Except that for every single quarter the last 2-3 years, highest VIN number assigned has been a stable predictor for number of model S cars produced.
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Except that for every single quarter the last 2-3 years, highest VIN number assigned has been a stable predictor for number of model S cars produced.
SebastianR
Active Member
On the matter of Demand - I don't believe that we have seen all of it yet. However, I do believe that we have seen a lot of saturation in the "easy" markets (think Norway, California, DK before the tax incentives ended etc.).
I believe the bigger issue for Tesla right now is, that there are 400k people waiting for the Model 3. And - to be honest - there is nothing much to do except for waiting. So I think that Tesla is required to do a lot to keep these folks as happy as possible and to show consideration to them.
Since the Model S / Model X is the "only" product they have on offer right now, I believe that we will see a lot of bending over backwards from Tesla to make the current offering attractive to these folks. Gee - if even BMW is trying to tap into the line of Model 3 reservation holders, I think that offering a Model S/X 60 or a 2 year lease (and who knows a bridge lending for an attractive price in future?) is more than appropriate.
Now call me a bull, but I believe that we don't see a demand issue right now but the inverse: a ton of people who would like to drive a Tesla but run into resource issues. Today, a person wanting to pay 45k USD for a car is lost to Tesla. In future there will be the Model 3.
In other words: right now and until the Model 3 is out, is the best time to buy a Model S / X on a budget. I would assume that with the Model X built complexity and also from a margin perspective, Tesla in future would rather sell a super well-optioned Model 3 than a base Model X/S. Thus if you want to buy an affordable Model S/X - the time is now.
I believe the bigger issue for Tesla right now is, that there are 400k people waiting for the Model 3. And - to be honest - there is nothing much to do except for waiting. So I think that Tesla is required to do a lot to keep these folks as happy as possible and to show consideration to them.
Since the Model S / Model X is the "only" product they have on offer right now, I believe that we will see a lot of bending over backwards from Tesla to make the current offering attractive to these folks. Gee - if even BMW is trying to tap into the line of Model 3 reservation holders, I think that offering a Model S/X 60 or a 2 year lease (and who knows a bridge lending for an attractive price in future?) is more than appropriate.
Now call me a bull, but I believe that we don't see a demand issue right now but the inverse: a ton of people who would like to drive a Tesla but run into resource issues. Today, a person wanting to pay 45k USD for a car is lost to Tesla. In future there will be the Model 3.
In other words: right now and until the Model 3 is out, is the best time to buy a Model S / X on a budget. I would assume that with the Model X built complexity and also from a margin perspective, Tesla in future would rather sell a super well-optioned Model 3 than a base Model X/S. Thus if you want to buy an affordable Model S/X - the time is now.
They do read the financial sheets. And they can easily see they issued bonds "for the GF" and spent it on daily life. They can see Tesla spending more dollars per car sold than they gave as future guidance in the past and margins are not improving that much and we can see the inventory cars being discounted somewhat aggressively to move old stock, as seen in Q4 2015 and now with classic designs. As they issue more stock to survive then bring in scty to keep it afloat, there comes a time when some will draw the line. BNP Paribas used to buy and sell millions of shares per quarter back in 2013 but has stopped. bailley Gifford seems to be playing a similar role now and is top holder. Being a Scottish firm, what makes them so interested and are they working for some european entity and not just favoring some new hot technology. With $2.5 billion on the line, and they do not have shares from the eary days like FMR and Trowe, they would be ones to have the most potential to damage pps if they react in a downtrend. They have tons of capital invested in tech stocks and need a stable market to hold an even keel. Maybe they are banking on downtrend of the value of USD against other baskets of currency if Hillary is elected and they have customers who are feeding funds into that campaign. One such feeder has bee the Saudis. She will continue to build on the prior eight years and much of that may include money printing to power spending projects. A lower USD should help ramp the stock market.
