Near-future quarterly financial projections

[Doggydogworld]

As I commented on in the main thread, my comment above was bogus, I misunderstood the tax exemption: it's a 10% consumer tax exemption, not a VAT exemption which was already at 0%.

I'm pretty sure VAT is 13% for EVs in China. I've read articles that confuse the 10% vehicle purchase tax exemption with VAT, but I've not found a reliable source that says EV VAT is 0%. None of the VAT category and exemption lists I've seen mention EVs.

 

[Doggydogworld]

ps : My non-lease auto margin assumption is 22% (Q3 21.8%). A 1 p.p. change here causes $60M change in profit.

I see 5.95b Auto Sales Rev and 4.54b Cost of Auto Sales. That's 23.8% margin, right?

 

[ReflexFunds]

I'm pretty sure VAT is 13% for EVs in China. I've read articles that confuse the 10% vehicle purchase tax exemption with VAT, but I've not found a reliable source that says EV VAT is 0%. None of the VAT category and exemption lists I've seen mention EVs.

VAT is 13% and is included in Tesla's list price. Purchase tax was never included in Tesla's list price - it was 10% now it is 0%. Delivery fee also appears to be included in Tesla's list price in China and is not broken out separately. National EV incentive is received by the company and not the customer in China, so list price is reduced to reflect the EV incentive Tesla gets. I think regional level EV subsidies are received by the customer and not reflected in any of Tesla's pricing.

 

[EVNow]

I see 5.95b Auto Sales Rev and 4.54b Cost of Auto Sales. That's 23.8% margin, right?

Without reg. credits it is 22%. I've changed to account for credits separately. In my spread sheet its the row 14.

 

[EVNow]

Without reg. credits it is 22%. I've changed to account for credits separately. In my spread sheet its the row 14.

@Doggydogworld - Oh well, while the above is correct - but that is not how I had calculated the margin for Q3 and before. I corrected that now - So, I've to reduce the estimated margins for Q4 and 2020. Q4 profit goes to 250M (GAAP 1.39 basic).

 

[kalefranz]

I'm an engineer, not a finance person, but I've very much enjoyed following along here to learn. In a video Gali just posted, he's projecting a Q1 loss, whereas several models here are projecting Q1 to be profitable.

see

at at 9:47

Especially significant of course because of impact on S&P500 inclusion. Just curious if anybody has thoughts or comments about divergence of Gali's estimates vs the consensus here?

 

[The Accountant]

I'm an engineer, not a finance person, but I've very much enjoyed following along here to learn. In a video Gali just posted, he's projecting a Q1 loss, whereas several models here are projecting Q1 to be profitable.

see

at at 9:47

Especially significant of course because of impact on S&P500 inclusion. Just curious if anybody has thoughts or comments about divergence of Gali's estimates vs the consensus here?

View attachment 497490

He is conservative assuming 90,500 units delivered in Q1 (80,000 M3, 10,000 S+X, 500 Y).
However, even with 90,500 delivered, I still estimate a profit of 40m to 60m depending on margins achieved.
Also he seem to not factor in any revenue from FSD which may come in Q1 and could bring another $150m to $200m in profit.

Overall, I believe he wants to keep expectations down.
I think a Q1 profit for Tesla is better than 50/50

 

[EVNow]

I'm an engineer, not a finance person, but I've very much enjoyed following along here to learn. In a video Gali just posted, he's projecting a Q1 loss, whereas several models here are projecting Q1 to be profitable.

see

at at 9:47

Especially significant of course because of impact on S&P500 inclusion. Just curious if anybody has thoughts or comments about divergence of Gali's estimates vs the consensus here?

View attachment 497490

He is actually talking about Operating Income, different from both GAAP and non-GAAP profit.

In anycase, there is a lot of uncertainty about Q1. We don't know the deliveries or margin or any extra FSD income etc. I expect a wide range of forecasts on Q1.

 

[dc_h]

For the quarter deliveries of SX are up 11% and 3 are up 16%. Production of SX was about even and 3 was up 11%. Combined margins should improve, if cost of goods are steady, by about 10% if accounting only focuses on production and higher if accounting focuses on deliveries. That would add 100 to 150 million in profit and free cash flow. The inventory draw seems to be higher then Q3 at about 7000 cars, or about 330 million in additional free cash flow. Reg credits were 134 million, which is on the low to medium trendline as well, but is a wildcard. Combining these factors and all else equal, why wouldn't operating income be at least 100 million higher from 261 million in Q3 and net income up as well from 143 million. I forgot to include another 80 million or so in the 2000 performance upgrade.
Is the expectation for net income here to be about 300 to 350 million? Is it net income or operating income that is used for S&P or EBITDA, which should be over 1 billion for Q4?

