
Tesla Financial Results 2019 Q4 - xyby
https://ir.tesla.com/static-files/b3cf7f5e-546a-4a65-9888-c928b914b529
======
40acres
The bull case for Tesla is clear. Aside from Nissan with the Leaf, who
recently loss their galvanizing CEO and who's market cap has tanked since,
what major automaker has anywhere near the success of Tesla with EV?

No doubt execution has been an issue in the past, but recent sales trends,
completion of gigafactory, and Chinese expansion show that they are on the
right trend.

Tesla's were confined to the luxury market, but the Model 3 is doing well and
Tesla is being allowed to come out with more and more SKUs while the other big
auto's are still finding their footing.

The branding is on point without the need to advertise, like the iPhone,
Tesla's are becoming just a feature of everyday life (at least in large
metro's). Finally, and this is absolutely non-empirical, I just believe in
Elon. Tesla might be one of those companies that simply fades away once a
galvanizing leader leaves, but as long as his heart is beating I'll hold.

~~~
Sohcahtoa82
Other car manufacturers are missing what makes Tesla do so well.

It's a lot of things, really. Range, performance, the hope of self-driving,
the supercharging network (Which is much bigger than people think!), and of
course, the fact that they look like normal cars. Most other EVs like the Leaf
are either incredibly lacking in range and performance, or they're incredibly
ugly like the BMW i3.

Then you've got cars like the Mullen Qiantu K50 [0] that try to be something
special, but other than looks are incredibly lackluster and overpriced. $125K,
and its performance and range are on par with a $48K Model 3 LR AWD. They're
trying to brand it like a supercar, but it's only a supercar in the looks.

It's crazy to me that other makers can't even get charging done well. Most
public CHAdeMO or CCS chargers are only up to 50 kW, while Tesla superchargers
are usually 72 kW and sometimes up to 150 kW. Being able to charge quickly is
a must when one of your biggest barriers to getting customers is overcoming
their range anxiety.

[0] [https://mullenusa.com/reserve-qiantu-k50/](https://mullenusa.com/reserve-
qiantu-k50/)

~~~
nexuist
>the fact that they look like normal cars

This was my first thought during the Cybertruck unveil. It no longer looks
like a normal truck. Rivian was far out originally, but this blew it out the
park.

So the question is really, would people want an electric pickup truck that
looks like nothing before it?

I'm leaning towards yes, but we have to wait for the market to make its choice
to find out for sure.

~~~
philwelch
Cybertruck is going to be an Edsel-type blunder if they keep pursuing it. It’s
obvious that Elon is a car guy because the Tesla cars all look slick and
sporty but he’s obviously not a truck guy and I think he’s utterly
misunderstood the market with Cybertruck.

~~~
nickik
Based on what? Its cheap, can pull lots of stuff fast, you can plug in power
tools and it has lots of storage area.

~~~
philwelch
It looks stupid, the trapezoidal side walls around the truck bed actually make
it much less usable, and it looks stupid.

The whole problem with eg the BMW i-Series or most other electric cars is that
they are designed in a silly way that says, “look at me, I’m a weird electric
car, I’m not a normal car at all, I’m willing to look like a total dork in
order to virtue-signal about being eco-friendly”. Teslas just look like sports
cars—except the Cybertruck’s styling is 100% “dorky virtue signal about having
a weird special truck”, and truck people are even less likely than car people
to put up with that.

~~~
nickik
Because you have active suspension you the bed can actually be lower then most
trucks. Also overall usability seems like its clearly better on this truck
compared to the competition you basically point out one single thing and
ignore everything that goes the other direction.

And I think it looks cool, so that literally purely your opinion.

The design of the truck allows it to be produced for 40k and still have quite
a bit of range. Those performance and price measures matter. Had they copied
an F150 it would cost at least 50k and would not have as much range.

Tesla had to make conservative cars to establish themselves, but a
revolutionary brands will not always just copy the competition, specially when
trucks are on of the most uninspired markets where literally every vehicle is
a copy of the other.

~~~
philwelch
Do you own a truck? What do you use it for and how would the Cybertruck
provide an improvement?

I wouldn't characterize Tesla's other cars as "conservative" in the slightest.
"Conservative" makes me think of Volvo or Lexus. The Model S is absolutely
gorgeous and if any car aficionado saw it, he would say, "that is an
absolutely gorgeous car". It literally looks like a better Lamborghini,
Ferrari, or Porsche. The Cybertruck provokes reactions somewhere on a spectrum
between "what the fuck is that?" and "hmm, that's interesting". Which is
roughly the same design space that the Pontiac Aztek, Chrysler PT Cruiser, and
BMW i-Series inhabit. It's not fertile ground.

------
slg
I have been a longtime bull, but their stock value is now up over 140% in the
last 3 months and I can't say I fully understand why.

