The Big Short Thread

[sancho panza]

34 minutes ago, azzuri82 said:

Yep!

 

It is indeed. We're going to find out once these rebates stop whether people actually like electric cars and are willing to pay the market price for them (i.e. it's a fashion accessory / lifestyle choice) or whether sales will bomb as a result. I'm willing to bet on the latter.

The problem I have with Tesla (and where it would fit my criteria for a short) is whetehr the product is easily replicable.

I have techie friends-who's views I wouldn't trade-who say that the electric vehicles tesla make are not worth the money and that the VW/Nissan equivalent is better value.

Obviously,a lot of qualitative assumptions and opinions there but like I said,I wouldn't trade it.I know next to nothing about cars.

[sancho panza]

48 minutes ago, azzuri82 said:

Sorry, I tapped this out on my phone this morning quickly whilst at work and realised it doesn't make a whole lot of sense and conflates two different things.

 

1. Tesla is basically asking parts suppliers whom have already supplied the company parts at a pre-agreed price for a rebate/refund on the purchase costs of said parts. It'd be like agreeing to buy a dishwasher for your kitchen, having it installed and then asking the supplier for a discount 3 months later. From what I understand, this isn't future parts they're asking for a discount on, it's parts already delivered (and perhaps used/installed on actual vehicles!).

 

Wolf has chimed in as per your line.

https://wolfstreet.com/2018/07/23/desperate-tesla-asks-suppliers-for-cash-back-retroactively-to-2016/

' Tesla burned $1.1 billion in cash in Q1 and likely more in Q2 – we’ll find out on August 1. It cut its workforce by 9% in June and promised to cut other spending. CEO Musk told the entire world in a bizarre earnings call that he didn’t “want to” raise new capital in 2018, though Tesla had only $2.7 billion in cash at the end of last quarter. No one can figure out how the math is supposed to work out…. Well things are getting pretty tight, it seems, and the year is only half-over.

In a memo that a global supply manager at Tesla (TSLA) sent to some suppliers last week, the company has asked the suppliers to refund what it called a meaningful amount of money of what it had already paid these suppliers since 2016; the purpose of these retroactive discounts is to help Tesla become profitable, it said.

Tesla really needs all the help it can get.  In Q1, it lost $710 million, its largest net loss ever. While total revenues – automotive and energy combined – rose 26% in Q1, it’s net losses jumped 114%, on the time-honored business model: the more it sells, the more it loses.

In addition to burning through cash at a breath-taking pace, Tesla has some obligations coming up. The WSJ:

Tesla will need to pay down a $230 million convertible bond this November if its stock doesn’t reach a conversion price of $560.64, and a $920 million convertible note next March if the stock doesn’t reach $359.87.

So the true believers need to go to work because Tesla’s shares, at $313.58, are just a little shy of those conversion prices. And if shares don’t hit those conversion prices, Tesla will have to raise even more money in 2018 that Musk said it wouldn’t need to raise.

At this point, given Tesla’s current share price, its investors really don’t care about anything other than doing whatever they can to keep the share price high. So it’s in their own best interest to support the shares, they think. A market capitalization of over $50 billion guarantees that Tesla can always raise more billions and burn through them in no time. That share price is Tesla’s lifeblood. Few other companies are so utterly dependent on an astronomically inflated share price for their survival. Once Tesla loses its ability to raise fresh cash to burn through, it’s over.

[Castlevania]

@sancho panzait’s ok, if you don’t agree with the new supplier contracts, Elon Musk will personally call you a paedophile

[azzuri82]

8 hours ago, Castlevania said:

@sancho panzait’s ok, if you don’t agree with the new supplier contracts, Elon Musk will personally call you a paedophile

His increasingly erratic behaviour could be explained by the incredible rate his company is burning through cash, and I think even Musk knows the writing is now on the wall.

They need to both up their prices dramatically which will destroy sales, and ask bondholders for more money/time to pay. I can't think both of these things are achievable in the short to medium term.

[A_P]

More Tesla drama today, worth clicking on the tweet to get the full thread:

 

Got to love this if it's true:

"As of October, 2017, the Gigafactory produced no more than two battery packs per day." "Even in January, 2018, Gigafactory completed no more than 14 finished Model 3 batteries every 1-2 weeks."

