Honestly, for the S/X, this is not proven at all. I would only model a return to those delivery numbers with a significantly lower gross margin contribution per car.
-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
Near-future quarterly financial projections
- Thread starter luvb2b
- Start date
Honestly, for the S/X, this is not proven at all. I would only model a return to those delivery numbers with a significantly lower gross margin contribution per car.
EVNow
Well-Known Member
Difficult to say in the long run, but because of the refresh I think it is possible to do 25k per quarter, if they can make that many this/next year.
PS: Tesla started selling significant number of model S starting in 2014. Many of those buyers are ready to upgrade. So, Tesla needs to get say 50k upgraders and 50k new customers to hit 100k.
Last edited:
Doggydogworld
Active Member
S/X was 25k/quarter almost like clockwork for a couple years. It would vary seasonally by a few thousand, but for the most part Tesla could easily manage demand with minimal promotion or discounting.
The 40% Chinese tariff last July changed things. Tesla said they'd compensate by selling more S/X in other markets, and for a while they did. Then Q1 took a hit in the US from tax credit stepdown. Even worse, in Europe the Model 3 seems to have cannibalized the S almost completely and even eaten into X sales. That didn't really happen in the US. Europeans lean toward smaller cars and incentives there (and now Canada) focus on less expensive EVs.
I think S/X volumes will mostly recover in the US, but only party in Europe and not at all in China. 70-75k/year could well be the new normal.
What worries me is their cash burn rate. In his email to employees, Elon stated that the $2.4Billion cash infusion that they just got was only enough to keep the lights on for something like another 10 months, and he called for extreme cost cutting.
Worrisome.
Have you read Musk's actual email? It's not as dire as reported.
If they kept the Q1 loss rate.
If they keep the Q3 or Q4 rate, they'll never run out of cash.
And the 10 month number was only regarding the 2.4 billion recently raised. They would still have 2+ billion.
Elon is rightly acting to avoid this syndrome:
Here's why lottery winners go broke
Full email:
Read the email Elon Musk sent to Tesla employees calling for 'hardcore' control of expenses
True. But
1) incentives changed in a few key markets (the Netherlands, USA) and tariffs are complicating others (China)
2) back then, there was zero competition if you wanted a longer range. I personally know a lot of people who went significantly out their comfort zone just to get a long range EV which happened to be an S because it was the only game in town. Now there is at least some choice. Some of those that went out of their comfort zone went back to it simply by buying a 3 to replace their aging S. Others go for E-Tron, I-PAce, new Leaf, Kia&Hyundai offerings. Each one in itself won't kill S/X but small paper cuts can add up.
These two reasons are why I say 25k is not yet proven and should not be taken for granted. Regarding gross margin contribution
3) Tesla lowered prices on S/X. Even if GM stays the same 25%, lower ASP will mean lower gross margin contribution per car.
EVNow
Well-Known Member
Oh its just EM being the drama queen again or you have not read the actual mail.
tl;dr : Just because we got some $2B don't get complacent. We need to keep cutting costs.
bdy0627
Active Member
I think it's very true that a lot of people stretched and spent more than they would normally when the only game in town was the S. I know I did. Had the 3 been available when I bought my S in 2015, I would have definitely spent less and gotten the 3. I need long range so no interest in spending less for a shorter range S.
Didn't Tesla already anticipate about 30% less demand for S/X and guide for about 70k annually? I think that's what we should expect, even with the refresh. That's about 18k per quarter with some seasonality.
Doggydogworld
Active Member
Good point. It also helps explain why S/X sales fell more in Europe where Jaguar and Audi have home field advantage than in the US.
They didn't lower the 75D/SR which sells in higher volume. They lowered P/Ludicrous a lot. Even if ASP falls 5k that's 24k gross profit instead of 25k. Volume and gross margin % are the issue, not ASP.
Barrons “in China, the trade dispute is feeding a wave of Nationalism, with commentators comparing it to the nations humiliation by foreign powers during the colonial era”
Don’t known what this means for GF3 if this continues to escalate. Yes there would be no tariffs for the cars coming out of GF3 but what about demand. Will the people want to buy a car from an American company with such nationalistic propaganda on both sides?
Don’t known what this means for GF3 if this continues to escalate. Yes there would be no tariffs for the cars coming out of GF3 but what about demand. Will the people want to buy a car from an American company with such nationalistic propaganda on both sides?
