Near-future quarterly financial projections

[Artful Dodger]

While it won’t be $0 fixed cost it won’t be linear to rest of factory as major costs relating to structure, heating, electrical were all already in place. Plus it’s also likely that several parts of the production process are already capable of handling more volume without increasing capital costs.

Actually, if you watched WaWa's videos over the past 12 months, you can see that almost all the buildings were duplicated. There's a 2nd Gigapress building, an extention to the paint mixing shop that's as big as the orginal in Phase 2, and so on. Basically, all the buildings on the far East row in Phase 2 have been duplicated.

Then there was a 3rd Stamping workshop added on the South side of the existing 2. There's also a new logistics building on the North end of the Model Y GA hall, and a 2nd complete Supercharger station with another 48 stalls, also perhaps with megapacks? Lots of capital expense.

My heuristic would be to reuse the capital cost expense amount per vehicle from first production of Shanghai Model Y, and then decrement those costs slightly to allow for a 'learning curve' and economies of scale when doubling production.

Cheers!

 

[st_lopes]

Actually, if you watched WaWa's videos over the past 12 months, you can see that almost all the buildings were duplicated. There's a 2nd Gigapress building, an extention to the paint mixing shop that's as big as the orginal in Phase 2, and so on. Basically, all the buildings on the far East row in Phase 2 have been duplicated.

Then there was a 3rd Stamping workshop added on the South side of the existing 2. There's also a new logistics building on the North end of the Model Y GA hall, and a 2nd complete Supercharger station with another 48 stalls, also perhaps with megapacks? Lots of capital expense.

My heuristic would be to reuse the capital cost expense amount per vehicle from first production of Shanghai Model Y, and then decrement those costs slightly to allow for a 'learning curve' and economies of scale when doubling production.

Cheers!

I wonder what land cost is relative to rest of capital costs. You may convince me that we won’t see mid 30 margins this quarter.

 

[Artful Dodger]

I wonder what land cost is relative to rest of capital costs. You may convince me that we won’t see mid 30 margins this quarter.

Well, the land cost is one line item that should not have changed, in that the Phase 2 extention was built within the footprint of the original land parcel.

I still hold that Tesla will achieve >30% margin (although not mid-30s) as one of their primary goals for 21Q4 and 22H1, simply because that is the actual metric on performance that unlocks Elon's final unvested tranche from the 2012 CEO comp. plan.

I can't see them NOT working that into the progress planned for these 3 quarters. It's over a billion bucks for Elon, I think he'll do what it takes and make it happen.

Cheers!

 

[st_lopes]

Well, the land cost is one line item that should not have changed, in that the Phase 2 extention was built within the footprint of the original land parcel.

I still hold that Tesla will achieve >30% margin (although not mid-30s) as one of their primary goals for 21Q4 and 22H1, simply because that is the actual metric on performance that unlocks Elon's final unvested tranche from the 2012 CEO comp. plan.

I can't see them NOT working that into the progress planned for these 3 quarters. It's over a billion bucks for Elon, I think he'll do what it takes and make it happen.

Cheers!

100% agree that they collectively have aligned incentives to sustain 30% margins and equally believe that they WILL sustain them going forward and Elon will unlock the final tranche of his compensation package.

I also do expect PWC to be VERY stringent on their audit of COGS calculations in this 10-K and next years, for that very reason. Fundamentals of auditing, detailed test the accounts the most subject to bias. So if they do post 30%+, I am also even more confident that they did it in the context of very intense scrutiny, making it all that more impressive.

My point on land cost (which in their case I believe is actually a lease agreement, hence actually allocated to COGS) was precisely that the total cost is now allocated across more units, thereby increasing the GM % of all units coming out of the factory. My assumption (perhaps faulty) is that there are a number of other common processes or costs that will also now be absorbed across an additional 60k units in Q4. Hence my supposition that GM %s will approach the mid-30s.

 

[The Accountant]

My Free Cash Flow Projection for Q4
I think Tesla has a shot to achieve $2B in FCF for Q4 (see orange box below).
$2B hinges on a few key assumptions . . . a critical one is the Capital Expenditure estimate for Q4 (see the row in Yellow).
I am estimating that Capital Expenditures increased in Q4 to $1.9B but the rate of growth slowed down.
Free Cash Flow is very difficult to forecast and my estimate can be off by quite a bit but $2B is possible.

