2015 Q1 Discussion thread for Delivery numbers, Earnings Report and Conference Call

[Ingenieur]

Looks like i am to play party pooper again.

On China, there is definetly a 1000+ inventory, not nearly 2000 described in one story but still huge, you can get up to 20% on brand new non-autopilot orphaned car and even more on non autopilot loaner (they may be all sold now though), so i see ca. 1300-1400 cars sold in Asia, 1000 in China, 300-400 "new", rest are discounted old stock.

In Europe i see ca. 3000 cars, problem is the low euro/nok so the margins in the gutter.

US 6000 cars.

Total 9300-9700

I see the problem on the Income statement side, all those discounts in China and higher discounts in US, cheap european currencies mean the margins will be hit badly, i also expect 20-30 Mio less in ZEV revenues and higher OpEx cost.
I see "pure" Gross Margin(without ZEV and other credits) in 15-17% Range (vs 20% in Q4)

GAAP Loss of over 200 Mio

Selling few hundred cars more or less doesnt really matter in this context.

If they sell much more cars obviously smaller loss though, we will see next week.

Its also a wild car how resale value guarantee will impact EU profit recognition.

 

[FredTMC]

I asked this question last year. My impression is registration is required before delivery in Norway.



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Keep in mind the discounted inventory sale will be nice surprise to Q1 total delivery. The reason TM didn't guide for those sales is because they were not on hook for any orders, but they will contribute for the Q1 financials (of course, had negatively affected Q4 financials). I believe TM had large inventory in China by end of Q4 from different local news reports, if it's not above 1000, but should be close. Think about that way, if suddenly TM got 1000 extra sales from China in Q1, we'll see a blockbuster Q1 ER. I can't exclude that possiblity at this piont.

Do you have any insight from Locals in China as to unsold inventory in China?

Can an someone remind me again why there is allegedly inventory in China given that cars are made to order? Scalper related?

 

[hobbes]

Someone in Norway did just that already, look at the EU thread.

Kjøretøyopplysninger | Statens vegvesen can be used to get information about all cars in Norway. Knowing that all EVs (registered after 2000?) uses licence plate numbers on the form ELxxxxx, someone could write a script to extract the latest data. This this data includes registration date and make/model.

 

[Gerasimental]

Do you have any insight from Locals in China as to unsold inventory in China?

Can an someone remind me again why there is allegedly inventory in China given that cars are made to order? Scalper related?

Was wondering about this too. Had always attributed it to scalpers without much thought, but of course cars sold to scalpers but not sold on to consumers still count as 'delivered' for Tesla.
Might Tesla have bought back the cars from the scalpers to avoid a separate market for Model S emerging? Then Tesla would now be sitting on lots of cars they can't sell and that can only really be used as loaners, show cars, test drivers etc. but in oder to deploy them in that role they simply have to wait for SC rollout to continue in China.

 

[Drax7]

Looks like i am to play party pooper again.

On China, there is definetly a 1000+ inventory, not nearly 2000 described in one story but still huge, you can get up to 20% on brand new non-autopilot orphaned car and even more on non autopilot loaner (they may be all sold now though), so i see ca. 1300-1400 cars sold in Asia, 1000 in China, 300-400 "new", rest are discounted old stock.

In Europe i see ca. 3000 cars, problem is the low euro/nok so the margins in the gutter.

US 6000 cars.

Total 9300-9700

I see the problem on the Income statement side, all those discounts in China and higher discounts in US, cheap european currencies mean the margins will be hit badly, i also expect 20-30 Mio less in ZEV revenues and higher OpEx cost.
I see "pure" Gross Margin(without ZEV and other credits) in 15-17% Range (vs 20% in Q4)

GAAP Loss of over 200 Mio

Selling few hundred cars more or less doesnt really matter in this context.

If they sell much more cars obviously smaller loss though, we will see next week.

Its also a wild car how resale value guarantee will impact EU profit recognition.

What at is your source on China inventory, any chance you went over there and counted them manually?

 

[Ingenieur]

I have my sources, please read my posts on China last few months.

