Thoughts on TESLA

[aja8888]

God forbid! You do know that they are trying to build cheaper ones and that the tax breaks will end soon. Unemployment rate is at historic lows, so I think his employees have options. Cheer up.

The auto industry is in the funk right now (check the stats) many of those workers will have problems finding similar jobs. I was at a Burger King today and they are hiring so, correct, there are jobs.

 

[Ready]

I wonder how many actual reservations with deposits they have left in the US. There are Model 3’s available for immediate delivery, so why would anyone let Tesla keep their $1,000 at this point? Maybe they think when the elusive $35K car comes out their will be a mad dash to buy them, but I think it’s silly to let Tesla hold your money at this point if you don’t plan on buying what’s currently available for sale. I let them hold my money for two years. When I decided not to move forward I requested a refund, which I got back in about a week.

Of course then we totaled our Prius and ended up buying one, but that’s another story.

 

[NW-Bound]

Many of the people waiting in line to make that $1K deposit wanted to get a M3 for $27,500 ($35K minus the $7,500 tax credit).

But Musk recently indicated that he will try to deliver the mid-range M3 by May 2019, and that's still a $44K car according to an article I read. By mid-year, the tax credit will be down to $1,875, and the people who wanted a car at $27,500 are not going to pay $42,125.

So, will there be more people stepping up to pay the going price? I suspect Tesla is already cutting back on production, because the sales already dwindle.

 

[ERD50]

I wonder how many actual reservations with deposits they have left in the US. There are Model 3’s available for immediate delivery, so why would anyone let Tesla keep their $1,000 at this point? Maybe they think when the elusive $35K car comes out their will be a mad dash to buy them, but I think it’s silly to let Tesla hold your money at this point if you don’t plan on buying what’s currently available for sale. ...

My guess is that is exactly what some of those people with reservations are holding out for. They missed the $7,500 tax credit. If they stay inline, they might get $3,750 off their desired $35,000 car. Or even if it only helps them get $1,875 off in the last half of 2019, that's still worth letting Tesla hold your $1,000.

-ERD50

 

[ERD50]

....

So, will there be more people stepping up to pay the going price? I suspect Tesla is already cutting back on production, because the sales already dwindle.

Hmmmm. Maybe I'm reading this wrong - if so, I know the fans will step in to shed some light on it.

So Musk cuts 7% of staff. But these reports say that they expect 3,000 Model 3's per week for Europe:

https://electrek.co/2018/12/12/tesla-imodel-3-volume-europe-port/

Tesla is going to ship 3,000 Model 3’s per week in Europe starting in February, report says

Seems like it was still a struggle to produce ~ 5,000/week for the US market. That should be even harder with 7% fewer employees. That only leaves ~ 2,000/week for the US market, maybe a bit more as they get more experience and smooth the production cycle some.

Does this mean US demand is down significantly? What does that mean for Tesla financials? Since Musk had predicted (SEPT2018):

"We aim to increase production to 10,000 Model 3s per week as fast as we can. We believe that the majority of Tesla's production lines will be ready to produce at this rate by the end of 2018," Musk said.

it would seem they anticipated that sort of demand at this time. Yet they just cut staff?

Maybe there's an explanation there, but I'm thinking it's just not looking good. I can understand that if they had limited production versus demand, they would prioritize the early EU/China shipments, and limit US sales, as they could focus early orders in EU/China on the highest end models. But that should be added to the 5,000/week they had been delivering to the US. So why cut staff?

Is there a silver lining?

-ERD50

 

[oneill225]

The auto industry is in the funk right now (check the stats) many of those workers will have problems finding similar jobs. I was at a Burger King today and they are hiring so, correct, there are jobs.

Both jobs are probably equally difficult to master. Lots of opportunity out there for those willing to take on the challenge and/or relocate. Who knows? Someday they may be able to afford a Tesla (without the tax break).

 

[eroscott]

Yes I believe he knew it would be bad for the stock, but he did not want it to come as a result of released financials that they did not meet targets he promised, so he can show he is proactive and has everything under control.

Below quote: I didn't realize they grew by +30% last year so down -7% they still grew by a large percent.
And you get to weed out the people that turned out to not be your high performers.

...
reduce full-time employee headcount by approximately 7% (we grew by 30% last year, which is more than we can support) and retain only the most critical temps and contractors.

Below quote: getting out the base model should sell a lot of cars.
Just look at the average price of cars these days (graphic below) -- $35K

...
Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months.

Higher volume and manufacturing design improvements are crucial for Tesla to achieve the economies of scale required to manufacture the standard range (220 mile), standard interior Model 3 at $35k and still be a viable company. There isn’t any other way.

 

[eroscott]

First SpaceX, and now Tesla with significant cuts to employee staff. Based on premarket, market didn't like the news this morning.

https://www.cnbc.com/2019/01/18/elon-musk-tesla-email-to-employees-about-job-cuts.html

I'm wondering if people are actually listening to this video and what those several analysts had to say. It was very good.

