Tweet

James

16 Jan, 9 tweets, 2 min read

1/The benefits of increased localized production for $TSLA is not cumulative, its synergistic.

- Much lower shipping costs
- No tarrif costs
- Localized supply chain

...all contribute to lowering costs of the product...which enables a lower price for the same margin as before

2/...those costs were greatly reduced. A lower price, in turn, makes $TSLA more competitive in the local market which, in turn, expands the addressable market. A ⬆️ market opportunity ➡️ higher volumes built + sold which, in turn, lower the fixed cost per unit sold....

3/...and in time, also lowers variable costs as Tesla needs more of all their parts as scale ⬆️.

These cost savings, in turn, lead to higher margins - enabling another opportunity to lower price while maintaining margin.

We see this playing out right now in China. The same..

4/...will happen in Germany, and eventually again in North America with Austin pushing out high volumes of Model Y.

Local production also enables a shorter sales cycle (time from when product is built to when product is sold). This, in turn, improves Tesla's cash flow. Higher...

5/...rate of cash flow is good because Tesla can better finance its operations and even invest in growth opportunities from cash it generates vs. relying on debt. As Tesla is less reliant on debt, its fiscal health will improve and it becomes less risky. As risk ⬇️, it will get..

6/...an improved credit rating, and better terms on future loans/lines of credit. Better terms on debt means less interest costs, which help Tesla's profitability.

I can keep going, but you see the point.

The kicker? Tesla's plan is to generate downstream sales from all of...

7/...their vehicle sales.

FSD, insurance, robotaxi and eventually SaaS/games will all drive additional, high margin sales from cars already on the road. Once this becomes a reliable stream of income, Tesla will be able to FURTHER drop price while maintaining margin. At a...

8/...much lower price than competition and with leading technology/range/specs, Tesla will hold a very high share of the market, and an even higher share of the VALUE in the market.

All of this enabled, in large part, to localized production.

Other noteworthy benefit:

9/ A diversified manufacturing base and supply chain will reduce business risk. We saw what happened in Q2-20 when Fremont was shut down for 50 days...

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More from @TSLAFanMtl

James

@TSLAFanMtl

16 Jan

1/Auto insurance is almost completely commoditized. No one gives a 💩 about company A or company B. Inevitably, a purchase decision comes down to coverage for price. Period.

We know that $TSLA buyers are fiercely loyal and have a strong affinity to the brand. If Tesla can...

2/...offer a competitive rate for equal or better coverage, the decision is a no-brainer. As a Tesla fan, I know who I would choose to support.

Insurance companies make money (in part) by collecting premiums in exchange for insuring the driver against future accidents/damage...

3/ The better the company knows the driver, the more accurately the company can assess risk. This means ppl who are lower risk can pay less, and Tesla can offer them better rates.

It also means that ppl who are more risky will pay more, and Tesla can better protect itself.

Read 7 tweets

James

@TSLAFanMtl

2 Jan

1/ To close out 2020, 5 tweets with 5 points:

5 best $TSLA things of 2020 (no particular order):

1. Launch of Fremont Model Y (STILL only selling AWD in NA)
2. MiC Model 3 production & strong sales
3. FSD Beta
4. Progress of Gigas Berlin & Austin construction
5. 4680 Battery

2/

Top 5 $TSLA surprises in 2020 (no particular order):

1. Model S Plaid
2. Kato road hidden battery factory
3. Single-piece cast underbody for Model Y from Giga Press
4. FSD/autopilot core re-write
5. Gigafactory USA x 2 (Austin)

3/ Top 5 stupid $TSLAQ statements of 2020 (no particular order).

$TSLA:

1. Is "structurally unprofitable"
2. Has no technological moat
3. Loses $ on every car sold

.....

Read 6 tweets

James

@TSLAFanMtl

2 Jan

1/Tesla cars offer incredible VALUE.

Value is defined as benefits (perceived or otherwise) divided by PRICE.

So...the more benefit the customer perceives from the product, the higher the perceived value. Similarly, the lower the price, the higher the perceived value.

2/ A strong brand enables a company to price its product high while maintaining high perceived value.

What happens when you combine a strong brand + best-in-class features, technology & performance - at a LOWER price than similarly-sized and positioned cars?

Market shr ⏫

3/ This is what has happened in every market Tesla has entered. Of course, bears will argue about "X" market and "Y" period of time (Norway, bro).

Its easy to blend markets & products & market shares & get everything & everyone all confused.

Read 11 tweets

James

@TSLAFanMtl

7 Dec 20

Tesla's strategy is on full display, right now:

1. Build new factory, localize the supply chain, eliminate import tarrifs, reduce transit costs
2. Serve latent/pent-up demand in the market from local production
3. Keep increasing volume and dropping costs with scale.

4. Cut price as costs decline, keeping margins stable - and widening the addressable market
5. Keep improving FSD --> this increases penetration. Increase price --> this increases perceived value
6. Leverage increased software revenue to support further price decreases

7. Introduce a new model from the new GF which is most popular in the local market to maximize domestic consumption:

Austin = Cybertruk (serving mainly USA)
Berlin = Hatchback sedan (serving mainly EU)
China = Compact sedan (serving mainly APAC)

Read 7 tweets

James

@TSLAFanMtl

14 Oct 20

1/Time to debunk some "Tesla is failing in EU" FUD.

First, bulls & bears, let's all agree on one thing = it takes supply to make sales. Fewer cars built = fewer potential cars sold. Simple, right? cannot sell what they do not have. Agree? Good. Let's move on.

2/Let's also consider what is being sold in Europe.

Model 3
Model S
Model X

is not selling Model Y in Europe.

Model Y is being sold exclusively in NA until Giga Berlin comes online for EU consumption, and Giga Shanghai's Model Y line comes online for China consumption.

3/ Next, let's discuss where Tesla builds their cars.

Fremont = S/3/X/Y
Giga Shanghai = 3 for China sales only

Next, let's discuss which production lines make the cars in Fremont;

GA 1/2 = Only S & X
GA 3 = Only M-3
GA 4 = Only M-Y

I am sure we all agree on these facts.

Read 13 tweets

James

@TSLAFanMtl

12 Jul 20

1/There are always many questions raised when $TSLA decreases price. Bears immediately jump to demand concerns, but the truth is, pricing strategy and pricing decisions are not *ever* the result of a single factor. Marketers understand this
Allow me to elaborate in this thread.

2/ Pricing strategy is driven by many things:

1. Corporate objectives (ex: high margin/niche products vs. mass market/market share)
2. Market size & opportunity for the specific product
3. Competitive product offerings
4. Product manufacturing cost
5. Brand/perceived value

3/ So let's explore the recent Model Y price cut. Some $TSLAQ may speculate that Model Y demand has gone to zero & the order backlog has been depleted.

Lets first remember that Model Y is only shipping to NA, and only AWD/Performance variants.

Lets also remember that...

Read 15 tweets

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