Report: Tesla Expects To Sell 500,000 Cars, Europe Model S Demand Strong

4 years ago by Jay Cole 22

Long Term, Tesla Expects To Sell 300,000 BlueStars

Long Term, Tesla Expects To Sell 90,000 Model S/Model X Electric Vehicles

Goldman Sachs is out with a note on Tesla Motors, after the company’s own Patrick Archambault took a tour of the California automaker’s Fremont manufacturing plant earlier.

Tesla Expects Proceeds From ZEV Sales To Evntually Be Less Than GHG Credits

Tesla Expects Proceeds From GHG/CAFE Credits To Be More Profitable And Reliable Than ZEV Credits In The Future

And even though the analyst has a neutral rating on the company, he filed a report on four new things he learned, mostly all positive; which caused the stock to have a massive day on the open market, closing at $110.33, up $13.25 (13.65%), giving the company a huge $12.75 billion dollar market cap.

Here are the analyst’s notes via Business Insider:

  • Demand looks strong. In Europe, the order rate is about  200/week with “highest per-capita demand from Nordic countries.” They expect  Germany to become one of their biggest markets, and in Asia, they expect China  to drive demand. In the longer-term they expect to sell 500,000 vehicles. The  breakdown: “Gen 3 sedan (around 200K units), Gen 3 SUV (about 150K units), Model  S/X (roughly 90K units) and the next Gen Roadster.
  • On the production side the company reported a few improvements that  should help support margins. 1. The number of temporary workers have  decreased since the start of the year. 2. Less waste at supplier and production  sites. 3. Full time employee work hours being lower to 40-50 hours per week,  from 60-70 hours per week. 4. “Improvement in logistics costs.”
  • Revenue from GHG/CAFE Credits: It has been argued that  Tesla’s margins are driven by its zero emission vehicle (ZEV), greenhouse gases  (GHG), and Corporate Average Fuel Economy (CAFE) credits. And that the many of  these could disappear if the government changed its mind. “Tesla believes that  revenues from these credits [GHG/CAFE] are far more reliable and sustainable  than from the sale of ZEV credits,” according to Archambault.  (Editor’s note: $17.1 million was realizd from GHG/CAFE credits in Q1)
  • “The 25% gross margin target is more of a challenge, in our  view.” Tesla reported  17% gross margin in Q1. But some like Donn Vickrey at Gradient Analytics say  the Q1 margin was closer to 5.7%, when excluding credits.

Other items of interest from the Goldman visit/report:

  • they expect Tesla to start delivering the Model X in 2015
  • gen 3 production by 2017
  • to begin 2014 at a production rate on the Model S of between 23,000 and 25,000
  • production team now is aiming to get current production (20,000 units) onto a single shift (currently body assembly and finished assembly are running 2 shifts), then to be able to increase production (if needed) to 40K by returning to 2 shifts
  • Tesla sees kWh costs to decline to under $100 over the next 10 years, which is down about 75% over today
Tesla Soars To An All-Time High...Again, But Is It Too Far, Too Fast?

Tesla Soars To An All-Time High…Again, But Is It Too Far, Too Fast?

And some other calculations on Tesla’s recent market moves via WSJ:

  • 104% – The amount Tesla has risen in May.
  • 217% – The amount Tesla has risen in the past 3 months
  • 2,870.6 – The price to forward earnings estimates for Tesla, as of Tuesday’s close, according to FactSet. The data provider has full-year 2013 earnings pegged at 4 cents a share. Full-year 2014 is expected to go up to $1.01 a share, which would put its price-to-earnings multiple at a still lofty 95.7x

Business Insider

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22 responses to "Report: Tesla Expects To Sell 500,000 Cars, Europe Model S Demand Strong"

  1. evnow says:

    Jay, hopefully you are making up on TSLA all the money you lost on A123 😉

    1. Eric Loveday says:

      Disclaimer…We at InsideEVS are umm…not quite wealthy enough to hold them now-coveted TSLA shares…Unless Jays hiding some somewhere!!!

      1. Jay Cole says:

        Yes, I should note that I always, always, always disclose any positions I am holding in a company when I report on them. Big/huge no-no to not disclose…especially when stories can easily affect the stock price. I currently own no position in Tesla…regretfully, (=

    2. Priusmaniac says:

      The good move was to convert Apples to Teslas in October 2012.