 

[maoing]

Scalper ordered the cars and cancelled the order when cars arrived the port.

Was wondering about this too. Had always attributed it to scalpers without much thought, but of course cars sold to scalpers but not sold on to consumers still count as 'delivered' for Tesla.
Might Tesla have bought back the cars from the scalpers to avoid a separate market for Model S emerging? Then Tesla would now be sitting on lots of cars they can't sell and that can only really be used as loaners, show cars, test drivers etc. but in oder to deploy them in that role they simply have to wait for SC rollout to continue in China.

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I echo that 1000ish inventory in China is very reasonable estimation. But I would say that's extra sales on top of current production capability. So it helps the delivery number to beat guidance. But strong dollar and inventory discount will certainly affect GM. I think Q1 analyst estimates is low enough -0.48 at this point, it makes TM hard to miss that estimate. Once everything is setup too low to miss, then any beat will stir the stock price to rapidly rise 30-50 points at least. Check AMZN's performance post Q4 ER.

Btw, Tesla needs to raise money sometime this year in order to fund Gigafactory, global expansioin and factory expansion. Elon said the spending will be staggering, so at some point Elon will make a setup to pump the stock price then raise money. Model X release should certainly be part of the setup, Q1 or Q1 ER beat should be in Elon's mind also I bet.

Looks like i am to play party pooper again.

On China, there is definetly a 1000+ inventory, not nearly 2000 described in one story but still huge, you can get up to 20% on brand new non-autopilot orphaned car and even more on non autopilot loaner (they may be all sold now though), so i see ca. 1300-1400 cars sold in Asia, 1000 in China, 300-400 "new", rest are discounted old stock.

In Europe i see ca. 3000 cars, problem is the low euro/nok so the margins in the gutter.

US 6000 cars.

Total 9300-9700

I see the problem on the Income statement side, all those discounts in China and higher discounts in US, cheap european currencies mean the margins will be hit badly, i also expect 20-30 Mio less in ZEV revenues and higher OpEx cost.
I see "pure" Gross Margin(without ZEV and other credits) in 15-17% Range (vs 20% in Q4)

GAAP Loss of over 200 Mio

Selling few hundred cars more or less doesnt really matter in this context.

If they sell much more cars obviously smaller loss though, we will see next week.

Its also a wild car how resale value guarantee will impact EU profit recognition.

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Is your source close to Tesla China? Actually I tried to follow some of the Tesla China employees on social media, but hardly any information can get.

I have my sources, please read my posts on China last few months.

 

[FredTMC]

Scalper losses deposit on cancellation. Right?

 

[maoing]

correct. otherwise scalper will take the risk of holding inventory.

Scalper losses deposit on cancellation. Right?

 

[pGo]

I don't get math here. If TM has 1000 cars waiting to be sold, why lowball q1 at 9500 deliveries while starting year with 10k reservations. At 10000 production goal for 12 weeks, they are running about 834 cars/ week which is way lower than 1000/week mid November.

In such a scenario I would have expected TM to sell 1000x12+1000 = 13k cars. We are nowhere closer.

 

[techmaven]

Looks like i am to play party pooper again.

Wow, actually, 9300-9700 is hardly party pooper material.

On China, there is definetly a 1000+ inventory, not nearly 2000 described in one story but still huge, you can get up to 20% on brand new non-autopilot orphaned car and even more on non autopilot loaner (they may be all sold now though), so i see ca. 1300-1400 cars sold in Asia, 1000 in China, 300-400 "new", rest are discounted old stock.

First, I think it is useful to think of the difference between stranded inventory and undelivered inventory. I really doubt there are 1000+ stranded inventory since the revenue numbers don't support that. Given the number of cars imported and a reasonable ASP, there's no way it was 1000+ stranded. Undelivered is a separate issue... we know there was a lot of inventory in finished goods, and a lot of this inventory, if bound for China, wasn't imported yet. I modeled under 500 stranded inventory, of which some of this was imported but undelivered. In any case, my estimate for Asia was conservatively the same... about 1300.

In Europe i see ca. 3000 cars, problem is the low euro/nok so the margins in the gutter.

