Short-Term TSLA Price Movements - 2016

[schonelucht]

Two new information bits for me. One positive, one negative : One TE and TA is going to be 50/50 (we already knew the GF had a larger potential output than originally planned from the last CC). I am still in a wait and see on that one but it does nudge me a little bit towards a positive attitude regarding TE. The other was that the run rate target for S/X production has once again been pushed out. It was given as a very firm 2000/week on the last CC by end of June, now it's going to be 80-100k run rate by the end of the year. Otherwise, from a shareholder perspective this was a non-event and I don't see it moving the stock price a lot over the next few days.

 

[neroden]

“The most important point I want to make is … that we’ve realized that the true difficulty and where the greatest potential lies is in building the factory,” Musk said.

This actually worries me, because the true difficulty is in aftermarket service, and it's *still* sounding like he does not recognize this. The factory definitely has the greatest potential for cutting production costs. But failures on the service side is what has the greatest chance of sinking the company by causing demand to drop.

They've been handwaving all the service related issues so far, and that's not good. That won't solve anything.

 

[dennis]

The other was that the run rate target for S/X production has once again been pushed out. It was given as a very firm 2000/week on the last CC by end of June, now it's going to be 80-100k run rate by the end of the year. Otherwise, from a shareholder perspective this was a non-event and I don't see it moving the stock price a lot over the next few days.

If Q2 guidance of 17K deliveries is met they will need to be at 2000/wk for Q3 and Q4 to meet the 80K-90K 2016 guidance. So I don't interpret anything Elon said as pushing out the production guidance.

 

[schonelucht]

If Q2 guidance of 17K deliveries is met they will need to be at 2000/wk for Q3 and Q4 to meet the 80K-90K 2016 guidance. So I don't interpret anything Elon said as pushing out the production guidance.

You're confusing delivery guidance with production guidance. I was talking about the latter. Here is what they said in the CC less than a month ago :

I feel confident that we are going to hit the 2,000 vehicle a week target by the end of this quarter, of which on the order of 40% are X. That's our internal plan and what we expect to meet.

Contrast that with what Elon said today

We're hoping to sort of be at an annualised rate of somewhere between 80 and 100 000 cars by the end of this year

Now maybe the target from the CC was really just 'peak production' with average real production lower. That would reconcile both statements but then again I don't think anyone on here took the first quote as such. I certainly didn't : for me it was a near given that they'd be producing over 50 000 cars in the second half of this year.

It's also interesting to do the math on total production this year : 15.5k in the first quarter (per report) 20k in the second quarter (per 1st quarter shareholder letter), 40-50k in the second half of this year (per shareholder meeting) for a total of 75.5k to 85.5k. Since the pipeline was pretty empty at the start of the year I don't think they will be able to deliver more than they produce this year. That makes a delivery guidance beat (>90k) impossible, a delivery guidance reach (>80k) more likely than not but a delivery guidance miss (<80k) remains a realistic possibility due to production constraints. This clearly shifts the potential for upside surprises over the next quarters downwards.

 

[WarpedOne]

This actually worries me, because the true difficulty is in aftermarket service, and it's *still* sounding like he does not recognize this.

If your production is good enough, you don't service at all.
You must rely on service if production is flaky.

Their goal is a product that needs little service. I'm fine with them focusing on that goal.

 

[schonelucht]

I agree with your hunch but how do you infer gross margin in TE from what they've said? Automotive GM is talked about in detail in every quarterly report.

Let's say 2018 model 3/Model S+X ratio is 2/1. Model 3 revenue : ASP of $42k on battery of 60kWh -> $700/kWh. Model S/X ASP of $100k on battery of 100kWh -> $1000/kWh. Averaging it out 2/1 means automotive revenue per kWh is $800/kWh. If an equal amount of battery production goes to automotive as goes to energy with equal total revenues, that means TE revenue per kWh of battery must be approximate $800 too. IIRC vgrinshpun previously calculated expected revenue on that side of the business below that price point so that really improves numbers.

