https://finance.yahoo.com/news/exclu...html?.tsrc=rss

Stock up 6+$ prr on news

Uh oh

Bear thesis playing out quite well in 2019 so far.

The idea that Panasonic created Tesla's Q3 & 4 profit last year by forgiving payments was something we were considering in this thread, given:

a) The incredibly bizarre reduction in costs while ramping car output
b) The fact that Panasonic posted a sudden huge drop in profit for the same period as Tesla showed its first meaningful profit.

At this point the thesis looks very plausible. Here's a Twitter thread discussing this some more.



In other news:

Panasonic has confirmed the reality of this report, although spinning it so it doesn't seem as bad. But in reality no one rethinks reinvestment in giant supposedly triply growing markets (cars ramping to 10K/week, powerpacks, powerwalls) that are supposedly profitable. So it's a confirmation.

Overnight, Tesla appears to have set an earnings date on April 24, a weekly earlier than they normally report earnings (which is always the first Wednesday in May), and two days after their "Autonomous Investor Day" fraud pump on the 22nd.

Except Motorhead claims that Panasonic's concessions were Q2 and Q3 and Tesla started paying back in Q4.

Q4 net profit was down significantly from Q3 despite more cars delivered (at slightly lower ASP) but then again they were able to deliver a bunch of cars in Q3 that they had held back from Q2 to avoid going over the tax credit threshold.

I agree that based on Tesla's timeline it would make more sense that the concessions were Q3/Q4 because Q3 was when the news broke that Tesla was going to suppliers and seeking discounts. Also Q3 was when the pressure mounted to show a quarterly profit.

LOL at Tesla spokeperson's statement.

Its more and more clear every day that this company operates with no long term strategy.

Its all about the latest stock price.

An interesting note from Roth Capital before the open today. His take on Panasonic seems the most reasonable one. And his comments on battery cost are hilarious and I think also correct.
Meanwhile, the fake news strikes again. The US press really is the enemy of the people. After building up a conman (Musk) for years with flattering hyperbolic articles and fawning praise, they do yet another fake news hit:



The reporter is either too stupid to realize that both are true, or seriously dishonest - Tesla were actually supply constrained on affordable S/X battery supply by the fact that they were buying batteries for S/X on supply-limited depreciated production facilities that required billions in (not worth it) capex to expand further, AND they had not asked Panasonic for it to be expanded. Neither are bad for Tesla.

I do think S/X demand is in decline now though. The iPace has gut punched Tesla in some key European markets, and the Model 3 ate some of its lunch elsewhere (why pay for an old S when you can have a new 3 with similar performance profile for $30K cheaper?)

What are you talking about?

The battery price has been Irwin's main thing for a long time now. Nobody has refuted his argument but also nobody else joining him. Not sure what to think- far from my subject matter expertise.

Not sure why you are attacking Russ Mitchell as "fake news" he has been one of the best reporters on Tesla for a long time now.

S/X don't use the custom cells from Gigafactory 1 that required large cap ex investment ($4 billion from Pana I believe.) They use 18650 cells manufactured in Japan that are very common. I believe Pana could easily have obtained or manufactured more if asked without any additional cap-ex.

Sounds more like Panasonic just didn't want to outright call Musk a liar.

Who cares if he's been right if he's wrong now? Weird argument.

It's been my understanding that ramping 18650 cells for S/X required enormous capex spending for new lines, which neither party thought was worthwhile given that the Gigafactory was underway. So much that Tesla sourced Samsung batteries for their cells when they puts in the South Australian utility battery hub; Panasonic couldn't supply them due to constraints.

If I'm wrong on this I'm all ears but I've read this from so many sources over the years I think it's reliable.
Do embedded tweets also not show for you? That was an embedded tweet.

No I saw the tweet, I meant your comment about S/X cell supply. Where did you see that new lines would be required? I’m reasonably sure you are wrong about this.

Tesla basically quietly quit pretending it’s going to rely exclusively on Panasonic and itself for battery cells. No formal divorce yet but, in effect, separation papers were filed when Tesla started using outside suppliers.

