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kenliles, can you please explain to me the reason for the significant EPS contraction? I understand that there will be some cheaper cars sold in q2 vs. q1, but that will not lead to significant EPS contraction in my opinion. Are there any other items this quarter that that weren't present in q1 that will lead to a bigger loss?
One such cause is that there are supposed to be a bunch of cars on a boat to Europe, which will not represent revenue in this quarter, since the revenue isn't booked until they are in the hands of the customers.
This I can agree with, but does anyone know how much lower these credits will be in q2? It sounded like they would start declining significantly in the second half though. Any idea what the estimate is for q2? I think that margin expansion will easily cover the lower ZEV credits.
I will save you guys some time. One item for $11m will not show up anymore and that is the removal of warrants liability on the balance sheet. Tesla also had a favorable currency exchange of $6m and this might happen again since Yen continued weakening.
I am trying to find out where these additional costs are supposedly coming from that will lead to lower EPS in q2 vs. q1?
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Not sure I am following you here. This is a balance sheet item, it does not affect P&L outside of interest expense which is immaterial, since the new debt is only $2m per quarter.
Is there supposed to be some additional R&D expenses this quarter? Higher SG&A? I am trying to figure out where the additional costs are coming from this quarter that were not there in Q1?
How do you know no boat headed over? Do you watch the ports? Do you have inside info?
Higher R&D and SG&A, lower revenue due to a higher mix of 40kWh and 60kWh. See my best case scenario in the attached xls-sheet.View attachment 130710_Tesla_Fundamentals.xlsx
We will need a decent increase in gross margin to get profitable again and a significant increase to get a higher profit than Q1.
I have to admit the 500 cars for europe are a wildcard here.
Growth stories can drive up stocks to insane levels. This is true. But these stocks also tend to crash hard when this growth path shows signs of weakness. The current volume on TSLA is just as insane as its valuation. TSLA is one of the most watched stocks on Wall Street. Everyday almost 10% of the free float changes hands. I have rarely seen anything like that. Many people have made a lot of money in a very short period of time. In fact Elon Musk has blown up most of the Street guys as the short ratio was so high and yet the market cap already ambitious at 27$.
But many times this short sellers take revenge. In fact, they get victory most of the time. The real growth stories only rarely have high short ratios. Apple for example never saw short ratios higher than 3%.
For the moment the Model S is a fashion statement, it’s the car to have. People are trading in there Porsche Panameras and Audi R8s. The current production rate of the Model S is crazy. They are outselling the whole competition with further backlogs for Europe and Asia. The question is: Will it last?
The Model S is obviously a great car, but it’s an electric car. For most people this is still a problem, despite Tesla’s upcoming supercharger network and battery swap systems. Right now and for the foreseeable future this car cannot give you the same kind of freedom as a gasoline car. Just imagine going to the supercharger station being completely occupied by various Teslas.
Many people in this forum have accused my for being misinformed or having “no clue”. I am not a scientist and neither an engineer. But I try to know as much as possible on the stocks I trade. I will also not hold on to my short position forever if things get out of control, which is possible of course. Still I believe that there is some validation on the points I made.
Being a car nut I’ve been working on several projects in the car industry before I actually started trading for a living. Engineering, producing and selling a 100.000$ car is an incredible difficult job and doing so on a profitable basis even more. The industry is facing huge competitiveness alongside overcapacity and without sizeable economies of scale there’s no way you can come close to the margin levels of the big guys.
Companies like BMW achieve a 10% EBIT profit margin because they sell close to 2 million cars a year with many parts in common. The BMW 4 cycl. is essentially a PSA engine being used not only in a BMW but also in a MINI, Peugeot and Citroen.
Of course Tesla will use many common parts for the Model S and X, but on the GenIII which is supposed to be the main game changer a platform strategy with the bigger cars is unlikely. Tesla is indeed an open minded fresh thinking company and they have a very pragmatic approach (for example the battery swap which I thought to be impossible) but they also have very little experience. There are just so many things that can go wrong in a car. I bet that Tesla will have many recalls to come. They try to revolutionize the car industry out of nowhere.
