Near-future quarterly financial projections

[The Accountant]

$9.2B Free Cash Flow in Back Half of the Year?
I am expecting incredibly high Free Cash Flows in Q3 & Q4 mainly driven by huge deliveries in the back half of the year.
These numbers are preliminary but I am pretty comfortable sharing them now.
The highest Free Cash Flow Tesla had generated to date was $2.8b in Q4 2021. This record will likely be smashed by $4.2b in Q3 ad $5.0b in Q4.
See details below.

 

[WattsHappening]

$9.2B Free Cash Flow in Back Half of the Year?
I am expecting incredibly high Free Cash Flows in Q3 & Q4 mainly driven by huge deliveries in the back half of the year.
These numbers are preliminary but I am pretty comfortable sharing them now.
The highest Free Cash Flow Tesla had generated to date was $2.8b in Q4 2021. This record will likely be smashed by $4.2b in Q3 ad $5.0b in Q4.
See details below.


View attachment 835089

Fantastic!!!!

One question: why do you think inventory balance will decrease in Q3? Just based on the outsized increase in Q2?

 

[The Accountant]

Fantastic!!!!

One question: why do you think inventory balance will decrease in Q3?

Inventory went up $1.5b in Q2 due to raw material inventory backing up at Shanghai with the lockdown. It should now draw down in Q3.
Zach stated this during the Q2 earnings call:
"Our free cash flows were impacted by working capital related to the Shanghai factory shutdown. However, we expect this will show as a benefit in Q3 as our working capital-related cash flows restabilize."

 

[BigDawgz]

$9.2B Free Cash Flow in Back Half of the Year?
I am expecting incredibly high Free Cash Flows in Q3 & Q4 mainly driven by huge deliveries in the back half of the year.
These numbers are preliminary but I am pretty comfortable sharing them now.
The highest Free Cash Flow Tesla had generated to date was $2.8b in Q4 2021. This record will likely be smashed by $4.2b in Q3 ad $5.0b in Q4.
See details below.


View attachment 835089

Again Thank you so much for doing all this work and sharing it with us. Have a couple of questions:

First, how do you have Energy performing in these? The start of a growth there thanks to the new factory or returning to normal from the surprise profit this quarter?

And second, does a share buyback actually make some sense at this point or will it soon? Gary Black obviously caught a bunch of flack for suggesting it, and I definitely disagreed with him initially, but free cash flow is about to absolutely take off the rest of the year and they've managed to build multiple factories and pay down nearly all their debt the last couple years while still remaining free cash positive, and that's only going to grow and grow fast. Doing a buyback before the stock split and credit rating upgrade would make seem pretty opportune time to do so as they're pretty obvious catalysts, but Elon did just say they sold BTC to have more cash on hand in case of more China shutdowns and it's not like they have too much cash just quite yet, so who knows. Any thoughts on them doing that this year?

 

[The Accountant]

Again Thank you so much for doing all this work and sharing it with us. Have a couple of questions:

First, how do you have Energy performing in these? The start of a growth there thanks to the new factory or returning to normal from the surprise profit this quarter?

And second, does a share buyback actually make some sense at this point or will it soon? Gary Black obviously caught a bunch of flack for suggesting it, and I definitely disagreed with him initially, but free cash flow is about to absolutely take off the rest of the year and they've managed to build multiple factories and pay down nearly all their debt the last couple years while still remaining free cash positive, and that's only going to grow and grow fast. Doing a buyback before the stock split and credit rating upgrade would make seem pretty opportune time to do so as they're pretty obvious catalysts, but Elon did just say they sold BTC to have more cash on hand in case of more China shutdowns and it's not like they have too much cash just quite yet, so who knows. Any thoughts on them doing that this year?

On Energy, here are my numbers as they stand now:

This is my first version of Q3 & Q4 and may change as I work on revisions.
I currently assume that Energy breakeven is about 780m and with sales projected at 940m and 1,000m for Q3 & Q4, margins will be at least 11%-12%.
If chips and batteries are available, we can see better results with higher sales.