~~~
stellar678
I dunno. My bullish view has more to do with Tesla using the vehicle market as
an entry point to the broader energy market.

If the Tesla cars start throwing off profit and make the company self-
sustaining, their vertically-integrated energy thing opens the kind of
insanely huge global energy market. They're not just going to eat Ford's lunch
- but also Chevron, Saudi Aramco and your local energy company.

~~~
mdasen
I think you've hit the nail on the head for the bullish Tesla case. I don't
think there's enough profits in the automotive industry for Tesla to be worth
$105-120B. Sure, Toyota is worth more, but basically no one else is and Tesla
is a long time from being the next Toyota and I think the odds of them
becoming the next Toyota have to be below 50% and are realistically probably
more like 5-10%. That's not a dig at Tesla, just a recognition that there may
never be another Toyota (just as no one has been dominant at anything like
Microsoft was with Windows in the 90s) and even if there is another Toyota,
it's a long shot that Tesla will be there.

I think Tesla might run into issues around energy regulation. They are working
on energy storage and solar, but we'll have to wait and see how that turns out
in the market. Energy companies are highly regulated and generally provide
highly reliable service. This comes with costs like running higher than you
can actually charge for so you don't get outages, employing a lot of people
for emergency response and storms, etc. What happens when solar roofs get
covered with snow and don't work as well? If the utility company is tasked
with making sure they have enough generation power to cover that, then we'll
still need to pay them for the investment even if we're using our solar roofs
90% of the time. We're already seeing net metering going out of fashion as the
unpredictability of it doesn't help utility companies lower their costs
enough.

Would Tesla be willing to also go into the generation and transmission side of
things? It's definitely possible, but that's also difficult. Generation is
easier since they could just set up solar arrays and batteries and sell into
the grid. However, that still means customers paying the transmission company.
It's possible that you're talking about the generation side and Tesla could
tackle that a lot easier. In terms of the transmission side, they'd probably
have to start buying utility companies which don't come cheap.

I think it's more likely that Tesla will sell tech to transmission companies
and solar roofs and small batteries to individuals. I think there's still a
lot of money and environmental benefit there, but I think transmission
companies are going to stick around. It's a good business if you're just
looking for standard return-on-investment, but it also requires dealing with a
lot of regulation and communities that end up hating on you.

\--

In terms of Tesla being up so much, it's a bit surprising. Automotive revenue
is basically flat year-over-year. Total revenue is up only 2%. So, Tesla isn't
really growing. By contrast, Apple's revenue was up 9% year-over-year and
Apple is solidly profitable today. Assuming that Tesla continues having
profitable quarters, their PE ratio would be around 250 which would be fine if
they were growing revenue rapidly.

On the plus side, Model 3 production and sales are up over 40% YoY which is
excellent, but it's clear why revenue is flat: Model S/X sales are down
significantly and they carry a high price tag. For every three Model 3 sales,
they lost a Model S/X sale. That's certainly to be expected. The Model 3 is
really nice. However, it does mean that revenue is flat.

As a car offering, I like the Model 3. However, I don't know if demand will
continue to increase. How many people want to spend $40k on a car - and
specifically a Tesla Model 3? Will there be some hockey-stick like growth in
revenue? Probably not. Profits? Maybe. Tesla's vertical integration might pay
long-term dividends. Maybe they can spend less developing things they've
already paid for or maybe they can keep spending on R&D and really outpace the
industry.

Still, it seems unlikely that they will grow more than 10x their current size
in the automotive industry. That's not a dig at Tesla. If they're pushing out
around 600k cars this year, becoming 10x the size would put them in the same
place as Ford and GM. A 17x increase would make them larger than Toyota. But
that's going to take time. It looks like Tesla is looking to increase
production capacity by 15.6% in 2020 (from their slides). At that rate, it
would take 20 years to match Toyota's capacity (starting from 640k production
capacity and compound expanding at 15.6% per year for 20 years).

Maybe Tesla can expand faster than that, but that would also likely require
moving into lower cost/margin vehicles, many more types of vehicles, etc.
Toyota has 17 US vehicles not including variants like hybrid vs non-hybrid not
to mention many more for other markets and not including things like Lexus -
Lexus adds another 12 models, not counting variations like hybrid vs non-
hybrid.

And I'm not saying that Tesla isn't going to do that. However, I think it's
going to take a long time and a 20-year horizon (and the risk involved in
money that might materialize in 20 years) deserves a discount compared to
money that's actually being earned today.

You might totally be right that Tesla will not only eat Ford and GM's lunch,
but also energy companies. However, that future is likely 20 years away with a
lot of risk between now and then. Musk has been very upfront that electric
vehicles are easier to make than ICE cars. Other auto makers are creating good
electric vehicles except they won't offer enough range because batteries are
expensive. When batteries become cheaper, will competition limit Tesla's
automotive expansion? I think they'll still be highly successful, but what
happens when Toyota or Volkswagen puts their full weight behind battery-
powered cars? Some people will surely buy them instead of Teslas. At some
point, if battery-powered cars are our future, Tesla will clash head-on with
Toyota. Toyota is so good at manufacturing. Even if Tesla is good, Toyota is
likely to find ways to capture a lot of the market. Heck, if electric cars are
more reliable as Musk touts, what happens when people double the lifespans of
their cars? That's a much smaller customer base to be selling to.

Again, I want to emphasize that Tesla is doing well, but anything with a long
time horizon has all sorts of things that can happen in the interim and Tesla
is playing a long game and going up against a lot of established incumbents
and that means risk. I don't think it means risk of bankruptcy or anything
like that, but there's a big difference between Tesla's current market cap
(around $115B in after-hours trading) and ending up as the next Mazda (a
solid, profitable, and well-respected auto maker) that's only worth $6B. Even
if they're the next VW (the second largest auto maker sitting just behind
Toyota), VW is only a $95B company - and there's a lot of risk between now and
Tesla selling 10M cars per year. Likewise, there's a lot of incumbents,
competition, and risk between Tesla's current solar and storage deployments
and eating energy companies' lunch.

