Seeking Alpha
View as an RSS Feed

Technology Equity Strategies  

View Technology Equity Strategies' Comments BY TICKER:

Latest  |  Highest rated
  • Tesla Motors to test referral program [View news story]
    Green, (and Happy flying):

    It is a total misdirection to suggest that recalls of other cars are comparable to Tesla's failure rate.

    This is a business model issue. Other car companies sell through dealers. Thus when an issue arises, the only way to distribute the solution is through the recall mechanism.

    Tesla does not do recalls for its recurrent, severe epidemic failures. If it did, we would have seen several recalls for the entire product line. Because it deals directly with the owners, Tesla has persuaded the NHTSA to not require "recalls" because Tesla is doing constant ongoing recalls on its own.

    The actual product failure rate of the Model S is far higher than any of the cars you describe.

    The reason only 20 percent of the Model S have had drivetrain failures is simply that many of the Model S units on the road haven't been driven sufficiently. Over 4 or 5 years, we will likely see epidemic failure rates over 50 percent, and maybe far higher.

    There is no other way to explain that Tesla customers who use the car extensively often have 3 or 4 drive units replaced, like Edmunds and many others.

    This will all become more widely known soon. The Model S reliability is garbage compared to any peer group. It is masked by ongoing replacement and excellent service.
    Jul 31, 2015. 10:41 PM | 3 Likes Like |Link to Comment
  • Positive read on used Model S demand [View news story]

    There is no fraud in overpaying for repurchased cars.

    The fraud is in hiding the overpayment in the "Other" line in the income statement, not disclosing it. This overstates gross margin in the automotive sales line.

    Its not the practice that is the problem, its how its accounted for.

    The investor needs to be able to see what the true gross margin is on the cars. Hiding the payment to the customer of an offsetting amount in "Other" conceals the actual economics of the transaction.

    In the end, investors sort out earnings quality. Here there are no earnings, and won't be in the foreseeable future. So maybe its a quality of losses analysis
    Jul 31, 2015. 10:31 PM | 1 Like Like |Link to Comment
  • Positive read on used Model S demand [View news story]
    Ken Sanders, Raster.

    Here is the cite for this. It is supplemented by a report from the conference in mid July that numerous attendees said they got the same approach:

    "My neighbor who owns a 2013 Tesla Model S P85 (one among a stable of 5 other cars he owns), arrived home recently with a brand new Tesla. He said that Tesla contacted him with a special program they are offering existing Tesla owners to buy back their existing car at 75% of its initial sales price, if they would purchase a new, more expensive Tesla. His Tesla is a little less than 3 years old and has about 20,000 miles he says, so this is a very rich offer (I think typical lease residuals for comparable luxury cars would be at the 50% to 60% range)."
    Jul 30, 2015. 10:41 PM | 2 Likes Like |Link to Comment
  • Tesla Motors to test referral program [View news story]

    What do you think the drivetrain failure rate is for the Model S?

    I have seen reports of 15 to 20 pct. What does your data say?
    Jul 30, 2015. 01:55 AM | 5 Likes Like |Link to Comment
  • Tesla Motors to test referral program [View news story]

    Tesla is not held to a higher engineering standard. Only Tesla, Tesla alone, can get away with drivetrain failure rate that is as high as 20 percent. Its shocking, truly, that it has skated through this, after all the false narratives about .50 cent shims, grease, only early models, etc. Even new cars now still have drivetrain failures, milling noise, need for replacement.

    Any other luxury car that had this crappy quality would be basically banned by CR, the auto press, and NHTSA.

    Tesla is coddled and nurtured, and allowed to compensate for very poor product reliability through excellent service. Thats the big surprise. That great service can trump product failures, and the auto world permits this.

    This coddling may well not be afforded to the Model X. In my view, thats why its taking so long. Thats what Tesla and Mr. Musk knows. The free lunch is likely coming to an end. There are plenty of signs that CR is not going to look the other way this time.

