Tesla is Bankrupting the Competition - Investor Day Preview.

well we've got some news for Tesla not

only do we need to talk investor day

lithium shocker but we gotta talk about

rumors around that small car but first

let's see what Morgan Stanley has to say

with their Tesla investor Day preview

here's how EVS will be made dot dot dot

yes that's literally the headline of the

investor day uh presentation preview

here from Morgan Stanley and I have to

say the dot dot dot is actually a really

brilliant placement of a dot dot dot now

you might be thinking Kevin what do you

mean like it's just an ellipse it's not

that big of a deal why would the dot dot

dot matter well the dot dot dot actually

matters a lot I'll show you why in just

a moment

first remember what Brett Whitten said

with extreme confidence that Tesla was

probably going to announce a new vehicle

on investor day that kind of shook me to

the core a little bit Brett witton's

obviously from Arc invest and I'm like

really it I I mean I I thought the next

master plan 3 the MP3 uh who remembers

playing MP3s on like a Walkman back in

the day anyway uh master plan 3 MP3 you

know I thought it was going to all be

all about scale right copy and pasting

gigafactories which it may be but I

didn't think they were actually going to

announce a new car Brad Whitton from Arc

invest thinks they are going to but now

I'm talking about this dot dot dot and

why am I doing that is it because I have

a flash sale going on built around

master plan 3's reveal for March 1st

when the mass and the Flash sales

already begun but it'll expire on on

March 1st well maybe or it has to do

with this dot dot dot right here look at

what Elon Musk says Elon Musk says

Kevin's courses are amazing and you

should join the private oh so I'm

reading a different screen uh okay ev1

to t0

to Tesla Roadster the original the OG

Tesla Roadster to Model S 3 X and Y

to semi-truck to cybertruck space

dot dot dot Elon Musk himself teasing

the dot dot dot which is in reply to

Tesla uh talking about being the largest

manufacturing employer and uh you know

starting as a long shot startup founder

20 years ago in San Carlos and so this

tease right here is really teasing

something missing something to come and

it's also fascinating because that's

what bread at ARC invest suggests and

it's also what at least this title is

toying with from Morgan Stanley so what

is Morgan Stanley say

well first of all they have an overrate

weight rating for the stock so they're

bullish they have a price target of 220

dollars for the stock and let's just

read what they say with investors a

Tesla's investor day just one week away

from now investors are focused on what

can change the narrative to continue to

Stock's recent rally we look for Tesla

to unveil a suite of Technologies where

crowd required for the mass adoption of

EVS at far lower price points a critical

component of Master Plan Three now this

is where one of the things that we've

talked about was this idea that if Tesla

can reduce their margins by 50 percent

or reduce their cost of goods sold by 50

on a vehicle they could reduce the cost

of their vehicle their headline price of

a vehicle by potentially 35 to 40

percent which is phenomenal now some

people challenged me on the math on that

because they they in my opinion they

were doing it wrong they're trying to

take like the pers to go like wow 50

costs less of 0 earlier anyway let's

let's just do the math together really

quickly and then you can see uh if this

seems logical to you so a model 3 right

now uh sells four if we pick a brand new

model three right now the least

expensive Tesla vehicle sells for here

it is on screen 42 990. but you don't

want to uh oh I didn't get to really

show that you don't want to take 50 of a

cost reduction off of this number

because that's actually not the number

you've got to pull the margins right so

if the cost of the vehicle is 42 990 and

now what we're going to do is we're

going to minus the margin let's go ahead

and take off 20 as margin today as

things are still potentially relatively

expensive today so if we take off 20

right now the cogs cost of goods sold

for this vehicle are three four three

nine two if we can take 50 off of that

then what we're really doing is taking

off minus 17196 right so now we're

saying three four three nine two minus

17 196 which should just be half right

what we're doing with that is we're

saying the car now costs 17.196 so

that's that means the new cogs equals 17

196. well if Tesla is trying to achieve

a 25 margin then that actually

represents 75 percent so we can just

divide that number by 7 75 percent and

if we divide that number by 75 percent

we get to a new vehicle price of twenty

two thousand nine hundred and twenty

eight dollars look at that there's your

25 000 vehicle if they can reduce their

cost of goods sold by 50 percent and

they want a 25 uh cost or a profit

margin if we change this to 70 which

would be a 30 profit margin that is the

long run goal right thirty percent

profit margin well now all of a sudden

the new vehicle price would actually be

watch this it's Eerie 24 564 dollars

there's your 25 000 vehicle so if they

can reveal how to get their costs down

fifty percent the twenty five thousand

dollar vehicle is basically in the bag

hey quick note Ricky Carruth on YouTube

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shadowing experience with me so if

