Obviously I watched all three parts, but the 3rd part of the Tesla Owners silicon valley
interview with Elon had some gems.
So I wanted to discuss them.
In fact this was a really great interview.
Now I am sure you have likely all watched it too, so I am not here to just repeat what
was said, but rather go into depth and analyze what it all means.
In reality I think what I really try and do
most when Elon is talking about things, especially when its more on the cusp, in a more casual
relaxed environment.
I think its important to really try and understand what are his overall objectives here.
What is he actually saying, and what path does it look like he will best achieve that
objective.
It's from there I like to try and piece together as much of the Tesla roadmap as possible,
to make sure it aligns with Elon's overall mission.
Which I feel I have a good grasp on at this stage.
Alright, let's begin.
I am not going to go through it all, just the highlights of what we can extract more
information from.
Of course there is the part where Elon says the factories are losing an insane amount
of money, but I was going to leave that for another video, and see if we could try and
calculate some idea of just how an insane amount they are indeed losing.
4680 Elon appears very frustrated with the progress
of the factory, he goes on to say that they had challenges with the 4680 and structural
battery pack ramps, which we also noticed too.
He said that they had challenges, implying that they are hopefully rectified now.
Elon's frustration doesn't stop there though.
The Texas factory has the ability to manufacturer with 2170 cells, but all the tooling equipment
for that has been stuck in ports in China.
This means the 4680 ramp has been so bad,
that they are having to resort to 2170 cells for this factory.
The tooling equipment should hopefully turn up soon, and Tesla will end up making 2170
Model Ys in the factory.
Presumably the highest margin performance versions like Berlin.
This isn't really what we wanted to hear for Austin, what with how excited we are about
these 4680 cells and this new Model Y.
Although the 4680s are not going well, in the past I have said that this product is
so amazing, and important, that even if takes another 2 years for it to get ramped up, then
it is more than worth the wait.
The more I get my head around this cell, the more I appreciate it.
It's simply outstanding.
And Elon does go on to say that the issues will all be sorted quickly.
If Elon was more worried about the 4680 line, then we might be expecting him to sleep on
the factory floor.
He isn't, he knows it is in very capable hands, and seems confident that they will get there.
Elon says he focuses his mind much more on solving FSD, when it comes to Tesla, implying
perhaps if it was more urgent, then Elon would also be focused on it.
A lot of my trading strategy is based on Tesla hitting volume production with the 4680s,
sometime in the next 2 years.
I feel like I have allowed enough time for that occur.
My point is, when it does happen, it'll be worth the wait.
Hence, why I am betting on it occurring over the next 2 years.
He goes on to say that it will take more effort to get the production to high volume, than
it was to build it.
He said more effort this time, but in the past he has said it would take longer, which
I think is what we are meant to infer.
In other words, if the factory took about 18 months or so to build, we wont see it at
high volume production for perhaps 2 years.
Elon is saying high volume production though, although we don't know entirely how high.
What we are hearing is that Tesla's S hanghai Model Y factory, is capable of doing 2,000
vehicles a day, or about 720,000 a year, after the line upgrade in July.
We have heard rumors of the cars coming out even faster than that too.
Equally we aren't sure of how much downtime that includes either.
Finding out production numbers in August is going to be a bit tell as to what is happening
in Shanghai.
But that’s still a little wait.
But this is an old factory now, with old manufacturing techniques, with hundreds of extra robots.
The Shanghai Model Y factory is actually smaller than the Texas factory too.
But Elon claims the Model Y in Texas will only have around 520,000 capacity, one every
45 seconds with 75% up time, the same as claimed for Berlin.
But hang on, it's taken 18 months for Model Y Shanghai to get to this 720,000/yr run rate.
Elon says ramping up takes longer than building.
Texas took 18 months to build.
Therefore ramping up for Texas takes more than 18 months, e.g. 24 months.
So just to reiterate according to Elon, Texas will take ~ 24 months to reach 520k/yr run
rate for Model Y.
Yet we saw Shanghai take 18 months to reach 720k/yr run rate.