~~~
reitzensteinm
I have to say, thank you for this thoughtful post.

Tesla is one of the most compelling stories to follow in recent years, but it
seems like moderates have been pushed out and discussions have devolved in to
Tesla is a fraud vs Hodl to the moon, with both sides cherry picking facts so
hard it's mildly impressive.

So the above is a breath of fresh air, and I'd love to read more in depth
takes from others whether I agree with them or not.

------
dgritsko
Model Y production ramp started in January, ahead of schedule. Deliveries
expected to start before the end of Q1. Exciting stuff!

~~~
new_realist
The Y will mostly cannibalize 3 sales, but will be good for a few quarters’
pop.

~~~
war1025
I thought the Y was most similar to the X? Am I missing something?

~~~
nordsieck
> I thought the Y was most similar to the X?

IMO, all Tesla vehicles (so far) are pretty similar to each other.

On the one hand, Y is a less expensive X.

On the other hand, Y is a bigger 3 with a hatch back.

I'm not an expert in automotive consumer behavior, but I have to imagine that
Y will cannibalize some amount of 3 sales. I also don't think that will matter
that much - there is so much demand for Tesla vehicles that they are battery
limited.

~~~
manmal
Also, Ys are more expensive, meaning an increased bottomline if they really
displace 3s.

~~~
xkjkls
Increasing the top line, not necessarily bottom line. There is nothing to
indicate that Ys have better margins than 3s.

~~~
mehrdada
There's _some_ evidence: pretty much same platform as 3 should imply roughly
the same cost structure for the Y. That+higher price implies higher margin. It
would be akin to Performance Model 3 in that sense.

~~~
xkjkls
There is still more material in the Y than the 3. That doesn't seem to
indicate better margins

~~~
manmal
But they might have reduced the number of stamped parts by an order of
magnitude, improved wiring in a revolutionary way (there’s a patent by Tesla
for that), MUCH less R&D and production setup than model 3 (they won’t make
all the mistakes twice),... and let’s not forget economies of scale, they will
produce more Y than 3.

~~~
xkjkls
All of this is theoretical and we don't have any real data on how it will
affect gross margins. When the car is larger, many things are going to be more
costly, like painting, which takes up a significant part of automotive
margins.

------
irjustin
Congrats to the whole Tesla team + SpaceX. Crushing things. It's taken a long
time, but it's all starting to pay off.

~~~
m0zg
For a while there it seemed like Musk would die from stress. He just looked
like he's hanging on by a thread, which he probably was. He seems far more
relaxed now - if I were an investor (I'm not - the company metrics are
completely detached from its valuation), I'd consider that to be a good sign.

~~~
xkjkls
I don't think investment thesis based on the body language of the CEO are
great ways to place your money.

~~~
m0zg
Given that if this particular CEO were to, like, physically die (or even just
throw in the towel) _Tesla_ would immediately die, I challenge this view of
the situation. Even in its current, more stable state, this is a good signal
that things are going well - this is not something most people can fake,
certainly not people "on the spectrum" like Elon.

~~~
xkjkls
I would never invest in any company which the bus factor is 1.

~~~
brianwawok
How many billions were made off of Amazon with a bus factor of 1?

~~~
xkjkls
I don’t think anyone who really understands Amazon would have ever claimed
that they have a bus factor of 1. In fact, I don’t think much would have
changed if Bezos retired a decade ago. There’s a reason there are two other
Amazon CEOs.