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weekend wild uh so as we wrote about in

its 1913 all over again Tesla's recent

price cuts are close to unprecedented in

the auto mode in Automotive history

since the early days of mass vehicle

production when Ford launched the Model

T Henry Ford introduced the moving

assembly line in Highland Park Michigan

in 1913 revolutionizing auto

manufacturing subsequent deflation

transformed the competitive landscape

and drove out much of the industry's

players at the time now that's really

interesting because if you think about

it who are some of the competitors that

are not profitable on EV Ford is not

profitable on 2020 on EVS probably won't

be until 26. GM probably not profitable

on EVS they're not showing us the

numbers Toyota is not even trying not

even trying right now although they will

in the future byd is barely profitable

on on EV and they're probably only

profitable because they're doing hybrids

lucid and rivian are basically a joke in

reference to profitability I mean

they're spending money hand over fists

just to get people to buy their cars and

Lordstown Motors I mean we don't even

need to talk about them they've produced

like 32 cars and they just pause

production because they can't figure it

out I think Ford's actually still under

pause because of their their uh

production issues as well but anyway

look at this comparison they're making

the Model T production line compared to

Giga presses over here uh it's uh you

know quite quite impressive we think the

investment community may be

underestimating the obsolescence curves

underlying much of today's EV and

Battery Technology in production it is

very possible that Tesla's March 1st

investor day may have greater

significance on the Market's perception

and ultimately valuation for Tesla's EV

competitors then for Tesla itself in

other words maybe Tesla stock doesn't

move much but maybe just maybe what

happens the other companies start

trending more towards bankruptcy because

they realize they're not even close to

what Tesla's doing and that just makes

it easier for Tesla to compete

for Tesla to become a massive Mass

Market manufacturer introducing lower

price points is necessary to have a

meaningful impact on the carbon

footprint however for this to be

possible Tesla will need to successfully

lower the average price of their

offerings ideally also cut Marge or cut

costs to leading to into you know

sustained margins basically but this is

their suggestion we or with a stated

Target of a competitive offering at

twenty five thousand dollars Tesla will

have to make significant progress on

their costs of good per vehicle a

redesigned interior of the model 3

project Highland and the subsequent

learnings could be a step in the right

direction yeah I mean this aligns with

the math that we were just pointing out

right totally aligns and this is where I

I have long term had the belief that

Tesla is actually going to be relatively

Recession Proof now I know that sounds

like a joke because obviously Tesla has

done horribly over the last year but I

think a lot of that is driven not by

Tesla's performance or their valuation

sure in part maybe there's some there

get given that growth has moved from

about 50 percent to like 38 percent

right I think most of Tesla's Pro

performance was actually due to Elon

Musk selling and some people laugh at me

when I say that but then I don't think

they know the data that remember Elon

Musk sold about 24

billion dollars of Tesla stock last year

how much in billions did retail huddle

like buy and huddle last year 15 billion

that means if retail just hoddled and

bought and that's net right 15 50 more

so like if you bought ten thousand

dollars of Tesla last year and you and

everyone else bought another five

thousand so fifty percent more you would

have just broken even what Elon sold

okay he milked like pardon my French

here

cover the children's ears he milked the

out of us

okay but anyway uh Tesla's model two

okay so this is potentially the idea

that maybe the model 2 will be what

leads to these margins or will it just

be a refined model three who knows what

does Morgan Stanley say Reuters reported

in in November that the aim of project

Thailand is to significantly ramp the

model 3 components and interior remember

the numbers that I just showed you were

based off the model 3. you could

actually turn the model 3 into the model

2 pricing of a 25 000 vehicle like you

don't actually have to announce a new

cheaper car even though there's some

speculation of that I kind of I've been

convinced by what Brett Whitten at over

at ARC invest says and the convincing he

gives is that you know what you do not

need a cheap vehicle in the American

Market because people won't buy it

