Good find. +20% would be almost 96k in Q4. If we believe the story about shipping 7000 packs to China, that's 88-89k Model 3s for Fremont. I believe they'll continue to supply China through Q1 then seamlessly shift that battery pack production to Model Y in Fremont while switching GF3 over to LG/CATL.
The "7,000 battery packs" story that was leaked to CleanTechnica is only about Q3 battery pack production for GF3:
Tesla Gigafactory 3 Has ~7,000 Battery Packs In Stock For Chinese Model 3 Production, Will Use LG Chem Cells In 2020 | CleanTechnica
"Tesla Gigafactory 1 has been supplying battery packs to Gigafactory 3 since the beginning of August. The company has been sending between 400 and 750 battery packs per week depending on what was needed in the Fremont factory at the time. The final shipment for 2019 was sent 2 weeks ago. So, basically 2019 GF3 battery packs were shipped over a period of 12 weeks."
"After some fairly simple math, you get a range of
4,800 to 9,000 battery packs that GF3 has in stock at the moment. The median number would be close to ~7,000 battery packs. Technically speaking, that is the maximum number of Model 3s that Gigafactory 3 could theoretically build in the 7 weeks till the end of the year."
Note the wide spread of the range and the present tense of 7,000 packs. This article dates November 3, so this is the end of Q3 state of things.
I.e. even if we believe the 7k story, it has no direct relevance on Q4 production and we cannot just subtract 7k from GF1 production levels. I do think GF1 is or will be sending excess battery packs to GF3, but we don't know
anything about the magnitude of that.
Tesla paid 566m of debt on 11/1 and will pay another ~170m in December. I don't think they'll liquidate much more inventory so we're probably looking at a bit under $5 billion at yearend.
In Q3 Tesla actually increased inventory, they didn't "liquidate". This artificially decreased free cash flow - organic cash flow was around +$947m according to @ReflexFund's cash flow metric: operating cash flow less changes in operating assets and liabilities, less convertibles and equity financing.
At the end of Q3 Tesla had $5,338m in cash equivalents. If we assume just pure Q3 cash flow then Q4 cash flow will be $5,338m+$947m-$566m-$170m = $5,549m - an increase over Q3.
But all other things are
not equal:
- If Tesla increases Model 3 production and deliveries from ~80k to ~90k, with mostly flat inventory and flat S&X, to meet the guidance of 360k, then they'll gain disproportionately more cash income, because the incremental cash income at the margin is around 30% because fixed costs are paid already. I.e. at $50k ASP that's +$15m of income for every +1,000 units, or +$150m for +10k units delivered.
- But S&X is probably not flat either: Q4 is seasonally the strongest.
- Capex outflows might have increased due to GF3 and Model Y construction - it's unclear to what extent. In Q3 capital expenditures already ticked up from the Q2 level or $250m to $385m, which Tesla characterized this way in their Q3 update letter: "Capex increased sequentially due to investments in Gigafactory Shanghai and Model Y preparations in Fremont."
Anyway, the net of these factors seems to suggest a further
increase in cash levels over Q3.
That's the baseline scenario - it could go anywhere with so many moving pieces and wide discretion by Tesla to manage quarter to quarter cash levels.
Also note that due to their wave production/delivery system their cash balance dips dramatically the first 2+ months of the quarter before it comes roaring back in the last minute deliverypalooza. They could probably pay 2b in cash but definitely not 4b.
Mid-quarter cash consumption depends on production levels, but they are also frequently working capital loan facility financed. For example Tesla recently opened up a large RMB denominated loan facility at favorable terms. Mid-quarter they'd prefer to pay Chinese suppliers in RMB, and pay it back from their ~$650m RMB revenue at the end of the quarter, avoiding FX exchange losses. This way they can finance a big part of their Chinese supply chain, without drawing on any of their dollar denominated cash reserves.
They also have dollar denominated credit lines secured by produced but not yet delivered cars. They'd obviously prefer to draw on their own cash first and use credit last - but their cash reserves are not a correct metric of their true mid-quarter working capital buffer, which is probably $1b-$2b higher than their cash reserves.
So I think Tesla could easily pay more than $2b in cash, if they wanted to - but I also suspect Panasonic would prefer to perform a part-equity deal or pure-stock merger of their GF1 operations with Tesla, and Tesla wouldn't mind paying in equity either, to conserve cash.
