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Discussion in 'TSLA Investor Discussions' started by JRP3, May 20, 2016.
Have at it.
It will be interesting to see whether members who are concerned about demand not letting Tesla meet 2016 guidance actually use this thread.
If they continue the discussion in the Short Term Price Movements thread, that would mean that the real reason for the discussion on demand is to just troll the most often visited thread on the Forum...
This is a topic that can become important at some point. I personally posit that "demand" is an intangible concept that cannot be easily modeled or measured. As long as demand is adequate that's all we can conclude.
Elon has actually somewhat muddied the waters on this issue, after pressing on about being "production constrained" quarter after quarter. He hasn't been wrong but it has created this idea (with some people) that Tesla sales are either limited by production capacity or demand in a very oversimplified way. In reality the are many complex variables that work together and also interact with each other in complex ways. For example: demand will be modulated by wait times, there are many more or obvious as well as more subtle ways to throttle or stimulate demand (Elon's "demand levers")."Demand" in the simplified way it has been discussed (in excess) lately here on TMC is largely an issue of perception.
The only hard metrics we have are: delivery numbers, reservations (in the extent that Tesla are willing to share these) and customer deposits on the balance sheet. In addition to this we have Tesla's own production guidance but we all know these are projections that can be more or less realistic and more or less optimistic.
One important concept for me is Elon's repeated warnings not to reason by analogy, I.e. to be very careful just extrapolating current trends in to the future. Again, there is something unmeasurable and unmodelable going on here which is the big driver: the big back drop phenomenon of a global shift away from fossil fuels, toward renewable energy, battery storage and electrified personal transport. My personal assessment is that we are still in the very early phase of these big changes and that a lot will change rapidly in the coming just 5-10 years. There will be large changes in public policy that can drastically alter the basic conditions in which demand for Tesla products exist (and I expect it will be a huge demand driver). Along with this, and as important, are changes in public perception and awareness of these issues, again something that will be an enormous demand driver. The third and equally important of these large scale changes is the change in macro economics and in particular the inevitable absolutely enormous divestment out of fossil fuels that will occur and the fact that all this capital is going to be looking for growth, and will find it in precisely the business Tesla is in. That kind of access to capital will be a driver of demand indirectly.
I like mrdoubleb's link the best: https://teslamotorsclub.com/tmc/attachments/177438/
Now that founder's and signature model X's have been delivered, the customer deposits number is simpler to calculate.
With ~$400million worth of $5000 deposits, that's deposits for almost 80k vehicles!
Any concerns about model S/X demand should be compared against the size of the customer deposits.
That inflection point is pretty!
I suspect total vehicles should be more since 5k deposit is for X, but S is 2.5k. So somewhere between 80-160k vehicles.
Demand likely won't be an issue this year. Even if Model X demand turns out to be soft, Tesla will be continually opening new markets for the Model X, and the pent-up demand will carry them through the year. Next year might be more difficult, but if Tesla successfully starts to ramp up Model 3 production in Q3, no one will care if S+X demand is only like 80k.
I don't think demand will be this soft, though. I think there are many fence-sitters who will jump down once they have an opportunity to test drive the X, wait times drop and Tesla continues to sort out issues with the X.
I'm aware this might be slightly off-topic but since this is about demand: what about the perception around demand for Tesla. There was a guy on the German TFF forum who spoke to a guy working at Mercedes Benz (there you have it, very very weak source - I know) but rumor has it that people working at MB simply don't believe the 400k reservations for Model 3 are real and that Tesla can be happy if they sell some 15k Model 3 - the whole proposition is laughable (for instance, why would a cheaper Tesla sell less than the expensive one etc.) but if some of these misconceptions are part of what forms the Wall Street consensus around the TSLA narrative, I can explain some of the Tesla FUD better...
I was one of those people at a Tesla store early when you could give a deposit for your Model 3 on March 31st. I arrived very early in the morning before people get up for work thinking I would be the 3rd or 4th person in line. I was the 29th in line. By the time 10:00 in the morning came and the store opened, there were about 150 people behind me. It was a cold morning and people still came out to give their deposits in person. There are video and news feeds of many stores having 500 people waiting in line in the morning before the store opened to leave their deposit. This is real! We are talking about over 350,000 deposits now. Even if it is only 100,000, which it is not, it would still be an unbelievable number of people willing to wait 1.5-2 years for a car that they have not yet test driven. I predict that the Model 3 demand will be larger than the demand of "pony" cars started by the Ford Mustang back in 1964. By 2019-2020, if Tesla can stay close to their production schedules, we could be looking at 1,000,000+ cars sold/reserved yearly...and, it will just get bigger with the Model Y. I already own a Model S (over 3.years old with almost 70k miles) that is a phenomenal car and a step above all other cars I presently own or have owned in the past. And, I have owned MB, Audi, Porsche, Nissan, Volvo, BMW, etc. It is tough to describe the driving experience and feeling you have while driving other than to say that Tesla is currently delivering a paradygm shift in the automotive market. I track a couple of my cars, specifically my 911 and GTR and they are awesome driving experiences on the track and on the road, but, our Tesla Model S gives me a bigger thrill each time I go out for a drive. Once the broader public gets the chance to experience driving the Model 3, which will be made for the mass audience, demand will just explode. The instant torque, the handling, the feel, the way the steering wheel just feels in your hands, the view out the front. All of these sensations will convince people that this car is just better than what they are presently driving. And, the bonus is that they will never have to visit a gas station again. Just plug it in at night like their iPhone and have a full tank of electricity in the morning to drive at least 220 miles+ Before having to charge again...and the additional bonus you have is that the Tesla Superchargers (that are FREE) will be all over the world so you have no worries when driving long distances. These value propositions cannot be beat by any other auto manufacturer presently. Tesla has such a huge advantage right now that continues to grow longer by the day as other auto Manufacturer's continue to make compliance cars. We welcome the competition and know they are capable, they just are not delivering and Tesla is and will continue to do so.
