Demand

[EinSV]

It was reported some time back that November 22nd would be the last day to order for Q4 delivery in the U.S.

Early January they will once again push out all those international orders that are mostly on hold in the meanwhile, so February makes sense...

January delivery for Model X sounds interesting. I wonder if the Model X demand really is that bad in the U.S. due to the falcon wings or the price?

Actually, I don't think it would make sense for there to be such a long delay if Tesla were not production constrained at current price points. Otherwise, Tesla would continue to make vehicles for immediate delivery in the U.S., or at a minimum be able to deliver Model S vehicles in the U.S. in a much shorter timeframe (such as early January).

In any case, I think the data is incontrovertible that demand for Model S is growing, as evidenced by:

• Increased pricing of S60 effective Nov. 22 together with delayed deliveries to both Europe and now U.S.
• Almost zero availability of S60 inventory models in U.S. and limited S60 inventory availability in Europe
• Increasing rate of VIN issuance from 13-14K/quarter in late Feb.- late August (roughly Q2/Q3 delivery timeframe) to approx. 17K/quarter late August to late November (roughly Q4 delivery timeframe) -- more than a 20% increase

It seems quite clear that absent some unexpected development Model S deliveries will be increasing signficantly in Q4 2016/Q1 2017, at the same time Tesla is increasing its pricing and limiting availability of its lowest priced Model S. The amount of increase in each quarter will depend on Tesla's ability to produce, ship and deliver vehicles.

Tesla will be selling more Model S vehicles even at higher price points, hence worldwide demand is clearly increasing.

 

[AnxietyRanger]

Actually, I don't think it would make sense for there to be such a long delay if Tesla were not production constrained at current price points. Otherwise, Tesla would continue to make vehicles for immediate delivery in the U.S., or at a minimum be able to deliver Model S vehicles in the U.S. in a much shorter timeframe (such as early January).

In any case, I think the data is incontrovertible that demand for Model S is growing, as evidenced by:

• Increased pricing of S60 effective Nov. 22 together with delayed deliveries to both Europe and now U.S.
• Almost zero availability of S60 inventory models in U.S. and limited S60 inventory availability in Europe
• Increasing rate of VIN issuance from 13-14K/quarter in late Feb.- late August (roughly Q2/Q3 delivery timeframe) to approx. 17K/quarter late August to late November (roughly Q4 delivery timeframe) -- more than a 20% increase

It seems quite clear that absent some unexpected development Model S deliveries will be increasing signficantly in Q4 2016/Q1 2017, at the same time Tesla is increasing its pricing and limiting availability of its lowest priced Model S. The amount of increase in each quarter will depend on Tesla's ability to produce, ship and deliver vehicles.

Tesla will be selling more Model S vehicles even at higher price points, hence worldwide demand is clearly increasing.

Let's not confuse leadtimes with production constraints, though. A two month delivery time for a custom order car is very fast by industry standards - by that measure any car is production contrained, most take much longer. Just-in-timing parts has leadtimes. Most German high-end basic volume models take longer than that. And this includes Tesla's expected overseas batching that likely takes up much/most of January and creates an artifical delay through batching... (Nothing abnormal about that of course.)

That said, with AP2 taking so long to ramp-up, definitely I can agree and see Tesla having longer leadtimes and delivery times in Q4 than they did in Q3 when people could get Model Ss built and delivered in a week. Unless there are manufacturing challenges with AP2, hopefully - for Tesla - this means AP2 has really increased demand. I certainly hope so.

 

[EinSV]

<snip>

January delivery for Model X sounds interesting. I wonder if the Model X demand really is that bad in the U.S. due to the falcon wings or the price?

