200,000th US Delivery

[wdolson]

My notes:

Assumptions:
19K deliveries to hit 200K in US

2Q production:
24K S/X - same as 1Q 18
26K M3 - assuming 1Q exit rate, shutdown, etc.

so while production might be bit higher on M3, due to final 2-3 weeks, lets assume 24 + 26 = 50K max production (S3X)

How to stay under 19K?

Usual thumb rule is that 60% of S/X is US sales, that would be 14K, if they want to meet 200K, this number will have to be lower, so say 40%, 9.6K

US - 9.6K S/X ~ 8K (adjust)
- 10K M3 (same as Q1)

- total 18K

Rest of world
- S/X usually 40%, increase slightly higher 50%
- up from usual 9.6K to 12K

M3.
Canada - 6K (wild ass assumption)

total = 18K

So 18K + 18K = 36 K accounted for out of 50K max.

Remaining
S/X = 24-8(US)-12(World) = 4K
M3 = 26 - 10(US)-6(Canada) = 10K

Notes.
.If AWD comes along Canada intake might be higher
.Germany numbers for 60K cars might be higher this quarter now that rebate issue has been resolved
. Norway S/X deliveries looking good, and this might be due to transport issues, or working as planned
.M3 delivered to some more countries
.Keep rest in inventory
.China Tariffs might throw a curveball

Questions:
How will market react if say Tesla says 50K produced, only 36K delivered. Market should know why this happened, to meet 200K ?

thoughts?

Decent analysis, but your assumptions for S/X deliveries are off. In 2017, 46% of S/X deliveries were domestic. If they really worked at it, they could probably get that down to around 30% for a quarter. Last year China was Tesla's biggest overseas market, but that might sour with the new tariffs.

 

[zerokewl]

I'm really thinking about this now. I just got my invite to configure and i want to hold off for AWD but the tax credit would be nice too. This is harder than when i was choosing my major in college lol

 

[elasalle]

Decent analysis, but your assumptions for S/X deliveries are off. In 2017, 46% of S/X deliveries were domestic. If they really worked at it, they could probably get that down to around 30% for a quarter. Last year China was Tesla's biggest overseas market, but that might sour with the new tariffs.

thanks. For 2Q, I had estimated 40% for US, so I guess, it could be reduced further to meet the 200K targets.

Kicker definitely is China tariffs. I think this uncertainity must already be impacting businesses. How should tesla(or other businesses) decide the number of products to send, because tariffs could kick in any time.

For vehicles already in China, it might however create an incentive to buy, because of the same tariff uncertainity.

 

[SteveG3]

@SteveG3 Does the higher cadence of Model 3 NHTSA VIN registrations change your view? If not, do you think Tesla is stockpiling VIN's or is it building the cars and stockpiling them in parking lots until July? Can Canada absorb a weekly production rate above 4,000 for 10 weeks? Wondering your updated thoughts, if any. Thanks in advance.

Model 3 VINs on Twitter
Model 3 VINs on Twitter
Model 3 VINs on Twitter

Haven't had much time for TMC the past several days.

As to your question... my current thought re first half 2018 Model 3 production is about 45K, down quite a bit from the 55K for first half '18 I was estimating 8 weeks ago when I first made the case for this scenario being a very real possibility (you can see that estimate in the "general discussion thread", ie, post 2498).

So, on that front, VIN registrations notwithstanding, the delaying of 200K seems easier to do than it looked a couple of months ago.

That said, we got a new bit of info in the last 24 hours that makes this strategy seem considerably less likely- Elon's tweet that dual motors will become available after the 5K ramp, probably in July. Unless Elon is using some form of semantics and the dual motor will be available in Canada sooner (a scenario I think is unlikely), I don't think the push out of the 200K is too likely to happen. Having only the demand for the initial config of the 3 (LR RWD) in Canada to soak up production would almost surely require considerably more juggling maneuvers with S/X and/or 3 deliveries outside the US, or some other sort of tactic, to keep Tesla under 200K through June.

 

[Waiting4M3]

Haven't had much time for TMC the past several days.

