TSLA - Tesla Motors

[Picasso]

I felt the CC is terrible. Elon was totally unprepared  and didn’t even seem to have the math correctly in terms of tact time. Then this rambling about expensive robot technicians and a manufacturing line being basically a software problem... Elon seemed aloft and disheveled. This hole thing runs on a wing and a prayer.

 

No question. I used to have a fairly optimistic view on the company but that has soured significantly in recent months. I'd say the range of outcomes are skewed far more negatively these days.

[Liberty]

I felt the CC is terrible. Elon was totally unprepared  and didn’t even seem to have the math correctly in terms of tact time. Then this rambling about expensive robot technicians and a manufacturing line being basically a software problem... Elon seemed aloft and disheveled. This hole thing runs on a wing and a prayer.

 

No question. I used to have a fairly optimistic view on the company but that has soured significantly in recent months. I'd say the range of outcomes are skewed far more negatively these days.

 

Things do look bleaker, but I still think the likely "bad scenario" is that they're acquired by Google or Apple or Tencent or someone else if things go off the rail too much. Or maybe they sell another big chunk of equity directly to Tencent or whoever.

 

Musk has done the seemingly impossible so many times that I think there's still a chance he gets the M3 ramp-up done through sheer force of will. Things didn't look good in 2008-2009 either, trying to sell a $100k two-seater of unknown technology and reliability during the great recession, or for SpaceX after their first three launches blew up and they barely had enough money for a fourth... Will this be another nail-biting chapter in the future book, or is this where they hit a wall?

 

This guy certainly is never boring to watch...

[rb]

Things do look bleaker, but I still think the likely "bad scenario" is that they're acquired by Google or Apple or Tencent or someone else if things go off the rail too much. Or maybe they sell another big chunk of equity directly to Tencent or whoever.

Why would Google or Apple buy them? Because they're tired of having money and would like to burn some?

 

Let's look at how things look and some options.

 

Tesla. Most recent quarter the lost 784M or 3.1B annualized. Previous year's quarter they lost like 400M or 1.2B annualized. Let's say these are weird times and maybe they should loose just 1B per year. Tesla's market cap is $48B.

 

Now BMW. It's market cap is 60B EUR or about $72B (though up until recently it was worth less then Tesla). In 2017 BMW made 10.7B EUR pre tax or $12.8B. So you could BMW and increase it's R&D budget by $12.8B or go the full Tesla and bump it by $13.8B per year. You don't think that the BMW guys can design u a car for 14 billion a year? BMW's current R&D budget is $6.5B EUR or $7.8B. Oh and there won't be any production hell. Or problems with suppliers. Seats would come in and they'll be comfortable and cars will go out of the factory.

 

Now you were were to make the purchase decision. Which company would you buy?

 

 

[Investmentacct]

So you could BMW and increase it's R&D budget by $12.8B or go the full Tesla and bump it by $13.8B per year. You don't think that the BMW guys can design u a car for 14 billion a year?

 

Probably not. It is similar to saying Microsoft spending enough money in early 2000s; and spending 6 billion a year in R&D to create next google. Reading Zero to One by Peter Thiel laid out a chapter on Tesla clearly. Businesses which change things are created only one time in their lifetime.

It would be good idea to check out Tesla Model 3 in person and drive for a day or on trip to figure out,  BMW or Mercedes building similar car. The way car Model 3 is built can not be built anywhere other than SF Bay Area. Also, getting a trip in California’s well-to-do enclaves give you take on Tesla replacing same BMWs and Mercedes of the world. At 2500 a week, Model 3 is already taking over bmw 3 and 4 series combined. As they cross 5000 a week, would be getting closer to Honda Civic#s. So, you are looking for this product, which will have #s of Honda Civic and Margin of BMW. Also, reading product reviews of this car and consumer’s own takes (anywhere on YouTube or Twitter) will tell you more about, snowballing is about to begin.

 

Things do look bleaker, but I still think the likely "bad scenario" is that they're acquired by Google or Apple or Tencent or someone else if things go off the rail too much. Or maybe they sell another big chunk of equity directly to Tencent or whoever.

Why would Google or Apple buy them? Because they're tired of having money and would like to burn some?

