Quarterly revenue has not shown any growth for nearly 2 years, despite introducing more models and expanding global deliveries. Their sales of regulatory credits this year is greater than all of the net income ever earned in their entire history.
The list goes on in terms of growth & profitability
Fiat alone must pay Tesla $2B for credits to keep selling internal combustion vehicles in Europe.
This doesn’t seem like a good long term strategy.
Take the the other side of the bet and short it if you doubt the long term value. The world isn’t going to suddenly stop supporting climate change mitigation through policy. It’s only going to ramp up, leaving legacy Orgs in the dust.
Tesla's IPO price was $17. So you got in right on the lowest price the stock has ever been and never bought another share since? Amazing.
Is Tesla overpriced today? We can only speculate based on potential and execution ability.
The problem long term is that's basically not the case anymore aside from FCA.
i cannot find any information from a Ford or Toyota or GM describing the millions of credits they’ve purchased from Tesla shrug
they also don’t have credits listed as an asset on their balance sheet when you’d otherwise expect these credits to go from asset -> revenue when they decide they should be recognized, instead it is as if these credits just appear out of thin air and sold.
Tesla's accountants know this and follow the SEC rules, even if Musk doesn't. Is there some special treatment for these tax credits? Are they rolling this credit in with something else? Otherwise I don't believe they can be "squirreled away" to make the numbers look good "at opportune times".
Though many cars have been announced, I can virtually guarantee most of them will be late or never arrive. Not one EV has arrived on market when it was actually announced to do so. These take lots of time and money to produce.
Year after year we've heard this repeated.
I recently saw a post saying GM is launching 12 EVs. Then I looked into it, and it's like, a new Bolt, a lifted Bolt under Buick, GMC, Chevy brands, and a few other concept cars multiplied by 3 brands.
I guess the Merc EQC is out, but I've never seen one. I've seen the odd Jag I-Pace. Some eTrons now. Lots of eGolfs here in silicon valley. I saw a truckload of Taycans in Portugal, and a grand total of ONE Taycan in the US, at the VW ERL facility in Belmont.
We just keep waiting.
If you lurk on the Tesla-killer forums, most buyers are apparently people who either dislike Tesla or only buy European cars.
And the used-car market is telling, too: Used 2019 i-Paces and e-Trons with less than 1,000 miles on the odometer (basically a brand new car) are trading for about the same price as today's cheapest Model Y.
Even if you assume the owners originally negotiated a fantastic deal(and if you lurk on the forums for long, it's clear that most of these cars come with trunk money) and that the owners took the tax credits, they're still apparently willing to take a bath to get rid of the car. That should tell you something (i.e., there's something so bad about the ownership experience with these cars that owners can't wait to offload the misery onto someone else).
There are only two companies today that sell EVs at MSRP and have good resale values: Tesla and Hyundai-Kia.
It may take competitors five or eight years to begin making serious inroads into the EV market, but let's say it does happen on that timescale. What is Tesla's moat that is going to allow it to compete with manufacturers who have almost infinitely more production capacity and a much larger customer base than Tesla? Better battery tech? Superchargers? Rapid year-over-year growth that makes Tesla too big and successful to compete with [note: there is no evidence of that growth in the Tesla earnings report]? I'm pretty skeptical right now.
Well, you listed a couple.
I hear that Ionity is better in Europe, but the Electrify America network is a hot mess here in the US. The forums for all non-Tesla EVs are filled with complaints about unreliable and inoperative chargers. I'm sure this will get sorted out in time, but these experiences color peoples' future perceptions. Just as everyone today "knows" that Teslas have poor build quality, everyone will "know", for the next 10 years, that it's not wise to take a road trip when relying on a different charging network.
Battery tech: Maybe, if you're open to including "charging tech patents" in "battery tech". Look at the charge curve of Tesla vs any of their competitors. Everyone else uses some variant of "constant current until voltage threshold" (often with 2-4 current steps). Tesla continuously adjusts the charging current during a charging session. Those patents will continue to be a moat for another 10 years.
I'm not optimistic about the battery longevity in VW products like the e-Tron, Taycan, and ID.3, which hammer the battery with high current and no regard to sensor feedback. It gives a good charging spec for advertising, but I think VW is going to have a battery reputation problem in 2-3 years (like Nissan currently does, thanks to the 2011-2014 Leaf).
The dealers also have an inverse incentive to sell them so one has to go way out of their way to purchase an electric from the legacy manufacturers. It's a classic disruption case against entrenched players who refuse to adapt. The only one making a real effort is VW and they're currently paying dearly for it.
