TSLA - Tesla Motors

[no_free_lunch]

rb,

 

Some of the cars will be the older models selling for $100k+, the model 3's will probably average $60k.  I said $60-70k overall and yes I think it's very reasonable.  I could care less that they are not going to hit their $35k number right away, they are going after higher margin sales first.  It is mostly a question of whether or not they can actually manufacture that many cars.  From the demand side it is already there, they have a ton of pre-orders.  Once they hit 500k they will be talking about 1m cars.

[rb]

The preorders are like 500k right? That's one year of ideal production? And that's mostly for Model 3 right? No worries that the pre-orders are a little front loaded?

 

In addition if the demand is so strong why are they not producing cars? Why is there a worry they cannot produce? Toyota just retooled a factory in Canada to move from Corolla to RAV 4 cost $400 million and took 8 months. At Tesla let's say brand new everything (though they have a lot of excess capacity in lots of places) 1.5 billion and 1 year. In regards to time the discussion of Tesla production stretches back years. In regards to capital they don't seem to have a problem raising it. 1.5 Bn is like 3% of market cap right now. So if they truly have the demand why not build the lines and crank them babies out like any other automaker?

 

Or maybe, just maybe, the stories and the promises are better for the stock than the actual results would be?

[no_free_lunch]

I think there is a big difference here.  You are talking about a company that already produces 10M cars, retooling to a new product line on existing factory.  You are also not taking into account the time to build the rav 4, which has happened over years.  Tesla doesn't have that infrastructure in place yet and this is a new model. They are also growing around 100% per year so I think it is unfair to say they are making empty promises.

 

I will admit that the future price point of the model 3 will drop.  Maybe it goes to $50k.  However, they will also be finding ways to lower the cost of production so they can probably keep some of that margin.

 

Also, again we are not even considering profits from the gigafactory(s).

[deadspace]

Porsche now has the envy of all car maker industry leading profit margins of 15%  -- So 25% would be a stretch indeed

 

 

 

Dyson said its pretax profits rose 41 percent last year to 631 million pounds, or $785 million, while revenue rose 45 percent to £2.5 billion, or $3.1 billion, partly because of the weakened British pound. Mr. Dyson, 69, who founded the company in 1992, is worth about £5 billion, or $6.2 billion.

 

https://www.nytimes.com/2017/04/02/technology/dyson-british-consumer-electronics-company.html?_r=0

 

Dyson's pretax proft margin is ~25%.  Dyson manufactures appliances, Tesla manufactures cars.  Is it so unbelievable that Tesla can't get similar margins?  To put the numbers in perspective if they can do their 500k cars the revenue would be $30-35B.  If they could get 20% profit margins that would be ~$6-7B pre-tax profits relative to a $50B market cap.  You can see why the market cap is at least plausible.

 

We start 2017 well positioned to scale our business significantly. Model S and X net order growth remains strong, as we are continually

evolving our products by elevating performance, convenience, and safety. Our Model 3 program is on track to start limited vehicle

production in July and to steadily ramp production to exceed 5,000 vehicles per week at some point in the fourth quarter and 10,000

vehicles per week at some point in 2018. To support accelerating vehicle deliveries and maintain our industry-leading customer

satisfaction, we are expanding our retail, Supercharger, and service functions.

 

http://ir.tesla.com/events.cfm, click on Q4 Update Letter.

 

It is just a question of whether Musk is being honest with his production forecast and what the margins will be if they do hit the numbers.  There is also upside with the solar roof project and the giga factory.

[Ballinvarosig Investors]

Porsche now has the envy of all car maker industry leading profit margins of 15%  -- So 25% would be a stretch indeed

I was going to say the exact same thing. You are out of your mind to think that any auto maker is going to get a 25% profit margin.

[awindenberger]

Porsche now has the envy of all car maker industry leading profit margins of 15%  -- So 25% would be a stretch indeed

I was going to say the exact same thing. You are out of your mind to think that any auto maker is going to get a 25% profit margin.

 

Here is one big reason people are willing to pay a premium for a Tesla: The car will get better over time! Tesla is the only company that does over the air software update, so as they improve the software, you car improves its capabilities. That means slower depreciation over time, and thus people are willing to pay a premium for the value today.

