Tesla Reports Profit In Q3, Beating Street Estimate Of Slight Loss – More Model X Delays

3 years ago by Jay Cole 108

Tesla Reported Quarterly Earning Wednesday After The Bell

Tesla Reported Quarterly Earning Wednesday After The Bell

Tesla’s quarterly financial reports are a barometer of sorts for the EV industry.

Tesla Model X Arrives In Q2 2015 And Threatens High End Petrol SUV Makers Everywhere

Tesla Model X Arrives In Q2 (er, make that Q3) 2015 And Threatens High End Petrol SUV Makers Everywhere

While other automobile makers may sell more electric vehicles than Tesla (with Nissan being the outright leader), none sell as many dollars worth of EVs.  And the degree of success (or failure) Tesla Motors finds at the end of each quarter has a dramatic effect on how – and if – the other OEMs build plug-in vehicles.

When a traditional automaker adds a EV to their lineup, they are careful to do it in such a way so as not to disturb the existing petrol vehicle hierachy in their lineup.  The result of which generally lands to one of the following EVs being produced:

  • a small, compliance type EV
  • an electric conversion of an existing platform, priced well above the top trim level of the gas version
  • an entry into a vehicle class size/platform that the OEM is currently not invested in

However for Tesla, with no petrol legacy, their only concern is selling electric vehicles – no consideration is given to product-creep of a new electric offering.

Which means for today, Tesla is ushering in obsolescence to the low hanging fruit of internal combustion offerings – high end performance luxury with the Model S.  For tomorrow (or rather Q2 of 2015) its the high end performance SUV with the Model X.  For the future, its a premium mid-size sport offering in the Model 3.

Love or hate Tesla, as long as they are around, they will force the hand of traditional auto makers to offer plug-in cars that people actually want…or risk potentially behind left behind.  It is for that reason we follow Tesla’s results every quarter so diligently.  As long as it is healthy, Tesla brings the fear to the rest of the industry.

Tesla Q3 2014 Earnings Report

The Tesla Model S P85D Arrives In December - But Was Taken To The Track Last Week (details)

The Tesla Model S P85D Arrives In December – But Was Taken To The Track For The First Time Last Week (details)

Tesla reported third quarter earnings after the bell Wednesday night, and overall the company netted a 2 cents per share profit (ex-items) or $3 million (non GAAP) on an automotive gross margin of 23%.

The street had expected a loss of 1 cent per share, as compared to the 12 cents the company earned a year ago on revenues of $890 million.

Driving the profit this quarter was an unexpected pop in regulatory credits – $93 million worth of them; $76 million of which where ZEV sales.  Tesla also booked $31 million of powertrain sales primarily to Daimler for the Mercedes-Benz B Class Electric Drive.

 In a statement, Tesla explained the unexpected resurgence of regulatory revenue, “ZEV credit revenue was much higher than expected as we closed additional contracts with several OEMs.”

It appears the business of selling ZEV credits isn’t as dead as we were lead to believe – good news for those with excess to spare.

On a GAAP basis the company lost 60 cents per share in the quarter, or $60 million. The street had been looking for a loss of $55 million.

Model S Sales

At the end of last quarter CEO Elon Musk guided sales as follows:

“After considering our planned production and the need to have more vehicles in transit (including the new RHD models), we expect to be able to deliver about 7,800 Model S vehicles in Q3. Without the planned factory retooling shutdown, Q3 delivery expectations would have been approximately 9,500 vehicles.”

In reality, that is pretty much exactly what was delivered as 7,785 Model S sedans hit driveways.

6,457 (Q1) +7,579 (Q2) + 7,785(Q3) = 21,821 Model S deliveries to date.

Less Options & Trims For The Model S

Tesla announced going forward they would reduce Model S option to help out future production.

“One of the significant actions we intend to take in order to reduce manufacturing complexity is to simplify our product offering by reducing the number of options and powertrain combinations. This will enhance our ability to scale production in 2015.”

Real world – what does that mean?

The just announced 60 kWh D (AWD) now isn’t a choice.  The 85 kWh keeps both the rear wheel drive and AWD options, while the Performance edition is AWD only.  Basically the AWD 60kWh and the RWD P85 is axed.  Also of note:  The cost of the AWD option on the 85 kWh Model S has increased from $4,000 to $5,000.

Model S Delivery Guidance

Apparently Americans Love The P85D Model S As "Extraordinary" Demand For It Is Currently The Norm

Apparently Americans Love The P85D Model S As “Extraordinary” Demand For It Is Currently The Norm

This would mean that Tesla needs to deliver about 13,179 Model S sedans to hit their estimated target of 35,000 given last quarter.

However, Tesla guided Q4 (and 2014 full year) deliveries down by 2,000 – so pencil them in for 11,179ish for Q4.

The cause?  Unexpected difficulties with restarting production at the company’s Fremont facility, as Tesla reported “losing almost a month of production due to factory retooling” – something one could have learned when it was actually happening by reading our monthly sales report on the company in August.

“Production for the full year is expected to be about 35,000 cars, despite entering Q4 with a deficit in production of 2,000 units from Q3. (due to extended plant closure)

However, the loss of these cars in Q3 means fewer available to deliver in Q4 and our ability to ramp up production in Q4 is constrained by the complexity of launches related to dual motor and autopilot hardware. Consequently, we expect to deliver approximately 33,000 vehicles for 2014. This is 50% above 2013 deliveries, but 5% to 7% below prior estimates for 2014. Previous projections for 2015 are unaffected.” – Elon Musk statement on production and deliveries.

As for what 2015 will looks like specifically, Tesla said that sales and production on the Model S will be 50% higher.

“We also substantially broadened the appeal of the Model S by introducing Dual Motor all-wheel drive and Autopilot. Based on net orders since that introduction, excluding the extraordinary initial demand peak, we are confident of a 50% increase in both net orders and deliveries for Model S alone in 2015.”

So, about 50,000 Model S sedans will be sold in 2015 + whatever the Model X nets Tesla.  Speaking of which…

Tesla Model X Coming...Uh, Sometime - Perhaps Around July-September 2015

Tesla Model X Coming…Uh, Sometime – Perhaps Around July-September 2015

Model X Delayed.  Again.  What New?

