damonbrodie
Member
Ok - then is the "Automotive sales" line on page 23 of the Q1 deck ($15.514M) using the same logic and subtract out the leased deliveries?
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Near-future quarterly financial projections
- Thread starter luvb2b
- Start date
Doggydogworld
Active Member
Yes, Automotive Sales Revenue and Automotive Sales Cost of Revenue both include only new car sales, so you have to subtract out leased cars.
15,514m is Auto Sales Revenue for Q1 of last year (2022). For Q1 of 2023 Auto Sales Revenue was 18,878m and Automotive Sales Cost of Revenue was 15,433m.
If I'm reading the 10-Q correctly (I might not be) the IRA battery credits were included. Margins would have been lower without them.
I think we have to wait until Panasonic reports, but this could potentially be in the $200-$300m range. Gross margins ex-credits / ex-leases would then have been 17-17.5% or so.
Why compute action independent of situation? Tesla could have used the materials cost decrease as an input to their pricing decision.
EVNow
Well-Known Member
But isn't the idea that the pricing will be driven by the need to move all production rather than margin ?
Depends which idea one is focusing on.
$200m/ 125k cars = $1600 difference in price cut.
EVNow
Well-Known Member
In Q4 ER Zach said 20% GM. This time he refused to give guidance and Elon made it clear they will cut prices all the way to 0% GM if needed to continue increasing volume. I mean - that's what every one has been talking about since ER, so I'm not saying anything new.
So, the fact that IRA credit has been clubbed with input costs shouldn't make any difference in terms of pricing.
I think Elon said 'if they did sell cars for 0 GM, they could still make money on them later' (like other OEMs do via financing). Previous call was cutting OM to zero.
D&S was running number as if the two items occured independent of each other, that's all I was pushing back on. Maybe they wouldn't have cut as much without IRA.
EVNow
Well-Known Member
Why not ? They are apparently cutting price to move the cars ... if they didn't cut as much, they wouldn't have been able to move all the cars they wanted to.
Basically, the gist of current guidance is - the primary objective is to keep increasing the production volume and sell all the cars. If it means cutting prices, lowering margin - so be it.
Yes, that 0 margin was a just boast from Elon as to how they are the only ones who can do it among OEMs - kind of funny considering other OEMs are making negative margin on EVs
Zach talked about monitoring OM last time - but didn't say much about it this time, IIRC. No guidance on what OM they are aiming for either. Yes, they do want to make enough money to be able to fund expansion. We don't know what happens if there is a conflict between this, OM% and ability to sell all the cars they make.Presumably in Q1, the objective of GM of 20% was sacrificed to sell more cars.
Doggydogworld
Active Member
I agree, but they don't just expand wildly. They plan based on expected demand at acceptable margins, so there is a (slow) feedback loop. They slow-rolled Berlin (as I predicted years ago), they delayed or canceled the Shanghai expansion onto adjacent land and they even curtailed Shanghai output in Q4.
That's why 2023 production is only slated to grow 31% from 2022 (and only 20% above 2022's planned output absent Shanghai COVID shutdown, etc.). This even though they have two "bigger than Shanghai" factories in the fat part of their "faster than Shanghai" ramp. Tesla anticipated the macro environment would weaken for 3/Y this year. It just weakened a little more than expected.
EVNow
Well-Known Member
I think the biggest surprise to me is
- In Q4 there was a lot of headwind, what with tax credits starting in Q1
- But they cut prices in Q1, initially apparently to avail of the tax credits
- But they kept cutting prices even after the Y limit was raised to 80k
- But even with all that Q1 demand wasn't much better than Q4
I think thats the part that is difficult to fathom. I guess "richcession" is really a thing - recession has started for the Tesla buying demo much earlier than rest of the US.
BTW, I don't know why Elon will not explain the logic you present above in ER. Because he doesn't want to say aloud that they are holding back on volume expansion. They do not want to disclose that in public.
ps : Isn't one of the possible reasons for slow expansion the 4680 issues ?
pps : From @Troy
Doggydogworld
Active Member
They mostly eliminated the US Q4 headwind by giving order holders 7500 off to take delivery by 12/31. China actually had a Q4 tailwind due to a subsidy cut on 12/31. Europe was a light tailwind, with subsidy reductions in a couple countries like Germany.
Troy documented the Q4 new order rate at ~200k. The rest of Q4's deliveries filled backlog (earlier orders placed at much lower prices, per Zach). So even in a steady macro environment they needed massive cuts from the inflated 4Q22 website prices to boost the new order rate from 200k to 400k+/quarter. Then add on top of that seasonality and a worsening macro environment.
Could be. In January last year Elon said they had enough batteries for 1.5m+ in 2022, but needed 4680 to hit 2023 goals. I don't know what his 2023 goals were back then, but I'd wager 2m++ with volume CT production in the back half. 4680 issues may constrain CT, but I think other issues are also constraining it. Inventing a whole new way to manufacture a car body using a new type of material is non-trivial.
I think the biggest surprise to me is
- In Q4 there was a lot of headwind, what with tax credits starting in Q1
- But they cut prices in Q1, initially apparently to avail of the tax credits
- But they kept cutting prices even after the Y limit was raised to 80k
- But even with all that Q1 demand wasn't much better than Q4
I think thats the part that is difficult to fathom. I guess "richcession" is really a thing - recession has started for the Tesla buying demo much earlier than rest of the US.
BTW, I don't know why Elon will not explain the logic you present above in ER. Because he doesn't want to say aloud that they are holding back on volume expansion. They do not want to disclose that in public.
ps : Isn't one of the possible reasons for slow expansion the 4680 issues ?
pps : From @Troy
If correct (and I've said before, China and Europe should be very close, so the remainder should be as well), the only meaningful QoQ growth was in China.
Of course, Q1 is the weakest historically but I would have thought the price cuts and IRA credit would have boosted demand more.
Per the 10Q, US and rest of world had the most revenue growth.
Inventory growth, for reference:
EVNow
Well-Known Member
petit_bateau
Active Member
I think there is also a strategic realpolitik angle to the decision to not proceed (delay) the Shanghai phase II (the pre-loaded land). The LFP supply was there to do this, however it would have meant starving Berlin and Lathrop and Fremont if they had done that. But in a world where already a lot of Tesla exposure in in China, then sending Chinese LFP to Berlin (etc) and getting on with another uto plant in Mexico does tend to further derisk exposure to China. I expect we'll see China II after Mexico is properly moving forwards. After all China II needs the 2/Z model to fill it. And by then the 4680 lines ought to be running, again notably outside China. Lots of careful manoeuvring in play imho.
