JRP3
Hyperactive Member
Hate to be "that guy" but the rear door trim does not line up and the gap looks a bit large.
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ValueAnalyst
Closed
After further research, analysis, and thought, I know think my SG&A:Revenue estimates are way too conservative for five reasons:
- Tesla will grow multiple times as fast as any other growth company ever did in the next 12 to 24 months, and the necessary SG&A investment to lead into that hyper-growth is being made today.
- Tesla's sales per square foot in its stores is 2x of Apple's, who had the highest $/sf before Tesla. So Tesla is in a league of its own with respect to SG&A:Revenue.
- Tesla does not need to substantially grow its number of sales stores/employees as Model 3 is sold out through 2018
- Tesla Automotive barely does any advertising
- Tesla Energy (especially Powerpacks) needs even less advertising... what does a tweet cost again?
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JRP3
Hyperactive Member
I offer the following comments:
1. There are some plausible reasons why Tesla's "hyper-growth" might not continue unabated beyond 1-2 years. Tesla Semi will have, at a minimum, Mercedes Semi with fleet position advantages. Model 3 will face 3-serie and others. Solar Roof has dozens of competitors as does utility and commercial products. S and X will have several attractive competitors. I am not pessimistic, but hyper-growth requires unimpeded conquest, a far reach perhaps.
2. Sales sq/ft are about to rise even more. But, SC and roaming techs will slightly diminish sales sq/ft advantages in SG&A. They'll still far outrank anybody else automotive and probably Apple too. Possibly not quite so spectacular though.
3. Spot on as far as it goes. They'll still be building out for Model Y, pickup, semi and TE so I think sales points and staffing probably will see stable proportional metrics, especially because TE is very, very sales force intensive.
4. Yes, in a traditional sense. The accounting does not actually reflect promotion expenses such as owner referrals, local/regional support, mobile design studio etc. we're in a new world, thus far with cheap promotion for Tesla, but nobody can guess how scalable the current processes may be. Thus, I'd be a trifle conservative on this one.
My points are certainly not negative evidence so much as they are risk factors. Maybe the obvious solution is to keep the optimistic projections but use a higher discount rate to account for the high uncertainty.
Two more points:
The problem of Elon or JB disappearing would cause massive upheaval. Probably not terminal, but certainly it would massively reduce share prices.
Overall staff turnover, while not huge by Silicon Valley standards, is massive by industrial standards. Coupled with that is the difficulty of hiring, training and retaining low-level staff in Fremont and Reno, both locations famously expensive for modest income people to survive. This one, I fear, we are underestimating.
DFibRL8R
Active Member
Perfect, I wouldn't want it to make my classic Model S look sloppy
ValueAnalyst
Closed
1.a. I agree that Tesla will have competition, but they cannot scale up BEV production nearly as quickly as Tesla due to reasons I discussed in this article: The Problem With Tesla's Competition - Tesla Motors (NASDAQ:TSLA) | Seeking Alpha
1.b. My YoY growth assumption declines quickly from 100% in 2020 to global GDP growth rate by 4Q25, which may be too conservative given that Tesla will likely keep building Gigafactories beyond the "10-12" to "maybe 20." Tesla needs 12 Gigafactories (200GWh avg, up from GF1's 150 GWh in 2020 just due to 7% annual energy density improvement, let alone alien dreadnought) to meet my revenue assumption for terminal year (2025) calc.
2. Agree that sales per sq/ft will rise further in 2018 due to model 3 and tesla energy as well as seemingly limited additions to sales stores in the coming quarters.
3. I agree that Solar Roof, solar panels, and also probably Powerwall, are sales force intensive, but I see the majority of Tesla Energy's revenue in outer years coming from Powerpacks for Utilities/Commercial, which may not be as sales intensive. I believe any survey/installation related labor expense gets booked into COGS, and that's in the gross margin assumption, not SG&A:Revenue. Agreed?
4. Got it. And thank you for the additional points as well.
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ValueAnalyst
Closed
I get 10+ of these a day in the form of comments and PMs... people need to get a life...
anticitizen13.7
Not posting at TMC after 9/17/2018
I would laugh if people sent me stuff like that.
And I openly admit that I laugh when short sellers lose money and wish them the worst defeat. Yeah, it's mean but frankly I stopped giving a %^#! because the entire game is so dirty.
ValueAnalyst
Closed
Trick of lighting... in these pictures of that photo shoot, the trim looks aligned:
Imgur: The most awesome images on the Internet
MitchJi
Trying to learn kindness, patience & forgiveness
I just listened to a podcast, stating that (he hadn't seen the picture) that he believes that Elon would get the car with vin number one, and Elon's MS and MX were both black.
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With 115K reservations in 1st 24 hrs, assuming many were also rest of World, in east coast and with a good ramp up - hope I get mine by Jan (maybe too optimistic)
One thing I am not sure about is up to what time do S/X owners get precedence over just new owners? Anyone?