 

 

[rb]

Porsche now has the envy of all car maker industry leading profit margins of 15%  -- So 25% would be a stretch indeed

I was going to say the exact same thing. You are out of your mind to think that any auto maker is going to get a 25% profit margin.

 

Here is one big reason people are willing to pay a premium for a Tesla: The car will get better over time! Tesla is the only company that does over the air software update, so as they improve the software, you car improves its capabilities. That means slower depreciation over time, and thus people are willing to pay a premium for the value today.

Is there any reason why competitors can't replicate this feature?

[SlowAppreciation]

Porsche now has the envy of all car maker industry leading profit margins of 15%  -- So 25% would be a stretch indeed

I was going to say the exact same thing. You are out of your mind to think that any auto maker is going to get a 25% profit margin.

 

From what I recall, the way Tesla reports COGS differs from other automakers in that they treat R&D as an operating expense. So gross margins between them and other automakers isn't apples to apples since they usually include R&D in their COGS #. 

[rkbabang]

Porsche now has the envy of all car maker industry leading profit margins of 15%  -- So 25% would be a stretch indeed

I was going to say the exact same thing. You are out of your mind to think that any auto maker is going to get a 25% profit margin.

 

Here is one big reason people are willing to pay a premium for a Tesla: The car will get better over time! Tesla is the only company that does over the air software update, so as they improve the software, you car improves its capabilities. That means slower depreciation over time, and thus people are willing to pay a premium for the value today.

Is there any reason why competitors can't replicate this feature?

 

Yes, because other automakers take 15 years to add a new feature to their cars. (maybe a slight exaggeration, but not by a lot).

 

[rb]

Porsche now has the envy of all car maker industry leading profit margins of 15%  -- So 25% would be a stretch indeed

I was going to say the exact same thing. You are out of your mind to think that any auto maker is going to get a 25% profit margin.

 

Here is one big reason people are willing to pay a premium for a Tesla: The car will get better over time! Tesla is the only company that does over the air software update, so as they improve the software, you car improves its capabilities. That means slower depreciation over time, and thus people are willing to pay a premium for the value today.

Is there any reason why competitors can't replicate this feature?

 

Yes, because other automakers take 15 years to add a new feature to their cars. (maybe a slight exaggeration, but not by a lot).

I'm not sure about others but my BMW gets quite a few updates for lots of things: engine control, transmission, suspension, you name it. After a little help from the internet guys I do it myself. Normally you would get it done at the dealer for about $150.

 

So the updates are there, all they have to do is open up the system. The dealers would bitch a bit if/when they do it. But I don't think they'd rather cede market share to Tesla instead of opening the system.

 

Since the transmission on my car is used by other OEMs and supposedly gets its updates from its manufacturer (ZF) there are updates on other brands as well. 

[no_free_lunch]

Porsche now has the envy of all car maker industry leading profit margins of 15%  -- So 25% would be a stretch indeed

I was going to say the exact same thing. You are out of your mind to think that any auto maker is going to get a 25% profit margin.

 

To be fair, I said 20%, not 25%.  Dyson did 25 but probably lower for Tesla.  I don't think it's so unreasonable given the price points they are selling their cars at.  They can probably get gross margin up to 30% so that would be about $9B gross margin.  Take out $3B for core operating expenses, they just might be able to pull it off.  Don't forget these are just accounting numbers, the actual numbers they report would be different.  IF they pull it off, it will be like Amazon where their true profit will be masked by a lot of growth expenses which is good because it will allow them to avoid taxes.  I am just hoping that similar to Amazon the market will give them credit for true profit, not GAAP numbers.

 

Again, I am not giving any credit here for their other business ventures.  I am still not sure about the solar city acquisition but the giga-factories could be worth a lot someday.  I just can't even guess at the value but it could be considerable.

 

Hey I get it, they have a lot of proving to do.  All I am trying to say here is that it is not so inconceivable that they earn their market cap over the next couple years.  Tesla is my second largest position so I am putting my money where my mouth is.

