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Tesla Stock Continues Tanking, China Production Record, EV Credit Bill, Rivian Earnings — Transcript

by Rob Maurer · 4,504 words · 650 segments · language en · Watch on YouTube

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0:00hey everybody rob Mauer here and today
0:02we've got another pretty negative day
0:03for Tesla stock on very high volume so
0:05we'll talk a bit about that we've also
0:07got production numbers for Tesla in
0:09China some news on Tesla and Germany
0:11updates on the EV tax credits in the
0:13United States rivian earnings and more
0:15alright so the difficulty for Tesla
0:17stock continues down another 7.2 percent
0:19today to close at
0:21177.59 Tesla now trading at just 55
0:24times trailing 12-month Gap earnings the
0:27NASDAQ was down two and a half percent
0:28on the day today so significant
0:30underperformance from Tesla and Tesla
0:32actually this morning was a little bit
0:33green and over performing before a
0:35pretty sharp drop off this afternoon
0:37looking at volume this was the second
0:39highest volume day for Tesla since
0:41mid-july second only to yesterday's 128
0:45million shares we're at about 124
0:47million today that's before the after
0:49hours volume but very close and again
0:51given the over performance in the
0:53morning it doesn't seem like an
0:54immediate reaction to any of the news
0:56that we had yesterday about Elon and his
0:58form fours being filed so extremely high
1:00volume and underperformance starting
1:02intraday that would certainly seem to
1:04have the characteristics of a large
1:06seller entering the market perhaps Elon
1:08now over the last month or two we have
1:10had high volume days where people have
1:12been pretty convinced that Elon was
1:13selling and turned out to not be the
1:15case that's a possibility it is also
1:17possible that someone is trying to make
1:18it look like you want to selling and
1:19then take advantage of that reaction
1:21just dump a bunch of short shares in the
1:23market create a big red candle and then
1:25capitalize on the continued downtrend I
1:27think that specific scenario was less
1:29likely than Elon actually having sold
1:31today but stuff like that does happen
1:33and one of the advantages that
1:34institutions have specifically is that
1:36they can see the order books they can
1:38see how leveraged certain positions are
1:41and then take advantage of those
1:42leverage positions and push stocks down
1:44to for selling or Force capitulation and
1:47then buyback shares that they shorted at
1:48a lower price or scoop up shares at a
1:50discount to hold long and the options
1:52Market only exacerbates this kind of
1:55activity and we know Tesla is a huge
1:56huge percentage of the options market so
1:59regardless of what today actually ends
2:01up being those kind of things are still
2:02important to keep in mind especially as
2:04we are likely moving through a period
2:06here where some of that forced
2:07capitulation is happening and hopefully
2:08that's nobody here but stuff like that
2:10in the right macro environment which in
2:12this case means a terrible macro
2:13environment those are the type of things
2:15that lead to stocks just hitting values
2:17that seem completely unreasonable for
2:19short periods of time so anyway getting
2:21back to whether or not it's Elon he
2:23really shouldn't have much more that he
2:25needs to sell for the Twitter
2:26acquisition we've walked through the
2:27math on that a number of times we'll do
2:29it one more time here just for
2:30completeness sake so the total
2:31commitment originally was 46.5 billion
2:33dollars Elon has already raised 19.3
2:35billion before any of these sales then
2:37there was 13 billion in debt that's all
2:39locked in there shouldn't be any changes
2:40on that if there were that would
2:42completely change the equity structure
2:43of the acquisition it would be similar
2:45to raising Capital to pay off debt for a
2:46public company so it shouldn't be
2:48anything with that that gets us to 32.3
2:50billion of the 46 and a half so at that
2:53point 14.2 billion left half of that was
2:55committed from other Equity investors so
2:57then there was maybe 7.1 billion
2:59remaining to cover the initial
3:01commitment as we talked about though
3:02Twitter's share count had been reduced
3:04not sure exactly what caused that so
3:06that's what left us with maybe four and
3:07a half billion remaining so because we
3:09aren't sure what the share count thing
3:11let's say somewhere between four and a
3:12half billion to 7 billion was remaining