Until now Tesla has not really seen much licensing for its technology. Daimler and Toyota are using some of the powerplants but nobody wants to take advantage of Tesla battery packaging. That is not really a surprise as companies like Toyota have been working on battery packaging for quite some time. Yet nobody really wanted to take the risk of producing a purely electric car the size of a Model S. And it is easy to see why.
There is one technical detail on the Model S that shows me that even Elon Musk and his fellows don’t have a magic trick in their hat. From the experience of the Roadster we know that there is some depletion of the battery pack. Nothing serious but present. Tesla claims the Model S’ pack to last longer despite using more cells and dealing with higher power demand and wider ROC and more demanding charging levels. Obviously Tesla has implemented a much more sophisticated Thermal Management system, with the system heating or cooling even when stationary at idle. But the trade of is the so called “vampire load”.
According to this forum the Model S consumes app. 3.2 kwh/24h at idle. A standard 2 person household has app. 12 kwh consumption per day. Therefore the Model S increases that rate by 25% just for standing there and doing nothing.
I cannot imagine any big manufacturer coming up with a car which basically needs to be driven in order to make any environmental sense. What are you going to do if you want to drive your Model S only during the summer months? What if you want to go on holiday and park your car at the airport? I cannot see such a construction being pioneering or advanced. This is a major flaw and many customers will not accept that. It also shows me that things on battery management are indeed not as easy as some people think or believe to know. As long as Tesla cannot fix that problem bears have a reasonable point to make alongside other issues like the Model S poor track performance.
At the moment nobody knows if the electric car can succeed. There are too many question marks to be answered.
But if it does, Tesla will face powerful competition. All the big car manufacturers have much higher R&D budgets. They have more dealers, higher economies of scale and they constantly earn money.
I know many people here don’t take me serious and I have no problem with that. I don’t care about it. Still, I can only see Tesla loosing from here, just like you guys only see it winning. For the moment my trade account tells me I am wrong. But as I said, I stay in the game for the moment.
Yet I will not continue that much writing here. I might eventually post my trading position from time to time, but I really don’t want to offend or insult other people with my unqualified posts.
Thanks for reading.
But many times this short sellers take revenge. In fact, they get victory most of the time. The real growth stories only rarely have high short ratios. Apple for example never saw short ratios higher than 3%.
For the moment the Model S is a fashion statement, it’s the car to have. People are trading in there Porsche Panameras and Audi R8s. The current production rate of the Model S is crazy. They are outselling the whole competition with further backlogs for Europe and Asia. The question is: Will it last?
The Model S is obviously a great car, but it’s an electric car. For most people this is still a problem, despite Tesla’s upcoming supercharger network and battery swap systems. Right now and for the foreseeable future this car cannot give you the same kind of freedom as a gasoline car. Just imagine going to the supercharger station being completely occupied by various Teslas.
Many people in this forum have accused my for being misinformed or having “no clue”. I am not a scientist and neither an engineer. But I try to know as much as possible on the stocks I trade. I will also not hold on to my short position forever if things get out of control, which is possible of course. Still I believe that there is some validation on the points I made.
Being a car nut I’ve been working on several projects in the car industry before I actually started trading for a living. Engineering, producing and selling a 100.000$ car is an incredible difficult job and doing so on a profitable basis even more. The industry is facing huge competitiveness alongside overcapacity and without sizeable economies of scale there’s no way you can come close to the margin levels of the big guys.
Companies like BMW achieve a 10% EBIT profit margin because they sell close to 2 million cars a year with many parts in common. The BMW 4 cycl. is essentially a PSA engine being used not only in a BMW but also in a MINI, Peugeot and Citroen.