 

[Tenable]

It's also interesting to do the math on total production this year : 15.5k in the first quarter (per report) 20k in the second quarter (per 1st quarter shareholder letter), 40-50k in the second half of this year (per shareholder meeting) for a total of 75.5k to 85.5k. Since the pipeline was pretty empty at the start of the year I don't think they will be able to deliver more than they produce this year. That makes a delivery guidance beat (>90k) impossible, a delivery guidance reach (>80k) more likely than not but a delivery guidance miss (<80k) remains a realistic possibility due to production constraints. This clearly shifts the potential for upside surprises over the next quarters downwards.

I hate to say it but what Schonelucht said makes sense to me. Does anyone have information or an interpretation that leads in a different direction? I may need to place more hedges than I'd originally intended.

 

[Johan]

Let's say 2018 model 3/Model S+X ratio is 2/1. Model 3 revenue : ASP of $42k on battery of 60kWh -> $700/kWh. Model S/X ASP of $100k on battery of 100kWh -> $1000/kWh. Averaging it out 2/1 means automotive revenue per kWh is $800/kWh. If an equal amount of battery production goes to automotive as goes to energy with equal total revenues, that means TE revenue per kWh of battery must be approximate $800 too. IIRC vgrinshpun previously calculated expected revenue on that side of the business below that price point so that really improves numbers.

Right, makes sense. And my thinking is that the gross margin in the battery pack as a component is better than on the car as a whole. So it would make sense for the TE products to have better overall margins since the actual battery makes up a much larger part of the entire product than in cars.

 

[hoang51]

I hate to say it but what Schonelucht said makes sense to me. Does anyone have information or an interpretation that leads in a different direction? I may need to place more hedges than I'd originally intended.

Well, in about a month, we will find out how well Tesla Motors pumped out how many vehicles. If it's lower than 20K for Q2Y16, it's going to be another sideways to downwards trading that some wouldn't want to get stuck with.

 

[TMSE]

You're confusing delivery guidance with production guidance. I was talking about the latter. Here is what they said in the CC less than a month ago :



Contrast that with what Elon said today



Now maybe the target from the CC was really just 'peak production' with average real production lower. That would reconcile both statements but then again I don't think anyone on here took the first quote as such. I certainly didn't : for me it was a near given that they'd be producing over 50 000 cars in the second half of this year.

It's also interesting to do the math on total production this year : 15.5k in the first quarter (per report) 20k in the second quarter (per 1st quarter shareholder letter), 40-50k in the second half of this year (per shareholder meeting) for a total of 75.5k to 85.5k. Since the pipeline was pretty empty at the start of the year I don't think they will be able to deliver more than they produce this year. That makes a delivery guidance beat (>90k) impossible, a delivery guidance reach (>80k) more likely than not but a delivery guidance miss (<80k) remains a realistic possibility due to production constraints. This clearly shifts the potential for upside surprises over the next quarters downwards.

I can not find Elon's purported statement about 80k to 100k run rate by end of this year. The recording is up there on Tesla site. Could you please point the location in the video of that statement? Thanks.

 

[Gerasimental]

I can not find Elon's purported statement about 80k to 100k run rate by end of this year. The recording is up there on Tesla site. Could you please point the location in the video of that statement? Thanks.

Sorry I can't look it up right now but it was when he had the slide of the trajectory of Tesla's fleet size up. Toward the end of the history lesson and before he started talking about manufacturing.

 

[Causalien]

This actually worries me, because the true difficulty is in aftermarket service, and it's *still* sounding like he does not recognize this. The factory definitely has the greatest potential for cutting production costs. But failures on the service side is what has the greatest chance of sinking the company by causing demand to drop.

They've been handwaving all the service related issues so far, and that's not good. That won't solve anything.

