Crown

As expected, Tesla posted a smaller profit for the last quarter, at least they still posted a profit. Good for them, Elon made Tesla profitable 2 quarters in a row with a monopoly in the segment. For the longest time, Tesla has the dubious honour of not making a profit in a monopoly.

Now the real test begin. can Tesla make a profit without the protection of a monopoly?

And they will also survive the cash crunch with the bonds due next month, they have enough cash to pay those now.

Model S ad Model X are higher priced with a higher profit margin, but with their production now focus on mass market cheaper Model 3, the product mix will change and the gross profit margin will shrink. Especially when the market for their fully loaded Model 3 in North America is already dried up and they had to ship those to Europe and Asia to continue the sale. Let's see how many of those can Europe and Asia absorb before those markets also dried up.

Hopefully that will last long enough so Tesla can make the base model 3 profitable. That's where the meat of their 'pre-orders' are, and it those can be profitable, them their factory will be kept busy for years.

But with competition coming this year, how many of those waiting will simply give up and switch brands? The EV market is growing, but not growing that fast, so Tesla will only stand to lose market share, they will just be 'another' brand in that segment, not the 'only' brand. 

It is safe to say the top end of the EV market will not be Tesla's. They simply cannot compete fit and finish and content wise, they will have to settle for the middle to low segment, 

I see Tesla surviving as a car maker, they won't disappear, but their stock price is still way over priced. adjusting for future growth, I think ~$200 would be a fair price going forward, still pricy compared to other automakers, $35b for a automakers that don't have a monopoly nor making a lot of cars or making much of a profit, but the Elon premium is wroth at least $15b.

I take a 1.5 month hiatus from RT and see that absolutely nothing has changed... Sad but in some ways conforting.

Anyway, good analysts except for 2 things:

1) so far competition is completely underwhelming or vapor ware (ie no price). Can’t wait to see that $75k Taycan that is supposed to kill that $100k Model S

2) no one mentioned it but S and X models just became quite cheaper. Tesla can tweak anything they want along the way, others cannot, maybe no one sees this but it is a MAJOR advantage

before I could not price a decent X I wanted below $145k. Now I can have something I like for $127k, and even tempted to go with a more basic one (software upgradable to other models later) for $102k all in.

Very few here including me thought they could be vastly positive free cash flow 2 quarters in a row. This cements Tesla for the foreseeable future. Model Y shares 75% of partes with Model 3, the ramp up in production is expected to be way cheaper and easier and like mentioned before, that’s where the real money is. Cars are dead.

Last tidbit, 70% of Model 3 users are paying way more for the car than they were paying before. I seriously doubt other EV manufacturers will get the same effect in the he USA.

Also worth noting that 2019 Q1 profitability will be lower, as the company is shifting focus to Europe and Asia for the Model 3, so higher cost of sales. US demand seems to have dried up.

One other minor point... the CFO resigned! 

The CFO already resigned before, what’s The news? As some other analysts put it, it is mostly irrelevant.

They need to move 10,000 cars in the channel because of longer delivery times to Europe which will affect Q1. One time effect, again irrelevant in the grand scheme of things. And short sellers still are hurting. What I don;t see anymore here are the doom and gloom posts about Tesla shutting down any week from now. How wrong many here were...

For those who didn't have time to listen to the Tesla 2018 Q4 conference call, here is an extract from the transcript...

...so it sounds like the European order book for Model 3 is around 20,000 cars, i.e. around one month of production?

20,000 is actually more than I expected, only when the cheaper model comes out will there be a real market there, let alone the charging infrastructure.

In Munich you can not test drive a Model 3 yet and in fact I would not buy a Model 3 unless the Superchargers have been retrofitted with CCS and/or there is an alternative fast charging network.  Don't know about the other European countries.

Re the competition (Jag I-Pace and Audi E-tron which is around 100k€) I'd say that there is no need to worry for Tesla .. at least for some more time.

SciFrog:

20,000 is actually more than I expected, only when the cheaper model comes out will there be a real market there, let alone the charging infrastructure.

In the 2018 full year financials, Tesla reported $18.5 billion of Automotive Sales and $3.1 billion of Inventory on balance sheet at year-end.

