1/1/2015
guest When I was young we were taught not to say moron, but to refer to such a person as being retarded, meaning a little behind.�
1/1/2015
guest Off-topic, but "imbecile", "moron", and "idiot" were originally different classifications for level of diminished intelligence before eventually becoming pejoratives. Recently, "mental retardation" has been replaced by "intellectual disability". Regardless, any of the above terms are accurate when describing someone who proposes that Tesla put an ICE in the Model S.�
1/1/2015
guest thanks TSLAopt... I'm actually "ValueHorizon" on seeking alpha. I'm a "contributor" there, so I can and have written articles. I'm reluctant to do so now 1) kind of seems like kicking people when they are down, 2) current crop of gibberish being put up on Seeking Alpha seems so transparent it does need to be refuted, 3) when people will say anything whether they believe it or not, what's the point discussing something with them. nonetheless, perhaps when JP puts another one up I'll put one up.
getting back to Cameron's question re retorting to valuation criticisms, I, of course don't put that lengthy discussion in comments to articles. Past few days, I've been getting at the spirit of the discussion by posing this question to those who say "bubble" "hype" "ridiculous valuation", etc.
"were there any specific tech bubble internet stocks you were thinking of that shared these characteristics with Tesla?
Over 3 year technological lead on the competition (in fact very likely over 5 years for Tesla)
Less than 0.1% penetration of addressable market (for Tesla one quarter of 0.1%)
Positive Cash Balance (net of debt)
Break even or positive EPS
500% or better year over year revenue growth
if you have some examples we can look at their Price/Sales ratio compared to Tesla�s as well as how they performed over 5 and 10 years."
at one point, I'd actually thought of writing a Seeking Alpha article offering a reward to the Tesla short with the most examples of companies that had these (and a couple other like 25% gross margins, $20 billion market cap, trailing revenue over $2 billion ) Tesla characteristics in the past, but underperformed the market for the following 5 years. the only catch to a short collecting the reward is that if longs collectively came up with more examples of such companies that outperformed the market the next 5 years no reward. I actually think it is quite possible there has never been a company in the past that shares these characteristics.
reward would be 5 shares of TSLA
�
1/1/2015
guest Ha! That is a great idea! I vote that you do it, what a creative and attention-grabbing idea...perhaps title it something like "5 shares of TSLA award to any short who can riddle me this..." So it gets all of their attention...we can gather them all in one place (your article's comment section) then take them all out zombie-apocalypse style�
1/1/2015
guest
maybe even better, write an SA article as an open letter to Brian Sullivan and the entire staff at CNBC to find more underperforming examples than over performing examples SA Tesla longs find. Sullivan is one of the guys who says over and over the pointless market cap per car sold stat. I would gladly donate $1,000 if CNBC staffers got to work on this and ended up running smack into Tesla's rare (perhaps unprecedented) and highly compelling strategic position. who knows, we might never have to hear the market cap per car sold gibberish again.�
1/1/2015
guest I would put Apple in that category.�
1/1/2015
guest Apple might fit, Apple in what year are you thinking?
kenliles, one thing to bear in mind, in that paragraph where I'd wondered whether this set of "specs" was unprecedented, I'd added these Tesla characteristics I'd forgotten in the pasted in quick and dirty list,
"...a couple other like 25% gross margins [or higher], $20 billion market cap [or higher], trailing revenue over $2 billion"
and I'm now remembering another key "spec" (this concept of possibly unique Tesla metrics is something I'd thought about a month or two ago)
10 times or less Price to Sales ratio, based on prior years sales... Tesla is borderline pushing this stat up to 11.
and, I don't mean to discourage your suggestion of Apple, I'm glad you made it. this could be a fun and possibly informative game
perhaps I should move this to a separate thread, something like "are Tesla's financial metrics unprecedented?", cleanly list the set of "specs", and see if we can come up with any Tesla precedents. inflation adjustment for $ figures is fair.�
1/1/2015
guest Yeah to your point I had to think hard! I was thinking of Apple from the time Jobs returned (with NeXT in tow). Then a few years on introduced the iPhone, but had existing cash flow from computing market. May not be exactly your criteria, but it's pretty damn close. But again to your point, that success story would be a terrific mentor to follow. I think Apple is close enough to your criteria to provide amplification of your point of value, long term investment and what it means.
They also fit Tesla's disruption of existing addressable market (phones, personal computing etc.) rather than a pure market creation scenario. This gives as you say a concurrent view of the size of addressable market against the technological 5 year lead over existing players. Exactly what Apple did. Apple turned out to be the largest company in the world (measured by Cap). Tesla's comparative challenge to that example is scaleability is harder to achieve, however Tesla's advantage is the same because the 5 year lead you mention in product technology extends to at least that in manufacturing scaleability relative to competitors, and probably permanent lead relative to sales scaleability (no dealers - direct sales). Not to mention the SC network of fuel supply in the same market space
That vertical integration is also exactly as Apple did by providing the hardware, software, operating system, services (iCloud/iTunes), direct sales, direct retail store service operation). The similarities are quite remarkable actually�
1/1/2015
guest kenliles, I must admit, it's hard for me to stomach the Steve Jobs/Elon comparisons... but your comparison of the companies, wow, vertical integration, direct sales, disrupting an existing market is big (barrier to entry for other newcomers for one thing, unlike say the probably dozens of start ups (on top of "big boys") going after something like 3D printing)... really strong similarities. I once saw Steve Wozniak talk about Apples first 5 years, some spooky & encouraging similarities.
as to the challenge of scalability. I understand that it looks that way, and I saw it that way until about a month or two ago. now I look at it as a disruption in slow motion.
