TSLA - Tesla Motors

[ERICOPOLY]

I shorted it at $935 today.  It is a tiny position.

No surprise you timed it so well. I think fondly of your kind and hyper-rationale comments back in May 2006 that gave many of us including me the confidence to buy FFH options and make incredible gains. Thank you again.

 

What a contrast to the quality of this board today when I post at the end of October my conviction that the shorts were failing to consider the disruption entailed in the recent series of positive developments and Tesla was likely entering into an exponential phase. Instead of support and discussion what I got in response was "ok Boomer". Perhaps in the future we all can realize that if we support and aid each other we will all be rewarded.

 

I've got $600 in unrealized gains at the close today. Woohoo!  More gains tomorrow?  Losses tomorrow?  This is fun stuff.

 

So are you out of the trade, or do you think you can grow that $600 bucks into the one comma club?

 

I'm still holding out but I hadn't put thought into making it to $1,000.

[TwoCitiesCapital]

I shorted it at $935 today.  It is a tiny position.

No surprise you timed it so well. I think fondly of your kind and hyper-rationale comments back in May 2006 that gave many of us including me the confidence to buy FFH options and make incredible gains. Thank you again.

 

What a contrast to the quality of this board today when I post at the end of October my conviction that the shorts were failing to consider the disruption entailed in the recent series of positive developments and Tesla was likely entering into an exponential phase. Instead of support and discussion what I got in response was "ok Boomer". Perhaps in the future we all can realize that if we support and aid each other we will all be rewarded.

 

I've got $600 in unrealized gains at the close today. Woohoo!  More gains tomorrow?  Losses tomorrow?  This is fun stuff.

 

So are you out of the trade, or do you think you can grow that $600 bucks into the one comma club?

 

I'm still holding out but I hadn't put thought into making it to $1,000.

 

I purchased a single put option w/ a strike of $500 when it seemed clear the short-squeeze was over (~$775 on the stock).

 

Looking at the Volkswagen short-squeeze back in 2008, it took about 2-months to fully resolve from the peak so have my put at a 3/20 expiry.

 

My expectations are this will end right back where they started which would put it back around $300-$350/share, hopefully by March, but dunno if I'll have the courage to hold on for that long.

 

Already told myself if it drops below $650 this week that I'll close the position to be lucky I stead of greedy.

[aws]

I shorted a $1500 March call for 24 thinking it was a good gamble.  Got a little scary as I was down almost 4k within a couple of hours, but now it's only worth 500.  I should probably close it now but I find it pretty far fetched TSLA will double in six weeks.

[Kaegi2011]

I would be interested in hearing some opinions regarding the trade that I put on and how to play this situation at this point. 

 

On Tuesday I shorted April $1500 calls between $54-$61, and closed it out yesterday for $10.  Thesis was:

 

1) Rally did not seem sustainable, and seems like likelihood of the stock going beyond ~1550 was incredibly low.  It would've implied another ~75% move to the upside, without an earnings announcement in the interim, and would put the market cap around $260bn, which seemed absurd.

2) Implied (and realized) vol was already huge, and I think it get magnified at the extreme end of the spectrum so it's like a double benefit to be a seller

3) While the gains are limited to the sell price, it seems like other forms of shorting magnified the risk without a commensurate increase in return profile

3a - I considered a bear spread at 600/800 at the same expiry.  In retrospect the gains (as of yesterday's close) was similar to the gains I had, but I think the risk seemed higher if the stock did not move lower than 700.  Alternatively, my risk assessment was that the probability of the stock moving higher than 1550 was way lower than the stock staying above 735 (breakeven for the spread trade).

3b - alternate forms of shorting via a straight long put position seemed the opposite of what I wanted to do, which is to be a seller of vol rather than be a buyer of vol.

3c - I did consider buying the stock and selling a fairly deep in the money call (@700 strike for example, when stock was ~950).  However, I had zero confidence in 700 being a price that the company was worth.  But if I moved it lower to 500 or lower the premium was not worth it.

 

I thought about this trade for a couple hours in terms of how to play it, and the one that I ended up with seemed like the most prudent from a risk perspective.  At this point I'm not sure I have enough confidence on where the stock will go so I closed it out.  It's probably de minimis risk to keep the trade, but since a lot of vol value is already realized I figured the prudent thing is to simply sit out for now.

 

Was there another trade I should have thought about?  Any other angles to play this where is it without possibly getting one's face ripped off? 

 

 

[Gregmal]

No, IMO the way you played it was exactly right.