I doubt this is correct. The trend for a couple of years now -- since the Falcon Wing Door problems were resolved -- has been that while S sales are slightly declining, X sales are increasing at least as fast than S sales are declining. The Model 3 isn't really a substitute for the Model X in any way (maybe the Model Y will displace Model X demand, but it doesn't exist yet). People in Europe who thought the S was too big and switched to the 3 certainly weren't buying the X! And the I-Pace and Taycan are S-sized (smaller actually), not X-sized.
30% less demand for S/X would mean *60%* less demand for Model S, which is totally implausible. 30% less demand for S and same demand for X would mean about 15% less demand for S/X together, or 21-22K/quarter. But I think X demand continues to rise overall; there have been no signs of inventory accumulation for Model X yet. Rumor is that the X is popular in China, though I can't confirm.
These cars will be "made in China", so if US relations become a concern, they can emphasize this local build aspect in their communication.
Regarding China, incentive is one thing, there are other regulations.
Beijing and Shanghai and other big cities have this rule that your car can only be driven 4 days per week, e.g. monday, wednesday, friday sunday, if your license plate ends with odd number. EVs are not affected.
in the case of sever polution days, 80% of the gas cars are not allowed on the streets, again, EVs are not affected.
And there's a limited license plate available per year, and there's a lottery system for applying for license plates. My friends back in Beijing told me the odds are so low it would take on average 10 years for a person to get a plate. So the only way to get a plate is to find someone with a car license plate that they want to get rid of. EVs have their own pool, usually people get a license plate in 6 month.
Tesla is too far way from any EVs from China, the SR+ would wipe the plate clean in my friends words, because according to him, Tesla is pretty much the only EV that you can take a road trip in. Unfortunately Trump and Xi complicated the situation by hyping up nationalism in both countries and he saw Apple and Tesla as collateral damage.
It is indeed popular in China. Chinese people like bling bling. High level executives of high tech firms such as Alibaba and Tencent own them as they brag about their wealth and "green-ness". Alibaba has this bi-annually group wedding ceremony where they have a big party on TV when employees get married. They line up two dozen model Xs to drive the new couples around. I know, weird. But the X got tons of exposure and has been very popular in weddings all over China.
it's a strange country.
Last edited:
Sorry in a previous post I provided inaccurate information about Chinese cities restrictions for ICEs
In Beijing 20 percent of the ICEs are forbidden each workday citywide, it's a huge metropolitan area. No restrictions on weekends. However when the air gets bad progressively more ICEs are forbidden, starting from 50%, go all the way to emergency vehicles only.
Hangzhou forbids half of ICEs in the central district. Not the whole city.
Shanghai has no license plate number based restrictions. The license plate itself cost more than 83k RMB new. Second hand ones slightly more expensive.
In Beijing 20 percent of the ICEs are forbidden each workday citywide, it's a huge metropolitan area. No restrictions on weekends. However when the air gets bad progressively more ICEs are forbidden, starting from 50%, go all the way to emergency vehicles only.
Hangzhou forbids half of ICEs in the central district. Not the whole city.
Shanghai has no license plate number based restrictions. The license plate itself cost more than 83k RMB new. Second hand ones slightly more expensive.
EVNow
Well-Known Member
I'm trying to work out the cash flow for Q2.
It looks like the operating cash flow was negative (-639M) in Q1 mainly because of inventory build up (800M). Given that we don't expect a much higher inventory in Q2, even if the p&l is as bad as Q1, they would still be operating cash flow positive this quarter (some 225M). So, saying they want to be cash flow positive going forward really doesn't tell anything. Am I missing anything ?
@neroden @Doggydogworld
It looks like the operating cash flow was negative (-639M) in Q1 mainly because of inventory build up (800M). Given that we don't expect a much higher inventory in Q2, even if the p&l is as bad as Q1, they would still be operating cash flow positive this quarter (some 225M). So, saying they want to be cash flow positive going forward really doesn't tell anything. Am I missing anything ?
@neroden @Doggydogworld
@EVNow their forecast from the Q1 letter is "Operating cash flow less capex should be positive in every quarter including Q2."
So free cash flow is forecasted to be positive, which means operating cash flow (free cash flow - capex) is expected to be strongly positive.
Their projected capex for all of 2019 is $2-2.5B, with $280M in capex in Q1, leaving $1.7B-$2.2B in capex for Q2-Q4.
So they are forecasting $1.7B-$2.2B in positive operating cash flow for the rest of the year, or about $600M-$700M on average per quarter.
EVNow
Well-Known Member
Not sure how much of that capex they will actually cover from internal cash generation and how much from debt they are going to get from China banks.