that is, even though the incumbent car makers are bigger, when they eventually do go to EVs, it takes vast amounts of time and money to build Giga Factories. They may not call their factories Giga factories, but basically for every 500K vehicle worth of production capacity, you have to spend, billions. thus, if the global car market is 100 million per year units sold around 2020, I think it will be at least a trillion to put up battery, or successor to battery, factories (probably over decades). Retooling all those ICE plants might be another half trillion. So while Tesla can't just pony up $50 billon over night, no else can either. slow motion disruption.?�
1/1/2015
guest Yep good point relative to the product and market. Agreed
re: Jobs/Musk similarities, has much more to do with goals, missions, and methods. As you infer, they're very different in style and character. I much prefer Elon's approach and dedication to engineering first principles etc. But have great respect for Jobs ability to operate outside the expected norms. In addition, in both cases they carry their relative skill to many disparate markets (Elon: SpaceX, PayPal), (Jobs: Pixar, Music). Anyway, great discussion and thanks for seeding it�
1/1/2015
guest Can we just go with "intellectually absent"? Or is that offensive?�
1/1/2015
guest Apple was approx $ 8.50 in October ,2001 when the iPod was released�
1/1/2015
guest Its not just about the batteries, or even the batteries and the superchargers. Remember that tesla is vertically and horizontally integrated and modern car companies are not. It will take the other companies years to be able to design a full carOS similar to tesla's. This alone is a huge cost advantage as all component subsystems in the model S route data and controls to a single virtual interface. This gives tesla a very unique ability around whole car telematics/ diagnostics and, of course, over the air upgrades. Again a massive cost advantage and a massive upgrade advantage over traditional car companies.
I think the level of disruption is more akin to Toyota in the 70s, 80s and 90s building a massive lead over the rest of the world in integrated design and quality. All the other car companies knew that they needed to change but it still took decades to turn their battleships. Not just the Americans but the Germans as well had to play catch up.
this is a company, not just a car, designed to take advantage of all sorts of cutting edge technologies - not just the electric drivetrain.�
1/1/2015
guest Good point. Also why Tesla would think far enough ahead to make a major hacker-hire where others are not even yet in this mode at all. Talk about long term thinking.
Tesla Hires To Boost Car Security - Car Tech - Popular Mechanics
These posts though should probably be moved to the long term thread�
1/1/2015
guest Speaking of intellectually absent
The Ohio Dealers at it again-
Elon and Tesla tweets
Auto dealers trying to pass a law to enforce their monopoly in Ohio & prevent consumer choice...
Auto dealers push legislation to keep Tesla Motors out of Ohio | cleveland.com�
1/1/2015
guest On the question raised earlier of shorts crying about valuation. There can be no such thing as valuation in the abstract except to look up the price on the NASDAQ. Every other valuation must have an comparison or features of a comparison assumed in a valuation model. In the case of shorts and Tesla that comparison is invariably a direct or assumed comparison with automotive technology businesses locked in for the most part by culture and capital expenditure on the production of a sunset technology that is rapidly going out of fashion ahead of an inevitable decline in sales.
Comparing Tesla's prospects like for like with GM's in 5~10 years time there is only one modeling assumption I would be prepared to set in stone. Tesla will be worth more than it is today. As for GM I would not like to guarantee that it is still in business 5~10 years out when even now it is only six years out of bankruptcy and failing to respond constructively to the same level of disruptive threat that GM itself posed to the horse and cart in a similar stage of its technology growth phase.
I would strongly suspect that Tesla and GM will converge on identical valuation prior to a 5 year time horizon and I would strongly suspect that the graph comparing both stocks will begin form a letter X commencing not much further out than 12 months from now.
- - - Updated - - -
I think another important point of note on valuation. Tesla is not just 3 to 5 years ahead of legacy automakers producing something equivalent to its 2012/2013 product. In 3~5 years it will have opened the gap to 5 ~ 7 years.
Tesla is actually accelerating much harder than the so called competition is following. For example Tesla is now gathering vehicle data and live customer and regulator experience everywhere the Model S is sold and driven in preparation for a hard launch of the Gen III. Musk is appointed to the UK government as an adviser on their EV adoption strategy. Belgium and Norway, Tesla has addressed grid anomalies that will trip up all who follow.
In less than 3 years time, ICE vehicle manufacturers will be beating down the doors of Chinese, Korean and Japanese battery suppliers in an escallating bidding war for battery supplies to compete with Tesla's ultra-attractive, low cost high performance vehicles. At that time Tesla will stand alone in control of the world's largest EV battery supply plant and it will have had years to lock down rawmat supply prices at contracted rates.
This is the nature of first mover advantage in a disruptive technology sea change.
One other thing. As a manufactured item, Gen III will not be a compromise on the Model S, it will be another technological leap forward. Given the character of Musk, the inherent nature of the technology and an an engineering team drawn from Aston to Apple we are going to see a vehicle that cannot be replicated for double the asking price of the base model and it is impossible to imagine a performance plus GIII not destroying the bragging rights of every sub $1Million sports car on the road.�
1/1/2015
guest Great point Julian. Agree with all of them. Tesla is still accelerating its lead advantage at this point.�
1/1/2015
guest You are so right. Did you all read the news today about Toyota recalling 1.9 million (!) Priuses for a 40 minute visit to their service stations as they need to perform a software update. That's almost 1.3 million work hours of a fix, not to mention the inconvenience to customers, their wait time, and the damage to the brand perception.
Talking about Tesla being years ahead, it's the equivalent of the competition using carrier pigeons in the age of the Internet. Same fix for Tesla? What fix?! You wake up and your car is ready to go with the latest firmware installed.�
1/1/2015
guest In Toyota's defense. If they did have over the air updates. They would have to contend with data usage of 1.9 million customers. Even if the customers weren't able to use that 3G/4G connection, the updates would be costly to send out from a bandwidth usage perspective. Though albeit more efficient.�
1/1/2015
guest I think the bandwidth costs far undercut the manpower costs involved in this recall. And the remote telemetry and diagnostics capability is also worth a ton. Might be the reason Tesla isn't still charging us anything
�
1/1/2015
guest Most people probably connect to WiFi at home... they wouldn't have to pay for mobile data.�
1/1/2015
guest I don't think the data is costing Tesla that much. It wouldn't surprise me if they are only paying $5/month for it. With 25k connections they should be getting a huge discount.�
1/1/2015
guest I'd keep a close eye on Nissan. They've made a huge investment in the EV sector and rumors are that they may be approaching Tesla/Panasonic cell density with their NMC chemistry. If they add some active cooling and put it in an attractive vehicle they could possibly come up with something compelling.�
1/1/2015
guest I view competition from other car companies as a positive for Tesla. It's my view that the limiting factor on Tesla's growth is the public's willingness to accept EVs as mainstream and, with that, the build-out of charging infrastructure. As more EVs reach the market, EVs will seem more mainstream and have higher acceptability to more consumers.�
1/1/2015
guest Agreed. Not in every case, but in this case, I believe that "a rising tide lifts all boats." That's Elon's publicly-stated position, as well.�
1/1/2015
guest Lets say the cars entire OS needs to be updated, and it's a 100mb update (does anyone know the average size of the update download for a Model S?). That's 190TB of data to pay for, which runs about $15,500 on Amazon S3.