So do we really think it is likely that Texas will be slower, and require more floor space,
to manufacturer fewer cars than Shanghai?
Admittedly like I said, we aren't sure how much downtime we are factoring in to Shanghai,
but even if we took 75% uptime again, then we are at 540,000 units.
It is still taking that much longer for Texas to supposedly ramp up.
Also we have had Elon say that he expects the new manufacturing processes to ramp up
faster, despite a few initial hurdles.
Which should be expected as it is a much simpler process, simpler for production, more complex
to set up.
My point is I really would expect the capacity to be a lot higher than Shanghai, eventually
when 4680s and structural packs are ramped.
Elon goes on to say that getting Austin and
Berlin functional, and Shanghai back in the saddle, are overwhelmingly Tesla's concerns,
and nothing else matters.
Great, I think we all feel exactly the same way.
Tesla have bet the future of this company on the success of the 4680 cell.
That's what is required for the stock to enter the levels we hope.
Hence why I talk about these cells so much.
Elon gets asked if he will make a Model 3
Plaid, this might sound like just some general consumer question, but its a great question
to try and understand how much Tesla really wants to meet consumers desires.
Obviously a Model 3 Plaid would be cool, and Tesla could make some kind of version, even
if its not as quick as the Model S. But this would be at an opportunity cost of Tesla going
doing more in the way of the mission.
Elon goes on to say that they are trying to reduce complexity, and a Model 3 Plaid would
do the opposite.
Elon even says the only reason they keep the S and X is for sentimental reasons, as they
are massively complex vehicles.
I try and explain, Tesla isn't here for the consumer, they have over delivered and under
promised more than enough to make consumers happy.
Tesla do not need to meet every whim, they will go mainstream.
Leave other markets and niches to be filled in by competitors.
Elon explains how the S and X are small in
sales anyway, and whilst saying this, he comes out with his Model Y sales expectations out
of the blue.
In the past I think all we have heard was that Model Y will be the biggest selling vehicle.
With that we were able to look at the current largest selling model, the Toyota Corolla.
Well Elon says the Model Y will beat that.
The Corolla has had annual global sales of close to 2 million.
Therefore we might have thought before that sales could be that high.
I have said in the past, that Elon said they will be more than the Corolla, and if you
look at the factories, it's probably closer to 4 million.
Verbatim Elon said "I think 3 and Y could probably do 3 or 4 million".
Now I assume he means collectively, but still.
As far as I can recall, this is the first time Elon has actually said how many sales
he thinks these models can eventually reach, which is a big deal.
4 million a year, is obviously 1 million a quarter.
Without FSD, we have done numbers that will take us to a $3,000 stock price with that
number of sales.
Also you might guess that the Cybertruck could be another million too, and possibly twice
as much operating income from that than a Model 3.
Yes, so much profit coming Teslas way, you know, as soon as they can eventually ramp
up their production.
Elon is asked how we can help, and he says
to shoot down FUD.
Great, I have been doing my part then.
He then talks about getting into advertising and how that could reduce FUD.
We have discussed this before, as to why Tesla gets hammered, because its good to look after
your customers.
One of CNBC's customers for example is GM.
GM is a happier customer, and spends more, when there are negative articles about their
threats and competition, i.e.
Tesla.
Anyway, as Tesla investors this is a matter we are all too familiar with.
Elon goes on to say that all these articles trashing Tesla, have somewhat managed to get
the name out there in the public eye.
No such thing as bad publicity as they say.
Bottom line though, is that Tesla doesn't need any more demand, so any investment in
advertising would only make waiting lists longer, and reduce profits.
There is still more to discuss, and we will
talk about that later.
What I am inferring though, is that the 4680s will be alright, they are happening, they
are getting there, it's just taking some time.
I know it's disappointing the progress isn't as fast as we hoped, and it is as important
as you think.
Austin is going to suffer for a while, but hopefully subsidized somewhat with some 2170s
on the line.
The important thing is though, that there are lots of signs this will be rectified.
It would perhaps be nice to have a more clear situation analysis.
Anyway, earnings call coming up soon, and shareholder meeting after that, where things
should be clearer.