Tesla reported 2018 total vehicle sales volume of around 245k, so the average selling price was around $75k... 

On that basis, the Inventory reported on the Tesla balance sheet at year-end is equivalent to around 41,000 vehicles, or around 2 months of sales...

...so the good news is that Tesla can fill the European order book of 20,000 x Model 3 out of existing Inventory! 

Wonder how much emission are made by all those boats travelling back and forth shipping Teslas. Hmm. That probably enough to offset all of the emission savings from the cars itself.

Nick tsk, tsk. Emission free driving of the life one car will make up for the emission used to transport the cars.

Be fair.

The more I think about it, you need to cross the border and work for the Donald.

--

Stress is man made.

Whoopsy:

Wonder how much emission are made by all those boats travelling back and forth shipping Teslas. Hmm. That probably enough to offset all of the emission savings from the cars itself.

With all respect; let me remind you that we are fighting wars because of oil and then shipping this stuff in huge tankers across the sea. 

nberry:

Nick tsk, tsk. Emission free driving of the life one car will make up for the emission used to transport the cars.

Be fair.

The more I think about it, you need to cross the border and work for the Donald.

--

 

Stress is man made.

 

The math only works that way for the EV greenies.

It takes energy to make something and transport something.

Unless those energy are from renewable sources, then those energy should be counted against. 

It's only fair.

schmoell:

Whoopsy:

Wonder how much emission are made by all those boats travelling back and forth shipping Teslas. Hmm. That probably enough to offset all of the emission savings from the cars itself.

With all respect; let me remind you that we are fighting wars because of oil and then shipping this stuff in huge tankers across the sea. 

And I think Elon should make solar powered ocean transports instead of cars. 

Ships are a billion time more polluting than cars.

SciFrog:

I take a 1.5 month hiatus from RT and see that absolutely nothing has changed... Sad but in some ways conforting.

Anyway, good analysts except for 2 things:

1) so far competition is completely underwhelming or vapor ware (ie no price). Can’t wait to see that $75k Taycan that is supposed to kill that $100k Model S

2) no one mentioned it but S and X models just became quite cheaper. Tesla can tweak anything they want along the way, others cannot, maybe no one sees this but it is a MAJOR advantage

before I could not price a decent X I wanted below $145k. Now I can have something I like for $127k, and even tempted to go with a more basic one (software upgradable to other models later) for $102k all in.

Very few here including me thought they could be vastly positive free cash flow 2 quarters in a row. This cements Tesla for the foreseeable future. Model Y shares 75% of partes with Model 3, the ramp up in production is expected to be way cheaper and easier and like mentioned before, that’s where the real money is. Cars are dead.

Last tidbit, 70% of Model 3 users are paying way more for the car than they were paying before. I seriously doubt other EV manufacturers will get the same effect in the he USA.

Love it that you still want to call the incoming Taycan a vapor  ware without price. But not the base Model 3 which is actually the proper vapor ware, every thing was announced but not the car itself, that's the precise definition of vapor ware.

Next up on that list will be the Tesla Roadster, then the Tesla Model Y, and the Tesla Semi, and the Tesla 'pickup'. Yes Tesla said something about them, but does't mea Tesla might stick around to actually make them.

Do I have a problem with Porsche not announcing pricing yet? Nope. Absolutely no problem with it. They still got another 6 moths before the car is introduced. Plus, what's in a price? I know it's more expensive than a Prius, and cheaper than a 918. That's enough information for me.

Whoopsy:

nberry:

Nick tsk, tsk. Emission free driving of the life one car will make up for the emission used to transport the cars.

Be fair.

The more I think about it, you need to cross the border and work for the Donald.

--

 

Stress is man made.

 

 

The math only works that way for the EV greenies.

It takes energy to make something and transport something.

Unless those energy are from renewable sources, then those energy should be counted against. 

It's only fair.

Nick, that’s the point. Renewable resources are part of the equation. You have to start somewhere.

Years ago when CA passed legislation that required catalytic converters many conservatives had a fit. They said it would be the end of the car industry as we know it. Today, try driving behind a car without exhaust restricted emissions. You’ll gag. 