Compare that to 1.3 million hours at an average cost of maybe $20/hr? Thats $26 million.
The cost of distributing over-the-air updates is approximately 99.94% less than forcing customers to bring their car in to a service center.�
1/1/2015
guest I agree that competition is positive for Tesla and how that will contribute to more acceptance. Not sure I agree that the limiting factor on Tesla's growth is the public's willingness to accept EVs as mainstream. Acceptance is currently happening much faster than Tesla can expand. Tesla is not the least bit constrained by demand. IMO the limiting factor on Tesla's growth is the ability to expand fast enough, and that will be the case for several years. Even if they had more cash, it's hard to hire and train new employees fast enough, build out assembly lines, sales and service infrastructure, etc. Did I mention giga-factory? In the 3 yrs that I've been driving electric, and now my wife, at least half of our friends are now saying "we're buying as soon as there's an affordable 200 mi EV." Nobody can expand fast enough to do that. There's more than enough acceptance and demand already.�
1/1/2015
guest This is a good point. Audi/BMW is probably several years behind, but Nissan could potentially take the Leaf drive-tran, trow in a 3x Leaf battery and stuff it all inside a Qashqai +2 and suddenly they have a TMX-killer (reasonable priced cross-over).�
1/1/2015
guest Mmm hmm. Coulda-shoulda-woulda. Just as tftf is claiming dead-perfect peaking and valleying his shorts and longs. Which isn't, by-the-by, any less likely than laws of probability allow Brownian Motion to cause every molecule of air in this room to zoom off to the top left corner, leaving a perfect vacuum everywh....gaak, gasp.�
1/1/2015
guest Is this ever going to be challenged at the supreme court level to settle it once and for all?�
1/1/2015
guest While Tesla Motors is production constrained, there is no great need to be aggressive on this dealership issue. The political fight adds to public awareness and further obviates the need for advertising.
I suspect that the federal courts will eventually invoke the Constitution�s interstate commerce clause in Tesla�s favor. The company may prefer that that takes a while, as they set up their company stores and service centers where they can, while delaying the day that the other automakers do the same thing.�
1/1/2015
guest Thanks. That makes a lot of sense.�
1/1/2015
guest Good point.
Infact I'd say Tesla & Nissan are approaching the market from either end. Nissan doesn't have a Model S competitor - nor does Tesla have a Leaf competitor.
But in 4 years, Tesla will have Model E - and Nissan will have Infiniti LE (or something similar). In a year or less, Nissan will have a 150 mile car that will undercut Model E.
I also think BMW will not just sit on the sidelines after spending Billions on the EV program. I won't be surprised if we see a Model E competitor from BMW in 5 years.
It is really a question of battery density & price. There, Tesla's advantages will not last forever.�
1/1/2015
guest I see it the same Curt. The investor in me is ok with how things are proceeding. It would be the height of amusement to me if a significant element in the downfall of the gasoline engine for personal transportation was due to the business model involving dealerships; as if they don't have enough to struggle against on outright merits, the business model also throws sand in the gears
To the extent the business model hangs on and hurts the sales process for gas cars, I'm good with it. To the extent that it delays meaningful competition and the conversion to electric personal transportation, that's a tragedy.�
1/1/2015
guest Keep in mind that Nissan with the Leaf seems to have had minimal problems dealing with Norwegian "floating ground" power network in contrast to Tesla up until the latest 5.8 software. That implies that for some issues the Gen III launch will be greatly improved by the experience Tesla gathers from the Model S (and X), but to a certain degree the old-time car-makers do know their stuff. We the Tesla bulls should not overlook that the big automakers do have some advantages with their tried and tested methods. The service level from Tesla in Norway has ranged from excellent to abyssmal f.inst. which is not yet the way it should be.
Cobos�
1/1/2015
guest Moderator's Note: Some posts about investing and personal trades were moved to Short Term TSLA Investor Social Chat�
1/1/2015
guest What do you all think are the intermediate term risks for tesla? To me, it is scaling manufacturing and about a successful design and launch of the model x. i am a little concerned about them pulling off the model x. with a significantly worse drag coefficient in the suv form factor, can they get the range they want with the 85 kWh pack? elon and jb have talked about the difficulty in designing the model x in oslo.�
1/1/2015
guest Can't recall the source, but last I heard they had solved (in a breakthrough I believe he actually termed it) the 4 AWD efficiency hit is now essentially zero. The drag coefficient is the only remaining hit as you say. I'm willing to bet they improved this enough to make it manageable.�
1/1/2015
guest yes. jb mentioned that in oslo. awd comes at no penalty (except price).
drag coefficient concerns me as that significantly impacts efficiency (enough that they want to get rid of side mirrors even). at higher speeds this is the biggest problem. they could do a bigger battery pack, but the website says it'll be offered at 60 and 85. so i'm not sure where they are going to get the range unless they think it will suffer.�
1/1/2015
guest It's certainly a valid concern. And no doubt a challenge. Another method to combat it might include a gear-ratio shift that gives less performance at the higher speeds in exchange for smaller draw. that would be acceptable to most drivers of a SUV class vehicle, especially if the AWD gives some of that back when really needed. I think someone asked Elon the question about why would anyone buy an S over an X once it's introduced and he said (paraphrased) the S performance will be superior (likely both acceleration and handling given CG aspects), in exchange for people and and cargo space. That seems to be the trade-off rather than range, so I'm guessing it's largely solved. But I may be overly optimistic�
1/1/2015
guest yes. hopefully they can pull it off with no compromises. maybe the dual motor is not only neutral, but also ultimately helps efficiency.�
1/1/2015
guest I think it was mentioned that the front motor will be smaller and have a different gear ratio as well as a separate inverter and controller, so it would be possible to gradualy switch over between rear drive for fast acceleration and front drive for faster cruising. That may well be the explanation for the "neutral impact" of awd that JB mentioned in Oslo.�
1/1/2015
guest Im confident that they will offer a bigger battery pack with the Model X, around 100-110kw.
