Nope - Cars that are fully assembled and not yet delivered to customers are finished goods inventory.
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The coming Tesla cash cow and the short burn of the century
- Thread starter DaveT
- Start date
Inventory is not capitalized; it's expensed when used or written down.
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Someone hoping to buy the $35k version and claim a $7,500 credit against their income tax liability; the deposits are fully refundable until a vehicle is configured. Several circumstances have changed that may adversely affect those hopes/expectations:
-M3 bottlenecks have delayed its availability causing more use by S & X buyers of the credits leading up the 200 k phase-out trigger;
-the delays may also cause those single-vehicle family needing to replace their existing car to opt for something else;
-higher priced M3s versions are being produced before the $35 k version will be available;
-individual tax law has changed (standard deduction doubled and brackets lowered while applying to higher levels of taxable income) which could mean some of those who were previously marginally able to receive the full benefit of the credit might now just receive partial benefit.
-the delays may also cause those single-vehicle family needing to replace their existing car to opt for something else;
-higher priced M3s versions are being produced before the $35 k version will be available;
-individual tax law has changed (standard deduction doubled and brackets lowered while applying to higher levels of taxable income) which could mean some of those who were previously marginally able to receive the full benefit of the credit might now just receive partial benefit.
It may not apply to most, or even a substantial minority of, reservers, but it's not inconsequential.
There you have it.
Looks like we'll see how your roll of the dice turns out in the next several months...
Correct.
So... if it's "expensed when used" what do you think constitutes "used"? In this case it's when the car is sold or delivered. If it's not expensed until it's sold then it's treated the same as being capitalized on the balance sheet even if it's not technically a capital asset. For that reason ShortSeller is correct that the cars delivered vs inventory has little impact on calculations.
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For years I've always been surprised at people who question Tesla's demand. They are getting more than 5k per week in reservations right now and they don't even have any cars in showrooms. Once people start seeing their coworkers or friends driving one, see them on the street, read the overwhelming positive reviews, have the ability to test drive, Tesla will be flooded with reservations. When inventory cars become available, the way people are used to buying cars, sales will increase even more.
As for gross margin assumptions, you may have a valid point. I think it will take some time to reach 18%, if ever. It's difficult to make any judgments right now because we don't know much about Tesla's accounting or how accurate their guidance is. We don't really know how they're accounting for COGS (cost of goods) so we can't predict to what extent GM will change when they scale production. For example, if a robot is written off on a per unit of production basis then it won't change GM when they scale up. OTOH, if it's written off over time regardless of how may units are produced, your GM willl obviously improve considerably. If the accounting accurately reflects COGS then it might be a while before M3 is profitable. Personally I think it will have a trajectory similar to Model S where the GM took a couple of years to reach Tesla's goal.
For the record. I outright own TSLA shares.
Personally my position here is that I have not heard a good explanation for a $120M shortfall on service&maintenance. The one sentence ‘explanation’ from Tesla is begging the question more than anything else. I packed out what possible charges could and could not be part of this loss and none seem to point to such a large gap. Underutilized or not. Yes, that makes me distrust full of this aspect of the company.
As indicated by their numerical description, the 2170 cells are 5mm taller than the 18650 cells that currently populate the Model S/X battery pack. Is it actually possible to make a Model S/X battery pack from 2170 cells?
Singer3000
Member
Hi SS,
Would appreciate seeing the adjustments you must be making to the Income Statement to conclude this. If you mean that you want to include everything that is not Energy in gross margin, this is what you get. Major falls in GM correlate with product launches, for reasons other have summarised. Seems to me that the chances are pretty good of gross margins settling comfortably at or above 20%, depending on your view on the sustainability of demand relative to production capacity (I am bullish on this, fair enough if you are not).
If your point is that Opex will scale linearly with deliveries due to tricksy accounting practices, I'd encourage you to look at SGA / Revenues through 2016 as the Model X ramp was achieved.
Attachments
Singer3000
Member
Got some rogue attachments in there too. I like to think I’m not technically illiterate but there we go.
One of th e pack teardown videos noted there was 1/4" (~6.5mm) dead space between the bottom of the module and the casing.
It could be this is "buffer space" to allow for the bottom of case to deform slightly to impact, etc... or it was there to accommodate taller cells all along.
Fair enough.
As part of this I've taken a closer look at a few things myself (warranty accrual vs. expenditure, etc...) myself. I appreciate the informative discussion (if not some of the "bairty" comments elsewhere in the thread by some folks).
Looks good, I just have a lot going on today to dive in, but I’ll bookmark and come back
bdy0627
Active Member
I would caution against thinking that since it hasn't happened yet, the risk for one is gone. The last time Elon saw one coming and called it out, it was about 6 months before the stock rocketed. Obviously, there hasn't been a major catalyst to trigger much fear in shorts or longs lately. People are just making money swing trading the stock. This is typical TSLA volatility, often dipping about 10% then climbing a similar amount. That will continue until a major catalyst sends the stock sharply out of that range. We know the arguments on either side for catalysts. We know one is coming, and we have some idea about when.
OK, my boss is going to be upset because I’m playing on the Internet, but I saw your charts and couldn’t help myself. Looking at March 2018 total gross margin, I’m questioning why total gross margin is decreasing even though M3 had begun to ramp up. The pattern beginning at the M3 launch doesn’t seem to follow the ones beginning at the S and X launches. Great charting skills, btw.
Since you have these battery pack numbers at hand:
If we assume that the current 2170 cell can indeed stand inside the Model S/X battery pack, what would be the maximum capacity of such a 2170-based Model S/X pack?
(Just want to know in case the 'short squeeze of the century' triggers my insanely high sell order, allowing me to upgrade from a Model 3 to a Model S...
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Taking the given auto expense and auto income sub total numbers. Q1 was actually better than Q4 on a gross profit basis (unless I typoed).
I would add services & other to that as well. All 3 together gives you the entire automotive picture.
Yah, I know you would
Given the production side is the revenue generator, I was looking at how it was trending. Service is a wild card (to me) due to expansion and cars going off warranty. Also separating the idea of losing money on every car they make/ sell from losing money on every car they sold.
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