Of course Tesla will use many common parts for the Model S and X, but on the GenIII which is supposed to be the main game changer a platform strategy with the bigger cars is unlikely. Tesla is indeed an open minded fresh thinking company and they have a very pragmatic approach (for example the battery swap which I thought to be impossible) but they also have very little experience. There are just so many things that can go wrong in a car. I bet that Tesla will have many recalls to come. They try to revolutionize the car industry out of nowhere.
Until now Tesla has not really seen much licensing for its technology. Daimler and Toyota are using some of the powerplants but nobody wants to take advantage of Tesla battery packaging. That is not really a surprise as companies like Toyota have been working on battery packaging for quite some time. Yet nobody really wanted to take the risk of producing a purely electric car the size of a Model S. And it is easy to see why.
There is one technical detail on the Model S that shows me that even Elon Musk and his fellows don’t have a magic trick in their hat. From the experience of the Roadster we know that there is some depletion of the battery pack. Nothing serious but present. Tesla claims the Model S’ pack to last longer despite using more cells and dealing with higher power demand and wider ROC and more demanding charging levels. Obviously Tesla has implemented a much more sophisticated Thermal Management system, with the system heating or cooling even when stationary at idle. But the trade of is the so called “vampire load”.
According to this forum the Model S consumes app. 3.2 kwh/24h at idle. A standard 2 person household has app. 12 kwh consumption per day. Therefore the Model S increases that rate by 25% just for standing there and doing nothing.
I cannot imagine any big manufacturer coming up with a car which basically needs to be driven in order to make any environmental sense. What are you going to do if you want to drive your Model S only during the summer months? What if you want to go on holiday and park your car at the airport? I cannot see such a construction being pioneering or advanced. This is a major flaw and many customers will not accept that. It also shows me that things on battery management are indeed not as easy as some people think or believe to know. As long as Tesla cannot fix that problem bears have a reasonable point to make alongside other issues like the Model S poor track performance.
At the moment nobody knows if the electric car can succeed. There are too many question marks to be answered.
But if it does, Tesla will face powerful competition. All the big car manufacturers have much higher R&D budgets. They have more dealers, higher economies of scale and they constantly earn money.
I know many people here don’t take me serious and I have no problem with that. I don’t care about it. Still, I can only see Tesla loosing from here, just like you guys only see it winning. For the moment my trade account tells me I am wrong. But as I said, I stay in the game for the moment.
Yet I will not continue that much writing here. I might eventually post my trading position from time to time, but I really don’t want to offend or insult other people with my unqualified posts.
Thanks for reading.
JRP3
Hyperactive Member
As I posted on Seeking Alpha in response to a similar statement, it's funny how people see being tied to a monolithic fueling infrastructure with no other choices as "freedom". I promise you EV drivers gladly give up their "freedom" to use gas stations.
There certainly could be a pull back in price, but your constant misrepresentation of the technology involved does not support your thesis.
Yes, because such a car would cut into their existing product sales, which they've taken decades to develop.
Again you are grasping at straws. First of all the S was not designed as a track car, I'm not sure any 4500lb vehicle ever was. Second, and more importantly, the vampire drain is a temporary issue. Earlier software versions had much lower draw but apparently there were some issues with the car powering back up in some cases, so Tesla disabled the sleep feature temporarily. Some people did not install the newer software version and have had minimal drain. It will be fixed, no question about it, and no technical reason it shouldn't be. Again, this is you not understanding the technology and blowing a minor issue out of proportion.
All of us driving electric cars know they can succeed. More people find that out every day.
They also have higher costs across the board, and as I said earlier they have a huge legacy investment in their older technology. If they actually produced a good EV it would cut into their existing product. They are stuck in a trap and will have to chew their own arm off to get out.
Realist, you seem to take speculative 'what ifs' and consider them as facts that will happen. This, I think is coloring your trades and if you do it with other companies I would recommend you stop trading.
As for your comment about "From the experience of the Roadster...". We don't know about battery degradation due to that experience. We know about it because Tesla told us about it. Later, the experience of the Roadster showed that there was not as much battery degradation as earlier speculated.