1. Elon Musk said in a Conference call "why not a 500mile range" so Tesla decently does see more room upwards.
2. Making the announcement of a 1xx kW pack would stifle Model S orders, people would assume that this battery option should also be available for the Model S, since its exactly the same drivetrain and battery form factor.
3. Tesla does the same regarding AWD Model S, they say they will not be AWD Model S for some time, in reality they don't want to have customers that will wait for another year instead of already ordering.
4. Such a surprise announcement would be much better for the stock price then if it would have been revealed 2 years ago.
If I would be Elon, I would make the announcement of the Model X 105kW pack as late as possible, basically the time when the first customers will have to make their configurations.
That will lead to much more Model S reservations and Sells of the P85+ version (the customers that just maxes out everything and clicks "buy") this kind of customer will soon make a new order if there is a Model P105+ AWD avaiblabe.
I saw a few people already wanting to trade in their 60kw version for an 85kw, and those are the kind of people that aren't infinitely wealthy since their decision to get a 60kw version was based on economics, still they push themselves to a 85 version.
I cant remember where I read it, but inside vaporware used to be a really huge problem in silicon valley.
A company would release a product A and would instantly announce that they are already working on product A v2 which is much faster/better etc. customers would be insecure to buy the product or waited for the v2 and skipped on the purchase. That ruined a lot of companies back in the day.
Nowdays the big companies usually don't do such mistakes, but we should keep in mind that they are very careful with such announcements.
Same with Apple, the time for the official announcement for a new version of a product till the date its possible to buy is kept as short as possible.
If they would announce in March how superior their Iphone 6 will be over the 5s, (although its obvious, at least they try to make it seem like that on the day of presentation) they would scare a lot of potential customers away that wanted to buy a new phone in that time period.�
1/1/2015
guest I'm 100% with you on both the bigger battery for Model X and the AWD Model S. They will suddenly be available and be announced as late as possible with regards to availability. The phenomenon you're describing above is called the Osborne effect by the way (Osborne effect - Wikipedia, the free encyclopedia).
Some examples in recent Tesla history of how they make changes on the fly and announce late: P85+ was suddenly available, not "honoring" the early res. holders/Sigs. The 90 --> 120kW A/B battery issue. Without any announcement, all of a sudden there is no longer a RWD Model S, only AWD etc. etc. In "our" (this forum's) opinion a new 105/110kWh or whatever battery is a very big deal but for a company like Tesla it's just one small step change in their continuous iteration process (no traditional "2012" model, "2013" model etc).�
1/1/2015
guest Why would tesla buyers be different from other car buyers? everyone knows that new engine / higher performance variants for BMW or Mercedes or Audis are rolled out incrementally for a given body type. The M cars come a couple of years after the base 3/ 5 series are available.
Some people will wait, many wont. Remember that the 1xxkW is going to cost more than the 85kW. Anyways I think TSLA would still be production, not demand, constrained even if 20% of target Model S buyers decide to wait a year or two.�
1/1/2015
guest this 20% target buyers that wait for a 1xxkW battery are the ones TM is making the biggest profit margin on.
Those people just maxout and TM makes 25-30% profit margin on them.
Tesla is rightfully after those customers, they also have to wait not as long as an 60kw model buyer.
Or can just pickup a loaner from them lot if they are happy with a full maxed out car.
Also the announcement of a bigger battery is a much bigger deal than the announcement of a slightly better motor in an ICE.
For EVs that means more power and range which is the boogieman for new EV adaptors.
And I can imagine a lot of customers would have instantly paused their reservation if Tesla announced "AWD available for Model S in around a year"
The Osborne Effect nails it pretty good.
I even feel bad proposing this theories here
I hope not to many potential buyers gonna read this�
1/1/2015
guest Next year all Model S' will come with free ponies!�
1/1/2015
guest I don't think Tesla will abandon the rwd only model S. Awd vehicles often feel much heavier in the front end. Our x drive bmw was way heavier. I liked the handling of the S drive bmw way better, however in the snow the x drive was nice to have.
Now it could be possible that Tesla with their amazing engineers have been able to engineer away that heavy feeling like they engineered away the driving economy hit.
I have a feeling that the bigger batteries will be announced at the same time for both the X and the S. However I also think that the awd S will be announced a few months after model X production is well into its rampup.�
1/1/2015
guest "What goes up must come down,
spinning wheel turning round.
Ride the painted pony, let the spinning wheel turn!"�
1/1/2015
guest
Marc Tarpenning Tesla Motors Co-Founder on how incompetent the big Manufacturers are and why they won't get better anytime soon.
I knew they are in a bad position but its quite amazing how bad their position is.
skip to 52:00�
1/1/2015
guest Extremely interesting. Great post. Thanks TD1�
1/1/2015
guest Great video, but why does he repeatedly say the X is going to be the less expensive vehicle from Tesla? I know he's no longer with the company but you'd think he would know better.�
1/1/2015
guest Yeah I didn't get that either
Less expensive per cubic foot I suppose�
1/1/2015
guest Liked the talk too, even though it was a bit hard to hear some questions. At least the video was steady.
Very interesting. Brilliant analyses, well presented.
I think he simply confused the X for the E (at the time still labeled Gen III). He had left the company, as you remember, and was perhaps no longer keeping � jour with details so imagined the third model would be Gen III. Transparent mistake.�
1/1/2015
guest Seems like a failure of logic to even think that a larger SUV would be less expensive without being range crippled, which is contrary to the basic Tesla mission.�
1/1/2015
guest Wow that is a must-watch for tesla investors. The insight into why the big automakers will be slow to do Ev's was astonishing to me.
