Near-future quarterly financial projections

[XHabjab]

So you think that the wave (regularly higher deliveries in Europe and the end of each quarter) was caused by production rate changes?…

No. The Wave is a result of differing delivery times between a local sale vs an export. A car made in China but delivered to the customer in Sweden spends about a month on a RORO ship and truck or train. A car made in China on Tuesday can be delivered to a Chinese customer on Wednesday (ha, maybe even Tuesday). A car that is built but not delivered is “inventory”. Tesla previously did not want cars on ships over a quarterly boundary because this would increase their inventory. So the RORO ships were contracted on an “on again off again” schedule, which is expensive and somewhat abusive to the carriers. This is “The Wave”. Unrolling this makes for cheaper and more reliable shipping but causes an increase in inventory over a quarter’s end.

Nothing to do with Production.

Edit: Here is a shot from a Wuwa video of a few thousand cars (“inventory”) waiting to get loaded on a RORO ship:

This is from a Wuwa video found here. This is from a week or so ago, and the cars are believed to be destined for Canada. They are obviously produced in Q2 and will be delivered in Q3.

 

[petit_bateau]

courtesy @Knightshade @Troy

 

[heltok]

These number seem reasonable to me for Q2. I am skeptical about Q3 production numbers going down, we will see. My guess is that by the end of Q3 troy will estimate >466500 produced(given no major force majeure). I don't think 1.8M was Tesla's target, I think it was their guideline, I think their target was 2M. Given the bad macro economical situation, slower than expected ramp of 4680 they had to revise down their internal target closer to their guideline.

Anyway I don't think targets, guidelines, misses and beats actually matter that much, imo what matters is the net present value of future earnings. That's what I care about, not these short term noisy estimates where one ship that is delayed a few days has a major influence on if it's a beat or miss.

 

[petit_bateau]

Anyway I don't think targets, guidelines, misses and beats actually matter that much, imo what matters is the net present value of future earnings. That's what I care about, not these short term noisy estimates where one ship that is delayed a few days has a major influence on if it's a beat or miss.

When I calculate an NPV-dervied shareprice in the manner you describe I get the following

- $187 @ discount rate of 10.7%
- $268 @ discount rate of 5%

Observing the share price action over the last several months (low c. $109, high c. $274) it seems to me that - alongside the natural debate in the stock market regarding the revenue growth trajectory, the margins trajectory, and the resultant earnings trajectory - the bigger debate is really about the appropriate discount rate to apply.

The exogenous factor of the interest rate environment seems to far outweigh endogenous factors related to actually building and selling vehicles etc. Either that or the market is getting very excited about potential non-vehicle value components in the share price in a very irrational way.

 

[heltok]

@petit_bateau : Yeah, imo the current share price can be motivated just by future earnings from automotive.

---

Imo the fact that Tesla keeps lowering the already low prices in Australia/New Zealand is an indication that they intend to run Shanghai at a high rate in Q3-Q4. I expect similar price changes in all markets served by Shanghai.

 

[XHabjab]

No. The Wave is a result of differing delivery times between a local sale vs an export. A car made in China but delivered to the customer in Sweden spends about a month on a RORO ship and truck or train. A car made in China on Tuesday can be delivered to a Chinese customer on Wednesday (ha, maybe even Tuesday). A car that is built but not delivered is “inventory”. Tesla previously did not want cars on ships over a quarterly boundary because this would increase their inventory. So the RORO ships were contracted on an “on again off again” schedule, which is expensive and somewhat abusive to the carriers. This is “The Wave”. Unrolling this makes for cheaper and more reliable shipping but causes an increase in inventory over a quarter’s end.

Nothing to do with Production.

Edit: Here is a shot from a Wuwa video of a few thousand cars (“inventory”) waiting to get loaded on a RORO ship:

View attachment 951757

This is from a Wuwa video found here. This is from a week or so ago, and the cars are believed to be destined for Canada. They are obviously produced in Q2 and will be delivered in Q3.

Part 2 of this story… Apparently VIKING SEA picked up only an estimated 250 or so of these cars (earmarked for Canada). It is underway right now, with an estimated arrival of July 3. You can track it here. There is the possibility of several labour strikes being staged in Canada, and it seems Tesla is limiting the risk accordingly. This means many (all?) of the remaining cars are still on the docks in China, and will be delivered later in Q3. [MSM will likely spin this as a demand story.]

