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Indeed this is what happens when you are production constrained and can sell higher ASP models internationally. Current estimated delivery time for a Model 3 i

by zaroth 7y ago

Indeed this is what happens when you are production constrained and can sell higher ASP models internationally. Current estimated delivery time for a Model 3 in the US is “5 - 9 weeks”. Basically they reserve about 1/3rd of their production for US sales which is all the units in the last month of the quarter, in order to minimize the number of units in transit at the end of the quarter, because they do not recognize a sale until the car is delivered.

new_realist 7y ago
Margins are highest in the US market (especially considering ZEV credits). Model mix may differ, but they’re shipping their lowest end models to Europe and China; those would be more profitable to sell in the US.
- reitzensteinm 7y ago
  I don't think that's true. You can see real time stats for the Netherlands, Norway and Spain on this site: https://eu-evs.com/ https://eu-evs.com/ The mix look pretty healthy so far (I would ignore October, which hasn't had meaningful units yet).
- Retric 7y ago
  ZEV credits only apply to 11 states, they don’t apply to the sales to the rest of the US. https://www.ucsusa.org/resources/what-zev https://www.ucsusa.org/resources/what-zev Presumably, Tesla is prioritizing those states rather than the entire US market.
- zaroth 7y ago
  Please don’t copy/paste answers. Tesla does not publish an ASP breakdown by market AFAIK. But what we do know is Tesla always sells highest margin SKUs first into new markets and then eventually sells down-market over time. In their Q3 report they said “Despite reductions in ASP of Model 3 as global mix stabilizes, our gross margins have strengthened.” In other words, their global deliveries benefit from higher ASP while they were initially delivering only the fully loaded models. We can also look at base price of the SR Model 3 and see a basic case for higher ASP internationally, but it’s a very tricky analysis to try to back out taxes and transportation costs.
brianwawok 7y ago
Earning report driven production? Do other automakers do that? Seems like you risk alienating a big chunk of your local market (wait goes from 1 week to 9 weeks based on the week in the quarter cycle you are in), to see a temp bump in earning reports?
- _ph_ 7y ago
  Tesla is trying to time production so that cars produced in one quarter are mostly sold in that quarter. So in the first month, oversea production gets prioritized. Musk has announced that they try to reduce the resulting effects, but so far they are still very dominant.
- CydeWeys 7y ago
  It does reek of extremely short-termist prioritization.
  - deleted 7y ago
    [deleted]
  - _ph_ 7y ago
    Tesla isn't hiding the fact, that production for oversea customers is done in the first month of a quarter, so the cars can be delivered in that quarter. Easy to imagine what the reporting would be, if they had large amounts of "unsold" cars in transit at the and of a quarter.
    - zaroth 7y ago
      15,000 units in delivery in Q1 was part of the reason why Q1 was so bad for them. They’ve said they would like to smooth out the delivery timing, and eliminate the dedicated delivery phase but I don’t see how that happens until you have more geographically distributed production (EU GF4 in 2021).
  - Aperocky 7y ago
    Massaging the market on the spot it wants massaged.
reitzensteinm 7y ago
The US sales decline is a non story. However, "production constrained" is not really accurate, as it implies they could sell more units for the same price if they could make them. Tesla has bumped down the price many times, suggesting they're selling their whole inventory for the highest price they think they can get (which is still a great position to be in if that price is high enough). The demand for the higher trims in the US has hit steady state, and it's less than they can make. If they stuck with the launch prices and their revenue was 10% higher with no corresponding increase to COGS, they'd be laughing all the way to the bank. Every single quarter would be profitable and absurdly cash flow positive. https://insideevs.com/news/343373/teslas-confusing-price-changes-heres-a-chart-of-the-adjustments/ https://insideevs.com/news/343373/teslas-confusing-price-cha...
- TrainedMonkey 7y ago
  You are assuming any of the Elon companies are driven only by profit. I would hazard a guess that real M3 goal is to make a car that costs $35k while being profitable. Lowering price serves not only as incentive to sell more cars, but also internal incentive to figure out a cheaper way to make them.
  - computerex 7y ago
    They are driven mainly by profit, as they are public companies and therefore Elon has a responsibility to maximize shareholder wealth.
    - Retric 7y ago
      Maximizing shareholder wealth and short term profits are very different things. De bears could flood the market with diamonds and make a lot of money in the short term, but it would be a terrible idea in the long term.
      - computerex 7y ago
        Yes I know. My point is that for profit, publicly owned companies are ran for profit where their ultimate goal is to maximize shareholder wealth. The parent seemed to imply that it may not be the case for Elon Musk's companies.
deleted 7y ago
[deleted]

by zaroth 7y ago

new_realist 7y ago

Margins are highest in the US market (especially considering ZEV credits). Model mix may differ, but they’re shipping their lowest end models to Europe and China; those would be more profitable to sell in the US.