[A_P]

2 hours ago, Admiral Pepe said:

Got to love this if it's true:

"As of October, 2017, the Gigafactory produced no more than two battery packs per day." "Even in January, 2018, Gigafactory completed no more than 14 finished Model 3 batteries every 1-2 weeks."

If, and a big if this is true I would hazard a guess that all those factory gated Tesla's that are sitting in the California heat must be batteryless.

 

 

[onlyme]

2 hours ago, Admiral Pepe said:

More Tesla drama today, worth clicking on the tweet to get the full thread:

 

Got to love this if it's true:

"As of October, 2017, the Gigafactory produced no more than two battery packs per day." "Even in January, 2018, Gigafactory completed no more than 14 finished Model 3 batteries every 1-2 weeks."

Need to watch the figures, situations change. 

New China factory announced (but will be 5 years in the making), but if Tesla can do an Apple with cars (or show any likelihood of doing so) going to be a difficult dog to bury.

 

https://eu.usatoday.com/story/money/cars/2018/05/03/teslas-battery-gigafactory-hits-new-output-levels/576017002/

RENO -- Tesla CEO Elon Musk says the Nevada factory making battery packs for the company's Model 3 mass-market electric sedan dramatically increased output in recent months.

Musk said the Reno-area "Gigafactory," as he calls it, produced a "sustained rate" of 3,000 battery packs per week and has reduced the amount of time it takes to make a pack from seven hours to 70 minutes.

"In general, our understanding of production is improving dramatically, exponentially in fact," Musk said in a conference call with investment analysts.

He said the Gigafactory, for a short period of time, produced battery packs at a rate that would equal 5,000 per week. 

"If you can achieve it even once in an hour then with continued refinement of the system … it means that you can achieve that sustained rate," Musk said

[Bear Hug]

5 hours ago, Admiral Pepe said:

 

..

Got to love this if it's true:

"As of October, 2017, the Gigafactory produced no more than two battery packs per day." "Even in January, 2018, Gigafactory completed no more than 14 finished Model 3 batteries every 1-2 weeks."

 

2 hours ago, onlyme said:

Need to watch the figures, situations change. 

...

He said the Gigafactory, for a short period of time, produced battery packs at a rate that would equal 5,000 per week. 

"If you can achieve it even once in an hour then with continued refinement of the system … it means that you can achieve that sustained rate," Musk said

I know these are over different periods but such huge jump in production just seems unlikely to me.  

I am also a bit confused about the whole big plan - if there is such a massive demand for M3 and they can't make enough of them, why not charge more for it?

[azzuri82]

1 hour ago, Bear Hug said:

 

I know these are over different periods but such huge jump in production just seems unlikely to me.  

I am also a bit confused about the whole big plan - if there is such a massive demand for M3 and they can't make enough of them, why not charge more for it?

This is my problem with the Model 3 @ $35,000 - if they could charge more for it, they would be, simple. Because they can't, they won't. And because they won't, their business model is toast. 

[onlyme]

6 hours ago, azzuri82 said:

This is my problem with the Model 3 @ $35,000 - if they could charge more for it, they would be, simple. Because they can't, they won't. And because they won't, their business model is toast. 

$35K, is the base model spec pricing, so in effect they do charge a lot more for the car, can't remember what a fully loaded spec pricing was but I think somewhere in the region of $50/$55K. Sort of makes sense, it brings the price down of a poverty spec model into the price range when more people think to themselves that they could buy one and then spend more for one they would actually want.  Model S/X way out of the price range of most buyers so introducing a car that the ordinary purchaser could potentially buy is certainly part of the marketing plan. 

[A_P]

54 minutes ago, onlyme said:

$35K, is the base model spec pricing, so in effect they do charge a lot more for the car, can't remember what a fully loaded spec pricing was but I think somewhere in the region of $50/$55K. Sort of makes sense, it brings the price down of a poverty spec model into the price range when more people think to themselves that they could buy one and then spend more for one they would actually want.  Model S/X way out of the price range of most buyers so introducing a car that the ordinary purchaser could potentially buy is certainly part of the marketing plan. 

1

The issue is though, the $35K is a pipedream. It will very unlikely ever be made. Seems like a good proportion of the pre-orders were for the base model too. They don't make a profit on their fully specced cars and it's two years since the proposal of the $35K. I don't think Tesla can afford any more of cash burn than they have to at the moment to even dare make it.

