General Discussion: 2018 Investor Roundtable

[ValueAnalyst]

How would you define what is an outlier and what isn’t? Also, cars taking longer in QC is reality. Filtering them out may make the numbers look slightly better but don’t learn us anything about actual current capacity.

QC-lagged VINs aren't representative of the current build rate, which is most important, so I'd cut the bottom 5% (or whatever % you want).

In other words QC-lagged production to total production ratio will improve as production ramps and issues in production are addressed.

 

[Mike Smith]

Just got this notification from CNBC:

Elon Musk directs Tesla to "slow down" on deliveries this quarter, citing local capacity issues


Not sure what to make of this ? Has the production ramped up so much that they can't "deliver" fast enough ??

Anyone want to shed some insight ?

He's only talking about Norway. This could delay 100 cars or so by a week or two. Not very important since Norway deliveries have already surpassed Q1 2017 when most people were expecting a drop after so many Norwegians bought Teslas late last year expecting the loss of a tax break.

 

[schonelucht]

Yes , trucking in Europe is dominated by Eastern European operators which are less strictly regulated by are still allowed to compete all over Europe (or just ignore local regulations) Possibly Tesla is hitting the same issue in Norway?

 

[schonelucht]

QC-lagged VINs aren't representative of the current build rate, which is most important, so I'd cut the bottom 5% (or whatever % you want).

In other words QC-lagged production to total production ratio will improve as production ramps and issues in production are addressed.

I respectfully disagree. QC is an integral part of production. Saying that we can disregard it today because it will improve in the future is the same as saying we can disregard any other bottleneck today because they too will be resolved in the future.

 

[RobStark]

Yes , trucking in Europe is dominated by Eastern European operators which are less strictly regulated by are still allowed to compete all over Europe (or just ignore local regulations) Possibly Tesla is hitting the same issue in Norway?

Yes, a Romanian truck with tires with barely any tread left crashed with ~6 Teslas on board about a week or two back in Norway.

Obviously Tesla is searching for rock bottom prices for transportation.

 

[RobStark]

I wonder if Tesla will do a P Model 3. Might cut into Model S P sales if they enable the full potential of the 3.

The alternative is to cede this profit rich niche to BMW M3, MB AMG C, Lexus IS F Sport,Cadillac ATS V and Audi S4.

 

[1101011]

Obviously Tesla is searching for rock bottom prices for transportation.

Or simply exhausted all better alternatives.

 

[RobStark]

Speak of the devil

Tesla’s car shipments in Norway keep being shut down for using ‘dangerous’ transporters, a truck crashed

 

[sundaymorning]

Yes, a Romanian truck with tires with barely any tread left crashed with ~6 Teslas on board about a week or two back in Norway.

Obviously Tesla is searching for rock bottom prices for transportation.

It sounds like the trucker was trying to save cost. Should Tesla now check the tire tread of every trucker? How about headlights too, while we’re at it add windshield wipers to the list... unbelievable.

 

[RobStark]

It sounds like the trucker was trying to save cost. Should Tesla now check the tire tread of every trucker? How about headlights too, while we’re at it add windshield wipers to the list... unbelievable.

Sounds like Tesla was trying to save cost.

Take it if they hired a Swedish or a German firm this would not be an issue.

Tesla is in a unique situation where they don't have a steady flow of cars and as a consequence don't have a well oiled machine shipping in parts and shipping out cars at a constant rate to all destinations.

Seat of your pant logistics have consequences.

 

[JRP3]

Sounds like Tesla was trying to save cost.

Sounds like Tesla was trying to deliver vehicles with what was available:

It is clear that we are exceeding the local logistics capacity due to batch build and delivery.

 

[Starno]

Just got this notification from CNBC:

Elon Musk directs Tesla to "slow down" on deliveries this quarter, citing local capacity issues


Not sure what to make of this ? Has the production ramped up so much that they can't "deliver" fast enough ??