 

[The Accountant]

For the quarter deliveries of SX are up 11% and 3 are up 16%. Production of SX was about even and 3 was up 11%. Combined margins should improve, if cost of goods are steady, by about 10% if accounting only focuses on production and higher if accounting focuses on deliveries. That would add 100 to 150 million in profit and free cash flow. The inventory draw seems to be higher then Q3 at about 7000 cars, or about 330 million in additional free cash flow. Reg credits were 134 million, which is on the low to medium trendline as well, but is a wildcard. Combining these factors and all else equal, why wouldn't operating income be at least 100 million higher from 261 million in Q3 and net income up as well from 143 million. I forgot to include another 80 million or so in the 2000 performance upgrade.
Is the expectation for net income here to be about 300 to 350 million? Is it net income or operating income that is used for S&P or EBITDA, which should be over 1 billion for Q4?

Your math looks right to me.
Since there a so many variables as you identified (margins, reg credits, etc), I think the low end is $200m NI and the high end $450m.
Net Income (GAAP) is what is used for S&P inclusion.

 

[The Accountant]

Your math looks right to me.
Since there a so many variables as you identified (margins, reg credits, etc), I think the low end is $200m NI and the high end $450m.
Net Income (GAAP) is what is used for S&P inclusion.

Oh - and one other thing.....Free Cash Flow can easily come in at greater than $1B (helped by the decrease in inventories)
Does anyone know if there are any debt payments in Q4?
Would love to know if the Cash balance will rise again.

 

[dc_h]

Oh - and one other thing.....Free Cash Flow can easily come in at greater than $1B (helped by the decrease in inventories)
Does anyone know if there are any debt payments in Q4?
Would love to know if the Cash balance will rise again.

No debt pay in Q4, was in Q3. Over 6 billion in bank would be awesome. Finding GF3 while cash is up 2 billion, implies semi roadster and all else is a Human Resources challenge more then technical or financial problem. If the China development center starts as fast as Shanghai plant, they’ll have a Corolla class Model 2 and CRV class CUV out in 2022 and puts Tesla on track for 5 million annual sales before 2025.

 

[luvb2b]

i've been off the forum for a while but still have my modeling for the company. i attached an update below. street estimates still look too low for the december quarter. there's an upside surprise catalyst in that i have not modeled additional credits from the fiat/chrysler deal. i would expect some of that deferred revenue to start flowing through this quarter. once we have some clarity i would be able to think more intelligently about the future periods. my guess is around $100m/quarter, so that would be around another 50c in gaap eps vs what i have shown.

i also haven't added the impact of solarcity installations/revenue increasing profitably. not sure that could happen this quarter. with the hiring the opex may go up there.

i am positioning for an s&p 500 index addition in 2020. i think any good active large cap manager would be aware of this, and it sets up a very natural trade for them in the stock. most active large cap managers are benchmarked to the s&p - and here's the easy outperformance trade based on the s&p index addition: underweight apple, and take tesla to a weight above what it would be if included in the index. on the day tesla is added to the s&p, sell the extra tesla and renormalize your apple weight (or whatever other stocks you underweighted). i think that's part of the reason we have this nonstop lift, you're seeing a huge amount of active managers almost being forced to buy. when it's added to the index, the index trackers will be forced to buy.

…

…

s deliveries

x deliveries

s+x deliveries

3 deliveries

3 production

lease 3s % veh

lease s/x % veh

avg price s+x (calc'd)

avg price model 3 (set)

non-zev credits per delivery

zev credits

revenue

auto sales ex 3

auto sales mod 3

auto leasing

zev+nonzev credits

1 time revenue

total auto

energy storage

solarcity

grohmann

services/other

total revenue

cost of revenue

auto sales ex 3

auto sales mod 3

auto leasing

1 time cogs

total auto

energy storage

solarcity

grohmann

services & other

total cost of rev

gross profit

auto ex 3 ex credits gm

auto gaap gm

auto lease gm

auto gaap ex 3 gm

model 3 gm ex credits

auto-credits incl 3 gm

storage gm

scty gm

maxwell/grohmann

services gm

opex

tesla r&d

tesla sg&a

1 time costs

solarcity r&d

solarcity sg&a

total opex

op income

interest inc

interest exp

scty interest

other income exp

1time scty gain

pretax income

income tax

net income

non-cont int.

