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Q4 results

Heard a little rumor a press release on Q4 numbers is coming out soon... Did anyone else hear this?

Pungoteague_Dave | 20 febbraio 2013

shs, why is the few thousand cancellation number wrong? It is exactly what the company reported in the footnotes, and Elon inferred that cancellations were high and expected to remain high in 1Q13, as TM pushes people to finalize - this is how they are shaking the bushes to see who is real and who isn't. There were a lot of initial tire kickers, and having 15%+ of them fall away isn't a big surprise.

Put another way, the quality of current reservations is WAY higher than an older reservation because new reservations get to take test drive, AND they know they will receive a car in a matter of a couple months - a new reservation may get the finalize email in a weeks now, so they are much more real.

Pungoteague_Dave | 20 febbraio 2013

Ohms, cancellations to re-up for a new color are not counted as cancellations - that would be double counting.

vgrinshpun | 20 febbraio 2013

I was always curious about the internal targets for Model S and Model X production going into the next year. According to what Elon mentioned during the call, he expects up to 10-15K Model S to be sold in 2014 in North America, 10-15K in Europe and 10-15K in Asia. He also indicated that Model X sales expected to be approximately 70% of Model S sales.

Adding all of the above numbers works out to 30-45K Model S and 21-31K Model X sales in 2014. This yield grand total of 51-76K vehicles per year.

It is my understanding that 20K production is based on 5 day per week/one shift operation. Since both Model S and Model X are supposed to be produced on the same line, the maximum production for both vehicles would be 7/5 x 20*3 = 84K.

Looks that Tesla thinking is that they might be close to a full production capacity of the line in 2014. Thoughts?

Mliss | 20 febbraio 2013

How could the order book for 2013 be full if new cars ordered today are being given April/may delivery dates?

vgrinshpun | 20 febbraio 2013

Miss@edsal.com - Delivery dates are driven by the configuration of the car being ordered. Tesla are actively managing cash flow and trying to improve manufacturing efficiency; cars with similar configuration are being produced in batches, starting with more expensive configurations. The lead time for 85kwh battery and air suspension will be shorter than for 85kwh battery and coil suspension and much shorter than 60 or 40kwh battery with coil suspension.

Kleist | 20 febbraio 2013

@Mliss - non US deliveries haven't started, backlog isn't cleared yet and current reservation rate about 30 per day (=10k/year)... so TM will be full for 2013. Current wait time is still 4-5 month. More stores in 2013 and more MS on the road will advertise for 2014.

shs | 21 febbraio 2013

@Pungoteague_Dave

What I thought was "wrong" with the NYT statement, was that the article suggested that people cancelled because they had to pay "a substantial down payment in cash" when they finalized. As far as I know, no payment is necessary after the initial $5K deposit until the car is ready. I didn't pay anything when I finalized, and it seems the the factory is building my car.

jat | 21 febbraio 2013

@shs - wait, you are surprised the NYT gets something about Tesla wrong???

Yes, you simply convert your existing deposit into non-refundable (up to $10k of it) when you finalize it.

shs | 21 febbraio 2013

@jat

Not surprised, but disappointed that they would state something incorrectly that was so easily checked. While it may have been the reporters opinion that that was why people cancelled, it gave the impression that a downpayment was due when one finalizes. Not true.

tsx_5 | 21 febbraio 2013

shs,

Actually -- it is true. Your reservation (amount to get a place in line) turns into a down payment (yes, we agree to do a transaction). Since the reservation amount is fully refundable and there's no agreement for exchange of product and/or services it can't be considered a "payment". So the NYT author would be correct.

jkirkebo | 21 febbraio 2013

dborn: Right hand drive reservations have been seriously lagging. 181 cars total for the UK and Australia ? Norwegian reservations alone are probably around 8 times this number. TM would be crazy to divert large resources to the RHD Model S before the LHD EU version is ready for production start.

If UK reservations were at 2000 cars now instead of 75, RHD would most probably not be on the back burner.