I think moving back Model X deliveries from December to January is pretty normal for this time of year. In any case it is a mistake to look at one data point in isolation. Other relevant factors to consider when thinking about Model X demand include:

• Tesla has had very limited X supply in inventory all quarter in the U.S. and almost none in Europe until recently
• Tesla discontinued the X60, which would make little sense if it thought demand was limited
• X VIN issuance increased to about 13K/quarter
• There have been and continue to be extended delays in Model X delivery times, especially outside the U.S.
• Model X is reported to be very popular in China -- will be interesting to watch how this converts into sales

 

[EinSV]

Let's not confuse leadtimes with production constraints, though. A two month delivery time for a custom order car is very fast by industry standards - by that measure any car is production contrained, most take much longer. Just-in-timing parts has leadtimes. Most German high-end basic volume models take longer than that. And this includes Tesla's expected overseas batching that likely takes up much/most of January and creates an artifical delay through batching... (Nothing abnormal about that of course.)

That said, with AP2 taking so long to ramp-up, definitely I can agree and see Tesla having longer leadtimes and delivery times in Q4 than they did in Q3 when people could get Model Ss built and delivered in a week. Unless there are manufacturing challenges with AP2, hopefully - for Tesla - this means AP2 has really increased demand. I certainly hope so.

I personally think Tesla's practices provide a better point of comparison than industry standards (apples to apples).

Also, as noted in my prior posts, VIN issuance has increased substantially from Q2/Q3 - Q4 -- to roughly 30K-31K vehicles/quarter for S/X combined. Unless Tesla has chosen to skip large swaths of VIN numbers, which I doubt, this suggests an increasing book of orders.

I believe this is why you see Tesla bears holding out hope that Tesla has a swollen inventory that will only sell at a discount. I think the evidence strongly suggests that that is not the case, and that Tesla is heading toward increased sales and margins in Q4 2016 and Q1 2017, as long as it can ramp production to meet demand.

Anyway, I am tied up for a bit so this will be my last post on the subject for now ....

 

[AnxietyRanger]

I think moving back Model X deliveries from December to January is pretty normal for this time of year. In any case it is a mistake to look at one data point in isolation.

I agree it is just one data point and let's not make too much of it. Just pondering why Model X could be had sooner than a newly ordered Model S... Basically a month+ delivery time for Model X in the U.S.? That is very quick.

I agree - and know from first hand experience - that Model X deliveries outside of U.S. are a slow, slow trickle.

 

[AnxietyRanger]

Also, as noted in my prior posts, VIN issuance has increased substantially from Q2/Q3 - Q4 -- to roughly 30K-31K vehicles/quarter for S/X combined. Unless Tesla has chosen to skip large swaths of VIN numbers, which I doubt, this suggests an increasing book of orders.

I have no trouble believing order numbers have grown. The P100D, AP2 and the 60 are certainly nice demand levers - and I think continue to be so. The Supercharger news adds small additional twist to it, too, though only for the current quarter and a bit for the next.

I just don't think Model S is production constrained. I am not saying it isn't selling and growing still, given these and other efforts by Tesla that by all accounts seem to be quite successful moves at least for the time being.

I believe this is why you see Tesla bears holding out hope that Tesla has a swollen inventory that will only sell at a discount. I think the evidence strongly suggests that that is not the case, and that Tesla is heading toward increased sales and margins in Q4 2016 and Q1 2017, as long as it can ramp production to meet demand.

Quite possibly. Tesla has good, refreshed new products and has shown it can and does want to be more aggressive about selling them in the past.

The real tests IMO are: is Model X appealing once it is no longer production constrained and how will Model S fare once Model 3 gets closer. Other than that, I think the situation is quite nice for Tesla sales-wise.

 

[dennis]

Looks like estimated date for Model S US deliveries on new orders is now February 2017 (Jan/Feb. 2017 for X).

Seems like having a few inventory vehicles available to sell in the meantime will come in handy.

I see this as an extremely bullish indicator for Q4 when it is combined with the accelerated rate of VIN issuance.

In prior quarters you were able to order cars for delivery on the West Coast up until 15-20 days before the end of the quarter. This quarter it was cut off at 35. It appears that Tesla is confident in meeting or beating their 25K delivery guidance.

