Projected Tesla Q3 sales for Model 3

[bwilson4web]

Hi,

I noticed Tesla sales each quarter follow a pattern:

1. 13,450 (July Q3) - Low production as the lessons learned are applied to improve production line and procedures.
2. 15,950 (Est. August Q3) - Medium production as the assembly line resumes production and integrates changes.
3. 20,950 (Est. September Q3) - High production, benchmarks the production line.

This suggests Q3 Model 3 production will run about 50,350. Not too shabby but it is based on a straight-line approximation. Unknowns include suppliers.

Bob Wilson

 

[David Green]

Hi,

I noticed Tesla sales each quarter follow a pattern:

1. 13,450 (July Q3) - Low production as the lessons learned are applied to improve production line and procedures.
2. 15,950 (Est. August Q3) - Medium production as the assembly line resumes production and integrates changes.
3. 20,950 (Est. September Q3) - High production, benchmarks the production line.

This suggests Q3 Model 3 production will run about 50,350. Not too shabby but it is based on a straight-line approximation. Unknowns include suppliers.

Bob Wilson

There are 2 ways to look at this, one is that Q3 2018 USA Model 3 sales were July 14250, August 17800, and September 22250, for a total of 54300 is Q3 2018, so you are projecting a drop is USA sales YOY? (I thought you value Tesla as a growth company?) That will be bad on the earnings report especially considering the price reductions, and model mix (Q3 last year the Model 3 price range was $50K for LR RWD to $75K for a P, and S and X still averaging over $100K per unit) that will both hit the earnings hard... Model S and X are also down dramatically over 2018 (worldwide), looks like it's going to be hard to get to profit in Q3 2019. I am going to start my predictions at $500M net loss for Q3, and think that is the best case scenario I can see $1B loss is possible if the sales continue to stagnate on S and X. I am guessing Tesla will drop at least 15% in revenue over Q3 2018 as well, that is going to send wall street into a frenzy, no more revenue growth story.

Meanwhile over at GM another earnings beat, and predictions are strong for the back half of 2019 with the new HD trucks going on sale

 

[bwilson4web]

you are projecting a drop is USA sales YOY?

It is a fairly simple algorithm:

1. Enter all monthly production numbers from Q1 2018 to current.
2. Cluster them in quarters.
3. Plot
4. Add a trend line to get the linear formula
5. Project starting with the July 2019 number and use the formula for the two remaining months
6. Sum the Q3 months for a quarterly number

I use the past metrics to find a pattern to predict the future for the Model 3. Rather I am more interested in the operational margins. If Tesla is able to improve the Model 3 margin to 20% or better the Model S/X becomes much less important.

Bob Wilson

 

[David Green]

It is a fairly simple algorithm:

1. Enter all monthly production numbers from Q1 2018 to current.
2. Cluster them in quarters.
3. Plot
4. Add a trend line to get the linear formula
5. Project starting with the July 2019 number and use the formula for the two remaining months
6. Sum the Q3 months for a quarterly number

I use the past metrics to find a pattern to predict the future for the Model 3. Rather I am more interested in the operational margins. If Tesla is able to improve the Model 3 margin to 20% or better the Model S/X becomes much less important.

Bob Wilson

I think your data set has major errors, the first error is you are starting from a time when tesla was supply constrained, that is no longer the problem. Tesla is showing new inventory on every continent for sale, so that means they are demand constrained. I think this flip-flop happened in Q1 2019, so we need more data to get an accurate projection of Q3 and Q4 . It looks like demanding Europe has fallen off a cliff the last month, as very few cars have been shipped, likewise China, and we saw yesterday what happened in the USA, a major drop off from 2018 numbers

 

[bwilson4web]

I think your data set has major errors, the first error is you are starting from a time when tesla was supply constrained, that is no longer the problem. Tesla is showing new inventory on every continent for sale, so that means they are demand constrained. I think this flip-flop happened in Q1 2019, so we need more data to get an accurate projection of Q3 and Q4 . It looks like demanding Europe has fallen off a cliff the last month, as very few cars have been shipped, likewise China, and we saw yesterday what happened in the USA, a major drop off from 2018 numbers

The data is what we have based on past performance. As for other speculations, I'm fairly sanguine.