Video in above 'article' plus standalone here:
https://www.cnbc.com/video/2019/01/18/tesla-layoffs-elon-musk.html

 

[Lakewood90712]

Below quote: I didn't realize they grew by +30% last year so down -7% they still grew by a large percent.
And you get to weed out the people that turned out to not be your high performers.



Below quote: getting out the base model should sell a lot of cars.
Just look at the average price of cars these days (graphic below) -- $35K

I don't see Tesla on the list. what is the average price of a Tesla brand vehicle sold, not just model 3 ? And are those MSRP on the list or actual retail sales ?

 

[eroscott]

I don't see Tesla on the list. what is the average price of a Tesla brand vehicle sold, not just model 3 ? And are those MSRP on the list or actual retail sales ?

I was pointing out why they need to get to the SR (Short Range) 200+ mile $35K car ... that is the correspondence to the table and my point. HTH

Per the table it is 'transaction price'. What they paid in the transaction so to me this does not mean the MSRP. See note for * tho. They could have gotten year end deal, Costco deal, etc.

*Kelley Blue Book average transaction prices do not include applied consumer incentives

Additional search you can do: https://www.google.com/search?q=average+cost+of+a+car+in+2018

My son's is the 2nd row. If you look at the 70 mph range in that chart (see 307 miles) that is about what he is getting on daily drives and trips. He has 10K miles on it now.

LR (long), MR, SR table. Light blue is range new.

Via: https://insideevs.com/calculated-tesla-model-3-mid-range-miles/

His actual TeslaFI.COM (3rd party) battery tracking report:

 

[Ronstar]

Below quote: I didn't realize they grew by +30% last year so down -7% they still grew by a large percent.

And you get to weed out the people that turned out to not be your high performers

+1. Maybe this was all done by design. Overhire, then weed out the underperformers. We had a manage consultant tell us to do that in order to build the most qualified workforce. He said that a company should lay off 10% of its workforce every year.


ETA: just got an email from Tesla wanting people to experience driving a Tesla on snow in Finland.

www.tesla.com/campaign/winter-experience/partner

 

[Midpack]

+1. Maybe this was all done by design. Overhire, then weed out the underperformers. We had a manage consultant tell us to do that in order to build the most qualified workforce. He said that a company should lay off 10% of its workforce every year.

Jack Welch was well known for that at GE as you probably know.

 

[bobandsherry]

Below quote: I didn't realize they grew by +30% last year so down -7% they still grew by a large percent.
And you get to weed out the people that turned out to not be your high performers.

The 13% drop in price (on a day when market was up) certainly shows the market considers this to be less than positive news.

 

[bobandsherry]

Jack Welch was well known for that at GE as you probably know.

Yeah things work well until they don't.

 

[NW-Bound]

Out of curiosity, I surfed the Web to read comments from Tesla workers, and people said that they were worked hard, and Musk acted aristocratically and fired people for petty things. Of course, these are just anecdotes, but seeing reports of Tesla cars not just with shoddy paint jobs, but obvious scratches and wheel rim rashes, I wonder if these were not incidences of sabotage.

About my earlier comment wondering if Tesla is reducing production, I took that back. No, even if US sales were slowing down, they would divert that to export.

 

[Ronstar]

Jack Welch was well known for that at GE as you probably know.

Yes I remember that. Works good on paper - but the workforce that you phased out could have been more productive than the one you hired in.

I’m kind of surprised that Tesla’s layoff is only 7%. I would think that they overhired by more than that temporarily to meet peak tax credit era demand and build inventory.

 

[ERD50]

Below quote: I didn't realize they grew by +30% last year so down -7% they still grew by a large percent.
And you get to weed out the people that turned out to not be your high performers. ...

Jack Welch was well known for that at GE as you probably know.

Yeah things work well until they don't.

The 13% drop in price (on a day when market was up) certainly shows the market considers this to be less than positive news.

To the fans, there appears to be no downside to anything, it's always rainbows, puppies and unicorns! To infinity and beyond!

"war is peace
freedom is slavery
ignorance is strength"

"Down is up"?
​

I was pointing out why they need to get to the SR (Short Range) 200+ mile $35K car ...

And when will that be, at decent margins? That's a big question, a big challenge for Tesla.

I'm wondering if people are actually listening to this video and what those several analysts had to say. It was very good.

Video in above 'article' plus standalone here:
https://www.cnbc.com/video/2019/01/18/tesla-layoffs-elon-musk.html

As bobandsherry said, if it was 'very good' the stock would not have dropped. When I lose money, it's cold comfort to find someone telling me it's all 'very good'.

I'm wondering if eroscott actually listened to this video. Here's some of that video (emph mine):

~1:08 - "You never want to see a growth company cutting staff like this."

Yep, he said "never".

~1:48 - "Clearly in my mind, they have an issue with demand." He goes on to point out that 90% of the reservations seem to be holding out for the $35,000 model. And that their 4% Q3 profit came with higher margin cars, that will change as they roll out cheaper models.

~3:14 - "I think there is a lot of risk to the name.". Goes on to mention high valuation, high level of debt, and competition entering 2019/2020.

~6:20 - "Realistically, for them to see the growth that is expected by the street, they do need to get the price down to $35,000 and I see that as an extraordinarily difficult thing for them to accomplish. I actually don't think they will accomplish it".