Is it 2013 yet?  December 2014?  April 2015?  –  All those projected dates for the Model X debut have gone down in flames.  The latest ‘estimate’ for deliveries in Q3 of 2015.  So July to September-ish.

“Work continues on the finalization of Model X with the testing of Alpha prototypes and initial builds of the first Beta prototypes. Model X powertrain development is almost complete with the early introduction of Dual Motor drive on Model S. We recently decided to build in significantly more validation testing time to achieve the best Model X possible. This will also allow for a more rapid production ramp compared to Model S in 2012.

Even though in this regard with the Model X, Tesla has totally dropped the ball; and it is pretty obvious that the repurposed Model S platform for the Model X could have well been ready by now, Tesla decided to take the opportunity to go on the defensive.

In anticipation of this effort, we now expect Model X deliveries to start in Q3 of 2015, a few months later than previously expected. This also is a legitimate criticism of Tesla – we prefer to forgo revenue, rather than bring a product to market that does not delight customers. Doing so negatively affects the short term, but positively affects the long term. There are many other companies that do not follow this philosophy that may be a more attractive home for investor capital. Tesla is not going to change.”

The old “we apologize for being so great excuse” seems to be at play here.  Put another way, if it is taking this long to adapt the Model S platform to the X, we expect the Model 3 to be out around 2025.

Because of the deep order book already for the Model X (reportedly past 21,000 deposits placed), Tesla notes on their site that reservations placed today for the SUV will be filled in “early 2016”.

Fremont Plant Productivity

On capacity, and the transition into producing the upcoming Model X, Tesla said they don’t expect the difficulties they recently experienced over the summer with an extended shutdown of their Fremont assembly plant.

“In contrast to Q3, actions to further increase capacity have been designed to be less disruptive, thus enabling us to increase output at a steadier and more predictable pace. For example, our Model X body center will initially be independent from our Model S body center, allowing us to start building Model X bodies without impacting Model S production.”

Gigafactory Update – Production Schedule Ramped Up

New Tesla Gigafactory Will Be Operational Sooner Than Expected (2016) According To The Company

New Tesla Gigafactory Will Be Operational Sooner Than Expected (2016) According To The Company

Tesla touched on Gigafactory progress, noting that they have started to pour the foundation of the battery plant.

In so doing Tesla will be enabling a modular build strategy that will let them not only scale the construction itself, but the capital requirements as more and more capacity is needed.

Surprisingly, Tesla also guided that (in co-operation with partner Panasonic) the first cells will be produced in 2016, not 2017 – easing some fears that the Gigafactory progress might have been falling behind.

Tesla felt it was necessary to get a jump on battery production to “reduce ramp-up risks for Model 3 and provide some potential expansion capacity for Model S and Model X.”

Popular Tesla Model S Trim Levels With Their New Lease Costs

Popular Tesla Model S Trim Levels With Their New Lease Costs

A New Channel For Sales – Leasing

When Tesla announced a new, more traditional, leasing program with US bank last month we couldn’t help but notice significantly lower cost-per-month ownership rates and speculated that a lot of new customers would opt for the deal.  Turns out, Tesla thinks so too.

“We expect to lease about 3,000 to 3,500 cars in North America during Q4. A large portion of these leases will be financed through our new bank partner leasing program. “

The Take Away

But what does it all mean?  We’ll use our “corporate-speak” decoder ring to translate:

“We kinda messed up that whole plant upgrade thing in the summer, and its costing us some sales now.  The launch of the P85D (and AWD variants) went great, and lots of people now want that – and because the margins are so swell on it, the Model X is going to take a back seat for a few extra months. 

As for the future, everyone keep your pants on about ‘if we have enough demand’, we are now sitting on several thousand orders for the S in America, but also tens of thousands for the X worldwide.  Are we going to make a lot of money (or any) in the near future?  No, probably not…but we are going to build a lot of plug-in cars.”

Shares of Tesla Motors traded up about 5% in early action after the announcement.  (A real-time quote can be found here)

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108 responses to "Tesla Reports Profit In Q3, Beating Street Estimate Of Slight Loss – More Model X Delays"

  1. ffbj says:

    TSLA is up big after hours.

    1. Mint says:

      It’s been all over the map after hours. Shot down to $228 initially, then rocketed up to $243, then to ~$235, and now back to $243.

  2. Kaiji says:

    Gembl paid off big time hoho

  3. pjwood says:

    “It appears the business of selling ZEV credits isn’t as dead as we were lead to believe”

    Jeez, I’ll say. Was that not a record quarter for credits? For financials, I think focus may go to the 23% margin, and 33k 2014 delivery retreat. It was only reduced by 2k, from 35k, but the margin figure (on a strong dollar?) may prove more of a test tomorrow.

    Now, the car. “reducing the number of options, and powertrain combinations”. Ok, now its RWD60, AWD60, RWD85, AWD85, P85 and P85D. My guess is S85 gets a power boost and P85 goes bye, bye.

    Options? They already packed the parking sensors and new auto-pilot features into the tech package. Not sure where to go on this.

    1. Anthony says:

      If you try to go to Tesla’s site right now and order, you get redirected to the home page. Their store is down while they’re updating the available powertains (thats what I’m guessing).

      I would figure they’d go RWD 60, 60D, 85D, P85D. The only RWD model would be the low end 60kWh unit, and everything else would be AWD. For an extra $4,000 or so on the 85kWh model probably isn’t a big deal.

      1. pjwood says:

        It’s back up. You were close. S85 gets both. 60 only comes in RWD and P only comes in AWD. So, 60D and P85 dropped.

        1. JakeY says:

          Wow, that’s surprising. I didn’t expect them to drop those models.

        2. Anthony says:

          Wow, really surprised they dropped the 60D. Why did they offer it in the first place. Seems like a basic management screw up – lets offer it an then pull it.

          1. pjwood says:

            Well, they appear to market AWD as better, with the deletion on P. A lot of us, and especially track guys still enjoy RWD. It makes great sense for devaluing their existing cars (as they’re attempting with weak trade bids).

            Dropped options:
            Green and Brown paint gone. Pinstripe alcantara seats gone. The new seats are still P85D, only.

