4 ms·

Here is a distillation of various Tesla commentary I have seen, heard, and read. Tesla made some mistakes, some due to hubris, some due to speed, some due to t

by babesh 6y ago

Here is a distillation of various Tesla commentary I have seen, heard, and read. Tesla made some mistakes, some due to hubris, some due to speed, some due to the newness of EVs. Their emphasis is on speed since their mission is accelerating sustainable energy. That results in rapid iteration to reduce cost and simplify production. All those changes result in deviance but also improvements. The speed helps them quickly fix novel problems. So you get panel gaps in some cars as they change and fix processes but you also get improved range due to the lighter rear casting. You get paint defects in some cars as they speed up the production line and don’t initially notice that it decreased drying time. You also get cheaper cars since they can produce more cars in the same time. You get a rattling heat pump that they subsequently insulate but you also get better range especially in cold weather. This is why he said that if you want perfection, you either get an early car (since they will be inspected thoroughly) or you get a car at the end after all processes have stabilized. What should theoretically be happening all along the way though is a car that is overall better than competition since it is being much more rapidly improved (and with Tesla learning along the way). It’s up to each consumer to decide.

totalZero 6y ago
Their emphasis is on speed because shareholders care about vehicle deliveries and guidance[0], and their net income depends on the sale of regulatory credits that are granted when Tesla sells a car in a ZEV state[1]. [0]https://www.fool.com/investing/2021/01/27/tesla-earnings-today-why-guidance-is-key https://www.fool.com/investing/2021/01/27/tesla-earnings-tod... [1]https://www.sec.gov/Archives/edgar/data/1318605/000119312510068933/dex1032.htm https://www.sec.gov/Archives/edgar/data/1318605/000119312510...
- mrDmrTmrJ 6y ago
  That news narrative is deeply misleading. Tesla achieves a 23.7% automotive margin, excluding regulator credits [#1 p. 31]. Regulatory credits for Q4 were $401M [p4] while they increased their quarter over quarter R&D spending by $156M [p. 28] and paid stock based compensation charge of $633M, up from roughly $347M in Q2 as the stock boomed [p.30]. Call that an additional $286M of stock based compensation and adding $156M in R&D we have an additional $442M in Q4 expenses. So the Q4 regulator credits are slightly less than the combined 42% Q/Q R&D increase (a great thing) and increased SBC charges (also a good thing as caused by rising share price). Keeping net income flat by investing in R&D, and 'suffering' from increased SBC charges as the stock soars, is a great thing for a high growth company to do! Why pay taxes on net-income when it's FAR more profitable longterm to invest more in R&D. Said differently, their $3B net cash from operations in Q4, and then $1B in cash invested in investment, are the real news of the quarter. [#1] https://tesla-cdn.thron.com/static/1LRLZK_2020_Q4_Quarterly_Update_Deck_-_Searchable_LVA2GL.pdf?xseo=&response-content-disposition=inline%3Bfilename%3D%22TSLA-Q4-2020-Update.pdf%22 https://tesla-cdn.thron.com/static/1LRLZK_2020_Q4_Quarterly_...
  - totalZero 6y ago
    Gross margin is not a reasonable metric of a company's profitability when it has large fixed costs, as does Tesla. I get the impression that you already know that. They run factories on three continents and will be constructing more for the foreseeable future. Tesla's operating margin is 5.4%.
- nickik 6y ago
  his story is repeated so often and is never given any context. Their net income does not depend on credits, if anything it is GAAP profitability, but that is just misleading. The story with Tesla is funny to me, the anti-Tesla crowed is just running down the field with goal post as fast as they possibly can. The TSLAQ crowd basically has two last bunkers they are defending, profit from regulatory credits and Tesla cars are literal trash when the come out of the factory. Both are vastly blown out of proportion. When Model 3 started to come out people said Tesla could never bring a mass market car to market. Prediction over prediction how it would kill the company. When that was accomplished people said, well but you can never make a mass market EV and be profitable, and the rules and regulation around regulatory credits have not changed since then. Now Tesla is making a profit for 6 quarters, now even in a pandemic year its not enough profit, because some revenue might go away in 2-3 years. What they ignore is the progression of both growth and margin, even excluding credits. Tesla grew automotive deliveries by 36% in a pandemic year and improved overall operational margin from basically less then 0% to among the best of any car company. During 2020 they have innovated technologically in many ways, most uniquely literally turning into a battery company that makes not only its own cell but also its own cell manufacturing equipment. Guidance for next year, and Tesla has been conservative with guidance since 2017 disaster, is another year of growth of around 50% and with operational margin that are as good or better then 2020. During 2020 they have massively expanded, more the doubled, Shanghai factory, they have begun billing truly huge factories in both Europe (Berlin) and the US (Austin). This required huge amounts of capital and will only real start to really make them money in 2022, but its massive operational leverage that is being generated here. Even when taking this into account, what many still ignore is that Tesla has to make massive investments in things they don't get a return for yes. Massive expansion of the supercharger network, service centres and stores. Basically every existing car company is making a huge amount of money from service (essentially parts), this is because they are not growing and the have millions and millions of cars that are out of warranty on the road. Tesla because of its growth has way more cars under warranty in relation to those out of warranty and that, plus building up new locations, makes their service a huge drain on the company. In the long run, both the super chargers and service will be making lots of cash for Tesla but you never hear this mentioned, specially in the sites that cater to the TSLAQ. There is just a large market out there for negative prediction on Tesla. The Fool is one of those pages who has been writing negative Tesla articles, for many years now. They have completely gotten the story wrong so many times and the often had known short seller write articles for them. The 'Tesla can not make money without credits' storyline will hold up maybe a 1-2 more quarters.

