TSLA corporate outlook

[LTLFTcomposite]

Does sound like a larger-than-expected portion of the revenue was ZEV credits. Not clear to me whether they are profitable on the cars they are building without that or if that is factored in.

 

[lorenfb]

Q3 $0.14/share GAAP profit and guiding for another GAAP profitable Q4. Maintaining guidance of 80k deliveries in 2016. Model 3 on time, Gigafactory on time. No need to raise cash before M3 launch.

It's looking more and more like Tesla is going to be a going concern for the foreseeable future.

Two positive GAAP quarters in corporate history hardly makes for a long term profitable company!
Remove the ZEV credits and then the reality becomes apparent.

 

[LTLFTcomposite]

Revenue is revenue, whether it's derived from selling cars or from selling ZEV credits. The concern with the latter as it pertains to Tesla's health and viability is that it's imposed by fiat (not Fiat). I would have greater confidence in their security if profitability was sustainable without the credits, but given that they are unlikely to go away any time soon it isn't an immediate concern. This is where public policy comes into play, you can envision a range of future actions on EV subsidies, ranging from huge increases, status quo, reductions all the way down to complete elimination. (We'll neglect the possibility that EVs could become subject to disincentives)

 

[mtndrew1]

Q3 $0.14/share GAAP profit and guiding for another GAAP profitable Q4. Maintaining guidance of 80k deliveries in 2016. Model 3 on time, Gigafactory on time. No need to raise cash before M3 launch.

It's looking more and more like Tesla is going to be a going concern for the foreseeable future.

Two positive GAAP quarters in corporate history hardly makes for a long term profitable company!
Remove the ZEV credits and then the reality becomes apparent.

Correct, it does not. But Tesla's massive slowdown in cash burn combined with a sliver of profit amidst truly mind boggling expansion and exponential growth in vehicle deliveries points to the company making it successfully to the Model 3 full launch. Which, incidentally, is looking more and more likely to be on time.

At some point here (~2020), if Tesla remains a going concern long enough, their need to invest capital into the Gigafactory is going to go away, the Fremont expansion needs will go away, the need to develop more platforms will go away, and they'll be left with four core models on two platforms with between 12% and 30% gross margins.

We then have a car and energy storage company which has a 500k unit/year factory fully running and developed, the largest battery factory on earth with inherently low $/kWh, and two malleable platforms in the hottest segments in the car industry (large premium sedan/CUV, small premium sedan/CUV).

It could all go tits up of course, and I suspect Tesla will be running right at the razor's edge of financial stability until the Model 3/Y launch, but after that it could very well be off to the races.

 

[edatoakrun]

Several comments at links below on TSLA Q3, noting irregularities in the earnings report.

As to the surprise ZEV credit revenue, quite an act of prestidigitation, IMO.

Tesla: The Bill Is Still Coming Due
Tesla Motors’ third-quarter results aren’t as strong as they seem

At first glance it is hard not to be impressed with results released Wednesday by Tesla Motors.
The company blew past boss Elon Musk’s third-quarter profitability goal, reporting revenue of $2.3 billion and earnings per share of 14 cents. Both topped analyst expectations. Tesla also delivered a record number of cars in the third quarter and expects to meet its full-year target.

Tesla even reported positive free cash flow, defined as operating cash flow less capital spending, for the first time since 2013, to the tune of $176 million. Shares rose after hours, a sign that fortunes for beleaguered investors might be turning.

But a closer look suggests that Mr. Musk will have his hands full delivering on his vision...the sale of regulatory credits to other auto makers generated $139 million of high-margin revenue...Total net income was just $22 million...

http://www.wsj.com/articles/tesla-the-bill-is-still-coming-due-1477518644

So Musk the magnificent turned an 117 million Q3 dollar net loss (almost, there was a small transaction cost in selling the credits) into a $22 million net gain, just by pulling that rabbit out of his hat.

The only problem with this performance is, that if you were looking closely, you could see when Musk slipped the bunny into his hat...

Some of those EV credit sales were for credits awarded by CARB for Q3 BEV sales, but an unreported amount were from prior quarters.

