General Discussion: 2018 Investor Roundtable

[generalenthu]

Here is a simplistic model on margin. Some numbers such as overhead and material cost are WAG based on Tesla's projection. The main point is how quickly margin can improve when you start mass producing. But Q1 will look bad for sure.

View attachment 296388

To be fair, the depreciation for production tooling is on a per unit built basis, but there are other items like buildings, etc., that are on a time based amortization schedule. So, the overhead should also scale linearly, with a small slope. I do think at ~6K per week, the margin will be in the high teens this year, but will improve to low to mid 20s by next year.

 

[ValueAnalyst]

To be fair, the depreciation for production tooling is on a per unit built basis, but there are other items like buildings, etc., that are on a time based amortization schedule. So, the overhead should also scale linearly, with a small slope. I do think at ~6K per week, the margin will be in the high teens this year, but will improve to low to mid 20s by next year.

Tesla uses the straight-line depreciation method for "Equipment," whereas "Tooling" is a small portion. Real estate also uses straight-line.

In other words, Tesla uses the straight-line method for the vast majority of its depreciation.

The following two sections are from the most recent Form 10-K:

@Waiting4M3 has the model as correct as possible given what we know.

 

[JRP3]

I think MattEnth means well...

By "means well" you mean betting against Tesla and therefore hoping all of us lose a lot of money?

 

[Waiting4M3]

To be fair, the depreciation for production tooling is on a per unit built basis, but there are other items like buildings, etc., that are on a time based amortization schedule. So, the overhead should also scale linearly, with a small slope. I do think at ~6K per week, the margin will be in the high teens this year, but will improve to low to mid 20s by next year.

Thx, using per unit basis for tool depreciation should help smooth out the negative impact on margin. Q1 should give us a lot more info on how to model M3 margin going forward. I look forward to analysis from people who are much more knowledgeable on the subject such as yourself.

 

[MattEnth]

Here is a simplistic model on margin. Some numbers such as overhead and material cost are WAG based on Tesla's projection. The main point is how quickly margin can improve when you start mass producing. But Q1 will look bad for sure.

View attachment 296388

How does your model change if Q1 margins are -20% or worse? At what point would you worry? That's what I'm asking.

I'm expecting a gross margin in the high negative teens. VA is expecting 0. Is there no number relevant here to the bulls?

 

[K_Dizzle]

How does your model change if Q1 margins are -20% or worse? At what point would you worry? That's what I'm asking.

The margins at low volume are pretty much irrelevant. We need to know how much Tesla will be making once the ramp gets past the 5k / week production rate

 

[K_Dizzle]

Tesla is actually doing very well compared to the rest of the market. It makes me very hopeful

 

[Yggdrasill]

How does your model change if Q1 margins are -20% or worse? At what point would you worry? That's what I'm asking.

-20% margin on the Model 3 wouldn't be so bad. I'd calculate around 18% automotive gross margin excluding ZEV and SBC, up from 13.8% in Q4.

-20% is really quite close to 0% margin, because in Q4 Model 3 margin was definitely in triple digits negative.

 

[Waiting4M3]

How does your model change if Q1 margins are -20% or worse? At what point would you worry? That's what I'm asking.

Not worried. Q1 number can be much worse, for example if overhead is much higher than I expected, $300m instead of $200m. But even in that case, its impact on higher production volume is dramatically reduced, still >20% margin in Q4:

As I said before it's a very simplistic model only to illustrate the rapid improvement of margin at high volume. Others here with much more sophisticated models show that Q1 could have negative margins even as low as -40%, but by Q3 and Q4 the cash flow from M3 will allow Tesla to self-finance CapEx, if they reach 5k/wk on target. So as long as Tesla maintains their guidance of 5k/wk around end of Q2, and positive cash/earnings in Q3/Q4, I'm 100% not worried, no matter what M3 margin is in Q1.

 

[Paracelsus]

A very positive, non-FUD article circulating on LinkedIn now that breaks down Elon's recent letter to employees to analyze the leadership strengths that are presented in it:

Elon Musk Just Sent an Extraordinary Email to Tesla Employees

 

[kbM3]

The trolls aren't the target audience. The targets are new open-minded people gathering information so they don't get infected by the troll FUD.

Don’t forget old open-minded people-

 

[Iceman]

Tesla is actually doing very well compared to the rest of the market. It makes me very hopeful

I´d say......

 

[JRP3]

Tesla secures dismissal in Autopilot case - Tesla, Inc. (NASDAQ:TSLA) | Seeking Alpha

I don't know which case this was.

 

[Todd Burch]

Tesla secures dismissal in Autopilot case - Tesla, Inc. (NASDAQ:TSLA) | Seeking Alpha

I don't know which case this was.

Is that the one where the road turned 90 degrees but the car went straight? That was mos' def' a user whoopsie-doodle.

(Edit: Changed whoopsie to whoopsie-doodle. Because it's important).

 

[Curt Renz]

Electrek - this afternoon: Target partners with Tesla, ChargePoint and Electrify America to install over 600 chargers

 

[Curt Renz]

 

[SteveG3]

Earnings call next week gives Tesla a chance to present information and respond to misinformation of recent weeks.

Five weeks after next week's call, Tesla gets to do this gain at the Annual Shareholder's meeting, about one week into June. Four weeks after that, Tesla releases production numbers for Q2, and very likely some commentary re the Model 3 ramp. About 5 weeks following that, Tesla will hold the Q2 earnings call.

So, for the next 3 months, Tesla has at least 3 platforms to get their message out on various issues including TM3 ramp, and one additional platform to update on TM3 ramp.

I'm quite glad to see this run of events where Tesla can present their case. That said, it's very unlikely that all of those events will not be subject to nearly wall to wall shouting of a fun house mirror image of Tesla's commentary via the efforts of most media outlets, and a few analysts' spin efforts those media outlets will highlight.

This is why I'd really like to see Elon take up the suggestion in post #2 here, even if for 15 minutes each quarter on CNBC and Bloomberg.

Investor CONSTRUCTIVE Suggestions and/or Requests of Tesla

 

[RobStark]

Mostly positive review but "overly harsh ride" " excessive noise at speed" for its class.

 

[defc0n]

Mostly positive review but "overly harsh ride" " excessive noise at speed" for its class.

Surprised to hear reports about high wind noise. Wouldn’t expect that for a slender aerodynamic car. How much of that must be due to the lack of engine noise filtering out wind in ICE?

 

[JRP3]

Mostly positive review but "overly harsh ride" " excessive noise at speed" for its class.

I assume that's an early model before the springs were changed.