by babesh 6y ago

totalZero 6y ago

Their emphasis is on speed because shareholders care about vehicle deliveries and guidance[0], and their net income depends on the sale of regulatory credits that are granted when Tesla sells a car in a ZEV state[1]. [0]https://www.fool.com/investing/2021/01/27/tesla-earnings-today-why-guidance-is-key https://www.fool.com/investing/2021/01/27/tesla-earnings-tod... [1]https://www.sec.gov/Archives/edgar/data/1318605/000119312510068933/dex1032.htm https://www.sec.gov/Archives/edgar/data/1318605/000119312510...

mrDmrTmrJ 6y ago
That news narrative is deeply misleading. Tesla achieves a 23.7% automotive margin, excluding regulator credits [#1 p. 31]. Regulatory credits for Q4 were $401M [p4] while they increased their quarter over quarter R&D spending by $156M [p. 28] and paid stock based compensation charge of $633M, up from roughly $347M in Q2 as the stock boomed [p.30]. Call that an additional $286M of stock based compensation and adding $156M in R&D we have an additional $442M in Q4 expenses. So the Q4 regulator credits are slightly less than the combined 42% Q/Q R&D increase (a great thing) and increased SBC charges (also a good thing as caused by rising share price). Keeping net income flat by investing in R&D, and 'suffering' from increased SBC charges as the stock soars, is a great thing for a high growth company to do! Why pay taxes on net-income when it's FAR more profitable longterm to invest more in R&D. Said differently, their $3B net cash from operations in Q4, and then $1B in cash invested in investment, are the real news of the quarter. [#1] https://tesla-cdn.thron.com/static/1LRLZK_2020_Q4_Quarterly_Update_Deck_-_Searchable_LVA2GL.pdf?xseo=&response-content-disposition=inline%3Bfilename%3D%22TSLA-Q4-2020-Update.pdf%22 https://tesla-cdn.thron.com/static/1LRLZK_2020_Q4_Quarterly_...
- totalZero 6y ago
  Gross margin is not a reasonable metric of a company's profitability when it has large fixed costs, as does Tesla. I get the impression that you already know that. They run factories on three continents and will be constructing more for the foreseeable future. Tesla's operating margin is 5.4%.
nickik 6y ago
his story is repeated so often and is never given any context. Their net income does not depend on credits, if anything it is GAAP profitability, but that is just misleading. The story with Tesla is funny to me, the anti-Tesla crowed is just running down the field with goal post as fast as they possibly can. The TSLAQ crowd basically has two last bunkers they are defending, profit from regulatory credits and Tesla cars are literal trash when the come out of the factory. Both are vastly blown out of proportion. When Model 3 started to come out people said Tesla could never bring a mass market car to market. Prediction over prediction how it would kill the company. When that was accomplished people said, well but you can never make a mass market EV and be profitable, and the rules and regulation around regulatory credits have not changed since then. Now Tesla is making a profit for 6 quarters, now even in a pandemic year its not enough profit, because some revenue might go away in 2-3 years. What they ignore is the progression of both growth and margin, even excluding credits. Tesla grew automotive deliveries by 36% in a pandemic year and improved overall operational margin from basically less then 0% to among the best of any car company. During 2020 they have innovated technologically in many ways, most uniquely literally turning into a battery company that makes not only its own cell but also its own cell manufacturing equipment. Guidance for next year, and Tesla has been conservative with guidance since 2017 disaster, is another year of growth of around 50% and with operational margin that are as good or better then 2020. During 2020 they have massively expanded, more the doubled, Shanghai factory, they have begun billing truly huge factories in both Europe (Berlin) and the US (Austin). This required huge amounts of capital and will only real start to really make them money in 2022, but its massive operational leverage that is being generated here. Even when taking this into account, what many still ignore is that Tesla has to make massive investments in things they don't get a return for yes. Massive expansion of the supercharger network, service centres and stores. Basically every existing car company is making a huge amount of money from service (essentially parts), this is because they are not growing and the have millions and millions of cars that are out of warranty on the road. Tesla because of its growth has way more cars under warranty in relation to those out of warranty and that, plus building up new locations, makes their service a huge drain on the company. In the long run, both the super chargers and service will be making lots of cash for Tesla but you never hear this mentioned, specially in the sites that cater to the TSLAQ. There is just a large market out there for negative prediction on Tesla. The Fool is one of those pages who has been writing negative Tesla articles, for many years now. They have completely gotten the story wrong so many times and the often had known short seller write articles for them. The 'Tesla can not make money without credits' storyline will hold up maybe a 1-2 more quarters.