That's 3rd party leasing. For Tesla that's just a regular sale. Although they may provide from resale value guarantees. Not sure about that on the M3.
-
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
-
- Tags
- elon is an ass
That's 3rd party leasing. For Tesla that's just a regular sale. Although they may provide from resale value guarantees. Not sure about that on the M3.
Thank you for your P&L.
I would increase Automotive GM to 22,8% with increased sales for refreshed S/X @ 25% GM and Model 3 @ 21% GM.
Don't forget in Q1 FY19 they took a hit of $92 Mio just on S&X..
Pre-model 3, S&X were already running at 25% GM excl ZEV credits.
Also they already had more than 20% margin on Model 3 (Q4 FY18 & Q1 FY19) and this will have increased again with increased output.
From Q1 FY19 Letter:
Secondly, what we've seen is larger volumes per ship to Europe & China in Q2 FY19 vs Q1 FY19
I can imagine them adding shipment costs in the COGS.
This makes a difference of 155 Mio to the bottom line.
Thirdly, I feel they have a massive number of ZEV credits in hands together with the non-ZEV credits from FCA; this should be a wildcard that could propel them to the 250 Mio profit.
Just to add: I think the Raven's are cheaper to build than pre-Raven cfr powertrain & battery modules from Model 3 design. Also they are looking to get volume back up despite going from 3 shifts to 2 shifts for S&X.
Another edit: they also sold a lot of showroom models in a lot of places.
Last edited:
EVNow
Well-Known Member
This was discussed earlier too. That 92 Mil loss they took was for resale price guarantee - not inventory adjustment.
Shipping efficiency is difficult to quantify. Margins and ASP are under pressure for various (one off) reasons
- Lots of pre-Raven inventory sold in Q2 at big discounts
- Raven orders are still mostly not delivered. Raven cars were delivered only in US starting June. Europe/China has not received any Raven cars. We should see better ASP & Margin in 'Q3.
- Price adjustments in Q1 continue to affect Q2 margins
- Lots of pre-Raven inventory sold in Q2 at big discounts
- Raven orders are still mostly not delivered. Raven cars were delivered only in US starting June. Europe/China has not received any Raven cars. We should see better ASP & Margin in 'Q3.
- Price adjustments in Q1 continue to affect Q2 margins
FCA credits were already accounted for in 20% margin. The volume increase does improve margins - but not by much. Somewhere in this thread there is some calculation on that (I've shown it as 0.4% better margin for Q2).
Show room model sales results in lower ASP & Margin. Good for cash flow, but not so good for profits.
I am sure you guys have considered this, but let's not forget that Autopilot is now a "mandatory option".
For S/X in the past we already had take rates of ~80% I think, and being the hy bundling they also made it 500 dollars cheaper maybe it did not make a huge difference.
However past the early Model 3 customers and all those early top tier Performance deliveries, I wonder I'd the take rate did not decrease. Especially with more price sensitive SR+ customers.
Making it mandatory probably helps GM, especially since AP SW is normally considered almost 100% profit - as the HW is already paid for in every car.
For S/X in the past we already had take rates of ~80% I think, and being the hy bundling they also made it 500 dollars cheaper maybe it did not make a huge difference.
However past the early Model 3 customers and all those early top tier Performance deliveries, I wonder I'd the take rate did not decrease. Especially with more price sensitive SR+ customers.
Making it mandatory probably helps GM, especially since AP SW is normally considered almost 100% profit - as the HW is already paid for in every car.
It seems to me that the most likely issue was Panasonic's new cell lines (around 10gwh) not working after installation in late Q4/Q1. Obviously this led to production constraints on Model 3, but i think most likely also led to higher cell prices than planned (i would expect pricing to be linked to Panasonic's production cost which is heavily impacted by the failed new equipment). I think there is a reasonable chance Tesla also planned to switch S/X to 2170s together with the Raven refresh in Q1, but Panasonic's cell ramp problems delayed the refresh and led to the reduced S/X volumes. Elon also likely underestimated the demand pull forward impact from the credit step down at the start of the year.
I think one major wildcard for Q2 will be just how much was Q1 model 3 gross margin impacted by ramp costs of the new SR+ battery module and pack lines at GF1. These line were likely designed for up to 5k per week and were up and running, depreciated and staffed in Q1, but only produced a very minor number of packs due to the inevitable production ramp s-curve period. Presumably the older inefficient LR pack lines have been shut down now in Q2, leaving just the Grohmann LR and Grohmann V2 SR+ module/pack lines. This should have significant margin benefit in Q2 but it is hard to quantify.
