Q3 2015 Report & Conference Call

Tesla will release its 3rd Quarter results on Tuesday, 3 November 2015. I feel that this report and call will be more important than usual, because the company will be reporting guidance after a major product launch (Model X).

In particular, I am looking for Tesla to answer serious questions about the Model X launch and ramp.

After a month, there seem to be only a handful of Founders Series deliveries, and questions continue to fester regarding specifications. For example, photos and videos taken on launch night showed Model X vehicles with 72-amp chargers. More recently, a customer was told that Model X would only have a 48-amp charger (http://www.teslamotorsclub.com/show...l-X-has-a-single-charger-but-only-48A-capable). With customers largely in the dark about critical specifications and actual delivery dates, I feel that Tesla needs to issue new guidance on Model X deliveries for this year. As a shareholder, I am not happy with the way that this launch has been handled. Given all of the experience gained with Model S, why is the company fumbling now? I want to know what they intend to do about this.

I am hopeful that increased interest in Model S, due to the X launch (people can get an S fairly quickly, if the event sparked interest in a Tesla) and publicity surrounding Autopilot, can cover any gap caused by any Model X production issues. Tesla had previously stated in quarterly reports that delays in Model X could affect deliveries and therefore reduce revenues by a noticeable amount (a couple hundred cars/week translates into 10s of millions of dollars in revenue).

Any news on Tesla Energy, Gigafactory, and Model 3 would be welcome.

tftf said:

This continued in recent weeks (a car factory in China, a battery factory in India, a Model Y variant coming soon after the Model 3...) even in view of severe Model X "launch" problems.

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Most of this has been talked about in the past already: Additional car factories (full facilities, not just assembly for partially completed cars), one in China and one in the European Union, are expected in the 2020's, or whenever the sales volumes can support them. Same with the "Model Y". Compact crossovers are big sellers globally, so it was no surprise that the company hinted at plans to build a smaller crossover based on Model 3. I don't see these as much of a distraction, because Tesla officials have said these things for years.

nobody asked about nasty details how these goals can be achieved/financed...

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A combination of the 10-Q statement and news on capital raises gives the details.

For the first 6 months of 2015, Tesla spent a net of around 755M $US (looking at their total intake vs. total outlays), much of this in R&D, equipment, and construction (new paint shop, assembly line upgrades, Gigafactory). Coincidentally, the company raised about $740M in a stock offering this past summer. Panasonic committed to investment of around $500M in automotive products for 2015, much of which will go towards the Gigafactory.

My perspective is that most of Tesla's cash burn is driven by R&D and purchases of property & equipment. These are items that have potential future payoff, which is why investors continue to buy shares and debt from the company.

The situation would be much different if the cash burn were driven by losses from operations (things like losing money on actual vehicles sold and health care & pension payouts exceeding revenues). If we put aside R&D and plant expansion for a moment and consider Model S production alone, it's clear that Model S is a money maker. It's the example case that people look at -- the hint at what Tesla could become. The question for now is whether Model X will be a money maker, and how much Tesla Energy will contribute to the bottom line.

I think this underscores a level of risk that may not be for everyone.

In my case, I find the level of risk perfectly acceptable and even amusing. Then again, you are talking to someone who accelerated buying of shares after Lehman Brothers collapsed. I bought piles and piles of stock all the way to the rock bottom of early 2009.

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Svetlin said:

Why do you think that? Let's say it's delayed by another 6 months. Tesla can either raise more capital, or slow down investments in superchargers and the gigafactory. Yes, it will push out Model 3, and analysts will adjust their models and the stock price will drop. But the company will survive just fine.

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Model X is in a way the answer to a critical question: is Tesla capable of being more than a "One Hit Wonder"? We know from Model S that Tesla's operations side is capable of operating at a healthy profit for that one product. Can they get to the next level by doubling production with the addition of a new product? How well will the company handle the complications of an expanded supply chain and production line? If Tesla does pull through and ramp up Model S and X to combined 1,600-1,800 units/week, and continues to be exceptionally profitable on the operations side, the answer will be unequivocally yes. However, a problematic ramp and/or reduced gross margins would call this into question. This does impact a company's ability to raise capital. People might not be willing to buy more share offerings at a high price, and lenders will demand higher interest rates on notes.

This is why I want more info from Tesla on the Model X ramp. It goes directly to the future ease or difficulty of getting future investment for rapid expansion.

FredTMC said:

All will be great with TSLA if they reaffirm q4 guidance. I think they will. Keep in mind that tesla said the MX ramp starts late in Q4. Everyone seems to think that the ramp should've happened right after the MX launch event but that was not what they said on the last earnings call. Ramp starts in late Q4... It's right in the ER from last quarter (dated August 5th).

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If there was some kind of discernible ramp (for example, 5-6 units per week to start, and increasing from there), I might be less concerned. What I've seen in the Model X forum appears to be no ramp at all for the past month, unless 1 blue Model X to the nVidia CEO counts as a ramp.

Now, it's possible that Founders Series owners are sworn to secrecy, but I'd like to hear from Tesla: where are the cars?