Thread by @PlugInFUD

SCOOP:

Tesla beat in Q3 solely because of supplier rebates.

I teased this in ALL CAPS WHEN I WAS Q3 RAGING but its time to more clearly articulate some thoughts on this.

as always, @elonmusk, feel free to let me know if i'm off track.

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So Tesla beat by like $300m in Q3. Whoop de doo. In fact, auto revenues were lower than many forecasts. they beat because of lower COGS (and to a lesser extent, lower OPEX) vs all reasonable forecasts.

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gross margin was fantastic DUE TO ONE-TIME SUPPLIER REBATES.

I guarantee it.

On July 23rd, Tesla (pathetically) put out the alert that suppliers need to bend the knee: bloomberg.com/news/articles/…

lets think about how this could have flowed through.

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the retroactive-refund request was apparently mostly related to CAPEX, but knowing our god-king @elonmusk, he's begging everyone for money.

Being ultra-conservative, $tsla spent $5b on CAPEX and $10b on COGS over the past few years.

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...and at the same time, their DPO was 90 days at Q2. vendors have been filing liens. Tesla isn't even paying its employment taxes. certainly not refunding customer deposits. the cash situation was looking super bleak.

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all of a sudden, $tsla blows out q3, albeit with somewhat lower cash and MUCH lower AP than expected.

How Sway??

here's how: Supplier rebates came thru.

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Even just a 2% rebate (on average) on the $15b cost pool is $300m - the amount by which $tsla beat earnings. that's certainly achievable when you're overdue on your bills and you tell your vendor "we'll pay you 95% now, or you can wait for a while longer."

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$tsla booked these gains in q3 (as is appropriate, as they were not foreseeable beforehand) which boosted earnings significantly. refunds flowing through COGS is why GM is unbelievably, inexplicably high.

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so whats the takeaway? as $tslaq knows, Q3 is an anomaly. Cash-strapped $tsla f'd its suppliers so badly that they were willing to cut deals. Not an ideal symbiotic relationship. not how you manage a real business.

Given the SEC settlement, SEC continued investigations DOJ investigations, etc. i can see why @elonmusk decided to YOLO with this one-time gain. The problem is, can it be replicated in Q4? TBD. are there more supplier baggies?? who knows.

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but with waning M3 demand, a $5k price cut on the most expensive version, no foreseeable international sales, increasing stories of poor customer experiences, etc... this might be the high water mark.

enjoy it while you can @elonmusk because, while this opportunistic move won't take you down, the securities fraud, wire fraud, and mail fraud will.

your days are numbered - and the days before $tsla is in the single digits are numbered too.

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. @CGrantWSJ @lopezlinette @russ1mitchell @lorakolodny @nealboudette @danahull if you have ins with the suppliers.. give this lil check when you have some free time.

Didn't highlight this enough the first time around - the payables being low are the fishiest part of all (after 25% gm)

Lower than expected cash & lower than expected AP = some of your bills were settled without actually sending them money.

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