Can’t understand, and can’t help but look, maybe this is the charm of Tesla?
Editor’s note: This article is from the WeChat public account “Yiouwang” (ID: i-yiou) author: Zhang male, edit Gu Yan. Released with authorization.
Core point of this article
1. The annual delivery task of 500,000 vehicles is “heavy.” Before Model Y is delivered on a large scale, Tesla needs to pay attention to the weak demand for Model 3.
2. Users have insufficient confidence in FSD, and software cannot become a source of revenue for Tesla in the short term.
3. Excessive regulatory credit income affects Tesla investor confidence.
In the year of the epidemic, Tesla unexpectedly went smoothly.
Tesla always surprises the outside world, just like the company’s third quarter earnings report just released, which is very eye-catching.
On October 22, Tesla’s 2020Q3 financial report showed that its total revenue was 8.771 billion US dollars, an increase of 39% from the 6.303 billion US dollars in the same period last year, and a 45% increase from the previous quarter, which was higher than the market expectation of 8.36 billion US dollars. . Among them, the automotive business revenue is 7.6 billion US dollars, accounting for about 91% of the total revenue.
Net profit has soared. In the third quarter of this year, Tesla’s net profit attributable to common shareholders was US$331 million. Although it was lower than the market’s estimate of US$369 million, it increased by 131% year-on-year and more than 218% month-on-month. 2020Q3 has therefore become the fifth consecutive quarter of profitability for Tesla.
The cash reserves are also abundant. The financial report shows that Tesla’s Q3 cash equivalent reserves reached 14.5 billion US dollars, a sharp increase of 5.9 billion US dollars compared with the previous quarter. Free cash flow was US$1.395 billion, an increase of 276% year-on-year.
Continuously rising revenue, net profit and cash flow have made Tesla no longer “stretched” before. “This is the best quarter in Tesla’s history!” Tesla CEO Musk said on the earnings call.
Although it has been questioned by the outside world whether it is seriously overvalued, everything about Tesla is developing for the better.
But from the critical eye of investors, Tesla’s earnings report still has some “imperfections”.
“Flag” with annual sales of 500,000 vehicles
Such strong earnings performance is due to Tesla’s “record-breaking” delivery volume.
In the third quarter of this year, Tesla delivered 139,300 new cars, an increase of 43% from 97,000 in the same period last year and 90,650 in the second quarterThe number of vehicles increased by 53% from the previous month.
Rough calculations, as of the third quarter, Tesla delivered a total of 318,000 new cars. Compared with Musk’s annual delivery target of 500,000 vehicles, Tesla still needs to deliver 182,000 new cars in the fourth quarter—a chain growth rate of 30%. However, in the third quarter that just passed, Tesla’s delivery volume increased by 54% from the previous quarter, so in the fourth quarter, it is not impossible to achieve a 30% growth rate from the previous quarter.
If this goal can be achieved, Tesla will once again set a delivery record.
The good news is that Tesla’s production capacity is constantly increasing. The financial report shows that Tesla produced 145,000 new cars in the third quarter, an increase of 76% year-on-year. Among them, the production of Model 3 and Model Y at the Fremont plant in California increased by 25% month-on-month.
According to the latest financial report, Tesla currently owns the Shanghai, Fremont, Texas, New York and Berlin factories in China and the United States. In order to increase production capacity, Tesla has opened a second spraying workshop, installed a large die-casting machine and upgraded the Model Y assembly line in the first Fremont factory built.
Currently, the annual output of Model 3/Model Y at the Fremont plant has increased from 400,000 to 500,000. “The annual production capacity of this plant will reach its maximum at the end of this year or early next year.” Musk said.
The Shanghai plant followed closely, and its annual production capacity for Model 3 increased from 200,000 to 250,000. Due to localized procurement and lower battery costs, the domestic Model 3 became the lowest-priced high-end mid-size sedan on the Chinese market at a price of 249,900 yuan. Recently, Tesla added a third production shift at the Shanghai plant to expand Model 3 production capacity.
It is worth noting that the domestic Model 3 will not only be sold in China, but will also be shipped to France, Germany, Italy and other European countries for sale, replacing the previous strategy of manufacturing and exporting in the US factory and making up for the unbuilt Berlin factory. .
But the challenge comes from logistics and delivery efficiency. With reference to the 2019 data, Model 3 exports from the United States to Europe only take 3 weeks. The first batch of domestically produced Model 3 exported to Europe is expected to depart from Shanghai on the 27th of this month and arrive at a Belgian port at the end of November. It will take 5 weeks to roughly calculate. And under the influence of the epidemic, The efficiency of international logistics is even more worrying.
This kind of “rejecting the near and seeking further” is also Tesla’s helpless move. The Fremont factory was forced to close due to the epidemic, which directly caused Tesla’s July sales plummet. Now, Model Y has split part of the factory’s production capacity, and it is the best solution to replace the American Model 3 with a domestic Model 3 with a lower manufacturing cost.
However, keeping up with production capacity is only one aspect. On the other hand, Tesla is also facing a crisis of weak demand. Research firm Cross-Sell data show that Model 3 registrations in California fell by 60% in the third quarter.
Perhaps because of this, Tesla is implementing a “crazy price reduction” strategy-not only reducing the price of Model 3/S/X in North America by 6%, but also lowering the price of Model X/S by 4% in China. Model 3 dropped to 249,900 yuan.
Weak demand and price cuts are the main reasons why institutions are short on Tesla. In the C-end market, Tesla, which has repeatedly cut prices, has also caused dissatisfaction among some users.
Fully Automated Driving Beta
With an annual sales volume of 500,000 vehicles, Toyota, the second-largest car company by market value, has already achieved this goal. In 2019, Toyota’s annual sales were more than 20 times that of Tesla’s, but now the market value of the former is only half of the latter.