On the Buyback question, I can see the argument for a buyback this year (when will the shares be this cheap?).
But I think that Tesla will wait until their cash on hand gets to $40b or higher so that they can comfortable announce a large buyback program of $10b to $20b. Having faced bankruptcy a few times, Elon is like a child of the Depression . . . may have a hard time letting go of a dollar.
I am no expert in this area but if I was the CFO of the company, I would recommend building our cash balance higher to allow for a large safety net.
Personally I would love to see a buyback . . .it signals confidence to Wall Street.

 

[Todd Burch]

I don’t think we’ll see a buyback soon. Elon wants to accelerate the transition to EVs and clean energy, so for a while I think Tesla will spend the majority of its money (on top of a healthy reserve) on development of new products and expanding manufacturing, Superchargers, and solar.

Elon knows the world needs more batteries and more EVs, so that will be the focus. Might see a small buyback in a few years, but I disagree with Gary that we’ll see one soon.

 

[JohnnyEnglish]

I don’t think we’ll see a buyback soon. Elon wants to accelerate the transition to EVs and clean energy, so for a while I think Tesla will spend the majority of its money (on top of a healthy reserve) on development of new products and expanding manufacturing, Superchargers, and solar.

Elon knows the world needs more batteries and more EVs, so that will be the focus. Might see a small buyback in a few years, but I disagree with Gary that we’ll see one soon.

To add one further point - creating a fleet of 1M robotaxis would cost in the region of $50B

 

[ammulder]

Not a major point, but they did just increase the capital expenditures forecast, while you have it declining. I assumed it was more from inflation/rising costs than major new projects, though perhaps getting cybertruck and semi into production will incur some meaningful capex?

 

[Yuha]

$9.2B Free Cash Flow in Back Half of the Year?
I am expecting incredibly high Free Cash Flows in Q3 & Q4 mainly driven by huge deliveries in the back half of the year.
These numbers are preliminary but I am pretty comfortable sharing them now.
The highest Free Cash Flow Tesla had generated to date was $2.8b in Q4 2021. This record will likely be smashed by $4.2b in Q3 ad $5.0b in Q4.
See details below.


View attachment 835089

A potentially significant new cash sink for Tesla is providing financing for their customers. The latest 10-Q has these paragraphs:

We have been providing loans for financing our automotive deliveries during the six months ended June 30, 2022. We have recorded net
financing receivables of $320 million which are presented on the consolidated balance sheets as a component of Accounts receivable, net, for
the current portion and as Other non-current assets for the long-term portion, as of June 30, 2022.

We have been providing loans for financing our energy generation products during the six months ended June 30, 2022. We have
recorded net financing receivables of $238 million which are presented on the consolidated balance sheets as a component of Accounts
receivable, net, for the current portion and as Other non-current assets for the long-term portion, as of June 30, 2022.

 

[The Accountant]

A potentially significant new cash sink for Tesla is providing financing for their customers. The latest 10-Q has these paragraphs:

We have been providing loans for financing our automotive deliveries during the six months ended June 30, 2022. We have recorded net
financing receivables of $320 million which are presented on the consolidated balance sheets as a component of Accounts receivable, net, for
the current portion and as Other non-current assets for the long-term portion, as of June 30, 2022.

We have been providing loans for financing our energy generation products during the six months ended June 30, 2022. We have
recorded net financing receivables of $238 million which are presented on the consolidated balance sheets as a component of Accounts
receivable, net, for the current portion and as Other non-current assets for the long-term portion, as of June 30, 2022.

You have a good eye . . .not many people have noticed that Tesla has grown its financing business.
I have actually been tracking this. The financing program really jumped in Q4 2021.
It can actually be a good use of their cash. I have estimated that they are making a little bit over 3% on these loans which is better than the returns they are currently getting on their cash. I believe they can wrap up these loans and sell them to a 3rd party in the future if cash is needed at a later time.
I will continue to monitor this to see if it becomes a good revenue stream for them.

 

[jeewee3000]

You have a good eye . . .not many people have noticed that Tesla has grown its financing business.
I have actually been tracking this. The financing program really jumped in Q4 2021.
It can actually be a good use of their cash. I have estimated that they are making a little bit over 3% on these loans which is better than the returns they are currently getting on their cash. I believe they can wrap up these loans and sell them to a 3rd party in the future if cash is needed at a later time.
I will continue to monitor this to see if it becomes a good revenue stream for them.

