Could Tesla have underestimated ZEV/CARB credits for Q2?

[jeff_adams]

I was pondering Tesla's decision to delay European production until the beginning of Q3 and this thought hit me.

We've seen evidence of other companies having to slash prices on their EV/Hybrid cars to stimulate more sales. There are also rumors that ICE sales have been strong.

Could some of the quicker build times we notice have to do with "batching to get more credits"?

Are Canadian orders coming as fast as US ones? Are California orders given highest priority?

If the credit market is there for Tesla, it would make a lot of sense to do it this way. Every one of those sales would be "double dipping" on profits.

 

[sleepyhead]

I am pretty sure they were being conservative with there estimates. Such as modelling in $0 from ZEV credits in Q4 - they will most likely have some ZEV rev in Q4 too.

 

[Citizen-T]

I think we've been sandbagged in just about every metric.

 

[ShortSlaver]

I think we've been sandbagged in just about every metric.

Yes. One of the advantages to have had such low expectations is they can promise nothing and deliver everything.

 

[strider]

I've heard (no source cited however) that Tesla already has more credits than buyers so if that's true there would be little incentive for them to skew production to California. I would assume it has to do with regulatory and delivery system build-outs.

 

[slyastro]

I have a friend here in Quebec who bought a loaded P85 (multi-coat red) and he took delivery in less than 7 weeks (he received it last week) after making his reservation / deposit !!

That's quite fast !!

 

[deonb]

I have a friend here in Quebec who bought a loaded P85 (multi-coat red) and he took delivery in less than 7 weeks (he received it last week) after making his reservation / deposit !!

That's quite fast !!

P85's have always been fast. I received mine months ahead of schedule.

 

[jeff_adams]

I have a friend here in Quebec who bought a loaded P85 (multi-coat red) and he took delivery in less than 7 weeks (he received it last week) after making his reservation / deposit !!

That's quite fast !!

Yeah, thanks for that info.

I just wonder if car makers purchase the credits ahead of time based on assumed demand of ICE and compliance cars. So if the ICE sell well and the compliance do not, they are short on credits. You wouldn't want to wait until Q4 to buy, because if others are short you will find the credits going to the highest bidder.

Tesla expects to sell few to none in Q4 because everyone should have hedged their position. Maybe the phone started ringing at the end of May and Tesla decided to delay the EU deliveries to take advantage of the credit demand right now.

 

[maekuz]

June U.S. sales projected to hit highest rate since late 2007

At the moment the mandate is 12% of new car sales have to be ZEVs. And its only Tesla and Nissan selling pure ZEVs. I dont see them to satisfy the demand of 12%.

Tesla cleans up on California ZEV credits | ChargedEVs

 

[Nicu.Mihalache]

June U.S. sales projected to hit highest rate since late 2007

At the moment the mandate is 12% of new car sales have to be ZEVs. And its only Tesla and Nissan selling pure ZEVs. I dont see them to satisfy the demand of 12%.

Tesla cleans up on California ZEV credits | ChargedEVs

This is completely wrong. From those 12%, only a small fraction of credits have to be generated from ZEV vehicles, the rest can come from hybrids and various clean vehicles. See for example page 51 of
http://www.arb.ca.gov/msprog/zevprog/factsheets/zev_tutorial.pdf

It clearly says that for 100k cars sold, you need 790 credits from ZEV. Model S generates 3-5 credits per car (5 if the battery swap is "validated" as a fast refuel car) so about 200 MS could cover ZEV credit needs for 100k ICEs sold. And this is only in a dozen states. Sorry to interrupt the happy talk (so it amounts to 0.2% - that if we forget there are Leafs and Volts around)

 

[maekuz]

This is completely wrong. From those 12%, only a small fraction of credits have to be generated from ZEV vehicles, the rest can come from hybrids and various clean vehicles. See for example page 51 of
http://www.arb.ca.gov/msprog/zevprog/factsheets/zev_tutorial.pdf

It clearly says that for 100k cars sold, you need 790 credits from ZEV. Model S generates 3-5 credits per car (5 if the battery swap is "validated" as a fast refuel car) so about 200 MS could cover ZEV credit needs for 100k ICEs sold. And this is only in a dozen states. Sorry to interrupt the happy talk (so it amounts to 0.2% - that if we forget there are Leafs and Volts around)

Well...for 100k cars sold you need 12,000 ZEV credits and you must use 790 credits from ZEVs and you may use 10,210 credits from Enhanced AT PZEVs, AT PZEVs and PZEVs. So the questions is: Can you pony up enough credits per Hybrid Car sales and other ZEVs (other than the Model S)?

