Long-Term Fundamentals of Tesla Motors (TSLA)

[neroden]

They are only in the used Tesla business. They can't let off-lease and trade-in Teslas go to auction, used car dealers lack the know-how and the tech docs needed to resell them. They could do a deal with someone like CarMax, but that's not the way Elon rolls.

Fair enough -- then they need to learn how to actually sell used cars. Tesla lacks the know-how and the tech docs to resell them -- they're selling pigs in pokes at the moment, where people can't even find out what the specs, condition, and repair history of the car they're getting are. That's not really the right way to sell used cars, unless you want a "used car salesman" reputation.

 

[Thekiwi]

Thread bump.

What are everyone’s thoughts on likely 2020 unit guidance?

I’m thinking a 450k-575k is a wide range might be feasible especially if shanghai gets a local battery supply for ~100k shipment level.

At least the drag from S/X won’t be as bad in 2020, after the less than stellar results in 2019 so far. Might even see some growth from model S due to the plaid (although have to think Y will take a bite out of X volume).

2020 hypothetical:

350k-400k model 3
50k-100k model Y
50k-75K model S/X

 

[FrankSG]

Thread bump.

What are everyone’s thoughts on likely 2020 unit guidance?

I’m thinking a 450k-575k is a wide range might be feasible especially if shanghai gets a local battery supply for ~100k shipment level.

At least the drag from S/X won’t be as bad in 2020, after the less than stellar results in 2019 so far. Might even see some growth from model S due to the plaid (although have to think Y will take a bite out of X volume).

2020 hypothetical:

350k-400k model 3
50k-100k model Y
50k-75K model S/X

My range is 486k - 570k

60k-75k S+X
425k-490k 3
1k-5k Y

I realise there are some rumors saying Y production could start much earlier because of prototypes being spotted, but I don't like to adjust my models based off of just rumors. Last official statement was start in Fall 2020, kind of like 3 started in Q3 2017. So considering 3 did 1,764 deliveries by end of 2017, I have between 1k and 5k deliveries for Y in 2020.

Also, Tesla is battery cell supply constrained at the moment, so we'll have to wait for Battery Investor Day to find out how and when this constraint will be resolved.

 

[Doggydogworld]

Thread bump.

What are everyone’s thoughts on likely 2020 unit guidance?

I’m thinking a 450k-575k is a wide range might be feasible especially if shanghai gets a local battery supply for ~100k shipment level.

At least the drag from S/X won’t be as bad in 2020, after the less than stellar results in 2019 so far. Might even see some growth from model S due to the plaid (although have to think Y will take a bite out of X volume).

2020 hypothetical:

350k-400k model 3
50k-100k model Y
50k-75K model S/X

Tesla guided 500k production from 7/1/19 - 6/30/20. A bit over 200k in 2H19 means almost 300k in 1H20. Maybe 50k Shanghai, 250k Fremont? 2H20 would be 75k Shanghai and maybe 275k Fremont for 650k total in 2020.

Alternative interpretation: the 500k guidance is just continued fallout from Musk's infamous "500k in 2019" tweet that triggered SEC contempt of court charges. This issue also drove the absurd claim in the Q1 letter that Tesla might increase inventory by 100-140k cars in 2019 (build 500k while delivering 360-400k). I give more credence to earnings letter guidance than Musk's verbal comments, but I expect them to miss this latest 500k claim. Still, there's no way 2020 guidance will be less than 500k. I see either 500-550k or 550-600k. I think 500k would be a good result, but the market may disagree.

 

[wdolson]

Thread bump.

What are everyone’s thoughts on likely 2020 unit guidance?

I’m thinking a 450k-575k is a wide range might be feasible especially if shanghai gets a local battery supply for ~100k shipment level.

At least the drag from S/X won’t be as bad in 2020, after the less than stellar results in 2019 so far. Might even see some growth from model S due to the plaid (although have to think Y will take a bite out of X volume).

2020 hypothetical:

350k-400k model 3
50k-100k model Y
50k-75K model S/X

I don't know about production volume, but I suspect Model Y sales will also cannibalize Model 3 sales. In many places Model 3 sales have been strong only because it's the only affordable Tesla. Most consumers today prefer the higher seating position and having a hatchback. The Model S has only kept up sales as other sedans decline because it's really a hatchback.

I expect Tesla will end up converting at least one of the Model 3 lines to Model Y production.

 

[Thekiwi]

I don't know about production volume, but I suspect Model Y sales will also cannibalize Model 3 sales. In many places Model 3 sales have been strong only because it's the only affordable Tesla. Most consumers today prefer the higher seating position and having a hatchback. The Model S has only kept up sales as other sedans decline because it's really a hatchback.

I expect Tesla will end up converting at least one of the Model 3 lines to Model Y production.

I agree. My figure above assumes a large increase in China model 3 units, countered by a small drop in model 3 sales in USA. Important to note though that the cheaper SR versions of the Y won’t arrive until 2021, and so the entry level 3 will still be $10k+ cheaper than the cheapest Y at $48k+ for all of 2020.

 

[GreenT]

I agree. My figure above assumes a large increase in China model 3 units, countered by a small drop in model 3 sales in USA. Important to note though that the cheaper SR versions of the Y won’t arrive until 2021, and so the entry level 3 will still be $10k+ cheaper than the cheapest Y at $48k+ for all of 2020.

In Tesla years ... 2025.

 

[mspohr]

In Tesla years ... 2025.

I think we need a new metric for Chinese Tesla Years.

 

[GreenT]

I think we need a new metric for Chinese Tesla Years.

Agreed. Double those of American?

 

[mspohr]

Agreed. Double those of American?

