TSLA - Tesla Motors

[Dalal.Holdings]

Are people surprised that dropping the Model 3, already unprofitable at $50K+ down to mid $30K range resulted in more sales? Let me know when they start making money...

 

This continues to be a great achievement for Musk, and poor investment from the short side; and.... a massive Ponzi scheme that requires Huodini to pull a rabbit(profits) out of his hat. Those profits continue to be non existent. And please, spare me the AAPL and AMZN rhetoric. Apple pretty much always had profits once they got going and AMZN did too once you got through the masking gimmicks Bezos employed to fuel growth and dodge taxes.

 

Yes, it's just like a "massive Ponzi scheme" (and Enron). Clearly this is just like Madoff Investments. No hyperbole here whatsoever.

 

I'm surprised at the Model 3's success. I'm surprised that it's crushing vehicles like the BMW 3 series, a car that was the king of its segment for a very, very long time. I'm surprised that Tesla is able to make a ton of cars using a high cost car plant like the Fremont NUMMI plant which the likes of Toyota and GM couldn't make workable. Making a plant in low fixed and variable cost manufacturing place like China will only boost Tesla's future margins. Lowering the cost/KWH will do the same. I'm surprised that Tesla customers love the product so much that they are willing to bear some headaches and still want to part with large sums to own one. I'm surprised Tesla has made desirable EVs when no other traditional automaker has even come close in this regard.

 

The odds of Tesla being a successful car company have grown substantially over the past 5 years. If you want to argue that the stock was in bubble mode 5 years ago, it's probably a fair point. Now is when that question is a lot murkier. It's what makes a market I guess.

[Ahab]

If I'm selling a dollar for $0.70. I'm going to sell lots of dollars. That's Tesla today. A sub-scale auto company selling "luxury" vehicles at a loss to virtue signalers, Silicon Valley bros and rich people who can afford to have their 3rd car in the shop for 6 months at a time. Musk focuses on end-of-quarter delivery pushes because 95% of the market cap of his auto company is based on sustaining the narrative that it is in fact a tech company. He had to discount several times this quarter just to print a 95k number, a small fraction of what the OEMS deliver in a quarter. Tesla's 1H CAPEX was far below plan and was also below depreciation (weird for a supposed growth company). Tesla has experienced rapidly declining deliveries of their car models that actually have nice margins, the S and the X. Selling more low margin Model 3's will not offset the declining volumes in their luxury segment. Furthermore, they will face massive competition from other automakers later this year and especially in 2020 (the Germans want to chase subsidies too).

Tesla's financials are absolute crap. Over 10 billion in debt. Billions in purchase obligations to Panasonic that are centered around production targets Tesla can't possibly hope to meet. They stretch and stretch their payables, which is why they face so many supplier lawsuits and suppliers who are now refusing to do business with them. They are burning 500+ million a quarter (if you even believe their accounting). Plus, they can't produce at a rate of 100k cars a quarter, let alone 90k a quarter. They achieved Q2 deliveries through massive price cuts, geographic subsidy hunting, and liquidation of inventory. In H2, Tesla will face subsidy cuts in many regions, new luxury BEV competition, and a November debt repayment. This will be a restructuring story faster than the bulls can say, "have you driven one bro?"

[Liberty]

If I'm selling a dollar for $0.70. I'm going to sell lots of dollars. That's Tesla today. A sub-scale auto company selling "luxury" vehicles at a loss to virtue signalers, Silicon Valley bros and rich people who can afford to have their 3rd car in the shop for 6 months at a time. Musk focuses on end-of-quarter delivery pushes because 95% of the market cap of his auto company is based on sustaining the narrative that it is in fact a tech company. He had to discount several times this quarter just to print a 95k number, a small fraction of what the OEMS deliver in a quarter. Tesla's 1H CAPEX was far below plan and was also below depreciation (weird for a supposed growth company). Tesla has experienced rapidly declining deliveries of their car models that actually have nice margins, the S and the X. Selling more low margin Model 3's will not offset the declining volumes in their luxury segment. Furthermore, they will face massive competition from other automakers later this year and especially in 2020 (the Germans want to chase subsidies too).