[rb]

Porsche now has the envy of all car maker industry leading profit margins of 15%  -- So 25% would be a stretch indeed

I was going to say the exact same thing. You are out of your mind to think that any auto maker is going to get a 25% profit margin.

 

To be fair, I said 20%, not 25%.  Dyson did 25 but probably lower for Tesla.  I don't think it's so unreasonable given the price points they are selling their cars at.  They can probably get gross margin up to 30% so that would be about $9B gross margin.  Take out $3B for core operating expenses, they just might be able to pull it off.  Don't forget these are just accounting numbers, the actual numbers they report would be different.  IF they pull it off, it will be like Amazon where their true profit will be masked by a lot of growth expenses which is good because it will allow them to avoid taxes.  I am just hoping that similar to Amazon the market will give them credit for true profit, not GAAP numbers.

 

Again, I am not giving any credit here for their other business ventures.  I am still not sure about the solar city acquisition but the giga-factories could be worth a lot someday.  I just can't even guess at the value but it could be considerable.

 

Hey I get it, they have a lot of proving to do.  All I am trying to say here is that it is not so inconceivable that they earn their market cap over the next couple years.  Tesla is my second largest position so I am putting my money where my mouth is.

Hey, I don't think there's much point arguing with you. I think you've already made your mind. All I can say is this: I am someone who believes global warming is a real and serious problem. I would like and try to do things about it. I think electric cars are a very good idea. I drive luxury cars. I drive a BMW instead of a Tesla. The reason is Teslas are too expensive.

 

As an investor I'd also take BMW at 8x real earnings over Tesla at a make believe multiple multiplied by hypothetical earnings. But you're free to go ahead and wait for that dyson margin.

[deadspace]

BYD sell for 1.5x sales. Tesla 6x sales

Byd has all those tesla side businesses.  Solar storage

And BYD actually makes money

 

It's hard to justify the degree of difference in valuation

 

 

Porsche now has the envy of all car maker industry leading profit margins of 15%  -- So 25% would be a stretch indeed

I was going to say the exact same thing. You are out of your mind to think that any auto maker is going to get a 25% profit margin.

 

To be fair, I said 20%, not 25%.  Dyson did 25 but probably lower for Tesla.  I don't think it's so unreasonable given the price points they are selling their cars at.  They can probably get gross margin up to 30% so that would be about $9B gross margin.  Take out $3B for core operating expenses, they just might be able to pull it off.  Don't forget these are just accounting numbers, the actual numbers they report would be different.  IF they pull it off, it will be like Amazon where their true profit will be masked by a lot of growth expenses which is good because it will allow them to avoid taxes.  I am just hoping that similar to Amazon the market will give them credit for true profit, not GAAP numbers.

 

Again, I am not giving any credit here for their other business ventures.  I am still not sure about the solar city acquisition but the giga-factories could be worth a lot someday.  I just can't even guess at the value but it could be considerable.

 

Hey I get it, they have a lot of proving to do.  All I am trying to say here is that it is not so inconceivable that they earn their market cap over the next couple years.  Tesla is my second largest position so I am putting my money where my mouth is.

Hey, I don't think there's much point arguing with you. I think you've already made your mind. All I can say is this: I am someone who believes global warming is a real and serious problem. I would like and try to do things about it. I think electric cars are a very good idea. I drive luxury cars. I drive a BMW instead of a Tesla. The reason is Teslas are too expensive.

 

As an investor I'd also take BMW at 8x real earnings over Tesla at a make believe multiple multiplied by hypothetical earnings. But you're free to go ahead and wait for that dyson margin.

[Liberty]

BYD sell for 1.5x sales. Tesla 6x sales

Byd has all those tesla side businesses.  Solar storage

And BYD actually makes money

 

It's hard to justify the degree of difference in valuation

 

Except when you look at their products (and remember that they make a lot of gasoline cars too)...

 

http://2.bp.blogspot.com/-H81tAzRTh0s/VYG-Mlr4GfI/AAAAAAAACyU/rVgjEwhhZfM/w800/BYD.jpg

[gfp]

Bloomberg published some model 3 shots from the wild -

https://www.bloomberg.com/news/articles/2017-04-06/tesla-s-model-3-prototypes-caught-on-camera

[CorpRaider]

WANT.

