Just to be clear, Sunnyvale is going to be a service center, not a store. There's currently no service center in the South Bay.
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Just to be clear, Sunnyvale is going to be a service center, not a store. There's currently no service center in the South Bay.
We are getting a new store here in Mission Viejo Mall right in the city of Mission Viego in Southern California where I live. Can't wait.
Having read the discussion, I feel that the 6,000 deliveries estimate is still on target. While I feel that 6,600 production is on the optimistic side, I increasingly believe that the adjustment for cars-in-transit, loaners etc. was exaggerated in my previous post. I think that 100 cars in transit after Q2 is too low, and I think that they kept the number down after Q3. An adjustment of 3-400 sounds right to me now, meaning that they would have had to produce 6,300-6,400 cars to deliver 6,000.
I also think I overshot with my ASP estimate (as was pointed out), and I forgot to take into account the Q2 guidance on R&D costs ("will increase significantly in Q3"). I've also added 1% GM due to EU sigs in Q3. Here is the updated projection:
To recap assumptions:
- 6,000 cars: Ref. above
- $101k ASP: Q1 was $98.4k and Q2 was $97.3k (dropped due to accumulated batch of S60s coming into production in Q2). EU deliveries in Q3 had a lot of sigs and high-specced cars - assuming those were 1/5 of total and have 15% higher ASP (as compared to "normal" Q1).
- ZEV credits: Was $68M in Q1 and $51M in Q2. Has been guided to zero in Q4. Lacking other data I assume $25M. The bottom line is highly sensitive to this assumption
- Dev't services: Were $6.6M in Q1 and $3.6M in Q2. $1M feels right based on that trend.
- 21% gross margin excl. ZEV credits. Development in recent quarters is -3% ---> 6% ---> 14%. Guided to 25% in Q4. Seems reasonable that they would improve 6% in Q3 and 5% in Q4. However, bumping up 1% due to EU sigs in Q3 and giving credit for some overperformance.
- R&D expenses: Recent quarters: $68M ---> $47M ---> $44M. Guided "significant increase". Gut feel = $60M - could be more.
- Selling and G&A: Recent quarters: $31M ---> $41M ---> $50M. Given continued rapid expansion of stores, service centers and superchargers, $60M sounds right.
PS: Note how sensitive the Net Income is to ZEV credits. If you set them to zero, then almost half the projected earnings are gone. If you set them to Q2 levels, you increase projected earnings almost by half.
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Will go out on a limb an also try to do a GAAP projection:
I am not surprised that GAAP is still in the red. The guidance from Q2 was: "Going forward, we expect to be non-GAAP profitable and generate positive cash flow from operations every quarter this year excluding any benefit from ZEV credits.".
I also think I overshot with my ASP estimate (as was pointed out), and I forgot to take into account the Q2 guidance on R&D costs ("will increase significantly in Q3"). I've also added 1% GM due to EU sigs in Q3. Here is the updated projection:
| Cars and CARB credits | 6000 cars x $101k ASP | 606 000 |
| ZEV credits | Guesstimate | 25 000 |
| Development services | Guesstimate | 1 000 |
| Total revenues | 632 000 | |
| Gross profit | 21% GM ex. ZEV | 152 470 |
| R&D expenses | 60 000 | |
| Selling, G&A expenses | 60 000 | |
| Net income | 32 470 | |
| Net income/share | 0.27 |
- 6,000 cars: Ref. above
- $101k ASP: Q1 was $98.4k and Q2 was $97.3k (dropped due to accumulated batch of S60s coming into production in Q2). EU deliveries in Q3 had a lot of sigs and high-specced cars - assuming those were 1/5 of total and have 15% higher ASP (as compared to "normal" Q1).
- ZEV credits: Was $68M in Q1 and $51M in Q2. Has been guided to zero in Q4. Lacking other data I assume $25M. The bottom line is highly sensitive to this assumption
- Dev't services: Were $6.6M in Q1 and $3.6M in Q2. $1M feels right based on that trend.
- 21% gross margin excl. ZEV credits. Development in recent quarters is -3% ---> 6% ---> 14%. Guided to 25% in Q4. Seems reasonable that they would improve 6% in Q3 and 5% in Q4. However, bumping up 1% due to EU sigs in Q3 and giving credit for some overperformance.
- R&D expenses: Recent quarters: $68M ---> $47M ---> $44M. Guided "significant increase". Gut feel = $60M - could be more.
