Near-future quarterly financial projections

[EVNow]

I see only 80k Model 3 for Q1 2020.
Am I correct that you have 0 deliveries from GF3? Or are you expecting a cliff for Fremont sourced production?

Expecting 22k down from Fremont and 10k from GF3. The idea is to be somewhat conservative and see where we land.

I should note that the FSD revenue in Q1 is looking less likely with City NOA not going to EAP in Q4 and delayed FC. If we remove that $200M in profit, we should still see some $200M GAAP Profit in Q1, more than enought to get into S&P 500.

At this point I feel getting into S&P 500 should be the priority. That will greatly increase long institutional holding which should put an end to rampant short manipulation.

 

[ammulder]

Expecting 22k down from Fremont and 10k from GF3. The idea is to be somewhat conservative and see where we land.

Wouldn't they want to maintain Fremont production and build up inventory a bit? More inventory helps satisfy customers looking for immediate deliveries, PLUS allows them to time-shift deliveries from seasonally-slow Q1 toward the red-hot latter half of the year. Whatever it costs to keep that inventory on the books in the mean time, strategically I think it's worth it.

 

[mongo]

Wouldn't they want to maintain Fremont production and build up inventory a bit? More inventory helps satisfy customers looking for immediate deliveries, PLUS allows them to time-shift deliveries from seasonally-slow Q1 toward the red-hot latter half of the year. Whatever it costs to keep that inventory on the books in the mean time, strategically I think it's worth it.

The income estimate is deliveries, not production.

 

[Singer3000]

Thanks for the models.

What’s the thinking behind only an average c. 2k per week of Model Y in Q4? This feels far too low for the base case. To me that’s a stressed cluster F production level for Y in Q4, given the production date has moved forward and the substantial overlap with the 3.

 

[EVNow]

Wouldn't they want to maintain Fremont production and build up inventory a bit? More inventory helps satisfy customers looking for immediate deliveries, PLUS allows them to time-shift deliveries from seasonally-slow Q1 toward the red-hot latter half of the year. Whatever it costs to keep that inventory on the books in the mean time, strategically I think it's worth it.

The income estimate is deliveries, not production.

Yes, the numbers are deliveries.

I do have production decreasing 10k in Fremont. Still we'll have 10k inventory buildup in Q1. BTW, inventory build up greatly reduces cash flow - so there is a big price to pay for inventory build up. Infact if the Q1 profit in mainly coming from deferred revenue, you can have positive income but negative cashflow in Q1. Unlikely, but you get the point.

 

[The Accountant]

Here is my update (cautious estimates with potential upside), including some 2021 calculation.

I was pleasantly surprised with global deliveries and the Model 3 trim mix in NL/Norway/Spain in December.

View attachment 496045

Thanks for sharing this. You have a slight loss in Q1 2020 on a GAAP basis. I think that your R&D and SG&A costs for Q1 is too high.
My guess is that if Tesla is that close to a profitable Qtr (to ensure S&P500 inclusion), they will manage these Operating Costs tightly and show a GAAP profit in Q1. I least I hope so.

 

[EVNow]

Thanks for the models.

What’s the thinking behind only an average c. 2k per week of Model Y in Q4? This feels far too low for the base case. To me that’s a stressed cluster F production level for Y in Q4, given the production date has moved forward and the substantial overlap with the 3.

Still looking for confirmation on production moving forward. That should come in the Q4 ER.

Also there is some doubt about how much they can make in Fremont - 3 + Y. Is it a total of 10k/wk - which is the apparent paint shop capacity ? In that case, increasing Y would decrease 3.

Model 3 - 7k/wk = 90k
Model Y - 3k/wk = 35k
GF 3 - 3k/wk = 35k

So, total 3+Y production of 160k is possible, with current information. I'm assuming 154k production in Q4.

 

[Singer3000]

Still looking for confirmation on production moving forward. That should come in the Q4 ER.

Also there is some doubt about how much they can make in Fremont - 3 + Y. Is it a total of 10k/wk - which is the apparent paint shop capacity ? In that case, increasing Y would decrease 3.

