Q1 2019 earnings call stuff

[bdy0627]

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.

It is confusing right now because there are so many factors affecting the market. You've got a seasonally very weak Q1 that would be expected to affect sales of mature lines like S/X. You had pull forward of demand into Q4 because of the tax credit being cut in half. You have exhaustion of the pent up demand for the model 3 higher trims in the U.S. In the midst of that, Tesla was undergoing significant line changes for the S/X for the new motors in particular. Stir that all up in a bowl and try to figure out what's going on with the much lower than expected (even by Tesla) delivery numbers in Q1.

The good news is that some of the softening of demand is seasonal (Q1) and temporary (tax credit drop off). The other good news is that there are lower trim model 3s that Tesla is now producing. There will definitely be higher demand for those. The downside is Tesla doesn't want too much demand for those lower trim model 3s vs the higher trim. As we get further away from the tax credit drop off, S/X sales should improve. The increased range of the S/X may improve sales but possibly at the cost of higher trim model 3s.

Q2 will be very important in terms of looking at sustainable demand in the U.S. market. China and Europe still have pent up demand even for the higher trims. Things will get much much better when Shanghai comes on line to supply the SR+. That will greatly improve margins. I'm thinking more and more that it makes sense to scale back model 3 production in Fremont and make room for the Y to keep costs low initially and likely speed up the time to market. I think Tesla is kind of waiting to get a handle on sustainable model 3 demand, particularly the higher trims, to make a decision on the location for Y. Exciting times for sure. I think we all need to recognize that this was an incredibly challenging time with the model 3 ramp, huge pent up demand, and unknown sustainable demand. It was probably nearly impossible not to screw this up in some fashion. Tesla crushed it in Q3/4 and bombed it in Q1. Now we should be on to smoother quarters but with the remaining question of what the trim mix (ASP) looks like in terms of sustainable demand.

 

[youngmcdonald]

Generating demand for electric vehicles from all possible sources (Tesla and non Tesla) is the only way to keep this gig afloat. They’re already the first choice when someone is in the market for a plug in vehicle. That demand seems just a bit better than negligible for all practical purposes given the otherwise size of the customer base that buys “cars”.

And by some miracle, even if 50% of all cars sold in 2019-2020 in USA turn out to be Tesla, there’s no way the infrastructure can sustain that. The political environment isn’t helping either.

Tesla may be largely debt free, but profitability (especially with low margin vehicle now introduced as flagship) may likely only get worse. There’s a reason Apple’s main “commodity” cost over $1200 and they quickly realized how the lower priced alternative is actually hurting its sale.

I wouldn’t be surprised if they get bought eventually.

 

[jboy210]

Generating demand for electric vehicles from all possible sources (Tesla and non Tesla) is the only way to keep this gig afloat. They’re already the first choice when someone is in the market for a plug in vehicle. That demand seems just a bit better than negligible for all practical purposes given the otherwise size of the customer base that buys “cars”.

And by some miracle, even if 50% of all cars sold in 2019-2020 in USA turn out to be Tesla, there’s no way the infrastructure can sustain that. The political environment isn’t helping either.

Tesla may be largely debt free, but profitability (especially with low margin vehicle now introduced as flagship) may likely only get worse. There’s a reason Apple’s main “commodity” cost over $1200 and they quickly realized how the lower priced alternative is actually hurting its sale.

I wouldn’t be surprised if they get bought eventually.

Agree with all. I think it would be good for Tesla to be bought. Hopefully by a car company. Toyota needs an BEV solution and is cash rich, maybe that solution is Tesla

 

[OTARon]

Reading so much of this kind of stuff is the main reason I haven't pulled the trigger on a used Tesla. My lease is almost up and I can't afford to pussyfoot around waiting for them to deliver a car. What is wrong with Tesla management? Do they realize how many people buy elsewhere because of all this kind of stuff? Can't see or drive the car before plunking down your $2500. I really wanted a used Model S because a new one equipped the way I want is out of my price range. I may just end up going with a new Model 3 instead. Rick

A lot of people here live in California

In WA there are Many Tesla's running about, (no i know we're not CA) but our Tesla numbers are growing. Just yesterday their was 4 Tesla's at Costco, last year I would have seen 1 in a week. I feel i see a new one daily! We are playing Punch-Tesla game (hell with Buggies). Should Tesla advertise? yes maybe some Apple like adds like the "Taken on an iPhone adds". But really working on their customer service would be a big help!

