2014 Q4 Earnings Report and Conference Call

[chickensevil]

I am considering Model X unveil in June with delivery starting in August. I am also considering ramp to 1000 MX/wk take 9 months (MS took 27 months). With linear ramp, you reach somewhere around 5-7K MX this year. Obviously, these are all assumptions. I know Elon talked about doubling of production YoY, but not sure if its relevant for 2015 if MX starts production in August. All in all, I feel comfortable with 55K total.

Seemed like overall doubling of production as opposed to just a single model doubling... since clearly doubling of MS Y/Y is NOT sustainable in the timeframes he talked about. Even 50% growth of a single model Y/Y is not sustainable. That would put 50k this year, 75k in 2016 (this seems likely), 112k in 2017 (this starts to test my belief in the demand limits of the car), 168k in 2018... yeah, that isn't happening... I would jump to be wrong about that, but I would put the yearly demand limits of JUST the model S as a best case around 100k and as a worst cast around 60k (that is, being right on the level of the MB S Class). So the Y/Y production doubling and Y/Y 50% delivery increase that keeps getting thrown around would have to be on the subject of Tesla's overall production. With the 50% being their idea of a conservative growth.

The other easy way to look at things, is along the lines of starting the year *at least* at 1000/wk puts at least 50k deliveries for 2015 in the bag in my mind. Because they should grow upward, maybe pull back a bit as things come online and they have production difficulties, and then grow upward again. That should easily give an average higher than 1k since the target is exiting at 2k. For reference, we started 2014 at around 600 a week (maybe a little less), and we cleared north of 30k. So *at least* 30k was in the bag, in spite of all the difficulties we faced through the year.

Anyway, 55k total is entirely possible, I am just coming at the 5k number as a depressingly low number because when someone says "Model X production is already sold out for 2015" they are *not* thinking about 5k... they are probably thinking closer to 20k. In fairness there is clearly enough demand there to do any number between 5 and 20k... but if they only do 5k in their first year, I would be quite sad. I guess that is all I am really trying to say here.

 

[Zaxxon]

I am considering Model X unveil in June with delivery starting in August. I am also considering ramp to 1000 MX/wk take 9 months (MS took 27 months). With linear ramp, you reach somewhere around 5-7K MX this year. Obviously, these are all assumptions. I know Elon talked about doubling of production YoY, but not sure if its relevant for 2015 if MX starts production in August. All in all, I feel comfortable with 55K total.

In this interview from 9/17/14, Musk says (at around 3:10) he expects 15k-20k Model Xs in 2015. Granted this was prior to the latest delay, I believe. But 5-7k this year would be a big disappointment.

 

[GenIIIBuyer]

Would also add the data-point that Tesla still claims new Model X orders will get delivered early 2016. With a 20,000 car backlog that implies significant X deliveries in 2015.

 

[Auzie]

Anyway, 55k total is entirely possible, I am just coming at the 5k number as a depressingly low number because when someone says "Model X production is already sold out for 2015" they are *not* thinking about 5k... they are probably thinking closer to 20k. In fairness there is clearly enough demand there to do any number between 5 and 20k... but if they only do 5k in their first year, I would be quite sad. I guess that is all I am really trying to say here.

CE, no need to be sad, 50% growth is an amazing number if achieved. More than 50% may introduce unforseen risks that bite back in unexpected ways and cause more damage than controlled growth.

 

[30seconds]

analyst consensus for 2015 revenue is $6.07B. With 55k delivered then ASP would need to be ~$110,000.

 

[Larken]

I see some are guessing the total deliveires for this year. For those who missed it, but want to patricipate in the little competition we've created, go to Prediction Competition for 2015
it's easier if we compile everyones vote there.

 

[Drax7]

at the rate of 1000 per week production, that equates with 52000 manufactured. Subtracting 3 weeks for retooling and vacation, gives me 49 weeks or 49,000 model s delivered.

model x production from sept through decemeber, averaging say 500 per week , over 15 weeks equates with 7,500 manufactured and delivered.

49000 plus 7500 = 56,500 is my guess estimate.

 

[chickensevil]

at the rate of 1000 per week production, that equates with 52000 manufactured. Subtracting 3 weeks for retooling and vacation, gives me 49 weeks or 49,000 model s delivered.

model x production from sept through decemeber, averaging say 500 per week , over 15 weeks equates with 7,500 manufactured and delivered.

49000 plus 7500 = 56,500 is my guess estimate.

I thought it was generally accepted that it was 50 total working weeks (when you subtract out two weeks of holidays and such) which is why 1000 a week equals a 50k run rate, and 2000 a week equals 100k run rate. I would not expect a shutdown to impact the line in a major way again, and at that, there will be a ramp up on the run rate beyond the 1000 a week so that number should still hold pretty solid as a nice bottom end number.

In any case, the point of bringing up production numbers was less to do with guessing on what will really transpire and more about trying to make sense of the comments from elon regarding their current run rates vs their expected run rates and figuring out where we stand by those meanings. I would recommend you post over on the Prediction thread if you were trying to put your hat in the ring for where you think Tesla will be at delivery wise by the end of 2015.

 

[30seconds]

Right - Im talking about run rates because I think the 2014 exit and the 2015 ramp are going to be the most meaningful thing in this call. I don't think that the "low demand" hypothesis has any legs as the current backlogs, continued geographical growth, D variants and X release will support at least 60k units in 2015. The real question is then how much demand can tesla monetize?

