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This is the most bullish news I've heard come out of Tesla for quite a while. Finally, Tesla Energy can be unleashed. Finally, Tesla Semi can be produced.
IF this continues, then the limiting factor is Tesla's ability to design and manufacture, which historically has amounted to 70% YoY growth. BUT there are storm clouds on the horizon. Will Tesla Berlin be able to continue to operate and expand if industrial natural gas supply is curtailed? Will Tesla China hit any more Covid related or other shutdowns? Will an expected energy cost induced European recession spill over into the rest of the world?
So, yes, Tesla finally has the cell supply it needs, just right at the exact moment that the world might fall off a cliff
And I suspect investors will be nervous because of this even with this great news. So I suspect TSLA will rise when the proof is delivered that sales continue to be robust. In other words, business as usual. I don't anticipate TSLA front running delivery news, but when news/rumor of great delivery numbers do come, I expect TSLA to rise.
This is the most bullish news I've heard come out of Tesla for quite a while. Finally, Tesla Energy can be unleashed. Finally, Tesla Semi can be produced.
IF this continues, then the limiting factor is Tesla's ability to design and manufacture, which historically has amounted to 70% YoY growth. BUT there are storm clouds on the horizon. Will Tesla Berlin be able to continue to operate and expand if industrial natural gas supply is curtailed? Will Tesla China hit any more Covid related or other shutdowns? Will an expected energy cost induced European recession spill over into the rest of the world?
So, yes, Tesla finally has the cell supply it needs, just right at the exact moment that the world might fall off a cliff
And I suspect investors will be nervous because of this even with this great news. So I suspect TSLA will rise when the proof is delivered that sales continue to be robust. In other words, business as usual. I don't anticipate TSLA front running delivery news, but when news/rumor of great delivery numbers do come, I expect TSLA to rise.
I'm still a bit unclear what Martin means when he says they have the batteries they need. I have to think this means 'currently,' which is mostly 2170 batteries.
Everything we're seeing indicates 4680 production ramp is behind schedule, so I don't see how he can mean they have what they need for the Semi, CT, etc. yet. If that's what he means, holy moly!
I have revenue per vehicle increasing from $56k in Q2 '22 to $62k in Q4 '23, which is a $6k increase. That's mainly driven by price increases from earlier this year coming into effect, and more Y and Cybertruck.
I have average vehicle cost gradually coming down from $41.3k in Q2 to $35.5k by Q4 '23, a $6k drop, due to
Applying $45/kWh for sales from Fremont and Austin with an estimated 75 kWh per car
Moving past Q2 one-time cost impacts
Improving underlying cost structure by $500/car per quarter, for $2.5k cumulative improvement by Q4 '23. This is the net expectation for the impact of the new factories, inflation, and ongoing continuous improvment.
Basically this equates to me estimating that we will return to the cost range we were in before Q2, such that the positive factors cancel out the effect of inflation.
To compensate for my optimism bias, I have not included much impact from increased FSD contribution per car over and above where it was in Q2. I'm also assuming in this model that demand doesn't push prices even higher. Also, I included the $45/kWh US tax credit in the cost field, but I have conservatively excluded any additional price increases or favorable mix shifts that may come from the $7500 tax credit. Insurance isn't factoring much into this either.
On the other hand, I'm more bullish about Energy. I think Tesla will 10x Megapack sales like they say they will, and I think that production scale plus the cost savings from the US tax credit will contribute around $5B to earnings next year.
There are still plausible but unlikely scenarios where earnings end up in the $70B -100B range next year. Maybe production ramps go better than expected and we get like 3.3M deliveries from 1.6M from Sha, 0.7M from Fre, and 0.5M each from Ber & Aus. Maybe the US tax credit and continuing demand growth drives up the price for the cars by thousands more than my projection of peaking at $62k average revenue per vehicle. Maybe FSD take rates spike up due to major upcoming improvements in how well it works. My model is predicting $25k average gross profit per car in '23. If this optimistic stuff happens then gross profit would be perhaps $5k per car better, at $30k/car. 3.3M * $30k per car would be $100B auto gross profit. This potential for the home run scenario is part of the reason I bought a bunch of cheap calls for $700+ strike.
I'm still a bit unclear what Martin means when he says they have the batteries they need. I have to think this means 'currently,' which is mostly 2170 batteries.