Brian H | 21 febbraio 2013

tsx;
What is not correct is the implication that that was something unexpected and sufficiently shocking to cause cancellations. Stories and slant live on such little inferences. Note the NYT defense that no explicit provable errors of fact were made. That leaves a lot of (well-explored and exploited) territory to play in.

jk2014 | 21 febbraio 2013

Best to cut the debate off now... Starting to lose valuable publicity time for the amazing things tesla is set to do in the near future. No one gives a sh*t about the nyt editors opinion in the country at large. Audience is interested in how Tesla will improve their lives in the future, not how the nyt is wrong.

vgrinshpun | 21 febbraio 2013

The market and market analysts are mostly driven/interested in the short term view. Let's not follow their lead and ignore the bigger picture which Elon tried to paint during the call.

Expected profitability throughout the 2013 production year is a bold commitment and will really set the scene for a sizable rump-up in production in 2014. 25% gross profit margin would be the highest in the world of auto manufacturing.

The guidance for 2014 global demand was given by Elon as 1/3 North America, 1/3 Europe and 1/3 Asia, for a total of 30-45K of Model S and up to 70% of the Model S demand for Model X SUV. This is a lofty goal for a total production for both sedan and SUV of 51 to 76K in 2014.

There are several reasons why this demand projection may be the reality in 2014:
1. Gas prices in Europe and Asia are higher than in US.
2. European and Asian tax policy is MUCH more friendly to EVs than the policy in US
3. Car driven trips in Europe and Asia are generally shorter that in US.

Future is looking bright for Tesla Motors!

vgrinshpun | 21 febbraio 2013

Financial model for the above 2014 guidance
Assumptions:
average selling price - $80,000
2014 R&D + SG&EA (GAAP) - $500 MM
Gross margin - 25%
P/E - 15x
Production will be ramped-up in 2014 to meet demand

LOW:
Earnings (51,000 x 80,000) x 0.25 - 500,000 = $520 MM
Price 520 x 15 = $7,800 MM
Target share price: 7,800,000,000 / 113,778,865 = $68.55

HIGH:
Earnings (76,000 x 80,000) x 0.25 - 500,000 = $1,020 MM
Price 1,020 x 15 = $15,300 MM
Target share price: 15,300,000,000 / 113,778,865 = $134.47

In spite of risks, the rewards could be substantial. With the start up company during the initial high growth phase the market could reach above target share prices ahead of 2014, probably in 2013.

jk2014 | 21 febbraio 2013

Vgrinshpun +1

Brian H | 21 febbraio 2013

jk;
TM's experience is otherwise. To this day they encounter people, and not just a few, who believe the "comedic" Top Gear skit was for real. Raising a stink at least gets a doubt out in circulation among the "large" audience that it was honest.

nickjhowe | 21 febbraio 2013

@Vgrinshpun - what were your assumptions that got you to 51,000 units?

vgrinshpun | 22 febbraio 2013

@nickjhowe - it was based on demand projection that was given by Elon Musk during the Q4 results call. 10-15k of Model S for each of North America, Europe and Asia. Model X demand at 70% of Model S demand.

1.7 x (10 + 10 + 10 ) = 51

Brian H | 22 febbraio 2013

I think 30K MS and 0.7x30K=21K MX = 51K.

Timo | 22 febbraio 2013

51 sounds a bit too much to me. Europe sales probably wont go as high as North America for Model S simply because it costs so much more here, and same applies even more to Model X: SUV:s are nowhere close as popular here as they are in North America.

I think it is closer to 15k Model S + 0.7*15k Model X = 25500 (annually) than 51000. Far less than vgrinshpun estimates.

