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  #21  
Old 05-08-2017, 06:26 PM
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From what I heard (and I don't follow at all), solar city was originally an installation/leasing company? They didn't produce solar panels, presumably because they didn't want to be Solyndra.

Now I hear talk of a solar roof, but the promise (which may or may not be pie-in-the-sky who knows with Musk) is that it will cost the same as a normal roof... Which IMO is the pricing point that matters in America.

I agree that it could be real vertical integration or it could just be cheesy branding. Another example of cheesy branding is Musk offering to put solar panels on top of his cars.
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Last edited by Sredni Vashtar; 05-08-2017 at 06:32 PM..
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  #22  
Old 05-08-2017, 07:44 PM
nonlnear nonlnear is offline
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From what I heard (and I don't follow at all), solar city was originally an installation/leasing company? They didn't produce solar panels, presumably because they didn't want to be Solyndra.
The bolded is partly my downfall too. I had been under the impression that SolarCity had brought their own in-house manufacturing online a while back. They are primarily a retail integrator, but they had announced a factory a few years ago and without thinking I had just figured they had it online already. But it's not. So you're right, they are not a manufacturer. Thank you for the gut-check. Those pre-existing plans for a panel factory apparently have been integrated into Tesla's manufacturing plan.

My comments about the risks of the rooftop solar business stand. The business of selling rooftop solar is mostly a financing gambit. And the retail integrators and marketing companies have been popping up and, well, popping, almost as much as the panel makers. The technology itself isn't that hard, although it is changing steadily so you need some engineers to keep a product lineup humming. I'm not sure if my initial reaction is that their lack of manufacturing makes the deal a better or worse idea. I'd have to think about it a while. I think it still comes down to the strategy, in much the same way I laid out in my previous post. Whether it's real integration with a push into products other than rooftop solar (at least the current business model for it), or if it's just putting a big ribbon around the different products and calling it a day.
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Now I hear talk of a solar roof, but the promise (which may or may not be pie-in-the-sky who knows with Musk) is that it will cost the same as a normal roof... Which IMO is the pricing point that matters in America.
This is a great point. You can argue long term returns and payback points all you want, but when a technology's price is rapidly falling, even if the DCF today makes sense compared to buying nothing, it often may not make sense compared to the DCF from buying the same product next year for 95% of today's sticker price. So the real breakout price point for home rooftop solar may be "same as non-solar". You'll notice in brochures from solar marketing companies that they avoid this observation like the plague.
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I agree that it could be real vertical integration or it could just be cheesy branding. Another example of cheesy branding is Musk offering to put solar panels on top of his cars.
Yeah that was a real moment for Elon imo.

Last edited by nonlnear; 05-08-2017 at 07:53 PM..
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  #23  
Old 05-09-2017, 02:32 AM
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Looking at their (still) negative earnings and that fat market cap, it just seems (WAY!) overbought to me.

While there are some good points in this thread about the untapped market for grid-scale batteries, there isn't any guarantee that TSLA wins that race. In my non-scientific opinion, flow batteries seem to be (potentially) better positioned for stationary applications than TSLA's scalable Li-ion and with far less degradation than Li-ion. UET, also heavily government-subsidized, is already building more impressive batteries than TSLA, imo.

Besides, most observes believe that nearly all of TSLA's insane valuation comes not from investors assuming long-term viability of their batteries or other periphery products, but from analyst's taking Elon Musk at his word that he will be able to produce, on a large scale, cars with twice the profit margins of the big automakers.

I'm highly skeptical of that claim.

Further, Toyota, Ford, GM, etc., don't release products to the market until they are 99.99% sure of their reliability (and they still get recalls and class action lawsuits). On the other hand, TSLA practically sends out their vehicles at full retail price for beta tests. Early adopters like products that aren't fully refined. Getting it ASAP is more important than getting a perfect product; that's a Silicon Valley thing. The quality and reliability of Tesla's vehicles is already under assault, and they take it as an aside that they will be able to scale up hugely, while, at the same time, increasing their quality to a standard that normal car-buyers will find acceptable. Notably, two-thirds of all the vehicles that TSLA manufactured in 2016 were recalled just two weeks ago! It's a minor issue, but still..

It isn't easy to acquire the manufacturing knowledge and to pursue the incremental improvements (kaizen) in quality that made Toyota famous. Musk waves his hand at what he sees as a triviality. Cars (and batteries) don't scale like software. That seems obvious, but Silicon Valley entrepreneurs forget that all the time.

There is a common misconception in the automotive industry. It's a bit of a paradox, but the more expensive the car is, the more people expect out of it; however, in practice, the opposite is true: the cheaper the car, the more people tend to rely on it, and the more reliability and quality come into play. Very few people who drive Porsche's are firing them up 5-6 days per week, running the kids to school, driving through Midwestern winters and Southeastern thunderstorms year in and year out until the cars reach 100,000+ miles. But, many middle class families who buy Honda Odysseys do exactly that. People take it for granted how high new car quality/reliability is these days.