Everything we're seeing indicates 4680 production ramp is behind schedule, so I don't see how he can mean they have what they need for the Semi, CT, etc. yet. If that's what he means, holy moly!
What we have heard about 4680 production is Kato Rd is current producing at about 20% of installed capacity so 2 GWh annually out of a 10 GWh factory.
Applying the same run rate to a 100 GWh facility in Austin, yields 20 GWh.
They are working to lift the 20% run rate, Austin may already have some design changes to avoid some of the problems Kato Rd is having.
For the CT they probably need all of the 22 GWh that may be possible from Austin and Kato Rd.
I don't think we can assume Tesla currently has raw materials for 20 GWh out of Austin, We can assume that they plan to have the raw materials sometime in 2023.
I think what Marin is saying is that they currently have enough batteries without a significant contribution from Austin.
All indications are they expect a significant contribution from Austin in 2023, that may or may not go to plan.
Oh thank God. I was on WSB and put holders were sweating all weekend because Cramer twitted this over the weekend. Guess their worries were well founded due to Cramer's reverse midas.
I am genuinely surprised that people don't understand the concept of ROI. Legacy auto are spending billions of dollars for zero ROI for this transition. Did any of them guided for increase revenue because they are building battery factories and EVs? No, because they are the transportation market and the only return they get on investment is to NOT lose what they had before. Every penny Tesla spends will go toward growth, not to sustain.
So are people really expecting Ford and all these legacy autos having some kind of forward PE that will significantly go down so therefore they should buy the stock today?
I'm still a bit unclear what Martin means when he says they have the batteries they need. I have to think this means 'currently,' which is mostly 2170 batteries.
Everything we're seeing indicates 4680 production ramp is behind schedule, so I don't see how he can mean they have what they need for the Semi, CT, etc. yet. If that's what he means, holy moly!
The upshot is that Tesla has proven itself to excel at battery flexibility. Yes, the 4680 matters long term, but Tesla isn't waiting around for it. They have already redesigned their manufacturing lines on the fly to use the older 2170s. They've also retooled to use a completely different cell form factor to use LFP batteries which now account for almost 50% of Tesla vehicle sales. The point being that they've secured enough third party batteries so they aren't dependent on, nor are they going to wait around for, the 4680.
What we have heard about 4680 production is Kato Rd is current producing at about 20% of installed capacity so 2 GWh annually out of a 10 GWh factory.
Applying the same run rate to a 100 GWh facility in Austin, yields 20 GWh.
They are working to lift the 20% run rate, Austin may already have some design changes to avoid some of the problems Kato Rd is having.
For the CT they probably need all of the 22 GWh that may be possible from Austin and Kato Rd.
I don't think we can assume Tesla currently has raw materials for 20 GWh out of Austin, We can assume that they plan to have the raw materials sometime in 2023.
I think what Marin is saying is that they currently have enough batteries without a significant contribution from Austin.
All indications are they expect a significant contribution from Austin in 2023, that may or may not go to plan.
A 20% run rate at Kato Rd. does not translate to a 20% run rate at Austin. Austin is not just a scaled-up version of Kato. Austin is for high volume production. Kato is for testing out new ideas. So the run rate for Kato is artificially low.
A 20% run rate at Kato Rd. does not translate to a 20% run rate at Austin. Austin is not just a scaled-up version of Kato. Austin is for high volume production. Kato is for testing out new ideas. So the run rate for Kato is artificially low.
I have revenue per vehicle increasing from $56k in Q2 '22 to $62k in Q4 '23, which is a $6k increase. That's mainly driven by price increases from earlier this year coming into effect, and more Y and Cybertruck.
I have average vehicle cost gradually coming down from $41.3k in Q2 to $35.5k by Q4 '23, a $6k drop, due to
Applying $45/kWh for sales from Fremont and Austin with an estimated 75 kWh per car
Moving past Q2 one-time cost impacts
Improving underlying cost structure by $500/car per quarter, for $2.5k cumulative improvement by Q4 '23. This is the net expectation for the impact of the new factories, inflation, and ongoing continuous improvment.
Basically this equates to me estimating that we will return to the cost range we were in before Q2, such that the positive factors cancel out the effect of inflation.