Let us not forget that the second term of Bill's administration saw a budget surplus; I always considered Bill to be a spend and tax democrat and Hillary to be fiscally conservative. She should receive at least some of the credit for Bill's achievement. As president, she will most certainly work to help the less fortunate and stimulate the economy, but not at the expense of continuing to reduce the federal deficit. Expect a strong dollar, but also expect that Hillary, like Obama, will speed the adoption of renewables and the electrification of transportation. With her election, we should expect a favorable environment for Tesla's growth.
Zhelko Dimic
Careful bull
Couple of thoughts and random observation...
I agree this demand lever pulling is not a great news. Why do it if it's not necessary? After all, S60 has lower margins, and 2 year lease probably has lower margins too, considering how inexpensive it is.
Having said that, I live in Toronto, Canada, market most similar to USA and there is nothing yet available in Canada along this line. My most inexpensive lease option for S60 is still 3 years, and is over $CAD1200 + tax with $5000 down+tax+freight etc...
This is still over $930US per month on a 3 year lease ++ on S60
This makes me think levers are pulled in a disciplined manner, not in panic, otherwise Canadian market would have gotten lease options similar to the USA. I'd soooooo jump on $600US S60.
Also, discounts on inventory cars, that are plentiful on USA market, well, they're ridiculously small in Canada. Is this implementation lag in canadian sales organization, or intentional decision to deal with inventory mostly in US? In any case, it tells me that demand softness is limited and what transpires in US is not part of Tesla worldwide strategy. So USA friends, enjoy your discounts!
Finally, I'm wondering if this is Q when Tesla decided to slay shorts!? I mean, demand could be a bit soft, and yet, through extra effort, Tesla could deliver close to 25K cars for ultimate 'kill'? Perhaps this is what they're trying to do, knowing that they'd be helped with shares recall shortly.
In any way, execution issues in the last 15 months have worn me down to the point that I think of completely un-leveraging and just going 100% TSLA shares, rather than some 150% eqviv. that I currently am. if I do it, that's likely to signal begging of a rally, since I've been baby-sitting this position for some 18 months, and sorta giving up would be a sign
I agree this demand lever pulling is not a great news. Why do it if it's not necessary? After all, S60 has lower margins, and 2 year lease probably has lower margins too, considering how inexpensive it is.
Having said that, I live in Toronto, Canada, market most similar to USA and there is nothing yet available in Canada along this line. My most inexpensive lease option for S60 is still 3 years, and is over $CAD1200 + tax with $5000 down+tax+freight etc...
This is still over $930US per month on a 3 year lease ++ on S60
This makes me think levers are pulled in a disciplined manner, not in panic, otherwise Canadian market would have gotten lease options similar to the USA. I'd soooooo jump on $600US S60.
Also, discounts on inventory cars, that are plentiful on USA market, well, they're ridiculously small in Canada. Is this implementation lag in canadian sales organization, or intentional decision to deal with inventory mostly in US? In any case, it tells me that demand softness is limited and what transpires in US is not part of Tesla worldwide strategy. So USA friends, enjoy your discounts!
Finally, I'm wondering if this is Q when Tesla decided to slay shorts!? I mean, demand could be a bit soft, and yet, through extra effort, Tesla could deliver close to 25K cars for ultimate 'kill'? Perhaps this is what they're trying to do, knowing that they'd be helped with shares recall shortly.
In any way, execution issues in the last 15 months have worn me down to the point that I think of completely un-leveraging and just going 100% TSLA shares, rather than some 150% eqviv. that I currently am. if I do it, that's likely to signal begging of a rally, since I've been baby-sitting this position for some 18 months, and sorta giving up would be a sign
Tesla just opened pre orders in Korea today. If the cars qualify for the EV incentive $15k) then Tesla will get thousands of preorders for the model s and x from just a single store in Korea. Population of 50 million in the area the size of ohio. Mercedes sells 1700 S-classes per month in Korea. Korea alone will account for several thousand new orders if they can deliver them there this year.
