EV Discussion thread

JKenH

1961Nick said:

JKenH said:

1961Nick said:

JKenH said:

Grumpy_chap said:

1961Nick said:

Another thing to remember is that at the beginning of 2022 Tesla were sold a long way forward & particularly the model Y. Orders placed in 2021 were therefore delivered at 2021 prices. It's only in the last few months of 2022 that the price rises have been realised.

That's a very good observation.  I wonder how many cars were actually ordered and paid at the highest price?

Possibly very few. Perhaps that’s why demand fell and the order backlog disappeared. 

Fans might say that was Tesla managing demand to meet production but they didn’t do it very well. A few months ago there was a few months backlog but demand fell in China and new factories opened in Germany and US. That backlog disappeared in almost as many months so for months Tesla must have known that demand was seriously failing to keep up with increased production yet they took no action to acknowledge or address the situation - until stockpiles of unsold cars built up and the world realised the emperor was wearing no clothes. 

It was almost as if they were just trying to get to the year end before admitting the bubble had burst. In business that is frowned upon and no doubt questions will be asked. 

It was the perfect storm - lockdowns supressing China demand, IRA uncertainty in the US, the Twitter fiasco, higher selling prices etc etc. Despite that I think Tesla are in a good position. They can cut prices & still maintain a healthy margin, they don't have any debt, they can increase production by 50% with the existing factories & the Cybertruck is launching this year. The solar & storage business is also reputed to be making a contribution now that battery supply issues have eased. For shareholders, the announcement of a B segment vehicle would probably turn round most of 2022's decline in share price. The rumours about another giga factory in Shanghai or Mexico are interesting because that could be for a model 1 or 2 plant? I wouldn't want to be shorting the stock while Must has the Model 1/2 trump card up his sleeve - could be the biggest margin call in history!

What no one seems to have picked up on is how rapidly the backlog of orders from last summer was cleared. There was speculation in September and October that Tesla might have a demand problem but Tesla fans and Bulls denied this as did Tesla themselves. The alarm bells were ringing but Tesla said there was no fire. A publicly quoted company needs to be more transparent. I would have expected a profits warning to be issued. 

If you look at the chart below it is apparent that Tesla production was rapidly eating into the backlog. On 27June the backlog was 476k,mwhich from the Troy Teslake calculation, would suggest 117 days of backlog. By 21 September the backlog was down to 317 units or 78 days production. Over a period of 56 days backlog was therefore reduced by 39 days. (Ok, calculating backlogs on the basis used may not be entirely scientific but it gives a pretty good indication that production was considerably in excess of demand.) Now there may be some regional variations of stocking levels but effectively by the end of  2022 that 317k backlog had completely disappeared. 

Using some very rough figures, if Tesla are building 4000 cars a day and in around 100 days they clear a 317k backlog then that means new demand over that 100 days is only around 83k or around 20% of production. These figures may be some way out but it would be hard to argue based on what we do know that there isn’t a major demand problem and it is going to take more than the 12-14% increase in demand that the Wedbush consultant Dan Ives foresees from the price cuts to sort this. 

This is a big, big problem. 

As I have said in previous  posts this is just my personal take and others will no doubt have alternative views to share. 

Edit: source link added for above table.

https://electrek.co/2022/10/13/tesla-demand-destruction-demand-triggers/

I guess we'll have to wait 10 days to see if a profit warning was necessary - even that might not be the whole story though because the 4th quarter will be made up of vehicles sold at the highest price/margin. As for demand, we'll know the answer to that one at the beginning of April. I'm hopeful that the price reduction & the tax credit in the US causes a significant uplift in demand.

I am expecting Q4 revenue to have held up well. Sales caught up with orders and the average selling price would have been higher.  I don’t know how they account for inventory stock though. 

It’s what happens next (2023) that I am concerned about. Tesla has already committed to adjusting any orders already in the pipeline to the new prices so the old high margins are now gone.  Tesla would already have benefited from IRA tax relief on some of its models without price cuts but to get the MY into the scheme it has lowered other prices to keep them in line. While the IRA provisions will increase sales volumes the margins will be lower. Is that a worthwhile trade off? I don’t yet know how the battery sourcing rules will work out for Tesla but in the short term other manufacturers can get the full benefit of the tax relief. Will the incomes of Tesla buyers be such that they will benefit less from the IRA provisions than say a Mach-E or Bolt buyer?

