tesla to dump prices

We got to talk Tesla stock and Tesla

stock valuation. So Tesla is pulling one

of the best of 4D chess moves ever right

now. This is absolutely brilliant. If

you've been watching the channel, you

might already know that I've been

talking about a risk with Tesla

obviously being that they're going to

have to reduce prices after the tax

credit expired. We all already know that

there's a massive pull forward that

happened before the tax credit expired

going into September 30th. And that's

how we got record deliveries surpassing

even Q4 of 24, Q4 of 23. I mean, these

were record deliveries. Production was

lower, but that's okay. We had a bunch

of standing inventory, cleaned house,

baby. But see, after a $7,500 tax credit

goes away, we have to recognize the

reason from an economic point of view

that people were able to afford, let's

say, a $40,000 vehicle was because the

net cost was really only like 325,

taking off the tax credit, not even

getting into the fact that, you know,

tax credits are maybe even more valuable

than that. So when that goes away, some

of that hurts a company's margins and

some of that hurts an individual's

buying power. How much depends on the

company's PP or pricing power. The

bigger the company's PP, well, the less

it affects them. For example, this

morning in the course member liveream,

we talked with course members and we're

like, "Wow, this AMD news, this is

really cool. This is great." But is

there a risk that this AMD deal is a

sign that AMD just has smaller PPE than

Nvidia? And there's really nowhere you

need to go further than the actual

Nvidia and AMD income statements to

determine that yes, AMD has

substantially smaller PP than Nvidia.

Now, that's not to say we should be

bearish on chips, although we were

pretty convinced that the top was in

this morning in the course of our live

stream. It is to say that Nvidia takes

five times as much money as AMD to the

bottom line and that is a sign of

pricing power. Their gross margin is

like you know AMD's

got like roughly half of the gross

margin that Nvidia does. That's a sign

of PP pricing power. So what happens

when you take away a $7,500 topline

incentive while a company like Tesla is

probably going to have to reduce prices.

The problem is reducing prices does not

reconcile well with stock price up. And

Elon want stock price up. We want stock

price up real big. We want big peep.

Okay. How do we get more car sales at

lower car prices without suggesting that

prices for cars are going down? It's

simple. More affordable model. What a

surprise. What a surprise that just

three days after, literally, you can't

make this up, three days after the tax

credits expire,

what happens? They drive a Model Y

around Giga Texas

without any camo on it. That is a more

affordable version. Folks, people try to

make this look candid.

I don't think people accidentally saw

this Model Y driving around and Tesla's

like

slip.

Like this is all this is all done on

purpose. Like what happens is they make

it seem like you've got candid photos

and they leak this stuff to the Tesla

fanboys and fan girls that that you know

that which is fine. That's just that's

how media works, right? like some inside

employee will be like, "Hey, don't tell

anyone, but I got the or like don't tell

anyone my name, but I got these leaked

images of this this happening over here

or whatever." Uh, and then that's how it

makes the news. So, that's how Tesla can

like unofficially engineer news by

utilizing other people who cover news

for Tesla as their leak conduit. And

then Tesla go,

h how how come they took the car out

without cable on it? Oh no, this is

horrible. It's all by design. It's by

design. This is how business 101 works.

And this is purposely a 4D chess move

because it is an opportunity for Tesla

to say we are lowering the prices of our

cars. Except rather than the stock

market going oh VP small they have to

lower the prices. The stock market goes

hell yeah more affordable vehicle.

Except it's not a different vehicle.

Like I would love if they came out with

a big van or a robo van or whatever,

right? It's fine. it that it's not going

to happen for a while. I'll I'll be

stuck with a Mercedes Sprinter van or a

Ford Transit or or whatever for for all

my seven kids. That said,

this is great for Tesla because we need

prices to be more affordable. Like, if

Tesla the worst thing that Tesla could

do would be the tax credit goes away and

they don't reduce prices. That would be

the worst thing they could do because

that would be stubborn. it would not be

an economic reality. It would not be a

smart business decision. So Tesla is

actually, you know, even though we're

just like exposing the whole MO here,

they're actually doing exactly what they

should be doing, which is lowering the

average cost per vehicle of these cars.

Now, what's different about this car?

Not actually that much. Uh like we've

got a great post here that breaks it

down for you. No front light bar. The

front bumper extends to the middle where

the light bar was. You've got uh you

know less of that glass roof on the top.

