Tesla

[weijian]

I do give boss musk credit for managing to hammer out a deal with chinese. In fact his recent fiasco with the buyout might be a leak of a Chinese investor wanting to buy out Tesla and be on the forefront of EV tech. Perhaps it could be Geely, they have already bought Volvo as well as Proton/Lotus, Tesla would be good addition to their automotive tech expertise. I suspect Elon may end up sell off his stake in the company to Chinese. There is no way Chinese just allow American company to just suka suka go and open factory in China without some sort of Chinese oversight or control or partnership....

On another note, seems like Dyson is coming over here to setup electric car factory to rival tesla. hahaha another high end EV company. Question is why didnt they go to China???

There seems to be an effort by China to continue to open up their automotive market (allowing wholly owned stakes) so as to spur more investment in new plants/offices (redistribution of wealth from State to bring up a healthy middle class?)

https://www.valuebuddies.com/thread-8882...#pid149898

I finished reading an autobiograpy on Elon Musk recently. While i was not privy to most of his work previously nor claim to be an expert about him, but his past experience at PayPal and the way he is hanging onto SpaceX suggest to me that he wouldn't be selling out of Tesla if he has a choice. All the brands bought up by Geely were sort of distressed sales.

As for Dyson's investment, there are always 2 pros and cons to the what/where decision of investing CAPEX. Can't underestimate the perks that EDB has thrown towards Dyson to secure their investment and the 600mil population that the ASEAN market offers. The electric car market in China is probably a crowded trade with SOEs and well connected/entrenched private players. Could Dyson be thinking out of the box by trying to play the game else where?

[donmihaihai]

https://www.thestreet.com/opinion/tesla-...s-14756742
Tesla Soars After Blowing Away Earnings Estimates: 10 Key Takeaways
Eric Jhonsa
Updated Oct 24, 2018 8:54 PM EDT

With the help of a major improvement in Model 3 gross margins (more on that shortly), as well as recent spending cuts, Tesla produced $881 million in free cash flow (FCF) in Q3. That's well above an analyst consensus of $191 million, and represents a big reversal from FCF of negative $739 million in Q2 and negative $1.42 billion in the year-ago period.
That in turn helped Tesla's cash balance improve by $731 million sequentially to nearly $2.97 billion, in spite of the repayment of $82.5 million worth of bonds (the company's long-term debt and capital leases still total $11.9 billion) Not surprisingly, Tesla is still guiding for positive Q4 GAAP net income and FCF; no specific targets are given. CEO Elon Musk had previously indicated that both Q3 and Q4 would be profitable on a GAAP basis and feature positive free cash flow.

On the call, Musk added that Tesla's "aspiration" is to be profitable and cash-flow positive every quarter going forward, save for ones in which the company has a large debt repayment to make. He also noted that Tesla wants to improve its cash conversion cycle to the point where it gets paid by customers for cars before it has to pay suppliers for the parts used to make the car.

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Tesla has came a long way since I first invested in 2016, they were only making $7Billion in annual revenues. Last quarter alone, they made $6.8 billion in revenues.

Optimistic about their future  

Sudden change in cost structure in a quarter. Lesser working capital requirement in FY18 compare to previous yr during the sudden change. how are these possible? Smell smell.

Know nothing about motor companies Nor Tesla. Took a look because it is the hot topic.

[BlueKelah]

Yes the 2 times where Tesla got profitable, was when (1) they first ramped up Model S, (2) they ramped up Model X. 



Now that they achieved profitability, the next question is whether it is enough to pay down debt + fund their future growth, and whether that is the most optimum thing to do. And with EPS of $3 this quarter, a share price of $300, assuming they can sustain similar net margins in the next 3 quarters, even with 0 q-o-q growth; in a snap, they are a 25 PE company with triple digit growth rate. Note that they have not shipped to Europe (to capitalize on the US tax credit before it phases out) and many States in the US (because they are not allowed to sell them without a dealer) yet.

Doesn't it look like a pattern forming? Ever increasing debt, and just as it becomes profitable for a quarter comes another ramp up of another model -> announce new factory and new ramp up of another model + add on even more debt. Rinse and repeat. Elon gonna start asking for money again.

It will be interesting to see how many more q of profit they can manage or if its going to be more of the same story again with losses starting up again in q4 or q1 next year.. Tax credit for EV is ending this year and a lot of debt is due to be repaid in 2019.

[Wildreamz]

Of course. In the auto business, capital outlay is necessary for growth. Alternatively, they could stop building new plants, and then they will maintain cash flow positive, and profitable.

As a shareholder, we would much rather they use the cash generated by the existing model (S, 3, X) and plough them all back into the business, and introduce new model, get more market share etc.

What many analyst did not see coming is how profitable their existing business really are (S, 3, X) when they finally ramp up.

What remains to be seen is how they will proceed with the next quarter, they could in theory completely fund their growth via internally generated cash (which is much higher today, now that they are producing 300k cars per year, compared to 100k car last year), or they could do a capital raise to grow even faster.

Actually, as an early investor, I would much rather they do a capital raise with their current high share valuation, to strengthen their balance sheet, and grow even faster. But now that they are hugely cash flow positive and profitable, they no longer rely on the capital markets to survive, so the risk of say a black swan event or a recession (which will limit their ability to raise capital) no longer exist.

