Tesla, Inc. (NASDAQ:TSLA)
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Today : Monday 25 September 2017
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By Trefor Moss and Eva Dou
SHANGHAI-- Tesla Inc. has long dreamed of planting its flag in China, but it now finds itself the only notable auto maker without public plans to manufacture electric vehicles in the world's biggest EV market.
This could be about to change. In recent weeks, Chinese officials have suggested that rules requiring foreign auto makers to have a Chinese partner--a sticking point for Tesla--could be relaxed, according to people with knowledge of the situation.
While there has long been talk of easing these rules, U.S. President Donald Trump's decision last month to launch an investigation into Chinese trade practices likely accelerated discussions, these people said.
Under a draft proposal shared with auto-industry executives, China is preparing to allow foreign companies to manufacture electric vehicles in free-trade zones without a Chinese partner, though the cars would be still subject to import tariffs if sold in the country, the people said. The plans were reported earlier by Bloomberg.
China's commerce ministry spokesman Gao Feng declined to confirm those plans when asked by state-owned broadcaster CCTV at a press briefing Thursday. But he said the government, in the future, would roll back policies limiting foreign investment in EVs, without mentioning joint-venture rules.
Industry watchers said such a change would be a limited concession by China, as long as a 25% tariff on imports remains in force. Last year, in a comparable move, China allowed foreign battery companies to set up wholly owned companies in selected free-trade zones, including Shanghai.
Even so, the development could be significant for Tesla, which analysts said is concerned that a joint venture could compromise its technology.
The Silicon Valley auto maker, led by Elon Musk, is under mounting pressure to open a Chinese base. General Motors Co., Volkswagen AG, Ford Motor Co. and many other foreign manufacturers with established operations in China have recently announced plans to begin or substantially increase electric-car production here as Beijing moves to phase out traditional gas and diesel vehicles.
Tesla said in June that it was talking to Chinese authorities about building a factory in Shanghai and that it hoped to have an announcement within 2017. On Friday, Tesla said it had no comment beyond that statement.
Analysts said Tesla appeared to be holding back on manufacturing plans in hope that China would ease rules require foreign auto makers to set up 50-50 joint venture if they want to build cars here.
The free-trade-zone plan for electric vehicles would be more cosmetic than a game changer for many companies, said Jing Yang, an associate director at Fitch Ratings. Companies operating in those free-trade zones will almost certainly still incur a 25% tariff levied on imported cars and not qualify for China's generous EV subsidies, Ms. Yang said.
But that may be less of an issue for Tesla, a luxury brand with unquestioned cachet here. Even with the tariffs, Tesla sold about 11,000 cars worth over $1 billion here in 2016--enough to make China its second-largest market, after the U.S.
That figure is dwarfed by the market potential, however, with Beijing targeting 7 million electric-car sales in 2025, and 15 million in 2030.
Other foreign auto makers are overcoming their concerns about intellectual-property protection by building entry-level EVs with no cutting-edge technology. GM, for example, just launched its first pure-electric car for China, the Baojun E100, with a $5,300 price tag. Its premium U.S. offering, the Chevrolet Bolt, is unavailable here.
But Tesla doesn't make low-end vehicles. Even the $35,000 Model 3 would be one of the priciest electric models in China.
The first 30 customers are invited to a handover party. This is the first 30 out of 400,000 who have pre-ordered.
With a waiting list over 400,000 long, the vast majority of buyers including UK customers will have to wait until 2018 to get their cars, but Musk has laid out a 2017 production schedule. The boss expects Tesla to produce a small batch of around 100 cars in August, ramping up to over 1,500 in September. By the end of the year, the company could be in a position to manufacture 20,000 cars per month.
I expect a lot of news coverage which will stimulate interest in the car and lead to a rise in the share price.
It may not be a popular opinion, but one stock I'd crown as overvalued -- ludicrously so -- is electric-vehicle and solar-panel-installation company Tesla (NASDAQ:TSLA).