net inc to common

basic shares

diluted shares

diluted gaap eps

gaap net income

+ stock based comp

+ one time scty

non-gaap net income

non-gaap diluted eps

[TD2] luv est [/TD2][TD2] tsla [/TD2][TD2] tsla [/TD2][TD2] tsla [/TD2] [TD2] Dec-19 [/TD2][TD2] Sep-19 [/TD2][TD2] Jun-19 [/TD2][TD2] Mar-19 [/TD2] [TD2]10,000[/TD2][TD2]8,741[/TD2][TD2]8,787[/TD2][TD2]6,000[/TD2] [TD2]9,450[/TD2][TD2]8,742[/TD2][TD2]8,935[/TD2][TD2]6,091[/TD2] [TD2] 19,450 [/TD2][TD2] 17,483 [/TD2][TD2] 17,722 [/TD2][TD2] 12,091 [/TD2] [TD2] 92,550 [/TD2][TD2] 79,703 [/TD2][TD2] 77,634 [/TD2][TD2] 50,900 [/TD2] [TD2] 87,000 [/TD2][TD2] 79,837 [/TD2][TD2] 72,531 [/TD2][TD2] 62,950 [/TD2] [TD2] 0.07 [/TD2][TD2] 0.08 [/TD2][TD2] 0.06 [/TD2][TD2] - [/TD2] [TD2] 0.14 [/TD2][TD2] 0.15 [/TD2][TD2] 0.10 [/TD2][TD2] 0.11 [/TD2] [TD2] 95.00 [/TD2][TD2] 95.18 [/TD2][TD2] 97.21 [/TD2][TD2] 113.65 [/TD2] [TD2] 50.00 [/TD2][TD2] 50.00 [/TD2][TD2] 50.00 [/TD2][TD2] 54.00 [/TD2] [TD2] 1.22 [/TD2][TD2] 1.38 [/TD2][TD2] 1.17 [/TD2][TD2] 3.18 [/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]15,412[/TD2] [TD2]1,589,065[/TD2][TD2]1,417,644[/TD2][TD2]1,545,857[/TD2][TD2]1,219,184[/TD2] [TD2]4,303,575[/TD2][TD2]3,550,356[/TD2][TD2]3,575,051[/TD2][TD2]2,574,076[/TD2] [TD2]240,100[/TD2][TD2]221,000[/TD2][TD2]208,362[/TD2][TD2]215,120[/TD2] [TD2]137,000[/TD2][TD2]134,000[/TD2][TD2]111,219[/TD2][TD2]215,981[/TD2] [TD2]20,000[/TD2][TD2]30,000[/TD2][TD2]-64,100[/TD2][TD2]-500,500[/TD2] [TD2] 6,289,740 [/TD2][TD2] 5,353,000 [/TD2][TD2] 5,376,389 [/TD2][TD2] 3,723,861 [/TD2] [TD2]280,250[/TD2][TD2]281,430[/TD2][TD2]244,850[/TD2][TD2]129,094[/TD2] [TD2]101,844[/TD2][TD2]120,570[/TD2][TD2]123,358[/TD2][TD2]195,567[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2] [TD2]575,000[/TD2][TD2]548,000[/TD2][TD2]605,079[/TD2][TD2]492,942[/TD2] [TD2] 7,246,834 [/TD2][TD2] 6,303,000 [/TD2][TD2] 6,349,676 [/TD2][TD2] 4,541,464 [/TD2] [TD2]1,223,580[/TD2][TD2]1,102,708[/TD2][TD2]1,264,570[/TD2][TD2]1,051,304[/TD2] [TD2]3,442,860[/TD2][TD2]2,911,292[/TD2][TD2]3,038,793[/TD2][TD2]2,213,705[/TD2] [TD2]127,253[/TD2][TD2]117,000[/TD2][TD2]106,322[/TD2][TD2]117,092[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]-49,600[/TD2][TD2]-408,800[/TD2] [TD2] 4,793,693 [/TD2][TD2] 4,131,000 [/TD2][TD2] 4,360,085 [/TD2][TD2] 2,973,301 [/TD2] [TD2]221,398[/TD2][TD2]215,133[/TD2][TD2]224,369[/TD2][TD2]159,456[/TD2] [TD2]83,512[/TD2][TD2]98,867[/TD2][TD2]101,154[/TD2][TD2]157,431[/TD2] [TD2]11,000[/TD2][TD2]11,000[/TD2][TD2]11,000[/TD2][TD2]11,000[/TD2] [TD2]678,500[/TD2][TD2]656,000[/TD2][TD2]732,022[/TD2][TD2]674,533[/TD2] [TD2] 5,788,103 [/TD2][TD2] 5,112,000 [/TD2][TD2] 5,428,630 [/TD2][TD2] 3,975,721 [/TD2] [TD2] 1,458,731 [/TD2][TD2] 1,191,000 [/TD2][TD2] 921,046 [/TD2][TD2] 565,743 [/TD2] [TD2]23.0%[/TD2][TD2]22.2%[/TD2][TD2]18.2%[/TD2][TD2]13.8%[/TD2] [TD2]23.8%[/TD2][TD2]22.8%[/TD2][TD2]18.9%[/TD2][TD2]20.2%[/TD2] [TD2]47.0%[/TD2][TD2]47.1%[/TD2][TD2]49.0%[/TD2][TD2]45.6%[/TD2] [TD2]32.0%[/TD2][TD2]32.3%[/TD2][TD2]26.6%[/TD2][TD2]33.9%[/TD2] [TD2]20.0%[/TD2][TD2]18.0%[/TD2][TD2]15.0%[/TD2][TD2]14.0%[/TD2] [TD2]21.8%[/TD2][TD2]20.4%[/TD2][TD2]17.3%[/TD2][TD2]15.6%[/TD2] [TD2]21.0%[/TD2][TD2]23.6%[/TD2][TD2]8.4%[/TD2][TD2]-23.5%[/TD2] [TD2]18.0%[/TD2][TD2]18.0%[/TD2][TD2]18.0%[/TD2][TD2]19.5%[/TD2] [TD2]-100.0%[/TD2][TD2]-100.0%[/TD2][TD2]-100.0%[/TD2][TD2]-100.0%[/TD2] [TD2]-18.0%[/TD2][TD2]-19.7%[/TD2][TD2]-21.0%[/TD2][TD2]-36.8%[/TD2] [TD2]315,000[/TD2][TD2]304,000[/TD2][TD2]293,898[/TD2][TD2]295,174[/TD2] [TD2]525,000[/TD2][TD2]506,000[/TD2][TD2]557,261[/TD2][TD2]573,929[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]117,345[/TD2][TD2]43,471[/TD2] [TD2]30,000[/TD2][TD2]30,000[/TD2][TD2]30,000[/TD2][TD2]45,000[/TD2] [TD2]90,000[/TD2][TD2]90,000[/TD2][TD2]90,000[/TD2][TD2]130,000[/TD2] [TD2] 960,000 [/TD2][TD2] 930,000 [/TD2][TD2] 1,088,504 [/TD2][TD2] 1,087,574 [/TD2] [TD2] 498,731 [/TD2][TD2] 261,000 [/TD2][TD2] -167,458 [/TD2][TD2] -521,831 [/TD2] [TD2]15,000[/TD2][TD2]15,000[/TD2][TD2]10,362[/TD2][TD2]8,762[/TD2] [TD2]-132,000[/TD2][TD2]-132,000[/TD2][TD2]-118,979[/TD2][TD2]-104,453[/TD2] [TD2]-53,000[/TD2][TD2]-53,000[/TD2][TD2]-53,000[/TD2][TD2]-53,000[/TD2] [TD2]0[/TD2][TD2]85,000[/TD2][TD2]-40,756[/TD2][TD2]25,750[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2] [TD2] 328,731 [/TD2][TD2] 176,000 [/TD2][TD2] -369,831 [/TD2][TD2] -644,772 [/TD2] [TD2]26,000[/TD2][TD2]26,000[/TD2][TD2]19,431[/TD2][TD2]22,873[/TD2] [TD2] 302,731 [/TD2][TD2] 150,000 [/TD2][TD2] -389,262 [/TD2][TD2] -667,645 [/TD2] [TD2]7,000[/TD2][TD2]7,000[/TD2][TD2]19,072[/TD2][TD2]34,490[/TD2] [TD2] 295,731 [/TD2][TD2] 143,000 [/TD2][TD2] -408,334 [/TD2][TD2] -702,135 [/TD2] [TD2]181,500[/TD2][TD2]179,000[/TD2][TD2]176,654[/TD2][TD2]172,989[/TD2] [TD2]190,000[/TD2][TD2]184,000[/TD2][TD2]176,654[/TD2][TD2]172,989[/TD2] [TD2] 1.56 [/TD2][TD2] 0.78 [/TD2][TD2] -2.31 [/TD2][TD2] -4.06 [/TD2] [TD2]295,731[/TD2][TD2]143,000[/TD2][TD2]-408,334[/TD2][TD2]-702,135[/TD2] [TD2]200,000[/TD2][TD2]199,000[/TD2][TD2]209,863[/TD2][TD2]208,378[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2] [TD2]495,731[/TD2][TD2]342,000[/TD2][TD2]-198,471[/TD2][TD2]-493,757[/TD2] [TD2] 2.61 [/TD2][TD2] 1.86 [/TD2][TD2] -1.12 [/TD2][TD2] -2.85 [/TD2]