 

Wait until you're literally falling out of your chair, pinching yourself thinking this cant be real, and can point to a substantial pile of things similar to what I described in my posts here a few days ago(helping with the "timing" aspect of the trade).....and then go absurdly out of the money, and short calls. These insanity induced technical trades are typically short lived. The only thing maybe to have done different is go even further out of the money to get more $$ for your calls.

 

Disclaimer: the above assumes you are a rational market participant and can discern a "shit thats a big rally" from "this is a once every few years type of extreme rally" and that you arent one of those thick frame glass wearing pencil dicks who is flabbergasted and just cant believe the insanity because company xyz, according to your spreadsheet, should only be worth $1.4333B but is trading at $2B....theres tons of those on Wall Street. But you should be able to tell the difference when its something spectacular like that rally we just saw.

[Liberty]

I find this situation a good practical demonstration of anchoring.

 

Because the stock fell from peak, a lot of people feel like the stock is down and doing poorly right now. But you would've told anyone a few months ago that Tesla would be above $700 and they wouldn't have believed you. So it's all about where you anchor and how far you zoom in or out.

[Gregmal]

I find this situation a good practical demonstration of anchoring.

 

Because the stock fell from peak, a lot of people feel like the stock is down and doing poorly right now. But you would've told anyone a few months ago that Tesla would be above $700 and they wouldn't have believed you. So it's all about where you anchor and how far you zoom in or out.

 

Eh, yes and no.

 

I dont think there's ever been a chart like these(with respect to short term parabolic moves) that doesnt at least give one an edge in terms of figuring out the temporariness of such a move. The key is the whole "staying solvent til the market gets a little more rational" thing.

 

That said, this is something that a lot of people will struggle with because it involves using experience and largely non quantifiable points.

[Liberty]

I'm not saying the move makes sense or whatever. I'm saying that the same price means two completely different things depending on how you look at it, which is a nice demonstration of anchoring.

[ERICOPOLY]

This stock is a fun one because you can use your imagination as to which technologies Tesla will grow into and how successful it will be.  If the shorts say it will lose $5b over the next five years, then knock less than $5b off the market cap if you are confident that the tech money in Silicon Valley wants a piece of the pie in the sky, the very place where Tesla’s cars are crowding the roads.

 

In the end, what will be will be of course.  I only shorted it on speculation that price would soon fall back.  I have no intention of holding out for more than a few months and hopefully not more than a few days.

[tytthus]

Interesting observations on TSLA short interest:

 

https://ihsmarkit.com/research-analysis/who-would-short-tesla.html

 

Seeking to explain the lack of observable short covering in shares of Tesla since the start of December:

*Convertible bond arbitrage may constitute half of reported short interest

*Suggests smaller losses for directional shorts than exchange SI would imply

*Hedging of call options sold to Tesla may be contributing to price move

[Liberty]

Cairn Energy Research Advisors, a consulting firm specializing in electric vehicle battery research, says the cost of a cylindrical cell battery pack dropped to $158.27 per kilowatt-hour last year, down by more than $100 per kWh from four years ago.

 

https://www.cnbc.com/2020/02/10/teslas-competitors-play-catch-up-on-electric-batteries.html

[LC]

Tesla’s success in building more powerful batteries and at a lower cost has sparked other automakers to announce they will spend billions of dollars to get in the EV game.

 

Last week, Toyota and the Japanese battery firm Panasonic, which also is a partner with Tesla at the Nevada Gigafactory, announced they will form a joint venture to develop and build prismatic battery packs that will power electric vehicles.

 

Meanwhile, General Motors and South Korea’s LG Chem are spending $2.3 billion to build a battery plant in northeast Ohio. That plant will supply battery packs to power a slew of electric vehicles GM plans to sell over the next several years, including the new all-electric Hummer pickup truck scheduled to roll out in 2022.

 

It really is the same story all over again. So what happens now? Does every automaker spend billions developing their own, overlapping battery technologies? The amount of capital wasted in this industry is incredible.

 

[Liberty]

It really is the same story all over again. So what happens now? Does every automaker spend billions developing their own, overlapping battery technologies? The amount of capital wasted in this industry is incredible.

 

What do you mean waste? Isn't that how competition works? Do television makers waste money because they all build factories to produce LCD and OLED screens and try to have better technologies than the competition? Do CPU and GPU makers waste money investing in their chips and fabbing process improvements and such?

 

I'm not saying they'll all get good returns on this, but good returns are scarce around the world, because they are driven down by competition... But it's that competition that keeps things moving and that creates a lot of consumer surplus, so I'm all for it.

