Tesla Q4 Plans & Expectations

In addition to the information on Tesla’s Quarter 3 operating and sales numbers, the most recent shareholder letter also provided some interesting new insights into the company’s plans for Quarter 4.

With regard to those, Tesla is planning for the production of 15,000–17,000 electric vehicles during Quarter 4, and for the delivery of 17,000-19,000 vehicles. If these plans are achieved, then that will bring the total delivery numbers for the year to 50,000–52,000.

Model x production


 

It’s also worth noting that Model S production and delivery numbers are looking likely to hit earlier Quarter 4 plan numbers. Total vehicle delivery numbers for the quarter would likely be a fair deal higher were it not for supply constraints for Model X parts — in particular, for the second-row monopost seats.

Interestingly, though, in order to deal with these supply problems, Tesla has moved to bring the manufacturing of these second-row monopost seats in-house. (Editor’s Note: I previously mentioned this possibility, given the apparent difficulties getting the seats from the original supplier, but I didn’t honestly think it would resort to this. Nonetheless, here’s another example of Tesla taking things into its own hands when the market fails it, further strengthening its skillset, vertical integration, and competitive advantage. As an investor in TSLA, the seat supply issue has been a little nerve-racking, but I am happy with Tesla’s fairly quick move to bring the product in-house. –Zach Shahan)

Despite these issues, the company is apparently expecting that the Model X will hit a steady production stride during Quarter 1 2016. The expectation is for averaged production and delivery numbers of 1,600 to 1,800 vehicles per week (Model S + Model X) beginning in 2016, as had been also indicated on a previous quarterly financials call.

Here’s more from the recent shareholder letter:

We expect our average vehicle sales price to increase slightly in Q4 with more deliveries of highly optioned Model X vehicles. We expect Q4 Model S gross margin to improve sequentially, but initial Model X launch expenses and higher overhead and depreciation allocations will temporarily elevate total production costs in Q4. As a result, we expect non-GAAP Automotive gross margin to decline slightly from Q3. After Model X production stabilizes in Q1 2016, we expect Model X gross margin to improve rapidly and become comparable to Model S gross margin over the next several quarters, even as we launch a lower priced version of Model X with a smaller battery pack during 2016. Finally, we expect gross margin in Services and Other to remain positive, but to vary within a relatively wide band given the diversity of businesses reflected in this measure.

In Q4, we expect to directly lease about the same percentage of cars that we did in Q3. As always, we will use lease accounting for these cars even in our non-GAAP financial results, as such treatment is consistent with the cash collected on these transactions. We do not expect to sell any ZEV credits in Q4. During the next several quarters, operating leverage should improve with revenue and gross profit both growing faster than operating expenses. Operating expenses should increase slightly in Q4, but reflect a further decline in Model X development expenses, offset by increased costs related to expanding our global sales capability and developing Model 3.

The official Model 3 unveiling is of course set for late March 2016, currently — meaning that those costs are relevant for the foreseeable future.

The company is currently planning to invest around half a billion during Quarter 4, thereby bringing total capital expenditures for the year up around $1.7 billion. These investments relate primarily to “accelerated” Gigafactory investments, and the aforementioned seat assembly integration, amongst other things.

→ Related: Tesla Q3 Results & Numbers

→ Related: Tesla Reveals New CFO & New President Of Global Sales + Service

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