Long-Term Fundamentals of Tesla Motors (TSLA)

[chickensevil]

There is a lot wrong with that chart, but for being published in 2013, it was pretty dang good!

The GM is off since they are shooting to beef that up to 30%. I don't think they will have an 88k ASP (unless something terrible happens) in 2015/2016 it will likely be north of 100k. So with that in mind I would suggest 60k @ 100k ASP would be revenues of 6BN in 2015. For 2016 It will be at least 100k, lets go 20% higher (which just parodies the 50k to 60k difference) which would be 120k delivered at 100k ASP would put us at 12BN in revenue for 2016. Then in 2017 we can drop our ASK down to something like 88k as we bring Model 3 online and the gigafactory.

So 2015 @ 6BN in revenue, and lets assume 28% GM, would put gross profits at 1.68BN.
2016 @ 12BN in revenue and assume they are finally able to hit the 30% GM would put gross profits at 3.6BN

Where I fail is trying to get a guess at their net profit margin, since I am sure they plan to be mostly break even on this since they are going to keep spending all the money they get on further expansion.

Just my guess, they will exit 2016 at 150k a year run rate, and lets just assume that is the theoretical cap for demand of MS/MX so from 2017-2019 that is all they make, and lets continue to carry forward an ASP of 100k. That means for these years you are looking at a revenue of 15BN, GM on this will remain 30% giving 4.5BN in gross profit just from MS/MX.

Now for M3, I am going to assume they have a slow release in 2017 of only a measly 50k units. Let's assume a lower GM of 20% and an ASP of 55k, that gives 2.75BN and 550M for revenue and GP respectively. 2018 they ramp up to 150k M3 holding the 55k ASP, and 25% GM. giving us 8.25BN and 2.06BN for revenue and GP. 2019 they hit 350k units (this is theoretically possible and stated by elon that they could hit this in 2019 in his latest CNBC interview), at 55k ASP and 30% GM coming to 19.25BN and 5.78BN in revenues and GP.

So, adding both values up this gives us:
2017: 200k delivered, 17.75BN revenues, 88.75K ASP, 5.05BN GP, 28.5% GM
2018: 350k delivered, 23.25BN revenues, 66.43k ASP, 6.56BN GP, 28.2% GM
2019: 500k delivered, 34.25BN revenues, 68.5k ASP, 10.28BN GP, 30% GM

 

[Hogfighter]

There is a lot wrong with that chart, but for being published in 2013, it was pretty dang good!

The GM is off since they are shooting to beef that up to 30%. I don't think they will have an 88k ASP (unless something terrible happens) in 2015/2016 it will likely be north of 100k. So with that in mind I would suggest 60k @ 100k ASP would be revenues of 6BN in 2015. For 2016 It will be at least 100k, lets go 20% higher (which just parodies the 50k to 60k difference) which would be 120k delivered at 100k ASP would put us at 12BN in revenue for 2016. Then in 2017 we can drop our ASK down to something like 88k as we bring Model 3 online and the gigafactory.

So 2015 @ 6BN in revenue, and lets assume 28% GM, would put gross profits at 1.68BN.
2016 @ 12BN in revenue and assume they are finally able to hit the 30% GM would put gross profits at 3.6BN

Where I fail is trying to get a guess at their net profit margin, since I am sure they plan to be mostly break even on this since they are going to keep spending all the money they get on further expansion.

Just my guess, they will exit 2016 at 150k a year run rate, and lets just assume that is the theoretical cap for demand of MS/MX so from 2017-2019 that is all they make, and lets continue to carry forward an ASP of 100k. That means for these years you are looking at a revenue of 15BN, GM on this will remain 30% giving 4.5BN in gross profit just from MS/MX.

Now for M3, I am going to assume they have a slow release in 2017 of only a measly 50k units. Let's assume a lower GM of 20% and an ASP of 55k, that gives 2.75BN and 550M for revenue and GP respectively. 2018 they ramp up to 150k M3 holding the 55k ASP, and 25% GM. giving us 8.25BN and 2.06BN for revenue and GP. 2019 they hit 350k units (this is theoretically possible and stated by elon that they could hit this in 2019 in his latest CNBC interview), at 55k ASP and 30% GM coming to 19.25BN and 5.78BN in revenues and GP.

So, adding both values up this gives us:
2017: 200k delivered, 17.75BN revenues, 88.75K ASP, 5.05BN GP, 28.5% GM
2018: 350k delivered, 23.25BN revenues, 66.43k ASP, 6.56BN GP, 28.2% GM
2019: 500k delivered, 34.25BN revenues, 68.5k ASP, 10.28BN GP, 30% GM

I just spent the past hour doing some math, and my numbers are scarily close to yours. Totally agree that net profit is a crapshoot as they will be spending to fund growth for the foreseeable future, as we would want them to do. Stock dilution is a subject for another thread....

