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Tesla Q4 2018 Earnings Letter

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Re: Tesla Q4 2018 Earnings Letter

#61

Post by sib »

threeseed wrote: post #20
anilshanbhag wrote: post #11

Looks like everyone is worried about a few percentage points up and down in financial numbers. There are three keys points I took away: 1) We expect the capital spend per unit of capacity for this factory to be less than half of that of our Model 3 line in Fremont. 2) Since Model Y will be built on the Model 3 platform and is designed to share about 75% of its components with Model 3, the cost of the Model Y producti…

> Tesla is significantly ahead of the pack so far Not really. Audi e-tron, Jaguar iPace and BMW i3 are all well reviewed. And 2019/2020 will see a wave of car companies e.g. Hyundai, Mercedes entering the market including plenty of interesting startups coming out of China. So Tesla is going to need far more to differentiate themselves than just range.

I've ridden in an i3 a lot (good friend owns one) and I own a Model 3, and they are _completely_ different cars. They both have 4 tires and will get you from point A to point B, but that's about it.

Re: Tesla Q4 2018 Earnings Letter

#62

Post by SECProto »

dragontamer wrote: post #52
olau wrote: post #45

Earlier quoted context omitted.

> A stupid move, but fair. Are you're saying this from a short-term financial perspective? I personally think it's too early to tell if it was a stupid move. Elon Musk had a plan, and his plans do seem to work out for the most part given some time. It's my understanding that they recently cut a major sales channel, so it's perhaps not surprising that the number of installations have fallen.

> Are you're saying this from a short-term financial perspective? Absolutely. Tesla's risk isn't long-term at all. Its all about the short-term risk. Just think about Tesla's debt schedue. * CUSIP 83416TAA8 -- $188,058,000 of Solar City Debt on November 2018. * CUSIP 88160RAB7 -- $920,000,000 of Tesla Debt on March 2019. (Not part of SolarCity, but it has to be part of the calculus). * CUSIP 83416TAC4 -- $566,000,000…

> We're looking at a ton of downsides with almost no visible upsides.

Now that's not quite true. We've maintained the idealized (idolized?) Musk as an infallible visionary an engineer.

(I say this as a huge Musk fan - I think his image/public perception play a big role in keeping Tesla afloat in hard times.. even when those hard times are caused by less-than-stellar tweets)

Re: Tesla Q4 2018 Earnings Letter

#64

Post by reitzensteinm »

btilly wrote: post #54
reitzensteinm wrote: post #40

Earlier quoted context omitted.

This is a bizarre argument to me, and I remember thinking that the last time you "pointed it out". You're essentially saying that tens of thousands of dealers and hundreds of billions of dollars worth of car companies are going to go out of business because they can't find a mutually beneficial incentive structure. It's not going to be all roses, but Tesla shunning dealers hasn't exactly been either, from a service q…

You're essentially saying that tens of thousands of dealers and hundreds of billions of dollars worth of car companies are going to go out of business because they can't find a mutually beneficial incentive structure. It would be far from the first time. One of the biggest problems is for a company whose internal incentives and business model are based around one set of market assumptions to rethink it all and do som…

Yeah, I've read them too. But you're not saying that it's a challenge the industry will face, you're saying the death is a fait accompli, and the entire traditional auto industry is not real competition to Tesla (your words from your linked post).

I don't need to wait ten years to decide that you're wrong; even if your prediction turns out to be correct (which it might), assigning a 100% probability to this outcome is absurd, and if you could reliably do this you'd be a trillionaire.

Since we're reading the tea leaves via business school curriculum, what about a little Prisoner's Dilemma?

Let's assume that consumer demand exists for EVs (which Tesla has basically created single handedly), and EVs aren't profitable when slotted in to the cost structure of a traditional dealership due to the lack of maintenance. Dealers try every trick in the book to steer customers away from EVs.

Why wouldn't a percentage of dealerships defect, rebrand and focus exclusively on EVs? They'll enjoy abnormally high sales, and be profitable on the margins from new car sales alone. Dealerships that insist on only selling ICE vehicles will stick around for a while, but nobody will start one, and the number will be reduced by attrition. The total number of dealerships fall and the EV transition is completed over a few decades.

So to be clear: you assign a zero percent probability to this happening?

Re: Tesla Q4 2018 Earnings Letter

#65

Post by xkjkls »

olau wrote: post #45
dragontamer wrote: post #19

Earlier quoted context omitted.

Yes. Musk abstained from voting. Musk made his opinion known, but otherwise "fairly" let the shareholders vote on the issue. At least technically fair. It was 85% in favor of merging. I say "technically", because Musk also went around trying to convince people that they should allow SCTY to be acquired by TSLA. But hey, shareholders trust Musk and were willing to follow his opinion on the matter. So I guess its fair…

> A stupid move, but fair. Are you're saying this from a short-term financial perspective? I personally think it's too early to tell if it was a stupid move. Elon Musk had a plan, and his plans do seem to work out for the most part given some time. It's my understanding that they recently cut a major sales channel, so it's perhaps not surprising that the number of installations have fallen.

> Are you're saying this from a short-term financial perspective?