Model 3 - 7k/wk = 90k
Model Y - 3k/wk = 35k
GF 3 - 3k/wk = 35k

So, total 3+Y production of 160k is possible, with current information. I'm assuming 154k production in Q4.

Thanks.

Both the supply and demand impact of Y on 3 is a quandary isn’t it? The public statements are that they are not expecting much if any impact at all.

I can’t speak for how they’re managing production constraints on shared 3/Y facilities at Fremont. But one way of managing demand cannibalisation is the return of the $35k Model 3, which becomes more plausible with the improved COGS per unit.

 

[mongo]

Still looking for confirmation on production moving forward. That should come in the Q4 ER.

Also there is some doubt about how much they can make in Fremont - 3 + Y. Is it a total of 10k/wk - which is the apparent paint shop capacity ? In that case, increasing Y would decrease 3.

Model 3 - 7k/wk = 90k
Model Y - 3k/wk = 35k
GF 3 - 3k/wk = 35k

So, total 3+Y production of 160k is possible, with current information. I'm assuming 154k production in Q4.

Q3 earnings call: Tesla, Inc. (TSLA) Q3 2019 Earnings Call Transcript | The Motley Fool

Regarding numbers:

Elon R. Musk -- Founder, Chief Executive Officer & Director

Regarding Model Y, we're also ahead of schedule on Model Y preparations in Fremont, and we've moved the launch timeline from full 2020 to summer 2020. There may be some room for improvement there, but we're confident about summer 2020. I've actually recently driven the Model Y release candidate and think it's going to be an amazing product and be very well received. I think it's quite likely to -- just my opinion, but I think it will outsell Model S, Model X and Model 3 combined.

Regarding timing and impact on 3:

Martin Viecha -- Senior Director, Investor Relations

Okay. Thank you. The next question is, with respect to Model Y, what is your latest expectations for launch timing? Do you anticipate any Model 3 production downtime at Fremont during the launch? And how should Model Y gross margin percent look compared to Model 3 gross margin?

Elon R. Musk -- Founder, Chief Executive Officer & Director

Well, we've talked about the launch time. What really matters is the timing to volume production where volume production is some number in excess of 1,000 units per week. And we're confident of reaching that point no later than the middle of 2020. Yeah, so from an interest standpoint, 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. From a margin standpoint, Zachary, do you want to add anything? [Phonetic]

Regarding impact on 3 sales:

Pierre Ferragu -- New Street Research -- Analyst

Yeah, just a quick one on the Model Y. So, I was wondering what you have learned with S and X that make you think maybe when you launch Model Y, you have some cannibalization of demand on the Model 3? And have you started to think about that and how to approach it?

Elon R. Musk -- Founder, Chief Executive Officer & Director

No, I don't think. We're not expecting to see cannibalization of Model 3, one is a sedan and one is an SUV.

Zachary Kirkhorn -- Chief Financial Officer

Yeah, the best comparison we have for that is when we launched Model X and we had Model S at the time.


Elon R. Musk -- Founder, Chief Executive Officer & Director

Model S sales increased.

Zachary Kirkhorn -- Chief Financial Officer

Yeah, and we didn't see any cannibalization there.

Elon R. Musk -- Founder, Chief Executive Officer & Director

The opposite. When we launched Model X, Model S sales increased.

Zachary Kirkhorn -- Chief Financial Officer

Yeah, so that's the best comparison that we have.

 

[kbM3]

Thanks for sharing this. You have a slight loss in Q1 2020 on a GAAP basis. I think that your R&D and SG&A costs for Q1 is too high.
My guess is that if Tesla is that close to a profitable Qtr (to ensure S&P500 inclusion), they will manage these Operating Costs tightly and show a GAAP profit in Q1. I least I hope so.

During autonomy day, Galileo Russell asked Elon point-blank about S&P 500 inclusion possibilities. Elon said that it is not on his radar, and he does not even think about it.

as far as Q1, I am sure they would stretch to make it profitable, if they are anywhere close. So the effect would be the same, as that should ensure the inclusion.

 

[EVNow]

Thanks.

Both the supply and demand impact of Y on 3 is a quandary isn’t it? The public statements are that they are not expecting much if any impact at all.

