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Final Q1 Production Analysis along with Preliminary Q2 Analysis

Discussion in 'TSLA Investor Discussions' started by CapitalistOppressor, May 5, 2013.

  1. CapitalistOppressor

    CapitalistOppressor Active Member

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    #1 CapitalistOppressor, May 5, 2013
    Last edited: May 5, 2013
    Cool your jets folks. The outlook is positive, but you should still be wearing your socks when its over. Scroll to the bottom for Summary numbers.

    First, anyone who is new to this rodeo should read my blog post to get a sense of the data I am using (and how it relates to the competition), as well as to how I arrived at the specific sales numbers (and by inference, production numbers). Following the post there was additional relevant information in the comments that I suggest you read.

    Tesla Model S - The #1 Brand in America - Blogs - Tesla Motors Club - Enthusiasts & Owners Forum

    The bottom line sales information from that blog was this -

    January Sales - 1,325
    February Sales - 1700

    Tesla was beating the pants off of all top end luxury models (spoiler alert - they still are).

    Current March Estimate - 1,725 Sales

    To that, I am now adding that contrary to some high end expectations, March was likely ~1,725 sales. For reasons that I don't care to detail, but which relate to the Multi-Red production switch-over and the Easter holiday, there was a substantial production shock at the end of Q1 and beginning of Q2.

    March Anomaly Explained

    There was a 4 week period, starting in the last week of February, where the production rate was ~500/week, but the extra 400 cars that were delivered in that period were probably meant primarily to smooth out the overall rate in anticipation of taking part of a week off at the start of Q2 (not to mention the week off at the beginning of Q1). This was "make up" production, which Elon mentioned in the Q4 conference call.

    It also might have helped increase margins for Q1, but there is clear evidence that temporary staff was hired in order to sustain the higher output. Because Tesla did not intend to maintain that higher production rate, most of those workers were likely let go.

    Note: There is a great deal of uncertainty regarding the last week of March and the first few weeks of April. My model assigns 225 sales to the last week of March (to reach 4,750) and then assumes a shutdown covering the second half of that week (leading into Easter). The factory basically resumes April 1st at the regular rate of 400/week.


    Q1 Total Sales - 4,750

    Anyways, 1,725 sales in March gets us to 4,750 for Q1. Any number higher than this point to a likely production rate of less than 400/week to start Q2, even accounting for time off around Easter. Honestly, if Tesla reported 5,000 sales for Q1 it would freak me out, because it would indicate a production rate substantially lower than 400/week in April.


    Preliminary April Production Figures

    Moving into April, my (very) preliminary production count is ~1,700 vehicles, which works out to a production rate of ~400/week after accounting for the production shock I previously discussed. Sales are potentially lower because of the new loaner program soaking up ~100 vehicles (which moves the "company use" VIN's from 125 to 225, which will then hold position because new loaners will only be built to replace sold vehicles).

    A Note About May

    There are indications of some disruption in production occurring right now, presumably as a result of the Performance Plus cars entering production. Nothing unexpected, but it is already helping to contribute to a general softness in the numbers. There is no reason to expect that to continue, but I want readers to be clear that even the current 400/week production rate has a squishy feel to it.

    Lies, Damn Lies, and Statistics

    As of the end of April the company has likely delivered somewhere around 9,025-9,125 cars to customers (depending on loaners), assuming a base of 125 vehicles for company use before the loaner program. In 2012, those were all limited edition pre-production cars (Sigs, Founders, etc) and cars with 85kWh packs.

    In 2013, ~30% of all vehicles delivered have been 60kWh cars. The underlying sales rate for 60kWh cars is likely substantially closer to ~20% however because production did not begin until 2013, while reservations were being made throughout 2012.

    That said, Elon expects the 60kWh sales rate to increase as a result of the lease program, and my own analysis is that the lease program was set up to recapture sales potentially lost by the failure of the 40kWh program.

    I believe this is the reason for the repeated efforts by Tesla to drive the notional monthly payment of a Tesla into the $500 range. The first effort was rejected by the press, and so Tesla increased their residual guarantee and loan length to make the $500 messaging accurate even with the more conservative assumptions (end result: $580/month "payment").

    Closing Thoughts

    When taken as a whole, the consistent theme is a sustained production rate of ~400/week.

