Tesla Sales Pundits Should Realize (Or Remember) These 2 Things
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. 😀
Have a tip for CleanTechnica? Want to advertise? Want to suggest a guest for our CleanTech Talk podcast? Contact us here.
CleanTechnica Holiday Wish Book
Our Latest EVObsession Video
CleanTechnica uses affiliate links. See our policy here.
The chart of deliveries you’ve posted seems to suggest Tesla’s learning curve involves a staircase with six month long steps. I have no idea why that should be the case, but if that is a real pattern, then it’s time for a step up — the only point unusual would be the “riser’s” height. If they have operated with one line til now and are starting up their second, then they may come close. Especially if most of Line 2’s team has already trained, say as a second shift on the first line. I believe you’ve mentioned in other stories Musk has said they have been production-constrained. If internal quality isn’t at issue and some suppliers (not just batteries?) are finally getting up to speed, maybe this could explain their optimism for this quarter?
Its not learning curve on the Model S anymore. Their production line determined output. The staircase reflects the jagged nature of adding new production facilities. Now that the line has been increased, look for increased output. Its supply constrained. The Model X is another story as Zach explained. There its parts supply, but IMO production line issues are still not completely known until volume ramps.
Tesla may make most of its future profits from energy storage. People just looking at the number of cars each quarter are missing the big picture.
Batteries are one of the key production constraints and from what I recall, the Reno Gigafactory will barely support Telsa’s auto and energy projected volumes. So…they will need more gigafactories for external sales (beyond what’s already committed to Toyota, Mercedes-Benz, etc) to make any sense. This is what shocked me about GMs announcement which is why I’m leaning more into batteries…to see what’s happening in that space and what the big players are doing (like Zach’s recent article on LG expanding their Wroclaw operations).
Musk already is looking at an expansion in GigaFactory production.
http://www.usatoday.com/story/money/cars/2015/05/06/tesla-gigafactory-batteries-boost/70915398/
“So…they will need more gigafactories for external sales (beyond what’s already committed to Toyota, Mercedes-Benz, etc)”
Didn’t Mercedes end their contract with Tesla and announce that they’ll be competing with them on home storage as well as cars?
Good point – I do recall reading that.
Or Tesla may make little money on energy storage, and the gigafactory output may go to cars.
I have a hard time believing, in the next decade, that the best battery solution for cars will also be the most cost effective solution for small to medium fixed storage.
I’m planning a flow battery for my basement, and a model Y in the garage in 2022 🙂
Musk has said the entire production of the Gigafactory could be taken up by the powerwall. I expect Musk will build more factories if it really is as successful as it seems.
The same battery is not used for both. There are two types of PowerWall batteries. One of the two types of PowerWall batteries matches the auto type, NCA. The other is NMC, which does not match the auto type.
https://en.wikipedia.org/wiki/Tesla_Model_S
http://fortune.com/2015/05/18/tesla-grid-batteries-chemistry/
I can say this. The best battery type on paper may not win in the market. The first to market and get to volume has an advantage.
I was referring to lithium technology generally. I’m betting that assembling light weight small cells into packs is not the long term future of fixed storage. Neither energy density or weight is terribly important constraints for my future basement battery.
But I’m not predicting that Tesla Energy will be unsuccessful with fixed storage. There are many niches. If I didn’t have a basement, maybe hanging a powerwall by the back door would be the way to go in 2022.
The different types have large differences. Tesla could care less about cell form factor. It’s which tech wins on performance.
They are increasing cell size.
The chemistry switch is in response to the kinds of things you describe.density may not be an issue, but cooling , and cooling energy cost are issues.
Oddly, the automotive knock on small form factor cylindrical is packing density. But Tesla has it right. You don’t want overheated EV batteries. Space is needed for cooling. Still, look for innovation in those areas.
Tesla would change quickly if it had a better tech.
“JB Straubel made a similar point in his interview with the SAE. “The first question we ask when we meet a new cell company is, show us your cost roadmap. Nobody wants to talk about cost – they always leave that to the end of the discussion. That’s silly. For EVs, there are some key safety and performance metrics that are foundational. They have to be there. Beyond that the most important thing is cost efficiency of energy storage. So if anyone has a more cost-efficient cell architecture, we’d be all ears. Right now nobody has proven they have a more cost-effective cell architecture than ours.””
https://chargedevs.com/features/teslas-batteries-past-present-and-future/
I am not sure I would agree about smaller cell sizes. Its much more convenient from the standpoint of making the skateboard style flat battery pack underneath the chassis used by Tesla. This has large space and packaging advantages that large cells don’t. GM is using an approach on the Volt that results in less space. GM started with the T shaped pack that used up the center.