This gives me a whole new perspective. Yes, TSLA has 1/2 of the market cap as GM, but this makes me think that GM is hugely overvalued.
He says in that video, that most of the functions of GM (or other large auto makers) has been subcontracted out, including the electronics. They essentially kept the engine part in house because that is "where the value is", in making good engines that run for 100k miles for not a lot of money, and the electronics and even some of the design and manufacturing is done by subcontractors. Maybe you all knew this already, but wow, they are in a terrible position to pivot and change in a major way.
He basically insinuates that 20 years ago you couldn't have started a new car company at all, because all of that subcontractor space didn't exist and now it does so they can leverage it. So basically, a brash silicon valley team could have probably succeeded in just making a good car of any sort (ICE for instance) with a small in -house team, lots of vertical integration, top in house design capability and a direct sales model. Whereas GM would be incapable of much more than making last year's car an inch longer.
That Tesla-as-a-new-ICE-car-maker thought experiment is valuable. I would probably be investing like crazy in that company. Now add on the fact that they make better cars than anyone in the world, and have a multi-year plan to expand like crazy and a plausible explanation for being demand constrained for many years.�
1/1/2015
guest Another thread raised the issue of cannibalization of the various Tesla models. Should Tesla be worried that Model X sales (and, later, Model E sales) will take away from Model S sales?
First, there's no doubt that there will be some cannibalization. As potential buyers look at the Tesla line-up, different characteristics will appeal to different people. But this is like BMW fretting that some people buy a 3-series who might have bought a 5-series if only there wasn't a 3-series offered. That may be true, but it's more likely that that buyer would have bought an Audi A4 or Mercedes C-class (or some other smaller sedan).
One way to think about consumer choice is to imagine an "attribute space". For the sake of discussion, let's start with an over-simplified example of how voting might work. Let's suppose all voters vote for the candidate who is most similar to their own political views, and that political views can be boiled down to "left" and "right". Voters are arrayed across the political spectrum with some distribution. In this simple model, candidates should position themselves to be closer to the center of that distribution than their opponent, that is, that want to be the closest choice to the highest proportion of people. (This exercise gets much more complex, and interesting, when there is a primary that has a different distribution of voters but, once you stake out a spot on the spectrum, you can't change, or change much. It's also more interesting if there are more than two candidates.) (This "bunching" effect explains why there will often be two-to-four gas stations at a common corner: they each want to be the closest gas station to as many people as possible.)
OK, so what does this have to do with cars? Cars live in an attribute space with many more dimensions, e.g. exterior size, perceived quality, perceived reliability, passenger space, cargo space, and driving performance. Modeling the consumer is more complex, too. They, too, are a point in this attribute space, which represents their ideal car. But, assuming that the ideal car isn't available, how do we measure the distance between a consumer and "nearby" cars to determine which they will choose? That's also idiosyncratic to each customer, because people value different characteristics. Fortunately, you can use prices to measure those, so you end up with a model that can be solved.
So let's take this back to cannibalization. Each Tesla model sits at a different point in the "car attribute space". Therefore, some people will be drawn to one more than to others; they choose the model closest to their personal ideal. IF there were no other car company, OR if you believed that someone buying a Tesla would never consider any other car, THEN adding a new model doesn't add new sales to Tesla, but simply cannibalizes demand for the earlier models. In the real world, however, car makers add models to draw in customers who otherwise would be buying some other car. The key is to position each model at the right point in "car attribute space" that is far enough away from your other offerings that the gains against other companies make the development worthwhile. This distribution in space also has to be thought of in terms of the cost to develop and produce additional models: it's relatively cheap to offer variants of a platform that increase the area of "car attribute space" that you dominate, but adding a new model is more expensive and, therefore, has to conquer a much larger new territory.
Also, remember that there is a real value to long-term customer loyalty if you can offer a product that is a close match to what people want. If someone is delighted each day with a product, they are more likely to buy its replacement from you. It's easiest to be delighted with a product when its function closely matches your needs. And needs change -- for example, my youngest will be heading to college this fall, so our need for a large car is greatly reduced. I'd be happier with something smaller. By offering the Model E, Tesla makes it easier for me to stay in their family of cars when/if I sell my Model S.�
1/1/2015
guest
Great presentation RB! I would add at this point in TMs history that worry about the 'X' cannibalizing 'S' sales or vice versa is a non issue until they are freed up from their 'supply constrained' situation. If profit margins are similar in the 'S' and 'X' why should TM (or we for that matter) care if people switch from one variant to another?�
1/1/2015
guest My brief thoughts on Robert's analogy:
I would say that of all the manufacturers out there, it blows me away at how much ground BMW is trying to cover with their lineup. It seems like some poor attempt to appeal to every attribute of every potential customer. I feel the need to mention this as I perceive the quality and integrity of BMW to have significantly dropped in recent memory. Maybe BMW doesn't care, but I'm less inclined to makes a high dollar purchase to a company that will produce anything, no matter how poorly it looks, performs or resells.
Tesla on the other hand is quite limited in only offering one model with relatively few trim levels. I see significant enough differences in the X to believe that any cannibalization effect will be small. The sales of Cayennes, X5's and Q7's make me think that there is a potentially an even larger market out there for a moderately high end SUV.
If Elon announced plans for a Model S "Grand Coupe", I'd be worried.�
1/1/2015
guest
The Model S is a Grand Coupe, Tesla would have to go in reverse and announce a proper sedan/saloon.�
1/1/2015
guest I just counted all the offerings Mercedes Benz has, 27 different models :scared:
Because you have to count not only the Classes but also the subclasses, like:
C-Class Limousine
C-Class T-Modell
C-Class Coupe
Every of those 27 Models has a different bodywork, which is a huge expanse in Tooling atleast
Im guess the number of drivetrains they share is much smaller but then again the engines they share should be around the same number.�
1/1/2015
guest That was supposed to be tongue in cheek. I was making reference to the BMW M6 Gran Coupe which is what I would consider a proper sedan/saloon, but is somehow NOT an M5.�
1/1/2015
guest It is the fastback shape that makes it a four door coupe, at least by the definition of the German automakers. 6 Series Gran Coupe, Audi A7 , and MB CLS. They all have their high performance variants.
