Tesla Production, Deliveries, Sales … What was the question?

27. April 2019 by Maarten Vinkhuyzen

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It is not often that Wall Street analysts prove Elon Musk right by the fact that they themselves are wrong within a few days.

The current stock price decline is partly due to doubts about the demand for the Tesla model 3. As evidence of this lower demand, the daily delivery numbers are used in Norway and the Netherlands.

Everyone who follows this knows that these two countries are on the other side of the Atlantic. The better informed know that the cars to Europe are shipped from Fremont, California, with ships through the Panama Canal. Analysts following Tesla should of course know that these ships sailed in the first half of last quarter, and that production in the second half of the quarter was for the domestic market.

When these ships arrived A few weeks before the end of the quarter, as many cars were being delivered as possible before the books closed in the quarter. But not all cars were delivered on time. We saw the latest cars from the ships that were delivered in the first weeks of April.

"In order to quickly meet international demand, Europe and China emerged model 3 buildings in the first half of the quarter, with buildings for local US markets in the second half, Tesla's shareholder letter says, and during the quarterly interview a few days ago it was explained that It distorted the figures to the extent that half of the quarterly deliveries occurred in the last 10 days of the quarter.

Okay, back to the diminishing demand observation, has half the demand in it last quarter over the past 10 days?

Any analyst who tried to say this would be laughed at. So why are they taken seriously with their demand for demand in Norway and the Netherlands now? There was no production for Europe 6 There were no ships sailing to Europe 4 weeks ago, there were no cars arriving in Europe 2 weeks ago, and there are essentially no deliveries in Europe today. There is zero relationship between current demand and deliveries in Europe.

And why does this Musk prove right? At the conference call, this was the question and the answer:

Philippe Houchois, Jefferies, Analyst : "And can I ask you a question of returning to what Adam said about the drama surrounding your warehouse, unfortunately. Why don't you reduce some of it by providing monthly deliveries and perhaps also revealing your greenhouse earnings early instead of just reserves, then we immediately get a better overview of some of these details that move the stock? "

Elon R. Musk, Tesla, CEO : "I think it would actually be counterproductive because people read too much into what happened in a month. I mean, even on a quarterly basis, things can be lumpy. And then, the more granularity that is stated, Say, on a monthly basis, people would come to any kind of conclusion that doesn't make sense, which is, as literally, as sales to a particular country, say, overseas, affected by when the ship arrives, and then, if the ship comes until the 31st of the month or the first of the next month, it will make it look like something has happened dramatically. But actually the ship was only one day late. So people read – it will increase the drama, not reduce it. "

Zachary Kirkhorn – CFO: " And we fill the ship 100% … "

Elon R. Musk – Chief Executive: " Filling the ship to 100%. Then it just gets lumpy. … If you have calculated GDP for a country – let's say the United States – Sunday GDP is extremely low, but Monday's GDP is extremely high … nothing really changed. "

Look at delivery numbers that lead to the wrong conclusions. [19659008]

Data and information

Data and information are not the same. Information is produced by making sense of data. That's what accountants, statisticians, IT professionals, computer scientists, and sometimes Wall Street analysts do.

This process starts by looking at the question, what is it you want to know?

At the end of the quarter, we receive production and deliveries as a starting point for the financial report. The production volume is an indication of costs, and deliveries times average sales prices are an indicator of revenue. Nothing more and nothing less. They are indicators of the forthcoming quarterly report. It is the financial analyst's questions that are answered with these figures.

If you are interested in demand, you need different numbers. To know what numbers you need, you need to know the market and how the product you are interested in is manufactured, distributed and sold.

Take strawberries for example. They are mostly sold in the summer. Not people like strawberries in autumn, winter or spring? Or does supply have anything to do with it. And is the price perhaps influenced by the offer? Most people know this about strawberries. Strawberry jam is sold in all seasons, just fresh fruit in season.

Beer is in great quantity all year round. Sales spike around sports events such as the Super Bowl, Olympics, or on hot summer days. There is a connection between demand and these events. Many in the marketing think that there is a causal relationship between them.

When market analysts have no problem with strawberries and beer, how can they be so wrong with Tesla cars?

The answer is simple – what they tend to do for the traditional car manufacturers in the United States, they do for other automakers around the world, not realizing that the North American car market is quite strange.

In North America, cars are sold from stock. In most of the world it is not normal to sell large capital goods from stock. New aircraft, yachts, cars, machines or houses are ordered first, then built and delivered. For most of these items, Wall Street analysts know they have to look at the order intake as the main indicator of market and economy trends.

Philippe Houchois should have requested monthly order entry and order number just as Boeing and Airbus publish. These are the important figures. More important than production and far more important than deliveries.

Not that I think Tesla will publish them, but at least he would have shown that he understands what he is talking about.

So we were basically fixed, with Tesla pointing out why it is irresponsible to publish the monthly delivery numbers. Two days later, Wall Street creates a panic using daily delivery numbers that have no relation to the RD&D story Wall Street peddler.

Okay, dear readers, when will this present RD&D attack be over? And how do we educate these Wall Street nitwits?

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19659035] About the author

Maarten Vinkhuyzen Grumpy old man . The best thing I did with my life was to raise two children. Just finished primary school, but when you do not go to school, you have a lot of time to read. I switched from accounting to software development and ended my career as a system integrator and architect. My 2007 boss got two electric Lotus Elise cars to show decision makers the future energy and transport direction. And I've been looking at replacing diesel-powered cars with electric vehicles ever since.