Demand

[dc_h]

I hope they do shorten lead times in Q2. As Model 3 picks up they will likely move S&X line workers to the new Model 3 line and they may slow down production while the new line ramps up. They are also likely to have shutdowns as new systems come online. The question is whether they are cutting delivery time by increasing production or reducing demand. Seems like they can produce 2500 or more cars per week now and continue to tweak towards dread naught .5 or .6.
I recall 500 and 1000 cars a week being big milestones, seems likely innovation will continue and the S&X lines will be over 3000 capacity by the end of this year. Capacity/=demand, but they should have ability to keep increasing output. The continued manufacturing improvements should also improve quality, which I'm sure is a big goal. Need to improve quality to reduce service costs and service center demand.

 

[Spidy]

Buy now

Model S and X 100 kWh price increase on April 16th • r/teslamotors

 

[JRP3]

Hmmm, discontinuing their cheapest model and increasing the price on their expensive model, yup, sounds like a demand problem for sure.

 

[kenliles]

Hmmm, discontinuing their cheapest model and increasing the price on their expensive model, yup, sounds like a demand problem for sure.

Prepping the M3, for the Have-Nots

 

[Spidy]

Hmmm, discontinuing their cheapest model and increasing the price on their expensive model, yup, sounds like a demand problem for sure.

It increases short term demand. Considering an 100D? Why wait another month an pay more. Or here is the effect of phasing out the 60kWh battery...

 

[JRP3]

Except that people only have 7 days to act on it if prices go up on the 16th.

 

[FlatSix911]

Tesla’s used vehicles are selling faster and closer to list price than most cars, report says

For the study, Alex Klein, VP of Data Science at Autolist, analyzed data from over 10 million vehicles and came to the conclusion that the Model S outperforms even the top performing GM and Ford vehicles.







Unsurprisingly, it also outperforms the vehicles in its own segment:

“As compared to its peer group – which includes the Audi A7, Porsche Panamera, BMW 6 Series, Mercedes-Benz CLS, and Lexus LS 460 – the Tesla Model S has seen prices trend between 3% and 5% above expectations for the past year.”

 

[bonaire]

Interesting numbers for possible builds going into Q2.

Quarter MS MX Total Vin #s
2016 Q1 13019 5324 18343
2017 Q1 12099 11227 23326 (fewer MS, double MX)

2016 Q2 13267 7655 20922
2017 Q2 2000 2000 4000 as of Apr 14 (appx and some indication are many inventory pre-assigns)

I have found that a good number of the recent Vin #s are going to be inventory.
MX 43xxx (33%+)
MX 44xxx (35%+)
MS 189xxx (42%+)
MS 190xxx (48%+)
MS 191xxx (36%+)
MS 192xxx (10%+)
MS 193xxx - interesting that some are already listed as Euro inventory in Ger/Nor/GB.

The later two-three 1000s are not yet filled in yet but it looks like there will be similar. It's clear the inventory selling model is working and has led to lower chatter in the forums about custom ordering.

This article indicates Model 3 will be more of a "pick from inventory" model and perhaps these recent blocks of inventory are going to test the waters. I've never bought $80k-120k+ cars off the lot but I guess there are people who do.

Supporting data shows inventory planning is building at similar levels as last summer.

 

[schonelucht]

@Bgarret asked me why I think Q2 may not have the orders to repeat Q1 deliveries. To keep the original thread clean, my reply here.

Interesting. First I've read of this on any thread. What are you basing demand slow down on @schonelucht ?

Now, all of the below are mere indications. Some may be due to other reasons. But together as a whole, they paint the picture that I see. I would welcome contrarian indicators.

* Free supercharging end pulled some demand forward
* Tesla emptied the international pipeline significantly going into Q2
* VIN assignments are lower than for Q1. Model S 190000->197000 took 7 weeks. Model X 42000 -> 49000 took 9 weeks.
* CPOs are withdrawn, while inventory levels are healthy, possibly to highlight the latter
* Model 3 being downplayed severely. Possibly because Tesla is starting to see people postponing a possible purchase to 'see what's new'
* Esp for Model S, cars go into production relatively quickly after being ordered
* Price level shift on the bottom end (75 costs what 60 used to cost) where demand elasticity is highest
* Initial surge of X deliveries in RHD countries in Q1
* Tax increase on EVs in Hong Kong
* Norwegian April deliveries are down heavily compared with January

In balance, the price increase on the top line would suggest enough deliveries. But, that price increase was well telegraphed to the markets, weeks in advance while the price decrease came out of the blue (suggests that price leaks were intentional). And that price increase was partially undone by folding a number of options into the base price.