As to your question... my current thought re first half 2018 Model 3 production is about 45K, down quite a bit from the 55K for first half '18 I was estimating 8 weeks ago when I first made the case for this scenario being a very real possibility (you can see that estimate in the "general discussion thread", ie, post 2498).

So, on that front, VIN registrations notwithstanding, the delaying of 200K seems easier to do than it looked a couple of months ago.

That said, we got a new bit of info in the last 24 hours that makes this strategy seem considerably less likely- Elon's tweet that dual motors will become available after the 5K ramp, probably in July. Unless Elon is using some form of semantics and the dual motor will be available in Canada sooner (a scenario I think is unlikely), I don't think the push out of the 200K is too likely to happen. Having only the demand for the initial config of the 3 (LR RWD) in Canada to soak up production would almost surely require considerably more juggling maneuvers with S/X and/or 3 deliveries outside the US, or some other sort of tactic, to keep Tesla under 200K through June.

Given the large batch of VIN registration on 4/5-6, and rapid increase of max VINs assigned to customers, I think Tesla is probably already closing in on 2.5k/wk, and could hit 3k/wk before May, so 45k production in 1H'18 (36k for Q2) seems low. I would say Q2 would likely see >40k M3 produced, maybe even close to 45k.

Below is a pretty unlikely scenario that I can see Tesla trying to stay under 200K at Q2 end: stash 10k M3 in transit, maintain 4k MS/X in transit, stash 3k MS/X in inventory, stash 1k M3 in inventory, deliver 18.6k to Canada, and keep US deliveries for MS/X/3 all to 40% of total deliveries.

 

[schonelucht]

What do you think of his projection? Sure, he may very well turn out to be wrong. But is it a reasonable prediction? Do you feel that it is a blind WAG or is he basing it on some amount of insight?

I feel it's at least as reasonable as predicting 5k by end of Q2. There's a lot of work to be done if you want to more than double your production. And we know Tesla needs work on their parts conveyance while also delaying capital expenses (they've basically been doing that ever since Model 3 cap-ex started). That's not a great position to be in, if you want to move fast. I am sure Jonas' opinion is alsco colored by previous experience with respect to guidance and reality. On the other hand, Tesla did grow from 700/week to 2000/week in one quarter, while actually producing cars. That's a great effort. In my experience, optimizing and improving a line that's already in production is hard. You don't nearly triple output like that with an engineering force that is out of their depth.

Basically, I have way to little insight to be of any help here on what the actual production rate is going to be come July (which is why I mostly limit myself to retrospectively trying to estimate production rather than speculation where it is going to be in several weeks/months/years). But estimating 5k is only possibly near the end of the year is a totally reasonable position.

 

[mongo]

Best case scenario proponent here:
They're shooting for 5k/wk in Q2. They are are also talking AWD integration after they hit 5k/ wk (with July for deliveries or configure or something).

The initial line concept was to be able to do 5k+ per week, so it theoretically has extra capacity once the pinch points are worked out. Their suppliers are reportedly set up for 5k/wk rates.

AWD was always in the plan, so the line should already have the stations needed for install. The self imposed constraint is to keep the production numbers up. I'm thinking they can work on the AWD once the line rate gets to the point that it is hitting the build target with time to spare. They can also do so whenever there is down time on the line for tuning. Then they can work on the AWD installation section without impacting build rate (assuming they plan ahead to have the correct VIN on the vehicle, database can be updated from RWD to AWD). They can also tune the robots without doing the actual install (part movement and placement, perhaps even install and remove).

If they can get the AWD install step to a decent fraction of the RWD line speed, then they can start adding them to the build mix without a rate impact. Example: RWD line takes 5 minutes per step. AWD station takes 10 minutes per car . If they run a 50% AWD mix, the average rate past the AWD station is 5 minutes. (Pass a car through (effective time of 0), work on a car for 10. Average rate 5 minutes, assumes a one chassis buffer post AWD install).

Using this method, they could slowly build up a buffer of AWD cars and then station them in Canada for Q2 or US for Q3 and only reveal their existence once there is a sufficient quantity and build rate to align with the reservations.

