2017 Investor Roundtable:General Discussion

[Rockster]

Forbes: "Tesla's 2016 Tally Shows Vehicle Deliveries Fell Short of Target"
Business Insider: "Tesla misses on deliveries for 2016"
Wall Street Journal: "Tesla Misses Its 2016 Sales Goal Despite 27% Fourth Quarter Rise"
The Street: "Tesla Misses on Full-Year Guidance"; "Tesla Shares Fall After-Hours After Automaker Misses on Full-Year Guidance"
Investor's Business Daily: "Tesla Falls Short of Delivery Estimates Due to Production Problems"

"Journalism" at its finest.

I predict short-term SP is f-ed.

 

[dandurston]

My guiding theory going into this is that since they were not (I think) aggressively discounting in Q4, they must not be scrambling to make the numbers....Maybe this is the start of the "great relaxing".

I think they didn't have cars to sell because of production difficulties, so no point in discounting the few you do have. If production had been better we might have seen discounting. I think they were scrambling - just on the production side instead of the sales side.

 

[Waiting4M3]

Over all not a bad quarter, close to 25K cars produced for Q4, and total almost 84K cars for 2016. I'm happy to see that demand and production capacity are fine.

However, the delay in AP2 HW production and the AP2 SW catch-up to AP1 capability are both disconcerting. Tesla needs to demonstrate that they can roll out new features and products on a reliable schedule, otherwise people will always question how these delays could impact M3 ramp.

On a side note, I also wonder how much of the Ap2 SW delay is due to the HW production delay. Tesla could be 2 weeks behind schedule in having enough cars with AP2 HW on the road in ghost mode to validate the SW. Now that they've adjusted their deadline to end of Jan for 8.1, I hope they can hold to that new target and prove that they can contain the delay and get back on schedule.

 

[mrdoubleb]

My guiding theory going into this is that since they were not (I think) aggressively discounting in Q4, they must not be scrambling to make the numbers. But they were never on pace to knock it out of the park, though they sort of came close except for delivery overhang.

Maybe this is the start of the "great relaxing"... Instead of treating the making of quarterly numbers as all-important, they are just going to let the results flow. No discounts. Less geographic batching micromanaging. No panicky "Please take delivery Dec 31" messages to customers. It had to happen someday.

Agree with all that... I still wouldn't mind if Elon didn't announce "ludicrous" delivery goals every year, just would be OK with "insane".

 

[Waiting4M3]

Any guesses on what margins and operating expenses will be for Q4 then? I'm not seeing any possibility of even a small profit.

Hopefully the margin is fine since they didn't have to discount cars to push delivery numbers

 

[EinSV]

To take stock...

50% YoY increase in deliveries.
A miss on guidance, 76,230 instead of the revised 79,000 guidance and the original 80,000 to 90,000
Vehicles in transit overhang increased by ~1,000 instead of drawing down by about 3,000.
Demand is strong - all time record high order levels in Q4, 24% higher QoQ, 52% higher YoY. BTW, not the first time they disclosed relative metrics for orders and these tidbits seem to be ignored often.
Assuming 11 weeks of production, they built 2,262/week. That's very, very good. That implies an annual rate over 100,000 and better margins.

The bears were expecting less deliveries, and in some famous cases, far less. They will press the demand issue, ignoring the all time high record order levels, which seems a foolhardy thing to do. Think Q2, 2016, or Q3, 2015, both quarters where the deliveries ran a bit short to then have big results in the next quarter. Assuming 12 production weeks in Q1, that's production of 27,000 vehicles, a new overhang of 2,500, and emptying the 6,450 Q4 overhang, for a total of 30,950. With record orders, demand isn't the issue, so it's all about delivery logistics.

For a long-term investor this is a very strong report. 24% growth in orders Q/Q is huge, especially given the reduced discounting, dropping the lowest cost (and lowest margin) version of the Model X (X60), increasing prices, etc. Significantly improved production efficiency and capacity once the noise from the AP2 switchover is factored in is also significant.

Strong growth in demand and production capacity is a very positive signal for the long run, even if the AP2 changeover and calendar did not align for great delivery numbers in Q4. Solid performance that sets up a potential blow-out quarter in Q1 2017.

 

[hobbes]

Update on European situtation:

Current status with countries representing half of the Europe delivery totals having officially reported : Q4 is 87% of Q3. (...)

