2014 Q3 Earnings Report and Conference call discussion thread

[aznt1217]

I was referring to the question where the analyst asked about the X and III being developed in parallel or one phase after the other. He asked if any progress was being made. Musk talked about the front motor being a smaller lighter unit and how it was basically a second generation motor and how he could easily just make a 20% smaller model S, but didn't want to just alter things.

He did walk through the problems and what they did to address it in past calls, but it's not something that can be phrased in a few sentences. Not entirely sure what your experience with manufacturing is but based on mine (have experience working with both mass market CPG's and high end products) I can tell you it's extremely complicated to set up work flows and get everything factored in in the beginning stage, nearly nobody gets it right on the first try (especially when Tesla adopts an agile working method with continuous changes).

Would you prefer him to give examples like he did in the past like with the tires that were flown in from Czech Republic? Frunk carpets not being made on time? I'd be curious as to what you would propose. We know Tesla Motors employees are probably on this forum so maybe your ideas can help all of us collectively.

 

[anticitizen13.7]

Who out there can be confident in the projection for the Model 3 and the GF? At some point, you lose your credibility. Again, I understand the desire for perfection, but I'm REALLY starting to think this gull-wing door thing is killing the Model X. Surely, its advantages are FAR outweighed by how much it has delayed production. I mean, what the heck else could it be? The technology for the drive train is there. The battery technology is there. Other than those doors, it's nothing but designing the body and the interior. It's been SO long since Musk and Tesla surprised us with GOOD news - whether it be significantly beating the delivery guidance or bringing something to market earlier than expected.


My GOSH, change the dang doors and build the freaking car.

We don't know for sure what is holding up the Model X, but I am sure that re-designing the unibody structure for conventional doors would almost certainly add to delays. According to the shareholder letter, the Alpha phase is finishing up, and initial construction of Betas has begun. This means that the design is more or less frozen at this point, and the task ahead is figuring out how to build the Model X in mass production.

Changing the design now would take time. Then there would need to be a new Alpha, and a new round of qualification tests. And then there would need to be alterations to the supply chain. If Tesla were to drastically change the design now, I don't think we'd see the Model X until 2016.

Admittedly, a bad example, but Musk is starting to remind me of Axl Rose after he split with the rest of the band Guns N Roses and got all new people. He worked on a new album for years. Every time, about 3 months before it was due to be released, he would delay it by 3-6 months. Same thing - he said he wanted it to be the perfect album. 13 years later, he released an album of music that had gone "out of style" about 9 years earlier. Relatively speaking, the album sold VERY poorly.

I might be concerned if Tesla wasn't improving its product line, but I was impressed with the Dual Motor release, along with the Autopilot and other tweaks to the Model S design. Tesla is keeping their products interesting. Axl Rose, in contrast, went into hiding for years and released nothing for years after GnR fell apart.

 

[Perfectlogic]

Be cautious about Elon's remote projection, often it turns out not accurate at all, the reality should really depend on the progress of production, demand and infrastructure deployment. It's really hard to project even Elon.

I remember I posted sth. in "China" thread, Elon said in an interview that the production capacity will likely be doubled every year in next a few years. I was excited about that but it turns out to be far off the reality.

Here is the link to my old post:

http://www.teslamotorsclub.com/show...on-and-outlook?p=649462&viewfull=1#post649462

I don't think you should worry too much about the rampup, I think the 50%+ growth per year was just a conservative guidance as Elon doesn't know where demand ends up. He has also mentioned a possibility of 150-200k vehicle/y rate before the gigafactory, which must be refering to the X/S sales in 2016 ofcourse. So if the stars align there is definately potential, remember guidance is higher than 2k/week run rate at the end of 2015, I think we can see 130k sales in 2016, which is 100% growth per year in 2015 and 16.

 

[pGo]

I don't think you should worry too much about the rampup, I think the 50%+ growth per year was just a conservative guidance as Elon doesn't know where demand ends up. He has also mentioned a possibility of 150-200k vehicle/y rate before the gigafactory, which must be refering to the X/S sales in 2016 ofcourse. So if the stars align there is definately potential, remember guidance is higher than 2k/week run rate at the end of 2015, I think we can see 130k sales in 2016, which is 100% growth per year in 2015 and 16.

So far Tesla barely met the guidance in all quarters with a slight beat in q4, 13. This is becoming more like scty where huge goals are set and then company barely meets them. No surprise whatsoever.

 

[Perfectlogic]

So far Tesla barely met the guidance in all quarters with a slight beat in q4, 13. This is becoming more like scty where huge goals are set and then company barely meets them. No surprise whatsoever.