    The coverage of the excessive problems (statistically) with the doors is CR's way of saying that the introductory kindness to the new kid on the block has exhausted its half life.

    The Model X, though late, is still early in testing. Its not in third parties' hands, even now so late in its launch. It is hugely dangerous to bring it out now. There are ample signs that Model X 1.0 is going to be really tough time.

    Thats why its so important to not hit dry rock on demand for the Model S now.

    Your scenario of 3 tough months and then everyone happy is not realistic.
    Jul 29, 2015. 11:36 PM | 11 Likes Like |Link to Comment
  • Tesla Motors to test referral program [View news story]
    In my view, this referral program is not a good idea. When your friend is getting paid for delivering you in as a customer, your friend now has an actual or at least perceived conflict of interest. This is not a good thing.

    Most people would kick the finders fee back to their friend. But even when that happens, this game undermines the integrity of the word of mouth element.

    Tesla is trying all kinds of things to keep the game going, as they should. But this trick shot should go back in the bag.
    Jul 29, 2015. 08:09 PM | 6 Likes Like |Link to Comment
  • Tesla Motors to test referral program [View news story]
    We all seem to be agreeing that its a 2000 price cut. The 70D was a $10,000 price cut. The new 70 is a further $5,000 price cut off of that.

    Now on top, we see an additional $2,000 price cut.

    Thats all fine, its just normal car stuff. Need to cut prices to move product. Thats the business in this tough industrial product category.

    What we do have to ask however, is how is Tesla going to account for this latest price cut? It seems that it will likely run at least half of the $2,000 through the Sales and Marketing line, enabling Tesla to once again overstate gross margin.

    No doubt Tesla has concluded that its stock price depends on units and gross margin. Thus giving away dollars at the sales and marketing line is an advantageous way to cut the price while not accounting for it in gross profit.

    The repurchase of CPO cars at above fair value is another way. We have already seen that--- Tesla is going to stick those overpriced repurchases in the Other line in the income statement.

    Its all just Tesla being Tesla.

    As for GreenTech's comments on why they are doing it, I think we are all converging on a consensus. They are doing it because they are worried about Model S demand going soft when they bring out the new car.

    One difference. I do not agree that having some backlog for a new car is the same as being "demand constrained" as a company. Tesla has constrained production of the Model S to prevent exhaustion of the entire Model S backlog. This is not demand constraint.

    The reason we debate demand constraint is really a side show anyway. We debate it because we are really interested in market size. Tesla shareholders try to deflect that Tesla is a small company in small niche, by trying to posture that the actual level of demand for Tesla products is vastly greater than the company's sales. They need to argue this because Tesla has shown that they can not be profitable at the scale of the current business.
    Jul 29, 2015. 08:04 PM | 13 Likes Like |Link to Comment
  • Tesla Motors to test referral program [View news story]

    Well, why don't you tell us what you think this suggests, in terms of demand?

    Lets hear it.
    Jul 29, 2015. 03:55 PM | 8 Likes Like |Link to Comment
  • Positive read on used Model S demand [View news story]

    There was a post that I saw in the Forum of someone who had gotten the offer and taken it. I am looking for it but didn't bookmark it. I will keep looking.

    I also heard from a friend who was at the Tesla Motors Club Connect Conference on July 10 through 12, that numerous attendees at the Conference said they had been approached and offered this deal.

    The discussion was that if Tesla was doing this, it was probably a sign that demand wasn't so great.
    Jul 29, 2015. 01:37 PM | 3 Likes Like |Link to Comment
  • Positive read on used Model S demand [View news story]
    Yes, here is the link. See first paragraphs under the heading "Q-1 Results"
    Jul 29, 2015. 01:05 PM | 3 Likes Like |Link to Comment
  • Positive read on used Model S demand [View news story]
    Back in the tech bubble, a number of companies got in serious legal trouble when they offset one product with a purchase of another. The accountants ultimately required that those companies book "contra revenue". Thus a company that sold product X to another company or customer, but bought product Y from that customer, had to aggregate the two transactions. They couldn't treat one as an arms length sale, and treat the other as an unrelated transaction.

