My early thoughts:
1. Lucky accident that in my forecast I got the GAAP EPS correct at $0.78, mainly because of the bump of $328m in the other income line, as auto GM% was below my forecast. But a win is a win, nailed it.
(see the Quarterly Projections thread if you want to stay abreast of that stuff
Near-future quarterly financial projections )
2. GM% on energy is now broadly equal to GM% on automotive, i.e. 18% or so in round numbers for illustrative purposes. A 500k/yr vehicle line consumes about 40 GWh/yr of cells. The Lathrop megapack storage line is currently consuming approximately 12 GWh/yr of cells (after allowing for some cells to go into Powerpacks, Powerwalls). This means that the Lathrop line is now the equivalent of about 150,000 vehicles/yr
in both revenue and profit terms. You can see that Lathrop now is almost contributing as much revenue and profit as Berlin is now, as Berlin is at about 200k/yr now. When Lathrop reaches 40 GWh/yr it will be equal to about 500k/yr vehicles, i.e. that is the same as the fully built and fully ramped phase 1 of Berlin. It is not obvious whether Berlin phase 1 will get fully ramped to 500k/yr=40GWh/yr before Lathrop reaches the equivalent fully ramped situation. This means that there no longer needs to be any hesitation in selling/ramping/etc storage vs vehicles and that makes overall business strategy decisions so much easier. Well done Lathrop. That makes LFP cell capacity allocation and negotiations so much easier. Plus of course there is the long tail of service/etc income from storage.
This table sets out the approximate situation and the broad equivalency between a 40GWh vehicle line and a 40GWh stationary storage line.
View attachment 957962
3. This means that decisions on Megapack factories are as important for recipent nations as automotive factories, but that they involve less technology exposure than automotive. That is good as they don't need as much labour/etc as an auto factory. This has huge implications for ability to scale overall business in a way that manages sovereign / political / strategic risk.
4. Berlin capacity is now significantly ahead of Austin capacity. The cell supply situation out of China has perked up now that Shanghai has gone fully LFP, clearing the way for the LG 2170 stream to go to Berlin. As yet the 4680 ramp in Austin has not caught up with the Chinese stream into Berlin (and into Lathrop). Well done to the Chinese LFP suppliers.
It is still all about the cells.
5. The improved 4680 for CT sounds to me like same external 4680 can, maybe with decreased wall thickness and perhaps (?) tweaked chemistry. The 4680 ramp is likely the pacing factor for CT launch, and since there is still plenty to do on vehicle shakedown and cell side they don't seem in any hurry. Pencil in Q4 deliveries in low volumes.
6. Volume expansion and operating at full capacity is
still the overriding target. Forget all about the waffle in the Q1 call about targetting operating margin. Or in previous calls about any other margin. Or about maintaining positive cash flow. though happily things are - and will continue to be - cash generative and so fully internally funded. Or share price stability. Or anything, except ramping as fast as possible and keeping the lines full. It is quite clear from the actual observable facts, that Tesla will reduce prices and throw in whatever promotional stuff it takes to keep the lines full.
7. This means that the real determinant of Tesla price is - wierdly - the extent to which there are competitive BEVs available from other automakers. The market will obviously take as many credible BEVs as the industry can produce, provided they aren't outrageously priced. So if Tesla has limited competition then Tesla can pretty much hold its own price up to a reasonable extent, with the result that Tesla obtains a (now) 18% or so GM%. And since (at the moment) the competitor BEVs are not as compelling a customer proposition (and their CoGS are higher) then the competitor OEMs are forced into low or negative GM%. It is really difficult to get those numbers, but let's just posit they range from +5% GM to -5% GM with an average BEV competitor of 0% GM. This is why demand for BEVs is collapsing at VAG etc, and they are in a cash crisis. The implication is that Tesla is probably near the bottom on pricing for the time being. Only if the competitors start bringing better products to market in a manner that is financially sustainable for them, will Tesla need to reduce prices. Of course that will happen, and so there may be further Tesla price reductions. But hopefully by then Tesla may have been able to make further CoGS reductions, and obtained further scale benefits, and so stay ahead of the game. But note - in an odd way - given that Tesla prizes capacity expansion above all else, then it is competitor products that now determine Tesla GM% and that is a new realisation for me.
8. Actuators are the pacing constraint on Optimus. Software is constrained by hardware. The hardware cycle is many months, that is the pacing constraint at this stage.
9. FSD will go to market in USA first. One day. Maybe.
10. Yeah, Q3 won't be a lot of growth. We are pretty sure the 3 lines (Shanghai, Fremont) will get a full rebuild and a next-gen 3 product. We don't know how fast they will ramp coming out of that. We don't know what will be done to the Y lines to keep them in lockstep (Berlin, Austin, Fremont, Shanghai). It seems to me that there is no reason for cell production to slow during Q3 (except of course for cell factories to do their hols and line maintenance & updates) and so they can build cells to stock, then that gives excess cells to mop up in Q4. Since vehicle line capacities seem to me to exceed cell line capacities that means that Q4 should be good. FSD-switch promotion to keep deliveries up during Q3 and avoid Osborning. I'm sure they will find enough promotions t keep it going - Herz etc.
11. So 1.8m for the year plus storage.
12. Very steady growth in S&S, nice.
ai.googleblog.com
