Q4 2015 Conference call discussion thread

[omarsultan]

They wouldn't have an event to release a picture. That would just require a press release. Referral Program winners got tickets to the M3 event, it's an unveiling. Elon is just saying the they don't want to give away information a good 1.5 years early as competitors could copy them.

Perhaps they split the difference and show a full-size clay model, but I think credibility will take a beating if they don't have a prototype. I think for the most part, people want to see what it looks like--Tesla's visual style is well established now, so its hard for someone to steal it without getting called out. I think they can defer any of the technical goodies for later.

Let folks look at the sheetmetal, confirm the range and price point and I think they will be good.

 

[Snow Drift]

Perhaps they split the difference and show a full-size clay model, but I think credibility will take a beating if they don't have a prototype. I think for the most part, people want to see what it looks like--Tesla's visual style is well established now, so its hard for someone to steal it without getting called out. I think they can defer any of the technical goodies for later.

Let folks look at the sheetmetal, confirm the range and price point and I think they will be good.

I think it will be like the MX concept reveal in 2012. More of a drivable design study.

 

[dhanson865]

The hand wringing about demand makes me laugh. There isn't a Tesla store or service center in the vast majority of major US cities.

Go ahead and look at Find Us | Tesla Motors, and then compare vs any sort of list of major cities or population density map.

There are something like 20-25 states with no store or service center. And several states with one but not in a location that serves the top population center in the state.

All it takes for some is to see that they can get it serviced without towing it 500+ miles and they'll order one.

You could double demand overnight by opening service centers without opening stores. You could double it again by opening stores and service centers. You could double it again on top of that by any one of a dozen easily implemented business strategies that don't involve any more insight than a middle schooler with an interest in cars would come up with.

Build more superchargers - check, it's on the to do list
Build more service centers - check, it's on the to do list
Build more stores - check, it's on the to do list
Build more cars - check, it's on the to do list

really they don't have to do any more than that to be profitable. Anything after that is about changing the market and changing the world. Model 3 is the more than that but if all you want are profits they could just scale up from here with S and X and still grow many times over.

 

[mikevbf]

What will be most interesting for me is to see where the second hand market is by that time. An 8 year battery/power train warranty will make a four year old MS very attractive when compared to a new optioned M3.

I was a bit surprised by Elon's response to the question about M3 pulling from MS sales. He returned to the Seven versus Three series analysis which may be true but it does ignore the not insignificant number of people that post about MS being the most expensive car they have ever purchased along with something like "I never thought I would pay this much for a car". I think MS is unique to a point where it does pull some number of sales from outside its "class". It is impossible to know now as there is no Three series to the Seven series that is MS.

I agree that the Model 3 will steal some of the Model S sales unlike the the Model X because it is so much cheaper. This is the problem with the March reveal and why they might not try to hit out of the park until a later date closer to production. It is a delicate dance between appeasing investors while not endangering a slow down in demand of what is currently available.

 

[roblab]

You could double demand overnight by opening service centers without opening stores. You could double it again by opening stores and service centers.

And this speaks mainly to the, shall I say, uneducated masses, who can only think in terms of their grandfather's old gas cars. What service do ICE cars need? Oil filters, oil changes, new catalytic converters, plugs, points, condensers. Rings. Transmission fluid top ups and changes. And on and on.

What maintenance is there for an electric? According to Tesla, windshield wipers. That's not even a Tesla item. Costco will do it for you.

People don't get it. You do NOT need to have a service center 5 miles from your home for your Tesla as you do for your Ford. I just took my 90D in, since I happened to be nearby for something else, 115 miles from home, four months after I bought it. It was for the seat belt fastener recall, took less than 5 minutes. According to Tesla, "there is no maintenance".

Oh my!

 

[dhanson865]

And this speaks mainly to the, shall I say, uneducated masses, who can only think in terms of their grandfather's old gas cars. What service do ICE cars need? Oil filters, oil changes, new catalytic converters, plugs, points, condensers. Rings. Transmission fluid top ups and changes. And on and on.

What maintenance is there for an electric? According to Tesla, windshield wipers. That's not even a Tesla item. Costco will do it for you.

People don't get it. You do NOT need to have a service center 5 miles from your home for your Tesla as you do for your Ford. I just took my 90D in, since I happened to be nearby for something else, 115 miles from home, four months after I bought it. It was for the seat belt fastener recall, took less than 5 minutes. According to Tesla, "there is no maintenance".

Oh my!

12v battery died 250 miles from SC making me pay for 150 mile towing

Near annual replacement of 12V battery is typical according to Tesla Service Tech


Really, have you never driven an EV or Hybrid long enough to see the 12v weakness? I only have to think of one component and already it's important how far away the service center is because Tesla hides the 12v so far into the car and makes it hard to replace and has a huge vampire drain issue. And this isn't an issue that only exists for Tesla. Nissan Leaf and Toyota Prius both have similar 12v issues and the Prius predates the Tesla by many years.