Tesla's financials are absolute crap. Over 10 billion in debt. Billions in purchase obligations to Panasonic that are centered around production targets Tesla can't possibly hope to meet. They stretch and stretch their payables, which is why they face so many supplier lawsuits and suppliers who are now refusing to do business with them. They are burning 500+ million a quarter (if you even believe their accounting). Plus, they can't produce at a rate of 100k cars a quarter, let alone 90k a quarter. They achieved Q2 deliveries through massive price cuts, geographic subsidy hunting, and liquidation of inventory. In H2, Tesla will face subsidy cuts in many regions, new luxury BEV competition, and a November debt repayment. This will be a restructuring story faster than the bulls can say, "have you driven one bro?"

 

You may be right, but I find it pretty hilarious that something equivalent to this has been written ever quarter since IPO and here we still are...

 

Have you driven one, though?

[fareastwarriors]

This will be a restructuring story faster than the bulls can say, "have you driven one bro?"

 

So have you driven it yet?

 

;D

 

 

[Ahab]

@Liberty

The company can certainly continue as long as the capital markets continue to fund it. Poster child of ZIRP excess..

[fareastwarriors]

@Liberty

The company can certainly continue as long as the capital markets continue to fund it. Poster child of ZIRP excess..

 

Then all the talk about lowering rates will only help.

Keep dancing!

[walt373]

As much as people complain about easy money keeping the company alive, markets still do not like to fund money losers that aren't growing their topline. That's the difference now. Revenue growth is about to go negative. We already had a big QoQ decline in Q1, and Q3 will bring the first YoY decline. Subsequent quarters should settle the bull-bear debate. Will be interesting to see how much of the story can be boiled down to revenue growth after all is said and done.

[Investmentacct]

You are correct. Once you punch the pedal on 3; it becomes addictive 0-60.  At 31K with rebates; and 1/4 operating running cost; minimal maintenance cost ( tire replacement and windshield fluid replacements - 3 bucks) ; it's no-brainer purchase for lot of people. Not counting (all other software and IOT advantages) of 3.

 

Can you imagine that California is the only state where that is the case and that that is not sustainable? (Look at what happened to solar panel producers after subsidies went away.)

You left out insurance, which is pretty expensive because Tesla is producing the worst quality cars in the world and the service has gone downhill since the introduction of the Model 3. Who wants a car where you have to wait 3 months for a repair and where you can`t even talk to someone on the phone with your problems?

Software/AP is were Tesla was ahead of the compeition, but that is catching up already. Now every new car has lane keep assistance and radar cruise control, which together is not that much different than AP, at least as long as it is not operating on level 4 or 5 autonomy. (which Tesla seems to be far away from.)

 

Here in germany the cost for electricity to run an electric car is the same as the cost to run an efficient ICE. For me it was a no-brainer to buy a hybrid car where you get the best of both worlds (silent operation of an EV, fast acceleration, easy energy refill, no investment into a wallbox necessary).

 

As all car manufacturers are ramping up their EV fleet i think the price of the battery will increase going forward, because there simply aren`t enough resources (Cobalt, Lithium) available. Thanks to the fracking boom, oil is abundant and will probably be cheap for a long time. And the crux is that if more EV cars are on the road and demand for oil goes down, the incentive to drive an pure electric car also goes down because electricity prices go up and oil prices down.

 

The price of an ICE car has gone down every year over the least decade, simply because parts and commodity prices have gone down and its a price competitive industry.

 

Lot of what you say make sense.

 

Two things would like to say from experience with products for past 2 years.

 

Insurance has been same as gas cars in similar price range, no extra.

 

Driven about 60k miles between two Tesla (X and 3). Tend to drive more due to autopilot driving 80-90% of driving.

