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Tesla Q2 2019 Letter
- flyGuyOnTheSly 7y agoJudging by the nosedive that the stock price is taking in after hours trading (down over 12% from $264.88 at close an hour ago to $236 right now), the outlook of this letter isn't great.
- kenhwang 7y agoThey missed market expectations. They lost 6x more money (-$2.31/share vs expected -$0.35/share) and sold less cars ($6.3b sales vs $6.5b expected) than the market wanted with more capex to come (China Gigafactory, Model Y).
- gordon_freeman 7y agoNot sure how does the CapEx gets allocated for the projects that are already progressing. For example: Tesla started building GF2 in China a few months ago so any idea in which Quarter(s) Tesla account for the CapEx? Is it before the project starts or at the end or every month gets even distribution of CapEx allocation from Start until End of the project.
- toomuchtodo 7y agoChina GF is GF3. GF2 is in Buffalo, NY (old SolarCity facility, which also manufactures Supercharger station hardware). I can't speak to how GF3 capex is being accounted for, but competition was fierce to provide financing to Tesla [1]. China pulled out all of the stops not just for permitting and financing, but also construction (GF3 is already having Model 3 production line equipment installed, after breaking ground in January [2]). In less than a year, it will go from vacant land to producing Model 3s. [1] https://www.teslarati.com/tesla-gigafactory-3-funding-chinese-banks-model-3-production-insider/ https://www.teslarati.com/tesla-gigafactory-3-funding-chines... [2] https://www.youtube.com/watch?v=XI6nJOic4BM https://www.youtube.com/watch?v=XI6nJOic4BM (June 22 2019) Tesla Gigafactory 3 in Shanghai China Update
- navigatesol 7y agoLinking to a Teslarati article, that's a laugh. When will you realize that this company makes things up at every turn? They are cutting capex, again. They are slashing prices on cars with "unlimited demand". Let's see in a year how it's going,and what excuse you and they will have.
- toomuchtodo 7y agoIs that Youtube video fake? The ~90k vehicles Tesla sold this quarter? "Fake news"? I have no excuses, just proof of hundreds of thousands of Tesla vehicles on the road, and billions of dollars worth of manufacturing capacity running. Come back in a year we shall.
- navigatesol 7y ago>The ~90k vehicles Tesla sold this quarter And made less revenue than last quarter. Brilliant. Is the 1 billion dollars lost this year after saying profits forever fake? The lawsuits from whistleblowers? Months long waits for parts? The miniscule growth after slashing prices greatly? The securities violations? Tesla Solar selling the least it ever has? I could care less about some factory shell in China. They told you they'd build 10k a week in Fremont, didn't they? You have rose coloured glasses.
- umeshunni 7y ago> And made less revenue than last quarter. Brilliant. They made $5.3B this quarter and $3.7B last quarter. Where are you getting your numbers from?
- navigatesol 7y agoI meant the last delivery record quarter. Information overload on Tesla ER day. More cars, less revenue was the point. Anyway, like the financials matter here. It's all about the next promise.
- lancewiggs 7y agoWhen invoices arrive from the build of the project they would be put into a capital expense account. I would imagine that the costs include upfront and ongoing components, as that's what contractors need. The asset (plant) is valued as the total of the invoices received and depreciation applies, which gives an ongoing tax shield.
- rgbrenner 7y agoSimply buying a capital asset is not an expense. It just moves assets from one asset account (cash, for example) to another (fixed asset account). You then depreciate the asset over the expected life of the asset. So if you depreciate it over 30 years, then in year 1 you would record a depreciation expense of 3.33%. (That's for straight line depreciation.. there are accelerated schedules.) In other words.. It's spread out over the expected life of the asset. Also the depreciation usually wouldn't start until the asset has been put into production.
- bryanlarsen 7y ago"Buy on rumours, sell on news". The stock is up about 50% since its low a month and a half ago when rumours of good deliveries started. A small pullback is expected. But maybe not 12%.
- tenpies 7y agoThe letter is usually the tip of the Tesla bad news iceberg. The 10-Q won't be released for several days and will almost certainly do more damage because it adds more detail (both intentional and unintentional).
- techntoke 7y agoHere's to hoping that they hire some creative talent to help make letters that don't look like they are from the 90's.
- justinsaccount 7y agoFound the problem: Microsoft Word - Q2 2019 Earnings Ex 99 - Final.docx Designers didn't have anything to do with this mess.