3:14we have since learned that Jack Dorsey
3:16did opt to roll over his 18 million
3:18shares of Twitter so that's about a
3:19billion dollars the Saudi Prince with 35
3:22million shares did the same so that's
3:24another 1.9 billion so about 2.9 billion
3:26in total from those two so that brings
3:28the range of need that we just talked
3:30about down to 1.6 billion to 4.2 billion
3:33remaining that of course does not
3:35include the 3.95 billion that Elon sold
3:38from Friday so the math there shows that
3:40as of yesterday it should be pretty much
3:42taken care of but we are left with two
3:43uncertainties the first uncertainty is
3:45that we don't know how much tax Elon is
3:47paying on these sales I have assumed
3:49zero because Elon has shares that he
3:51exercised last year that would have a
3:53high cost basis he can be selling those
3:55and be generating Capital losses when
3:57raising these funds that would seem like
3:59the logical choice but Elon has
4:01surprised us a little bit on those
4:02choices in the past nevertheless all of
4:04this has assumed no money set aside from
4:06these sales for taxes now the other
4:08uncertainty that group of other
4:10investors for 7.1 billion we don't know
4:12how much of that ended up coming through
4:14I would have assumed that if it were not
4:17a significant portion of that Elon would
4:19have been selling more sooner but maybe
4:21he didn't because of the blackout period
4:23and things like that so it could be that
4:25whatever is the remaining amount of that
4:26commitment is what Elon would still have
4:28to sell after the sales that we had
4:30learned about yesterday if all those
4:32commitments did get fulfilled then
4:34barring any weirdness with taxes Elon
4:36should have been done yesterday so
4:38that's the clearest picture of the math
4:39that we've got today somewhere between
4:41zero dollars remaining and seven billion
4:43dollars remaining assuming Elon
4:44minimized taxes with the combination of
4:46these sales and remember in that worst
4:48case that seven billion dollar case that
4:49assumes no other Equity investors came
4:52through you've got Larry Ellison on
4:53there for a billion you've got other
4:55investors that Elon has worked with in
4:56the past that presumably want to honor
4:58their commitments so pretty much a
4:59certainty at least some of that came
5:01through so I hope walking through the
5:03math on that helps people with their
5:04understanding will know for sure whether
5:05or not Elon sold today by Friday
5:07remember form fours have to be filed
5:09within two business days of the
5:11transactions all right let's move on to
5:13Tesla in China because I did get the
5:15October production numbers from the cpca
5:18Reuters has already reported on this
5:19today as well but Tesla's production at
5:21gigashanghai in October was a record 87
5:25706 vehicles I am very happy with this
5:28number especially after the wholesale
5:29sales figure that we had talked about
5:31previously and how big of a spread we
5:33might see between production and
5:34wholesale sales here we're seeing 16 000
5:36more Vehicles produced than that
5:38wholesale sales number so of course
5:39Reuters reporting this as a big growth
5:41in inventory but as we've talked about
5:43before this is the norm for the first
5:45month of a quarter on every single
5:47occasion we have seen Tesla in the first
5:49month out produced to the wholesale
5:50sales figure so that overproduction or
5:52build in inventory is represented in
5:55pink in this chart and if we just
5:57isolate in on that overproduction we can
5:58see that that has grown pretty steadily
6:00over time we are seeing a bit of a
6:02bigger jump here in October than what a
6:04trend line might have indicated but that
6:06trend line is thrown off a bit because
6:07of the weird production shutdowns with
6:10covid and production upgrades that we
6:12had in the first months of Q2 and Q3 so
6:14anyway if we look back at production
6:16that total is about 5 600 more Vehicles
6:18than Tesla produced in September we're
6:20seeing a split here of 32 254 model 3 55
6:24452 model y on a weekly basis combined
6:28this ends up being 19 800 per week
6:30that's about 96.5 of the 20 and a half
6:34thousand vehicles per week that has been
6:36reported as Tesla's targeted production
6:37rate post upgrade that split was
6:40reported to be 13 000 model Y and seven
6:42and a half thousand model three so as a
6:44percent of those targets by vehicle
6:45model Y at 96.3 percent model 3 at 97.0
6:49which is an important figure because
6:51that shows us that both vehicles on
6:53their own are pretty much at their
