Model 3 "Production Bottlenecks" lead to lower-than-anticipated Q3 delivery #s

[AustinPowers]

What do you think? Were they truly "confident' they could produce over 1,500 vehicles in the quarter? And if they were confident, is Tesla's failure to meet the target attributable to incompetence, or to bad luck?

Tesla/Elon have a history of showing over-confidence about almost everything. I don't believe a word they say anymore, until they prove what they say/promise/hope/show confidence in.
Just like I didn't believe the staff member at our local Tesla store who told me the S 75 had a realistic range on the Autobahn of around 500km when I asked him very specifically about the realistic Autobahn range at an average speed of about 130 km/h.
Perhaps I just expect too much of people when I expect competent answers from someone who can be expected to know them.

 

[run-the-joules]

This is not funny at all!
Besides, your comparison is not applicable. Apart from the fact that there isn't any "rad-as-hell" car made by VW, Audi or BMW that I know of that hasn't been available in the US as well. Care to enlighten me what models you are referring to?

The new Scirocco
Current Golf R with a sunroof (had this been offered when I was in the market a couple of years ago, I wouldn't be waiting for a Model 3 currently…)
Current Golf R with the correct number of doors…
Most versions of the Audi RS series
The 8L generation of the Audi A3
Any 4MOTION variation of the MKIV (and later) Jetta/Bora
Various wagon versions of BMWs

So on, so forth.

Of course, it was made clear that at first there would be a priorisation. Emplyoees, then existing owners from US west coast to east coast, then the rest. But that shouldn't mean that people who showed support and reserved on day 1 (and gave Tesla their money in the process) should be pushed back even by people reserving one and a half years later, just because the are from the "wrong" market. That is showing no respect to those early supporters.

I do agree with this. It bugs the hell out of me that people can go out and buy a used Tesla and jump ahead of me in line, for what it's worth.

 

[dhanson865]

About cars that only exist in Europe, like I said, it is something different because these were never promised to be sold elsewhere. Like there are lots of cars that only exist in the US and not in Europe. Or in Japan. Or in China. Or wherever. That is not the point.
I am also not complaining about not getting it "first", as that was never my expectation in the first place. But I was indeed expecting to get it before people who are reserving now, one and a half years after me. Wouldn't you? Or would you not mind if people pushed in a queue, and would be rewarded for it. Imagine you are at the cinema, the new blockbuster is about to debut. You are standing in line, near the front, and have been standing there for ages. Then someone else pushes in before you, and the clerk at the counter says "well done, have a free jumbo pack of popcorn as well". Wouldn't you be p**ed off, and rightfully so?

If some guy in California can casually get ahead of you in a physical line at the movie theatre in Germany on a moments notice I think he deserves more than a pack of popcorn for the feat. He'd deserve magazine covers and a documentary of the feat. Teleportation would be a breakthrough for sure.

Since we don't have teleportation You in EU get things at different times than us in US.

Would it have made you feel better if you weren't allowed to make a reservation at all back then? They could have opened reservations in stages just like they are doing production in stages and delivery in stages. You'd still have to wait the same number of years to get the first car in Germany. You just wouldn't have a reservation during the waiting period. Then someone who just learned about Tesla 2 years after you could be there on the same "day 1" whenever Germany got to start reservations and you might be even further back in line behind the rest of the world that already reserved before Germany.

The cars are being built in North America and it is simply quicker and simpler to sell them here than to transport them to Europe. Nothing you say about it will change the laws of physics. You are there and the cars are here. If that distresses you then you will have to wait, if the wait disturbs you, you will have to deal with that however you deem best. But I say anything you say about it being unfair is tilting at windmills because the distance can't be crossed at zero cost (in time or money).

 

[Phrixotrichus]

If some guy in California can casually get ahead of you in a physical line at the movie theatre in Germany on a moments notice I think he deserves more than a pack of popcorn for the feat. He'd deserve magazine covers and a documentary of the feat. Teleportation would be a breakthrough for sure.

Since we don't have teleportation You in EU get things at different times than us in US.