As we saw in 2014 the upgrade put production a bit behind scheduled and the company had to guide total deliveries down. If 2014 exit rate is above 1000/week then they should be able to recover from slowdown from upcoming BIW upgrade given the target for 2015 exit rate of 2000/week.

Higher ASP and margins will also be positive, but i think the real story about tesla is how they can get to 500k units annually and this is what drives the stock.

 

[Drax7]

Elon mentioned some retooling that will bring the tolerance levels to the highest quality and mark a new high standard in manufacturing.
That could be 2 weeks of no production.

 

[Robert.Boston]

We know that Tesla had a run rate of 1,098/week towards the end of last year, so it doesn't make sense to assume 1,000/week in 2015.

 

[jhm]

We know that Tesla had a run rate of 1,098/week towards the end of last year, so it doesn't make sense to assume 1,000/week in 2015.

So it seems 55k for the year would be at the low end of expectations as it represents zero growth in capacity for the whole year. At the high end, we close the year at 1900/week with 75k for the whole year. A moderate scenario would be 65k.

So there's my conservative, baseline, and optimistic scenarios at 55k, 65k, and 75k respectively. I'd be pretty happy with the baseline, especially with a solid launch of the X, as this would represent nearly 100% over 2014.

 

[Drax7]

cool Robet Boston, 1098/week for 49 weeks equates to 53,802, plus 7500 model equals 62,052 car manufactured and delivered.
knock that down by 10% for a margin of safety, somethings always goes wrong in manufacturing, just
looking at the complexity assures me something will go wrong. 55,802 is a safe guidance figure.

 

[jhm]

To be safe, it seems Tesla should try to front load the year with lots of Model S deliveries in H1. Q3 will be complicated and risky. The push in Q4 will depend on how quickly X launch issues are resolved. So this puts alot of risk in H2. So I'd love to see Tesla blow out H1 with 30k deliveries, at least 25k.

 

[pGo]

It appears the S85D production issues are persistent so far and no one has yet claimed that their car is really being produced. This may explain why S85 is prioritized over S85D in some markets. Also, I am thinking we won't have a blowout Q1.

 

[techmaven]

It appears the S85D production issues are persistent so far and no one has yet claimed that their car is really being produced. This may explain why S85 is prioritized over S85D in some markets. Also, I am thinking we won't have a blowout Q1.

I think the P85D firmware is still getting polished, so it makes sense that the S85D is still on production delay. Further, Q1 is the first full quarter of P85D production and they still have overseas P85D demand to fulfill. The S85D is really a far lower priority and they can build other variants in the meantime. Q1 may bring the highest gross margin ever in a quarter for Tesla. As it stands right now, if you order a P85D for U.S. delivery it might just make it within Q1 (late March).

 

[pGo]

I think the P85D firmware is still getting polished, so it makes sense that the S85D is still on production delay. Further, Q1 is the first full quarter of P85D production and they still have overseas P85D demand to fulfill. The S85D is really a far lower priority and they can build other variants in the meantime. Q1 may bring the highest gross margin ever in a quarter for Tesla. As it stands right now, if you order a P85D for U.S. delivery it might just make it within Q1 (late March).

I agree with highest GM due to full production quarter for P85D. However, in terms of units, I don't think we'll see a blowout as I think S85D would be the majority of new orders. I think street looks for units produced as much as GM if not more.

 

[Gerasimental]

I agree with highest GM due to full production quarter for P85D. However, in terms of units, I don't think we'll see a blowout as I think S85D would be the majority of new orders. I think street looks for units produced as much as GM if not more.

To be fair to the Street, units produced probably IS more important right now since we all know Tesla can sell high-price premium cars at high margins. Achieving a record high GM doesn't tell us much about the company. The big unknown is whether and how they'll manage to scale production by another 2 orders of magnitude in the next decade, and their ability to ramp up production quickly now DOES give pointers for how they may do in the future.

that said, the above clearly comes with any caveats, but I can see their thinking

 

[uselesslogin]

I agree with highest GM due to full production quarter for P85D. However, in terms of units, I don't think we'll see a blowout as I think S85D would be the majority of new orders. I think street looks for units produced as much as GM if not more.

I honestly think they are holding back the S85D because they got more P85D orders and are filling those first. I mean the videos are out there now that is sure to stoke some additional demand. It seems like expectations are really low right now which should bode great for the stock price this year. I just don't know which earnings report will wake it up again.

 

[techmaven]

I agree with highest GM due to full production quarter for P85D. However, in terms of units, I don't think we'll see a blowout as I think S85D would be the majority of new orders. I think street looks for units produced as much as GM if not more.

What I am saying is that the production levels are likely to be a blowout simply because there are fewer obstacles for Q1. Last quarter, Tesla had a stumbling launch of the P85D and the quarter before that the factory was shut down for an extended period of time. Q1 is likely the first quarter to achieve consistent building of the P85D and the rest of the variants with the new factory lines and therefore production will likely be far higher than Q4. Combine that with the P85D increase in revenue with a possible increase in gross margin, minus forex issues (not clear if the cells are bought in yen or USD), we are looking at a likely blockbuster quarter. Any delay of the S85D can easily be shifted to P85D production to overseas markets if nothing else.

Q4 is obviously much harder to forecast, but expectations have been correspondingly lowered.