- 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
- 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
- why even track anymore, installations fell, yawn
- 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
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."
Personally I expect them to use the Google hack where they create a wholly owned subsidiary that is a registered power company so that they can negotiate at grid rates for power rather than with various power providing entities where the super chargers are located.
Tesla Model 3: 26 kwhr / 100 mi
Model S: 33 kwhr / 100 mi
Model X: 39 kwhr / 100 mi
Hard to say where the balance of supercharging comes from (more expensive models more likely to have it free, but maybe less likely to use?) so let's be generous and call it 30 kwhr/100mi
I pay 24 cents per kwhr but I hope their average price is more like 10 cents (not even counting the solar...)
So each 100 miles charged would cost $3.
So 100 million dollars spent giving out electricity would generate 3.3 billion miles charged.
Back in september there were 20 million telsa miles driven per day, but a year long projection would be hard given the fast growth of model 3. let's just say 20M per day. That's about half of the year's miles driven covered with 100M.
I can't imagine that even 1/2 of the total miles driven are charged by superchargers. So I am inclined to agree with you; the free-supercharging-electricity costs are probably a small piece of the total 500M.
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.
I'm not sure "premium branding" for the competition matters vs Tesla, as I don't think the latter has a downmarket reputation. Interior/existing brand relationships I can see helping the conventional players. Range doesn't seem to be there even on the models supposedly coming out this year. It seems like we keep hearing the Tesla killer is coming Real Soon Like Now.
Still, I ultimately agree they need to sustain through the onslaught, it just seems like it's taking longer than expected.
Maybe, but haven't people been saying that about Tesla for 15 years now?
Companies like Mercedes, Audi, Jaguar own the mainstream, premium car market and they've only just joined the game.
(This is a prediction that I've been aware of for around 20 years now. And the form of the problem - that existing tech manufacturer's wind up hamstrung by their existing supply and sales networks, is a common one for companies that get destroyed by disruptive innovation.)
You're essentially saying that tens of thousands of dealers and hundreds of billions of dollars worth of car companies are going to go out of business because they can't find a mutually beneficial incentive structure.
It's not going to be all roses, but Tesla shunning dealers hasn't exactly been either, from a service quality and cost structure perspective.
Porsche doesn't seem to have any trouble shifting Taycans, doubling their production from an initial 20k to 40k units a year (simultaneous to Tesla cutting their X/S production from 100k to maybe 80k).
Here's my prediction: legacy auto manufacturers will continue to be years behind Tesla, but if and when the space matures that'll stop mattering. At that point, Tesla better stop acting like a startup and have their shit figured out, lest they become the Myspace of EVs.
It would be far from the first time. One of the biggest problems is for a company whose internal incentives and business model are based around one set of market assumptions to rethink it all and do something else instead.
Both The Innovator's Dilemma and The Innovator's Solution touch on this. The latter one in particular walks through how internal structures and incentives have caused company after company to fail to figure out how to sell products that they know consumers are buying.
The two most common problems being that it is very hard to cut your own margins to match a low margin competitor, and it is even harder to convince a third party sales distributor to cut their margins.
Anyways this is something that I've been aware of for close to 20 years. In another 10 years you'll be able to decide whether I was wrong.
I don't need to wait ten years to decide that you're wrong; even if your prediction turns out to be correct (which it might), assigning a 100% probability to this outcome is absurd, and if you could reliably do this you'd be a trillionaire.
Since we're reading the tea leaves via business school curriculum, what about a little Prisoner's Dilemma?
Let's assume that consumer demand exists for EVs (which Tesla has basically created single handedly), and EVs aren't profitable when slotted in to the cost structure of a traditional dealership due to the lack of maintenance. Dealers try every trick in the book to steer customers away from EVs.
Why wouldn't a percentage of dealerships defect, rebrand and focus exclusively on EVs? They'll enjoy abnormally high sales, and be profitable on the margins from new car sales alone. Dealerships that insist on only selling ICE vehicles will stick around for a while, but nobody will start one, and the number will be reduced by attrition. The total number of dealerships fall and the EV transition is completed over a few decades.
So to be clear: you assign a zero percent probability to this happening?
As for your hypothetical, the reason is that the dealers that try to do that won't make a sufficient profit to their business model unless they sell EVs at a very significant premium to published list price. And it will be very hard to sell consumers on letting them do that.
Even if you could get consumers to accept those prices, the industry would then face the problem that the margins on EVs from traditional car manufacturers have much higher margins than the EVs from startups like Tesla. Which will make them uncompetitive in the marketplace. This gets us back to the classic problem that it is hard to get organizations to significantly cut their margins. And even harder to convince your business partners to do so for your benefit.
They don't get their physical presence for free, and the cost is baked in to the sales price just the same way.
Maybe Tesla can pull that off but there's no reason to expect other EV manufacturers will until they hit massive scale.
As someone interested in more profit, which store would you rather own?