- eclipxe 7y agoThe drop shadows are straight out of a bad Photoshop Tutorial.
- wyldfire 7y agoAnd here I am reading the numbers thinking, "wow, nearly doubled in sales revenue? Great job!"
- bad_good_guy 7y agoWhy is that important?
- techntoke 7y agoIf they are going to release this to the public it would help encapsulate the brand as a whole and represent the company in a more professional way.
- rcMgD2BwE72F 7y agohttp://www.berkshirehathaway.com/ http://www.berkshirehathaway.com/ really needs to be redesigned, too.
- ianlevesque 7y agoThey jumped the shark with the Model 3, and I really wanted to like it.
- justina1 7y agoIt's still the most popular car in it's class by a mile, how is that "jumping the shark"?
- mavhc 7y agoSomeone should jump an actual shark in one as a stunt though.
- stcredzero 7y agoIf the cold gas thrusters on the new Roadster are powerful enough, that car could straight out pull some Speed Racer Mach 5 antics!
- KevinCarbonara 7y agoPeople wanted a Model S for a third of the price
- ricardobeat 7y agoThe model 3 is a better car by many accounts, what’s the disappointment exactly?
- ianlevesque 7y agoIt ended up in the wrong class.
- dkonofalski 7y agoHuh? How so? I'm a Model 3 owner and I love this damn car.
- 7y ago
- danhak 7y agoLooks like the cash situation is finally under control. They generated over $600 million in FCF in Q2. Compare this to only $200 million by Ford over the same period, also announced today: https://s22.q4cdn.com/857684434/files/doc_financials/2019/q2/updated/2Q19-Financial-Release.pdf https://s22.q4cdn.com/857684434/files/doc_financials/2019/q2...
- deleted 7y ago[deleted]
- new_realist 7y agoThey sold a lot of existing inventory (as in, cars sitting on lots) this quarter. That generates cash. Loss is more than $400M on record sales. Tesla has a demand problem and is discounting cars in order to maintain the growth story.
- deleted 7y ago[deleted]
- slg 7y agoThis report is bad news for Tesla, but I think it disproves the "demand problem" narrative. Tesla delivered more cars than they could produce this quarter. Both delivery and production numbers were at record highs. The average sale price of the Model 3 remained stable. Meanwhile they are nearing production of the Model Y which is likely depressing demand of both the Model 3 and Model X. Once the Model Y is available, people expect it to have more ongoing demand than any of their current vehicles. Tesla has a lot of problems, but people not wanting their cars doesn't appear to be one of them.
- new_realist 7y agoASP on the Model 3 has been falling quarter over quarter, as have margins. S and X demand and prices have dropped significantly. Model 3 prices dropped yet again less than a week ago.
- boldslogan 7y agoanyone care to talk about this part "This feature is currently operating in “shadow mode” in the fleet, which compares our software algorithm to real-world driver behavior across tens of millions of instances around the world." that seems very juicy? edit: it seems people put a disclaimer on their ownership of tesla stock on hn about tesla threads. i dont own any.
- leesec 7y agoThis is a known feature unveiled, I believe, on Tesla's autonomy day. It just means they're able to test Autopilot on cars even if they aren't running autopilot.
- boldslogan 7y agoneat. I would say im optomistic on this actual self driving stuff. But coming from almost no machine learning knowledge, doesn't this make tesla way ahead of google/waymo and others? Because they can simply check when they failed and tweak. I'm just curious if it does make them way ahead, and if so how much more ahead? Is this driving a car vs horse wagon levels?
- leesec 7y agoWhich company is in the lead is a very contentious topic it seems. This one specific feature doesn't seem to push it one way or the other. But IMO Tesla has the best approach and has a huge lead on the data collection pipeline. No other self driving company has even close to as many cars to test on / gather data from.
- Despegar 7y agoTesla's stock has massively under-performed over the past 5 years (will be up 8% over that period if the after hours price action holds). The opportunity cost of owning it has been huge while the rest of the market ripped up.
- greglindahl 7y agoYes, if you pick the most embarrassing time period for a given stock, it probably massively under-performed. Alternately, you can pick the most flattering time period.
- ajross 7y agoIt was a statement about a 5-year period in a stock issued just a few weeks longer than 9 years ago. Are you seriously making a cherry picking argument?
