Q1 2019 earnings call stuff

[neroden]

Very very brief summary:
-- not enough cars delivered to make a profit in Q1. Automotive profit down by $750 million from Q4 to Q1 mostly because fewer cars. Most of the rest of the profit change is noise; a drop in solar and more service & other costs.
-- plan to reach 90K-100K total car production in Q2, S/X slightly below normal (due to ramping up on the altered production line). Implication is that 3 should head to 65K - 80K (so still not hitting 7K/week?!?)
-- S&X production was deliberately lowered in Q1 for the retooling.

-- massive buildup in inventory in Q1 due to essentially everything being in transit over the end of the quarter. However, Q2 should probably expect an even HIGHER buildup in inventory in transit due to ending the "wave" of foreign-production-early / US-production-later.
-- ending the wave was the explanation for not expecting Q2 profit; while this should mainly impact cashflow, increased buildup of inventory in transit == fewer deliveries booked within quarter.

-- will announce Model Y location "soon" (next few weeks / months). Fremont or Sparks; there's a scheme for rearranging things at Fremont and expanding on the west side of the complex while relocating internal space used for warehousing.

-- Tesla does not anticipate being cell constrained for Model 3 in Q2. (Asked three ways -- so apparently Panasonic is fixing its problem.)

-- Tesla expects the Maxwell merger to close in May (there are talks with SEC ongoing). They will have an investor day for cell & battery stuff late this year or early next.

-- difference between 220 and 240 range is quite important, more important than most investors realize (he's right)

-- looks, as of now, like 1000/week from Shanghai near start of Q1 2020 [edited: 2019 was a typo]

----
My commentary: failing to get 10K/week out of Fremont hurt, a lot.

 

[anon]

looks, as of now, like 1000/week from Shanghai near start of Q1 2019

Thanks for the summary. Any chance you could fix that typo with the correct date? I actually missed that part on the conference call and would like a reminder of exactly what he said.

 

[neroden]

Copied over from general thread:

"We believe we will deliver between 90,000 and 100,000 vehicles in Q2. "

Gah, thank you, I'm having delivery-production confusion today.

OK, so suppose Model S/X don't come back to full production (25K/quarter) until Q3, but manage to get to 20K/quarter. Also assume S/X deliveries closely track production. Then we have 70K - 80K model 3 deliveries, plus unknown amount for building inventory. If I assume an inventory-in-transit build of 10K (plausible, to get to steady state -- probably a bit low) then that gives 80K-90K Model 3 production, which is 6150 - 6950/week. Presumably the high end is "no more bottlenecks found" and the low end is "oops, we bottlenecked again".

This is internally consistent. It absolutely requires that the cell bottleneck is already fixed, as well as the Euro-spec parts bottleneck, and any other bottlenecks at Fremont. Musk claimed the cell bottleneck was fixed (in response to 3 different questions) -- we'll see. :-(

---------

Thanks for the summary. Any chance you could fix that typo with the correct date? I actually missed that part on the conference call and would like a reminder of exactly what he said.

Aaaaand, it's too late to edit, but yes, I meant Q1 2020. He said (waffling massively) that right now it looked like 1000 or 2000 a week from Shanghai by the end of the year, or maybe the start of next year, but they were trying to reach high numbers during Q4, etc etc. You can llisten again for the exact quote but there was so much waffling that I don't think exactness is relevant.

 

[Ulmo]

Ok, excitement abounds this week! It’s an intriguing idea that Tesla decided to use the day before its quarterly financial report day to announce new upgrades of its Model S & X vehicles.

The Longest-Range Electric Vehicle Now Goes Even Farther

As I read through the upgrades about the vehicles, it looks like they’re attempting to make Tesla’s Model S & X even more grown-up vehicles, with their better reliability and efficiency, and with smoother driving; since I just read their announcement, I now want to test-drive those vehicles and report back my comparisons to the Model S I used to own and other Tesla drives I've done. If anyone has any idea which sales center has test drives first, let me know, and I’ll go try. I’ve been a frequent complainer about the lost opportunity Tesla had in prior Model S & X vehicles with their ride quality and sound insulation, but I feel like they’re slowly addressing those over time, with incrementally better sound insulation over the last handful of years, and now with the suspension upgrades, and I’d like to see how far they’ve gotten. If they did what they said in yesterday’s announcement, this will open up the Model S & Model X to a wider market segment that values comfort, and hopefully reliability, as well as style and efficiency which were already good, and many aspects of safety which continue to be very good. In addition, I’ll see any other attributes that those vehicles have.