The other major hit to Q1 gross margin was the S/X production cut and subsequent significant negative operating leverage on S/X margin. This likely continued through Q2 but I think there is a good chance we see production ramp back up in Q3 with stage 2 of the refresh and get S/X margins back to a more normal level.
Doggydogworld
Active Member
It's nuts that they don't break opex down by reportable segment, I've never seen that before. Anyway, SCTY SG&A was 672m in 2016, the year Tesla bought them. Two-thirds was sales and marketing, now down to almost zero. The other third was G&A, which continues at a lower level. I estimate total SG&A of 200m per year. Luvb2b has it at 500m, but I just can't see it. O&M for the 2+ GW lease portfolio was only supposed to be about a penny per watt and a lot of that should be COGS.
The 92m was 500.5m revenue reduction and 408.8m COGS reduction. Subtracting items with 18.4% of margin served to increase reported gross margin slightly, not penalize it.
Yes, Model 3 has impacted S/X.
Hard to see credits exceeding Q1's 215m going forward.
S/X is at one shift. They dropped to two shifts 18 months, saying that's all they needed for 100k/year.
At large discounts to original MSRP. That hurts margins.
I can't imagine the contract requires Tesla to pay for Panasonic's failures.
Even if the Grohman miracle machine cost a ridiculous $200 million, depreciating it over 10 years is only 5m/quarter. That doesn't move the gross margin needle.
Yes but still a loss of $92 Mio.
Prices got increased in Q2 vs Q1..
Yes, FCA credits. But almost no ZEV credits - they recognized $15Mio... 3 years ago they had +100Mio from just S&X.... Yes, even taking into account the 'pennies to the dollar' comments, I think they have a boatload of unrecognised ZEV credits (only used $1 Mio in Q4 FY18)
ASP sure, margin not really.
If an item is recognised as showroom, the asset gets depreciated as an expense. If sales discount < current depreciated amount on asset, it creates an increased GM.
S&X were running at 25%+ excl ZEV credits...
Only $15Mio ZEV credits...FCA credits will continue running
Thanks, even increases my believe in higher S&X margins.
Also from their own 10-K:
Literally every part of their COGS has dropped on a per vehicle basis for Model 3. and from Q1 19 Letter:
Regarding the Raven and Q2:
Attachments
Last edited:
How do you think the GF1 cell price formula works? Panasonic's production cost per kwh is going to change dramatically from initial ramp to full capacity efficient production - the price Tesla sets each month is surely going to be linked to this. I would imagine Tesla's price goes down as Panasonic hits new production cost milestones - I guess Panasonic's failed equipment delayed them reaching the next milestone so delayed the price reduction Tesla was anticipating.
This is presumably full battery module and pack manufacturing equipment for weekly production of 4-5k Model 3 SR+ packs per week - maybe c.14GWh. I would expect it to cost a lot more than $200m. Because it was built in-house by Tesla Grohmann and not an external supplier, the capex will have been spent and booked over the past 6-12 months while the machine was being built. The largest costs of a new manufacturing ramp is not depreciation though but instead very high labour costs per part and high scrap rates while they work on getting the line running smoothly and efficiently.
Last edited:
That was at much higher production rates, so will be lower in Q2.
I have to admit that I didn't track post-Raven and pre-Raven price change, so I don't know if there was an increase at that time. I know that making autopilot standard increased the price too. However, Tesla later lower S price by $3k and X by $2k. Furthermore, even if the cars cost more than in Q1, they definitely cost much less than they did before Q1, particularly on the high-end models! So this has a significant impact on margin compared to margins reached in earlier years.
- On 2 or 3 shifts versus 1 shift now (labour decrease by 50%?)
- much much lower tooling costs now ( depreciation based on 325k production for S/X; didn't they get pass this - so this could drop to almost zero?)
- cheaper material now (model 3 powertrain & battery modules, FSD computer, ..)
- much lower reserves for warranty expenses vs 2 FY's ago (esp. on Model X)
- shipping & logistics combined with volume model 3's, ...
Last edited:
While most of those are good points, margins were far worse in Q1 than before, so I don't see recovery to anything like previous levels without higher rate production and perhaps some price increases. Although labour has been reduced at Tesla by removing an S/X shift, we don't know how supplier pricing has been affected - the cost of components is likely to be meaningfully higher due to reduced volume.