 

[Doggydogworld]

No debt pay in Q4, was in Q3.

November is in Q4. That's when they repaid the 566m SCTY bond.

Debt repayment has no effect on FCF, of course.

For the quarter deliveries of SX are up 11% and 3 are up 16%. Production of SX was about even....

S/X production was up 10% at 17,933 in Q4 vs. 16,318 in Q3.

 

[The Accountant]

November is in Q4. That's when they repaid the 566m SCTY bond.

Debt repayment has no effect on FCF, of course.

S/X production was up 10% at 17,933 in Q4 vs. 16,318 in Q3.

If they generate about $1B in FCF, paying off the debt of $566M will still leave them with a nice increase in their Cash balance.
Can you imagine that? Build GF3...pay off debt.....increase cash....wow!! the Shorts will scream Frawwwd

 

[generalenthu]

He is actually talking about Operating Income, different from both GAAP and non-GAAP profit.

In anycase, there is a lot of uncertainty about Q1. We don't know the deliveries or margin or any extra FSD income etc. I expect a wide range of forecasts on Q1.

I think the FCA emissions pool payments would be counted on a per EU car delivered basis within the gross margin for Q1. That should comfortably get them to a positive GAAP EPS territory.

I am not sure if that is included in Gali's model or even in any of the models here. I think using 30K EU deliveries in Q1, the bounty from FCA should be ~240 Million. See @Prunesquallor do the math here.

Tesla, TSLA & the Investment World: the 2019-2020 Investors' Roundtable

I was half expecting Tesla to drop prices slightly, but am happy to see them doing nothing. That said, expect to see an inventory build in Europe as these are more profitable sales for Tesla.

Remember that Norway deliveries do not count for EU totals, but UK will, pending Brexit.

 

[Fact Checking]

i am positioning for an s&p 500 index addition in 2020. i think any good active large cap manager would be aware of this, and it sets up a very natural trade for them in the stock. most active large cap managers are benchmarked to the s&p - and here's the easy outperformance trade based on the s&p index addition: underweight apple, and take tesla to a weight above what it would be if included in the index. on the day tesla is added to the s&p, sell the extra tesla and renormalize your apple weight (or whatever other stocks you underweighted). i think that's part of the reason we have this nonstop lift, you're seeing a huge amount of active managers almost being forced to buy. when it's added to the index, the index trackers will be forced to buy.

Very interesting, and this largely rhymes with this recent analysis by @ReflexFunds.

He also pointed out the fact that because Tesla isn't in the S&P 400 either, there's an even larger 'gradient' between fund ownership of TSLA before and after the inclusion event.

This brings me to the following topic - the magnitude of the move. There was one recent S&P 500 inclusion of a large cap company, the 2018 inclusion of Twitter (TWTR).

Here are the events as I understand them:

• 2018, April 25, Twitter posts Q1 profits of $61m, narrowly meeting the 12-months profitability condition of S&P 500 inclusion, the sum of the last four quarters is $14m.
  
• 2018, June 4, after trading closes, the S&P 500 index inclusion announcement by the S&P index committee:
  • Netflix Set to Join S&P 100; Twitter to Join S&P 500; REGENXBIO to Join S&P SmallCap 600 - Jun 4, 2018
• 2018, June 5, in early trading TWTR breaks out already on the news:
  • Twitter Stock Breaks Out on S&P 500 Inclusion

Here's the daily chart history of the ~three months of TWTR price changes from April ~20 to July:

Here's the macro environment in that timeframe, Nasdaq futures - it was mostly supportive of any TWTR price moves:

Note the various pricing anomalies:

• On the day of the Q1 announcement there was no meaningful price reaction to the meeting of the S&P 500 criteria: in fact TWTR dropped and closed at $29. Did the market not realize that this happened? Was there some doubt about Twitter's inclusion?
• Almost a full month passed and TWTR traded on average volume in a tight 10% band - despite Nasdaq rises being supportive of bigger price moves.
  
