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

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Remember this: Elon said Q1 2020 will be tough during the 2019 Q2 earnings call. That was after Elon started his new strategy of under-promising and over-delivering. And that is precisely what I think he was intending to do.

It was also before there was any certainty that Gigafactory 3 would be already ramping production in Q4. This will move some of the ramp expense into the strong Q4.

Also know that China is starved for Made in China Model 3's. My guess is they will not only have a smoother than expected ramp (it's not like they don't have a ton of experience building Model 3's) and they will be able to sell every one they can produce. Remember, there are juicy subsidies for buyers of the MIC Model 3 that didn't exist with the more expensive imported Model 3. From what I can see, TSLA is pulling out all the stops to get the cars produced and out into the wilds.

None of this was known when Musk said he thought Q1 would be "tough".

I'm banking on a profitable Q1, record production and delivery numbers (both this quarter and Q1) and inclusion in the S&P500 Index. Good times for TSLA shareholders, bad times for TSLA shorts.

Agree with everything you said and want to add this about Q2. Elon's statement (see quote below) that "Q2 will be not as bad but still tough" was made before the increased confidence in MiC ramp up and the potential for Model Y to show up in Q2. So Q2 could be pretty darn good. Also let's not forget the last part of his statement "Q3 and Q4 next year will be incredible"...and this coming from a man who is beginning to under-promise and over-deliver.

"I think Q1 next year will be tough. I think Q3 or 4 will be good, Q1 will be tough. Q2 will be not as bad, but still tough. And then I see like Q3 and Q4 next year will be incredible."
 
The point I want to make here is that even if Tesla ships vehicles in December, it will not hurt financials. Margins are lower but they still make a profit.
Great analysis Accountant, thanks, it sorts out the doubts ;)

I thought the new loan including paying off the older loan. If I'm doing my math correctly, they will only owe the $1.5B, and have an additional $1.0B to work with.
Yes, Tesla declared the new loan pays off the older.
The $2bn figure was just the projected cost declared at the beginning.
 
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Or, in the case of WV, when the politicians are automall owners themselves like our former Senate president. No issues there whatsoever. :rolleyes:

A government hands off free market is great until competition threatens your market. Then, you need the government to protect deale..., um, consumers.

Forbes - 6.5 years ago: Strangling Innovation: Tesla vs. 'Rent Seekers'
 
If Tesla becomes 2170-cell constrained after the ramp up of Model Y, then they will probably give precedence to Model Y orders over Model 3 ones, since that brings more revenue for the same amount of battery.
I am of the same opinion. The Shorts will be screaming how it is a sign of a drop in demand and use it to try and push the SP down.

We almost need someone like Fact Checking to do the bullet list of push-down BS that should be looked out for 2020.
 
Er, I’m not sure French is the, um, Lingua Franca it used to be. ;)
OT but it is the weekend: as I understand it, interestingly enough, French was never the lingua franca referred to in the phrase's original meaning. Rather, it was a kind of pidgin Italian[1]. This is sometimes confused in part because much later (after lingua franca came to have a generic meaning) then French played a role as the lingua franca of diplomacy.

Sorry, entirely too much time on my hands...
 
The next four weeks ending 31 Jan will be an exciting time

History has shown 4th quarter reporting , and more importantly , 1st quarter expectations can dramatically effect the next 5 months share price

For example

31 Dec 16 to 31 May 17 shares went from $213 to $325 for a 52% gain

31 Dec 17 to 31 May 18 shares went from $ 311 to $ 278 for an 11% fall

31 Dec 18 to 31 May 19 shares went from $ 317 to $ 185 for a 42 % fall

So , all eyes are on 27 / 28 Jan 20 , to see if Elon gives indications of positive Q 1 , and how
the market reacts to that forward looking guidance

As others has said Elon has hopefully set up expectations that Q1 will be difficult , so exceeding expectations
should be easier , especially with China Giga now selling and ramping up
 
Yes, but the little blue logo doesn't account for service centers! So the map is not entirely accurate. There are probably other inaccuracies too.

Doesn't blue mean Tesla is free to operate? Or are you saying that all the blue states can't have service centers either? (The map says only states in red, without an exception, can't have service centers.)
 