You are making it sound worse than it is, they will miss the Q4 and thereby the full year guidance by a bit, and that is because of the weeks of production they missed working on the production line, but they will still meet the higher than 1k runrate/week guidance and therefore forward guidance of 2k/week end of next year shouldnt be affected either. I think a lot of people are pretty harsh on Tesla not meeting guidance and launches, but forget about the huge improvements to the Model S they just made, they had scheduled the dual motor upgrade for the S for after the X so that is well before promised.

 

[anticitizen13.7]

So far Tesla barely met the guidance in all quarters with a slight beat in q4, 13. This is becoming more like scty where huge goals are set and then company barely meets them. No surprise whatsoever.

What is wrong with meeting guidance?

I believe that investors should be focused on probability of long-term success: establishment of the Gigafactory and production of the Model 3 in the 300k+/year range. Model 3 in mass production is the goal.

 

[pGo]

My thought is more in the way Tesla communicates. Well into a month in q3, Tesla knew of production difficulties but if you listen to q2 er, Elon was asked the exact question on how he will keep 35k delivery and he kept on saying that will be done.

Starting with q2, Tesla is talking about 2015 exit because current issues don't get more visibility unlike last year where they talked about 2014 only during q4 2013. The whole notion of putting bits and pieces here on 2015 exit rate and demand in q2 and q3 has me wondering why is Tesla doing that.

Before, batteries was a huge problem to increase manufacturing. Understood. That set up a debate on GF. We got that. Before that, it was anywhere from IHS not anticipating huge volume to USB cables coming in the way of manufacturing. Understood. Now what? I agree demand is a non issue, but then damn it, what's taking more to produce cars. As ive understood, electric cars have much lesser parts in total and that should be a bit easier to manufacture compared to ICEs which just has so many freaking parts. 2 years is a huge ramp to learn the best processes. Enough.

 

[pGo]

What is wrong with meeting guidance?

I believe that investors should be focused on probability of long-term success: establishment of the Gigafactory and production of the Model 3 in the 300k+/year range. Model 3 in mass production is the goal.

I agree. And a few announcement on future is what made this stock go higher today. But a lot of this companies valuation depends on current execution. A few more quarters like this and people will wonder if GF will really start at the end of 2016 and that will we really see model 3 in 2017. I know they will get it done but setting right expectations is very important.

 

[Perfectlogic]

Starting with q2, Tesla is talking about 2015 exit because current issues don't get more visibility unlike last year where they talked about 2014 only during q4 2013. The whole notion of putting bits and pieces here on 2015 exit rate and demand in q2 and q3 has me wondering why is Tesla doing that.

Because for a growth company, the future is more important than the present.

Elon emphasized several times in the recent earnings call how difficult it is to produce such complex cars, I don't think you are appreciating that fact. Even though it is a difficult task they are still making the best cars in the world at the price while ramping up 50-100% per year, I really don't share the dissapointment.

 

[Lump]

"I think our stock price is kind of high right now...

This was said when the stock was at ATH & was pretty much ignored back in September, today many are surprised & disappointed.

Here is the full quote "I think our stock price is kind of high right now. If you care about the long term, Tesla, I think the stock is a good price. If you look at the short term, it is less clear." Musk also said that when it came to TSLA's share price, investors have a tendency to "get carried away."

 

[blakegallagher]

"I think our stock price is kind of high right now...

This was said when the stock was at ATH & was pretty much ignored back in September, today many are surprised & disappointed.

Here is the full quote "I think our stock price is kind of high right now. If you care about the long term, Tesla, I think the stock is a good price. If you look at the short term, it is less clear." Musk also said that when it came to TSLA's share price, investors have a tendency to "get carried away."

Time will tell but as more and more people see the future coming the stock price will get more and more "out of hand"

 

[Perfectlogic]

"I think our stock price is kind of high right now...

This was said when the stock was at ATH & was pretty much ignored back in September, today many are surprised & disappointed.

Here is the full quote "I think our stock price is kind of high right now. If you care about the long term, Tesla, I think the stock is a good price. If you look at the short term, it is less clear." Musk also said that when it came to TSLA's share price, investors have a tendency to "get carried away."

The quote doesn't even make sense, it is self-contradictory. If he thinks it's a good investment long term then obviously he doesn't think it is a bad investment even at that ATH price point. He also said the same thing a year ago when the price was around $150, what is your point?

 

[Lump]

He knew of the production problems & delivery shortfalls when he made those comments, he didn't have to make that comment but he felt obligated to cool the stock, the point I am trying to make is if there is a next time...don't ignore it if you are a trader.

 

[sundaymorning]

My thought is more in the way Tesla communicates...

Before, batteries was a huge problem to increase manufacturing. Understood. That set up a debate on GF. We got that. Before that, it was anywhere from IHS not anticipating huge volume to USB cables coming in the way of manufacturing. Understood. Now what? I agree demand is a non issue, but then damn it, what's taking more to produce cars. As ive understood, electric cars have much lesser parts in total and that should be a bit easier to manufacture compared to ICEs which just has so many freaking parts. 2 years is a huge ramp to learn the best processes. Enough.

