I definitely read about people in Norway taking delivery of Ravens on TMC in Q2, but it was only in the last week or two of June and so is likely only a few hundred at most, like you said.
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Near-future quarterly financial projections
- Thread starter luvb2b
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- elon is an ass
anthonyj
Stonks
Don't expect them to be sane.
After all, the correct move for any oil and gas company, since 2008, has been to shut down the exploration & development department, fire all the geologists, and simply pump & sell the oil from the old wells. Not one of the US-based oil and gas companies has done it, though I believe one of them actually started making some moves in that direction. Some of the European companies have sold off their oil and gas interests to suckers and put their money in wind turbines, or whatever, but the suckers they sold them to are *still* wasting money on exploration & development.
Trump can't affect it; it's a state-level law. That said, there's a glut of ZEV credits on the market, so they're not worth much.
EVNow
Well-Known Member
95k cars + FCA credit = non-gaap break-even.
For S&P you need $251M gaap profit. In other words, you need to find $500M ZEV credits.
EVNow
Well-Known Member
Norway shows where CA could have been if they were serious. By giving ZEV credits too easily, they made it easy for ICE companies to keep selling gas cars. In 2008 they should have set a 20% EV mandate by 2020.
I think California has quite stiff requirements coming in the next five years:
The credit requirement is 4.5 percent in 2018, which will require about 2.5 percent of sales to be ZEVs. The credit requirement rises to 22 percent in 2025, which will require about 8 percent of sales to be ZEVs.
There are also restrictions on the amount of credits that can come from ‘transitional’ ZEVs that still have an engine. In 2018, plug-in hybrid vehicles (PHEVs) can only account for 55 percent of credits, meaning at least 45 percent must originate from battery electric vehicles (BEVs) or hydrogen fuel cell vehicles (FCEVs).
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The regulations apply to "model years" so 2018 refers to 2018 models sold by auto manufacturers...
EVNow
Well-Known Member
This is what I mean by they are not serious.
If the requirement is 22% in 2025, then 22% should be EVs - not 8%. CA regulators are still beholden to ICE car lobby.
tmoz
S85D, Y LR, ex Prius PiP
I would say that EVs will replace ICE cars with or without government "help". And coal will go away with or without government aid or disincentives, because solar, wind, and natural gas are all cheaper now. It's all economics. But I will agree that the transition could go faster with government incentives, but getting government to be ahead of the curve is not what we do best here.
Doggydogworld
Active Member
CARB operates under an exemption granted by the EPA. Trump's administration has threatened to revoke that exemption.
That's a vehicle line that ran ~10% of capacity for an entire quarter. This is one portion of a component line that apparently ramped up without incident.
They probably should charge against capex until the line begins producing packs for customer cars. I don't know if they actually do. Neither capex nor R&D directly affect gross margin, though, so it doesn't matter.
After equipment starts making stuff for customer cars they could charge in-plant engineering time to COGS, but Musk has said they don't.
Scrappage was a big deal during the Model 3 ramp, but I don't see it here unless the machine was destroying millions of cells per week or something. Overall, I just don't see a big COGS impact. I also think Tesla would have mentioned it in the Q1 letter to help explain lower margins.
He can't.
California's separate CAFE standards and ZEV regulations are not an "exemption"; they're a deal made during the passage of the Clean Air Act due to the distinctive local pollution concerns in particular states, specifically due to California's weather conditions which accumulate pollution over Los Angeles. Attempting to change it raises both statutory and constitutional federalism concerns; the states have the plenary authority to legislate regarding local conditions, and the federal government does not have the power to abrogate state laws which address specific local conditions. California has stated outright that they're going to continue enforcing the law no matter what Trump does, and Trump has precisely zero power to stop California, while California has absolute power to interdict cars and prevent them from being sold.
California has in fact threatened to ban the sale of gasoline cars entirely, if that's what they have to do; it's clear they have the indisputable power to do so.
Trump could create a constitutional crisis which could end with reduced powers for the federal government vs. the states. He can't repeal the ZEV credit regulations.
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Stars aligned
Member
Reaching 251mn GAAP for inclusion is a possibility.
95.2k record deliveries, good margins on Model 3 and Raven
Inventory write down on pre-Raven in Q1
ZEV credits not only from FCA but also GM
Maxwell
Lower stock based compensation from depressed SP
other GAAP opportunities
I think around -$200m GAAP seems most likely currently. It seems unlikely but not impossible for Tesla to stretch to +$251m if they have a big beat on gross margin (this would most likely have to be driven by battery cell/pack prices/costs) while reporting strong GHG and ZEV credit revenue, limited exceptionals and good control of SG&A and R&D.
I wouldn't be surprised if the new FCA & GM contracts for GHG credits in US lead to continued strong GHG reveneus. Tesla may be able to book some FCA credits in Europe too, but only a minor amount I think as they will have to be booked as the cars are registered and upfront payments will be deferred revenue until then - most of FCA's deal in Europe relates to 2020.
