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I think it validates my thesis that Tesla has spare production capacity. Otherwise there is no reason at all to give up 1% in customer incentives when your CFO has a 'Cash is King' mandate from the man himself.

I agree to this. But it could also be to "keep up momentum" I.e. To give the demand curve a nudge upward now because the X ramp is finally hitting the steep part of the curve (or is expected to in a few weeks). So it's not necessarily a bearish signal at all.
 
I think it validates my thesis that Tesla has spare production capacity. Otherwise there is no reason at all to give up 1% in customer incentives when your CFO has a 'Cash is King' mandate from the man himself.

Considering the launch, it would not be surprising if there are a lot of model X "fence sitters". The referral program may be a good way to get those people to buy.

Also, while it is hard to compute Tesla's customer acquisition cost, $1000 is a modest cost on a $100K+ vehicle.

Personally wrt demand, if Tesla misses their guidance this year there must be something seriously wrong.

Tesla simply can't know the net impact of the model 3 reveal on sales over the next 4-6 quarters.
 
Considering the launch, it would not be surprising if there are a lot of model X "fence sitters". The referral program may be a good way to get those people to buy.

I disagree. Model X quality is turning around nicely and the horror stories from the early days are dying down on this forum. I'd wager that's much more important for the fence sitters rather than getting a $1000 discount. Remember these are people who reserved this car without knowing what the price would end up. They are not buying based on a price differential of $1000.

Also, while it is hard to compute Tesla's customer acquisition cost, $1000 is a modest cost on a $100K+ vehicle.

Assuming Tesla were still production constrained then this is simple an additional costs without additional revenue (since they will deliver not what the market demands but what the factory can deliver). And then it becomes quite substantial. If they are demand constrained on the other hand (my thesis) then I agree : it's a reasonable cost for generating additional demand.

Tesla simply can't know the net impact of the model 3 reveal on sales over the next 4-6 quarters.

If the Model 3 reveal really hits demand of the S/X in such a way that it actually would lower demand below 2015 then I'd consider that something seriously wrong. For the record : I don't believe it will.
 
Tesla re-opened the referral program once again. It's running for 6 weeks and is worth slightly above 1% of ASP. Gross margins on car sales will therefore be negatively impacted by around 0.5% next quarter.
The use of the referral program absolutely indicates somewhat flat demand; they wouldn't do it if they didn't want to increase demand.

I think this indicates that Model S demand has kind of flattened out, which really doesn't surprise me. (Tesla's original estimate was that the Model S market, at a lower base price for Model S, was less than *half* what they're selling now, so they have way more demand than they originally expected -- and Model S is now over 50% of sales in its category and price class, which leaves relatively little room for growth). The referral program is a fairly logical way to try to increase demand for a company whose biggest marketing problem is that many people still haven't even *heard* of them.

It's also probably an attempt to make up for the initial bad press of the Model X launch, which has probably temporarily suppressed orders (it isn't June yet... I said the demand suppression would likely last until June or so...). Model X is probably now ramping up to full production, but the backlog isn't refilling due to people who were scared off by the early-production-line problems. Those Model X sales would have happened eventually, but I'd guess this is an effort to accelerate them; some people probably were trying to put off their Model X purchases until later in the production run.

Tesla is trying to avoid the horror of making inventory cars. Given that literally every other carmaker makes inventory cars by the millions, it won't be a horrendous failure if they end up making a few inventory cars, but I'm sure they'd like to avoid it. If they don't manage to boost the US backlog, I expect they'll shift to making Chinese models earlier and still avoid making inventory cars. The bad press from the Model X launch in the US doesn't seem to have had an effect on China either way.
 
I think it validates my thesis that Tesla has spare production capacity. Otherwise there is no reason at all to give up 1% in customer incentives when your CFO has a 'Cash is King' mandate from the man himself.

Or as vgrinshpun has pointed out, they're preparing for their production ramp.

With all but california model X deliveries scheduled for July (Q3) or later, and deliveries from this referral program not impacting only deliveries in Q3, any "spare production capacity" should probably be interpretted as trying to smoothen out customer orders to keep the production line operating optimally.

Automotive demand is seasonal, and a large dealership inventory buffers against that. I see the referral program as a way to bring forward some of that demand, so that someone who was going to wait a few months would decide to order sooner than later (and clog up the order queue in the summer months). If we could overlay the automotive sales cycle over the instances of the referral program, I wonder how closely they'd correlate?
 
I'm actually surprised that Tesla doesn't publish the metric which aircraft manufacturers and train manufacturers publish: *backlog*. Number of orders booked but not built. Given the build-to-order business model, rather than the other carmakers' build-first, sell-later business model, the backlog is a critical number for gauging demand. But they don't publish backlog for Model S or Model X in their quarterly or annual reports. It would be a helpful stat.

Maybe they just haven't thought to publish it, since they aren't an aircraft or train manufacturer.
 
Does Tesla have a demand problem? Simply put, no, but the answer is more complex than that,.

Ford could sell twice as many Explorer SUVs if they price it at $12,000($20K cheaper). If they did that, the Explorer would be operationally unprofitable with negative net margins. So the Explorer is priced at $32,000 and demand has a hard ceiling at an average of 18,000 units a month, because that is how many people a month are willing to buy an Explorer for $32K and up. Ford will also have a 12 month backlog if they only produced 120,000 Explorers a year when the yearly global demand is about 250,000 to 300,00. They can claim "Unlimited Demand!!! Mile long lines!!! A year long waiting period!!". It will make for a great story but at 120,000 units a month they wouldn't achieve the economies of scale needed to make money.