 

[bonaire]

My graph of Vin # growth on Model S is right now is about 6 days per 1000. (6,6,7,6,6) And the last four 1k's for the MX are (8,9,7,8). So, you can figure out a ratio of production from that for the last month or so. Basically about 2000/wk in aggregate Vin # assignment. This forecasts production throughput in the near term. I don't see "exiting 2016" with a run-rate above 2k per week given that most new Model X orders still get a vin # assigned nearly immediately after confirmation. The Model S rate is mainly linked to getting cars done for USA end of year delivery for tax purposes for some who want it. 2000/wk is ~100k per year total run rate but it's being watched closely, of course. There were 33 concurrent "viewers" of the Model S tracking spreadsheet earlier today. The 2000/wk run rate can be enhanced with inventory builds, of course, but only if sales location selling is completing walk-in sales at the same rate as inventory is layed out there. With advertising and more kiosk locations, they could sell at this rate through 2017 as long as the Model X gets some make-up "good reviews" following the recent Consumer Reports one.

 

[TMSE]

My graph of Vin # growth on Model S is right now is about 6 days per 1000. (6,6,7,6,6) And the last four 1k's for the MX are (8,9,7,8). So, you can figure out a ratio of production from that for the last month or so. Basically about 2000/wk in aggregate Vin # assignment. This forecasts production throughput in the near term. I don't see "exiting 2016" with a run-rate above 2k per week given that most new Model X orders still get a vin # assigned nearly immediately after confirmation. The Model S rate is mainly linked to getting cars done for USA end of year delivery for tax purposes for some who want it. 2000/wk is ~100k per year total run rate but it's being watched closely, of course. There were 33 concurrent "viewers" of the Model S tracking spreadsheet earlier today. The 2000/wk run rate can be enhanced with inventory builds, of course, but only if sales location selling is completing walk-in sales at the same rate as inventory is layed out there. With advertising and more kiosk locations, they could sell at this rate through 2017 as long as the Model X gets some make-up "good reviews" following the recent Consumer Reports one.

Do you have any estimates on Q4 delivery?

 

[Turing]

Do you have any estimates on Q4 delivery?

I'm still really bullish that tesla will beat @bonaire 2016 delivery estimate of 65k.

 

[EinSV]

My graph of Vin # growth on Model S is right now is about 6 days per 1000. (6,6,7,6,6) And the last four 1k's for the MX are (8,9,7,8). So, you can figure out a ratio of production from that for the last month or so. Basically about 2000/wk in aggregate Vin # assignment. This forecasts production throughput in the near term. <snip>

I expect the data from the past few weeks are a bit skewed as the order backlog is building, we just finished Thanksgiving and are approaching the end of year holiday.

But luckily for us, more data is available. If you apply the same methodology to a little broader data set -- either VINs issued since October 1 or VINs issued over the past 13 weeks -- your method results in a predicted production rate of about 17-18K Model S and 13K Model X over 13 weeks.

This equates to 30-31K S/X per quarter versus Q4 guidance of about 25,200.

That number seems a little aggressive to me for Q4 since the backlog seems to be growing and some of these vehicles won't be delivered until Q1 2017. But applying your methodology to a more complete set of data for the quarter does seem to point to Tesla being on target to meet or beat Q4 delivery guidance.

 

[TMSE]

I expect the data from the past few weeks are a bit skewed as the order backlog is building, we just finished Thanksgiving and are approaching the end of year holiday.

But luckily for us, more data is available. If you apply the same methodology to a little broader data set -- either VINs issued since October 1 or VINs issued over the past 13 weeks -- your method results in a predicted production rate of about 17-18K Model S and 13K Model X over 13 weeks.

This equates to 30-31K S/X per quarter versus Q4 guidance of about 25,200.

That number seems a little aggressive to me for Q4 since the backlog seems to be growing and some of these vehicles won't be delivered until Q1 2017. But applying your methodology to a more complete set of data for the quarter does seem to point to Tesla being on target to meet or beat Q4 delivery guidance.