As for people here seeing nothing but Tesla winning, I think that is incorrect.
Tesla has a lot of challenges in front of it and I don't think there is anyone here that sees nothing but success.
I do appreciate your viewpoint. And all opinions are welcome. But if you put forth faulty facts to support your opinion, don't be surprised when people correct them.
As for your comment about "From the experience of the Roadster...". We don't know about battery degradation due to that experience. We know about it because Tesla told us about it. Later, the experience of the Roadster showed that there was not as much battery degradation as earlier speculated.
As for people here seeing nothing but Tesla winning, I think that is incorrect.
Tesla has a lot of challenges in front of it and I don't think there is anyone here that sees nothing but success.
I do appreciate your viewpoint. And all opinions are welcome. But if you put forth faulty facts to support your opinion, don't be surprised when people correct them.
I know Tesla claims the power drain having nothing to do with thermal management. Fact is the issue is not fixed yet.
Regarding track perfomance: I hope do drive a Model S soon and I really cannot wait to see how it perfoms on the Autobahn at high speed.
JRP3
Hyperactive Member
My average consumption is from 28-50KWh per day. Scanning around the web, I find the EIA saying the average was 31/day in 2007, a 2004 California study said it's 32.8/day nationwide and 22/day in CA. According to a Wikipedia article breaking things down further, if you use electricity for heat and hot water, you're looking at 41/day JUST FOR THOSE.
So that 3.2KWH/24 might sound bad - but a little math shows it's the equivalent of leaving a 133-watt incandescent light bulb turned on. *If* that number is accurate. So, rather than being a 25% hike, as you state, it's more like a 10% hike - and that's assuming your vampire-drain number is correct. Now - my electric bill runs north or south of $150. My gasoline bill is around $200. Do you think I'll trade one over the other? In my case, I could probably break even if we managed to empty out the spare refrigerator/freezer we have in the basement and disconnect it.
deonb
Active Member
The vampire draw is due to having the computer system always ready instead of it "booting up" for a few seconds when you get into the car. Has nothing to do with battery management.
Thanks for posting your Excel Model.
I might not have made this clear, but lower Auto Revenues will not cause lower EPS in Q2. Auto Gross margins were so low in Q1 that gross profit in Q2 from Auto Sales will certainly be higher, no matter what the mix of 40/60/85 is. Only higher costs and/or lower ZEV credits can lead to lower EPS in Q2. I agree with what you said about the increase in R&D and SG&A.
But I actually found the answer to my question myself. The reason that Tesla is looking at negative EPS this quarter is due to the Revenue Recognition Principle associated with Lease Accounting. When you lease a Tesla, the company recognizes revenues over the period of the lease. So on a GAAP basis Tesla will not be profitable. That is why they are going to introduce "Adjusted" Earnings this quarter. Wall Street is not stupid and they understand the limitations of GAAP.
Which leads to my next question: What percentage of Teslas sold are under the "lease" arrangement?
If you buy a Tesla and finance it through one of Tesla's bank partners is it automatically considered a lease? Or do you have the option to finance an outright purchase through Tesla?
jrickard
Member
As I said. I think there will be a build in stock price leading up to the Q2 numbers and a bit of a dip after the announcement. But if they ARE up to 550 per week, and show say 450 average across the quarter, they'll be over 5000 units. The dip will be driven by more fundamentalist shorts jumping in, and the tech guys are going to sit on it for the most part. THey're all about production numbers not EPS.
To a growth guy, EPS represents taxable income. It is not even a good thing in the early days when you hope to get in cheap. They will be all about execution and demand. They could care less about revenues and EPS. In some cases in Internet investing, they have been betting on companies with eyeball growth that don't even have a business model for monetizing it, or worse, a dubious one.
So I see a little dip after earnings from fundamentalists coming back hoping to make it back on the fall. And I think ultimately they'll get handed their head AGAIN. Second day after earnings will probably be a good day to be a buyer.
Jack Rickard
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