 

[omgwtfbyobbq]

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.

Tesla announced the layoffs in the third week of January. Assuming they spent a whole two weeks deciding who to let go means they got rid of a bunch of S/X staff after seeing 1 week of poor sales. They either have a near supernatural level of prescience, or they knew S/X production was going to slow down because they were bringing the lines down for updates/redesigns.

Tesla slashed Model S and X staff in recent layoffs

 

[neroden]

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.

IMO? Ran out of parts. They were planning to do the retooling and spin up the new line earlier, and Project Raven got delayed. I'm not sure what's unique to an "old 75D" which would have changed for Raven, but I'd be totally unsurprised if there was something.

3) Raven motor upgrade took longer than expected/required more downtime than expected.

Raven's been in progress for years. The "cliff edge" temporary drop in demand from the tax credit was anticipated for years. Everyone was already talking about how S&X needed a refresh. I am pretty much sure that they planned to implement the "Raven" changes as soon as possible in January, because *it just makes sense*. They may do dumb things sometimes, but they're smart enough to plan *that*.

Seems to me like something delayed Raven and messed up their plans substantially. A ~$350 million delay. The costs of Panasonic's failure to hit 7K/week cell supply is probably ~$300 million.

 

[neroden]

Why is it so important?

240 mile range = 4 hours in good weather (as long as anyone wants to drive without a break), and 156 miles in weather from hell (still comfortably safe for a 2 hr./ 120 mile planned trip)

220 mile range = shorter than you want to drive in good weather, short enough to make you nervous in weather from hell

 

[omgwtfbyobbq]

Raven's been in progress for years. The "cliff edge" temporary drop in demand from the tax credit was anticipated for years. Everyone was already talking about how S&X needed a refresh. I am pretty much sure that they planned to implement the "Raven" changes as soon as possible in January, because *it just makes sense*. They may do dumb things sometimes, but they're smart enough to plan *that*.

Seems to me like something delayed Raven and messed up their plans substantially. A ~$350 million delay. The costs of Panasonic's failure to hit 7K/week cell supply is probably ~$300 million.

My guess is that the cell supply issues pushed them to do upgrades to the 3 lines sooner than they were planning to, and those upgrades delayed some of the upgrades to the S/X lines. They may also have decided it's better to consolidate losses in a single quarter than to have two consecutive quarters of smaller losses.

 

[anthonyj]

In WA there are Many Tesla's running about, (no i know we're not CA) but our Tesla numbers are growing. Just yesterday their was 4 Tesla's at Costco, last year I would have seen 1 in a week. I feel i see a new one daily! We are playing Punch-Tesla game (hell with Buggies). Should Tesla advertise? yes maybe some Apple like adds like the "Taken on an iPhone adds". But really working on their customer service would be a big help!

Funny that you say Costco. I always see 3-4 there too

 

[durkie]

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

OR, alternative theory: they are supply limited and not at all worried about demand as they claim every conference call and advertising would be spending money just to create fulfillment problems for themselves.

 

[lmmo]

240 mile range = 4 hours in good weather (as long as anyone wants to drive without a break), and 156 miles in weather from hell (still comfortably safe for a 2 hr./ 120 mile planned trip)

220 mile range = shorter than you want to drive in good weather, short enough to make you nervous in weather from hell

I still don’t see a big difference between 220 and 240 miles besides the fact that longer range is always better.

 

[Brando]

IF S/X reach a sales point and have extra capacity, perhaps time for Model X based pickup to be added?
S/X/pickup should easily have 100,000 per year demand.
Perhaps all pickups be lease only and go into Tesla Network - robotaxi fleet?

no ads, no refresh IMHO, are needed - just a waste of money
REFERRAL programs YES.

 

[Sudre]

I still don’t see a big difference between 220 and 240 miles besides the fact that longer range is always better.

I own a 2013, S60. I can tell you as a fact I need just a few more miles of range. Maybe 10 more and it would be the perfect car. Remember the 2013 S60 would actually get about 210-220 miles in good weather driven perfect when it was new. Average range is about 180 miles in good weather when I am not hyper-miling.