 

[CorneliusXX]

Do we have any detail on estimated changes in product mix for this quarter?

This post is speculative, but I'm wondering if much of the increase in 3/Y sales this quarter is going to be SR LFP variants made in China and sold to Chinese customers. The thought process is as follows:

• CATL has been ramping LFP cell supply in China
• No news of LG ramping nickel cell supply in China - so unit volume growth likely to be SR variant
• SR variants of the China made Y aren't available in Europe - lower ASP
• Sales have surged in China in the last quarter - greater weighting of low ASP vehicles
• The Chinese market has a very low FSD penetration rate

While there are still many offsetting factors of increased unit volume (fixed cost absorption, etc) and there are historical price increases still to flow through in Q4, and there are more S/X sales in Q4, I wouldn't be surprised if the ASP doesn't increase as much as we might hope this quarter due to product mix.

Anywho - if anyone has links to data that can dis/prove the above would you mind linking in a reply.

 

[CorneliusXX]

Do we have any detail on estimated changes in product mix for this quarter?

This post is speculative, but I'm wondering if much of the increase in 3/Y sales this quarter is going to be SR LFP variants made in China and sold to Chinese customers. The thought process is as follows:

• CATL has been ramping LFP cell supply in China
• No news of LG ramping nickel cell supply in China - so unit volume growth likely to be SR variant
• SR variants of the China made Y aren't available in Europe - lower ASP
• Sales have surged in China in the last quarter - greater weighting of low ASP vehicles
• The Chinese market has a very low FSD penetration rate

While there are still many offsetting factors of increased unit volume (fixed cost absorption, etc) and there are historical price increases still to flow through in Q4, and there are more S/X sales in Q4, I wouldn't be surprised if the ASP doesn't increase as much as we might hope this quarter due to product mix.

Anywho - if anyone has links to data that can dis/prove the above would you mind linking in a reply.

As a follow on - It seems that there were around ~8k (12%) additional deliveries to Europe in Q4 over Q3 out of the additional 65k 3/Y sold in Q4. China and the US to make up the difference. Rob is estimating an additional 20k production from Fremont in Q4 over Q3 (of which 5k are S/X) - leaving c.42k additional Shanghai produced 3/Y sold in China (ignoring smaller markets like Oz/NZ etc). Perhaps not a terrible mix - but initial thoughts are that we could see more of a skew towards SR variants this quarter given the lack of info on increased nickel cell production.

https://twitter.com/x/status/1478689475991646209

From Rob's delivery video

 

[Todd Burch]

Just a note:

Fly4Dat is a longtime TSLAQ member.

“Shrinking market share” is TSLAQ’s new rallying cry. That’s their new argument. They’ll claim Tesla’s share of the EV pot is shrinking even though it’s market share of the automotive pot is rapidly growing.

Of course, when you start out with an extremely high market share of EVs and then others enter the marketplace, necessarily your share of that subset will go down. They conveniently leave out Tesla’s growing market share of the entire auto market.

 

[Boomer19]

Do we have any detail on estimated changes in product mix for this quarter?

This post is speculative, but I'm wondering if much of the increase in 3/Y sales this quarter is going to be SR LFP variants made in China and sold to Chinese customers. The thought process is as follows:

• CATL has been ramping LFP cell supply in China
• No news of LG ramping nickel cell supply in China - so unit volume growth likely to be SR variant
• SR variants of the China made Y aren't available in Europe - lower ASP
• Sales have surged in China in the last quarter - greater weighting of low ASP vehicles
• The Chinese market has a very low FSD penetration rate

While there are still many offsetting factors of increased unit volume (fixed cost absorption, etc) and there are historical price increases still to flow through in Q4, and there are more S/X sales in Q4, I wouldn't be surprised if the ASP doesn't increase as much as we might hope this quarter due to product mix.

Anywho - if anyone has links to data that can dis/prove the above would you mind linking in a reply.

also;
they sold less than 25k s&x in 2021
what will be the number in 2022?

 

[CorneliusXX]

Just a note:

Fly4Dat is a longtime TSLAQ member.