At least double

 

[davepsilon]

In the Q3 earnings call Elon gave a long term yearly sales target of 1% of global vehicle fleet for Tesla (and explicitly listed 20M as the number in his head).

If you assume a 16 year average car lifetime, that is typical In the US, only about 6% of the US fleet is replaced every year. So that'd be, in round numbers, a 15% market share by sales volume (if that number extends to just US market). No single brand enjoys that in the US, which this year would be about 2.8 M sales so it does seem to be a reach goal. And one that seems to require pushing down market out of the luxury segment.

Something to ponder on. From a business value perspective I might rather sit at the top (or middle through top) of the market and maintain a luxury brand with a complete luxury experience from sales to ownership. Maybe they'd consider splitting off a lower tier brand.

 

[dc_h]

I agree. My figure above assumes a large increase in China model 3 units, countered by a small drop in model 3 sales in USA. Important to note though that the cheaper SR versions of the Y won’t arrive until 2021, and so the entry level 3 will still be $10k+ cheaper than the cheapest Y at $48k+ for all of 2020.

They listed Fremont's current capacity as 350,000 for Model 3 and 90,000 for SX and 150,000 for Model 3 at Shanghai. That allows for about 425,000 at Fremont with 75,000 S/X and 350,000 Model 3's and 150,000 at Shanghai for 575,000. If they add capacity for the Model Y or combined 3Y lines, and increase Shanghai at all in 2020, they should be well over 600,000 cars. I don't expect, but hope that Shanghai will have a full second line by the end of 2020 and have a 300,000 run rate. Who knows where the heck the Semi and Roadster are going to be built, but they will not have a material impact on volume or cash flow.
I am probably being overly specific already and don't want to jinx or get ahead of myself. I think they are in a great position to run at 100% of whatever capacity they can build out with the combined 3Y production.

 

[mspohr]

In the Q3 earnings call Elon gave a long term yearly sales target of 1% of global vehicle fleet for Tesla (and explicitly listed 20M as the number in his head).

If you assume a 16 year average car lifetime, that is typical In the US, only about 6% of the US fleet is replaced every year. So that'd be, in round numbers, a 15% market share by sales volume (if that number extends to just US market). No single brand enjoys that in the US, which this year would be about 2.8 M sales so it does seem to be a reach goal. And one that seems to require pushing down market out of the luxury segment.

Something to ponder on. From a business value perspective I might rather sit at the top (or middle through top) of the market and maintain a luxury brand with a complete luxury experience from sales to ownership. Maybe they'd consider splitting off a lower tier brand.

Certainly the top 15% of the market is premium priced and Tesla can capture that. You also have to consider the TCO of EVs is less so they can compete with lower priced cars.

 

[Cal1]

Also, Tesla is battery cell supply constrained at the moment, so we'll have to wait for Battery Investor Day to find out how and when this constraint will be resolved.

I thought of this as a one off and probably not reoccurring on any kind of regular basis. Any idea of next Battery Investor Day date?

 

[davepsilon]

Certainly the top 15% of the market is premium priced and Tesla can capture that. You also have to consider the TCO of EVs is less so they can compete with lower priced cars.

They can capture a percentage of any market they enter. They make a good product but they are not going to capture one hundred percent of the luxury auto market ... or even a majority of it. And since this is a long term view they will compete against other good EVs.

 

[FrankSG]

I thought of this as a one off and probably not reoccurring on any kind of regular basis. Any idea of next Battery Investor Day date?

I reckon they've been cell supply constrained since mid-2018. At first there was a lot of talk of going to 10k M3/week. Then in mid-2018 they said they would go to 10k/week more gradually in a more capital efficient manner. Yet, although 5k/week to 10k/week should be much easier than 0/week to 5k/week, in the past 15 months they've gone from 4-5k/week to what? 6k/week?

They've also made comments over the past year saying they have been starving the Energy storage business from cells in favor of M3 production, and they reiterated this again at this Q3'19 earnings call. Add to that the friction with Panasonic, and them moving fast to produce their own cells, and possibly get into the mining business.

And last but certainly not least, Tesla Semi and Roadster 2 were unveiled end of 2017, but still seem far away from (volume) production. Elon said during 2019 Shareholders Meeting that it doesn't make sense to add production complexity if there's not enough cell supply. All in all, to me it seems obvious that they've been cell supply constrained for quite a while now.

Battery Investor Day was supposed to be this year, but is now scheduled for early 2020. I am hoping Q1.

 

[mspohr]

They can capture a percentage of any market they enter. They make a good product but they are not going to capture one hundred percent of the luxury auto market ... or even a majority of it. And since this is a long term view they will compete against other good EVs.

MB is effectively out of business in Norway.

 

[davepsilon]

MB is effectively out of business in Norway.

Norway. A market that has regulated away almost all ICE competition. So does Tesla own the top 15% of the market. No, s&x share it with etron and ipace. EVs that unlike Tesla do not compete very well against ice due to low range. So sure let's look at the Norway micro-market because it shows Tesla, even if they can maintain an advantage in powertrain stats, will have to compete for luxury market share.

 

[mspohr]

Norway. A market that has regulated away almost all ICE competition. So does Tesla own the top 15% of the market. No, s&x share it with etron and ipace. EVs that unlike Tesla do not compete very well against ice due to low range. So sure let's look at the Norway micro-market because it shows Tesla, even if they can maintain an advantage in powertrain stats, will have to compete for luxury market share.

The future is here now. It's just not evenly distributed.

 

[clmason]

Not sure about fundamentals, but certainly long term. I've got several lots of shares that I acquired between 2010-2012. It took a while but this is getting very interesting!