Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[Fact Checking]

I just wanted to clarify that Q1&Q2 income needs to be more than negative $400 million (-$400m)?

Yes, I think so: Q3+Q4 was +$313m+$139m = +$452m. So if Q2 is even just minimally profitable then Q1 losses as deep -$452m would still keep the 4 quarters sum positive.

Not advice...

 

[sundaymorning]

I agree with China and US delivery theory. I still think China did around 16-19k + 20-22k Europe. The leftover are NA and it seems low but sound about right bc of seasonality/weather/tax etc. I just cant see a way that China did anywhere below 15k deliveries Q1.


I think TE is a wild card here but that's just me being optimistic.

I’ve been told that TE has increased a lot, for example a team can get 5-6 installs per week vs 1-2 several months ago.

But TE won’t make that big of a difference, yet.

 

[ZachF]

I think the biggest silver lining here is that expectations for Q2 may be lowered significantly allowing for an eventual significantly upward surprise, especially if it's enough to secure S&P addition.

 

[Fact Checking]

On many occasions you have quite passionately defended Tesla's decision not to raise cash. And yet you are now saying that they are constraining their production because they are worried about working capital cash consumption.

Yes, but:

• Raising cash would come with its own set of problems.
• Note how one of their biggest delivery problems is China, where they are not cash constrained to grow and build GF3.
• Even in Q1 they possibly generated 1b+ of cash from operations - so these final 2 weeks of March were basically a one time event that won't ever repeat.

Also note that even after raising cash the optics of 20k+ vehicles in transit would be bad - the market doesn't accept them as the cash equivalent instruments they are.

So I still maintain that raising cash now is unnecessary and counterproductive: probably all the one time costs of not having higher cash levels are paid already in essence.

 

[TSLA_Hopeful]

Also S and X have to get free supercharging.... it literally makes getting a refresh impossible rationally if you pay more for a newer model with the same features, and you now lose free supercharging.

 

[Antares Nebula]

They were clearly conserving cash in March, as @schonelucht correctly speculated.

They could have made EU and China units and could have kept putting them on ships but didn't: doing so might have increased Model 3 production from 61k to 71k but would have ballooned in-transit from 11k to 21k, which would have consumed up to a billion dollars of cash.

End of Q1 cash levels could still be around Q3 levels, despite the $920m debt repayment. With 20k+ in-transit they'd have risked Q2 levels, with bad bankwuptcy optics.

Yes, many people are wondering why the production is low, but I was not surprised. The above assessment is correct. Tesla rightly gauged international transit issues as well as US demand shortfall and reduced production (till intro of SR, SR+) to conserve cash.

They said they have sufficient cash. To me that means somewhere btwn 2 - 2.5B, at least, which sounds about right given 0.9B debt repayment and Q1 cash burn.

 

[EVNow]

Also S and X have to get free supercharging.... it literally makes getting a refresh impossible rationally if you pay more for a newer model with the same features, and you now lose free supercharging.

That should be fine - esp. if they trade in a Tesla.

 

[neroden]

They were clearly conserving cash in March, as @schonelucht correctly speculated.

They could have made EU and China units and could have kept putting them on ships but didn't: doing so might have increased Model 3 production from 61k to 71k but would have ballooned in-transit from 11k to 21k, which would have consumed up to a billion dollars of cash.

End of Q1 cash levels could still be around Q3 levels, despite the $920m debt repayment. With 20k+ in-transit they'd have risked Q2 levels, with bad bankwuptcy optics.

An extra 10k in transit should consume about 300 to 350 million in cash on top of whatever actually happened. Certainly probably was a consideration. Also getting the promised SR delivered was vital for customer relations and it had to go to the US first to get delivered in time.

Now this is hindsight. ;-)

 

[Fact Checking]

"Seamless Navigate on Autopilot" is now rolling out to the wider fleet:

Introducing a More Seamless Navigate on Autopilot​

"Today, we’re beginning to roll out our latest version of Navigate on Autopilot for a more seamless active guidance experience. In this new version, drivers will now have the option to use Navigate on Autopilot without having to confirm lane changes via the turn stalk."

"Through our internal testing and Early Access Program, more than half a million miles have already been driven with the lane change confirmation turned off."​

Since this is part of the FSD option it should increase the $3k+$5k FSD take rate in Q2.

These are 100% margin options, so should improve margins across all configurations.

 

[Antares Nebula]

You can go look in the other thrrad for my most pessimistic scenario of 50k. Foresight.

The "hangover" model is foresight but I do not remember whether I publishef projections.