While I don’t have the pull to do an extended test drive (without unnecessarily burning bridges), I will make a point to at least bring the cars over a nice course to test the suspension. I might have to make a few accidental wrong turns to make certain I can find some representatively slightly bumpy roads to try out while I follow the designated test drive routes Tesla sales staff are required to tell us to use. (That’s how I was able to fully test the Model 3 Performance All Wheel Drive, and how I found out that its driving quality is superb and ride quality adequate for a mid-cost premium vehicle; my je ne sais quoi was excellent at the time, which was good, since the salesman there was very rigid.)

Until we start to get first-hand reports back from the new Model S & Model X upgrades from reviewers we can trust (which I can count on one hand, such as Bjorn, Like Tesla, and a few others here on TMC), anticipation will leave me and maybe others in a mini-lurch. Anyway, the announcement is good in that Tesla obviously made efficiency improvements in the new Model S's & X's and their manufacturing, and very likely other very substantial improvements as well (suspension). If these improvements come to pass, I think this might become a major milestone in getting a larger marketshare of the premium market for Tesla, which they temporarily partially got from Mercedes et al, and in my opinion, were at risk of ceding back to those competitors as Tesla's competition got back a lot of the business due to competitive products. If Tesla can plug some gaps in their premium side, their potential market share reductions can be lessened and increases can be increased.

 

[Ulmo]

Where are they getting all this money for solar & insurance? (Solar now with "$99 down" per letter; is that lease or loan? Tesla insurance in a month per Elon in call.)

Things they've said they'll do in prior quarterly letters and conference calls that haven't yet happened that they said again they're going to do:

• Even out delivery times in each region to keep constant flow of deliveries everywhere
• Increase Tesla Energy PowerWall and PowerPack production & installation
• Tesla Insurance product
• Full Self Driving
• Solar Roof

Why are we listening to JB? He's not even worth paying more than minimum wage!

It looks like Tesla exec team has loaded news for the next few weeks and months to keep things interesting.

First banker question sounded terrible; why can't the bankers ask better questions like I am asking above? His second question was better. The second caller phone was awful. The balance of the banker questions later in the call are better.

Did Tesla sweep under the rug less demand than supply for Model S, X, and 3?

This is the second time this week they've been warmer toward upcoming capital raise.

They kept the conference call very short. I'm surprised that they kept it so short; this is the first time they've done that recently. They may be trying to limit the communication that can cause effects. They seem to want less communication with investors every quarter, which is in line with keeping the company publicly traded but wanting it to be a privately traded company. Also, as they spend more time with the S.E.C. over bullcrap, they get a finer understanding of what is necessary, and will probably start screwing investors more and more as S.E.C illegally cracks down on Tesla more and more. "The ship has sailed" comment about staying public means the KSA-420-Khashoggi punchdown seems more drama than honest, but at the time, before the communists interceded on behalf of The Globalist Establishment by nixing the KSA deal, it was serious, so even though we did get screwed by that, the SEC is just being dishonest, and they know it. It's like guns pointed and shot, not any kind of legitimacy.

 

[anon]

Aaaaand, it's too late to edit, but yes, I meant Q1 2020. He said (waffling massively) that right now it looked like 1000 or 2000 a week from Shanghai by the end of the year, or maybe the start of next year, but they were trying to reach high numbers during Q4, etc etc. You can llisten again for the exact quote but there was so much waffling that I don't think exactness is relevant.

Thanks, that helps!

 

[neroden]

Where are they getting all this money for solar & insurance? (Solar now with "$99 down" per letter; is that lease or loan? Tesla insurance in a month per Elon in call.)

$99 is just the reservation deposit. Cash on delivery.

Insurance is obviously through a third party insurance copmany.

Things they've said they'll do in prior quarterly letters and conference calls that haven't yet happened that they said again they're going to do:

• Even out delivery times in each region to keep constant flow of deliveries everywhere

Here's hoping!

• Increase Tesla Energy PowerWall and PowerPack production & installation

Panasonic screwed up big time

• Tesla Insurance product

They tried it and their insurance partner was no good, offered bad rates. So second try.

• Full Self Driving

Musk is an optimist.

• Solar Roof

Musk is an optimist.