Probably smart move long term to diversify supply base. Short term, it’s probably because Musk deprioritized battery production and didn’t want to pony up the CAPEX. Doing the right things for the wrong reasons.

This is a comical ****show. Earlier today Tesla sent out texts to people who ordered and paid for the $35K standard Model 3, saying delivery was indefinitely delayed. Some of these people had paid more than 40 days ago. Now, the $35K Model 3 is officially vaporware with their latest blog post:

Take aways

- No one wants their ****ty base Model 3, apparently.
- Their cheapest online car will be $40K
- Leases start today, the final demand lever they can pull

This is officially a ****show. The bolded is the funniest of all. Run out of cash? Down-covert your car and have Tesla give you a $4500 cashback!

actually this is the funniest part:
T minus 3 years until Tesla Taxi! should be enough time to figure out stop signs

I found a picture of Musk selling the $35k Model 3:

I thought the 18650 cells were basically a commodity.

But regardless even if you are right- why give Tesla the benefit of the doubt? Why interpret the situation in the only way that means Tesla is not lying given Tesla's propensity to lie and shift blame?

Bringing up a similar contradiction from 2018 to add color to this new Pana-Tesla spat is not "fake news" its good reporting.

The best parts of the Nikkei stories weren't even reported in this thread:

-Pana insinuated it would sell excess Giga capacity to Toyota. Not sure if current agreement with Tesla allows that or if Tesla being in breach triggers some other clause.
-Tsuga straight up threw Musk under the bus. Said Musk regularly begs him to lower battery prices.

I guess that was supposed to be the pump. Leading into whatever crap he is trying to pull at Autonomy Investor Day.

But even the lemmings can do basic math and figure out these "leases" are a horrible deal without an option to buy at the end.

Pana is acting here. Tesla is reacting.

Semantics. Panasonic's decision was made for them when Musk declined to raise the capital needed to support Gigafactory expansion and opted to get outside suppliers instead.

Outside suppliers were irrelevant. Pana is 100% the actor here imo. And they're doing it based on terrible demand. There's no other reason to back off.

And yes, Pana has full rights to sell excess output to others. Under the agreement they essentially own the cell part of the gigafactory.

I assume the lack of a purchase option at the end of a lease is because they couldn't find a leasing partner. Does that sound fair? Obviously the story about Tesla wanting to retain those cars for their fleet of robot taxis is nonsense.

I don't really understand the accounting behind leases but I wouldn't be surprised if assigning a realistic residual to the end of the lease would be a disaster for their balance sheet. It should do something to help move inventory though since most consumers don't understand leases either. They just want to see a low monthly payment and don't grasp or care about what happens at the end. That's years away after all.

I can't think of any substantial benefit they would gain from only providing operating leases. Maybe they can double dip with inventory write-downs or write-offs. Fixed assets look a little better then receivables and amortizing unearned income.

if they have a lot of corporate lesee's then accounting for operating leases is generally more favorable for the lesee on financial statements

Not offering a buy-option basicly means the lease should be classified as an operating lease, and remains on the balance sheet of Tesla.

I can think of 2 likely scenarios where they are not offering financial leases (=with a fixed buy back option).

1/ They think they can make a profit on the sale at the end of the contract. If they can convince clients to take a lease where the asset it written down to x, and at the end of the contract it will be worth y>x, Tesla will make additional profit.

2/ They want to manipulate their EBITDA. Accounting for operating leases is a bit funny for the lessee, since the asset is written down in the lessee's P&L, but over the lease its lifecycle it's a cash flow neutral operation, Tesla "bought" the asset to lease it to the customer, after which the client pays monthly bills which include depreciation. This has a favorable effect on EBITDA, but usually a negative effect on debt (=Tesla has to finance the transaction).

For companies that are purely active in operating leases, the classic EBITDA metric is useless and is not used. I'm not sure whether Tesla makes this distinction somewhere in its reporting?

If my explanation is confusing, you can look at financial statements of ALD, a huge company exclusively active in operating leases:
https://www.aldautomotive.com/invest...-communication

Thanks bbfg. That was helpful.

What are the chances this is just a pure hype move and they'll just "change their mind" and offer the buy option later.