In your face short sellers! Tesla goes two quarters in a row without losing money Tesla stocks jumped last night despite a vaguely disappointing set of financials for Q4 of the company's fiscal 2019. Declaring 2019 a "turning point" for the company, Tesla trumpeted a return to GAAP profitability for the second half of the year. Stockholders certainly agree as the company's valuation crossed $100bn yesterday …
"CFO Zachary Kirkhorn cautioned that there would be 1 to 1.5-week delay in that Model 3 ramp due to a "government required factory shutdown"."
Makes it sound like they're surprised by CNY. Welcome to doing business with/in China. If the business impact is only 2 weeks, consider yourself lucky. It's certainly manageable, but you need to know that the lunar new year is a thing if China is part of your supply chain.
While I'm not a big fan of Tesla, the CNY comments are out of line. Chinese New Year is a big holiday but the Chinese government has ordered companies to remain closed after CNY due to the coronavirus.
If you need to blame someone, blame the companies and governments who stopped work on a SARS vaccine after that epidemic faded out since, while it would not be a vaccine against the coronavirus, it would have given us a leg up on developing a new vaccine.
I think the speed they're developing the vaccine is pretty damn impressive.
The cause of the virus transferring to humans was almost certainly poor hygiene practice. In particular live animals being kept and slaughtered in Wet markets, contrary to regulations that were introduced after the SARS epidemic. There is a cultural practice there of buying only freshly slaughtered meat, and avoiding the use of fridges / freezers.
Their valuation is probably affected by their massive exposure to consumer debt in the form of car loans, and the growing number of Americans who are behind with their repayments on those increasingly expensive vehicles.
If cars were not considered to be sold until they were actually off the books, either of the car maker or the finance company linked to the car maker, it would be interesting to see what the real pecking order was. Though I suspect Toyota would remain as the most valuable car company in real terms.
Meanwhile, after quite a lot of perusal of statistics over the last couple of weeks, I conclude that Tesla is in fact really a competitor to BMW and is not that relevant to the rest of the industry.
How are Ford and GM exposed to consumer debt? They no longer own any of that debt, do they? GMAC was spun off in 2010.
I suppose high levels of consumer debt might in principle threaten future sales, but offhand I don't see direct exposure. But this isn't an industry I pay much attention to, so I could well be missing something.
Personally, I think Ford would be more worried about the $154B of its own debt.
"Tesla trumpeted a return to GAAP profitability ". Chances are they just didn't have any more fictitious "losses" to book any more. With the umpteen millions of dollars they claimed they lost there's no way the could remain a going concern. Unless those losses were paper only and had no relation to actual cash balances.
Most businesses, when starting, get cash from investors and use it to pay for losses until they start to make a profit. Tesla has done this on a grand scale, having received 6.618 billion USD from investors (as of 31st December 19, unaudited). If you include investments received by its subsidiaries, it is 8.11 Billion.
At this point, it is hard to know whether Tesla will be successful in the business of selling electric cars. It has already proved to be very successful in the business of selling that dream to investors.
Tesla will need to join in with the rest of the auto industry who will eventually catch-up with electric power-trains and battery technology
Once that happens it’s a numbers game on manufacturing economies of scale. Consolidation and alliances.
See
- Fiat-Chrysler/Peugeot Citroen Alliance
- Renault-Nissan Alliance
- VW Group
- Hyundai-Kia
Who needs partners??
- Toyota big enough
- Honda ? Enough outside cars ??
- Suzuki - too small
- Ford ?
- GM ?
- Chinese ?
- BMW ?
- JLR (working with BMW on electric) ?
Tesla has total long term debt of $15billion. They have on hand cash of $6.3billion. The GAAP was only about $115million but the free cash flow (money after minus money before) of $900million.
They produced 367,500 cars in 2019 with the top-end cars (largest margin) more or less stagnant at 35-40,000. The Model 3 is the current cash cow with margins of about 20% or so.
The interesting bit is that the MY is coming out at the end of Q1 with (I expect) about 80,000+ cars due to be produced this year (with a somewhat higher margin than Model 3). China is expected to produce about 150,000 cars this year (lower margin type with reduced costs, so probably flat margins compared with the US (a mix of high and low).
Guidance is for "Easily" 500K cars in 2020. Actual, seems a lot more like 600K cars in 2020 with higher all-around margins (especially as Tesla moves component content toward 100% China for their Chinese cars), realizes production efficiencies from robotically installed wiring harnesses in MY and single cast unibody (replacing 70 parts with 1).
So they are currently making $900m/quarter in free cash flow now. I expect a small dip in Q1 2020 (seasonally the weakest quarter). then all quarters after bringing in about the same or larger as they have already ramped their California production rate to 415K cars. The dip should account for unprofitably low MY production and ramping Chinese production. After as output grows, stand-alone profitability of these two components will grow.
