Short-Term TSLA Price Movements - 2016

[AlMc]

Let's say that Tesla exits Q3 with a weekly production rate of 2200 vehicles/week. That's only about 10% more than produced in June, so an in transit amount grows from 5000 vehicles as in Q2 to 5500 vehicles in Q3. Tesla produces 25,000 vehicles in Q3, doesn't deliver 5500 of them, but gets 5000 deliveries brought in from Q2 production. The net deliveries would be 25,000 + 5,000 - 5,500 = 24,500. More likely, If Tesla reaches their 2200 vehicles/week target mid-quarter, we'll see even higher numbers. Bottom line: for deliveries to fall short in Q3 and Q4, Tesla has to do worse on delivering the vehicles in Q3 than they did in Q2, and I see no reason for that reduction.

I'm not counting on the 5K in transit to decrease in Q3 and Q4. I'm expecting that number to stay the same. One could argue that Q4 last couple of weeks includes winter weather, which could have some effect of Q4 deliveries, but I think the growth of production in Q4 will more than outweigh any winter weather reduction, due to end of year transportation issues.

@papa: We are both bullish on TM and have the LEAPS/stock to prove it but your reply does not answer my concerns.

I agree with your production numbers and I do believe there is demand and that the trucks, boats and trains can carry the finished vehicles..BUT...Can they deliver them into customer's hands? To increase deliveries to customers they either need to be either 50% bigger at the SCs, 50% more efficient or a combination of both giving that 50% increase.

My comment is that I, and several other long term bulls on TSLA/TM are not seeing this at the moment. The SCs are crammed with normal
servicing (the 13 bays at my SC are always full), fixing issues with QC on some of the early Xs and pre delivery check lists (more time on the X than the S) and I do not see a lot more SCs opening.

Certainly, things can change over the next few months AND they will need to if TM is to make guidance.

 

[madodel]

I understand Tesla introducing the X 60, but I don't understand why they are so freely disclosing that it's a software limited 75. This is causing a lot of people who are on the fence to go with the 60, and then they may or may not upgrade later. If I was buying an X I'd want the 90 but probably go 75 because finances are tight, but wait the 60 can be upgraded so why not buy that and then upgrade later if needed.

Instead, 2 years from now Tesla could make an announcement that 60 owners can upgrade. Yeah us Tesla geeks would probably figure this out before long but the general public wouldn't know.

It is about expanding the electric vehicle market. Profits will come later. Even if they don't upgrade, their purchase will spawn more and as we have seen so far, once you own a Tesla, everything else is just a car.

 

[dandurston]

So wait, it's a bad thing for this company to use software to create a whole new product? You would rather them have to have a different chemistry, assembly, and pack for each battery capacity level? That would cost the company even MORE money to make each version. Some of you are nuts.

Per this logic, Tesla should just use the 90 pack for everything.

Or better yet, cram a 120 pack into every model so they don't even need new versions when the Gigafactory brings down costs.

 

[PaulusdB]

Re: 60 kWh versions of Model S and X
I'm missing a specific viewpoint on the addition of these versions to both product ranges. In the automotive industry it's always been very important to get your products out on the streets (not only into brochures, ads and showrooms). My personal experience is that the Tesla Model S is a common car in daily traffic, here in The Netherlands. On my commute to Amsterdam (30 miles / 50 kilometers one way) I stopped counting, seeing more than a dozen S's per trip. And only few of them are the well know Schiphol (Amsterdam Airport) taxis. I guess every Dutch professional has one or more persons in his contacts list actually owning a Tesla. (Of course my 500+ LinkedIn contacts do so. )
I see this as 'critical mass' being reached in my home marketplace by Tesla. Except for California and Norway, this is not the case elsewhere.
So getting more cars on the road (even at reduced gross margin) might be just as wise an investment as buying media coverage or advertisement space (revenue to others...).