Nissan is going after under seat space.
IMO, the Tesla approach is superior. Lowest center of gravity, and best space utilization.
Hard to achieve that with large format prismatic cells.
Also, cooling is harder to achieve with larger cell formats.
The available surface area is better for smaller cylindrical cells.
Sometimes it is the second to market. :0
Yes. Its market x volume. The first to that metric gets the lead.
I think the volume of their energy storage sales will raise car sales in eventuality by the price decline in battery production. I’d agree you’re focused on the right current component.
I find it pretty shocking that Musk would partner with suppliers who couldn’t provide firm commitments on supplying key components. Not a very smart business move.
I don’t think that he had a real choice. That panoramic window for example is much bigger than most car windscreens and so it would take specialised equipment just to be able to handle it. not forgetting special ovens and mouldings. All of this needs to be developed as only a few manufacturers can handle the work.
With all new developments, there’s teething problems so the manufacturers are probably saying we’ll guarantee 95% of your requirements, and we’ll get up to 100% when we get most of the bugs out of the operation.
Yes. There are just a handful of cars that have had that feature, and this is the biggest piece of glass. Glass is always a special order, because each car must have its own, but this one might require new tooling on the part of glass makers because its size is so large.
It is just another deflection of whos fault it is. Tesla have not developed and implemented as fast as they wanted but instead of saying “sorry, guys we are a bit late and a bit below predictions and it’s our fault” they blame it on something or someone else than Tesla itself.
The funny thing is that some people still buy those excuses, but so far it’s been working for them and their stock.
Tesla is awesome and I will buy a Model 3 in a few years when it gets out (hopefully in less than 3,5 years from now).
Just remember that next year when they probably will predict 80+k sales for the year when they will more likely end up in the ~65-70k-region.
Catch me up on the facts.
The Roadster was delayed when the drive train delivered by the supplier couldn’t handle the torque produced by the motor so Tesla took the job in house and designed a drivetrain that worked.
They’ve said that production of the ModX might not be as fast as they’d like because there’s no assurance that some suppliers will be able to keep up with demand.
What are the delays that Tesla has blamed on others?
Same here.
It’s not really possible that they aren’t aggressively looking for alternate suppliers for those key components. With as much money and image value as they have on the line, that’s just common sense and key for business continuity planning.
“the long-term vision is to have a production split of approximately 50–50 between the Model S and Model X” LoL…you said long term, referring to Tesla 🙂 They may hit that in a year but then Model 3 comes and slams that equation into somewhere new. Can’t wait 🙂
The Tesla supplier probably has a different story on which company caused the delay.
Yes. That goes with out saying. No volume manufacturer wants to be single sourced.
And Model 3 will stress volume deliveries even more. The GigaFactory is going to be a very busy place soon!
What the chart really means is that many model S buyers delayed purchase until they saw that the Model X wasn’t superior in some way.
Are people on tours seeing Model X’s on the production line? I hear that they just seeing the Model S. I expect the 2015 Model X projection is major production push for last six weeks of the year.
All of this is fine, IMO. As long as Model S orders are now strong again, and the Model X is well received, the big picture is good.
More likely, they saw the 1 year waiting list, and decided to lease a Model S now and address the issue at the end of the lease.
There wasn’t a waiting list a month ago. You could get a custom car from Tesla faster than Ford or GM.
The Model X has the waiting list.
The deliveries are production limited, not sales or demand limited. There is still much pent up demand. When Tesla can make more, they sell more. When production ratcheted up, sales ratcheted up.
Tesla even announced it beforehand.
http://www.latimes.com/business/autos/la-fi-hy-tesla-earnings-20140801-story.html
http://insideevs.com/tesla-idles-factory-to-convert-to-model-x-production-increase-model-s-production/
I’m sure Tesla is guaranteed a set number of windows. Then the manufacturer may have said they will attempt to deliver X number over the guarantee.
And no manufacturer would have promised to deliver what couldn’t be delivered.
Volkswagen would have.
No. They can deliver.
They even deliver extra… extra NOx.
You’d be amazed what a manufacturer will promise in order to get a contract. In fact, your comment suggests you have very little experience with them (no offense intended).