory to supply all the batteries they're going to need.�
1/1/2015
guest The revenue per car is not declining to this level. In fact it likely went up in Q1 due to Model X. You need to use the non-GAAP numbers for revenue as the GAAP numbers do not allow the full revenue on a sale due to the residual guarantee and lease accounting. This is why Tesla gives non-GAAP numbers and I understand in 2017 the accounting rules change to allow this revenue with GAAP. Also, the % of leases have been increasing.
4th QTR - 2015 = $1,742,024/ 17.5 = $99.5K per Car
1st QTR - 2016 = $1,601,727/ 14.8 = $108.0K per Car
This is just a rough number as there is some services revenue, Tesla energy, etc that should be backed out of the revenue number.
Also, cars in transit will not effect this calculation. They are considered inventory and Tesla cannot recognize in the revenue number above. The are not counted as deliveries as well.�
1/1/2015
guest I've been thinking that once the Model 3 is out in volume Tesla may move the S and X further upmarket to better differentiate them from the Model 3. This should lead to higher ASPs for them.�
1/1/2015
guest I think that Tesla expects the model 3 to cannibalize a lot of model S sales. It is ironic that the Model S is compared to Mercedes S class when it seems that very few buyers went from top of the line Mercedes and BWM to Tesla cars.
Tesla best chance for highest growth is the next five years. I think that they won't hold back features on the model 3 to improve S/X sales. If this is true, the only differentiators are the S/X having more space and range.
Perhaps one reason Musk keeps thanking S/X owners for their contribution towards the model 3 is that he is worried about them being pissed off about the relative value of their cars to the model 3.
But if Tesla can't get more than a 250 mile range in an upgraded model 3, the product line will still be well differentiated. Model S/X margins will continue to improve with dropping battery prices and sharing some costs with the model 3 line. I think the Germans and the Japanese will need to pivot and go after the model 3 as soon as they get their first S/X competitors launched.�
1/1/2015
guest No they don't. Didn't they just state on the last ER that the reveal of the Model 3 INCREASED interest in the Model S? I'm pretty sure they did.�
1/1/2015
guest Announcing the model 3 increased interest in the model S. There is no way that the many model S buyers who traded a mainstream car would have chosen the S over an model 3 if both are generally available.
Tesla is going to compete with itself. Advice to follow this approach as a business strategy is often given, but few CEO's are brave enough actually implement such a plan.�
1/1/2015
guest Tesla will be able to increase MS-MX margins when they reduce cell costs using the GF production equipment., either in Nevada or Japan.
IMO the revenue from TE will be substantial by the end of 2017, and that will surprise the market.�
1/1/2015
guest Totally agree with this. Also, they probably will have some overseas vehicle production by 2020 which could act as a currency hedge -- the strong dollar has definitely hurt margins.�
1/1/2015
guest Are you for real? I would never buy a Model 3 over an S. The 3 is a lot smaller, and I'm sure the interior won't be as nice as an S. Some people prefer a nicer, bigger car if they can afford it. That is like saying nobody will be an Accord because they can buy a Civic.�
1/1/2015
guest Go look at the "what car did you own before a Tesla" threads. Do you really believe that Prius owners will buy an S/X because it has a nicer interior?
There are three types of current Tesla owners:
1) Those who would have never considered the expensive S/X if the model 3 was available
2) Those who would have seriously weighed the pros and cons of the Model S against the Model 3
3) Those who "buy the best" and would only consider the S/X.
How many current Model S owners have a model 3 pre-order?�
1/1/2015
guest Uh oh -- "demand constrained"? Again?
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1/1/2015
guest I've been on the fence about getting an S because while I can afford it, and it's clearly to me pretty much the best overall car right now, I consider it pretty flashy which is a significant deterrent for me. I'd much rather drive a model s than some cars that cost twice as much, it's like choosing a pc over a really luxurious typewriter. But that said, the model 3 would be a much easier choice for me, and I end up squeezing into small parking spots a lot, so the smaller size would be a bonus in that way too.�
1/1/2015
guest It seems like people forget that the model s is pretty much the best car in it's class, and it's fair to expect the model 3 to be as well. So unless there is a major economic meltdown and car sales start going down on a national or international level, or gas prices go to .01 a gallon, demand is really not something to worry about. These are products that basically need no advertising after all.�
1/1/2015
guest From the transcript,
"Elon Reeve Musk - Chairman & Chief Executive Officer
Yeah, actually � one point worth mentioning is that we're fairly worried about what would happen with the Model 3 announcement. Would it cause some big drop in, say, Model S sales? It seems to have had the opposite effect. It seems as though S demand has increased. It has...
