Tesla Taps into Booming Demand with a Grand Lease Securitization Plan

September 16, 2023

By Kevin Armstrong

Tesla to start securitization through vehicle leases

Tesla

As the Big 3 went on strike, costing Ford, GM and Chrysler billions, Tesla is making big money moves in order to spend more. Tesla has started its grandest lease securitization project to date, which is set to redefine its financing strategy. The company is initiating the securitization of a staggering $1.8 billion worth of its electric vehicle leases, paving a path for a sophisticated financial instrument that can potentially foster the company's growth. This massive cash grab may be needed if rumors of the new production advancements are true.

What Does it Mean?

Tesla has started a process called "securitization." This is a financial strategy where they bundle together many car leases and sell them as bonds to investors. Tesla is packaging $1.8 billion worth of car leases in this case. This strategy allows them to get a large sum of money now instead of waiting for the lease payments to trickle in month by month. This is the same as getting a full year of pay; all you did was promise to do your job for the next year.

Tesla is doing this now because it wants to have more money on hand to create more leasing opportunities for potential Tesla drivers. When they sell these bonds, they will get a large amount of money that they can use to offer more leases to customers, essentially expanding their business, Giga Mexico is coming, and potentially boosting their profits.

By turning leases into bonds, Tesla effectively leverages its existing assets to garner immediate liquidity. This strategy entails the creation of financial instruments backed by the value derived from Tesla’s leases, which are then marketed to investors, offering them a structured debt investment with different tranches of risk and returns. The issuance is segregated into various classes, with ratings spanning from Triple-A to Double-A, targeting a diverse risk appetite of the investors, ranging from conservative to moderate. This is a big money move, considering their Master of Coin has stepped down.

An Established Strategy with a Fresh Magnitude

As the financial specialists monitor the dynamics, there is a consensus on the resilience showcased by U.S. consumers in the wake of the Federal Reserve’s aggressive interest rate hikes. Elon Musk has loudly spoken out about the rate hikes and urged the Fed to reverse the massive increases. Now, Tesla can use the hikes to its advantage as more buyers may be looking for a short-term lease instead of a long-term one, which would lock them into a higher rate for a longer period.

This financial maneuver is not new in Tesla's playbook; however, this issuance marks the largest since the inception of such undertakings in 2014. The issuance of these asset-backed securities is designed to drum up about $1 billion, transforming the vehicle leases into a liquid asset that can foster Tesla's business acumen in navigating the corporate finance landscape.

The proceeds from this strategic financial endeavor can potentially fuel Tesla's ambitious expansion plans, serving as an alternative reservoir of funds apart from the conventional corporate bond market. This comes at a pivotal time when Tesla’s share has seen a remarkable uptick, soaring by 124.1% year-to-date.

Tesla plans to create different groups or "classes" of bonds to sell, with some being safer investments and others offering the potential for higher returns. This strategy is designed to attract a wide variety of investors, including those who prefer to play it safe and others willing to take on a bit more risk for a higher reward.

This strategy seems to be well-received as Tesla's share prices have gone up, indicating that investors have confidence in Tesla's plans. Moreover, people are still very much interested in leasing Tesla cars despite the general rise in interest rates.

Tesla FSD V12.4 - Features and Release Date

May 16, 2024

By Not a Tesla App Staff

The greatly anticipated FSD v12.4 is around the corner, with Elon Musk mentioning that it will be going to employees this weekend, with limited external testers next week.

Several significant improvements are coming with V12.4, which is being compared to the leap in performance that was previously seen between V12 and V11.

Improved Comfort and Reduced Interventions

There are quite a few improvements expected with V12.4, which Musk has said will be focused on user comfort by reducing hard accelerations and sudden braking. According to Musk, FSD v12.4 is also expected to have a 5-10x improvement in time between user interventions, which means that Tesla is rapidly approaching its goal for the Robotaxi announcement on August 8, 2024.

Steering Wheel Nag Removal

FSD V12.4 is expected to eliminate the steering wheel nag, as Musk confirmed its removal last week. The camera-based driver monitoring system will be taking over, providing a hands-free experience. These improvements will most likely benefit owners who have cabin cameras with infrared lights the most, while Tesla may continue to use steering wheel nag as a fallback mechanism.

Driverless Autopark

The second key feature that may be included in v12.4 will be Banish Autopark, previously known as Reverse Summon, allowing you to choose a parking spot, exit the vehicle and have the car park itself. Whether this feature makes it in v12.4 is yet to be seen, but Musk has mentioned that parking without a driver is coming soon.

Automatically Seek Parking Spot at Destination

Finally, your Tesla will now traverse a parking lot and automatically enter Autopark mode when arriving at a destination, according to a post from Musk.

Eligibility and Branch

Tesla recently added FSD v12.3.6 to the 2024.14 branch with updates 2024.14.5 and 2024.14.6. This makes it very likely that Tesla’s next FSD version will also be based on 2024.14, meaning that it will be available to any vehicle on 2024.14.x.

For users on update 2024.3.25, this means that they’ll receive all of the features included in updates 2024.8 and 2024.14, which should make it a massive update.

Release Date

Musk has mentioned that FSD V12.4 is going out to employee vehicles for internal testing this weekend, with external testing starting next week. The rollouts typically go slower than predicted but looks like we may see this begin shipping to customers by the end of the month.

U.S. Raising Tariff Rates on Imported EVs and Batteries From China: How It Affects Tesla

May 15, 2024

By Not a Tesla App Staff

Today, as part of a broader change of tariff rates on Chinese goods, U.S. President Joe Biden announced that he’ll raise tariffs on electric vehicles imported from China, increasing the rate from 25% to 100%, effective this year.

This increase won’t just impact the import of vehicles, but also the rate for lithium-ion batteries produced in China, which will be moving from 7.5% to 25%.

Impact on Competition

The immediate impact of this new regulation is significant for Chinese manufacturers, who have been regarded as Tesla’s largest and greatest competition. Given the tariff hike, this means that new Chinese manufacturers, such as Nio, XPeng, or BYD, will either need to set up production in North America, or be subject to the increased import tariff.

Nio’s vehicles cost between $40,000 USD to $70,000 USD in China based on today’s conversion rates, and with an import tariff of 100%, an imported vehicle’s price would be doubled to $80,000 USD to $140,000 USD, not including other fees. Chinese manufacturers will have to closely weigh the advantages and disadvantages of opening up the North American market, with challenges including vehicle homologation, new tariffs, and a difficult EV market.

Tesla and Chinese Tariffs

Elon Musk recently visited China, engaging with officials to build a foundation for what is currently the world’s largest electric vehicle market. With the potential import of Chinese EVs becoming restricted to the United States, this places Tesla in an advantageous position over its Chinese competitors who have yet to establish their brands in North America.

On the other hand, this could also impact Tesla, as they import Chinese batteries for usage in some vehicles in the United States.

Tesla does not import Gigafactory Shanghai vehicles to the US, but has been increasing North American battery production lately, with expansions in Lathrop, California and a new facility in Sparks, Nevada.

Canadian Tariffs

In Canada, the Model 3 and Model Y are currently being imported from Gigafactory Shanghai. Given Canada’s close following of US foreign policy, this could impact either the prices of Tesla vehicles in Canada or have Tesla shipping vehicles from Fremont and Texas to the United States once again, should Canada also adopt a similar tariff policy.