Why Tesla’s Q1 2016 Miss Isn’t A Big Deal

1 year ago by Tesla Mondo 37

Musk Discusses Model 3 Produciton Capacity

Musk Discusses Model 3 Production Capacity

Screen Shot 2016-04-05 at 6.03.52 AM

MISS!

The nice thing about Tesla’s Q1 volume miss is that, like all quarterly data, by the time we receive the news, the conveyor belt of time has already moved it into the past. Since investing is about the future, Tesla’s Q1 miss should nag us only if it portends future problems. Does it?

It’s hard to see how. Model X production is a problem solved. It’s down the conveyor belt. And Model ☰ production is a potential problem recognized and dissected years before it arrives on that conveyor belt. The company has talked about this very subject for over a year already. Here’s a direct Musk quote from the 2014 Q4 conference call:

“We don’t want the delays that affected the X to affect the Model III. We’re really being quite conscientious about this. There are things we could do with the Model III platform that are really adventurous but would put the schedule at risk. So what we’re going to do is have something that’s going to be an amazing car but it won’t be the most adventurous version the Model III to begin with. But we will then have the more different version of the Model III, on the Model III platform, following the initial version.” 

Model Y might be the “more adventurous version.” Or maybe it’s just a super-duper ☰. Either way, Tesla has long recognized “it” as a potential repeat of Model X and has pushed “it” up the conveyor belt instead of trying to assemble maximum Shock/Awe right away. A good decision, since mild-mannered Model ☰ is proving to have more than enough S/A.

Glancing today’s headlines, reporters are having fun with a new vocab word: “hubris.” They apparently missed the 2015 Q4 conference call, during which Musk said exactly what he said yesterday:

“We put too many new features and technology — too many great things at once — into a product. In retrospect, it would have been a better decision to do fewer things with the first version of X, and then roll in the capabilities and features and new technologies over time . . . there was some hubris there. The net result, however, is that the Model X is an amazing car.”

*Editor’s Note: This and other Tesla-related posts appear on TeslaMondo. Check it out here.

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37 responses to "Why Tesla’s Q1 2016 Miss Isn’t A Big Deal"

  1. jelloslug says:

    That’s exactly what they need to do with the Model 3: get it out on time and do it right. There will always be time to make crazy versions after the product is out and running smoothly.

  2. proxymusanonimy says:

    Keep it KISS!

    1. evcarnut says:

      Keep it…K I S S …That’s what my music teacher always said. It always came out right and worked out better that way !

      1. Just_chris says:

        You are kidding me? People really don’t think before they type, 6 components short? Across the entire range? That can’t be sourced, machined or done without? That is a supply chain issue and nothing to do with the complexity of the vehicle and everything to do with rushing to market. That is not a problem with the design or over reaching, hopefully the suppliers have got their s**t together and we are now on our way.

        This is a normal production glitch, the only thing amazing is that Elon can walk out and say something in such a way to make it sound like tesla is amazing when really they have dropped the ball, not in a big bring the company too it’s knees kinda of way but not being able to manage your supply chain shouldn’t be a selling point…. I love tesla for being able to do this

      2. deborah crazy train flower power says:

        Cool teacher !!! 🙂

    2. arne-nl says:

      Writing out the acronym, you just wrote:

      “Keep it Keep It Simple and Stupid”

      Any special reason for repeating the “Keep It”? 😉

  3. QC says:

    Tesla learns from it’s history, did the Model 3 presentation start on time? Was the audience too big? Roadster was the first car ever, Model S was the first production version and X was a bit too ambitious compared to the original master plan (X=2.5). Model 3 is easier to manufacture, the issue do they have the capacity to produce more than 200 000 in 2018 or less and can the gigafactory schedule flex to achieve this?

  4. Lol, just ignore the fact that Model S sales were down sequentially almost 5000 from Q4, and only 2000 of those can be attributed to the rush in Denmark. That’s right, nothing to see here…

    1. Boris says:

      Model S will soon get a facelift with some goodies on top, sales will go right back up…

    2. ffbj says:

      I really doubt that you are lol, about Tesla at the moment.

    3. Get Real says:

      Ugh, we get slimed again by professional stock manipulator Mark Spiegel!

      Well Spiegel, your wallet is probably lighter and you are walking funny after the reaming you and your shorter buddies on Seeking Liars took with the M3 pre-order tsunami.

      Let me tell you why it doesn’t matter that Tesla slightly missed their quarter guidance.

      You see unlike you, Tesla actually makes something of value.

      While you and your buddies slime around participating gambling (mostly with other people’s money)in what should be fraud, Tesla is laying the groundwork for the future which will hopefully see your type of gambling outlawed.