All that said, Tesla also doesn’t build and sell cars profitably. Selling credits is the source of their profits.
EVs are not disruptive in any well-defined sense of that word. They are more expensive and do not create demand against non-consumption of automobiles. The disruptive electric mobility option is the explosion of personal form factors such as ebike, scooters, and the like.
GAAP gross margin is 21%. They're making excellent profits on their cars.
So as a simple matter, it helps to double check the reported gross margin against EBIDTA. And with that measure, my comment stands: Tesla’s reported profits depend on continuing to sell regulatory credits.
Pass a realistic carbon tax and see what happens.
Can you explain how their capex is decreasing as they build out more factories and invest in new technology? Seems odd, doesn't it? Yet is sure makes that cash flow number look good. These are the kinda things that analysts consider red flags.
>it the only company with increase in # of deliveries among the 10 largest autos globally
Do you think this is a reasonable comparison when Toyota builds as many cars in a few days as Tesla does in a quarter? Tesla can futz a few thousand cars with a fleet sale or inventory build and drastically change their growth trajectory.
By the way, what's a "delivery"? I don't think I've ever seen them define it. I would assume it means "car delivered to customer", and yet they build inventory. Very opaque.
Could you give more detail on that? The last big capex increase was due to Model Y rollout. Now that most of the lines are completed, it's just replicating what Fermont's Y production line has in Shanghai's.
I do, however, agree that Tesla's definition of 'delivery' is suspect.
Capex:
2017 - $4 Billion
2018 - $2.5 Billion
2019 - $1.5 Billion
2020 to date - ~$1 Billion
From 2017 to 2018, they were focused in ramping-up production at the Fremont factory [0]. And compared to Q2 2019 Capex is actually 118% * higher ! * (546m vs 250m), so I can't see how they are slowing investments.
>Do you think this is a reasonable comparison when Toyota builds as many cars in a few days as Tesla does in a quarter? Tesla can futz a few thousand cars with a fleet sale or inventory build and drastically change their growth trajectory.
I do believe they did a tremendous job in ramping-up deliveries (page 18) in such a short period of time). It is 2x the number from just 3 years ago.
>By the way, what's a "delivery"? I don't think I've ever seen them define it. I would assume it means "car delivered to customer", and yet they build inventory. Very opaque.
By delivery Tesla probably needs to recognize revenue according to ASC 606, or when the product is delivered instead of paid. I'm sure theirs auditors must pay close attention to this number.
I'm sure they do.
https://finance.yahoo.com/news/wirecards-auditors-ey-were-vi...
>And compared to Q2 2019 Capex is actually 118% higher ! (546m vs 250m),
And yet they were building a factory in China then.
Capital efficiency. It should not be surprising that a greenfield factory built in China based on a spec you iterated on in Fremont, CA results in a much higher $/Cars/Day, a.k.a capital efficiency. Iterating on a live line in Fremont, CA is significantly more costly. It's like $/sq ft. for renovating your house versus buying new.
Also, look at the flow diagrams they've published on the floor layout and the path through a factory a car takes to go from start to finish in Fremont vs. GF3. This is also why they're moving to Austin.
> By the way, what's a "delivery"? I don't think I've ever seen them define it.
Of course they define it. In their Annual Report, under a section titled "Critical Accounting Policies and Estimates", under a sub-section titled "Automotive Segment - Automotive Sales Revenue";
We recognize revenue on automotive sales upon delivery to the customer, which is when the control of a vehicle transfers. Payments are typically received at the point control transfers or in accordance with payment terms customary to the business.
> and yet they build inventory. Very opaque.
I'm not sure what you're asking here.
URL? I found a 2016 Fremont planned layout http://digital.olivesoftware.com/Olive/ODN/SanFranciscoChron... and a 2019 Fremont layout https://villanyautosok.hu/wp-content/uploads/2019/09/2019_09... plus GF4 images https://photos.google.com/share/AF1QipOVTM-avTBP0VMbqc3dynh6... No comparison of process flow, which would be very interesting. All I found was https://cdn.shopify.com/s/files/1/0173/8204/7844/articles/Te... which seems to have more to do with combining multiple buildings than altering process.
https://ir.tesla.com/static-files/b3cf7f5e-546a-4a65-9888-c9...