I can definitely see Europe over 3,000 vehicles. Maybe 3,200 or so.

US 6000 cars.

GoodCarBadCar has 2,900 for Jan. and Feb.
InsideEvs has 2,250 for Jan. and Feb.
3rd month can definitely be equal to or greater than the first two months, so 5,500 is not unreasonable. S85D's started to ship and Tesla is definitely keen to ramp up as many P85D and S85D deliveries to NA as possible.

Total 9300-9700

I'm pretty much at the same place - the scenario is setting up where they can definitely make their numbers, maybe even have a good beat. It'll still come down to U.S. deliveries, but at least Europe will likely provide good support. 1300 + 3000 + 5000 = 9,300. 1300 + 3200 + 5500 = 10,000. That's my range for now.

I see the problem on the Income statement side, all those discounts in China and higher discounts in US, cheap european currencies mean the margins will be hit badly, i also expect 20-30 Mio less in ZEV revenues and higher OpEx cost.
I see "pure" Gross Margin(without ZEV and other credits) in 15-17% Range (vs 20% in Q4)

If the there are a large number of stranded finished goods in China, the discounts will likely come directly from deposits that were given up. Also not clear that there are any larger than normal discounting in the U.S. than normal. Further, margins will be affected by both the FX issues on the income side, but also on the cost of goods side. About half the car is sourced overseas and commodities prices have also dropped. So while gross margins will likely be hit, I don't think it will be that bad in a normal delivery environment.

edit: I forgot to mention... a higher U.S. mix of deliveries is also a way to mitigate the FX revenue problem.

 

[dha]

GoodCarBadCar has 2,900 for Jan. and Feb.
InsideEvs has 2,250 for Jan. and Feb.
3rd month can definitely be equal to the first two months, so 5,500 is not unreasonable. S85D's started to ship and Tesla is definitely keen to ramp up as many P85D and S85D deliveries to NA as possible.

Something I haven't seen discussed around here...

It seems possible to me that Q1 will be the first time Model S is the best-selling plug-in car in America. I'm wondering what the value of this will be as a headline attention-grabber / possible positive catalyst, particularly if Q1 deliveries are pre-announced in the coming weeks.

 

[techmaven]

I don't get math here. If TM has 1000 cars waiting to be sold, why lowball q1 at 9500 deliveries while starting year with 10k reservations. At 10000 production goal for 12 weeks, they are running about 834 cars/ week which is way lower than 1000/week mid November.

In such a scenario I would have expected TM to sell 1000x12+1000 = 13k cars. We are nowhere closer.

12.5 total weeks in Q1, 11.5 actual production weeks. Tesla mentioned the number 11. It is usual to have 2-3 weeks of finished goods inventory on the way to delivery at the end of a quarter. Last quarter, there was 4 production weeks of inventory, which includes both stranded inventory in China and vehicles on their way to normal delivery.

That's another reason why I don't think there's 1,000 stranded cars in China. We know the 1,400 cars that Tesla discusses in the shareholder letter are pretty much the P85D's bound for NA that had to be pulled aside and get re-worked... reference the black hole P85D delivery thread. That neatly folds into what was discussed in that thread. That leaves about 2.5 production weeks of inventory, which is pretty much inline with other quarters. 1,000 stranded vehicles means they only had 1.5 production weeks of finished goods otherwise, which would be a low that we haven't seen since Tesla started overseas deliveries. 500 vehicles I can see and not even all of those are stranded inventory. Basically, 1 week of finished goods on the way to Europe, 1.5 weeks to Asia, 1.5 weeks in NA. Pretty much all inventory sold overseas in January and February comes from the production overhang from the previous quarter.

I think Tesla chose to sandbag this quarter since they had three significant possible delay factors - P85D launch in Europe and Asia, S85D launch in North America, and the west coast port strike. All three issues appear to have been handled smoothly. Tesla guided 10,000 production, which probably incorporates a delay caused by S85D production start.