 

[dandurston]

We've been over this before, when the Model S "60" came to market. Basically it's delyed revenue in a trade with increased demand. Look, every "60" car ever sold ("every" as in for all practical intents and purposes every) will be unlocked to a 75, either by an owner (which creates increased revenue seeing as how the unlock costs more than the price difference between a 60 and 75) OR by Tesla as they trade in the car and resell it as a CPO car. I guarantee we will not see one single S or X "60" sold as CPO. It costs Tesla nothing to unlock these cars. As I said; they just delay that part of the revenue in exchange for keeping the factory boiling and getting cars out the door.

I think there are a lot of 60's that will be sold (rather than leased) where the buyer would have bought the 75, but because of the disclosure ended up buying the 60. If they upgrade later there's not much of a difference, but I think a good portion of these buyers will realize than 60 is enough and never upgrade. As a result Tesla is down $9g compared to if they hadn't disclosed this and the buyer bought the 75. Whether this is offset by the upsides (spread out fixed costs over higher volumes, incentive on the fence buyers etc.) is the big question, but a non-disclosed upgrade would still provide much of this upside.

The delayed revenue to TSLA only applies to leased cars, or cars where the owner will upgrade. If the owner upgrades that is great for TSLA, but after a few years it gets harder to justify doing so, since sinking $9g into a $70g vehicle is more palatable than sinking $9 into a 4 year old $35g vehicle. Tesla will probably depreciate the upgrade cost so it remains about 15% of the value of the vehicle so buyers continue to opt for it 5 years from now.

With the leased cars, Tesla is taking a lot of depreciation on the un-used 15 kWh since a 3 year old X75 won't be worth $9g more than an X60. If the car depreciates by half, then unlocking the 15 kWh might add $4.5g in value to a 3 year old car, which is probably equal to Tesla's cost for the 15 kWh so TSLA just breaks even with this delayed revenue.

I think the main upside of the 60 to Tesla is bringing in buyers who couldn't afford a Tesla, but now can afford the 60. This does help TSLA since these cars still have a positive margin and it spreads fixed costs, but I doubt a lot of this price sensitive crowd are going to upgrade to the 75. It's true that just having the option as peace of mind might help the sale, but I still don't think an upgradeable 60 is bringing in a lot more new buyers than a non-upgradable 60. I think the the main effect is bringing in new buyers who won't upgrade, and causing on-the-fence 75 buyers to downgrade.

 

[3Victoria]

Yes, but I would expect that at least some of that $9k savings will get spent on some options that would not have otherwise been bought. So the downside is likely to be less that $9k. I also agree that efficiencies of volume will help the bottom line.

 

[mmd]

Did anyone attend the weekend tea event (forgot exact name) at any Tesla store recently? Does anyone know the weekly production rate, if disclosed, this week or last week? Thanks in advance.

One more question about the software limited X60D:
Is Tesla guaranteeing a range of 200 miles with this? Normally, one would see range degradation over time. Is that eliminated with this, as there is a buffer of 15 kwh? Can Tesla guarantee 200 mile range, no matter the age of the car or the driving conditions?

 

[jhm]

No. I think you've got a good handle on it. The program gets really expensive as the cars get older in their life cycle and resale is lower.

This is not how the option works. IiRC, one has only a 3 month window to exercise the guarantee. It was only meant to simulate a lease. At the end of the lease, you return the car or buy it.

 

[Electrifying]

I see quite a few arm-chair CEO's here. Nobody knows Tesla's cost differential between 60 and 75 except them. Nobody knows how much larger the addressable market became when 60D Model S was unveiled. Nobody knows how much incremental investment Tesla needs to make to double model S and X production if 60D drives demand up that much. Intel had many 3GHz CPU's which is just software locked 4GHz CPU's. I guess they did the calculation already.

 

[madodel]

Re: 60 kWh versions of Model S and X
I'm missing a specific viewpoint on the addition of these versions to both product ranges. In the automotive industry it's always been very important to get your products out on the streets (not only into brochures, ads and showrooms). My personal experience is that the Tesla Model S is a common car in daily traffic, here in The Netherlands. On my commute to Amsterdam (30 miles / 50 kilometers one way) I stopped counting, seeing more than a dozen S's per trip. And only few of them are the well know Schiphol (Amsterdam Airport) taxis. I guess every Dutch professional has one or more persons in his contacts list actually owning a Tesla. (Of course my 500+ LinkedIn contacts do so. )
I see this as 'critical mass' being reached in my home marketplace by Tesla. Except for California and Norway, this is not the case elsewhere.
So getting more cars on the road (even at reduced gross margin) might be just as wise an investment as buying media coverage and advertisement space.

