'Production constrained' common theme during Tesla conference call (in progress)


Tesla Motors (TSLA) CEO Elon Musk says the automaker will be "production constrained" - not demand constrained as it moves forward next year.

Model S deliveries will expand into Asia and new parts of Europe in 2014, says Musk.

The call bogs down into details on battery components before getting into some more interesting production questions. Musk says the company is set to sustain a production run of 20K a year in North America, but he seems cautious on aiming higher globally due to production constraints. Nothing specific yet on production targets for 2014.

Earnings call webcast

TSLA -9.4% AH.

From other sites
Comments (23)
  • Yesterdays_news
    , contributor
    Comments (2084) | Send Message
     
    What about the other car production start dates?
    5 Nov 2013, 05:54 PM Reply Like
  • Esekla
    , contributor
    Comments (4447) | Send Message
     
    They've already said the Model X will ramp up in 2014, but not reach full production until 2015.

     

    I think the important info is already out, margins @22%, cash on hand UP by almost $50m. Look for correction during market hours in the days to come as detailed here: http://seekingalpha.co...
    5 Nov 2013, 06:07 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (7514) | Send Message
     
    Mass-production of Model X (comparable to Model S output) is only achieved in "Q2 2015".

     

    If you don't believe me on that date, listen to the CC. There will probably be very few vehicles built in late 2014 for demos etc.

     

    PS: The elephant in the room however continues to be battery supply. See my comment below on that.
    5 Nov 2013, 06:22 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (624) | Send Message
     
    Why expand in Europe and go to Asia if there are production constraints? Why not conserve capital and focus on the U.S. market first? It looks like the U.S. demand is getting soft - there is no other logical explanation.
    5 Nov 2013, 06:02 PM Reply Like
  • AlexiaEP
    , contributor
    Comments (1074) | Send Message
     
    "Why expand in Europe and go to Asia if there are production constraints?"

     

    He clearly answered that question. They delivered cars to Europe because customers had been waiting for years. Secondarily, Tesla's goal is to accelerate world wide adoption of BEVs. It's about the world, not just the US.

     

    "Why not conserve capital and focus on the U.S. market first?"

     

    Are you kidding? They have MORE money in the bank after this quarter than the previous WHILE EXPANDING world wide.

     

    "It looks like the U.S. demand is getting soft - there is no other logical explanation."

     

    Nope, that question was just answered as well. First a chuckle and then, 'nope, we have much of an untapped US market left.'
    5 Nov 2013, 06:12 PM Reply Like
  • Esekla
    , contributor
    Comments (4447) | Send Message
     
    Actually, they've just explicitly said that North American order and demand have grown, but they simply have to deliver some cars to Europe. More important was the comment that further growth will be funded from free cash flow, although hard # projections will have to wait for the end of year report.
    5 Nov 2013, 06:13 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (7514) | Send Message
     
    " They have MORE money in the bank after this quarter than the previous WHILE EXPANDING world wide."

     

    And when in need for both the Gen III ramp-up AND the new "battery giga-factory" (quote from the CC) they will need that cash and probably more.

     

    This huge battery plant won't come cheap nor built itself in a few months.

     

    I see a huge secondary offering coming between now and Gen III introduction date, today's CC remarks just re-iterated this in my opinion.
    5 Nov 2013, 06:43 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (624) | Send Message
     
    @Esekla, Alexia

     

    1. I understand what they say - I don't understand what they do. If they have major issues to work through - focus on them first, then expand sales to the new markets. Europe and Asia are not going anywhere.

     

    2. $50m is peanuts in auto manufacturing. You can't fund anything with such cash flow. So, again, why spend money on Superchargers in Germany and give press-conferences in London if they can't meet the demand in the U.S.? Why start taking pre-orders in China, if they won't have enough cars to supply the U.S. customers for at least two years?
    5 Nov 2013, 07:35 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (7514) | Send Message
     
    @Andrei. Good question in 2. especially because it doesn't appear that they can magically resolve these production issues short-term (this at least how I interpreted Musk's remarks in the CC).

     

    They will only anger customers worldwide who pre-order with deposits and then have to wait for months to get the car in 2014 or 2015...
    5 Nov 2013, 08:05 PM Reply Like
  • Esekla
    , contributor
    Comments (4447) | Send Message
     
    Read the article I referenced. The short answer is because Elon doesn't want Tesla to become the next GM, he wants it to become the next ExxonMobil. However, whether that goal is achievable or not, either has Superchargers along the way to further the goal of "popularizing" electric vehicles.
    5 Nov 2013, 08:19 PM Reply Like
  • Yesterdays_news
    , contributor
    Comments (2084) | Send Message
     
    "Why expand in Europe and go to Asia if there are production constraints?"

     

    Why not buy a battery company so you can better control battery production and short falls. You have the capital.
    5 Nov 2013, 08:34 PM Reply Like
  • Water Brothers Financial Co...
    , contributor
    Comments (382) | Send Message
     
    Because they can hide their sales, fudge their accounting and because they are about done in US with the hot-to--trot early adapters. The people who can buy the car and had to have the car have bought it, more or less. Great simple lesson in investing - anytime a US company starts signing a bunch of international deals before it is even profitable here (and, please Tesla is really not cf profitable) it is a red flag - do I hear Netflix anyone - again I am convinced Reed and Elon were separated at birth and their companies will die equally painful, ignominious deaths.
    5 Nov 2013, 08:42 PM Reply Like
  • AlexiaEP
    , contributor
    Comments (1074) | Send Message
     
    "And when in need for both the Gen III ramp-up AND the new "battery giga-factory" (quote from the CC) they will need that cash and probably more."