Also, they are taking orders in Taiwan and Mexico.
Also, they are taking orders in Taiwan and Mexico.
SebastianR
Active Member
I had one more thought: aside from the (pointless?) discussion on if Tesla today is able to produce more cars than they can sell - when would we want Tesla to be able to sell more Model S/X than there is demand?
Hear me out: There are 400.000 people on the list for the M3. We have a lot of people doubting that Tesla can ramp up quick enough. But we know that at some time they need to be able to produce a lot more cars than they do today. Of course these will not be Model S / X but M3 but still: wouldn't it be a very serious and credible warning signal if Tesla was not able to ramp-up production? I mean there are many people that doubt that Tesla can reach their production goals in 2020. If they were truly production constraint today - wouldn't raise doubts on their ability to deliver the volume they need to reach for the M3? In other words, shouldn't we all be happy to see Tesla's production capacity raise much quicker than the demand - provided that the demand for Model S / X is still growing steadily?
Hear me out: There are 400.000 people on the list for the M3. We have a lot of people doubting that Tesla can ramp up quick enough. But we know that at some time they need to be able to produce a lot more cars than they do today. Of course these will not be Model S / X but M3 but still: wouldn't it be a very serious and credible warning signal if Tesla was not able to ramp-up production? I mean there are many people that doubt that Tesla can reach their production goals in 2020. If they were truly production constraint today - wouldn't raise doubts on their ability to deliver the volume they need to reach for the M3? In other words, shouldn't we all be happy to see Tesla's production capacity raise much quicker than the demand - provided that the demand for Model S / X is still growing steadily?
I think it's premature to discuss demand for the model s and x until Tesla has expanded into more markets. Tesla still has very little presence in Asian cities that buy 100k cars. Think of places like the Middle East (Dubai, Abu Dhabi, etc), Moscow, Seoul, Taipei, Jakarta, Singapore, Bangkok where Tesla has no presence. Tesla has untapped demand for thousands of cars from just a handful of cities across Asia (look at how many cars are sold in Hong Kong).
Tesla's launch in Asia was kind of slowed by the problems they had in China (slow launch and grey market cars at huge markups that sapped demand). Grey market Model X's are being sold for 70k over the base price in China.
A single store in Taiwan and Korea will open up the market to 75 million more potential customers. Tesla will do really well in population dense island based countries where gas is expensive and range doesn't matter. Also other places like Israel(MBLY) would be a good market since you can't drive very far in that country either.
Tesla's launch in Asia was kind of slowed by the problems they had in China (slow launch and grey market cars at huge markups that sapped demand). Grey market Model X's are being sold for 70k over the base price in China.
A single store in Taiwan and Korea will open up the market to 75 million more potential customers. Tesla will do really well in population dense island based countries where gas is expensive and range doesn't matter. Also other places like Israel(MBLY) would be a good market since you can't drive very far in that country either.
If demand goes soft on S/X, it has van and truck bodies in the works. M3 is gong to have a lot of autonomous driving features to keep Tesla at the bleeding edge of the industry. What the world needs right now is M3 based EVs in sedan, SUV, van and truck truck bodies without the automation.
Public interest now demands all current EV incentives be phased out in favour of new incentives for EV with a minimum of US EPA 200 mile range and for 24-hour charging stations with suitable fast charging infrastructure. There is a full range of 2-, 3-, 4-, and more, wheel vehicles designed purely for local travel -there should be incentives for these as well. Hybrid trucks (freight only) with a minimum EV range of 50 miles should also get incentives. At present, only Tesla has vehicles in the market that allow people to reliably do intercity trips. The Chevy Bolt will be another. In 5 years a 200 mile electric range will be common. Investment in charging stations needs to reflect this range - a shorter range leads to big gaps in the charging networks. Government incentives should purely focus on what will be sustainable use of EVs and supporting infrastructure. Telsa should be advocating for this change in its own, and the public, interest. Tesla should also be thinking about supplying its EV drivetrain, automation, battery, and charging systems to other vehicle manufacturers. Robert Bosch and the other electrical and electronic suppliers have a lock on a large share of industry profits. Making carbodies and selling cars is generally a low margin business. While Tesla should stay in the solar, battery and vehicle markets as a premium brand and industry leader, the big profits are in its core technologies.
The S. Korea market could be quite good and that would be a general benefit to other Asian markets. So, that is a tail-wind. But wil it be like Norway or Japan in result? Pretty good incentive of $15,000 but
I look at this chart as a possible guide to what markets can do - it is a list of disposable income by average wage. SK is below UK and above Germany.
List of countries by average wage - Wikipedia, the free encyclopedia
What seems to be missing are good sales of all EVs in certain countries like Ireland which has higher disposable income and higher petrol prices. Sort the list by disposable income descending and you can almost line that up with Tesla sales by country. But what then has to be done is multiplication by the number of active workers in each country's labor force.
And yes, I know that non-workers buy Teslas and other EVs. Retired people with investments certainly do buy cars. But their demand for cars with range for commuting is not really there - their driving while retired is a different blend of needs and time-frames.
This link below indicates a law needs to be changed - as electric vehicles are not allowed on highways.
Seoul, South Korea Offers Up To $24,825 In Electric Car Incentives
What we see in some of the data, like Vin # counting, is that the rate of Vin # issue has not been steady yet at 2000/wk or more. We need to see the combined S+X Vin # given out become steady-state at 2k/wk and more, or else new markets need to come along to create demand for inventory deployment (maybe 500 MS 60s can be sent to S Korea?) Would lease "deals" like the 2-year be available in S. Korea?
Demand as a word can include "we need to put cars on sales lots around the world so demand can be created". "Net new orders" appears (and calculates) to include that. Demand is basically "economic weather" and that has various types. I wrote elsewhere that in my mind, "demand" equates to "binding contracts with an eager customer". I actually believe M3 reservations is "active involvement" but not truly a demand number.
I look at this chart as a possible guide to what markets can do - it is a list of disposable income by average wage. SK is below UK and above Germany.
List of countries by average wage - Wikipedia, the free encyclopedia
What seems to be missing are good sales of all EVs in certain countries like Ireland which has higher disposable income and higher petrol prices. Sort the list by disposable income descending and you can almost line that up with Tesla sales by country. But what then has to be done is multiplication by the number of active workers in each country's labor force.
And yes, I know that non-workers buy Teslas and other EVs. Retired people with investments certainly do buy cars. But their demand for cars with range for commuting is not really there - their driving while retired is a different blend of needs and time-frames.
This link below indicates a law needs to be changed - as electric vehicles are not allowed on highways.
Seoul, South Korea Offers Up To $24,825 In Electric Car Incentives
What we see in some of the data, like Vin # counting, is that the rate of Vin # issue has not been steady yet at 2000/wk or more. We need to see the combined S+X Vin # given out become steady-state at 2k/wk and more, or else new markets need to come along to create demand for inventory deployment (maybe 500 MS 60s can be sent to S Korea?) Would lease "deals" like the 2-year be available in S. Korea?
Demand as a word can include "we need to put cars on sales lots around the world so demand can be created". "Net new orders" appears (and calculates) to include that. Demand is basically "economic weather" and that has various types. I wrote elsewhere that in my mind, "demand" equates to "binding contracts with an eager customer". I actually believe M3 reservations is "active involvement" but not truly a demand number.
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I don' think individual disposable income is an accurate assessment of demand in Korea.
In July of 2016 German sold 460 S-Classes. In Korea, they sold 1700 (starting price 130k) in July. Korea is shifting away from diesels after VW, in fact, right now VW and Audi are completely banned from selling cars in Korea. The difference with Norway is that Korea has 10 times the population so Korean sales will far exceed those in Norway. Also in Japan, people don't really buy large cars.