We could start here: May 2013 Dashboard - HybridCars.com

Looks like homework for the weekend!

 

[Nicu.Mihalache]

Well...for 100k cars sold you need 12,000 ZEV credits and you must use 790 credits from ZEVs and you may use 10,210 credits from Enhanced AT PZEVs, AT PZEVs and PZEVs. So the questions is: Can you pony up enough credits per Hybrid Car sales and other ZEVs (other than the Model S)?

We could start here: May 2013 Dashboard - HybridCars.com

Looks like homework for the weekend!

Talking with people who are wrong by almost two orders of magnitude and then come back with cocky answers is not too interesting for me, sorry. You may have to do your homework yourself, I'll just get busy placing my bets for the earnings call.

 

[brianman]

P85's have always been fast. I received mine months ahead of schedule.

It didn't feel that way from June to November of last year.

 

[maekuz]

Actually that the homework remark wasn't directed at you and it was meant to say its homework for me.

Anyhow, I think its interesting how big the demand for ZEV credits in 2013 could get and how many ZEV credits are actually getting produced (especially by PZEVs and the like). The sales figures from hybridcars.com could provide for an estimate and i will try my best.

 

[Nicu.Mihalache]

Actually that the homework remark wasn't directed at you and it was meant to say its homework for me.

Anyhow, I think its interesting how big the demand for ZEV credits in 2013 could get and how many ZEV credits are actually getting produced (especially by PZEVs and the like). The sales figures from hybridcars.com could provide for an estimate and i will try my best.

That definitely sounds more reasonable. My bad then, I will happily wait for the results.

 

[sleepyhead]

Talking with people who are wrong by almost two orders of magnitude and then come back with cocky answers is not too interesting for me, sorry. You may have to do your homework yourself, I'll just get busy placing my bets for the earnings call.

What bets are you looking to place? It sounds to me like you are looking at placing bearish bets?

I think that this might be a blow-out quarter for Tesla, and I might be going all-in long on Tesla right before the earnings. Just today I sold all my non-TSLA stock in my 401k and bought TSLA in case Elon Pre-announces earnings this weekend. I hope he doesn't, because I plan on buyin a lot of calls before earnings; some deep out of the money options too.

I think their is 70% chance for a huge quarter and only 30% chance for a bad quarter. I will take my chances.

 

[Nicu.Mihalache]

What bets are you looking to place? It sounds to me like you are looking at placing bearish bets?

I think that this might be a blow-out quarter for Tesla, and I might be going all-in long on Tesla right before the earnings. Just today I sold all my non-TSLA stock in my 401k and but TSLA in case Elon Pre-announces earnings this weekend. I hope he doesn't, because I plan on buyin a lot of calls before earnings; some deep out of the money options too.

I think their is 70% chance for a huge quarter and only 30% chance for a bad quarter. I will take my chances.

I still have about $20k worth of July TSLA calls and much less in July and September puts. I am trying to liquidate the calls, as they will expire in three weeks anyway. If we go higher in the short term, I will definitely get August puts and roll up my September puts (increase the strike for cheap). There will probably be an opportunity below $95 before earnings so I could get some speculative August calls, in the unlikely event of (very) good news.

The only upside I see is 5500+ cars delivered and better margins. But from my point of view, there is at most 15% chance for positive EPS (GAAP). Even the worst result will be presented in a good light, some will bite and some won't.

If you want my opinion on your recent moves, even if you're right this time, the risk is extreme and you will get wiped out the second or the third time. You have to buy from pessimists and sell to optimists, not the other way around

 

[Benz]

You have to buy from pessimists and sell to optimists, not the other way around

That's the way to do it.

 

[Nicu.Mihalache]

[...] in case Elon Pre-announces earnings this weekend.

Tesla pre-announced earnings only once, so inquiring minds want to know why. I would bet that they needed some weight in the "leasing" arrangement negociations. So I think it is very likely that it won't happen again soon. But they have done some unpredictable things lately, so there is still a chance that they will, especially if Elon want to treat shorts as Pavlov treated his dog.

 

[clmason]

Has tesla released any data on zev credit customers? What about transaction info? Are they priced at a flat rated or based on demand? Could they make more by withholding sales towards the latter part of the year when customers are itchy to fill their quotas?