2014 Q3 Earnings Report and Conference call discussion thread

[Krugerrand]

Can't agree more, the is exactly what I'm feeling. As a loyal investor, we all trust Elon & TM to success in long term, but we can't blindly do that. We need to inspect the execution of each step carefully and it's our Money in TSLA.

And per the shareholder letter, if you aren't happy with how Tesla is doing things you are invited to invest your money in a company more to your liking because Tesla isn't going to change for you or any other investor. Now may be the time for some to take that advice and relieve themselves of current and further angst.

 

[Arb1ter]

I'm also guessing that the Model X will have a reduced number of configurations at launch to help with ramp.

Model X will only be offered in dual motor configurations.

 

[daniel Ox9EFD]

And per the shareholder letter, if you aren't happy with how Tesla is doing things you are invited to invest your money in a company more to your liking because Tesla isn't going to change for you or any other investor. Now may be the time for some to take that advice and relieve themselves of current and further angst.

So it is either blind support and no questions asked, or 'take a hike'? That is no winning attitude, and probably not what Tesla has in mind either.
Being a public company means you get questioned.

 

[Auzie]

My thought is more in the way Tesla communicates.

Before, batteries was a huge problem to increase manufacturing. Understood. That set up a debate on GF. We got that. Before that, it was anywhere from IHS not anticipating huge volume to USB cables coming in the way of manufacturing. Understood. Now what? I agree demand is a non issue, but then damn it, what's taking more to produce cars. As ive understood, electric cars have much lesser parts in total and that should be a bit easier to manufacture compared to ICEs which just has so many freaking parts. 2 years is a huge ramp to learn the best processes. Enough.

From my point of view, Tesla communicates quite well. It seems to me that their language is not understood due to a lack of understanding of manufacturing process and the process of extra capacity build.

Fremont has capacity to grow to output of 500,000 cars/year. That capacity cap is determined by press capacity. The rest of Fremont manufacturing plant, which has many modules or processes, is at various capacity rates at the moment, nowhere near 500,000 cars/year. So these other production processes, such as paint plant, various assembly plants, etc have to grow, or be built, in increments. These incremental increases are most likely of such sizes that it might take several iterations to reach the maximum capacity.

Most likely various infrastructure (power, IT, air, water, etc) also need upgrades along the way.

This is extremely complex process that takes time as it requires a lot of planning, building, testing, training, etc and then repeating it all over again for the next upgrade. It is likely more complex and challenging than building giga factory, as there are more constraints in the Fremont facility.

 

[schonelucht]

Tesla claims 'innovative manufacturing' as one of its core competencies, in its 2013 Annual Report, p8. It does not make sense to outsource something that constitutes business core competency.

And yet, there are currently about 70 posts after yours in this thread alone discussing how 'production is the problem, not demand'. And there is Tesla themselves saying "Being unable to increase production fast enough, not lack of demand, is a fair criticism of Tesla." (comes verbatim from the recent shareholder letter, you can't have it much more official and up to date than that)

So I stand by my original point : "Tesla today is better at generating mass demand for electric cars than producing them in mass numbers".

 

[Auzie]

And yet, there are currently about 70 posts after yours in this thread alone discussing how 'production is the problem, not demand'. And there is Tesla themselves saying "Being unable to increase production fast enough, not lack of demand, is a fair criticism of Tesla." (comes verbatim from the recent shareholder letter, you can't have it much more official and up to date than that)

So I stand by my original point : "Tesla today is better at generating mass demand for electric cars than producing them in mass numbers".

Production is the problem, no one is denying that.

I find Tesla's claim of 'innovative manufacturing' as its core competence justified, from what I have seen so far. These two statements are not mutually exclusive.

I would not put it that way, that Tesla is generating demand for electric cars. The demand is there for cars better than ice cars.

Also I would not critique Tesla for not being able to increase production fast enough. Increasing production capacity can be very slow and difficult process.

 

[FANGO]

Whatttt? A century ago numbers when the automation was no where near to the current one. Give me something more realistic and comparable!!

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Yes it is. But, how does anyone believe that when you did't deliver what you have promised a while ago!!

In case you forget, the model t had neither air conditioning nor a 17 inch touch screen.

 

[Robert.Boston]

Model X will only be offered in dual motor configurations.

And in any color you'd like, provided that it's black.