To compensate for my optimism bias, I have not included much impact from increased FSD contribution per car over and above where it was in Q2. I'm also assuming in this model that demand doesn't push prices even higher. Also, I included the $45/kWh US tax credit in the cost field, but I have conservatively excluded any additional price increases or favorable mix shifts that may come from the $7500 tax credit. Insurance isn't factoring much into this either.
On the other hand, I'm more bullish about Energy. I think Tesla will 10x Megapack sales like they say they will, and I think that production scale plus the cost savings from the US tax credit will contribute around $5B to earnings next year.
There are still plausible but unlikely scenarios where earnings end up in the $70B -90B range next year. Maybe production ramps go better than expected and we get like 3.3M deliveries from 1.6M from Sha, 0.7M from Fre, and 0.5M each from Ber & Aus. Maybe the US tax credit and continuing demand growth drives up the price for the cars by thousands more than my projection of peaking at $62k average revenue per vehicle. Maybe FSD take rates spike up due to major upcoming improvements in how well it works. My model is predicting $25k average gross profit per car in '23. If this optimistic stuff happens then gross profit would be perhaps $5k per car better, at $30k/car. 3.3M * $30k per car would be $100B auto gross profit. This potential for the home run scenario is part of the reason I bought a bunch of cheap calls for $700+ strike.
I was posting today in the Tesla Energy forum about residential solar implications of the IRAct tax credits and some of the other state-level subsidies being thrown around. People are dramatically underestimating the margins coming from simple solar/Powerwall installs very soon.
Generally when solar subsidies arrive in a state all the sales effort flocks to that region and neighborhoods are carpet bombed with door-to-door sales effort. The net effect is sales teams or 3rd party marketing companies make all the money(literally $2.5B per year), homeowners save nothing, and installers continue to barely break even or lose money.
We've let sales become a $2.5B industry unto itself in US residential solar, and no one seems to mind the havoc is wreaking on the marketplace. Tesla has no real sales effort in residential solar. They do their best to market their offering clearly, and hope people will buy it. Now that the market's matured a bit, and by coincidence the subsidies are ramping to ungodly levels, I think Tesla is poised to take over.
The thing people won't see coming is that as Tesla scales, bloated margins go to the bottom line instead of to sales teams. So we're going to see the impact of dramatically widening margins on residential energy products due to subsidies AND at the same time the demise or complete transformation of every sales-heavy operator in the marketplace. Which is basically everyone else.
As subsidies grow, sales cost will balloon from 22% to 35% for everyone else. Literally all of that will simply flow to the bottom line for Tesla. All they need is a bit of service and communication and they'll pull in more latent demand than they could handle in 5 years. All at 30-50% gross margins depending on the local subsidies.
I went on Tesla.com and priced out some arrays today. Illinois options were priced at $2.47/Watt while mine here in PA would cost $2.21/Watt before incentives. They're capturing the massive IL state subsidy and moving it to other states.
Just wait til Elon really digs into this offering AND has quality service/communications to back it up. He'll be sending 20% of all residential solar subsidies in the entire US directly to the TSLA bottom line.
Others have reported first impressions of 10.69, so I guess I should chime in as well.
It did great on roundabouts. Better than any previous version.
But I still had a lot of disengagements. Some would have put the car in a dangerous situation if I didn't take over.
My test for whether I should be exited or not has to do with usefulness. If FSD is useful on city streets like it is on the highway, I'm excited. But we aren't quite there. As of now, it's fun to play around with. But FSD on city streets is not yet useful..
Others have reported first impressions of 10.69, so I guess I should chime in as well.
It did great on roundabouts. Better than any previous version.
But I still had a lot of disengagements. Some would have put the car in a dangerous situation if I didn't take over.
My test for whether I should be exited or not has to do with usefulness. If FSD is useful on city streets like it is on the highway, I'm excited. But we aren't quite there. As of now, it's fun to play around with. But FSD on city streets is not yet useful..
I’ve seen a few reports now against the overwhelming majority that say 10.69.2 is working wonderfully…..which makes me think the people have issues need to recalibrate their car and make sure their cameras are clean
I’ve seen a few reports now against the overwhelming majority that say 10.69.2 is working wonderfully…..which makes me think the people have issues need to recalibrate their car and make sure their cameras are clean
This inspired me to look into Amazon's financials and other companies valued more than Tesla. I think you're right here.
