2017 Investor Roundtable:General Discussion

[flankspeed8]

There's over 2,000 cars missing.

5,500 were in transit at the end of last quarter.

There were 2,600 more built than delivered this quarter.

There were only 6,450 in transit at the end of this quarter.....there should have been over 8,000. Must have that many more inventory cars?

I would hope that would not be inventory cars as that would not be a good sign but there have been posts indicating healthy inventory availability. It just does not jibe with the whole "we build to order" model. Would we have seen people walk away from AP 1.0 cars this q only to order again a 2.0 car?

 

[techmaven]

This is classic: "Our Q4 delivery count should be viewed as slightly conservative, as we only count a car as delivered if it is transferred to the customer and all paperwork is correct."

Isn't that the definition of what a delivery is?

Actually, no. The vast majority of automakers count a delivery as transferring ownership to the dealership. Tesla counts a delivery as transferring ownership to a end customer. There's a vast difference between the two and is at the heart of some of the misunderstandings surrounding Tesla's business model and how it differs from most automakers. For many other automakers, the dealership takes ownership well before the car has arrived at the dealership.

 

[SebastianR]

I thought the super charger was based on when the car was ordered, not when it got delivered.
Is it based on delivery?

From Tesla.com:

"These changes will not impact current owners or any new Teslas ordered before January 1, 2017, as long as delivery is taken before April 1, 2017."

 

[Yggdrasill]

I suspected something like this. Not great, but not terrible either.

I would have preferred if Tesla had hit 80k, and only had 2.7k in transit, but practically, there's little difference. Of those cars in transit, we know 51 have already been delivered in Norway. Globally, it might be the case that 500-1000 have been delivered.

I expect TSLA to have a small dip, but recover quickly.

 

[Papafox]

22,200 deliveries in Q4 but demand is very high and production was good.
Production of 24,882-22,200= 2,682 difference
Q4 in transit in report: 6450 Q3 in transit at time of initial report 5,500, thus increase of in transit reported of about 950 vehicles
(Note: I am assuming the in-transit number will decrease a like amount as Q3 in-transit number decreased by Q3ER)
2,682 excess of production in Q4 - 950 growth of in transit = about 1,732 increase in inventory

So... demand and production are both strong, but bigger emphasis of selling from inventory caused a hit this quarter. If this larger inventory level becomes the norm, this will be a one quarter hit.

The good news is that Q1 looks good with strong demand, strong production, more vehicles already in inventory, and a larger carry-over of in-transit to owner vehicles.

Edit: Much of that increase in inventory is likely to be replenishing after Q3 drawdown of inventory, as esk8mw suggests below.

 

[esk8mw]

There's over 2,000 cars missing.

5,500 were in transit at the end of last quarter.

There were 2,600 more built than delivered this quarter.

There were only 6,450 in transit at the end of this quarter.....there should have been over 8,000. Must have that many more inventory cars?

Keep in mind Q3 drained inventory, including selling all showroom cars in the store in many cases. That had to be replenished. I assume many of those 2000 cars are in service as showroom cars, loaners, test drive cars etc....and will be available for inventory purchase in due time.

 

[Atlantis]

Atlantis, Dec 16, 2016
I was very optimistic at the beginning of this quarter, expecting Tesla delivers some 26.500 cars, but rumours of delays in Ap-2 hardware supplies, QC of this hardware taking more time and delaying deliveries, 5 seats and RDH Tesla X seeming a little late, put me in the reserve about total deliveries for this quarter, so my guess is more like 22.955 cars in Q4, but with an huge number of cars in transit, maybe more than 6.500.
Please Tesla, prove me wrong and delivers 26.000 cars in Q4 to complete 80.000 deliveries in the year!

So my estimation was not too far from real, specially for the transit cars figure. But, I'm wondering where the 2750 cars figure as not delivered in Q4 because last minute problems or owners that can't take them, as they cited, could go. Should it count in the 6450 cars in transit or apart?

 

[dandurston]

Q3 Production: 25185
Q4 Production: 24882

On the face of it, that doesn't look great but Tesla was closed for 2 weeks in Q4 and 0 weeks in Q3. Taking that into account we get:
Q3 Production Rate: 1937/wk
Q4 Production Rate: 2262/wk

That's a pretty big increase (17%) in production rate even with the AP2 difficulties. I assume they were cranking at 2400/wk in December.

If Tesla can do 13 weeks at even 2260 in Q1 they would produce 29,400 cars. Considering the hangover in pipeline cars from Q4 (I expect the pipeline will shrink 1-2k) and considering demand is strong, I could see about 30k delivered in Q1 even without any increases in production capability.

 

[bonaire]

"Vehicle demand in Q4 was particularly strong. Q4 net orders for Model S and X, which were an all-time record for us, were 52% higher than Q4 2015 and 24% higher than our previous record quarter in Q3 2016."