Wait - they need to do it, but he does not think they will accomplish it? That does not sound 'very good' to me!

There were some other positive views, and some balance, but of course, eroscott gives the impression it's all 'very good', no negatives?

-ERD50

 

[oneill225]

Europe

As expected:

https://insideevs.com/tesla-model-3-approved-sale-europe/

 

[ERD50]

....
About my earlier comment wondering if Tesla is reducing production, I took that back. No, even if US sales were slowing down, they would divert that to export.

But Musk planned on 10,000 Model 3's per week by now. They were around 5,000/week, with lots of push. What can they do in the near term after a 7% cut?

Sure, exports mean more sales, but if they are only making ~ 5,000, that means fewer sales to the US. I would think they would want to go for all they can while they still have the half tax credit in the first half of 2019, and the quarter tax credit in the 2nd half.

-ERD50

 

[NW-Bound]

~1:48 - "Clearly in my mind, they have an issue with demand." He goes on to point out that 90% of the reservations seem to be holding out for the $35,000 model. And that their 4% Q3 profit came with higher margin cars, that will change as they roll out cheaper models.

Regarding Q3 2018 "blow out" earnings of $311M, it was later revealed that $190M of that came from emissions credit sold to other car makers that did not meet the emission legal requirements. This pure profit item is erratic and can be lumpy.

Q4 earnings will be released soon on Feb 7. It will be interesting to see, but Musk already prepared the market to not see a repeat of Q3.

 

[oneill225]

But Musk planned on 10,000 Model 3's per week by now. They were around 5,000/week, with lots of push. What can they do in the near term after a 7% cut?
Sure, exports mean more sales, but if they are only making ~ 5,000, that means fewer sales to the US. I would think they would want to go for all they can while they still have the half tax credit in the first half of 2019, and the quarter tax credit in the 2nd half.-ERD50

Wants vs reality. Getting to 5,000 per week in a year is a major accomplishment, but it took a lot of learning and improving to get there. Now they largely know what works and they can reproduce it in China to build the Model Y next year. In the meantime, charging networks need to grow, service becomes a larger issue, and battery production needs to grow. All of it takes time and money. Remember, it has only been a little over a year for the Model 3.

As an investor, I look at the trajectory of a business based on actual performance and demand, not the platitudes promised by the leadership or PR department. With Tesla, there is no significant short-term threat to continued growth. That could change, but all of the angst over Musk overpromising misses the point. Tesla has kick-started a dormant electric vehicle industry and is poised to be the next Apple, Amazon, or Microsoft for investors.

The stock market is very skittish, right now. Headlines drive huge swings, but if the underlying business is promising, the stocks should rebound. Tesla has a very promising business.

 

[Texas Proud]

Just under $30,000 is right where the Camry, Accord, Legacy, etc. buyers are at. Add the same types of options as the Model 3 and they will bump up into the low $30k range. If Tesla can get the Model 3 down to $35k without incentives, then they are going to be competitive with those cars (and similar ones)

I think the Tesla has a competitive advantage over these sedans with gas savings, performance, and technology. What is it worth to cut your gas bill in half or more? I think a $5,000 difference is not a show-stopper for those willing to spend $30k on a Camry. Of course, there will always be a market for the least expensive cars, but the majority of sedan buyers are in that 30-40k range (whether we call it luxury or not).

Not sure what you mean by no new big car manufacturers entering the US since 1969. The Japanese car makers nearly put Detroit out of business in the 80s. A superior product can sell. That is why Tesla is the 4th or 5th best selling sedan after being on the market just over 1 year.

One of the other things you have to consider is styling and comfort along with driving dynamics.... I do not think the 3 looks good at all... there has been many posts about the interior being sub par.... not sure about handling, but the 3 does beat the others on acceleration....

 

[Chuckanut]

I can't help but think that their automated assembly line (the one that proved humans were under-rated) has had some fixes done to it. My guess is the $35,000 Model 3 price always depended on machines doing most of the work while the under-rated humans pushed a button and dozed (Meet George Jetson!). I can't help but think they will get more out of those machines as time goes by.

 

[Texas Proud]

If Musk had claimed they would be making 4,500 per week currently, would you be praising him? Would you have predicted it a year ago?

Why do you care if he is aggressive in his estimates? Take a step back and try to recognize that what Tesla is doing to the auto industry is pretty amazing.

It is not me... but if any other CEO in almost any industry was as far off in their estimates the market would hold them accountable... heck, they might even be driven out of their job... why should Musk get a pass?


BTW, I think that the auto industry would be going in this direction anyhow without Musk... I think he has just made it happen sooner than if he were not here...

 

[Lakewood90712]

Tesla Layoffs

Speculating, many of the 7 % are temps , contractors , and, excess staff tripping over each other in the mad push to prove the 5K production and delivery rate.

Vehicles produced per employee will improve over time and the 35K model 3 could happen, but only with large sub assemblies produced in China , shipped to Freemont for final assembly.

Wall Street needs to be patient and the company needs to stop over promising for the company to succeed long term.