Tesla China Shutting Down.

Tesla Shanghai is shutting down the

automotive world is in crisis in China

and boy do we have updates about Tesla

folks today is December 9th 13 years ago

I stood in front of the New York Stock

Exchange and folks today at the closing

bell I get to ring the closing bell I

hope it marks a bottom for the stock

market I hope Santa Claus comes to town

after really good inflation data next

week but hope is not an investing

strategy so we must continue to be

informed investors and we will have a

public Meetup at 5 PM outside the New

York Stock Exchange at one broad if

you're interested in coming to show up

at 5 pm and let's get into the video but

I'm very very excited today is December

9th it is also the coupon code

expiration day which doesn't mean prices

will be going up and when I get back

from New York we'll be releasing some

new lectures for all of the courses

which I'm very excited about constantly

expanding Okay so first things up we've

got to talk about this Tesla shutdown

Tesla to suspend output at Shanghai

later this month most workers on the

model y model 3 Lines might not be

required in late December now look

Shanghai recently underwent production

shutdowns for upgrades a few months ago

even during the Shanghai shutdowns

anytime generally Tesla shuts down its

factories it takes advantage of the

opportunity to upgrade the assembly

lines to make sure they are as efficient

as possible to increase those margins

remember Tesla has some of the most

phenomenal profit margins gross profit

margins and quite frankly net profit

margins and cash flow of any automotive

company to ever exist and stark contrast

to Lucid who not only are lucid and

rivian on a path towards bankruptcy but

apparently Lucid is now in a rush to

prevent people to cancel orders and

you're not going to want to see the kind

of methods they're going through to

prevent these but I'll explain those in

just a moment anyway Tesla will suspend

output in stages at Shanghai at the end

of this month until as early as a

January some people familiar with the

matter said this is all reported here by

Bloomberg most workers on both the model

3 and Y assembly lines will not be

required the last week of December and

could also continue into Chinese New

Year people said asking not to be

identified because they're not

authorized to speak publicly model y

output disruptions could extend through

early January production uh it you know

upgrades are obviously expected right

now we're just expecting the suspension

between December 25th and January 1

consumer demand for cars in China has

been dented by the country's still

strict policy to covid which has

resulted in obviously these strict

lockdowns and and apparently keeping

buyers away not only from showrooms but

orders just getting canceled and syncing

in fact orders Across the Nation and

sunk almost 11 in November from October

keep in mind that Tesla sold over 70

percent more Vehicles year over year in

China in November than they did last in

November which is very very incredible

but folks this is not a Tesla problem

this is I mean it ends up being eight

Tesla problem as well but it is a

national problem for China China is

probably in a deep deep recession and I

want you to look at this chart right

here which I'll hide myself for in a

moment so we can look at this in a

little bit more detail but

this is very critical this chart this

will share shared by Gary black thank

you to him for for sharing this but I

want you to understand this chart so

first of all this is the seasonally

adjusted annual rate of production for

vehicles and when you zoom into this

chart at the very bottom you're going to

see quarters and you can see uh covid q1

Q2 Jan 20 and March 20 down uh just

about where I am right there just to the

left of me Jan and March and you can see

how that line is basically zero right

this is because obviously at the

beginning of the pandemic you had a very

very uh large shutdown in everything but

that also happened again right here in

May of 2022 that's when also Tesla

Shanghai was shut down

and when you zoom out for a moment you

could actually see and you will go ahead

and hide Kevin you can actually see that

the bar on the right the orange bar

represents the lowest point in nine

years of production in China

now keep in mind that there are some

benefits to this lower production in

China notably we are seeing prices of

vehicles across the globe fall this is a

huge disinflationary impetus which you

might think oh my gosh disinflation that

means prices might come down but wait a

minute if prices come down that means

inflation can come down and that can

actually boost stock prices right that

is a benefit we do believe that not only

