Model 3 Production Rate Poll

[bambam4171]

I guess the other question would be: At which point does Tesla stop burning cash? According to the Bloomberg article they go through roughly 80 million/week. Now if we say an average model 3 costs 45k this would mean they need to be able to produce 1792 cars/week to stop burning cash. Of coures this is very rough and does not account for raw material and the like so the number might be double but even then: Once they hit 5k/week it it pretty much game over and once they have 10000/week they can afford to build whatever is neccessary for Semi, Roadster any Model Y plus investing heavily into new factories, services and Super/Megacharger buildout or am I missing something?

 

[schonelucht]

I guess the other question would be: At which point does Tesla stop burning cash? According to the Bloomberg article they go through roughly 80 million/week. Now if we say an average model 3 costs 45k this would mean they need to be able to produce 1792 cars/week to stop burning cash. Of coures this is very rough and does not account for raw material and the like so the number might be double but even then: Once they hit 5k/week it it pretty much game over and once they have 10000/week they can afford to build whatever is neccessary for Semi, Roadster any Model Y plus investing heavily into new factories, services and Super/Megacharger buildout or am I missing something?

Realistically a net margin of 15% would be extremely good. With an ASP of 45k that would bring in $67.5M in additional cash each week if they reach 10k. Clearly Tesla must reduce cash burn from 2017Q3 levels to be sustainable. I suspect we will learn more during the next conference call on capital expenditures for new factories and infrastructure. But it could very well be that even at 10k/week, Tesla will (need to) use external funding.

 

[KarenRei]

Important to note: the current total seems to be at least over 1130, since VIN 1131 was spotted recently, which also means that they've stopped counting down from 1100 and are now back to counting up (aka, the gap has been filled in). Also, a few dozen different vehicles appear in the lots each day and disappear. Even if you credit some of them to going back for more work to fix inspection issues, we're still probably at around 150 per week at present. And possibly more.

I can't see how they don't hit at least 500 per week by the end of December. Unless there's something really big wrong that's going to take more than a month to fix. It's quite possible that they pass Model S production by the end of the year.

Big question of when the revenue from Model 3 sales starts becoming relevant. They're looking to hit breakeven around the end of the year, have moderate margins at 5k/week, and 25% margins at 10k per week. Average sale value is less than half that of an S and even less compared to an X. I'm thinking that Model 3 revenue should start to meaningfully dent the cash burn some time February-March. That said, Tesla still hasn't purchased the tooling for 10k/year, so that's a big capital outlay still to come...

 

[bambam4171]

Realistically a net margin of 15% would be extremely good. With an ASP of 45k that would bring in $67.5M in additional cash each week if they reach 10k. Clearly Tesla must reduce cash burn from 2017Q3 levels to be sustainable. I suspect we will learn more during the next conference call on capital expenditures for new factories and infrastructure. But it could very well be that even at 10k/week, Tesla will (need to) use external funding.

I was thinking about reducing it to margin but that is leaving out all the financial efforts that are currently already contributing to them burning cash at such a rate. Thus I've chosen to calculate differently.

 

[ValueAnalyst]

Important to note: the current total seems to be at least over 1130, since VIN 1131 was spotted recently, which also means that they've stopped counting down from 1100 and are now back to counting up (aka, the gap has been filled in). Also, a few dozen different vehicles appear in the lots each day and disappear. Even if you credit some of them to going back for more work to fix inspection issues, we're still probably at around 150 per week at present. And possibly more.

I can't see how they don't hit at least 500 per week by the end of December. Unless there's something really big wrong that's going to take more than a month to fix. It's quite possible that they pass Model S production by the end of the year.

Big question of when the revenue from Model 3 sales starts becoming relevant. They're looking to hit breakeven around the end of the year, have moderate margins at 5k/week, and 25% margins at 10k per week. Average sale value is less than half that of an S and even less compared to an X. I'm thinking that Model 3 revenue should start to meaningfully dent the cash burn some time February-March. That said, Tesla still hasn't purchased the tooling for 10k/year, so that's a big capital outlay still to come...

The guidance is for 25% gross margin in the quarter after 5k/week is achieved, which should be enough for GAAP+ quarter.

 

[KarenRei]

The guidance is for 25% gross margin in the quarter after 5k/week is achieved, which should be enough for GAAP+ quarter.

You sure about that? I'm pretty sure that which I've seen was for 25% not to be hit before they hit 10k per week. Current guidance is for 5k per week at the end of Q1, with 10k "at some point" after that. The tooling for 10k still needs to be purchased.

 

[electracity]

That said, Tesla still hasn't purchased the tooling for 10k/year, so that's a big capital outlay still to come...

Not just tooling, but the need for investments in the entire system. For example service centers going from 2K to 12K.

10K model 3 in 2018 was likely just too much. It could have turned into taking a model 3 win and turning it into a loss. Ideally they would make the model Y on the new line in 2019.

I think Tesla at a run rate of 10K total cars per week on 1/1/2020 is a realistic win.

 

[bambam4171]

I thought the second line was already being tested? You guys remember the article from Dailykaban that was mistaken for the first line?

 

[ValueAnalyst]

I thought the second line was already being tested? You guys remember the article from Dailykaban that was mistaken for the first line?