 

[ValueAnalyst]

I feel it's at least as reasonable as predicting 5k by end of Q2. There's a lot of work to be done if you want to more than double your production. And we know Tesla needs work on their parts conveyance while also delaying capital expenses (they've basically been doing that ever since Model 3 cap-ex started). That's not a great position to be in, if you want to move fast. I am sure Jonas' opinion is alsco colored by previous experience with respect to guidance and reality. On the other hand, Tesla did grow from 700/week to 2000/week in one quarter, while actually producing cars. That's a great effort. In my experience, optimizing and improving a line that's already in production is hard. You don't nearly triple output like that with an engineering force that is out of their depth.

Basically, I have way to little insight to be of any help here on what the actual production rate is going to be come July (which is why I mostly limit myself to retrospectively trying to estimate production rather than speculation where it is going to be in several weeks/months/years). But estimating 5k is only possibly near the end of the year is a totally reasonable position.

AJ is whack. He originally was adamant about Model 3 first production not starting until " the very end of 2018."

Tesla Model 3 will not arrive until ‘very end’ of 2018, says once TSLA-cheerleader Morgan Stanley’s Adam Jonas

Of course, AJ was off by 18 months.

AJ's current projections are being used by skeptics, like Montana Skeptic, to spread the bear talking point that Tesla will deliver only 110,000 Model 3's in 2018. What these FUDsters are hiding, of course, is the above fact.

 

[dhanson865]

AJ is whack. He originally was adamant about Model 3 first production not starting until " the very end of 2018."

Tesla Model 3 will not arrive until ‘very end’ of 2018, says once TSLA-cheerleader Morgan Stanley’s Adam Jonas

Of course, AJ was off by 18 months.

AJ's current projections are being used by skeptics, like Montana Skeptic, to spread the bear talking point that Tesla will deliver only 110,000 Model 3's in 2018. What these FUDsters are hiding, of course, is the above fact.

Heh, I love that the worst case the seeking alpha types are crowing about is double the prior years production (S and X did about 100,000 a year in 2017). Plenty of upside but even that worst case of doubling 2017 production is a healthy growth rate no other car company is currently seeing.

 

[ValueAnalyst]

Heh, I love that the worst case the seeking alpha types are crowing about is double the prior years production (S and X did about 100,000 a year in 2017). Plenty of upside but even that worst case of doubling 2017 production is a healthy growth rate no other car company is currently seeing.

Precisely. Even the worst case scenario being paddled by shorts warrants a valuation multiple expansion. Tesla's future is volatile, but bright.

 

[Chickenlittle]

It’s like heads I win or tails you lose scenario. Shorts will proclaim doom of company if they don’t get to 200K sales volume in USA and doom if they do get there

 

[Waiting4M3]

AJ is whack. He originally was adamant about Model 3 first production not starting until " the very end of 2018."

Tesla Model 3 will not arrive until ‘very end’ of 2018, says once TSLA-cheerleader Morgan Stanley’s Adam Jonas

Of course, AJ was off by 18 months.

AJ's current projections are being used by skeptics, like Montana Skeptic, to spread the bear talking point that Tesla will deliver only 110,000 Model 3's in 2018. What these FUDsters are hiding, of course, is the above fact.

I personally think AJ's 5k by end of 2018 prediction is not unreasonable. A couple of things factored into this:

1) more conservative approach that Tesla announced w.r.t. M3 ramp CapEx in Q4ER, moving 10k/wk into 2019, combined with Elon's letter alluding to 400k/yr MS/X/3 production rate at the end of 2018, suggest that Tesla is shooting for 6k/wk M3 by end of 2018.
2) Tesla hit 80% of Q1's target, extrapolating the same ratio to the 6k/wk goal and you get 5k/wk at end of 2018.

But it's not realy that bold of a prediction, even if Tesla hits their goal and reach 6k, he is only off by 20%.

I think the call we should be judging AJ on is the total 2018 M3 production, 8k in Q1, 24k in Q2, 32k in Q3, 46k in Q4, 110k total. He's already off by 20% in Q1, I think he will be way wrong in Q2, Q3, and maybe closer in Q4. In the end the overall production # is what gives Tesla the cash to continue to expand, the ramp is just an indicator of when we will get there.

 

[wdolson]

AJ is whack. He originally was adamant about Model 3 first production not starting until " the very end of 2018."