Jason Wheeler - Chief Financial Officer
It has increased.
Elon Reeve Musk - Chairman & Chief Executive Officer
It has increased.
Jason Wheeler - Chief Financial Officer
Yeah. I think you saw the estimated number in the first quarter is 45% up year-over-year and that demand continues."�
1/1/2015
guest If it is the 60k+ fully optioned Mode 3 taking away the 71.5k base Model S sales, that would be great. As options are where the most profits are made.�
1/1/2015
guest A small point but maybe worth mentioning is that the transcript is a little off -- it should read:
Yeah, actually � an important point worth mentioning is that we were fairly worried about what would happen with the Model 3 announcement. Would it cause some big drop in, say, Model S sales? It seems to have had the opposite effect. It seems as though S demand has increased. It has...
The relevant bit starts at 51:02 of the earnings call. http://edge.media-server.com/m/p/c67hnavs�
1/1/2015
guest Finally, an upside to Tesla's tardy car releases. "It will take Tesla years to release the model 3, I'll just buy the model S"�
1/1/2015
guest Oh, stop it now. Accept that you're wrong on the topic and move on to putting a negative twist on something else instead of trying to move the goalposts. It's getting really tiresome and you'd think the dislikes you get from thread to thread on all sorts of Tesla topics would clue you in; we're not buying the garbage you're peddling.�
1/1/2015
guest Dang, I forgot that in my calculations. Makes sense now!
Actually I would think they should move them down market. The price difference between the Model 3 and the S/X is already larger than the spread for any other car maker. For most of the cars I was looking at before Tesla, the spread from their compact sedan to their full sized sedan was less than $20K. I didn't look at premium brands like BMW where it might be a bit more, but I don't think anyone has a spread like Tesla does.
The S would be about $80K fully optioned if it was a Lincoln or Cadillac. They would have to add an awful lot of stuff in the cabin to be as cushy as a BMW or Mercedes. The price of used Model Ss will likely drop when the Model 3 is introduced. People who are looking at used 70s today will be going for the Model 3. For most people, the size of the Model S is kind of a turnoff. In the US there are places where a large car is difficult to maneuver, but it's even worse in Europe. There are some people who like a big car, but they are rare. Most people who want a big vehicle are buying trucks.
Between the cheaper batteries when the GF is in production and possible cost savings from sourcing materials in larger quantities (the 3 and the S/X won't share many body parts, but they will share small components like motor parts, battery pack parts, etc.), Tesla could afford to drop the prices on the S/X and still make as much money. That's probably the only way they keep selling as many of them as they do. If they go up market they end up under utilizing two production lines to build two cars that will be selling in smaller numbers.
It would tick off existing customers that the cars are cheaper, but whining here on the Forum when Tesla does something is common.�
1/1/2015
guest The model 3 looks to have a HUD that will show autopilot information, a fancy-pants steering wheel with a lot of buttons, and the 15 inch touch screen they have shown.
Is the S/X going to go all space ship like the model 3, or stay closer to the current design?
A year ago I would have said that the model 3 would offer a subset of S/X technology and options. Now I am not so sure.�
1/1/2015
guest Maybe SX goes Dragon
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1/1/2015
guest BMW 3 series starts at $33K, the 7 series starts at $81K Build Your Own BMW - BMW North America�
1/1/2015
guest All opinions are welcome on TMC. Especially in a thread like this where the bulls outnumber the bears.
It's obvious that Model 3 will cannibalize a few Model S sales. That doesn't mean there's a demand problem. Model S sales will probably continue to increase as the company and general knowledge of EVs continues to improve. That's one of the reasons Model 3 reveal contributed to more S/X sales. You can't deny the fact that a lot of people bought Model S because it was the only compelling EV on the market. Many of those buyers would have preferred something different such as a smaller or less expensive car like the 3, but there wasn't one available, and still isn't.
