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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?

The conference call ended. The big picture is that the Model S is a great car and on its way to 20,000 annual units even with the high price. The other point is 26m shares are short and do not believe in the car or the company in spite of the success of Model S.

However, the stock is down big because delivery of 2400 came in shy of the projected 2500-3000, expenses were high, and on the call there were some statements perceived as less than totally confident. Finally, this forum was helpful in seeing the gross orders for the quarter at well over 6000, but the forum missed the large number of cancellations. The people who cancel probably don't post.

How high were the cancelations? I never heard a concrete number of percentage. I must say that I am not surprised about it - when you see 12,xxx reservations getting 5,xxx VINs something had to be up.

PS: I should get my Model S tomorrow - not sure I'll be able to sleep tonight. Never been so excited about a car - ever.

To know the precise cancellation, you need to know 2 out of the three following: gross reservations, cancellations, and net reservations.

Tesla only gives us partial rounded data, so we have to guess. End of Q3 net reservation at 13,200, end of Q4 net reservation of over 15,000. Delivery was 2400.

13,200 + 6000? - 2400 - cancellations = 15,000?

Cancellation about 1800 in December Quarter.

They referenced that cancellations increased as expected when old reservations got called to finalize. Good news is that new reservation holders won't cancel- when you order car and finalize right away presumably you are aware of pricing, options, etc, which res holders from pre 2012 could not see yet.

It is interesting to note that no one is really focused on number of cars delivered. The focus was on revenue and losses. Revenue is the most important. As Q1 comes to a close, the big story will be the loses dropping significantly.

And as for confidence in responses, I think that is due to Elon's speaking style. He stammers and repeats words, just the way he is... we all know that.

This quarter was about the rubber meeting the road burning off the hype I think. We know where things are now and Q1 expectations are clear.

I look forward to how the European res. numbers go up after marketing happens. Hopefully we can get some visibility before the end of Q1 to help people see demand is still growing strong after the price hike.

I am reservation 16,635 and can't wait to get my car. Of course I am getting it about 6-9 months earlier than expected. I am curious if I am getting mine and new reservations are being delivered in April, what is tesla going to do to fill its order book in May, June and onward. We may all have to get out there and help sell.

The orderbook for 2013 seem to be close to full and Elon said they would fill it even if they closed all stores today...

Elon stated in second to last question of conference call that Model X likely to be 70% of Model S demand, and exceed it in some countries...

This is helpful to see future revenue potential expectations, but still keeps things open to when MX production will start...

Hope to see something like a production model unveiling sometime before year end... maybe a demo in stores around the country at that time... all things that will further help build confidence (and positive news) pushing into 2014...

The NYT now has an article out on the Q4 results that mentions that focuses on cancellations:

"However, Tesla’s numbers suggest that a few thousand reservations were canceled in the fourth quarter. Many customers were in line but pulled out when it became time to make a substantial down payment in cash."

http://dealbook.nytimes.com/2013/02/20/teslas-earnings-indicate-some-cus...

Wrong again.

Regarding cancellations, remember that a number cancelled their earlier commitments and then immediately re-reserved for... red.

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.

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

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?

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

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.

@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.

@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.

@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.

@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.

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.

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.

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.

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.

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!

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.

Vgrinshpun +1

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.

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

@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

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


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