“In the eyes of many people, Tesla is a high-tech company, not a car company. It has its own software architecture that can support its own user experience and functional updates.” A software company executive told Yiou , “The valuation depends on the company’s development potential, including car manufacturing innovation, software development, etc.”
In other words, the continued optimism of the secondary market is the future of Tesla that is different from traditional car companies. Among them, autonomous driving is the most important part.
Tesla is the only auto company that develops all self-developed software algorithms to hardware architecture, and its autonomous driving technology has always been ahead of other auto companies. Nikkei BP once concluded when disassembling Model 3 that Tesla has been ahead of its competitors for 6 years in the electronic architecture. Thomas Ulbrich, a member of the Volkswagen board of directors, acknowledged that Tesla has a 10-year lead in electric vehicles and developing software.
In 2019, Tesla is driving on its own Open Day released the “Full Self-Driving Computer” (full self- Driving computer, FSD for short), its self-developed chip has a computing power of 144TOPS, a power consumption of 72W, an energy efficiency ratio of 2TOPS/W, and its performance level exceeds that of NVIDIA.
It is understood that FSD can realize functions such as automatic parking, automatic assisted lane change, automatic assisted navigation driving, intelligent calling, identifying and responding to traffic lights and stop signs, and automatically assisting driving on urban roads.
After March of that year, every new Tesla Model S/X/Y/3 was equipped with a computing platform HW3.0 that can be upgraded to a fully automated driving system. In other words, as long as the Tesla software is successfully developed and opened to the C-side, users can enjoy the new features.
But the system is expensive, priced at US$8,000 in the United States and 64,000 yuan in China, which is close to about a quarter of the price of the Model 3 standard battery life version. And with the addition of more features, the price of FSD will be higher in the future. Software gross profit is higher than vehicle sales, which may become a new growth point for Tesla.
On the day before the 2020Q3 financial report was released, Tesla introduced a small-scale fully automated driving test version to users. Musk said that the latest FSD has a “zero driving intervention” function, but also has the ability to drive and call across states. The Q3 financial report said that the Tesla Autopilot team has been working on rewriting the basic architecture of neural networks and control algorithms.
Many car owners are still on the sidelines. “The price is a bit high, and the performance is not known to be stable,” a Tesla owner believes, “AP is enough for now, and I won’t buy it rashly.”
The recent Tesla Model 3 out-of-control accident has also left a shadow in the hearts of some car owners. A car owner said: “I always see Tesla accidents, and I don’t believe in Autopilot anymore.”
The profitability has “moisture”
Another worry is whether Tesla has the ability to continue to make profits.
On the surface, Tesla has achieved profitability for five consecutive quarters, and the results are quite good. But in fact, behind the dazzling earnings report, there are not a lot of sales from regulatory credit.
According to the financial report, Tesla’s third-quarter revenue of $397 million came from this, nearly three times that of the same period last year, and higher than the market’s expectations of its $209 million.
Tesla CFO ZacharyKirkhorn also admitted in the earnings call that the good performance in the third quarter was due to better than expected revenue from regulatory credit. “(Regulatory credit income) is stronger than we expected, and it is expected that this year’s regulatory credit income will more than double that of last year.” He said.
The so-called regulatory credit means that if car companies want to sell cars in more than ten states such as California, they must first sell a certain number of electric vehicles, hybrid vehicles or other zero-emission vehicles. If car companies do not have the ability to produce and sell these types of cars, they can purchase production indicators from friends to obtain qualifications. Tesla is earning revenue by selling this indicator.
Different from the method of obtaining gross profit for manufacturing electric vehicles, the income from the sales of regulatory credit is entirely net profit. Since the beginning of this year, Tesla has already reaped $1.179 billion from this project alone.
For Tesla, the world’s largest sales of electric vehicles, it is not an exaggeration to say that the regulated credit market is its world. Benjamin Leard, an environmental economist and a researcher at Future Resources, said: “No traditional car company has yet to launch a high-selling electric car. So this is a’buyer’s market’, basically Tesla’s. Privilege realm.”
At present, most information about the market’s pricing and transaction volume is not transparent, which is also one of the basis for bearish Tesla. When Tesla released its second-quarter earnings report, Garrett Nelson, a senior equity analyst at CFRA Research, warned: “The sale of regulatory credit may have been the largest source of Tesla’s earnings in the past four quarters, and the most Unpredictable factors.”
Regulatory credit is also affecting Tesla’s gross profit margin. The financial report shows that since the beginning of this year, Tesla’s gross profit margin has been 25.5%, 25.4%, and 27.7%. After excluding regulatory credit income, the data becomes 20.0%, 18.7%, and 23.7%—not much difference from the gross margins of 20.8% and 20.9% after deducting regulatory credit in the second two quarters of 2019.
According to Ludd’s analysis, in the next 5 to 10 years, the US emission vehicle plan will become more stringent, and Tesla and other electric vehicle companies will make a fortune in this market. But for Tesla, how to increase gross profit margins as much as possible without supervision of credit income is always a question worth considering.
Conclusion
Anyway, Tesla always surprises people.
When the outside world thinks this company is not good enough, Tesla can always come back to life under Musk’s “iron fist”; when the outside world thinks the company’s financial data is good, Tesla can often hand over a better look Answer sheet.
Just like at the beginning of this year, when Tesla’s market value exceeded $100 billion for the first time, the outside world was shocked.Sigh and cheer, but who would have thought that its market value has exceeded US$400 billion in just six months.
I can’t understand, and I can’t help but look. Maybe this is the charm of Tesla?