I'd argue it was a stupid move from a short-term, long-term, and even medium-term financial perspective. Not only did TSLA subsume all of SCTY's debt, they diluted their shares doing so, and most analysts of TSLA value the solar/energy business at a 0 despite the $2.6 billion acquisition. How many other businesses can make multi-billion dollar acquisitions that people think are goose eggs two years later without that being considered a bone headed move.

> It's my understanding that they recently cut a major sales channel, so it's perhaps not surprising that the number of installations have fallen.

And why did they have to do that? Because Tesla had been negative free cash flow for so long that they had to stop spending any additional money on Capex. Had they been in a better financial situation, like, for instance, like they would be if they didn't do this acquisition they might have been able to invest in future growth and wouldn't have done two series of layoffs in the last 6 months.

Re: Tesla Q4 2018 Earnings Letter

#66

Post by xkjkls »

sib wrote: post #61
threeseed wrote: post #20

Earlier quoted context omitted.

> Tesla is significantly ahead of the pack so far Not really. Audi e-tron, Jaguar iPace and BMW i3 are all well reviewed. And 2019/2020 will see a wave of car companies e.g. Hyundai, Mercedes entering the market including plenty of interesting startups coming out of China. So Tesla is going to need far more to differentiate themselves than just range.

I've ridden in an i3 a lot (good friend owns one) and I own a Model 3, and they are _completely_ different cars. They both have 4 tires and will get you from point A to point B, but that's about it.

I disagree with that. The main appeal of a Tesla over other cars is the zippy electric drive train. The rest of a Tesla car... well, leaves a lot to be desired for. The Model 3 has already developed a reputation for being unreliable, and that's even with the simpler design of an all electric vehicle compared to an ICE vehicle. They mess up on all the things that every other auto manufacturer has spent enough time in the business to get right: panel gaps, paint issues, soundproofing, etc. That's a huge competitive problem.

Re: Tesla Q4 2018 Earnings Letter

#67

Post by tomp »

paganel wrote: post #55
tomp wrote: post #44

Earlier quoted context omitted.

> offer far more value i.e. premium branding and better interiors This can't happen soon enough. Ever since driving a Tesla, I'm completely disappointed by the interior/control panels of most (all?) other cars. Buttons, seriously? A 9-inch screen?!

> Buttons, seriously? Buttons allow a driver to not take his/her eyes off the road while changing the radio station or adjusting the AC. Totally eliminating dashboard buttons is dumb, but fortunately some car-makers have started realizing this and have started to re-introduce some of those buttons.

Yeah, I'm not opposed to a few buttons - like +- temperature, all blinkers, etc. But in most cars, the number of buttons is just overwhelming, so you probably need to take your eyes off the road just to find the button you're looking for!

Re: Tesla Q4 2018 Earnings Letter

#68

Post by bronco21016 »

paganel wrote: post #55
tomp wrote: post #44

Earlier quoted context omitted.

> offer far more value i.e. premium branding and better interiors This can't happen soon enough. Ever since driving a Tesla, I'm completely disappointed by the interior/control panels of most (all?) other cars. Buttons, seriously? A 9-inch screen?!

> Buttons, seriously? Buttons allow a driver to not take his/her eyes off the road while changing the radio station or adjusting the AC. Totally eliminating dashboard buttons is dumb, but fortunately some car-makers have started realizing this and have started to re-introduce some of those buttons.

Additionally, buttons and knobs allow critical systems like HVAC to be operational and affordably serviced when the infotainment system inevitably dies. This was the primary reason I got rid of my 2015 Ford Fusion. The SYNC system in it became a generation behind and even when it was the latest generation it was nearly impossible to get it serviced at the dealer for software updated.

Re: Tesla Q4 2018 Earnings Letter

#69

Post by xkjkls »

jesscxc wrote: post #60

Is there another vehicle company that is close to Tesla in self-driving capabilities? If Teslas drive themselves and other EVs don't, are they a comparable car?

Tesla's don't drive themselves though. Tesla has removed the FSD option from all it's model's since October. Most self driving engineers don't actual believe the strategy of using only standard cameras installed in the vehicle is going to work out long term, and their self driving unit has less funding than BMW's, GM's Cruise division, Google or Uber.

It's hard to see how they win the self driving game, and if they do, it will be years off.

Re: Tesla Q4 2018 Earnings Letter

#70

Post by xkjkls »

Pharmakon wrote: post #59
chollida1 wrote: post #2

Pre: - Will they give guidance on Model 3, Geographic breakdown(most other peers do)? - how many sales are high end cars vs low end? - TSLA down 11% on year vs market up 5ish - convertable debt issue, we're now in the 20 day average window, option implied vols show market doesn't think they'll make it - Elon commented that they could pay bond w cash and didn't seem concerned, cash balance is up, though so are short t…

Tesla also just lost another CFO. Deepak Ahuja announced he’s leaving. Again. https://www.cnbc.com/2019/01/30/musk-says-tesla-cfo-deepak-a...

And this much turmoil in an accounting department is never good. In the last year, they've lost 5 finance VPs, their CFO, and a CAO that they hired and left a month into his tenure. That would be shocking for any other $50 billion market cap company.
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