This month will be filled with Tesla (NASDAQ:TSLA) announcements. We have the earnings report on October 26, then on October 28 we have the SolarCity/Tesla product announcements, which will include the solar roofing product, and likely also the new Powerwalls and Powerpacks, with doubled capacity and now using the new 2170 cells produced at the Gigafactory.
This weekend, though, Elon Musk added something new. There will be a Tesla product announcement on October 17. Elon Musk also adds that this product will be unexpected by most.
Source: Elon Musk's Twitter Feed
Well, I'll be the first one to say I have no idea what the product will actually be. However, it coming on October 17 after a quarter of massive discounting and desperation to shift cars might offer a clue as to its nature.
You see, after such a quarter, Tesla's backlog will be depleted and Tesla will be having trouble finding enough orders to keep its factory running at the same speed. Indeed, Tesla entered October idling its factory for a week. It's not the first time Tesla has been here, either. There's a pattern. Here's what the pattern is based on:
- October 10, 2014: Tesla unveils the 'D,' the AWD versions of the Model S. These were clearly rushed, until the end of Q4 Tesla even shipped cars with the wrong seats in them, as well as filled with gremlins, and not having the announced range. Tesla's software would only catch up in the following months, with the autopilot features being delivered 1 year later.
- April 8, 2015: Tesla unveils the 70D. The 70D replaced the S60, with massive amounts of new content while costing just $5k more.
- July 17, 2015: Tesla unveils the S70, with the same content as the 70D except for AWD, yet presented at the same price as the S60 which was retired on April 8.
- April 12, 2016: Tesla unveils the Model S facelift and new equipment.
- July 9, 2016: Tesla unveils the S60 and 60D, the new lower price versions of the Model S. These versions have the same content as a 70D/75D, including the same battery, so they have the same cost to produce. Yet, they're proposed starting at $66k.
What do all of these product announcements have in common? They all happened early in a new quarter. Most of them happened when doubts were surfacing regarding Tesla's ability to meet its deliveries guidance. Some, like the "D" versions, were clearly rushed.
So what does October 17 have in common with all of these announcements? Well, it's also early in the quarter and there are also doubts that Tesla can meet its now-lowered 79,000 deliveries guidance for 2016, after spending so many discounting bullets during Q3 2016 (as well as eating up Model X's backlog).
So, taking into account this pattern, while I don't know the exact product Tesla will announce, I'll guess that this product:
- Will be immediately available.
- Will be car-related.
- Will constitute either a discounted version or an addition of equipment/content which can drive immediate demand.
There is something which would fit these requirements: the introduction of Autopilot 2.0 hardware. However, there are a couple of problems with this:
- First, with new Mobileye (NYSE:MBLY) generations out of the picture, adding such hardware could present a dead-end (though it's not inconceivable another supplier - like Nvidia (NASDAQ:NVDA) - could use the same sensors).
- Second, Tesla has just introduced version 8.0 of its software, including autopilot improvements. If Tesla introduces new hardware right now, it likely wouldn't be accompanied immediately with new software using it to its potential (this would be similar to what happened with the "D" versions).
However, in a really desperate move, perhaps Tesla could indeed introduce Autopilot 2.0 hardware and promise the world for later (near full autonomy or something like that). Moreover, some easy-to-add features could be added immediately, like 360º parking vision ("birds-eye" view), similar to what already exists in some competitors.
As An Aside
This isn't related to the new product, but it is relevant for Tesla. A usual theory among Tesla fans is that the traditional automakers will be doomed because they're deeply invested in their ICE-making operations and the EV revolution will put them all under. Well, this theory is being challenged by reality because of a very simple fact:
- Traditional automakers will be building EVs alongside their ICE (Internal Combustion Engine) cars in the same factories. We can see this is a fact both because of GM's (NYSE:GM) Bolt already being built that way and because Mercedes has stated as much recently, saying it would be building its EVs alongside its traditional vehicles (in the same factories).
The truth of the matter is that the car bodies will just be mated to a different powertrain, the same way they already are mated to the ICE powertrain today. As a result of this, most of the automaker's factories will just continue chugging along, transparently switching from ICEs to EVs while keeping their existing efficiency and quality untouched.
The product Tesla is set to release on October 17 is likely to be car-related, available immediately and likely to boost near-term demand. However, it might also negatively impact margins, as most of the previous early-quarter demand-boost products did. The margin impact is less certain, though - because at least 2 of the previous announcements (the "D" version and the facelift) were not margin killers (it could be argued they even increased margins).
A likely guess would be Autopilot 2.0 hardware. However, this is just a guess. I think the nature of the product will be as described above, but I'm far from certain what the actual product will end up being. There's also the chance that the new Powerwalls and Powerpacks get announced on October 17 instead of October 28 - this would eliminate the new "car-related" product I am predicting here.
Disclosure: I am/we are short TSLA.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.