I'm going to throw out what I suspect a number of people are thinking:
- Nobody bothered to call Musk out - either on the call, or afterwards - leaving the discrepancy in the public record.
This is not exactly true. From the CC:
Emmanuel Rosner
Okay. And, I guess, my follow-up would be on the demand side. So you're talking about 50% increase this year.
You said a few times that it could be higher than this. I think you just mentioned in the previous question 350,000 to 500,000, if I understood well.
So what is sort of like what drives the cautious outlook that's in your letter? Because it feels like it's the - it's just basically four times the fourth quarter run rate, which would imply sort of 50% for the full year but not really a lot of growth versus what you just accomplished.
So, I guess, how do we think about the total demand for 2019, especially if you introduced this - the cheaper version?
Elon Musk
Well, we need to bring the
Shanghai factory online. I think that's the biggest driver for getting to 500K plus a year. Our car is just very expensive going into China. We've got import duties. We've got transport costs. We've got higher-cost labor here. And we've never been eligible for any of the EV tax credits. A lot of people sort of dependent on incentives. In fact, we are [indiscernible] EVs, we have the least access to incentives. It's pretty crazy because there's so many companies that - countries that have put price caps on the EV incentive, which affects Tesla. And in China, which is the biggest market for EVs, we've never had any subsidies or tax incentives for vehicles.
So it's - it is eligible for that. But it sounds like that's going to be reducing in China in the coming years. But, really,
bottom line is, we need the Shanghai factory to achieve that 10k rate and other cars be affordable.
The demand for - the demand for Model 3 is insanely high. The inhibitor is affordability. It's just like people literally don't have the money to buy the car. It's got nothing to do with desire. They just don't have enough money in their bank account.
If the car can be made more affordable, the demand is extraordinary.
-------END CC--------
What I think happened was that Musk was simply making a qualitative (and not quantitative) statement. He was saying look how far we've come from 0 cars back then to almost half-million today. He was not making a production forecast. And in his mind, he genuinely thought that number was approx right, as evidenced by his 350-500k M3 claim in the CC.
I think what happened later was that legal flustered him all up, and yeah you're right I don't think everybody involved had a clear idea of the numbers (they essentially forgot about the above portion of the CC). The nuances of CC vs earnings report/10k, M3 vs total vehicles, and production vs delivery were all missed.
For several days after the tweets, the press and even the bulls (Gerber, ValueAnalyst, Galileo, etc.) were not giving the correct numbers. Some people caught the 350-500k numbers, but they didn't catch that it was just M3, so they were saying stuff like 500k is not the same as 350-500k. I didn't see anyone say a word about the 600k range, even though it was directly implied by the CC (and hence my post on TMC and SA, and my emails to Tesla).
As the Bloomberg article I posted earlier shows, Musk and Tesla finally realized that they were in fact in the clear (maybe they actually read my email
). And I even heard Phil Lebeau yesterday on CNBC, transcribing from the earnings call, that the 400k number was the conservative estimate and the 600k the more aggressive (which I also stated in my email).
Whatever the case, the SEC was in the wrong from the beginning. Musk was not making a material statement, it was qualitative. The SEC was out for him ever since he thumbed his nose at them. It was a witch hunt, pure and simple. Unfortunately for the SEC, in their overzealousness, they did not do their homework and missed the CC and the various nuances in the different numbers (just like everybody else missed it). I hope the judge throws the book at them.