“Shrinking market share” is TSLAQ’s new rallying cry. That’s their new argument. They’ll claim Tesla’s share of the EV pot is shrinking even though it’s market share of the automotive pot is rapidly growing.

Of course, when you start out with an extremely high market share of EVs and then others enter the marketplace, necessarily your share of that subset will go down. They conveniently leave out Tesla’s growing market share of the entire auto market.

Good to know - I was only referencing the delivery numbers in Q's 3&4 which appear accurate. Agree the market share stuff is nonsense.

 

[deffu]

My conservative numbers on margins come from my concern that the higher sales within China have lower margins as pricing is much lower. I have heard from some analysts that the margins within China is higher but I will bake that in when I see it. So we have huge upside to my numbers here potentially.

On Regulatory credits, I am assuming that this will drop each qtr going forward just based on comments that Zach has made in the past. There can be an upside here too.

Thanks for the great work half of Shanghai’s production r high priced models ending in EU, right. It’s lower price overall, but local sourcing and cheaper labor play an important factor. It’s hard to gauge, but I believe most of tsla s margin expansion comes from Shanghai. Manufacturing in Bay Area is simply not economic

 

[deffu]

My conservative numbers on margins come from my concern that the higher sales within China have lower margins as pricing is much lower. I have heard from some analysts that the margins within China is higher but I will bake that in when I see it. So we have huge upside to my numbers here potentially.

On Regulatory credits, I am assuming that this will drop each qtr going forward just based on comments that Zach has made in the past. There can be an upside here too.

Also, i saw you put SGA -2% lower in Q4 compared to Q3, since there r 65K more car delivered. Can we really expect SGA to go down even they didnt do crazy eoq push?

 

[The Accountant]

Also, i saw you put SGA -2% lower in Q4 compared to Q3, since there r 65K more car delivered. Can we really expect SGA to go down even they didnt do crazy eoq push?

The decrease is driven by the lower CEO award in Q4 ($151m) compared to Q3 ($190m). That's a 39m decrease.
When you back this out, I have SG&A going up $25m (+3%).
I break-out the CEO award from SG&A below:

 

[The Accountant]

Thanks for the great work half of Shanghai’s production r high priced models ending in EU, right. It’s lower price overall, but local sourcing and cheaper labor play an important factor. It’s hard to gauge, but I believe most of tsla s margin expansion comes from Shanghai. Manufacturing in Bay Area is simply not economic

My logic here is as follows:
In Q3, 45% of Shanghai production was exported out of China (55% delivered in local China)
In Q4, 35% of Shanghai production was exported out of China (65% delivered in local China)

I believe the cars from Shanghai going to Europe have more margin than the cars delivered in China. I know that there are export duties to Europe but I believe the SR+ models in China have low margins. I can be very wrong on this but I wanted to take this conservative approach and will correct once the Q4 results are published.

 

[The Accountant]

2022 Forecast
I present my base case for 2022. These numbers will change throughout the year as quarterly results get published.
This base case is conservative in my opinion - it is in the lower range of my base case possibilities.

Deliveries:
Fremont deliveries are mainly driven by Models S&X which represents over 60% of Fremont's increase from 2021
I'm estimating that Shanghai produced 64k cars in Dec giving it a annual run rate of 768k. The projection of 802k in 2022 is likely too low.
Shanghai delivered about 145k in it's first year; I have lower first year numbers for Austin and Berlin due to the late launch dates.
My 2022 estimate of $1,550k may be 100k too low

Margins & ASP
When you look at Auto Margins excluding Credits (2nd row below), you see a huge step change from 2020 to 2021 with Q4 2020 at 20.7% vs Q4 2021 at 29.5%. This was due to Shanghai entering it's 2nd year of production and achieving huge economies of scale.
I don't show another step change in 2022 and the increase in Auto Margins sans credits are more modest with Q4 2022 ending at 30.8%. This is due to Austin and Berlin ramping with lower margins. I expect to see huge margin improvements in 2023 when Austin and Berlin start producing 400K+ each.

Energy margins will improve as more batteries are made available for storage products. My 6% margin in Q4 may be too low.
Service margins finally move to positive territory in Q4 2022 (0.5%)

Average Selling Price (ASP) dropped in 2021 vs 2020 as Models S&X deliveries decreased and the SR+ was introduced in China.
I show an increase in ASP for 2022 as Models S&X deliveries increase and US price increases made in 2021 start to appear in 2022.

