Originally published on EV Obsession.
Tesla sales and projected Tesla sales for 2015 are hot topics these days, amongst EV enthusiasts and journalists as well as the financial media and investors (full disclosure: I’m long TSLA). Naturally, nobody really knows what Tesla’s 2015 sales total will look like (even if some people arrogantly act like they do), but there’s a lot of conjecture and a lot of reason for some people to conjecture.
Unfortunately, a couple of key points seem to be routinely unacknowledged or underplayed in the many articles and comments I read on the topic.
First of all, nobody really has a clue what Tesla Model X production/sales will look like in 2015 because nobody (Elon included, it seems) knows how fast one or two key suppliers will be able to ramp up their own production, and without sacrificing quality. Furthermore, if they fall through completely, we don’t know how long it will take for Tesla to find another manufacturer or take over production of the components themselves (if that’s even an option). The key pieces of concern are apparently the second-row seats (concern #1) and the huge panoramic windshield (which is said to be the biggest piece of glass ever put into a production automobile).
In a recent interview with Elon, Motley Fool analyst Daniel Sparks got this response (paraphrased): “If you can tell me when and how these suppliers will deliver these parts, I can tell you how many Model Xs we’ll make.” (h/t MrBoylan)
I thought that this issue was clear from the last Tesla conference call, when Elon said essentially the same thing and reduced the lower end of 2015 sales (delivery) guidance to account for the uncertainty. However, this interview seems to clarify that Elon and Tesla are really in the dark about supplier issues with these unique parts.
Many commenters seemed to miss that key point, but there’s another key point they seem to routinely miss as well. Before discussing that one, here’s an important chart from the Motley Fool (h/t FlatSix911):
As you can see, Tesla sales are projected to jump a ton in quarter four (Q4) in order to meet Tesla’s sales guidance. Some may look at this and think Tesla is screwed and underperformed in the first three quarters, but this actually matches several of Tesla’s previous statements and guidance.
One critical point in this regard is that Tesla’s second production line will be running in Q4. While the long-term vision is to have a production split of approximately 50–50 between the Model S and Model X, production can be split however demand requires (and also based on supplier issues, of course). In any case, it has not been expected for several months that Model X production would ramp up fully before the beginning of 2016. The production ramp will grow gradually to be cautious about the quality of the product and any potential issues, and because of the natural learning curve of producing a new product.
Tesla previously gave guidance of 11,500 vehicles in Q3, and it slightly surpassed that with 11,580 sales. So, while Q4 sales must jump a great deal to hit full-year guidance, that has basically been the plan for several months, and will be enabled via the new production line. Whether Tesla will be able to produce as many Xs as it would like or will produce more Model Ss is unclear, but in either case, it shouldn’t have a problem jacking up vehicle production a great deal in the fourth quarter (pun noticed as I was typing it).
I hope that helps to clear up some matters. What to do if you are an investor considering TSLA, I can’t really tell you. I am holding, but keeping an eye out for another buying opportunity in case Tesla struggles to meet guidance and the market overreacts. 😀
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