But let’s be clear: This is not a prediction. It’s also not any kind of investment advice. It’s just me having some number fun.
Yes, I’m trying to get the numbers as close to reality as possible. In that sense, yes, it’s not much different from what “analysts” and “forecasters” do when they put out their opinionated reports influencing people in charge of millions or billions of dollars. But I’m not going to pretend that I came up with the perfect formula that really, really, seriously tells the truth.
Anyhow, let’s jump into the numbers.
|Vehicle||Orders||Average Price||Total Revenue||Profits based on 20% Gross Margin||Profits based on 25% Gross Margin|
|Tesla Model 3||400,000||$42,000||$16,800,000,000||$3,360,000,000||$4,200,000,000|
|Tesla Model S||45,000||$84,000||$3,780,000,000||$756,000,000||$945,000,000|
|Tesla Model X||55,000||$91,000||$5,005,000,000||$1,001,000,000||$1,251,250,000|
|Tesla Model Y||700,000||$50,000||$35,000,000,000||$7,000,000,000||$8,750,000,000|
|Tesla Roadster 2||1,100||$230,000||$253,000,000||$50,600,000||$63,250,000|
I was inspired to do this after crunching some numbers for a Tesla Semi forecast, the responses to that number crunching, and perhaps my own investment in Tesla (though, I don’t really give that much thought or tie it too seriously to financial estimates like this*). There are assumptions every step of the way and I expect many of you would tweak many of these assumptions. That’s the fun of it all. Below are some of the assumptions I used and why.
Deliveries are, of course, a huge guess. Some of them are based on Tesla’s own projections over the years, but there’s also some modification for certain assumptions I’m making. For example, Tesla has estimated approximately 100,000 Model X and Model S deliveries per year (combined), but I’m giving Model X more of an edge by 2022 since I expect the shift to SUVs and CUVs to continue, more on-demand taxi services and usage, and growing awareness of the unique benefits of the Model X (which I consider to be the best passenger/family vehicle on the planet).
I assume Tesla will have a pickup truck on the market by 2022 as well, and project similar sales as the Model S or Model X, but heavily centered in the US. I also expect Tesla to have the Model Y on the market and at nearly full production. It’s a big assumption, but I think a reasonable one. I think the Model Y, like the Model X, will benefit from certain market trends that end up making it much more popular than the Model 3. I expect the Model 3 to still see 400,000 sales a year, but put demand at approximately double that and production capacity at 700,000.
I actually think the Tesla Semi estimates are the most pessimistic of the bunch, because I think Tesla has a genuinely disruptive product here and that the number crunchers buying such vehicles will understand that well by 2022. But we’ll see.
Average selling price for each of the models felt a little hazier to me, but I feel pretty good about the estimates input here. That said, it’s important to realize that the total can shift quite a bit with potentially realistic modifications to average selling prices for certain models (e.g., Model Y and Model 3).
For gross margin and automotive gross profit, I provided two options — Tesla’s target of 25% and a more pessimistic 20%. Given Tesla’s hyperfocus on this and progress to date, I’m more inclined to go with 25%, but my cautious side prefers 20%. Of course, you could get more pessimistic and estimate 15%, but I didn’t feel that option was compelling enough to include in the table.
Above & Beyond — Tesla Network, Tesla Energy, & Tesla Merchandise
There are various other products and revenue streams Tesla might launch by 2022 (a minibus perhaps being my favorite), but it seemed the vehicles above were enough to keep Tesla’s hands full on that front for a while. That said, Tesla Network is a software-based system that is probably getting quite ripe and just awaiting full self-driving capability and permission in some locations to launch. It’s extremely hard to estimate where this market will be in 2022 and what portion of it Tesla will hold, but what I landed on after thinking about it a while (and for many months leading up till now) was a conservative revenue of $1.4 billion in 2022. Being such a nebulous estimate anyway, I simply kept the same figure across the table — in other words, assuming 100% gross margin (or, envisioned a different way, assuming much more revenue from this business and XX% gross margin).
Similarly, I found it exceptionally hard to estimate where Tesla Energy sales would be in 2020 (solar products of various sorts, Tesla Powerwalls, and Tesla Powerpacks). What I ended up doing was more or less tripling 2017 sales for this estimate. Feel free to get more nuanced and give me your best guess if you feel inspired to jump deeper into this market and what Tesla offers here. Overall, I think my figures for this are a huge underestimate, but I also think there’s a lot of risk.
Then there’s Tesla merchandise, which it sells in its stores, online, and now at some Supercharger rest stops. Done right, I actually this this could be a tremendous source of revenue for Tesla, but it’s also the hardest for me to estimate at this point. Given lack of insight into Tesla’s plans and current numbers in this segment, I just decided to leave it empty. Let us know if you have some strong opinions on this.
|Vehicle||Orders||Average Price||Total Revenue||Profits based on 20% Gross Margin|
|Tesla Model 3||400,000||$42,000||$16,800,000,000||$3,360,000,000|
|Tesla Model S||45,000||$84,000||$3,780,000,000||$756,000,000|
|Tesla Model X||55,000||$91,000||$5,005,000,000||$1,001,000,000|
|Tesla Model Y||700,000||$50,000||$35,000,000,000||$7,000,000,000|
|Tesla Roadster 2||1,100||$230,000||$253,000,000||$50,600,000|
|Tesla Goodies (Stores, Superchargers, Online)|
|Vehicle||Orders||Average Price||Total Revenue||Profits based on 25% Gross Margin|
|Tesla Model 3||400,000||$42,000||$16,800,000,000||$4,200,000,000|
|Tesla Model S||45,000||$84,000||$3,780,000,000||$945,000,000|
|Tesla Model X||55,000||$91,000||$5,005,000,000||$1,251,250,000|
|Tesla Model Y||700,000||$50,000||$35,000,000,000||$8,750,000,000|
|Tesla Roadster 2||1,100||$230,000||$253,000,000||$63,250,000|
|Tesla Goodies (Stores, Superchargers, Online)|
Tesla operating expenses have been approaching $4 billion (reaching nearly $1 billion in Q3 2017, according to its last 10-Q statement). How that will change as Tesla scales up production more than 10x over is a big question if you want to look at the full equation. If you simply multiplied 2017 expenses by the same figured as orders are multiplied by, you’d end up with a dark, dark picture, but one pro of moving into the mass market is that you benefit from more economies of scale. Few serious people expect Tesla’s expenses relative to revenue to stay the same. Still, if you just triple or quadruple expenses, that puts you at approximately $12–16 billion in expenses in 2022, showing even more potently the value of that 25% gross margin versus 20% gross margin. (Putting in those operating expenditures for the two different scenarios, you get down to profits in the range of approximately $1 billion to nearly $9 billion.)
All of this also shows the tremendous potential of a mass-scale, high-margin, software-based Tesla Network service.
Okay, I’m sure I left myself open to plenty of sharp and scathing criticism. Throw it my way now!
*Share price and market valuation, as much as some number crunchers would like to accept, are due to much more than numbers. They’re also due to sentiment, societal trends, brand enthusiasm, vague expectations of growth, hard long-term expectations of growth, and more. I think that’ll be a topic of a coming Tesla-focused article.