are used car prices falling but we also

believe that as used car prices fall

less people might be interested in

buying new vehicles and that can lead to

prices for both new and used vehicles to

continue to fall which is so incredibly

important for disinflation now as long

as these price decreases occur at a

company like Tesla where we expect

margins to still be maintained because

of falling input costs like commodity

prices which will take a while for

contracts to roll roll off and those

falling commodity prices actually be

realized but also EPS to continue to

grow earnings per share to continue to

grow

then we believe that Tesla can actually

be strongly positioned uh for for uh

within the certainly the next I would

believe no guarantees within the next

three years a Tesla to potentially be a

3xr now we don't want to say that with

opium right we want actual facts and

data so we want to see that happen

because if demand for Tesla specifically

fall off a cliff that might not happen

however if this is just a Chinese

problem then this this I believe is a

realistic expectation of course it's

certainly not a guarantee now uh what I

do think is very interesting about Tesla

is that Tesla is the company that is all

about efficiency that you just don't see

at other companies I want to show you

this picture right here

this is Tesla Giga Berlin this is where

you go to pick up your Tesla in Germany

you pick up your car now at the factory

rather than going to a dealer shipping

these vehicles to a dealer and then

getting them to customers customers can

just go pick them up right at the

factory obviously not everybody's going

to do this there's going to be a lot of

shipping coming out of factories but

it's quite remarkable just everywhere

Tesla is trying to improve their

efficiencies look at this from Austin

three Noob hairs uh well now we have

three total pairs of Rail lines two new

ones just finalizing their production so

that way as Giga Austin ramps it's much

easier to get Tesla's right into the

rail network so you can actually see the

rail network over here in the distance

you could get Tesla's right on the rail

network straight from the factory this

is phenomenal no Trucking between the

truck to the rail yard why not just

build the factory right next to the rail

yard and stick the train or the plane

stick the cars right on the rails really

incredible here's another photo from

another angle you can see the main Rail

lines right here and where Tesla's Rail

lines are being connected

you could also see another photo that

I'll share from Giga Berlin looking at

expansion plans to the right of the blue

line here looking for expansion plans

quite incredible

now

what's important to do at this point is

realize that most Automotive

manufacturers will not be as lucky I

believe as Tesla when you look at a

company like lucid Lucid right now

according to uh potentially a little bit

of a bias Source but drive Tesla Canada

is reporting that lucid is doing the

following in a in coordination here with

Business Insider to make sure that

individuals stop canceling orders for

lucids which I'm going to give you an

anecdotal update about lucids in just a

moment because remember I bought a lucid

to compare it to Tesla's Innovation

capabilities

and I gave it to my father-in-law I'll

give you an update in a moment

apparently according to Business Insider

and drive Tesla Canada

now the procedures for getting people to

not cancel their Lucid orders

or that if somebody wants to cancel a

lucid order the customer is immediately

to be assigned to a case manager and

within 24 hours

they are supposed to be contacted by

their case manager who has to attempt to

contact that customer three times over

three days

if that person fails they move up to a

manager who has to make five attempted

contacts within five days and if that

fails that person the customer gets

promoted to a regional manager who has

24 hours to initiate contact and call

them three more times within three days

so in other words

if you want to cancel your Lucid order

you're expecting 11 calls within 11 days

from three different people to beg you

not to cancel your order

so in other words if if you do not want

all of these phone calls make sure you

answer your first call from Lucid asking

you please not to cancel your order

this is quite remarkable

I do think there's a lot of pain in the

industry and I don't want to make light

of any company uh you know trying to

survive a recession right

recessions are hard everybody suffers in

a recession

and uh

while I do believe the growth story is

still intact for Tesla and that their

EPS will will not suffer the EPS

downgrade cycle that most companies I

believe will face in uh going forward

into 2023.