• June 1: uptick in trading volume and breakout from previous range.
• June 4, on the day of the S&P committee announcement, TWTR closes on a nice up-move $37.
• June 5, all hell breaks lose and the big rally continues: stock closes on $39.
• June 15, on the 9th trading day after the S&P 500 inclusion, TWTR reaches the top and ATH of $47.
• In the weeks following the S&P 500 inclusion TWTR daily trading volume doubles compared to the pre-inclusion period, despite markets entering the more quiet, lower volume summer lull.

The over +60% rise of TWTR from $29 to $47 was meteoric - and I'd say in large part related to the S&P 500 inclusion event. What's surprising to me is how little this was arbitraged apparently.

Also note that the obvious arbitrage trade of selling TWTR on the day of the index inclusion didn't result in a drop of the price, the rally continued another 9 days with another +20% up-move.

Also, Twitter had a market cap of $22b - Tesla is going to have 4x the market cap or more on inclusion ...

(Also, I couldn't find any information on whether Twitter was included in the larger S&P 400 index already in June 2019.)

 

[Bobfitz1]

In anycase, there is a lot of uncertainty about Q1. We don't know the deliveries or margin or any extra FSD income etc. I expect a wide range of forecasts on Q1.

How much FSD income Tesla might claim in Q1 is uncertain, but do you believe it is likely there will be some amount claimed if needed for a GAPP profit this quarter? My recollection is that when an additional portion of reserved FSD income is claimed as real income is largely up to Tesla, as long as there is a reasonable explanation they can make to justify it. I haven't followed the latest postings on FSD "Feature Complete" milestone closely, but I am under the impression Tesla is getting quite close to making it widely enough available to justify claiming FSD revenue. At some point doesn't this likelihood becomes sufficient to warrant including some amount in these Q1 models?
To be clear I'm not saying it has become sufficient and should. I suspect it may have but don't honestly know.

 

[Thekiwi]

I think it’s far too early to be saying Q1 will report a loss.

Following are possible positive factors for Q1:

- There has been no price drop in the USA yet despite the end of the federal tax credit, which seems like a bullish sign to me that they are confident of US demand at present, and it should be noted that state level incentives (California etc) were often actually already a bigger portion of incentive and remain in place.

- MIC model 3 is now being delivered, and although I haven’t collated estimates for quarterly MIC deliveries - seems like 7,500-15,000 units is a range of expectations? (With S/X/P&LR3 on top of that)

- Although max incentive on NL has been lowered, Europe (along with Rest of world) is still awash with large incentives.

- The FCA deal brings in a large, as yet unknown, amount of profit to every car tesla sells in Europe in Q1 onwards, providing room for price cuts as a demand lever if necessary OR very strong margins if demand remains high.

- Q1 sees the further ramp up of solar glass installations, with California new “every new house built must have solar” law starting being a perfect time for product to ramp up. With an ASP similar to a model 3, and margins improving, the impact on earnings has the potential to be significant to achieving profitability, even if quarterly installs are only in the low thousands.

- unknown FSD contribution depending on feature release.

Q4 earnings report and conference call will of course be where we learn much more about Q1 profitability prospects, but at this stage I think it’s more likely to be positive than negative.

 

[EVNow]

How much FSD income Tesla might claim in Q1 is uncertain, but do you believe it is likely there will be some amount claimed if needed for a GAPP profit this quarter? My recollection is that when an additional portion of reserved FSD income is claimed as real income is largely up to Tesla, as long as there is a reasonable explanation they can make to justify it. I haven't followed the latest postings on FSD "Feature Complete" milestone closely, but I am under the impression Tesla is getting quite close to making it widely enough available to justify claiming FSD revenue. At some point doesn't this likelihood becomes sufficient to warrant including some amount in these Q1 models?
To be clear I'm not saying it has become sufficient and should. I suspect it may have but don't honestly know.

I don't think they can recognize deferred revenue until the functionality is delivered. For that to happen Tesla has to release City NOA and upgrade older vehicles to HW3.

Tesla may miss City NOA in Q1 - since it is not available even to EAP. Infact there is a slight chance of City NOA becoming another Enh Summon and getting delayed by several quarters. I hope not.

I've included $200M of profit in Q1 and $100M in Q2. Without this the profit in Q1 reduces to ~ 100M and if ASP or margin goes down they could end up in the red.