 

Let's look at how things look and some options.

 

Tesla. Most recent quarter the lost 784M or 3.1B annualized. Previous year's quarter they lost like 400M or 1.2B annualized. Let's say these are weird times and maybe they should loose just 1B per year. Tesla's market cap is $48B.

 

Now BMW. It's market cap is 60B EUR or about $72B (though up until recently it was worth less then Tesla). In 2017 BMW made 10.7B EUR pre tax or $12.8B. So you could BMW and increase it's R&D budget by $12.8B or go the full Tesla and bump it by $13.8B per year. You don't think that the BMW guys can design u a car for 14 billion a year? BMW's current R&D budget is $6.5B EUR or $7.8B. Oh and there won't be any production hell. Or problems with suppliers. Seats would come in and they'll be comfortable and cars will go out of the factory.

 

Now you were were to make the purchase decision. Which company would you buy?

[Dynamic]

Here's a question. Why does Tesla need 10k units per week to make their margins? 5k units would be 250,000 units per year. That's about the output of a serious auto manufacturing plant. So why can the other manufacturers make their margins at 5k but Tesla need 10k, especially since model 3 is a (much?) simpler build compared to ICE autos?

 

Well it's not an apple-to-apples comparison. Even with the decline in price per kWh, the high capacity battery pack is still going to eat away at the margin compared to a fossil-fuel powertrain. GM's Bolt probably loses $7,000 to $9,000 per vehicle at present at a $35,000 price tag. Tesla has designed and set the price of the Model 3 ahead of the curve in declining battery costs as part of its master plan to show that a mass-market, fast-charging performance BEV capable of long trips and effortless everyday driving can be mass-produced at a price comparable to ICE cars. In some ways, the inherent advantages of EVs such as smooth torque from zero rpm, a single ratio reduction gear and no need for clutch/torque converter/flywheel/emission control luckily mean that it's the whole powertrain (engine, emission control and transmission + possibly hybrid system) whose cost they must come close to matching for the eventual goal of price parity, not the cheaper IC Engine alone.

 

Tesla is mostly installing new production lines, rather than re-purposing existing capital equipment like many traditional auto plants would, and it is taking on a good portion of the work on battery cost/kWh reduction itself in-house to speed up the replacement of ICEVs with BEVs in the world. So it's actually becoming more vertically integrated than most of the outsourced automotive industry in order to push the master plan, which itself is more about the big vision of making EVs mass-market years sooner than it otherwise would be than it is about running the company for profit.

 

I don't doubt that there are plenty of problems and that there is plenty of cash burn that will be fruitless at Tesla as well as some that delivers rapid gains in productivity. I wouldn't dream of shorting it however, especially with a fan-base of shareholders that could sustain irrationally high stock price for a long time to come.

 

Nor am I tempted to buy it, certainly not until I have far more money than I will every need and wish to support a worthy cause that might not provide a financial return.

 

Nonetheless one could argue that Tesla are taking on the role of not only the modern streamlined OEM (e.g. BMW or VW/Audi) but also that of many of the Tier 1 suppliers of powertrain components too (e.g. Getrag, Bosch, etc.), in part because their mission is to grow the EV market far more rapidly than the entrenched chain of OEMs and Tier 1 suppliers who still build in very much the same way as they have since the 1990s for the majority of their mass-market vehicles, with modest incremental technology improvements (e.g. emissions and safety) incorporated gradually from year to year to keep up with tightening regulations. A lot of the financial improvements in the auto industry over the last 20 years have been in the industry structure, more than the technology, and have come from the switch away from vertical integration to outsourcing to Tier 1 suppliers, the implementation of the Toyota style quality and inventory management, and the VW/Audi/Seat/Skoda style ideas of using a single-platform across multiple consolidated brands and models, with a limited set of engines and common parts used across the complete range of vehicles.

 

Tesla is trying to do something different, not for financial motives, but for its environmental mission to bring significant change to the status quo, yet is also walking the tightrope of a certain reliance on outside capital in trying to accelerate the introduction of new classes of vehicles at significant volumes. Their plan to start at the top end low volume, create desire and work down market to high volume is far more likely to achieve the mission than a series of weird golf-buggies, G-Whiz and compliance cars that emerged before they came along, but requires a lot of capital to reinvent how things are done. I think that capital has come from enthusiastic supporters much more than from financially savvy value investors, and could support an irrational stock price far longer than many shorts could hold out.