FYI the model is for every 5% price discount from an expiring tax credit or increasing tarriff or whatever -- (calculated as (projected post expiration price - pre expiration price) / projected post expiration price)1.8 months demand is pulled forward.... very roughly (1 digit of accuracy, not 2)

Q3 in the US should look awful as I expect 2 months of pullforward on SR and SR+. July should be extra awful due to pullforward on S/X/LR. Send nearly all production overseas in early Q3.

Did not see the downtime or continued low "when operating" production rate.

PS math corrected

There will be a similar pattern because of the tax credit dropoff, but I think you're missing the fact that SR and SR+ will have higher overall volumes due to the larger market / lower price, vs the higher price variants that under went a similar transition from Q4 to Q1, and this should fill the channel sales.

Additionally, SR and SR+ will enter international markets. And there is still UK, Australia right-hand drive models. AND leasing lever to be pulled.

In summary, I think demand should remain robust in second half 2019 and you will not see the same demand drop off that occurred from Q4 to Q1.

 

[Leo9]

I won’t be surprised if we see a new 52 weeks low...
This is unfortunate and I hope Tesla will recover. The FUD is going to be insane.

 

[Thekiwi]

@Troy did pretty well with his estimates:

 

[Antares Nebula]

I will say this: Q2 P&D report can't come soon enough. Can somebody put me in a coma and wake me up in three months?

 

[MarcusMaximus]

To everyone panicking about demand and demanding ads: look at in-transit numbers. 10,600 vehicles in transit. That means, of the Model 3’s produced during the quarter, a total of between 1,450 and 3,500 weren’t spoken for by EOQ. And S/X was 0-2,050(and, of course, if you assume either of those was on the high end of the range, it means the other was just as far on the low end).

To put that in context, at absolute most, ~72% of *one day’s* production of Model 3s were left over.

I said it before and I’ll say it again: the story this quarter is weak production and lots of in-transit cars.

 

[⚡️ELECTROMAN⚡️]

So investors can start selling their TSLA at 4 a.m. ET? Looks like Charles Schwab won't let me start selling untill 7 a.m. ET. WTF!?

 

[MP3Mike]

Once GF3 starts ramping up it will eliminate/reduce the longest shipping delay (China).

Not really. All of the models being delivered to China now will continue to come from Fremont. (All LR/AWD/P models.) The only ones they are planning to build locally are be the SR, and possibly the SR+. (I sort of doubt the SR+ since they requires double the number of interior pieces.)

So as long as they can keep the demand up for the premium, US made cars, in China there will continue to be shipping delays.

 

[Antares Nebula]

Perhaps all this could have been avoided with better planning. Nonetheless, it is clear that international logistics AND drop-off in demand of higher end M3s were the negative catalysts. Put aside the tax credit. The question we need to ask is what is the steady state annual demand for M3s given the full available mix from SR to LR AWD Perf. We don't the answer yet based on Tesla's results so far (as that only includes the mid and high end models). But we will know the answer as the quarters progress. If it is at least 300-400k, then Tesla will be okay. I believe it will be at least that much if not more.

 

[Antares Nebula]

So investors can start selling their TSLA at 4 a.m. ET? Looks like Charles Schwab won't let me start selling untill 7 a.m. ET. WTF!?

Most brokers are like that. I think Interactive brokers lets you trade at 4am.

 

[Fact Checking]

Not really. All of the models being delivered to China now will continue to come from Fremont. (All LR/AWD/P models.) The only ones they are planning to build locally are be the SR, and possibly the SR+. (I sort of doubt the SR+ since they requires double the number of interior pieces.)

So as long as they can keep the demand up for the premium, US made cars, in China there will continue to be shipping delays.

Yes, but China would have a significantly higher proportion of SR/SR+ sales, due to:

• lower purchase power,
• the 15% import tariffs,
• EV incentives only available to cars made in China,
• lower GF3 ASPs, which could be below $30,000 later on while still generating 25% margins. Both labor and materials costs are significantly lower.

So once GF3 is fully ramped up I'd expect over 90% of Fremont capacity to go towards North America and Europe.

 

[Fact Checking]

"Seamless Navigate on Autopilot" is now rolling out to the wider fleet:

Introducing a More Seamless Navigate on Autopilot​

"Today, we’re beginning to roll out our latest version of Navigate on Autopilot for a more seamless active guidance experience. In this new version, drivers will now have the option to use Navigate on Autopilot without having to confirm lane changes via the turn stalk."

"Through our internal testing and Early Access Program, more than half a million miles have already been driven with the lane change confirmation turned off."​

Since this is part of the FSD option it should increase the $3k+$5k FSD take rate in Q2.

These are 100% margin options, so should improve margins across all configurations.

Elon tweeted that this NoA update also updates the neural networks:

Elon Musk on Twitter

"Neural net is upgraded too in this release. It’s not just a settings change."​