
Tesla Q4 2018 Earnings Letter - 11thEarlOfMar
http://ir.tesla.com/static-files/0b913415-467d-4c0d-be4c-9225c2cb0ae0
======
chollida1
Pre:

\- Will they give guidance on Model 3, Geographic breakdown(most other peers
do)?

\- how many sales are high end cars vs low end?

\- TSLA down 11% on year vs market up 5ish

\- convertable debt issue, we're now in the 20 day average window, option
implied vols show market doesn't think they'll make it

\- Elon commented that they could pay bond w cash and didn't seem concerned,
cash balance is up, though so are short term liabilities

Car Notes:

\- current lowest price car sold is Model 3 $44,000

\- reported to sustain 7,000 per week, a pretty big miss from the 10,000 that
elon claimed they'd be at by mid 2018 but expected

\- Est. 2019 delivered 360,000 to 400,000

\- Est. Q1 delivers expected to be down vs 2018

\- Est. Q1 deliveries expected to be down in North America

\- still no funding secured for China plant

Solar:

\- why even track anymore, installations fell, yawn

Numbers:

\- cash balance is 3.7B

\- cash flow positive again!!, beat last quarter, though capital spending fell
alot( down to $300ish million)

\- 4Q Adj EPS $1.93, Est. $2.14 (Big misses, what happend here?)

\- layoffs could cut $400M annually from budget

\- Customer Deposits $792.6M vs $908.5M in 3Q

\- Bonds unmoved, yield still 8%

\- Elon expects to be profitable each quarter in 2019

Misc:

Lots of analysts congratualting Tesla saying they've got the supply side
sovled.

Shrinking sales on the high end indicate taht their next challenge will be on
the demand side, especially on the high end that allowed them to survive for
so long

Can they be profitable with $1000 in margin per car instead of 5,000-10,000?

Interesting note by Bloomberg

> Services reported a loss of almost $500M

"So basically, Tesla is taking a $500 million hit just to save customers from
the dealership experience."

~~~
threeseed
For me the next couple of years are going to make or break Tesla.

You have pretty much every car manufacturer releasing flagship electric cars
in 2019/2020\. And most of them are either cheaper than Tesla or offer far
more value i.e. premium branding and better interiors. And whilst they have
their Supercharger network I suspect that pretty soon we will governments
intervening to regulate standards and build out infrastructure.

So they better get ready quickly before the onslaught comes and like you said
be profitable if margins drop.

~~~
Reedx
> For me the next couple of years are going to make or break Tesla.

Maybe, but haven't people been saying that about Tesla for 15 years now?

~~~
taneq
That's what happens when you aggressively scale a business. They could have
throttled back and been a profitable niche manufacturer with the Roadster, and
again (albeit a bigger niche) with the Model S, and again now with the Model
3. But that's not their goal, so they're continuing to expand as fast as
possible, and that carries risks.

------
dmode
These numbers are unreal. From 100 cars in 2011 to 140,000 Model 3s (+100K
Model X and S) in 2019. And all electric. I personally am not interested in
minor changes in financials, and want to just sit back and marvel the machine
that Tesla and Elon Musk has created. Kudos to everyone at Tesla.

~~~
ccorda

      $TSLA annual revenue (billions)
      2018: $21.46
      2017: $11.76
      2016: $7.00
      2015: $4.05
      2014: $3.20
      2013: $2.01
      2012: $0.41
      2011: $0.20
      2010: $0.12
      2009: $0.11
      2008: $0.01
    
      CAGR:
      2 yr: 75%
      5 yr: 60%
      10 yr: 107%
    

source:
[https://twitter.com/TeslaPodcast/status/1090719629922746374](https://twitter.com/TeslaPodcast/status/1090719629922746374)

It's interesting to overlay Tesla 2014 - 2019 with Apple 2002 - 2007. Now what
Apple did from there will be tough to match (not to mention the margins):
[https://ark-invest.com/research/tesla-through-the-lens-of-ap...](https://ark-
invest.com/research/tesla-through-the-lens-of-apple)

~~~
dmode
Thank you for putting these numbers out. Also, kind of reminds me of Facebook
revenue growth

------
anilshanbhag
Looks like everyone is worried about a few percentage points up and down in
financial numbers. There are three keys points I took away:

1) We expect the capital spend per unit of capacity for this factory to be
less than half of that of our Model 3 line in Fremont.

2) Since Model Y will be built on the Model 3 platform and is designed to
share about 75% of its components with Model 3, the cost of the Model Y
production line should be substantially lower than the Model 3 line in
Fremont, and the production ramp should also be faster.

3) This year, we will continue to implement more automation projects, and our
ongoing cost reduction efforts will also make an impact.

In the end if Tesla wants to achieve its mission of moving to world to
sustainable energy, costs need to go down. Every quarter they are making
improvements and the three points above show significantly potential to
further improve costs. The global auto market at $2 trillion is gigantic and
good fraction of it is going to be electric - it is really a race to improve
costs and Tesla is significantly ahead of the pack so far.

