As we start a new week of trading, we are just a few days away from being halfway through the first quarter of 2019. For Tesla (TSLA), this was always going to be a tough period as U.S. sales fell after the tax credit was halved and Model 3 deliveries took a while to reach other parts of the world. While a variety of numbers should eventually pick up, the question so far is have they been pushed back too much for targets to be hit in Q1?
Last week, the first ship headed to Europe made port, but it was estimated that it only contained 1,400 Model 3 units. The second ship was originally expected to arrive on February 7th, but it has been pushed back twice and now should be there on Monday the 11th. We have seen almost 100 units registered in the Netherlands this month so far, but through Sunday, no Model 3 units had been registered in the key country of Norway. Competition is starting to ramp up a little there, however, as seen in the following registration data:
- Hyundai Kona: 94 for February, 423 so far this year.
- Jaguar i-Pace: 85 for February, 165 so far this year.
- Audi e-tron: 91 for February, 99 so far this year.
- Kia Niro: 36 for February, 63 so far this year.
Through Sunday, things weren't looking too good for the Model S/X either. In Norway, the total so far was 204 units for the year, as compared to 238 in the prior year period. It will be even tougher to match last year's Norway March figure of more than 1,400 units thanks to the discontinuation of the 75 kWh battery pack versions. In the Netherlands, it was even worse, with roughly 15 units delivered in January against 233 a year ago. If Tesla wants to report a GAAP profit for the quarter, without needing tremendous credit sales, it will need a serious sales push in the back half of the quarter.
Another major item I'm watching currently is the U.S. Dollar, which had a very strong couple of days last week. With a much larger percentage of deliveries this quarter outside the U.S., currencies could play an important role in the company's results. It may not seem like much, but for example a 4% rise in the Dollar versus the Norwegian krone for instance could mean that Tesla only gets roughly $48,000 for a Model 3 sale that normally would equal $50,000. That can really hurt margins especially as Tesla moves to lower-priced variants that don't have a strong margin profile to begin with.
Finally, I'm curious to see how some of Tesla's other supposed growth efforts are going. I previously discussed how the company's solar efforts have been all but gutted, while service center expansion doesn't seem to be on track according to the company's own website. The other major promise this year from CEO Elon Musk is to add 12,000 new supercharging stalls, which means an average of 1,000 per month. As the graphic below shows, we aren't anywhere close to that pace, just a few hundred so far in 2019.
(Source: supercharge.info, seen here)
While I know Tesla bulls will talk about supercharging expansion surging after the third version comes out, when will that be exactly? It was supposed to happen last summer, and the latest timeline is just early 2019. Also, last year was supposed to see a dramatic jump in stall growth thanks to urban superchargers, and so far this year, growth has been significantly slower than last January/early February. Last year fell well short of expectations, just as the year before did as well. Perhaps we are seeing the company come in well below plan for capital expenditures yet again, which can help make its free cash flow numbers look better. Of course, that's not good news for Tesla customers forced to wait to charge, waiting for service, expecting new products to hit the market soon, etc.
The news cycle over the last week was also pretty negative for Tesla. Despite the company saying in its Q4 investor letter that the Model 3 was fully certified for sale in Europe, it turned out that such approval did not include Autopilot originally which seems like a big deal. The company is also including the Autopilot feature as a standard item on the Model 3 in China, meaning it is taking a margin hit in the country where it already is at a major price disadvantage. Finally, a new report out suggests that Tesla safety data backed up by the NHTSA actually is quite misleading, with the agency not being very transparent towards those trying to find out the real truth.
In the end, it has been a very slow start to 2019 for Tesla. Model 3 units are starting to filter out through Europe, but not rapidly at the moment, while the S/X face numerous headwinds around the globe. Most of the news last week wasn't good for the company, and another government shutdown or problem on the China trade war front could pinch sales even further. If we don't see sales pick up in the next couple of weeks, it would only seem to raise the chances for a capital raise in the short term, especially as it seems the March notes are going to be repaid fully in cash. Tesla better hope that sales of the Model 3 materialize rather quickly, or it will be left with tons of inventory, since the Bloomberg model now sees the company potentially heading to north of 80,000 units in the period.
(Source: Bloomberg Model 3 tracker, seen here)
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