A related point: There is a major downside risk to their approach to quality besides just the lack of car sales. Their lack of quality and their willingness to sell cars that haven't been refined leaves them open to a massive lawsuit. (Or, it would leave them open to such a lawsuit, if only they first sold enough cars.)

So, yeah, I say TSLA is a battery company mostly because I think the car side of the company is doomed. I don't see the long-term viability of even their batteries as any type of certainty, though.

Again, I don't have the balls to short them, mostly because I'm afraid the herd might be right. Maybe I'm missing something.

For them to have a higher market cap than profitable automakers who have invested decades into the business seems ludicrous to me.
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  #24  
Old 05-09-2017, 10:56 AM
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Again, I don't have the balls to short them, mostly because I'm afraid the herd might be right. Maybe I'm missing something
Also, "the market can stay irrational longer than you can stay solvent".

Good post tho, mostly agree.
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  #25  
Old 05-09-2017, 11:44 AM
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For them to have a higher market cap than profitable automakers who have invested decades into the business seems ludicrous to me.
The car industry does not welcome newcomers. In fact, I just flipped through wikipedia and it took me about 30 guesses to find a famous car company that is not >90 years old. Seriously. I finally hit Lamborghini which is only 50 years old. On top of that there are plenty of very dead companies, eg. DeLorean.

But I think? It's fair to say that Tesla has already exceeded those expectations. The question is has Tesla totally blown them? What is our a-priori?


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Looking at their (still) negative earnings and that fat market cap, it just seems (WAY!) overbought to me.
Temporary negative earnings are a basic feature of investment. Maybe you mean something else. But that's pretty silly.

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It isn't easy to acquire the manufacturing knowledge and to pursue the incremental improvements (kaizen) in quality that made Toyota famous. Musk waves his hand at what he sees as a triviality. Cars (and batteries) don't scale like software. That seems obvious, but Silicon Valley entrepreneurs forget that all the time.
Continuous improvement and Scalability are an engineer's bread and butter. I would say he's already proven capable of the former, in the Model S, batteries, rocketry.

He hasn't proven scalability yet, but it should also be second nature to Musk (and Silicon Valley). If a young woman's heart is a dark forest, then an engineer's heart is a gargantuan factory full of robots.



Where I get worried here, by the way, is that the effer isn't working full-time on the Model 3 factory. He is thinking about Hyperloops, drilling holes through LA, landing rockets, Smart AI, and brain-to-computer interface. Among other things. Really, it's hard to imagine a more Herculean task than ramping up Model 3 production to scale, and here it's his part-time job.


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Further, Toyota, Ford, GM, etc., don't release products to the market until they are 99.99% sure of their reliability
Tesla's rushing is a gamble, but it's not obvious it's a good or bad gamble. It's also a bad idea to compare Tesla to others, since success requires doing things differently.


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but from analyst's taking Elon Musk at his word that he will be able to produce, on a large scale, cars with twice the profit margins of the big automakers.
Also I don't know about this. My bet is that in the long run he continues to do better than the rest of the market. And that this results in slow but certain domination. Only, because we're talking stocks, we have to price as though the future has already happened.
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  #26  
Old 05-09-2017, 11:47 AM
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Again, I don't have the balls to short them, mostly because I'm afraid the herd might be right. Maybe I'm missing something.
Also if you want to short them, then short them IMO.

Whenever you pick a stock, you are basically making a gamble. No reason that gamble shouldn't be in the opposite direction.
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  #27  
Old 05-09-2017, 11:57 AM
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Also, while we're talking, I'm super encouraged by Autopilot. Again, a big risk (with recent failures). But Tesla is very well positioned there. Next year, it may have the only mass-produced car that's capable of avoiding accidents and (eventually) driving itself.
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  #28  
Old 05-09-2017, 12:22 PM
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Remember when Amazon was overvalued because they had basically succeeded in beating back the other book retailers, and there were no worlds left to conquer?
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  #29  
Old 05-09-2017, 04:02 PM
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Remember when Amazon was overvalued because they had basically succeeded in beating back the other book retailers, and there were no worlds left to conquer?
Fair point. If you thought AMZN was too expensive, then you never owned AMZN--and you probably still don't...
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Old 05-09-2017, 04:09 PM
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Also if you want to short them, then short them IMO.

Whenever you pick a stock, you are basically making a gamble. No reason that gamble shouldn't be in the opposite direction.
Potentially unlimited losses on a company that it seems people will buy regardless of poor fundamentals seems like a reason to me.
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