I agree with this. Service and charging for Model 3 owners who lives in condos downtown will be a big issue. Since TSLA is engineering oriented, I can see why they have an aversion to tackle this issue. Engineers hates thinking about service and service is basically a manhour per customer thing that does not have any hack or shortcut.

People want to hear back same day. People want to be pampered and feel like a king.

I also don't see them being able to tackle this issue until the first production line is ironed out.

 

[Bet TSLA]

Elon tweeted a pointer to this piece as a good summary of the annual meeting:
Elon Musk Confessions: All the Stupid Things Tesla Has Done

 

[TMSE]

Sorry I can't look it up right now but it was when he had the slide of the trajectory of Tesla's fleet size up. Toward the end of the history lesson and before he started talking about manufacturing.

I am sorry I have to say this: Unless you can quote or verify, please don't post anything. It will just send us on wild goose chase. It is incumbent upon you to justify what you claim as fact. I am not saying that you are wrong, I just need proof. That's all.

 

[Gerasimental]

I am sorry I have to say this: Unless you can quote or verify, please don't post anything. It will just send us on wild goose chase. It is incumbent upon you to justify what you claim as fact.

The information is readily publicly available and most people in this thread were watching the event live. It's not my job to trawl through it and find an exact time in the video when it's said. I have other things to do at the moment. Maybe if you are going to post with the only intention of telling someone else not to, you are the one that should not be posting. Mods please remove this nonsense.

 

[Johan]

I am sorry I have to say this: Unless you can quote or verify, please don't post anything. It will just send us on wild goose chase. It is incumbent upon you to justify what you claim as fact. I am not saying that you are wrong, I just need proof. That's all.

If you did not take the time to watch the presentation please don't question the correctness of respected member's reporting of what was said. Demanding time stamped video links or transcripts makes you come off like a spoiled free loading brat.

Elon did say exactly what @Gerasimental is reporting: they aim for an exit rate of 80-100k, with an emphasis on 100k.

 

[schonelucht]

I can not find Elon's purported statement about 80k to 100k run rate by end of this year. The recording is up there on Tesla site. Could you please point the location in the video of that statement? Thanks.

Sure. It's at the 2h17'45" mark in the video on the investor relationship website of Tesla.

 

[Vitold]

Now maybe the target from the CC was really just 'peak production' with average real production lower. That would reconcile both statements but then again I don't think anyone on here took the first quote as such. I certainly didn't : for me it was a near given that they'd be producing over 50 000 cars in the second half of this year.

I did and still do. I also think that product mix goal will not be maintained at 40% of X as it would be unwise to keep on pushing X while S is hot after refresh. Especially since X has lower margins and is affecting service times as confirmed by EM.

 

[Hogfighter]

Actually, the answer to your question is part of the information that was provided:

• Output of GF will be approximately evenly split between TE and TA
• Revenue from TE in a long term will approx. equal to TA

This means, as I was speculating for a while now, that net margin and profit for TE will be significantly higher than for TA, and my paper math for TE vs. TA actually improves.

Together with 3-fold increase of the GF output from the same footprint, and, therefore, with the 3-fold reduction in the GF campus costs per GWh of capacity and output, this is HUGE, but will continue to fly under a radar, until it is not. My guess that 2017 will be a watershed year.

Even though my TE margin question wasn't asked, I give you credit in being the one to bring this to light. This was the most important tidbit said last night.....up to 3x output from the existing GF when completed, and approximately 50% of revenue to TE. That means well over 50% of the output will be for TE. It's the elephant in the room that no one is seeing.

 

[Hogfighter]

I agree with this. Service and charging for Model 3 owners who lives in condos downtown will be a big issue. Since TSLA is engineering oriented, I can see why they have an aversion to tackle this issue. Engineers hates thinking about service and service is basically a manhour per customer thing that does not have any hack or shortcut.

People want to hear back same day. People want to be pampered and feel like a king.

I also don't see them being able to tackle this issue until the first production line is ironed out.

I would have felt like a king if Elon paid for my carbon fiber bikes that were stolen from my barn.