The prior quarter, for example, Q2 16 when TSLA

...recognized an insignificant amount of ZEV credit revenue in Q2...

https://files.shareholder.com/downloads/ABEA-4CW8X0/2563692152x0x903036/562D56A1-5426-4D79-8B99-3408D1B60226/Q2_16_Update_Letter_-_final.pdf.

Since TSLA's Q2 16 GAAP net loss was whopping $293 million, a sum so large ZEV credit sales could barely dent it, TSLA instead held off on credit sales until Q3, for dramatic effect.

The problem for TSLA going forward is, this off-the-books asset is now largely depleted, as after TSLA sold over 80,000 ZEV credits in the eleven months prior to 8/31/16, it had only ~3,500 remaining in inventory at that time:

https://www.arb.ca.gov/msprog/zevprog/zevcredits/2015zevcredits.htm

Which illustrates the fundamental limitation in Musk's performance, it is not repeatable.

Unlike rabbits, once ZEV credits are pulled out of the hat, they can't be put back in again...

More on this, and some of the other questionable aspects of the Q3 report here:

Tesla Motors: Not as Good as It Looks?

Firstly, on why it is not as good as it looks: Tesla reported a +$139 mn benefit from the sale of Zero Emission Vehicle (or “ZEV”) credits, vs. our model which had forecast $25 mn and vs. guidance for a negligible amount. We estimate this alone helped EPS +$0.73 vs. our model, meaning that what appears to be a large +$1.13 beat to JPM was more like a +$0.40 beat — so still a beat, but not as strong...

http://blogs.barrons.com/stockstowatchtoday/2016/10/27/tesla-motors-not-as-good-as-it-looks/

And here:

Tesla's Pie Looks a Bit Crumbly

https://www.bloomberg.com/gadfly/articles/2016-10-26/tesla-earnings-pie-looks-a-bit-crumbly

 

[finman100]

Please just give it up. It's actually hilarious the way people WANT Tesla to fail. Maybe Lutz is the man.

http://www.autonews.com/article/201...a-musk-compares-followers-to-a-religious-cult

Now THAT's funny.

It is curious though, how no matter what is put in his way, Elon just keeps doing the impossible...making it all possible, while others continue to downplay and deride, DOING NOTHING for sustainable transportation. It's just maddening and funny all at the same time.

Go Tesla!

 

[LTLFTcomposite]

Well to be fair, if Tesla or anyone else making an EV is reliant on ZEV credits to innovate sustainable transportation, that in itself is unsustainable in the long run. If tomorrow the whole world decided to only buy Teslas (obviating the need for anyone else to buy ZEV credits), and Tesla could somehow instantaneously ramp to meet that demand, could they make enough to cover their incremental costs of building the cars? Looks like it would be iffy.

EV enthusiasts may hate the ICE world but really they need them buying those credits, just like wealthy Starbucks shareholders need people who can't afford to stopping by every day and frittering away $5 on a latte.

 

[lorenfb]

Q3 $0.14/share GAAP profit and guiding for another GAAP profitable Q4. Maintaining guidance of 80k deliveries in 2016. Model 3 on time, Gigafactory on time. No need to raise cash before M3 launch.

It's looking more and more like Tesla is going to be a going concern for the foreseeable future.

Two positive GAAP quarters in corporate history hardly makes for a long term profitable company!
Remove the ZEV credits and then the reality becomes apparent.

Correct, it does not. But Tesla's massive slowdown in cash burn combined with a sliver of profit amidst truly mind boggling expansion and exponential growth in vehicle deliveries points to the company making it successfully to the Model 3 full launch. Which, incidentally, is looking more and more likely to be on time.

At some point here (~2020), if Tesla remains a going concern long enough, their need to invest capital into the Gigafactory is going to go away, the Fremont expansion needs will go away, the need to develop more platforms will go away, and they'll be left with four core models on two platforms with between 12% and 30% gross margins.

We then have a car and energy storage company which has a 500k unit/year factory fully running and developed, the largest battery factory on earth with inherently low $/kWh, and two malleable platforms in the hottest segments in the car industry (large premium sedan/CUV, small premium sedan/CUV).

It could all go tits up of course, and I suspect Tesla will be running right at the razor's edge of financial stability until the Model 3/Y launch, but after that it could very well be off to the races.

