Tesla is off the rails

[Red Badger]

Apple could have said "our experience vs IBM is minuscule."

Someone should have told Mr. Bezos that his experience compared to JC Penny and Sears was minuscule.

Sometimes new technology replaces those that are outdated.

The new California law mandating truck sales being electrified in 2024 will further increase Tesla sales.

+1.

Even with millions of vehicles sold, GM can still produce some dogs - - -like the bolt.
2019 US sales? <5000 units.
Big doesn't mean great.

 

[OldShooter]

+1. Even with millions of vehicles sold, GM can still produce some dogs - - -like the bolt. 2019 US sales? <5000 units. Big doesn't mean great.

True, but tangential. I don't know how far down this rabbit hole I want to go, but years of field experience has taught automakers what effects underbody corrosion has on various bits of the car like brake caliper pins, CV joints, bearings, etc. It has also taught them what has to be stronger than maybe the straight strength-of-materials calculations call for. How brake lines should be routed to minimize the probability of damage. How manufacturing tooling wear affects fit, finish, and initial quality. Where salty snow can accumulate and cause serious corrosion. Seat tracks and springs after years of driving on rough roads. How battery storage areas must be vented. On, and on, and on. They also learn from every recall. They know to go slow and monitor new things, like auto driving software that novice Tesla released too soon. Anyone who has done any kind of engineering or manufacturing management knows that organizational learning and experience is an important contributor to success. As they say, life is like school but first you get the test and then you get the lesson. Tesla's test-taking experience is very limited at this point.

Now, fan-boys and true believers: Tesla's lack of experience is a negative. There are many positives and many other negatives plus a lot of future good and bad luck that will all determine their long term success. And the economic impact of that success or lack of success will show, in hindsight, the stock price range that corresponds to it being a good investment.

 

[njhowie]

True, but tangential. I don't know how far down this rabbit hole I want to go, but years of field experience has taught automakers what effects underbody corrosion has on various bits of the car like brake caliper pins, CV joints, bearings, etc. It has also taught them what has to be stronger than maybe the straight strength-of-materials calculations call for. How brake lines should be routed to minimize the probability of damage. How manufacturing tooling wear affects fit, finish, and initial quality. Where salty snow can accumulate and cause serious corrosion. Seat tracks and springs after years of driving on rough roads. How battery storage areas must be vented. On, and on, and on. They also learn from every recall. They know to go slow and monitor new things, like auto driving software that novice Tesla released too soon. Anyone who has done any kind of engineering or manufacturing management knows that organizational learning and experience is an important contributor to success. As they say, life is like school but first you get the test and then you get the lesson. Tesla's test-taking experience is very limited at this point.

Now, fan-boys and true believers: Tesla's lack of experience is a negative. There are many positives and many other negatives plus a lot of future good and bad luck that will all determine their long term success. And the economic impact of that success or lack of success will show, in hindsight, the stock price range that corresponds to it being a good investment.

Don't you think that Tesla employs lots of folks with years of field experience having previously worked for the major auto manufacturers? Of course they do.

They sure did at SpaceX. They hired all the experts in the field, then they simply started from square one, using everything they knew about traditional (rocket) vehicle design and asking "What's the better/best way to do it"?

 

[Red Badger]

Don't you think that Tesla employs lots of folks with years of field experience having previously worked for the major auto manufacturers? Of course they do.

They sure did at SpaceX. They hired all the experts in the field, then they simply started from square one, using everything they knew about traditional (rocket) vehicle design and asking "What's the better/best way to do it"?

Exactly the point. I'm pretty sure Musk also did not want hire design engineers that built a car that looks like a dog taking a dump.
But GM did - twice.

 

[OldShooter]

Don't you think that Tesla employs lots of folks with years of field experience having previously worked for the major auto manufacturers? ...

These would be the guys who won the "dead last" prize behind IIRC 34 other manufacturers in the JD Powers initial quality ratings, right?

Tesla may be a roaring success in the long run, it may be an also-ran, or it may be dead. I actually don't care much, but I do know enough to not drink the Kool-Aid.

 

[Animorph]

There's already at least one Tesla with 400k miles driven in commercial service. There are many in the 100k's and 200k's from long commutes. I'm comfortable with the reliability. Battery lifetime in years and not just miles is a question in my mind. Battery cells are in short supply, so buying just a new battery could be expensive.

I think the main drawback of electric car operation is charging, of course. If you can't charge at home you still have to stop somewhere to charge and it takes longer than at a gas station. And trips take a bit longer, which we actually like at our ages. But charging at home and no gas or combustion smells is also a big benefit.