 

[ggr]

I agree with almost everything you wrote, except:

I think Tesla chose to sandbag this quarter since they had three significant possible delay factors - P85D launch in Europe and Asia, S85D launch in North America, and the west coast port strike. All three issues appear to have been handled smoothly. Tesla guided 10,000 production, which probably incorporates a delay caused by S85D production start.

To me, "sandbag" implies intentionally slowing deliveries. I think they were stuck, for exactly the reasons you mention and particularly the port strike, with cars they'd built but couldn't deliver, while having orders they couldn't fill because they produced the wrong (in hindsight) mix.

Either way, whatever waters were held back by the sandbags will flow now that the levee has broken. Yes, I expect a beat for Q1.

 

[techmaven]

I agree with almost everything you wrote, except:


To me, "sandbag" implies intentionally slowing deliveries.

I'm using sandbag here meaning that they deliberately gave lower Q1 guidance due to those issues that could dramatically affect production and delivery.

 

[ggr]

I'm using sandbag here meaning that they deliberately gave lower Q1 guidance due to those issues that could dramatically affect production and delivery.

Ah, OK, my misinterpretation. I agree with you completely then .

 

[schonelucht]

I think Tesla chose to sandbag this quarter since they had three significant possible delay factors - P85D launch in Europe and Asia, S85D launch in North America, and the west coast port strike. All three issues appear to have been handled smoothly. Tesla guided 10,000 production, which probably incorporates a delay caused by S85D production start.

If all three were indeed handled smoothly, we should expect a large beat on the deliveries. But if that large beat doesn't materialise, the only conclusion is that Tesla deliberately throttled production a the factory since they were capable of producing just as much last quarter when they DID have big issues both on production (seat saga) and logistics (port strike). In that case, it's hard not to follow the bear case that production has outrun demand.

 

[RobStark]

If all three were indeed handled smoothly, we should expect a large beat on the deliveries. But if that large beat doesn't materialise, the only conclusion is that Tesla deliberately throttled production a the factory since they were capable of producing just as much last quarter when they DID have big issues both on production (seat saga) and logistics (port strike). In that case, it's hard not to follow the bear case that production has outrun demand.

You shouldn't make factory workers work 70+ hours per week for 50 weeks a year. That is begging the UAW to come in and throw a monkey wrench into Tesla's long range plans. As Elon said the factory guys and gals need rest. They normally work 55 hours per week and more during quarter end pushes. Hiring large amount of new workers is too costly instead Tesla will focus on automation and increased labor efficiency to increase output. They want to increase margins not lower them.

 

[schonelucht]

You shouldn't make factory workers work 70+ hours per week for 50 weeks a year. That is begging the UAW to come in and throw a monkey wrench into Tesla's long range plans. As Elon said the factory guys and gals need rest. They normally work 55 hours per week and more during quarter end pushes. Hiring large amount of new workers is too costly instead Tesla will focus on automation and increased labor efficiency to increase output. They want to increase margins not lower them.

I can't see how hiring costs would be a bottleneck at all. Tesla has repeatedly demonstrated they can run at a production rate of 1000/cars with the current factory. Next quarter the company even expects to produce between 12 and 13k cars with essentially the same shop because the big overhaul to make sure they can produce without interruption while the factory gears up to Model X production happened last year already. On the grand scale of Tesla cash burn rate, hiring factory workers isn't a big expense at all. Secondly, every car produced and delivered betters their margin because it lowers the proportion of the revenue needed to pay for fixed and sunk costs which are of course significant.

 

[Benz]

I can't see how hiring costs would be a bottleneck at all. Tesla has repeatedly demonstrated they can run at a production rate of 1000/cars with the current factory. Next quarter the company even expects to produce between 12 and 13k cars with essentially the same shop because the big overhaul to make sure they can produce without interruption while the factory gears up to Model X production happened last year already. On the grand scale of Tesla cash burn rate, hiring factory workers isn't a big expense at all. Secondly, every car produced and delivered betters their margin because it lowers the proportion of the revenue needed to pay for fixed and sunk costs which are of course significant.

The Tesla Model X body line was to be established/realised in Q1 of 2015 at the Tesla Fremont factory, right?

The assembly line was established/realised in July 2014.