    For reasons that I've partly discussed elsewhere, I currently believe that Tesla is near to achieving it's planned targets of 25% gross margin while at 400/units/week, and ought to be in the 20%+ range IMHO (this is without factoring in credits). Aggregate gross margin for Q1 is much lower because I believe it took at least until February before Tesla shook many of the inefficiencies out of their processes.

    Before credits are factored in, my current estimates for gross margin range from 10-15% for Q1, but there is a high degree of imprecision and I respect any value that anyone wants to argue for that falls between ~5-17%. With credits factored in gross margins are substantially higher, and likely much higher than most folks who don't read these threads expect.

    I don't think I will be doing estimates for earnings, which is why this post is not in the earnings thread. I see them being higher than Wall Street expectations, but I see the psychology being balanced from possibly inflated expectations for the future based on a supposed 500/units/week. The report will shift psychology, and right now TSLA share prices are based more on psychology than they are on the balance sheet, so "better than expected" is all I need right now.

    Anyways there are many implications to all of this that we can be free to speculate on. But that speculation needs to center on a current production rate of 400/units/week until we start to see otherwise. I am extremely impressed with the recent moves by Tesla to bolster demand. But those moves were clearly (IMHO) about ensuring continued demand, not about pure goodheartedness. If it eventually results in demand levels of greater than 400/week that's great.

    But the critical factor is to ensure demand is high enough to at least meet their 400/week goal, and I feel we should interpret their activities in that context until evidence emerges of sustained higher production rates. Elon's guidance is our friend here.

    Summary -

    Promised Production Rate - 400/week

    Sales 2012 -

    Total - 2,650

    Final Production Rate (last 3 weeks of December) - 400/week

    Sales 2013 -

    January - 1,325
    February - 1,700
    March - 1,725
    April - 1,700 (preliminary estimate of production. Sales are up to 100 lower).

    Current production rate - 400/week (preliminary result for April. March anomaly was a temporary increase, but demonstrates that 500/week is easily attainable).
     
  2. Jonathan Hewitt

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    Thank you for all your work! Yeah, the market will respond however it decides to respond...This whole psychology thing as far as how the market responds is not something I like but I'm in it long so I'll try not to care about these short trends, whether good or bad.
     
  3. CapitalistOppressor

    CapitalistOppressor Active Member

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    Just for clarity, I should add that while the situation was very unclear at the end of March, it is much less unclear now. If there were 4,950 deliveries in Q1 (1,925 March), then it would mean that the production break was at the beginning of April and April "sales" (including loaners) was 1,500.

    The point being, that there we are very close to 9,250 total delivered VIN's as of April 30th, including all company cars. In a week or two we'll know the actual number, but there is very little uncertainty right now, unlike when March/April was transitioning and we had cars 1000+ VIN's out of sequence.
     
  4. akula

    akula Member

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    what are the odds that once even the "moderate" number of 400 cars/week and the corresponding EPS that will still beat the analysts comes out (say it is moderate at best), all the shorts will be buying first to cover and will trigger a nice rise?
     
  5. CapitalistOppressor

    CapitalistOppressor Active Member

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    We already had a nice rise. What are the odds of it rising more? The pro case needs to be built on the likely strong margins and high profit levels of Q1. A Tesla with 25% gross margins and 400/week production is much more valuable than a Tesla with 500/week production and 13% gross margins.

    Thats another reason I am going to try to stick it out until the conference call. If regulatory revenue is as solid as my model predicts, and the gross margins from the underlying business come in at the upper end of my estimates (which are quite wide), then Tesla might start to be viewed as minting money even at 400/week production. Nobody is estimating really huge earnings, and there could be a lot of upside if Tesla pulls a report out like that.

    400/week is not bad. That's the company's guidance and they are clearly matching that. There will be a lot of sad faces in the media with a 400/week rate when they are thinking 500/week, but nobody credible anywhere is predicting extreme profitability (including me). But I see it as a possibility and worth sticking around for. If they hit 30% GM then I think Fox News would explode.
     
