Assessing Semiconductor Supply Issues, Giga Berlin Battery Update, Autonomy Regulation, Vanguard (02.10.21)
Everybody robbing our here and today we're going to be talking about the semiconductor supplier issue that has been affecting the automotive industry as a whole and we do have a few other topics to go through as well. This is a live episode because after we go through this. I do have some thoughts to share. But i thought it'd be best shared live so we're gonna do the kind of normal episode structure But it will be live so bear with me as always but we'll get into it will start off just looking at the stock today so finish down five point three percent to eight hundred and four dollars eighty two sons. I compare to the nasdaq which is on the video. But down a quarter of a percent so it was a tough day for tesla today especially relative to the broader market other automakers. Did you know at least the ones. I looked at fare worse than the market today as well thing. Gm ford were right around down to percents neo. Probably in that ballpark as well So i don't know that this drop was entirely isolated to tesla but certainly tussle moved a little bit further perhaps related to the supply of semiconductor. So let's move into that topic For whatever reason. I've had i don't know fifty to one hundred people. Ask me about this over the last two days whether that's in the youtube comments or on twitter or on patriae on a lot of people for some reason seem to be incredibly interested in this in the last forty eight hours even though this has been something that's been discussed in the automotive industry since back in mid december And tesla has already talked about it a little too so we'll go through tussles comments. I'm here as well. So essentially what's going on. I'll go into some links here in a second. But what's going on here is that there is the semiconductor supply shortage which is a factor of multiple different things that factored into it so primarily what has been driving it is two things the pandemic and then the rise in some areas of consumer electronics. So the work from home movement during the pandemic has caused increase supply for things like laptops and stuff like that. That people are upgrading for working from home. The five g cycle with phones has caused an increase from what i gather in semiconductor needs and then the next generation consoles with the xbox one whatever it's called now and the bs five launching those things have worked together to create more more demand in the consumer electronics base and then in the automotive space because of the shutdowns that were experienced in the first half twenty twenty the a lot of automakers cut their orders or their contracts with semiconductor suppliers to help get through that period of time. So what that is caused. Is those autumn those suppliers to necessarily want to cut production. And things like that. They worked through Their safety stocks. So let's let's get into you some comments here from Chipmakers the first one. That i wanna look here. This is from microchip technology. So this is from a couple of weeks backer. Just not only one week back. But they kind of talk about how they got into the situation that they're in In terms of semiconductor in the automotive supply chain so they're talking about how their customers generally pulled back very hard. During the pandemic there was no backlog visibility in this environment. They had no choice to down inventories and safety stock to protect themselves from what looked like severe economic contraction and they saw similar similar actions from their suppliers that worked that they were together for Actually producing their semiconductors so they said during his time no one in the industry was adding capacity. Obviously given the uncertainty about win things would recover And that uncertainty extended significantly as the bottom of market as well so one of the things that they talk about here. That will come back. A little bit later is that they're offering this microchip. Preferred supply program called bs to offer the prioritized capacity to companies. That are willing to work with them. To order. twelve months of continuous non cancelable non reschedule will supply So they're not guaranteeing capacity for that but they're prioritizing people that are willing to make those longer term commitments and because if we rewind it back to the for salvatore nineteen because other because a lot of other because a lot of automakers were uncertain about their demand they were unwilling to give a lot of certainty to these two suppliers. So that's kind of brought the semiconductor situation into where it is today and they're trying to work through this now and that's impacting. A lot of different automakers couple other quotes here just from people in the industry so this one is from continental Major supplier in the space. They're talking about lead. Times for semiconductors saying what with lead times of six to nine months. The semiconductor industry has not been able to scale it fast enough to meet this unexpected growth. In automotive demand which really is a return to previous levels not necessarily new growth than they continue saying quote the bottlenecks from the semiconductor industry expected to continue well into twenty twenty one causing major disruptions and continentals production. So that gives us a bit of a timeline in terms of how this issue looks. We don't necessarily have a scale from that. Then let's move into one of their quote here. This is from Tmc one of the obviously major manufacturers. I think they do like seventy percent of some semiconductors or something like that so specific to their automotive customers They continued to decrease demand for cms t s emcees semiconductors in third quarter of two thousand nineteen. The chipmaker only began to see southern recovery automotive orders in the fourth quarter. Their ceo said earnings call earlier this month so they kind of highlights just the issues that were caused into the channel that were brought into the channel from the decrease in orders from automotive companies in the first half of the year so anyway getting forward to this year. Then i've been doing like hours of research on this all day to see where everyone is at So i've got like the ten major automakers here and all the comments that they have made on