[LC]

It's waste because you have 5-10 companies researching the same thing with little marginal benefit. At this point they are just trying to catch up to Tesla, not design a groundbreaking technology.

 

In contrast, in computer electronics the R&D is consolidated and the technology is licensed. Autos refuse to do this.

 

This is Marchionne's argument that he made 4 years ago with FCA and my point is that here we are again at the crux of change in this industry, and instead we see the same uneconomic behaviors from the major participants.

 

Imagine Tesla licensed their battery tech out at $5B to the major automakers for 7 years. Now the automakers are 2 years ahead in their manufacturing plan and can start pumping out EVs. The industry change happens much quicker which builds some network effect. Tesla immediately is profitable, and can pump 1/3 of that into continued R&D to continue to improve battery efficiency and get Elon his space-palace on Mars or whatever.

 

 

[TwoCitiesCapital]

It's waste because you have 5-10 companies researching the same thing with little marginal benefit. At this point they are just trying to catch up to Tesla, not design a groundbreaking technology.

 

In contrast, in computer electronics the R&D is consolidated and the technology is licensed. Autos refuse to do this.

 

This is Marchionne's argument that he made 4 years ago with FCA and my point is that here we are again at the crux of change in this industry, and instead we see the same uneconomic behaviors from the major participants.

 

Imagine Tesla licensed their battery tech out at $5B to the major automakers for 7 years. Now the automakers are 2 years ahead in their manufacturing plan and can start pumping out EVs. The industry change happens much quicker which builds some network effect. Tesla immediately is profitable, and can pump 1/3 of that into continued R&D to continue to improve battery efficiency and get Elon his space-palace on Mars or whatever.

 

This.

 

Honestly, I'm surprised that Tesla doesn't just license the IP and collect toll-like revenues on their supercharger network as ALL EVs recharge there which would allow them to keep building sexy and niche cars for massive premiums instead of trying to get the scale/economics to get this to work for the masses.

 

I'd be a lot more bullish on Tesla's economics in this scenario, but doesn't seem like it's going to happen.

[Liberty]

It's waste because you have 5-10 companies researching the same thing with little marginal benefit. At this point they are just trying to catch up to Tesla, not design a groundbreaking technology.

 

In contrast, in computer electronics the R&D is consolidated and the technology is licensed. Autos refuse to do this.

 

This is Marchionne's argument that he made 4 years ago with FCA and my point is that here we are again at the crux of change in this industry, and instead we see the same uneconomic behaviors from the major participants.

 

Imagine Tesla licensed their battery tech out at $5B to the major automakers for 7 years. Now the automakers are 2 years ahead in their manufacturing plan and can start pumping out EVs. The industry change happens much quicker which builds some network effect. Tesla immediately is profitable, and can pump 1/3 of that into continued R&D to continue to improve battery efficiency and get Elon his space-palace on Mars or whatever.

 

A lot of that investment is just scaling up production, it's not fundamental research. Either they invest that money, or someone else does, but the batteries don't magically appear just because there are fewer companies. This isn't software. If these other companies are serious about making EVs in volume in the coming years, they have to invest ahead of the curve as these have long lead times.

 

But the "duplicative R&D" can lead to real progress, and I'm glad to see some investments finally starting to happen more seriously. We're early enough in the industry that lots of approaches should be tried. At maturity, I'm sure it'll consolidate more naturally.

 

Tesla's battery tech is mostly in the packaging and cooling and software, not in the cells. They get lower costs because they make so many of them (Gigafactory, etc), not because they have very different cells than others. Licensing that wouldn't make that much difference, afaik, and I'm not sure they're quite ready to license the rest of the stack when they clearly have an advantage there. The value capture in a car doesn't happen in that part of the stack and they couldn't charge enough to compensate for cannibalized sales, I think.

 

Doesn't mean they'd never do this kind of work. They did it in the past for Daimler and Toyota on a small scale, but I actually wouldn't be surprised if the contracts weren't renewed by Toyota and Daimler because they either didn't care enough about EVs at the time and/or because they don't want a future core technology to be controlled by a competitors and them not going up those learning curves themselves.

 

Also, the Model 3 ramp was a bet-the-company move and they had enough trouble producing enough drivetrains and packs for themselves internally, I don't think they wanted to be distracted by that. Sure they want to accelerate the advancement of EVs generally, but they have to take care of their own house first and survive and let others do some of the lifting too. They've opened patents and had a huge influence already on the whole industry, and they'll keep things progressing faster if they keep being successful and growing at hypergrowth than if they become some tier 2 supplier to other boring companies that have much less ambitious and much slower plans for EVs.

