General Discussion: 2018 Investor Roundtable

[Reciprocity]

Agree, here is my WAG on the conservative side:

Q1: 500/wk entry rate, 1.5k/wk exit rate, 2.5k/wk burst at exit, avg 1k/wk, 13k total
Q2: 1.5k/wk entry rate, 3k/wk exit rate, 5k/wk burst at exit, avg 2.2k/wk, 29k total
Q3: 3k/wk entry rate, 5k/wk exit rate, 6k/wk burst at exit, avg 4k/wk, 52k total
Q4: 5k/wk entry rate, 6k/wk exit rate, 7k/wk burst at exit, avg 5.5k/wk, lose 1 week EoY downtime, 66 k total

Total 2018 160k. A conservative WAG, I think there is a good chance Tesla beats it.

Edit: perspective: at this level, if they get $50K ASP on the M3, this would be ~80% increase in revenue from 2017 just from Tesla Auto.

I get where everyone is coming from and its somewhat depressing because these are all linear ramps for the most part. Where is the S Curve in these estimates? Could it be more like 8k in Q1, 24K in Q2, then 60k in Q3 as the curve goes more vertical and flattens out to 70-80k in Q4. My point is that we could all see a bit more pain this quarter as wait for the vertical part of the S Curve. With each bottleneck that is resolved, you should see a step up almost instantly. You kind of see that Q1 where the pack assembly fixes should lead to 5-8x the production over Q4-2017 based on the estimates here, which would be a significant increase. Maybe 5x is more likely for Q1, but then another 3x for Q2 and Q3, flattening into the end of the year at a rate closer 5k/w.

My main point is that any estimates should try to figure out where the S Curve goes vertical and these estimates are all linear. Maybe the S Curve is a myth anyway, but it seems logical that you would have noticeable increases in production as production bottlenecks are removed.

 

[ValueAnalyst]

My Base and Conservative scenario expectations for Model 3 in the coming quarters:

View attachment 273072

Base scenario assumes 5,000 per week exit-2Q18 and 7,500 per week at end-18, with minimal CapEx.

View attachment 273074

Conservative scenario assumes another three-month delay.

Slightly revised:

Lowered 4Q18 for Base and 1Q18 for Conservative.

 

[dc_h]

I think 15,000 is a good conservative number. 4784 has been spotted in the wild. Hopefully we'll see some 5xxx in the next few days. With models showing up in Florida and Georgia, it does seem like there is some ramping, even if linear.

 

[neroden]

I think the most charitable explanation is that it broke due to changes in the way the file systems are managed and not enough people care about USB playback to put a fix high on the priority list.

That's less charitable.

We know that at least dozens of people care about USB playback (probably hundreds or thousands); I can literally *name* a dozen off the top of my head. I also know exactly how hard it is to fix this, which is not at all: it's something every Linux computer gets right, so Tesla just has to remove whatever idiot code they've inserted which causes the problem. (They are probably doing unnecessary scans which can just be deleted.) I could fix it given access to the code. Guaranteed.

Saying "To hell with you, we can't be bothered" to dozens of highly loyal early adopter customers over something which is objectively entirely Tesla's fault, something which is necessary in order for the car to have a media system as good as a *tape deck*, and something which any programmer could fix rather quickly... would be much, much worse than my more charitable interpretation that their communications is so screwed up that they don't realize what they've done. It would indicate contempt for their customers and a hostile disinterest in Tesla's reputation. It would be the kiss of death for the company, long term; companies with that attitude do *not* survive.

I prefer to take a more charitable interpretation about this, and assume that they're so distracted and their communications are so poor that they haven't really noticed what a huge screwup they made.

 

[RobStark]

https://hmg-prod.s3.amazonaws.com/videos/tesla-loop-2-1515775269.mp4

it does seem like there is some ramping, even if linear.

I spotted my 2nd and 3rd Model 3 in the wild yesterday driving for about 45 minutes in Los Angeles.

The first Model 3 I spotted was about a month ago.

Hopefully, it is not another month before I sport #4 and #5.

 

[ruralectric]

That's less charitable.

We know that at least dozens of people care about USB playback (probably hundreds or thousands); I can literally *name* a dozen off the top of my head. I also know exactly how hard it is to fix this, which is not at all: it's something every Linux computer gets right, so Tesla just has to remove whatever idiot code they've inserted which causes the problem. (They are probably doing unnecessary scans which can just be deleted.) I could fix it given access to the code. Guaranteed.

