Tesla Might Break Even In Q2: Musk Calls For All Hands On-Board

[TMC Staff]

“Breaking even is looking super tight.” According to Reuters, the second quarter of 2020 may not be totally lost for Tesla, as the company is close to breaking even in Q2, despite the fact that its main plant in Fremont, California was closed between March 23 and May 13 (more than six weeks). Elon Musk...
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[TechOps]

My informal data point at the EoQ for TSLA is always how many trucks delivering Teslas I see driving up and down Bay Area freeways.

A couple weeks ago, I drove from Austin to SF, and I was shocked how many trucks loaded with Teslas I saw driving down I-5. It was approx 10-12 in one day of driving up to the Bay. I assumed they must have been filling up a cargo ship full of cars out of the Port of LA or something.

Since then, I've seen a lot more than usual driving around the Bay Area -- more than I've seen in past quarters. Of course this measure is *super* anecdotal, but my personal belief is that if they can deliver all these cars, Tesla is going to have a really / surprisingly good Q2.

 

[CLK350]

Having followed the End of Quarter circuses for a while now - I would like to suggest possible improvements. This is spontaneous/ creative thinking, but I figure I may as well share now and open this idea for discussion. Recalling the situation:

1 - It is advantageous for Tesla to report the best results possible at each EOQ (End of Quarter) because that's when financial analysts aka the Street reviews and publishes results/ ratings/ pundits opinions. This is the nature/ disadvantage of public companies. Some energy has to be spent polishing the books every quarter.

2 - Because cars produced cannot be counted in financial results until actually/ delivered, there is an incentive to rush as much production/ inventory to customers before each EOQ. Although it makes for a good show and energizes the company some, it may be wasting time/ resources unnecessarily.

3 - Unlike traditional ICE car makers, Tesla does not have a distributorship model wherein distributors /dealers purchase cars off the company so they are counted in the financial results as soon as they are "sold" to said distributors.

Instead of this binary approach, can a better mechanism be created to smooth out the delivery mechanism without bringing the negative inefficiencies of the distributorship model?

To start off, here's a suggestion: create a separate financial company (call it VOLTA for one of the key inventors of capacitors*). Volta, funded by private or public investors, purchases vehicles in inventory from TESLA and then resells then to Tesla for an agreed upon fee/ price, within four and a half months***. Looked at it from another angle, Volta (only) takes the risk of ending up with a failed Tesla not being able to live up to its contract,and gets a fee for its loan guaranteed by this inventory. Tesla ends up with more degrees of freedom to smooth out its delivery system, and is able to report proper quarterly results in an orderly manner.

Details need to be worked out - but the gist of it is that if Tesla has to buy back any unsold vehicle from Volta within 137 days, at least it has more room to maneuver and adjust price & production. Note that Tesla does this now already by adjusting the prices of its unsold cars in inventory**

Can Volta be created as a financial arm of Tesla if that is even feasible (any accountant/ lawyer? ), or should it be created as a separate company (private or public?) that accepts capital from investors and pays a dividend - or become something like a closed end fund (see CEF, now Sprott's CEF).

Okay comments/ critiques/ contributions welcome!

(**) see the excellent ev-cpo.com site, and for example this Model S VIN 5YJSA1E10HF231314 pricing at EV-CPO.com CPO Consolidator support thread and EV-CPO.com CPO Consolidator support thread)

(*) History Of The Capacitor – The Pioneering Years

(***) Why 137 days or 4 1/2 months .. well 137 is a prime number, and this seems like a good time interval, not too long nor too short.

 

[MC3OZ]

Having followed the End of Quarter circuses for a while now - I would like to suggest possible improvements. This is spontaneous/ creative thinking, but I figure I may as well share now and open this idea for discussion. Recalling the situation:

Having a Factory in China, Europe and 2 in the US will smooth out the wave at least for Model 3/Y.

Model S/X and Roadster will be lower volume, hence less of a drama.

So IMO more factories is the best solution as that also achieve economies of scale, reduced shipping costs, and simplifies production.

Get to the ideal situation we most cars are not more than 2-4 weeks in transit from factory to delivery centre, there is less of a rush.

Being more profitable mean being able to carry a bit more inventory.... Tesla can slowly make adjustments here....

When significant upgrades are done, Tesla also wants to clear out old inventory cars and end of quarter is a good time to do that.
Still with less time in transit, it is a smoother process.

 

[CLK350]

Having a Factory in China, Europe and 2 in the US will smooth out the wave at least for Model 3/Y.

Model S/X and Roadster will be lower volume, hence less of a drama.

So IMO more factories is the best solution as that also achieve economies of scale, reduced shipping costs, and simplifies production.

Get to the ideal situation we most cars are not more than 2-4 weeks in transit from factory to delivery centre, there is less of a rush.

Being more profitable mean being able to carry a bit more inventory.... Tesla can slowly make adjustments here....

When significant upgrades are done, Tesla also wants to clear out old inventory cars and end of quarter is a good time to do that.
Still with less time in transit, it is a smoother process.

Yes - excellent point, might well be a moot issue soon - till then, of course, the drama is cool, let us (better informed fellows) make some profits. In the long term, it may still be useful for Tesla to offload to second parties the work that they don't need to be doing (no added value add possible from innovations). I'm thinking of the car repair and maintenance business.