It's not all bad. For example there are two boats with new cars inbound for Europe. Could be that May is going to be surprisingly stronger than we are used to.

All in all, I would bet deliveries in Q2 closer to 22 000 than 25 000 should things remain as they are. However, there are still two months for Tesla to turn on a demand lever (something it has been able to do before). It could come out with new tech for example. This could spur a lot of sales of existing inventory at reduced prices and with the short production times, they could still take orders for delivery this quarter in California for at least an additional month if not longer. There is also some more leeway in emptying the pipeline further. And spring generally sees more orders anyway than winter. We will have to see!

 

[schonelucht]

Also I forgot to mention that we do not yet have enough data to see if the 75 to 60 pricing triggers additional demand. It might just deliver the boost necessary to still to get to 25k this quarter.

 

[EinSV]

@Bgarret asked me why I think Q2 may not have the orders to repeat Q1 deliveries. To keep the original thread clean, my reply here.



Now, all of the below are mere indications. Some may be due to other reasons. But together as a whole, they paint the picture that I see. I would welcome contrarian indicators.

* Free supercharging end pulled some demand forward
* Tesla emptied the international pipeline significantly going into Q2
* VIN assignments are lower than for Q1. Model S 190000->197000 took 7 weeks. Model X 42000 -> 49000 took 9 weeks.
* CPOs are withdrawn, while inventory levels are healthy, possibly to highlight the latter
* Model 3 being downplayed severely. Possibly because Tesla is starting to see people postponing a possible purchase to 'see what's new'
* Esp for Model S, cars go into production relatively quickly after being ordered
* Price level shift on the bottom end (75 costs what 60 used to cost) where demand elasticity is highest
* Initial surge of X deliveries in RHD countries in Q1
* Tax increase on EVs in Hong Kong
* Norwegian April deliveries are down heavily compared with January

In balance, the price increase on the top line would suggest enough deliveries. But, that price increase was well telegraphed to the markets, weeks in advance while the price decrease came out of the blue (suggests that price leaks were intentional). And that price increase was partially undone by folding a number of options into the base price.

It's not all bad. For example there are two boats with new cars inbound for Europe. Could be that May is going to be surprisingly stronger than we are used to.

All in all, I would bet deliveries in Q2 closer to 22 000 than 25 000 should things remain as they are. However, there are still two months for Tesla to turn on a demand lever (something it has been able to do before). It could come out with new tech for example. This could spur a lot of sales of existing inventory at reduced prices and with the short production times, they could still take orders for delivery this quarter in California for at least an additional month if not longer. There is also some more leeway in emptying the pipeline further. And spring generally sees more orders anyway than winter. We will have to see!

@schonelucht, Tesla clearly has taken a number of steps to try to ensure that Model S/X demand remains solid through the Model 3 reveal/launch, which you nicely summarize.

In terms of Q2 delivery predictions, one factor to consider is that Tesla likely had a larger than normal backlog of orders going into Q2.
For example, in Q1 US website Model X deliveries were switched to May very early -- on Feb. 3 for X75D/X90D and Feb. 10 for X100D, P100D -- and Model S US deliveries were also switched on the early side (Feb. 25 or earlier). Website wait times for delivery change (posts 1048, 1052, 1056). I believe the same was true for Europe at least for Model X although I don't have the exact dates at my fingertips.

Since there was effectively an extra month of Model X orders banked going into Q2 (along with a smaller number of S orders), I would expect this to provide a fairly substantial tailwind for Q2 deliveries.

Also, I tend to view delivery data for the first month of the quarter as fairly meaningless as a predictor of how the quarter will go given the way quarterly production rolls out (overseas production in the first month with few of those delivered), although an overhang from the previous quarter can help as it did in Q1.

The biggest question in my mind is the extent to which preparations for Model 3 production may interfere with S/X production and whether there will be any significant shutdowns this quarter. Maybe we'll hear something about that on the earnings call.

 

[geneclean55]

The effect of Initial surge of RHD MX during Q1, and taxes in HK, could be blunted by new markets coming online in South Korea, Middle East.