[lilvestor]

Of course. In the auto business, capital outlay is necessary for growth. Alternatively, they could stop building new plants, and then they will maintain cash flow positive, and profitable.

As a shareholder, we would much rather they use the cash generated by the existing model (S, 3, X) and plough them all back into the business, and introduce new model, get more market share etc.

What many analyst did not see coming is how profitable their existing business really are (S, 3, X) when they finally ramp up.

What remains to be seen is how they will proceed with the next quarter, they could in theory completely fund their growth via internally generated cash (which is much higher today, now that they are producing 300k cars per year, compared to 100k car last year), or they could do a capital raise to grow even faster.

Actually, as an early investor, I would much rather they do a capital raise with their current high share valuation, to strengthen their balance sheet, and grow even faster. But now that they are hugely cash flow positive and profitable, they no longer rely on the capital markets to survive, so the risk of say a black swan event or a recession (which will limit their ability to raise capital) no longer exist.

As reported by MarketWatch:

When asked whether he’d support Apple buying Tesla, Buffett offered his support but was skeptical.
“I’d support whatever Tim Cook does, but I think it’d be a very poor idea to get in the auto business,” Buffett said.
Selling cars is “not an easy business,” with plenty of competition, no first-mover advantage, and you win one year and lose the next, he said. “It does not give you a permanent advantage,” Buffett said.

Those margins are going to collapse once the big boys get into the EV business.

[Wildreamz]

Warren Buffett is right about 99% of car companies out there. Bulls are betting that Tesla is not 99% of car companies (it's a long shot, I know). 

There is a long discussion out there (and earlier on this thread) why the Big Boys aren't already pushing big into EVs already, and why they likely never will. 

But let just see how things play out over the next few quarters.

https://www.bloomberg.com/news/videos/20...tion-video
"Tesla is the Sun that is melting the ICE (internal combustion engine) age."- Sandy Munro, Auto Industry expert.

[lilvestor]

Warren Buffett is right about 99% of car companies out there. Bulls are betting that Tesla is not 99% of car companies (it's a long shot, I know). 

There is a long discussion out there (and earlier on this thread) why the Big Boys aren't already pushing big into EVs already, and why they likely never will. 

But let just see how things play out over the next few quarters.

How is Tesla not like other car companies? It makes cars and sells them don't they?

The big boys are making a push into EVs but they are doing it very slowly, its slow because no one has actually figured out a way to manufacture cheap EVs that don't look and/or drive like crap, its just easier for them to make a profit selling conventional cars than EVs.

[Wildreamz]

The biggest differentiator is Elon Musk. Everything else is commentary (marketing strategy, brand value, cross-selling of auxiliary services and products, ecosystem, technology leadership, vertical integration, Gigafactory, access to cheap capital in the form of high share price, investor confidence, no risk of cannibalization of old product line etc.).

Example: 
1) Which other car company can muster 400k reservation with $1000 down payment (interest free, for up to 2 years) for a product that they haven't seen or touch? http://fortune.com/2016/04/15/tesla-mode...ns-400000/
2) Which other car company has existing owners volunteering to help employees deliver cars to new customers? https://www.seattletimes.com/business/te...-deadline/

[specuvestor]

Warren Buffett is right about 99% of car companies out there. Bulls are betting that Tesla is not 99% of car companies (it's a long shot, I know). 

There is a long discussion out there (and earlier on this thread) why the Big Boys aren't already pushing big into EVs already, and why they likely never will. 

But let just see how things play out over the next few quarters.

How is Tesla not like other car companies? It makes cars and sells them don't they?

The big boys are making a push into EVs but they are doing it very slowly, its slow because no one has actually figured out a way to manufacture cheap EVs that don't look and/or drive like crap, its just easier for them to make a profit selling conventional cars than EVs.

The big auto makers has vested interest to milk the ICE models that they had invested in, that's why they are taking it slow vs Tesla with no such legacy and profitability concerns. Good thing Auto market is a highly regulated and long development cycle product; same thing happened to Kodak, Fujitsu etc.

[Wildreamz]

..

The big auto makers has vested interest to milk the ICE models that they had invested in, that's why they are taking it slow vs Tesla with no such legacy and profitability concerns. Good thing Auto market is a highly regulated and long development cycle product; same thing happened to Kodak, Fujitsu etc.

Spot on. Misalignment of incentives, that is the real reason Tesla had the head start. 

There are other reasons why Tesla completely obliterated other EVs in the same price (or even lower) price range. The car dealers that Big Auto uses are incentivized NOT to promote EVs (like the Volt and Bolt) because dealerships make money from repairs and maintenance, EVs require less maintenance (https://www.greencarreports.com/news/111...ctric-cars). Tesla do not have this problem because they have direct-to-customer business model (which also improves their margin theoretically).

Automakers also do not make much money from EVs (especially without incentive) in addition to them cannibalizing ICE sales. This is why EVs are often called "compliance car" because automaker sells them just to be compliant to regulations in the US (which mandates they sell a "green" model). https://www.thoughtco.com/what-is-a-comp...-car-85648

Tesla has a in-build advantage, in addition to having very strong brand power (exemplified in my previous post).

It is still a risky investment in a very bad business, but the recent quarter has showed the first time, they may be able to thread the needle.