[eek]

3 hours ago, Admiral Pepe said:

The issue is though, the $35K is a pipedream. It will very unlikely ever be made. Seems like a good proportion of the pre-orders were for the base model too. They don't make a profit on their fully specced cars and it's two years since the proposal of the $35K. I don't think Tesla can afford any more of cash burn than they have to at the moment to even dare make it.

I got a mail through from Telsa today saying that if I ordered a fully specc ed Model 3 I can have it in  2-4 months.

The lead time for a 1.4 litre Seat Leon is currently 6-9 months.

[A_P]

1 hour ago, eek said:

I got a mail through from Telsa today saying that if I ordered a fully specc ed Model 3 I can have it in  2-4 months.

The lead time for a 1.4 litre Seat Leon is currently 6-9 months.

I did see ther other day that they were quoting 1-3 months (in the US) so the difference I assume is for transit. Are you going to buy one?

[eek]

Just now, Admiral Pepe said:

I did see ther other day that they were quoting 1-3 months (in the US) so the difference I assume is for transit. Are you going to buy one?

Nope, while electronic cars are the future - the lack of driver side display rather puts me off. I suspect I'm going to buy a sporty petrol automatic and run that for the next 5-10 years until electric takes over the world.

[A_P]

3 minutes ago, eek said:

Nope, while electronic cars are the future - the lack of driver side display rather puts me off. I suspect I'm going to buy a sporty petrol automatic and run that for the next 5-10 years until electric takes over the world.

I do admit I've not invested much time myself into the tech, however, the cyncial side of me believes we will have another diesel fiasco in 20 years or so with these electric cars. I'm not convinced in the tech thus far. I guess mainly because TPTB are the ones who are pushing it so much. No doubt we will see the next wave of eco vehicles being pushed and batteries will be the baddie .

With that said what peaked my interest in Tesla was a work aquaintaince that bought a Model S at the tail end of last year. At the last minute changed the meeting location to Norton Manor (as they have a charging station there). In the meeting wouldn't stop bleeting on about this damn car. So afterwards we get a little tour. Underwhelmed big time. I thought it looked like a cheap jag from the outside. Inside, well take that ghastly oversized screen out and it was pretty basic for a premium car in that price range.

[sancho panza]

[sancho panza]

On 04/07/2018 at 21:36, sancho panza said:

 

 

Stopped out on RB today.Ouch!

[sancho panza]

Piece by Wolf below.

https://wolfstreet.com/2018/07/29/the-numbers-are-in-uber-lyft-versus-rental-cars-and-taxis-in-the-us-in-q2/

Numbers are in: Uber, Lyft v. Rental Cars & Taxis in the US in Q2

by Wolf Richter • Jul 29, 2018 • 37 Comments

The ugly market-share battle in reimbursed ground transportation.

Rideshare companies are shaking up the rental-car industry and the taxi industry in the US. In at least one segment that we can track – company-reimbursed ground transportation – the rental-car and taxi industries, both, are getting crushed.

Facing these rideshare startups are, after decades of consolidation, three rental-car companies that now control 95% of the $28.6-billion-a year US rental car market, each with a number of national brands.

• Hertz Global Holdings (HTZ) which owns Hertz, Thrifty, and Dollar Rent A Car
• Avis Budget Group (CAR) which owns Avis, Budget, Payless Car Rental, and Zipcar
• Enterprise Holdings (privately held) which owns Enterprise, National Car Rental, Alamo, and Enterprise CarShare.

The total rental-car fleet in the US (all operators, including independents) dropped 5% year-over-year to 2.19 million vehicles in 2017, as right-sizing fleets has become a big theme. According to estimates of Auto Rental News, total revenues in 2017 were essentially flat with 2016.

While there are segments within the rental-car business that are doing well, there is one segment where rideshare companies are eating their lunch: reimbursed ground transportation.

And Rideshare companies are totally wiping out the market share of taxis within the reimbursed ground transportation segment.

These trends show up in the data from Certify, a provider of online travel and expense management for companies, based on its analysis of over 10 million business travel receipts and expenses.

