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Near-future quarterly financial projections

Discussion in 'TSLA Investor Discussions' started by luvb2b, May 23, 2018.

  1. EVNow

    EVNow Well-Known Member

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    In that case, the mystery continues. Why do they have constantly high inventory ?

    10k old inventory is 50 cars per store/service center.
     
  2. Fact Checking

    Fact Checking Active Member

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    I did some finished goods based estimates too, in this comment:

    The result suggests that a large chunk of the finished goods inventory can be explained with new units in the delivery pipeline of cars. There no space for a significant fleet of 13.7k used MS/MX vehicles in those numbers AFAICS.

    Does anyone know if GAAP allows the reporting of a couple of years old loaner or service car at a significant discount as a new sale? Maybe @brian45011 knows this?

    According to their financial reports Tesla is already adjusting the inventory carrying value of used vehicles to market prices and is gradually writing off any decreases in value. At the end of their life time it might also be viable for Tesla to simply scrap old loaners for service parts of newer loaners and other fleet cars. This lowers the parts costs and also protects the used car resale value.
     
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  3. EVNow

    EVNow Well-Known Member

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    That DIO looks high for S, X considering the wave. While their avg DIO is high, they have always tried to bring it down using the wave.
     
  4. Doggydogworld

    Doggydogworld Member

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    45/7*2,000*75%*$0.105m = $1,012m

    45/7*2000 = 12,857 S/X in inventory. Close enough to 13,700 for my purposes.

    I never claimed the 13.7k were "used" or old or anything of the sort. In fact, I've argued the opposite. It's perfectly reasonable to assume the 13.7k are mostly new cars that rotate through the inventory account on their way to being sold. Tesla uses inventory to smooth out seasonal trends and to satisfy buyers who can't or don't want to wait 2-3 months for their car. My big question: Where are these cars?

    A few big stores and SCs probably have 50+ S/X hanging around. But the combo store/SC outside San Antonio only has a dozen or so, including demos, loaners and in transit. I expect this is more typical of Tesla's 200+ locations. Let's generously say 50 large sites have 50 each and another 200 average 10-15 each. That's 5k cars, where are the other 8-9k?

    Inventory sites never show more than a few 1000 S/X in the US and Europe, and that includes many demos and loaners which Tesla is always happy to sell. And with Tesla's "wave" delivery system, there really shouldn't be 45 days of inventory at EOQ.

    BTW, GAAP doesn't really care if a car sale is new or used. The company has leeway to report in a way that best reflects their business. Also, Tesla rarely writes down cars in FGI. Some example cases, assuming 75k COGS and 100k MSRP:

    1. Car sits on lot for two years, becomes obsolete due to refresh. Dump for 78k. NO WRITEDOWN. 3k gross profit.

    2. Car used for demo rides, sold after six months with 10k "mileage adjustment". NO WRITEDOWN. 15k gross profit.

    3. Car used as loaner for >12 months. NOT INVENTORY. Move to PP&E and depreciate like any other long term business asset. Eventually scrap or sell and book the difference between sale proceeds and carrying value in appropriate category (probably Services, Other … but Tesla doesn't say).

    Tesla has been lax about #3, IMHO, but they did recently move ~1000 cars from FGI to PP&E. It was the first time I'd seen that. A year or so back an analyst asked if they carried demos and loaners in FGI or PP&E, but Deepak seems to have misunderstood the question. So it's pretty opaque. I wish an analyst would ask straight out where the 13.7k are, but it seems the first rule of inventory club is we don't talk about inventory club.
     
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  5. Fact Checking

    Fact Checking Active Member

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    That's at the full 2k/week S/X production rate, while in Q1 they had a 1.1k/week average production rate, so the DIO estimate of pipeline inventory is more like 45/7*1,100 = 7,071 units, many of them in transit.

    I'm not convinced the simple estimate is reliable though.
     
  6. Doggydogworld

    Doggydogworld Member

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    My total guess for the 13.7-14k produced but not delivered as of 3/31/19:
    4k - demos, "new" loaners and showroom cars
    2k - in transit
    2k - US unsold new inventory
    2k - Euro unsold new inventory
    2.5k - China unsold new inventory
    1k - old loaners transferred to PP&E
    0.2-0.5k - scrapped, "lost at sea", insurance salvage, etc.​
     
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  7. EVNow

    EVNow Well-Known Member

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    This is what their 10-Q says. Since Tesla has said their loaners are high end cars to get people to upgrade, I think they are covered under "new vehicles available for immediate sale at our retail and service center locations". BTW, CPO are in FG too - so, it really doesn't matter whether they sell loaners as used or new. I think they are all in FG.