 

Low maintenance. Maintenance has been Changing tires and replacing windshield water fluid. Drives practically free on public solar charging.

[Orchard]

https://www.quora.com/Where-do-Tesla-charging-stations-get-their-electricity

[awindenberger]

I'm a bull on Telsa as a company, but not on the stock.

 

What bears continue to discount is how much Tesla owners enjoy driving their cars, whether its an S, and X, or a 3. I live in a small town in Iowa which has about 5 or so Tesla's. I am friends with an X owner that loves their car (They also own the high end Volvo SUV). I'm also good friends with a Model3 owner who is a car nut. He's used to flipping cars every 12-18 months so he can drive something new (he breaks even/makes money on his flips). Since he got his model3 he no longer has any interest in flipping.

[Liberty]

@Liberty

The company can certainly continue as long as the capital markets continue to fund it. Poster child of ZIRP excess..

 

So yours is a macro thesis, then? Good luck adding alpha with that.

[Ahab]

No, my thesis is that investors like Baggie Gifford will eventually pick a shiny new toy like WeWork after Musk's promises never come to fruition and the company's sales tank in H2.

The macro picture obviously helps zombies like Tesla survive, but I will enjoy watching the bagholders turn on Musk, as they will ultimately do it in.

[Liberty]

No, my thesis is that investors like Baggie Gifford will eventually pick a shiny new toy like WeWork after Musk's promises never come to fruition and the company's sales tank in H2.

The macro picture obviously helps zombies like Tesla survive, but I will enjoy watching the bagholders turn on Musk, as they will ultimately do it in.

 

Ok. You don't sound emotional at all about the position.

[Ahab]

I am emotional about the position (violating rule 1 of any investing checklist). I think the company is a fraud. Let's check back in 12 months and see who was right...

[Liberty]

I am emotional about the position (violating rule 1 of any investing checklist). I think the company is a fraud. Let's check back in 12 months and see who was right...

 

My whole point here:

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/tsla-tesla-motors/msg374991/#msg374991

 

Was that people have been saying "it's dying in the next few months" for over a decade now. Maybe someday they'll be right, but timing certainly hasn't be impressive so far...

[Dynamic]

Haha, I was just about to post this when Liberty posted...

 

Something tells me that in July 2020, the situation for Tesla will be

[*]that it will still be trading at a nosebleed valuation

[*]that it will still be "on the edge of bankruptcy with suppliers about to clamp down on payment terms"

[*]that its "demand will still be about to fall off a cliff especially with all the new EV models from established automakers hitting the market and Rivian just round the corner"

[*]that the Shanghai Gigafactory 3 will be criticised because it can't turn out 150,000 cars a quarter yet

[*]that analyst X predicts that battery costs per kWh will rise next year

[*]that Tesla branded insurance is a failure (it may well be)

[*]that solar roof is just not competitive with regular rooftop solar (it may well not be)

[*]and that someone here will still be saying that within 12 more months (by July 2021 this time) we'll have discovered who was right whether or not it's a fraud.

 

In the mean time, I'm sure plenty of people will make money on the short side and the long side alike over the next year, and plenty of people like me will remain interested in the company and its products while keeping Tesla firmly in the "too hard" pile as far as investments go.

 

I have some sympathy with people feeling Tesla is hugely overvalued and one day may come crashing down, perhaps even that it presents its financial figures a little less conservatively than we might like, but if you have no idea about the timing, I'm not sure what use that would ever be and it's not going to look that different from being wrong.

 

Disclosure: No position long or short Tesla. No immediate plans to buy a new car either. But I do expect my next car to be an EV, and quite possibly a Tesla.

[Liberty]

I think there's a decent chance that the shorts end up being largely right (there's just too many things that are obviously wrong on the financial and operational side with the company for that likelihood not to be decently high), but that most of the shorts might not make much money anyway.