6:55targeted production rates remember we
6:56should have a little bit of a reduced
6:58production number here in October
6:59because of the holiday early in the
7:01month Tessa worked through it but some
7:02people probably took that off so the mix
7:04between the two was a little bit odd in
7:06September but this being back to normal
7:08kind of confirms those targets and also
7:10confirms that things are now smooth
7:11going as planned which is excellent
7:14excellent news for the fourth quarter I
7:16was a little bit worried that maybe we'd
7:17get something like an 82 83 000 vehicle
7:19number which would still leave us with
7:21questions on that Shanghai ramp while
7:23those questions here are very thoroughly
7:24answered it's ramped if this even just
7:27extrapolates through November and
7:28December which hopefully it improves a
7:30bit because remember we did have that
7:31holiday at the beginning of the month if
7:33this just evenly extrapolates that would
7:34suggest over 260 000 vehicles from
7:37Shanghai and Q4 now that also is of
7:39course dependent upon downtime as far as
7:42I know there isn't unscheduled but there
7:43certainly could be within one of those
7:45two months the other really exciting
7:47thing about this production number 87
7:49000 vehicles per month that extrapolates
7:51to more than one million vehicles per
7:53year I don't think people fully
7:55appreciate this Tesla has achieved this
7:57at gigashanghai in less than three years
7:59from first production it truly is insane
8:02so huge congratulations to the Tesla
8:03China team for that Milestone so I'm
8:06very happy with this production number
8:07and what it means for the rest of Q4
8:09that said I do want to briefly revisit
8:11the conversation from yesterday about
8:13domestic demand in China and just
8:15hopefully explain that a little bit
8:16better the first thing would just be
8:18that I would hope that whenever I have
8:19conversations like that people are
8:20bringing in context from other episodes
8:22so even though I'm talking about demand
8:24concerns in China I still think
8:26production is the most important number
8:27for Tesla and I'm still just as bullish
8:29on the company haven't sold any stock or
8:31anything like that I don't have any
8:32plans to it's just a red flag and that
8:34red flag should be lowering shorter term
8:36expectations on the margin line I think
8:39that's all I'm trying to express
8:40obviously when we saw Tesla drop prices
8:43in China everybody should have gone back
8:45and unless they already suspected that
8:46was coming revised their margin
8:48expectations for Q4 you just have to
8:50like I'm already modeling in the cost of
8:52goods sold benefits that I think Tesla's
8:54going to achieve and I think those are
8:55way more significant than what people
8:57are expecting right now that's a huge
8:59part of what makes me more bullish on
9:01Tesla than the average analyst but when
9:03we see signs of demand softness that
9:05needs to be factored in too so does that
9:07change my bull thesis on Tesla no it
9:09just changes my expectations a bit or
9:11average selling prices for margins both
9:13gross margin and operating margins and
9:15ultimately net income for more of the
9:16short and medium length type of time
9:18periods so those are the type of impacts
9:20that software demand signs have and
9:22we're going to already see that show up
9:24in the financials here in Q4 because of
9:26the price cuts that we've already seen
9:27in China but whatever that's not a big
9:29deal so much on its own where the
9:31concern really accelerates is that right
9:33now going back to our multiple
9:34conversations on demand Pockets Tesla
9:37China should not be in a demand pocket
9:39right now or a valley it should be
9:40peaking Tesla just lowered prices by
9:43five percent pretty much across the
9:44board in effect to a consumer on the
9:46model y standard range it's more like a
9:4810 cut plus people were already holding
9:51off delaying their order waiting for
9:52this to happen so when it finally does
9:54you should see a massive influx from
9:56those people plus huge demand for new
9:58orders with that new price cut
10:00furthering that point here in Q4 we
10:02should be seeing even more of a desire
10:04to order before the end of the year
10:05because that new energy Vehicle Tax
10:07Credit in China expires at the end of
10:09the year so there should be a spike in
10:11orders that should be clear we should be
10:12in that Spike right now and yet Tesla is
10:15already layering on another demand
10:16incentive which if they had a strong
10:18amount of orders there wouldn't really