 

[Brando]

Tesla announced the layoffs in the third week of January. Assuming they spent a whole two weeks deciding who to let go means they got rid of a bunch of S/X staff after seeing 1 week of poor sales. They either have a near supernatural level of prescience, or they knew S/X production was going to slow down because they were bringing the lines down for updates/redesigns.

Tesla slashed Model S and X staff in recent layoffs

Why would you suddenly think these writers have ANY idea what they are talking about? My FUD meter spiking on this one.
They are so often wrong and so seldom right I won't give this article much value.

 

[Doggydogworld]

Why would you suddenly think these writers have ANY idea what they are talking about? My FUD meter spiking on this one.

They quoted a Tesla spokesperson who said they cut S/X production hours, so that part's not FUD. I don't really see how that had anything to do with the Raven motors, though. It was mostly driven by lower US demand, which they fully expected the first couple months of Q1 due to the tax credit stepdown, near-zero orders from the Netherlands (also expected), weak orders from the rest of Europe as preference shifted from S/X 75D to Model 3 AWD and apparently a similar effect in China.

They may have also taken the opportunity to re-work the S/X lines to improve space and labor-hour efficiency.

 

[EVNow]

I still don’t see a big difference between 220 and 240 miles besides the fact that longer range is always better.

Depends on where you are driving. On long drives you basically want to be able to comfortably go from one SC to another in winter. That is where that extra 20 miles can help.

Let's say you can gain 80% of the range at an SC fast. Then, you lose some 10% to winter weather. 10% more to free way driving & age of batteries. So, you need to be able to go from one SC to another with 60% of ideal range. If the SCs are 150 miles apart you need, you need 250 miles of range.

 

[Brando]

They quoted a Tesla spokesperson who said they cut S/X production hours, so that part's not FUD. I don't really see how that had anything to do with the Raven motors, though. It was mostly driven by lower US demand, which they fully expected the first couple months of Q1 due to the tax credit stepdown, near-zero orders from the Netherlands (also expected), weak orders from the rest of Europe as preference shifted from S/X 75D to Model 3 AWD and apparently a similar effect in China.

They may have also taken the opportunity to re-work the S/X lines to improve space and labor-hour efficiency.

You are correct about the numbers and I have no idea about the causes - if you think you know why, fine.
Tesla DID update/upgrade the production line for motors, FSD computer and suspension as I remember. Demand? we shall see by year end. Production/delivery down?? but note: YoY $ up 36%
Revenue Q1 2018 2.735 Billion
Revenue Q1 2019 3.723 Billion

My bias to find the media lacking. So take my comments with the usual grains of salt. And as I'm old, perhaps you can rightly ignore. try to evaluate on the facts and be suspicious of my bias. I'll try to write better. Trying to adopt continuous improvement - execution no doubt lacking.

thanks for your thoughtful comments.

 

[neroden]

OR, alternative theory: they are supply limited and not at all worried about demand as they claim every conference call and advertising would be spending money just to create fulfillment problems for themselves.

They've certainly been tripping over fulfillment problems pretty much nonstop for three years, haven't they. I mean, they're kind of awful at fulfillment. I hope they get better.

 

[neroden]

I own a 2013, S60. I can tell you as a fact I need just a few more miles of range. Maybe 10 more and it would be the perfect car. Remember the 2013 S60 would actually get about 210-220 miles in good weather driven perfect when it was new. Average range is about 180 miles in good weather when I am not hyper-miling.

Likewise, I have a 2013 S85 (265 miles of rated range) and I can tell you as a fact that it's just enough -- I never need extra miles, but very occasionally I come home cutting it close with about 15-20 miles left.

So there's the experimental pair of cars proving that the ideal range is higher than 220 and lower than 265... it's really around 240-250.

I guess it has something to do with humans, how far humans drive, human psychology. It probably varies by country, but this is the Eastern US experience.

 

[googlepeakoil]

Why is it so important?

because nobody wants to use that last 30,40,50 miles as they are worried about predicted range - so take that away from 220 and you have only 170. Or roundtrip 85 miles. Having another 20 miles is a lot when you remove "your comfort buffer" .