View attachment 835462

Small datapoint on these loans: when ordering a Tesla from Belgium (EU), the private loan is provided by 3rd party Alphacredit. The business loan/leasing is provided by 3rd party KBC. My point being: over here Tesla is not providing any loans as far as I can tell.

I assume Tesla will build up their financing business in a similar manner as Tesla Insurance: starting with parts of the US as that is closer to home (literally and figuratively) to tread the waters and correct possible errors in execution.

Europe and the rest of the world can then be tackled after Tesla gained more experience in the matter. The fact that they'll already be running a significant business (be it insurance or financing), will surely instill trust overseas when Tesla sets up those businesses there.

All in all great to see Tesla is adressing yet another market. (A market which many 'competitors' don't touch.)

 

[CorneliusXX]

Small datapoint on these loans: when ordering a Tesla from Belgium (EU), the private loan is provided by 3rd party Alphacredit. The business loan/leasing is provided by 3rd party KBC. My point being: over here Tesla is not providing any loans as far as I can tell.

I assume Tesla will build up their financing business in a similar manner as Tesla Insurance: starting with parts of the US as that is closer to home (literally and figuratively) to tread the waters and correct possible errors in execution.

Europe and the rest of the world can then be tackled after Tesla gained more experience in the matter. The fact that they'll already be running a significant business (be it insurance or financing), will surely instill trust overseas when Tesla sets up those businesses there.

All in all great to see Tesla is adressing yet another market. (A market which many 'competitors' don't touch.)

In the UK my loan contract is with Tesla Financial Services Ltd. So presumably they are at least contracting directly, however most finance companies sell down the loans to funding warehouses - it is unclear what Tesla is doing on the back end.

 

[The Accountant]

After Elon's comments about a 2m vehicle run rate exit in 2022, I am feeling very comfortable with my bullish forecast (it may actually be conservative).
My new forecast shifts some vehicles from Q3 to Q4. I had originally 383k in Q3 and 455k in Q4 and now I am at 363k Q3 and 476k Q4.
I exit December with a 2m vehicle run rate but I am still at 1.4m for the full year. I may be light for Shanghai in Aug through Nov (see black box below).
If Shanghai comes in stronger, I could see 1,425k in deliveries. To get to 1.5m we would need huge help from Berlin and Austin.
I have provided monthly deliveries by production site so you can eyeball the progress at each site.
Apr/May had the lockdown effect in Shanghai and for July we see dips in Shanghai and Berlin as they install upgrades.
Feedback is appreciated as crowdsourcing from TMC members helps me improve the forecast.

 

[petit_bateau]

After Elon's comments about a 2m vehicle run rate exit in 2022, I am feeling very comfortable with my bullish forecast (it may actually be conservative).
My new forecast shifts some vehicles from Q3 to Q4. I had originally 383k in Q3 and 455k in Q4 and now I am at 363k Q3 and 476k Q4.
I exit December with a 2m vehicle run rate but I am still at 1.4m for the full year. I may be light for Shanghai in Aug through Nov (see black box below).
If Shanghai comes in stronger, I could see 1,425k in deliveries. To get to 1.5m we would need huge help from Berlin and Austin.
I have provided monthly deliveries by production site so you can eyeball the progress at each site.
Apr/May had the lockdown effect in Shanghai and for July we see dips in Shanghai and Berlin as they install upgrades.
Feedback is appreciated as crowdsourcing from TMC members helps me improve the forecast.

View attachment 837064

I am more conservative. The big difference in our numbers originates from Shanghai where I already thought I was being aggressive the numbers I have pencilled in.

 

[The Accountant]

I am more conservative. The big difference in our numbers originates from Shanghai where I already thought I was being aggressive the numbers I have pencilled in.

View attachment 837077

I think the difference between our Shanghai numbers is that I am expect a stronger ramp from the upgrade than you are.
You may have the better number. I think we watch for August production. If it is 80k or higher, my number looks good. If it is lower than 80k, your number looks to be more accurate. Our other numbers look similar; I would love to see Berlin and Austin surprise us.

 

[Todd Burch]

@The Accountant your Berlin/Austin numbers for Q3 and Q4 look too pessimistic to me. You’ve got basically linear growth for the last 4 months of the year. IMO that will be more of that “hard-to-predict” steep S curve for Berlin and Austin. I think Tesla is sandbagging a bit with the 2M/year run rate at EOY.