What I will give Tesla is this: It's the first car company in decades to really build itself from the ground up and disrupt Detroit's big three automakers. The demand for Tesla's Model S and X, as well as initial orders for its cheaper Model 3 sedan, have been phenomenal and demonstrate the desire of Americans to own cleaner vehicles.
But what looks to be a good idea on paper has yet to translate into profits. Just days ago Tesla reported a 79% increase in automotive fourth-quarter revenue, but it still delivered an adjusted net loss of $106.6 million. Sure, that was a 60% narrower adjusted net loss from the prior-year quarter, but it's still a loss. In fact, the company burned through more than $448 million in cash flow during Q4 as it continued to ramp up the Gigafactory in preparation for the Model 3. Tesla ended the year with $3.39 billion in cash and cash equivalents, but has plans to spend $2 billion to $2.5 billion in capital expenditures in 2017. In other words, yet another cash raise may be in order.
Tesla's solar business -- it acquired SolarCity less than two months ago -- also languished. Tesla reported 201 MW of solar installation in Q4, which was almost 100 MW lower than what SolarCity had previously guided for. It's no secret that solar has been weak, but these figures are exceptionally weak.
A simple comparison of General Motors (NYSE:GM) and Tesla really shows how out in left field Tesla's valuation is at the moment. In 2016, General Motors sold nearly 10 million vehicles and generated nearly $9.12 billion in profit. In fact, it's currently valued at roughly six times its trailing 12-month earnings. By comparison, Tesla produced only around 90,000 vehicles and is losing money hand over fist, and its $41 billion valuation implies a market value of almost $500,000 per car! GM's $56 billion valuation and annual production of 10 million implies a valuation of approximately $5,600 per car produced. That difference is insane. Even with the two companies having very different business models, I don't see why any fundamental investors in their right minds would choose Tesla over GM.
Tesla Overtakes GM to Become Most Valuable U.S. Auto Maker
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Tesla, Inc. (NASDAQ:TSLA)
Intraday Stock Chart
Today : Monday 10 April 2017
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By Tim Higgins
DETROIT -- The Motor City has fallen to Silicon Valley.
Tesla Inc. on Monday became the largest U.S. auto maker by market value, overtaking General Motors Co. -- a feat that would have seemed highly improbable 13 years ago when the electric-car maker first began tinkering with the idea of making a sports car.
Shares of Palo Alto, Calif.-based Tesla rose as high as $312.75 during Monday morning trading, pushing the company's market capitalization to $51.01 billion. That eclipsed Detroit-based GM's $50.89 billion, based on its highest point in early trading. Ford Motor Co., meanwhile, was valued at $44.95 billion.
The milestone underscores the seismic change occurring in the global automotive industry as Silicon Valley pursues a vision for transportation -- including self-driving cars and vehicles-on-demand -- that could upend century-old players. Last week's disappointing monthly sales results by traditional auto makers served as a further example to investors concerned that the profitable U.S. new-car market is plateauing.
"We've built a track record of strong financial performance," a GM spokeswoman said in an email. "We'll stay focused on delivering outstanding results and making decisions to deploy capital where it will generate the strongest returns, to enhance shareholder value."
Tesla declined to comment.
GM remains the largest auto maker in the U.S. by market share, making up 17.3% of the sales last year, according to Autodata Corp. Tesla had a 0.2% share, which beat Ferrari and Maserati.
"What's fun about following this company now is that anything can happen, " Chaim Siegel, an analyst for Investing.com, said in an email about Tesla that seems to mimic investor sentiment even as the auto maker remains unprofitable and deeply in debt. "The potential is huge. The hopes are huge."
Even some of Tesla's most optimistic followers are surprised at the recent run up in value. "We're pretty surprised by the recent run in Tesla's share price to over $300 so quickly," Adam Jonas, an analyst for Morgan Stanley, wrote in a note to investors as Tesla's market cap neared GM's. He has been targeting a $305 price for Tesla. "Such is the power of technical factors over fundamental drivers."