~~~
threeseed
> Tesla is significantly ahead of the pack so far

Not really.

Audi e-tron, Jaguar iPace and BMW i3 are all well reviewed.

And 2019/2020 will see a wave of car companies e.g. Hyundai, Mercedes entering
the market including plenty of interesting startups coming out of China. So
Tesla is going to need far more to differentiate themselves than just range.

~~~
fvdessen
Audi e-tron and Jaguar iPace compete with the Model S; BMW i3's small range
puts it in another category entirely. There's no competition for the Model 3
yet, and I don't think there will be for a while.

~~~
janoc
Well, given that the Model 3 is going to cost around 60k EUR in Europe
according to recently announced prices, they aren't going to sell many of
them.

That's a price you can have a huge (gasoline) SUV for. Or a luxury Mercedes.
Or two smaller BMWs ... People aren't going to buy the Model 3 (which is
supposed to be a "budget" car) only for Musk's puppy eyes at such price.

The other reason is a horrible lack of charging infrastructure. Europe isn't
US where everyone has a house, garage and a driveway so plugging a car in to
charge overnight isn't a problem. Here a huge amount of people live in
apartments and the shared parkings simply don't have charging spaces. And a
token one/two slow charging poles at some larger supermarkets are really not a
solution. Even Tesla has a very poor coverage with their superchargers here.

That's why the electric cars aren't exactly selling like hot cakes here. That
Model 3 doesn't have an equivalent electric competitor is very much irrelevant
when everyone is going to compare it with a gasoline (or diesel) powered car -
which cost half the price and have higher utility value.

------
Cyclone_
I think Tesla may start to face issues when the other automakers start coming
out with electric cars within the next few years. I sold off all my stock in
Tesla, although I think they may still be a good short term bet. The
supercharger network and cool factor is their big advantage at the moment, but
I think in the future they won't do as well when there's more competition.

~~~
NickM
_I think Tesla may start to face issues when the other automakers start coming
out with electric cars within the next few years._

Perhaps, but people have been saying exactly this about Tesla for the last ten
years now. Hasn’t been an issue for them yet, despite much improvement in the
EV offerings from other manufacturers.

~~~
danhak
Not only has it not been an issue...Tesla's share of plug-in sales has been
_increasing_ dramatically year over year.

Cadillac ELR, BMW i3, Chevy Volt, Chevy Bolt were all billed and hyped as
"Tesla Killers" upon launch.

[https://insideevs.com/monthly-plug-in-sales-
scorecard/](https://insideevs.com/monthly-plug-in-sales-scorecard/)

To date, no other manufacture has announced any plans to procure enough
battery supply to produce cars in comparable volume to Tesla.

~~~
MBCook
To date. But more and more manufacturers are biting at their heels for the
chance. With better and better cars.

~~~
stevehawk
that aren't selling nearly as well...

[https://insideevs.com/monthly-plug-in-sales-
scorecard/](https://insideevs.com/monthly-plug-in-sales-scorecard/)

------
sidcool
What Tesla has achieved in the past decade is a miracle. Their success is a
combination of luck and the resolve of everyone at Tesla.

But given the tall odds and strong pessimism from multiple groups, it's a
marvel they continue to thrive. Kudos Team Tesla!

------
kornish
Looks like shares dropped a bit in after-hours. Likely related to the CFO
planning to leave during 2019, which was not in the earnings letter.

[https://www.cnbc.com/2019/01/30/musk-says-tesla-cfo-
deepak-a...](https://www.cnbc.com/2019/01/30/musk-says-tesla-cfo-deepak-ahuja-
is-leaving-the-company.html)

------
11thEarlOfMar
Interesting set of charts here:

[https://www.zerohedge.com/news/2019-01-30/tesla-shares-
viole...](https://www.zerohedge.com/news/2019-01-30/tesla-shares-violently-
unchanged-investors-try-figure-out-what-musk-just-reported)

------
thesausageking
Model Y. So Tesla will have four models: S 3 X Y

~~~
xutopia
That isn't an accident. The Model 3 was meant to be called Model E but Ford
owns the rights to that name even though they haven't marketed a Model E in
forever.

------
jesscxc
Is there another vehicle company that is close to Tesla in self-driving
capabilities?

If Teslas drive themselves and other EVs don't, are they a comparable car?

~~~
xkjkls
Tesla's _don 't_ drive themselves though. Tesla has removed the FSD option
from all it's model's since October. Most self driving engineers don't actual
believe the strategy of using only standard cameras installed in the vehicle
is going to work out long term, and their self driving unit has less funding
than BMW's, GM's Cruise division, Google or Uber.

It's hard to see how they win the self driving game, and if they do, it will
be years off.