There are reports Panasonic is having trouble reaching the 35 GWh production level and they have financial problems. Other than that, I've not heard of other supplier problems beyond the general price increases from Trump's tariffs.

As for demand, it looks like in Q2 Tesla sold more cars than it made: 87,048 produced and 95,200 delivered. What this suggests is there are queues of vehicles that grow and shrink between Fremont and the customers. In Q2, ~8,152 vehicles were delivered (and revenue booked) from the queues. Musk has said he is finding logistics to be a current problem. Perhaps that explains the Tesla owned car carriers.

We'll have more details the first week of October.

Bob Wilson

 

[David Green]

The data is what we have based on past performance. As for other speculations, I'm fairly sanguine.

There are reports Panasonic is having trouble reaching the 35 GWh production level and they have financial problems. Other than that, I've not heard of other supplier problems beyond the general price increases from Trump's tariffs.

As for demand, it looks like in Q2 Tesla sold more cars than it made: 87,048 produced and 95,200 delivered. What this suggests is there are queues of vehicles that grow and shrink between Fremont and the customers. In Q2, ~8,152 vehicles were delivered (and revenue booked) from the queues. Musk has said he is finding logistics to be a current problem. Perhaps that explains the Tesla owned car carriers.

We'll have more details the first week of October.

Bob Wilson

I tend not to count data achieved by heavily discounting to move iron, as was done during Q2, TFLC bought a Model X and got 6-8K of the already 20% discounted price... That kind of transaction has 2 effects, both bad for business. It pulls ahead sales that may come later more naturally, and it kills residual value, as anyone selling a used Tesla the last 6 months has learned.

 

[bwilson4web]

A serial Macintosh owner since 1985, I am shocked! Are you suggesting Tesla cars should not depreciate?

A 2013 Tesla Model S P85 loaned a CHAdeMO adapter as the SuperCharger network was thin back then. He doesn’t even have the MagicEye system ... just basic, traditional cruise control. Yet he still likes and drives it.

So I have no empathy with earlier Tesla buyers as they have gotten what they paid for. Had I waited 30 days, I would have gotten AutoPilot hardware V3.0 instead of V2.5 but I don’t care. I made a deal and bought what I wanted back then and don’t regret the 11,000 miles on my ride.

Bob Wilson

 

[David Green]

A serial Macintosh owner since 1985, I am shocked! Are you suggesting Tesla cars should not depreciate?

A 2013 Tesla Model S P85 loaned a CHAdeMO adapter as the SuperCharger network was thin back then. He doesn’t even have the MagicEye system ... just basic, traditional cruise control. Yet he still likes and drives it.

So I have no empathy with earlier Tesla buyers as they have gotten what they paid for. Had I waited 30 days, I would have gotten AutoPilot hardware V3.0 instead of V2.5 but I don’t care. I made a deal and bought what I wanted back then and don’t regret the 11,000 miles on my ride.

Bob Wilson

Bob, if I bought a car from a company that claims they do not negotiate on prices (everyone pays the same) and then found out many others are getting better deals I would be pissed. And If I bought in 2018 nd just a month or so later Tesla lowered the price 10K or more hurting my residual value, I would think that company is shady. Tesla lowered the price on Long Range performance S and X by $20K last month by including ludicrous mode, if I had just bought prior to the 20% price drop, that would be a painful pill to swallow. Let's look closer, a ludicrous Model X loaded with options was $160K a year ago, and now it is $46K less, that's a pretty huge price drop, and that does not include quarter end blowout deals.

 

[bwilson4web]

Bob, if I bought a car from a company that claims they do not negotiate on prices (everyone pays the same) and then found out many others are getting better deals I would be pissed. And If I bought in 2018 nd just a month or so later Tesla lowered the price 10K or more hurting my residual value, I would think that company is shady. Tesla lowered the price on Long Range performance S and X by $20K last month by including ludicrous mode, if I had just bought prior to the 20% price drop, that would be a painful pill to swallow. Let's look closer, a ludicrous Model X loaded with options was $160K a year ago, and now it is $46K less, that's a pretty huge price drop, and that does not include quarter end blowout deals.

I'm reminded of Matthew 20:

1 For the kingdom of heaven is like a landowner who went out early in the morning to hire workers for his vineyard. 2 He agreed to pay them a denariusa for the day and sent them into his vineyard.