Tesla shares have been on roll this year, rising more than 40%, a run that last week had Chief Executive Elon Musk's car company surpass Ford Motor Co. as the second-largest car company. The exuberance comes even as Mr. Musk faces huge challenges in accomplishing all that he is claiming to do, including making 500,000 vehicles next year after building just 84,000 last year and creating software that would enable a vehicle to drive itself.
"It's indicative of the market wanting to pay for potential, including into markets that don't exist yet in any large size such as EVs, home energy generation and storage, rather than profits and cash flow today that the large auto makers generate," said David Whiston, an analyst for Morningstar Research.
Mr. Musk, who has struggled to bring out new products before, faces the daunting challenge of later this year rolling out the $35,000 Model 3 sedan, the linchpin in his plans to take the company into the mainstream from the rarefied air of selling luxury vehicles.
His acquisition of SolarCity Corp. late last year and removal of the word "Motors" from the company's official name is part of a broader vision of being able to offer solar panels to generate energy and batteries to store that power at home or the office -- all for the benefit of the vehicles being sold. He has also begun shipping vehicles equipped with the hardware he says is needed to make them fully self-driving once the software is completed, aiming to demonstrate the prowess by ye
Who can say? There's lots of discussion about extra funding needed, so presumably that will dilute existing shareholdings and reduce price in the short term if it happens, however a bounce back, which might have started today, could easily see it sale back up to $280 and possibly beyond while nothing is decided on that front.
Medium - Longer term, I can very much see Tesla being as successful as the likes of Google, Amazon, Apple and Facebook in terms of share price.
Although its hard to for a car company being able to maintain similar growth rates, which I think worries many commentators when they look at TSLA's earnings multiple, I can see Tesla being very much more than an auto-manufacturer - plus they may end up selling software and systems to other auto-manufacturers which is a much easier way to maintain high growth than building huge manufacturing plants.
I've probably said it previously, but for me a punt on TSLA is a punt on Musk and his drive and abilities to innovate and embrace the latest technological developments, wherever they might lead the company.
I have 'seller's remorse' at the moment, I wish I hadn't sold both of my tranches, but I'm sure I'll get in at much lower than current prices if I am patient enough, given the price history ... and if we can still afford to buy stocks priced in dollars in the UK!
I don't want to re-buy around 1 to 1.25 Fx rates, where we've been for a while, and then see a 10% plus come back in GBP. Not that I think that is very likely with chances of a Fed rate hike at the next opportunity now being given as 50-50 and article 50 due within a month.
It could be that you don't get your price range, but make just as much GBP profit selling at a lower price in a month or two.
I'm a believer in TSLA and Elon Musk particularly over the longer term, but I'm having real difficulties building a position for a long term investment at a reasonable entry price - not least because I have no idea what such a price is amidst great volatility, which isn't helped by TSLA seemingly being a 'love it or hate it' stock as far as commentators go. Important in the type of business they are in (the cars, anyway).
I bought my first tranche @$225, then another under @$200, sold some leaving an average of around @$206 then sold that recently to take a profit, all while jugglin g changing Fx rates, on the assumption that I'll be able to get in later at a lower price.
This note from Goldman was largely responsible for the 4%+ drop in price yesterday, but other sell-offs recently have also been on strong volume (see chart).
"Goldman drops Tesla to Sell from Neutral. Six-month price target drops to $185 from $190. Implied downside 28%.
Says that while Tesla currently has a lead relative to OEM peers with respect to vehicle technology adoption, electric vehicle architecture, and (potentially) battery scale, "our concerns are more near-term oriented with respect to operational execution on the Model 3 launch, an unproven solar business, and cash needs.
"Ultimately we see a delayed launch (pushing volume growth out and to the right) and FCF burn rate (necessitating a capital raise before 4Q17) to weigh on TSLAs shares."