  6. luvb2b

    luvb2b Member

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    cappy, you want to recheck your figures? the recent information indicates they are definitely wrong by quite a bit.

    the reason i say that? well look here:

    now i haven't seen a second person confirming this email, but if it is true, that 10,000 vehicles have been delivered to customers as of may 6th, the implication here is that we have had at least 7,350 deliveries thus far this year (10,000-2,650 from last year = 7,350).

    your numbers imply a maximum of 6,450 as of the end of april. so assuming there's maybe 400 vehicles difference for the 6 day timing differential, you're still off by about 10%.

    thoughts?

    assuming they did 4,750 in q1, we would have 2,650 + 4,750 = 7,400 customer deliveries by the end of q1. how did they do more than 2,600 in the 36 days since april 1 with a week off? that would be over 500 a week. either that, or we're over 4,750 in q1, maybe like 4,900 or so and then 2,450 thus far in q2. and that's not even half way through the quarter. in almost any circumstance the guidance will be for over 5,000 vehicles delivered this quarter it seems.

    looking forward to your reply.
     
  7. RobotGrease

    RobotGrease Member

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    Are you taking Roadsters into account?


     
  8. gregincal

    gregincal Active Member

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    Yeah, that figure definitely has to include roadsters. They haven't yet delivered vehicles with VINs > 10000, so it's impossible for them to have delivered 10000 Model S.
     
  9. RobotGrease

    RobotGrease Member

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    I was referring to his figure of 2650 from last year... There's no question 10k+ includes roadsters as you point out.

     
  10. luvb2b

    luvb2b Member

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    well in that case pretty useless. wikipedia has roadster deliveries at 2,400:
    "Since 2008 Tesla has sold more than 2,400 Roadsters in 31 countries through September 2012."

    so the email only tells you 7,600 model s cars delivered. that's pretty obvious taking 2,650 from 2012 & 4,750 from q1 = 7,400.

    sorry for the false alarm... was an exciting non-event.
     
  11. RobotGrease

    RobotGrease Member

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    Thanks for the correction... Thats what i figured

     
  12. CapitalistOppressor

    CapitalistOppressor Active Member

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    That ok. Folks were having the same interpretation in other threads.

    Someone posted "almost 10k electric vehicles" because the Model S is right around 9,600 right now and they had that in their brain. Then someone said "dude, you do know we built 2,400 Roadsters don'tcha?" Second post is corrected, lol.
     
  13. CapitalistOppressor

    CapitalistOppressor Active Member

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    And just to clarify, 9,600 is total including all company cars/loaners. Customer deliveries is probably 9,300-9,350 right now.
     
  14. ShortSlaver

    ShortSlaver Member

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    Right, but what gets me is that they changed their email since last week. Probably nothing.
     
  15. CapitalistOppressor

    CapitalistOppressor Active Member

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    See. That's the danger to the stock price after the earnings announcement. 500/week has become gospel in the last month that Tesla spent in their Multi-Red information black hole. The media have run hundreds of stories assuming 2000+ sales in March. That at least still might have happened, but everyone is thinking 2,000+ in April too, while reality is that if there were 2000 in March then April is like 1,400.

    And the most likely thing was that the last 3 months have been a boring 1,700/month like clockwork. Even now experienced folks want to believe the old numbers and they've had a day to adjust. Frankly, *I* want to believe the old production rates too and I spent hours being bitter about it yesterday, lol.
     
  16. gregincal

    gregincal Active Member

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    The 31 countries is a bit of a tipoff, though, since they've only delivered the Model S in 2 countries.
     
  17. ShortSlaver

    ShortSlaver Member

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    If they're putting out 1,700/month then that's pure beauty.

    I love your analysis because you're more grounded than me. And more rationale. I'm just happy we're both enjoying the belief in these guys! Let's hope this bull keeps raging!

    - - - Updated - - -

    Well put!
     
  18. Cattledog

    Cattledog Active Member

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    Reported today on teslamotors.com:

    regarding VINs, I got mine today - 10,423

    Didn't indicate expected delivery date.
     
  19. ShortSlaver

    ShortSlaver Member

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    There is so much we don't know...can't know...shouldn't know.

    This could be a legendary week...
     
  20. ElBarto

    ElBarto New Member

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    I was watching in Youtube Tesla Megafactories and at 22:43 there is a sign that says 10,000 Model S Vehicles Manufactured :confused:
     

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