Tesla usually doesn't adjust price/change until the 7 days return window is gone, another week or so then we will be able to know.
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Near-future quarterly financial projections
- Thread starter luvb2b
- Start date
Tesla usually doesn't adjust price/change until the 7 days return window is gone, another week or so then we will be able to know.
Only one data point, but a year ago Tesla announced a $2000 price cut in the Jan 2nd P&D report.
Ya, 3750 is pretty steep drop on the credit. Will know soon
Fact Checking
Well-Known Member
Well, for deliveries taken on December 31 the vehicle return deadline has already passed yesterday:
Tesla Return Policy
"To return the vehicle, you will need to deliver the vehicle (including all original equipment and any parts and accessories that came with the vehicle, including the mobile connector kit) to us at a Tesla Delivery Center (or other location that we agree to), and complete a vehicle inspection, by the end of the seventh (7th) calendar day following the delivery date."
"To return the vehicle, you will need to deliver the vehicle (including all original equipment and any parts and accessories that came with the vehicle, including the mobile connector kit) to us at a Tesla Delivery Center (or other location that we agree to), and complete a vehicle inspection, by the end of the seventh (7th) calendar day following the delivery date."
Last year they dropped the U.S. price by $2,000 on January 2. Customers doing so would lose the $3,750 federal tax credit and only gain a $2,000 price cut, so Tesla was clearly not worried about this.
This year the federal tax credit step-down is $1,875, so Tesla could already have dropped the price by $1,000 or even $500 if they wanted to - but they didn't so far.
The Accountant
Active Member
Price elasticity is not there for a price decrease. Let's say Tesla has $5,000 margin on a Model 3. A $1.000 price cut is a 20% drop in profit. You would need to drive 25% incremental sales to break-even.
80k cars x $5k margin = $400m
100k cars x $4k margin = $400m
SageBrush
REJECT Fascism
I'd like to understand the magnitude of TSLA ownership in a future S&P that includes Tesla.
I gather that the total market cap of the S&P 500 is ~ 25 * 10^12.
If a future TSLA market cap is e.g. 75 * 10^9
How much will S&P hold of TSLA stock after inclusion ?
I am under the impression that the S&P basket is proportional to the market cap of each member company but I get funny numbers. How does this work ?
Addendum: I think I know what I am missing -- the market cap of the S&P index itself. The index has what it calls a "divisor" that is seekret but estimated at ~ 9 billion. Can I use the divisor this way --
TSLA market cap / divisor = TSLA value in a future S&P that includes Tesla ?
I gather that the total market cap of the S&P 500 is ~ 25 * 10^12.
If a future TSLA market cap is e.g. 75 * 10^9
How much will S&P hold of TSLA stock after inclusion ?
I am under the impression that the S&P basket is proportional to the market cap of each member company but I get funny numbers. How does this work ?
Addendum: I think I know what I am missing -- the market cap of the S&P index itself. The index has what it calls a "divisor" that is seekret but estimated at ~ 9 billion. Can I use the divisor this way --
TSLA market cap / divisor = TSLA value in a future S&P that includes Tesla ?
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To counter your point, there is still post of Los Angeles resident picking up their cars today on the Model 3 FB page.
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Doggydogworld
Active Member
I agree on price elasticity vs. contribution margin. It generally doesn't help to cut prices, unless there are too few customers to eat the batteries they committed to buy from Panasonic. That's what happened in Q1 of 2019, when they cut on January 2, 2019, again in early February and finally a 3rd time with the late February SR/SR+/"close all stores" frenzy.
In Q3 they only cut prices once, on July 15. That was two weeks after the 3750 tax credit dropped to 1875, so I'd wait at least another week before declaring no price cuts this time around.
Switching topics, do you (or anyone else) know how Tesla accounts for the depreciation/amortization of the Panasonic equipment in Nevada? The SEC filings say they treat that equipment as a finance lease. With a finance lease you split the monthly lease payment into imputed interest and paydown of the lease liability, just as if you were paying down a mortgage instead of paying rent. But Tesla doesn't make a monthly lease payment on Panasonic's equipment, they just buy cells.
They could consider part of the price they pay for cells as "equipment rental" and treat that portion the same way they'd treat a monthly payment on a capitalized lease. But that seems to severely distort the underlying economics. I don't know enough about ASC840 to know if it allows other approaches. Nor do I wish to learn, ha, so I'd appreciate anyone who can provide some Cliff Notes.
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Doggydogworld
Active Member
SP500 is just an index. It won't own any TSLA. Mutual funds and ETFs that try to match the SP500 will buy TSLA. This includes those that advertise themselves as SP500 index funds and so-called "closet indexers". Nobody knows how much stock these funds hold in aggregate, and some of the estimates I've seen disagree wildly.
Market cap of all companies in the SP500 index is a little over 28 trillion, so TSLA would be roughly 0.3% of the index. But that info by itself gets you nowhere.
The reason that there is no price drop is that there are no cars in inventory. Tesla has a pretty good sense of current order level and price elasticity. As shipments approach the delivery centers Tesla will adjust prices. at this point decreasing price would just cut revenue from the current sales.
SageBrush
REJECT Fascism
Of course you are correct -- I was speaking loosely to mean all the funds that ~ track the S&P500.
I'm surprised it is difficult to estimate their combined market power. What are the mid ranges you have seen ?