            1. mike w says:

              Also increased the AWD option to $5K.

          2. LuStuccc says:

            Testing the demand?

          3. Kalle says:

            I wonder how many D60 were made?
            It must be rather reare, a colecters car now.

            1. Ed says:

              None. They weren’t going to be made until February.

    2. liberty says:

      Why would they get rid of the power option. It cost more for the motors and inverters, so you can’t simply sell as many 85s if you put all the goodies in. the 85 is pretty damn fast, and probably most of the sales, with the D option it gets even a little more range. They are nixing the D on the 60 model to force people that want awd up into the 85. They probably are parts constrained, but may make it an option a year from now if they get production under control. 2000 fewer sales this year, but maybe with higher revenues if they can produce and sell enough P85D and 85Ds

      1. Get feeling battery availability is constrained. Delay of Model X ramp up to late 2015 and Gigafactory production starting in 2016 should help to ease pressure on supply lines. The extra time will also allow for fine tunng and testing of proroduction line prior to ramping up MX speed.

  4. Emc2 says:

    Being picky again, but the letter to shareholders says that “we now expect Model X deliveries to start in Q3 of 2015.”

    1. Jay Cole says:

      Whoops, should read deliveries in Q3 2015, not production. Side effect of trying to write a synopsis on the fly when its released, (=

      Fixed…thanks!

    2. DaveMart says:

      The 4WD should tide them over for demand well until Q3 2015 if they can start the Model X by then to give decent numbers for 2015.

    3. Anthony says:

      And the Model X reservation page now says that if you place an order now you’ll get it in early 2016.

      1. DaveMart says:

        So, presumably they are talking fairly late in Qtr 3 for any substantial Model X production then, with maybe nominal production and deliveries prior to that.

        50k for the year total deliveries may be tough then, as I can’t see as good a response in Europe to the 4WD as in the US, and China is an impenetrable mess as regards information on what is really going on.

        1. Grendal says:

          Considering there are 20K pre-orders in place already. I wouldn’t be surprised if they said Q2 before you get a car. However they did say they are shooting for 2000 cars a week, so that is only 10 weeks at full tilt.

  5. Anthony says:

    Positive:
    Forecasts to deliver 11K units in Q4, that’s a lot of cars!
    Gigafactory to produce first cells earlier than expected in 2016
    Until the Model 3 arrives in 2017, no major manufacturing disruptions planned (at least, that’s how I read it)

    Negative:
    Model X delayed to Q3 2015 (ouch)
    One-time factory retooling cost them big this Q (gross margin down 400 bps)
    Increased warranty set-aside by 14M in Q3

  6. Mint says:

    Semi-props to DaveMart, who went out on a limb with this statement:
    “I put real deliveries in this quarter at nearer 30k than 35k. with unknown amounts of fooling with the figures.”

    He’s still almost assuredly wrong, but not *that* wrong, and still has a chance to be right if Tesla hits a production snag and misses substantially.

    1. DaveMart says:

      33k with their leasing program I believe.
      I adjust my views as new information comes in.
      What do you do?

      1. DaveMart says:

        Checking their site it looks like there is only a full price P85D for sale in December, with other cheaper ones not coming until Feb.

        That could put even their lower figure of 33k for the year in trouble, and hit Qtr 1 hard depending on cancellations.

        So nearer 30k for 2014 might be more like the mark after all.

      2. pjwood says:

        You may be more right, if they put half the short in this announcement, and left the other half for Q4 results.

        My theory is the 28% margin guidance is one-time, as they’re going to be selling more P85D this quarter, as they witness the S85D orders shift to Q1 ’15.

        I think Jay’s main point is the crux. They need to be healthy, and even a retreat on growth estimates is less critical than keeping to a viable high quality path.

        1. DaveMart says:

          Once they have digested the slippage in the two critical figures of 3rd qtr deliveries and the Model X I don’t think the Street will like this.

          Its more of a small guy’s ‘sure thing’ investment than one for the big boys though, so enthusiasts may think it a buying opportunity.

          1. liberty says:

            we have wall street’s answer stock is up after hours. I don’t think anyone likes the delay, but would rather delay than put out a bad model. Many probably like this very un old auto reply from tesla.

            In anticipation of this effort, we now expect Model X deliveries to start in Q3 of 2015, a few months later than previously expected. This also is a legitimate criticism of Tesla – we prefer to forgo revenue, rather than bring a product to market that does not delight customers. Doing so negatively affects the short term, but positively affects the long term. There are many other companies that do not follow this philosophy that may be a more attractive home for investor capital. Tesla is not going to change.

          2. Mint says:

            You mean 3rd quarter being short a mere 15 deliveries of guidance? If Tesla slipped to 7300 or 7500 like some analysts were guessing, there would be worry, but not at 7785.

            The X delay is heavily muted by the S AWD.

            1. DaveMart says:

              Apologies.
              S/be 4th quarter guidance, not 3rd qtr deliveries.

        2. DaveMart says:

          Another whacking great bulge at the end of the first quarter, I would guess.

          The Tesla factory must be very close to hell on earth, as anyone who has worked in a manufacturing environment where there is always a last minute get them out the door panic to hit targets will know.

          1. Mint says:

            Other than the annual summer shutdown (which was bigger this time), I really don’t think the factory is capable of such swings in output, or that Elon is stupid enough to run the factory so inefficiently.

            Any games being played for PR regarding monthly deliveries has to do with the distribution pipeline.

            1. DaveMart says:

              Its going to be smoothed out to a fair degree, but there are all sorts of games that can be done in a factory to hit target, mostly not great for efficiency which works best with a smooth flow but there you go.

              Musk said that they pushed everything they had out the door to hit target in Q3, and you don’t do that without all sorts of fun and games in the production process, running short (and consequently inefficient) groups through spraying a particular colour, hunting around the parts bin at the main factory and at suppliers to dredge up parts which had failed QC for a car to replace it and get it out the door, even if it means special delivery, and on and on.

              1. DaveMart says:

                I passed over the obvious one used to get product out of the door to meet a deadline.

                Letting components through which would normally fail QC or bodging them up.
                It varies from organisation to organisation how much of it is done, but to some degree is pretty universal.