 

If things go really wrong, the stock will fall a decent amount, then the shorts will feel finally vindicated (there's a lot of pent up pressure in that group for sure) and press their shorts and try to milk the situation and be sure that they can ride this to zero, and then either Musk will pull a rabbit out of a hat (get Larry Page or Larry Ellison to invest a few billions) or get bought out by a deep pocketed company or whatever, maybe even with Musk out as CEO but still in charge of tech and product direction, maybe they'll even find really bulletproof COO and CFO to steer the ship, who knows, and on that the downside will be severely capped, maybe we'd even see new highs. ¯\_(ツ)_/¯

 

So all that brain damage and carry costs (I mean, something so heavily shorted isn't exactly super asymmetric) and opportunity cost and angst for so many years to maybe make a little dough on this short... Seems like it almost has to be emotional to hang in, rather than be purely a risk/reward, expected returns kind of situation. There has to be easier ways to make money. I think it's more that Musk and the situation rubs some people the wrong way and they get on a crusade about this and it's not even about making money anymore, which is a very dangerous situation, IMO.

[fareastwarriors]

Haha, I was just about to post this when Liberty posted...

 

Something tells me that in July 2020, the situation for Tesla will be

[*]that it will still be trading at a nosebleed valuation

[*]that it will still be "on the edge of bankruptcy with suppliers about to clamp down on payment terms"

[*]that its "demand will still be about to fall off a cliff especially with all the new EV models from established automakers hitting the market and Rivian just round the corner"

[*]that the Shanghai Gigafactory 3 will be criticised because it can't turn out 150,000 cars a quarter yet

[*]that analyst X predicts that battery costs per kWh will rise next year

[*]that Tesla branded insurance is a failure (it may well be)

[*]that solar roof is just not competitive with regular rooftop solar (it may well not be)

[*]and that someone here will still be saying that within 12 more months (by July 2021 this time) we'll have discovered who was right whether or not it's a fraud.

 

In the mean time, I'm sure plenty of people will make money on the short side and the long side alike over the next year, and plenty of people like me will remain interested in the company and its products while keeping Tesla firmly in the "too hard" pile as far as investments go.

 

I have some sympathy with people feeling Tesla is hugely overvalued and one day may come crashing down, perhaps even that it presents its financial figures a little less conservatively than we might like, but if you have no idea about the timing, I'm not sure what use that would ever be and it's not going to look that different from being wrong.

 

Disclosure: No position long or short Tesla. No immediate plans to buy a new car either. But I do expect my next car to be an EV, and quite possibly a Tesla.

 

 

When the day comes, it will be fun!

[Dalal.Holdings]

What bears continue to discount is how much Tesla owners enjoy driving their cars, whether its an S, and X, or a 3. I live in a small town in Iowa which has about 5 or so Tesla's. I am friends with an X owner that loves their car (They also own the high end Volvo SUV). I'm also good friends with a Model3 owner who is a car nut. He's used to flipping cars every 12-18 months so he can drive something new (he breaks even/makes money on his flips). Since he got his model3 he no longer has any interest in flipping.

 

According to #TSLAQ on Twitter and recent major headlines related to the company, your friends' Tesla vehicles should have already spontaneously combusted, auto-piloted themselves into being totaled, and/or be sitting in a service center collecting dust.

 

Well, it's either that or perhaps following such drivel online might lead one to form opinions contrary to reality...

 

Perhaps there is a product--a brand--here that customers love and are loyal to more than even traditional luxury car brands...  :-X

 

In other news, BMW's CEO is OUT! This executive exodus needs to stahp!!!

[Ahab]

It's just a statistics problem. Buy enough Tesla's and you too can experience an exploding car or a vehicle that drives straight into a firetruck. Heck, someone richer than me on this board should buy 100k fully self-driving robotaxis. You'll singlehandedly save Musk's middling Q3, while cornering the market in self-driving cars like the Hunt brothers did for silver.  ;D ;D ;D

[Dalal.Holdings]

It's just a statistics problem. Buy enough Tesla's and you too can experience an exploding car or a vehicle that drives straight into a firetruck. Heck, someone richer than me on this board should buy 100k fully self-driving robotaxis. You'll singlehandedly save Musk's middling Q3, while cornering the market in self-driving cars like the Hunt brothers did for silver.  ;D ;D ;D

 

Perfectly illustrates the bears’ (mis)understanding of statistics. Fly enough trips in a plane, you are sure to perish in a crash. Drive enough miles in any car and ditto. Live a million years and you’re sure to get struck by lightning at least once...