We have two Teslas. I would never buy another ICE car. And that's based on performance, driving experience and home "fueling", not the environment. I'd be happy to buy an electric from a different manufacturer if they had a better electric car. Driving an ICE rental car is major pain, to be avoided if at all possible.

So I love the product. The company has been close to break even for quite a while, even while spending on ramping production and R&D. I don't know of any direct subsidies they receive other than selling pollution credits to other car companies. I expect they will do well in the future. I sure hope they do well and push all the other dinosaur car makers to compete. When your sales tactic is "Subaru is love" what are you really selling? The major car companies have been doing nothing for a long time.

So back when Elon Musk tweeted he was taking Tesla private I bought 10 shares at $377. That was just in case he was able to take us little shareholders private and I'd be able to stay in touch. When the stock price dropped to $281 I bought another 10 shares at my 25% down buy point. When it dropped to $188 (my 50% down buy point) I said what the heck and bought 100 shares. Right after that TSLA went crazy.

Now my capital gains are too high to sell shares this year. But I have no other individual stocks, and only a few ETF's and non-index mutual funds left in my taxable account. None of which fit my current AA. They'll be sold off in the next 5-7 years for living expenses. I'll be happy to sell TSLA at anywhere near current prices, but next year or maybe later if it's still nuts then.

Last week the topic of Tesla shorts was that they were going to reach $20B in short value, an all-time record for any stock. I think the shorts are super crazy and can't see how anyone would trust them with money. Nonetheless, there's still the potential there for a really big short squeeze. And the possibility of inclusion soon in the S&P500 (after a possible yearly profit for the first time) is another possible booster. But I sure wouldn't be a buyer at these prices.

 

[ExFlyBoy5]

True, but tangential. I don't know how far down this rabbit hole I want to go, but years of field experience has taught automakers what effects underbody corrosion has on various bits of the car like brake caliper pins, CV joints, bearings, etc. It has also taught them what has to be stronger than maybe the straight strength-of-materials calculations call for. How brake lines should be routed to minimize the probability of damage. How manufacturing tooling wear affects fit, finish, and initial quality. Where salty snow can accumulate and cause serious corrosion. Seat tracks and springs after years of driving on rough roads. How battery storage areas must be vented. On, and on, and on. They also learn from every recall. They know to go slow and monitor new things, like auto driving software that novice Tesla released too soon. Anyone who has done any kind of engineering or manufacturing management knows that organizational learning and experience is an important contributor to success. As they say, life is like school but first you get the test and then you get the lesson. Tesla's test-taking experience is very limited at this point.

Now, fan-boys and true believers: Tesla's lack of experience is a negative. There are many positives and many other negatives plus a lot of future good and bad luck that will all determine their long term success. And the economic impact of that success or lack of success will show, in hindsight, the stock price range that corresponds to it being a good investment.

I am not looking to argue as I am agnostic in regards to EVs and Tesla. However, all the "advances" you speak of by the biggest auto makers are...well, common knowledge. Musk doesn't build these cars alone, he has brought on the brightest and smartest people to help him...many of the same folks that worked FOR YEARS at the big car producers. He's not stupid and neither are the folks that work for him. A couple of the absolute smartest folks I worked with in the Air Force work for Tesla and listening to them talk about some of the new technology they are working on...well, it's freaking amazing.

 

[RetiredAtThirty-eight]

Folks who subscribe to Efficient Market Hypothesis would say that it is already baked into Tesla's stock price.

By that logic, everything we already know is already baked into the share price of every public company.

So, why invest?

We invest for the capital appreciation over time. Since everything we know about a company is already baked into the share price, it doesn't matter which companies you invest in.

 

[njhowie]

By that logic, everything we already know is already baked into the share price of every public company.

That's what EMH says. At any point in time, that is the case. I do not agree with it, and I have enough evidence (anecdotal, of course) that I know it is a bunch of BS.

Since everything we know about a company is already baked into the share price, it doesn't matter which companies you invest in.

That is an incorrect inference and not what EMH says nor should have you conclude.

You do not know which companies will succeed in the future nor which ones will fail. EMH only tells you about the price today and at any moment in time.

Considering that we're on the Tesla thread, and seeing what the shares have done over the past year, how can you seriously say that it doesn't matter which companies you invest in?