I can’t speak for how they’re managing production constraints on shared 3/Y facilities at Fremont. But one way of managing demand cannibalisation is the return of the $35k Model 3, which becomes more plausible with the improved COGS per unit.

I've written about this before - my contention is Tesla is not interested in expanding Fremont capacity beyond 10k/wk for 3 + Y. I think that's the demand for NA. They will similarly have about 10k/wk for Europe and 10k/wk in GF3. This will be a total of 1.5M/yr capacity in 2022/23 compared to 350k/yr capacity now in Fremont for 3.

 

[EVNow]

Q3 earnings call: Tesla, Inc. (TSLA) Q3 2019 Earnings Call Transcript | The Motley Fool

Regarding numbers:


Regarding timing and impact on 3:


Regarding impact on 3 sales:

Thanks for the quotes.

I remember this very well. Musk trailing off when talking about paint line tells us a lot. There is impact of Y on the paint shop. I'd assume 10k/wk is the limit for 3+Y unless they clear that up in ER. I hope someone asks the question - "what is the expected total Fremont capacity for 3 + Y by the end of 2020".

Yeah, the body line is separate, the paint line is -- basically we do not expect it to interfere with Model 3.
​

Regarding cannibalization, I think they'll be as surprised by Y cannibalizing 3 as they were 3 cannibalizing S/X. Ofcourse, 3+Y will still be more than just 3 now. Infact in the medium term, 3 + Y will be 500k/yr in NA, compared to ~ 250k / yr now.

 

[mongo]

I've written about this before - my contention is Tesla is not interested in expanding Fremont capacity beyond 10k/wk for 3 + Y. I think that's the demand for NA. They will similarly have about 10k/wk for Europe and 10k/wk in GF3. This will be a total of 1.5M/yr capacity in 2022/23 compared to 350k/yr capacity now in Fremont for 3.

The Jerome e-mail from earlier this year may point toward a higher output from Fremont than the current 8k/ wk (7k of 3 1k of S/X).
Bloomberg - Are you a robot?

Thanks for the quotes.

I remember this very well. Musk trailing off when talking about paint line tells us a lot. There is impact of Y on the paint shop. I'd assume 10k/wk is the limit for 3+Y unless they clear that up in ER. I hope someone asks the question - "what is the expected total Fremont capacity for 3 + Y by the end of 2020".

Yeah, the body line is separate, the paint line is -- basically we do not expect it to interfere with Model 3.
​

Regarding cannibalization, I think they'll be as surprised by Y cannibalizing 3 as they were 3 cannibalizing S/X. Ofcourse, 3+Y will still be more than just 3 now. Infact in the medium term, 3 + Y will be 500k/yr in NA, compared to ~ 250k / yr now.

That comment on the paint line could just be that they are shared, not that they are a limitation. Cannibalization may occur, but if they are planning that it won't, and that the Y will be higher volume than the 3+S+X, that indicates that they expect Fremont can do much more than 8k per week.

 

[gerebgraus]

$2.11 EPS - GAAP
$3.24 EPS - Non-GAAP

Wow - that would be terrific.
And you have only a slight increase in improving auto margins. They may deliver better margins...fingers crossed !!

Gross margins will be way over 25%. Price increase ~1% on Model 3-s. Labor costs including production, sales and delivery is
about stable. (Production seems to have the same labor force) Think of deliveries from temp. facilities in the port in Netherland or at the factory in Fremont. Quality of cars became insanely high, so not much cost in detailing, repairing at delivery. I doubt that they gave more test drives this quarter either.) Model 3 was supply constrained and they sold sold a higher ration of higher gross margin Model 3-s.
My dream is 30% gross margin, but the truth should be over 25% certainly.

 

[EVNow]

The Jerome e-mail from earlier this year may point toward a higher output from Fremont than the current 8k/ wk (7k of 3 1k of S/X).
Bloomberg - Are you a robot?

We don't know what Jerome was talking about. Anyway, if they have increased the capacity - we should find out this ER.

BTW, I had forgotten about S+X. So, I'm assuming 11k/wk, rather than 10k/wk in Fremont total.