 

[kalikgod]

Ok, I took a shot at reproducing the table with a few more features. I broke out S / X from Gen III, so that you can enter separate volumes, ASP, and GM. I also added share dilution as a fixed rate over the timeframe (2014 forward). And I started with the current number of shares.

The first tab is my rough example shot at filling it out. I made a second tab with a blank table so others can fill it out themselves. Just fill in the green cells. Make additional tabs as needed.

Anyone with this link should be able to edit it. Let me know if it works.

TSLA Valuation - Google Sheets

 

[chickensevil]

Just to make it a bit easier to read, here are my numbers in a bit more digestible of a format.

- - - Updated - - -

Ok, I took a shot at reproducing the table with a few more features. I broke out S / X from Gen III, so that you can enter separate volumes, ASP, and GM. I also added share dilution as a fixed rate over the timeframe (2014 forward). And I started with the current number of shares.

The first tab is my rough example shot at filling it out. I made a second tab with a blank table so others can fill it out themselves. Just fill in the green cells. Make additional tabs as needed.

Anyone with this link should be able to edit it. Let me know if it works.

TSLA Valuation - Google Sheets

Thanks for the chart, looks like you cover just about everything, it is interesting to see your estimate vs mine, I thought I was being conservative. Seems like we are both more conservative in some areas and ambitious in others, but it seems like the only major difference between our two thought processes here is how quickly they hit 500k. I am betting on Elon meeting his more ambitious goal of 500k by 2019.

 

[kalikgod]

He has stated many times publicly 500k cars by 2020. I agree there is a good chance to beat that, but I thought I would use it as a baseline.

I was really just throwing numbers up quickly to make sure the sheet worked. I am sure I would adjust it with more time, thought, and discussion.

 

[FANGO]

I think the GM numbers we are talking about here are too high. Tesla has stated that they don't expect 30% GM out of model 3.

 

[kalikgod]

I had S / X GM topping out at 30% and Gen 3 topping out at 20%.

 

[Hogfighter]

I have a feeling that Model S/X production will exceed 150,000 worldwide by 2019. There's over 20,000 deposits for the Model X, and it hasn't even hit the road yet. There's a 3 month wait in the U.S., a 6 month wait in China for the S. With no advertising.

I suppose that's why I'm long the stock.

 

[uselesslogin]

I have a feeling that Model S/X production will exceed 150,000 worldwide by 2019. There's over 20,000 deposits for the Model X, and it hasn't even hit the road yet. There's a 3 month wait in the U.S., a 6 month wait in China for the S. With no advertising.

I suppose that's why I'm long the stock.

There are over 20,000 deposits and people haven't even seen the final version which is apparently quite different from what was unveiled in 2012.

 

[kalikgod]

If there was no Model 3 / Y coming, I would agree with you. I was also not proposing a best case scenario.

That is why I made a separate tab for others to fill in the numbers they believe so we can compare. So far nobody has taken me up on it. I did lock my sheet because some people were changing my numbers.

I will post the link again to see if anyone will bite with the extra "D" traffic we are going to get. TSLA Valuation - Google Sheets

 

[jhm]

Under the hypothesis that D is a dual motor option for MS, what could be the impact on gross profit. Baseline, assume $100 ASP and 28% GM. Suppose the D option is $10 on any MS at a cost of $5. If 20% of orders opt for D, then ASP is $102 and gross profit per car is $29. So 40% option rate would take GM to about 30%. I'd expect the option rate to be between 20% and 50%. So we are looking at incremental profit of $1000 to $2500 per car, or $13M to $33M on 13000 deliveries. That's a nice ball park.

 

[ItsNotAboutTheMoney]

I have a feeling that Model S/X production will exceed 150,000 worldwide by 2019. There's over 20,000 deposits for the Model X, and it hasn't even hit the road yet. There's a 3 month wait in the U.S., a 6 month wait in China for the S. With no advertising.

I suppose that's why I'm long the stock.

I think that you're excessively optimistic. You should expect that the Model 3/Y will kill S/X sales.

 

[jhm]

I think that you're excessively optimistic. You should expect that the Model 3/Y will kill S/X sales.

Why should one expect that? If demand (in aggregate dollars for Tesla products) is growing 50% or more per year, there is plenty of new demand for Gen2 cars to offset any switching from Gen2 to Gen3. You seem to be making the assumption that aggregate demand will not grow much.