Would it have made you feel better if you weren't allowed to make a reservation at all back then? They could have opened reservations in stages just like they are doing production in stages and delivery in stages. You'd still have to wait the same number of years to get the first car in Germany. You just wouldn't have a reservation during the waiting period. Then someone who just learned about Tesla 2 years after you could be there on the same "day 1" whenever Germany got to start reservations and you might be even further back in line behind the rest of the world that already reserved before Germany.

The cars are being built in North America and it is simply quicker and simpler to sell them here than to transport them to Europe. Nothing you say about it will change the laws of physics. You are there and the cars are here. If that distresses you then you will have to wait, if the wait disturbs you, you will have to deal with that however you deem best. But I say anything you say about it being unfair is tilting at windmills because the distance can't be crossed at zero cost (in time or money).

Uh sorry, but that`s just bullshit...the transport isn`t the problem...we`re shipping 100s of tons of material each month between asia/europe/US, and it`s cheap, fast and logistically simple.

The problem here is probably the production plan. european models aren`t 100% the same as american models, and something like model variety is the last thing you want to have to consider when you`re in production hell.
To make it simple: Tesla simply doesn`t care about anything but NA atm. After that comes asia and then europe.

 

[AustinPowers]

The new Scirocco
Current Golf R with a sunroof (had this been offered when I was in the market a couple of years ago, I wouldn't be waiting for a Model 3 currently…)
Current Golf R with the correct number of doors…
Most versions of the Audi RS series
The 8L generation of the Audi A3
Any 4MOTION variation of the MKIV (and later) Jetta/Bora
Various wagon versions of BMWs

So on, so forth.

But were any of these promised to be sold in the US?
And more specifically, did VW / Audi / BMW take reservations and reservation fees from US customers for these cars?

If some guy in California can casually get ahead of you in a physical line at the movie theatre in Germany on a moments notice I think he deserves more than a pack of popcorn for the feat. He'd deserve magazine covers and a documentary of the feat. Teleportation would be a breakthrough for sure.

I get the sarcasm, but again, not really funny. You know what I meant by that analogy.

To make it simple: Tesla simply doesn`t care about anything but NA atm.

The Donald will be pleased.

Would it have made you feel better if you weren't allowed to make a reservation at all back then? They could have opened reservations in stages just like they are doing production in stages and delivery in stages.

Come to think of it, yes I would have preferred that.

If Tesla had been upfront about this and told me that people who reserved one and a half years after me would get their car before me, I would have not reserved a Model 3 back then. And I would have 1K USD more in my pocket and not in Tesla's bank account.
As a matter of fact, I might not have reserved a Model 3 at all, would not have spread the word, would not have tried to convince so many of my highly sceptical friends, colleagues and family to consider a Tesla as a viable alternative for their next car.

The upside is, the longer Tesla takes to bring the Model 3 to market over here, the better the upcoming European and Asian competition will fare against it. Then Tesla can keep their vehicles on their side of the pond and be spared the hassle of transporting them to Europe at all.
Then it won't be "America first" any longer, it will be "just America", and well deserved. Goodwill only goes so far!

 

[dsvick]

I believe you are correct.

I believe that the stock was going down with constant bad news about low production numbers.

Tesla finally said something about the fact that the issues have been resolved and production ramp is now back in play....and then the stock goes up = a bit.

Maybe I'm wrong but isn't the timing between Tesla non-information and information impeccable compared to the stock price?

I'm not sure why you insist on there being some nefarious scheme where Tesla is trying to con all of the investors and reservation holders. The stock went down about $5 per share right after the announcement, it has been going up steadily since then. They announced the shortfall in production at the same time as they said they had figured it out and overcome the issues.

If you have such a negative opinion in the way a company is doing business I'm very surprised that you would choose to spend so much money on a product from them. Aren't you worried that they'll lie to you and keep information from you in the future when your car is in for service or when that OTA is a day late?

 

[AustinPowers]

I can't speak for Garlan Garner obviously, but when you ask me, I don't trust Tesla any more than I trust any other car manufacturer. In the end, they are all just interested in getting my money and selling me one of their products.

The only reason I am still interested in the Model 3 and have not cancelled my reservation is because at the moment there just isn't any viable alternative for me around. That's why I said that the longer it takes Tesla to get the Model 3 to market over here, the less likely I am to buy one. The German as well as Asian manufacturers are all gearing up towards releasing their own long range BEVs in the coming years.