I had a 12v battery last 10+ years in a Saturn SL. I expect more like 5 years in a Prius or Leaf with SKS and other loads running non stop. Maybe a Model S will get 2 years on a 12v in similar use? How many Tesla owners do you think will go as far as I will to replace a 12v themselves or use a CTEK to maintain it? I've replaced a 12v in a Prius and that involved a hatch, a couple of floor/storage layers, pencil posts not SAE, short cables in a tight space with need for proper sockets/ratchet/etc. Just glancing at it I think the Model S requires more labor and that isn't my idea of a fun maintenance project. Heck I don't want to do the Gen II Prius 12v ever again. But I don't want to have to make an appoint ment and drive several hundred miles to pay someone else to do it either. At least for the Prius if I decide to pay for the service I can drive less than 15 miles to one of several options.

but while we are at it have you read

Tesla won't perform any alignment/wheel/suspension work on car with aftermarket rims/tires it's clear they don't want me installing my own aftermarket parts, so I have to make a long trip if I want a roof rack, tow mount, or some other modification that I want installed by a professional installer?

Service centers are also helpful if the firmware update fails and you see http://www.teslamotorsclub.com/attachment.php?attachmentid=99889&d=1446513357 or see that or a similar message for a drive unit issue or a inverter issue or any other issue.

Tesla has a little bit of a split personality about service centers. They want to tell you not to service your own car so they have complete control and thus you have to go in for "service" when they don't want you do to it yourself. At the same time they want to tell you how little service a Tesla needs.

Yep, I'd agree that EVs should require less service than ICE only and hybrid vehicles. I fully plan to migrate away from gas and enjoy not buying ICE components for my current EV and not having to pay for oil changes. But if you want to talk about low maintenance Tesla has a long way to go to hit Toyota Prius level reliability and I don't get flack from anyone if I buy a battery from Amazon or a local parts store and install it myself in a Toyota/Nissan. I'd be a bit miffed if I had to wait in line for the only service center within 500 miles of me to schedule an appointment to do work on a car that I'd otherwise do myself if they didn't make it hard to do and/or complain about end users doing maintenance.

This is a bit off topic for a earnings thread though so if you really disagree we should take this to a new thread. I just ask that if a moderator moves this post that they move the post I quoted so it isn't left un-refuted.

and to be clear I'm not a short, I'm long TSLA. I live 185 miles from a service center. I'm not in the worst case scenario. I just see it as an easily addressed, valid issue that reducing the average distance to a service center would increase demand.

 

[motobaleno]

any comment about the fact that cash burning seems unstoppable?
I really don't understand how it is possible to lower capex while having to built up new production facilities for m3.
The excess capex in 2015 have been attributed to MX but production line for MX was the same that MS right?
It seems rather obscure to me how the past capex expenses could be lower than future ones...

 

[Gerardf]

any comment about the fact that cash burning seems unstoppable?
I really don't understand how it is possible to lower capex while having to built up new production facilities for m3.
The excess capex in 2015 have been attributed to MX but production line for MX was the same that MS right?
It seems rather obscure to me how the past capex expenses could be lower than future ones...

From the filing :

We expect to generate positive net cash flow and achieve non-GAAP profitability for the full-year 2016. Thus our cash balance at the end of 2016 shouldincrease from the year end 2015 level. We plan to fund about $1.5 billion in capital expenditures without accessing any outside capital other than our existing sources that support our leasing and finished goods inventory. We plan to invest in equipment to support cell production at the Gigafactory, begin installation of Model 3 vehicle production machinery, open about 80 retail locations and service centers, and energize about 300 new Supercharger locations.

http://files.shareholder.com/downlo...26234x0xS1193125-16-457674/1318605/filing.pdf

 

[schonelucht]

So I've been going over the transcript today. Couple of remarks (some of them already touched on by others)

• Including the Asset Backed Line in their cash changes forecast moves the goalpost. On the other hand it makes sense. The cash is there and the credit is quite secured against short term deliveries. I like the new measure but still not forgetting they aren't as positive about cash projections as they were even just last quarter. I can't help but think that the CFO is a big influence here. Sure Deepak left on superlative terms but he really didn't deliver on what his ultimate mandate was : cash.
• Model S production is maxed out and possibly on a downward trajectory. That's a good thing. The new product is better although Elon himself isn't convinced.
• The botched X launch costs the company possibly up to $67M last quarter. Ouch.
• Tesla Energy is a write off for 2016 in terms of financials. Ok, this is part speculation but with even Elon himself sounding very restrained about possible revenue add Powerwall waiting for a refresh middle of this year, I would take a bet that TE's contribution is going to be fairly underwhelming to the overall numbers.

Looking forward the the quarterly report (should be available from ir.teslamotors today, right?) to dive into the numbers some more.