As a Canadian I’m puzzled by your resistance to environmental issues.

Stress is man made.

nberry:

Whoopsy:

nberry:

Nick tsk, tsk. Emission free driving of the life one car will make up for the emission used to transport the cars.

Be fair.

The more I think about it, you need to cross the border and work for the Donald.

--

 

Stress is man made.

 

 

The math only works that way for the EV greenies.

It takes energy to make something and transport something.

Unless those energy are from renewable sources, then those energy should be counted against. 

It's only fair.

Nick, that’s the point. Renewable resources are part of the equation. You have to start somewhere.

Years ago when CA passed legislation that required catalytic converters many conservatives had a fit. They said it would be the end of the car industry as we know it. Today, try driving behind a car without exhaust restricted emissions. You’ll gag. 

As a Canadian I’m puzzled by your resistance to environmental issues.

I am not, as a matter of fact where I live our energy is from hydro power, purely renewable.

I just call a spade a spade, I do't like people sugar coating stuff to hide the truth.

I will be super impressed had Elon says his factory is built with purely environmental stuff. Say solar powered electric construction equipment, structured using reclaimed wood, recycled steel, and whatnots. And their whole factory and supply chain are all being environmentally friendly and ethnically sourced material. So lithium from china would be out, so is china steel. 

But he isn't, so basically he is just being a hypocrite. Plain and simple.

Elon talks big, but he is in it for the money, nothing more.

Whoopsy:

Elon talks big, but he is in it for the money, nothing more.

 

He is an egomaniac, so he's clearly not in for the money only, he very likely sees Tesla as a challenge as well.

RC (Germany) - Rennteam Editor Audi R8 V10 Plus (2016), Mercedes E63 S AMG Edition 1 (2018), Mercedes C63 S AMG Cab (2019), Range Rover Evoque Si4 Black Edition (2019)

Whoopsy:

SciFrog:

I take a 1.5 month hiatus from RT and see that absolutely nothing has changed... Sad but in some ways conforting.

Anyway, good analysts except for 2 things:

1) so far competition is completely underwhelming or vapor ware (ie no price). Can’t wait to see that $75k Taycan that is supposed to kill that $100k Model S

2) no one mentioned it but S and X models just became quite cheaper. Tesla can tweak anything they want along the way, others cannot, maybe no one sees this but it is a MAJOR advantage

before I could not price a decent X I wanted below $145k. Now I can have something I like for $127k, and even tempted to go with a more basic one (software upgradable to other models later) for $102k all in.

Very few here including me thought they could be vastly positive free cash flow 2 quarters in a row. This cements Tesla for the foreseeable future. Model Y shares 75% of partes with Model 3, the ramp up in production is expected to be way cheaper and easier and like mentioned before, that’s where the real money is. Cars are dead.

Last tidbit, 70% of Model 3 users are paying way more for the car than they were paying before. I seriously doubt other EV manufacturers will get the same effect in the he USA.

 

Love it that you still want to call the incoming Taycan a vapor  ware without price. But not the base Model 3 which is actually the proper vapor ware, every thing was announced but not the car itself, that's the precise definition of vapor ware.

Next up on that list will be the Tesla Roadster, then the Tesla Model Y, and the Tesla Semi, and the Tesla 'pickup'. Yes Tesla said something about them, but does't mea Tesla might stick around to actually make them.

Do I have a problem with Porsche not announcing pricing yet? Nope. Absolutely no problem with it. They still got another 6 moths before the car is introduced. Plus, what's in a price? I know it's more expensive than a Prius, and cheaper than a 918. That's enough information for me.

 

The base Model 3 is also totally vaporware and if it ever comes, is at least a year away imho.

Again, Tesla has the power to tweak all the offers and pricing as they go and following their production cost whereas Porsche will be stuck for the next two decades with a starting price and hefty yearly increases. I would love to be proven wrong but I just cannot see a $75k Taycan at a dealership anytime soon without destroying Cayenne, Panamera and even high spec Macan sales in the USA. Just think about it, where will be the Macan EV? $70k base? In this case it would canabalize other sales once again, and it would take away at some high end Model Y sales but not touch the mid range $55k Model Y, let alone the base model around $40k if it ever comes out.