the semiconductor issue and how it's impacting them so to start off. We'll just kind of go through these volkswagen. They're saying that it's affected their. I'm qb flat platform both in volkswagen passenger cars volkswagen commercial vehicles than they've had impacts on skoda seat and i don't know if that's pronounced that way or asiatic but and to a limited extent they said audi is affected so somewhat limited in terms of what it's affecting Obviously there's no mention of porsche there or anything like that And certainly not all of their their production toyota. They've reduced production on the tundra. So it seems relatively isolated there renault nissan. They said that nissan expects one hundred fifty thousand fewer vehicles this year for full year. And then i the lantis i. i'm gonna put some of the renault stuff. Install lintas but regardless they say that still social stone into says the new company between psa and fiat. Chrysler the merger. There they said that they've delayed restarting production on the jeep compass pas production on the chrysler three hundred dodge charger and challenger and a brief positive opel and citron and peugeot their tvd on delays. There as of the last thing that i saw hyundai kia. They said that south korea's hyundai and kia have afforded material chip shortages at the as they have maintained larger orders so that goes back to what we heard there from tsmc and from microchip technology. Talking about how the orders that they were getting cut impacted their ability to supply these automakers and they had to work through that backlog safety stock but if these automakers stayed firm in their commitments than they would have just kept rolling and kept things on their original original plan. So automakers that did that should be less impacted. Which obviously we'll come back to when we talk about tesla which on the next slide here as for gm. They cut production at four plants. Aside from that it was a little bit unclear in terms of how much production was caught. Or what models Bud seems pretty broad there for gm they stuck on the civic and the accord they expect a hundred thousand fewer vehicles for the full year. So like i said there with neath nissan. Obviously a lot of that impact is gonna come in the first half of the year. But they're just saying for the tunnel year out of the four to eight million vehicles or whatever that we produce about one hundred hundred and fifty thousand that is going to be reduced from the semiconductor shortage as for ford. They said that they reduced production on on fifty. That happened in the last couple of weeks. They've also pas production on ford escape. The lincoln corsair and they said that they expect ten to twenty percent reduction in global production for key want as rhode island. They said the production and the bremen and rasta plans. Add whatever however it's pronounced but they said that is primarily for score problem. So that's there in those two plants. Generally they're c class In bremen and the neurologist at the and glass for bmw they maintain a production But they are watching the situation intensively and then volvo avoided shortages so forth so far so when we look across all these different automakers we can see there's variability here right like not every automaker is being impacted to the same degree. You've got forward. You know saying ten to twenty percent reduction globally. They seem to be among the worst situation here. But of course not. Every automaker is commenting in that way. It seems like volkswagen has also been hit relatively hard with this. But some like bmw and volvo are saying you know really not changing anything but monitoring the situation closely. So as i said tesla has made a couple of comments on this flip over here. Both in their ten k. That was filed on monday and then of course on the earnings call back in late. January zach talked about this briefly opening comments That he men's cfo. So in the ten k they said you know. Basically just addressing that there might be port congestion supplier shutdowns delays because of the ongoing impacts related to the pandemic and that they talk about the increase and man for personal tropics has quote created a shortfall for microchip supply and it has yet unknown how we may be impacted later other section. They say that quote for example. A global shortage of microchips has been reported since early. Twenty twenty one and the impact us as yet unknown. They continue to talk about the unavailability of suppliers Or components four suppliers could result in production delays etcetera etcetera. Stuff that we all can understand. So essentially what tusla saying is like. Hey we don't know. We're doing the best that we can to manage through the situation. We don't know the exact impact of it yet. Zac earnings call said that quote the global semiconductor shortage as well as poor capacity may have a temporary impact And on again tesla. They're not giving us much information as some other. Automakers are an hopefully that is because they haven't had to deal with any production shutdowns because of this if we go back to you kind of the comments earlier about the orders and how the shortage is somewhat of a result of cancelled or reduced orders from automakers and key one in two of last year. Tesla wasn't in that situation as badly as these other. Automakers were if we go back to think q. One maybe was to you. Tussles down five percent year over year whereas the rest of automotive industry was on average down thirty percent in terms of production and deliveries so there wasn't as big of a drop for tesla and because tesla was probably among the more confident automakers knowing that they had a lot of demand seeing that they had a lot of demand that period of time they were probably able to give more secure orders and contracts to their suppliers whether that semiconductors or elsewhere so i think tesla just naturally as a result of those circumstances is going to be less impacted by this tesla also has a less diverse offering a vehicles so it should be a little bit easier to manage the supply chain with just four models versus who knows how many models from these other automakers so there should be an tussles just a a smaller scale company right now delivering hundred and fifty thousand to two hundred thousand vehicles per quarter. So i don't expect major