Of the three ground transportation segments for business expense reimbursement – rideshare, rental cars, and taxis – the share of Uber and Lyft combined reached 72.5% share in the second quarter, according to Certify. That’s up from 0% not too long ago!

In Q1 2014, when Certify started tracking rideshare reimbursements, their combined share was 8% (almost all Uber).

At the same time, rental-car share of reimbursed ground transportation plunged from 55% in Q1 2014 to just 22% in Q2 2018. And the share of taxis plunged from 37% to just 5%:

Rideshare companies have a huge competitive advantage: They’re losing enormous amounts of money, and their investors like it that way and reward them – or rather themselves – with lavish valuations. In fact, investors are eager for feed them more billions to burn through, and thus they eagerly subsidize each ride.

Rideshare companies also have the advantage in many jurisdictions of not being regulated as taxi enterprises, and thus are able to dodge some expenses and rules.

But most importantly, rideshare companies are offering a service that riders appreciate and value. This came about as the staid taxi industry slept through the arrival of smartphones – and what an app-based system could do. While there are now apps for taxi services, it’s too little too late.

In terms of competing with rental cars in the reimbursed ground transportation segment: it’s logical. When you get off a plane in a city you don’t know, nothing beats skipping the rental car counter and getting picked up by chauffeurs that are at your beck and call, day and night, for the entire five days of your stay. And the company willingly pays for it all. This is a no-brainer for many business travelers – see above chart.

But within the rideshare universe of reimbursed ground transportation, it’s a raging battle for market share between Uber and Lyft. Uber was first and had the small pieces it was carving out from rental cars and taxis all to itself initially. Then Lyft came along and gradually started eating into Uber’s market share. But both were taking share away from taxis and rental cars at an astounding pace, and Uber’s loss of market share to Lyft was no big deal.

Then in late 2016, Uber’s self-inflicted series of fiascos caused a sudden shift in ridership to Lyft, with Lyft bumping up its market share from 7.7% in Q4 2016 to 21.1% in Q2 2018. Over the same period, Uber’s share dropped from 92.3% to 78.9%:

While Uber is losing share to Lyft within the rideshare segment, business travelers are spending more money per trip with Uber than with Lyft, according to Certify. In Q2 2018, on average per ride:

• Uber: $26.00
• Lyft: $22.37.

Only a tiny percentage of business travelers tip, and for Uber, that percentage fell, according to Certify:

• Uber: percentage of riders that tip fell from 6% a year ago to 2% in Q2 2018. Average tip: $4.24.
• Lyft: percentage of riders that tip remained at 2%. Average tip: $3.46.

In many industries, new entrants with a slicker product or service can gain a good portion of the market, until the incumbents get the hang of it and fight back successfully, thus halting their own market-share losses. This does not appear to be the case in the reimbursed ground transportation segment where Uber and Lyft are continuing to crush the rental-car and taxi industries which have not yet mounted any kind of visible pushback.

[sancho panza]

 

Lose some win some.

 

TPK getting mullered as below.This is a massive red flag for the construction sector if anyone is looking.Strangely,builders up today.

 

https://www.theconstructionindex.co.uk/news/view/travis-perkins-mulls-quitting-diy-market

Travis Perkins mulls quitting DIY market

5 hours Builders’ merchant group Travis Perkins has posted a first-half pre-tax loss of £123m because of its exposure to the consumer DIY market.

Business is going okay for Travis Perkins in the construction industry; its problems relate to its chain of Wickes DIY stores, a sector already struggling across the board even before a snowy March and April kept DIY-ers out of the stores.

Travis Perkins booked a £246m write-off of goodwill in Wickes in the first half of 2018 and is slashing cost from the business.

The board is now looking at whether it wants to be dealing with the High Street consumer at all.

A comprehensive review of its business has been launched, focusing on “defining a simplified group structure aligned more closely with its core customer base”.

Overall group revenue was up 4.4% to £3,364m for the six months to 30^th June 2018. Excludi ng exceptional one-off costs, adjusted profit before tax was £167m.

Chief executive John Carter said: “Our trade focused businesses in General Merchanting, Contracts, Toolstation and Plumbing & Heating achieved good sales growth despite experiencing a volatile first half. These businesses exited the period with encouraging momentum and, supported by a continued focus on cost, they remain on track to deliver modest profit growth for the full year.

