The case for Tesla deferring 200K until July

So I have long been arguing that Tesla would cross the 200K US vehicles barrier in 2Q18, despite optimistic estimates that they would cross it in the first quarter.  Some enthusiasts even thought they would cross it in the final few weeks of 2017!  With the latest news from Tesla, I don’t think anyone believes it will occur in the first quarter any more.

With the latest news from Tesla, there are now some people speculating that Tesla may be able to defer hitting 200K until the third quarter (July 1).  Initially I was definitely not in that camp.  In fact in my post two days ago, I specifically thought that Tesla would hit the 200K mark in late April and there was no way they would defer.

However, between new speculation on what it means that some Canadians are getting earlier delivery estimates for AWD models that even those of us in the US, combined with news that a key Ontario EV tax credit is expiring in June, and a fellow forum member who kindly reminded me that there is a lag between an increase in production at the Gigafactory and actual sales, I have revised my thinking and run the numbers.  The results indicate that it is at least plausible that Tesla may try to do this.

Here is what that would mean:

  1. As was the assumption before (prior to the extended production delays) it will be necessary to divert additional Model S and X overseas above and beyond what Tesla would normally do.  I am assuming a 20% figure.  This will be somewhat hard to swallow for US buyers due to the extremely low inventory of Model S/X already, so build times might climb past 8 weeks from order to delivery.
  2. I am assuming that a best case scenario for the new equipment to be installed and running at the Gigafactory is the end of March.  This will allow the battery module production rate to spike to 2,500 per week, but because the cars using those modules still need to be built, sent to a distribution center, prepped and actually delivered, I am assuming a four week lag before we start seeing the sales ramp hit 2,500 per week.  So I effectively moved my step-wise ramp to the right by 4 weeks.
  3. Finally the key aspect of this plan would be to divert a significant number of Model 3s to Canada.  For simplicity I assumed that up to 2,000 per week (subject to actual production rate) would be diverted to Canada, starting in April through the end of the second quarter (June 30).  This adds up to a total of 23,000 vehicles that otherwise would have been destined to the US, and effectively meaning there would be a 10 week pause in US deliveries before significant numbers were seen again.  During the second quarter, only 9,500 deliveries would be made in the US.  Of course Tesla wouldn’t have to follow this exact plan, but the effectively the numbers would have to work out roughly this way.

With those assumptions, I have Tesla selling a total of 200,246 vehicles as of June 30th, so with only a day or two of halted selling, they could defer selling #200,000 until July 1st.

This is what the ramp I’ve described looks like visually:

The drop in Model 3 sales in April and May represents the diversion to Canada.  The increase in late June represents the factory throughput kicking into high gear, not an end to the diversion to Canada.  After the end of the quarter, this rate would further increase to the full 5,000 per week (6,000 across the whole product range).

The cumulative sales look like this:

The slowdown in sales to the US is noticeable, but not tremendously so.  Of course the impact will surely be felt by those with April to June delivery estimates!

I’m certainly not at the point where I’d be willing to say this is how Tesla will play this, but there are certainly some indications that it may go this way.  As usual it will be very interested to see February sales estimates, any indication of the Model 3 ramp, and probably most importantly if and when Canadians start to get more specific delivery estimates and even invites to configure.  Certainly if we don’t see any of that happening by late March, this plan will not be put into play.  But until then, it’s something to think about.

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *

Post Navigation