I think Tesla could get some minor benefit from the $64m q1 inventory write downs if they wrote down un-optioned older cars to zero predicted gross margin but then sold them with profitable options - but these will still be below average margin car sales.
I'm mostly looking at ZEV as the possible driver of a large beat. Tesla has likely saved up significant ZEV credits the past 12 months. The ZEV market has obviously been weighed down by Trump's EPA's attempt to end California's ZEV mandate - however I think it should be clear to most auto companies by now that ending ZEV is not going to be easy. It is worth ICE OEMs stockpiling ZEVs for the event that the democrats win the next election in any case. The ZEV regulation became much less flexible this year with California car sales no longer automatically generating ZEV credits in every ZEV state (but they can still be transferred between states) - so there should be increased demand for ZEV theoretically.
However, if the ZEV market does still have demand at acceptable prices this year, it would really have made more sense for Tesla to sell in Q1 and limit the loss ahead of the capital raise.
I don't think Tesla booked any credit revenue in Europe in Q1. They recorded $140m deferred revenue for non-ZEV credits but booked little or any of this to revenue as far as I can tell. FCA said on their call that EU compliance costs are now expected at around €120m this year - I'm pretty sure this relates to the Tesla upfront payment which was booked as deferred revenue. Maybe this will be split roughly evenly over the rest of 2019, so $47m per Q, or it may be weighted to late in the year. A much larger payment/revenue from FCA for the EU should be booked in 2020 - it looks like around $800m based on my extrapolation from the FCA call.
I think the reason for the dip in GHG credits per US car in Q4 and surge in Q1 ($2.1k per US car in 3Q18, $1.3k in 4Q18 and $5.6k in 1Q19), was because Tesla cannot sell GHG credits until it has registered the sold car. There were widely documented 1-2 month delays in US Tesla registrations in late 2018 - this will have put credit revenue slightly out of sink with car sales. If we estimate c.30k 4Q US car sales were registered in 1Q19, and then nearly all 1Q19 car sales were registered immediately (less pressure on admin staff with lower sales), then 1Q19 US GHG credits per car may have been more like $2.8k (likely increased from 2018 due to new deals with FCA & GM).
China NEV credits are unlikely to be much more than $100 per car currently - the NEV subsidies have been a much larger forcing function than NEV mandate so far and the market is running ahead of its NEV credit targets. It looks like China is updating its NEV credit system soon though and more ambitious targets could lead to significantly higher price per credit in future.
It will be interesting to see the non-ZEV line in Q2, but i'm currently expecting c.$50m in Europe (c.$2.5k per car) and $2.5-3k per car in the US (and assuming no significant registration delays this time).
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Stars aligned
Member
I found this snippet in the Q1 transcript from Elon: "So if we have to fully optimize for profitability in Q2, I think we can do it, but then we would be unable to unwind this crazy wave of deliveries and it also helps our working capital within the quarter to not have the wave."
So, has the wave really been unwound? Not so much if I look at European realtime deliveries and Elon's mail to go out for a record delivery quarter.
GAAP neutral + 100mn ZEV + 90mn from Maxwell yearly revenues + some help from reserves or whatever... I still give the 251mn a >35% chance. With a little luck, and within the GAAP rules, I think it is an act of will.
But certainly I wouldn't bet my house on it.
So, has the wave really been unwound? Not so much if I look at European realtime deliveries and Elon's mail to go out for a record delivery quarter.
GAAP neutral + 100mn ZEV + 90mn from Maxwell yearly revenues + some help from reserves or whatever... I still give the 251mn a >35% chance. With a little luck, and within the GAAP rules, I think it is an act of will.
But certainly I wouldn't bet my house on it.
EVNow
Well-Known Member
When EM talks about "profitability", he doesn't talk about gaap. Like all wall st analysts (and estimates etc) it is non-gaap.
Sudre
Active Member
I think if (or should I say when) Trump gets re-elected and he installs another Supreme Court judge he will have the power to do as he pleases. The Auto industry and the EPA can move this issue to the highest court and Trumps three judges will side with him on everything. It wouldn't be hard to get a few other judges to also agree. AND then we may end up with your constitutional crisis.
Luckily I think Tesla has made it far enough to make it even without credits or government assistance. It will just slow them down.
EVNow
Well-Known Member
Showroom/loaner/service (aka Ranger) vehicles are only depreciated if they have been reclassified from Finished Goods Inventory to Property, Plant & Equipment.
Doggydogworld
Active Member
I don't buy this. You assume zero registrations spilled over from Q3 into Q4. They had crazy tent sales at the end of Q3 and their logistics/paperwork was in dire trouble due to never before registering cars at that rate. They had the same tent sales at the end of Q4, but it was their second time doing it so they presumably improved. You again assume zero spillover at the end of Q1, when they "delivered half the cars in the final 10 days". You further assume a ~50% spike in GHG value in 2019. This is too many assumptions without evidence.
On the other hand, we know for a fact Tesla entered into a deal with FCA in Q1 that for the first time gives Tesla emissions revenue for European sales . This deal is a much more logical explanation for the spike in non-ZEV credit revenue.