     

    That's why a certain CEO also talked about a 'partnership' in the giga-factory. Tesla won't be carrying all the cash burden, sir.
    5 Nov 2013, 08:50 PM Reply Like
  • AlexiaEP
    , contributor
    Comments (1074) | Send Message
     
    "1. I understand what they say - I don't understand what they do. If they have major issues to work through - focus on them first, then expand sales to the new markets. Europe and Asia are not going anywhere."

     

    You are not alone, lots of people don't understand what they do. That's the beauty of it. If everyone understood, they'd be climbing over each other to get the stock.

     

    They ARE focusing on issues and those issues continue to be slowly resolved. In the meantime, they're shipping some of their production cars to Europe to satisfy long waiting customers and are getting Asia in order now, since that takes time.

     

    "2. $50m is peanuts in auto manufacturing. You can't fund anything with such cash flow. So, again, why spend money on Superchargers in Germany and give press-conferences in London if they can't meet the demand in the U.S.? Why start taking pre-orders in China, if they won't have enough cars to supply the U.S. customers for at least two years?"

     

    $50 mil is NOT peanuts considering how fast Tesla is growing. That's darn near a miracle in the automotive industry to fund hypergrowth and still be building money in the bank. If fact, we should just straight up call it a miracle.
    5 Nov 2013, 08:55 PM Reply Like
  • AlexiaEP
    , contributor
    Comments (1074) | Send Message
     
    "They will only anger customers worldwide who pre-order with deposits and then have to wait for months to get the car in 2014 or 2015... "

     

    Well, isn't this an ironic statement, coming from the side of the fence that first didn't believe there'd be any demand for Model S, now we've decided there'll be so much demand that Tesla will make customers angry. LOL!

     

    BTW, reservationists are being clearly told what the wait times will be. There's a limited amount going to China, so order yesterday or you're not getting one for a while. Just watch China be sold out before you can blink and the rest will happily wait. The same thing happened in Europe and now those that missed the boat are having to wait until Q1 2014.

     

    Never before has demand for a product been considered a hinderance, until now apparently.
    5 Nov 2013, 09:00 PM Reply Like
  • Sellinpanic
    , contributor
    Comments (894) | Send Message
     
    Well that $50 mil saved Tesla back in 2008-9 when Daimler bought in. It depends how you view that amount, but in Tesla's case it is not peanuts and what Tesla has really proved is that they can use their money 100 times more efficiently than the legacy automakers which need to be bailed once in a while.
    6 Nov 2013, 05:38 AM Reply Like
  • stockahead
    , contributor
    Comments (148) | Send Message
     
    20'000 cars next year in North America. Listen to the conf call.
    6 Nov 2013, 06:22 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (7514) | Send Message
     
    "production constrained"

     

    That's the key part even when numbers are low compared to global auto output.

     

    More specific, listen to the Q3 CC about the need for a "giga factory", this will take time to resolve.

     

    The way I understood the CC and the capital input needed, TSLA will probably opt for a JV with a battery supplier when setting up this battery plant.
    5 Nov 2013, 06:20 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2861) | Send Message
     
    Solid quarter, great company, but the stock is over heated. Price does not equal value.
    5 Nov 2013, 07:25 PM Reply Like
  • singh6613
    , contributor
    Comments (13) | Send Message
     
    Demand = people with the ABILITY and willingness to pay. Regarding the answer to the question about softening demand in the US, Elon retorted that there is still a large 'untapped market'. No doubt about it, but what will happen when the Fed starts the taper and interest rates rise? In this report, Tesla acknowledges that the leasing program was very popular, and drive a significant rise in sales. Tesla has grown substantially, in part because of the current money supply conditions. As they expand their market beyond those who can pay >50% cash down for a car, how will tightening of money supply affect demand? How will it affect their ability to borrow and/or raise more equity to fund their expansion plans.
    I am a HUGE admirer of Elon and Tesla. As AlexiaEP said, what they have done is nothing short of a miracle.

     

    I bought the shares at 33 and sold recently with a x4 and x5 bagger. Thank you Elon, Tesla and the 'TSLA market longs' for that... Looking forward, I really hope this company succeeds and if the stock doubles, I won't regret my decision to sell. Given their lofty valuation based on current quarterly EPS of $0.12 non-GAAP, the need for significantly higher investment to drive production and supercharging infrastructure, the lack of a 'Benjamin Graham buffer' in the price is such that if I bought again, I believe I would be 'speculating' and not 'investing'.
    5 Nov 2013, 11:51 PM Reply Like
  • OneCarnut
    , contributor
    Comments (5) | Send Message
     
    You all do as you wish...I saw this company's potential and got in at $66.25 and plan to hold for the foreseeable future.
    This company is well managed and in the news daily whether positive or negative. However mostly positive, including today's conference call.
    6 Nov 2013, 12:03 AM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1543) | Send Message
     
    I have said it before that I believe the land purchase made a few months ago by Tesla, right next to the current factory in Fremont, is the location for the future giga-factory. Tesla supplies the land and building, Panasonic supplies the expertise in constructing the production lines.
    6 Nov 2013, 03:57 AM Reply Like
  • ChasL
    , contributor
    Comments (48) | Send Message
     
    I wonder how long it took Panasonic to tool up for Tesla initially or are they producing off of old production lines.
    6 Nov 2013, 01:30 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs