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Model S orders, and thus demand, continue to grow even in our most established markets.

Model S orders, and thus demand, continue to grow even in our most established markets.

From the Q2 earnings letter:

"Expanding Model S Demand

At Tesla, we see a clear distinction between demand and deliveries. We measure demand by the number of cars that have been ordered. An order occurs when a customer selects their vehicle configuration and pays the nonrefundable cash deposit. Deliveries, on the other hand, are the fulfillment of those orders. The number of deliveries in a quarter is influenced by three main factors: our ability to increase production; the allocation of that production among our North American, European and Asian markets; and the need to fill the in-transit pipeline for future deliveries in each region. This quarter, for example, we delivered 7,579 Model S vehicles, slightly ahead of guidance and up by more than 17% sequentially. However, even though we increased both production and deliveries, average global delivery wait times increased because our production growth was unable to keep pace with increased demand.

Model S orders, and thus demand, continue to grow even in our most established markets. In both North America and Europe, Q2 Model S orders increased sequentially at a much faster rate than for the rest of the automotive industry. Accordingly, we believe these markets remain under-penetrated. We expect demand to continue to increase worldwide as we continue to grow our customer support infrastructure and broaden the appeal of our products, and as consumer awareness improves."

This should put to rest the issue that US demand is not declining, but increasing.

NKYTA | 31 luglio 2014

Glad we can finally stop talking about that. Thanks mdemetri.

But somehow, I fear we won't.
;-)

Bighorn | 31 luglio 2014

Looks like tes-s got under someone's skin at TSLA. Glad that's settled:)

tes-s | 31 luglio 2014

I take them at their word that US orders in Q2 increased from Q1, a low bar indeed.

Is it really asking too much for them to report monthly sales by country like every other auto manufacturer?

Mathew98 | 31 luglio 2014

Here we go again. Forget about getting along. Can't we all just ignore each other???

There, we're one big happy family again...

JZ13 | 31 luglio 2014

tes-s: And Q1 orders were up 10% from Q4. So not such a low bar afterall. I think it's time for you to fes-s up and admit you have been wrong all along.

tes-s | 31 luglio 2014

Here is what frustrates me about their carefully-worded releases. Everything they say is half the information - just raises questions trying to decipher what it really means. I wish they would have their accountants or engineers write this stuff, instead of the marketing department.

"Model S orders, and thus demand, continue to grow even in our most established markets."

(would it be too hard to name the established markets? Continue to grow from what - from Q1? From last month? Last year? Does "continue to grow" mean they have had consistent quarter over quarter order (demand) growth in established markets?)

"In both North America and Europe, Q2 Model S orders increased sequentially at a much faster rate than for the rest of the automotive industry."

(thank you for naming the markets in this sentence - does that mean "most established markets" in the previous sentence means NA and Europe? You have now switched to talking about "much faster growth" compared to other manufacturers, not growth in Tesla demand.)

"Accordingly, we believe these markets remain under-penetrated."

("these markets" - NA and Europe?? What does under-penetrated mean - there is "potential" for more orders than you are getting currently? Under-penetrated because of increasing orders, or because you are growing faster then the rest of the automotive industry. Any plans to unlock that potential?)

"We expect demand to continue to increase worldwide as we continue to grow our customer support infrastructure and broaden the appeal of our products, and as consumer awareness improves."

(now we are on to talking worldwide, not NA/Europe/established markets. Do you expect demand to continue to increase in all markets, or just in aggregate?)

NKYTA | 31 luglio 2014

As I said, @mdemetri.
:-)

renwo S alset | 31 luglio 2014

Oops, wrong thread. Thought I was in "Please Ignore". With tes-s here, that should be easy.

omarsultan.ca.us | 31 luglio 2014

Here is the full letter: http://ir.teslamotors.com/common/download/download.cfm?companyid=ABEA-4C...'14%20Shareholder%20Letter.pdf

The highlights:
• Tesla and Panasonic announce Gigafactory agreement
• Site preparation started in June for a potential Gigafactory location
• Record Q2 Model S deliveries of 7,579 vehicles
• Record Q2 Model S production of 8,763 vehicles
• Net income of $16M and $0.11 EPS (non-GAAP), loss of $62M and $(0.50) EPS (GAAP)
• New Model S/Model X assembly line planned to begin operation next week
• On track for more than 35,000 deliveries in 2014

O

SamO | 31 luglio 2014

@mdemetri,

I read the report 15 minutes ago and considered making this exact post ;-)

AndyO | 31 luglio 2014

#tes-s: Tesla has a marketing department?