- greglindahl 7y agoThe period chosen misses a 10x run-up just before it.
- Despegar 7y agoIts under-performance over 2 and 5 years explains why it's been such a great short. Investors like Chanos have a basket of shorts so any one stock ripping up would hurt but wouldn't kill them. And the shorts ultimately let them be even more net-long the market.
- deleted 7y ago[deleted]
- almost_usual 7y agoUp 8%? It's down 10%+, what made you think it would go up? Rest of the market ripped up? The S&P is up 20% this year while Tesla has gone down 20%. Edit: >The opportunity cost of owning it has been huge while the rest of the market ripped up The S&P is up over 50% in five years. TSLA could go up 20% tomorrow (and ignore today's after hours change) and the S&P would still be outperforming TSLA.
- HereBeBeasties 7y agoThey've achieved a 0.5% increase in production volume in Q2, compared to Q4 2018, to 87,084 vehicles. I'd hardly call that "rapid progress". For comparison, Toyota make around 2.2 million vehicles per quarter. A more reasonable brand comparison might be Mercedes-Benz Cars, which made 575,639 vehicles in Q2. It's quite impressive that Tesla have got to about 15% the volume that Merc do, but they're hardly going to take over the world with that kind of growth rate. IMO they should stop chasing volume sales of lower cost vehicles and concentrate on premium vehicles with higher margins. What's the point of killing themselves trying to lift production numbers to try to make all the analysts who seem to be obsessed with that happy, which doesn't yet seem to be working, if the margins aren't worth bothering? It won't end well.
- leesec 7y agoyeah but they made only 53k ish vehicles in q2 2018, so your stat is weird. and theyre about to bring online another factory (q1 2020).
- kevan 7y agoThey're not killing themselves with production numbers to make analysts happy, it's literally in the mission statement... Mission statement: Tesla's mission is to accelerate the world's transition to sustainable energy. [1] Strategy (paraphrasing): Start with low-volume, high margins. Over time introduce high-volume, low-margin. [2] [1] https://www.tesla.com/about https://www.tesla.com/about [2] https://www.tesla.com/blog/master-plan-part-deux https://www.tesla.com/blog/master-plan-part-deux
- eanzenberg 7y agoSidenote: I can't stand the ipad in the middle of Tesla cars (and other carmakers who choose this path). I got a BMW because of the sheer usefulness of physical buttons while driving / keeping eyes on the road.
- eanzenberg 7y agoGuess people like fiddling through an ipad while driving a 2 ton machine at highway speeds? ¯\_(ツ)_/¯. Looks like Tesla drivers are becoming the "Toyota Camry/Prius" drivers of the past.
- kinghajj 7y agoI've found that the majority of functions needed when driving are available through the steering column's stalks, left/right buttons, or voice commands. If I ever do need to use the touch screen, I can activate TACC & Autosteer, and glance back and forth between the screen and road while finding the next button to press. And for the common functions, I've developed an awareness of the button locations, so I can press them while maintaining a view of the road. Sort of like how I had a sense for the physical buttons of my last car; only difference is that now the sequence of button pushes must also be learned, not just the physical location.
- eanzenberg 7y agoMaybe I'm not familiar with what the steering wheel buttons do in a Tesla. Volume, change stations, change tracks, voice command (siri), adaptive cruise control (including mph selection) and auto-steering are available on my steering wheel in my BMW. In the middle of the car, climate zone and drive modes are available as physical buttons and knobs.
- kinghajj 7y agoThe stalks and buttons on the Model 3 can access all of those same features, as well as adjust the follow distance for adaptive cruise control. Climate settings are through the screen, via a fan symbol button in the center. That pops up a temperature selection slider with buttons to increase/decrease the setpoint, and (de)sync the driver/passenger set points. Press the button again, and you get a full screen with more settings (auto-flow vs manual, air stream splitting and direction, etc.)
- jaimex2 7y agoLooking healthy to move along for Chinese factory, Model Y and pickup truck later this year. I like that they don't stop moving even if it scares a few investors with heavy capex spending on their next products.
- navigatesol 7y agoHeavy capex spending??? Did you even look at the financials? It doesn't even cover depreciation! Edit: Downvoters want to explain how $250mm is "heavy capex spending" in the automotive world, particularly in a "high growth" company?