I was excited to see a Model S while driving locally here in NEPA. Few people where I live have any idea what a Tesla is. I know there is one other Model X in the county I live in, but I have never seen it. The potential market is huge. Lots of BMWs, Audis, Lexus and MBs so people here can afford a Model Ξ, but the closest Tesla presence is a SuperCharger at an outlet mall. The auto-dealers limit Tesla showrooms here and in NJ so to see one in person and learn about one you have to travel 1.5 to 2 hours. Can you imagine the demand if people were actually allowed to experience these wonderful vehicles? Note the trolls are always bloviating about demand, which is artificially suppressed by their employers. Eventually the dam will burst and we'll see what an unrestricted market can accomplish.

 

[eloder]

Is Tesla guaranteeing a range of 200 miles with this? Normally, one would see range degradation over time. Is that eliminated with this, as there is a buffer of 15 kwh? Can Tesla guarantee 200 mile range, no matter the age of the car or the driving conditions?

I'm not sure why a guarantee would exist, not a single other battery-powered item in the rest of the world exists with such a promise.

Gas cars also do not have any sort of guarantee as many aspects of performance and efficiency and and will go down with age.

 

[jhm]

As a 60 owner I mostly agree. My 60 is more than enough for daily usage (double what I need). On road trips during winter it's more challenging. However, the key to 200 miles being enough has nothing to do with the car but the infrastructure. 200 miles rated range (with 150 to 170 usable) is plenty with a robust supercharger network. Things fall apart quickly when the spacing of superchargers gets near 150miles or farther though. To me, the fact that Tesla is committing to building MX60s, reintroducing the MS60, and basing the model 3 at 200+ miles of range says that Tesla will commit to making the 200 mile car practical. I was nervous when they initially dropped 60, thinking us 60 owners would be left out by a change in supercharger strategy (larger spacing, fewer chargers). This appears not to be the case (I think I hope). They need to keep up a robust charging network or a lot of owners will be unhappy, and they won't want to be told to just drop 9K just to upgrade the battery a few kwhs. That's not even an option for me. BTW, 77K miles on my 60 right now and getting 199 miles on a full charge.

I'm with this. Makes me wonder how they'll play this upgradable battery version with the Model 3. Will the $35k version have a 75 kWh physical pack software limited to 60? Or could it have say a 60 kWh physical pack? If the latter, then could their be a 45 kWh software limited version for under $35k, say $27k?

This could be quite a good surprise.

 

[X Yes?]

This is not how the option works. IiRC, one has only a 3 month window to exercise the guarantee. It was only meant to simulate a lease. At the end of the lease, you return the car or buy it.

This is true. I was referring to the effect of the program IF it was to continue, as the S moves toward obsolescence

 

[madodel]

I'm sure there are some negatives I can't think of, but I wonder why Tesla doesn't provide a kiosk at every SuperCharger location with information about what Teslas are and why the SuperCharger is there. Like I said the local SuperCharger here is the only Tesla presence for a 100 miles or more. I'm sure outside of California it is similar. People know of it when I mention it, but have no idea what it is about.

 

[Papafox]

Making 2016 guidance. To make guidance TM needs to have the demand, have the production capabilities and have the ability to deliver 50K+ vehicles.

Opinion: Demand: I think they have it
Production capabilities: Check that off as well
Delivery capability: My concern

I am not saying TM can't deliver 50K vehicles in H2...but it is the one place I have concerns.

Why? I am not seeing many new Service Centers opening and if what I read here about getting appointments at the West Coast Scs and
my personal observation of my local East Coast SC I believe it will be difficult to increase efficiency alone to allow for the delivery capacity to increase by 50% over H1.

Yes, there are 5K vehicles in the pipeline but unless the person(s) in charge of delivery logistics is near perfect and we have no delay in ships/trains,etc. that number may not go down by Dec 31st.