Did Tesla sweep under the rug less demand than supply for Model S, X, and 3?

I think they're covering for Panasonic?

 

[googlepeakoil]

Very very brief summary:
-- not enough cars delivered to make a profit in Q1. Automotive profit down by $750 million from Q4 to Q1 mostly because fewer cars. Most of the rest of the profit change is noise; a drop in solar and more service & other costs.
-- plan to reach 90K-100K total car production in Q2, S/X slightly below normal (due to ramping up on the altered production line). Implication is that 3 should head to 65K - 80K (so still not hitting 7K/week?!?)
-- S&X production was deliberately lowered in Q1 for the retooling.

-- massive buildup in inventory in Q1 due to essentially everything being in transit over the end of the quarter. However, Q2 should probably expect an even HIGHER buildup in inventory in transit due to ending the "wave" of foreign-production-early / US-production-later.
-- ending the wave was the explanation for not expecting Q2 profit; while this should mainly impact cashflow, increased buildup of inventory in transit == fewer deliveries booked within quarter.

-- will announce Model Y location "soon" (next few weeks / months). Fremont or Sparks; there's a scheme for rearranging things at Fremont and expanding on the west side of the complex while relocating internal space used for warehousing.

-- Tesla does not anticipate being cell constrained for Model 3 in Q2. (Asked three ways -- so apparently Panasonic is fixing its problem.)

-- Tesla expects the Maxwell merger to close in May (there are talks with SEC ongoing). They will have an investor day for cell & battery stuff late this year or early next.

-- difference between 220 and 240 range is quite important, more important than most investors realize (he's right)

-- looks, as of now, like 1000/week from Shanghai near start of Q1 2019

----
My commentary: failing to get 10K/week out of Fremont hurt, a lot.

I call total and complete B.S. on "S&X production was deliberately lowered in Q1 for the retooling." that was said on the call (not by Elon).
I believe S/X sales did fall quite substantially for the most expensive cars (S/X) with the increasing ramp of 3 and the "cliff edge" $7500 tax break end. Tesla laid off one production line of S/X (there was news in Jan/Feb about that) as presumably only 50% was needed to meet current demand. They then panicked and crashed the prices (15% in the US for top-end, as high as 40% internationally (Korea, China protests in the news) - UK price went from £137k to I think £87k or £97k). They then raised it back only by £4k. The closed line I presume was then reworked to make the new version now. The free Ludicrous car upgrade will probably boost sales this quarter. But it might not take demand much over Q1 - unlikely back to 2k a week.
While oil is below $100 and Trump is in the White House I think Tesla will have a demand problem - unless some new incentive passes. Model Y might help. I think a hatchback version of "3" (like S's boot) would have been better than a saloon - but I'm European and we prefer these!
The fact Tesla is now making model 3's to batch, and not to order means I think production is running ahead of availability. If demand is ahead of supply there'd be no $35k car (even off menu) and we'd be closer to 8k/wk model 3 than 6k.

 

[anon]

The free Ludicrous car upgrade will probably boost sales this quarter.

Much more significantly, the re-introduction of the cheaper Model S/X should boost sales this quarter! I'd be interested to know exactly why they discontinued it, as that's the key to understanding what happened last quarter. It's likely some mix of:
1) Negligible demand for the 75 because of the similarly-priced high-end Model 3. But why did this happen so suddenly in very early Q1 and not earlier? I have trouble seeing why demand for that particular model would suddenly evaporate relative to the other models when it had held up previously; even if they received negligible orders right at the start of Q1, it seems a bit drastic to eliminate the model completely just after a brief lull in demand. Also, it was clear that they were planning to bring it back from the beginning, as Musk was tweeting about an upcoming Model S "standard range" designation at around that time.
2) An effort to push more people to the high end Model 3 to keep margins up until they were able to launch SR+ at a reasonable margin late in the quarter. That's no longer an issue.
3) Raven motor upgrade took longer than expected/required more downtime than expected.

 

[TheTalkingMule]

S demand dropoff rationale is now completely obvious. The new drivetrain improving range by like 12%. Is there any scenario where would I buy an S prior to these upgrades? Hell no. A lot of buyers may still smell a considerable refresh coming and opt for a higher end 3. That's just how it is with a product improving so rapidly.

Model S buyers are a super-savvy well informed demographic. V3 supercharging rates weren't entirely clear either. Would it be for all Model S or just after some unannounced upgrade to only new models?