GM didn't have a demand problem either when they went bankrupt in 2009. They were selling about 2 million cars and trucks in the US alone. They had a pricing problem. They couldn't increase their prices to where they were operationally and net profitable and still continue to sell 2 million cars a year. If Tesla increased their prices until they are net profitable each quarter, would demand still be the same? Will they grow 50% this year and the next if the MSRP on the Model S is increased by $15K to $20K?
 
I'm actually surprised that Tesla doesn't publish the metric which aircraft manufacturers and train manufacturers publish: *backlog*. Number of orders booked but not built. Given the build-to-order business model, rather than the other carmakers' build-first, sell-later business model, the backlog is a critical number for gauging demand. But they don't publish backlog for Model S or Model X in their quarterly or annual reports. It would be a helpful stat.

Maybe they just haven't thought to publish it, since they aren't an aircraft or train manufacturer.

It would have been a perfect question for the shareholder meeting :)
 
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Tesla isn't about to reveal critical and sensitive information like the exact size of their backlog. I don't want them to either, as it would give too much away. If you follow AAPL for instance, they do not tell you all sorts of otherwise-would-be-nice-to-know metrics about their business.

The referral program probably is not about having spare production capacity. The #1 issue is risk, as JB mentioned in his discussions with EU transportation ministers recently. It is very risky for Tesla avoid marketing and bring down the order level too far, as any interruption in order flow that drops below production capacity is potentially a very big problem for them. So it's a matter of keeping the order flow above production capacity to a certain extent... too big of an order backlog means unhappy customers and sales that might not wait... and too few means possible gaps in matching customers to production. Given possible lead times to close sales, doing no marketing at all means possibly risking a gap where if you do decide to ramp up marketing, it takes a while for it have an effect.

It is a bit ridiculous to think that there is spare production capacity given the number of people waiting for vehicles and the high amount of customer deposits.
 
To be clearer on what I think is happening, I think production capacity is just about to increase substantially. I suspect that Tesla still has an increasing order book, but that it may not be increasing *as fast* as the upcoming production capacity increase, so Tesla wants to increase the backlog before the production rises. Does that make sense?
 
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Tesla recently increased prices by $1500.

Now is offering 1000 "Tesla dollars" as an incentive.

Can't be used for the purchase of a new Tesla but on accessories and/or service.

Not really a 1000 USD discount.
The facelift most likely increased the cost of the car (probably some savings thought streamlining e.g. one frunk). And I would say also the value.

Center console is a new addition where it also just didn't increase the cost of the car, but also removed revenue from their shop.

LED lights are probably more expensive.

Painted body panels will cost more and increase logistics vs. all black.
 
I explained in the general investors trend why I think this strengthens my theory on spare production capacity. But I also think it will dramatically increase demand going forward so we may very well return to the days of being demand constrained like right after the AP/dual motor reveal pretty soon.
 
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Sorry guys, I did not read all postings in this thread.
But thinking about demand, wouldn't it be easiest to observe the VINs for Model S and Model X, which are currently assigned to other users, who just ordered such models? The increase of VIN per time should be a good indication of demand.
Or is the VIN no real serial number? For example: Is it possible that (for example) no Model S with VIN 123,456 has been build although the VINs are in the 140,000s at the moment?
 
Sorry guys, I did not read all postings in this thread.
But thinking about demand, wouldn't it be easiest to observe the VINs for Model S and Model X, which are currently assigned to other users, who just ordered such models? The increase of VIN per time should be a good indication of demand.
Or is the VIN no real serial number? For example: Is it possible that (for example) no Model S with VIN 123,456 has been build although the VINs are in the 140,000s at the moment?

VINs are not sequential, for this very reason I.e. It could be used to track production in a very detailed way.
 
Model S 60kWh option is back

...Ahead of factory ramping production to above 2000 cars per week in H2, as per the Q1 shareholder's letter:

" Importantly, now that supply chain constraints have been resolved, we plan to exit Q2 at a steady production rate of 2,000 vehicles per week, thus laying the foundation
for a strong Q3 delivery number.


Looking out beyond Q2, we remain confident that we can deliver 80,000 to 90,000 new Model S and Model X vehicles in 2016. This
is due to the growing demand we are seeing for Model S and Model X, the improved rate of production that we project for Q2, and
the production increases planned for the back half of 2016
."
 
The facelift most likely increased the cost of the car (probably some savings thought streamlining e.g. one frunk). And I would say also the value.

Center console is a new addition where it also just didn't increase the cost of the car, but also removed revenue from their shop.

LED lights are probably more expensive.

Painted body panels will cost more and increase logistics vs. all black.

Cost of metal has declined sharply in the last year , that is : copper, steel and aluminum, and represent substantial saving. There are at least 3000 pounds of metal per car.
 
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Sorry guys, I did not read all postings in this thread.
But thinking about demand, wouldn't it be easiest to observe the VINs for Model S and Model X, which are currently assigned to other users, who just ordered such models? The increase of VIN per time should be a good indication of demand.
Or is the VIN no real serial number? For example: Is it possible that (for example) no Model S with VIN 123,456 has been build although the VINs are in the 140,000s at the moment?
Vins in the early to middle 140's are reported delivered on other threads. Vins assigned are approaching 150,000. Since vins assigned this year seem to start around 107 to 110( anyone able to supply the actual figure? ), Tesla appears to have issued about 40,000 ms vins in 6 months. They are on track to hit 80,000 vins for ms this year. They are already past 11,000 vins issued for mx. 22-24,000 for mx seams reasonable for the year. Obviously not all will get delivered this year. They might deliver close to 80,000 who knows exactly.
As for 60 kWh ms, there seems to be interest in swiching some m3 res. To ms orders. This might be part of Teslas thinking. Also this gives them something to fill the gap similar to bmw 3-5-7 or MB c- e-s.