Raven did not introduce Model 3 battery modules, just one of the motor designs from the Model 3, along with new suspension and higher-power battery charging (seemingly with new cabling/electronics to the battery pack). Also, although Raven has likely been designed to reduce costs, the Raven ramp likely included a number of weeks with inefficiencies and lower-rate production.
Having said that, one thing in favour of possible higher margins in Q2 is that the production line may now be capable of higher volume than before the Raven refresh, although that assumes they still haven't re-introduced the second shift: S/X production was higher in Q2 than Q1, despite meaningful downtime during Q1 for the Raven ramp, and 2-3 weeks of double-shift production at the start of Q1. That's very impressive if they are still on single-shift for the S/X line, although it may be explained by the re-introduction of double-shift production close to the end of Q2 - that wouldn't help much with Q2 margins (and could even hurt them further if the second shift is inefficient at the beginning), but would at least indicate that Q3 is likely to be good.
But the biggest factor is probably the price drops, which were very large in Q1, particularly in Europe (many tens of thousands on the high-end cars), so recovery to 25% margins in Q2 just doesn't seem likely. Maybe they will be able to compensate for that in Q3 if Raven introduced significant cost savings, and if they are back to higher-rate production.
EVNow
Well-Known Member
They can't depreciate inventory (AFAIK). They can only write off when they value it below COGS (80M in Q1). This is because inventory is not being used for operations. If they want to use inventory for operations (like mobile service), they need to transfer from inventory to assets first - and then, if they sell those cars, it comes under sale of assets rather than auto sales.
The S+X ASP, Margin depend on 2 things.
- How many pre-refresh cars were sold and at what discount
- How many refreshed cars were sold at what ASP
From glancing through S/X threads it looks like refreshed cars were only sold in US, some in May but mostly in June. If this is the case, only about 3K of the 17.7k s+x sold are post-refresh. If we assume half of May US sales were post-refresh, that still leaves it at 4k Raven - 13.7k pre-Raven. May be I should rethink my ASP & Margin for Q2.
ps : Reducing S/X ASP to $95k and non-leasing margin from 19% to 18% makes a difference of about ~$70M in P&L.
Last edited:
Doggydogworld
Active Member
These "captive" contracts are typically flat-rated. The supplier prices the expected ramp period into the flat price. If the supplier screws up the ramp, they eat that cost. Rewarding a supplier with a higher price for underproducing would be really dumb. If this was a pure cost-plus contract as the bears claim, Panasonic's North America operations would not be showing losses.
The Pana contract is in tranches. Each time Tesla wants Pana to add new lines they negotiate a new tranche. I think pricing adjusts for changes in raw materials (or in some cases Tesla buys the raw materials themselves). Beyond that I think pricing is set when they negotiate each new tranche.
I'm sure they had tons of engineers setting it up and babysitting it during the ramp, but Tesla charges that cost to R&D. Actual production labor expense should be very low - the whole point of automation is to avoid labor. Even 1000 production workers for a full quarter is only ~20m. That's 250 workers per shift, during a quarter when the machine was mostly being installed. These numbers just don't move the needle.
Esme Es Mejor
Member
Small point: if the Norway data is correct, Ravens were being delivered during the last 10 days of June— though, even then, the majority of S/X deliveries were still pre-refresh. Extrapolating to all of Europe, it would only add a few hundred Ravens to the quarterly numbers.
July deliveries in Norway still look to be majority pre-refresh.
Doggydogworld
Active Member
They don't depreciate inventory.
We're talking about the effect on Q1 margin, when S/X margin was nowhere near 25%.
ZEV has been pretty dead for a while. Trump's trying to kill it altogether.
FCA will continue to run, IMHO, but probably less than 200m/quarter. And it will be spread over a much higher rate of deliveries.
If volumes ramp back up, sure. We don't know that will happen.
Musk called COGS reductions "a game of pennies". Do the math on fixed cost absorption going from 63k to 72k, it's a few hundred bucks. Meanwhile, ASP is dropping by thousands.
We will see soon enough, but I think its conceivable SR+ pack depreciation, scrap and staff costs could easily together add to c.$50m impact in Q1 or c.200bps 3 margin impact. This 200bps higher underlying model 3 margin could be c.$70m extra profit in Q2 given the higher volume. Production ramp inefficiencies are the primary reason model 3 margin increased from c.-38% in 1Q18 to c.+18% in 4Q18.
I think the set up/repair engineers should all be booked under capex rather than R&D. Are you sure they are all expensed and booked as R&D?