I think TM needs to build GenIII affordable car before they can get real breakthrough here in Europe.

vgrinshpun | 22 febbraio 2013

@Timo - estimates obviously vary depending on who puts them ogether. There are several facts, however, worth noting:
1. This estimate was given by Elon Musk, not vgrinshpun
2. Underlying market for luxury cars in the mold of Model S is split 30% North America, 70% Europe and Asia
3. Gasoline prices, tax policies and average length of trip in other parts of the world make EV more economical choice than in US
4. Currently Europe and Asia accounts for 25% of all reservations even though thre are no stores and no cars on display

shop | 22 febbraio 2013

I find it impressive that Tesla is going after the European and Asian markets already. It is hard to do - different regulations, slightly different car, lots of overhead, etc. but as the luxury car market numbers show, there is lots of demand there. I still say the most impressive thing in that quarterly report is that they are cash positive now. This allows the company to grow more quickly as their sales grow. Shareholders will not have to worry about another dilutive share offering soon. As least not til they start spending lots of money on gen III, and maybe even not then.

vgrinshpun | 22 febbraio 2013

Tesla is one impressive company indeed. Their decision making in any area one could think of - engineering, manufacturing, business, marketing, public relationships - proven to be superb. I believe that shareholders will be rewarded nicely if they stick with Tesla.

The big boys might be destined just to play catch-up for quite some time.

At least some of them are taking notice. Last Saturday I hang-out at the Delaware SC location to see the Tesla Road Trip owners go on their NYT challenge trip and observed Tesla Model S that was owned by Volkswagen charging there. The two guys seemingly test driving it for Volkswagen were clearly not interested in publicity, but with their luck were at the superchargers at the wrong time...

jk2014 | 22 febbraio 2013

V -- w're VW people in dark glasses and Hawaiian shirts turning away hoping you wouldn't notice?

vgrinshpun | 22 febbraio 2013

Ik - plain clothes, no glasses, but awkward and uncomfortable. Delaware SC is at the very busy rest stop. There were a lot of Tesla cars, owners eagerly answering numerous questions from on-lookers and well-wishers... The Volkswagen guys just did not fit there...

Timo | 22 febbraio 2013

@vgrinshpun, what were Elon exact words? I have not seen transcript of that yet (if someone posted a link I have missed that).

Kleist | 22 febbraio 2013

v - just curious, how did you find out the S is VW owned.

vgrinshpun | 22 febbraio 2013

@Timo, The link for webcast of the Q4 call is included below. There is at least one transcript at Seeking Alfa site, but many who used it point out that it is wildly inaccurate. I suggest listening to the webcast.

http://ir.teslamotors.com/eventdetail.cfm?eventid=125428

vgrinshpun | 22 febbraio 2013

Kleist - from one of the Model S owners who took part in the Road Trip. His car was charging next to the Volkswagen owned Model S. A

Brian H | 23 febbraio 2013

IIRC, Martin Eberhard hired on with VW as an EV consultant at one point. Don't know if he's still there.

jkirkebo | 23 febbraio 2013

vgrinshpun: There are indeed stores and cars in Europe. The Tesla store in Oslo, Norway has two cars. One for display (a beta I think) and a production model for test drives. The test drive car is unfortunately in crash repair at this time, due to an idiot in a Q5 that did not respect the right of way.

While the Model S is more expensive in Norway than in the US in absolute terms, it is cheaper in relative terms. A M5 is 3x the price of a P85 here while a base 60kWh costs the same as a lightly optioned VW Passat 2.0TDI.

vgrinshpun | 23 febbraio 2013

Great information, jkirkebo - it makes my point about Model S being much more attractive buying proposition in at least some European contries as compared to USA.

Let's make some assumptions and then compare these two cars. Please feel free to correct assumptions regarding the Norway as I am going to throw some numbers which I remember from different sources, but not 100% sure.

1. Price of Electricity $0.03 per kWh
2. Gasoline $8.00 per gallon
3. VW Passat TDI overall fuel economy 35mpg
4. Model S power overall consumption 380/0.85=447Wh per mile (average efficiency of the charger = 0.85)

So the question is why would anybody choose less sporty, slower car (8.9 sec 0-60mph for VW vs. 5.9 for 60kWh MS), which is significantly smaller (5 inches shorter and 5 inches narrower), has about twice less luggage space (15.9 cu ft VW vs. 31.6 cu ft MS), and costs 17 times (!) more per mile to operate (22.85 cents per mile VW vs. 1.34 for MS) ?? In Norway Model S wins this comparison hands down.