10:20be any reason to do the added concern
10:22then is what happens once we move out of
10:24this period of time where we should be
10:26seeing order a spike now they've already
10:27pulled the second demand lever what
10:29happens when things normalize and we
10:30don't have the simultaneous boost of a
10:32fresh price cut withheld orders flowing
10:34in and orders pulled forward because of
10:37that new energy vehicle credit
10:38expiration on the other side of those
10:40things lies a possible Valley and then
10:42you've got Tesla dramatically increasing
10:44production that's where price and margin
10:46concerns come in now yes Tesla can
10:48export those but then we've got
10:49gigaberlin ramping up and we should be
10:51working through the backlog in Europe
10:52and other places the concern not
10:54necessarily as much from me but the
10:55concern in the marketplace is going to
10:57be okay what happens then does Tesla
10:59have to do the same thing in Europe that
11:01we just saw them do in China we've
11:03already seen them introduce the model y
11:04standard range in Europe which is a move
11:06in this direction that we haven't seen
11:07them really do in the US yet so we'll
11:09pause there and I already feel people
11:10yelling at me that's the point of Tesla
11:12that's what they're trying to do bring
11:13costs down absolutely yes that is the
11:15point the question is how sudden does
11:17that have to be to keep up with Tesla's
11:19production and what the margin rate is
11:21at those levels for example I don't
11:23think this is going to happen but just
11:24for example I don't think there's any
11:25Tesla balls out there modeling for a 15
11:27gross margin for next year those are the
11:30kinds of questions that start to
11:31percolate when we see things like this
11:33again not necessarily for me but those
11:34questions enter the market institutional
11:36investors become nervous you can't shake
11:38it out of them demand is always going to
11:40be their main question when Tesla is
11:42growing at these rates like I said
11:44yesterday I think that the progress that
11:46Tesla will end up making on reducing
11:48their cost of goods sold is under
11:49forecasted underappreciated by the
11:51broader market right now that's why
11:53these kinds of things don't really
11:54change my demand thesis but those are
11:56things I was already forecasting for
11:58self demand is coming in a little bit
11:59softer than Maybe expected my average
12:01selling prices my margins my earnings
12:03per share all that has to come down a
12:04little bit also as I alluded to
12:06yesterday this isn't necessarily even a
12:07reflection on Tesla it could just be a
12:09reflection on the market in China right
12:11now but that's kind of the point too
12:13what happens if we see that same thing
12:14in Europe there would be plenty of
12:16reasons for that those are the concerns
12:18even setting aside all this stuff with
12:19Elon that I think the market has
12:21regarding Tesla right now so I know we
12:23spent a lot of time on that I hope that
12:25clarifies some of my thoughts from
12:26yesterday it's always difficult to get
12:27these points across on a live stream
12:29it's hard enough with the benefit of
12:30editing I'm still gonna have people that
12:32are misunderstanding this and thinking
12:33I'm some bear on Tesla now it's not the
12:35case but we should all be keeping our
12:36eyes very open and very aware of
12:38possible red flags like I believe this
12:40is I mean why would Tesla add an
12:42incentive if they were happy with where
12:44the order book was at now the other
12:46thing to add to this that may be a
12:47little bit more of a positive reflection
12:49on it I haven't 100 confirmed this but I
12:51do believe that that insurance credit is
12:53only on inventory Vehicles so it might
12:55seem like oh well why does it even
12:56matter then if it's only inventory well
12:58Tesla's probably not going to have much
12:59Tory or produce much inventory if
13:02they're happy with that order book so I
13:03don't really think it changes too much
13:05the conversation Tesla's not really
13:06producing an order anyway so what really
13:08constitutes an inventory vehicle it's
13:10not entirely clear I've heard
13:12anecdotally that orders that aren't just
13:14being picked up off the inventory lot
13:15same day or anything like that are still
13:17receiving this bonus so my assumption
13:19would be that this would be applied to
13:21most sales that may be wrong but I'm not
13:23waiting that inventory Clause as heavily
13:25as some others might be last comment on
