Near-future quarterly financial projections

[KSilver2000]

Lets think about long term demand. The idea is obviously to produce 3 and Y in 3 continents. Fremont would produce for NA (and SA), GF3 for Asia and GF4 for EU.

Musk has said earlier, the demand for 3 is about 700k annually, worldwide. Let us say Y demand is slightly more - 800k. The split could be

If buying preference of Tesla’s is similar to other luxury brands, the splits will be much more in favor of Y than 800 to 700.
BMW SUVs are growing in double digits while sedans are dropping double digits, and most recent Audi sales show SUVs at 2/3 of sales volume.

 

[EVNow]

If buying preference of Tesla’s is similar to other luxury brands, the splits will be much more in favor of Y than 800 to 700.
BMW SUVs are growing in double digits while sedans are dropping double digits, and most recent Audi sales show SUVs at 2/3 of sales volume.

I think that is mostly in US. I can't find definitive figures - but it seems worldwide MB, BMW & Audi sell more sedans than SUVs.

Mercedes again beats BMW, Audi in global sales | CarAdvice

- More than one-third of Mercedes-Benz Cars’ sales (820,000) were SUVs, led by the GLC and GLE.
- The company sold 792,590 BMW X-badged SUVs, or 37.3 per cent of the brand total.
- SUVs accounted for a whopping 57 per cent of all Audi sales in the USA.

 

[electracity]

I'm sure that the typical gen 3 buyers is not a luxury buyers. Anecdotally the Prius plugin seems to be the most common gateway car to these Tesla models.

Affordability is certainly a determinant. But historical market segmentation somewhat irrelevant.

Tesla has not only "stolen" car buyers from established companies, but also made the market larger.

 

[EVNow]

But historical market segmentation somewhat irrelevant.

Tesla thinks they will sell more Ys than 3s (+s&x). So current trends seem quite relevant.

 

[electracity]

Tesla thinks they will sell more Ys than 3s (+s&x). So current trends seem quite relevant.

I was referring to non-luxury buyers purchasing the M3 and even the MS. There are many Tesla owners who have not and would not buy a BMW or Mercedes due to price and the nature of the status of those brands. The MY will take buyers from the CUVs at comparable price points in those brands, but the story is obviously much more complex.

 

[hobbes]

How do you think this will affect Q4 earnings? Looks like no output from GF3 Shanghai this year..
Tesla is still in need of a manufacturing license in China, hopes to get it by end of the year - Electrek

 

[EVNow]

How do you think this will affect Q4 earnings? Looks like no output from GF3 Shanghai this year..
Tesla is still in need of a manufacturing license in China, hopes to get it by end of the year - Electrek

Tesla has been sending a lot of cars to China - so, they didn't think there was going to be much produced at GF3.

But that does mean - there is not much upside potential in Q4 since Tesla will be production constrained to what they can make at Fremont + inventory.

 

[Doggydogworld]

Tesla only installed production equipment to get Model 3 to 5k per week. They were waiting to get to 5k before signing off on installation of duplicated equipment to get to 10k per week.

There's no question it was a 2 stage plan with incremental capex. But the 2nd stage was never a full duplicate line. Analysts specifically asked early on about a 2nd line/duplicate line and while the replies were vague it was clear that was not the plan.

The paint shop was explicitly announced as a 10k/week installation. You can search the original Eisenmann press release. The gigantic Schuler press was also spec'd for 10k/week, or at least to be easily expanded to 10k. The body shop was floor-planned for 10k, though welding lines are modular so they obviously didn't buy all the robots on day one. The seat factory was laid out for 10k, though once again they didn't buy all the equipment in stage one. General assembly, well..., who knows what the plan was there.

They're installing a new final assembly line (GA5) and new welding robots. Even that involves moving a bunch of stuff to other locations. I've heard zero about new stamping presses or paint shop. They specifically said building Y in Fremont would save a lot of capex, which wouldn't be true if they were putting in new stamping, paint, etc. Which they don't have room for, anyway.

That's why I say 3+Y will be 10k/week. We'll find out in January, I suppose.