Good points, but Mgmt has guided to about two weeks of shutdown due to holidays in Q4. So, using your numbers and applying 11 instead of 13 weeks, would result in approximately 25k units produced/delivered.

 

[EinSV]

Good points, but Mgmt has guided to about two weeks of shutdown due to holidays in Q4. So, using your numbers and applying 11 instead of 13 weeks, would result in approximately 25k units produced/delivered.

To be clear, I would not use this method to predict production -- to me VIN numbers are just one piece of the puzzle to factor in. For my own purposes I am more comfortable just sticking with an estimate derived from company guidance of 2300 cars/week x 11 weeks = 25,300 cars produced, with deliveries slightly higher due to a small drawdown from the 5,000 vehicles in transit. So call it 25,500-26,000 deliveries, which is about the number you came up with.

But applying @bonaire's methodology of using VIN numbers to predict upcoming production rates it doesn't seem to make sense to exclude holidays, since presumably the company factors them in when assigning VIN numbers, and we already have VIN numbers assigned to vehicles scheduled for delivery in 2017.

In any case, as you suggest, using this methodology should get you to guidance even if you deduct for a two-week shutdown at the end of the year (30,000x11/13=25,384) even if we assume 5,000+ vehicles in transit again at the end of the quarter.

My graph of Vin # growth on Model S is right now is about 6 days per 1000. (6,6,7,6,6) And the last four 1k's for the MX are (8,9,7,8). So, you can figure out a ratio of production from that for the last month or so. Basically about 2000/wk in aggregate Vin # assignment. This forecasts production throughput in the near term.

 

[vgrinshpun]

It was reported some time back that November 22nd would be the last day to order for Q4 delivery in the U.S.

Early January they will once again push out all those international orders that are mostly on hold in the meanwhile, so February makes sense...

January delivery for Model X sounds interesting. I wonder if the Model X demand really is that bad in the U.S. due to the falcon wings or the price?

The reason Model S delivery is projected for February, while Model X delivery is projected for January is because Model S production is batched by geographic area, while Model X production is not. This means that starting approximately last production week of December Model S production will be dedicated to Asia/Pacific/Europe, switching to US later during the quarter. This is not the case with Model X, as production seem to be allocated proportionately to the finalized orders throughout the quarter. This results in quantity of Model S delivered in a recent quarters approximately equal to quantity of cars produced during the same quarter, while for Model X more cars produced than delivered.

Here is the snapshot of the spreadsheet I maintain:

 

[AnxietyRanger]

The reason Model S delivery is projected for February, while Model X delivery is projected for January is because Model S production is batched by geographic area, while Model X production is not. This means that starting approximately last production week of December Model S production will be dedicated to Asia/Pacific/Europe, switching to US later during the quarter. This is not the case with Model X, as production seem to be allocated proportionately to the finalized orders throughout the quarter. This results in quantity of Model S delivered in a recent quarters approximately equal to quantity of cars produced during the same quarter, while for Model X more cars produced than delivered.

I agree that is how it goes on the Model S. Do you have any data references to support Model X being different? My own experience has been that Model X's heading to EU seem to - at least anecdotally - follow exactly the same pattern, no matter when the order is placed, building seems to start at end/start of next quarter...

 

[bonaire]

I'm still really bullish that tesla will beat @bonaire 2016 delivery estimate of 65k.

That's my Feb 2016 estimate. I've revised. At least 74k. I think Q4 is about 21.5k unless more 2-year leases pop in December. You know what,though? My 65k was actually far more realistic than so many who were way over 80k. Including the corporate directors. Think of all the things that happened during 2016 to "get there". P100DL, P90DL 30k discounts, classic->facelift fascia, 70, 60 re-intro with D, Ludicrous, etc and 2-year lease to offer to Model 3 waiters and others. And weeks of $7500 discounts on 75's during September that were "just not supposed to happen"... Oh yeah and now, AP2.0 hardware which is "muted" but supposed to be awesome next year. So, there is now a wave of on-faith buying/upgrading going on.