      Tesla has already over 14 BILLION dollars of reservations for the Model 3.

      Lest you try your slimey FUD here again on this point, these are not simply signups but rather major commitments in the form of $1000.00 apiece reservations.

      Short version of this is YOU LOST, the rest of the world won!

      So by all means, continue to lamely and desperately try to spread your anti-Tesla FUD as you “take one for the team” over there at Seeking Liars because you and they are on the wrong side of history (hint- you are standing next to people like Martin Shkreli on that wrong side).

      1. ffbj says:

        Not satisfied with simply kicking a man while he is down, Get Real continues to jump up and down on him.

        1. Get Real says:

          A better analogy is driving a stake through the heart of a vampire because that is what we are dealing with here.

          Spiegel and his breed do NOTHING for our society or financial system except to siphon off other people’s money that could instead be used to fund investments that actually benefit society at large as well as the individual investor.

  5. Boris says:

    Model Y will probably be on hold. The Freemont factory will hardly be able to produce cars for the whole world. Tesla needs to build a factory in China and Europe. Model 3 platform would be perfect for a slightly larger car that would start at $50K. Something like 3-series and 5-series obviously. Just make the 5-series equivalent slightly bigger and put in some gadgets and you have a margin maker. Leave the Model S with 90kwh+ batteries and let it compete with 7-series and Audi A8 for $80K+ Like this, along with a few SUVs, a convertible, coupe, a sportscar Tesla will be selling at least 1.5 million cars a year, utilizing 3 factories in each big market.

    1. agzand says:

      Have you seen inside a 7 series or S class? Model S competes with those in price only. In terms of space it is comparable to 3-5 series/E class. A 7 series has 114 ft3 passenger space. Tesla Model S is about 95 ft3. A 5 series is 102 ft3.

    2. Fantain Asniono says:

      The complication with China factory is the required partnership – a system China set up to “learn” from a foreign enterprise. Tesla will need to meet this requirement while protects its IP.

  6. Pushmi-Pullyu says:

    Let’s just keep in mind that TeslaMundo is a “long” stock investor in Tesla’s stock, TSLA, and that Mark B. Spiegel (see comment above) is a short investor.

    Both of us are literally trying to sell us something.

    * * * * *

    Despite Tesla’s success at actually starting the Model ≡ “reveal” media event on time, I’m still skeptical that Tesla can actually get the Model ≡ into production when they plan to. The history of the company shows they’re chronically late with every car model.

    However, Tesla’s history also shows that whenever they do manage to get a car into production, it absolutely blows away every other car in the price range. And in the long term, that’s a heck of a lot more important than whether or not the Model ≡ is a few, or several, months late getting into production.

    Personally, I hope Tesla delays the Model ≡ for as long as they need to, to develop an instrument panel and an actual dashboard, even if they’re just options you have to buy. If they stick to that weird central screen as a replacement for an instrument panel, and they stick with that narrow rail where a dashboard ought to be, then that’s going to put off a lot of potential buyers.

    1. Boris says:

      not with a HUD…

    2. Murrysville EV says:

      Agreed 100%.

      I reserved a Model 3 before I saw one. I’d still do it, but that cheapo screen and no central gauges with at least speed, range, and temperature = not good.

      1. pk says:

        HUD will be fixed.

    3. ffbj says:

      It’s true that it is not a forgone conclusion that everything will now be butterflies and rainbows for Tesla.

    4. zzzzzzzzzz says:

      Better tell where they will get money to keep running if they will delay. It is not growing on trees. EM needs to figure out where to get capital for Model 3 production, and it is not small sum. Sure they can sell shares at current bubble price again. But how many times this trick will work really? Competitors will be far ahead after any delays.

  7. But it does have an impact when deliveries miss. There is often a “miss now but next quarters will be great” attitude. By missing Q1, the full year is more difficult to reach. Even if they reach it, they would have exceeded it had they not missed Q1. So the forward looking market starts to question forecasts going forward.
    As for Model 3, I’m impressed with their stage of development and am cautiously optimistic. I think their full intent is to keep it extremely simple and efficient. Probably half the parts of the Model X. I know Elon is a micro-manager but was impressed that the actual design resembled the concept sketches by Franz. However, now I’m worried, that the micro-managing is creeping in with Elon talking about tweaking the trunk, the front, the dash, the steering wheel, etc. They better move quickly. They need to be close to final stages and starting all the testing that is needed. 1.5 years will fly by. My biggest worry is that Elon will keep tinkering and improving. It’s a hard habit to break.