There is no demand problem and there never has been. Tesla's biggest headwind, by far, is being able to ramp up fast enough. It's extremely difficult to hire staff and grow infrastructure at 30 - 60% a year, every year for 15 consecutive years (to 2020 and beyond). Whether or not there's any S/X cannibalization is irrelevant. It won't change the overall exponential growth curve. Tesla's biggest problem is not demand. It never has been and won't be for at least several years. Their biggest problem is growing pains.�
1/1/2015
guest Let me correct your implication of me. I welcome opposing opinions regardless of a bull vs bear ratio. What I object to is someone who is clearly and purposely twisting information from thread to thread, and I don't care which side of the fence they stand on. I seek the truth, not opinions for the sake of opinions.�
1/1/2015
guest Tesla did not build only 50K vehicles last year due to lack of production capability. They built only 50K vehicles last year due to limited demand for the model S. If Q1 2015 had been strong they could have ramped up to 60-70K MS for 2015.
I have three Tesla showrooms within 20 miles of my home because Tesla is spending money to stimulate demand.
One of the reasons Tesla is surging Model 3 production is the concern that they may have killed model S demand growth, especially next year. This situation will likely become more obvious at the second model 3 reveal. The model 3 is likely more fabulous for the typical Tesla tech buyer compared to the current S/X.
Tesla is likely not positioning the model 3 as a typical car company would position a mid-level product. This apparent strategy looks great long term to me, but could produce some quarterly ugliness.
The way to counter the interest shift to the model 3 would be to release an upgraded dash/UI for the S/X. That may have been the ideal plan, but Tesla may not have the capacity for that change in the next 12 months.�
1/1/2015
guest Anyone see a problem there?�
1/1/2015
guest No. Demand is often about trends in opposition. Sales of a particular product is always the net of favorable and unfavorable forces.�
1/1/2015
guest Nonsense.
There is no typical "Tesla tech buyer". It's well known that Tesla buyers come from many different segments, from environmentally conscious Prius owners to luxury performance oriented Mercedes owners, and every possible combination thereof. We are still in the "innovator" phase of the adoption curve for EV's, demand is only going to go up for all Tesla vehicles.
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1/1/2015
guest The use of the word cannibalize was overly dramatic, we could argue hyperbole, when considered in the context of the poster trying to minimize the message - a (reduction of a) FEW model S sales.
No doubt the reveal of the Model 3 did or will pull a group of people from a Model S purchase. It's already been discussed at length who might fall in that category of people. At the same time the reveal of the Model 3 did or will push another, different group of people to purchase a Model S.
The net result to date is an increase in Model S interest/demand/purchases, not cannibalization of said model. (That's not directed at you. I know you know what's going on. But some of us here are having a real hard time grasping reality.)�
1/1/2015
guest Perhaps you would face less vehement opposition if you labeled your opinions as such, rather than stating them as facts.�
1/1/2015
guest He could also just avoid posting an opinion that is in clear contradiction of what's been publically stated by the company. That would probably help immensely.�
1/1/2015
guest Maybe. But the last EC shows that real Tesla is not sure what the Model 3 does to Model S sales. You and cartoon Tesla are certain about demand.
All car fan sites have proponents that have certainty about their preferred cars and car companies. I prefer examining probabilities when discussing real companies.�
1/1/2015
guest In your opinion?�
1/1/2015
guest Moderator Note:
Slightly more than half of the prior two pages of posts absolutely deserve to be snipped - let's end it right now.
As a strongly worded suggestion, however: do consider your wording if you write something you know will be controversial - whether bearish, bullish or piggish - and it's ALWAYS a good idea to preface such statements with the recognition that you're presenting opinion.
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1/1/2015
guest Offering a suggestion is different than making a statement of fact or opinion. Sorry Aud, will let it lie now.�
1/1/2015
guest As do I. The probability of the leading manufacturer in a growing industry which is still in the "Innovators" stage being demand limited for any of their products is quite low.�
1/1/2015
guest Over the long term, I suspect Tesla may do what other car makers do and introduce most new technologies on their higher end cars and only trickle them down to the mainstream cars when they have been proven and some of the wow factor has worn off. Back in the 60s power windows and door locks were only available on premium cars, but are now standard on most cars. Back up cameras will be on all car soon because US law will demand it, but it was a luxury car feature a few years ago.
This keeps up demand for the high end cars, and it allows car companies to do the final debugging of new technologies on more limited release cars before releasing it to the masses.