P&L
Deliveries, ASP and Margins presented above drive Revenues, Cost of Revenues and Gross Profit Margins in the P&L below.
I'll comment here on expenses below margin:
R&D in 2021 showed a huge step change in Q1 and then stabilized during the year. I am showing a an increase of 25% in R&D to $3.1B but it's not as large of the % increase we saw in 2021. I expect decreasing R&D for the Semi, Cybertruck and 4680 batteries to move to AI, Energy products and Model 2.
SG&A grows as Tesla continues to expand Delivery Centers throughout the world.
CEO Award costs decreases in 2022 as Elon achieves his final tranche.
EPS - GAAP comes in at $12.87 for 2022
EPS - Non-GAAP comes in at $14.15 in 2022 (Wall Street currently sits at $8.76 for 2022.

Free Cash Flow (FCF)
I expect to FCF to grow to over $11B in 2022.
I see Capex practically leveling out at $7.2B.

 

[The Accountant]

As an Addendum to my post above, here are the quarterly numbers:

 

[dc_h]

My logic here is as follows:
In Q3, 45% of Shanghai production was exported out of China (55% delivered in local China)
In Q4, 35% of Shanghai production was exported out of China (65% delivered in local China)

I believe the cars from Shanghai going to Europe have more margin than the cars delivered in China. I know that there are export duties to Europe but I believe the SR+ models in China have low margins. I can be very wrong on this but I wanted to take this conservative approach and will correct once the Q4 results are published.

Europe Margin pros is primarily higher option packages and ASP's. China advantages are no import export costs and lower shipping costs. Additionally the lower ASP is also offset by lower cost LFP batteries from CATL. Those LFP batteries could be 20-30% cheaper than NCA (Nickel/Cobalt) batteries. That should have a big positive impact on margins to offset the lower ASP. We won't know until the end of the month and even then, it will be a lot of Sherlocking the earnings report. Tesla will not release their costs with CATL vs LG and Panasonic. If LFP is $60-80 vs NCA $100-120, they could be saving could be $3500 per car, or as little as $600 based on my Fischer Price math. Europe import duties of 10% or ~$5500 and optimistically ~$3000 on batteries and another $1500 on logistics, they could save as much as $10,000 per car MIC Sold in China (SIC) vs Sold in Europe. Not sure if we have good data on ASP in China. I did a quick look on Troy's site, but didn't see anything pop out.

 

[The Accountant]

Europe Margin pros is primarily higher option packages and ASP's. China advantages are no import export costs and lower shipping costs. Additionally the lower ASP is also offset by lower cost LFP batteries from CATL. Those LFP batteries could be 20-30% cheaper than NCA (Nickel/Cobalt) batteries. That should have a big positive impact on margins to offset the lower ASP. We won't know until the end of the month and even then, it will be a lot of Sherlocking the earnings report. Tesla will not release their costs with CATL vs LG and Panasonic. If LFP is $60-80 vs NCA $100-120, they could be saving could be $3500 per car, or as little as $600 based on my Fischer Price math. Europe import duties of 10% or ~$5500 and optimistically ~$3000 on batteries and another $1500 on logistics, they could save as much as $10,000 per car MIC Sold in China (SIC) vs Sold in Europe. Not sure if we have good data on ASP in China. I did a quick look on Troy's site, but didn't see anything pop out.

Thanks - this is helpful.

 

[Artful Dodger]

My 2022 estimate of $1,550k may be 100k too low

Nice estimate of 483,377 cars delivered from Shanghai in 2021. @DKurac just reported on twitter that the actual number of GF3 delivers for 2021 was 484,130 (just 760 more than your estimate, or +0.16% difference). Good job, well done!

Cheers!

 

[thx1139]

Good to know - I was only referencing the delivery numbers in Q's 3&4 which appear accurate. Agree the market share stuff is nonsense.

They even seem to be off on the Market Share. Looking at this which doesnt have UK yet for 2021.

Electric Vehicle registrations in Europe: 15 countries, majority of BEV market

Tesla Marketshare went up 2% from 11.09% to 13.13%
VW Group went down 0.21% from 27.09% to 26.88%
Stellantis was 3rd going from 10.64% to 13.92%