reitzensteinm 7y ago
I don't think that's true. You can see real time stats for the Netherlands, Norway and Spain on this site: https://eu-evs.com/ https://eu-evs.com/ The mix look pretty healthy so far (I would ignore October, which hasn't had meaningful units yet).
Retric 7y ago
ZEV credits only apply to 11 states, they don’t apply to the sales to the rest of the US. https://www.ucsusa.org/resources/what-zev https://www.ucsusa.org/resources/what-zev Presumably, Tesla is prioritizing those states rather than the entire US market.
zaroth 7y ago
Please don’t copy/paste answers. Tesla does not publish an ASP breakdown by market AFAIK. But what we do know is Tesla always sells highest margin SKUs first into new markets and then eventually sells down-market over time. In their Q3 report they said “Despite reductions in ASP of Model 3 as global mix stabilizes, our gross margins have strengthened.” In other words, their global deliveries benefit from higher ASP while they were initially delivering only the fully loaded models. We can also look at base price of the SR Model 3 and see a basic case for higher ASP internationally, but it’s a very tricky analysis to try to back out taxes and transportation costs.

brianwawok 7y ago

Earning report driven production? Do other automakers do that? Seems like you risk alienating a big chunk of your local market (wait goes from 1 week to 9 weeks based on the week in the quarter cycle you are in), to see a temp bump in earning reports?

_ph_ 7y ago
Tesla is trying to time production so that cars produced in one quarter are mostly sold in that quarter. So in the first month, oversea production gets prioritized. Musk has announced that they try to reduce the resulting effects, but so far they are still very dominant.
CydeWeys 7y ago
It does reek of extremely short-termist prioritization.
- deleted 7y ago
  [deleted]
- _ph_ 7y ago
  Tesla isn't hiding the fact, that production for oversea customers is done in the first month of a quarter, so the cars can be delivered in that quarter. Easy to imagine what the reporting would be, if they had large amounts of "unsold" cars in transit at the and of a quarter.
  - zaroth 7y ago
    15,000 units in delivery in Q1 was part of the reason why Q1 was so bad for them. They’ve said they would like to smooth out the delivery timing, and eliminate the dedicated delivery phase but I don’t see how that happens until you have more geographically distributed production (EU GF4 in 2021).
- Aperocky 7y ago
  Massaging the market on the spot it wants massaged.

reitzensteinm 7y ago

The US sales decline is a non story. However, "production constrained" is not really accurate, as it implies they could sell more units for the same price if they could make them. Tesla has bumped down the price many times, suggesting they're selling their whole inventory for the highest price they think they can get (which is still a great position to be in if that price is high enough). The demand for the higher trims in the US has hit steady state, and it's less than they can make. If they stuck with the launch prices and their revenue was 10% higher with no corresponding increase to COGS, they'd be laughing all the way to the bank. Every single quarter would be profitable and absurdly cash flow positive. https://insideevs.com/news/343373/teslas-confusing-price-changes-heres-a-chart-of-the-adjustments/ https://insideevs.com/news/343373/teslas-confusing-price-cha...

TrainedMonkey 7y ago
You are assuming any of the Elon companies are driven only by profit. I would hazard a guess that real M3 goal is to make a car that costs $35k while being profitable. Lowering price serves not only as incentive to sell more cars, but also internal incentive to figure out a cheaper way to make them.
- computerex 7y ago
  They are driven mainly by profit, as they are public companies and therefore Elon has a responsibility to maximize shareholder wealth.
  - Retric 7y ago
    Maximizing shareholder wealth and short term profits are very different things. De bears could flood the market with diamonds and make a lot of money in the short term, but it would be a terrible idea in the long term.
    - computerex 7y ago
      Yes I know. My point is that for profit, publicly owned companies are ran for profit where their ultimate goal is to maximize shareholder wealth. The parent seemed to imply that it may not be the case for Elon Musk's companies.

deleted 7y ago

[deleted]