The reality is that the push for deliveries at the end of Q3 has occurred. Elon Musk’s email to employees on 29 August makes it clear he feels it is important to be ‘cash flow positive’ and ‘profitable’ for Wall Street, e.g., Tesla is “on the razor’s edge of achieving a good Q3, but it requires building and delivering every car we possibly can, while simultaneously trimming any cost that isn’t critical, at least for the next 4.5 weeks.” (Bloomberg 2 Sep 2016)
My question is: Given the publicity around Elon’s email, is this third quarter push for deliveries good for Tesla owners and stockholders?
I’ll get this going with a few thoughts (unfortunately none of them especially positive):
(Full disclosure. I am trading my 2103 Model S60 on an refreshed 2016 inventory Model S75D, because I got a huge discount in this EOQ push for deliveries, i.e., self-interest at work.)
My question is: Given the publicity around Elon’s email, is this third quarter push for deliveries good for Tesla owners and stockholders?
I’ll get this going with a few thoughts (unfortunately none of them especially positive):
- The capital markets are not going to be surprised (favorably) if Tesla happens to be Cash Flow positive or profitable because they now know how it was achieved.
- The EOQ push broke Tesla’s simple “no-discount” model. Discounts were everywhere. Now many potential buyers will just wait for EOQ discounts to get a good deal.
- People who had deliveries scheduled in Q4 at full price switched to buying an inventory car at big discounts. This suggests fewer sales in Q4 and lower profit margins in Q3.
- The unusually large quantity cars to be delivered at the end-of-quarter 3 could be hurt quality and damage the reputation of Tesla.
- The unusually large quantity cars to be delivered at end-of-quarter 3 (plus all of the future repairs caused by inadequately prepared new cars) could lead to even greater service backlogs for existing customers – further damaging Tesla’s reputation.
(Full disclosure. I am trading my 2103 Model S60 on an refreshed 2016 inventory Model S75D, because I got a huge discount in this EOQ push for deliveries, i.e., self-interest at work.)