3 About the third hour he went out and saw others standing in the marketplace doing nothing. 4 ‘You also go into my vineyard,’ he said, ‘and I will pay you whatever is right.’ 5 So they went.

He went out again about the sixth hour and the ninth hour and did the same thing.

6 About the eleventh hour he went out and found still others standing around. ‘Why have you been standing here all day long doing nothing?’ he asked.

7 ‘Because no one has hired us,’ they answered.

So he told them, ‘You also go into my vineyard.’b

8 When evening came, the owner of the vineyard said to his foreman, ‘Call the workers and pay them their wages, starting with the last ones hired and moving on to the first.’

9 The workers who were hired about the eleventh hour came and each received a denarius. 10 So when the original workers came, they assumed they would receive more. But each of them also received a denarius.

11 On receiving their pay, they began to grumble against the landowner. 12 ‘These men who were hired last worked only one hour,’ they said, ‘and you have made them equal to us who have borne the burden and the scorching heat of the day.’

13 But he answered one of them, ‘Friend, I am not being unfair to you. Did you not agree with me on one denarius? 14 Take your pay and go. I want to give this last man the same as I gave you. 15 Do I not have the right to do as I please with what is mine? Or are you envious because I am generous?’​

The first buyers bought their car and got to use of it well before a later buyer. The later driver paid less but suffered from less use of their new car than the first. This is variation of what Macintosh buyers faced during the early years of rapid advance. But the first buyers gets an advantage because there was a later buyer.

The company stays in business and the first buyer avoids orphan depreciation (aka., American Motors or Saturn.) In the case of Tesla, subsequent software updates, about every 4-6 weeks, that continues to improve both the first and last cars. Add to that Tesla spare parts for repairs which benefits everyone.

We shop at Costco that runs special sales after the first week of each month. I have bought toilet paper and missed the sale that started a few days later. But my wife and I appreciated the clean bums.

Bob Wilson

 

[David Green]

I'm reminded of Matthew 20:

1 For the kingdom of heaven is like a landowner who went out early in the morning to hire workers for his vineyard. 2 He agreed to pay them a denariusa for the day and sent them into his vineyard.

3 About the third hour he went out and saw others standing in the marketplace doing nothing. 4 ‘You also go into my vineyard,’ he said, ‘and I will pay you whatever is right.’ 5 So they went.

He went out again about the sixth hour and the ninth hour and did the same thing.

6 About the eleventh hour he went out and found still others standing around. ‘Why have you been standing here all day long doing nothing?’ he asked.

7 ‘Because no one has hired us,’ they answered.

So he told them, ‘You also go into my vineyard.’b

8 When evening came, the owner of the vineyard said to his foreman, ‘Call the workers and pay them their wages, starting with the last ones hired and moving on to the first.’

9 The workers who were hired about the eleventh hour came and each received a denarius. 10 So when the original workers came, they assumed they would receive more. But each of them also received a denarius.

11 On receiving their pay, they began to grumble against the landowner. 12 ‘These men who were hired last worked only one hour,’ they said, ‘and you have made them equal to us who have borne the burden and the scorching heat of the day.’

13 But he answered one of them, ‘Friend, I am not being unfair to you. Did you not agree with me on one denarius? 14 Take your pay and go. I want to give this last man the same as I gave you. 15 Do I not have the right to do as I please with what is mine? Or are you envious because I am generous?’​

The first buyers bought their car and got to use of it well before a later buyer. The later driver paid less but suffered from less use of their new car than the first. This is variation of what Macintosh buyers faced during the early years of rapid advance. But the first buyers gets an advantage because there was a later buyer.

The company stays in business and the first buyer avoids orphan depreciation (aka., American Motors or Saturn.) In the case of Tesla, subsequent software updates, about every 4-6 weeks, that continues to improve both the first and last cars. Add to that Tesla spare parts for repairs which benefits everyone.

We shop at Costco that runs special sales after the first week of each month. I have bought toilet paper and missed the sale that started a few days later. But my wife and I appreciated the clean bums.

Bob Wilson

Yeah Bob, Tesla does build a quality product, NOT... https://insideevs.com/news/363399/tesla-model-3-paint-fragile/