Pgo, how long have you been invested in tesla? From reading your posts, I'm sensing aggravation because Tesla isn't producing at your expectations or timetable. Many of us here have been with tesla since inception, patiently waiting on the S and now X. We "smart ones" know where this is heading in 2017, but if not, 2018 is fine by me. I won't be leaving this stock and I think you know why..

2 years to ramp up a car company is nothing, especially if you are simultaneously working on multiple projects, spearheading technological advancements, building out your own charging infrastructure, and trying to rush your suppliers to increase production which implies that they shoulder more risk then they are usually inclined to, and as a caviar, you're also distracted by nitwits like the gov. of New Jersey, Texas, politicians, auto-dealers, shorts, newspaper agencies, journalists, big oil....not to mention that this is a product completely foreign to the automotive industry, so any engineer who steps in must be retrained. And on top of that, you have to balance your accounting, so that your losses do not exceed "expectations." If you think 2 years is a long time to work out all those stated bumps on the road, let's compare Tesla model S to the Ford's model T ramp up.

Below are Ford's model T production numbers:

Year: 1909 = 7,728 produced.


Year: 1910 = 16,890 produced.

year: 1911 = 26,405 produced.

if tesla produces 50k next year (on its 3rd year) it will almost double the Ford model T's production numbers. Now put that into perspective and be appreciative for this investment and the Tesla team.

 

[Perfectlogic]

He knew of the production problems & delivery shortfalls when he made those comments, he didn't have to make that comment but he felt obligated to cool the stock, the point I am trying to make is if there is a next time...don't ignore it if you are a trader.

He also knew about the D reveal, for the stock to sell off from $290 to $220 with the only significant news being the D event was highly illogical. I guess the selloff probably had something to do with low expectations for the quarter, but imo it doesn't salvage the stupidity of the recent selloff, and foreseeing illogical almost random price movements like that isn't easy.

Edit: If you think the selloff was foreseeable on the simple basis that Elon said the SP was kinda high right now then you thesis is wrong and you got lucky, he has said this one time before, and that time the stock rose 30% shortly after the comment before getting crushed by the fires.

 

[geturchiru]

Pgo, how long have you been invested in tesla? From reading your posts, I'm sensing aggravation because Tesla isn't producing at your expectations or timetable. Many of us here have been with tesla since inception, patiently waiting on the S and now X. We "smart ones" know where this is heading in 2017, but if not, 2018 is fine by me. I won't be leaving this stock and I think you know why..

2 years to ramp up a car company is nothing, especially if you are simultaneously working on multiple projects, spearheading technological advancements, building out your own charging infrastructure, and trying to rush your suppliers to increase production which implies that they shoulder more risk then they are usually inclined to, and as a caviar, you're also distracted by nitwits like the gov. of New Jersey, Texas, politicians, auto-dealers, shorts, newspaper agencies, journalists, big oil....not to mention that this is a product completely foreign to the automotive industry, so any engineer who steps in must be retrained. And on top of that, you have to balance your accounting, so that your losses do not exceed "expectations." If you think 2 years is a long time to work out all those stated bumps on the road, let's compare Tesla model S to the Ford's model T ramp up.

Below are Ford's model T production numbers:

Year: 1909 = 7,728 produced.


Year: 1910 = 16,890 produced.

year: 1911 = 26,405 produced.

if tesla produces 50k next year (on its 3rd year) it will almost double the Ford model T's production numbers. Now put that into perspective and be appreciative for this investment and the Tesla team.

Whatttt? A century ago numbers when the automation was no where near to the current one. Give me something more realistic and comparable!!

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Because for a growth company, the future is more important than the present.

Elon emphasized several times in the recent earnings call how difficult it is to produce such complex cars, I don't think you are appreciating that fact. Even though it is a difficult task they are still making the best cars in the world at the price while ramping up 50-100% per year, I really don't share the dissapointment.

Yes it is. But, how does anyone believe that when you did't deliver what you have promised a while ago!!

 

[pGo]

Pgo, how long have you been invested in tesla? From reading your posts, I'm sensing aggravation because Tesla isn't producing at your expectations or timetable. Many of us here have been with tesla since inception, patiently waiting on the S and now X. We "smart ones" know where this is heading in 2017, but if not, 2018 is fine by me. I won't be leaving this stock and I think you know why..

2 years to ramp up a car company is nothing, especially if you are simultaneously working on multiple projects, spearheading technological advancements, building out your own charging infrastructure, and trying to rush your suppliers to increase production which implies that they shoulder more risk then they are usually inclined to, and as a caviar, you're also distracted by nitwits like the gov. of New Jersey, Texas, politicians, auto-dealers, shorts, newspaper agencies, journalists, big oil....not to mention that this is a product completely foreign to the automotive industry, so any engineer who steps in must be retrained. And on top of that, you have to balance your accounting, so that your losses do not exceed "expectations." If you think 2 years is a long time to work out all those stated bumps on the road, let's compare Tesla model S to the Ford's model T ramp up.