One thing I am not sure about is up to what time do S/X owners get precedence over just new owners? Anyone?
So... for investors, this first Model 3 is just following through on something previously announced. Its great, but doesn't count for very much at this juncture.
What is important to knowing the state of the Model 3 assembly line. What is the discount factor we should assign to the production numbers of 30, 100, 1500+, 20k/month rate as given by Mr. Musk? Knowing the timing of the first 10, 100,1,000, and 10,000 is really the issue at hand which helps us try to determine if Tesla can achieve a positive gross margin on the Model 3 in 2017. Too low of a production number and the Model 3 is likely gross margin negative in 2017. Given that the first production effort is likely sized at 5,000/month, there is a percentage of line utilization that is necessary to be gross margin positive. I don't know that percentage, and I suspect very few people outside of Tesla knows. Even automotive industry experts are likely just are wrong because they are not familiar with the particulars of Tesla's production and supply chain. Obviously, some people believe that the Model 3 will never be gross margin positive, but that's nonsensical. There is the possibility that Mr. Musk gave us a very conservative ramp rate... in other words, he's sandbagging. That's probably not built into most people's perceptions right now if he under estimating. We went from extreme optimism to... well, pessimism around the ramp. Therefore pictures of the factory lines is more important that the pictures of the first Model 3 for investors.
I suspect that the stock will basically trade around here, possibly snapping back some if the Model 3 production expectation for 2017 is 10,000 to 20,000 which applies a conservative discount to Musk's stated numbers. Such a possible ramp could be: 30, 50, 1,000, 1,800, 3,500, 7,000, which is around 13k. I suspect with this kind of ramp, Tesla doesn't achieve Model 3 positive gross margins across the full Q4 '17.
We also still have the risk that people will not be as enthusiastic about the final product. We still don't know final price, efficiency, range, and options. Given the fawning of over the Chevy Bolt and its many shortcomings, I don't think that will be the case. But it is still a risk, or a least the perception of mass cancellations at some point in this ramp.
Now, if the ramp is actually much better... the 30 and 100 next month can be presumably mostly hand built using prototype parts. So the perception right now is that the real ramp is in September and these vehicles being made are production prototypes that are actually going to be sold. But if these are actually being mostly made on the new assembly lines and are actually indistinguishable from the final product, then the perception switches again. So if they are getting 1,000 parts a week this month, and they really get 500/week in usable production parts and they can actually make 500 or 1,000 in August, then we're in a very different viewpoint on 2017 and therefore the stock price. But of course, it is hard to think that Tesla is ever ahead of any guidance given.
But an optimistic scenario would be that they make 250 vehicles in July. They deliver about 100, with 30 during that July event. They make 1,000 in August and deliver about 500. They make 2,000 in September... folding in something that causes a delay as they try to really ramp. For example, they may try to run the line at 1/4th speed, realize something significant needs to be fixed, and take 1-2 weeks to do it, and then run faster. Then in October, they're really starting to crank at 50% line speed. It could therefore be like 100, 500, 1,800, 6,000, 13,000, 16,000. That's just over 37k for 2017, and 35k for Q4. The Model 3 is likely then gross margin positive in Q4 and we'll start to know that in Q4. For the very short term, anything that lets us know that the Model 3 production lines are actually working and they are truly trying to ramp numbers in July or August will be very pleasant surprises.
Note that even if they make a few hundred in July, they may choose to do extended validation on these vehicles and not deliver them in July. Chevy did this with the Volt and the Bolt for example. But of course, Tesla often deviates from industry standard practices.
What is important to knowing the state of the Model 3 assembly line. What is the discount factor we should assign to the production numbers of 30, 100, 1500+, 20k/month rate as given by Mr. Musk? Knowing the timing of the first 10, 100,1,000, and 10,000 is really the issue at hand which helps us try to determine if Tesla can achieve a positive gross margin on the Model 3 in 2017. Too low of a production number and the Model 3 is likely gross margin negative in 2017. Given that the first production effort is likely sized at 5,000/month, there is a percentage of line utilization that is necessary to be gross margin positive. I don't know that percentage, and I suspect very few people outside of Tesla knows. Even automotive industry experts are likely just are wrong because they are not familiar with the particulars of Tesla's production and supply chain. Obviously, some people believe that the Model 3 will never be gross margin positive, but that's nonsensical. There is the possibility that Mr. Musk gave us a very conservative ramp rate... in other words, he's sandbagging. That's probably not built into most people's perceptions right now if he under estimating. We went from extreme optimism to... well, pessimism around the ramp. Therefore pictures of the factory lines is more important that the pictures of the first Model 3 for investors.
I suspect that the stock will basically trade around here, possibly snapping back some if the Model 3 production expectation for 2017 is 10,000 to 20,000 which applies a conservative discount to Musk's stated numbers. Such a possible ramp could be: 30, 50, 1,000, 1,800, 3,500, 7,000, which is around 13k. I suspect with this kind of ramp, Tesla doesn't achieve Model 3 positive gross margins across the full Q4 '17.