So looks like VIN assignment beat and delivery miss from what we have, which seems contradictory.(...)

Have to pat myself on the back a bit
22,200/25,000 = 89%

 

[austinEV]

I think they didn't have cars to sell because of production difficulties, so no point in discounting the few you do have. If production had been better we might have seen discounting. I think they were scrambling - just on the production side instead of the sales side.

Yeah a good way to think of it. The probably needed more AP2 cars than they could get.

Agree with all that... I still wouldn't mind if Elon didn't announce "ludicrous" delivery goals every year, just would be OK with "insane".

No kidding. Elon's public flogging of his team is the #1 depressor of the stock price. I imagine this happening:

Elon: "Theoretically, if everyone worked harder than humanly possible and nothing went wrong all year, what could we deliver in S/X in 2017"?
Factory planner: "Uh, well that would never happen. Realistically probably 100k, give or take"
Elon: "Yeah, but what if everything went super perfectly?"
Factory planner: "Sigh. like 150k. But really that will never happen and lets talk about why"
Elon: (Tweeting) "2017 we should deliver 160k"

 

[SBenson]

Someone please chime in.

Tomorrow's event is for a select group of investors with no press, no CC, no live feed. Is that correct?

Is management allowed to give material info to a small select group?

In what form are we expecting any news? A parallel press release?

 

[Fallenone]

Someone please chime in.

Tomorrow's event is for a select group of investors with no press, no CC, no live feed. Is that correct?

Is management allowed to give material info to a small select group?

In what form are we expecting any news? A parallel press release?

I think press is invited and will report what is allowed.

 

[bonaire]

And that assumption is based on what? VIN counting?

PS: Honest question.

Yes, Vin # issuance and the pacing over the course of Q4 going into Q1. MX culminated in a Q3+Q4 completion of what could be considered the "four-year backlog" and now it is a matter of does it push hard and through the recent "Consumer Ratings" issues and other aspects of FWD ownership. The MS makes a bit more sense for EV drivers being smaller and able to go more miles than the MX on a charge. The only thing missing from MS is an factory-supported towing mode.

When Musk said something like "and we should do good in Q4 also" I immediately heard "about 22k deliveries" underlying that.

 

[KLC13]

I think the biggest problem with this is the loss of confidence in Elon's words from now on. TSLA affirmed the H2 50k guidance on Oct. 26th Q3 call. So is it just coincidental that production probs occurred only after that call?

Basically, even if TSLA says they will deliver 120k -130k S&X in 2017, I'm going to stick with 110k (assuming about a 50% increase from actual numbers, just like 2015 to 2016).

The biggest impact I fear is market not trusting the M3 timeline as well now, even if TSLA management continues to affirm till Q2 2017. That takes away one major catalyst for the SP.

Edit: And another bigger problem with this is Mark Spiegel now will rant with even more panache for one more quarter. I bet that guy murders Elon every night in his dreams

 

[techmaven]

I think the biggest problem with this is the loss of confidence in Elon's words from now on. TSLA affirmed the H2 50k guidance on Oct. 26th Q3 call. So is it just coincidental that production probs occurred only after that call?

Basically, even if TSLA says they will deliver 120k -130k S&X in 2017, I'm going to stick with 110k (assuming about a 50% increase from actual numbers, just like 2015 to 2016).

The biggest impact I fear is market not trusting the M3 timeline as well now, even if TSLA management continues to affirm till Q2 2017. That takes away one major catalyst for the SP.

Not a production problem per se. Delivery logistics problems, including RHD homologation delays. Maybe some AP2 hardware didn't pass QA or the parts suppliers were slow in delivery so we did have some parts shortages in late November that matches up with some anecdotes. Take about 1,500 to 2,000 RHD Model X's that aren't delivered in Australia, HK, and UK, add to it a slow down in November that would cause a miss of vehicles going to Europe, and that's about right. To still average 2,200+ vehicles/week production is actually quite excellent. That probably means 2,500/week is possible.

 

[Zhelko Dimic]

I don't really see 50% YoY as dropping the ball.

I made that same point elsewhere. But it's all a matter of perspective, number of people in AH disagree with you.

I'm very pleased with overal progress Tesla made from 2015, but very displeased with consistent failure to communicate 'safe goals', as other companies do.

It's going against the grain for no particular reason, and by missing self-imposed goals, it's creating noise that masks otherwise amazing progress.