One final thought...at least Tesla has stepped up to the plate over the last 10 years to give the world a real use electric car that is every bit as good if not better than an ICE car. Yes, their introductions gave been late each time, but, they did deliver, in spades. What are we getting so far from the so-called automotive Manufacturer's that are supposed to be experts...nothing! We are talking about a start-up that, we all admit are having teething pains, was given no chance to survive and they are currently hitting Grand Slams.
What you described here, as well as the incredulity I experience still to this day that my car is "all electric" is why I continue to believe that Tesla has a lot of room to grow. There are people I talk to almost on a daily basis that do not even know what a "Tesla" is. I live in a metropolitan area too, and we have a Tesla store. The market penetration is so minimal right now. Tesla has the potential to really become a more well-known brand, and I would say that only when more people start seeing these things (perhaps Model 3) on the roads daily that demand will start to spike hard. When that time times, Tesla better be ready to make 1M+ cars per year at least.
Doesn't this chart just show people configuring for the model X?
Speaking only for Sweden, where I live, Tesla is still in an early adopter/enthusiast phase but interest is now spreading among premium car buyers and others. It is also clear that demand is higher in Stockholm than in the rest in Sweden, which is typical for new trends and "paradigm shifts". Growing demand is clear not only from new registration of cars but from growing buzz. Looking at Google trends is an helpful indicator. The increase in Tesla interest from 2015 is phenomenal, with a peak in April 2016 with the Model 3 release. Tesla is still a very rare car in Sweden, the 28th most common new car in Sweden in the first four months of 2016. No Model Xs have been delivered (registered) yet so I am confident 2016 will be another year with a very strong growth for Tesla.
160k backlog. Meanwhile you can order a car and recieve it in 4 weeks while the production rate is 50k yearly. Not even math laws can hold Tesla down.
This right here is pretty much what I was feeling compelled to post. Hate to do so in the ST thread!
Demand is a meaningless "metric" without a certain level of awareness of the product.
Teslawareness is a deep deep untapped well of potential in most regions still.
To prove or disprove this lack of awareness saturation, simply drive a Model S as an Uber car for two days. Any US state that does not end in the letter "A." Answer the passengers' questions about the company, car, charging logistics and cost of ownership. Demonstrate the performance of the lowest-powered S and note the reactions!
Now favor us with an assessment of what Demand should look like after awareness is at a decent level, when people generally know these things.
I agree, with the car at the right price point.
Tesla likely has showrooms with a couple miles of every higher volume Mercedes dealership. In high net worth zip codes in the U.S. there are many Tesla's. The early adopters in these zipcodes will drive some demand growth.
But there are not likely areas with many high net worth household that are untouched by Tesla.
The real question is how much model 3 has dampened model S demand. No one knows. The other question, paradoxically, is how much model 3 interest will drive model S sales.
Fortunately for Tesla, most potential buyers over the next year will assume that the model 3 is considerably less car than the model S.
Pretty unknown even in many parts of CA! I still run into someone who either has never seen one or has no clue about tesla every day
Oy, I had to reply to this just so I could add some line returns and chop up that never ending paragraph. More white space please.
I completely agree with this assessment. I flew to Detroit last weekend to pick up my Model S, and there were nothing but turning heads when we were driving around and lots of questions about the car when we parked. Everyone who rode in the car was blown away.
Even charged up at a Chevy dealership and they were very friendly and inquisitive.
You can order a Model S and get it soon. Not true for Model X or Model 3. Current estimates are:
Model S Late June (if I order on May 21 so maybe 4 or 5 weeks)
Model X July delivery (if I order on May 21 so maybe 8 weeks?)
Model 3 late 2018 delivery (If I order on May 21 2016 I might get it in 100 weeks or so?)
And assuming 2,500 a week max production rate per car type we get
Model S under 12,000 backlog
Model X under 20,000 backlog
Model 3 under 400,000 backlog
So yes, looking at those numbers I think you are right there is no way that S/X alone are 160,000 backlogged.
The only way that would make sense would be if 80,000 or so Model X are all in transit between the factory and delivery right now.
I could believe there are tens of thousands of model X working through the pipeline right now but not that many.
Don't forget that Model X deliveries haven't started in most of the world. If I try to order a Model X here in Norway, I will get delivery "late 2016". Maybe Tesla is running low on reservations in the US, but the solution is simple: Start deliveries in more markets.
That's been my experience.
Demand follows awareness. Butts-in-seats drives compulsion. Which is an order of magnitude more powerful than 'demand.'