However, I do agree that the Model 3 could hurt Model S sales at least initially. I've been watching the used and inventory markets for a while and Tesla has had a lot of inventory Ss for sale the last 4-5 months. It's more now than ever and a number of them only have a few miles on the odometer. I suspect they built a few more inventory cars the last quarter because demand has been a bit soft. They are now pitching them as the last of the classic look cars now that the facelift is out there, but i don't see the inventory going down much. In some regions like Florida they have started discounting the inventory cars.
Back when I first started looking in July last year, there were only a few inventory cars advertised on the CPO part of the site and those all had 2K-4K miles on them. There were many more used Teslas than new.
Tesla has said that since the Model 3 reveal Model S sales have gone up and the refresh probably helped that. A lot of people would prefer the refresh if the cost is essentially the same, but with prices on the inventory cars dropping, some people are opting for the inventory cars. One thing I am concerned about for Tesla's resale is if a number of those people who are buying Ss now plan to dump them when the Model 3 comes out and there will be a glut of used Ss around.�
1/1/2015
guest How come this gentleman is repeatedly yet forcefully applying his wooden cane to this equine specimen which appears deceased?�
1/1/2015
guest In my opinion, a used S will still be better than many (most?) cars that are $35k and up. So if you are saying that the Model 3 is so appealing that it absorbs all the demand for cars 35k and up (used S being one), you are essentially saying that very few buyers in that segment would be choosing anything from competitors either. That isn't a problem, so not really anything to worry about, in my opinion.�
1/1/2015
guest Tesla seems to have manufactured some model S for CPO inventory. This keeps their numbers up, and lets them hide discounting.
Very long lead time on Model 3 could increase demand for lower priced CPO model S.�
1/1/2015
guest I'm bearish on Tesla because well, I just sold all my shares and im here to troll, hoping to scare the bejezzuz out of everyone. This may effectively cause a cascade of stop loss orders which can potentially drive prices down even lower so I can buy back in. I want to milk this method as much as possible before M3 launch because the strategy, IMO is working, especially with members here. I mean c'mon, this thread is filled with non-educated, misinformed investors who clearly has no data to back up their opinions. Am I fooling anyone yet?�
1/1/2015
guest There aren't going to be that many M3 buyers who go for the $35K base car. Elon has said the average is going to be around $42K. If someone is comparing a well equipped M3 at $50K to a fairly bare bones CPO MS with rear wheel drive and no AP, I think most are going to go for the M3.
My point is they have had many more new inventory cars over the last few months than they had when I first started looking last summer. The CPO/Inventory car website last summer was 95% CPO and 5% Inventory and all the inventory cars had a couple of thousand miles on them. Now the site has 0 CPOs for the entire US and 370 inventory cars. Around 50 of those cars have less than 100 miles. Around 150 have less than 1000 miles.
Tesla Inventory Search
http://ev-cpo.com/
The third party sites are easier to search than the Tesla site. I've seen Tesla's site just drop cars from the list mysteriously when you change parameters. For example you search for 90D only and a car that was on the list when showing all disappears.�
1/1/2015
guest They just updated Midel S, hence all inventory is out of date and must go.�
1/1/2015
guest Apparently they did list about 100 CPO cars on the site within the last couple of hours. So the used ones are coming back. Apparently a lot of leases from 2013 are expiring.�
1/1/2015
guest What do you base that remark on ? I am not aware of any factual information to points to that. Au contraire.
I am not so sure what to think of the last line in that quote...
Are you seriously implying that Tesla is 'dumping' newly build cars in the CPO stock to sell at a lower price ?? This instead of delivering to their world-wide customers eagerly awaiting delivery of their ordered full-price Model-S. (Or is this a language barrier at work and do I not understand what you say correctly ?)�
1/1/2015
guest You need to call. Tesla doesn't expose their inventory to the public.�
1/1/2015
guest There's something called showroom car, and there's something called loaner car.�
1/1/2015
guest And test drive car.�
1/1/2015
guest Apparently those test drive cars need to be replaced after a couple hundred miles.�
1/1/2015
guest They need to be replaced when a new Model S design is introduced. Exactly like they did when they introduced the dual motor / autopilot variants.
How does something this obvious not make sense to you?�
1/1/2015
guest Apparently showroom cars only have a couple hundred miles on them.�
1/1/2015
guest Than why do they have a link for it on their website?
Pre-Owned Model S | Tesla Motors�
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