                Try never to buy goods which were the last few to go through to meet a deadline, if you are lucky enough to find out that they were.

  7. DaveMart says:

    The financial are here if anyone has not spotted them yet:
    http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-14-398650&CIK=1318605

    I think that is quite positive, especially in view of the 2WD Model S being likely to get sales in the snowbelt so as to offset what are still disappointing European sales.

    I’d expect sales in the US to climb well above the ~4,000 a quarter they have been at since the early days blip.

  8. pjwood says:

    “The battery industry has to have more BS in it than I have ever encountered”, Elon Q&A.

    I think he’s saying they’re:
    Li – ing

    1. DaveMart says:

      I’m sure that like everything else he does he will find a way of moving it on to a whole new level.

      1. DaveMart says:

        More seriously that sounds as though it confirms that he is not going to get the increases in density he was no doubt hoping for, although he was properly conservative and projected cost decreases with no major improvement in energy density for the next few years in European talks.

    2. DaveMart says:

      Hi pj.
      Where’s the Q & A?

      1. pjwood says:

        Over at the website/Investors (at bottom). It’s the “webcast” option.

        1. DaveMart says:

          Still can’t spot the webcast option on the investor’s page.
          Senility is getting worse, from what I remember.

            1. DaveMart says:

              Many thanks.

              1. DaveMart says:

                Double helpings of floss when asked about Chinese demand.
                Lots of talk about rolling out infrastructure, much avoidance of talking about selling cars.

                In general, they reckon they can make 50k cars next year and reckon that the can sell them, with some caveats on the economic climate.

                Tesla is usually far more moderate in their claims than Tesla boosters have convinced themselves they are.

    3. Anthony says:

      If its not working in the lab in 2014, then it cant get into small scale production in 2015, and it cant get into large scale production by 2016.

      I do think they’re going to get some tech improvements in the battery, but it wont be some crazy 400Wh/kg battery that comes up out of nowhere. I expect it to be a tweaked version of the 3600mAh cells Panasonic supposedly has in the pipeline (300Wh/kg, 790Wh/L vs currently 250Wh/kg, 700Wh/L).

    4. scottf200 says:

      GM said the exact same thing then they were evaluating batteries for the Volt. The quote was something like if the battery potential suppliers are talking they they are probably lying. That is very close to what he actually said.

      1. DaveMart says:

        Yet strangely Toyota gets loads of flack on here for developing alternatives in case the super duper all singing battery is a long time coming.

        Moving batteries on significantly is extremely difficult, as when you improve one characteristic others tend to deteriorate.

        1. Anthony says:

          Toyota gets flack because, as Elon has pointed out before, the probability of reducing automotive battery cell costs is high, and will likely get down under $100/kWh in the next 10 years. The best case for fuel cells prices cannot match what automotive cells have now, never mind where they are in 10 years. I’m paraphrasing what he said a little, but thats the gist. If you disagree with him, I understand. If I were president, I wouldn’t go to the DOE and end all fuel cell research & funding – but I would have batteries be the priority because I believe that’s whats going to work.

          1. DaveMart says:

            Oddly enough, Elon supports batteries and that is what he is selling, and he hardly has the resources to develop fuel cells at the same time, which all the majors have.

            Since I am not an industrial chemist, I look to the most impartial appreciations of those who are for their judgements on what is possible, and the DOE as well as the chemists at all the major car companies are happy with fuel cells, whose cost is dropping far faster than batteries.

            What do all the major car companies and the DOE know though, particularly if Elon has said that he ‘hopes’ to get batteries under $100kwh?

            1. pjwood says:

              They know it is physically possible to get long range from an FCEV, with zero emissions. Cost is another matter. Electrolysis isn’t free, and with natural gas the likely feedstock, much of mechanizing hydrogen economically falls apart.

              The major OEMs and the DOE don’t have policy solutions to distribution issues. And deference to the experts, at this point, seems like certain would-be politicians claiming not to be “scientists”, when they defer without appreciating what is really going on.

              1. DaveMart says:

                pjwood
                Here is the DOE with the information:
                http://www1.eere.energy.gov/vehiclesandfuels/pdfs/program/hptt_roadmap_june2013.pdf

                And more on distribution etc:
                http://www.hydrogen.energy.gov/pdfs/review11/h2pn01_dillich_pd_2011_o.pdf

                The bottom line:
                Yes they have covered it – they are not actually complete idiots, and neither are Toyota and Hyundai etc, although of course not all the i are dotted yet.

                Here is a more digestible summary of costs for production of different technologies:
                http://www.hydrogen.energy.gov/pdfs/progress12/ii_0_dillich_2012.pdf

                Natural gas is already hits all targets, but that does not mean it is the only way, as for instance distributed electrolysis from renewable electricity is only $3gge, (Table 1).

                Hydrogen has been used is huge quantities in industrial processes for decades, including piping it for hundreds of miles, and they are well up to speed on corrosion issues etc.

                I have of course extensive references to back that up, but the stuff I have already given is a pretty good read.

                Costs for the fuel stacks are currently put at $47kw at a production level of 500k(pg 6)
                http://www1.eere.energy.gov/cleancities/toolbox/pdfs/hydrogen_webinar.pdf

                And this sort of costing is NOT a guess, and is something I do know a little about.

                This is not a projection of technology, but simply running the best that we CURRENTLY have against standard mass production models.
                I would be astonished if it were as much as 10% out.

                But that does not mean that is what fuel cell stacks will cost, as it does not take into account any technological progress before that level of production is reached.

                That is why the major companies are interested in fuel cells and hydrogen, because they are sure that both it and its fuel can be produced at reasonable cost, competitive to ICE.

                That is not to say that batteries might not do the job, or most of it, better, but that relies on breakthroughs in cost and chemistry which are not needed for viable fuel cells and hydrogen.

                Lithium air batteries are great if we can make them, at a good cost and with good durability.

                They are far more uncertain than fuel cells are though.

                So everyone who can afford to is developing both.

                1. Mint says:

                  No. You’re wrong. They are PROJECTIONS of manufacturing cost, not actual costs. And quite frankly they’re BS.

