A bear and a bull argument, pretty much what we should have all expected. The S/X deliveries were rip your face off beat the market great. That said, without Model 3 production to back it up, no one cares. What does this mean going forward is the important question, not what is today's market response, or who can spit out the nastier response. Today's numbers were almost exactly what I though 2-3 weeks ago and I thought that would support a bullish story for the year. I also thought 2500 end of Q1 was more realistic, based on the ramping challenges to date. I still thought that was ok, since combined with 25k+ Model S\X and some slowly increasing TE sales and deposit money, they can be pretty close to or at cash flow parity.
Getting into the details for the year you can target 100,000 S\X for 9 billion in revenue. Q1 might be below 25,000, since they need to build stock and possibly divert production and sales resources. Delivering 100's of cars a day at Marina Del Rey appears to be very organized, but something not built to scale nationally yet. Model 3 production seems to be on track, but low enough for some to tell us the sky is falling. Assuming they are on track to produce this new lower number, they are probably entering the first week of January below 1000 a week. The mad rush over the holiday was likely herculean, but it does not seem like the Model X, where you had substantial issues that took another 6 months to work out. So, assuming production this week is about 750 and the last week of the quarter is 2500 that produces about 21,000 cars. Assume that leaves 4000 enroute, that is 17,000 Model 3's delivered and perhaps only 22,000 S/X delivered. That is not a great number, but reasonable numbers based on Tesla's statement and normal channel filling requirements. At this rate, Q1 is not awesome, but hopefully a burn of less than 300 million, not counting Roadster and other deposits. Based on Q4 deposits, I don't think cash flow is nearly as bad as many bears would say.Total revenue would be about 2b plus 1b, plus 500m for TE, or 3.5 billion for Q1 and about 300 million cash burn.
Going into Q2, S/X stock should be restored and staffing to increase production should be normalized, so production should be over 25,000 and deliveries should be at least 25,000. If production is on target and ends Q2 at 5000 Model 3's per week, production should be about 48,500 and deliveries about 44,000. At that rate cash flow is 2.2 billion (SX) and 2.6 billion, plus TE, so between 5 and 6 billion.
Going into Q3 and assuming capacity continues to grow, ending about 6300, production scales to 70,000 and deliveries about 62 to 65,000. S/X sales stay at 25,000. Perhaps Tesla could sell more S/X, but resources to increase production are probably still limited. At that rate, sales are again 2.2 billion for S/X and about 3.8 billion for the 3, or 6 billion plus TE, or approaching 7 billion Q3 revenue.
For Q4, assume no 10k per week, but more conservative 7500, that is about 90,000 3s for the quarter and again I stay with 25,000 for S/X. Again with 2.2 billion S/X rev and now 4.5+ billion for the 3, or 6.7billion plus TE, which should total close to 8 billion.
If Tesla can approximate these numbers, that is 23 billion in revenue for 2018. Cash flow in Q1 is probably marginally negative, Q2 is about even and the second half should be generate close to 3 billion in cash flow. I'm assuming normal Tesla investments in charging and distribution centers, etc. Based on Model 3, I would not expect any new Semi line install to start before Q1 or Q2 of 2019 and with 90 days payment schedule, they won't be paying for those systems until Q3 or 4 2019. By then, the Semi will be generating some cash flow and the Model 3+SX will be generating almost 3 billion free cash flow per quarter. This implies cash available for the Semi, and an as yet unidentifid plant that might build Model 3 and Model Y cars with an integrated battery factory. This will be a much bigger investment than needed for the Semi or Roadster, so is not likely before the end of 2019. I'd love for that to be sooner, but don't really see that this can be moved up much. I think the Roadster was a smart way to create Model Y like revenue, without nearly as much up front investment, making the eventual Model 3 plant much more affordable without a new round of financing.
The bottom line there is much for the bears to beat their chests over for now, but I think the long term story remains the same. I do think delays do affect future production numbers, so MU and other naysayers have a point, no denying. Long term there is still no strong attack against Tesla's home turf, so Tesla continues to compete against the 100 million car market, but only a small percent of the 100 million car market competes against Tesla. Perhaps a 100 PowerPoints are aimed at the heart of Tesla and a pack of Bolts,i3's, Porsche's and Jag's will attack like wolves to kill the leader of the pack, but I think the market to date only highlights Tesla's technical and design advantages and begins to educate a bigger market about the long term direction of the auto market towards EV, which is to Tesla's advantage.
We can all have this discussion next new years and I'm sure the lines will still be drawn about the same. Stupid Tesla and crooked Elon can't build over 500k cars, Elon is a liar and fraud and so on and on. Personally I'm not familiar with any historical frauds and cheats that slept on their factory floor or ever gambled their own money before their investors. He does at times resemble Howard Hughes with great gambles and a willingness to give all of himself to win the bet, and that certainly attracted detractors for HH. So, while I wish the numbers were better, I don't think anyone should have expected more for Q4. Q1 is lower than many here hoped, but seemingly on track with a more controlled rollout.
Longer term, I'd like to see Peter Hochholdinger perhaps step up and take a bigger lead role on the manufacturing side. I'm sure he is more conservative about timelines than Elon. Going forward as Tesla grows into 2018's 20+ billion industrial adolescent, I think Elon needs to let go of more day to day operations and only dive in for emergencies. Finding time to focus on visionary engineering, as well as the more mundane international purchasing agreements (lithium in Chile) or plants in China will require more and more time. I'm looking forward to looking back on 2018 as Tesla's first year as a near adult in the auto market. Still growing like a teenager, but getting more stable, stronger and faster going into 2019.