Whitney Tilson’s email to investors disussing the concept cars gleam, but executive dread clouds the Frankfurt Auto Show; Anton Wahlman on Tesla Inc (NASDAQ:TSLA)’s Q3 unit deliveries.
1) Good background on the auto industry: The Concept Cars Gleam, but Executive Dread Clouds the Frankfurt Auto Show. Excerpt:
Car executives are paid to be optimists, but behind the pomp and salesmanship at the Frankfurt International Motor Show this week lurked an unmistakable sense of angst.
The talk among industry insiders at the show, one of the auto industry’s biggest events, reflected the existential threats that carmakers face.
The European and global auto markets are in decline. Carmakers are betting their futures on electric vehicles whose marketability is untested. Manufacturers are under intense public and regulatory pressure because of the role that vehicles play in climate change. The global trade war has disrupted supply chains.
2) I read this Twitter thread with interest. It begins:
TESLA STRONG EUROPEAN SALES 2019 Q3 WIP Three “benchmark” countries going strong . . .
I asked Anton Wahlman for his take on it, and he replied (shared with permission):
The article quoted in the email thread below is not my most recent article on the subject; it is from August 12, over a month ago. My most recent article is from September 4 and it estimates Tesla's Q3 unit deliveries to be just over 97,000:
Since September 4, the only news has been from the three European countries where we get daily sales data. Among those three countries, compared to my expectations as of the morning of September 4, The Netherlands is tracking above, whereas Norway and Spain are tracking below. On a net basis *among those 3 countries*, there is a net impact to my full Q3 projection of almost 2,000 units, which means that my current estimate, all other things equal, is closer to 99,000 units.
But here is the other twist: We kind of know why The Netherlands is tracking so strongly right now. Their tax incentive is going to be reduced on January 1. That is why the situation in The Netherlands is essentially unique in Europe right now. Barring any change in legislation, Tesla's sales in The Netherlands will collapse 95% in January.
So the question we must ask ourselves is: Does the rest of Europe look more like The Netherlands, or more like Norway and Spain? I would submit that it looks more like Norway and Spain, for the reason mentioned above.
It is of course true that the UK is seeing the initial sell-in of the Model 3, but that was already known in late June. I had estimated 2,000 Model 2 units for the UK for August. The actual result turned out to be 2,082. That's about as close as one could have ever conceived. I have 3,000 for September, which is basically just a wild guess.
We are of course missing many of the most important numbers in order to get to within a certain 10% guess for the quarter. In the end, it's just too early to say whether the unit number will be closer to 88,000 or 107,000. As I said, my estimate had been 97,000 but as of the last couple of days I have been leaning closer to 99,000. That still leaves plenty of room for Tesla to report something in the 88,000 to 94,000 range.
When in doubt, I have been saying for multiple years now that Tesla will prioritize units over margins. They will move the units, whatever the discount may be, if at all possible. Very rarely does the company fail to do so. Q1 2019 was such a quarter, but Q2 2019 was not. I don't believe Tesla will fail to do so in Q3 2019 either. I think the baseline is 95,000 to 97,000 and that will likely be very close to the final result based on what we can see to date.
Having just come back from Europe and met with the various automotive managements, they are slow-walking EV deliveries in 2019 in anticipation of the new European quotas that start on January 1, 2020. That's when they will crank up the deliveries. The longer-range Hyundai Ioniq, the new Renault Zoe 2.0, the VW ID.3, and many others, will hit with full force in 2020. Mercedes EQC deliveries have begun, but will remain very small until January 1. MINI and BMW iX3 all crank up volumes in 2020, plus Volvo XC40 and Polestar 2, among many others.
Here are the Model 3 numbers for Q3:
|Model 3||Jul||Aug||Sep||Q3 2019|