And once those are out, people like me who traditionally are very happy with their current cars will think twice before throwing money at a company that - even though they might have led the revolution - has a history of overpromising and underdelivering big time, many times. They can only get away with it for the time being because they are the only kid on the block so to speak. It won't be long before they are just one among many, and once Joe Average can get a long range BEV Chevrolet, Ford, Chrysler, Honda, Toyota, VW, BMW, Audi, Merc, Hyundai, Kia, etc. for a reasonable amount of money, who will fork out a small fortune for a bare-bones Tesla? Especially if by then a Tesla is more or less just a taxi - remember "you won't care", "no one needs xyz in a taxi"? Well guess what, many people don't dream of owning a taxi!

 

[THXULTRA]

I can't speak for Garlan Garner obviously, but when you ask me, I don't trust Tesla any more than I trust any other car manufacturer. In the end, they are all just interested in getting my money and selling me one of their products.

The only reason I am still interested in the Model 3 and have not cancelled my reservation is because at the moment there just isn't any viable alternative for me around. That's why I said that the longer it takes Tesla to get the Model 3 to market over here, the less likely I am to buy one. The German as well as Asian manufacturers are all gearing up towards releasing their own long range BEVs in the coming years.

And once those are out, people like me who traditionally are very happy with their current cars will think twice before throwing money at a company that - even though they might have led the revolution - has a history of overpromising and underdelivering big time, many times. They can only get away with it for the time being because they are the only kid on the block so to speak. It won't be long before they are just one among many, and once Joe Average can get a long range BEV Chevrolet, Ford, Chrysler, Honda, Toyota, VW, BMW, Audi, Merc, Hyundai, Kia, etc. for a reasonable amount of money, who will fork out a small fortune for a bare-bones Tesla? Especially if by then a Tesla is more or less just a taxi - remember "you won't care", "no one needs xyz in a taxi"? Well guess what, many people don't dream of owning a taxi!

Elon said that delays would happen with even the smallest issue on the production line. I actually think Tesla is smart the way they are rolling out the model 3. Making them in small batches at first and then ramping up production once the bugs are worked out. I think it would be worse for Tesla to give you a car that is full of bugs and has all kinds of problems. I would rather wait a bit longer and have a solid car. Major manufacturers have EV's coming as well but at this price point nothing is even close to the model 3. Looks at the Bolt it looks awful. To me it looks worse then a Hyndai Accent. The leaf also yuck. What got me interested in the Model 3 is it is a fast fun to drive car with awesome tech that just happens to be electric. I think that is what makes Tesla different. Other manufacturers are busy trying to make cars that are electric but take away any joy you have driving them. I do look forward to self driving but see it as something I would use for my commute. Other times I would rather drive. When I'm sitting in bumper to bumper traffic I would love my car to be my own personal taxi.

 

[jhs_7645]

I think people are conflating two things:

1. Tesla provides guidance to shareholders (during earnings calls, etc...). They missed guidance wrt Model 3 production, share prices seem to have held, which means that overall the street think's Tesla's plan is still intact. Demand is still there, and the price, to quite a large extent, reflects future demand.
2. Tesla provides *estimates* to customers. Right now, that is in the form of a delivery estimator.

With regards to 1. If, as an investor, you think Tesla's plan is no longer intact, and you think there is too much risk in the stock, you should probably sell. wrt #2. If they haven't missed your delivery window, or haven't changed it, then you really shouldn't complain. That's why they gave a range of months, not weeks. They knew, when providing estimates, that there might be delays.

Bottom Line: Don't confuse the two though. in other words, the "I want my car and Tesla is breaking their promises" narrative just doesn't hold water at this point.

 

[Garlan Garner]

I'm not sure why you insist on there being some nefarious scheme where Tesla is trying to con all of the investors and reservation holders. The stock went down about $5 per share right after the announcement, it has been going up steadily since then. They announced the shortfall in production at the same time as they said they had figured it out and overcome the issues.

If you have such a negative opinion in the way a company is doing business I'm very surprised that you would choose to spend so much money on a product from them. Aren't you worried that they'll lie to you and keep information from you in the future when your car is in for service or when that OTA is a day late?

