UBS cuts Tesla forecast: ‘Deliveries may provide a pop, but earnings may cause a drop’

Jun 28 2019

Key Points

• Improved deliveries in the second quarter could drive Telsa shares in the near term but second quarter profits and deliveries in the second half of the year are keeping UBS cautious on Tesla’s stock.
• UBS maintained its sell rating on the stock a lowered its 12-month price target to $160 from $200.
• Langan lowered Telsa’s earnings per share estimates for the rest of 2019 until 2023. UBS cut Tesla’s second-quarter earnings per share estimate to a loss of 78 cents from a loss of 49 cents.

A move by Beijing to keep a sales tax break on environmentally friendly cars to help the sputtering auto sector will boost the fortunes of top domestic EV manufacturers as well as the popular Tesla from the US over smaller players, analysts say.

Beijing had been widely expected to scrap the sales tax break, but the Ministry of Finance announced on Friday it is extending it. A change had been expected to go into effect Monday, but buyers battery-powered and plug-in hybrid cars will still be exempt from the 10 per cent sales tax until the end of 2020.

The auto sector is one of China’s biggest economic engines and accounts for one of six jobs. But car sales have fallen off in the world’s largest auto market, partly due to weakened demand amid the US-China trade war.

This happens as China has been turning itself into the world’s leader in electric vehicles, as Xi Jinping steps up the battle against air pollution and pushes toward innovative technology. Sales of EVs totalled 1.26 million units in 2018, or 52 per cent of the world’s total, making China the largest new energy car market on the planet.

Tesla’s head of Europe is out

Jul. 2nd 2019

Another Tesla executive is leaving the automaker. Electrek has learned that Jan Oehmicke, an executive hired by Tesla a year ago to lead European operations, is leaving the company.

Oehmicke had been with BMW for almost 20 years when he decided to join Tesla.

Most recently, he was CEO of BMW Financial Services France when the electric automaker poached him to lead its European operations in May 2018.

Now two sources familiar with the matter have told Electrek that Oehmicke is not with Tesla anymore.

Tesla didn’t respond to a request for comment regarding Oehmicke’s departure from the company. The executive also didn’t respond to a request for comment.

One source told Electrek that Sascha Zahnd, Vice-President Global Supply Chain at Tesla, is replacing Oehmicke as the head of Europe.

The departure adds to several other executive departures at Tesla over the last few months.

Tesla lost its head of production just last week, which followed the departures of Two other Tesla manufacturing executives earlier in the year.

Several other execs also left Tesla in the last few months.

Lucid Motors hires former Tesla production executive

July 1, 2019

Lucid Motors said on Monday it hired Peter Hochholdinger, a former Tesla Inc production executive, as vice president of manufacturing, its latest high-profile hire from the electric-car maker.

Newark, California-based Lucid Motors had in April named here Peter Rawlinson, former chief engineer of Tesla's Model S, as its chief executive officer.

Hochholdinger, who was vice president of production at Tesla’s Fremont factory, left last week after three years with the company.

At Tesla, he was tasked with improving production for Tesla’s luxury Model S sedan and Model X sport utility vehicle as well as helping build a cost-effective manufacturing program for the Model 3 sedan.

His departure is the latest among a string of senior executives to leave Tesla in the past two years, as the company struggles to deliver Model 3 sedans efficiently in international markets.

Lucid, which has more than $1 billion investment from Saudi Arabia’s Public Investment Fund, was founded in 2007 as Atieva by Sam Weng and Bernard Tse, a former vice president of Tesla.

The company positions itself as being less of a direct competitor to Tesla than with luxury car makers such as Audi or BMW, Rawlinson had said.

Rawlinson said Hochholdinger’s experience in manufacturing would help the company in launching Lucid Air and other future models.