- Selling and G&A: Recent quarters: $31M ---> $41M ---> $50M. Given continued rapid expansion of stores, service centers and superchargers, $60M sounds right.
PS: Note how sensitive the Net Income is to ZEV credits. If you set them to zero, then almost half the projected earnings are gone. If you set them to Q2 levels, you increase projected earnings almost by half.
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Will go out on a limb an also try to do a GAAP projection:
| Revenues (non-GAAP) | 632 000 |
| Deferred due to lease accounting | 137 000 |
| Revenues (GAAP) | 495 000 |
| Net income (non-GAAP) | 32 470 |
| Deferred profit | 27 000 |
| Stock based comp | 22 000 |
| Non-cash interest on convertibles) | 1 800 |
| Net Income (loss) (GAAP) | -18 330 |
| EPS | -0.15 |
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Yes, this is why you must use pipelining. Multiple production lines and such.
Note: This post is neither a recommendation for nor an admonition against applying techniques such as pipelining for population growth augmentation.
Consensus seems to be $0.00 per share, with a range of -$0.03 to $0.03: http://www.nasdaq.com/symbol/tsla/earnings-forecast
LOL. I think there's a missing "not", or you just have a really awesome sense of humor.
Gtoffo
Member
Thank you all for the excellent work done so far.
I think we are getting closer to more realistic numbers.
Estimating how many cars are in transit/loaners/display at any given moment will be extremely hard/impossible. But I believe we don't really need those numbers. Correctly estimating all of Tesla's numbers might help in the short term... but any long term projection of Tesla's trajectory (and therefore stock price) will be mainly driven by only two factors: the number of cars currently in production (as long as Tesla has no problems selling all of those) and margins. (UPDATE: should have included future guidance, although that is a function of the rate of change during this quarter of those two key factors. Some interesting info regarding that came out of Elon's Munich speech)
I don't think we have any data points that can help to estimate margins....(except faith in Tesla's guidance)
However we have a lot of info regarding production (which is already a big advantage). I would like to give more weight to primary sources such as Elon/official statements, so what I am seeing right now is this:
Q2 shareholder's letter: "During Q2, we improved our production rate by 25% from 400 to almost 500 vehicles per week." "While we expect production to increase from Q2, a considerable number of vehicles produced during the quarter will be in transit to European markets at the end of Q3. As a result, we plan to deliver slightly over 5,000 Model S vehicles in Q3, and remain on plan to deliver 21,000 vehicles worldwide for 2013."
Elon Aug 20 video: "Now we are at around 500 to 550 a week"
We have 1 month (the quarter ended September 30) of missing data. (Or am I missing some other primary data point?)
If we did reach 600 cars at the end of Q3 that would be another 25% increase in production (from ~480 to 600) which I think is the maximum we can expect (it would already be an extraordinary feat!).
So I think the realistic production estimate bracket shrinks to 580-610 cars a week by the end of Q3 with a confidence level of around 75%. Of course we shouldn't ignore the possibility that the previous production rates might have been limited by some specific supplier problem and that the resolution of those issues has bumped production rates up significantly in the last month.
I think we are getting closer to more realistic numbers.
Estimating how many cars are in transit/loaners/display at any given moment will be extremely hard/impossible. But I believe we don't really need those numbers. Correctly estimating all of Tesla's numbers might help in the short term... but any long term projection of Tesla's trajectory (and therefore stock price) will be mainly driven by only two factors: the number of cars currently in production (as long as Tesla has no problems selling all of those) and margins. (UPDATE: should have included future guidance, although that is a function of the rate of change during this quarter of those two key factors. Some interesting info regarding that came out of Elon's Munich speech)
I don't think we have any data points that can help to estimate margins....(except faith in Tesla's guidance)
However we have a lot of info regarding production (which is already a big advantage). I would like to give more weight to primary sources such as Elon/official statements, so what I am seeing right now is this:
Q2 shareholder's letter: "During Q2, we improved our production rate by 25% from 400 to almost 500 vehicles per week." "While we expect production to increase from Q2, a considerable number of vehicles produced during the quarter will be in transit to European markets at the end of Q3. As a result, we plan to deliver slightly over 5,000 Model S vehicles in Q3, and remain on plan to deliver 21,000 vehicles worldwide for 2013."
Elon Aug 20 video: "Now we are at around 500 to 550 a week"
We have 1 month (the quarter ended September 30) of missing data. (Or am I missing some other primary data point?)