It would be interesting if somebody from other European countries can chime in on how this comparison holds in their respective countries.

dborn @nsw.au | 23 febbraio 2013

Jkirkebo - regarding right hand drive, you can't lay of the local rep and make zero sales effort and expect reservations to rise, as they were doing prior to that event. The roadster was sold here, even though at DOUBLE the USA price!! Japan is a large market also.. With a sales person and a get amped tour, I have little doubt that reservations would take off, and further once a few deliveries were on the road you can rest assured the market in Australia is much larger than reservations represent. Our gas costs are 1.50 per liter and our off peak electricity is around 12c, so energy is expensive here. However, we have a lot of sunlight!! The point is, though, that Tesla was prepared to take our money, but now is doing exactly what they are doing to the 40 kwh folks in the home country. They DO need to be up front with us. If we are not going to see cars here for the next 2 to three years, then I want my money back!
I wrote to George asking what the state of play was immediately following the call. NO REPLY! Yet other communications from me to him were answered virtually immediately, as I posted over on TMC where I considered him to be incredibly responsive. Silence from the company is not helping. If they are simply using our funds with little intention to deliver, that is simply dishonest. Teslas financial considerations do not figure in my calculations. They offered a car in this market, were more than happy to take our deposits, and now appear to be reneging on supply. The right thing to do would be to be up front about their plans and offer us refunds. I am not canceling yet, but do want some official communication from senior management, not platitudes from lower downs...

jkirkebo | 23 febbraio 2013

vgrinshpun:

1. Electricity is sadly not 3 cents/kWh, but aound 15 cents at this time. We mostly buy electricity on spot market prices, so the price can vary quite a lot over the year.
2. Gasoline is just under $10/gal now.

So yes, the Model S is very competetive. Thre is however one problem, and that is no hitch and no tow rating. My guess is that 90% of the VW Passats are sold with the hitch, and it can tow around 3100 pounds. No hitch is a deal breaker for quite a lot of people. I wish Tesla would fix this ASAP.

dborn @nsw.au | 24 febbraio 2013

A hitch is available aftermarket in the USA.

jk2014 | 24 febbraio 2013

Dborn -- question is in to Tesla right now on whether or not putting on a trailer hitch will void the service and warranty agreement... Currently awaiting the answer.

vgrinshpun | 25 febbraio 2013

In an interview with Bloomberg Elon Musks confirms that he sees demand for Model S in each of Europe and Asia to be equal to the demand in US, although mentioning somewhat lower pgojection that he mentioned in Q4 conference cal: 10-12K each vs. 10-15K each in conference call.

Interrestingly Elon indicates that Tesla Model sees it's biggest eurpean market as Germany. Sounds like a direct challenge to Audi, MB and BMW...

Video:

http://www.bloomberg.com/video/musk-expecting-30k-40k-model-s-demand-per...|get_items|%7B%22status%22%3A200%2C%22page_num%22%3A1%2C%22filter%22%3A%22unarchived%22%2C%22total_matches%22%3A0%2C%22is_search%22%3Afalse%2C%22items%22%3A%5B%5D%7D

vgrinshpun | 25 febbraio 2013
Longhorn92 | 25 febbraio 2013

vgrinshpun: I thought I remember them stating that Model X wouldn't start production until end of 2014, so your numbers may be good 2015 guidance.

cloroxbb | 25 febbraio 2013

@longhorn

It was said in the Model X unveiling (the video which was posted in February of 2012) that Model X would start production at the "end of next year" which means 2013.

At least thats what I got out of the announcement. If it has changed tho, I have not read it.

Longhorn92 | 25 febbraio 2013

@cloroxbb: you are correct - my mistake - I just reviewed the press release, and it does state end of 2013/beginning of 2014. I don't know how I got a year off in my mind. Thanks.

cloroxbb | 25 febbraio 2013

You scared me for a second, thought it changed :)

Brian H | 26 febbraio 2013

I think that's an "underpredict, over-achieve" ploy. MS has played that one for years.

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