Notes that need for capital is exacerbated by the addition of SolarCity, "whose business would continue to be a FCF drag and requires an equal amount of sale of project level debt and tax equity financing to maintain cash balances." "
Tesla delivered 76,233 vehicles in 2016, representing 50% growth over 2015 deliveries. Despite missed guidance on the 80-90,000 deliveries initially expected, this was because of the transition to Autopilot 2 after the much documented fatal crash earlier in the fiscal year.
New orders for 4Q2016 promise further growth in deliveries in 1Q2017
On the whole, I wasn't the disappointed by Tesla's delivery of 22,200 vehicles in Q4 as reported in the press release. The slow start to the quarter made it likely that Tesla would miss its Q3 guidance of delivering 25,500 vehicles. The 13% shortfall for the quarter could have been much worse, but Tesla need to learn not to over-egg expectations. The market will only put up with too many misses which damage the stock price short term.
The delays in switching to autopilot 2 were understandable given the much greater level of complexity of the hardware of the new system. In addition to the Drive PX2, the new system has a total of 8 surround cameras and 12 ultrasonic sensors plus the forward-looking radar.
Even if a customer doesn't opt for Autopilot 2, the hardware still is installed in the car and has to be integrated and pass acceptance testing. That means if customer opts to upgrade later to Autopilot 2 functionality all should work properly, in theory, after the over-the-air (OTA) update that installs Autopilot 2 software.
According to Tesla, production delays pushed hardware deliveries for Autopilot 2 into late in the quarter, but once available sales and deliveries moved quickly and have almost caught up to the 3Q production of of 24,882. 6450 vehicles are now in transit to customers for delivery this quarter.
It is now looking like there is a good chance of full-driving capability being delivered in 2017 on the back of the autopilot 2 system hardware and new software.
I also think we'll see losses in revenues very much reduced towards break even, although what the SolarCity impact will be is unsure. SolarCity results will be reported separately in their own right.
SolarCity need to somehow address the cost of installation of panels and what can be charged. The economics are no longer making sense. However, I have faith in Musk to understand the low cost rooftop panel installation model isn't working and expect a total switch to more top-end market products, E.g. 'whole roof' panels. I think he has other ideas for SolarCity that we haven't heard yet also.
Back to the autos, Tesla has already stated that Q4 orders for Model S and X were 52% higher than a year ago. and probably plenty of capacity to expand production beyond 100,000/year.
Meanwhile, I've sold out of Tesla temporarily having taken a profit and have expectations of every chance of re-buying at something under the $200 level on the price volatility that has been shown and seems likely to continue. Tesla/Musk seem to be a love it or hate it, Marmite-like company, and on any PR gaff, the price will be hit hard because many pundits are just waiting for the chance to do so.
Ultimately, I still believe in the drive and vision of Elon Musk as well as the future of electric vehicles with Tesla as a major leading light in the market.
Reports of the gigafactory going into production and looking exceedingly busy came a little too late to stop me selling out my final tranche, I may well have held it at an average of $206, just in case my target price doesn't present itself. We'll see. Maybe on the SolarCity results ...
That's the plan for customers buying a Tesla (NASDAQ:TSLA) vehicle after January 1st, 2017. Those that purchased their vehicles before then (and takes delivery before April 1st, 2017) will be grandfathered into the current model, which allows Tesla owners to use the Supercharger Network for free.
However, those that do order the vehicle after January 1st will have some leeway, as they will receive ~1,000 miles per year of free Supercharging credits.
Bears argue it hurts the brand and will turn customers off, while bulls argue about financial savings and how it may boost sales this quarter.
Tesla will not operate the network as a "profit center." As I interpret this, it means the company will operate at breakeven, only passing along its expenses to the users. The amount of those expenses, though, are not yet known. This could be an important factor later if it's indeed material to the customer.
From a business perspective, this is a good choice. The company will stop losing money on its charging network, which will help bolster the bottom line and get its finances in order.
