Grant

This isn't rocket surgery. Tesla built inventory in Q1 and liquidated in Q2 so they could sell as much as possible before the tax credit expired. This created significant OCF. It's similar to what happened in Q3 and 4 of last year, just with losses. Cash flow from operations is obviously an incomplete metric for a company with a lot of debt and capital. The company has enough cash to launch the Shanghai factory and Model Y. Since the capital raise is over, robo-taxi talk has died down. The Y is obviously going to seriously cannibalize the Model 3, so it's good they're going to build it in Fremont alongside the 3. Current sell-side expectations for the Y will certainly have to come down, but if they launch it right it should work out better for them than selling the Model 3 alone. I really don't know how Shanghai will do. Labor will be much cheaper, but the cars will be cheaper too. They probably won't get a sweetheart deal on battery cells like Panasonic gave them (see Pana's filings on 'cylindrical cells'; they aren't making any money at Giga 1). The CPC is building them a factory, and are also going to try to steal their IP. In the near-term, Q3 will have lower prices and lower trims than Q2. I don't see how Q3 earnings aren't significantly worse than Q2's. InsideEVs July estimates will be out Thursday, and should be telling. Will the market give Tesla the benefit of the doubt until the Y launches and Shanghai ramps up? I don't know. I have some November puts for the same reason I bought May puts during Q1, but it's increasingly looking like the market is again looking further ahead.

Cathie Wood isn't just pumping; her ETFs have been buying this "dip". If Tesla can achieve level 4 autonomy next year, it really might be worth $4,000. Of course no one else believes it can do this. The market's days of believing Elon Musk seem long over.

The Tesla bull thesis seems to have shifted to robo-taxis. A common tactic of stock promoters is to promise the moon, so even if there's only a small likelihood of success some investors will think the risk-adjusted returns justify a long position. While the probability of near-term success in level 4+ autonomy seems unlikely, Tesla's autonomy day did make me realize the company is taking this effort seriously. It's not just a way to promote the stock and raise cash selling FSD options.

I've been doing some research on stock offerings, in light of Tesla needing one and their forward guidance probably being fraudulent. From what I've read, anyone underwriting their offering is liable for fraudulent guidance under sections 11 and 12 of the Securities Act. Unlike the more common 10b-5 violations, sections 11 and 12 don't require the plaintiff prove scienter (basically the intent to defraud). This makes them fairly easy to prove compared to most securities fraud. Their underwriters don't want to have to defend the 2019 100k cars / quarter delivery guidance in court. So they should either require Tesla to give accurate guidance, or give no guidance at all. I'm guessing this applies to delivery and robo-taxi guidance. Ergo I think Tesla will have to walk back their fraudulent guidance, which will negatively affect the stock, or not raise at all, which may drive them into bankruptcy. With this in mind I think July puts may be a very good bet as they capture Q2 deliveries and probably an attempt at a capital raise.

I don't know the answer to this. My point was just that if GM did want to gather this sort of data, they are very well positioned to do so. Google could also pay people to put sensor pods on their cars, with OBD2 data acquisition to capture driver inputs. As far as I know, neither company has expressed any desire to do this.

I watched the entire presentation live. I was surprised at how seriously the company took their FSD program internally; I had honestly thought it was mostly a way for Tesla to generate more cash flow and pump the stock. Clearly they're really going for it. I also didn't know they could ask the fleet to store images or video to later be uploaded to Tesla (Twitter user @greentheonly has rooted his car and documented this). I had previously thought the computer just stored data and video surrounding disengagements. While the cars clearly don't upload nearly as much data as some bulls think, this still seems like an advantage. However, they're still really far behind. Most people who took demo rides seem to say they experienced a disengagement. The route was only 12.2 miles around Tesla's HQ (https://goo.gl/maps/ERgLqczBWsoDxPzUA), so it was surely not chosen because it was difficult for the cars. If we assume the demo rides disengaged once every two laps, that's still 246 and 451 times worse than Cruise and Waymo, respectively. Cruise also operates exclusively inside San Francisco, a far more challenging environment. While I think Tesla's data collection is probably an advantage, their approach needs to be vastly superior to the competition if they have any hope of catching up. Keep in mind GM made almost ten million cars in 2017. If they needed more data, couldn't they find a way to get it?

Musk was replaced by Peter Thiel at x.com in September of 2000. He did do some pre-financial crises fundraising for Tesla, but the vast majority of it in dollar terms has been recent. I don't think there's a connection between his mission here, as none of his missions are highly time-sensitive. There's no "tipping point" in climate science orthodoxy, though I'm unsure what theories he believes in. Automotive engineers have never thought a high-volume BEV couldn't be done in volume; the limitation has always been battery cost and mass. What Musk did was show the ICEV manufacturers how much demand there could be for BEVs, despite the high costs and other disadvantages of not-so-great Li-ion technology. I think the Model S was the big revelation here.

This seems to be Musk's "style", perhaps because he had enjoyed success during massive bull markets (the first being the dot-com bubble, then the post-financial-crises bull run). However I'd also say his incentives may not be aligned with the company's and shareholder's. He owns Tesla on margin, and it's possible (especially given his recent behavior) banks may not let him pledge any more shares against his loan. By my estimations, without pledging more shares he risks a margin call around $210. A serious correction could ruin him. Then there's the convertible debt with a minimum conversion price of $251. Musk's incentives may be to swing for the fences and keep the stock price high, damn the consequences.