- jtchang 7y agoBeing able to test your code out in the real world and dark launch a feature gives Tesla a ridiculous advantage. No other company has the infrastructure to be able to do that. Plus they can even tell if the decision the neural net made was wrong because I assume even Tesla knows you got into an accident. And this over thousands of cars. The speed at which they are collecting data is unprecedented.
- skybrian 7y agoWell, maybe. Since most of this data will be very repetitive, I don't think we can know for sure how much it helps?
- imglorp 7y agoYou (and neural nets) learn the most when a boring repetition is violated. The error function was activated and that's worth feeding back into learning. Ask any kid, they probably couldn't say what happened at school all week. But if they do remember something, it would have been something outside of their routine.
- imglorp 7y agoYou (and neural nets) learn the most in the smaller number of cases when a boring repetition is violated. The error function was activated and that's worth feeding back into learning. Ask any kid, they probably couldn't say what happened at school all week. But if they do remember something, it would have been something outside of their routine.
- skybrian 7y agoYes, exactly! We don't know the amount or quality of interesting data from the total amount of data.
- BoorishBears 7y agoI'm so tired of this unapologetic Tesla hand holding. > No other company has the infrastructure to be able to do that. Because they don't want it. They don't want AP regressions we've already seen happen. They don't want engineers testing code out on real people's lives. You really think other companies just don't know how to send OTA updates to an ECU or other car components? I could literally put that together with scraps in my garage, my car's ECU can be flashed over OBD, it'd be trivial to write firmware for a microcontroller to repeat a set of OBD commands downloaded from a webserver. Obviously an auto manufacturer would do more than that, but there is literally nothing but choice stopping other manufacturers from doing this. Why is everything Tesla does always suddenly some sort of competitive advantage. Next people will be saying the fact they have cars that spell out "S3XY" is a competitive advantage.
- WheelsAtLarge 7y agoI know at least one person that's decided not to buy a Tesla simply because their future is so murky and is not sure if they will be around for repairs. That's a problem they need to tackle now before it spirals out of control. Also, it seems to me that Tesla should work with one of the big three automakers on manufacturing. Tesla has spent a lot of resources reinventing car manufacturing and yet they can't produce a vehicle that meets their needs. They need to focus on the high tech aspects and leave the mundane manufacturing to experts. At the very least, Musk should trust his manufacturing experts on how to produce a car rather than try to make every decision by himself. He's a great marketer and should focus on that role and leave the rest to the experts. Too bad they can't lower the cost of batteries enough. If they did that, they could lower the price of the car to a point where it would be a no brainer to buy one.
- mehrdada 7y ago> I know at least one person that's decided not to buy a Tesla simply because their future is so murky and is not sure if they will be around for repairs. That's a problem they need to tackle now before it spirals out of control. I’m sure there is one person that made a decision on that basis but I’ve heard many more not-real customers speculating about this as if they were in the market, but they very clearly wouldn’t buy a Tesla anyway and would’ve found another excuse (hint hint: with so much negative noise and FUD and hatred by big media it’s not hard to find one). The reality is even if Tesla hypothetically goes bankrupt, it’ll most likely cause a change in who owns the equity at large and will likely not materially impact the customer base. In general, it’s much easier to expand the customer base by solving real problems for people who are eager to buy stuff but can’t (for example, due to real charging problems in urban areas or the car being expensive) than to try to soothe a skeptic. This applies to VCs you pitch too. Spending time changing people’s mind is often futile, and in this case it’s not at all clear that it materially impacts Tesla. They are for the most part production constrained still.
- topkeks 7y agoGoogle or Apple would buy Tesla immediately. They both have tried already.
- Animats 7y ago"GAAP net loss of $408M" - the number that matters. Tesla isn't doing that badly. But now that they have some production volume, they have to be evaluated as a car company, not a startup. Can they make lots of cars at a profit? They got the production quantity up by throwing people, money, and a big tent at the Fremont plant. That ran up the cost per car. Although it's better than their previous state of low production with a full staff. Can they get to a smooth running production plant with labor hours per car comparable to Detroit? (About 30-50 labor hours per car is typical in the industry.) "Model 3 average selling price was stable at approximately $50,000." That's nice, but the Model 3 was supposed to be $35,000. Tesla has caught up with their backlog, and you can now buy a Tesla Model 3 off the lot, just like regular car dealers.[1] That's good; they're now like a normal car company. But it also means they've saturated the market at their high price point, which is about where BMW is. They're also at the point where all their models need a refresh or a replacement. Tesla is slow at new models compared to the competition. [1] https://www.extremetech.com/extreme/289911-what-shortage-tesla-has-plenty-of-model-3s-on-sale-online-today https://www.extremetech.com/extreme/289911-what-shortage-tes...