Assume the worst. The consensus here seems to think 500/week to 1,000/week by end-17, and 5,000/week some time in 2Q18.

 

[30seconds]

I guess the other question would be: At which point does Tesla stop burning cash? According to the Bloomberg article they go through roughly 80 million/week. Now if we say an average model 3 costs 45k this would mean they need to be able to produce 1792 cars/week to stop burning cash. Of coures this is very rough and does not account for raw material and the like so the number might be double but even then: Once they hit 5k/week it it pretty much game over and once they have 10000/week they can afford to build whatever is neccessary for Semi, Roadster any Model Y plus investing heavily into new factories, services and Super/Megacharger buildout or am I missing something?

The bloomberg calculation shouldn't be used as it includes cash payments for Model 3 production equipment that will be over in 2018. A number of their vendors for the production line equipment had payments triggered based on the line becoming operational. I believe Deepak outlined this during the last two Qs

 

[mkspeedr]

I am not sure what the production rate is now but I know in the bay area seeing a model 3 is no big deal. I saw 6 while I was shopping Sat/Sun. 3 Red, 2 Silver and 1 blue - 11XX being the highest. The ramp must be increasing at a good rate.

 

[ValueAnalyst]

I am not sure what the production rate is now but I know in the bay area seeing a model 3 is no big deal. I saw 6 while I was shopping Sat/Sun. 3 Red, 2 Silver and 1 blue - 11XX being the highest. The ramp must be increasing at a good rate.

I wish there was an "awesome" rating.

 

[dalalsid]

That's a reasonable timeline and solid logic; thank you for sharing.

My guess for exit-17 is 1,500 to 2,000, primarily due to the config opening up to non-employees and the four-week delivery estimate. If we get a significant acceleration of invites this week or next, that would be a good sign that 1,500 to 2,000/week is on track for exit-17.

The config opening to non-employees is likely from running out of employees that want a loaded Model 3. While the ramp seems to be progressing from the uptick in photos in the Model 3 production thread, I have zero hopes of hitting 4 digits/week in 2017.

 

[ValueAnalyst]

The config opening to non-employees is likely from running out of employees that want a loaded Model 3. While the ramp seems to be progressing from the uptick in photos in the Model 3 production thread, I have zero hopes of hitting 4 digits/week in 2017.

hmmmmmm...... let's see I don't think 4 digits/week is as far away as the market seem to think...

 

[dalalsid]

hmmmmmm...... let's see I don't think 4 digits/week is as far away as the market seem to think...

I think mid Q1 (right before earnings results)

 

[Starno]

Anyone thinks over 3000 by last week of december possible ?

 

[ValueAnalyst]

Anyone thinks over 3000 by last week of december possible ?

If you mean production rate per week: Highly unlikely by end-17, 25% chance by January, 50% chance by February, 75% by March.

If you mean number of deliveries in the last week of December: Probably, but the production rate is what I believe will matter to the stock in the shorter term. The two are related, but watch for possible stockpiling for a mass delivery event.

 

[Reciprocity]

I guess the other question would be: At which point does Tesla stop burning cash? According to the Bloomberg article they go through roughly 80 million/week. Now if we say an average model 3 costs 45k this would mean they need to be able to produce 1792 cars/week to stop burning cash. Of coures this is very rough and does not account for raw material and the like so the number might be double but even then: Once they hit 5k/week it it pretty much game over and once they have 10000/week they can afford to build whatever is neccessary for Semi, Roadster any Model Y plus investing heavily into new factories, services and Super/Megacharger buildout or am I missing something?

The "cash burn" or as I call, investment, to support model 3 is not infinite. You only have to pay for kuka robots once, even in shortsville. Deepak (the CFO) stated on the last call that capex replaced to model 3 production would taper down dramatically this current quarter to nearly nothing by the end of next quarter. Certainly there will always be a large amount of capex but once you pay for the investment in expansion, you get to extract the profit from that investment over decades. Over long periods of time the capex will be mostly linear with new car programs/gigafactories while the ability to extract profits compounds with each iteration. Not to mention the learnings from ramping from 0-5k-10k/w which can be duplicated to several new factories in other countries with little or no ramp time. This means going from 2k/w S/X to 7k/w S3XY takes 3 years but going to 20k/w S3XY cars a week only takes 3 more years. The assumes the Y us based on the model 3 with out fwd, but even if Tesla does go with fwd, they clearly know how to do that now. In short, the cash burn for 3 is not infinite, it's actually finite and most of the painful part is behind us and now we get to reap the rewards.

 

[bambam4171]

Share your thoughts and that is exactly why Tesla should turn positive rather fast if they get the ramp going. Yes there will be much more investment in near future (2 new Gigafactories, Semi Line, Roadster Line, Model Y line) but Model 3 should pretty much be able to finance most of that.

 

[doctoxics]

Not just tooling, but the need for investments in the entire system. For example service centers going from 2K to 12K.

10K model 3 in 2018 was likely just too much. It could have turned into taking a model 3 win and turning it into a loss. Ideally they would make the model Y on the new line in 2019.

I think Tesla at a run rate of 10K total cars per week on 1/1/2020 is a realistic win.

Elon said that Fremont was maxed out and Model Y would have to be made elsewhere.