[RadMan24]

It's waste because you have 5-10 companies researching the same thing with little marginal benefit. At this point they are just trying to catch up to Tesla, not design a groundbreaking technology.

 

In contrast, in computer electronics the R&D is consolidated and the technology is licensed. Autos refuse to do this.

 

This is Marchionne's argument that he made 4 years ago with FCA and my point is that here we are again at the crux of change in this industry, and instead we see the same uneconomic behaviors from the major participants.

 

Imagine Tesla licensed their battery tech out at $5B to the major automakers for 7 years. Now the automakers are 2 years ahead in their manufacturing plan and can start pumping out EVs. The industry change happens much quicker which builds some network effect. Tesla immediately is profitable, and can pump 1/3 of that into continued R&D to continue to improve battery efficiency and get Elon his space-palace on Mars or whatever.

 

This.

 

Honestly, I'm surprised that Tesla doesn't just license the IP and collect toll-like revenues on their supercharger network as ALL EVs recharge there which would allow them to keep building sexy and niche cars for massive premiums instead of trying to get the scale/economics to get this to work for the masses.

 

I'd be a lot more bullish on Tesla's economics in this scenario, but doesn't seem like it's going to happen.

 

GM and Tesla have similar battery pack optimization.

GM and Tesla rely on battery manufactures to create their battery packs.

There are only 5 companies in the world that can manufacture these batteries at scale - these are the companies that have the IP and scale auto makers must license from. It's not Tesla that has the IP auto's need.

[A Dhandho Investor]

FWIW, this article suggests that VW cost of batteries in the ID.3 is below $100 per kilowatt hour https://www.nytimes.com/2019/09/08/business/volkswagen-trademark-electric-vehicles.html

 

Executives at Volkswagen, which last year edged out Toyota as the world’s largest carmaker, have hinted that economies of scale have allowed them to push the cost of batteries in the ID.3 below $100 per kilowatt hour. That price is considered the point at which electric cars become more affordable than internal combustion models. Analysts had not expected costs to fall that far for several more years

[CorpRaider]

It's waste because you have 5-10 companies researching the same thing with little marginal benefit. At this point they are just trying to catch up to Tesla, not design a groundbreaking technology.

 

In contrast, in computer electronics the R&D is consolidated and the technology is licensed. Autos refuse to do this.

 

This is Marchionne's argument that he made 4 years ago with FCA and my point is that here we are again at the crux of change in this industry, and instead we see the same uneconomic behaviors from the major participants.

 

Imagine Tesla licensed their battery tech out at $5B to the major automakers for 7 years. Now the automakers are 2 years ahead in their manufacturing plan and can start pumping out EVs. The industry change happens much quicker which builds some network effect. Tesla immediately is profitable, and can pump 1/3 of that into continued R&D to continue to improve battery efficiency and get Elon his space-palace on Mars or whatever.

 

This.

 

Honestly, I'm surprised that Tesla doesn't just license the IP and collect toll-like revenues on their supercharger network as ALL EVs recharge there which would allow them to keep building sexy and niche cars for massive premiums instead of trying to get the scale/economics to get this to work for the masses.

 

I'd be a lot more bullish on Tesla's economics in this scenario, but doesn't seem like it's going to happen.

 

GM and Tesla have similar battery pack optimization.

GM and Tesla rely on battery manufactures to create their battery packs.

There are only 5 companies in the world that can manufacture these batteries at scale - these are the companies that have the IP and scale auto makers must license from. It's not Tesla that has the IP auto's need.

 

Long Panasonic? 

[rb]

Long Panasonic?

 

That's actually not a bad idea at all. I took a quick look expecting some crazy valuation. But it actually looks ok. It's at 10x PE. A market cap of 3T yen and it has 1T in cash and 1T in WC. pretty good.

 

The only iffy thing I see is that lately it's been starting to suck in a lot of WC. I guess Tesla must be getting some pretty awesome terms of trade.

[Liberty]

GM and Tesla have similar battery pack optimization.

GM and Tesla rely on battery manufactures to create their battery packs.

There are only 5 companies in the world that can manufacture these batteries at scale - these are the companies that have the IP and scale auto makers must license from. It's not Tesla that has the IP auto's need.

 

There's confusion between the cells and the packs and how the packs are managed. All these are different levels, and companies like Panasonic make the cells, not the packs or the software that manages the packs.