- lazyjones 7y ago> Tesla isn't doing that badly. But now that they have some production volume, they have to be evaluated as a car company, not a startup. While they're growing at this rate, they're still a startup and expected to use their available cash to improve their market share.
- SergeAx 7y agoThey are lowering customer's urge of refreshed models with nice and quite meaningful software updates. Clever move, if you ask me.
- 11thEarlOfMar 7y ago"they have to be evaluated as a car company" Take a look at the rate of growth in capacity both of their cars and their batteries. I don't know what it is, but with Shanghai Giga coming online this year, Model Y next year, Pickup + Semi thereafter, the growth in capacity and the capital requirements to install it, is not matched by any other car company, possibly in the history of car companies (Musk's posit, to be fact checked). All that growth is very expensive, but they may be able to fund it from operations. That is 'super impressive'. In terms of production volumes, they are still small relative to GM, Toyota, VW, I'd still put them in the startup category. But not for much longer.
- justapassenger 7y agoMost recent story of Tesla's profitability was built around Musk's manufacturing innovations, that will make Model 3 much cheaper to produce. Experts disagreed, got fired, and alien dreadnought continued. It was such a huge failure, that to this day, portion of Model 3 production is happening a tent. With forklifts, leaking roof and space-heaters. Tesla now has new profitability story - Musk's innovations in FSD, will make them a lot of money, and make cars appreciating assets. Experts disagreed, got fired, and FSD continues. Wonder how will that end?
- tomcam 7y agoI could be wrong here, but I believe experts will disagree and get fired.
- spookthesunset 7y agoFSD is snake oil and is a distraction. In no way will a Tesla ever be an “appreciating asset”. Ever. Full stop. Tesla would be wise to focus on being a car company first and foremost.
- LeoPanthera 7y ago> It was such a huge failure, that to this day, portion of Model 3 production is happening a tent. With forklifts, leaking roof and space-heaters. Citation needed?
- justapassenger 7y agohttps://www.cnbc.com/2019/07/15/tesla-workers-in-ga4-tent-describe-pressure-to-make-model-3-goals.html https://www.cnbc.com/2019/07/15/tesla-workers-in-ga4-tent-de... Tent was temporary, and year later - it's still there
- rcMgD2BwE72F 7y ago>Tent was temporary So what? It ended easier and cheaper to design, set up and operate than a traditional building (the GA in the tent is already far more efficient that the other ones). It can last for decades, too.
- nisten 7y agoIn 2017 Intel acquired mobileye( the makers of the autopilot radar in the early Teslas), for 15.3 Billion. That begs the question, if Tesla were to sell their autopilot system tomorrow, , given it's safety record, amount of training data, and new FPGA processor IP, how much would it be worth? 15, 20, 40? This is why I find their delivery numbers completely and utterly irrelevant to company value. This is a just a technology company that has produced a great user experience and is now scaling it. Their main bottleneck is battery production and they're very competitive at it. If the bottleneck was auto-manufacturing they would have no trouble raising enough investment to just buy out a car company.
- abduhl 7y agoWhich car company do you imagine Tesla would have "just bought out"? Keep in mind that Tesla couldn't even raise enough money to buy out themselves, not even at the incredibly discounted price of $420/share.
- nisten 7y agoActually they could and did raise enough to buy themselves out and have done so every time.
- reitzensteinm 7y agoTesla has 11bn in debt, alongside other obligations like warranties. If they can't make the car thing work, and their autopilot tech sells for as much as mobileye, shareholders are going to be wiped out in the event of liquidation. How the cars are selling and what margins they're getting matters a great deal, even if you believe that the long term value comes from autopilot.
- nisten 7y agoLooking at the competition, ford, VW, Mercedes. Their battery production numbers look pretty mediocre. Also their cars are less and less competitive in a rising carbon market.
- mettamage 7y agoSo can someone explain to my why the Tesla stock made a nose dive to about $170 and is now almost back to where it was 3 months ago? I don't understand how such huge volatility could happen assuming that the efficient market hypothesis is real.