                  Here’s the most recent cost report:
                  http://energy.gov/sites/prod/files/2014/03/f11/13012_fuel_cell_system_cost_2013.pdf

                  They state $102/kW for 10k units (80kW) per year. That would be only $82M to produce 800MW of power generation. A single natural gas plant that big would cost $500M+, and more portable units for backup, UPS, etc fetch way more than $1000/kW. The US alone has 490GW of NG capacity, and installed 5GW just in 2014 so far.

                  There’s an enormous market for fuel cells in stationary generation that can take 5x the price that the automotive market would.

                  Yet who is producing fuel cells for $102/kW, or even $300/kW? Nobody. Those cost estimates are completely bunk.

                  1. DaveMart says:

                    Of course they don’t know what they are talking about, they must have been completely wasting their time doing PhDs in the relevant subjects.

                    Quite honestly if you wandered on to a building site and started telling the guys their trade, you would simply get a punch in the nose.

                    Do you know better than the experts about everything?

                    For your costs for grid power, which you insist on diverting the subject to, where are your costings for reformers for the natural gas for the fuel cells?
                    What else is in the system costs as well as the fuel cell stack for grid power?

                    I rely on the analysis of experts, which I do not have the training or expertise, or the time or money to analyse in detail.

                    You rely on the assumption that the only real expert is you, and that you know all the limiting criteria.

                    Since they specify on the link you gave the exact fuel cells and manufacturing processes they are costing, they are clearly present costs, not some future technology.

                    Congratulations however on knowing far more than the DOE and the major car manufacturers.

                    1. Mint says:

                      You don’t need a PhD to look at the prices in the market (but I have one anyway). Nobody is making fuel cells that cheap.

                      Companies and gov’t have put in billions into fuel cell research, and you’re telling me that none of them can afford $82M/yr to produce 10k units/yr?

                      Get real.

            2. GSP says:

              True, the major OEMs have made incredible progress on fuel cell cost, relibility and performance.

              However, the major fuel companies have made ZERO progress on the cost and inconvenience of H2 fuel.

              GSP

              1. DaveMart says:

                Yes they have.
                See above, whenever it gets through moderation.
                I don’t understand where people get some of their notions from, when the data is so easy to find.

                1. Dwayne says:

                  form your source “With the exception of natural gas reforming, all hydrogen production technologies discussed in this roadmap require significant advancements and additional development prior to commercial use.”

                  From the same source the greenhouse gas emission per gge is only slightly less than burning gasoline.

                  So what makes you think this is as good or better than existing battery technology?

                  1. DaveMart says:

                    Dwayne:
                    Since I quoted several sources, some of them over a hundred pages long, you will have to be more specific as to which bit precisely you are looking at for me to address your question.

            3. Mint says:

              The DOE has already had to significanly revise downward its battery cost estimates from just a few years ago.

              Meanwhile, it’s 2013 estimate for fuel cell cost is only $102/kW at a mere 10k units per year. If that was anywhere near true, stationary fuel cells would be destroying NG peaker plants on cost, and Toyota wouldn’t be talking about $70k for its 2015 FCV.

              The DOE does fine work when it comes to presenting actual data. It’s garbage when it comes to predictions.

              1. DaveMart says:

                @Mint:
                If you wish to critique specific claims, please provide precise references so that I can take a look at them in context.

                1. DaveMart says:

                  @Mint:
                  I find it astonishing that you should have a casual glance at data, and imagine that you know so much more about it than people whose life’s work it is.

                  Even without the reference which is always given by anyone who knows how such debate is conducted, the following misapprehensions on your part are obvious:

                  ‘ it’s 2013 estimate for fuel cell cost is only $102/kW at a mere 10k units per year. If that was anywhere near true, stationary fuel cells would be destroying NG peaker plants on cost, and Toyota wouldn’t be talking about $70k for its 2015 FCV.’

                  Neither Toyota nor anyone else is currently making fuel cell stacks at a rate of 10k a year.
                  They are producing in the hundreds, if that, and have only just started doing so, as they intend to move on to newer processes before going to a 10k level.

                  You are confused between using PEM fuel cells for emergency supply, where they are used around 50% of the time instead of other fuel cell technologies, and using them as even a peaking power plant, where they are not.

                  Cars and even more emergency power supplies are only used a fraction of the time out of the 8760 hours a year.

                  Plants for grid use have to have lifetimes in the tens of thousands of hours for decent life cycle costs.

                  SOFC or MCFC are what is used for the grid, which are an entirely different matter, and are rapidly expanding in their use but are not $100kw.

                  Instead of seeking to correct the experts in the field, or declaim on how you could teach them a thing or two, it is usually a good idea to firstly find out a little about the subject, and secondly approach it with the thought that people who have studied it for years usually know what they are talking about, and that any gaps are more likely to be due to your own defective comprehension.

                  Tyros make fools of themselves when they imagine that they can instruct.

                  1. Mint says:

                    There are many GW of peaking plants that are used only a few hundred hours per year or less. The US had 1063 GW of generation capacity in 2012, but average use was only 467MW. The rest of the capacity is to handle peaks.

                    10k units of 80kW each @ $102/kW is only $8.2k each, and $82M/yr total. That’s peanuts for a company like Toyota, and highly profitable for 7 ZEV credits or Japan’s $20k FCV subsidy.

            4. From the documents you posted:

              “DOE’s goal is to reduce the cost of hydrogen production to ≤$2.00 per gge1 ($2.00 to $4.00 delivered and dispensed2) by 2020.”

              $2 to $4 per gallon equivalent to the consumer. By 2020.

              I think most consumers will prefer to purchase 200 mile EVs which cost $1 per gallon equivalent to operate and have nation-wide refueling infrastructure already in place, including at home, overnight.

              That’s going to be pretty hard for Hydrogen to compete with.

              1. DaveMart says:

                The competition is not with BEVs, but with ICE cars.
                Fuel is only a small part of total cost, with depreciation being the biggest cost of motoring, including depreciation of the battery packs

                FCEVs get over 60mpge, so that they are far more efficient per mile than most ICE cars.

                VW plan to make them as PHEVs anyway, so that for everyday use they would be running on electricity anyway.

