TSLA Market Action: 2018 Investor Roundtable

[beachbum77]

Really?

I figured most of that came out of the warranty reserve, certainly for the delivered cars which had to go back into the service center. Do you have a reason to believe otherwise? Warranty reserves got raised in Q2....

Most of the cars requiring rework before delivery seem to have been done at the service centers by the *salaried* service center workers. Only the parts would add to cost of revenues.

Luvb2b is estimating *$50,400* per car as the Model 3 "cost of revenues". Honestly this seems... high? I'm not sure how you're calculating it, but it seems to me like there's a large allowance for trouble and unexpected costs in that number. I mean, all of us can only guess as to Tesla's cost structure, since it's a trade secret, but the *variable* costs appear to be around *$28,000* based on the German teardown, so there's gobs of room for capital equipment depreciation, warranty reserves, and unexpected costs in that. Honestly this is one of the highest cost-of-revenue numbers I've seen in any estimate, so I'm wondering where you're getting your higher number.


No. How could it? Profit in Q4 and more-or-less-breakeven in Q3 is all that's needed to pay off the upcoming bond maturities.

Simple answer. The service centers do not do paint work. It goes to outside body shops. They are not on Tesla's payroll.

 

[Unpilot]

Ok, that made me laugh! I gave you a "funny".

I read a survey recently of "M3 owners". The author used a survey sample of 28 owners... that is right 28 owners out of 70,000+ to form all sorts of conclusions. Were the ones he cited the only 28 he spoke to? who knows? My point is statistical sampling is done every day. How much of it is really useful is debatable. Sadly, we are in another political season and will have to listen to the noise about poll after poll saying this or that. Oh joy!

Here is the thing. There is no DEMAND problem...there are no parking lots full of Model 3's that need discounts to sell. There is NO large scale "rework" issue.
There is only OVERWHELMING demand for a car that is setting sales records every month and has not even started to scratch the world wide demand.

You can watch the local parking lot and local dealer all you want.

 

[beachbum77]

See the comic relief in his comment "But will it be too little to late"

Darn, you are right. I misspelled that second "too". My bad.

 

[neroden]

Absolutely correct. But there seems to be a problem there. According to Electrek this morning, Tesla just announced they are willing to let lessees out as much as two years early if they are willing to take delivery of a new S or X by 9/30. That means 1) taking a unit from inventory and 2) it is going to be expensive for Tesla. I do not see how that will help profits. It is just another way (in addition to discounts they are already offering) to unload existing inventory.

Clearly not. The number of people with direct leases is small enough that this is a pretty limited offer, and can't really be considered a serious attempt to get rid of inventory.

Targeting something specifically at leaseholders indicates something else. There is some reason why Tesla wants to close out the old leases. Haven't quite figured that out. One of the accounting experts may be able to figure it out. I only have wild speculations and none of them make sense to me.

 

[neroden]

Because the residuals are so good they can make money both ways. Duh. Their inventory doesn't change until the lease-return car is sold. You're just being thick on purpose here.

I don't understand lease accounting well enough. (It's all changing next year, so I kind of didn't bother to learn the old system.) Could you explain how the business with the lease returns / residuals ends up getting accounted for this year?

 

[beachbum77]

Here is the thing. There is no DEMAND problem...there are no parking lots full of Model 3's that need discounts to sell. There is NO large scale "rework" issue.
There is only OVERWHELMING demand for a car that is setting sales records every month and has not even started to scratch the world wide demand.

You can watch the local parking lot and local dealer all you want.

1) I never said there was a demand problem for Model 3. There is a big DELIVERY problem
2) The parking lots full of M3's do NOT need discounts, I agree. They just need to get DELIVERED.
3) The worldwide demand, be it what it may, is not going to help Tesla hit its Q3 and Q4 goals.
4) Only Tesla insiders know the truth on the size of the rework issue. The rest of us are guessing.

 

[dc_h]

I have been following the threads and using my own observations in NC and FL to gauge the percentage of potential rejected cars. Many are over paint issues. Those are not fixed in 37 minutes. What is also clear is that many of those 4,300 cars from that last week in June were not completely fixed. Issues still existed by the time the cars made it to the DC's and issues are still continuing today.

Our algorithms and spreadsheet data come to different conclusions than luvb2b. So what? Everyone gets an opinion at this point. In about 60 days we will know who was correct and what it did or would have taken to produce a profit.

I don’t know who’s right. Does seem like overtime is coming down and cost per unit should be declining and future investments are at a minimum this quarter. I doubt Deepak knows for sure what number of cars they need to sell for break even. I’d say riding S/X sales will help buffer margins for the 3. Q4 should see sales over 60,000 3’s and close to 30,000 S/X and more energy sales. I think Q3 is gonna be close on profit. Cash flow is much more important.

 

[K_Dizzle]

Did anyone notice the call buying activity at the end of the day?

 

[sub]

I do not see a single mention of the model 3 numbers in my Apple news app, shocking. There is an article regarding Audi starting production of “new Tesla fighter” though.

 

[Unpilot]

1) I never said there was a demand problem for Model 3. There is a big DELIVERY problem
2) The parking lots full of M3's do NOT need discounts, I agree. They just need to get DELIVERED.
3) The worldwide demand, be it what it may, is not going to help Tesla hit its Q3 and Q4 goals.
4) Only Tesla insiders know the truth on the size of the rework issue. The rest of us are guessing.