[rb]

So you could BMW and increase it's R&D budget by $12.8B or go the full Tesla and bump it by $13.8B per year. You don't think that the BMW guys can design u a car for 14 billion a year?

 

Probably not. It is saying Microsoft spending enough money in early 2000s; and spending 6 billion in R&D to create next google. Reading Zero to One by Peter Thiel laid out a chapter on Tesla clearly. Businesses which change things are created only one time in their lifetime.

It would be good idea to check out Tesla Model 3 in person and drive for a day or on trip to figure out,  BMW or Mercedes building similar car. The way car Model 3 is built can not be built anywhere other than SF Bay Area. Also, getting a trip in California’s well-to-do enclaves give you take on Tesla replacing same BMWs and Mercedes of the world. At 2500 a week, Model 3 is already taking over bmw 3 and 4 series combined. As they cross 5000 a week, would be getting closer to Honda Civic#s. So, you are looking for this product, which will have #s of Honda Civic and Margin of BMW. Also, reading product reviews of this car and consumer’s own takes (anywhere on YouTube or Twitter) will tell you more about, snowballing is about to begin.

Dude, what are you smoking? The type of car like model 3 can only be built in the bay area? Please!

 

Also at 2500 a week that gives an output of 125,000 cars a year. That's not enough to beat the 4 series at 131,688 delivered in 2017. Let alone 3 series and 4 series combined. BMW shipped 409,005 3 series in 2017. Throw in a bunch of other models and the numbers are about 2.1 million vehicles for BMW marque and 2.5 million for BMW group.

 

Then you're comparing search engines to cars especially electric cars? Electric cars are really simple. Simpler than ICE cars actually. What you have is an unibody, suspension, steering and brake system, a bunch of electric motors, a vf drive, a battery strapped to all of it, and an interior. The VF drive/electric motor combination is a standard application used widely in the world. The rest every automaker already does.

 

Do you think strapping a Lithium Ion battery to the motors is that hard that an army of engineers cant figure it out? It's not.

 

Also thinking about how the model 3s will shake out. Think about fit, finish, and reliability. All those cars that were not fit to deliver and had to be worked over. When you get one of those you basically start with an unfit vehicle that was refurbished/patched over. Then you take that vehicle slam it through pot holes, rumble strips and hit curbs. I'm a car guy and my feeling is that those vehicles will not age well.

[Investmentacct]

So you could BMW and increase it's R&D budget by $12.8B or go the full Tesla and bump it by $13.8B per year. You don't think that the BMW guys can design u a car for 14 billion a year?

 

Probably not. It is saying Microsoft spending enough money in early 2000s; and spending 6 billion in R&D to create next google. Reading Zero to One by Peter Thiel laid out a chapter on Tesla clearly. Businesses which change things are created only one time in their lifetime.

It would be good idea to check out Tesla Model 3 in person and drive for a day or on trip to figure out,  BMW or Mercedes building similar car. The way car Model 3 is built can not be built anywhere other than SF Bay Area. Also, getting a trip in California’s well-to-do enclaves give you take on Tesla replacing same BMWs and Mercedes of the world. At 2500 a week, Model 3 is already taking over bmw 3 and 4 series combined. As they cross 5000 a week, would be getting closer to Honda Civic#s. So, you are looking for this product, which will have #s of Honda Civic and Margin of BMW. Also, reading product reviews of this car and consumer’s own takes (anywhere on YouTube or Twitter) will tell you more about, snowballing is about to begin.

Dude, what are you smoking? The type of car like model 3 can only be built in the bay area? Please!

 

— Sure you may say that. Writing Tesla autopilot elsewhere was not seamingly possible. Level 2-3 autonomy on California’s clogged roads plays wonder. As more people will become aware of benefits of software , utilization will soar. Drove recently about 10k miles in various road trips, where, software drives about 9700 miles in all kind of terrains and make us look like dumb, and take away all tiredness(common from long drives 12hr -14 hr) from driver stand point. Other cars autonomy solutions are not close in terms of handing and giving over control back and forth. it is seamless transition of control between system and driver. All Other IOT features, no other car has available. Ultimately, car behaves more of a system than a car.