that doesn't mean there aren't overhangs

for Tesla and paying for Tesla consider

just what the Twitter overhang has done

and the relationship between uh Tesla

investors and the perceived relationship

between Tesla investors and and Elon

Musk right not only selling Tesla shares

but potentially now margining them to

lower interest costs over at Twitter

which ironically could be good because

the sooner Twitter gets the stability

the less likely Tesla actually needs to

be a piggy bank for Twitter but anyway

Elon Musk did respond to uh indirectly

to some of these uh CEO concerns about

his potential absence while he's at

Twitter and he says quote I continue to

oversee both Tesla and SpaceX but teams

there are good are so good that often

little is needed for me

fair I think uh people still believe

that Elon should be heavily involved and

I'm sure he is to the extent that he's

needed I don't think you could be a

Tesla investor without having faith at

this point

um but I do want to give that anecdote

about lucid so my father-in-law is

somewhat frustrated that the

over-the-air updates are not making

the Lucid better in fact he believes

they're making the Lucid more buggy he

uh I was actually really surprised by

this I would have never taken my father

in love for this but

so hold on

yeah

it's it's worth pouring a cup of coffee

for this one because it's pretty

remarkable so I asked him how it is

and his responsible as yesterday uh

interesting I go no what happened he

goes oh nothing it just tried to kill me

and I'm like dude shut up what what

happened

so apparently

he gets a software update saying oh now

we've enabled the lidar all the lidar

cameras because Lucid has like I don't

know 13 of these lidar cameras it's

crazy it's got a lot of lidar and he's

like oh yeah I get a software update

that that now it's enabled

and so he's excited and he reads the

notes and it says drive on a straight

highway for 30 minutes and I'm thinking

to myself okay he'll probably just do

that you know whenever it just happens

along with his ordinary driving and he

says no you know what I'm I'm excited I

I want to see Lucid succeed uh so he

hops in the car and drives on the

highway for 30 minutes

okay your lidar's now active then he's

holding his hands above the steering

wheel

driving on a road to turn around and get

back he's got his lidar enabled every

all that all the signs and everything

say this is okay the road you're driving

on everything is fine in terms of being

able to activate this this centering

steering lidar system it basically just

keeps you in in the middle of your lane

think of it kind of like other cars have

this already like adaptive cruise

control but then it also centers you

apparently

through my father-in-law okay so the

second hand information

he's driving on a road

the car

Yates over into a left turn lane

with no signaling no indication

and that left turn lane uh stops short

and right at the other end of that uh

left turn lane is oncoming head-on

traffic because that left turn lane kind

of stops and they kind of traffic that

goes around that left turn lane and he

has to you know take control and

overtake the vehicle and pull to the

right thank God he's you know holding

the steering wheel or nearly holding the

steering wheel uh again this is an

anecdote but

now the vehicle is in service and it's

been in service for like eight days or

something at that effect

he does mention that there are quite a

few bugs and frustrations like every

time a software update comes it resets

his driver profile and he has to like

reprogram everything

uh he's frustrated about this lidar he

says pretty much anytime a new feature

comes out it's just buggy and you know I

don't take him as somebody who's just

trying to you know poop on Lucid he's an

apple investor okay he he he's a house

hike investor too and and you know uh

like he's obviously supportive of me but

he's not a test semester he's actually

not an Elon Musk fan so I'm I'm not here

to suggest that uh you know here's

somebody that's a testify I'm trying to

bag on Lucid he wants to see Lucid

succeed because he actually thinks if

companies like Lucid could succeed they

could you know take some Edge away from

Elon

I think this one's a victory so far for

Elon

uh and I don't want to laugh at it

because it is dangerous uh and I do wish

the best for uh for lucid and and the

Lucid team because I do think there are

hard workers working there trying to

work it and and figure it out but um it

all let me put it this way when I first

bought the lucid

I was

um

a little frustrated that it was sort of

my first tell that when you asked Amazon

Alexa to do something

it you got this response in certain

circumstances that was like

this version of the free source Alexa

API does not have that capability and

I'm like this is just a bolt-on software

this was not by any means designed to

integrate with Lucid this is probably

just some free Amazon Alexa code you

could pull off the internet and it has

very limited functionality but it sounds

like you have Alexa and now you could

like advertise oh the car has Amazon

Alexa but it's by no means customized

for the car

uh

I mean maybe it is maybe Lucid is able

to customize certain things but but it

seemed very frustrating anyway those are

just some thoughts

look I I know recessions are hard and I

I know it is it is easy to lose Faith

um

let's see what happens when when Tesla's

able to ride

with with growing EPS while other

companies in the S P 500 and across the

border seeing their EPS get slashed and

certainly would help if we see some

disinflation because we need to get out

of the federal reserve's grasps anyway

thank you so much for watching

cheers we'll see at the New York Stock

Exchange next check out those programs

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