You obviously haven't been understanding my posts correctly.

I don't think Tesla is trying to con anyone. I simply believe Tesla isn't providing information....FOR SOME REASON. I'm not suggesting what the reason or motive is. Not at all. Period. That's it.

They have been very open about other cars in their production ramps etc....but not the model 3. Do they owe it to anyone to say anything? Obviously not. Its not illegal to be quiet, however IMHO I believe that they could have done themselves a favor by being more forthcoming about the Model 3 as the other models, however that's just my opinion.

I'm pulling for Tesla. I own ( IMO ) a lot of shares. I don't want the value of my shares to go down. IMO again......I believe their transparency in the past fueled the confidence of their investors. When Tesla was open in the past about delays and being late......it was the truth. I believe people like that kind of thing. Even the truth about your own bad news draws confidence in anything you say.

IMO When Tesla is open and out front.....people respond favorably with their confidence and money.

 

[Max*]

What time was this taken?

10:39am

 

[ohmman]

What do you think? Were they truly "confident' they could produce over 1,500 vehicles in the quarter? And if they were confident, is Tesla's failure to meet the target attributable to incompetence, or to bad luck?

I appreciate your well articulated argument. It is refreshing. I don't agree, but I like the way you laid out your side. As a response, I'll point you to the forward-looking statement disclaimer (present on all shareholder communications for all public companies). Easy enough to say that these are boilerplate freebies, but they're there for a reason.

FORWARD-LOOKING STATEMENTS

Certain statements in this shareholder letter, including statements in the “Outlook” section; statements relating to the progress Tesla is making with respect to product development, such as Model 3 and Solar Roof; statements regarding growth in the number of Tesla store, service center, delivery hub, Supercharger and destination charger locations and in other service and repair capabilities; statements relating to the production, production rate and delivery timing of products such as Model 3 and Solar Roof and completion of energy generation and storage projects; statements regarding growth of our energy business and means to achieve such growth; growth in demand and orders for Tesla products and the catalysts for that growth; the ability to achieve product demand, volume, production, delivery, deployment, revenue, cash generation, cash flow, leasing, gross margin, spending, capital expenditure and profitability targets; productivity improvements and capacity expansion plans, such as for Gigafactory 1; and statements regarding Gigafactory 1 and Gigafactory 2 timing, plans and output expectations, including those related to battery and photovoltaic cell and other production, are “forward-looking statements” that are subject to risks and uncertainties. These forward-looking statements are based on management’s current expectations, and as a result of certain risks and uncertainties, actual results may differ materially from those projected. The following important factors, without limitation, could cause actual results to differ materially from those in the forward- looking statements: the risk of delays in the manufacture, production, delivery and/or completion of our vehicles and energy products, particularly Model 3; the ability to design and achieve and grow simultaneous and separate market acceptance of Model S, Model X and their variants, as well as new vehicle models, specifically Model 3; the ability of suppliers to meet quality and part delivery expectations at increasing volumes, especially with respect to Model 3 parts; adverse foreign exchange movements; any failures by Tesla products to perform as expected or if product recalls occur; Tesla’s ability to continue to reduce or control manufacturing and other costs; consumers’ willingness to adopt electric vehicles; competition in the automotive and energy product markets generally and the alternative fuel vehicle market and the premium sedan, premium SUV and small to medium-sized sedan markets in particular; Tesla’s ability to establish, maintain and strengthen the Tesla brand; Tesla’s ability to manage future growth effectively as we rapidly grow, especially internationally; the unavailability, reduction or elimination of government and economic incentives for electric vehicles and energy products; Tesla’s ability to establish, maintain and strengthen its relationships with strategic partners such as Panasonic; potential difficulties in finalizing, performing and realizing potential benefits under definitive agreements for Gigafactory 1 and Gigafactory 2, maintaining Gigafactory 1 and Gigafactory 2 implementation schedules, output and cost estimates; and Tesla’s ability to execute on its strategy for new store, delivery hub, service center, Supercharger and other locations and capabilities. More information on potential factors that could affect our financial results is included from time to time in our Securities and Exchange Commission filings and reports, including the risks identified under the section captioned “Risk Factors” in our quarterly report on Form 10-Q filed with the SEC on May 10, 2017. Tesla disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

 

[gregincal]

You obviously haven't been understanding my posts correctly.