 

Also at 2500 a week that gives an output of 125,000 cars a year. That's not enough to beat the 4 series at 131,688 delivered in 2017. Let alone 3 series and 4 series combined. BMW shipped 409,005 3 series in 2017. Throw in a bunch of other models and the numbers are about 2.1 million vehicles for BMW marque and 2.5 million for BMW group.

 

— you are right. However, Numbers I pulled only compared USA sales for BMW 3 and 4 series. Not , worldwide since, model 3 is not delivered worldwide yet, but only in USA. Time plays factor here and that’s where argument of business as ongoing concern.

 

Then you're comparing search engines to cars especially electric cars? Electric cars are really simple. Simpler than ICE cars actually. What you have is an unibody, suspension, steering and brake system, a bunch of electric motors, a vf drive, a battery strapped to all of it, and an interior. The VF drive/electric motor combination is a standard application used widely in the world. The rest every automaker already does.

 

— You are correct about electric car. However, if you consider IOT, Systems, Autonomy integrated in a vehicle, that creates the experience and consumer perception.

 

Do you think strapping a Lithium Ion battery to the motors is that hard that an army of engineers cant figure it out? It's not.

 

— Sure. Secret been out for sometime, still we do not see 315 miles ( range of model 3) range vehicle available with combinations of similar technologies. Beginners mindset may help to those engineers.

 

Also thinking about how the model 3s will shake out. Think about fit, finish, and reliability. All those cars that were not fit to deliver and had to be worked over. When you get one of those you basically start with an unfit vehicle that was refurbished/patched over. Then you take that vehicle slam it through pot holes, rumble strips and hit curbs. I'm a car guy and my feeling is that those vehicles will not age well.

 

— Not doubting you as car guy. all previous model S and X has highest safety ratings. Model 3 safety ratings are not out yet.  Media creates lot of perceptions. So checking product reviews or hearing consumer feedback may be useful activity when product is newer and not widely available. And, better yet driving yourself few hundred miles with model 3, may help set right idea.

 

[kab60]

It's a friggin' car company - and they apparently suck at building cars as well as earning money deep into an economic upturn. Plus, they've basically had the space for themselves. This is Mike Jackson from Auto Nation (biased, yes, but reasoning right I think):

 

"So I could not be more bullish on German Premium Luxury business. As you know, I have experience there. It's coming up on 45 years and have been on product development committees with those companies. And I think they have the best pipeline I've ever seen. They are in a massive pivot and shift away from diesel investment into electrification in both pure electric and plug-in hybrid.

 

And the vehicles I've seen are far superior to anything Tesla has, in my humble opinion. And they'll be arriving in the marketplace in the next year or two years and you will begin to see. If you look at just – probably one of the closest one – if you look at the Porsche Mission E, I mean, it is spectacular vehicle that will have great success in the marketplace."

[Dynamic]

I really hope the Porsche Mission E really makes some waves and results in installation of something at least comparable to superchargers on major routes. 350kW CCS DC quick charge is probably not necessary, but anything over 100kW CCS being available every 60 miles / 100km at typical Services on motorways/autoroutes/autobahns/interstates and the Porsche Mission E would become seriously competitive with Tesla Model S. I think they're right to start at the high end, like Tesla, but if they cannot get the charging infrastructure to make it truly effortless for long trips, I think a lot of consumers may choose Tesla or wait until the chargers are there before buying. The same applies to the Jaguar I-Pace - decent range from a full overnight charge for short weekend trips and regular commuting but a bit of a faff for really long road trips or for those who have to drive long distances in their job.

[Cardboard]

"Dude, what are you smoking? The type of car like model 3 can only be built in the bay area? Please!"

 

Most products that I see these days have on the label: "Engineered in California. Made in China."

 

If you are looking to start a plant of anything these days which State would you avoid like plague?