Below are Ford's model T production numbers:

Year: 1909 = 7,728 produced.


Year: 1910 = 16,890 produced.

year: 1911 = 26,405 produced.

if tesla produces 50k next year (on its 3rd year) it will almost double the Ford model T's production numbers. Now put that into perspective and be appreciative for this investment and the Tesla team.

I purchased my first leaps in 2012. Still holding converted shares. No questions on the future this company holds. This does not mean I as a shareholder don't track the progress and judge them by their own words.

The comparison to model t in production ramp is almost laughable. I hope everyone here does not compare Tesla that way.

Remember what has Tesla shown as a perceived value once someone visits factory. Best in class robots doing multitasking and great big efficient factory where a lot of automation happens. I just want a bit more transparency on production from Tesla. That's all.

 

[kbeckley]

So far Tesla barely met the guidance in all quarters with a slight beat in q4, 13. This is becoming more like scty where huge goals are set and then company barely meets them. No surprise whatsoever.

Maybe I misunderstand. A company set 'huge' goals and meets them (barely even) and somehow that is bad? Sounds great to me.

If you listen to Elon a lot it seems obvious to me that he barely cares about Tesla's stock price and pretty much just wants to build awesome electrical cars and change the paradigm. He only cares about the stock price, I think, insofar as it gives him access to cheaper capital to fulfill his primary goal. In a tertiary way he might be slightly interested in how 'investors' are feeling about the stock at any moment. This is all totally refreshing to me - think years out and communicate the vision. Today be damned - in complete contradiction to most public companies who are all so short term focused.

Tesla is interesting for 3 reasons in my opinion: model III, battery expertise, stationary power. Those are all huge. The X being delayed - pffft (although I am planning to get one). Today's run rate for Model S - pffft. Quality of cars being produced - now that is interesting. Status of battery degradation in the current fleet - also interesting. That is what analysts should be asking about but they rarely do.

 

[maoing]

I fully agree with Lump that Musk was intentionally cooling down the stock after Q3 miss is inevitable. Also AJ from Morgan Stanley knew a lot of production and X delay insider information, as a big fan of TSLA he also tried to cool down the stock a lot. So the TSLA price got tuned to the appropriate level before ER, otherwise it'll be a waterfall like Q3 in 2013.

He knew of the production problems & delivery shortfalls when he made those comments, he didn't have to make that comment but he felt obligated to cool the stock, the point I am trying to make is if there is a next time...don't ignore it if you are a trader.

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Yes it is. But, how does anyone believe that when you did't deliver what you have promised a while ago!!

TM can't keep their promise just 3 months ago, so it's an execution mistake. In my opinon, this mistake can be dealt in much better shape if TM mangement can forsee it. We all knew 2014 is an important year to ramp up the production significantly, why the assembly line retooling got pushed to Q3 instead of Q1/Q2? If the same extended shut down happened in Q1/Q2, then TM might have sufficient time to catch up the production loss. But right now the only way is to disappoint shareholder and market to lower the annual guidance.

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Can't agree more, the is exactly what I'm feeling. As a loyal investor, we all trust Elon & TM to success in long term, but we can't blindly do that. We need to inspect the execution of each step carefully and it's our Money in TSLA.

My thought is more in the way Tesla communicates. Well into a month in q3, Tesla knew of production difficulties but if you listen to q2 er, Elon was asked the exact question on how he will keep 35k delivery and he kept on saying that will be done.

Starting with q2, Tesla is talking about 2015 exit because current issues don't get more visibility unlike last year where they talked about 2014 only during q4 2013. The whole notion of putting bits and pieces here on 2015 exit rate and demand in q2 and q3 has me wondering why is Tesla doing that.

Before, batteries was a huge problem to increase manufacturing. Understood. That set up a debate on GF. We got that. Before that, it was anywhere from IHS not anticipating huge volume to USB cables coming in the way of manufacturing. Understood. Now what? I agree demand is a non issue, but then damn it, what's taking more to produce cars. As ive understood, electric cars have much lesser parts in total and that should be a bit easier to manufacture compared to ICEs which just has so many freaking parts. 2 years is a huge ramp to learn the best processes. Enough.

 

[30seconds]

It seems to me that reducing paint choices, seating and configurations are all aimed at simplifying production and increasing output. I doubt these decision were made without consideration of how to up production. Elon seems very intent on ramping production and only producing 4 main configurations (60, 85, 85D and P85D) instead of 7 (60D, P85, P85+) should help.

I'm also guessing that the Model X will have a reduced number of configurations at launch to help with ramp.