Also I want to point out there are actually not many cars in the pipe to China as originally expected by end of Q1, because the first delivery to China scheduled end of April instead of end of March. So with production ramp up, less cars in pipe, the end result is more delivery to the market!
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2014 1 QTR predictions/results
- Thread starter Chickenlittle
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Also I want to point out there are actually not many cars in the pipe to China as originally expected by end of Q1, because the first delivery to China scheduled end of April instead of end of March. So with production ramp up, less cars in pipe, the end result is more delivery to the market!
Just to clarify, it is not clear when the ramp up took place. It might have happend after the end of Q1, we just do not know...
Good point, it's better not to speculate too much when one cannot know for certain. Worst case it blows up in our face....... like it did in Q3, took me 3 months to grow back my eye brows after that one!
I believe you are confused. The 1000 cars in the pipeline at end of third qtr would be delivered in 2nd qtr which starts April 1st. Cars delivered in march would be 1 st qtr deliveries and hence not in the pipeline at end of first qtr
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Exactly.
I think he was saying since deliveries were pushed back to late April, they may not have been sent out in March, so they weren't in the pipeline at the end of Q1.
I think my point is China delivery got delayed from end of march to end of april. So by end of Q1 (03/31), there should have less cars in the pipe allocated for April delivery. Agree?
Another thing I want to point out is the initial (probably Q2) delivery in China will be limited to customers around ONLY existing (Beijing) service center. The rest of the 5 service centers won't be fully up until end of Q3, so the massive China delivery should really shooting for Q4.
Weekly production rate is a great data point, and this now allows us to do some decent speculation.
According to the Q4 2013 Shareholder's Letter:
"We expect to deliver over 35,000 Model S vehicles in 2014, representing a 55+% increase over 2013. Production is expected to increase from 600 cars/week presently to about 1,000 cars/week by end of the year as we expand our factory capacity and address supplier bottlenecks. Battery cell supply will continue to constrain our production in the first half of the year, but will improve significantly in the second half of 2014. First quarter production is expected to be about 7,400 vehicles, which is significantly higher than the prior quarter production of 6,587 cars. However, as the number of cars in transit to Europe and Asia must grow substantially to support those markets, we plan to deliver approximately 6,400 vehicles in Q1. Deliveries will grow dramatically in future quarters as the logistics pipeline fills."
1. We need to figure out how many cars/week was Tesla producing at the beginning of Q1 2014. According to above, Tesla notes "production is expected to increase from 600 cars/week presently". How should we take this. Does this mean:
a. Q1 2014 started at 600 cars/week production rate
b. At the time of the shareholder letter (Feb 19, 2014) production rate was at 600 cars/week
Now, I would typically assume that Tesla is referring to production rate at the beginning of Q1 to be 600 cars/week. But I do have one area of concern. Tesla notes that Q4 2013 production was 6,587. That seems kind of low if Tesla ended Q4 at 600 cars/week. In Tesla's Q3 2013 shareholder letter, they note:
"We are now producing 550 cars per week with improved process controls which consistently result in high quality cars."
So, if Tesla began Q4 at 550 cars/week and ended Q4 at 600 cars/week, the average would be 575 cars/week. Q4 was effectively 13 weeks, so 575 x 13 = 7,475 cars. This is significantly higher than what Tesla reported (6,587). So, let's say they didn't finish any cars during the last week of Q4 and bring down the # weeks to 12 in Q4. 575 x 12 = 6,900 cars. This is still over 300 cars higher than what Tesla actually produced. So, something's going on here. Either: 1) they started Q4 lower than 550, or 2) they ended Q4 lower than 600 cars/week, or 3) they ramped to 600 cars at the very end of Q4 suddenly, or 4) they didn't finish a lot of cars they were making at end of Q4. (I'm not sure what other scenarios there would be.)
Anyway, I'm really not sure what number to use for the beginning of Q1 2014. But let's assume that Q1 2014 started at roughly 600/week for speculation's sake.
2. We know know (GS report) that production was roughly 700 cars/week at end of Q1 2014.
3. There was effectively 12 weeks to Q1 (a little bit more, but assuming factory was shut down on New Years and day after).
4. If average Q1 production rate was 650 (avg of 600 and 700), then times that by 12 weeks = 7,800 cars produced. This is 400 cars more than Tesla guided for.
