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For financial analysis purposes, when you're analyzing a growing company with huge economies of scale, the critical thing is to separate out fixed costs from variable costs. You want economic gross margin, which only includes variable costs, and then you want to add up fixed costs separately, to figure out how many cars the company needs to make to cover the fixed costs.
it's completely useless to use GAAP numbers which include overhead.
This person is saying that Munro's numbers don't include overhead and that GAAP numbers do include some overhead. They're probably right about that.
In short, Munro's analysis is generating the numbers which are *useful* for financial analysis, and this... person... at Seeking Alpha is saying that the GAAP numbers may be worse for technical reasons which mean that they are *not useful* for financial analysis.
If you take this person's critique seriously, add some amount to your SG&A estimates for "fixed costs which are dumped into cost of sales because GAAP rules suck". I would do that.
Maybe if you do that you'll find that Tesla needs to make 8000 cars/week in order to break even. (Or 4000 cars per week. Or whatever.) I don't know, I haven't redone my calculations recently. But all it does is change the breakeven number of cars per week.
Looking back, Deepak said he expects depreciation to be “well below” $2,000 per car at a production rate of 5,000 Model 3s per week. Warranty may also be lower than the Seeking Alpha author is estimating. But these differences would change the gross margin figure by at most 4% — up to at most 11% from 7%.
Looking back, Deepak said he expects depreciation to be “well below” $2,000 per car at a production rate of 5,000 Model 3s per week. Warranty may also be lower than the Seeking Alpha author is estimating. But these differences would change the gross margin figure by at most 4% — up to at most 11% from 7%.
Warren Buffett has said he'd rather have two dollars of non-GAAP-reported income than one dollar of GAAP reported income.
If you have a reason to care specifically about how stuff is GAAP reported, please present it.
Anyway, I conclude that this conversation is over; Munro and the guy at Seeking Alpha are simply calculating different numbers, and Munro's is the useful one.
@neroden The Seeking Alpha author jaberwock is just trying to calculate gross margin the same way Tesla calculates gross margin, so that we can compare apples to apples.