Anyone want to shed some insight ?

EDIT: CNBC just revised the title to include deliveries "in Norway" ... so this obviously does not speak to Model 3 production. Story goes on to say Tesla is having trouble finding companies to safely deliver their vehicles ....

is it really that hard ??

That's just from a tweet :

 

[EinSV]

The following graph is based on the data submitted to the google spreadsheet. I seperated out VIN assignments from before the factory shutdown (blue) and after the factory shutdown (red). I took March 7th as the separation date. This is possibly a little arbitrary and I am open to rerun the data with a different date but I think it is a good fit. It's nearly two weeks after the shutdown to allow time for the production improvements to actually trickle down to VIN assignments. March 7 is also the first VIN assignment storm by Tesla. In addition to the two data sets, I also graphed the linear trendlines for both sets. Here is the result :

View attachment 288898

It's quite clear that there are two different trends. Production most certainly picked up. So far the good news. Now for the less good news : the slope of the two trendlines is the number of VINS assigned per day (assuming there are no gaps in the VIN assignment!) For the blue series this slope is 75 cars/day or 525 per week. The red slope is 135 cars/day or 945 per week. This is clearly much less than everyone is currently hoping (between 1000 and 1500; I've seen some here mentioning close to 2000/week after the NHTSA disclosures).

How is that possible? I think few here really realized how bad VIN progression actually was before the factory shutdown. Most still had that 1000/week from the end of year in mind, maybe discounted a little but certainly not by half. So even an almost doubling of the production rate still comes down to less than 1000 cars/week.

Note : I had to lightly edit the graph to crop the trendlines to just the data range that was relevant for each.

I am curious how to explain the discrepancy between a straight count of VINs issued, which per @Waiting4M3's post below suggests VIN issuance rate per day more than tripled between Jan/Feb and the two weeks starting March 7, versus less than doubling suggested by your analysis.

Your Jan./early Feb. estimate of 525/week multiplied by the increased VIN issuance rate from the post below (14.2/4.5) results in an estimated production rate of ~1650/week.

The data is publicly available, March VIN assignment continues progressing at >2X of Jan-Feb rate.

Dec: 70VIN
Jan: 141 VIN, avg 4.5/day
Feb: 109 VIN, avg 3.9/day, or if you count 4 day shutdown, 4.5/day
Mar: 242 VIN, avg 11.5/day, averaging last 2 wks starting 3/7, we have 14.2/day

View attachment 288331

 

[K_Dizzle]

That's just from a tweet :

View attachment 288967

Check the author of the article

 

[Reciprocity]

How about this: Model 3 ASP in the second half of 2018 may be more than $60,000.

Since Standard Range is now a 2019 story, and P (10% take rate) and D (50%) are around the corner, as well as already popular EAP (80% take rate) and possible FSD-exclusive features in the coming months with the new-and-improved Karpathy-magic neural networks (50% take rate in 2H18 but possibly as high as 80% with a killer feature like even highway-only Level 3 at $3,000), including wheels and premium paint and delivery:

OPTIONS
Enhanced Autopilot: $5,000; 80% take rate
Full Self-Driving: $3,000; 80% take rate as exclusive features roll out
Premium Upgrades Package: $5,000; 50% take rate
Premium Wheels: $1,500 to $4,500; 50% take rate with $2,000 average
Paint: $1,000 to $1,500; 80% take rate with $1,200 average

MODELS
Long Range: $44,000 - 45%
Long Range with Dual: $49,000 - 45%
Performance with Dual: $75,000 - 10%

ASP without options: $49,350
ASP of options: $10,860
ASP: $60,210 excluding $1,000 delivery

Model 3 ASP may be more than $60,000 in 2H18.

Now consider that the ultra-bearish UBS analyst had estimated Model 3 breakeven (not COGS but EBIT-level so including R&D and SG&A expenses) at $41,000 (page 45 of 95) even using $160/kWh battery cost estimate, which is just dumb. His other dumb assumptions include D&A per unit and Warranty Provision per unit, which should be combined $3,000 per unit lower, but to be conservative, let's use his bear-level dumb assumptions.

