Now what? Thoughts on 2013 post-Q1

[DonPedro]

Any thoughts on Q2, Q3 etc.?

Am particularly wondering about the following:

• Will there be a change in the mix of deliveries that could change the avg. revenues per car? (E.g. less Signatures, less Premium)
• Will there be increased costs related to rampup in Europe? (Freight, hiring new people/offices, etc)
• Will start of European deliveries mean a one-off dip in revenues (since it may take 5-6 weeks more to ship a car to a European customer than to someone in the US)?
• How do service plans affect the picture? (Should be positive?)

 

[Robert.Boston]

Am particularly wondering about the following:

• Will there be a change in the mix of deliveries that could change the avg. revenues per car? (E.g. less Signatures, less Premium)

There'll be 500 Signatures delivered in the EU; fewer than the 1,200 in NA, but still notable. P85s appear to be highly popular variants. I would argue that many early reservation holders for the Model S weren't looking for a performance car, but instead a green car; in contrast, current reservations may be skewed towards people looking for mind-blowing performance. So it's entirely possible that the mix will be heavy on Performance (and the associated higher margin, esp. now that the cost of the alcantara headline has been removed).

• Will there be increased costs related to rampup in Europe? (Freight, hiring new people/offices, etc)

Yes, though presumably the EU pricing reflects a premium to cover a portion of these costs--certainly freight, but also a portion of the additional overhead. Some impact on SG&A.

• Will start of European deliveries mean a one-off dip in revenues (since it may take 5-6 weeks more to ship a car to a European customer than to someone in the US)?

Good point. I think the answer has to be "yes". As long as it's explained well enough to the street, it shouldn't be viewed as a big negative on the stock price.

• How do service plans affect the picture? (Should be positive?)

Assuming Tesla has priced the service plans correctly (i.e. with an expected value > expected cost), yes, there will be some small upside. Service plan payments are not realized as revenue all at once, however. So it will be a cash infusion today, plus a source of earnings over time. Still, a good thing -- they have a lot of cash rolling out the door to fund Service Center development.

 

[DonPedro]

Good point. I think the answer has to be "yes". As long as it's explained well enough to the street, it shouldn't be viewed as a big negative on the stock price.

If it brings the numbers into the red, it is still not good psychologically and should not be underestimated. But fundamentally it is near-irrelevant.

 

[Citizen-T]

We need to think some more about margins. They promised us 25% margins in a day and age when we thought they would be selling a number of low-end 40kwh cars (smallest margins). The mix is now going to be significantly higher than modeled. What is the new target margin?

 

[CapitalistOppressor]

We need to think some more about margins. They promised us 25% margins in a day and age when we thought they would be selling a number of low-end 40kwh cars (smallest margins). The mix is now going to be significantly higher than modeled. What is the new target margin?

Are we certain the 40kWh car was "low margin"?

Also, we know(?) that Tesla must have done market research on their reservation holders and should have known for at least a year now that relatively few would choose the 40kWh. Despite this they continued to provide 25% as their guidance.

If there was a margin hit (say ~15% vs 26%) on the 40kWh car, it seems likely to not affect the company wide margin much because a) Tesla should only have been expecting less than 10% of customers to purchase it (and maybe less depending on their research), and those cars would have represented a much smaller fraction of total revenue. It seems like the large numbers dominate the small ones and leave you with a result that is just fractionally less than it otherwise would be.

 

[Citizen-T]

I think you give them too much credit on foresight. They way underestimated the demand for the Performance version right? That's not just based on their public projections, they ran out of spoilers and wheels. That's hard evidence that they got it wrong internally. They were way, way, way off. Why is it so hard to believe that they were wrong about the 40kwh battery?

 

[blakegallagher]

Maybe this is all part of the Tsunami of hurt ... I find it strange they have kept their target at the 20000 rate .... Maybe they will raise the target margin while raising their target production rate to provide a double whammy effect ( I can hope anyway)