1/ Short thread on production & deliveries.
First, production. According to Tesla on 7/22/20, its quarterly capacity is now somewhere between 172,500 & 197,500.
2/ However, in no quarter this year has Tesla achieved even the low end of capacity.
Q3 is best so far, at between 84% and 73% of capacity, depending upon whether Tesla has, as it stated in its July 22 update, extended Fremont 3/Y capacity to 500k.
3/ Now, deliveries. Having guided to 500k for 2020, Tesla in Q3 achieved a delivery number exceeding the 125k/quarter needed.
However, the Q3 delivery number amounts to between 81% and 71% of installed capacity, again depending on whether Fremont is now at 500k 3/Y.
4/ Next July, the Grünheide factory comes on line, reportedly at 150k/year. That will bump Tesla's capacity to 940k/year, or 235k/quarter.
5/ Assuming the rule of thumb that an auto factory needs to operate at 75% of capacity to break even, Tesla will need 2021 quarterly deliveries of at least 176k. In other words, about 37k more than it achieved in Q3.
6/ Where will it find the new customers? In Europe? The EV incentives are great, but Tesla's market share in both percentage & absolute terms is shrinking, and more formidable competition continues to arrive each month.
7/ In China? That has been Tesla's only recent growth area. Tesla just slashed prices, likely because it is offering the lower cost LFP battery, to try to tap into a larger addressable market. Obviously, Tesla's China results are crucial to understand.
8/ But continues to eschew any meaningful segment reporting. Tesla investors continue to fly blind in what has become the most important geography. (Not, of course, that it bothers them.)
seekingalpha.com/article/436929…
9/ What about the US, where EV makers have largely left alone, focusing instead on China & Europe where subsidies are more generous & mandates bite harder.
Yet it appears US demand is flat. (Again, meaningful segment reporting would certainly help.)
10/ Now throw Austin into the mix. Musk says he expects the factory to come on line late next year, but Tesla has not estimated its production capacity (Musk says "a lot").
And, Tesla claims it will keep Fremont running after Austin comes on line.
11/ By late 2021, Tesla will have the following annual capacity:
Fremont: 590k
Shanghai: 300k+
Grünheide: 150k
Austin: 150k (?? at least)
Total: at least 1.19mm/year, or 297.5k/quarter
12/ Using the 75% break-even number, Tesla will need to find at least 223k buyers per quarter by the end of 2021.
With ferocious competition in Europe & China, it will need further price cuts.
13/ All this, while Tesla's massive regulatory credit revenues, which have a margin of 100% & have accounted for all its profits to date (and then a lot more), are drying up.
14/ The bulls will tell you that Tesla's battery plans will give it insuperable advantages. Two problems:
First, the miracle battery is three years away at best.
Second, the miracle battery is premised on dry-coat process that doesn't yet work (and likely never will).
15/ And, third, as @jaberwock2 details in this superb article, the Lithium mining claims are, at best, quite fanciful, and more likely complete nonsense.
seekingalpha.com/article/437718…
16/ So, notwithstanding all the spin we'll hear about the record Q3 numbers, what they best illustrate is the danger Tesla runs of having far more capacity than it can profitably use.
17/ Can a Biden Administration, with Democratic control of both branches of Congress, lead to massive new "Green New Deal"? Sure.
Will that save Tesla? Highly unlikely. Look at Europe...
18/ Europe has already instituted what amounts to a Green New Deal, with punishing emissions limits & generous subsidies. Yet Tesla is getting hammered in EU markets.
The problem is that such governmental profligacy attracts *all* the OEMs, & Tesla can't compete effectively.
19/ Conclusions:
1st, Tesla already has too much capacity, and that problem will grow as Grünheide & Austin come on line.
2nd, Tesla will remain dependent on capital markets for its existence.
And, 3rd...
20/ ...capital markets have always come through for Tesla, so be very careful thinking the story is anywhere close to ending.
21/ No sooner do I put this up than I see that @russ1mitchell has beat me to the punch.
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