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Quarter end window dressing - when will it stop?

Discussion in 'TSLA Investor Discussions' started by dirkhh, Mar 16, 2015.

  1. dirkhh

    dirkhh Middle-aged Member

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    I know Elon said about a year ago that they will stop with this nonsense.
    But reading through the forums once again the European deliveries promised for the first month of the next quarter (April this time) seem to have all been pushed out to "late second month of the quarter" (May) and quite a few high value cars in the US have been pulled in with P85D for March delivery available until about Mar 10.
    This is foolish pandering to clueless Wall St bean counters. It makes no meaningful difference for the company, worse it risks pissing off even more customers and potential customers outside of the US.
    At what point can Tesla just stop doing this and provide a more predictable delivery time outlook to its customers?
     
  2. trils0n

    trils0n 2013 P85

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    I went in for my 2 year service today. First appointment Monday was supposed to be my best chance to get a loaner. No loaner. They said all the loaners were sold over the weekend as part of the end of quarter push. Driving a terrible rental Cadillac SUV. Model S loaner when in for service really makes ownership a much better experience. Wish they could do better in delivering on it.
     
  3. austinEV

    austinEV Active Member

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    When will it stop? When stopping it would not create a "bad quarter" that would punish, for stupid reasons, shareholders. I think it makes sense to pulse out international cars in the first half of the quarter and then NA in the second half. That way they have a reasonable amount of inventory. If you reversed it and ended the quarter with a huge number of cars on ships we would have to endure 3 months of "see, inventory is piling up. Demand is dead. RIP Tesla".
     
  4. dirkhh

    dirkhh Middle-aged Member

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    While I still think that silly and that all you would have is one odd quarter in which you explain the issue and after that you'd be fine because the sales would show up in the next quarter...
    But what's worse is that they aren't self-consistent. We here see this every quarter and are expecting this. Yet they keep showing European customers "April delivery" when the customers order, only to then, six week later, switch them to "late May" which can only cause people to be frustrated.
    So if you know you're going to play this silly game again, don't show people "April", show them "May" from the get go. Otherwise you are lying to customers.
     
  5. mrdoubleb

    mrdoubleb Active Member

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    It will stop when either of these 2 things happens:
    - Tesla has a factory in Europe and another one in Asia
    - The world economy/financial regulations stop requiring quarterly reports
     
  6. flankspeed8

    flankspeed8 Member

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    Or they could just disclose monthly sales and deliveries like pretty much every other manufacturer. The tighter they are with information, the more speculation is going to occur.
     
  7. Dwdnjck

    Dwdnjck Member

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    I think finishing this quarter strong is important,to Tesla, because of all the doomsaying and FUD that occurred as a result of the poor finish of the last quarter. Tesla needs to have a solid quarter in sales and production, this quarter because they intend to spend a huge amount of money next quarter. I believe they are determined to have a beat after having a miss. I also think they want John Lovello at Merrill Lynch to eat his words about Tesla reducing production in order to hide demand problems.
     
  8. evme

    evme Member

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    You clearly underestimate/overestimate the media. Tesla is going to have some months with more deliveries than other months and some with less, this is due to shipping, customs and the like. 2/3 months will have less deliveries. Which means now media will start speculating how Tesla is dying 3X more often.

    Your reasoning is in tune with saying: I will show the shark I am not a seal by cutting myself and releasing my blood in the water, surely once the shark notices my blood is not seal blood it will leave me alone.
     
  9. sundaymorning

    sundaymorning Member

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    Agreed. Tesla does not need to show its cards to anyone. It's business as usual.
     
  10. Johann Koeber

    Johann Koeber Member

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    I also think this 'rush' is silly. OTOH it keeps the team under pressure to deliver. Probably we need another metric. Monthly figures as suggested above by flankspeed8. These would have to include not only tha actual deliveries, but also production and the number of finished cars in transit to be really meaningful.

    Either way there will be speculating in this forum and elsewhere.

    Elon Musk has a track record of not having shareholders als #1 priority in the short term, thus serving us (shareholders) in the long term.

    So - I wish they just pushed out as many cars as possible, regardless of which month in the quarter it is. Other considerations should prevail: shipping optimisation, batching, etc.
     
  11. dirkhh

    dirkhh Middle-aged Member

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    THIS. +100
     
  12. flankspeed8

    flankspeed8 Member

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    Media is going to speculate regardless. Providing sales points only 4x a year is not helping. Tesla can not have it both ways. Is there a slow down in China or not? And if so, so what? Admit it or deny it but back it up with facts. Don't be surprised when the media/analysts are going to scour any sort of information in the sake of clarity. And this practice of racing cars out the door in the 23rd hour just to meet some sales metric at the expense of QC and good CS is counterproductive. By taking Tesla public they ceded a lot of the secrecy that a private company could get away with. But to sit there and say well, well,well.... they (media) just won't understand because of the logistics....etc.. so we are not even going to tell you the numbers just feeds this. What in the world is wrong with reporting total sales/deliveries each month? Start with that and don' even list the region as it shouldn't matter. A car sold in China is just as profitable (I think) as a car sold in Denver or Denmark.
     