    Here we are again. Growth company needs new sales, and is willing to buy other product (in this case an old car) at a higher price than would otherwise be the true arms length cost.

    The excess price paid for the old car should be "contra revenue". I am sure that Tesla is discussing this with its accountants. But so far, the accountants are probably saying its not an issue because its "not material", and there is no "clear third party valuation" for those products. Tesla hasn't had very many sales of that CPO inventory as they dribble it out.

    But this will be an ongoing issue for Tesla. Bryce, are you out there? Do you remember the old "contra revenue" issues? See AOL, Purchase Pro, Commerce One......

    Blast from the Past. Tesla brings back our collective nostalgia. Brings a tear to the eye.
    Jul 29, 2015. 12:25 PM | 10 Likes Like |Link to Comment
  • Positive read on used Model S demand [View news story]
    The answer is NO. Not yes.

    Here's what Tesla says it will do:

    “Services and other” revenues and related costs include activities such as powertrain sales, service revenue, Tesla Energy and pre-owned Tesla vehicle sales.

    Thus the CPO sales will be aggregated with a other stuff so that Tesla can mask that it is buying CPO cars at above market prices to induce new sales, and taking zero margin or losses on them when it resells them.

    To get an accurate read, we would need to see Tesla break out CPO inventory from other finished goods inventory. They aren't going to do that.

    This is all a game to make new car gross margins look better than they are.
    Jul 29, 2015. 12:18 PM | 7 Likes Like |Link to Comment
  • Positive read on used Model S demand [View news story]
    Tesla has also widely approached existing Model S owners and offered to buy their cars at 75 pct of original prices, if they will buy a new Model S.

    This supports new car prices, but causes Tesla to buy used cars at an inflated value. At this stage they have been accumulating inventory of CPO cars, which they dribble out.

    The effect of this is to support new car sales at a price higher than the market would bear if they did not do so, as to both volume and pricing.

    Tesla has indicated it will report used car sales in the "other" line in its income statement. Thus the new car sales will show an artificially high gross margin, and the loss that Tesla is taking on the trade in will eventually be seen in the "other" line item. In reality, that overpayment for the trade in oldcar should be a deduct to to the gross profit of the new car, as this is just another way if giving money back to the customer.

    Prior to the sale of the old car, the repurchased car will sit in inventory.
    Thus true gross margin will be overstated, and inventory will swell. Eventually, Tesla will show poor or negative margins in the Other line, but we likely won't see this until Tesla sells down its inventory of old cars.

    If so, this will be another artifice to overstated reported gross margin in its automotive sales.

    Its all very Tesla. Gimmicks, gadgets, and games and distractions.
    Jul 29, 2015. 11:55 AM | 12 Likes Like |Link to Comment
  • With Android Auto, Google Goes After Tesla's Infotainment Advantage [View article]

    I think Tesla can eventually support Google Android and Carplay too.

    Tesla is behind and was caught napping, and its a meaningful disadvantage for Tesla. But if they get off the dime, and stick with it, they can close the gap and try to catch up in this brutal, commodity industry.

    The first thing is to accept that they are behind and that its a serious problem.
    Jul 28, 2015. 01:26 PM | 1 Like Like |Link to Comment
  • Tesla's Insane Mode Of Pricing [View article]
    "The P85D is a high margin car aimed at the infantile buyer who is willing to pay tens of thousands more for the most rapid acceleration possible in a sedan. Essentially, it is a litmus test for whether you happen to be a fool."

    This made me laugh out loud.

    Maybe it was the combination of this post and the price action today.
    Jul 27, 2015. 09:40 PM | 9 Likes Like |Link to Comment