If we did reach 600 cars at the end of Q3 that would be another 25% increase in production (from ~480 to 600) which I think is the maximum we can expect (it would already be an extraordinary feat!).
So I think the realistic production estimate bracket shrinks to 580-610 cars a week by the end of Q3 with a confidence level of around 75%. Of course we shouldn't ignore the possibility that the previous production rates might have been limited by some specific supplier problem and that the resolution of those issues has bumped production rates up significantly in the last month.
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Grant Gerke
Member
I was looking into the VIN # issue on the board and saw your post on the German reaction. Confirms my suspicion of the German market, see my blog post below from this morning.
See post below, has video from the Munich event:
Musk and Tesla Motors Cater to the German Market
Event Coverage: Musk and Tesla Motors Cater to the GermanMarket - Blog Posts - Electric Vehicle Parade - Insight on advanced vehicles and next generation manufacturing.
See post below, has video from the Munich event:
Musk and Tesla Motors Cater to the German Market
Event Coverage: Musk and Tesla Motors Cater to the GermanMarket - Blog Posts - Electric Vehicle Parade - Insight on advanced vehicles and next generation manufacturing.
I'm worried that they may not break even on GAAP, when the street seems like it expects them to. So I have looked at how many cars would they have to deliver in Q3 to break even on GAAP. Turns out that it very much depends on three key assumptions. The most important one being ZEV credit revenues and the two others R&D spending and Gross Margin.
Here is the analysis:
You can see that the break even point could be anywhere from 5875 to 7210, depending on these assumptions.
I bet they found a way to break even (for instance limiting R&D to exactly what they could afford). ;-)
Here is the analysis:
| GM excl. ZEV credits | 20 % | 20 % | 21 % | 21 % | 21 % | 22 % | 22 % |
| ZEV credit sales | $25M | $25M | $25M | $30M | $35M | $30M | $35M |
| R&D expenses | $60M | $55M | $55M | $55M | $55M | $55M | $55M |
| Deliveries to break even | 7210 | 6960 | 6630 | 6395 | 6160 | 6100 | 5875 |
I bet they found a way to break even (for instance limiting R&D to exactly what they could afford). ;-)
As this relates to guidance for 2014, which might be announced in Q3 ER, posting it here:
"Musk reassured his audience about the current anxiety surrounding Tesla's battery cell supply. He stated that Panasonic is set to increase its battery manufacturing capacity to allow Tesla to build between 1,200 and 1,500 cars a week by the end of next year. Samsung and LG are also stepping up as secondary suppliers to make sure the supply of battery cells keeps up with the demand."
http://www.fool.com/investing/gener...a-prototype-of-teslas-gen-iii-in-12-mont.aspx
"Musk reassured his audience about the current anxiety surrounding Tesla's battery cell supply. He stated that Panasonic is set to increase its battery manufacturing capacity to allow Tesla to build between 1,200 and 1,500 cars a week by the end of next year. Samsung and LG are also stepping up as secondary suppliers to make sure the supply of battery cells keeps up with the demand."
http://www.fool.com/investing/gener...a-prototype-of-teslas-gen-iii-in-12-mont.aspx
Thanks for the nice work helping put things into perspective. I’d like to add my two cents.
Personally I don’t feel the ZEV credit revenue is important because it has nothing to do with the future growth rate which is the basis for elevated stock price. Therefore the GAAP profitability might not be very important either as it’s highly dependent on the ZEV credit as you said.