 

[RetiredAtThirty-eight]

The company has been close to break even for quite a while, even while spending on ramping production and R&D. I don't know of any direct subsidies they receive other than selling pollution credits to other car companies.

After the first 200,000 zero emission car sales the Income Tax subsidies began to be cut from the original $7,500/car to half that. Then, six months later, a quarter that. Then, six months later they went to zero.

Tesla naysayers have claimed for many years that Tesla's business depended upon those Federal Tax subsidies and, when they phased out, Tesla demand would evaporate and Tesla would go bankrupt, kaput, done. Well, since the subsidies disappeared, Tesla has been selling more cars than ever. And the sales order backlog has increased. And Tesla's financial position has changed dramatically for the better.

The Tesla naysayers have been dramatically wrong for 10 years running. I don't expect them to all of a sudden start being right.

 

[RetiredAtThirty-eight]

That's what EMH says. At any point in time, that is the case. I do not agree with it, and I have enough evidence (anecdotal, of course) that I know it is a bunch of BS.



That is an incorrect inference and not what EMH says nor should have you conclude.

Congratulations!

That was my point.

 

[RetiredAtThirty-eight]

This kind of thing comes along from time to time. Examples include JDS Uniphase, Enron, WorldCom, Cisco, MySpace, and Amazon. You never know until everything becomes clear in the rear-view mirror.

I didn't invest in any of those companies. There was only one on your list that I wanted to own back in 2006, and I desperately wanted to own it but, alas, it was too expensive (yes, at $26/share, LOL!). Everyone said it was like tulip-mania and wouldn't end well and I didn't want to lose any money. I'm older and wiser now and realize I should have trusted my instincts that it would continue it's amazing growth and the share price and eventual profits would follow.

Guess what, for every $10,000 I had invested back then would now be worth $1,230,000.00! That's $1.2 million for anyone challenged by all those zeros. I wanted to invest about $30K but was waiting for it to hit a "more reasonable" $20/share, LOL!

I missed out on over $3.6 million in profits for my want of a "more reasonable" price.

 

[aja8888]

I didn't invest in any of those companies. There was only one on your list that I wanted to own back in 2006, and I desperately wanted to own it but, alas, it was too expensive (yes, at $26/share, LOL!). Everyone said it was like tulip-mania and wouldn't end well and I didn't want to lose any money. I'm older and wiser now and realize I should have trusted my instincts that it would continue it's amazing growth and the share price and eventual profits would follow.

Guess what, for every $10,000 I had invested back then would now be worth $1,230,000.00! That's $1.2 million for anyone challenged by all those zeros. I wanted to invest about $30K but was waiting for it to hit a "more reasonable" $20/share, LOL!

I missed out on over $3.6 million in profits for my want of a "more reasonable" price.

Yeah, we all had misses like that too.....

 

[RetiredAtThirty-eight]

A pretty rich valuation for a company with $2-3b in annual operating cash flows and $7b in shareholders' equity. Someone is in for a big disappointment.

I have a bit over half of my retirement currently invested in Tesla. I'm 57 years old, retired, and not worried one bit. All investment carries some risk. It takes money to make money.

 

[RetiredAtThirty-eight]

Yeah, we all had misses like that too.....

This is true. Anyone who has market investments has stories about the 'big one that got away' and I've heard a lot of them. The most common reason for missing out on big gains was not because someone hadn't heard of the company, not because they were too broke to buy a single share, not because they didn't want to own the company, no, it was because it "seemed" too expensive.

What I've learned is there are only so many truly exceptional companies that come along and, when you see one, it's best to just bite the bullet, close your eyes, and own a piece of it. So that's what I did with Tesla after following it for over 9 years.

 

[Sunset]

I have a bit over half of my retirement currently invested in Tesla. I'm 57 years old, retired, and not worried one bit. All investment carries some risk. It takes money to make money.

Wow.... That is certainly risky sounding.

Perhaps you bought it all at $50 when it amounted to 3% of your savings.
Now because it has gone up so much it's worth over 50% of your savings.

 

[RetiredAtThirty-eight]

Wow.... That is certainly risky sounding.

It's volatile, yes, but not as risky as it might sound. There is a difference between the two.

 

[aja8888]

Over the weekend, Tesla dropped the price of all its models, including the Y, by about 5%. This is a reflection on weak demand by all the automakers. Sales are down across the board and with rental fleets cancelling orders and going BK, it's going to get worse. With 30 million people out of work, who's buying new cars?

And the battle of the incentives and price cuts and deal-making is raging to move the iron. Not all vehicles will have fat incentives – such as fast-selling vehicles – but other vehicles have super-juicy incentives.