~~~
m0zg
Not really, no. I hope you don't have a large position in AMZN. It can only
have a PE ratio of 82 because investors believe in the myth of Jeff Bezos.

~~~
xkjkls
Jeff Bezos could retire tomorrow and it would barely change the stock. Is it
expensive? Sure, but it’s expensive because it has a wide variety of
charismatic businesses, not Jeff Bezos.

------
aguyfromnb
Year-over-year revenue flat, year-over-year GAAP income down 25% on 20k more
units delivered. Hard to understand...

~~~
Animats
Tesla is at breakeven. Marginally profitable for 2019, but R&D was cut by more
than the difference between last year's loss and this year's profit. Still $26
billion in long term debt, up a bit from last year. Not clear on the terms on
that. They had to agree to some awful terms about two years ago, but dodged
the bullet on some of those.

Read the numbers on page 21-22 first, of course.

~~~
jsight
R&D was at $356 million in Q4 18 and $345 million in Q4 19. For the year, it
moved from 1.4 billion in 18 to just over 1.3 billion in 19. I don't see how
these minor differences were a major factor.

~~~
xkjkls
R&D hasn't been up to depreciation for a year.

------
notananthem
Everyone's financial statements: WE'RE DOING GREAT Everyone's GAAP numbers:
ehhhhhh

~~~
xkjkls
Yeah, if you choose to pay people more in stock, its easy to make your non-
GAAP numbers look good.

------
pcurve
I guess he is happy about "Funding secured" not panning out.

~~~
xkjkls
He should be happy that he wasn't reprimanded more for faking the largest
corporate buyout of all time...

~~~
yellowbeard
He was reprimanded by the SEC: [https://www.sec.gov/news/press-
release/2018-226](https://www.sec.gov/news/press-release/2018-226)

~~~
xkjkls
For what he did that was a slap on the wrist. He committed the most boneheaded
act of blatant securities fraud the SEC has ever seen.

------
xiphias2
It's interesting that Model Y production in China is starting only next year,
but I can imagine that first further cost reductions in the manufacturing
process must be achieved.

------
the8472
> We also introduced in-app purchases, where our customers can buy various
> software updates, such as basic Autopilot, FSD, acceleration boost and
> additional premium features.Software will continue to play a growing role in
> our business model.

I forsee an ingress-style mobile game and "pay 1$ to outmuscle that guy on the
highway/arrive faster at work" features.

------
jaimex2
Looks like they are truly unstoppable now, Musk's plans seem to have shifted
into high gear.

------
tempsy
no joke there are several people on /r/wallstreetbets that have turned a few
hundred dollars into $1M+ in 2 months.

~~~
xkjkls
There are also several people I know who have done so at a craps table. That
doesn't make it a sustainable or recommendable activity.

~~~
tempsy
I call BS. There's no casino game outside of a slot machine that someone could
play that could turn a few hundred dollars into $1M in a gambling session.

This difference you're missing is the upside is asymmetric with options. Your
losses are capped but your gains are essentially unlimited. In a typical
casino game the house edge is >50%. If you're turning $500 into $1M at a
blackjack or craps table you're cheating.

~~~
lucasmullens
Can't you go all-in 12 times to get there? It would only work for one out a
few thousand people, but it's certainly possible.

~~~
tempsy
uh find me one real life example of someone doing that and succeeding.

on a craps table there's no bet that has no house advantage other than the
behind the line bet. Same with roulette.

and no, usually these tables have max bets, so it wouldn't be possible, if you
had got to $500k (somehow), to bet that on a single bet.

again, the difference is the upside is asymmetric with options. also it's
never an all or nothing bet like a coin flip - if your option value goes in
the wrong direction you can sell for a partial loss.

~~~
bduerst
12 second search:
[https://www.youtube.com/watch?v=kWok7813jZU](https://www.youtube.com/watch?v=kWok7813jZU)

Splitting hairs over whether or not it's in a casino isn't really a
requirement to being gambling, which is kind of the point.

~~~
tempsy
I was responding to the hypothetical example of betting it all on flipping a
coin 12 times to get from X to Y.

i'm not sure what your point is. this is a just a large 35x bet. turning $500
into $1M is 2000x. what casino game can you play that would get you there?

again, outside of essentially winning at a slot machine I don't know a game
where you can turn $500 to $1M.

the insight here is that options buying is _asymmetric_. max loss for
essentially unlimited gain if you bet in the right direction. there isn't a
casino table gain that has the same quality.

i'm also not suggesting this is not speculative or not akin to gambling, but
the risk/reward for options buying is better than a casino. it's also not an
"all or nothing" bet. You can sell for partial losses without losing
everything if it goes in the wrong direction, whereas table games are
generally "all or nothing".

