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

[hobbes]

I guess the delivered cars will only be 15 and to employees because there must be a way to delay the contabilization to 2020.
It would not make any sense to financially include GF3 in Q4 19.

I am actually thinking the opposite (just an educated guess though) - they are delivering a few cars in order to pull the GF3 contabilization into 2019, knowing that they will *still* be profitable. They have said that Q1 will be harder reaching profitability, pulling the cost forward into Q4 makes it more likely to be profitable in both quarters (and qualify for S&P inclusion in the process).

If my assumptions are correct, that would be quite a bullish sign.

Does anyone actually know if "15 cars only to employees" does not count for triggering contabilization?

EDIT: I swear, didn´t read @Right_Said_Fred ´s post before typing this ...

 

[Words of HABIT]

Gene tends to be conservative. I agree with him that Tesla cannot maintain 75-80% US EV market share forever, but with Model Y coming online in 2020 and no compelling new offerings from competitors I doubt Tesla's US market share will drop much if at all. Market share could even increase a bit, despite Tesla having two hands tied behind its back:

• $7500 tax credit disadvantage

• Direct sales banned or restricted in many states

Tesla Direct Sales Map (US)

What is wrong in the USA with all of its states not shown in blue. It is like benching your star quarterback during the championship run. Those states need to get new coaches and get their game on.

 

[ZachF]

But this says Tesla's EV share will drop from 75% to 60%??? Makes no sense. It should increase, shouldn't it?

I suspect over time, Tesla's EV share will drop as it's share of the total auto market grows, until both numbers are roughly the same ~15 years from now.

 

[sparcs]

What is wrong in the USA with all of its states not shown in blue. It is like benching your star quarterback during the championship run. Those states need to get new coaches and get their game on.

States where dealers pay large sums of money for influence over local politicians.

 

[Unpilot]

I suspect over time, Tesla's EV share will drop as it's share of the total auto market grows, until both numbers are roughly the same ~15 years from now.

so 100% then

 

[Fact Checking]

Does anyone actually know if "15 cars only to employees" does not count for triggering contabilization?

If those employees are customers, and the cars become their personal property, then I think they count as deliveries and quite a few GF3 Q4 costs would attach to those units - and this could indeed help Q1 profitability.

Tesla did this in July 2017: just ~22 units delivered to employees in Q3"17 IIRC, and they were counted as deliveries in their Q3 financial report.

The CoGs of the thousands of units they made in November-December would carry over into Q1, but that's OK and standard accounting practice.

 

[mongo]

They have said that Q1 will be harder reaching profitability, pulling the cost forward into Q4 makes it more likely to be profitable in both quarters (and qualify for S&P inclusion in the process).

When did they say that? In the Q2 call they said quarter over quarter delivery increases would be tough in Q1. On the Q3 call, they mentioned production was pulled forwards and that they have continuing backlog.

Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable

 

[Prunesquallor]

What is wrong in the USA with all of its states not shown in blue. It is like benching your star quarterback during the championship run. Those states need to get new coaches and get their game on.

Automobile dealerships are very large contributors to state politicians (at least in Texas). They hate Tesla's direct sales model for obvious reasons.

 

[ggr]

I am actually thinking the opposite (just an educated guess though) - they are delivering a few cars in order to pull the GF3 contabilization into 2019, knowing that they will *still* be profitable. They have said that Q1 will be harder reaching profitability, pulling the cost forward into Q4 makes it more likely to be profitable in both quarters (and qualify for S&P inclusion in the process).

If my assumptions are correct, that would be quite a bullish sign.

Does anyone actually know if "15 cars only to employees" does not count for triggering contabilization?

EDIT: I swear, didn´t read @Right_Said_Fred ´s post before typing this ...

Can someone explain "contabilization"? I'm not finding a definition.

 

[MTL_HABS1909]

Can someone explain "contabilization"? I'm not finding a definition.

He means to include GF3 in Q4 financials.

 

[NicoV]

Can someone explain "contabilization"? I'm not finding a definition.

COMPTABILISATION : Définition de COMPTABILISATION

 

[Andy O]

It is of course risky to try and say what someone else means by a word, but based on previous posts, here goes anyway. I think what is meant by contabilisation is that by selling some cars in 2019 some of the depreciation of the capital cost of the China factory must be added to expenses in the Q3 report, thus lowering profitability in the accounts.

There was an unresolved discussion here about how much depreciation must be added to the Q3 report according to the GAAP rules: an entire quarter of depreciation, or just an amount in proportion to the number of days left in the quarter after the first sale.