 

Let’s extrapolate headlines and twitter posts into “statistics”. Or, let’s look at true, scientifically derived measures like NHTSA’s probability of injury.

 

The above (mis)understanding may be why some people will never accept self driving cars—even if much safer than traditional cars—always selecting from headlines about self driving crashes, ignoring the 3000+ human caused fatal crashes a day worldwide. Because when your data source (and recall bias) is from headlines or tweets, your views are tainted.

[Liberty]

Anyone ever searched for "car fire" on youtube?

 

https://www.youtube.com/results?search_query=car+fire

 

There's a lot more energy in a gas tank than a battery, and it's a lot more flammable. But because gasoline has been around for a while, we don't think of the risk anymore.

 

EVs are newer, so anything wrong still stands out, but we'll get used to them too. They're safer anyway (you don't have a huge block of steel in front of you that tries to ram itself into the passenger space at impact, so you can have much larger crumple zones, and the center of gravity is lower and the mass tends to be higher relative to the size of the vehicle).

[Dalal.Holdings]

Anyone ever searched for "car fire" on youtube?

 

https://www.youtube.com/results?search_query=car+fire

 

There's a lot more energy in a gas tank than a battery, and it's a lot more flammable. But because gasoline has been around for a while, we don't think of the risk anymore.

 

EVs are newer, so anything wrong still stands out, but we'll get used to them too. They're safer anyway (you don't have a huge block of steel in front of you that tries to ram itself into the passenger space at impact, so you can have much larger crumple zones, and the center of gravity is lower and the mass tends to be higher relative to the size of the vehicle).

 

There are about 500 car fires in the U.S. each and every day, but it’s the occasional Tesla fire that generate clicks and retweets, so they get all the CNBC headlines and tweets (bears love it). Lots of Munger-worthy behavioral factors drive this sort of misinterpretation and journalistic malpractice of covering Tesla.

[NBL0303]

 

There are about 500 car fires in the U.S. each and every day, but it’s the occasional Tesla fire that generate clicks and retweets, so they get all the CNBC headlines and tweets (bears love it). Lots of Munger-worthy behavioral factors drive this sort of misinterpretation and journalistic malpractice of covering Tesla.

 

It works the other way too, though, right?

 

Tesla receives a wildly disproportionate amount of media coverage/business journalism/CNBC stories/etc. as compared with the proportion of the US car sales Tesla's cars comprise. They have received such an intense amount of publicity - this has surely helped them in some ways but also comes with some drawbacks, including, that even minor negative stories or developments with Tesla get a disproportionate amount of media attention and general interest.

[Liberty]

It works the other way too, though, right?

 

Tesla receives a wildly disproportionate amount of media coverage/business journalism/CNBC stories/etc. as compared with the proportion of the US car sales Tesla's cars comprise. They have received such an intense amount of publicity - this has surely helped them in some ways but also comes with some drawbacks, including, that even minor negative stories or developments with Tesla get a disproportionate amount of media attention and general interest.

 

It has tremendously helped them.

 

It's a bit like Apple. They have an event to announce a new product, and every media outlet will cover it front page, giving them a tremendous amount of free publicity.

 

And they'll also get a lot of scrutiny because criticizing them gets a lot of attention/pageviews. That's why there's a fake "gate" scandal with every new product, that a few months later (often without any change to the product) everybody has forgotten. Antennagate, bendgate, etc.

 

It comes with the territory for sure. It's still worthwhile to try to understand the underlying facts under the hype, though.