 

[dalalsid]

Whatttt? A century ago numbers when the automation was no where near to the current one. Give me something more realistic and comparable!!

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Yes it is. But, how does anyone believe that when you did't deliver what you have promised a while ago!!

It is faster than the Prius, leaf and volt.

 

[geturchiru]

In case you forget, the model t had neither air conditioning nor a 17 inch touch screen.

Pardon my ignorance but I've heard about this model for the first time and I'm guessing it still has more parts to assemble than MS!!

It is faster than the Prius, leaf and volt.

We are talking about the making of it not how fast it can go!!

My point is, don't over promise and disappoint later. Give may be 40%(evaluate from the recent exp) and exceed the expectations with 45%. Nobody is asking for 50% YoY and get disappointed with 45% at the end. I'll be delighted if the current trend does not repeat!!

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And per the shareholder letter, if you aren't happy with how Tesla is doing things you are invited to invest your money in a company more to your liking because Tesla isn't going to change for you or any other investor. Now may be the time for some to take that advice and relieve themselves of current and further angst.

I guess that comment was made regarding "perfecting the Model X" that they will do in their own sweet time and their own way and you can not rush them. If that's the attitude you bring to the table for every discussion good luck to all of us!!

 

[uselesslogin]

So as far as production is concerned, yes it sucks that they dodged the question. Anyone following the stock might want to read the delivery threads. That is where we go early indications of a production issue before Elon even said the stock is high. Right now there seems to be a lot of date shuffling but it isn't bad like last quarter. But, from their dodging the question, one can assume production is not high right now, but is planned to be high in late November/December. So first, I would say they are dodging the question because they don't want a low production rate to be taken the wrong way. Second, lets keep a close eye on the delivery threads. If everyone gets their cars in December we should be in pretty good shape. Elon said the orders are currently coming in at an annualized rate of 70,000 since the D launch. That is at least 5,500 orders since the launch and they still show a December delivery date on the website. They clearly plan on producing a lot of cars between now and the end of the year and I don't see them missing 33,000 deliveries for the year *if* December goes well. The huge difference between this quarter and last is that some people actually are getting their cars even on time or early. Others are getting delayed by as much as 3 weeks though.

 

[aznt1217]

So as far as production is concerned, yes it sucks that they dodged the question. Anyone following the stock might want to read the delivery threads. That is where we go early indications of a production issue before Elon even said the stock is high. Right now there seems to be a lot of date shuffling but it isn't bad like last quarter. But, from their dodging the question, one can assume production is not high right now, but is planned to be high in late November/December. So first, I would say they are dodging the question because they don't want a low production rate to be taken the wrong way. Second, lets keep a close eye on the delivery threads. If everyone gets their cars in December we should be in pretty good shape. Elon said the orders are currently coming in at an annualized rate of 70,000 since the D launch. That is at least 5,500 orders since the launch and they still show a December delivery date on the website. They clearly plan on producing a lot of cars between now and the end of the year and I don't see them missing 33,000 deliveries for the year *if* December goes well. The huge difference between this quarter and last is that some people actually are getting their cars even on time or early. Others are getting delayed by as much as 3 weeks though.

Where was the implication that production is not high? Did I miss it? I was under the impression the team wasn't comfortable giving an estimate because of weekly fluctuations.

 

[geturchiru]

Where was the implication that production is not high? Did I miss it? I was under the impression the team wasn't comfortable giving an estimate because of weekly fluctuations.

They would have given the average over a month time. When you leave those lose ends FUDs tie to the wrong end and weave a story out of that.

 

[dalalsid]

We are talking about the making of it not how fast it can go!!

Yes the making. Model S ramp is faster than all those cars.
Chart: http://seekingalpha.com/article/2457685-understanding-the-scale-of-teslas-battery-pack-production (disclosure - my article)

 

[aznt1217]

They would have given the average over a month time. When you leave those lose ends FUDs tie to the wrong end and weave a story out of that.

Oh of course. Regardless of what Tesla says, FUD will try to tie something to a sinking rock in the ocean. I think the hard part of having such a technical wizard on the management team is that their range/standards is significantly tighter than a normal person would want to give. I honestly think that the line is somewhere at 950-1200 a week when they first started up because I think they can easily hit those ranges and it's consistent with next years estimates stated on the call (excluding the new line.