Also what do you think will happen when someone cross shopping a Model S and a Taycan will realize 2 years down the road the Model S was OTA upgraded with all the lastest bells and whistles when the Porsche is now obsolete tech wise and Porsche refuses to update them? Adding autonomous tech as soon a ready is integral part of Tesla customer retention, and since autonomous tech will take a decade to be real, having OTA updates will help along the way.

Many here are just discounting too much the coolness effect Tesla has in the USA today. It is THE car to own, even for people who didn’t care about cars before and were never spending money on them.

SciFrog:

 

Many here are just discounting too much the coolness effect Tesla has in the USA today. It is THE car to own, even for people who didn’t care about cars before and were never spending money on them.

These effects wear off very quickly. Trend business is short-term business...

SciFrog, you are still too stuck up on mixing up EV market with normal engine market.

You keep thinking people are flogging to showroom to replace their planned purchase of Cayenne/Macan/Panamera with Taycan.

Doesn't work that way. the Initial 2 year production deposits are basically mostly new customers. Like people giving up one Tesla and buy Porsche instead.

You might gain a gadget here and there via the OTA update with Tesla down the road, but it's still the same old car. 

But you are right about Porsche, they don't like updating stuff inside. They just make fresh ones. 

Yes the deposits on the Taycan seem to be from new costumers because they are salivating at the idea of a decently optioned $75k Porsche EV. When that dream doesn’t materialize, only the usual Porsche buyers will scoop the car instead of their Macan/Panamera/Cayenne.

This is anecdotal but if there was on the market a decently optioned Macan EV for $80k with better than 3.5 sec 0-60 and over 270 miles of range I would buy one instantly and not even look at whatever else is on the market (you know I loved my Macan). What does that tell you? It will not happen anytime soon. I know you have some inside access to Porsche and that you have some decent first hand information, but this car would just destroy the entire non 911 line up of Porsche in the USA, especially the ultra high margin Panameras and Cayennes. Blame this on congestion and low speed limits in the USA, the torque of EV will have people realize they don’t need to pay for a big engine only necessary to reach high speeds on the Autobahn (for how long anyway). Of course as a collateral it would also destroy anything but the cheapest current or future Teslas and most likely put Tesla under, along with all Audi EV luxury sales (E Tron SUV which is a Q5 is $75k base for low end performance).

Agian, I would love to be proved wrong. I just don’t see how the bean counters let it happen unless they produce so few of it that they sell at a premium.

You keep thinking EVs are stealing normal car market shares. It does't happens that way.

EV segment is a small segment, it's growing, but not at the pace that manufacturers are pumping cars into it pace. The extra EV cars will continue to expand the segment, but the majority of the sales will come from existing EV marketshare, which is all Tesla's. So they are the only one to stand to lose out.

And you keep thinking the Macan is the perfect car for everyone. No it isn't. A lot of people don't want SUVs, so they will keep buying Panamera, well not that those are flying out the the door in the first place. And Macan is simply too small for many people, they need the extra size from the Cayenne. 

At the end of the day, a Macan sized small EV SUV is only a tiny fraction of the market.

And again, within a brand, nothing steals sales from another product. You don't hear people saying the S class is dead cause the E class is stealing sales. or do you hear the E class is dead cause the GLE is stealing sales from the sedan. It's not happening at Mercedes, it's not happening at BMW, so why should it happen at Porsche? Doesn't make any sense for that argument to stick.

About that stuck in traffic part. Even the mighty torque from a Tesla electric motor is useless. People are stationary. And that's exactly where Tesla falls flat on it's face. People would look around their car, and realized how much did I paid for this thing again? With this kind of subpar fit and finish and material? While the guy in the Mercedes is enjoying the fine leather and stitching and perfect fit and finish. 

https://realmoney.thestreet.com/investing/tesla-earnings-do-not-validate-its-market-value-14851100?puc=yahoo&cm_ven=YAHOO&am...