In vehicle manufacturing process engineering, an interesting recent startup is UK brand 'Arrival' who decided to avoid stamped chassis parts entirely and instead assemble from sheet and extrusions (IIRC). They can allegedly assemble a whole van in a 1000m2 'microfactory' and have just brought out a bus concept. https://www.electrive.com/2020/03/20/arrival-moves-into-new-... https://www.pesmedia.com/arrival-bicester-electric-van-manuf... https://www.pesmedia.com/arrival-zero-emissions-bus-17062020... https://en.wikipedia.org/wiki/Arrival_(company) 3B valuation.
It better. Tesla has a market cap of 4x that of VW, a car maker with €256bn revenue and ~€17bn profit in 2019.
It is beyond me why anyone would buy this stock over VW, let alone pay 4x the price for it. Even if Tesla could put out 900K cars in a quarter instead of the current 90K, they'd still not come even close to the competition is terms of financial success.
Tesla would need to utterly dominate the car market to live up to its current valuation. Dominate as in market share, not relative quarter-to-quarter growth.
The better answer is that nobody should buy VW either. Their business has zero potential upside and a huge downside risk in the transition to EVs; along with the inevitable rise of China's domestic automakers, which will eat a very large amount of market and sales away from the old giants. VW's position is its weakness, it has everything to lose and nothing to gain from the peak they've reached.
Which also isn't the same as saying that Tesla should be bought at its present absurd valuation.
VW is an EV manufacturer and is investing heavily in the transition to EVs themselves. And they’re already at a much larger scale than Tesla in terms of distribution and manufacturing the rest of the car.
When you buy a tesla, tesla gets 100% of the revenue.
When you buy a VW or a ford, what % cut does the dealership take?
How much does it cost to have 800 cars sitting on a lot, vs order on demand?
Auto industry is ripe for innovation, glad we have someone innovating. I will hopefully never need to talk to a car salesmen or do the dealership thing again.
Tesla's market cap is crazy, but is a reflection of having actual products.
I think that’s a very reasonable argument to make. However, Tesla is not even close to this peak VW might have reached, and is valued (roughly speaking) at 4x that.
VW might lose its peak, Tesla never had it in the first place.
People think the stock will go up, because it's a hot company with a lot of press, so they buy it. More people buy it, and it becomes a self-fulfilling prophecy: the stock goes up.
Eventually Tesla will either find their groove and be a breakout success, or the stock price will fall. It's just a matter of time, and depends on when people get tired of waiting.
Remember also that VW is, comparatively, a super boring company.
These are all bad reasons for Tesla's stock price, but they are reasons.
I’m not saying I agree with this. Even if achieved, the amount of future success being priced in today is extraordinary. Combine that with a stock that’s become “cool” to own with retail, and the huge short interest...and well it starts to make sense.
TSLA price action at the moment is really down to a lack of sellers. Shorts have been bent over in a way not seen at this scale since (ironically) VW. Simply put: everyone who has said TSLA is overbought has paid dearly. The bubble will burst, but it’s never shorts that pop bubbles.
What does this mean? ELI5 pls
My understanding is that very likely—whatever green energy technologies win out—energy storage and load shifting will be a major issue.
The entities that can build energy and power storage effectively and at scale will have a new and large market opening before them.
Tesla is in a decent position—by being near the front-edge of battery production and scaling there's real room for Tesla to be a major player in the world energy market.
One (extreme) way of looking at it, is that it's a company that's enabling climate change, at a tiny scale (as they aren't really that big).
Regulatory credits, that are driving their profitability, is selling other car manufactures ability to produce gas-guzzling vehicles.
For Norway, in 2020, for all car sales, Model 3 is in the 6th place, and with 1-4th place occupied by BEV from "legacy" car companies [1]. Model S/X sales are basically gone. Their market share of EV went from over 30%, to well under 10% in just a year [2].
In Netherlands, their sales also plummeted. While model 3 is still best selling EV there [3], lead isn't wide, and they only have 13% of overall EV market, at mere ~2700 cars.
And this is HUGE drop from 2019. In 2019, they sold almost 30k cars [4]. Annualized that's over 80% drop.
[1] https://cleantechnica.com/2020/07/09/69-of-autos-sold-in-nor... [2] https://i.redd.it/amrtc9yhl9851.png [3] https://www.tesmanian.com/blogs/tesmanian-blog/tesla-model-3... [4] https://insideevs.com/news/391681/plugin-car-sales-netherlan...
Both the "n% of new cars are Teslas" and the "instant n% drop in Tesla sales" news stories are red herrings. They were both artificially caused by where Tesla allocated their production.
