Sunday, October 29, 2017

Tesla Watch - Month 2 Of The Ramp Up -- October 29, 2017

Updates: Following the 3Q17 Sales / Earnings Release

Tesla watch: wow, wow, wow. Buried in the news today -- Tesla's head of battery engineering exits. Wow, wow, wow.  Not aware that it was mentioned on CNBC -- didn't hear it mentioned on "Fast Money" or "Mad Money."

Production hell, November 4, 2017: from Bloomberg. I assume the link will eventually break; that's too bad. Anyone who buys shares in TSLA after reading this article has nerves of steel.

Tax credit. November 4, 2017. Some folks thought that talk of eliminating the US tax credit for EVs was the reason Tesla tanked. Hardly. It was everything but the tax credit talk that tanked Tesla. Tesla will soon lose the tax credit anyway, having reached the sales threshold

Will need capital raise within 90 days, contributor to SeekingAlpha, November 3, 2017. 

Tesla derangement syndrome, November 2, 2017.

Headlines at CNBC crawler after earnings call:
  • largest quarterly loss reported yesterday
  • will cut back production of Model 3
Chevrolet Bolt outsold Tesla's Model S and Model X.

Earnings call: huge miss

  • October sales pending; will see numbers by end of week
  • Chevy Bolt outsells Models S/X for first time
  • Tesla's first month sales plunge from Q3 to Q4 (same link): 3,075 units is a 36% first-month-of-the-quarter-decline for Tesla; the InsideEV source reported Models S/X sales for October but not October sales of Model 3
Original Post: Prior to 3Q17 Sales / Earnings Release

Ramp up, Model 3, company forecast and numbers:
Current non-company forecasts for October, 2017:
  • contributor to SeekingAlpha: less than 100 cars so far in October, 2017
  • MarketWatch: 1,000 units toward the end of November, pushing the S-curve out 6 - 8 weeks
  • Market Watch (same link): bleaker scenario if Tesla unable to meet 1,000-unit-a-week threshold until January, 2018; and, not getting to a higher rate by late April
  • my hunch: the Tesla cult will be happy if 500 units were delivered in October, 2017 (we'll know next week) and the tea leaves suggest the S-curve is simply pushed a bit to the right, regardless of whether Musk Melon says that (everyone has gotten used to his delays)
For investors:
  • old money: I am reminded of Jim Cramer's oft-quoted adage: bulls make money; bears make money; hogs get slaughtered
  • new money: a lot (I wouldn't say "everything" but a "lot") depends on numbers that will be reported this week
  • from a SeekingAlpha contributor, October 31, 2017: for Tesla, it would mean to first emerge from losing $-766 million into a break-even level, and then to earn around $1,750 million a year. 
  • this may be the huge clue that Tesla is slowing down the production line: from The Street: Tesla has cut December orders from one of its Model 3 parts suppliers in Taiwan to 3,000 per week from 5,000 per week. The supplier says that the 40% reduction is due to a production bottleneck for the vehicle. 
  • two things from that clue:
    • if the cut is for December orders, this means that if there is a hiccup in production it extends well into the next year (2018)
    • the reason for the delay in cutting orders may have to do with the contract; it is likely the supplier requires a two-month notice for any request to slow down the supply chain
Investors: Tesla Will Need More Cash
Tesla Chief Executive Elon Musk has outlined ambitious plans to expand its network of factories and service facilities, including potentially an assembly plant in China and up to three more electric battery Gigafactories. He told investors in July the company could sell more shares to fund that expansion. "I'm sure there will be some funding rounds that happen in the future," he said.
Sticker Shock

"Way" more than $35,000. From InsideEVs:
  • base model: $35,000 but that will probably go up (slightly)
  • lowest-price model that folks will actually buy: $42,000
  • "Sure, a top of the line Model 3 will still cost way more than $42,000, but knowing that you can get a decently equipped 3 for just a hair over $40,0000 is a welcoming message." -- Really? Who are they trying to kid?
Price creep
Tesla, by comparison to its legacy rivals, is market value rich, and cash poor. It had $3 billion in cash on hand at the end of the second quarter, and some analysts predict the automaker will have to raise more to cover the expected cash drain from the slow launch of the Model 3, which is lower priced than other Teslas and aimed at the market for $35,000 to $45,000 cars.
JPM, October 20, 2017, just 10 days before earnings come out:
  • Tesla downgraded: Tesla may have to raise prices on the Model 3
The bank said that investors are underestimating the risk of Tesla not being able to solve its production problems. If the Model 3 is simply harder to manufacture than Tesla predicted, it could mean lower delivery numbers and potentially higher prices for the new car. Both of these problems would put dents in the "mass-market" branding of the Model 3. JPMorgan lowered its production forecasts for the Model 3 to 15,000 in the fourth quarter, half of its previous forecast.

How gas guzzlers are fueling development cars -- Reuters. Some key points:
  • margins on EVs, if we ever see profits on EVs, will remain very, very low for quite some time
  • meanwhile, the majors are making tons of money on high-margin SUVs and pick-up turcks
  • majors have robust assembly lines and experience (especially with welding) -- someting Tesla does not have

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