You do have a great imagination!

By the way, the Q3 cash flow numbers don't look that great when the increase in current liabilities is considered,
i.e. accounts payables.

http://seekingalpha.com/article/401...04d74ff840c1ca71997685c1e5ef7e2&uprof=44&dr=1

Additionally, a large part of operating cash flow was achieved by the company not paying its bills. If we look at the balance sheet, accrued liabilities and accounts payable rose by more than $628 million in the period! That's nearly 1.5 times the quarter's operating cash flow, and more than 3.5 times free cash flow for Q3. While the headline looks good, it was mainly due to good accounting. Had Tesla paid its bills, cash flow would have likely been negative, and perhaps by several hundred million dollars if accounts payable and accrued liabilities had been flat sequentially.

 

[edatoakrun]

...It's actually hilarious the way people WANT Tesla to fail....Go Tesla!

By any rational accounting standard TSLA already is a spectacular corporate failure, having destroyed billions of dollars of investor's capital.

Convincing fools to part with their money is hardly an innovation by TSLA.

But what is a significant innovation, is that in accomplishing this financial failure, TSLA has wasted untold billions of dollars in subsidies from government programs intended to advance the progress of achieving public benefits from reduced vehicle emissions and energy efficiency.

The $139 million of ZEV credit revenue TSLA improperly reported as accruing last quarter to goose that earnings report will bring its total haul from this single program close to to a Billion dollars by the end of this year.

Go to CARB to look at the credits TSLA sold, and also look at which manufactures bought them...

...The problem for TSLA going forward is, this off-the-books asset is now largely depleted, as after TSLA sold over 80,000 ZEV credits in the eleven months prior to 8/31/16, it had only ~3,500 remaining in inventory at that time:

https://www.arb.ca.gov/msprog/zevprog/zevcredits/2015zevcredits.htm

The ZEV credits TSLA received from each BEV it sold, has reduced more than one BEV sale by another manufacturer.

Since TSLA fraudulently claimed thousands of additional ZEV credits for rapid-fueling (battery swapping) capability that its BEVs never actually achieved, there are thousands fewer BEVs on the roads today in the ZEV regions than there would have been if it TSLA never existed.

CARB ZEV credits for rapid refueling, gone in 2018?

http://www.mynissanleaf.com/viewtopic.php?f=7&t=19907

 

[braineo]

Wonder who is drinking the Koolaid?

Without TESLA coming into the picture,

1. GM wouldn't have done the Volt nor the Bolt EV.
2. Nissan wouldn't have released the Leaf early with a faulty battery.
3. Mercedes wouldn't have launched the Smart EV nor the the B class, nor stated that they will have 20+ EV cars by 2020
4. Norway, the Netherlands and now Germany wouldn't have thought that they would ban ICE vehicles by 2025 or 2030.
5. BMW wouldn't have come up with the i3, i8 and electrifying all their fleet.
6. VW wouldn't come up with the Dieselgate nor starting to get into EV for the whole fleet.
7. Audi wouldn't be electrifying their whole fleet.

Seems there is a German trend here, when all German manufacturers are scrambling to come up with any competition to TESLA before their main profit makers are obsolete. ANd now they are running behind 3-5 years at least while TESLA pulls ahead 200 million miles +++ each year with not only EV's but Sperchargers and autonomous features.

Is that a failure?

 

[lorenfb]

Wonder who is drinking the Koolaid?

Without TESLA coming into the picture,

1. GM wouldn't have done the Volt nor the Bolt EV.
2. Nissan wouldn't have released the Leaf early with a faulty battery.
3. Mercedes wouldn't have launched the Smart EV nor the the B class, nor stated that they will have 20+ EV cars by 2020
4. Norway, the Netherlands and now Germany wouldn't have thought that they would ban ICE vehicles by 2025 or 2030.
5. BMW wouldn't have come up with the i3, i8 and electrifying all their fleet.
6. VW wouldn't come up with the Dieselgate nor starting to get into EV for the whole fleet.
7. Audi wouldn't be electrifying their whole fleet.