I don't think Tesla is trying to con anyone. I simply believe Tesla isn't providing information....FOR SOME REASON. I'm not suggesting what the reason or motive is. Not at all. Period. That's it.

They have been very open about other cars in their production ramps etc....but not the model 3.

Sorry, but I don't think you paid close attention to the other ramps. This ramp is basically the same to previous ramps in terms of information Tesla has provided and the amount of hand wringing and speculation on the forums. In fact, I believe guidance on how many cars they expected to produce for the first few months of the ramp is unprecedented. I don't remember them ever giving that much information about how the ramp will proceed before. The Model X ramp was basically total radio silence for the first couple months after the initial shipments, and the Model S ramp pretty much the same.

 

[phil0909]

I appreciate your well articulated argument. It is refreshing. I don't agree, but I like the way you laid out your side. As a response, I'll point you to the forward-looking statement disclaimer (present on all shareholder communications for all public companies). Easy enough to say that these are boilerplate freebies, but they're there for a reason.

I think you overestimate the power of the disclaimer. It means that "future events are uncertain." It does NOT mean that "everything we just said could be a lie, and you can't hold us to it." "We are confident" is a present-tense statement; it does not look forward. Were they or were they not confident, at the time the statement was made?

I also appreciate your even tempered reply. But you have not said what it is that you disagree with in my comment. What did I get wrong? Do you believe Tesla was "confident" of 1500+ at the time they said so? I do not intend to pick a fight here, I would really like to know what your view is, or the views of other informed observers.

 

[scaesare]

I think you overestimate the power of the disclaimer. It means that "future events are uncertain." It does NOT mean that "everything we just said could be a lie, and you can't hold us to it." "We are confident" is a present-tense statement; it does not look forward. Were they or were they not confident, at the time the statement was made?

I also appreciate your even tempered reply. But you have not said what it is that you disagree with in my comment. What did I get wrong? Do you believe Tesla was "confident" of 1500+ at the time they said so? I do not intend to pick a fight here, I would really like to know what your view is, or the views of other informed observers.

My view is that "confident at present" != "future guarantee"

Certainly not a promise.

Count me in for supporting @ohmman 's suggestion of a tagline change for @Bladerskb

 

[AustinPowers]

Elon said that delays would happen with even the smallest issue on the production line. I actually think Tesla is smart the way they are rolling out the model 3. Making them in small batches at first and then ramping up production once the bugs are worked out. I think it would be worse for Tesla to give you a car that is full of bugs and has all kinds of problems. I would rather wait a bit longer and have a solid car.

Sorry, but you misunderstood my post.
I completely agree with you that Tesla should not rush out an unfinished product. I don't have any issues with the general idea of starting deliveries close to home and going from there. Neither do I mind that they do batching.

But there has to be a point were they believe they have nailed it quality-wise. From then on it should be back to the first come first served basis. Not the way it is that anyone from the US can jump ahead, even if he ordered one and a half years after those day one reservation holders from countries other than the US. Or as I said, they should have restricted reservations for the first year to US customers only. That way, those that reserved first would get their cars first, as it should be. It is not as if they were demand-constrained at any time, even with just US customers. Perhaps "production hell" would have only been "production purgatory" then

 

[Barklikeadog]

True enough. But remember that the tweet was followed by a more definitive, written assertion in Tesla's Q2 shareholder letter, in which the Company said: "Based on our preparedness at this time, we are confident we can produce just over 1,500 vehicles in Q3, and achieve a run rate of 5,000 vehicles per week by the end of 2017."

"Confident" is quite different from "should". Either this later assertion was truthful, or it was not. Both of these two possible situations are troubling.

Having confidence is still not a promise. Sometimes we are confident of things that turn out to be not true. But when a large public corporation expresses confidence to its stockholders, those words mean something. When a Company fails to achieve something of which it was confident just weeks earlier, its competence is rightly called into question. If such failures happen repeatedly, incompetence eventually becomes a certainty.

People are going to argue about his tweets, but the issue is similar statements are declared in quarterlies and earnings calls.

