Another Q - I remember a note to Alexandra Merz, from Moody's, in the last 2 years saying that TSLA's investment grade wouldn't go higher until they show Cybertruck at volume production. What constitutes volume production?
If TSLA goes to a higher grade, then there's a lot of money that'll need to flow into the stock just for being at a higher investment grade, right?
Short answer to what Moody's *might* define as Volume Production for Tesla: 500,000 vehicles per year of one model.
I don't agree with that, and it's definitely a metric that would be unfair to Tesla relative to other automakers' production figures for single models. But: based on my memory of Moody's statement, I think it will take a big number like that to "prove" that Tesla isn't wholly reliant on the Model 3 and Y. The Cybertruck at "Volume Production" enough to satisfy Moody's might just mean production numbers that are a sizeable fraction of 3 & Y production numbers.
If I remember correctly, part of that "volume production" argument was that Tesla is basically reliant on two similar products -- the Models 3 and Y. Moody's noted that the 3 and Y are the vast majority of Tesla's revenue and profit, and the other products (energy, S, X, etc.) are small in comparison.
There are many flaws with this analysis. The first to come to my mind are:
Anyway...given that Moody's sees Tesla's production of 1.5+ million 3's and Y's per year as a "weakness" that needs to be addressed by another vehicle produced at volume, I can very much see Moody's wanting to see Tesla producing Cybertrucks at a sizeable fraction of that figure...so 500,000 seems about right.
There are many flaws with this analysis. The first to come to my mind are:
- Tesla's per-product scale is different and MORE efficient than others. It shouldn't be "bad" that Tesla produces a million Model Y's per year, split among relatively few trims. That is MUCH more efficient than, for example, producing 100,000 each of 10 different models, and each of those split among many different trims.
- The 3 is produced at two different factories, and the Y is produced at 4 different factories...and there are frequent small upgrades to the vehicles at each, as well as regional differences in the method of production as well as the final vehicles sold. So it's not like Tesla's "reliance" on 2 products has created other limitations or vulnerabilities. Production is still global and diverse.
- And, of course, with an assortment of work/research/products that are not typical of automotive manufacturers, Tesla is still, in fact, a diversified business even if they only produce huge numbers of 2 car models.
Anyway...given that Moody's sees Tesla's production of 1.5+ million 3's and Y's per year as a "weakness" that needs to be addressed by another vehicle produced at volume, I can very much see Moody's wanting to see Tesla producing Cybertrucks at a sizeable fraction of that figure...so 500,000 seems about right.