That comment on the paint line could just be that they are shared, not that they are a limitation. Cannibalization may occur, but if they are planning that it won't, and that the Y will be higher volume than the 3+S+X, that indicates that they expect Fremont can do much more than 8k per week.

Paint shop is one of the most difficult and expensive parts of the plant - with a lot of regulations. They can't just put it in a tent. It has a fairly long lead time. We'll know about it if they are expanding or creating a new paint shop.

Also, we have to consider the medium term capacity goals now that GF3 and GF4 are coming up. No point in increasing the capacity in Fremont and idling it after GF4 comes online.

 

[kengchang]

We don't know what Jerome was talking about. Anyway, if they have increased the capacity - we should find out this ER.

BTW, I had forgotten about S+X. So, I'm assuming 11k/wk, rather than 10k/wk in Fremont total.


Paint shop is one of the most difficult and expensive parts of the plant - with a lot of regulations. They can't just put it in a tent. It has a fairly long lead time. We'll know about it if they are expanding or creating a new paint shop.

Also, we have to consider the medium term capacity goals now that GF3 and GF4 are coming up. No point in increasing the capacity in Fremont and idling it after GF4 comes online.

There were several permits this year on the South Paint

 

[Dig deeper]

Thanks for the quotes.

I remember this very well. Musk trailing off when talking about paint line tells us a lot. There is impact of Y on the paint shop. I'd assume 10k/wk is the limit for 3+Y unless they clear that up in ER. I hope someone asks the question - "what is the expected total Fremont capacity for 3 + Y by the end of 2020".

Yeah, the body line is separate, the paint line is -- basically we do not expect it to interfere with Model 3.
​

Regarding cannibalization, I think they'll be as surprised by Y cannibalizing 3 as they were 3 cannibalizing S/X. Ofcourse, 3+Y will still be more than just 3 now. Infact in the medium term, 3 + Y will be 500k/yr in NA, compared to ~ 250k / yr now.

I wonder if they can implement what they learned with the Schuler press to other areas like the Eisenmann paint line or if they can put Grohmann to the task.

What would you say is limiting paint capacity to 10k in Fremont? Square footage or something engineering related like filter capacity not meeting VOC limits?

 

[Singer3000]

1.5 million global 3+Y may well be where things settle at. But seems to me that Musk thinks sustainable demand is higher than that.

If you are right about Fremont being capped at 10+1k, unless the cannibalisation of 3 by Y is pretty brutal, they are going to have starve America and Europe of 3s in late 2020 to 2021 as the more profitable Y ramps and Berlin takes its time to get turned from trees to a factory.

I struggle to believe this is what management have in mind but let’s face it, they give hardly any useful forward looking info these days so perhaps you’re right.

 

[EVNow]

Gross margins will be way over 25%. Price increase ~1% on Model 3-s. Labor costs including production, sales and delivery is
about stable. (Production seems to have the same labor force) Think of deliveries from temp. facilities in the port in Netherland or at the factory in Fremont. Quality of cars became insanely high, so not much cost in detailing, repairing at delivery. I doubt that they gave more test drives this quarter either.) Model 3 was supply constrained and they sold sold a higher ration of higher gross margin Model 3-s.
My dream is 30% gross margin, but the truth should be over 25% certainly.

Yes, these are all upsides.

We don't know how much of GF3 costs will hit the P&L - I think it will be negligible, but we don't know. The other downsides are in things like other income (-40M once earlier) and subsidiary losses (70 once earlier).

There were several permits this year on the South Paint

What was the consensus as to what these were for ?

What would you say is limiting paint capacity to 10k in Fremont? Square footage or something engineering related like filter capacity not meeting VOC limits?

I have no insights into this. @Doggydogworld ?

1.5 million global 3+Y may well be where things settle at. But seems to me that Musk thinks sustainable demand is higher than that.

IIRC, Musk thinks 3 demand is 700K and Y is more than that - so about 1.5M. BMW sales is 2M with a lot more models.
​

 

[EVNow]

Here is the spreadsheet - for anyone to play around with it. Posting as I got requests to share.