The only signal you can extract from this data is basically that the demand for Teslas well exceeds the company's capability to manufacture them, as whichever country or region they allocate more of their production towards will see a corresponding sales spike. This is mildly positive, but given how long it takes to expand production, I still don't think you can justify the share price on this. Right now, if Tesla had much more cars available, they'd be able to sell them. However, by the time they have ramped up production to match the demand, competitors might have something that matches them.
I fully agree that regulatory credits were big part of that growth and drop, in Netherlands. But the story that sticks to people is wrong one, that Tesla dominates Netherlands and demand for them is huge, and Tesla is posed to dominate all markets in the world. It was demand for free money from government. And while one can argue that other governments will have similar initiatives, that will allow Tesla to play this game for years, competition in EV space is growing, so they’re unlikely to get such a big piece of pie there.
There was no regulatory change in Norway. Tesla brand got pretty badly bruised, with lots of stories in Norway about subpar service. And, most importantly, real competition arrived, while their portfolio is aging (model 3 is 3 years old design, model y is model 3 with a lift kit, and model s/x are way way due for redesign).
But I do see your point, that this all can be attributed to Tesla being production constrained. Except, that Tesla keeps on dropping prices and offering initiatives to push more sales.
Why not push more cars to one of the wealthiest nation on earth (Norway), where EV are ridiculously competitive to ICE cars, due to taxes? Why instead keep on dropping prices, while company is pushing really hard to be profitable?
There are currently ~10 major automakers outside of China and India. In a decade, there will be less than 10. The only one I am confident that will be sticking around is Tesla. The others have a difficult transition to electric ahead of them and possibly a difficult transition to self-driving and will possibly have to deal with strong Chinese competition. Not everyone will successfully transition. Perhaps spending heavy on the electric transition like VW is the right approach. Perhaps letting everybody else take all the risks and swooping in late like Toyota is the right approach. I don't know.
The only manufacturer that I'm confident of being around in 10 years is Tesla. Some of them will transition well and will likely sell more cars than Tesla and have an enterprise value larger than Tesla in 10 years. And some of them will go bankrupt or be swallowed cheap like FCA-PSA.
That being said, I significantly reduced my holdings in Tesla this year. I'm pro-Tesla, but not at current prices.
I'm not saying the valuation makes sense, but to compare them to a car company doesn't make a ton of sense.
The whole argument is that they could use off the shelf materials at scale to attain profitability, since that hasn't happened the goalposts keep being moved by Musk, rumors, and myths.
"Now we’ve learned that Tesla is building a battery cell pilot production line in Fremont"
"Tesla currently buy cells from Panasonic made in Japan for Model S and Model X, as well as cells made by Panasonic at Tesla’s Gigafactory 1 in Nevada for Model 3.
The automaker used those cells, which they help design, to make their own modules and battery packs, but they have never produced their own cells."
It irks me because you clearly do understand they're currently building the factory after years of research (and buying up some startups).
Estimates for Q2 2020 are around -3,2 € per share (EPS) for Volkswagen while Tesla posted a profit.
They’re likely to own a big chunk of the market for electricity generation and storage equipment.
Also, people hate dealerships and CO2 so much that I think the general assumption is that Tesla will be one of a very small number of car manufacturers left standing in a decade or so.
Finally, I think people assume Tesla will be like Amazon, and keep doubling down on their bets until they’ve run out of industries to take over.
This is what Tesla investors hope for Tesla’s future. That ten years from now, there would be Tesla and all other car manufactures looking to emulate Tesla by producing a couple of electric models that would lack the features or refine of Tesla .
Tesla has a first mover advantage similar to what AWS had for the first 5 or so years.
The Model Y, a compact SUV, starts at $53,000. That is wildly out of bounds for most people. Factor in the low price of gas right now, the unreliability of Teslas, and tax credits that are going away and you really erode away the savings that put a dent into the Tesla's value equation. You're left with a vehicle that competes on value moreso against a smaller luxury compact SUV class.
The big question is if Tesla can continue to see gains from scale that either allows them to address a larger market while still keeping margins at an industry leading level. All that while managing to stay ahead of the influx in competition that will be coming from all the major auto manufacturers as they increase their EV and battery capabilities.
I'm sure others have commented, but this is some real silly logic. Yes, going from (fake numbers) 100k -> 110k cars sold is a lot easier than going from 1M -> 1.1M.
The canonical example is snow shovels after a blizzard.
