Photo: Denys Nevozhai on Unsplash
By publishing the Fourth Quarterly Report for 2018, Tesla does not look back on the past year alone, but looks to the future as well. Which will surely be even more relevant to the car's long-term success.
The production rate of model 3 should continue to grow / the gross margin should remain stable at 25%
Tesla's priority is to expand or increase the production speed of Tesla's model 3. During 2019, he will continue to grow steadily and reach a constant rate of 7,000 units per week until the end of the year. It is planned that production of model 3 2019 will start with full production.
Together with the new Gigafactory in China, by the end of 2019 it intends to produce 10,000 vehicles per week (sustainable); 7,000 in the US, 3,000 in China. "We are faced with unexpected challenges with Gigafactory Shanghai, aiming to achieve annual production of model 3 of over 500,000 units between the fourth quarter of 2019 and the second quarter of 2020.", says the quarterly report.
While the number of vehicles in Model 3 in the first quarter should increase compared to the previous quarter, deliveries to North America in the first quarter will be lower than in the previous quarter. The reason is that the vehicles are being shipped for the first time to Europe and China.
Deliveries to overseas markets will result in differences in production and sales rates. For S and X models, sales in the first quarter of 2019 are expected to be somewhat below the first quarter of 2018. The deciding factor here is certainly the planned reduction of the national tax credit for EV from 1 January 2019.
For Model 3, the goal is to achieve a gross margin of 25% in 2019. This should be ensured by a significant cost reduction in combination with better absorption of fixed costs and careful management. For model S and X, the current gross margin should be maintained.
The sales of stationary Tesla battery storage systems will increase
Revenues from production and storage of energy should be significantly increased in 2019, mainly due to battery battery operation. For seasonal reasons, it is expected that the number of renewable solar systems in the first quarter will be somewhat below the level of the fourth quarter. However, the gross margin of energy business should grow as the energy storage margin continues to improve at current levels.
Services and other businesses are continuing to grow / expected to cut costs
Tesla is convinced that service companies and companies will continue to grow. This is mainly due to the anticipated sales of used cars in 2019. And in this area, it is targeted to improve the gross margin. The company is confident that operating costs will increase by less than 10% in 2019, which will lead to huge debts with respect to revenue growth in 2019.
The fact that about 70% of the customers of model 3 bought their vehicle without a test drive also had a positive effect. The way we would like to continue in order to significantly reduce costs with current automation projects.
It is also expected that the restructuring measures taken in the first quarter will cut costs by around $ 400 million a year. The gap between production and deliveries in the first quarter will lead to a temporary but predictable collapse in business. As a result, Tesla's only goal in the first quarter is to reach a positive conclusion.
Planned growth from 45 to 65% in 2019
All in all, Tesla expects to reach 360,000 to 400,000 deliveries by 2019. Compared with the previous 2018, this corresponds to a growth of about 45% to 65%. In each quarter, after the first quarter of 2019, Tesla expects a positive result and a positive cash flow (operating cash flow less investment). You will spend about $ 2.5 billion in 2019. Most of these funds will be spent on expanding their own capacity and developing new vehicles.
Furthermore, major projects such as Gigafactory Shanghai, Model Y and Tesla Semi Truck will continue to develop. For model Y, Tesla said that it shares about 75% of its 3-component components. This has the appropriate effect on the cost structure of the vehicle and makes it faster for serial production.
Source: Tesla – Press Release from January 31, 2019