 

[geturchiru]

Oh of course. Regardless of what Tesla says, FUD will try to tie something to a sinking rock in the ocean. I think the hard part of having such a technical wizard on the management team is that their range/standards is significantly tighter than a normal person would want to give. I honestly think that the line is somewhere at 950-1200 a week when they first started up because I think they can easily hit those ranges and it's consistent with next years estimates stated on the call (excluding the new line.

My guess is lower than your lower value. So far they delivered ~23k cars in 2014 and their estimate for 2014 is 33k. Assuming 1k cars will be shipped to SC/stores they need to make ~11k cars in 12 weeks(1 week for holidays!!) and that makes ~920 per week to meet their estimates.

 

[dalalsid]

My guess is lower than your lower value. So far they delivered ~23k cars in 2014 and their estimate for 2014 is 33k. Assuming 1k cars will be shipped to SC/stores they need to make ~11k cars in 12 weeks(1 week for holidays!!) and that makes ~920 per week to meet their estimates.

+1-2000 for production because deliveries are generally lower than production.

 

[geturchiru]

Yes the making. Model S ramp is faster than all those cars.
Chart: http://seekingalpha.com/article/2457685-understanding-the-scale-of-teslas-battery-pack-production (disclosure - my article)

Thanks Sid for the article. I don't have an account with SA and not planning to open one, but the the chart on first page gave me an idea of what you are talking.

 

[Zzzz...]

Yes the making. Model S ramp is faster than all those cars.
Chart: http://seekingalpha.com/article/2457685-understanding-the-scale-of-teslas-battery-pack-production (disclosure - my article)

Great point! Prius got to top-3 best selling model in the world, and this is how it ramped up, worldwide sales by year, in thouthnds:

 

[chickensevil]

Pardon my ignorance but I've heard about this model for the first time and I'm guessing it still has more parts to assemble than MS!!

First of all, I will forgive you for not knowing about the original for Model T given your stated location but it was basically THE first mass produced automobile starting in the 1900s.

As for parts, it depends on how specific you want to get about the parts of the Model S since technically every microchip, resistor, and capacitor on each of the boards would be a separate "part", which was actually largely designed by Tesla to incorporate into the car... That would easily put the parts into the thousands without even trying.

The best I could find on the number of parts in the Model T was this:

There are about 5,500 parts in a Model A, varying in number between body styles. Naturally, a Town Sedan will have more parts than a roadster, although the chassis are all the same. 'Can't speak for the Model T parts, but it's got to be a lot less, perhaps 1/3 as many, once again depending upon body style. The Model A front end has more than 100 parts in it alone, including the many cotter pins, which DO count as parts. More complicated steering and braking systems add to the total number of Model A parts, although the T magneto itself is heavily parts-laden. I think claiming a 1/3 difference in total number of parts is a fair guesstimate.

taken from: Model T Ford Forum: Model T vs. Model A question

While I can't find specifics on the number of parts in a model S, we know in the battery pack alone there are over 7,000 batteries, all which have to be carefully assembled (by Tesla) into modules (which the modules have their own added parts, probably in the hundreds) of which there are 16 of them I believe that are assembled into the main pack (which also probably adds another couple hundred parts) so just in the battery pack alone I would estimate 10,000 parts easily. And these are TINY TINY parts being assembled with high precision. So that easily puts just the battery pack alone as double the number of parts as the entirety of the Model A which was about 3x as more complex as the Model T.

So yeah, very complex piece of machinery...

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So yeah, very complex piece of machinery...

Note that complex does not make it any more prone to failure given that most all of the battery pack is a "non-moving part". So outside of a design flaw it should last a very long time. What hurts an ICE is that you are moving parts constantly for 150k+ miles and hoping that you are keeping them well oiled. Even if you are keeping them well oiled there is still some friction and heat and wear down on these parts that shake the connectors loose, cause belts to fail, and shred gearing (which is why you have to replace a clutch generally every 70-100k miles). The moving part of the motor isn't actually *touching* anything because it is operating within the scope of a magnetic field. The center of the shaft basically has a metal pole coming off of it that spins a gear inside the closed gearbox to spin a larger gear that is directly attached to the axel that spins the wheels. So hypothetically with fewer parts moving in this critical chain, there is less risk of a design flaw presenting itself meaning that the product should average a higher lifetime. This is assuming that they are using high quality parts and are ensuring a high quality build process.