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Stat-Up Facility impact on Margins: When a new facility begins to ramp up, costs are typically higher. Material costs can be higher due to higher waste or rework of errors, Labor may be higher as new workers are not at top efficiency (taking more hours to complete a car as they get up the learning curve) and Overhead costs get spread over less units. For example Fixed Overhead cost in a month of $10m spread over 4,000 cars is $2,500 per car. But if you were to produce 12,000 cars, the $10m in Overhead would only be $833 per car. So the margins will be lower during the factory's start-up phase.

There's two aspects I'm wondering about:
  • Tesla already made approximately 2,000-3,000 cars at GF3 since the mid-October startup, most of it in the November-December timeframe.
  • If they had fixed costs of say $10m-$20m, not directly attributable to any car made, if they don't deliver any units in December then all of that fixed cost carries over into Q1, right?
  • So if they deliver just 15 cars in December, that automatically activates the fixed costs that ran up until December 30 (the day of the last deliveries), right?
So the timing of the fist deliveries could shift quite a bit of CoGs between quarters - if I understand this correctly.

Secondly, there's also depreciation and amortization based on the straight line depreciation method, which could amount to another $10m-$20m per quarter for GF3. Would those expenses fully hit in Q4 already, or would they be delayed to Q1 if there are no deliveries in Q1?
 
Looks like shorts are turning up the marketing spend again on traditional news. You can always tell because new age news sites do not deem tgese news worthy.

I do like the new angle though. Accusing tesla of skirting tariff and enraging Trump. Maybe get trump to have one of those sit downs like he did with gm. Slowing down gf3, hitting tesla where it is crucial.

But so transparent in what they are doing.
 
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I want to add some of my thoughts on the accounting for GF3. First some background on me: I have held CFO roles at 2 Fortune 50 companies in my career (now retired). Not the top CFO role but CFO of divisions/regions in these organizations. I also ran a manufacturing facility at one of these companies (not the finance role ....the GM). I am pretty well versed in manufacturing Cost Accounting.

Having also worked in Public Accounting for one of the Big Accounting firms for 10 years, I can tell you that even though there are Generally Accepted Accounting Principles (GAAP) for cost accounting, companies often have slight variations in how they apply and interpret GAAP. So my comments below may not be consistent with what Tesla is doing but it should be very close.

I could write pages and pages but let me hit on some of the areas that I see sometimes misunderstood by some members.

GF3 Costs are all Inventory/COGS: If a facility is dedicated to production, all costs at that facility will go to Inventory/Cost of Goods sold. None of the costs will go to SG&A. That means that general management, finance, HR, security, IT personnel in Shanghai will be part of overhead applied to production costs. Telsa has its China corporate office in Beijing....these costs go to SG&A. Tesla Sales Locations costs go to SG&A. All costs at Shanghai will go to Inventory/COGS. The only situation I have seen where costs do not go to COGS at a facility is the gain or loss on sale of equipment which is recorded in Other Income/Expense on the income statement. But we should not see any of this at Tesla at this moment.

Inventory vs COGS: Cost at the factory are classified as Material, Labor and Overhead (some fixed, some variable) and they all get capitalized to Inventory as the car is being produced. So all these costs sit on the balance sheet as Inventory until the moment the car is sold (ownership transfers to customer) and then at that point the Inventory gets released to Cost of Goods Sold (COGS). This allows for the matching of Revenues with COGS at the moment of sale.

So all of the GF3 costs thus far in 2019 are either on the balance sheet as Equipment or Inventory. There is one exception: The costs to train production workers (including their payroll) go straight to expense (does not get capitalized to inventory). So even it GF3 had no sales in 2019 (no revenue) they might still have slight COGS for training. But most likely no more than $2m.

Stat-Up Facility impact on Margins: When a new facility begins to ramp up, costs are typically higher. Material costs can be higher due to higher waste or rework of errors, Labor may be higher as new workers are not at top efficiency (taking more hours to complete a car as they get up the learning curve) and Overhead costs get spread over less units. For example Fixed Overhead cost in a month of $10m spread over 4,000 cars is $2,500 per car. But if you were to produce 12,000 cars, the $10m in Overhead would only be $833 per car. So the margins will be lower during the factory's start-up phase.