5. Tesla noted in their Q1 guidance that they expect the pipeline to Europe and Asia to grow, thus they guided for 1,000 cars less than produced (6,400 delivered, 7,400 produced). But we know that China shipments have been delayed from end of March to now end of April. So this reduces the expected Asia pipeline. Also, seeing the huge numbers of Norway deliveries at the end of March leads me to believe that maybe Tesla did push Europe deliveries to land before the end of Q1 and perhaps Europe pipeline might not have been grown as much as Tesla had guided. Anyway, if Tesla guided 1,000 cars less than produced and that included Asia, then let's say they actually deliver 500 cars less than they produced since Asia pipeline didn't need to be filled.
So, if Tesla produced 7,800 cars in Q1 2014 and they delivered 500 less than produced, then we have Tesla delivering 7,300 cars in Q1 2014. This is 900 more cars than they guided.
6. Now the question is would Tesla really try to deliver that many cars, since they would need to beat that number in Q2. I think they would if they were confident in Q2 production. If they started Q2 at 700 cars/week and they believed they could reach 800 cars/week by end of Q2, then that would average 750 cars. Q2 has effectively 13 weeks, so that would be 750 x 13 = 9,750 cars produced in Q2. If they delivered 1,000 less than produced (assuming they're filling Asia pipeline, etc), then they could deliver 8,750 cars in Q2, which would be significantly higher than 7,300 (ie., Q1) so that would give them confidence to deliver as many cars as possible in Q1.
7. Note that this is completely based on starting Q1 at 600 cars/week and ending at 700 cars/week. If those number change (or are incorrect) all these figures are in error.
8. Also, remember that Tesla's expenses are growing very fast as well as they expand. So, just because they deliver 7,300 cars in Q1 2014 doesn't mean a huge profit/eps beat since their expenses could have grown even faster than their 15% guidance (note: their Q4 2014 expenses grew much faster than their previous guidance).
Cheers, everyone.
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Another possibility is that Tesla started at 600 cars/week but ramped at the very end of Q1 to 700 cars/week. In this scenario, let's assume an average production rate in Q1 of 630 cars/week x 12 weeks = 7,560 cars produced (this is very close to Tesla's guidance of 7,400 cars produced in Q1). But if their didn't need to fill their Asia pipeline and could deliver 500 cars less than produced (rather than 1000 cars less than produced), then that would make Q1 deliveries at 7,060. Still 660 more than their guidance of 6,400 deliveries in Q1.
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DaveT:
If "Tesla notes that Q4 2013 production was 6,587. ", how did Tesla deliver 6900 in Q4? Also 550/week production rate from end of Q3 multiply 12 (deduct one holiday week) weeks, the Q4 production would be 6600. So I suspect the production rate from beginning of Q1, if it's not 600/week, then 575/week should be safe bet.
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Also Q4 shareholder letter should really disclose the data from Q4 instead of some progress in Q1, isn't it the practice? So if we assume 550/week from beginning of Q4 and 600/week at the end of Q4, then average 575/week rate X 12 weeks = 6900. This number matches Q4 delivery assume minimum cars in the pipe for European delivery. So I'm 80% confident that we have 600/week start from Q1.
If "Tesla notes that Q4 2013 production was 6,587. ", how did Tesla deliver 6900 in Q4? Also 550/week production rate from end of Q3 multiply 12 (deduct one holiday week) weeks, the Q4 production would be 6600. So I suspect the production rate from beginning of Q1, if it's not 600/week, then 575/week should be safe bet.
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Also Q4 shareholder letter should really disclose the data from Q4 instead of some progress in Q1, isn't it the practice? So if we assume 550/week from beginning of Q4 and 600/week at the end of Q4, then average 575/week rate X 12 weeks = 6900. This number matches Q4 delivery assume minimum cars in the pipe for European delivery. So I'm 80% confident that we have 600/week start from Q1.
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Yeah, it's interesting that Tesla produced 6,587 cars in Q4 2013 but delivered 6,900 cars (313 more cars than produced). From what I know, the way Tesla did this was to largely sell the vast majority of their inventory cars at the end of Q4. I've talked with several store reps and they all tell me that Tesla had a major push at end of Q4 to sell off their inventory fleet. It was getting ridiculous toward the end of Q4 as some showrooms were even lacking enough test drive vehicles. Tesla waived delivery charges (which sometimes they do at end of quarter for inventory cars) but they also did a wheel swap offer at end of Q4 for inventory cars where you could swap the wheels of a car that had 21" wheels with 19" wheels and get $4500 credit. Cars were flying off the inventory shelves like crazy. It was like a clearance sale.