You've got uh you know some

miscellaneous other changes. There's

really like not that much that's

different in the vehicle. Uh so the

other model has a light bar going across

over here. So it looks a little bit more

basic, but that's okay. Who cares? Like

there are plenty of people who want a no

frills car and they don't want, you

know, all the glitz and glamour. They

just want a car that they can get from

point A to point B in reasonable safety

and comfort in. That is extremely

reasonable. Here's a side by side that I

thought was useful. You could actually

see here's that light bar. Here's no

light bar. You can see the lights are a

little different over here. This one

obviously has a roof rack whereas this

one doesn't. But that's that's probably

just a separate upgrade or marketing.

You can see the uh the back over here is

a little more simplified though. Over

here in fairness, the lights are on

whereas here they're not. And this is a

marketing photo versus this being a real

photo. Nominal differences, but it's

going to be a way to reduce the price of

the vehicle. So, right now, if you go to

uh tesla.com

and uh we can actually see on the front

page, we've got the new Model Y

performance. Order yours. We've also got

uh FSD14 that's supposed to be getting

released today, which is really

fantastic. Uh we'll see it got delayed

from last week. And we'll talk in just a

moment about, you know, price forecasts

and price targets for the stock. But

understand right now, if you go to the

financing tab right here, they got rid

of the APR benefits. So, like right now,

they're doing the purposeful sandbag

where they don't really want sales of

these vehicles. If they wanted sales of

the Model Y performance right now, they

would have 0% APR. They don't want sales

of this because they're probably

shifting production from the more

expensive Model Y's, which they just

cleared the inventory out of. They're

probably shifting production to the

lowerc cost vehicle and then tomorrow

107 they're probably going to announce

the lowerc cost vehicle and I bet you

they will also have special introductory

financing. It'll be like 0% APR or

whatever. I mean look at this. Why why

is the long range rearwheel drive 3.99

and the performance 5.14?

It's because they don't want to produce

as much of the performance. It's it's

all based on inventory, supply and

demand. Very simple, right? Let's go to

the Model 3 here for a moment. And let's

go to uh order now on the Model 3.

Financing offers here, $299 on the Model

3. They print these for days. They want

to incentivize these. Look, they'll give

you any model of the Model 3. Uh they

print these. So, they're incentivizing

production there or, you know, sales

there now. And you can even see the

banner 299 APR. I expect that when this

new model comes out, you'll probably see

a combination of intro financing and a

substantially lower price. Now, that

lower price on the Model 3, my

expectation is you really want to see

this probably be under $35,000 on the

cash price. The problem is I don't think

it's going to happen. Uh, so I would

like my best case scenario is under 35

for a no frrills Model Y. Best case

scenario, probably not going to get it.

It will probably be a $39,000

vehicle, which if you think about it,

that kind of makes sense. $45,000

minus the $7,500 tax credit uh leaves

about $24.99

between where the new price is and where

the old price is. And now you could kind

of justify getting a model

without the tax credit because it's the

more affordable model and it's still

roughly the nearly the same price. It's

about $24.99 more than it was

previously. That's my guess as to where

they're they'll go. If they go all the

way to 35, it's a sign of pricing power.

Okay, so this is how you can actually

help deter or you yourself can figure

out how much pricing power Tesla has. So

I'm going to write you a little menu

here. Okay, so this is your playbook for

tomorrow. Playbook uh for tomorrow. All

right. So, if price $399,

uh, Tesla pricing power equals $24.99 on

Model Y. We're assuming zero value for

the fact that you're getting a, you

know, cheaper car because honestly, most

people don't give a flying hoodie that,

you know, it doesn't have the full light

bar or whatever. Most buyers aren't

going to care. They're going to be

payment sensitive. They're like, I just

want I just want the Tesla. I just I

want I want FSD, whatever. Right. Okay.

Uh if the price comes in at 35,

uh then Tesla's pricing power will

actually be negative uh $2,500 on Model

Y. That means you've now net gone beyond

the tax credit. Uh so uh you know, and

then obviously you've got neutral uh

pricing power at 375 uh for the

affordable model, right?

So

if they really want to ramp sales, you

go 35. So this here, this this would be

an actual uh price decrease uh and uh

would be great for sales volume. Me

personally, I would want uh sub 35K for

that affordable vehicle. I know that's

that's that's big. It's going to hit

margins, but it's going to get us

volume. It's going to get Tesla back in

that momentum. Okay? Back to momentum uh

of growth following surge of uh tax

credit buys, right? And that's what you

want. You want to incentivize that that

momentum again. Keep this puppy going.

Keep these factories cranking. That's

what I would I would personally love to

see this. I don't think they're going to

do this. I think they'll end up going

incremental. And this in my opinion

would be bad like worse for the stock. I

know this is worse for the stock because

you are still net price increasing uh

buyers you know following the credit

right so near-term

uh this would be I should say long-term

stock longer term right because we want

volume and we're not going to see that

volume really level out until you know

the next 12 months really on a new model

okay good so all that said let's Now go

into our Tesla sheet, which has been a

minute since we've done our Tesla sheet.