Short version... 2020 is going to be a surging year in profitability despite the financial drain of the construction of GF4 and possible expansion of GF1.
The wild card in this will be the Dry Anode batteries that promise to dramatically increase cell production rates while dropping prices 20% or so over solvent based designs (and pushing MS/MX past 400 mi EPA range). The question is: This will dramatically improve performance and push down costs - but how fast can they ramp?
Tesla was virtually a first mover as a company committing to EVs, and were able to open a considerable lead. They still have a lead but it has narrowed considerably and I expect in 2-3 years they will be caught unless they have another rabbit in the hat. They need to become firmly established as a high volume maker of vehicles by then or they will become a niche maker and not nearly so valuable.
Whilst several traditional automotive manufacturers have entered the EV market, their offerings (with the exception of Hyundai and Kia) seem to have a problem matching the range and efficiency of Tesla cars - even those that cost more. It seems that, in their years of manufacturing EV batteries and battery management systems, Tesla has some secret sauce that others have yet to discover.
Then there's charging: Tesla has a global network of DC chargers, which are free at the point of use and easy to use - which makes long journeys viable and straightforward in a Tesla. While a number of manufacturers are involved with Ionity's rollout of DC chargers, they are years behind.
Significant competition for Tesla may come from Chinese EV manufacturers, some of whom have been quietly selling EVs in large numbers in China and elsewhere.
makes long journeys viable and straightforward in a Tesla
Oh, sure. I just did a quick search for one of the long journeys I take regularly. If I had a Model S Long Range,1 I'd only spend an extra 2.5 hours charging it on that 10-hour drive. Oh, and I couldn't use my preferred route; I'd have to go through various urban areas I'd much rather avoid.
"Viable" perhaps. Desirable? Not at all.
1Which wouldn't meet my needs anyway, but let's leave that to the side.
I think you’ve rather over-estimated the charging time there, and ignored the increasing speed of Superchargers. It’s 30 minutes to 80% charged. 10 hours driving implies something like 650 miles, and two stops. I don’t know about you, but I wouldn’t want to drive more than 2 or 3 hours without a rest stop and refreshments, so the actual extra time added is going to be rather less than the 1 hour charging required.
I suspect that Tesla's lead will last a while yet. While competitors have managed several big launches of EVs, they often seem to be suspiciously low on stock. It still feels as if they are engaged in what is essentially a PR exercise aimed at getting publicity and pulling potential buyers into the showroom with the ultimate intention of guiding them gently towards a petrol or diesel car that's actually available now.
Some competitors' EV offerings are so low volume it seems possible they may be essentially hand-built and/or sold at a loss.
Apparently the best-selling EV worldwide for 2018.
EVs don't meet my needs, but if for some reason I was forced into a daily commute by car again, I'd consider the Leaf.
I don't care for any of the Teslas - there's really nothing about them that appeals to me, and I really dislike the technophilic attitude that dominates the designs. (I loathe touchscreens in cars, for example, and while they're becoming impossible to avoid in new models, Tesla seems to consider them an object of worship. And I detest driver-"assistance" systems like Autopilot.)
You do realise that Driver Assistance systems are something you have to deliberately turn on? Depending on the level you want then they are even optional extras on the Tesla. Don’t like them then don’t use them. Other than that, have you actually tried driving one rather than reacting on instinct?
I'm seeing quite a few Tesla S and 3 models on the road now. I think the 3 (and X) is fugly but they're still selling. I think I'm probably seeing more of them (the S) than equivalent sector models like the Porche Panamera.
I can see the appeal in terms of the technology and performance, but I like the sound of a V8.
There was something that looked a bit like a 20y old Escort with a Tesla badge on the front outside my local tonight; I assume that was the model 3. It looked like they tried really hard to make it look completely bland and generic. There's a Chinese(!) badged 4x4 pickup that's does a really good impression of a Toyota Landcruiser that parks a bit further up the road, and that has a quirkier, more distinctive design than the Tesla. If you wanted to represent that GIF of Homer Simpson fading backwards into a hedge not through interpretative dance, but with metal, glass and plastic, that's what you'd get.
(I was a passenger in an all-electric Jaguar SUV recently that was far more convincing. Probably much more expensive and I gather the perf and range aren't great, but I know which I'd rather have.)
In the Netherlands Tesla sold 12.000 model 3 in December. They've sold less than 1000 in Januari (so far). I don't expect sales to pick back up too much. A change in taxes is to blame for this weirdness, and this has happened before with for instance the Mitsubishi Outlander PHEV.
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