                1. Mint says:

                  Where is there any evidence that VW will build FC cars at all, let alone FC PHEV? I’ve already asked you before.

                  Here’s VW’s CEO on FCVs:
                  http://green.autoblog.com/2013/03/16/volkswagen-chief-fuel-cell-vehicles-not-possible/
                  VW Japan’s President said this recently:
                  http://www.bloomberg.com/news/2014-09-07/vw-says-fuel-cell-cars-doomed-to-struggle-beyond-japan.html

                  At best you’ll see a single model that will tank in sales due to their own PHEV lineup.

                  1. DaveMart says:

                    VW always downplays every alternative fuel technology right up to the time they are ready to sell them.

                    I said that they would produce electric cars when many said they would not, and told people to follow the money, not their statements, and now:

                    ‘“We have a huge hydrogen car programme ongoing,” said Krebs. “We have a lot of cars that are being tested with a fuel cell stack, but we have to make clear that hydrogen vehicles in bigger numbers will not happen before 2020. There is no infrastructure available and the technology is extremely expensive and not as reliable as conventional vehicles.”

                    And:
                    ‘Krebs believed the best solution would be a vehicle that relies primarily on battery electric propulsion, with a hydrogen fuel cell as a back-up.

                    “The best hydrogen vehicle will be a plug-in – you enlarge the capacity of the battery to a certain extent, and do most of your journeys using that, and only in the case of emergency – or if you wish to drive long distances – do you use the hydrogen. In terms of energy saving, this is the only way to have a sensible hydrogen vehicle,” he said.’

                    The Volkswagen Group’s MQB car platform has been future-proofed to accept fuel cell technology if necessary, said Krebs, but the company’s short-term focus was on refining its electric and hybrid cars: “First of all we need to do our homework and make a very good electric and plug-in hybrid vehicles. In doing so we bring down the cost of the components and optimise the efficiency and performance of the products. Hydrogen can come later because it uses all the same technological components.”’

                    http://www.autocar.co.uk/car-news/motor-shows/hydrogen-cars-wont-be-marketable-until-2020-says-vw

                    Not exactly a ringing endorsement, I grant you, but check back some of the things they and Audi said about BEVs and PHEVs before they built them.

                    No one claims that fuel cell vehicles will be commercially viable before 2020 anyway.

                    1. Mint says:

                      He said “in terms of energy saving”, which is undeniable owing to the poor conversion efficiency of H2 FCs vs batteries.

                      In terms of economics, FCPHEV has no chance against PHEV, because a small ICE is much cheaper than an FC system, and gas infrastructure is a sunk cost while H2 is expensive to build. FCPHEV won’t even be able to compete with FCEV, because batteries are more expensive than H2 tanks.

                      We already know that economics are the only way any alternative fuel vehicle will succeed.

                      You should heed your own observation that “it’s not exactly a ringing endorsement”. In no way is it proof that VW is going to build a FCPHEV.

          2. Priusmaniac says:

            I would stop all Hydrogen Fuel cell funding and leave only some funding for direct bioethanol fuel cells. At least those make sense for long range airplanes, long range boats, car rex, and stationary generators.

            1. DaveMart says:

              Its just as well you are not then, isn’t it, as quite apart from any applications in transport PEM fuel cells the same as in cars did an excellent job in Hurricane Sandy in providing emergency power, not breaking down as did many diesel generators or running out as did batteries.

              They are also great for providing power for mobile phone masts in remote locations.

              It is usually unwise to rule out vast areas of technology as of no use.

              1. IDK says:

                DaveMart – I can’t fill up my FC car at your home, but I can my EV!

                1. DaveMart says:

                  No you can’t – I am far too mean to let you have the electricity! 🙂

              2. Priusmaniac says:

                Hurricane Sandy is the exact result of fossil fuels use like gas, oil and coal. Hydrogen is made from fossil fuels and would therefore be no different and if Hydrogen was made from renewable electricity it would be better to use that electricity directly to charge a car battery.

        2. Lensman says:

          Toyota, Honda, and Hyundai “get flack” for promoting fuel cell cars, which Elon Musk rightfully characterizes as “fool cell” cars. The problem is not the fuel cell, it’s the fuel. Hydrogen is much too expensive, for reasons of basic physics, to ever be competitive, regardless of any tech improvements in production. And that, Dave, is a -fact- you continually reject, as if your opinion can override the laws of physics. Good luck with that.

          The only industry that fuel cell cars benefit is Big-Oil-and-Gas, because commercial scale hydrogen fuel is made from natural gas. Is Big Oil funding the rollout and promotion of fool cell vehicles, as a method of delaying the EV revolution? I dunno; I haven’t seen any actual evidence of that. But they certainly do have both the motive and the money to throw away on that, unlike the auto manufacturers. As they say: Cui bono.

  9. mhpr262 says:

    I think those falcon doors were a mistake. I am pretty sure they and the troubles they cause are the main reason behind the pushed back release date of the X. I have never heard anybody but Elon get excited about them.

    1. scottf200 says:

      Au contraire, I am very excited to have them. I am looking forward eating out with 4 other friends. Very cool feature I want. Minor snow brushing over what I already do on the doors top edge. No big deal.

      1. Stuart22 says:

        I too think they are cool. But a few weeks ago at GM-Volt.com I also brought up the falcon doors as the reason for the delays. Why else – other than those doors, the Model X and Model S are pretty much alike.

        It’s the doors – getting them to work consistently well without rattles & wind or water leaks has got to be a production nightmare. And sure to cause a spike in post-sale warranty work for Tesla.

    2. Priusmaniac says:

      I don’t know if it is an error, but I think that an extra Model X version with conventional doors would be a plus, both in choice for the customers and in the sense that that one could probably jump start deliveries faster. I am pretty sure no one would blame Elon for proposing an extra X version, at contrary.

  10. tftf says:

    Call me a perma-bear, but as I estimated in prior comments the Model X ramp-up could be delayed into 2016 given the histor of delays.

    Here’s how I see it for Model X:

    Q3 2015: Signature deliveries
    Q4 2015: A few thousand deliveries at best, maybe 1-3k

    Essentially all but the first reservation holders will get the car in 2016 in my estimates.