 

Tesla likely has the scale and know-how at this point that if they wanted to make their own cells, they could. I don't know if they will, but I wouldn't be surprised, considering how vertically integrated they've been in other ways.

 

Or maybe they'll do something on that front with their Maxwell Technologies acquisition..

[RadMan24]

GM and Tesla have similar battery pack optimization.

GM and Tesla rely on battery manufactures to create their battery packs.

There are only 5 companies in the world that can manufacture these batteries at scale - these are the companies that have the IP and scale auto makers must license from. It's not Tesla that has the IP auto's need.

 

There's confusion between the cells and the packs and how the packs are managed. All these are different levels, and companies like Panasonic make the cells, not the packs or the software that manages the packs.

 

Tesla likely has the scale and know-how at this point that if they wanted to make their own cells, they could. I don't know if they will, but I wouldn't be surprised, considering how vertically integrated they've been in other ways.

 

Or maybe they'll do something on that front with their Maxwell Technologies acquisition..

 

With all due respect, there’s no confusion. Battery management and packs are indeed auto IP. Tesla doesn’t have the chemical expertise to create cells and would never risk its capital to do so, and it would likely fail if it tried at this moment in time. Manufacturing cells is complex and requires near perfection to be done correctly or battery is gunk. If you’re looking for an auto company with battery cell expertise its byd - and this was developed over decades working on batteries. 

 

Tesla is good at spinning its advantages but it relies heavily on panasonic, lg chem, catl for cells which are agnostic to auto buyer. 

[Liberty]

With all due respect, there’s no confusion. Battery management and packs are indeed auto IP. Tesla doesn’t have the chemical expertise to create cells and would never risk its capital to do so, and it would likely fail if it tried at this moment in time. Manufacturing cells is complex and requires near perfection to be done correctly or battery is gunk. If you’re looking for an auto company with battery cell expertise its byd - and this was developed over decades working on batteries. 

 

Tesla is good at spinning its advantages but it relies heavily on panasonic, lg chem, catl for cells which are agnostic to auto buyer.

 

So you think they've done all they've done but they couldn't buy/build their way to making battery cells?

 

I tend to think they could if they wanted to. But they might not want/need to.

[Spekulatius]

GM and Tesla have similar battery pack optimization.

GM and Tesla rely on battery manufactures to create their battery packs.

There are only 5 companies in the world that can manufacture these batteries at scale - these are the companies that have the IP and scale auto makers must license from. It's not Tesla that has the IP auto's need.

 

There's confusion between the cells and the packs and how the packs are managed. All these are different levels, and companies like Panasonic make the cells, not the packs or the software that manages the packs.

 

Tesla likely has the scale and know-how at this point that if they wanted to make their own cells, they could. I don't know if they will, but I wouldn't be surprised, considering how vertically integrated they've been in other ways.

 

Or maybe they'll do something on that front with their Maxwell Technologies acquisition..

 

I do not think that Tesla has any expertise or IP to build cells at this point as this is an entirely different process and technology than building packs. Perhaps they could create the technology ( or a better one ) but that would take time and billions of $ most likely, at least going to scale.

I don’t think any car  manufacturer will go down this route, but of course I could be wrong.

[Liberty]

GM and Tesla have similar battery pack optimization.

GM and Tesla rely on battery manufactures to create their battery packs.

There are only 5 companies in the world that can manufacture these batteries at scale - these are the companies that have the IP and scale auto makers must license from. It's not Tesla that has the IP auto's need.

 

There's confusion between the cells and the packs and how the packs are managed. All these are different levels, and companies like Panasonic make the cells, not the packs or the software that manages the packs.

 

Tesla likely has the scale and know-how at this point that if they wanted to make their own cells, they could. I don't know if they will, but I wouldn't be surprised, considering how vertically integrated they've been in other ways.

 

Or maybe they'll do something on that front with their Maxwell Technologies acquisition..

 

I do not think that Tesla has any expertise or IP to build cells at this point as this is an entirely different process and technology than building packs. Perhaps they could create the technology ( or a better one ) but that would take time and billions of $ most likely, at least going to scale.

I don’t think any car  manufacturer will go down this route, but of course I could be wrong.

 

Depends what you mean by expertise. Have they done it at scale? No. Have they been studying it closely for years (in good part to pick which technologies to bet on and to get manufactured) and watching Panasonic do it inside their own factory and likely been hiring people from that industry? There's a lot of learning and expertise that has been building there...

 

They might never decide to do it, but if they did, it wouldn't be the hardest thing that they've done...