[fareastwarriors]

Bloomberg published some model 3 shots from the wild -

https://www.bloomberg.com/news/articles/2017-04-06/tesla-s-model-3-prototypes-caught-on-camera

 

Looks good. I should be seeing plenty of them soon in the SF Bay area. 

[Liberty]

I think it should do well vs the competition:

 

 

 

 

Bolt starts at US$37,495, Model 3 said to start at $35k, LEAF starts at $30,680. All can get a lot more expensive with options, of course, but those prices aren't comparable to gasoline-car prices since your "fuel" costs and maintenance costs are a lot lower.

[gfp]

Wow that Leaf is especially bad.  Besides the necessity to pay close attention to aerodynamics, why do so many companies insist on making electric vehicles look different from internal combustion auto designs?  Tesla will sell a bunch of those, but I bet they cost most people $50k.

[Guest longinvestor]

I have zero qualms buying either the Leaf or the Bolt. Or even the BYD. They look non-distinctive which is just fine. A vehicle for me is bent sheet metal on rubber rings with padding to keep my butt comfy. One that takes me from place to place reliably and at the lowest total cost of ownership. I'm now on a 100% renewable power plan at home now and somewhat care about the total/type of energy consumed including how the car is made. So an electric car is in my sights but the pricing for extended range per charge makes it prohibitive for me. I will never buy any car for much more than $30K in today's dollars. Never have, always chosen a used car model of my liking <30k. I look forward cheerlly to Ford, Toyota, Mazda, Hyundai/Kia all getting into this segment to make it a perfectly competitive space. Looks like most of them have plans. 

[Liberty]

Wow that Leaf is especially bad.  Besides the necessity to pay close attention to aerodynamics, why do so many companies insist on making electric vehicles look different from internal combustion auto designs?  Tesla will sell a bunch of those, but I bet they cost most people $50k.

 

They are afraid of cannibalizing their existing line sales, so they make vehicles that they know will be more niche. They're basically holding back. Otherwise Nissan could easily make an all-electric vehicle that looks like a Sentra or Altima or Infiniti and sell more.

 

Same thing happens at dealerships, there's been many articles written about how salespeople don't try to sell EVs and sometimes even have no idea how they work.

 

A purely EV carmaker like Tesla has a big advantage on that front.

[boilermaker75]

 

 

Same thing happens at dealerships, there's been many articles written about how salespeople don't try to sell EVs and sometimes even have no idea how they work.

 

A purely EV carmaker like Tesla has a big advantage on that front.

 

That's because 44% of the dealer's profit comes from parts and service. That will almost disappear if they are selling EVs instead of ICEs.

[Spekulatius]

 

 

Same thing happens at dealerships, there's been many articles written about how salespeople don't try to sell EVs and sometimes even have no idea how they work.

 

A purely EV carmaker like Tesla has a big advantage on that front.

 

That's because 44% of the dealer's profit comes from parts and service. That will almost disappear if they are selling EVs instead of ICEs.

So EV's don't need spare parts? I guess the auto part retailers will have even larger problems some time down the road.

[boilermaker75]

 

 

Same thing happens at dealerships, there's been many articles written about how salespeople don't try to sell EVs and sometimes even have no idea how they work.

 

A purely EV carmaker like Tesla has a big advantage on that front.

 

That's because 44% of the dealer's profit comes from parts and service. That will almost disappear if they are selling EVs instead of ICEs.

So EV's don't need spare parts? I guess the auto part retailers will have even larger problems some time down the road.

 

An ICE has over 200 parts, an electric engine less than 10. ICEs require a transmission, tailpipe, gears, and a bunch of grease-covered stuff, EVs do not. EVs do not require oil changes.

 

Here are the motor and batteries in a Tesla,

 

https://c1.staticflickr.com/7/6235/6875778848_d9a5524e8e_b.jpg

[Liberty]

Even the brake pads don't wear out much because of regenerative braking. There's definitely a lot fewer moving parts, fluids, and maintenance requirements.