Seems there is a German trend here, when all German manufacturers are scrambling to come up with any competition to TESLA before their main profit makers are obsolete. ANd now they are running behind 3-5 years at least while TESLA pulls ahead 200 million miles +++ each year with not only EV's but Sperchargers and autonomous features.

Is that a failure?

Really? And what are the basis for those conclusions? You have just presented personal suppositions without any
underlying data. Luckily neither CARB/EPA nor the DOE has been or will be relying on your EV market analysis for future decisions and funding related to EVs.

For some, it's difficult to imagine a world without the existence or influence of Tesla.

 

[cwerdna]

Wonder who is drinking the Koolaid?

Without TESLA coming into the picture,

1. GM wouldn't have done the Volt nor the Bolt EV.
2. Nissan wouldn't have released the Leaf early with a faulty battery.
3. Mercedes wouldn't have launched the Smart EV nor the the B class, nor stated that they will have 20+ EV cars by 2020
4. Norway, the Netherlands and now Germany wouldn't have thought that they would ban ICE vehicles by 2025 or 2030.
5. BMW wouldn't have come up with the i3, i8 and electrifying all their fleet.
6. VW wouldn't come up with the Dieselgate nor starting to get into EV for the whole fleet.
7. Audi wouldn't be electrifying their whole fleet.

Seems there is a German trend here, when all German manufacturers are scrambling to come up with any competition to TESLA before their main profit makers are obsolete. ANd now they are running behind 3-5 years at least while TESLA pulls ahead 200 million miles +++ each year with not only EV's but Sperchargers and autonomous features.

Is that a failure?

Really? And what are the basis for those conclusions? You have just presented personal suppositions without any
underlying data. Luckily neither CARB/EPA nor the DOE has been or will be relying on your EV market analysis for future decisions and funding related to EVs.

For some, it's difficult to imagine a world without the existence or influence of Tesla.

Yep.

Perhaps braineo is unaware of CARB ZEV mandates. The below have plenty of pointers as to why automakers have had to build EVs and PHEVs otherwise they might have trouble continuing to sell ICEVs in the largest auto market in the US, California:
http://www.myrav4ev.com/forum/viewtopic.php?f=7&t=379
https://web.archive.org/web/20130821091341/http://www.toyota.com/esq/vehicles/regulatory/carb-mandate-for-zero-emission-vehicles.html

 

[GRA]

To be fair, his point '1' is valid; Bob Lutz has been very clear that he used the Tesla Roadster (also the Prius) as a way to convince his bosses at GM to go ahead with the Volt, when the auto companies were trying to get the CARB standards eliminated. See http://blog.sfgate.com/energy/2011/11/10/the-chevy-volts-unlikely-father/ as an example.

Without the Roadster the Volt almost certainly wouldn't have happened as the auto makers would have been able to more effectively hold back the mandates, which means the Spark EV and now the Bolt probably wouldn't have appeared either. LEAF-level capability, by itself, isn't compelling to the mass market - the Model S (along with the equally important SC network) was the first and IMO remains the ONLY compelling PEV that could sell without subsidies. Model X had too many poor decisions in the design to have the impact that the Model S did.

So, while government mandates have played a huge role, I think the public support for those mandates has been based to a large part on the demonstrated capabilities of the Roadster and particularly the Model S/SCs; automakers couldn't claim that 'it can't be done', with the latter especially giving the lie to that. Automakers were left with the weaker claim that 'it can't be done at a price point that the public can afford and we can make a profit on'. So far that remains true without subsidy except at the premium end of the market, but that claim too is approaching obsolescence with the Volt 2 knocking on that door, and the Bolt and/or Prius Prime ready to go through it, once the subsidies expire and they drop their prices in consequence.

 

[lorenfb]

To be fair, his point '1' is valid; Bob Lutz has been very clear that he used the Tesla Roadster (also the Prius) as a way to convince his bosses at GM to go ahead with the Volt, when the auto companies were trying to get the CARB standards eliminated. See http://blog.sfgate.com/energy/2011/11/10/the-chevy-volts-unlikely-father/ as an example.

Without the Roadster the Volt almost certainly wouldn't have happened as the auto makers would have been able to more effectively hold back the mandates, which means the Spark EV and now the Bolt probably wouldn't have appeared either. LEAF-level capability, by itself, isn't compelling to the mass market - the Model S (along with the equally important SC network) was the first and IMO remains the ONLY compelling PEV that could sell without subsidies. Model X had too many poor decisions in the design to have the impact that the Model S did.