Tesla’s price cut of the Model Y looks steep for a supposedly hot model in a hot vehicle category. It’s a sign Tesla is now no longer exempt from sagging demand in the US market where hype and true believers alone don’t cut it anymore. And Tesla is using the classic automaker method — offering deals — in order to compete and move the iron. Every car will be sold eventually if you cut the price enough.

https://wolfstreet.com/2020/07/13/m...-as-other-automakers-offer-record-incentives/

 

[Born2Fish]

Over the weekend, Tesla dropped the price of all its models, including the Y, by about 5%. This is a reflection on weak demand by all the automakers. Sales are down across the board and with rental fleets cancelling orders and going BK, it's going to get worse. With 30 million people out of work, who's buying new cars?



https://wolfstreet.com/2020/07/13/m...-as-other-automakers-offer-record-incentives/

As a result, TSLA is up ~$100/share, 6.8% Premarket... will be interesting to see if TSLA continues the steep upward trajectory over the next week.

While I don't have a position in TSLA, there's no denying that Elon Musk is a brilliant leader that gets results.

 

[Whisper66]

It's volatile, yes, but not as risky as it might sound. There is a difference between the two.

50% of ones savings in any one stock easily meets any definition of risky I’ve ever heard. If one has so much money in the other 50%, this 50% just doesn’t matter. Then it’s just gambling money. Care to expound on your definition of “risky”?

 

[RetiredAtThirty-eight]

50% of ones savings in any one stock easily meets any definition of risky I’ve ever heard. If one has so much money in the other 50%, this 50% just doesn’t matter. Then it’s just gambling money. Care to expound on your definition of “risky”?

I have a pretty dim view of typical "professional" financial advisors. I could see they major flaws in their recommended strategies long before I retired. I had to fire my original stock broker because his recommendations came down from the top and he was telling me I needed to sell the company that would shortly become the best performing stock on the NASDAQ in the history of NASDAQ. They do not give good advice because it is corrupted by money.

Risk is widely misunderstood and the best example of this is that financial analysts use volatility as a proxy for risk. It's a grave error that cause most investors of professionally managed portfolios to have terrible performance. Traditional analysts use cash as a benchmark for risk while ignoring the substantial risk involved in holding cash.

The real answer to your question would require a book and I'm not going to go there. Suffice to say, I'm extremely comfortable with the composition of my retirement portfolio (and I've been retired 20 years).

 

[jim584672]

Tesla is looking like a Bitcoin parabolic. Up almost $200!

 

[RetiredAtThirty-eight]

Over the weekend, Tesla dropped the price of all its models, including the Y, by about 5%. This is a reflection on weak demand by all the automakers.

That is a severe misinterpretation of the price drop. Tesla consistently cuts the price of new models as they reach production volumes that allow for increased production efficiencies. The first few weeks and months of production of a new model are the most expensive to produce. The price drop is actually a very positive thing because it telegraphs that Tesla is ramping production of new models much more quickly and this is evidenced by the much shorter times between the start of production of Model Y and the first price drop.

Tesla is successful precisely because they can produce amazing cars at such affordable price points. Even when the cheapest Tesla was $70,000 they had good value compared to the most comparable ICE cars. When comparing like to like.

I am really laughing because for years the Tesla naysayers would say Tesla's cost too much for enough people to afford them, they will go bankrupt". Now, the same Tesla naysayers say "Tesla dropped the price, this must mean they can't sell enough of them!" If you understand what is actually going on, it's beyond comical!

 

[MRG]

Over the weekend, Tesla dropped the price of all its models, including the Y, by about 5%. This is a reflection on weak demand by all the automakers. Sales are down across the board and with rental fleets cancelling orders and going BK, it's going to get worse. With 30 million people out of work, who's buying new cars?



https://wolfstreet.com/2020/07/13/m...-as-other-automakers-offer-record-incentives/

The author certainly cherry picked his data. No mention of the cancelation of the short range Y, or the move under 50k allowing state tax incentives?
I'm not buying at this point, I'm up almost 100% in a few weeks and am expecting a small pullback

 

[Whisper66]

The real answer to your question would require a book and I'm not going to go there. Suffice to say, I'm extremely comfortable with the composition of my retirement portfolio (and I've been retired 20 years).

Disappointed but I suppose that was the answer I suspected would come. Glad you’ve had good results in the past and wish you continued good luck with your Tesla gamble.