We all have TMC friends that converse 'offline' and I am not the only one that has this concern.

I hope it is unfounded.

OK Al, I think I see your concern. Let me probe a little. You are suspecting that the service centers will be so overloaded with work that the deliveries will pile up and by the end of the quarter we'll see quite a large number of undelivered vehicles at the service centers? Musk told us that when problems with Model X are reduced, the backlog at service centers will improve. Maybe the service centers are not falling further behind at this point, but they're not gaining on the backlog either, because of the past Model X situation. So, let's assume that to be the case. Along comes a load of new Teslas. How are these to be prioritized into the system? The vehicles should need nowhere near the care that was required when every X needed to be inspected carefully and a list of fixes needed to be addressed. My guess is that the person in charge of each service center will make sure that his service center is not growing a backlog of deliveries. He'll likely be fired if he doesn't prioritize to keep the deliveries flowing.

Your point is well-taken that many service centers are swamped with work right now. My point is that Tesla cannot afford to fall behind on deliveries, and so deliveries will be prioritized. You may have irate customers waiting for work on their Teslas, but vehicles will get delivered simply because it is a higher priority. Your turn.

 

[Irishjugg]

"My opinions have been much more accurate than Tesla opinions, as of late. I'm opining about cash needs, capital raises, margins, GAAP (or non GAAP) profitability, production targets, deliveries, stuff like that".

You seem to like to debate as much as I do. Let's review after ER to see who was closer to the mark.

As far as I can tell you haven't said anything to compare against.

The vagaries mentioned in your post "cash needs, capital raises, margins, GAAP (or non GAAP) profitability, production targets, deliveries" don't really say anything.

A capital raise right now would be extremely surprising, so if you are calling for that, good luck.

 

[Irishjugg]

Thanks for taking the time for a passionate rebuttal.

Most observers in the media don't see it that way: Tesla Cuts Model X Starting Price As Full-Year Goals Look Iffy | Stock News & Stock Market Analysis - IBD

Most observers in the media are blathering idiots who know next to nothing about the brand. Relying on their word is a large mistake. They tend to be wrong on every single thing they say about this company (and others). Keep in mind, they don't even have budget to fact check anymore. It's clicks not news, and much of it is purchased.

Tesla is no longer solely build to order. What % of these are inventory cars?

0%, they were listed as customer cars in transit.

Are you basing this on Tesla's website showing Sept. delivery? I think you will see orders placed today delivered within weeks.

Bet you they wont. Sort of ridiculous to assume Tesla is wasting time coding in lies to the website temporarily.

Couple of problems here. The bad publicity will reduce demand for the system and the car and we have no idea what restrictions will be placed by the NTSHA and NSB.

There is no reason for that to be true, and there will be no restrictions at least initially.

I could go on, and will if you want. For the last 2 quarters, most of the promises on Sales, Production, and Delivery have not been met, so I don't see the reduced guidance being met.

Please don't, you didn't say anything new, and most of what you said was, sadly, useless.
Also, there hasn't been reduced guidance.

 

[X Yes?]

A capital raise right now would be extremely surprising, so if you are calling for that, good luck.

Tesla has said repeatedly capital raises would not be necessary. This has been repeatedly false. If the SolarCity deal is forced through, that will hasten the need, expect another by end of year.

The vagaries mentioned in your post "cash needs, capital raises, margins, GAAP (or non GAAP) profitability, production targets, deliveries" don't really say anything.

The point was: Tesla's forecast's on all of these measures have been negative for them, the past 2 quarters.

 

[Irishjugg]

You really do drink the Kool-Aid. Did he explain he had exhausted the ability to raise money in the capital markets and had months to survive on his own with out a "bridge loan" from Tesla?

That's all incorrect. Stop it, at this point it's got to be on purpose. You can't be that poorly informed on everything by chance.

 

[X Yes?]

Please don't, you didn't say anything new, and most of what you said was, sadly, useless.
Also, there hasn't been reduced guidance.

There has been reduced guidance, It's no longer 80-90K. And that's Tesla's. We haven't heard revised figures from the analysts. I'm sure we will get some revised figures after ER.