So, while government mandates have played a huge role, I think the public support for those mandates has been based to a large part on the demonstrated capabilities of the Roadster and particularly the Model S/SCs; automakers couldn't claim that 'it can't be done', with the latter especially giving the lie to that. Automakers were left with the weaker claim that 'it can't be done at a price point that the public can afford and we can make a profit on'. So far that remains true without subsidy except at the premium end of the market, but that claim too is approaching obsolescence with the Volt 2 knocking on that door, and the Bolt and/or Prius Prime ready to go through it, once the subsidies expire and they drop their prices in consequence.

That's your opinion of what was the key impetus for GM. To then infer that all other present and future
EV participants were similarly motivated or a definitive link exists from a very limited edition vehicle,
i.e. the Roadster, with a production volume of about 2500 is a "stretch". Furthermore, none of the other
present EV market participants view the EV market as does Tesla, i.e. with its relatively small Model S/X
volume, for the numerous issues that are discussed in the FCEV thread and that you "trumpet".

 

[sparky]

They've disrupted the EV market and the FCV market.
But enough about Tesla EVs.
Now it's Tesla roofs and whole house batteries: https://www.tesla.com/energy

Went to the roof and Powerwall event on Friday. Solar "slate" roof tiles were indistinguishable from the real thing.
Powerwalls now include inverter and have 14kWh storage. Good stuff.
They're not standing still.
Model 3 was there. Also splendid. Smaller than I expected. Perfectly proportioned.

 

[edatoakrun]

Musk seems to be poised to attempt to do for homes what he did for cars, divert public benefit programs into subsidies for the well-to-do seeking new outlets for displays of conspicuous consumption.

Just as TSLA has sold a number of ~$100k BEVs, I imagine TSLA will be able to sell quite a few ~$100k solar roofs with integrated battery storage (and also maybe a few ~million dollar roofs, to The princes of Silicon Valley) if the buyers are able the cost of their fashion statements subsidized by the current 30% federal investment tax credit, and other public subsidy programs.

The WSJ gives a good overview of the scheme in the article below.

How could anybody call Tesla a cult?

Tesla CEO Elon Musk Aims to Make Solar Panels as Appealing as Electric Cars

Mr. Musk lays out vision of how his proposed merger of Tesla Motors, SolarCity would work

Elon Musk wants to make solar-roof panels as sexy as his electric luxury cars.

Mr. Musk, who is chairman of both Tesla Motors Inc. and SolarCity Corp., laid out in broad strokes his vision for how his proposed merger of the two companies would result in an integrated system of solar panels, wall-mounted batteries and electric cars...

“The goal is…to make solar roofs that look better than a normal roof, generate electricity, last longer, have better insulation and an installed cost that is less than a normal roof plus the cost of electricity,” he said.

The audience greeted his words with cheers of encouragement, including an attendee who yelled, “Save us, Elon!”

Consumers equipped with the products of the combined companies could generate enough clean energy to help reduce global greenhouse gases, he said, and score points with neighbors...

http://www.wsj.com/articles/tesla-ceo-elon-musk-aims-to-make-solar-panels-as-appealing-as-electric-cars-1477705988

But its still an open question whether TSLA will be any more sucesfull in building a sustainable business model selling roofs, than it has in selling cars.

Musk seems to be incapable of turning a profit, no matter how much money the American and individual State taxpayers throw his way...

Behind the myth of Elon Musk: Has the onetime Silicon Valley visionary lost his magic?

Musk is the CEO of three companies — Tesla, SpaceX and SolarCity — all of which would fail without government money

...The ugly truth is that, for all Elon Musk’s entrepreneurial moxie and innovative thinking, his companies are not money-making enterprises...

The question now is clear. Can Musk survive his present financial perils or, despite considerable government help that has allowed him to become a very wealthy man, will his empire finally succumb to the sheer weight of its massive debt? Stay tuned for that announcement, splashy or otherwise.

http://www.salon.com/2016/10/29/behind-the-myth-of-elon-musk-has-the-onetime-silicon-valley-visionary-lost-his-magic/

 

[sparky]

How could anybody call Tesla a cult?