From a customer perspective, this is obviously a loss. Of course, if the cost is relatively low, then perhaps this is no big deal for many - especially because they can charge at home, like most do anyway.
But those taking a road trip in their new Tesla might feel let down that what once appeared to be free is no longer so.
At the end of the day, the company only needs the decision to be a net positive. Should demand remain relatively strong for the vehicle, and the Supercharger Network starts operating in the black rather than in the red, I would suspect Tesla will be the beneficiary, and so too could its stock if other catalysts fall in line.
"The duo has a received the blessing from the Institutional Shareholder Services, helping to green-light Tesla's (NASDAQ:TSLA) $2.6 billion acquisition of SolarCity (NASDAQ:SCTY).
So is the deal as good as done?
More than likely. Tesla and SolarCity have the support of several large shareholders and its large base of individual shareholders who have bought into the companies' promise for a greener and cleaner future.
It probably helped that Tesla and SolarCity showed off its latest joint project, the solar roof, in that it should help convince investors that a combination is in the best interest of everyone.
Of course, not too many people have an issue with the concept of the deal, which is Tesla adding solar power to its product portfolio of energy storage products and electric vehicles. The issue that most people do have is trapped within the four sides of the financial statements. (Some also don't like the fact that Musk is also the largest shareholder in SolarCity and is using Tesla to buyout the company).
Both companies burn a lot of cash and while Musk did ease concerns about an impending capital raise in the short term, many doubt that the company can continue operating both business segments without raising capital.
Despite an earnings report that seemed better than expected on the surface, a new solar roof and positive commentary around the company's autonomous driving capabilities, the stock remains under pressure. While up about 2% Friday, it's down roughly 10% over the past month.
You could make a case for either side - that's the type of stock Tesla is. Long-term buyers will say the stock is simply pulling back and will eventually squeeze the hell out of the short-sellers, who have sold short 24% of the stock's float. Bears will counter that the stock is wildly overvalued and will eventually crumble. This recent decline is just the first of many declines to come.
I'm not going to say which side will be right, only that it's still a coin-toss. I can picture a future where Tesla is a much larger player in the automotive and energy world just as easily as I can picture the company losing focus and stumbling quite hard."
"Tesla Motors (TSLA) plans to change how it reports its earnings, something that has the potential to cause plenty of confusion when it releases its earnings on Oct. 26. Oppenheimers Colin Rusch and team try to get in front of the change:
The critical change in proforma revenue is the recognition of lease revenue not total vehicle value. Due to high percentage of deferred revenue (~35%), this change also materially changes EPS.
We expect cash flow estimates to remain intact. We also believe the new reporting structure highlights the importance of Teslas lease partners and risks around Teslas used vehicle market whether it is older vehicles cannibalizing new sales or the brisk pace of innovation limiting interest in older vehicles.
While used Teslas have held value well to date, we view the end of lease vehicle strategy as a critical variable for future cash needs
Restating prior results based on GAAP revenue Previously, revenue had been adjusted to reflect deferred revenue due to lease accounting. Our forward estimates no longer include this deferred revenue. Our 3Q16 revenue estimate is now $1,866.3M (was $2,327.4M)."
Current Analyst Consensus Estimates (lowered in last 7 days):
Click Here for more Solarcity Corp. (MM) Charts.
Tesla Motors Inc. said in a federal filing Wednesday it expects to pay out $422 million in the third quarter to holders of convertible notes.
The disclosure, part of an S-4 filing related to its planned merger with SolarCity Corp., comes as the auto maker faces big costs related to product development and continues to book net losses in its core business. The company said that it had $3.25 billion in sources of liquidity as of June 30.
Tesla recently completed a $1.7 billion equity raise and likely needs to issue more shares if a SolarCity merger takes place.
The company has said that senior notes due in 2018 were convertible as early as the third quarter of 2016 at the holder's option. After repaying the principal amount of the conversion in cash, Tesla has $224 million in aggregate principal remaining on the 2018 notes outstanding.