Saying "To hell with you, we can't be bothered" to dozens of highly loyal early adopter customers over something which is objectively entirely Tesla's fault, something which is necessary in order for the car to have a media system as good as a *tape deck*, and something which any programmer could fix rather quickly... would be much, much worse than my more charitable interpretation that their communications is so screwed up that they don't realize what they've done. It would indicate contempt for their customers and a hostile disinterest in Tesla's reputation. It would be the kiss of death for the company, long term; companies with that attitude do *not* survive.

I prefer to take a more charitable interpretation about this, and assume that they're so distracted and their communications are so poor that they haven't really noticed what a huge screwup they made.

My opinion, for the time being anyway, is that issues of this nature are a result of 1) a young company with growing pains, and 2) prioritization of the ton of work they've got on their plate. Heavily leaning towards the latter. We will see.

Also, I strongly suspect that the Alcantra matter is an example of the latter. I haven't seen the new woven material, but it looks fine in the photos I've seen. Much better in my mind to find a suitable replacement than to let the headliner material (in a car with a glass roof!) become a production bottleneck. Pretty sure that whatever material they're using will hold up adequately. Otherwise they'd be looking at some serious warranty costs.

What's my confidence level of this view? High enough that I've got 75% of my retirement (i.e my income from damn near here on out), and high enough that I'm willing to plunk down the dough for an M3 when that email comes in a couple of months, and risk the hiccups that will likely come with the car with the closest service center nearly 300 miles away. Pretty sure that Tesla is not a "to hell with you" company. That kind of characterization is more appropriate for the likes of VW and all the others with their dieselgate scams, and just about every car dealership I've ever dealt with.

By the way, I've read about lots of folks who are waiting for the AWD M3. My intent is to get the LR RWD now, and hopefully get the tax credit, and then trade in when the AWD becomes available. Got a 2nd reservation for this purpose back in March 2017. Not sure if I believe the Dec 2018 estimate for the 2nd reservation, but who cares, I'm gonna be drivin an M3 in a couple of months .

 

[bdy0627]

Slightly revised:

View attachment 273101

View attachment 273102

Lowered 4Q18 for Base and 1Q18 for Conservative.

Adding to the discussion from a few days ago, here is a list of Model 3 2018 production estimates laid down so far. We really need a separate thread for this.

Waiting4M3
Q1: 13k total
Q2: 29k total
Q3: 52k total
Q4: 66 k total
Total 2018: 160,000

ValueAnalyst Base
Q1: 20k total
Q2: 42.5k total
Q3: 67.5k total
Q4: 85k total
Total 2018: 215,000

ValueAnalyst Conservative
Q1: 15k total
Q2: 37.5k total
Q3: 57.5k total
Q4: 72.5k total
Total 2018: 182,500

Gene Munster
Q1: 14,300 total
Q2: 35,000 total
Q3: 57,000 total
Q4: 75,900 total
Total 2018: 182,200

Adam Jonas
Q1: 8,000 total
Q2: 24,000 total
Q3: 32,000 total
Q4: 46,000 total
Total 2018: 110,000

Mine (similar to Waiting4M3)
Q1: 13,000 total
Q2: 32,000 total
Q3: 55,000 total
Q4: 68,000 total
Total 2018: 168,000

Rob Maurer (Tesla Daily Podcast) - Highly recommended Podcast for TSLA investors (shout out to Generalenthu for the rec)
Q1: 12,000 total

Generalenthu
Q1: 12,000 total

 

[BornToFly]

Source: Model 3 has Tesla Store Debut, Gets Mobbed.

BMW is SO screwed!!!!!

 

[sub]

They BROKE USB MUSIC PLAYBACK in an UPDATE a year ago and still haven't fixed it.

The most *charitable* interpretation of this is that their communication is completely fscked so that the team who's supposed to fix it, and Musk, can't tell how important a problem this is. (It's more important than practically anything else in the software. It's a regression, where they actually broke something which was working when they shipped the car.) The less charitable interpretations are worse.

Not sure how this pertains to the point I was making, which was Tesla has made WAY more UPGRADES to their initial prototype vehicles then the "downgrade" which is alcantragate.

Your point goes more to quality or ongoing customer service issue, not related imo.