impact here from tesla. And if we look at this this next line here. This is just a a note that i offer my just market that you market research. They say that quote fewer than six hundred seventy thousand or sorry more than six hundred seventy s. More than six hundred and seventy thousand. Fewer cars will be produced in the first quarter of the year as a result of the shortages of research by the provider. I just market so if we assume. The automotive market is around eighty million per year. A reduction of six hundred seventy thousand fewer cars on twenty million quarter is only about three percent. So i'm not sure why. This has been receiving so much attention over the last few days again. Because it's something that we've known about and the estimated impact is relatively small worst case it seems like automakers are being hit maybe ten to twenty percent of production some are being hit non not at all and maybe the average there is a more between you know five percent of three percents or something like that so i don't expect this to be a big impact for tesla and this relates to the tweet that had earlier. Today of any of you happen to see. That is at yawns aggressively. This tweet is directed at short-term thinking. This is a result of me. Going through stuff that i doing like hours of research on this and then you're sitting there and thinking about how little any of this matters. This is such such a short term issue if we think about the semiconductor industry these people are manufacturing millions and millions and millions of units. every single. quarter This is a you know. A very robust supply a very robust area of supply that's experiencing a temporary shortage for you know a myriad of reasonable reasons so there shouldn't be any. That problem is going to be resolved. Maybe for a couple months here. It has some impact on automakers. Maybe that impact extends to tesla but even if tussles manufacturing operations the production were reduced by fifteen percent. Quarter over quarter so looking out that ford number. That's probably where for it's gonna come in even if tussles production down fifteen percent quarter over quarter that would still give them their second. Best quarter ever of production and if we compared to last year one they be up like fifty percent from that one hundred forty thousand vehicles versus One hundred two thousand last year so not quite fifty percent but they're still be significant growth even if there was a large impact from this which it doesn't seem to be the case as of yet even if there were that impact the industry would resolve that very quickly again we there from tsmc or maybe from continental they were saying you know three to six months in terms of how long it could take a to fix this issue so this is tweets not entirely directed on that. It's a combination of that. And then just a lot of i dunno short-term discussion that i've been seeing over the last few days that seems to just be sort of creeping in and it's just i don't know it gets a little bit frustrating at times and it's kind of weird because this is like tesla daily and you know we kind of talk about all those little short-term things often but the way that kind of view this as sort of like hand holding through things like that because at the end of the day we should be thinking in decade-long terms and the day to day stuff doesn't necessarily impact that all that much and part of tussle daily is just kinda to be a reminder that hey on a decade long time horizon. The stuff isn't necessarily all that important. Now tesla makes fifty thousand fewer vehicles because of this. It's not a big deal. They're still going to be able to continue their expansion on their gigafactory. Is there's still going to be able to continue their d. They're still going to be able to develop their full. Self-driving continue expanding the beta making that more robust and more accurate. They're gonna continue to be able to work on construction. Add gigabyte len gets axis. They're going to continue to be able to work towards model to building out the cyber truck. None of those things are going to be impacted by a semiconductor shortage show. It's just a really a really really small issue in the grand scheme of things that you know. I don't know if the stock was down because of that today but if you're thinking about tesla's a long-term investment something like this is really at the end of the day just noise so that's kind of my thoughts. I'm just looking at my notes over here to make sure i didn't miss anything there. kinda ran kind of iran's there but i at that captured most of it So just a couple of other topics for today if we flip over here. This is a report from cash In germany and it is on. Tesla's gigabyte lynn battery manufacturing plans. Obviously that's going to be sort of a separate facility berlin And this is from york steinbach who we often get information from the minister of economic affairs from brandenburg. He saying that this is translated quote. I guess this requisites. I won't say it that way but cash says that at tesla battery cell production could begin in about two years with which musk wants to supplement the electric car plant in grenada. So i think that date is a little bit surprising. I'm sure many of us would expect battery cell to be earlier than that. But we also haven't seen a whole lot of time on that so i think it's going to be interesting to watch this particularly and see what we might find out. I think as tussle progresses down this will see more from when they have to sort of get approval for things. I think we'll see some of those documents. Come out so definitely be keeping a close eye on that because if tests wants to ramp up giger berlin and i've said that will use internal battery production. They've only got you know. Best case from fremont ten gigawatt hours per year once that gets fully ramped up to support that. And that's just not gonna. That's not going to cover the production at giga berlin for very long so certainly not for two years and i think if we think in the context of tesla's goal of one hundred gigawatt hours of battery production internally twenty twenty two. It doesn't really fit with this time. Line either two years from now about two years from now. It'll be twenty twenty three so i don't know if that's you know a conservative date from we've heard from york