The MR is hardly even shipping. Of the 213 MR orders on Troy Teslike's spreadsheet, only one is reported as delivered. It's also a lower-priced car compared to the LR RWD it replaced - the model they've sold the most of. The LR AWD uses the same battery pack as any LR Model 3. The Model 3 AWD started at $54,000. A few weeks later it dropped to $53,000, then in August it went back to $54,000 (source, electrek). Now it's $53,000 again.

Historically SG&A per delivery has exceed gross profit, so to the extent rebates affect either of these two things I think they're very relevant in the long-term. October was a terrible month in the NY data. Here's a table of NY registrations I believe are newly-sold cars: month all S X 3 1/1/2018 13 1 0 12 2/1/2018 43 21 5 17 3/1/2018 276 122 136 18 4/1/2018 73 5 8 60 5/1/2018 163 46 10 107 6/1/2018 363 129 115 119 7/1/2018 240 26 46 168 8/1/2018 447 84 58 305 9/1/2018 800 124 114 562 10/1/2018 197 21 30 146 My belief is Tesla saw October sales sucking, and decided to lower prices via the MR and inclusion of the Performance Upgrade package. In my default "no change" scenario, Tesla loses almost all of its subsidies by 2020. At this point I think it's hard to justify extending the tax credits, even for a democrat-controlled congress. The worst I would think could happen here is they get pulled and ICE manufacturers don't have the benefit of them (which would be a big blow to the short thesis). This said my understanding of contemporary politics is nil, which is why I assume no change. Gotcha, thanks. I think what matters is how much money they can make selling Model 3s. To estimate that we need to know just how juiced Q3 was.

I have been going over the NY registration data. Wow does Tesla do a lot of their sales at the end of each quarter! Perhaps this is one reason why their sales expenses seem so high? All the capital and manpower needed to handle the burst of deliveries at the end of each quarter doesn't look like it's put to good use the rest of the time. Here's a table: week of Q "new" registrations 1 124 2 159 3 190 4 177 5 190 6 167 7 200 8 238 9 299 10 325 11 473 12 522 13+ 966 "New" is in quotes because I don't actually know which cars being registered are new. I just guess they are if they're made in the same year they're being registered in. Data goes back to the start of 2017.

SHDL, I agree there were no red flags. Might we call the lack of disclosure regarding supplier rebates a yellow flag? The $TSLAQers are saying the language regarding a a single "entity" comprising 10% or more of accounts receivable is strange, and might represent supplier rebates. Regarding sustainability, consider: - Tax credits get cut in half for all cars delivered after Dec 31st. At 83,500 quarterly deliveries, that's $313M fewer subsidies. - Average regulatory credit sales over the last 2 years have been $98M, $91M fewer than Q3. There's been a lot written on how ZEV credits aren't going to be worth much in 2019. I'd imagine as other manufacturers ramp up BEV production, the same will be true of GHG credits? - Tesla lowered the price of the RWD Model 3 shortly into Q4. A $3,000 discount for 13 fewer kWhs. It's been said the MR uses the LR pack with fewer cells, implying a $1,300 lower cost if we assume $100 per kWh cell cost. Per Troy Teslike's data, 42% of Model 3s in Q3 were RWDs. If these had've instead been MRs, this would've cost ~$40M less in gross income. - FSD is no longer an option. In Troy Teslike's data, 23.1% of purchasers bought this $3,000 option. If we extrapolate this to all 83,500 orders, that is $58M of gross income lost. - The performance upgrade package is now included in Performance Model 3s. 11.9% of all Model 3s delivered in Q3 included this upgrade, so including this for free knocks out $33M in gross income. - Then of course there's the $71M one-time opex discount Deepak mentioned on the call. - SG&A actually dropped. Tesla had customers helping sell Model 3s, as well as engineers and mechanics. Sales experiences were anecdotally horrible. It takes longer to sell a Tesla than a normal car, because of all the abnormal features people aren't familiar with. It stands to reason sales costs per delivery will increase in the future, though this may be offset by continued liquidation of Solar City. - Tesla had every incentive to juice this quarter as much as possible, so they can start converting bonds into stock in the beginning of 2019. Keep in mind they've juiced numbers before. The last time Tesla posted a GAAP profit was 2016 Q3. They also sold an unusually large value of regulatory credits ($168M). SG&A as a percentage of revenue dropped from 25.3% down to 14.7% that quarter, only to go back up again in subsequent quarters (don't read too much into this though, since the SCTY merger went through in Q4). So If try to "normalize" Q3's results for Q4, I get at least $293 less net income. For Q1 that could be $606M. European sales could make all this moot, even at the lower Model 3 options / ASPs we now see, but there's also the upcoming Service Hell to consider. I continue to hold a short position in the common stock, which covers my short position in near-term puts. It's highly unlikely the cash flow is fake. With a near-term cash crunch off the table, I'll gladly keep selling $TSLAQers extremely expensive puts.

From the 10-Q: In the recent past, non-ZEV regulatory credit sales had been disclosed in the quarterly update letters. Not so for Q3. These credits account for a lot of the unexpectedly high margins in Q3. I'm trying to derive their quarterly regulatory credit sales from their filings.

This is why my strategy is to sell covered puts on a short common stock position. In 2019 my data may indicate a straight short is a better idea, but until then all shorts have to hope for is Elon doing something really stupid or getting arrested.