13:27this is that as I said before I view
13:29this as more of a short to medium term
13:31type of thing I think it's more a
13:33reflection on the economy than on Tesla
13:35as that turns around I don't expect this
13:37to be so much of the case and if that is
13:39correct that should be a much bigger
13:41concern for any Tesla competitors than
13:44it is for Tesla because Tesla's got the
13:45margin to give other people don't so
13:47we'll move on just want to reiterate
13:49still bullish on Tesla just because
13:50we're discussing something that maybe is
13:52a little bit more bearish doesn't mean
13:53that changes my whole thesis or anything
13:55like that I shouldn't have to review
13:56that every time we discuss something
13:57that's not maybe super positive yeah it
14:00seems if I don't do that people
14:01interpret my natural subdued
14:04emotions on live streams as some sort of
14:07depression so that's cool but it's
14:11inaccurate as I've said before I'm just
14:12not a super emotive person so I guess
14:14keep that in mind I think people just
14:16project whatever the stock price is
14:17doing onto me and assume that that is my
14:20accompanying emotion not the case
14:23all right well we still do have a few
14:24other topics here for some news on the
14:27electric vehicle tax credit hat tip to
14:28tessarati for noticing this there has
14:31been a bill introduced by democrats in
14:33the house that would change the
14:34structure of the EV tax credit we've
14:36talked a lot about the pushback that the
14:37US has received internationally for this
14:40portion of the inflation reduction act
14:41this bill seems to seek to resolve some
14:43of those complaints so we'll dig out our
14:46old marked up version of how this has
14:47evolved over time basically the black is
14:49how it started the green is what has
14:50been added through the IRA and then the
14:53orange are the proposals from this bill
14:55so here we see that to qualify as a new
14:57clean vehicle the stipulation that
14:59requires final assembly occurring in
15:01North America is altered with the
15:03preface of in the case of any motor
15:04vehicle sold after December 31st 2025.
15:07so basically just pushing that
15:09requirement back by three years from day
15:11one of the ACT January 1st 2023 to
15:13January 1st 2026 instead said another
15:17way you would be eligible for the
15:18credits for vehicles with final assembly
15:20outside of North America for the first
15:22three years next exchange is within
15:24excluded entities previously this put a
15:26restriction on earning the credits if
15:27the vehicle's battery contained any
15:29critical minerals that were extracted
15:30processed or recycled by a foreign
15:32entity of concern for any vehicle placed
15:34in service after year end 2024 or the
15:37same foreign entity of concern
15:38stipulation for battery components after
15:40year end 2023 both of those under this
15:43bill would be pushed back one year next
15:45would be changes on the critical mineral
15:47and Battery component requirements
15:48themselves remember the scales up over
15:51time the percentage that is required to
15:53be eligible for these credits which each
15:55earn half the 7 500 credit for critical
15:57minerals it basically scraps the
15:59applicable percentage which was 40 for
16:01any vehicle before January 1st 2024 and
16:04replaces that whole line just to say in
16:07the case of a vehicle placed in service
16:08during calendar year 2026 40 so it
16:12removes the before part that leaves no
16:14language to let us know what the
16:16percentage would be before 2026 so I
16:18assume it would have to be then zero
16:20percent all the dates then as it scales
16:22up are push back three years same exact
16:25thing for battery components it says
16:26during calendar year 2026 and then it
16:29pushes all those dates back although
16:30they were different by three years so I
16:33assume that that means anything before
16:342026 has no requirement in which case it
16:37doesn't matter where your components or
16:38your minerals come from or those first
16:40three years and again they also delayed
16:42the final assembly having to happen in
16:43North America as well so I'd have to
16:46read through the entirety of this again
16:47because remember it all Builds on top of
16:49itself so I have a low amount of
16:50certainty with this but it seems like
16:52the intent of the bill is to basically
16:54just make all electric vehicles eligible
16:56for the full credit for three years that
16:58would give everybody more time to react
17:00as those qualifications become more
17:02strict now you would still have some of