If it turns out to be correct that Tesla growth is running out of steam ( e.g. Elon Musk has indicated that 2019 Q1 will be below 2018 Q4 and they will need some luck to make a "tiny" profit  ) then here is a "back-of-the-envelope" valuation based on FY2018 results applied to the valuation multiple of a benchmark growth company that has also been running out of steam...

• LTM EBITDA ~ $1.6bn
• EV / EBITDA multiple ~ 9.60x (based on prevailing AAPL multiple)
• Implied Enterprise Value ~ $15.36bn
• Existing Net Debt ~ $8.28bn
• Implied Equity Value ~ $7.08bn
• Outstanding Shares ~ 171,733,000
• Implied Share Price ~ $41.23 per share

...so a downside risk of 87% below the current $312 share price! 

Whoopsy:

People would look around their car, and realized how much did I paid for this thing again? With this kind of subpar fit and finish and material? While the guy in the Mercedes is enjoying the fine leather and stitching and perfect fit and finish. 

My sister took delivery of her Tesla 3 in November, and I put a few hundred miles on it over the holidays.  I think she paid around $60k USD. 

My takeaways: 

1) Car is extremely boring to drive.  Went full throttle once and then the fun of the torque wore off.

2) It does make a nice commuter car for the average person.  Quiet and the stereo is nice.  Rides very well.

3) Auto-pilot is just fancy cruise control.  Car doesn't even change lanes well and I would not trust my life with it.

4) I liked the car for what it is, just not for $60k.  For that money, there are a lot of other cars that would be way more fun and luxurious.  Interior does feel cheap.  This car should be $40k.

As a long time reader who rarely posts, this is a super interesting topic.

Due to dieselgate our 2011 q7 will be repurchased by Audi this summer and we are looking for a new suv. I tried to convince my wife in the GLC 43 or a Macan GTS but she says she would like something bigger but not as big as the Q7. We also looked at and test drove the Tesla X 60D but at $115k Cad plus tax, out of our budget, though she loved it. I agree that all manufacturers are worried that their EV sales will eat away at the profit Centers. I am no Tesla fanboy but  they have shaken up the industry. My Audi SA is quoting me $95k cad plus tax for the E from, so in real terms a Q5 size with a Q7 plus price, Porsche will be no different  and Mercedes either. 

AJ 

FWIW, Tesla Model 3 sales were down 73% in January. I think the production problems are beginning to affect the reputation of Tesla thus impacting sales.

AJ, have you looked at the Range Rover Sport? It sells for around $70,000 and it’s a terrific SUV. Test drive one, you’ll buy it. 

Stress is man made.

nberry:

FWIW, Tesla Model 3 sales were down 73% in January. I think the production problems are beginning to affect the reputation of Tesla thus impacting sales.

AJ, have you looked at the Range Rover Sport? It sells for around $70,000 and it’s a terrific SUV. Test drive one, you’ll buy it. 

Nick, it has nothing to do with that.

The reason is very simple, the market for the top end Model 3 dried up already. 

Tesla still have the majority of this 400k+ deposits, as most of which are for the base Model 3 which Elon refused to build, as building those are not profitable and he needed the extra revenue to pop up the stock price.

Now that the North American market for the top end Model 3 is gone, he is shifting the production to supply Europe and Asia just to keep the factory busy and pumping out nice numbers for Wall Street.

Boxster Coupe GTS:

If it turns out to be correct that Tesla growth is running out of steam ( e.g. Elon Musk has indicated that 2019 Q1 will be below 2018 Q4 and they will need some luck to make a "tiny" profit  ) then here is a "back-of-the-envelope" valuation based on FY2018 results applied to the valuation multiple of a benchmark growth company that has also been running out of steam...

• LTM EBITDA ~ $1.6bn
• EV / EBITDA multiple ~ 9.60x (based on prevailing AAPL multiple)
• Implied Enterprise Value ~ $15.36bn
• Existing Net Debt ~ $8.28bn
• Implied Equity Value ~ $7.08bn
• Outstanding Shares ~ 171,733,000
• Implied Share Price ~ $41.23 per share

...so a downside risk of 87% below the current $312 share price! 

With the Elon premium, which I figured to be worth 15bil, stock price will have at least a bottom of ~$130.