One thing to point out (notice the MX chart from vg...)

The # of cars produced can include # of do-over cars that fail QA inspection. If you go back through time, Tesla has produced far more cars than sold. They may hedge that saying "5000 cars in transit" but honestly, we have no idea how many cars are scrapped and 2nd one rebuilt for customers. Would they ever say (other than the "write-down" line?) Are do-overs sold to employees at big discounts? Who knows. It's in the thousands since inception, it would seem. Q4 is showing a lag in Vin#s due to in-progress Quarter. This is MS only. Blue almost always higher than red - built > sold ongoing. Vins have always "led" production and production leads sale. What you see below are 15Q4 supposed inventory sell-off in China, Denmark dump and other factors. Denmark definitely will not re-occur in 16Q4 while China is never clear.

(what you may notice is the chart above is not too dissimilar to the stock chart.)
As of now for MS only:
Totals Vins: 175,999 Built: 165,528* Sold: 159,887*
Vin # is through today, not 12/31. Expect another minimum of 7000 Vins in Dec.
* inclusive of my Q4 estimates.
That will be 10k excessive Vin #s for MS alone. Hard to determine how many do-overs make up the delta with Built > Sold.

The one great unknown is what the take-rate of MX will be in 2017 once the entire backlog is built-out. Since 5-seaters just "started" and all the coil springers are being asked to convert, if they choose to, to SAS, that backlog of "withheld" reservations is getting worked down.

What we do know is Tesla stated "35,000 Model X reservations" at the onset of 2016, 1/1/16. The max Vin # given at this point is 31999 (for P, not inclusive of Sig) and people get their vin #s at the date of confirmation. As such, what is the realistic view that many MX reservation holders have beefed up the MS order rate due to switch-away from buying an MX as they had planned to? What has to be looked at as time goes by is the settling out of take-rate of both models as the EV space "evolves". Naturally, they just cannot maintain 50% CAGR "for years to come" but it will evolve naturally as people get their friends to buy, they crash a car and buy a replacement, some come off lease and get replaced with new, etc. One obvious factor is that higher-end luxury car sales by the competition ICE makers has suffered and this is where the target market currently is. Model 3 changes the landscape.

 

[vgrinshpun]

I agree that is how it goes on the Model S. Do you have any data references to support Model X being different? My own experience has been that Model X's heading to EU seem to - at least anecdotally - follow exactly the same pattern, no matter when the order is placed, building seems to start at end/start of next quarter...

Well, the proof is in the pudding - look at the table I included in post above. Model X build is consistently above the deliveries, with the total cumulative differential of 3,796. This is far more than required for the "demo" fleet, so majority are cars in the pipeline. Cars in the pipeline are an indication of production that is geographically proportional to the incoming orders, as opposed to the produvtion batched geographically to minimize cars in pipeline while maximizing deliveries during the quarter that cars are produced.

 

[neroden]

I'm still really bullish that tesla will beat @bonaire 2016 delivery estimate of 65k.

Yes, that would require Tesla to deliver 11,311 cars in Q4. Pretty easy target to beat there.

 

[bonaire]

Well, the proof is in the pudding - look at the table I included in post above. Model X build is consistently above the deliveries, with the total cumulative differential of 3,796. This is far more than required for the "demo" fleet, so majority are cars in the pipeline. Cars in the pipeline are an indication of production that is geographically proportional to the incoming orders, as opposed to the produvtion batched geographically to minimize cars in pipeline while maximizing deliveries during the quarter that cars are produced.

What you don't factor in is whether a do-over car is added into the Produced category. Are all produced MX actually able to be sold? I can't imagine that end of Q3 being about 3600 "MX in transit".

 

[AnxietyRanger]

Well, all I can contribute is that the few Model X's I know of heading this way across the pond their manufacturing has followed the same pattern as with Model S. Manufacturing has waited for the change of next quarter, they don't seem to go to a normal queue as they do in the U.S... However, I am the first to admit this is anecdotal info.