“Our consumer-focused business, Wickes, has had a far more challenging period as weaker consumer spending trends, combined with a difficult competitive environment, have held back profitability. Consequently, the Wickes team is executing a significant cost reduction programme. Whilst these savings will help drive improved profitability through the second half of the year, Wickes’ profits will be lower than previously expected.

“Against a backdrop of changing market conditions which are expected to continue for the foreseeable future, the group has commenced a comprehensive review of its business, with a view to driving stronger performance and enhanced value for shareholders in the medium term.”

 

[macca]

59 minutes ago, sancho panza said:

 

Lose some win some.

 

TPK getting mullered as below.This is a massive red flag for the construction sector if anyone is looking.Strangely,builders up today.

 

https://www.theconstructionindex.co.uk/news/view/travis-perkins-mulls-quitting-diy-market

Travis Perkins mulls quitting DIY market

5 hours Builders’ merchant group Travis Perkins has posted a first-half pre-tax loss of £123m.. 

Travis Perkins booked a £246m write-off of goodwill in Wickes in the first half of 2018

Again could BTL be to blame? My rental house is falling apart.. the amount of glue a sealant I go through just to stop the roof from leaking and my cracked tap from flooding the worktop... How do you sell to buy to let sharks who just don’t care.. Landlord told me to fix it myself.. I’m not buying new stuff.. 

Maybe the new HMO licensing in October might force a few slum lords to tidy up their slave boxes.. 

[sancho panza]

4 hours ago, macca said:

Again could BTL be to blame? My rental house is falling apart.. the amount of glue a sealant I go through just to stop the roof from leaking and my cracked tap from flooding the worktop... How do you sell to buy to let sharks who just don’t care.. Landlord told me to fix it myself.. I’m not buying new stuff.. 

Maybe the new HMO licensing in October might force a few slum lords to tidy up their slave boxes.. 

I suspect a lot of maintenance is getting canned.

We rent.Our LL is well off enough for now but I have my doubts longer term.

Marginal BTL LL's will be badly hit and I suspect will stop delivering to the tenants they so regularly claim to do 'chariddee' work for.

[macca]

2 hours ago, sancho panza said:

I suspect a lot of maintenance is getting canned.

We rent.Our LL is well off enough for now but I have my doubts longer term.

Marginal BTL LL's will be badly hit and I suspect will stop delivering to the tenants they so regularly claim to do 'chariddee' work for.

Mines better than my cuz’s Room/apartment/front room a converted house.. her front door (patio door) gets stuck.. she can’t have more than 3 electrical items on or the power trips.. The place is a death trap.. only £1000 per month + £75 to park her motorbike in the front garden..

[Bear Hug]

7 hours ago, macca said:

Again could BTL be to blame?

Of course it is.  I have lots of ideas how improve my rented place but there is no way I am spending any money in addition to rent on it.

Plus even getting wall paint of non-magnolia colour was enough of an achievement. 

I had worse - remember one of my previous landlords only allowing a repaint of exactly the same colour.  Which happened to be some precise shade of pink.  

[Lightscribe]

Simple economics.

Policies put in place to keep house prices going higher for voting boomers, have left a younger rent generation that doesn’t give a shit about doing up a place that isn’t theirs.

On top of that, the ‘skills’ required to learn DIY (for non-tradies) is usually passed down from father to son etc. That has been ousted due to being able to get cheap EU labour instead, same as washing your car for a fiver.

Now put on the added pressures of the cost of living/mortgage/rent pushing the average joe into reliance of credit/debt, causes people to make do and put off any non essential repairs/redecoration.

It’s a dead sector as far as retail non-trade goes. This is also the reason why we’re seeing other retail sectors suffer also like generic restaurants and entertainment. My local Vue cinema has reduced their prices by 50% and are charging £5.99 at any time just to get bums on seats.

[onlyme]

 I got the distinct impression the last time I went into Wickes a couple of months ago the pricing had shifted upwards. The get slaughtered on pricing for basic consumables by Proper Job locally and will be  buying sand and alike loose from now on in the trailer as it should be worth the effort hauling it out for the price difference. 

Agree on the BTL, dire for the quality of work done on increasing proportion of housing and renters do not want to splash out on furnishings that they have to cart around with them every time they move.