If it is a proportional amount this gives a reason for not starting sales in mid-December. The revenue from selling the small number of cars that had been produced to that point would be out of balance with depreciation based on the days left in the year. Waiting until now to sell the first cars will give a more accurate ratio between sales and depreciation.

 

[capster]

COMPTABILISATION : Définition de COMPTABILISATION

Er, I’m not sure French is the, um, Lingua Franca it used to be.

 

[mrdoubleb]

When did they say that? In the Q2 call they said quarter over quarter delivery increases would be tough in Q1. On the Q3 call, they mentioned production was pulled forwards and that they have continuing backlog.

Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable

OK, so I was going to let this go when you brought this up last time as an answer to my post, because 1, you are a native speaker and I am not 2, I hate arguing over semantics, but I think yours is a very specific and narrow interpretation of the answer he gave there.

Consider the following:

• This was a live off the cuff conversation. In such a case sentences are not that coherent, people's minds race ahead and their mouths are trying to catch up. Especially Elon's. Judging by people's interpretation here and elsewhere both back then and now as you brought it up, I think I am not the only one who understood the second part of his answer as much broader than just the order book. When he says Q1 will be tough, I don't agree that he means the Q on Q growth will be slow, but that, well, Q1 will be tough.
• Q1 is traditionally the weakest part of the year in the auto industry. Tesla has been somewhat exempt from that on a few occasions, but only because due to some havoc part of the year-end deliveries slipped into Q1.
• When they start up a new production line and run it sub-capacity, especially the first few months, that is usually very bad on the financial statements. (Just the nature of things due to costs split between few parts produced). All things point to Model Y lines being spun up in Q1.
• US incentives run out end of this year and the Dutch tax changes have pulled a lot of demand forward as well. So far this quarter Dutch deliveries gave them 40% of their EU sales. Yes, there may be some starved/pent-up demand elsewhere in Europe because of that but at this point that's all just guesswork. We haven't really seen wait times increase in the rest of Europe vs. the Netherlands during the past few months that would support that. I think most of us expect a drop in deliveries in Q1 which will make breaking even tricky.

So a profit in Q1 is unlikely. Not impossible, just unlikely. They can play with Chinese deliveries a bit to generate volume in Q1 and may also time Fiat payments to help the income statement. Who knows, they have surprised us before.

 

[The Accountant]

Can someone explain "contabilization"? I'm not finding a definition.

contabilizacion is Spanish for Accounting...perhaps that is what he meant.

 

[EV Promoter]

How about this one: maybe they DO want the contabilization to fall in Q4 because they already know the financial results will be so good that this quarter can absorb the extra costs and still be profitable. It would make it easier to show a profit in the ‘tough’ Q1. Remember, S&P 500 inclusion is only possible if the last quarter is positive.

That would be wicked
I guess profitability should be huge in Q4 for covering also GF3 initial costs.
We will see february financial report unless someone can evaluate the theoretical amount of GF3 cost due to be included in Q4 if it gets into Q4 financials.
I remember the bank loan in march was $521million. Adding the new loan of few days ago $1,5bn gives the total predicted cost of $2bn.

 

[kbM3]

OK, so I was going to let this go when you brought this up last time as an answer to my post, because 1, you are a native speaker and I am not 2, I hate arguing over semantics, but I think yours is a very specific and narrow interpretation of the answer he gave there.

Consider the following:

• This was a live off the cuff conversation. In such a case sentences are not that coherent, people's minds race ahead and their mouths are trying to catch up. Especially Elon's. Judging by people's interpretation here and elsewhere both back then and now as you brought it up, I think I am not the only one who understood the second part of his answer as much broader than just the order book. When he says Q1 will be tough, I don't agree that he means the Q on Q growth will be slow, but that, well, Q1 will be tough.
• Q1 is traditionally the weakest part of the year in the auto industry. Tesla has been somewhat exempt from that on a few occasions, but only because due to some havoc part of the year-end deliveries slipped into Q1.
• When they start up a new production line and run it sub-capacity, especially the first few months, that is usually very bad on the financial statements. (Just the nature of things due to costs split between few parts produced). All things point to Model Y lines being spun up in Q1.
• US incentives run out end of this year and the Dutch tax changes have pulled a lot of demand forward as well. So far this quarter Dutch deliveries gave them 40% of their EU sales. Yes, there may be some starved/pent-up demand elsewhere in Europe because of that but at this point that's all just guesswork. We haven't really seen wait times increase in the rest of Europe vs. the Netherlands during the past few months that would support that. I think most of us expect a drop in deliveries in Q1 which will make breaking even tricky.

