Q4 2013 results - data points, projections and expectations

[TSLAopt]

The 550 cars per week with two running shifts was reported by DJ Frustration yesterday - in the Tesla Fremont Factory Work Schedule thread (post #6):

I was on a factory tour last week. They are working two shifts and producing 550 cars per day as of the end of last week. ​

wow! That would be 2750 cars per week, sweet! Jk, I'm sure he meant 550 per week.

anyone have any guesses on where demand is right now?
If there was no supply constraint and ability to build as many as they wanted where do you think we'd be at?
1000 per week? 2000 per week?
(ie. even if reservation rate is only 500-700 per week right now it wouldn't be evident as a lot more people would be lining up to reserve/buy a Model S all over the world if there wasn't a 3-12 month waiting time and they could get the car in 4-6 weeks).

on nothing other than "gut feeling" I would say 1600 per week and that figure would likely grow for a while.
600 week in US
200 week in China
200 week in Norway
400 per week in rest of Europe
200 per week in rest of world

 

[Mario Kadastik]

Just to make sure people don't get overly optimistic the Q4 numbers might come out ahead of guidance etc, but Q4 is also when Tesla reports FY2014 guidance. Now various things indicate that the battery supply issue isn't solved yet (latest example being Elon's tweet about the difference of battery tech in SCTY offer and that there is no short term constraint THERE). Then the report about the ramp up of battery production by panasonic is expected by second half of 2014.

So while we all throw around numbers like 40k cars in 2014 the cautious scenario may be that from Q1-Q2 Tesla can't really ramp up car production going between 550-650 cars a week (so say 25 weeks x 600 average = 15000 cars) and then in the second half they could ramp up and end the year at Elon's guided 800 cars / week (25 weeks x 725 average = ~18 000 cars) which gives a guidance of 33k. So do not be surprised if Tesla is conservative and guides for 30k cars in 2014. This will be far below the expectations and will kill the stock at least in the short term post-ER.

This is just to keep everyone thinking realistically as Tesla is most likely ready to do 1000+ cars / week already now, but they are constrained by some subcontractors. Until we get a clear indication that this is resolved I'd be cautious about the 2014 guidance.

 

[JRP3]

I think max on two shifts is about 800/week, unless they start doing overtime again.

 

[vgrinshpun]

I think max on two shifts is about 800/week, unless they start doing overtime again.

The precise number for the "design" capacity of the assembly line is 83 cars per day according to Gilbert Passin, Tesla Motors Manufacturing VP (http://www.edmunds.com/autoobserver-archive/2011/10/tesla-wows-with-model-s-rides-factory-tour.html). The weekly (5 working days) capacity is then 415 cars. Then two shift operation would yield 830 cars per week.

There was a discussion at the end of the Q3 2013 call on how Tesla would approach task of producing 80-100K cars/year (40-50K Model S and 40-50K Model X). I was surprised to hear Elon mentioning that existing line would not be able to produce in such numbers.

Up to the time when I heard Elon state this my assumption was that scaling from 83 cars per day in three shifts would add up to 249 cars/day, and then assuming 48 weeks, 7 days per week operation would result in total production of more than 83K cars.

It seems, however, that current internal thinking does not include 3 shift operation, and Elon during the call indicated that some reconfiguration of the assembly line would be required to scale production up to these levels.

The complete exchange betwee Elon and Patrick Archambault of Goldman Sachs:

Patrick Archambault - Goldman Sachs
Got you. If I can, just one more just on, how you are going to configure your manufacturing sort of going into the end of this year? Does your current line have flexibility or will have flexibility to build Model Ss and Xs going through the same line or are you going to have to sort to build a parallel one.
Ultimately, I think the original expectations you put out was 40 to 50 global units of demand for S. Clearly, that would probably at some point the setup you have now but just kind of wondering when that additional capacity would go in and how it might be configured?

Elon Musk - Chairman of the Board, Chief Executive Officer, Product Architect
We have a game plan on that front because, obviously, if we are doing 40 or 50 in Model S volume, if Model X turns out to have a comparable demand and we are on the order of 100,000 units then clearly our current production line is not going to do the trick. So we are going to need something else and we are looking at reconfiguring a part of the factory, maybe using one of the moving production lines that's still there from the NUMMI days but I feel pretty confident. I mean it's not going to be any, the production of vehicle is not going to be constraint. That's not a limiting factor. No doubt we have got some sort of huge capital, training thing that's going to need to happen. I think we have got a handle on how to get there.

 

[FredTMC]

The precise number for the "design" capacity of the assembly line is 83 cars per day according to Gilbert Passin, Tesla Motors Manufacturing VP (http://www.edmunds.com/autoobserver-archive/2011/10/tesla-wows-with-model-s-rides-factory-tour.html). The weekly (5 working days) capacity is then 415 cars. Then two shift operation would yield 830 cars per week.

There was a discussion at the end of the Q3 2013 call on how Tesla would approach task of producing 80-100K cars/year (40-50K Model S and 40-50K Model X). I was surprised to hear Elon mentioning that existing line would not be able to produce in such numbers.