  2. GeorgeS says:

    Go Goldman Sacks!!
    That’s big time.
    Go Elon.
    I want you to win!!

  3. Brian says:

    Under $100/kWh in 2023? That would be incredible! Here’s to hoping that even half of these predictions come true.

    1. Schmeltz says:

      I saw that too Brian. 10 years is a long time in the world of cars, but still, if $100/kwh is even close to being accurate, that would be huge for EV’s. That would put the Volt’s 16 kwh pack as it currently stands at around $1600 in 2023 as an example. One thing I wonder is, when people like Elon make a projection like that, are they projecting the cost of the current Lithium Ion battery chemistry that they are using now 10 years in the future, or are they projecting the cost of a new technology like Lithium Air or Zinc Air? I can’t imagine how he would be able to do that given those batteries are mostly theoretical at this point, but perhaps he knows more than we do. Can anyone elaborate? (Don’t say ‘crystal ball’ either!)

  4. IDK says:

    Hmm…notice this part “Gen 3 SUV (about 150K units)” here is something that Elon hasn’t mentioned before (as far as I know).
    Jay- any insight on this? The only thing I could come up with is the electric truck? But it clearly says SUV from the report and SUV is not a truck.

    1. Josh says:

      The first (and only?) time this vehicle was mentioned was at the annual stock holder meeting summer 2012. It was on a PowerPoint slide and Musk may have even commented on it in the Q&A.

      Same idea as Model S vs. X, just another body style on the same skateboard.

      Full disclosure: I own a token amount of Tesla stock from 2011. I need Tesla to be worth more than Toyota before I can buy my Model S 😉

  5. Alaa says:

    Tesla paid its debt 9 years earlier than it should have, can we see them shorten these 3 to 4 years too?

    1. Jay Cole says:

      We would think the ability to tap the market cap to both pay off the loans and gain 500 million more in liquidity has significantly changed internal plans at Tesla.

      …I mean, how could it not? Regardless of where the share price goes from this level, there should be some exciting things from Tesla in the near future.

      1. Anthony says:

        I think it might speed up their tooling for the Model X or increase capacity for the Model S and X combined. But that’s about it. Maybe instead of end of 2014, we see early/mid 2014 for the model X SUV.

        That extra $500M or so of capital isn’t going to make Panasonic (or anyone else) speed up their battery development any faster than its already going. Its not going to change the CAGR of Li-Ion battery industry a huge amount. Its not going to make it dramatically cheaper for Tesla to produce the cars through automation.

        To me, its a simple capacity play. They want to be able to sell 40-50K cars/yr assuming the demand is there. Will it be? I don’t think it will.

        1. evnow says:

          I think the money basically goes to development rather than adding capacity – I hope so, anyway. I don’t think there is demand for more than 20 to 30k per year. Expanding capacity to 50k would be a waste.

          1. Alaa says:

            @evnow it odesn’t take much to key the number -20% on a computer. Elon said that the new car will be 20% smaller than the Tesla Model S. And if the money is going to go into the tooling then yes they will come up with a new model quicker if they have more money for tooling. As for the demand I think it is already there. In addition in just a few months if not before there will be a new battery that has at least 500wh/kg. Infact it is already there and it costs less than the current batteries AND charges faster AND can be charged many times more than needed; so all this indicate that yes there will be a demand and I think that demand is already there.

  6. Martin T says:

    Excellent news, I watch Tesla’s news with much interest.
    A real fresh approach to the industry.

  7. Alaa says:

    Tesla’s factory was sized to make 500,000 of ICE cars. There are at least 240 moving parts in an Internal Compustion Engine (ICE). In addition there is that fuel tank the tail pipe etc. All these units are not needed, thus this factory of Tesla can make much more than 500,000 a year.

  8. Alaa says:

    Can anyone predict when will Tesla start using the Lithium Sulfur batteries or any of the long list of new batteries that has >500wh/kg energy density AND a high number of recharges AND can be chargered in a a much shorter time than the current batteries AND are much cheaper than the current ones?

    If we can not predict that date we can be sure though that if any new battery is used on even the OLD Model S then the range and charging time will be different, and to the better. Right?