The argument you're responding to wasn't "Tesla's stores are dramatically more efficient".
The argument is that Tesla stores sell Tesla's EV cars effectively (because that's the only thing they sell) and traditional dealership anti-sell EV cars because they make more money on selling ICE cars.
This is not a conjecture. In addition to plenty of anecdotal evidence, there were qualitative studies both in US and Europe where researches sent "mystery shoppers" pretending to be interested in buying EV cars.
The results were dismal. Many dealerships didn't know much about EVs themselves and in the worst case, they would literally lie about how bad EVs are.
That will be a problem for GM, Ford, and others when they finally have good EV cars to sell.
And there's no obvious solution to that. Car makers and dealerships are frenemies so it's not like GM can dictate terms to their dealers or that they can force dealers to do a good job selling EVs.
The obvious solution (heavily subsidize dealers with bigger discounts) is bad for profit margins. Investors like profit margins and it'll look doubly bad because when they finally have EV cars to sell, they'll go through the same "loss due to low volume / production ramp" that Tesla went through in first half of 2018 and will be competing with Tesla's 2021 heavily cost optimized production.
Feel free to argue with my prisoner's dilemma point earlier in the thread if you want, which is in my view how this will play out. I've already agreed that what you're describing is an issue (and am at a loss why you took the time to write it out), I'm merely asserting that it's not going to spell the end of a quarter trillion dollars worth of wealth.
Walk into a regular dealership and then Tesla's version and you tell me which is more efficient.
For just one example of the differences, consider the typical haggling over price where multiple sales people and managers interact with you for an extended period of time to try to get you to spend top dollar. Compare with the Tesla version where you're pointed at a computer open to their website where you can order and configure the car that you want.
I've already agreed that what you're describing is an issue (and am at a loss why you took the time to write it out), I'm merely asserting that it's not going to spell the end of a quarter trillion dollars worth of wealth.
On what principles will it not do so? Merely because it seems absurd? Or is there some logic that applies?
Granted, that's to a large degree a speculative reduction in wealth. A similar re-valuation of the global car industry's future prospects would cause more mayhem due to well-established investments in supporting industries. It's fascinating how 250 billion dollars in reduced marked cap means "meh, it was overvalued" in Apple's case, whereas it would be a nasty surprise of historic proportions if it happened to the car industry.
Also I wouldn't count out Tesla's major advantage in sourcing the best batteries at wholesale prices.
Audi is matching the Model X with the E-Tron, but without Tesla build quality:
Volvo Drive-E, Jaguar I-Pace, new Nissan Leaf; similar stories.
This can't happen soon enough. Ever since driving a Tesla, I'm completely disappointed by the interior/control panels of most (all?) other cars. Buttons, seriously? A 9-inch screen?!
Buttons allow a driver to not take his/her eyes off the road while changing the radio station or adjusting the AC. Totally eliminating dashboard buttons is dumb, but fortunately some car-makers have started realizing this and have started to re-introduce some of those buttons.
I'm sure there's someone somewhere who can prove me wrong and touch-type flawlessly on their touch screen phone. But in most cases you're relying heavily on auto-correct to make a parseable sentence. Which means you'll need to look at the screen a lot.
The radio/Cassette player in my car is all buttons. I can change stations, volume, switch to tape etc without looking much at all. Some buttons I might no remember their place - but here's the crucial thing. I don't have to keep looking until I make contact. I glance, see where the button is, and then feel for it.
A touch screen simply doesn't give you that, you either need to see yourself making contact or wait for the software to do something you may (or may not) have wanted. If it's wrong, you're now trying to fix that and try again.
I do not believe that touch screens reduce risk in interacting with car functionality, indeed I'm pretty sure they increase it.
Cash flow was critical during this period, so it made sense to choose a CFO who both has a long history with the company and was able to take over on short notice. Now that Ahuja returns to retirement, Tesla figures it's better to hire an insider than get someone with external experience, given how many external executives they're losing after a short time.
In this scenario, the executive departures are taken at face value, namely that Tesla is such a chaotic and stressful environment that it's a bad match for many executives who thrive in other companies.
Q4 Services and Other Revenue: $531 MM
Q4 Services and Other Cost Of Revenue: $668 MM
Which would suggest a loss on services of $137 MM.
Is this the same 'Services' that Bloomberg is referring to? I cannot find any other mention of Services in the letter.
$1,880,354,000 costs - $1,391,041,000 revenues is $(489,313,000) in losses
I agree its sketchy, but Musk doesn't technically control the company. He has a large share of the voting pool, but the shareholders in general were willing to bail out SolarCity. Its kinda "Democracy in action".
I think it was a stupid move for the shareholders to do, but its fully within their rights to do so.
I say "technically", because Musk also went around trying to convince people that they should allow SCTY to be acquired by TSLA. But hey, shareholders trust Musk and were willing to follow his opinion on the matter. So I guess its fair overall.