    1. Vexar says:

      This is a solid point. What is missing is an understanding of the order queue for the Model S right now. There is supposed to be expansion into some new markets, like Mexico, as I recall. I saw 60 Model S and X delivered of my own Service Center late last month, which is a lot more than usual, perhaps double. We do know that the existing reservations on Model X are at about the 25,000 unit level now (based on what’s been delivered), so in theory, they just have to build and deliver their existing demand for Model X and match the Model S deliveries from 2015 to hit their guidance. The second manufacturing line and the equipment that the investor firms saw early this year along with the new worker hires show that everything is in place (assuming no supplier issues) except proof of the Model S demand at least maintaining flat levels. With California ending their subsidy for anybody who can afford a house in the state and Tesla identifying 1 in 4 of their vehicles are sold in California, there’s an argument to be made that their demand could go down by 25%, but the Federal incentive is still there, so maybe that impacts only half the state’s demand.
      However, autopilot is becoming better-understood. I think that drives demand significantly up, and quite a number of California residents who own a Model S from a few years ago are trading in for the newer version.

      1. agzand says:

        There are a couple of issues that can surface, one is competition. Chevy Bolt will have an impact on lower end Model S sales. Also BMW i3, eGolf will be updated in Q3 with 1.5x range. The other issue is the Osborne effect. If you already have an order for a Model 3 and expect to buy it in about a year you are less likely to buy a Model S toward the end of the year. Same with Model S/X, there is some overlap because the cars are very similar in terms of price/performance and practicality. One will affect the sale of the other one. So if Tesla sells 25k Model X cars maybe they cannot match last years Model S sales.

      2. Mike I says:

        Income limits for the CA $2,500 rebate will have not any noticeable effect on Model S and X sales. That small amount of money just doesn’t affect people buying $80k+ cars that earn over $250k/person $500k/family.

  8. Speculawyer says:

    “Model X production is a problem solved.”

    No, it is not. They are certainly much better than they were. And they are getting better every day. But Model X production is still pretty slow.

  9. agzand says:

    Tesla Model X was not ready for production last September. It is not ready even today. There are a lot of issues with the doors (front and rear) and overall quality in March cars. The car was another 6 months late but Tesla did not want to admit it. Something to consider if you expect to see a Model 3 late 2017. Initial Model 3 cars will be just as complex because they need to be highly optioned models. Also I believe making 100k x $35k cars is a lot harder than making 25k x $100k cars.

    1. PK says:

      The biggest issue with the model X were those damn doors. Not a problem with the model ≡ however. Fingers crossed I guess.

  10. Dan Hue says:

    The Tesla-mania is so juvenile, it irks me to no end, but I still want Tesla to succeed. It would be a tragedy to see them fold.

  11. Mike I says:

    What Tesla needs to do is start acting like a real automaker and do away with “Founders Series” (already done for Model 3) and instead produce 100+ cars as pre-production with final tooling, but 3-6 months before the start of production for customer cars. That will get the bugs out and allow for a faster ramp up. Those pre-production cars can be used for showrooms and later, service loaners, even if they are never to be sold, they could be useful.

  12. agzand says:

    Honestly I don’t think Tesla can make a $35k car in 2017 or 2018, period. In 2019, 2020 maybe. The cost of replacing roadster battery is $29000. It has similar capacity as Model 3 (72kWh), and Tesla claims they make no profit on these batteries. Lets say they cut the cost by 50% (gigafactory/mass production etc). That leaves $20k for everything else, including the car itself, sales, warranty, equipment depreciation, etc. For GM it is different because they can sell the Bolt at a loss and still profit from it (zero emission credits).

    1. zzzzzzzzzz says:

      Tesla gets the same CARB credits as GM and sells them, there is market for credits.

      1. Agzand says:

        No, they can’t sell them anymore. There is no demand because everybody has some sort of EV/plug in these days. Elon said that they don’t expect to sell any ZEV credits in Q4. Even if they sold some it was minor.

    2. Mike I says:

      The Roadster battery is hand made in low volume from cells purchased from LG Chem. It is not at all the same thing as a battery pack mass produced in the Gigafactory from cells made on-site.

      1. Agzand says:

        Yes, that is why I assumed 50% savings. Most of the cost of LI batteries is material. Doesn’t matter how you make them, the material cost will be the same.

    3. Tech01x says:

      agzand, how do you manage to get so many things wrong and state your opinion so concretely?

      The Roadster battery upgrade includes a lot of manual labor. The batteries are hand made from much more expensive LG Chem cells, not the Model S cells and not the Model 3 cells. The PEM is removed, tested, upgraded, and possibly replaced if need be.

      Model S cells cost Tesla somewhere around $150/kWh. The Gigafactory production is expected to continue to drop that price. The price to the consumer for Model 3 battery pack should end up approaching $150/kWh.