I also agree that 575 cars/week at beginning of Q1 is probably a safe bet, but I wouldn't completely rule out 600 cars/week either.
Have you seen this from a short trader of TSLA on CNBC?
CNBC.com 04/10/14 12:16 PM ET
John Fichthorn, Dialectic Capital co-founder and portfolio manager, explains why investors are beginning to see "the whites of Tesla's eyes."
At the end he says they've made "calls" in China and he DOESN'T think Tesla orders in China "are big enough to hit their target". I wonder if he's just blowing smoke. Many got Tesla wrong: Pro - CNBC
CNBC.com 04/10/14 12:16 PM ET
John Fichthorn, Dialectic Capital co-founder and portfolio manager, explains why investors are beginning to see "the whites of Tesla's eyes."
At the end he says they've made "calls" in China and he DOESN'T think Tesla orders in China "are big enough to hit their target". I wonder if he's just blowing smoke. Many got Tesla wrong: Pro - CNBC
Q4 is strange. Tesla reported production of 6,587 for Q4 2013 (in their Q4 shareholder letter), which is quite low if they started the quarter at 550/week and ended at 600/week.
6,587 production for Q4 as reported works out to be roughly 550 cars/week x 12 weeks (13 weeks - 1 week off) = 6,600. But this doesn't match up with the following:
a. Tesla's Q3 shareholder letter saying they're at 550/week (presumably meaning end of Q3).
b. Weibo pic from factory visit in late-October showing 570 week production
c. Elon Musk saying production is "at around 600/week" in mid-December. Teslas Musk speaks out on battery production - CNBC (speaking at Dell conference)
Q4 had 13 weeks. But perhaps they gave the factory more than a week off (ie., 1.5 weeks off). So maybe, 11.5 weeks x 575 cars/week = 6,612 (which is close to 6,587 reported)
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Actually, Elon Musk's interview (at Dell conference) of him saying their "at around 600/week" back in mid-December is quite convincing. It leads me to believe that they started Q1 2014 at 600 cars/week production rate.
sahanim
Member
Elon Musk and TM staff are very smart people. With the new Tesla Finance we can see the team is doing an amazing job at resource management. The numbers dont add up because the team is extremely savvy when it comes to controlling their output so the numbers are always in their favour.
I've personal placed my trust in Elon and the team to make the right decision (ethically and capitally). Seeing DaveT's analysis is very assuring even though the numbers dont seem to add up.
I wouldn't be surprised if they've got a fail-safe of 1000 Model S in a warehouse in the event of a shutdown of the assembly line for upwards of one week.
I've personal placed my trust in Elon and the team to make the right decision (ethically and capitally). Seeing DaveT's analysis is very assuring even though the numbers dont seem to add up.
I wouldn't be surprised if they've got a fail-safe of 1000 Model S in a warehouse in the event of a shutdown of the assembly line for upwards of one week.
Dave,
great analysis as usual. Keep in mind there was that factory accident in Q4 last year which I think could make up the difference for that extra half week product miss or so. I'm sure the factory shut down the rest of that day and probably slowed down for a few days after that to make sure all safety precautions are in place.
This assumes a linear increase from 600 at start of Q1 to 1000 at end of Q4. But from my understanding for the 1000 weekly rate they need a second assembly line, right? So my guess is that the rate levels off somewhere before the second line goes into operation and then jumps up somewhat.
Elon has mentioned several times, and I think the GS note also mentions this, that production will ramp up dramatically in the second half of the year. So I wouldn't be surprised if we ramp up fairly slowly in Q1 and Q2 then Q3 and Q4 be much more dramatic. I don't think we can assume production will ramp up linearly.
I like Dave's analysis- but I have the same suspicions based on Elon comments. I would guess based around battery supply and getting new line running smoothly, the ramp will be non-linear (perhaps double in H2)
Yeah, I had forgotten about the factory incident. It would make sense with the factory incident, Thanksgiving, and Christmas that the factory rested 1.5 weeks in Q4.
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I agree that the new production line coming online 2nd half of the year will ramp production, so the production ramp this year won't be linear.
But, I still find it surprising (if the 700 cars/week figure from the GS article is true) that Tesla has already reached 700 cars/week (that's a 35k production run rate).
would not assume 1st qtr started at 600 cars a week. the share holder letter was more than half way through the qtr. i dont know where they were then but at 600 halfway through the qtr