steinbach so far he hasn't really. You know followed that sort of tactic most of the time but it was interesting to see this all just wanted to pass that along the next thing here also sticking with germany kinda. Some good news A lot of at least in parts of europe on pilots functionality is a little bit restricted due to some of the regulation. There looks like there might be some progress here. A little bit in germany So teslarati here reporting that. The german government is working towards passing something. I don't think it's fully passed. It's working through legislation right now that would allow level for driving and vehicles so level for as a reminder is essentially fully autonomous but it just required it doesn't function and you know every single circumstance that a human could drive so you can't necessarily like take out the steering wheel take out the pedals from from a level vehicle but otherwise it is fully thomas's capable of operating Fully autonomous it. Just needs to give you some morning or give you some warning. If you need to take over or just can't operate in some certain circumstances so germany. It looks like they're you know really focused on making sure that that is removed as a regulatory hurdle at least up to that level. Four level redundant level there But as part of the this update's one of the people working on it said that quote. Germany will be the first country in the world to bring autonomous vehicles out of the research. Labs onto the today. We have taken a decisive step toward the school. I'm delighted that the cabinet has cleared the way for law on autonomous driving. Now the draft will go to the bundestag and produce drought for the consultation. We need swift implementation for the innovations in the transformation process. I am sure that we will reach groundbreaking agreements here too so that the germany so that germany continues to be the international number one in autonomous driving. So definitely good to see that You know you almost continues to talk about how the regulatory environment he sees that as being not necessarily about a bottleneck but slowing down the road option until tests can really prove that technology out. So it's good to see that you know as we saw with nitsa a few weeks back with some of the legislation changes here in the united states. Now we're seeing this germany. It seems like governments are at least aware of this trying to get ahead of it to some extent. And so the next topic here. Just a quick update tulsa filed on. Sec filing today sharing that vanguard has exceeded the five percent ownership stakes. Just like we saw with brett blackrock. A couple weeks ago the collectively across vanguard they now own fifty seven point eight million shares of tesla. So i think that's you know six million more or something than black rock For a six point. One percent stake in total. The shouldn't be too surprising. Just like when we saw tesla added to p five hundred we saw blackrock steak increase because they added it into there. S and p five hundred funds. Somewhere thing that we're seeing here with vanguard. I don't know exactly what their steak was before. But i it was around thirty eight million or something like that so djembe too surprising to see a jump up of this five percent threshold and likely all due to be The s p five hundred inclusion Just looking at a couple other quick things and then we'll wrap it for today the. Us federal tax credit on electric vehicles. It looks like there's been a little bit of progress in there. I don't have an article on it here share but From and we'll probably talk a little bit more about this tomorrow but it looks like they may be extending that from being sort of the. I two hundred thousand vehicles to get that. Us federal tax credit to now being about six hundred thousand vehicles and then of course. There's always that little short phase out period so overall i would actually expect. This tanabe. a huge impact tesla or maybe even be slightly negative because it gives other automakers much more time with that credit just like we saw with the two hundred thousand vehicles because tesla's going to burn through that like instantly so it would just be around for a few quarters of tesla if it's introduced in this way. Sorry there's a dog barking out there. Classic livestream Anyway so that's kind of the update on the federal tax keep an eye on how that legislation potentially advances There was a report by bloomberg. Today i don't have pulled up here but That riviera maybe looking to ipo september So some people were speculating that may be attributed to the drop tesla today. I don't think that would really be the case You know five percent drop in tusla's many many billions of dollars. I don't think that would be capital. Shifting out of tesla to prepare for ravina vio. Ipo seven months from now. That's unlikely or even just getting out of the out of the stock because there's going to be you know more competitors in the market. I don't know it just. I don't really think that line of lot Checks out to me And then the last thing for today just a quick comment here on the common sections on youtube so there are these accounts. Impersonator accounts that you know. Make their profile picture tussle daily. They say their daily and then the comments and say you to connect with them on like what's app and they have like hints on or you know trading strategies for crypto. I'm never gonna say to you guys never ever going to do that. If you see something like that. Report the comment. You should be able to see a little check mark by my name or some sort of like black highlighter. Outline that indicates that it's me. If it ever seems weird you can click on the town's And go in there and just you know. See if it's this channel or if it's an impersonator channel. But i'm sorry about that as soon as i see those i do. Delete them Super frustrating takes forever but yet just let me know if you see him. And i'll take care of it. And i'll never ask you to contact me on whatsapp so don't ever do that. But that will wrap it up for today as always thank you for listening Hopefully that wasn't too randy and we got through it. Okay but other than that. I will talk to you tomorrow for the february eleventh episode. Tesla daily the meantime can make sure to follow me on twitter at tesla. Podcast and i'll see them thank you.