What we also don’t know is just why sales have fallen. Is it because the cars were too expensive - something that price cuts will address? Is it down to competition when again price cuts will help or is it down to disenchantment with some aspects of Tesla ownership (e.g. phantom braking, windscreen wipers or lack of parking sensors etc) which price cuts may not address? Or could it be that a certain section of the Tesla buying population no longer wants to be associated with Musk and what he/the brand stands for? I can imagine in some parts of the US this could be a significant factor. 

Has Tesla become the Ford of the 2020s? Once there was a cachet about the brand but now Teslas are everywhere. Company car policies have made the TM3 and TMY the default options in the UK. If one wants to stand out buy an electric BMW or Mercedes perhaps. Having owned a Tesla do people just want a change for their second electric car? Once there was very little choice if you wanted an executive EV but now there are a lot of options around the price territory TM3 and TMY occupy. Not everyone will choose the minimalist option when there is a more conventional alternative. 

Although many buyers are price sensitive others have chosen Tesla for deeper reasons. I suspect some new Tesla buyers had never bought a new car before but weren’t deterred by the price so a price cut may not help. If you were a die hard Tesla fan the price would be immaterial. No other car would do. 

Then there is the charging network; Tesla’s USP. It’s not just the holiday queue click bait reporting, the chargers are getting busier. Those that have opened up to the riff-raff have seen rival EV brands blocking 2 spaces because the charging cables are too short. Will all Tesla chargers have to open up and if so that USP is lost?

Then there is the whole issue of how far EV penetration can extend on a voluntary basis. Much of the low hanging fruit has already been picked (the EV in the 2 car household, home owners with off street parking and cheap home charging). Energy prices have made those who can’t charge at home think twice about the economics of running an EV. Judging by social media commentary the dire state of the charging network is causing some early  adopters to revert to ICE vehicles. It isn’t scaremongering. I would question whether anyone on this board would run an EV if they had significant mileage to cover and no home charging.

Presumably Tesla will have done some research to find out why their sales had fallen or maybe not. Without proper understanding of the underlying reason for sales falling in particular markets/sectors they may just be throwing away margin for little gain in volume. 

Magnitio

Krakkkers said:

I found it very balanced and he has tested many electric cars and loved them.
He talked also about suspect sales figures and the need to sell EVs in order to be allowed to sell ICE cars.
Very interesting to those with a totally open mind.

Your summary was "buy a diesel". My comments were to address how this odd recommendation was arrived at for those who don't wish to watch the whole video.

ABrass

The biggest barrier to EV sales has been a lack of supply, both new and secondhand.

Now BYD is reaching outside of China and Tesla have increased their capacity EV sales should ramp up even further this year.

Krakkkers

The point i was making was its complicated and you can't summarise what he was saying in 30 seconds.
He made some very interesting points about the fines levied if sales of EVs fall short and then showed figures that show the sales figures jump every December just when needed and that they also need to sell EVs in order to be allowed to sell ICE cars, i found it very interesting.
Also touched on the fact that where the batteries are going to be made matters because of the total carbon footprint of the car and that may lead to manufacturing moving to the UK or Scandi countries away from dirty countries like Germany.

JKenH

ABrass said:

The biggest barrier to EV sales has been a lack of supply, both new and secondhand.

Once again, Tesla, the pioneer, has ripped up the rule book.

michaels

I think they have no choice but to chase volume as they are priced as a growth stock. They could have consolidated and maintained margin like a traditional auto maker would have done but then their market value should be similar to other car makers, perhaps BMW.

It is a double or nothing strategy. I think they may have to offer a prise promise going forward as otherwise buyers may hold off in anticipation of future price cuts.

Martyn1981

michaels said:

I think they have no choice but to chase volume as they are priced as a growth stock. They could have consolidated and maintained margin like a traditional auto maker would have done but then their market value should be similar to other car makers, perhaps BMW.

It is a double or nothing strategy. I think they may have to offer a prise promise going forward as otherwise buyers may hold off in anticipation of future price cuts.

Yeah, I was wondering if another price cut may be possible, maybe within a year. I guess they'll have to ramp Berlin and Austin up to 1/2m (annualised), but that will take all year. Or if the 4680 start to pull costs down, but again, I think that's a year of ramping. Expanding Austin, and also ramping the Cybertruck, but there's a tonne of demand for that already, and again slow ramping to start, and estimations for the price rise (since the launch event) are now being reduced a bit.

S'funny how price reductions are actually trickier than increases.

In the US, including the $7,500 tax break, the TM3 and Y undercuts BMW's on price, and the Y matches (depending on models) the Toyota Highlander, and the 3 matches the Camry V6.