A core component of the report is that UBS used market rates to estimate the costs of each of the car’s components, and then added them up to come to a total cost of the car. As Maarten pointed out, that doesn’t make sense when Tesla has in-housed so many core components, especially high-priced components that don’t actually have a competitive market to bring down their costs. When you consider that Tesla has “military-grade electronics” in the car and other sophisticated tech that it has in-housed, that can quickly lead to a cost estimate thousands of dollars higher than reality. That’s just one portion of the overall mistake of a report, but my goal here isn’t to just rephrase Maarten’s piece, so just read his piece if you want more details on this.

The topic of focus for this article is the top analyst listed on the first page of the report. That analyst is Colin Langan. Non-journalists with a stronger journalistic gene than CNBC’s reporters did some sleuthing and found out that this analyst has recommended selling TSLA 18 times in the past two years. He hasn’t recommended buying TSLA at all.





Furthermore, this UBS analyst has recommended buying GM stock over two dozen times in the 7 years he’s been covering the company. He has never recommended selling GM.





I don’t really understand where this bias comes from, but it’s clearly at play in buy/sell recommendations and seemingly in the misleading Model 3 report as well. You don’t recommend only selling a stock (never recommending that someone buy it) over the course of a couple of years and then get treated as neutral. Furthermore, only recommending that people sell TSLA and only recommending that people buy GM is absolutely confusing when you look at how the companies have performed in the past few years.

Update → One note Maarten dropped into the comments is that UBS has a large TSLA short position, which you can track to some degree on Fintel.io. As one reader summarizes it, “UBS Group AG has a history of taking positions in derivatives of the underlying security (TSLA) in the form of stock options. The firm currently holds 314,690 call options valued at $107,923,000 USD and 1,302,400 put options valued at $446,658,000 USD.”

That’s not supposed to influence their analysis arm, but I’ll leave it to free thinkers to contemplate the relationship. (Of course, their analysis arm should influence their stock position, but if that’s what’s going on, it seems like the company should pay for some better analysis.)

As one more note, pile on the fact that the Tesla Model 3 was the highest selling car in the United States last month in terms of revenue and was the 5th best seller in terms of unit sales. Also add in that Tesla sold more cars (only cars, excluding SUVs) than BMW, Mercedes, Lexus, Audi, Acura, and every other luxury automaker in the US. When you look at this information, you have to wonder, why is Colin Langan so bearish on Tesla? When you look at the UBS report, you have to wonder, why did the report’s analysts do such a crappy job trying to estimate component prices? You have to wonder, why did UBS come up with such a dramatically higher cost estimate for the Model 3 than other independent examinations cost estimates. (See what experts at the German paper WirstschaftsWoche and Sandy Munro concluded. Their estimates for the cost of the Model 3 line up very closely with Tesla’s own statements.)

After writing this article, I was passed the following video. It’s another great rebuttal to the UBS report and media coverage of the report. It also mentions some odd assumptions and apparently bad math from Colin Langan and this UBS report, as well as from the major media outlets parroting their claims.



One of the fun gems Galileo Russell pulled up in this video was a reminder that it was UBS that falsely claimed in 2016 that Tesla’s battery pack costs were $260/kWh. On a conference call in which the same Colin Langan was discussing this matter, Tesla’s head of investor relations, Jeff Evanson, joined the call to correct the record and share that Tesla’s battery pack costs were $190/kWh at that time. That’s just a reminder of how bad UBS assumptions about Tesla have been for so long.

To simplify everything for you: Something smells fishy in Basel, and shitty as hell in New York City or wherever Colin Langan is based.

But, again, for a deeper critique yet of the UBS report on the Tesla Model 3, I think this is still the best piece to consume and share: “Analysis: Sloppy UBS Tesla Burn Is Not Supported By UBS’s Own Numbers.” Please do the world a favor — send it and a comment or two to CNBC, CNN, the Wall Street Journal, the New York Times, and the Washington Post.