On this last point, my opinion is that although margins at Shanghai will be lower at start-up, they will still be positive. Meaning that if at full capacity the facility delivers $5,000 in gross profit per car, it is possible that at Start-up it is about $3,000 per car. The point I want to make here is that even if Tesla ships vehicles in December, it will not hurt financials. Margins are lower but they still make a profit.

Anyway - sorry for the long post - but I hope it helped.

Who knew accounting could be so much like interpretive dance and yet still so boring?
 
Whatever happens in Q1 2020 doesn't really matter because by the time we get to Q4 2020, TSLA will reach ATHs as the investment community fully appreciates what has happened and what's to come. If Q1 2020 deliveries exceeds Q4 2019, then the stock push up begins in April...if Q1 2020 is a "head fake" with lower deliveries with FUD being spewed by the regular suspects, then the stock push up does not arrive until June/July.

Help me see a path to Q1 2020 deliveries exceeding Q4 2019.
All back of an envelope:
I expect decreased shipments in Q1 from the Netherlands and US (the US due to seasonality and loss of tax credits).
I expect the MiC sales and the sales to starved European countries to offset the lost Netherlands sales.
So outside the US, I can see sales in Q1 2020 being equal to Q4 2019.
What would offset the sales drop in the US?
 
Anyone noticed what didn’t happen?
We don’t have an EoQ push email leak yet.
I think all cars are accounted for so no giant push. We bought my wife’s car at the end of Q3 out of inventory on the website (even though “inventory” was actually just built and on a transport truck). At the time (7 days from end of Q) there were several to chose from even though there was only ONE color combo and performance level we wanted. Now there are 0 cars showing in inventory.
 
Whatever happens in Q1 2020 doesn't really matter because by the time we get to Q4 2020, TSLA will reach ATHs as the investment community fully appreciates what has happened and what's to come. If Q1 2020 deliveries exceeds Q4 2019, then the stock push up begins in April...if Q1 2020 is a "head fake" with lower deliveries with FUD being spewed by the regular suspects, then the stock push up does not arrive until June/July.

Help me see a path to Q1 2020 deliveries exceeding Q4 2019.
All back of an envelope:
I expect decreased shipments in Q1 from the Netherlands and US (the US due to seasonality and loss of tax credits).
I expect the MiC sales and the sales to starved European countries to offset the lost Netherlands sales.
So outside the US, I can see sales in Q1 2020 being equal to Q4 2019.
What would offset the sales drop in the US?
Surprise Y, surprise 100kwh model 3, hopefully more useful FSD features like autopark. Any mention of the first two things now would Osborn selling every car they have in Q4.

What about solar roof? Nobody seems to be even listing this as a real thing. Tesla is hiring installers for this now.
 
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If they had fixed costs of say $10m-$20m, not directly attributable to any car made, if they don't deliver any units in December then all of that fixed cost carries over into Q1, right?
The fixed costs of $10-$20m are attributable to each car as overhead is applied to each car produced. Let's say $15m of fixed costs and 3,000 cars produced. The $15m is sitting with each car in inventory at $5,000 per car. This $15m is sitting in inventory and will get released $5,000 at a time as cars are sold.

So if they deliver just 15 cars in December, that automatically activates the fixed costs that ran up until December 30 (the day of the last deliveries), right?
If they sell 15 cars in December, then only $75,000 of fixed cost hits COGS (15 cars x $5,000). The remaining fixed costs stays in inventory with the remaining cars not sold.

So the timing of the fist deliveries could shift quite a bit of CoGs between quarters - if I understand this correctly.
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Not really, the $15m in our example gets released in increments of $5,000 as each car is sold.

Secondly, there's also depreciation and amortization based on the straight line depreciation method, which could amount to another $10m-$20m per quarter for GF3. Would those expenses fully hit in Q4 already, or would they be delayed to Q1 if there are no deliveries in Q1?
Depreciation and Amortization is part of Fixed Costs and works exactly as the examples above. Charged to COGS as each vehicle is sold otherwise held in inventory with each car not yet sold.