They are all LHD but it is believed that they were built for the Canadian market and likely can’t be sold elsewhere since even a tail light difference will keep them from being sold in another market. Shanghai exports a lot of cars but most are RHD for UK, Ireland, Australia markets and the LHD areas are Canada and Europe. Each of these is quite different. Just think of the charge port.

Edit: a second ship is believed to be lined up for departure from Shanghai with the remaining Tesla stock about July 3, arriving in Vancouver July 18. It will dock shortly and it takes a day or two to load. [this load time is how to estimate how many cars are onboard, and how the “250” number was arrived at with the VIKING SEA.]

In any case, thousands of Tesla cars made in Shanghai in Q2, delivered in Canada in Q3. On the books as “Inventory” over the Q2/Q3 reporting period.

 

[mongo]

Part 2 of this story… Apparently VIKING SEA picked up only an estimated 250 or so of these cars (earmarked for Canada). It is underway right now, with an estimated arrival of July 3. You can track it here. There is the possibility of several labour strikes being staged in Canada, and it seems Tesla is limiting the risk accordingly. This means many (all?) of the remaining cars are still on the docks in China, and will be delivered later in Q3. [MSM will likely spin this as a demand story.]

They are all LHD but it is believed that they were built for the Canadian market and likely can’t be sold elsewhere since even a tail light difference will keep them from being sold in another market. Shanghai exports a lot of cars but most are RHD for UK, Ireland, Australia markets and the LHD areas are Canada and Europe. Each of these is quite different. Just think of the charge port.

Edit: a second ship is believed to be lined up for departure from Shanghai with the remaining Tesla stock about July 3, arriving in Vancouver July 18. It will dock shortly and it takes a day or two to load. [this load time is how to estimate how many cars are onboard, and how the “250” number was arrived at with the VIKING SEA.]

In any case, thousands of Tesla cars made in Shanghai in Q2, delivered in Canada in Q3. On the books as “Inventory” over the Q2/Q3 reporting period.

That theory/ narrative is wrong.
Most of the cars have European style license plate holders. They were never going to Canada.

https://twitter.com/x/status/1670467493222031361

 

[petit_bateau]

How have other folks distributed the 3/Y production for Q2 ? This is my initial stab at a distribution. Note that for now I am assuming 30 Semis were made in the quarter - I've seen some folk saying 60 were made, but others say just a handful.

And this is what the corresponding production ramp rates may now look like. However this is only tentative and I am very interested if others have better insight.

 

[petit_bateau]

Hmmmm........ info sufficient to quantify CN prod per @Dikkie Dik

so based on this I have revised my initial guesstimate to be this

which means this is the revised ramp chart

I wonder if we will get more data so as to allow a better fix on this ?

 

[DarkandStormy]

Hmmmm........ info sufficient to quantify CN prod per @Dikkie Dik

View attachment 953122

View attachment 953124

so based on this I have revised my initial guesstimate to be this

View attachment 953125

which means this is the revised ramp chart

View attachment 953126

I wonder if we will get more data so as to allow a better fix on this ?

Weren't Berlin & Austin supposed to ramp faster than Shanghai because of the lessons learned and all that? And now they're below Fremont?

 

[heltok]

I heard some bulls saying that low numbers from China is bullish because that means Austin/Berlin did better than expected which bodes well for the future. Now with China being high they will probably say that this is bullish as there is more room for Austin and Berlin to grow. We should be careful to not have a model where any outcomes can proves it right.

I think this quarter increases the likelihood of my thesis that Tesla will not be demand constrained in Q3 and Q4, that lowering the prices(which I think they will do) drives demand.

And imo the most important outcome from this "not a price war" is that the competition is so screwed. Tesla are maxing luxury products with best specs at a lower TCO than budget cars. How do you compete with that? You don't... VW et al will have to cut production, increasing cogs, making their products even less appealing.

 

[petit_bateau]

I heard some bulls saying that low numbers from China is bullish because that means Austin/Berlin did better than expected which bodes well for the future. Now with China being high they will probably say that this is bullish as there is more room for Austin and Berlin to grow. We should be careful to not have a model where any outcomes can proves it right.

I think this quarter increases the likelihood of my thesis that Tesla will not be demand constrained in Q3 and Q4, that lowering the prices(which I think they will do) drives demand.

And imo the most important outcome from this "not a price war" is that the competition is so screwed. Tesla are maxing luxury products with best specs at a lower TCO than budget cars. How do you compete with that? You don't... VW et al will have to cut production, increasing cogs, making their products even less appealing.