 

Cardboard

[MrB]

HyperChange TV version of the call

 

[black-dog]

It's interesting too that Elon essentially dismissed the next-couple-years Semi & Y production. The Fremont factory is full up, he admitted they'll have to find a new place to build them, but they're not looking to raise capital. So even if you think they'll use Gigafactory space or someone will give them a factory space somewhere that can work, there's a boatload of money they need for the lines themselves, all that good stuff.

 

Which means in turn you're betting on whether they can make & sell enough of the Model 3, and make it profitably, to stop the cash bleeding... and there's no evidence so far they can.

 

So what then? Assuming there's no capital raise you can just draw a straight line forward of burning of available money and see where this ends. Is it that simple?

 

Also, when he says that you could build the Tesla Semi with existing battery technology and get the 500-mile range, if you figure that it needs 1000 kWH, use the M3 energy density, that's ~6,500kg just of batteries, which is the weight of a nice new redesigned-to-be-lighter Volvo VNR regional it's competing against. So this built-on-today's-best-batteries semi is 2x heavier than ICE competition. Suddenly SpaceX is relevant, because you get to a "to add range, you have to add battery then battery to haul that battery" point like you do with getting to orbit.

[Dynamic]

Also, when he says that you could build the Tesla Semi with existing battery technology and get the 500-mile range, if you figure that it needs 1000 kWH, use the M3 energy density, that's ~6,500kg just of batteries, which is the weight of a nice new redesigned-to-be-lighter Volvo VNR regional it's competing against. So this built-on-today's-best-batteries semi is 2x heavier than ICE competition. Suddenly SpaceX is relevant, because you get to a "to add range, you have to add battery then battery to haul that battery" point like you do with getting to orbit.

 

No, that's not quite right. It's not like climbing out of the atmosphere.

 

For range when cruising, it's friction and aerodynamic losses that use the energy per km, aerodynamics being independent of weight being carried. The range is also specified at maximum gross vehicle weight including cargo. You would lose a little cargo weight limit if it weighs twice as much as the ICE truck, but the tractor unit is considerably lighter than the maximum load anyhow (which is how the Tesla Semi is expected to do 5.0sec 0-60mph without the trailer, and about 20-25 seconds with trailer, IIRC. More weight requires more energy to accelerate it to a given speed but once at that speed it need no more energy to speak of unless the aerodynamic profile is different.

[black-dog]

True, true...and there Tesla claims the Semi's got a drag coeffecient like the Model S, which... raise of eyebrows.

 

But also... the max highway load of a tractor's what, 150,000 pounds? The extra weight of the batteries will be 1% of that load. And for ICE tractors, if you make changes that get you an extra 0.2% efficiency that gets a multi-page spread in the sales brochure.

 

If nothing else, don't you pay highway taxes based on vehicle weight? That'd add up, too.

[CorpRaider]

Did Jobs do quarterly calls?  First and second stint as AAPL ceo? 

[rb]

True, true...and there Tesla claims the Semi's got a drag coeffecient like the Model S, which... raise of eyebrows.

 

But also... the max highway load of a tractor's what, 150,000 pounds? The extra weight of the batteries will be 1% of that load. And for ICE tractors, if you make changes that get you an extra 0.2% efficiency that gets a multi-page spread in the sales brochure.

 

If nothing else, don't you pay highway taxes based on vehicle weight? That'd add up, too.

Max weight of a tractor trailer combination is 80,000 lbs. If the battery is 6,500 kg that's 14,300 lbs or 18% of the max allowed weight.

[Grant]

True, true...and there Tesla claims the Semi's got a drag coeffecient like the Model S, which... raise of eyebrows.

 

Tesla says their semi has a Cd of 0.36, which is actually higher than achieved by some U.S. Supertruck competitors such as Cummins (0.32). Of course a lot of this number is dependent on a streamlined trailer.

 

To me the biggest head-scratcher of the Tesla semi is the pricing. The 300-mile version is said to be $150k, with the 500-mile version being $180k. On the last call, Musk said the 500-miler would probably have a range of 600 miles (presumably in ideal conditions). If we assume the 300-miler has an idea range of 360 miles, this implies each model has battery packs of 618 and 1,030 kWh, respectively (https://docs.google.com/spreadsheets/d/1JZBBLIf-mOcsyxo3ECpS-oCOzJhDNfl-O_geCl9xV1s/edit?usp=sharing). This implies a battery cost of at least ($180k - $150k) / (1,030 kWh - 618 kWh) = $73 / kWh.