7 Series, A8, and S Class is what the Germans and most auto enthusiast consider a proper sedan/saloon. Not all have their high performance variant.
The size of the Model S is in between the two versions but much closer to the 4 door coupe too.�
1/1/2015
guest I just received this email from Tesla today:
"Thank you for your Model X reservation. I am your local Vancouver representative for all things Tesla.
I will be in touch late summer to schedule your Model X test drive for this Autumn. I expect Model X deliveries to begin in Canada in Q2 of 2015."
I had originally put in a Model X reservation but wasn't patient enough to wait so I ended up getting the Model S. I have kept my X reservation and am not sure what I will do with it yet!
Point being - Model X deliveries expected in Canada Q2 2015 confirmed! Anyone in the US get an email like this?�
1/1/2015
guest Tesla deploys its first mobile SC. Cool
Details on Teslas First $35,000 Mobile Supercharging Station
- - - Updated - - -
Couldn't be prouder of my fellow WAshatonians today.
Damn dealers are hitting on all state fronts everywhere.
One sponsor saying he's trying to 'save dealerships'. Why do you need a law to do that!?
Compete with the real world like everyone else
http://www.thenewstribune.com/2014/02/17/3052717/tesla-protests-bills-that-would.html�
1/1/2015
guest I thought this article would be most relevant here because Tesla is making grid storage batteries. This will have a major impact on the long term for Tesla.
SolarIndustryMag.com: Utility-Scale Energy Storage Demand To Hit 8.5 GWh By 2023�
1/1/2015
guest Looks like those Tesla fans pulled it off in WA. Assuming this gets through the governor, it's another important wrinkle in this battle;
Tesla wins this one twice. Now they can and others can't (sell direct);
Tesla wins battle against auto dealers in Washington state, but future rivals are screwed - GeekWire
completely exposes the legislature to cronyism of special interests though-�
1/1/2015
guest Can it be the charging solution for China urban customers that was mentioned by Elon during the Conf call?�
1/1/2015
guest I would love to have the answer to Sanny's question be "yes", but I don't understand how it could be. First, it's not really 'mobile' - it needs be tied to large-cap 240V lines. However, a horse has to come before the cart: that is, let's say there is an apartment complex. No resident is going to need a SpC....unless he also owns a car, which must be overnight parked somewhere. So, determine where cars will be moored and the charging mechanism, whatever it is, presumably also can be there. I'm still hoping against hope Tesla can introduce cable-less inductive charging....�
1/1/2015
guest "We believe we are witnessing the most disruptive intersection of manufacturing, innovation and capital experienced by the auto industry in more than a century," Morgan Stanley analyst Adam Jonas wrote in a Thursday morning note.
Wow.. what a statement from Adam Jonas..�
1/1/2015
guest Unless I've missed a really big announcement, Tesla is not making utility-scale energy storage batteries. Li ion batteries to store 10 - 30 kwh in basement of a home, means house can be off the grid and still powered. Those are not grid storage batteries for utilities.�
1/1/2015
guest Here is the article:
All in the Family: Tesla Battery Packs in SolarCity Backup Systems | PluginCars.com
This article explains that they are 10kwh modules so they can be any size one wants. Of course it still doesn't sound like utilities would be buying them at this point.�
1/1/2015
guest JB Straubel | [email�protected] SLAC 2013 - YouTube
Watch this video starting @ 19:20. JB talks about their stationary battery systems, they even have a 2 MWH one installed @ the factory.�
1/1/2015
guest Doesn't he have a $153 PT or did he raise it?�
1/1/2015
guest He hasn't made any new ones since $153 in early December. Seems like a big PT increase from him is imminent though with his bullish comments.�
1/1/2015
guest yes, I bet he's waiting for the stock price to settle after ER or the Giga factory announcement and then will present his new price target which I guess would be approximately $50 above wherever the price is trading at that time, perhaps 265ish�
1/1/2015
guest I share that sentiment 100%. I'm completely sure Adam Jonas of Morgan Stanley will be raising his PT significantly next week. Anything under $230 would shock me, anything above would not, even $260 and beyond.
Here's what Adam had to say about the Giga-factory:
That does not read like someone on the fence about Tesla Motors' prospects any longer.
I think the public Giga-Factory announcement is going to make global headlines, and global history.�
1/1/2015
guest I want to sell my house and buy march calls for it when I read that.�
1/1/2015
guest If your mortgage rate is low you coukd take out a home equity loan. Better than borrowing on margin.�
1/1/2015
guest The Supercharger announcement in September 2012 was very important and very impressive, but this Gigafactory announcement of next week will be even more important and impressive.
Just think about it. For the existance of Tesla Motors as a manufacturer of EV's just how important the combination of the battery pack technology, the Supercharger network and the Gigafactory really is? It's like the pillars of a foundation on which a building can be built. Elon Musk really does reason from first principles.�
1/1/2015
guest I know, to bad I rent my house�
1/1/2015
guest This is actually a strategy (although somewhat unknown, especially to Canadians) known as the Smith Manoeuvre. I wish I had done it this time last year and picked up some June calls.
I really wish Elon had listed a date to end this standoff. Next week is quite vague, but I might look at some SCTY calls on Monday morning as I like what that company's doing regardless of the Gigafactory speculation.�
1/1/2015
guest You like apples? How do you like them apples?
- - - Updated - - -
You know, I imagine one day in some MBA classes when they are studying the rise of TSLA, hundreds of MBA students are going to smack their foreheads and ask, "Why didn't more people see it". And they'll construct a timeline of every time Tesla (Elon) said something and then draw a straight line to when it happened months or years later. And they'll say, 'He told everyone they were going to (insert ANYTHING of significance that Tesla has done here) and a year later they did it - no wonder the stock rose meteorically". I hope Elon's smiling from his craterside lounge chair on Mars by then. Isn't this gigafactory the latest example? Didn't he tell us last year that Tesla was going to build one? Sort of generated a few smirks last fall as everyone was worried about why a car would catch fire if it drove over a World War 2 anti-tank obstacle (um, duh). People should have been looking a little further ahead, and of course listening. I practically can't stop laughing every time some analyst compares their valuation to GM. Really? Isn't GM now mostly an aggregator of parts made elsewhere? No wonder they call it an assembly line.