Looks like a market share grab, to ramp up production, and lower costs again. Just hope there are enough raw materials for batteries (for the whole industry), as that seems to be the limiting factor now, as prices (BEV's v's ICEV's) close in on parity.

JKenH

A bit more detail on the reduction in order backlog (also known as the amount by which production exceeded sales).

According to Troy Teslike, who provides very interesting Tesla stats and forecasts, the estimated order backlog as of November 30, 2022 was roughly 190,000. That's a significant decrease (by some 33%) compared to 285,000 at the end of October.

It was at nearly 300,000 at the end of September and through October, nearly 400,000 at the end of August, and close to 500,000 in the period between March and July.

https://insideevs.com/news/627076/estimated-tesla-order-backlog-november2022/

Backlog reduced from 476k to in July to 190k in November, that’s 286k units in 4 months or 71.5k units a month. In November alone it fell 95k units, that’s 3167 units more production than sales/day. Tesla reported production of 439701 units in Q4 2022, an average daily run rate of 4779 units so on this basis new sales in November were only one third of the vehicles it manufactured. In other words for every 3 cars being manufactured Tesla was only getting replacement sales orders for one. 

That’s not quite as bad as the 20% I suggested in my earlier post but it is still worrying in a company that is feted with being able to sell everything it can manufacture and which up to 9 months ago was doing. In the space of six months which it seems has coincided with the opening and ramp up of Berlin and Texas Tesla has moved from a situation of healthy demand to significant overproduction. 

I haven’t yet seen the December backlog figures so the figures may either have got better or worse.

If we take the July to November period overproduction (286k units/105 days) backlog decreased by 2724 units/day. If we assume, say, 4500 units manufactured, sales are only being replenished at a rate of 1776 units/day or 39.4% of production. At an annualised rate that projects sales of 648k units, around half what was actually achieved in 2022. Based on Q4 2022 figures Tesla has a manufacturing capacity of 1.744 million units but annual sales based on the July to November figures are only 37% of capacity. Just to achieve the 2022 sales target of 1.5 m units Tesla needs to up its current level of sales by 131% and that will still be around 244k units short of plant capacity. That must  surely blow any plans for more Mega factories out the water, at least in the near future. 

The one thing I haven’t taken into account here is the trend. I have just used average figures but the trend of backlog (orders less deliveries) is very interesting. From Nov 2 2021 to 5 Jan 2022 backlog grew by 66k units or 1k per day. From 5 Jan to 11 March it grew 125k units  over 65 days or around 1.9k units/day. (Possibly this backlog was o tribute to by COVID issues in China.) It then stabilised between 11 March and 27 Jul growing only 6k units then started to fall rapidly as Tesla Berlin ramped up from 1000units/ week in June to 2000 units/ week by beginning of October and Tesla Austin also started production aiming for 10,00 units per week by year end. It is easy for Tesla Bulls to argue that these backlog trends are down to COVID issues in China and the ramping up of Berlin and Austin so why would anyone be surprised that the backlog has been dealt with. Isn’t that a good thing - wasn’t that the plan? 

However we can’t ignore that over the course of a year we have gone from a situation where Tesla orders were increasing faster than the cars could be built to a situation where new orders are not only falling in absolute terms but are coming in little more than a third of current plant manufacturing capacity. That is not only a bad financial situation but it is really bad for the brand image.  

The reality is Tesla could have met demand at the end of 2022 without building Berlin or Texas. Given the current state of demand those plants might just as well be standing idle. They are a dead weight round Tesla’s neck in the short term. Tesla has all the expense of running them without any sales value coming from them. 

This all seems very pessimistic so perhaps I have got the sums wrong in which case (as a Tesla shareholder) I will be happy to see them corrected. 

JKenH

Demographics of Tesla Model 3 owners: average income

I just thought I would post this in the context of income limits for IRA new EV tax credits. It isn’t clear if this is the average income for both new and used Tesla buyers.

Let’s start our Tesla Model 3 demographics analysis with average household income. In 2022 a Tesla Model 3 owner has household income of $133,879 per year, up from $128,140 per year four years ago.

Only 56% of current Tesla Model 3 owners own their own home. That’s significantly lower than owners of Model S or X.

https://hedgescompany.com/blog/2019/03/tesla-model-3-demographics-income/

Grumpy_chap

JKenH said:

Demographics of Tesla Model 3 owners: average income

I wonder whether similar information is available with a UK slant.
For me, it would also need to be compared to other vehicle choices to make it more meaningful.