    1. tftf says:

      *** mod edit *** above post typo fixed at poster’s request *** mod edit ***

      1. DaveMart says:

        If you are right hitting 50k for the year will be very tough, although maybe they might squeak in.

        I would put demand for the Model S including the 4WD model at around 45k, tops, so they might manage it with a few thousand from the Model X, but it will be tight.

        1. See Through says:

          I would be very surprised if they sell more than 35K model S in 2015. Few reasons:
          1. Competition is increasing
          2. Many govt incentives are ending
          3. High chance of slowdown in Tesla’s major growth market of China
          4. Used Model S coming to market
          5. Cheaper gas prices
          6. Possibility of macroeconomic downturn in US
          7. Slowdown in share price appreciation for Tesla

          1. Jouni Valkonen says:

            Potentially reduced demand cannot have influence on Q4 deliveries as wait times are at best six weeks for premium customers and at worst six months for the rest of us.

            It is odd that Dave is thinking that demand cannot increase, because only less than 10 % of Tesla’s potential customers are even aware of the product not to mention that they have had a test driving opportunity. And for X, the product does not even exist yet and still the demands seems to be several tens of thousands.

            Therefore when Tesla gets established as a brand and there are test driving opportunities in every major cities on this planet and Tesla has commercial adds in SuperBowl and Hollywood block busters, we can safely say that demand for S has potential to quadruple.

            Therefore my guess is that stabilized demand for Model S alone is around 200 000 cars per year around in 2017.

          2. DaveMart says:

            SeeThrough:
            I think the 4WD will swing it, as it taps new markets in the snowbelt so they should get a boost in the US where the bulk of their sales are from the current ~4,000 a qtr to 5-6k.

            They need the Model X pronto though.

          3. Priusmaniac says:

            I would rather think 50000 is a low estimate and more is more likely.
            This could be for the following positive reasons:
            1. There is still no real competition and most people only really know the car now
            2. Incentives are still there even if they are not required anymore due to lower prices
            3. High chance of sales in brand new markets like Brazil, Russia, India and expansion in China
            4. Used Model S demanding replacement by brand new ones
            5. Gas prices still four times as expensive the equivalent electricity
            6. Possibility of macroeconomic upturn in US and Europe
            7. More Tesla confidence from potential buyers because the brand has been there one more year

          4. Priusmaniac says:

            By the way some extra reasons:
            – lower battery supply constrain due to Panasonic’s actions
            – much more available superchargers
            – new D models creating a boost on their own
            – burgeoning Model S taxi, corporate and government fleets
            – increasing emissions regulation and global warming alarm
            – five star safety level on Euro NCAP

            There is just no end to the cascading reasons to buy a Model S.

          5. MDEV says:

            1)I don’t see any competition for model S in the near future.
            2) Used model S will compete with new i3 models and similar not with new Tesla S.
            3) Low gas price at this point will not affect the MS sales, people are buying because is a better car, been electric falls second.

          6. See Through says:

            You folks are all hilarious! But you all missed one important bull reason, and that is the significantly lower leasing cost in US. I think, this will help the sales a bit. And if they cut similar lease deals in Europe, it might help.

            We will see next year. I will be around 🙂

            1. Priusmaniac says:

              I must admit I had a good time turning all the negatives into positives. Hope you don’t mind.
              But actually you just added to the cascade by mentioning that extra cars will be build thanks to the new lease deals. For Tesla that actually equate to a sell at the leasing bank. So that is still more sales.

  11. Taser54 says:

    It appears that Tesla has trouble with deadlines.

    Lots of rationalization for continued delays.

    Tesla IWII.

    1. Jouni Valkonen says:

      That was not my impression. Most important deadline is when the Gigafactory is online and in this they were ahead of schedule. This indicates that the Tesla Model 3 and ramp up of production of S and X can be faster than anticipated. And Model 3 will get on markets as planned in 2016.

      Tesla does not lose money if they delay the Model X, because right now they do not even have enough production capacity for Model S to meat the demand.

      1. Tftf says:

        Still 2016 for Model 3? No way. Look at the history of delays in the Model S and X…and the Roadster before that. Tesla can’t keep deadlines, it only got worse on the X.

        The Model 3 will be a 2018 car for volume production..and even that could slip.

        I was saying that since 2013 and I’m more confident than ever in this estimate.

  12. David says:

    Really have to wonder when the Model 3 can come out. GM is coming out with the 2nd gen Volt in January, working on a 200 mile EV, Nissan will have a higher range LEAF out in 2015 or 2016 at the latest. Meanwhile the Tesla Model 3 keeps staying years away. Looks like it will be late to the market.

    1. Stuart22 says:

      Where have you heard about Nissan coming out with a higher range LEAF in 2015? Where’s the beef?

      1. Big Solar says:

        I’d like to know that too.

      2. kdawg says:

        LOL, “Where’s the beef?!”

        1. Anon says:

          “Where’s the Leaf???”

          Mmm, classic. 😉

          1. Stuart22 says:

            Yukity-yuk-yuk -:)

    2. Jouni Valkonen says:

      Tesla Model 3 does not compete with Nissan LEAF, but it is competing with Audi A4 Quattro or BMW 328i xDrive. These are real and serious entry level luxury cars.

      Leaf on the other hand cannot maintain demand without subsidies and subsidies for Leaf are discontinued well before Tesla Model 3 enters to markets in late 2016 and early 2017.

      1. Tftf says:

        “Leaf on the other hand cannot maintain demand without subsidies”

        ? We haven’t even seen the LEAF 2. At 150-200 miles of range and more mainstream design it could sell like hotcakes – and beat the Model 3 to market by months.

    3. Tftf says:

      My estimate for the Model 3 (volume production) remains 2018.

      If Tesla wants margin success in China and even Europe it may have to localize production to Asia and Western Europe for the cheaper Model 3, that could delay things further.

    4. Lensman says:

      It matters very little what EV models legacy auto makers market before the Model ≡ comes out, because those companies have a disincentive to sell them in large numbers, even if they are a compelling car. If some company is serious about making EVs in the numbers Tesla is planning for the Model ≡, then they’ll have to build the equivalent of the GigaFactory to ensure a supply of batteries. So long as nobody else is doing that, we can be sure the Model ≡ will have no serious competition.