Fact Checking
Well-Known Member
Nobody knows for sure, but see this recent post by @ReflexFunds for a number of educated guesses:
Tesla, TSLA & the Investment World: the 2019-2020 Investors' Roundtable
"So over time I’d expect S&P 500 membership to bring far more than just the 15-20 million direct forced passive fund Tesla share purchases. S&P 500 membership is a huge, huge catalyst for bringing new active shareholders on board and increasing the pool of active investment capital valuing or making gut feel investment decisions on Tesla stock."
"So over time I’d expect S&P 500 membership to bring far more than just the 15-20 million direct forced passive fund Tesla share purchases. S&P 500 membership is a huge, huge catalyst for bringing new active shareholders on board and increasing the pool of active investment capital valuing or making gut feel investment decisions on Tesla stock."
Then there's the inevitable debt rating upgrades, which will unlock new investors as well.
Adam Jonas's ridiculous "our bear TSLA target is $10" stunt in June IMO created the perfect bear trap, unintended.
EVNow
Well-Known Member
There are plenty of reasons to believe ramping of M3 production at GF3 will greatly benefit Tesla's 2020 and future performance, but one more reason just occurred to me. Enthusiasm for Tesla in China was already high and is fast trending higher. Once GF3 has been pumping 150K and higher M3s a few quarters, IMO we could see a big jump in Plaid MS and MX sales. Existing and new Chinese Tesla owners are not going to keep/get the Tesla status sugar rush when hundreds of thousands of M3 are being driven by upper middle class consumers. To show they are more financially successful than M3 owners way upper income consumers are going to need the latest and highest performing Tesla models available. That will be Plaid MS and MX. A big jump in sales of these highest margin and profit models would be a nice extra shot in the arm to increasing revenue and net income. My recollection is MS/X production is limited to around 100K annually as long as they use Panasonic 18650 cells. Do we know yet for sure if Plaid MS/X will continue with the older cells, or switch to 2170?
If my understanding of status conscious consumers is correct, I bet future demand for MS/X could go significantly higher than 100K annually. Not suggesting this outcome would be nearly as important as the expected ramping of M3/Y production which is coming. Just that it could be one more cherry topping the profit picture sundae starting next year.
If my understanding of status conscious consumers is correct, I bet future demand for MS/X could go significantly higher than 100K annually. Not suggesting this outcome would be nearly as important as the expected ramping of M3/Y production which is coming. Just that it could be one more cherry topping the profit picture sundae starting next year.
I’m not considering any big growth in S/X (not that it couldn’t happen). The expansion of the Tesla automotive Product range will have a negative effect on S&X sales as buyers have more options: Model Y will eat into X sales a little, the cybertruck (especially the 500 mile option) will appeal to some S/X potential buyers, and also Roadster at the high end will steal some sales from S/X. That will be countered somewhat by the positive effect of Plaid Models and by the general growing acceptance of EVs.
Fact Checking
Well-Known Member
I agree with @Bobfitz1 that if Tesla manages to break into the "Chinese status symbol" market of BBA (BMW/Benz/Audi), which sell over a million $100k+ luxury units a year, then S/X sales will accelerate.
Gaining more than 10% of that market is definitely possible, but possibly on the 1-2 years time scale.
The significance of that process cannot be overstated though: there could be 100k+ S/X sales per year in China alone.
EVNow
Well-Known Member
Fact Checking
Well-Known Member
Well, maybe not $100k+ but $75k+ in China alone if you look at the Chinese data:
If we add up the luxury car makers and assume a third of the sales are $75k+, we get beyond a million units for S/X addressable market - around 4% of all chinese car sales.
EVNow
Well-Known Member
I posted this earlier - you can actually lookup the exact sales in China by model.
Mercedes-Benz C-Class US car sales figures
I doubt 75k+ sales is anywhere near 1M.
ps :
BAM sold 1.5M total cars in China in 2018.
Fact Checking
Well-Known Member
So, Mercedes-Benz C class sales in China were 156,567 in 2018, and in the first 11 months of 2019 they grew from 116,769 units to 143,754, a growth of +23%.
So the estimated 2019 sales of the C-class alone were not 150k units, but closer to 192k units.
Likewise, BMW has shown growth of +21% in 2019 as well.
2017->2018 growth was similarly high across the German carmakers, around +21%, in 2016->2017 it was high too +23%.
I believe this kind of growth is showing how China's lower-middle class and upper-middle class is expanding and increasing in buying power, buying German premium and luxury cars - plus BBA are also moving down the entry price via China made versions. There's no reason to believe that this expansion of Chinese prosperity won't continue into 2020 (barring global economic troubles).
So while the 1m sales numbers of S/X-class cars I estimated are indeed too high, I stand by my prediction that in the next 1-2 years Tesla could grow to selling around 100k S/X units in China alone - assuming they manage to establish themselves as a desirable luxury carmaker via the MIC Model 3 and Model Y and continue to be price-competitive with German models.
The Model S is the de-facto "L" version of the Model 3 - and "L" (long-wheelbase) versions are sought after by Chinese families, for elderly Chinese businessmen who often don't have a driving license or don't have much experience driving. (In China 'driving' was a separate profession in itself, private car ownership was very low in the early adulthood of now prosperous upper class Chinese.)
EV-friendly policies and restrictions of gascar sales will further accelerate this I believe.
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