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Appropriate levels of finished goods inventory

Discussion in 'TSLA Investor Discussions' started by FrozenCanuck, Nov 6, 2015.

  1. FrozenCanuck

    FrozenCanuck Member

    Feb 24, 2014
    Port Perry, Ontario
    One of the standard favourite bear arguments is that Tesla has far too many "unsold cars". Sometimes people genuinely don't understand that a car in transit is finished goods inventory, but often times it's the bears that want to perpetuate FUD who publish loads of garbage.

    I suggest we discuss what level of finished goods inventory is appropriate for Tesla and then compare it to actual finished goods inventory.

    My very simplistic model requires that we know:

    • Total number of Tesla retail stores (over 200 in USA alone, anyone have global number?)
    • Average number of showroom cars per store (usually 1 or 2)
    • Average number of test drive cars per store (usually 2)
    • Total number of service centers around globe
    • Average number of loaner vehicles per service center (or could just approximate as % of global fleet size)
    • Average number of orders in a quarter
    • Average time required to go from manufacturing-complete to delivered around the world (I propose 30 days, just a guess)

    If I run some basic numbers on this I figure Tesla needs at least 7,000 finished cars on the balance sheet. Also consider that CPO inventory counts as finished goods inventory, and sits on Tesla's balance sheet until sold.

    Anyone care to expand on this?

    It's clear to me that whenever we see idiotic bearish comments about "look at the inventory", they're either lying to spread FUD or they just truly don't understand how accounting works.

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