people want a car for that odd time

they're going to go a long distance they

don't want a smaller car now there is

this suggestion that what about that

design of a smaller car that Tesla

teased when they announced their uh

their Shanghai expansions we'll take a

look at uh let's see here oh hold on I

want to share the screen but I broke

something uh Tesla basically a teased

this smaller form factor Tesla in sort

of a mock-up design there it is it's on

screen right now Tesla has previously

teased the smaller car but maybe Tesla

doesn't actually need that maybe they

just need to make the model 3 so much

less expensive to build they've got the

25 000 car in the bag alternatively

there's also this idea that a smaller

like model 2 gets announced in China

only so for like the Chinese and Indian

market where smaller vehicles are

actually normal they're not heavily

they're not super normal out here so

that's possible continuing more with

Morgan Stanley here images of the model

3 with a covered front rear end have

sparked further debate about whether the

exterior would also see changes why it

matters well obviously because of margin

and then they say here ultimately we

believe if Tesla is to successfully

fulfill the goal of having a 25 000

model there will need to be further

improvements related to the gigapress

and Battery manufacturing now look

battery manufacturing is great I mean

the 4680s are phenomenal right we saw

that on battery dim I do have my

speculation though about how great the

4680s really are now I know that sounds

kind of Blasphemous as potentially like

a Tesla Bowl but uh you know we could

jump on over here and just sort of draw

this out but I want to ask you this for

a moment and this is just me being super

jaded okay super super jaded but watch

this Jade okay and I think it's

mind-blowing Jade okay I'm gonna draw a

very bad drawing of a battery and let's

call this have you ever heard of a C

cell battery of course you have they're

the big fat round ones right and then

have you ever heard of a D cell battery

which is bigger like you put it in your

Nerf gun guns and stuff right okay like

I don't know exactly what the numbers

are but the D cell is obviously 25

larger you use like 25 fewer cells it's

got more energy right the 4680 in my

opinion might be cheaper to manufacture

and create like cost benefits of maybe

15 to 25 but is it possible that some of

the excitement around the 4680 and again

I'm tinfoil ahead I'm not an engineer

here and I know they're going tablets

design maybe it'll be cheaper to

manufacture okay we can get rid of

cobalt and stuff on but is it possible

that a lot of the excitement around the

4680 is is just because it's a larger

cell right I mean think about it when

they pitch on battery day uh Hey look

it's it's got more energy or whatever

well yeah it's a larger cell than the

prior battery so like for example let me

show you this this screenshot over here

if I show you this screenshot from

investor day and then I hide myself

they're showing larger cell that has

five times the energy sixteen percent

more range six percent or six times more

power I'm like yeah it's a bigger cell

you know like I'm sorry a little tin

foil you hat there don't get me wrong I

do think there will be some cost

improvements but I think the better

battery is really just about better

margin for Tesla which obviously has a

Tesla vestro I'm a fan of but you know I

I I don't get as excited about the 4680

as other people do sorry I just I just

tin foil hat in here a little bit you

know anyway uh so I mean like eventually

you know I was talking to people about

this yesterday as we were looking at

real estate and one person's like you

know maybe they'll just have one battery

cell in the future and then we're all

joking like this battery is a thousand X

more powerful than the 4680 because they

use about a thousand forty six eighty

cells per car and it's like well if it's

all one cell it's a thousand X more

powerful it's like you didn't really

engineer anything other than a larger

battery so right again I'm not trying to

tin foil hat I just think some of what

we saw on battery day was kind of

clickbait I hate to say it but anyway so

uh announcing the introduction for the

the Giga press of the model Y at battery

Day 2020 okay now we got five Giga

presses obviously they'll be the Giga

press for for the Cyber truck okay these

are things that could help us reducing

uh uh components right going from 80

pieces to one of the rear floor going

from 90 to 100 pieces to one other

structural components whatever like all

of these unibody castings big deal uh

and so look at Holy Smokes wait what is

this our forecast has the global Tesla

oh car park okay okay okay yeah uh so

basically they Morgan Stanley actually