We also still have the risk that people will not be as enthusiastic about the final product. We still don't know final price, efficiency, range, and options. Given the fawning of over the Chevy Bolt and its many shortcomings, I don't think that will be the case. But it is still a risk, or a least the perception of mass cancellations at some point in this ramp.
Now, if the ramp is actually much better... the 30 and 100 next month can be presumably mostly hand built using prototype parts. So the perception right now is that the real ramp is in September and these vehicles being made are production prototypes that are actually going to be sold. But if these are actually being mostly made on the new assembly lines and are actually indistinguishable from the final product, then the perception switches again. So if they are getting 1,000 parts a week this month, and they really get 500/week in usable production parts and they can actually make 500 or 1,000 in August, then we're in a very different viewpoint on 2017 and therefore the stock price. But of course, it is hard to think that Tesla is ever ahead of any guidance given.
But an optimistic scenario would be that they make 250 vehicles in July. They deliver about 100, with 30 during that July event. They make 1,000 in August and deliver about 500. They make 2,000 in September... folding in something that causes a delay as they try to really ramp. For example, they may try to run the line at 1/4th speed, realize something significant needs to be fixed, and take 1-2 weeks to do it, and then run faster. Then in October, they're really starting to crank at 50% line speed. It could therefore be like 100, 500, 1,800, 6,000, 13,000, 16,000. That's just over 37k for 2017, and 35k for Q4. The Model 3 is likely then gross margin positive in Q4 and we'll start to know that in Q4. For the very short term, anything that lets us know that the Model 3 production lines are actually working and they are truly trying to ramp numbers in July or August will be very pleasant surprises.
Note that even if they make a few hundred in July, they may choose to do extended validation on these vehicles and not deliver them in July. Chevy did this with the Volt and the Bolt for example. But of course, Tesla often deviates from industry standard practices.
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anticitizen13.7
Not posting at TMC after 9/17/2018
I believe that the vast majority of people are good and will try to do the right thing. Civilization wouldn't exist if this wasn't the case, because cooperation and fairness are necessary to build social structures.
But I also believe that there are people who are inherently immoral or even completely evil. It's a spectrum. A person could be 66% immoral and 34% good, depending on how they act in various areas of their life. I see many of the short sellers and FUD-slingers as immoral because they attempt market manipulation via playing on people's fears and lying outright. I am happy to see wrongdoers punished for their misdeeds.
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Paracelsus
Active Member
Aggressive look? How do you call the one of a Lamborghini then?
You might be on to something good, @Starno. Perhaps we could take the next leap and simply refer to this Painted Black SN1 Model 3 as Tesla's new 'Lamborghini Killer' after all the ridiculous FUD stories of the new 'Tesla Killer' from Porsche, from Audi, and from BMW. Especially since it wouldn't be much of a stretch to imagine the first Model 3 as a Pininfarina-inspired design for a futuristic movie from many decades ago. These new images really accent the aggressive front end design and beautiful upward sweeping lines that travel seamlessly all the way from the headlights to the taillights.......lines that are even further accented by the door handle design and placement. Very well done in all seriousness! Mondays headlines could emphasize how this is the first real 'Lamborghini Killer' Car for the masses in many ways....including acceleration, appearance, price, and ironically enough probably even range as well.
Krugerrand
Meow
Hate to be "that guy" but the rear door trim does not line up and the gap looks a bit large.
Fortunately, since it's Elon's car I imagine that it will hit his 'fix it' list right off.
This is from
fantastic post. A couple of comments:
Most if not all Wall Street analysts (the guys you see on CNBC) have discounted Tesla's ability to either be on time or get any meaningful quantity in their estimates. That (the reality that production ramp has now started much to the dismay of the market) needs to be factored in at some point and should positively impact share price. Also - Tesla's share price can be largely attributed to m3 but we also have a "dramatic" ramp up coming in TE (this was said by Elon before recent Austraila win) plus the hype and expectations for sept semi reveal (Elon commented that demand was insane). On that - I don't know a single ws analysts who has this new line factored into any sort of pro forma DCF.
Biggest hurdle was getting tesla to launch m3 without months of delays and that has now happened. Tesla is better capitalized (compared to prior launches) and has the luxury of being so popular that they attracting the "A" teams from OEM suppliers. This makes a huge difference in ensuring stuff gets banged out the right way from the get go.
MitchJi
Trying to learn kindness, patience & forgiveness
I believe that either people don't believe the 5k per week estimate, or have not considered the implications. Sixteen hours per day x seven days per week equals 112 makes 45 cars per hour! I believe that a movie of the production line spitting out M3's at that rate would cause a substantial SP bump.
I believe that the chances of an unenthusiastic reception or a large number of cancellations are zero. Elon-Tesla have definitely been sandbagging on how compelling the M3 is.
They are ahead so far with the M3 ramp. Remember when Elon said does that mean that we'll produce cars in July of 2017. "Of course not."
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