Up to the time when I heard Elon state this my assumption was that scaling from 83 cars per day in three shifts would add up to 249 cars/day, and then assuming 48 weeks, 7 days per week operation would result in total production of more than 83K cars.

It seems, however, that current internal thinking does not include 3 shift operation, and Elon during the call indicated that some reconfiguration of the assembly line would be required to scale production up to these levels.

The complete exchange betwee Elon and Patrick Archambault of Goldman Sachs:

Patrick Archambault - Goldman Sachs
Got you. If I can, just one more just on, how you are going to configure your manufacturing sort of going into the end of this year? Does your current line have flexibility or will have flexibility to build Model Ss and Xs going through the same line or are you going to have to sort to build a parallel one.
Ultimately, I think the original expectations you put out was 40 to 50 global units of demand for S. Clearly, that would probably at some point the setup you have now but just kind of wondering when that additional capacity would go in and how it might be configured?

Elon Musk - Chairman of the Board, Chief Executive Officer, Product Architect
We have a game plan on that front because, obviously, if we are doing 40 or 50 in Model S volume, if Model X turns out to have a comparable demand and we are on the order of 100,000 units then clearly our current production line is not going to do the trick. So we are going to need something else and we are looking at reconfiguring a part of the factory, maybe using one of the moving production lines that's still there from the NUMMI days but I feel pretty confident. I mean it's not going to be any, the production of vehicle is not going to be constraint. That's not a limiting factor. No doubt we have got some sort of huge capital, training thing that's going to need to happen. I think we have got a handle on how to get there.

My two cents. This Q&A was somewhat reassuring to me. Suggests they are still planning for over 40k MS in 2014 and up to maybe the same amount of MX. I read on TMC somewhere that a separate body assembly line for MX will be used in the near term and that longer term it may be on same line as MS. I DO believe that TM has a handle on ramping to over 40k MS in 2014. Let me put it another way: if TN guides to anything less than 40k units of MS in 2014 then the stock price is going to take a major hit. Elon has always said he wants to test limits of demand in 2014. I certainly hope TM mgmt realizes after the Q3 earnings debacle that they are a growth company and they need to continue to grow at least as fast as their stated guidance. And, Exceeding their guidance is the real key to maintaining the stock price. Remember that Elon has an incentive plan to hit. The car fires didn't help of course. I think we'd be back into the 160s without those damn fires and NHTSA pending verdict.

 

[DrDave]

The precise number for the "design" capacity of the assembly line is 83 cars per day according to Gilbert Passin, Tesla Motors Manufacturing VP (http://www.edmunds.com/autoobserver-archive/2011/10/tesla-wows-with-model-s-rides-factory-tour.html). The weekly (5 working days) capacity is then 415 cars. Then two shift operation would yield 830 cars per week.

It seems, however, that current internal thinking does not include 3 shift operation, and Elon during the call indicated that some reconfiguration of the assembly line would be required to scale production up to these levels.

We don't hear much from Gilbert anymore do we? Wonder if his title/role has changed.

 

[vgrinshpun]

We don't hear much from Gilbert anymore do we? Wonder if his title/role has changed.

Both Tesla Motors Executives page and his LinkedIn page list him as TM Manufacturing VP. I guess that he is really busy working on scaling up production/planning reconfiguring of the current assembly line. :wink:

 

[sleepyhead]

Elon already said a while back that the current line is designed for 40k units/year. He also said that they can expand to 50k units/year with very minimal capital expenditure of $25m - $50m.

Anything over $50m would probably require a lot more CAPEX and probably installing a completely new line.

For those who don't know Elon has said that batteries are now the ONLY constraint, that they worked everything else out with suppliers. It is only the batteries holding them up.

 

[Mario Kadastik]

Let me put it another way: if TN guides to anything less than 40k units of MS in 2014 then the stock price is going to take a major hit. Elon has always said he wants to test limits of demand in 2014. I certainly hope TM mgmt realizes after the Q3 earnings debacle that they are a growth company and they need to continue to grow at least as fast as their stated guidance. And, Exceeding their guidance is the real key to maintaining the stock price. Remember that Elon has an incentive plan to hit. The car fires didn't help of course. I think we'd be back into the 160s without those damn fires and NHTSA pending verdict.

Tesla might be ready to do 40k, they are most likely and are eager to do so, but if their suppliers know they can't deliver, then what else can TM do but to guide to realistic numbers. That's what I'm trying to say that if this supply constraint issue isn't resolved in Q4 '13 like many assume, but instead in the second half of 2014, then we have a problem on our hands as the market will expect far more than TM can promise and the price will tank. It's just a risk we should be aware of and not get overly excited. I fully expect TM to be able to do in the years to come hundreds of thousands of cars per year, but in the short term they might be hitting a wall on supply side....

 

[FredTMC]

Elon already said a while back that the current line is designed for 40k units/year. He also said that they can expand to 50k units/year with very minimal capital expenditure of $25m - $50m.

Anything over $50m would probably require a lot more CAPEX and probably installing a completely new line.