* It's tricky to message right. Most theaters do some dynamic pricing, with discounts for certain hours or certain days, but stronger or more complicated schemes inevitably start to come across as "we're taking more money out of your wallet just because we know you'll let us".
* Charging too high of a price can shift your market segment. Most movie theaters sell themselves as entertainment for the average Joe, and having special events with $50 tickets really undercuts that.
Tesla already has better margins on EV sales than any other automaker. If Tesla price their cars at a level that forces everyone else to lose money on EVs, it makes everyone else's transition from ICE to EV that much harder.
The much-lauded ID.3 (which is a bet-the-company project for VW) was supposed to undercut the Model 3, but the price has been slowly creeping up (and VW has had to massively de-content the base model to hit their price targets). If Tesla forces VW to take a loss on every ID.3, VAG's shares are going to start looking over-valued pretty quickly.
Revenue is actually down 4% year over year. I'd say a lot of this is because their Model S/X sales were down 56% from the same quarter last year. Huge reduction in high end vehicle sales was essentially replaced with the sale of regulatory credits (8000 cars at 60,000 each is 480million, regulatory credit sales were up 317 million). Free cash flow was +418 million. Even without the regulatory credits, they would've had positive cash flow during a quarter where their factory was closed for a significant chunk of time.
I actually take this as a good sign - it shows that they can be profitable without counting on high margin model S/X.
* You're cherry-picking 2018Q3. So it's not exactly 2 years, it's actually 1.75 years (2018Q3 - 2020Q2).
* But now you're saying pre-covid too, so now it's actually 1.25 years (2018Q3 - 2019Q4).
That period in question is the time after Tesla finished ramping Model 3 production (using a tent!) at Fremont in 2018Q3, and before they finished building the factory in Shanghai in 2020Q1.
So... doesn't it seem reasonable that production gains would be a bit "lumpy"? They go up every time a new factory is finished, and they stay flat until the next one.
2 years ago flat?
Source: https://en.wikipedia.org/wiki/Tesla,_Inc.
Tesla production will be around 100k+ per quarter until they open a new factory (Berlin, july 2021) or expand current ones.
If they're still production limited the only growth in production numbers for the next 12 monthes will be in their China factory and may be a bit in Fremont (p7 of PDF).
Tesla announced they hope to be close to 500k produced vehicules in 2020 (p10 of PDF) so that makes 157k/quarter for the next two quarters. I don't think they'll reach 500k in 2020.
But of course the thing you have to look at is results from other automakers (hint: ugly).
Can you show me in the financial statements where this "aggressive investing" in factories is, and how it affects net profit? Why are they doing it if revenues are stagnant?
They are doing it because they need more capacity to increase revenue, because their ASP is lower in the new markets they've entered. And because they need local factories to reduce tariffs. And do you really think that comparing this quarter YoY is a good way to evaluate their revenue growth?
What's your point? That if we exclude all expenses from their income statement they'd be profitable? Unfortunately, they can't do that.
>They are doing it because they need more capacity to increase revenue
Are any of their factories running near capacity?
>And do you really think that comparing this quarter YoY is a good way to evaluate their revenue growth?
Probably not. Q1 y-o-y wasn't great either though.
Though it could be the case that their investment in new product development reduces their ability to meet current demand and therein throttles revenue; not sure if the 10Q references their order backlog.
That said, I think tesla is WILDLY overpriced (and I used to own tesla stock).
Isn't this pretty easily explained by the total number of deliveries not growing? They might be expanding internationally to new markets or introducing new cars, but total deliveries have been pretty consistently around 90k for the last 2 years also. They still seem to be selling every car they produce and aren't able to produce cars fast enough to increase total deliveries. The real question is what happens when some of those new factories come online and at what point is demand saturated.
EDIT: This was comment was downvoted multiple times so I rephrased it to be less aggressive than how it was originally written.
Its not that long ago people were arguing even a small crisis would wipe out Tesla.
If you back out the regulatory credits they've lost money on every car they've ever sold, for almost 20 years. Where do you get "good margins" from?
This is an example of narrative versus financial data.
They don't make money because they are investing lots of money all the time. People seem to miss that they only launched their first large production cars a few years ago.
Its insanely difficult to start a car company and to scale it to the level Tesla is now with a product that basically nobody else can do profitable is a gigantic achievement.
They are currently building 3 huge new factories.
You can go broke with 99% gross margins.
It would be very challenging for them if the political environment changed and regulatory credits disappeared altogether.