 

[kengchang]

Seasonality in Q1 20 will be the perfect quarter to unwind the wave.

 

[Thekiwi]

Seasonality in Q1 20 will be the perfect quarter to unwind the wave.

‘“The wave” won’t be unwound until GF4 Europe opens.

 

[ReflexFunds]

There's no question it was a 2 stage plan with incremental capex. But the 2nd stage was never a full duplicate line. Analysts specifically asked early on about a 2nd line/duplicate line and while the replies were vague it was clear that was not the plan.

The paint shop was explicitly announced as a 10k/week installation. You can search the original Eisenmann press release. The gigantic Schuler press was also spec'd for 10k/week, or at least to be easily expanded to 10k. The body shop was floor-planned for 10k, though welding lines are modular so they obviously didn't buy all the robots on day one. The seat factory was laid out for 10k, though once again they didn't buy all the equipment in stage one. General assembly, well..., who knows what the plan was there.

They're installing a new final assembly line (GA5) and new welding robots. Even that involves moving a bunch of stuff to other locations. I've heard zero about new stamping presses or paint shop. They specifically said building Y in Fremont would save a lot of capex, which wouldn't be true if they were putting in new stamping, paint, etc. Which they don't have room for, anyway.

That's why I say 3+Y will be 10k/week. We'll find out in January, I suppose.

I agree that the paintshop was 500k capacity when ordered in 2015. Presumably at somepoint they changed the design to allow for the 600k+ 3+S+X target. I'm sure the paintshop will be upgraded or expanded again if it becomes a bottleneck. I also wouldn't be surprised if the press can handle 10k or more per week, though I don't think i've read the exact specs. Still, the bulk of the capex for 10k Model 3s was waiting on stage 2 sign off.

The initial plan leaked to Business Insider was to build Model Y at GF1. This involved pilot line installation by the start of June 2020, 2k per week production by early September and 7k per week by the end of 2020.
In April 2019 Tesla were still on the fence between going with this initial plan or moving to Fremont, but all the equipment had been ordered in any case. The better capital efficiency they describe is from better designs and more internal design and production of equipment/tooling - not from just cancelling equipment orders. The 50-50 location decision was based on factors such as ramp up speed (the Fremont plan looks to be running 3 months ahead), labour availability/experience vs increased logistics costs and more space. It was not a choice between having 14-15k Y+3 production capacity vs a 35% downgrade to 10k.

Q1 call:

For Model Y production, we are right now trying to decide whether Model Y vehicle production should be in California or Nevada and we expect to make a final decision on that very soon. But in the meantime, we have ordered all of the tooling and equipment required for Model Y. So, we don’t expect this in anyway to delay production of Model Y, but it’s a very close call between Nevada and California as to whether we do the Model Y at Giga or at Fremont, but those are the two options and we will hopefully be able to make the decision in the next few weeks.

When Elon clearly stated on the Q3 call that Model Y would not interfere with Model 3 production, do you not think it would have been important for him to add the small disclaimer - "except of course for a permanent 60%+ reduction to Model 3 production capacity".

We do not expect it to interfere. Yeah, the body line is separate, the paint line is -- basically we do not expect it to interfere with Model 3. No, we do not expect any downtime.

If many people are really expecting Fremont Model 3 production to be cut to 3k per week I hope Tesla do not wait too long to clarify to the market.

 

[EVNow]

If many people are really expecting Fremont Model 3 production to be cut to 3k per week I hope Tesla do not wait too long to clarify to the market.

My expectation is that Tesla will
- stop expansion of 3 production in Fremont (and concentrate on GF3 & GF4)
- stop any inefficient temporary expansion of production of 3 in Fremont (overtime etc)
But, if 3 demand in US continues to expand, they will do whatever they can to expand capacity.

Currently N.A. consumes about 60% of Fremont 3 production. With GF3, NA+EU should absorb ~40k 3s that China buys. Later when GF4 comes, NA should absorb further ~120k.