 

[ValueAnalyst]

The conservative scenario is too optimistic. It'll be no more than 14-15k at the high end for Q1. The line is not up all weeks. You CANNOT multiply exit rates with number of weeks.

Look at the discussion here from a few days ago, talking about Gene Munster and Rob Maurer's estimates.

What made you think I multiplied exit rates with number of weeks, when my Base scenario estimate showed 42.5k for 2Q18 and 5,000 exit?

As for the original 90k in 4Q18, the inherent assumption is that Tesla will push beyond 5,000 in 3Q18, to the extent that it can do so until 7,500 with minimal CapEx, but delay the push to 10,000 and beyond to 2019. This is reasonable.

I’m open to discussing my estimates, if you can refrain from jumping to unwarranted conclusions.

 

[generalenthu]

What made you think I multiplied exit rates with number of weeks, when my Base scenario estimate showed 42.5k for 2Q18 and 5,000 exit?

As for the original 90k in 4Q18, the inherent assumption is that Tesla will push beyond 5,000 in 3Q18, to the extent that it can do so until 7,500 with minimal CapEx, but delay the push to 10,000 and beyond to 2019. This is reasonable.

I’m open to discussing my estimates, if you can refrain from jumping to unwarranted conclusions.

Easy there VA.

I should have been clear. Average of exit rates from previous and current quarter cannot be used. Even using the exit rate from prior quarter will likely be an over estimate from past model X experience, because Tesla quotes burst rates.

 

[Starno]

 

[bdy0627]

I hope Tesla is able to keep up in the FSD realm. It has been very quiet on that front, which is not typically EM's style, but I'm going to remain optimistic. If we go by the EM timeline filter, his plan for a coast to coast FSD trip by the end of 2017 probably means they will get it done but it will be in the June - Sep 2018 timeframe. That would still be awesome. Any solid guesses on when this may happen?

 

[ValueAnalyst]

CNBC, you suck.

 

[Brando]

BMW is SO screwed!!!!!

Could we add these sedans to the list?
Audi A4, Cadillac CTS, Lexus ES 350, Acura TLX, Benz C Class
Not sure of the amounts these models sold.

and used shorter range electrics may get cheaper??

 

[RobStark]

Daimler Benz admits G-Wagen is a fossil fuel guzzling fossil.

Mercedes display at North American International Auto Show.

 

[Lessmog]

Daimler Benz admits G-Wagen is a fossil fuel guzzling fossil.

Mercedes display at North American International Auto Show.

Was that an amber alert?

 

[BioSehnsucht]

Long lines just to see a Model 3 in person are to be expected in CA. When we see them in Michigan or similar, then it will be a bigger deal.

 

[Starno]

I hope Tesla is able to keep up in the FSD realm. It has been very quiet on that front, which is not typically EM's style, but I'm going to remain optimistic. If we go by the EM timeline filter, his plan for a coast to coast FSD trip by the end of 2017 probably means they will get it done but it will be in the June - Sep 2018 timeframe. That would still be awesome. Any solid guesses on when this may happen?

I think they'll get it done at the end of September 2018.

Pure speculation though.

 

[30seconds]

Here’s my high level thoughts on where tesla gets to cash flow breakeven based on model 3 production (excluding one time events like paying for the factory equipment).

At $55k price, 20%GM & 2,500/week average production the contibrution from Model 3 will be $330m for a quarter. Add the $650m contribution from S+X (see Q2 financials before 3 production began) and we get something in the $980m range. S+X margin should improve as much of fixed factory cost is now shared with the 3 (not included here).

Looks like selling expenses are up to $650m and interest expense about $120m. Assuming service (which operates at a loss) and energy (which operates at a profit) wash out that leaves about $220m. R&D has been running around $330m, but that will likely reduce somewhat for a few quarters until gear up for Y, semi or new GF. Let’s say it goes to $250m, which puts them at roughly breakeven.

So that’s about 125,000 on an annual basis. Let’s say 150,000 to be safe (3k/ week). So maybe sometime in Q2.

Based on this I’m expecting a very rough Q4 cash usage (maybe $1B) due to equipment payment terms, and maybe $400-$500m in Q1 (should be better than Q3 ‘17, but current production is still low).

The good news is that if the production ramp is approaching 2,000/ week by the time of the year end call I would expect Elon/ Deepak to start to give guidance on cash flow breakeven.