Tesla's Order Backlog And Why It Is Worth More Than Porsche

|
 |  About: Tesla Motors (TSLA)
by: Siddharth Dalal

Summary

Porsche has shown great growth in the last few years.

However, Porsche's growth pales in comparison to Tesla.

Tesla's Customer Deposits rose to a record $228M, implying exploding worldwide demand and constant backlog of several months.

I have reported before about how Customer Deposits is the most overlooked number for Tesla (NASDAQ:TSLA). Never before has a company held a constantly growing sum of such magnitude of customer money for a product. As deliveries are growing, deposits are growing in sync, keeping Tesla at a constant backlog of several months of production. There is so much demand for Tesla cars that the company is avoiding stoking more demand.

At the end of last quarter, Tesla held $228 million in customer deposits. Assuming a Model X backlog at the end of the quarter of 1,800 Signature and 16,000 Production models, we have Model X deposits worth over $150 million. This leaves approximately $75 million for Model S deposits or approximately 30,000 cars.

Tesla is expected to have a production run rate of 1000 cars a week at the end of 2014. At that rate, they have a 30-week and growing backlog. This bodes well for the foreseeable future.

There are many doom and gloom Tesla analysts that constantly conflate demand and deliveries, but to get the real truth, follow the money i.e. customer deposits. Tesla clearly stated about this demand in their letter to shareholders:

In both North America and Europe, Q2 Model S orders increased sequentially at a much faster rate than for the rest of the automotive industry.

Also, Tesla sells cars at average prices of over a $100,000 and as of this writing, has a market cap of about $30 billion, more than that of Porsche at about $27 billion.

To see whether this is justified, let's look at the growth of Porsche and Tesla:

At this rate, Tesla is expected to sell more cars than Porsche at some point in 2017/2018, coinciding with the Gigafactory and Model 3 launch on its path to 500,000 in 2020.

This great growth rate and significant technology and infrastructure lead in electric vehicles will keep Tesla ahead of the pack for many years to come. I wouldn't worry about Tesla's prospects unless all major manufacturers simultaneously announce groundbreakings of extremely large battery factories or a global fast charging network. Unless that happens and companies stop fooling around with hydrogen, there neither is nor will be any viable competition to Tesla or dampening of Tesla's growth.

In conclusion, I leave you to think about this: If $60,000-$120,000 luxury vehicles for the wealthy caused Tesla to hold deposits like this, imagine the growth when their cheaper model comes along. In a growing market for plug-in vehicles, Tesla is king even at the current valuation of $30 billion.

Disclosure: The author is long TSLA. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.