 

[kalikgod]

Why should one expect that? If demand (in aggregate dollars for Tesla products) is growing 50% or more per year, there is plenty of new demand for Gen2 cars to offset any switching from Gen2 to Gen3. You seem to be making the assumption that aggregate demand will not grow much.

I tried to back out the volumes from the assumption that Tesla would max the capacity of Fremont in 2020 at 500k vehicles. If they maxed production and had four models S/X and 3/Y, what would be the ratio of uptake that would cap the 500k production? My guess was 135k S/X and 365 3/Y. I could be wrong on the ratio.

The timeframe for production capacity beyond 500k is very grey until firm plans for another factory exist.

 

[jhm]

I tried to back out the volumes from the assumption that Tesla would max the capacity of Fremont in 2020 at 500k vehicles. If they maxed production and had four models S/X and 3/Y, what would be the ratio of uptake that would cap the 500k production? My guess was 135k S/X and 365 3/Y. I could be wrong on the ratio.

The timeframe for production capacity beyond 500k is very grey until firm plans for another factory exist.

Limiting capacity to the Freemont plant has interesting implications. No capacity to grow in 2021. Moreover, gains in 3Y compete with capacity for SX. This implies declining revenue and declining profit. Basically, it's not sustainable. The only way to sustain growth is to get more factory space. If 3Y are not priced high enough to pay for the expanded capacity, then they probably not be worth doing at all. It certainly won't do anything to bring EVs to the masses.

So given this absurdity, you may want to consider two scenarios: one with expanded capacity and the other without. You also may want to build up your assumptions about revenue growth and unit growth in SX, then back into the implied volumes of 3Y to make this work. I might try out myself.

 

[TD1]

any opinions on the Oil price in the influence on TSLA?
If WTI Crude drops to:
-80
-70
-60
-50?

Also the implications for the world economy of such prices.

 

[TSLAopt]

any opinions on the Oil price in the influence on TSLA?
If WTI Crude drops to:
-80
-70
-60
-50?

Also the implications for the world economy of such prices.

no immediate or near term effect, perhaps it would have an effect once Tesla starts pumping out millions of cars but that is a long way off

 

[AlMc]

no immediate or near term effect, perhaps it would have an effect once Tesla starts pumping out millions of cars but that is a long way off

Actually, I believe it will affect sales at the Gen3 level if we have a significant gasoline price drop (maybe that is what you said in a different way). Many people I know that are looking at a Model3 are not doing it for the environment but for the savings on electricity vs gas. It would also have a positive impact on our economy.

 

[TSLAopt]

Actually, I believe it will affect sales at the Gen3 level if we have a significant gasoline price drop (maybe that is what you said in a different way). Many people I know that are looking at a Model3 are not doing it for the environment but for the savings on electricity vs gas. It would also have a positive impact on our economy.

i agree partly, I think Model 3 "demand" might drop from 2-5 million cars per year to 1-3 million cars per year for example if oil drops significantly where gas becomes cheaper to run the car than electricity from the even more expensive utility companies by that time (more people will have solar but I doubt the majority of people will have solar until the end of the 2020s decade), but keep in mind tesla Superchargers will still be free and more plentiful by that time.

however, because tesla won't be able to produce more than 1-2 million cars per year for a while it won't affect them until that time if oil was to drop significantly, that will be well into Model 3 territory by then.

this is all just my oracle-like opinion. I also think TSLA stock price will be 1500-2000 by then and could potentially be impacted with a temporary over-reaction to the stock price if there was a sudden very significant drop in oil that lessened demand enough where Tesla would have to put the breaks on production bc it would be the first time they aren't production constrained.

 

[AlMc]

i agree partly, I think Model 3 "demand" might drop from 2-5 million cars per year to 1-3 million cars per year for example if oil drops significantly where gas becomes cheaper to run the car than electricity from the even more expensive utility companies by that time (more people will have solar but I doubt the majority of people will have solar until the end of the 2020s decade), but keep in mind tesla Superchargers will still be free and more plentiful by that time.

however, because tesla won't be able to produce more than 1-2 million cars per year for a while it won't affect them until that time if oil was to drop significantly, that will be well into Model 3 territory by then.

this is all just my oracle-like opinion. I also think TSLA stock price will be 1500-2000 by then and could potentially be impacted with a temporary over-reaction to the stock price if there was a sudden very significant drop in oil that lessened demand enough where Tesla would have to put the breaks on production bc it would be the first time they aren't production constrained.

Man, I like that number!! The economic impact is huge with gas price reductions: 'every 10 cent per gallon savings translates into $13 billion increase in our economy'...Drop in gas prices benefits US drivers, economy.