But agree that waiting to see how August pans out for Shanghai will give us a better idea for them (although some of the upgrades have extended into August). I could see 90k for Shanghai in September.

I recommend taking your Austin/Berlin numbers and plotting them (# cars vs time), then comparing that to the S-curve we had in Shanghai. Slow it down by about 15-20%, and use that for Austin and Berlin estimates.

 

[petit_bateau]

@The Accountant your Berlin/Austin numbers for Q3 and Q4 look too pessimistic to me. You’ve got basically linear growth for the last 4 months of the year. IMO that will be more of that “hard-to-predict” steep S curve for Berlin and Austin. I think Tesla is sandbagging a bit with the 2M/year run rate at EOY.

But agree that waiting to see how August pans out for Shanghai will give us a better idea for them (although some of the upgrades have extended into August). I could see 90k for Shanghai in September.

I recommend taking your Austin/Berlin numbers and plotting them (# cars vs time), then comparing that to the S-curve we had in Shanghai. Slow it down by about 15-20%, and use that for Austin and Berlin estimates.

Pretty much that is what I did, slipping the Berlin & Austin early ramps to look more like the early Fremont ramp, but then assuming a subsequent ramp more akin to Shanghai. It is amazing how fast Shanghai came out of the blocks, I wonder how much of that can be attributed to supply flowing in from Fremont. Can that performance be repeated ? The evidence so far from both Berlin and Austin is that they have had slower starts.

 

[StarFoxisDown!]

I think the difference between our Shanghai numbers is that I am expect a stronger ramp from the upgrade than you are.
You may have the better number. I think we watch for August production. If it is 80k or higher, my number looks good. If it is lower than 80k, your number looks to be more accurate. Our other numbers look similar; I would love to see Berlin and Austin surprise us.

After the upgrades, Shanghai’s new capacity is 94k a month. I don’t know why you have them not reaching that until Dec. I think they’ll hit that in Sept. If there’s no ramp up time, which there shouldn’t be since this isn’t a Covid related ramp back up (and thus suppliers aren’t an issue), then August should come in at 86k or above.

 

[JohnnyEnglish]

After Elon's comments about a 2m vehicle run rate exit in 2022, I am feeling very comfortable with my bullish forecast (it may actually be conservative).
My new forecast shifts some vehicles from Q3 to Q4. I had originally 383k in Q3 and 455k in Q4 and now I am at 363k Q3 and 476k Q4.
I exit December with a 2m vehicle run rate but I am still at 1.4m for the full year. I may be light for Shanghai in Aug through Nov (see black box below).
If Shanghai comes in stronger, I could see 1,425k in deliveries. To get to 1.5m we would need huge help from Berlin and Austin.
I have provided monthly deliveries by production site so you can eyeball the progress at each site.
Apr/May had the lockdown effect in Shanghai and for July we see dips in Shanghai and Berlin as they install upgrades.
Feedback is appreciated as crowdsourcing from TMC members helps me improve the forecast.

View attachment 837064

Based on recent comments about record production at Fremont my production figures for that plant are higher than your estimates. In Q3 and 4 I assume 10k/week for 3/Y. Hoping that the S/X line finally starts to approach where it should be with close to 20k in Q3 and 26k in Q4. I must be a bit higher elsewhere as well as I am just under 1.5M production for the year and just over 2M run rate at year end. However I am always a bit over optimistic

 

[The Accountant]

@The Accountant your Berlin/Austin numbers for Q3 and Q4 look too pessimistic to me. You’ve got basically linear growth for the last 4 months of the year. IMO that will be more of that “hard-to-predict” steep S curve for Berlin and Austin. I think Tesla is sandbagging a bit with the 2M/year run rate at EOY.

But agree that waiting to see how August pans out for Shanghai will give us a better idea for them (although some of the upgrades have extended into August). I could see 90k for Shanghai in September.

I recommend taking your Austin/Berlin numbers and plotting them (# cars vs time), then comparing that to the S-curve we had in Shanghai. Slow it down by about 15-20%, and use that for Austin and Berlin estimates.

Thanks. I believe my disappointment with Berlin and Austin creates a bias that trumps logic. When I look at the drone videos for these sites, the activity at their logistic lots look uninspiring. But you're right, when they ramp it won't be linear. I will look to adjust.