This is the first time they mention "hard numbers" on demand? Or have i missed it the privous quarters?

24% QoQ demand growth and 52% YoY growth. Thats very good.

And we still are waiting for HUD, proven AP2.0 capabilities, crash test on Model X(?).. Lots of demand levers still in the medium to short term.

I wrote a piece in the investor forum a while back where I computed that "Net New Orders" is inclusive of the Tesla-store inventory/marketing restocking orders plus named customer orders. They do not break them out. Restocking inventory is included in net-new orders when you do the math on the "Q1 2016 45% higher model S net new orders over Q1 2015". So, the Q4 number should include AP 2.0 restocking orders which in many cases are "in-transit".

 

[Ameliorate]

Tesla (NASDAQ: TSLA) produced 24,882 vehicles in Q4, resulting in total 2016 production of 83,922 vehicles. This was an increase of 64% from 2015.

Some outlets taking a positive stance.

other thoughts - reasons for 1000 car rollout of autopilot, >30% margins. Elon needed 3 quarters in succession over 30% for his options to become available yes? Q4 Q1 and Q2 ought to be better candidates than initial M3 sales.

 

[Zhelko Dimic]

Building the most-expensive cars near the end of a quarter (ie. P90DL in end of Q2, P100D end of Q4) can be used to borrow for a period of time against the ABL. A built expensive car is worth more than the sum of its parts. Then they can be sold in the following quarter at discountable prices after miles are drawn against the car and written down in terms of mileage allowances by the IRS. Let's see how the ABL looks at the end of Q4 on the Earnings Report. It can be paid back in January - but is a tactical CFO maneuver to build inventory for a short period and make the customers who are paying full price wait a little longer (ie. cars "in transit").

Sounds like a smart strategy?
When you're able to improve mix of models to be selling s... of $150K cars with insane margin, why not? Even with large discounts, as you say, margins would be better than selling 90D

 

[Value Ev]

so what does a delivery miss bode for the quarter EPS?

Lower revenue probably would mean a lower EPS unless they had a lot of ZEV credits and/or a strong cost reduction program.

What was the guidance at the end of Q3, wasn't is to be about the same as Q3?

 

[Hogfighter]

Keep in mind Q3 drained inventory, including selling all showroom cars in the store in many cases. That had to be replenished. I assume many of those 2000 cars are in service as showroom cars, loaners, test drive cars etc....and will be available for inventory purchase in due time.

Sure....buts that's about $200mil in increased costs without associated revenue.

 

[bonaire]

In my own work, I had estimated that MS deliveries for Q4 were going to be 14,500. They ended with 12,700. I do not see a growth in MX deliveries going into Q1 so I think we have to assume that a good block of the in-transit "net new orders" are inventory/marketing/AP2.0 refreshes. So, I can't see Q1 deliveries overall being much more than 21,000. Model S should be staying strong but without the USA sales of September as they were (lease deals and discounts on P90DL) they fell back again in Q4.

 

[moe.salih]

Q4 deliveries in context:

 

[Value Ev]

Actually, no. The vast majority of automakers count a delivery as transferring ownership to the dealership. Tesla counts a delivery as transferring ownership to a end customer. There's a vast difference between the two and is at the heart of some of the misunderstandings surrounding Tesla's business model and how it differs from most automakers. For many other automakers, the dealership takes ownership well before the car has arrived at the dealership.

FYI. Tesla doesn't have dealerships, so a delivery is when it gets to the customer.

 

[Quesder]

OK everybody, it is all my fault. I ordered an inventory car at end of December and then changed to a custom one. That deduct the Q4 delivery number by one.

 

[bonaire]

Actually, no. The vast majority of automakers count a delivery as transferring ownership to the dealership. Tesla counts a delivery as transferring ownership to a end customer. There's a vast difference between the two and is at the heart of some of the misunderstandings surrounding Tesla's business model and how it differs from most automakers. For many other automakers, the dealership takes ownership well before the car has arrived at the dealership.

Not really - numbers of cars "sold" in the industry should be to an end-customer. Dealerships report numbers up to the automaker for collection as end of month data.

 

[techmaven]

I'm thinking the delays in RHD homologation of the Model X took their toll. And it was too late for U.S. deliveries to make up for it. That might very well be about 1,500 vehicles by itself. Increased Chinese order allocation can also push deliveries to be longer, which means more overhang. So instead of a 2-3,000 draw down in the overhang, they increased it. That's the entire miss right there.

 

[flankspeed8]

Not really - numbers of cars "sold" in the industry should be to an end-customer. Dealerships report numbers up to the automaker for collection as end of month data.

This has been discussed at length before. I used the example of the Cadillac ELR which ended production almost a year ago, yet each month continues to notch up incremental sales months after production ceased. This would indicate a sale is recorded when the dealer unloads it off their inventory as I doubt that GM is still shipping ELR's.