1/ We have the Q4 deliveries report. There's a debate within $TSLAQ about whether the number are accurate. I understand that; the huge gap between claimed deliveries and reported registrations is now even larger. I'm going to assume the report is accurate & offer some thoughts:
2/ Remember this? "What people should absolutely have zero concern about, and I mean 0, is that Tesla will achieve a 10,000 unit production week by the end of next year... I think people should really not have any concerns that we won’t reach that outcome from a production rate."
3/ That of course was Musk in August 2017, when $TSLA was busy peddling a debt offering. 10k didn't happen. It didn't come close to happening. Instead, Tesla's Q4 weekly average of Model 3 production remained well below 5k.
4/ And that huge backlog of $TSLA Model 3 orders? All those people in line in March 2016, dying to put down their $1,000 deposit? We now know what that was all about. It was about something that can now never exist: a $35k Model 3 with a full $7.5k income tax credit.
5/ US $TSLA Model 3 backlog was exhausted in Q4. Today's 8-k makes that clear. Yes, "there remain significant opportunities to continue to grow Model 3 sales." But, guess where? Not in the US. With US demand pulled forward, the FIT tax credit tailwind is now a powerful headwind.
6/ Just as we saw in the State of Georgia, Denmark, Hong Kong, and most recently Ontario, a reduction in subsidies or a change in favorable tax laws creates an immediate and enormous reduction in $TSLA demand.
7/ In Q1, the halving of the FIT credit be an enormous problem for US $TSLA sales. Hence $2k price cut for all models, effective immediately. Expect more such price cuts and incentive deals to be announced before Q1 ends.
8/ As for the Netherlands, $TSLA's second most important EU market, the Q1 cliff will be even more dramatic than the US cliff (where partial subsidy still remains), compounded by the earlier arrival there of formidable competition from Hyundai, Jaguar, and Audi.
9/ Another thing to consider. $TSLA has enjoyed approximately $2k of GHG revenues on the sale of each car in the U.S. (You know, the $90MM+ GHG credits that it left out of its Q3 earnings announcement, and buried in the 10-Q.)
10/ With fewer U.S. Q1 sales, there will be fewer GHG credits earned. And none earned on sales in the EU. So, for the EU, the $2k price cut just announced amounts to a $4k revenue reduction per car.
11/ Has the $TSLA Model 3 now been homologated in the EU? Well, there are reports today of some 1k Model 3 cars registered with European VINs. And Tesla says that deliveries in Europe and China will start in February. But guess what else Tesla says, in language that is brand new?
12/ It says its statements about "plans and timing for international expansion" are "forward-looking statements" based on management "expectations" but subject to "risks and uncertainties."
13/ That's the first time Tesla has included "plans and timing for international expansion" in a deliveries report. Remember the Wochos case? Where $TSLA's defense was, Sure, Elon fibbed about when the Model 3 would be produced, but it was subject to forward-looking statements?
14/ So, I'm going to assume $TSLA will actually start delivering in EU and China at some point in February, but with a dollop of caution. And with this further observation: it's a massive planning & logistical miss that Model 3s are not being delivered in Europe right now.
15/ Now, for my personal views. Not provable, just what I observe and believe...
16/ Q4 is the high water mark for $TSLA , for revenues, for deliveries, for ever. What about GAAP profit? I think we already saw that high water mark in Q3.
17/ Why forever? Because $TLSA simply hasn't spent nearly enough CapEx on desperately needed new projects. It will require an investment of several billion dollars just to launch the Model Y. I had thought $TLSA would contract with Magna for that, but Magna is busy with the Jag.
18/ Also, the Model S badly needs a refresh. $TSLA longs are, based on what I see, utterly unprepared for what a massive dive Model S sales are about to take in Europe now that the I-Pace is here, the E-Tron is arriving, and offerings from Daimler & Porsche closer to reality.
19/ $TSLA needs more capital to accomplish such a refresh. And more capital if it's actually serious about the semi, the Roadster 2, and the pickup truck. The first two of which boast specs that remain technically out of reach.
20/ Meanwhile, to $TSLA's credit, American roadways (though mostly in coastal California) are filled with Model 3s. But they come with a price. There are simply hundreds of reports of problems with the car, ranging from trivial to serious.
21/ The new $TSLA Model 3 backlog is not an order backlog. You can buy one off the lot today. It's a service backlog. Tesla damaged its brand by rushing this car out. The extent of the damage will be known once we see EU sales numbers.
22/ Estimates from the EU so are not encouraging. About 14k or so orders for the AWD version. Far fewer than $TSLA was hoping for when it opened the order process so it could pad its deposits.
23/ Okay, what about China? Right now, there's just a mud flat. And tariffs. And no visible source of finance for a factory or equipment. And intense Chinese EV competition. And a shrinking car market.
24/ In 2019, $TSLA will be just another car company, subject to the vicissitudes of intense competition in a cyclical and capital intensive industry. And its share price will shrink to reflect that reality.
25/ Just another car company, except with this difference: with a CEO who is a serial liar, whose massive "funding secured" lie has exposed $TSLA to existential risk from private lawsuits, facing SEC & DOJ investigations, and short of capital. <fin>