TeslaLandShark | 31 luglio 2014

Hahahahaha! Talk about waving a red cape in front of a bull!

JZ13 | 31 luglio 2014

Tes-s: So to summarize you think Tesla and Elon are misleading us? OK, for a guy who has been CEO of 4 companies and Chair of a 5th and not 1 accusation of misleading investors you don't have a logical reason to be skeptical of Elon's message. In fact, he has answered to NASA for over 10 years and they still trust him. Give it a rest dude.

SamO | 31 luglio 2014

They are opening 100 Service Centers in China.

Run rate of 100,000 per year exiting 2015 worldwide.

150K to 200K packs under current Panasonic deal without gigafactory.

Not pushing stores.

Double Apple $/sqft.

150 more Superchargers to get to projected 200 by end of 2014.

michael1800 | 31 luglio 2014

Regardless of my personal conclusions, congrats, Tes-s! With very little doubt, I believe you have impacted an earnings letter...in addition to the Super Charger rollout web page. I request you push for version 6.0 timing next, please!

jbunn | 31 luglio 2014

"Sales" don't matter. "Deliveries" matter. Tesla is different from other car manufacturers because it does not produce "spec" cars.

For example, Caddy. They made a bunch of their hybrid vehicles. My understanding is sales rate was so low, they had a several year supply before they needed to make more. Total sales appear to be about 350 this far this year. If true, those cars are sitting on dealers lots. Caddy and the dealers are offering heavy incentives, dropping profit margins. Per unit design and production costs at this volume will drive future development.

In the case of Cadddy, there is a difference between numbers of ELRs produced, and ELRs sold, and that difference is critical to know.

In the case of Tesla, the number of S cars produced is roughly equivalent to the number of model S sold (less loaners, demo and display, and test vehicles). For all intents and purposes, we can consider the number of cars delivered to be the number of cars produced, with a slight time lag for shipping. With Tesla, cars delivered is a much more accurate metric than cars sold because it shows the transaction at completion.

carlk | 31 luglio 2014

That was an unexpected disclosure. Imagine if tes-s was there at the CC to shoot his questions to Elon.

Al1 | 31 luglio 2014

"Model S orders, and thus demand, continue to grow even in our most established markets".

I believe this implies California, probably Norway. This must refer to the markets with highest penetration.

"In both North America and Europe, Q2 Model S orders increased sequentially at a much faster rate than for the rest of the automotive industry. Accordingly, we believe these markets remain under-penetrated".

johncrab | 31 luglio 2014

Great numbers all over the place, beats Wall St expectations by 280% and after-hours trading says, 'That's not good enough." There is no way to satisfy those WS b*stards short of putting straw on the floors.

Red Sage ca us | 31 luglio 2014

Pretty much what I expected all along.

tes-s | 31 luglio 2014

Looks like tes-s got under someone's skin at TSLA

I'd put .01% probability on that.

Tes-s: So to summarize you think Tesla and Elon are misleading us?

No. I said their statements left me with more questions.

"Sales" don't matter. "Deliveries" matter.

Sales=deliveries. Ask Elon.

@Al1 - that is my point exactly!! The way they stated all the sales / orders / demand stuff we are forced to speculate about what the hell they are talking about. Are they intentionally giving half the information, or do they think they are being clear?

@carlk - I just love and own the car - not the stock (never had a position), so I would not take time away from owners to get their questions answered. It is just a curiosity to me.

MNGreene | 31 luglio 2014

@JZ13 Great line: "fes-s up"

VERY funny! Multiple LOL's as I re-read it.

tes-s | 31 luglio 2014

I thought Elon was pretty clear about sales of the MS in North America - dropping from 2013 levels to about 20,000 per year.

100,000 MS and MX combined.
40% North America
Even split MS and MX.

My calculation is 20,000 MS in North America when they get to the full 100,000 per year run rate.

My estimate was 15,000 to 18,000 for 2014 and thought it would remain there, not much different than Elon came out with today.