  9. vdiv says:

    How to decide which car to buy? Regardless of the car or the manufacturer go to the assembly line and look at the floor. From the picture above one can practically eat off of the Tesla one. Everything is white, everything is clean and orderly, and everything is well-lit. It is almost like a clean room and it puts most hospitals and clinics to shame, not to mention other manufacturers.

    How to decide where to service your car? Do the same with the service centers.

  10. Darius says:

    I decided to atract Statik’s atention to some anonymous poster at gm-volt site. Battery future looks nof so bright as Elon Musk says.

    Korean battery buy Says

    May 29th, 2013 (9:12 am)
    Recently GM CEO promised to cut the price of 2nd generation Chevy Volt by $10,000, which received lots of media attention,this infuriated LG because Akerson’s sole purpose is to pressure LG Chem to cut price even further, as many suggested here premature price cut announcement will coerce many protential Volt customer to simply wait for Gen. 2.
    On May 28th, LG finally decided to exit the automotive Li-battery business and has been evaluating strategic choices for months, one option is to sell the business to a US consortion, possibly GM/Ford joint venture, as Johnson Controls and Dow Kokam are losing too much money to have any real interest, another choice is to sell the business to Panasonic (another player, Samsung is also exiting the business due to heavy losses). Currently LG is selling the batteries to GM for 50 cents on the dollar, the price GM is paying barely cover the material cost of the Lithium ion battery (electrode material, high purity aluminum/copper foil, electrolyte, separator, other components). The price GM is currently paying is about $600/kwh, LG incur heavy losses at this price point. For example, 1440 mAh (about 0.0053 kwh) iPhone battery is made by Lishen (China) and cost about $5 to make (do you think Apple will only charge you $5 to replace your iPhone 5 battery?), one has to realize manufacturing of small pouch cell has been going on for years and all kinks have been worked out, and cost of expensive Japanese equipment has been spread out over 3-5 years already, this $5 price point is equivalent to $1000/kwh) and the quality standard by LG is much higher than the iPhone battery, all of these are further complicated by the expensive tooling (korean made, still expensive) which means the real
    cost to LG Chem is close to $1300/kwh and obviously LG can NEVER reduce it to $300/kwh demanded by GM/Ford (all those ballyhooed price cut predictions by Boston Consulting Group are just bullshit)
    Since LG Chem received $150 million ARRA grant in 2009, simply shutting down the Michigan plant is not an option without paying back US taxpayer, so one option for them is to pay back the $150 million and shut the plant. It is well known in the automotive supplier chain that US auto companies are behaving like brothel clients who insist paying you $5 a night and have all kinds of abusive demands on the sex worker, even Johnson Control is moving away from automotive supplier business!
    I will suggest Jeff contact LG directly (phone number: 011-82-2-3777-1114) to confirm this post! Do not contact LG Chem America as they have little control in the fate of
    the Michigan battery plant ( LG will start making cells in late summer, regardless whether LG can sell the business to someone else in the next 6 months as LG Chem is contracted to supply battery to GM/Ford for the next 2-3 years.
    BTW, it is estimated that the 18650 supplied to Tesla by Panasonic cost at least $7 (korean price) to manufacture on a large scale. It may cost even more!

    1. Jay Cole says:

      Thanks for the heads up Darius

      I will have a looksie into it. There is a couple weird anomalies in the statement (besides the math and prostitute analogies), and some recent moves by LG Chem that would indicate this story either isn’t accurate or is being portrayed from a skewed prospective. The Volt is a relatively small piece of LG Chem’s Li-auto pie, Akerson/GM would have little to no sway on pricing.

      Not that it is related to EVs, but LG Chem just sign a really big deal with Southern Cal Edison, that should give them some even more scale in the US to go along with the Michigan facility operations for EVs.

      That being said, I could see how LG Chem could be moving around assets or want to re-structure their li-auto business, so someone could come away with this impression…but why they would make this public before actually figuring out exactly what those moves are, IDK.

      Worth a couple emails to shake the tree though, thanks D

    2. evnow says:

      Tesla is getting the batteries much cheaper. The upgrade from 60 to 85kWh is only 10k (and includes things other than the battery, like supercharger access).

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