I think there is still ambiguity in the numbers. The China data above may include a reduction in the local China inventory so as to achieve the high China sales (plus exports). If so that leaves more room for Austin & Berlin to have ramped, and we cannot be sure without knowing Fremont numbers.

Overall I'm hopeful and despite what some say to an extent this is a zero sum game. VW is it seems cutting BEV production. Which means the German state will be thoughtfully observing that Tesla is not. Similarly in China, these things get noticed.

 

[CreativeName]

Weren't Berlin & Austin supposed to ramp faster than Shanghai because of the lessons learned and all that? And now they're below Fremont?

Golly, it’s so Dark and Stormy in Berlin and Austin. Maybe they can burn them down and collect insurance at least?

 

[Patrick66]

I like the Fremont numbers better this time, but I don't think Shanghai'd production could have increased by more than 7%. Also I don't know how Berlin didn't do significantly better. Austin could have "only" done an extra ~10k vehicles in their ramp, but Berlin should have been at least 15k higher than Q1. I think Austin did significantly better than 10k, but looking at outbound logistics and re-work it is possible I was over optimistic.

 

[Dreadnought]

If cell supply is the limiting factor, it makes sense to prioritise Austin over Berlin for IRA-propped margins.

 

[petit_bateau]

If cell supply is the limiting factor, it makes sense to prioritise Austin over Berlin for IRA-propped margins.

As far as I can see Berlin and Austin are independent cell supply streams, such that neither affects the other in production terms.

Berlin are sourced from China (I think CATL and LG, and maybe now BYD*), whereas Austin are USA-sourced Panasonic 2170 and Tesla 4680.

The prioritisation that did apparently happen was pulling the 4680 machinery out of Berlin and moving it to Austin. Likely both for US IRA subsidy reasons and also perhaps team proximity reasons.

My personal suspicion - just looking at the overall numbers - is that cell supply is constrained from all sources. As it always has been.

* Tesla Giga Berlin starting production of Model Y with BYD batteries: report
* Tesla Model Y Batteries: Advantage Of BYD Over CATL

 

[DarkandStormy]

Golly, it’s so Dark and Stormy in Berlin and Austin. Maybe they can burn them down and collect insurance at least?

A very creative deflection to a question quoting company execs. I guess when you don't want to answer an honest question you have to deflect somehow.

 

[CreativeName]

A very creative deflection to a question quoting company execs. I guess when you don't want to answer an honest question you have to deflect somehow.

Bro, I agree with your continuous premise… shareholders should hand over their TSLA keys and just walk away. It’s all doomed to come crashing down any minute now given the Dark and Stormy (and super scary!) environment we are in. TSLA will never learn to execute 100% in line with their optimistic visions, so it’s all a waste of time.

 

[Doggydogworld]

I like the Fremont numbers better this time, but I don't think Shanghai'd production could have increased by more than 7%.

That +7% was off a down Q1. Shanghai was shut down the first few days of January then shut down again for ~10 days late that month for an extended Lunar New Year break. There was also a partial shutdown in February, rumored at the time to be for the Highland changeover, but apparently not.

The highest 3 month output was 256k cars in Sep-Nov 2022. Q4 was on track for 260k+ until they throttled back in December to keep inventory under control. So Q2's estimated 247k is a record for a calendar quarter, but still a bit below demonstrated capacity. Shanghai ran close to capacity in Q2 except for a brief partial shutdown in late May, again rumored to be for Highland but again not.

They may have upgraded a bit in these shutdowns, so perhaps we'll see 270k+ in Q3 or Q4. The best months I've seen were 30k+ for 3 and 60k+ for Y (not the same month). So 90k+ months are thus theoretically possible. On the other hand, they have to retool for Highland at some point, right?

 

[Artful Dodger]

So how can production fall in Q3? Guess we will have to wait another 3 months to find out if Troy/Gojo et al were correct about the busted growth story and I am missing something they are not.

What am I missing ?

Geography. Specifically, Area code 248:

• Tesla is a Texas company, not a Michigan company (new vs. old)
• Elon told us straight up during a conference call, that Tesla would take margins to zero before they would back off on production growth, they have lots of headroom, and are attacking COGS the way others can't
• some 'consultants' blithely assume (w/o critical thinking) that Tesla would roll back production to preserve margins because that's the way legacy auto does it
• That might make sense when your gross margins are already close to zero (they make most of their income from Financing & parts-designed-to-wear-out, so their autos are 'loss-leaders' already)
• Guess what? This Ain't Your Father's Oldsmobile. The old rules don't apply to the new way.

Word.