If we take the 40% split with 2014 volumes, I think that would put Elon's projections very much in line with my projections.

mdemetri | 31 luglio 2014

tes-s - there you go again conflating deliveries/production with orders/demand. The "100,000 MS and MX combined, 40% North America, even split MS and MX=20,000 MS per year in NA" point you make has nothing to do with demand. This is deliveries/production. Let me say that again slowllllllllllllyyyyyyyyyy, that is deliveries/production not orders/demand.

As JZ13 said: just "fes-s up" and

tes-s | 31 luglio 2014

So you are saying Tesla is not capable of expanding capacity over 18 months to be able to meet demand?

Can't they simply start another production line with all that empty space in Freemont and double the output of MS?

Tesla can't make money from demand - only from sales. Tesla can't save the world from carbon with demand - only from sales. Elon knows that when demand outpaces production customers are unhappy. Why are they holding back - makes no sense to me.

Al1 | 31 luglio 2014

"Are they intentionally giving half the information, or do they think they are being clear?"

To me they are clear enough. On all things that matter they are on track. With regards to demand it is not hard to notice that despite steady increase of production they sell every single car produced.

If you really really need to understand their demand look at customer deposits on their balance sheet. It grew by 15% over last quarter.

Meanwhile in last quarter they started deliveries to China and Hong Kong and UK. Those markets are not small and whatever customer deposits they had accumulated they moved out of deposits and into the sales. There is probably rising portion of model X, but that's still demand.

Their gross margin improves quarter after quarter. What do you want them to tell you? This would have been unthinkable, was there any issue with demand.

Elon responded at his CC very well to this question. How many stores do they build? They hardly build any, much less than service centers. Meanwhile their sales per square foot is twice as much as Apple's, which was among the highest.

You need to compare apples to apples. Talking about demand in their situation is misleading. They are maximizing profit, to put every single dollar into growth. And this is what matters the most.

Mathew98 | 31 luglio 2014

Ok. Let's saturate NA and deliver all 50K units next year and let China, EU, and the rest of the world starve for a year.

Then only deliver cars to China the next year and starve the rest of the world that year.

Would any of the frustrated world wide buyers still want the car after 2-3 years wait under this delivery policy? These are not your diehard early EV adopters. These are mainstream high end luxury car buyers.

So does Elon method of madness in delivery make sense to you now?

mdemetri | 31 luglio 2014

They cannot expand to meet the worldwide demand over 18 months as they are battery constrained until to the GF comes on line. Simple as that.

Elon has said it as clear as possible, demand is not an issue. He also said they can 'increase demand at will' but they do not want to because they cannot deliver on the demand and end up with angry customers who damage their car on delivery because of the long delay.

Al1 | 31 luglio 2014

"Tesla can't make money from demand - only from sales".

Sales don't make money. Profits do. GM may ships million cars this year and recall them next year. That's why they are hardly making any money to pay current portion of their debt.

Tesla is sitting on two billions in cash.

"Tesla can't save the world from carbon with demand - only from sales".

You can't save the world with model S. But you can earn money to build gigafactory and model 3 and that's what Tesla is doing.

Brian H | 31 luglio 2014

Earlier, Elon had said that 2014 would be the year they "probe the limits of NA demand", or some such. Wonder how the probing is going; since Middle America is still pretty much terra incognita ...

tes-s | 1 agosto 2014

To me they are clear enough...If you really really need to understand their demand look at customer deposits on their balance sheet. It grew by 15% over last quarter.

See, that is exactly what I am talking about. Could they tell us change in MS deposits so we could separate out MX? We know MS deposits grew less than 15% since some of the deposits are MX. We are left to speculate how much.

And how about telling us change in MS deposits from last quarter by the markets they referenced earlier when they said demand is increasing even in their most mature markets. What was the change in MS deposits in North America Q1 to Q2? 5%? 25%? -10%? We just don't know.

@Brian - If they said they would probe the limits of MS demand in NA in 2014, then I'd say they are behind schedule. Probably because they are focused on production, since they are selling all the cars they can make. I think it will be 2015 when they have the production capacity, get refocused on the US, and start probing what the real demand potential is.

