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).
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).
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