Do they buy large cars in S. Korea? Someone said it is 50 million people in the space of Ohio. Range is not a big deal so the MS 60 fits their needs well as will Model 3. S. Korea is a country with lots of tech pride and their Kokam and other battery makers are some of their pride. I wonder how they will feel with Japanese or USA-made cells coming into the country. Also, that weird law not allowing electric cars on highways needs to be revoked.
Disposable income is a huge part of the decision to pay for expensive cars. I doubt that "all" S-class buyers will migrate to Model S. Let's start with thinking that 10% would convert then 20% as experience grows. If Tesla lands 500 inventory Model S and 200 Model X into the country, that would be a good base to start selling from. They may not want to wait for custom orders but rather begin with active selling. From press coverage to possible slight advertising to start selling inventory quickly.
I think S.Korea would be a poor market. The S-class buyers are heads of large companies who are driven around in comfort. Just like in China, the rear passenger space is more important than driving dynamics. Source: watch a lot of Korean drama.
Not being able to ramp up certainly is a risk for M3. But M3 production goal is an order of magnitude higher than S+X combined in two years. So, even if they show they can double production for S+X (which they basically have been doing for several years), it does little to convince people about M3 production ramp up
Let's not forget that Telsa essentially put in wrong manufacturing capacity for Model S/X from the get go: 20K for each, and on the assumption that there will be a lot of commonality between MX and MS. AFTER the manufacturing capacity was put in place they needed to redo what they put in place to TRIPPLE the manufacturing capacity, while maintaining production, due to surprising demand for Model S. Also, due to high demand for Model S (3 times higher than originally projected), the urgency of producing MX was no longer there and Tesla changed priorities, spending more time on design of MX, increasing new features while decreasing commonality with the MS. Due to this creep of the MX design the commonality between MS and MX was greatly reduced, and this again had an impact on the required manufacturing modifications. Model S, the first car design by Tesla from scratch, was designed to be a compelling car first and foremost; by Elon's acknowledgement, manufacturability was not a concern.
None of the above factors are in play with Model 3. The design is complete, was done with the manufacturability in mind from the ground up, pencils are already down, the demand was tested BEFORE any manufacturing equipment was put in place.
As far as I am concerned any comparisons and attempts to draw any conclusions by comparing manufacturing ramp up of MS/MX with Model 3 are not valid. This was explicitly highlighted by Elon several times.
None of the above factors are in play with Model 3. The design is complete, was done with the manufacturability in mind from the ground up, pencils are already down, the demand was tested BEFORE any manufacturing equipment was put in place.
As far as I am concerned any comparisons and attempts to draw any conclusions by comparing manufacturing ramp up of MS/MX with Model 3 are not valid. This was explicitly highlighted by Elon several times.
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dc_h
Active Member
I think they need a back seat designed in China, or specifically for China. Could use the same model for Korea. Auto-show has a lot of cars with very refined back seats, high end Kia comes to mind, with very limo-like personal controls in the back seat.I think S.Korea would be a poor market. The S-class buyers are heads of large companies who are driven around in comfort. Just like in China, the rear passenger space is more important than driving dynamics. Source: watch a lot of Korean drama.
SebastianR
Active Member
Agree 100%
It is a necessary but (as you point out) not a sufficient condition. My argument is this: if they couldn't even meet Model S/X demand, then how on earth are they going to ramp to meet Model 3 demand? Also, let's not forget this argument goes for all the suppliers, too. If we believe the articles that claim that all kinds of suppliers are trying to impress Tesla right now in order to get some of the upcoming Model 3 pie & if you take the comments from Elon Musk into account that any "non-performing" supplier will be kicked out and never be let in again - I mean with all this - if they still couldn't meet Model S / X demand today - that would be a really bad sign for the future.
Thus today with the Model X ramp issues out of the way, I really hope that Tesla is no longer production constraint.
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