  13. jhm

    jhm Active Member

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    Monthly sales reporting was thoroughly hashed out in this thread.
    Should Tesla publish monthly sales numbers?
    I still think it reflects a lack of confidence not to report monthly numbers, but I am not the CEO. For me the most compelling reason not to report monthly numbers is that it poses customer satisfaction risks, nothing to do with the share price.
     
  14. CHG-ON

    CHG-ON Still in love after all these miles

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    I hate to say it, but as long as they are a public American company, it will never end. The pressure just gets worse as time goes on. So sad that even Elon Musk has to cave to the Wall Street vultures. Stifles meaningful innovation and deep investment in R&D: which drives our future. Maybe when they get to point of Apple, having more money than the US gov't, things might change for them.
     
  15. dirkhh

    dirkhh Middle-aged Member

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    I couldn't agree more. I work for a company that invested more than 20% of its revenue in R&D last year and if you look at the list of companies spending the most on R&D it's interesting that car makers are very well represented there, but the % of revenue for them tends to be a lot lower, usually mid single digits. Tesla for comparison spent about 14% of revenue on R&D.
     
  16. Auzie

    Auzie Tree Hugger Member

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    #16 Auzie, Mar 17, 2015
    Last edited: Mar 17, 2015
    I think such distribution of R&D spending as % of revenue has a lot to do with the nature of the industry that business operates in. The profits in manufacturing are driven by low costs and efficiencies, less so by innovation. Established manufacturing plants require significant capital to enable incorporating innovation. R&D outcomes have to overcome significant capital hurdles before translating into profits in these plants.

    In some other industries, such as electronics, software products, etc these capital hurdles may be far lower and profits are likely to be innovation driven. Hence, such businesses will innovate more.
     
  17. adiggs

    adiggs Active Member

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    There are additional systemic impacts I see as well. Internally, you have employees going through a boom / bust work cycle on a regular basis. That is extra stress and it's no longer needed. I do believe that there was a time, about 1 to 1.5 years back, when Model S was still ramping and quarter to quarter revenue really did make a difference in the survivability of the company. I believe that we're past that point now.

    As I look longer term at Tesla, this is in fact one of the things I'm watching as a long term risk to the company.


    The behavior I would like to see is a company wide decision to optimize total production while ignoring arbitrary quarter end cutoffs. That will sometimes result in large numbers of US cars being produced (and delivered) at the end of the quarter and will sometimes result in large numbers of Asia / Europe cars being produced at the end of the quarter, and it doesn't matter. Optimize the production of the cars in a way that is designed to make the production smooth and regular. I figure that involves batches of cars (similar options list, similar geographic destination), but really what I figure is irrelevant - whatever helps improve the sustainable production rate without burning out your increasingly experienced employees.

    Within that set of optimization criteria, if the company chooses to permanently prioritize the P85D orders ahead of 85D and 60's, I'm completely fine with that. It's a subtle but useful carrot to entice people to upgrade to a more expensive and more profitable car.


    To help make the Wall Street crowd more happy, I believe the company can do a better job of emphasizing production numbers and deemphasizing delivery numbers. Production numbers are all cars that are within a week or 5 of being delivered to an end purchaser and are not like a produced car from other car makers. They do have a small timing vagary associated with revenue recognition, but all produced cars are very close in time (say a month or less) from revenue recognition, depending on how far away / how much shipping is involved. Emphasize the production numbers and the ASP, and the analysts that want to can translate produced but undelivered cars into revenue that is early arriving in the next quarter, and even redo Tesla's financials (pretend that the produced but undelivered cars were delivered) as a what-if.

    In process terms, the production process can be optimized for the least variance and greatest throughput, while allowing variance in the delivery process and the corresponding impact to the quarter end numbers. That variance is constrained and a shortfall in one quarter turns directly into a windfall the next, and both are meaningless. With further practice of both processes, I'm sure Tesla will also find ways to begin reducing the variance within the delivery process.
     
  18. jhm

    jhm Active Member

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    +100. Let's put the focus on maximizing production. Delivery is secondary. What the market thinks about it is tertiary. And what nonsense FUD hoses make of it matters not at all.
     
  19. brianman

    brianman Burrito Founder

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    Unleashing loaners for sale, that likely is a quarterly thing.

    While it's likely this is quarterly window-dressing, I'm not certain it is. A few factors come to mind:
    1. constant influx of new buyers that are pulling the trigger on the higher end (P85D)
    2. fence buyers opting for an upgrade because they are offered earlier delivery (human or website offer) or for other reasons*
    3. parts delays for other markets
    4. shipping delays for overseas markets

    * I talked to a P85D buyer recently that agreed to a configuration change from 85D to keep his green paint job. Just sayin'. (I did not get his forum handle, as I had the impression he's not on TMC.)
     
  20. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    FUD can affect potential buyers.
    Sales could affect the supply chain.
    It could also affect willingness of investors to put money into the Gigafactory.

    Exoect the games to stop around the time Model 3 is produced in large numbers and it's clear that Tesla will survive.
     

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