People who just bought because they absolutely had to have this cool thing have already bought. These are rational high-end car buyers that skew young.

Us sitting here actually considering the idea of demand "tailing off" really speaks to the narrative having a major effect of late. 1Q was mediocre execution within a very rapidly evolving marketplace.

 

[RIP->OPEC]

This is my take: The Tesla Cult-Buyers-Spree (like me) is obviously winding down here in the USA, demand will continue to fall I fear unless something is done, and soon! (Tesla can't wait for China sales to kick in) So it's time to initiate Plan-B, expand your Marketing Base in the USA Elon with an innovative and comprehensive advertising campaign in all demographics before its too late! ... short & fun 5-10 second spots made by car owners using their smart phones for instance... blanket the Web and limited TV/Cable/Dish services. There is a vast ocean of Americans who are tempted but not ready to pull the trigger! All they need is a little push, that's all... Its time to tap into this resource by countering all the negativity coming from the Short-Seller scum and their handlers, namely the competion which is ready to pounce! Now hurry the F up baby!

 

[lmmo]

-- difference between 220 and 240 range is quite important, more important than most investors realize (he's right)

Why is it so important?

 

[Spacemanspliff]

Of the 12,000 S&X delivered what percentage do we believe were 75kwh?

And what were prior quarters take rates for 75kwh?

 

[hcdavis3]

This is my take: The Tesla Cult-Buyers-Spree (like me) is obviously winding down here in the USA, demand will continue to fall I fear unless something is done, and soon! (Tesla can't wait for China sales to kick in) So it's time to initiate Plan-B, expand your Marketing Base in the USA Elon with an innovative and comprehensive advertising campaign in all demographics before its too late! ... short & fun 5-10 second spots made by car owners using their smart phones for instance... blanket the Web and limited TV/Cable/Dish services. There is a vast ocean of Americans who are tempted but not ready to pull the trigger! All they need is a little push, that's all... Its time to tap into this resource by countering all the negativity coming from the Short-Seller scum and their handlers, namely the competion which is ready to pounce! Now hurry the F up baby!

It’s time to start advertising Elon. Think about your target market. Very few people know anything about Tesla. Blast the airwaves. You’ll get great returns for a minimal investment. I’m a case in point.

 

[hcdavis3]

It’s time to start advertising Elon. Think about your target market. Very few people know anything about Tesla. Blast the airwaves. You’ll get great returns for a minimal investment. I’m a case in point.

I’m available for filming of the killer spot that will get us yuge sales.

 

[hcdavis3]

Why do you disagree Mule? Just curious. Do you want the ship to sink? Are you a Tesla owner?

 

[anthonyj]

Why do you disagree Mule? Just curious. Do you want the ship to sink? Are you a Tesla owner?

Because people here act as if Elon’s statements are a bible verse. Elon said advertisements aren’t necessary. So if you suggest advertising in the bullish echo chamber, you will get disagrees or worse, flamed.

A lot of people here live in California, where Teslas are everywhere and everyone knows about them. Here in NJ Teslas are like some weird alien *sugar*. I’m always asked if it takes gasoline, can it go further than 50 miles, do they explode, oil changes, etc. They don’t know about autopilot, updates, low maintenance. Tesla won’t be successful selling a mainstream product if the mainstream isn’t informed about it. YouTube and Twitter only reaches so many people.

 

[hcdavis3]

Because people here act as if Elon’s statements are a bible verse. Elon said advertisements aren’t necessary. So if you suggest advertising in the bullish echo chamber, you will get disagrees or worse, flamed.

A lot of people here live in California, where Teslas are everywhere and everyone knows about them. Here in NJ Teslas are like some weird alien *sugar*. I’m always asked if it takes gasoline, can it go further than 50 miles, do they explode, oil changes, etc. They don’t know about autopilot, updates, low maintenance. Tesla won’t be successful selling a mainstream product if the mainstream isn’t informed about it. YouTube and Twitter only reaches so many people.

Thanks Anthony. Let them flame the f#$&k out of me. They would be confusing me with someone who really gives a ****

 

[Doggydogworld]

Why is it so important?

Because Tesla really does not want to sell 220 mile SRs.

 

[jboy210]

Let's face demand for the Model 3 is soft. Demand for the S and X is even worse.

Y introduction may have created an Osborne effect potential buyers waiting on a CUV instead of a sedan.