Tesla Production, deliveries, sales … What was the question?

April 27, 2019 by Maarten Vinkhuyzen

---

It is not often that Wall Street analysts prove to Elon Musk that he is wrong to be fake themselves in just a few days.

The current decline in stock prices is partly due to doubt about the demand for the Tesla Model 3. Proof of this drop in demand, daily delivery figures from Norway and the Netherlands are used.

Everyone who follows knows that these two countries are on the other side of the Atlantic Ocean. The best informed know that cars destined for Europe are shipped by ship from Fremont, California, through the Panama Canal. The analysts who follow Tesla must even know that these ships sailed during the first half of the last quarter and that the production of the second half of the quarter was destined for the domestic market.

When these ships arrived a few weeks before the end of the quarter, deliveries began to deliver as many cars as possible before the closing of the quarter's accounts. But not all cars are delivered on time. The last cars of these ships were delivered during the first weeks of April.

"To respond quickly to international demand, the model 3 of Europe and China was built during the first half of the quarter, while the models for the local American markets were built in the second half," says Tesla's letter to shareholders during the quarterly conference call, it was explained that this distorted the numbers tremendously. This distorted the figures as half-quarter shipments occurred in the last 10 days of the quarter.

Okay, let's go back to watching the declining demand. Has half of the demand in the last quarter occurred in the last 10 days?

Any analyst who tried to say that would have fun. So why are they being taken seriously with their demand claims in Norway and the Netherlands now? There was no production for Europe 6 weeks ago. There were no ships en route to Europe 4 weeks ago. No car arrived in Europe two weeks ago. There are virtually no deliveries in Europe today. There is no relationship between current demand and deliveries in Europe.

And why does that prove that Musc is right? During the teleconference, there was this question and answer:

Philippe Houchois, Jefferies, Analyst"And may I ask you a question of going back to what Adam said about the drama surrounding your stock, unfortunately. Why do you not reduce a portion of your revenue by monthly disclosing your shipments and possibly your greenhouse revenues earlier than reserves, so that we get a better view immediately on some of those details that move the stock? "

Elon R. Musk, Tesla, President and CEO"I think it would actually be counterproductive because people read too much about what happened in a month. I mean, even every quarter, things can be rude. Thus, the more granularity would be provided, for example, every month, then people would come to all sorts of conclusions that would make no sense. It is as if, literally, sales to a given country, for example, abroad, were affected by the moment the ship arrived. Thus, if the ship arrives on the 31st of the month or the first of the following month, it will give the impression that something dramatic has occurred. But in reality, the ship was only one day late. So people read – it would increase the drama, not decrease it. "

Zachary Kirkhorn – Chief Financial Officer: "And we fill the boat 100% …"

Elon R. Musk – Chief Executive Officer: "Fill the ship to 100%. So it ends up being lumpy. … If you calculated the GDP of a country – say the United States – GDP Sunday is extremely low, but Monday's GDP is extremely high … nothing has really changed. "

Examination of the number of deliveries leads to erroneous conclusions.

Data and information

Data and information are not the same thing. The information is produced by giving meaning to the data. That's what accountants, statisticians, IT professionals, data scientists and sometimes Wall Street analysts do.

This process starts with looking at the question, what do you want to know?

At the end of the quarter, we obtain production and deliveries as a prelude to the financial report. The production volume is an indication of the costs, and the deliveries multiplied by the average sales price are an indicator of the revenues. Nothing more and nothing less. These are indicators of the next quarterly financial report. This is the question of the financial analyst who is answered with these figures.

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

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

Beer is in large quantities all year round. The peak of sales around sports events like the Super Bowl, the Olympics or the hot summer days. There is a correlation between demand and these events. Many in the marketing even think that there is a cause-and-effect 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 are accustomed to doing for traditional car manufacturers in the US, they do it for other automakers around the world, without realizing that the North American auto market is rather peculiar .

In North America, cars are sold from stock. In most countries of the world, it is not normal to sell large equipment assets in stock. New planes, yachts, cars, machines or houses are first ordered, then built and delivered. For most of these products, even Wall Street analysts know they have to consider new orders as the main indicator of market and economic trends.

Philippe Houchois should have asked for a monthly order and order book numbers, like Boeing and Airbus. These are the important numbers. More important than production and much more important than deliveries.

It's not that I think Tesla will publish them, but at least he would have shown he understood what he's talking about.

So, we were basically stuck, Tesla repeating why it's irresponsible to publish the monthly delivery figures. Two days later, Wall Street panics using daily delivery figures that have nothing to do with FUD's story.

OK, dear readers, when will this FUD attack be over? And how are we going to educate these Wall Street nitwits?

Keywords: EV Sales, Netherlands, Norway, Tesla, Tesla Financial Data, Tesla Model 3, Tesla Model 3 Deliveries, Tesla Model 3 Application, Tesla Model 3 Production, Tesla Model 3 Sales, Tesla Sales, Tesla Shares