    Finished goods inventory included vehicles in transit to fulfill customer orders, new vehicles available for immediate sale at our retail and service center locations, used vehicles and energy storage products.​

    I went back and checked a few quarters in '16 and '17. FG is fairly close to calculated inventory (using 25% margin and 105k ASP). I guess they have continued to carry large inventory of S, X to have for immidiate sale / loaner. It would be interesting to see if they will try to replace s/x loaners with 3 now that they probably want to liquidate pre-Raven inventory.
     
  8. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    Oh, I can add one more. Tesla is converting certain cars to internal use -- i.e. "buying" them for themselves. For instance, the various Model S and X cars converted to Mobile Service. I don't think those are counted as deliveries. They're mostly doing this with used cars, but they may be doing this with older loaners / floor models as well. In which case they'd count as production but not deliveries.
     
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  9. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    Actually, a bunch will be converted to internal use and never sold to outsiders.

    I'd guess not.
     
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  10. SPadival

    SPadival Member

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  11. schonelucht

    schonelucht Active Member

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    At the end of 2017, the cumulative difference between reported production and sales for 3/S/X was 10203 cars with 3380 in transit. That leaves 6823 cars in potential inventory.
     
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  12. schonelucht

    schonelucht Active Member

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    Why not? At the end of 2017Q3, finished goods was $1.4B with with 15508 cars cumulative delta from production to sales. Assume 500 cars over 5 years ended up scrapped for whatever reason (accidents before delivery, used in r&d, ...), that's nearly $93k per car or quite close to what you'd expect based on margins, ASP etc at the time. By the end of the following quarter, the delta dropped by 5000 cars and the finished goods inventory by $400M. Again pretty much in line with selling older inventory and replaced by (more valuable) newer cars in transit to customers.
     
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  13. Fact Checking

    Fact Checking Active Member

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    Yeah, I concur, and this estimate looks reasonable to me:

    I suspect they probably have delivered a fair chunk of those in Q2 already, with discounts, immediate availability vs. months to wait for Raven, and the Lifetime Free Supercharging perk.

    This "inventory refresh" process could actually help revenue and add a bit of GAAP income as well, but MSX gross margins might go down due to the discounts. (Will any writedowns reduce GM?)

    The cash flow aspect should be good AFAICS, especially if they prioritize Raven deliveries to customers and allow the loaner/demo pool to shrink.
     
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  14. Doggydogworld

    Doggydogworld Member

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    They reclassified 72.8m of loaners from inventory to PP&E in Q3 2018. That's my:
    1k - old loaners transferred to PP&E
    But I missed them transferring another 48.4m worth (~650) in Q4 of last year. So the total should be 1.6k. No mention of any such reclassifications in Q1.

    I agree. They expected to clear many of them out in Q1, but fell way short. Of almost 14k produced but not delivered on 3/31 I figure about 12k were available for sale. They built more pre-Ravens in early Q2, maybe 4k? I figure they'll sell ~10k pre-Ravens in Q2. The other 6k will be available for immediate sale in Q3, many serving as demos and new loaners while they wait.
     
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  15. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    I expect to see more transfers to PP&E in the second quarter. The reason: service centers and mobile service are both expanding, significantly, but that process was not advanced enough in Q1 to add a bunch more service cars. It has advanced enough in Q2 that I expect more vehicles.

    There's been a definite effort to flush pre-Raven S & X. I expect they will mostly be emptied out by the end of Q2. There might be a little left for Q3 but I doubt 6K.
     
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  16. Doggydogworld

    Doggydogworld Member

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    Will we know or have good estimates for how many Ravens they produce and/or deliver in Q2? That'd be interesting.
     
  17. EVNow

    EVNow Well-Known Member

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    Also by moving new cars to PP&E, I guess they can claim $3.75k tax credit ?
     
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  18. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    Sure, but it only works if they have a full-year positive taxable income for the US. In the past this was extremely unlikely given "net operating loss carryforwards", which allow them to show very little taxable income until they've used up all the losses from the past.

    However, the Trump tax bill limited the use of NOL carryforwards a little tiny bit (they're only allowed up to 80% of otherwise-taxable income) so if Tesla has a net taxable profit before the NOL carryforward, they would have some tax bill to use the tax credit against (the tax on 20% of their pre-NOL taxable income). This applied to 2018 as well. So I guess maybe they are getting to use the tax credit?
     
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  19. EVNow

    EVNow Well-Known Member

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    They have some provisions for income tax - so I guess they pay some tax (unless it is outside US).
     
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  20. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    It's mostly outside the US
     
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