17:04those foreign entity of concern things
17:05hitting before 2026 but this would
17:07certainly seem to open up those credits
17:09and you'd still have the income limits
17:11and things like that and obviously this
17:12is just a bill we have no idea how far
17:14how much support this will get but it's
17:16the first attempted change that I have
17:18seen so far so we'll have to return to
17:20keeping a very close eye on this but if
17:22these changes went through it would seem
17:24to follow that perhaps again I have to
17:27read through everything but perhaps
17:28Tesla could be importing vehicles from
17:30China to the United States that may be
17:32eligible for the full credit again don't
17:34hold me to that but it seems possible
17:35when we think about Tesla's worldwide
17:37production average selling prices in
17:39different regions it all at the end of
17:40the day is related Tesla's going to try
17:43to put that production where it makes
17:44the most profit All Things Considered
17:47alright last few items here we'll try to
17:48go pretty quick through these but looks
17:50like Tesla's got another Parts
17:51distribution warehouse happening in
17:53Germany thanks to stickerato for tagging
17:56me on this one so this is in southern
17:57Germany a little bit West of Munich and
18:00apparently a 23 500 square meter
18:03facility so about 250 000 square feet
18:06this comes after we have talked a couple
18:08of times in probably the last month or
18:10so about warehouses that have popped up
18:12in the United States this one too seems
18:14to be four parts distribution so it
18:16seems like Tesla is pretty aggressively
18:18expanding that capability in the recent
18:20months next we've got an update from Fox
18:22con they have announced that they intend
18:24to build their first car next year
18:26called Project X start mass production
18:28in 2024 they're going for some
18:30differentiation here they say this will
18:31be a three-seat vehicle that costs less
18:34than twenty thousand dollars earlier
18:35this week Foxconn also announced taking
18:37a stake in Lordstown Motors next we've
18:40got rivian's Q3 earnings report they did
18:42report a net loss of 1.7 billion dollars
18:45on revenue of about 530 million dollars
18:48Revenue was a little bit short of
18:49analyst expectations apparently that
18:51loss was a decent amount lower than
18:53analyst expectations their operating
18:55expenses for the quarter still 857
18:57million dollars so basically half of
18:59what Teslas are and remember that's
19:01operating expenses nothing to do with
19:02cost of goods sold so still very high
19:04but rivian did say that they do have 14
19:06billion dollars of cash and cash
19:08equivalents on hand at the end of the
19:09quarter they did reaffirm their 25 000
19:11production guidance for the year like
19:13they had previously when production was
19:15announced so we've already talked about
19:16that they said that they've got 114 000
19:18net pre-orders on their books as of
19:21November 7th versus 98 000 end of June
19:23and they noted that they have started a
19:25second production shift also reaffirmed
19:27their annual guidance for ebitda for the
19:29year but they have lowered their capital
19:31expenditure forecast they did provide an
19:33update on their next platform they call
19:35that the R2 versus of course the R1
19:36right now they say that they expect that
19:38to launch in 2026. all right last item
19:41for today just a couple of quick updates
19:43on Twitter first the New York Times has
19:45reported that Twitter has registered
19:47paperwork with the US Treasury
19:48Department to become a payment processor
19:51so this of course would be a key piece
19:52of the x.com Vision that Elon has talked
19:55about having for Twitter he talked a lot
19:57more about that today in a Twitter
19:58spaces event alongside a lot of other
20:00things related to advertising on Twitter
20:02and the changes that they're working to
20:04make within the platform in the interest
20:05of time we won't go through all of those
20:07but I did post my bullet point notes
20:09from listening to that on Twitter so if
20:11you're interested in that I'll put a
20:12link to that down in the description to
20:14that alright long one here but that is
20:16where we'll wrap it up for today so as
20:18always thank you for listening make sure
20:20you're subscribed and signed up for
20:21notifications also find me on Twitter at
20:23Tesla podcast we'll see tomorrow for the
20:25Thursday November 10th episode of Tesla
20:27daily thank you

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