$60,000 ASP in 2H18 - $41,000 COGS, R&D, SG&A = $19,000 EBIT per Model 3

31.66% EBIT margin in 2H18.

That's better than Apple.

I agree. The model 3 is not a 35k car. Tesla may only find a small number who even buy at that price. Most want more. To get to an ASP of $41k that Elon originally talked about, at least half would have to be base models with no more upgrades then color. I think the small battery will be very popular, but with many options. EAP take rate is so high that almost no car will be under $41k. And... And... Mark my words. Tesla will enable EAP and FSD on every car that is not complete wrecked at some point in its life. So it almost doesnt even matter what the ASP is today because over 5 years after the original sale it will be $6-10k higher for cars that are not sold with the options to begin with, as original owners and subsequent owners enable the options. Tesla can even sell the options twice as cpo by disabling the option and allowing people to add it to the car. This is more of a wash, but, it's a nice tool for Tesla to move the car quickly regardless if people do or do not want the option.

Imagine that for a second as it's been ignored by the dumb car media.. $6-9k of certain revenue for every bare bones car sold. It's just out there driving around, waiting for someone to swipe their credit card. And every barbones car will eventually do this. Either the original owner or the next or some fleet owner. That is $15-25% margin.. for nothing. Free. Only cost is time. Let that sink in. What other car had anything even close. People say OTA had value.. that's only the surface.. this is the real value. This is serious money, but just minor updates.

 

[Reciprocity]

I wonder if Tesla will do a P Model 3. Might cut into Model S P sales if they enable the full potential of the 3.

Model S will go up segment.. model 3 will fill the vacuum. Tesla will need a revised model S with better interior, 2170 and more pizzazz. But it won't be an issue for Tesla. They can barely keep up with demand as it is.

 

[dc_h]

It sounds like the trucker was trying to save cost. Should Tesla now check the tire tread of every trucker? How about headlights too, while we’re at it add windshield wipers to the list... unbelievable.

If only they had their own self driving semi?

 

[Reciprocity]

Some people will always want a bigger car, more luxury, and more range. I expect MS' battery size (i.e. range and charge time per 100 miles) to be the primary distinguishing factor going forward, but there will be others. If Tesla can fit 200 kWh in a Roadster, then it can up MS' battery size beyond the current high of 100 kWh. I'm modeling 125 kWh avg battery size after the refresh as part of my sanity check for Gigafactory capacity needed by quarter for my Base and Conservative projections. Further, Model S is available now vs. significant wait time for Model 3, which will come into play in a major way once the news of 200,000th US delivery picks up.

Having said that, even if Tesla never introduced the P75D, Tesla's EBIT margin would still be better than Apple according to above math.

P75D .. S or 3? Never for S, defiantly for 3. 3 can fill the role of the BMW M3 and M5 and Audi/MB version of the same.

 

[Mike Smith]

With only four delivery days left in the quarter (Easter holiday weekend) this 'delivery slowdown' will have almost zero effect, and will be easily sorted out before the next rush at the end of Q2. Good PR move though showing Norwegians Tesla cares about their safety.

 

[Waiting4M3]

Your blue line looks correct, but the red line should be split into two sections - it looks like pace quickened significantly starting March 19.

Unfortunately due to the granularity of the data (rounded to 100 for most) and the short interval, there is no statistically relevant conclusion to be had either way. I will try to run the analysis again from that date next week.

This is what the post 3/19 period extrapolate to using current data (mine is slightly stale from last night). The linear fit is the maroon solid line, it's clearly not realistic since it predicts a 5k/wk rate. I also hand-drew in a 2k/wk line (green dash) just to see what it looks like. I think it's possible that it could fit. I agree that we need next week's data to be able to tell.