Amazon compared to Tesla:
2x less revenue compound annual growth rate
Gross margin % in low 40s, about equal to where Tesla will be in 2024 with new factories ramped up
2-3x less operating/net margin, and Tesla's lead is widening due to operating leverage increasing
Heavy competition in online retail segment and moderate threat from Microsoft Azure in cloud services, vs Tesla being absurdly far ahead of competitors
Here are the rough numbers for Amazon before the recent slowdown in the last year:
Amazon annual/quarterly revenue history and growth rate from 2010 to 2023. Revenue can be defined as the amount of money a company receives from its customers in exchange for the sales of goods or services. Revenue is the top line item on an income statement from which all costs and expenses...
www.macrotrends.net
Right now my Tesla model for 2023 has deliveries of 2.8M and gross profit per car rising into the low-to-mid $20k range as Tesla improves on both the revenue and cost sides of the equation. Opex will stay under $8B I think. I've recently incorporated the $45/kWh US tax credit for batteries to cost on both cars from Fremont and Austin and also stationary storage, which has a big impact on margins. My thesis hasn't significantly changed from earlier this year other than the US sustainable energy tax advantages being finalized. I'm just trying to estimate the impact of the remaining price rises, mix shift, cost savings, etc.
The combined effect is a profit bonanza of $58B GAAP net income. I almost can't believe it but I derived each number independently of the others as best I could and I've spent months trying to figure out if I've lost my mind yet I keep getting similar results.
So I'm projecting Tesla to crush Amazon on earnings next year in addition to the better growth and margins, but as of today Amazon has a market cap more than 30% higher than Tesla's. How much longer can this last? How much longer until Tesla has the highest market cap?
Ranking the world's top companies by market cap, market value, revenue and many more metrics
companiesmarketcap.com
Apple makes steady profit with good margins but they're growing slowly. It took them 4 years to double net income from $50B to $100B, and that happened mainly because of a spike in 2020.
Saudi Aramco is in an industry facing secular decline towards extinction with no hope of long-term salvation, and their products are commodities with wildly variable prices. Tesla's rise will make this reality increasingly obvious over the next few years. It looks like the long-feared Peak Oil quietly happened in 2019 without much fanfare.
Microsoft and Alphabet have similar financials with about $75B annual earnings growing about 40% per year or so. They've both been doubling earnings every 2-3 years. Excellent, but still much slower than Tesla. They also have good margins, but less than where Tesla will be in 2023 according to my projections.
So there really is no one and nothing stopping Tesla from becoming the world's most valuable company within the next two years in my opinion. When Tesla gets to Microsoft and Alphabet level earnings by around 2024 and are still showing growth above 50% per year, it's hard to see Tesla not shooting to #1 at around $3T market cap.
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Vehicle deliveries
310,048
254,695
371,752
489,457
578,123
668,171
735,556
813,516
Auto Rev excl ZEV creds
$ 16,182
$ 14,258
$ 20,804
$ 28,389
$ 34,109
$ 40,090
$ 44,869
$ 50,438
Auto CoGS
$ (11,322)
$ (10,521)