Out4aDuck | 1 agosto 2014

Actually, you CAN equate US deliveries to US demand. For the past several quarters, Tesla has squeezed out as many US deliveries as they could from the final orders of the quarter. Therefore, US deliveries are an accurate measure of US demand.

So how many US deliveries were there? Worldwide total of 7579, minus 2481 EU (including 200 UK and 93 Belgium), minus 1545 China, minus 220 Canada. That leaves 3333 for the US. A solid 3% increase over last quarter.

Grinnin'.VA | 1 agosto 2014

@TeslaLandShark | JULY 31, 2014:
On Tesla marketing ...

"Hahahahaha! Talk about waving a red cape in front of a bull!"

Well put.

Go Tesla!
Ron :)

Rocky_H | 1 agosto 2014

@tes-s: "Why are they holding back - makes no sense to me."

I guess you had missed it the last few times they've said they are constrained in production because they can't get battery cells any faster. They are not holding back by choice; they are being held back by a lack of building materials.

Red Sage ca us | 1 agosto 2014

tes-s: Please understand that the questions, queries, and quandaries you persue, will not be answered in the manner you request before Tesla Motors has sufficient capacity, production, and market share to warrant their mention. I can give it a try though...

"would it be too hard to name the established markets?"

Apparently so.

"Continue to grow from what - from Q1? From last month? Last year?"

Presumably 'continue' would mean a trend that has been continued, and was continuing before he spoke on the issue in this Conference Call.

"Does 'continue to grow' mean they have had consistent quarter over quarter order (demand) growth in established markets?"

Yes.

"does that mean 'most established markets' in the previous sentence means NA and Europe?"

Apparently so.

"'these markets' - NA and Europe??"

Probably.

"What does under-penetrated mean - there is 'potential' for more orders than you are getting currently?"

Certainly.

"Under-penetrated because of increasing orders, or because you are growing faster then the rest of the automotive industry. Any plans to unlock that potential?"

All this will be revealed with the passage of time.

"Are they intentionally giving half the information, or do they think they are being clear?"

They are intentionally giving all the information that is relevant.

"Could they tell us change in MS deposits so we could separate out MX?"

No. It is irrelevant.

"What was the change in MS deposits in North America Q1 to Q2? 5%? 25%? -10%?"

You will never know.

"Do you expect demand to continue to increase in all markets, or just in aggregate?"

It is undeniable.

-- Magic 8 Ball

carlk | 1 agosto 2014

@tes-s "I just love and own the car - not the stock (never had a position),"

Sorry to hear that. ;-)

JZ13 | 1 agosto 2014

+1 carlk - well put

tes-s: fes-s up dude, your argument has officially lost. You are now talking in circles that only you are following.

SamO | 1 agosto 2014

Cognitive dissonance is the excessive mental stress and discomfort experienced by an individual who is confronted by new information that conflicts with existing beliefs, ideas, or values.

http://en.wikipedia.org/wiki/Cognitive_dissonance

Al1 | 1 agosto 2014

Tesla customer deposits:

163153 end of 2013
198006 end of 1st quarter
228017 end of 2nd quarter

Steady increase in customer deposits. Steady increase in production. 2 times sales per square foot of sales store than with a recognized market leader. And still very low market penetration.

Why they don't tell you everything? Because they don't have to.

pvandeloo.ipod | 3 agosto 2014

Two questions:

1) If demand figures are great like Tesla is suggesting, why hide them?

2) If demand is greater than production by a signifcant percentage, why not increase prices?

Low CG | 3 agosto 2014

pvandeloo - This forum is for "enthusiasts." Are you one of those? I could be wrong, but you seem quite the nay-sayer!

mdemetri | 3 agosto 2014

@pvandeloo.ipod -

1) TESLA is not suggesting that demand is higher, they are stating it as a fact in a legal document. If falsified, the company and its officers could be subject to criminal prosecution. So there is no question that demand is up. Now to your question about why TESLA does not reveal the actual number of orders per country is a good one. I think they would be better served releasing the number of orders by model and country, but they are under no obligation to do so. I suspect that they may be worried that the data will be mis-interpreted or manipulated by 'shorts'. I would argue that demand is mostly untapped, as they have purely relied on word of mouth. As Elon said, they can increase demand at will. This type of demand cannot easily be quantified and may be why they do not release numbers.