On the other hand I think the growth margin (ex ZEV) and the total production/delivery number are extremely important since they’re direct indicators of future profitability and growth. In Q2 conference call Elon had explained why he was so confident about 25% GM (ex. ZEV) for Q4 and he also mentioned 6% improvement in Q3 and Q4 from Q2’s 14%. So probably 20% GM for Q3 and 25% for Q4 are what priced in right now. this was also what DB said on Sept. 19th when the price target was updated to $200:
“We believe that Gross Margin (ex ZEV Credits) will likely hit 20% in Q3 (vs 14% in Q2). We see this as modestly higher than expected (largely due to better-than-expected positive impact from option pricing increases), providing good visibility on hitting the 25% target in Q4, and supporting higher levels in the future as production increases and supply chain continues to mature. On the demand side, Veh ID Number assignment rates appear to support order rates approaching 30k units annualized vs our estimate of <25k in Q2. Both US and European order rates appear to be increasing. Finally, we believe that the production rate continues to rise, as Tesla breaks supply chain bottlenecks. We expect that Tesla will achieve its 600/week 2013YE target sometime in Q4. Despite the production increase, we believe that deliveries will be similar to Q2 (as Tesla guided to) because vehicles in-transit to Europe will be substantially higher at the end of Q3 than the end of Q2”
Deutsche: Tesla ‘Margin Progression, Demand Appear Strong’ - Stocks To Watch - Barrons.com
if the GM (ex ZEV) can get to 22% it should be a nice surprise that may drive price up. It’s highly dependent on ASP, delivery # and cost of Revenues. It’s interesting that the cost of revenues (of Auto Sales) dropped significantly from $461.8M in Q1 to $303.6M in Q2 while the delivery increased slightly from 4900 to 5150 between Q1 and Q2. Are these mostly cost of materials and parts? Does anyone know more about the reason for this significant cost reduction? If it continues in Q3 so much so that the cost of revenues for 6000 cars delivered does not increase >10% than Q2 then we can probably get to 22% GM (ex ZEV)
DB still just expects delivery slightly above 5000 as guided though. Some analyst had much higher expectation based on VIN analysis but it does not seem his number made any impact. So maybe lower 5K is still what being priced in, and it sounds like 6K delivery will be a big surprise.
You're right the lower 303.6M auto sales cost in Q2 is due to lease accounting. total auto sales cost is 427.5M including the cost related to deferred revenues (compared to 461.8M in Q1). If it increases only by 10% to 470M then my calculation of GM ex ZEV is ~21% assuming 6000 delivery/$101K ASP.
I know on this forum most people predict 6000+ delivery#, much higher than guided. What do you think is the number that the street has priced in? Per DB it seems still in the lower 5000 range. I believe Wedbush mentioned that the 7000 # was based on the VIN analysis found on the forum, and it did not make much impact on the stock price. it feels like people don't even remotely believe that number. I hope this is the case, or there will be no earning beat at all.
This is the million dollar question. In previous quarters, my sense has been that the market has reacted in a knee-jerk fashion. That is why I brought up GAAP figures. I found somewhere that consensus is break even - I took that to mean GAAP. That would be very optimistic, in a quarter where guidance says that ZEV will drop sharply and R&D increase significantly! I am surprised that R&D is not put on the balance sheet, but maybe that is for tax reasons? Or maybe it is not common to activate R&D in US GAAP?
Otherwise, I completely agree with your statements. ZEV credits will have virtually zero impact on Tesla's future, and increased R&D is a good thing. The key Q3 figures are production and gross margin. The key guidance is anything that has to do with Q4 and 2014 production and demand. Those four factors are what the market should look for on Nov 5.
StapleGun
Member
I'm currently putting together some production analysis from a new angle and I have a couple questions that are imperative to the analysis, hopefully someone here can answer. At what point is a car registered with the DMV compared to the day it is delivered? Secondly, are loaners and showroom cars registered with the DMV? Any help is much appreciated!
Where did you find that?
Not the best source, but finance yahoo has consensus at $0.11. And consensus estimates are most certainly non-GAAP, at least the ones that are quoted on finance websites or CNBC, Bloomberg, etc. The only media that uses GAAP is a Reuters or Forbes and I haven't figured out why. Wall St. always talks in non-GAAP numbers and those are the ones we should be focusing on as investors.
Sometimes different analysts have different ways of calculating non-GAAP. E.g last quarter Wall St. was using Lease Accounting in Non-GAAP as well as GAAP. But Elon set them straight in the Q2 letter and said that they will be providing non-GAAP only after adjusting for lease accounting to show higher revenues.
Here: http://www.nasdaq.com/symbol/tsla/earnings-forecast
Good to hear that it would probably be non-GAAP. I think the projection I did would be a quite spectacular success for Tesla, even with negative GAAP.
At the same time, I am still pondering the question: Why would they game the Q3 results at the expense of Q4, by halting EU shipments in September? Could it be because they saw an opportunity to break even on GAAP?
*Based on Norwegian registration numbers and anekdotal evidence from Norwegian forum, I am quite sure they did
Loaners have to be registered since they are used in public traffic. For show room cars this might be different, but i saw the show car in Munich, Germany, and this car has been registered (it got license plates and so on...). And for the other question: At least in germany the car is delivered first and registered afterwards.
I came up with roughly 6,600 registered cars worldwide for Q3. I am thinking to subtract about 500 - 600 cars (show room cars and loaners).
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