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1/ I think $TSLA will disappoint on cash flow in Q4. I've seen estimates as high as $4bn of cash on 12/31 - I believe there's a reasonable chance unrestricted cash actually declines to the $2.7-2.8bn range. This thread will walk through the various drivers underlying my view.
2/ First, I believe the market underappreciates the cash impact of the elimination of the FSD option. At 30% penetration, this could be almost a $100mm drag vs prior quarters. There's a good chance that deferred revenue declines for the first time, resulting in cash usage.
3/ Customer deposits could also move to a sizable cash drain. Deposits includes full payment of the car prior to delivery, which would have been a healthy number on 9/30 given how many deliveries were delayed to Oct. Conversely, hardly any deliveries were made in early Jan.
4/ Additionally, more of the existing deposit base has now received their vehicle, $35k version deposits should be dropping due to the tax sunset and new Europe/China deposits are anemic.
5/ $TSLA made $450mm of debt repayments but only had ~230mm of untapped capacity under its ABL, assuming it draws the full amount (which is unlikely). That's a sizable cash drain.
6/ If $TSLA surprises to the upside on cash, it will be because of traditional working capital. A/R should be a sizable tailwind, but inventory and payables are tougher to gauge.
7/ I see inventory as sequentially higher (use of cash) due to #SGF field observations, various inventory trackers and the high number of trade-ins $TSLA was carrying.
8/ Further extending payables would be a master stroke by Deepak. They're already close to 90 days and there was no appreciable production increase vs. Q3 (which is what drives payables). I see flat payables sequentially but admit Deepak has done well with this in the past.
9/ Lastly, VIE cash flows are tough to estimate. Falling residuals on the S/X lease pool might require more collateralization for lease deals or make whole payments on 3rd party lender guarantees. It's a risk, but I didn't adjust my cash estimates for it.
10/ All told, there are a number of cash headwinds this quarter that weren't there in Q3. As a result I expect the cash balance to disappoint vs. expectations which will lead to further discussion on liquidity given the $920mm May convert payment. Fin.
Edit - March convert payment. And as long as we're editing, let's just add that regulatory credits will likely be lower vs Q3.
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