Europe sales could be higher than expected for M3

Model 3 had around 20% gross margin with ASP around $57k and production 60k+ units (basically at/near max capacity), before the Q1 price cuts. Even after backing out interior costs and battery reduction, it’s hard to see how they can do better than around -10% gm. It also appears the SR battery is just a software limited MR, so battery costs are likely not even reduced. I’m all ears if you have some reason why these cars are gonna be profitable.

This 5750 (disaster #) seems to be way out of line.

MDR was monitored all day/every day for most of the month at 1 car/day. The other DC's had days/weeklong stretches of -0- deliveries. Bad #'s come out and Tesla doesn't even contest them = real numbers are even worse.

What would the stock do if IR or BB came out with a direct headline of Feb deliveries = 2.xk?

How is the stock not lower on this news? These are awful numbers, right?? Nowhere close to guidance.

The same reason it went up 5% on Musk's promise of news two days ago, or his $420 funding secured tweet. The bulls are some of the dumbest people ever to walk this Earth, maybe as dumb as Charles Ponzi's victims.

It's a good thing though. You want people buying between the numerous crashes as reality hits home that Tesla is a disaster. Today was a nice return.

What is the long thesis right now?

Ended up getting closer to a 10% reaction but still... Last Friday market close: $294.71, today's market close: $294.79. Another week of lagging tech and the overall market but still going nowhere. Amazing given the SEC story, pump and dump on the $35k M3 announcement, bond payment and February deliveries. All that and a 8¢ gain on the week lol.

Who are these dumb bulls? Stocks move up and down based on what institutional traders do. Mom and pop tesla owners and people who buy into the cult aren't affecting the price. Or are some of the big tesla owners part of the cult as well?

The same people who are buying the cars, who think they are part of the "revolution" and the TSLA stock will make them money to buy the next car. They really don't care about or understand the day-to-day business or valuation, they are part of the next big thing.

Not that there was any doubt, but they paid the $920mil bond. Kinda shocked no tweet/pump for it.

Another fatal Tesla accident in Florida: https://electrek.co/2019/03/01/tesla...ler-autopilot/

Electrek's take is that it is similar to the 2016 Autopilot doesn't see semi fatality which is still under investigation. Yikes.

Although my reading of the brief report seems like the semi was likely at fault. Unless the M3 was in the turn lane and went straight? Or the M3 was testing out the new high speeds?

Musk said in October that they could build the $35,000 model 3 for $38,000. That seems plausible to me, and in line with your numbers of 20% gross margin for the higher priced cars. it also seems plausible that they could have cut several thousand more dollars in the past five months from the production cost.

Really? The $50+ billion market cap of the pot stocks at P/S of 700 or so that goes running +-$10 billion is institutions? I don't believe you. To a first order you're correct but stocks like pot, Tesla, ROKU, etc are moved a lot by retails.

I don't believe this to be true. Retails hold 10-20% of the stock and much of the rest is locked up (a lot of the institutional holdings aren't discretionary but are for things like tech funds) so they have an outsized effect on the stock. I think retails are often moving the stock.

Wow that's interesting

How did you play this?

So lets say in some world they can somehow get costs to $32k. Gross margin basically 10%. How does it even matter how many they sell? We are talking gross profit in the low hundreds of millions per quarter for a company with a $55 billion market cap.

and positive gross margin does not mean they are making money.

I don’t put much stock in those sort of statements from musk, and I think the other available information/numbers suggest breakeven is generous. Given that they appear to have built out the full EU/China order books already, have been selling at around 1500 units/wk in the US, and still have to meet the panasonic cell purchase commitments, it can make sense for them to produce at 35k even at negative gross margins (ie the fact they chose to sell it is not good evidence itself that it is profitable).

True.

Agreed.

My point was just that even giving Keeeeed all of his assumptions, best case scenario for Tesla, so what? If they can make and sell 7k/week, 75% of which are low margin SRs, this is a barely profitable car manufacturer at best?

The margin won't be the same across different production rates because of fixed costs.

Sure. But that tooth sayer guy was saying they would lose a huge amount of money with each 35,000 model 3 sale, like more than $5k. Which if they had 20% gross margin on an average sale price of 58k it seems unlikely that's true.

There are no "different production rates". Perhaps that's what you're not understanding. Tesla are maxed out at 5K/week for M3 with maybe a little wiggle room for another 1000. By their own (always absurdly/fraudulently) overoptimistic projections, they'll try to hit 7K/week run rate by the end of the year.

Hence why they guided, in the letter, thus:

This is total, which means they're guiding for 260K to 320K Model 3 (i.e. essentially their run rate for the last few months plus an extra thousand through midyear). They say:
This is before Musk committed securities fraud again by twitter and in the conference call, contradicting his own letter.

In short, you don't know wtf you're talking about. And you shouldn't even need to. The fact that they're breakeven selling S+X at 20% higher before the cut (with a good profit stream subsidizing 3) AND Model 3 at ~$60K ASP, means they're losing ****load of money at $35K even if they hit miracle efficiency improvements.

This ain't hard bro. There is so much room to be wrong about nearly everything and still have them losing substantial money on the 3 at $35K.

They were maxed out on production rates when Musk made the $38k cost of production statement. Maybe they can make a few tweaks but I don't see how they can go materially above their "peak production" rate without more cap ex.

If they invest money in more lines and equipment their fixed costs will go up and its not clear that even at these price points there is enough demand to justify that.


Certainly they need to get back to Q4 production to spread out their fixed costs and that was the reason for the price cuts. Selling less than 1,500 M3s/week in the US is a death spiral.

uh of course there are different production rates. If they only sell 3000 model 3s a week they can't make 5000 a week. And the margin would obviously be far worse for 3000/week then 5000 a week. Never mind you have literally no idea what sort of production rate they could sustain.

They literally tell us in the letter how many they can make (not many more than 5K/week in 2019) and they've never understated anything in their history.

Apart from that, Freemont has physical limitations - space, paint shop emission allowances, etc. It's maxed out. They had to build a tent just to hit 5K/week.

There's no room for improved production. That's the whole point - they had the same production rate last quarter as 2019 will be, and $60 ASP was breakeven even with Model S&X subsidizing the M3 and also priced 20% higher before the recent cuts.

The assembly lines can't move much faster or get more much efficient. Tesla tell us that in their own projections. The only out they have for cost improvement is battery pack cost improvement. They might save a few thousand dollars a car at best if they do some miracles there with new robotics.

Okay, he’s entitled to his opinion on that. I don’t think it’s out of the realm of possibility that they lose ~$5k gross, but that most likely is a smaller loss, maybe 2-3k. If SR battery really is just software limited MR, then it could be worse. I don’t think your comment on the margins follows; the upgrade packages and AP are extremely high margin (my ASP excludes FSD), and there doesn’t appear to be much other major cost variance aside from battery. It could easily be the case that it costs 40k to build the 35k version, but that because of mix and add ons they had 20% gm at 58k.