 

[schonelucht]

In terms of Q2 delivery predictions, one factor to consider is that Tesla likely had a larger than normal backlog of orders going into Q2.
For example, in Q1 US website Model X deliveries were switched to May very early -- on Feb. 3 for X75D/X90D and Feb. 10 for X100D, P100D -- and Model S US deliveries were also switched on the early side (Feb. 25 or earlier). Website wait times for delivery change (posts 1048, 1052, 1056). I believe the same was true for Europe at least for Model X although I don't have the exact dates at my fingertips.

I have difficulty reconciling this supposedly larger backlog with the speed with that orders get produced. For example I count 26 Model S orders that confirmed in March with delivery ASAP. 6 of them went in production the same month, another 15 went in production the first half of April and 1 4/19 and the rest were just not updated.

Personally I think the delivery dates were pushed out because of the reconfiguration of the production line in February. I can see Tesla taking a conservative approach given how much was going on in the factory at the same time and how badly the production retooling went last year.

Also, I tend to view delivery data for the first month of the quarter as fairly meaningless as a predictor of how the quarter will go given the way quarterly production rolls out (overseas production in the first month with few of those delivered), although an overhang from the previous quarter can help as it did in Q1.

Another question that I didn't mention here is. Normally the first few weeks is all dedicated to overseas production. Didn't happen this time around. We can find many US production starts very early in the quarter.

The biggest question in my mind is the extent to which preparations for Model 3 production may interfere with S/X production and whether there will be any significant shutdowns this quarter. Maybe we'll hear something about that on the earnings call.

Both S and X go into production pretty soon after confirmation and this trend is still current. I don't think they are production limited at this point.

 

[schonelucht]

The effect of Initial surge of RHD MX during Q1, and taxes in HK, could be blunted by new markets coming online in South Korea, Middle East.

Good point. Didn't really consider this and that may be a mistake. I saw some action from Dubai over the last few weeks on the forums. These new markets may certainly contribute positively. Although I think the hard core Tesla fans in those countries already imported a car. And since Tesla doesn't do advertising, most of the sales come form mouth-to-mouth which usually takes a few quarters to get full steam ahead.

 

[ggr]

@schonelucht, I don't agree. First, you don't seem to be taking into account demand at all from Asia. It's quite possible that any slack is being taken up in China or the newly opened Taiwan and South Korea market. Second, Q2 should be a full-production quarter with no short months and no shutdown of the factory; Tesla would be smarter to have smoothed deliveries over the two quarters if there was actually a demand problem. Third:

Normally the first few weeks is all dedicated to overseas production. Didn't happen this time around. We can find many US production starts very early in the quarter.

I see no evidence for the first part, and the second part is circular argument; you assume demand is limited because of US production starts, but if the factory is getting more efficient (and there is demand) they can produce more US cars and more OS cars at the same time.

 

[luvb2b]

asian demand has definitely had healthy growth.

@schonelucht maybe on to the fact that model s production has reached a new level of efficiency and orders for model s have flattened somewhat. there has been some slowdown in auto sales overall too. these are most likely to appear on the model s which has had time to penetrate its market more deeply than the x.

@ggr when i go to my local tesla store it is as busy as i've ever seen it. last weekend was even hard to get a test drive scheduled. a friend just bought an x and he was told it would be late june to july if he ordered today. so he took an inventory vehicle instead. even if demand for the s has flattened, there are so few x's that have been produced (< 50k) and the market for those is fairly large.

that friend who bought the x - he had compared to a number of different luxury suv brands and basically came away with tesla being the same price after adjusting for fuel and the tax credit, but with many extra features from upgradability. he's a very picky analytical buyer so that was good to see. the really great part though is the car was for his wife, and she was sold upon learning she could get her favorite international music on demand and didn't have to go to a gas station any more.

regarding inventory, i think they are going to need some inventory as the 3 launches. the 3 is going to increase store traffic and it would make sense to have vehicles on hand that could be sold same day or week vs having to wait 12 months for a 3. so i do expect some inventory build going into the 3 launch.

finally, on using price drops to spur demand i wonder if that's the most economical way to stimulate demand. tesla has very little marketing or advertising. selling 10k vehicles for 7k less would cost 70 million. that would buy a lot of ads. i wonder if they took the price drop as a measured move because they could and still preserve margin, while setting up the lower end s to be very tempting to the high-end 3 buyer. margins would have several percentage points of room from: eliminating 60s that were built with 75 packs and sold at lower prices, autopilot revenue recognition, eliminating unlimited free supercharging, and manufacturing efficiencies.