"What we have ahead of us, of course, is an incredibly difficult production ramp. Nonetheless, I think we've got a great team, and I'm very confident that we will be able to reach a production rate of 10,000 vehicles per week towards the end of next year. And we remain, we believe, on track to achieve a 5,000-unit week by the end of this year."

I said that this was Enron-ish... of course people freaked. I'm not talking about Special Purpose Entities, I'm talking about misleading disclosures and rosy predictions in their footnotes... losing
the trust of investors. Or maybe this is more like a Jim Bakker who was selling a service that they would be unable to provide in any realistic time frame.

Perhaps someday Tesla's non-gaap deferred revenue gimmick will be a topic in university accounting courses.

I really shouldn't care, I cashed out my gains, bought some expensive popcorn and am ready to watch the show.

 

[ohmman]

I think you overestimate the power of the disclaimer. It means that "future events are uncertain." It does NOT mean that "everything we just said could be a lie, and you can't hold us to it." "We are confident" is a present-tense statement; it does not look forward. Were they or were they not confident, at the time the statement was made?

I also appreciate your even tempered reply. But you have not said what it is that you disagree with in my comment. What did I get wrong? Do you believe Tesla was "confident" of 1500+ at the time they said so? I do not intend to pick a fight here, I would really like to know what your view is, or the views of other informed observers.

Saying that one is confident of a future event is a forward looking statement. I owned and operated a broker-dealer for years, had all the requisite registrations, examinations, and continuing education, and I can assure you that the forward-looking statement disclaimer covers this case. Also, if you read the statement, they repeatedly call out the Model 3 timing.

My disagreement with your statement is that I believe they were confident at the time, and it appears you do not believe that. Reading everything that Elon and Tesla has said this year gives some context to the statement. That context is that there are many pieces that have to fall into place to make things work, and I assume at the end of Q2 they felt confident that the puzzle was coming together. Hiccups happen, though.

Overall, though, we've moved the goalposts. The statement I was arguing was:

Remember Elon promised 150,000 cars in 2017 initially then Tesla promised 80,000 in 2017. Then it got reduced again to like 40,000.

And I think we've determined that it is demonstrably false.

 

[voip-ninja]

Uh sorry, but that`s just bullshit...the transport isn`t the problem...we`re shipping 100s of tons of material each month between asia/europe/US, and it`s cheap, fast and logistically simple.

The problem here is probably the production plan. european models aren`t 100% the same as american models, and something like model variety is the last thing you want to have to consider when you`re in production hell.
To make it simple: Tesla simply doesn`t care about anything but NA atm. After that comes asia and then europe.

If that were true then there would be no reason for Apple to release new products in stages. They don't. They release to their biggest markets where they are going to sell millions of units first and then they release to smaller markets after production is further ramped up.

 

[gregincal]

Sorry, but you misunderstood my post.
I completely agree with you that Tesla should not rush out an unfinished product. I don't have any issues with the general idea of starting deliveries close to home and going from there. Neither do I mind that they do batching.

But there has to be a point were they believe they have nailed it quality-wise. From then on it should be back to the first come first served basis. Not the way it is that anyone from the US can jump ahead, even if he ordered one and a half years after those day one reservation holders from countries other than the US. Or as I said, they should have restricted reservations for the first year to US customers only. That way, those that reserved first would get their cars first, as it should be. It is not as if they were demand-constrained at any time, even with just US customers. Perhaps "production hell" would have only been "production purgatory" then

But they are only adding one thing into the production line at a time. Dual motor won't be until late spring, and producing European versions with 3-phase charging won't be until after that. It has nothing to do with when people ordered, just when they are putting different versions into production (people who want AWD are getting their cars later than people who ordered far after them and want RWD). There is definitely a valid comparison with versions of German cars that ship first in Europe and only later in the US. In fact, the car I had before my Model S was an Audi A3 sportback. The second generation 5 door sportback shipped in Europe in 2004 with promises that it was coming to the US and only started shipping in the US a year later. The car company states that they will start shipping a car to a certain country at a certain time, and that's it.

Perhaps they should have only accepted US reservations to begin with. I was surprised when they did initial orders worldwide, since I was sure they wouldn't ship worldwide to begin with. I figured they wanted as impressive a reservation total as they could get.