In Q3 Tesla built 80k - or 6k per wk. If Tesla wants to build 7k/wk of Y, they will have to expand that 10k/wk of paint shop and press etc. It may happen later, but I don't think they will be doing it by Q2 '20.

Ultimately, Tesla's strength is their flexibility. They will make adjustments to the 3/Y mix as per demand - and if they hit a bottleneck they will prioritize high ASP vehicles, as they have always done. In this context that could mean fewer 3/Y SR+ and more AWD 3/Y.

 

[RobStark]

I'm sure that the typical gen 3 buyers is not a luxury buyers. Anecdotally the Prius plugin seems to be the most common gateway car to these Tesla models.

Affordability is certainly a determinant. But historical market segmentation somewhat irrelevant.

Tesla has not only "stolen" car buyers from established companies, but also made the market larger.

Historically, Prius cannablized a lot of Lexus sales. To the horror of Toyota executives.

Prius buyers were loaded with typical luxury car buyer profiles.

 

[RobStark]

I was referring to non-luxury buyers purchasing the M3 and even the MS. There are many Tesla owners who have not and would not buy a BMW or Mercedes due to price and the nature of the status of those brands. The MY will take buyers from the CUVs at comparable price points in those brands, but the story is obviously much more complex.

And there are many Honda and Toyota trade-ins for Model 3 and Model S that would have been Lexus,Acura,BMW and Mercedes buyers had Tesla not existed.

It is a natural progression. Most people don't buy a luxury car as their first new car.

 

[electracity]

I agree that the paintshop was 500k capacity when ordered in 2015. Presumably at somepoint they changed the design to allow for the 600k+ 3+S+X target.

Unlike most areas the space the paint shop requires in the factory expand linearly with throughput. It's difficult to image how a facility that needed a "tent" for a GA line has much space to expand beyond 500K. It would be useful to know how long a car painted in a California factory needs to spend in the paint shop. In Nevada they could have added baby's blood and Napalm to the paint if it would speed hardening and throughput.

Tesla's production plan is preliminary and will evolve into making the vehicle type people want to buy. If that demand exceeds capacity they will make higher margin vehicle. So in the medium term I expect Fremont to make fewer lower end model 3. The lower end 3 without the purchase of FSD is probably not profitable anyways.

 

[The Accountant]

@EVNow and @luvb2b
I find your Deliveries, P&L and Cash Flow forecasts very informative. Thanks for your quality work.

Do you plan on adding Semi sales into your 2020 forecasts.
From Tesla's Q3 2019 Letter:
"We are planning to produce limited volumes of Tesla Semi in 2020 "

 

[nativewolf]

I'm sure that the typical gen 3 buyers is not a luxury buyers. Anecdotally the Prius plugin seems to be the most common gateway car to these Tesla models.

Affordability is certainly a determinant. But historical market segmentation somewhat irrelevant.

Tesla has not only "stolen" car buyers from established companies, but also made the market larger.

Bloomberg - Are you a robot?

This actually says that while the Prius is the most likely gateway as a brand BMW is taking the greatest hit.

 

[luvb2b]

i feel fortunate to get even 1-2 quarters right and thus could be rightfully accused of short-termism when it comes to forecasting.

@EVNow and @luvb2b
I find your Deliveries, P&L and Cash Flow forecasts very informative. Thanks for your quality work.

Do you plan on adding Semi sales into your 2020 forecasts.
From Tesla's Q3 2019 Letter:
"We are planning to produce limited volumes of Tesla Semi in 2020 "

 

[EVNow]

Do you plan on adding Semi sales into your 2020 forecasts.
From Tesla's Q3 2019 Letter:
"We are planning to produce limited volumes of Tesla Semi in 2020 "

I don't think Semi will materially affect Tesla P&L much in '20. Esp with Y & GF3 in volume production by Q4.

Semi is definitely something to keep in mind for Capex. But I don't think cash flow is much of a concern in '20.

 

[electracity]

Bloomberg - Are you a robot?

This actually says that while the Prius is the most likely gateway as a brand BMW is taking the greatest hit.

The chart actually says that an inexpensive Japanese car is the most likely trade-in for the M3.