@schonelucht, I don't agree. First, you don't seem to be taking into account demand at all from Asia. It's quite possible that any slack is being taken up in China or the newly opened Taiwan and South Korea market. Second, Q2 should be a full-production quarter with no short months and no shutdown of the factory; Tesla would be smarter to have smoothed deliveries over the two quarters if there was actually a demand problem. Third:

I see no evidence for the first part, and the second part is circular argument; you assume demand is limited because of US production starts, but if the factory is getting more efficient (and there is demand) they can produce more US cars and more OS cars at the same time.

 

[schonelucht]

@schonelucht, I don't agree. First, you don't seem to be taking into account demand at all from Asia. It's quite possible that any slack is being taken up in China or the newly opened Taiwan and South Korea market. Second, Q2 should be a full-production quarter with no short months and no shutdown of the factory; Tesla would be smarter to have smoothed deliveries over the two quarters if there was actually a demand problem. Third:

I did consider Asian demand. Not wrt to new markets, but existing markets. Unfortunately the only hard numbers I got out of that research have been the Hong Kong deliveries from Apr16 till Jan17 (see Chinese outlook and market thread in this forum). Not enough to make any solid predictions on. But if Asian demand is taking up the slack, we should see it in VIN assignments. We should also see it in longer periods early in the quarter with little US production starts. (See below for evidence)

I see no evidence for the first part, and the second part is circular argument; you assume demand is limited because of US production starts, but if the factory is getting more efficient (and there is demand) they can produce more US cars and more OS cars at the same time.

This is pretty evident from the Model S tracking spreadsheet. I had statistics on March confirms and April production starts above. 95% of those are US bound cars. Clearly a lot of US production starts in April then. For Model X it is a little bit more difficult since the Model X tracker is not as helpful as the spreadsheet so you have to piece this information together from individual posts on forums. If I do so, I clearly also see a lot of US starts early in the quarter. Both @bonaire and me do this work. Maybe he can verify my claim independently.

 

[schonelucht]

finally, on using price drops to spur demand i wonder if that's the most economical way to stimulate demand. tesla has very little marketing or advertising. selling 10k vehicles for 7k less would cost 70 million. that would buy a lot of ads. i wonder if they took the price drop as a measured move because they could and still preserve margin, while setting up the lower end s to be very tempting to the high-end 3 buyer. margins would have several percentage points of room from: eliminating 60s that were built with 75 packs and sold at lower prices, autopilot revenue recognition, eliminating unlimited free supercharging, and manufacturing efficiencies.

Still this raises the question : if you have several points of wiggle room on margins, why give it to customers? Especially if you truly could sell every car you can build. I am not totally convinced that enticing Model 3 buyers to upgrade to an S is the correct answer. Why now? The high end Model 3 won't come out until 2018. The timing is just completely off. And as you say, if you want to pre-build inventories for when foot traffic to your store quadruples overnight it would make double sense to not 'give away' your cars today. Better to accept a little lower sales at extreme gross margins and use the inventory to make a killing again off the impatient that walk into your store on Model 3 D-day.

Note as well that giving margins to customers is explicitly against the often repeated mission statement of the Model S/X : to generate cash to make the model 3 a reality.

 

[geneclean55]

I took a look at VIN assignment for q3 2016 as this seems the most comparable quarter to the current quarter, in terms of lack of factory shutdowns. At the comparable date in q3 to our current date, Tesla had already assigned about half of the VINS that they were going to deliver for that quarter.
Using the same rationale for this quarter and the VIN numbers posted above by schonelucht would put us around 28k VINS this quarter.

 

[schonelucht]

I took a look at VIN assignment for q3 2016 as this seems the most comparable quarter to the current quarter, in terms of lack of factory shutdowns. At the comparable date in q3 to our current date, Tesla had already assigned about half of the VINS that they were going to deliver for that quarter.
Using the same rationale for this quarter and the VIN numbers posted above by schonelucht would put us around 28k VINS this quarter.

The VINs I posted above were not 'assigned VINS for this quarter'. They were rather just a rather arbitrary 'last 7000' to get a feel for how long it took to assign them (since I had good data on VINS on either side of the range). Sadly I don't have enough data on the X to pinpoint with enough accuracy from which VIN on the bulk was produced for delivery this quarter. That means you could be on to something good but I just don't have the data to confirm nor reject. Maybe someone else has.

Regardless I don't know if Q3 is the best quarter to compare : Tesla entered that quarter with significant backlog from the production issues that had hampered it early in Q2. (It's the famous quarter when half of the production happened in the last 4 weeks if your remember)