Sigh...I've had a few beers so I will take the bait.
You have said Tesla had to higher a guy to "clear out inventory" what does that infer.
Your the only one guessing about the rework issue.

Any other car company would kill for a delivery problem instead of a demand problem

Tesla Model 3 Outselling Small And Midsize Luxury Cars In U.S. In July [Infographic]

 

[neroden]

Simple answer. The service centers do not do paint work. It goes to outside body shops. They are not on Tesla's payroll.

Fair 'nuff on the paint work. We have a survey with an actual decent sample size (193 -- not enough to be certain it's representative, but decent) which indicates that paint problems more than "insignificant" are limited to about 12% of cars. (12% is certainly enough to create a lot of noise on the Internet!) It should be declining since the sabotage was found. I'm not sure how to estimate the paint rework costs specifically, but if you say it's... $1000/car for 12% of cars, that would be $120/car in cost of goods.

You still think $50,400 is too *low* a cost of goods sold? I mean, based on your statements, you think it should be more like $51,300. I admit these aren't really that far away from each other... but to me, they both seem startlingly high.

I mean, we're all guessing as to these numbers; depreciation allocations are probably the better part of it, and they're *complete* guesswork.

 

[mutle]

But Tesla started it by trying to deliver cars with too many issues that led to the infamous "checklists" for M3.

I was a member of the biggest BMW i3 Facebook group before and when the car started shipping in 2013/2014. The group also had a similar checklist. Also there were daily reports of issues, which could have lead you to think there were a lot of problems with the car in general (coincidentally, or not, most of the problems affected the version with the petrol range extender). Meanwhile my car has been problem free since I took delivery in early 2014.

 

[ggr]

Clearly not. The number of people with direct leases is small enough that this is a pretty limited offer, and can't really be considered a serious attempt to get rid of inventory.

Targeting something specifically at leaseholders indicates something else. There is some reason why Tesla wants to close out the old leases. Haven't quite figured that out. One of the accounting experts may be able to figure it out. I only have wild speculations and none of them make sense to me.

Tesla knows what they can sell CPO vehicles for. If they can take back leased cars and re-sell them at a profit, all while selling (leasing) a new car, why wouldn't they? Just my hypothesis.

 

[JRP3]

You will not have much of an investor roundtable if everyone at the table is of one mind.

Somehow we've been able to discuss Tesla long before you arrived, in fact before any bear arrived. The "echo chamber" insinuation has never been accurate, even when there were absolutely no irrational FUD stirrers around. Intelligent people of "one mind" are quite capable of investigating and researching many sides of an issue.

 

[beachbum77]

Sigh...I've had a few beers so I will take the bait.
You have said Tesla had to higher a guy to "clear out inventory" what does that infer.
Your the only one guessing about the rework issue.

Any other car company would kill for a delivery problem instead of a demand problem

Tesla Model 3 Outselling Small And Midsize Luxury Cars In U.S. In July [Infographic]

For S&X inventory, not Model 3. At the end of Q2 Tesla had 6,600 unsold Model S & X units globally. These include units at the showrooms. Jon McNeill has reduced the number from 8,000 in August of 2017 to 2,400 by year-end. But it has been on the rise again since then.

 

[InDaClub]

Hint: you can help others to block a TMC member by publishing the ignore link on that persons profile.

E.g. https://teslamotorsclub.com/tmc/members/tsla_hopeful.21735/ignore

(No reason for blocking you, just to show the way to facilitate that.)

I found that the link below works much better

https://teslamotorsclub.com/tmc/members/beachbum77.61926/ignore

 

[Zaxxon]

Boy, there sure are a lot of posts here arguing with ghosts. If only there were a way to fix that and raise the s/n ratio...

 

[Unpilot]

Again with the comic relief....they can't sell what they build....really...that's your thesis?

 

[beachbum77]

Tesla knows what they can sell CPO vehicles for. If they can take back leased cars and re-sell them at a profit, all while selling (leasing) a new car, why wouldn't they? Just my hypothesis.

Don't forget CPO cars are no longer put back to near original condition and they also do not get the $7,500 FITC. Tesla already has a list of 5-10k mile new 2017s and 2018's. Why would anyone take a CPO unit for about the same price without the FITC? A CPO car is still a used car.

I would guess they will leave the lease returns on the books and take the new sale now. But when they dispose of the early lease returns that first year depreciation hit could be tough. The lessors may also want their expected profit from the 3 yr cash flow, but I have never dug into the Tesla lease arrangements.

 

[Drumheller]

Don't forget CPO cars are no longer put back to near original condition and they also do not get the $7,500 FITC. Tesla already has a list of 5-10k mile new 2017s and 2018's. Why would anyone take a CPO unit for about the same price without the FITC? A CPO car is still a used car.

I would guess they will leave the lease returns on the books and take the new sale now. But when they dispose of the early lease returns that first year depreciation hit could be tough. The lessors may also want their expected profit from the 3 yr cash flow, but I have never dug into the Tesla lease arrangements.

CPOs have never received the tax credit and that has always been clearly stated when you talk to Tesla.

I bought my CPO in 2016 and paid about half the price it was sold new. That's quite a savings over a discounted inventory car.

I've been on the fence about putting you on ignore, but this was it for me. It's clear that you just keep pushing an agenda instead of actually looking at facts and numbers.