A stupid move, but fair.
Are you're saying this from a short-term financial perspective?
I personally think it's too early to tell if it was a stupid move. Elon Musk had a plan, and his plans do seem to work out for the most part given some time.
It's my understanding that they recently cut a major sales channel, so it's perhaps not surprising that the number of installations have fallen.
Absolutely. Tesla's risk isn't long-term at all. Its all about the short-term risk.
Just think about Tesla's debt schedue.
* CUSIP 83416TAA8 -- $188,058,000 of Solar City Debt on November 2018.
* CUSIP 88160RAB7 -- $920,000,000 of Tesla Debt on March 2019. (Not part of SolarCity, but it has to be part of the calculus).
* CUSIP 83416TAC4 -- $566,000,000 of Solar City Debt, on November 2019.
Imagine how much easier 2019 would have been if Tesla didn't have to worry about $740 Million of Solar City debt coming due.
As a result, Tesla's CapEx spending (ie: building factories, buying factory equipment money) has dropped dramatically.
That doesn't even get into the stock-dillution issue either. Millions of shares were issued, reducing Tesla shareholder voting power, and your representation of the company. Solar City investors joined with Tesla investors as a freebie, part of the deal.
So now that we've talked about the costs of merging the companies. What exactly has SolarCity done for Tesla? Absolutely nothing. Tesla has been given hundreds-of-millions of dollars in debt, and millions of shares worth of dillution... with nearly nothing in return.
SolarCity employees and contractors were fired or laid off for the most part. SolarCity's deal with HomeDepot has evaporated. And finally the Gigafactory 2 is barely operational. The Solar Roof is years late and sales / revenue of SolarCity are completely ignorable.
Oh, and future Solar City debt will come due. There's also a 2020 bond due (I can't figure out how much it costs though). Its not like Tesla is close to paying off all that old debt yet.
We're looking at a ton of downsides with almost no visible upsides. Even after a year of waiting, all the touted "potential upsides" (Solar Roof, etc. etc.) are basically dead.
Now that's not quite true. We've maintained the idealized (idolized?) Musk as an infallible visionary an engineer.
(I say this as a huge Musk fan - I think his image/public perception play a big role in keeping Tesla afloat in hard times.. even when those hard times are caused by less-than-stellar tweets)
I'd argue it was a stupid move from a short-term, long-term, and even medium-term financial perspective. Not only did TSLA subsume all of SCTY's debt, they diluted their shares doing so, and most analysts of TSLA value the solar/energy business at a 0 despite the $2.6 billion acquisition. How many other businesses can make multi-billion dollar acquisitions that people think are goose eggs two years later without that being considered a bone headed move.
> It's my understanding that they recently cut a major sales channel, so it's perhaps not surprising that the number of installations have fallen.
And why did they have to do that? Because Tesla had been negative free cash flow for so long that they had to stop spending any additional money on Capex. Had they been in a better financial situation, like, for instance, like they would be if they didn't do this acquisition they might have been able to invest in future growth and wouldn't have done two series of layoffs in the last 6 months.
Edit: for context, total assets are $29.7bn and liabilities are $23.0bn.
$TSLA annual revenue (billions)
2 yr: 75%
5 yr: 60%
10 yr: 107%
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...
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
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.
So the only thing that actually matters is results: how they performed last quarter.
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.
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.
Not surprised there isn't much competition for the Model 3 given that sedans are out of fashion at the moment. Car companies are far more focused on the crossover market.
IMO the biggest dealbreaker for non-Tesla EVs is the extremely anemic state of affairs for non-Supercharger charging stations: there are barely any of them, many are poorly maintained or broken (or reserved for customers/employees/building residents), and dear God they're slow. As a Tesla owner, I can't imagine having to depend on them... Half the time I come across one, which is rare enough as it is, whatever I find is literally unusable, and the rest of the time getting a decent charge takes hours. With a Supercharger I can reliably get 100+ miles in about 15 minutes, which is plenty for almost anything, and there's many, many more charging stations.
Is it the range? I think they went too low.
Or just general Jaguar unreliability?
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.
Cadillac ELR, BMW i3, Chevy Volt, Chevy Bolt were all billed and hyped as "Tesla Killers" upon launch.
To date, no other manufacture has announced any plans to procure enough battery supply to produce cars in comparable volume to Tesla.
The comparison of Tesla to other EV options just isn't fair. Tesla models were designed from the ground up as being electric from the start, but other options have been ICE cars transitioned to EV, which makes them less-than-ideal and they lack the low center of gravity and storage capacity a tesla has.
I really do struggle to see how other manufacturers will compete with Tesla. Tesla just does so many things right...
But given the tall odds and strong pessimism from multiple groups, it's a marvel they continue to thrive. Kudos Team Tesla!
If Teslas drive themselves and other EVs don't, are they a comparable car?
It's hard to see how they win the self driving game, and if they do, it will be years off.