Blast off.�
1/1/2015
guest Likewise, Cattledog. Except I don't laugh; I use it to suggest they turn their telescope around and look through its eyepiece, instead. That is, the "Tesla's market cap is half of what GM's is" means to me a terribly demonstrative indicator that GM's price has a long way to fall before it's appropriately priced.�
1/1/2015
guest In fact as I recall, the stock moved down some on the announcement as if the news was seen as a surprised this would be required for GENIII and worry about its funding.
Nice post @Cattledog�
1/1/2015
guest I've just finished posting my revised model of TSLA by 2023 on reddit's investing subreddit. It has a lot of assumptions and estimated projections discussed on this forum.
My (revised) model of Tesla (TSLA) by 2023 : investing�
1/1/2015
guest I too am very excited about the gigafactory announcement. Battery supply is a major constraint to growth and their description of lowering the battery cost is very interesting.
But, can someone answer this question? Where will they build the actual cars? Fremont is big and all, but it feels like it will be busy building Model S/X for the duration. Isn't there another car factory plan we need to hear next? Is that just the thing that will be on deck after the battery thing is all taken care of?�
1/1/2015
guest Fremont built 500k cars under Toyota/GM ownership and Elon has said Tesla can build the same number there.
IMO max Model S/X demand is 200k so that leaves at least 300k capacity for Model E.
$3600 to ship a Model S to Europe is not too bad but way too much for the Model E to absorb.
My guess Tilburg Netherlands assembly facility will start manufacturing Model E for Europe shortly after Model E is fully ramped up at Fremont.
Tesla will need to build another Giga Factory to supply factories after Fremont and Tilburg.�
1/1/2015
guest �It�s not going to happen in a year from now. It�s going to be hard. But I think we can get down to five to 10 minutes,� Straubel said in an interview with MIT Technology Review.
Tesla CTO JB Straubel Says His Company Can Charge Electric Vehicles, With No Battery Swapping, in Five Minutes | MIT Technology Review
Shortly after battery-swap announcement JB mentioned the above. I think that if, in the next few years, Tesla can really get it down to 5-10 mins full charge for the 85KWh (assuming they might offer 100/110KWh in the future), or double the charging speed to 240-270KW, it's going to be the holy grail..
Couple that with 90-sec battery swapping, it's going really change the perception of EV for everyone. After that, it's just a matter of covering as much area with the charging+swapping station (or Tesla station) as possible..�
1/1/2015
guest I'm at stanford and talk to the business students. You're right, they are doing Tesla analyses. I enjoy it because I was like "we, on the forum, picked this up before it happened. Not after the fact".�
1/1/2015
guest Couldn't make it more than 2 minutes. Horrible.�
1/1/2015
guest It has been - what? - Two weeks now, that "Apple + Tesla" has been the pundits' favorite topic to dismiss, as though there MUST be someone out there who thinks this realistic so I'm going to show him how goofy that is.
Can we please start a new moronic rumour? Maybe we can get The Onion to report on Moscow being re-named Musk-Ow; or how the IOC has announced the 2018 Winter Olympics will feature Tesla Skateboard Slaloms, or....�
1/1/2015
guest I've only read through the past few days posts on this thread, so sorry if this link has been posted before.
The link gives you a couple of paragraphs from many analyst's reports (simply click on each listing). The 6 or 7 I looked over since the earnings report typically give transparency on the analysts' price target by showing the year they base their valuation on, the vehicle volume forecasted for the year, margin assumption, resulting eps, and discount rate. I didn't to an intensive analysis, but it seems the analysts are all more or less are in the same range on volume, and eps, with variation in valuations stemming from different choice of pe to assign and discount rates to arrive at price target for this year.
StreetInsider.com
well, today I was fantasizing the impact of Warren Buffett buying up an entire secondary offering via Berkshire. This would spare us from ever hearing again the bogus "market cap/car sold" stat, as well the continuing practice of some in the media calling Tesla overvalued without offering any justification for the claim as though it were a given you'd be an "idiot" not to agree with. so, hey, if the Onion feels they have to start another rumor, I can live with "Buffett to Purchase Tesla Secondary."�
1/1/2015
guest As much as I would love to even fantasize about that, I'm halfway through "Tap-dancing to work" and the line that keeps sticking in my head is "We are simple and we do not buy businesses we do not understand." So this will have to just remain a rumour for now. Which is a shame, as it would give Tesla the funding they need with no change in the management style.
I really wish though...�
1/1/2015
guest c041v, Buffett indeed talks about the need to be able to understand what you invest in. I learned this from him and apply it... I don't even bother looking into 3D printing, social media,... I think understanding the EV advantage to the ICE is in Warren's "wheelhouse," afterall they did invest in BYD for their electric car initiatives.
of course, just because it's something we'd like to see, and perhaps even a good idea for Buffett, doesn't mean he'll do it (the odds that the idea would even cross his mind are probably quite small... many investment opportunities to explore, only so much time).�
1/1/2015
guest
I've read that book and others too and know what you guys are talking about. But I also thought he looks for companies with great management and what better company than Tesla? Especially with Elon at the head.....�
1/1/2015
guest Buffett owns insurance companies and those are a lot harder to understand than TSLA.
Matter of fact TSLA is probably the easiest company to understand. It is really straightforward.�
1/1/2015
guest I can just about guarantee if Buffett is aware of this list of TSLA specs, he would instantly understand it, and start salivating
Over 3 year technological lead on the competition (in fact very likely over 5 years for Tesla)
Less than 0.1% penetration of addressable market (for Tesla one quarter of 0.1%)
Positive Cash Balance (net of debt)
Break even or positive EPS
500% or better year over year revenue
over 25% gross margins
market cap over $25 billion
12 times or less price to sales ratio
on the technology side, I'm not worried about Buffett's ability to understand over 70% efficiency for Tesla, ~mid 25% for ICE or energy from any source that can be converted to electricity (including renewables) vs. energy from one finite resource.�
1/1/2015
guest I was looking for news on Car of The Year and came across this article where one of the judges reviews his picks for 2014. He picked the Mercedes for his car of the year, and the i3 as second. The Model S was third. He didn't reveal his exact scores for each though.