Tesla delivered record 95,200 vehicles in the second quarter, vs. 91,000 expected

Jul 02,2019

Tesla Q2 2019 Vehicle Production & Deliveries

PALO ALTO, Calif., July 02, 2019 (GLOBE NEWSWIRE) -- In the second quarter, we achieved record production of 87,048 vehicles and record deliveries of approximately 95,200 vehicles. In addition, we made significant progress streamlining our global logistics and delivery operations at higher volumes, enabling cost efficiencies and improvements to our working capital position.

. . . . . . . . Production . . . . Deliveries
Model S/X = 14,517 . . . . 17,650
Model 3 = 72,531 . . . . 77,550
Total = 87,048 . . . . 95,200

Orders generated during the quarter exceeded our deliveries, thus we are entering Q3 with an increase in our order backlog. We believe we are well positioned to continue growing total production and deliveries in Q3.

Customer vehicles in transit at the end of the quarter were over 7,400. Due to the order-to-VIN matching process we described in our Q1 2019 Shareholder Letter, which we extended to Model S and Model X in Q2 to improve process efficiency, this metric has become less relevant. As a result, we do not plan to disclose the customer vehicles in transit metric going forward.

Our net income and cash flow results will be announced along with the rest of our financial performance when we announce Q2 earnings. Our delivery count should be viewed as slightly conservative, as we only count a car as delivered if it is transferred to the customer and all paperwork is correct. We count a produced but undelivered vehicle to be in transit if the related customer has placed an order or paid the full purchase price for such vehicle. Final numbers could vary by up to 0.5% or more. Tesla vehicle deliveries represent only one measure of the company’s financial performance and should not be relied on as an indicator of quarterly financial results, which depend on a variety of factors, including the cost of sales, foreign exchange movements and mix of directly leased vehicles.

Car of the Year 2018: Jaguar I-Pace

The Auto Express Car of the Year for 2018 is the all-electric Jaguar I-Pace

By definition, any Auto Express Car of the Year has to change the automotive industry for the better and force its competitors to re-evaluate – and that’s just what Jaguar’s I-Pace has done in 2018.

Premium Electric Car of the Year 2018: Jaguar I-Pace

Up until now if you wanted a premium electric vehicle your choice was basically limited to some kind of Tesla, but Jaguar has arrived and moved the goalposts with its all-electric I-Pace SUV.

The 1996 Caravan didn't just set the design standard for the minivan. It set the features standard, too: dual sliding doors, second-row captain's chairs, and seats that fold forward, allowing owners to load in 4x8 sheets of plywood—the list goes on and on.

Wall Street was expecting revenue of about $6.375 billion for the quarter and a loss of $0.54 per share.

Tesla announced that it made $6,349 billion in revenue and a loss of $1.12 per share (Non-GAAP) – on expectation for revenue and below expectation for earnings.

However, it’s a big improvement over Tesla’s previous quarter results of $4.5 billion in revenue and a loss of $4.10 per share.

Combined with our public offering of equity and convertible bonds (net proceeds of $2.4 billion),we ended the quarter with $5.0 billion of cash and cash equivalents, the highest level in Tesla’s history.

As a result of our strong deliveries and continued progress on cost efficiencies, our GAAP net loss declined significantly compared to Q1.

more than 60% of Model 3 trade-ins are non-premium brands, indicating a larger total addressable market for this product than initially expected.

During the quarter, a majority of orders continued to be for a long-range battery option and the Model 3 average selling price (ASP) was stable at approximately $50,000. At the same time,manufacturing costs continued to decline.

Depending on the timing of the Gigafactory Shanghai ramp, we continue to target production of over 500,000 vehicles globally in the 12-month period ending June 30, 2020.

we are making progress managing Model Y cost with only a minimal cost premium expected over Model 3. Due to the large market size for SUVs, as well as higher ASPs, we believe Model Y will be a more profitable product than the Model 3.

Powerwall and Powerpack deployment grew by 81% in the second quarter to a record 415 MWh.

Solar retrofit deployments declined sequentially to 29 MW. We are in the process of improving many aspects of this business to increase deployments.