Uh, and let's go do some updates over

here. So, by the end of 2027,

uh, you know, I still think our revenue

per vehicle is going to fall. Uh, and

I'm going to reduce this even more now

since we don't have the credits. Uh, and

we've written some notes over here as

well already about reducing the revenue

per vehicle, but I honestly think we're

probably going to get down to an average

rev per vehicle by the end of 27 of

about 30. Honestly, probably 32 33 even.

I'll call it 33 even. Ideally, we get to

4 million vehicles in 27.

Okay. Now, we're going to go we've got

revenue, service, uh, energy. Energy.

This is still

This is probably going to get hit. I'm

going to write a little note here.

Reducing from 26 bill due to uh Trump

cuts to Dem states. This is where you're

going to see some energy hit. This was

supposed to double from 13 bill. I'm

going to actually take this down to 20

billion because I do think we're going

to see a real loss of mega pack buyers

unfortunately as not only the solar

panel credits uh expire at the end of

the year for solar panels on residential

on residences but also we end up getting

um unfortunately

lower city buying. So, okay, we'll drop

that to 20. So, that will slow growth a

little bit. I I consider most of these

things extra. I consider FSD part of

margin. Uh I'm not going to price in

anything for insurance or semis or the

Optimus. Uh third party FSD revenue has

always just kind of been a scam. So I'm

not going to price that in. So I'm going

to go with margin. So margin honestly is

probably going to be closer to 85.

So our expense margin 85 because right

now we're operating I mean let's let's

look at the last sheet. I think we were

at like 157. So this was our previous

sheet. In the previous shareholder deck,

we can see X credits. We wrote down 15%

still good. That's what we want to use

now.

And we're going to have potentially some

hit due to advertising. We assume

potentially a 1 percentage point gross

margin hit due to advertisements. So

let's throw in 1% as well for ads. Let's

go

14%.

Even though that ad section will be

coming out in

SGNA, I'm going to go ahead and throw it

into gross margin.

There we go. Or you know what? We'll

throw it into SGNA. Screw it. We'll put

it in over here. I'll bump that. And

I'll make a little note that we did

that. So, we'll throw a little note

here. We'll say uh bumped uh SGNA to 7%

from 6% due to advertising. Well, we

throw in an extra 1% there. No big deal.

Okay, cool. So, now we've got 15%

margin. We've got 4 million deliveries

by the end of 27, 33,000 average price

per vehicle. And this doesn't really

include anything on Optimus. This

doesn't include anything on uh really

FSD

um revenues beyond what's already built

into the vehicle margin. So this this

should be low compared to where the

stock price is right now. So if we look

at this as a manufacturer,

this puts us at 207. As a service

provider, it puts us at 324.

So basically as as a vehicle producing

company if we can pull this off by 27

we'll make a note here. So this will be

our 1026 or 106 bottom line. Okay as

manufacturer only. Let's make it so you

can see as a manufacturer only it's

probably about a $28 stock at 15%

margins. Okay. As a serer you know it's

a 324 stock. 324 stock and this does not

include

robo taxi or optimus uh revenues. So

basically the delta between the stock

price today you know let's say stock

today uh 450 uh the delta or the

difference between the two the targets

uh and the stock price equals optimis

optimus and robo taxi um hope basically

uh that's that's what's being priced in

so it's interesting it gives us a little

bit of guide in terms of where the stock

is fundamentally I think if you could

get these margins up again I I don't

really think you're going to get off

this but if you could get back to you

know 18% margins let's see what that

looks like if I could get to 18% margins

we would actually move to

about an extra 50 bucks $47

as manufacturer only at 18% gross

margins 255 5 at 15% gross margins. And

if I go serer with those margins, uh

will be almost $400.

So 397

397 with 18% gross margins. So, it so

shows you even with higher gross

margins, we're the market's definitely

still pricing in a lot of enthusiasm for

other aspects of the business that are

hard to put a handle on right now. Uh,

but I'm I'm really optimistic about the

pricing tomorrow. I want to see what

happens with the pricing. The lower the

better. That's my vision for it. Uh,

lower the better because as I always

say, I want this company be cranking

printing cars again. Uh, so that's my

reaction to what's going on with Tesla.

>> Why not advertise these things that you

told us here? I feel like nobody else

knows about this. We'll we'll try a

little advertising and see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Praath there, financial analyst

and YouTuber. Meet Kevin. Always great

to get your take.