For those that don't know, each judge has 25 points to award to the 7 finalists while not awarding more than 10 to any one car.�
1/1/2015
guest One factor that is often overlooked when people say "Tesla is ahead of the competition" is the fact that Musk sets impossible deadlines for his teams. It's a tricky concept to pull off. He's setting them up for failure, but he's moving them faster than anyone else can.
Think about where everyone else is. They are setting "reasonable timelines". How can they ever catch up doing that? Answer, they won't. They will only fall further back...
BTW, how do I know these impossible deadlines are Musks idea? Because SpaceX is using them too. Watch how fast they pull away from their competition.�
1/1/2015
guest But he rewards the team with setting low production numbers, so they always end up over performing.�
1/1/2015
guest Yes, very similar to Job's "reality distortion field", however both men seem(ed) to have a way of getting things done and highly motivating teams to advance their visions.�
1/1/2015
guest So guys, with articles out now mentioning Panasonic investing $1bn in the Gigafactory I'm thinking about how this might play out. I mean, the company I own shares in is called "Tesla Motors Inc." Is there a chance/risk that they will form av new company for the battery factory? Will Tesla Motors Inc. own the battery factory or be a partner in it? If battery cell and battery pack production is a very large future business will this be a business conducted by Tesla Motors Inc or will it shift to only "Tesla Inc." or "Tesla Motors and Energy Solutions Inc."? And if so, what happens to my current TSLA shares?
If Tesla Motors Inc. do a capital raise now, let's say they raise $2Bn, how exactly will this money go in to the Gigafactory??? Ideally I would like Tesla (currently Motors Inc.) to widen their business model to include battery cell and pack production. My second choice would be for them to form a daughter company of sorts, togehter with their partners, in which Tesla Motors Inc. would be, hopefully, the majority owner, to run the Gigafactury. This company should then IMO be privately held.
The thing is now a lot more people have opened their eyes up to the possibilities of TSLA and if there a reforming of the company and owner structure me and many others here, who saw the possibilities long before most, may lose our advantage of having bought shares early. I mean, if they were to create a new company in which much of the future growth would happen then either this company could be not public (no way for us to invest in it) or if a new company were to IPO we would have to "get in line" with everyone else.
Am I being paranoid?�
1/1/2015
guest Could it be solved by keeping the existing business entity and when they do another offering to raise funds for it Panasonic would just buy $1B worth of shares?�
1/1/2015
guest Elon has been talking about the gigafactory in his role as Tesla CEO for many months. I think it's certain that Tesla will both make a substantial investment in it and be the beneficiary of much of its success. But the project could take many shapes. It has to accommodate multiple other partners all of whom want to reap some value. Ideal scenario would be if the factory is wholly owned and controlled by Tesla and that partners like Panasonic are paid back, in the form of guaranteed contracts. But I guess more likely is that a subsidiary is set up in which Tesla holds a large, hopefully majority stake. It is possible such a subsidiary could be separately floated at some point, but if that happens Tesla shareholders will benefit proportionately from the value it creates. There are multiple other ways the project could be financed and contracted. I'm extremely interested to learn what they've come up with.�
1/1/2015
guest Sure. But then Panaaonic are also investing directly on the auto business. Do they want that??? And for 1B they get what, like a 5% stake ownership. To me it seems not likely.�
1/1/2015
guest I thought Panasonic already owns some TSLA shares? I bet they wish they had more�
1/1/2015
guest The giga-factory appears to be setting up as a joint venture. JVs are typically not IPO'd, at least not initially. Instead the parties agree to what they contribute and how they split revenues/margins.�
1/1/2015
guest I'd like to see it set up as a JV with TSLA having first right to any output�
1/1/2015
guest Believe Panasonic owns 1M shares.�
1/1/2015
guest Headline only so far, but TSLA to offer $1.6B convertible notes. No details as of yet.�
1/1/2015
guest Wow. GF total investment $4-5B of which Tesla $2B. I hope that means majority stake and control of it all.
As of now GF is no longer short for girl friend or anything else apart from GIGAFACTORY.�
1/1/2015
guest Am I reading the headline of this prospectus correctly in that they sold all 2.3bn worth of Convertible Notes? So TSLA really is getting a 2.3bn capital infusion?
Tesla Motors - Prospectus Filed Pursuant to Rule 424�
1/1/2015
guest I haven't read the prospectus, but I could have told you yesterday that they are going to exercise the over-allotment option and sell $2.3b.
I thought that was obvious.�
1/1/2015
guest makes sense thanks...my feeling is that they will want to start spending that 2bn+ money ASAP....you don't go raise 2.3bn AUM to have it sitting on your books for a year or even 6 months....I would be surprised if they don't purchase the land and start breaking ground on the factory within the next 3-4 months.�
1/1/2015
guest My wife and I had the pleasure of meeting a local fellow Model S owner for the first time. We had dinner with him and during our conversation we learned that he works in the fuel cell industry.
I asked him if he thinks there is a future for fuel cells in automotive transportation. He said after owning the Model S it is extremely unlikely. Just some further confirmation of what we already know.�
1/1/2015
guest Bingo.�
1/1/2015
guest Elegant piece on Tesla by Vivek Wadhwa in the Washington Post. Teslas success is a victory for anyone who loves the environment
"My prediction is that by the early 2020s, Tesla�s scale and innovation capability will lead to cars that can travel more than 1,000 miles on a single charge and that are priced lower than $35,000 (in today�s dollars). We will all be driving cars as powerful and elegant as the Model S."
�
1/1/2015
guest Some insight on the competitive landscape from John Voelcker over at Green Car Reports: How Financial Analysts (And Many Others) Misunderstand Tesla's Competitors�
1/1/2015
guest I am an engineer in the fuel cell industry and have the same opinion. The energy storage density for fuel cells is a lot better but that is only part of the equation. Refueling infrastructure and poor hydrogen reformer efficiency vs ease and efficiency of charging batteries really puts fuel cells at a disadvantage for mass market applications.�
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