thinks that Tesla's going to get to 33

million vehicles on the road by 2030 and

they think that Tesla's going to deliver

7.2 million Vehicles by 2030. okay uh

yeah I think Arc invest is at like 20

million vehicles and I'm about 4 million

for 2025. interesting okay uh they think

we expect 2.6 of that so about a third

of that to be the model 3 or a future

compact vehicle I think any future

compact vehicle will end up just being

in China okay fine front end gigapress

is now available 4680s running off the

line fine lets you change sort of the

structural battery pack that's another

benefit right obviously structural

battery pack helps gigapress has

multiple advantages okay I mean this

gets a little like now they're just

trying to get a little bit you know

detailed here showing you how they're

going from look lots of parts to one

part ooh lots of parts to one part I

mean we've all seen this kind of stuff

before uh this is quite interesting

though they've got there you know this

whole

presentation sort of reiterating the

structural uh information that we

learned on battery day like hey look you

know planes put their fuel in the wing

so why not put our batteries as part of

the structural elements of the car so

that way uh we we have maybe a stronger

car that is more simply designed to

increase margins so in other words what

they're really suggesting Morgan Stanley

here saying hey um we're just going to

give you an update on all of these

advancements that we've made in

manufacturing to get uh margins up

that's Morgan Stanley's take here but I

did promise Steve that I would talk a

little bit about Commodities so let's

just touch on Commodities a little bit

for the lulls so uh sorry Steve but

lithium prices are plummeting lithium

prices

even though production has remained

stable apparently in China you've got a

substantial decline in EV demand which

is a potentially red flag for Tesla

unless Tesla is the one holding up

demand and other EV demand is slowing

although that's unlikely that's kind of

like the Goldilocks hope apparently the

China reopening has not really supported

much of a floor in lithium prices and

lithium prices are down 30 percent in

China and recently here and demand is

down 52 percent for lithium in China and

lithium prices in America are down about

10 now that's quite interesting and

maybe actually really good for Tesla

margins as well and who knows maybe

we'll hear about that as well uh on

investor day but what do we have over

here Goldman Sachs talks about this

being the first leg potentially of many

lower for Ev uh pricing on uh pricing

pressures on lithium lithium now

dropping to a 12 month low broadly

unchanged production leading to a rise

in inventories and a bigger correction

here than expected for lithium pricing

obviously some other Commodities are

still moving but apparently here's some

charts weak battery supply chain

activity has halved lithium demand in

China

catl's actually been reducing their

prices trying to become more competitive

catl is a Chinese battery manufacturer

Tesla actually buys a lot of batteries

from catl and they're actually reducing

their pricing very interesting why would

Tesla consider buying a lithium Miner if

prices are going to come down and say

down

damn Checkmate Steve's back at it again

damn it that's it cancel the deal don't

buy the mine anymore

that wasn't nice Steve I was supposed to

be right

yeah that's a good point but but anyway

uh look I mean Commodities are very

volatile uh but obviously if commodity

price pressures can come down and Tesla

can buy cheaper uh batteries from catl

lithium prices come down that's

phenomenal right that ultimately helps

because it on the way up they've been

hurting margins more than I expected I

didn't think lithium would I know that's

a big deal but I didn't think it would

hurt as much as it has for Tesla but but

it has been so uh now we got Muhammad

alerian saying the Market's starting to

doubt whether the FED will ever get to

two percent I'm so exhausted at all this

talk about the January reports over and

over again but we'll see what happens as

the day evolves and then obviously uh in

in the next season here but anyway

that's my thought on uh yeah okay so

there's a question about whether this

this drop in lithium is seasonal this is

this weakness is greater uh and this

correction is greater than what would be

expected for seasonal adjustment that's

talked about as well in the Goldman

piece and they talk about basically uh

they go into so much more detail

honestly I don't really want to go into

it but but yes that that is talked about

and they suggest that this is worse than

typical Uncle Jesse wants has a message

for you Steve

Uncle Jesse says go fondle your rocks

Steve