Tesla separately said it could issue as much as 100.6 million shares in relation to paying out SolarCity shareholders in the proposed merger. The deal still needs approval by shareholders at a special meeting.
In the filing, the company said its swap offer now values SolarCity at $24.16 a share, or roughly $2.4 billion. That is $400 million less than an original merger proposal announced in June.
SolarCity and Tesla share Elon Musk as chairman. The merger is expected to result in $150 million in cost savings, Tesla said, and Mr. Musk has said the merger will help the Silicon Valley auto maker transition into an energy company with battery, solar and automotive products.
Comment is made that Employees from the Japanese company were expected to arrive in Nevada at the end of last year to prepare for the start of cell production. I hope Western Lithium can keep up lithium supplies. Could be the reason for DL flying down to Mexico for a bit of hands on and stepping up a gear in Sonora to meet the Tesla contract.
Panasonic Commits $1.6 Billion For Tesla Battery Gigafactory
Throughout its project to build a massive battery "Gigafactory" near Reno, Nevada, Tesla has had assistance from its current battery supplier, Panasonic.
The Japanese electronics company has agreed to help fund the project, and will use its technical resources to help set up and run the factory.
Panasonic hasn't previously disclosed the amount it plans to invest in the $5 billion project, which will provide the economy of scale to lower the prices of Tesla electric cars.
DON'T MISS: Tesla Gigafactory To Host 'Hundreds' Of Panasonic Workers Starting This Fall (Jun 2015)
Now, the company--which also owns a small stake in Tesla--says it will spend up to $1.6 billion on the Gigafactory.
That estimate came from Panasonic president Kazuhiro Tsuga, speaking to MarketWatch at the recent Consumer Electronics Show (CES) in Las Vegas.
Panasonic's continued involvement in the Gigafactory project is reportedly part of plan to grow the company's presence in the automotive sector.
Tesla Motors - Model S lithium-ion battery packTesla Motors - Model S lithium-ion battery pack
Sales to carmakers accounted for about 15 percent of Panasonic's revenue in 2015, but the total revenue is expected to double over the next four years, representing 25 percent of the total.
At the same time, though, Panasonic faces stiffer competition from Korean battery suppliers Samsung SDI and LG Chem.
The latter will supply battery cells and many other components for the 2017 Chevrolet Bolt EV as part of a far-reaching partnership with General Motors.
ALSO SEE: Tesla And Panasonic: Partners In Electric Cars, Foes In Home Energy Storage (Sep 2015)
The $1.6 billion investment Panasonic revealed at CES is significantly higher than the $92 million it had previously discussed.
Employees from the Japanese company were expected to arrive in Nevada at the end of last year to prepare for the start of cell production.
According to previously-released terms, about half of the Gigafactory is to be devoted to cell production supervised by Panasonic. The other half will be occupied by suppliers and assembly lines for cell modules and battery packs.
Tesla Model S undergoing assemblyTesla Model S undergoing assembly
The majority of cells initially will be used for its current Model S and Model X electric cars, as well as for its Powerwall home and business energy storage products.
Ultimately, though, the output will be used for the 200-mile Model 3 electric car, which is scheduled to be unveiled in March.
Tesla will need the economy of scale offered by such a large factory to achieve the Model 3's oft-quoted $35,000 base price.
MORE: Do Tesla, Panasonic Differ Dramatically On Growth Of Electric Car Batteries? (Jun 2015)
But that relies on the factory being fully operational by 2017, when Tesla has claimed Model 3 production is expected to start.
The company has delayed each of its new-vehicle launches, and the added variable of the Gigafactory could make the Model 3 launch more complex than previous models.
And Tesla needs to ramp up Model 3 production quickly to meet its goal of selling 500,000 cars a year by 2020.
If it does meet that goal, Tesla will likely account for the largest portion of Panasonic's planned automotive-market growth.
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