I am expecting drop tomorrow, and then to reverse and continue (slow) march upwards, as smarter heads prevail...

 

[Rockster]

Yeah a good way to think of it. The probably needed more AP2 cars than they could get.



No kidding. Elon's public flogging of his team is the #1 depressor of the stock price. I imagine this happening:

Elon: "Theoretically, if everyone worked harder than humanly possible and nothing went wrong all year, what could we deliver in S/X in 2017"?
Factory planner: "Uh, well that would never happen. Realistically probably 100k, give or take"
Elon: "Yeah, but what if everything went super perfectly?"
Factory planner: "Sigh. like 150k. But really that will never happen and lets talk about why"
Elon: (Tweeting) "2017 we should deliver 160k"

In my undergrad days I worked as a lab tech in the R&D division of a biotech company. Our typical process was to test a new process in the lab and then scale it up to production levels. The Chem-E would conceive of a process and have the tech perform the synthesis on the benchtop. A typical result would be:

Boss: "What was the yield you obtained in the synthesis?"
Tech: "58%"
Boss, thinking that if an engineer did the benchtop work and not a tech the results would be higher, reports to his boss, the director of the group: "We're getting yields of about 70%."
Director to VP, believing that with a little work yields can be even higher: "We're getting yields of nearly 80%."
VP to CEO, thinking that if the R&D group can reach 80% then the production people can certainly refine that: "We can get yields of 90%:"
CEO: "Here's a million dollars. Scale this up to production level."

-Six months later, the project is shut down because yields were only 65%.

 

[dennis]

I'd like to see them get better at estimating these things, or getting back to under promising and over delivering.

When did Tesla ever under promise and over deliver?

 

[Fallenone]

I think the biggest problem with this is the loss of confidence in Elon's words from now on. TSLA affirmed the H2 50k guidance on Oct. 26th Q3 call. So is it just coincidental that production probs occurred only after that call?

Basically, even if TSLA says they will deliver 120k -130k S&X in 2017, I'm going to stick with 110k (assuming about a 50% increase from actual numbers, just like 2015 to 2016).

The biggest impact I fear is market not trusting the M3 timeline as well now, even if TSLA management continues to affirm till Q2 2017. That takes away one major catalyst for the SP.

It's fine. Market's confidence in Elon's words has already been low for quite some time. This miss is far less than some other stuff happened in 2016.

 

[aznt1217]

I made that same point elsewhere. But it's all a matter of perspective, number of people in AH disagree with you.

I'm very pleased with overal progress Tesla made from 2015, but very displeased with consistent failure to communicate 'safe goals', as other companies do.

It's going against the grain for no particular reason, and by missing self-imposed goals, it's creating noise that masks otherwise amazing progress.

I am expecting drop tomorrow, and then to reverse and continue (slow) march upwards, as smarter heads prevail...

I also agree with your sentiments, but I feel like the difference this time is a miss was priced in just due to the fact that it was the same scenario last year but of smaller magnitude. The bear case was pricing in 19K Q4 deliveries and that Tesla is doomed forever. Good thing we didn't see that. It's also good that it was a production driven delay and less so the logistics/delivery side that was the root cause. I believe it will just be an issue of 1Q phasing.

With the Gigafactory Event I believe it will be more of a "oh hey, remember what else we are doing and working on besides cars." It should be a good confidence booster and filler until the FY16 Conference Call.

 

[GoTslaGo]

I made that same point elsewhere. But it's all a matter of perspective, number of people in AH disagree with you.

I'm very pleased with overal progress Tesla made from 2015, but very displeased with consistent failure to communicate 'safe goals', as other companies do.

It's going against the grain for no particular reason, and by missing self-imposed goals, it's creating noise that masks otherwise amazing progress.

I am expecting drop tomorrow, and then to reverse and continue (slow) march upwards, as smarter heads prevail...

Tomorrow is also Motor Vehicle Reports with consensus expecting lower sales for 2016 vs. 2015, whereas Tesla has 50% YoY. Link:

Econoday Economic Report: Motor Vehicle Sales January 4, 2017

 

[Yggdrasill]

It's fine. Market's confidence in Elon's words has already been low for quite some time. This miss is far less than some other stuff happened in 2016.

Yeah. One example - Musk says Model 3 is on track for mass production in late 2017, while Adam Jones expects only 60k Model 3 to be produced in 2019.