 

[edatoakrun]

...

edatoakrun:
Musk seems to be incapable of turning a profit, no matter how much money the American and individual State taxpayers throw his way...

This was covered up-thread. Check it out; Tesla is now profitable...

Tesla's misrepresentation of its financial results for last quarter has been discussed extensively on this thread, so I'll assume you are joking...

Please correct the two other quotes, that you misattributed to me.

 

[GRA]

To be fair, his point '1' is valid; Bob Lutz has been very clear that he used the Tesla Roadster (also the Prius) as a way to convince his bosses at GM to go ahead with the Volt, when the auto companies were trying to get the CARB standards eliminated. See http://blog.sfgate.com/energy/2011/11/10/the-chevy-volts-unlikely-father/ as an example.

Without the Roadster the Volt almost certainly wouldn't have happened as the auto makers would have been able to more effectively hold back the mandates, which means the Spark EV and now the Bolt probably wouldn't have appeared either. LEAF-level capability, by itself, isn't compelling to the mass market - the Model S (along with the equally important SC network) was the first and IMO remains the ONLY compelling PEV that could sell without subsidies. Model X had too many poor decisions in the design to have the impact that the Model S did.

So, while government mandates have played a huge role, I think the public support for those mandates has been based to a large part on the demonstrated capabilities of the Roadster and particularly the Model S/SCs; automakers couldn't claim that 'it can't be done', with the latter especially giving the lie to that. Automakers were left with the weaker claim that 'it can't be done at a price point that the public can afford and we can make a profit on'. So far that remains true without subsidy except at the premium end of the market, but that claim too is approaching obsolescence with the Volt 2 knocking on that door, and the Bolt and/or Prius Prime ready to go through it, once the subsidies expire and they drop their prices in consequence.

That's your opinion of what was the key impetus for GM.

No, that's Bob Lutz' opinion, and he's in the best position to know, as he was the Volt's corporate godfather at GM.

To then infer that all other present and future
EV participants were similarly motivated or a definitive link exists from a very limited edition vehicle,
i.e. the Roadster, with a production volume of about 2500 is a "stretch". Furthermore, none of the other
present EV market participants view the EV market as does Tesla, i.e. with its relatively small Model S/X
volume, for the numerous issues that are discussed in the FCEV thread and that you "trumpet".

I'm not inferring that they all were similarly motivated - Carlos Ghosn gets the credit at Nissan/Renault. But the German premium manufacturers have unquestionably been motivated to compete with Tesla on BEVs owing to the latter's success, as well as the mandates which they were unable to ignore or fight successfully, again owing to Tesla's demonstrated capabilities. So, while I'm often critical of Tesla's mistakes, I'll also give them credit where it's due. Would PEVs, especially long-range BEVs, have come about without them anyway? Maybe, but they would undoubtedly have been delayed by several years, and it would have been far tougher for CARB et al to maintain mandates in the interim without some such successful product. They already showed that movie in the late '90s/early '00s.

As it is, I believe that PHEVs remain the way to go for the mainstream for another model generation or two, at least until long-range BEVs start at $20k MSRP. And BEVs, even the most expensive Tesla's, remain poorly suited for long range, high speed road trips compared to the alternatives (including FCEVs), although they're closing the gap.

 

[edatoakrun]

... See http://blog.sfgate.com/energy/2011/11/10/the-chevy-volts-unlikely-father/ as an example...

that's Bob Lutz' opinion, and he's in the best position to know, as he was the Volt's corporate godfather at GM...

This is Lutz' actual opinion, his words from that 2011 interview:

...John Lockner, who was my closest subordinate on this thing — a brilliant technologist and a guy with fantastic common sense — said, “You know Bob, look, we could easily do the same thing that Tesla does. But we’d wind up with a $90,000 to a $100,000 car, which is relatively pointless...

And IMO TSLA's BEVs, sold at average prices exceeding $100,000 remain in the realm of the relatively pointless, particularly so as TSLA, even after receiving tens of thousands of dollars of additional government subsidies for each car it sells, still remains unprofitable.