Tesla Model 3 will not arrive until ‘very end’ of 2018, says once TSLA-cheerleader Morgan Stanley’s Adam Jonas

Of course, AJ was off by 18 months.

AJ's current projections are being used by skeptics, like Montana Skeptic, to spread the bear talking point that Tesla will deliver only 110,000 Model 3's in 2018. What these FUDsters are hiding, of course, is the above fact.

It does appear they are getting the production volumes ramped now and they may beat 110K deliveries of Model 3s this year. But even if they do that's around $5 billion in revenue and over $1 billion in gross profit. That will go a long ways towards stemming the red ink.

I think all the shorts who have been betting on Tesla's demise are panicking because it looks like they are going to lose their shirt when Model 3 production hits stride.

When the Model 3 AWD goes into production, they will almost certainly have to shut down the line for a few days. They are talking about starting AWD deliveries in July. That gives them an excuse to shut down the line in June for a bit, thus stemming Q2 production a bit.

 

[Out4aDuck]

Based on the Bloomberg Tracker, I'm feeling more and more comfortable with my June forecast.

 

[schonelucht]

If you follow the VIN assignments, it's impossible not to notice the newly formed gap. No VINs were assigned between 15800 and 17400 so far. Speculation on my side : these are Canadian builds (no Canadian reported a VIN yet) If so, that gives an indication of the depth of the Canadian reservation list given the currently available option list. 1600 cars with all first day reservers accounted for (and some second day reservers as well). That's at least 1/3 of the reservations. So 5000 is really an upperbound on the number of Model 3's Tesla can shift to Canada this quarter. Not enough to make a dent in the 200k with current production plans. My feeling is that early Canada reservations were more about the rebate in Canada itself than the federal credit in the US.

Again this is speculation but it's really the only plausible explanation I have for the VIN gap.

 

[ValueAnalyst]

If you follow the VIN assignments, it's impossible not to notice the newly formed gap. No VINs were assigned between 15800 and 17400 so far. Speculation on my side : these are Canadian builds (no Canadian reported a VIN yet) If so, that gives an indication of the depth of the Canadian reservation list given the currently available option list. 1600 cars with all first day reservers accounted for (and some second day reservers as well). That's at least 1/3 of the reservations. So 5000 is really an upperbound on the number of Model 3's Tesla can shift to Canada this quarter. Not enough to make a dent in the 200k with current production plans. My feeling is that early Canada reservations were more about the rebate in Canada itself than the federal credit in the US.

Again this is speculation but it's really the only plausible explanation I have for the VIN gap.

You hit the nail in the head when you said Tesla considered pushing 200,000th delivery to July as a back up if the ramp hadn’t gone as planned.

 

[gora321]

Possible simple scenario?
-Q2: fill USA up to 200.000 and stop after in USA by end of Q2, fill other markets as possible by end of Q2
-Q3: fill USA as possible, surpluses (S,X) for foreign markets only.

If this scenario occurs It would be interesting to monitor medias.

 

[elasalle]

If you follow the VIN assignments, it's impossible not to notice the newly formed gap. No VINs were assigned between 15800 and 17400 so far. Speculation on my side : these are Canadian builds (no Canadian reported a VIN yet) If so, that gives an indication of the depth of the Canadian reservation list given the currently available option list. 1600 cars with all first day reservers accounted for (and some second day reservers as well). That's at least 1/3 of the reservations. So 5000 is really an upperbound on the number of Model 3's Tesla can shift to Canada this quarter. Not enough to make a dent in the 200k with current production plans. My feeling is that early Canada reservations were more about the rebate in Canada itself than the federal credit in the US.

Again this is speculation but it's really the only plausible explanation I have for the VIN gap.

We are in beginning of quarter, so there could be more than one batch of invites.

 

[schonelucht]

Yes, which is why I said the likely maximum is 5000 for Canada and not the 1600 (apparently) ordered so far.

 

[schonelucht]

There are some US vins assigned in that special range that I assumed was for Canada. So, back to having no clue where there is that gap.

In other news : target output of between 30k and 40k Model 3's this quarter. If true, then the subject of this thread will fall this quarter.