$ (14,672)
$ (19,073)
$ (21,951)
$ (25,026)
$ (27,159)
$ (29,602)
ZEV Credits
$ 679
$ 344
$ 420
$ 469
$ 469
$ 469
$ 469
$ 469
ZEV cred rev per veh
$ 2.2
$ 1.4
$ 1.1
$ 1.0
$ 0.8
$ 0.7
$ 0.6
$ 0.6
Auto Gross Profit excl ZEV creds
$ 4,860
$ 3,737
$ 6,131
$ 9,315
$ 12,158
$ 15,064
$ 17,710
$ 20,836
Avg Rev per Vehicle excl ZEV creds
$ 52.2
$ 56.0
$ 56.0
$ 58.0
$ 59.0
$ 60.0
$ 61.0
$ 62.0
Avg CoGS per Vehicle
$ (36.5)
$ (41.3)
$ (39.5)
$ (39.0)
$ (38.0)
$ (37.5)
$ (36.9)
$ (36.4)
Avg Gross Profit per Vehicle excl ZEV creds
$ 15.7
$ 14.7
$ 16.5
$ 19.0
$ 21.0
$ 22.5
$ 24.1
$ 25.6
Gross Margin excl ZEV creds
30.0%
26.2%
29.5%
32.8%
35.6%
37.6%
39.5%
41.3%
Auto Rev
$ 16,861
$ 14,602
$ 21,223
$ 28,857
$ 34,578
$ 40,559
$ 45,338
$ 50,907
Auto Gross Profit
$ 5,539
$ 4,081
$ 6,551
$ 9,784
$ 12,627
$ 15,533
$ 18,178
$ 21,305
Avg Rev per Veh
$ 54.4
$ 57.3
$ 57.1
$ 59.0
$ 59.8
$ 60.7
$ 61.6
$ 62.6
Avg Gross Profit per Veh
$ 17.9
$ 16.0
$ 17.6
$ 20.0
$ 21.8
$ 23.2
$ 24.7
$ 26.2
Auto Gross Margin
32.9%
27.9%
30.9%
33.9%
36.5%
38.3%
40.1%
41.9%
Research & Development
$ (865)
$ (667)
$ (700)
$ (735)
$ (772)
$ (811)
$ (851)
$ (894)
Selling, General & Administrative
$ (992)
$ (961)
$ (990)
$ (1,020)
$ (1,050)
$ (1,082)
$ (1,114)
$ (1,147)
Restructuring & Other
$ -
$ (142)
$ -
$ -
$ -
$ -
$ -
$ -
Total Operating Expenses
$ (1,857)
$ (1,770)
$ (1,690)
$ (1,755)
$ (1,822)
$ (1,892)
$ (1,965)
$ (2,041)
OpEx as % of Auto Gross Profit
34%
43%
26%
18%
14%
12%
11%
10%
Energy Generation and Storage Rev
$ 616
$ 866
$ 1,299
$ 1,949
$ 2,923
$ 4,384
$ 4,823
$ 5,305
Energy Gen and Store Cost
$ (688)
$ (769)
$ (1,077)
$ (1,507)
$ (2,261)
$ (3,391)
$ (3,730)
$ (4,103)
Energy Gen and Store Gross Profit
$ (72)
$ 97
$ 222
$ 441
$ 662
$ 993
$ 1,092
$ 1,201
Energy Gen and Store Gross Margin %
-12%
11%
17%
23%
23%
23%
23%
23%
Services & Other Rev
$ 1,279
$ 1,466
$ 1,616
$ 1,766
$ 1,916
$ 2,066
$ 2,216
$ 2,366
Services & Other Cost
$ (1,286)
$ (1,410)
$ (1,530)
$ (1,650)
$ (1,770)
$ (1,890)
$ (2,010)
$ (2,130)
Services & Other Gross Profit
$ (7)
$ 56
$ 86
$ 116
$ 146
$ 176
$ 206
$ 236
Services & Other Gross Margin %
-0.5%
3.8%
5.3%
6.6%
7.6%
8.5%
9.3%
10.0%
Income Tax provision
$ (346)
$ (205)
$ (600)
$ (1,200)
$ (1,700)
$ (2,200)
$ (2,500)
$ (3,000)
Share count fully diluted (B)
3.471
3.465
3.519
3.573
3.627
3.681
3.735
3.789
GAAP Net Income
$ 3.32
$ 2.26
$ 4.57
$ 7.39
$ 9.91
$ 12.64
$ 15.04
$ 17.73
GAAP Earnings per Share
$ 0.96
$ 0.65
$ 1.30
$ 2.07
$ 2.73
$ 3.43
$ 4.03
$ 4.68
Non-GAAP Earnings per Share
$ 1.08
$ 0.76
$ 1.40
$ 2.17
$ 2.83
$ 3.53
$ 4.12
$ 4.77
Neither investment nor financial advice. Just my model.
I’ve seen a few reports now against the overwhelming majority that say 10.69.2 is working wonderfully…..which makes me think the people have issues need to recalibrate their car and make sure their cameras are clean
I also wouldn't discount different behavior for different regions. Even within a single state, the consistency of road infrastructure (and how well Tesla has mapped that infrastructure) can vary pretty dramatically.
This is why I was thinking that individual disengagements are actually a pretty poor metric of progress. If possible, it would be great to measure the percentage of roads that FSD Beta can handle disengagement-free. So at some point, it will be able to drive 50% of roads disengagement-free, 80%, 90%, 99%, etc.
That is somewhat biased data. The model 3 barely sold any models that year. If you looked at average selling price of Tesla cars in 2017 vs now it'll probably be lower now.