 

Then there's his false comments on platooning semi vs. rail efficiency, in both the semi reveal and the last conference call. Platooning only results in about a 20% reduction in drag (http://www.extremetech.com/extreme/241442-mit-study-driverless-truck-platoons-will-save-fuel-money-especially-tailgate). It's also not a new technology, but one many manufacturers have worked on for over a decade now. The hurdle is regulatory, on a state-by-state basis. Ironically, Tesla's autopilot deaths spurred a regulatory backlash against platooning (https://www.missourinet.com/2017/02/01/truck-platooning-back-on-the-agenda-for-missouri-lawmakers/).

 

Rail is more efficient mostly because of the coefficient of rolling resistance of the best pneumatic tires on tarmac is about 2.3 more than rail.

 

A long-range electric semi will make sense eventually, but I don't see it making any sense in 2021 without unexpected advances in battery technology. It's also not a great environmental idea until electricity is generated more cleanly - diesels at cruise are more efficient than the electrical grid plus charge/discharge losses, especially in cold temperatures.

[rb]

Well here you go. The CEO now wants to start a candy business. This all because somebody uttered a line at an annual meeting somewhere. Totally normal behavior.

 

https://www.bloomberg.com/news/articles/2018-05-05/musk-is-super-super-serious-in-attacking-buffett-s-candy-moat

 

[CorpRaider]

Seems like he might be having a breakdown.  Who was the guy they replaced him with at PayPal? 

 

We may have to re-route the Tesla Tithe to BYD.  ;D

[Liberty]

Well here you go. The CEO now wants to start a candy business. This all because somebody uttered a line at an annual meeting somewhere. Totally normal behavior.

 

https://www.bloomberg.com/news/articles/2018-05-05/musk-is-super-super-serious-in-attacking-buffett-s-candy-moat

 

The media don't understand that Musk is a part-time internet troll. Didn't he try to buy The Onion recently? He grew up on the internet and it's his type of culture/humor.

 

Interesting how the halo effect works for this... When things are going well for Musk and his stock is up, people love his humor/iconoclasm (remember when the whole world's mouth was agape at the red convertible orbiting the Earth with Douglas Adams and Bowie references and an empty spacesuit driving?). When things are going badly, then it must be going badly because he's not a serious old stodgy CEO like all the others... ¯\_(ツ)_/¯

 

As for the candy, Munger seems to like it:

 

[LongHaul]

Would a few Longs tell me their long thesis on TSLA? 

Thanks.

[Cardboard]

"When things are going badly, then it must be going badly because he's not a serious old stodgy CEO like all the others... ¯\_(ツ)_/¯ "

 

And when things eventually go sour, as they logically should, some choose to keep their heads deep in the sand.

 

Cardboard

[black-dog]

Tesla filed their 10-Q at last http://ir.tesla.com/secfiling.cfm?filingID=1564590-18-11086&CIK=1318605 -- isn't it abnormal to get this in almost a week after your call?

 

Also the lock-out today, that's totally normal.

 

 

[black-dog]

I had a thought about production efficiency, and am curious if I'm off the rails -- comparing 10-Qs, Tesla's inventory $/cars sold compares quite badly to other car makers. I know the energy business skews this a little, but it looks like Tesla's at $51k in inventory per car shipped, where Ford is ~2.5x better there (~$12b in inventory, ~650k vehicles sold/quarter), and GM is 10x+ better (~$11b in inventories on ~2.5m sold/quarter).

 

 

[Jurgis]

Interesting how the halo effect works for this... When things are going well for Musk and his stock is up, people love his humor/iconoclasm (remember when the whole world's mouth was agape at the red convertible orbiting the Earth with Douglas Adams and Bowie references and an empty spacesuit driving?). When things are going badly, then it must be going badly because he's not a serious old stodgy CEO like all the others... ¯\_(ツ)_/¯

 

Liberty, you can't do that! I'm the one who's gonna shout "Halo Effect" on every thread, not you!  8)  ;D  ;D  ;D

 

 

 

This thread has so much salt, we could start a mine.