2) They have increased prices already. My P85 from March '13 costs $15,000 more today. The P+ was also a cost increase as the a simple improvement in the suspension costs a lot less than $6,500. It is also coupled with the high margin 21' wheels etc.

Mark K | 4 agosto 2014

In simple terms - "Do more, or less people want to buy this car"?

Tes-s has spun and respun numbers, and selectively parsed statements by the company.

But he just couldn't support the claim that fewer people want this car.

It is troubling that he has persisted this long in his spin campaign.

"I'm just curious" does not seem a credible explanation for such a vigorous attempt to dull Tesla's impressive accomplishment.

Red Sage ca us | 4 agosto 2014

There are auto manufacturers who sell 27,000 to 40,000 vehicles per day, Monday-Friday worldwide. Given that metric, specific sales per trim level and territory for Tesla Model S can only appear to be disappointing. Should Tesla Motors manage to secure sales in excess of 100,000 per year, of a specific model, in a particular territory, it might be worthwhile to bring that to the attention of shareholders.

minervo.florida | 4 agosto 2014

I spoke with a long term Tesla employee Saturday, he said district sales managers may NOT open the new sales center in a Florida area. The reason is that they cannot make enough for world demand now and might be crazy at this time to open another store just to have no cars and piss people off.

I understand his reasoning, open it in the future when production gets ramped up even more.

as Elon said, "demand is not our issue"

minervo.florida | 4 agosto 2014

One more comments from a sales rep, they said a recent study shows about 78% of the population does not know about Tesla.

Advertising will kick demand up substantially when the time comes.

tes-s | 4 agosto 2014

Growing in all mature markets - Norway included in that?

A year ago I said US sales were dropping; others were in denial. They have dropped 25%.

I figure US wait has gone up 2 months over the past year. That is about 2000 cars at current sales levels, so if they delivered 500 more US cars a quarter (about 3800) they would be meeting demand.

I think they will catch up a little by the end of the year (shorter wait time than currently), so we will see some uptick in sales as they catch up. Maybe 14,000 for the year, still short of the 15,000 that I feel they could have sold if they had the production capacity.

I expect that 15,000 I see as the demand to drop slightly in 2015 as consumers have alternatives (including the MX), and increased awareness, superchargers, service centers, and sales centers are offset by much of the market already having a MS.

Just my opinion. I know you disagree.

Al1 | 4 agosto 2014

"One more comments from a sales rep, they said a recent study shows about 78% of the population does not know about Tesla".

I know quite a few people who on question whether or not they know Tesla would answer yes. Meanwhile most of what they know is stereotypes.

SamO | 4 agosto 2014
Al1 | 4 agosto 2014

"Growing in all mature markets - Norway included in that?"

Tes-s, term mature market is used when people really mean saturated and there is fierce battle to gain some 0.2% percentage point.

Tesla is certainly not in this category. And Tesla didn't use the word "mature". They used the word "developed", which has a different meaning. I don't really see any place they can call developed outside California. Even if you take the density of superchargers in California per miles of highways, US needs more than 400 to reach the same level of density across the country, that California has today. Meanwhile, California is probably still the place where the biggest number of new superchargers is being built.

Tesla is a unique car, no other model can come close. Its sales is really function of car availability (production, battery related issues), knowledge of car (function of sales centers and advertising / PR) and availability of charging infrastructure (density of superchargers).

Any of these metrics can be Tesla changed by Tesla at will. And they've been addressing the first, - car availability (production, battery related issues).

"A year ago I said US sales were dropping; others were in denial. They have dropped 25%."

Wow, you said that the sales were dropping as far as a year ago! These guys must be really crazy giving billions to Tesla for its gigafactory and what not, after you've already warned them, that the sales were dropping! But, what do you want! They were denial!

It also looks like some other guys were saying even earlier, as far as four years ago that Tesla was dead!

Others were in denial. And they still are in denial! Incredible!

As far as Norway goes, it looks like cars sold in Norway in July were produced by Tesla in May, about the same time they had to fill the pipeline for China and UK and build some safety stock before factory close.

I should say they are pretty good in focusing their efforts where it makes most sense. If we were to rank Tesla's ability to sustain growth momentum without disruption I would rank them 10 out of 10.

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