      There is no opportunity here for an Apple to do an iPhone “stealth move” into the market. Making cars is heavy industry, unlike consumer electronics. If a large company moves into the EV market, there will be plenty of signs of that. Nor will any new company be able to ramp up production much quicker than Tesla Motors has. Building a new auto manufacturing company is hard.

      Eventually, Tesla Motors will have some real competition. But that won’t be for some years, at least. Perhaps decades. Given China’s industrial boom, quite possibly competition will come from there, starting first with the domestic (Chinese) market, and then expanding to other markets.

      You’ve heard the saying “Follow the money”. But when it comes to EV production, follow the battery production.

  13. Lindsay Patten says:

    ‘Because of the deep order book already for the Model X (reportedly past 21,000 deposits placed), Tesla notes on their site that reservations placed today for the SUV will be filled in “early 2016″.’

    This suggests to me that Tesla expects to sell 20,000+ Model X by early 2016, which doesn’t sound as pessimistic as some of the comments here.

    1. Stuart22 says:

      What was the date they promised when they first were asking for and receiving deposits? 2013?

      Why the delay? Had I put my hard earned money down, I’d want to know. Better not be “because we’re doing other things we need to do’ or I’d consider demanding a refund.

      1. lithiumfire says:

        I am pretty sure the agreement says you can get a refund at any time. Of course, you would then lose your place in line.

  14. DaveMart says:

    (Very) rough notes on Q & A to make it easier for folk to locate subjects by time – all times approx, sometimes just the question if I did not spot much substance in the answer, some omitted altogether as I was drinking my coffee, but FWIW:

    http://www.media-server.com/m/p/sqcykevk

    2:47 50k deliveries 2015
    3:52 70k pa based on initial orders at the rate they are occuring after the AWD announcement, but don’t count on that as the true underlying rate
    4:30 Just over half of orders now in North America
    5:58 Demand not the issue, just supply as they have a lot of things they could do if they needed to to stimulate demand, but there is no point as they are supply constrained.
    6:55 50% YOY growth for the next few years.
    8:43 Refused to break down demand by region and month on the grounds that it is misleading.
    11:30 States does not allow reselling and claims not to know that that is happening in China.
    12:37 Currencies not hedged save by selling goods in different regions providing a virtual hedge.
    13:49 Prices in Europe will probably rise due to currency movements.
    17:34 Battery advancements – anything which is not working in the lab right now is not going to be ready for mass production by the time the GF opens, so they are not worried that the investment will be made obsolete as soon as it is made.
    19:06 No battery breakthroughs in sight
    20:24 The 30% cost improvement for batteries in the GF is due to location and economies of scale, and does not count technological improvements, although some are probable.
    22:20 Customer reservations up, not flat as the figures look at first glance
    24:45 7200 production qtr 3 – they shipped everything they had out of the door.
    25:25 Model X – betas done, 3rd qtr 2015 ready for mass production
    28:45 Model X – they don’t have major issues, are sorting details.
    29:41 The pilot plant for the GF will have about the same output as the present largest battery factory there is.
    31:45 Chinese production when they run out of space in California and after Model III start.
    34:00 China – have not asked about using Tesla patents, working on getting on the Government electric vehicle list.
    35:30 Accruals
    36:30 Why were deliveries in qte 3 concentrated in North America?
    They are working on getting the infrastructure and servicing set up in China
    38:57 How much has Panasonic committed to investing?
    Talked only about investment when the GF is completed of $1.5-2bn
    40:14 Defended tax incentives in Nevada saying they are over 20 years and amount to ‘a few percent’
    42:00 China: They can probably hit target for total sales next year even if they sell zero in China and are busy rolling out infrastructure there.
    43:00 Model X – If you order now delivery will be in 2016
    43:40 How many are you selling in China?
    Talked about that they are rolling out the infrastructure, laying the foundation etc.
    45:30 What capacity is your final assembly line?
    – Not a constraint for the next few years
    They will build a state of the art body line next year.
    47:30 Why are you building the Model X?
    – it is not a bridge to the Model III, but generates cash and is a great car
    49:30 Direct leases – will continue even though a bank now does most leasing
    50:30 How does the Model X relate to the Model III?
    -The small motor in the dual drive is a second generation motor, along the line of development for the Model III motor.
    – The GF is for the Model III
    – The Model III will not just be a 20% smaller Model S as it could be, but more interesting.
    52:50 – Automated Driving – why bother with a great car if you are not driving it?
    – Some time away, perhaps 10 years.
    – Carsharing- most things which could be shared aren’t, so there is likely to be a limited place for it.
    55:10 Is the share price high and do you need additional funding?
    – no need to raise money at the moment, and perhaps not until around the time of the Model III if then
    57:00 What is your present production run rate?
    – Complex numbers, not relevant, but we reckon we can make 50k next year of the Model S
    58:10 What is the demand by region?
    – Talked about the need for Chinese infrastructure
    59:50 How big will the market be next year?
    50k for the Model S, but macroeconomic factors could affect it in various regions
    1:00:00 What new features did the customers like most?
    – Seats, wipers, sunvisor
    1:03:30 Reduced options?
    – No dual motor 60kwh
    – No more orders being taken for RWD Performance
    1:05:05 What are your margins?
    – Wait for next qtr
    -29.6% GAAP Qtr 3
    – 27% GAAP Qtr 3 excluding one off and ZEV
    1:06:37 – Market for grid storage implications?
    – Significant long term and 30% of GF output, synergy with car batteries.
    1:08:45 AWD Order and Wait times?
    – 6-7 weeks to 4 months depending on location.
    – Wait times static.

    Whew!
    This is on one listening, so there may well be errors, but there it is.

    1. See Through says:

      Thanks! Many good questions. No real answers.

    2. scottf200 says:

      Thanks for the efforts on that. Great contribution.

  15. EVer says:

    I cant wait for the Model X to come out but i’d never want an SUV.

    if i wanted a Tesla (which i do) i’ll take the Model S no question so i dont see how anyone could be mad.

    And people shouldnt be mad, Tesla isnt going to put out a half ass unfinished product, this is great.