For those who don't know Elon has said that batteries are now the ONLY constraint, that they worked everything else out with suppliers. It is only the batteries holding them up.

yep. Agreed. Elon said batteries are the only constraint.

 

[Raffy.Roma]

yep. Agreed. Elon said batteries are the only constraint.

I am not an expert in this field but isn't the gigafactory going to solve this issue?

 

[vgrinshpun]

I am not an expert in this field but isn't the gigafactory going to solve this issue?

The giga-factory will be required for Gen III. The new Panasonic agreement for a minimum of 1.8 billion cells is designed to fully address Model S/X demand during the next four years.

 

[Bonken]

yep. Agreed. Elon said batteries are the only constraint.

source?

 

[RobStark]

source?

Several sources now. Google is your friend.

 

[ecarfan]

Oops, removed my post as I misinterpreted the OP's post.

 

[anon]

source?

This was in a note from Barclays within the last few days - a Barclays analyst had spoken with Elon or possibly another Tesla executive. I think sleepyhead reported on it, perhaps in the short-term thread.

 

[Bonken]

This was in a note from Barclays within the last few days - a Barclays analyst had spoken with Elon or possibly another Tesla executive. I think sleepyhead reported on it, perhaps in the short-term thread.

oh thats right, forgot about that, thanks!

 

[Clprenz]

I have looked at the VIN's posted last time before the quarter end. Est. about 20,000 "VIN deliveries" reported. But the total amount delivered was about 18,200 through Q3. That means that 25% were on the boat or loaner cars. Looking at the current VINS, we look to be about 27,00 right now and 28,500 at end of quarter. Elon suggested that euro deliveries would continue to grow. So I would estimate 33% are going to be unaccounted VIN's (on boat etc.). That leaves us with 6,800 deliveries. That's my estimate.
NON-GAAP
107k ASP
26% GM
125 million capex
64 million in profit
EPS (138 million shares) $.46
This is above the usual 10% delivery beat.
I'd be happy with 6,600 deliveries, 35,000 outlook

 

[bonaire]

CLPrenz, you are saying that all Vin #s in the list have been built?

If the factory ran an average of 500 per week from January 1 with five holiday weeks off (one at start of each quarter plus Christmas) you will have 47 * 500 or 23,500 built this year by end of December and some 2700 built and 2650 sold in 2012. Given that, assume 26200 produced from Q4 12 to end of Q4 13. Sales so far this year are 15500 out of 23500 built so you have a possibility of from 6000 to 8000 sales in Q4 depending on pipeline loaded up to end Q3, which I believe is over 1000. Q4 also brings tax credit fulfilling sales in the USA and a subsidy-ending period in The Netherlands. Q1 may be lower in sales than Q4 unless new markets open up. UK opens in Q2 with the delivery of the right-handed drive models.

I'd say that 6200-6400 sales in Q4 are possible, 6000 probable. Anything more is mis-interpreting the Vin # assignment history and the extreme overage of Vin # assignment used during Q3 (for whatever reason - insert conspiracy theories here...)

Some EU buyers have Vin numbers from the summer period of excessive Vin assignment and their cars are still not built here in December. The primary concern of all investors is going to be reservation #s outstanding to end Q4, free cash flow, OpEx and CapEx and GAAP earnings. With the stated increase in R&D and CapEx, GAAP earnings will not be better than Q3 (IMO).

I wonder if they can really give such guidance of 35k for 2014. That is over a 50% YoY increase. It means it must magically go from 6K sales in Q4 to 7K or more in Q1 and steady increase through the year. To do that, the factory must move to a 3rd shift to increase production 50%. You can't take the existing shift workers and extend them but train up 50% more workers and usually if you have 500 workers, you need to train 300 more for a 3rd shift due to eventual attrition of all shifts. All suppliers must be on-board. The factor influencing increased production will be a demonstrable increase in reservations in regions that are small but growing. Let's say China rolls in 100/month reservations now but changes to 300/month in February and grows. I just don't know how investors can make proper decisions without knowing some of this data and working off simple one or two sentence statements from the factory. Other auto firms give far more detailed guidance and monthly sales numbers (and reservations are not an important part of their business).

To me, the stock price and all this forcasting is meaningless. The price of shares is whatever wall street tells us it should be and we just have to hold on for the ride. For example - who really believes that the "German Fax" caused the recent $20 increase in pps? The increase was immediate and sustained with a whole lot of 100-block trading in the mix by computer algorithm HST occurring. These are not retail investors but trading robots controlling the pps.

 

[bonaire]

yep. Agreed. Elon said batteries are the only constraint.

Would it make sense to "highlight" selling more MS60 in order to do more vehicles without eating through the battery constraint? Maybe have gallery employees talk customers into considering those models over the 85? Also, how many batteries are going to SolarCity - or will those be Samsung or other vendors'? With SCTY CEO saying they want to try to install "all future" systems with battery standby, that is a lot of batteries going over to SCTY.

Getting more EVs on the road by selling MS60 is more in tune with the corporate declared statement of bringing affordable, sustainable transportation to consumers.