We remain on track to launch local production of the Model 3 in China by the end of the year and Model Y in Fremont by fall of 2020. We are also accelerating our European Gigafactory efforts and are hoping to finalize a location choice in the coming quarters.We are working to increase our deliveries sequentially and annually, with some expected fluctuations from seasonality. This is consistent with our previous guidance of 360,000 to 400,000 vehicle deliveries this year.

Additionally, we expect positive quarterly free cash flow, with possible temporary exceptions, particularly around the launch and ramp ofnew products. We believe our business has grown to the point of being self-funding.

We continue to aim for positive GAAP net income in Q3 and the following quarters, although continuous volume growth, capacity expansion and cash generation will remain the main focus.

Our 2019 capex is expected to be about $1.5 to $2.0 billion, a reduction from prior guidance. We continue to find opportunities toimprove capital efficiency and shift cash outflows to future periods.

“Tesla has evolved. What we need now is a focus on sales, delivery and manufacturing. I have been helping with that in recent years, but it’s not what I am best at. There are people in the world who are better at this stuff and enjoy it more.”

“He’s Full of Shit”: How Elon Musk Fooled Investors, Bilked Taxpayers, and Gambled Tesla to Save SolarCity

The controversy over SolarCity, which has dovetailed with questions about Musk’s mountain of debt and profit shortfalls, offers a window into the mindset of America’s most outlandish CEO.

August 25, 2019


[ . . . ]


But three years after Tesla bought SolarCity, there are serious doubts as to whether the plant will ever fulfill its promises. The website CleanTechnica, which is mostly supportive of Musk, calls SolarCity “a disaster waiting to happen.” A potentially costly lawsuit alleges that Tesla acquired SolarCity at the expense of its own shareholders. And former employees want to know what happened to the massive subsidy Tesla received. “New York State taxpayers deserved more from a $750 million investment,” a laid-off employee named Dale Witherell wrote to Senator Kirsten Gillibrand. “Tesla has done a tremendous job providing smoke and mirrors and empty promises to the area.”

There are growing questions about SolarCity’s product, too. Last week, Walmart sued Tesla for breach of contract due to “years of gross negligence,” claiming that solar panels installed at seven of its stores went up in flames, causing millions of dollars in damage. The lawsuit, citing Tesla’s “utter incompetence,” seeks to have the company remove rooftop panels it installed at more than 240 Walmart stores.

The controversy over SolarCity, which has dovetailed with questions about Musk’s mountain of debt and profit shortfalls, offers a window into the mind-set of America’s most outlandish and unpredictable CEO. Musk’s believers argue that the details of his ventures don’t matter: It’s the grand vision that counts. “The guy has a will to make stuff happen that is extraordinary,” says someone who worked closely with Musk. “He willed Tesla to happen. And in willing a reality into existence, he might not stick to the facts.” But in the case of SolarCity, Musk’s penchant for making promises he can’t deliver on turned out to matter a great deal—and could even pose a threat to his entire empire.


[ . . . ]


As is common with Musk’s ventures, SolarCity professed to be focused on changing the world. “Everything was very motivational,” says a former executive. Some workers, taking the ethos to heart, sported SolarCity tattoos.

But the initial success of the company’s stock masked some difficult realities. SolarCity’s business model was to front the costs of installing solar panels and allow homeowners to pay over time, which created a constant need for cash. That required raising money from outside investors, often big banks, who were then entitled to the first chunk of the payments homeowners made—leaving SolarCity in a never-ending scramble to raise more debt. The real engineering that took place at SolarCity, in short, was financial, not environmental.

On the consumer side, SolarCity was plagued by complaints about misleading sales tactics and shoddy installations. As the problems mounted, some workers began to feel manipulated by the company’s talk about being a force for good in the world. “I turned a blind eye to a lot of the silliness because of the idealism,” says one former senior employee. “I don’t know when the Rubicon was crossed, but there were micro-crossings every day.”