So a profit in Q1 is unlikely. Not impossible, just unlikely. They can play with Chinese deliveries a bit to generate volume in Q1 and may also time Fiat payments to help the income statement. Who knows, they have surprised us before.

In addition, Elon recently stated they may not be cash flow positive and profitable in quarters where ramps are beginning.

On the other side of the argument, it just seems like demand may be even higher now, than it was when Elon made the statement, so hopefully he’s feeling more positive now.

 

[Tim S]

OK, so I was going to let this go when you brought this up last time as an answer to my post, because 1, you are a native speaker and I am not 2, I hate arguing over semantics, but I think yours is a very specific and narrow interpretation of the answer he gave there.

Consider the following:

• This was a live off the cuff conversation. In such a case sentences are not that coherent, people's minds race ahead and their mouths are trying to catch up. Especially Elon's. Judging by people's interpretation here and elsewhere both back then and now as you brought it up, I think I am not the only one who understood the second part of his answer as much broader than just the order book. When he says Q1 will be tough, I don't agree that he means the Q on Q growth will be slow, but that, well, Q1 will be tough.
• Q1 is traditionally the weakest part of the year in the auto industry. Tesla has been somewhat exempt from that on a few occasions, but only because due to some havoc part of the year-end deliveries slipped into Q1.
• When they start up a new production line and run it sub-capacity, especially the first few months, that is usually very bad on the financial statements. (Just the nature of things due to costs split between few parts produced). All things point to Model Y lines being spun up in Q1.
• US incentives run out end of this year and the Dutch tax changes have pulled a lot of demand forward as well. So far this quarter Dutch deliveries gave them 40% of their EU sales. Yes, there may be some starved/pent-up demand elsewhere in Europe because of that but at this point that's all just guesswork. We haven't really seen wait times increase in the rest of Europe vs. the Netherlands during the past few months that would support that. I think most of us expect a drop in deliveries in Q1 which will make breaking even tricky.

So a profit in Q1 is unlikely. Not impossible, just unlikely. They can play with Chinese deliveries a bit to generate volume in Q1 and may also time Fiat payments to help the income statement. Who knows, they have surprised us before.

I just wanted to say that, judging from this post, you speak English better than 99% of the native speakers here in America.

However I disagree that a profit in Q1 is unlikely. I think it is likely, but significantly less than the huge profit coming in Q4.

 

[jerry33]

What is wrong in the USA with all of its states not shown in blue.

It's called the best government money can buy.

 

[mongo]

OK, so I was going to let this go when you brought this up last time as an answer to my post, because 1, you are a native speaker and I am not 2, I hate arguing over semantics, but I think yours is a very specific and narrow interpretation of the answer he gave there.

Consider the following:

• This was a live off the cuff conversation. In such a case sentences are not that coherent, people's minds race ahead and their mouths are trying to catch up. Especially Elon's. Judging by people's interpretation here and elsewhere both back then and now as you brought it up, I think I am not the only one who understood the second part of his answer as much broader than just the order book. When he says Q1 will be tough, I don't agree that he means the Q on Q growth will be slow, but that, well, Q1 will be tough.
• Q1 is traditionally the weakest part of the year in the auto industry. Tesla has been somewhat exempt from that on a few occasions, but only because due to some havoc part of the year-end deliveries slipped into Q1.
• When they start up a new production line and run it sub-capacity, especially the first few months, that is usually very bad on the financial statements. (Just the nature of things due to costs split between few parts produced). All things point to Model Y lines being spun up in Q1.
• US incentives run out end of this year and the Dutch tax changes have pulled a lot of demand forward as well. So far this quarter Dutch deliveries gave them 40% of their EU sales. Yes, there may be some starved/pent-up demand elsewhere in Europe because of that but at this point that's all just guesswork. We haven't really seen wait times increase in the rest of Europe vs. the Netherlands during the past few months that would support that. I think most of us expect a drop in deliveries in Q1 which will make breaking even tricky.

So a profit in Q1 is unlikely. Not impossible, just unlikely. They can play with Chinese deliveries a bit to generate volume in Q1 and may also time Fiat payments to help the income statement. Who knows, they have surprised us before.

Thanks for expounding.
I think the Q3 call sets the stage that, even if they were saying Q1 was tough from a profitability standpoint previously, things have improved such that they will be profitable (barring any huge one time P&L line startup costs).

GF3 is going strong and should continue to as long as they are fed packs. Y is expected to hit 1k per week by mid 2020. Tesla Energy is ramping up on both solar and storage. FSD may get a useful release as soon as Q1. Order backlog
is strong (US deliveries are not till March) and they are adjusting pricing as a result. So I see Q1 being green at this point.