 

[motobaleno]

From the filing :

We expect to generate positive net cash flow and achieve non-GAAP profitability for the full-year 2016. Thus our cash balance at the end of 2016 shouldincrease from the year end 2015 level. We plan to fund about $1.5 billion in capital expenditures without accessing any outside capital other than our existing sources that support our leasing and finished goods inventory. We plan to invest in equipment to support cell production at the Gigafactory, begin installation of Model 3 vehicle production machinery, open about 80 retail locations and service centers, and energize about 300 new Supercharger locations.

http://files.shareholder.com/downlo...26234x0xS1193125-16-457674/1318605/filing.pdf

this is rather faint don't you think so?

 

[Hogfighter]

So I've been going over the transcript today. Couple of remarks (some of them already touched on by others)

• Including the Asset Backed Line in their cash changes forecast moves the goalpost. On the other hand it makes sense. The cash is there and the credit is quite secured against short term deliveries. I like the new measure but still not forgetting they aren't as positive about cash projections as they were even just last quarter. I can't help but think that the CFO is a big influence here. Sure Deepak left on superlative terms but he really didn't deliver on what his ultimate mandate was : cash.
• Model S production is maxed out and possibly on a downward trajectory. That's a good thing. The new product is better although Elon himself isn't convinced.
• The botched X launch costs the company possibly up to $67M last quarter. Ouch.
• Tesla Energy is a write off for 2016 in terms of financials. Ok, this is part speculation but with even Elon himself sounding very restrained about possible revenue add Powerwall waiting for a refresh middle of this year, I would take a bet that TE's contribution is going to be fairly underwhelming to the overall numbers.

Looking forward the the quarterly report (should be available from ir.teslamotors today, right?) to dive into the numbers some more.

Using the ABL in the cash flow discussion makes sense, but pundits will jump all over this as gimmicky.

And I'm surprised how long the Tesla Energy ramp-up is taking.

Overall, terrible Q4 and wonderful projections for 2016. The problem is, hardly anyone believes them anymore. Hopefully 2016 will feel like a win.

 

[aznt1217]

Using the ABL in the cash flow discussion makes sense, but pundits will jump all over this as gimmicky.

And I'm surprised how long the Tesla Energy ramp-up is taking.

Overall, terrible Q4 and wonderful projections for 2016. The problem is, hardly anyone believes them anymore. Hopefully 2016 will feel like a win.

I don't think the TE ramp up is long at all. They explained that it took longer because they moved to the Gigafactory earlier for a better and smoother long term S curve ramp (this makes total sense). It's actually common practice for mass market manufacturing. This has already led their first products to be profitable right out the gate.

 

[omarsultan]

The excess capex in 2015 have been attributed to MX but production line for MX was the same that MS right?

They built a new line for S + X which was mostly completed at the end of 2014, but the remaining buildout and all the tooling (those fancy robots) plus the raw material and parts inventory would have hit in 2015. If they had managed to get those other ~250 vehicles delivered, it would have been less of an issue.

This is actually where I give Elon and Co a lot of credit. Many companies would have delivered everything they could in Q4 to recognize the revenue and put a rosy glow on EoY numbers, and then handled issues under warranty in Q1. Instead, Tesla is taking the beating now by doing the right thing for customers by holding built cars until they are right. I think too many analysts neglect to evaluate the impact of that on lifetime customer revenue.

 

[YBT]

Here's the audio for those who don't have access:

Elon Musk declares Model X the best car ever - Q4 2015 Earnings Call (2016.2.10) AUDIO - YouTube

After listening to the call I'm feeling extremely optimistic. These guys are getting leaner and meaner with each new vehicle they build. Sounds like some humbling lessons were learned from X, and in the process the company now has some really great tech up its sleeve to put into future products.

The changing of guard in the ranks is perfectly timed. Deepak has been excellent - a steady & mature voice during many years of short term losses servicing a longer term vision. Seems perfect for him to step aside as that wave begins to break to allow a younger and more urgent energy to drive that transition and begin tightening the nuts and bolts of the operation.

Would have loved to hear an acknowledgement that the company wishes to expand service centre's dramatically before launching the 3 - I live in a major city yet my nearest SC is a 10 hour drive. Doubtlessly this is known and being scrutinized in great detail behind closed doors, so hopefully we'll see some focus on this in the coming quarter(s).

 

[RobStark]

Would have loved to hear an acknowledgement that the company wishes to expand service centre's dramatically before launching the 3 - I live in a major city yet my nearest SC is a 10 hour drive.

Australia has two major cities and Tesla has SC in both of them.

I am sure regional cities of Adelaide,Brisbane, and Perth SC are coming in the not too distant future.

 

[YBT]

Australia has two major cities and Tesla has SC in both of them.

I am sure regional cities of Adelaide,Brisbane, and Perth SC are coming in the not too distant future.

Are you sure, as in "have proof" sure? I haven't seen, heard or read of any plan or intention to have this done within any time frame in my city (Brisbane). Obviously they're going to do it eventually, but a city with a $246 Billion economy and 2+ million residents should have a Service Centre by now - "major" or not.

Without the simplest of infrastructure to support its product, how could any company reasonably expect growth in such places?