[ . . . ]


In reality, the situation was even uglier than outsiders knew. As SolarCity struggled to raise money from institutional investors, it began offering individuals a chance to buy what it called Solar Bonds. (“Now you can get paid while driving the solar revolution,” the marketing material said.) But there were few takers—so other parts of the Musk empire took up the slack. According to the shareholder lawsuit, SpaceX acquired $255 million of the bonds. Musk himself bought $75 million of them, and the Rives acquired another $38 million. To raise the cash, Musk borrowed against both Tesla and SolarCity stock, increasing his personal credit lines from $85 million to $475 million. He also used his own reputation to shore up the stock: In February 2016, when SolarCity stock plunged to its lowest level in three years, Musk bought $10 million in shares. A week later, when the news became public, the stock soared by almost 25 percent.

At the same time, according to the shareholder lawsuit against Tesla, the company faced “significant liquidity concerns”—meaning it was running out of money. An accounting inquiry from the SEC noted that SolarCity was burning through cash—$659 million in the first quarter of 2016 alone. That February, at a Tesla board meeting, Musk proposed a solution: Tesla, he said, should acquire SolarCity.

The board balked. But Musk kept pushing. Two weeks later, he proposed the acquisition again. Once again, the board said no.

It was a hopelessly conflicted situation. Musk owned more than 20 percent of both SolarCity and Tesla. His brother, Kimbal, served on both boards, as did several investors, including Antonio Gracias, a close friend of Musk’s. As a judge in the shareholder lawsuit ruled, it is “reasonably conceivable” that Musk effectively controlled the Tesla board when he pushed it to acquire SolarCity.


[ . . . ]


Now the brewing problems at SolarCity threatened to give skeptics real ammunition against Musk—unless those problems could be buried. In May 2016, the Tesla board finally agreed to acquire the company for almost $5 billion, including the assumption of nearly $3 billion in SolarCity debt. On a conference call on June 22, the day after the deal was publicly announced, Musk told analysts and investors that the company had “the best technology out there for high-efficiency, low-cost solar panels.” He didn’t say anything about the liquidity crisis at SolarCity. Nor did he mention something else that shareholders allege the Tesla board came to learn as it did its due diligence on SolarCity: The cost per watt of solar modules being produced in Buffalo was actually projected to be 20 cents above the rest of the industry.

On October 28, 2016, just before shareholders were set to vote on the acquisition of SolarCity, Musk strode onto a platform erected on the set of Desperate Housewives at Universal Studios’ back lot in Los Angeles. He talked about the existential threat presented by global warming and the desperate need for sustainable energy. Then he gestured to a group of houses that had been set up around him. They might look normal, he said, but they actually featured a revolutionary new product called the Solar Roof—shingles that would last longer and cost less than a regular roof, even before factoring in electricity. Tesla expected production to begin the following summer.


[ . . . ]


In early 2018, the company announced that production of the Solar Roof had begun in Buffalo. That fall, Tesla told Bloomberg News it was “gearing up for tremendous growth in 2019. We have a product, we have the customers, we are just ramping it up to a point where it is sustainable.”

But in its quarterly letter, a month earlier, Tesla had confessed that the product wasn’t actually ready yet. “We continue to iterate,” the company wrote. In a legal filing, Tesla acknowledged that the much-hyped technology it had acquired from Silevo wasn’t all that it was cracked up to be. And last May, an investigation by Reuters revealed that most of the solar cells being produced in Buffalo were being sold overseas, not used in the Solar Roof, because demand was so low.

Customers who tried to purchase a Solar Roof took to Twitter to share their horror stories: Kevin Pereau, a California homeowner, said he paid a deposit of $2,000 to have a Solar Roof installed more than two years ago—then never heard from the company again. He got his money back only after he started tweeting at Musk every single day.

Musk, meanwhile, is still making promises. Last March, he proclaimed that 2019 would be the “year of the Solar Roof.” In late July, he tweeted that Tesla is “hoping” to turn out 1,000 Solar Roofs a week by the end of the year. But even onetime believers have become doubters. The MIT Technology Review, which included the Solar Roof in its list of 10 “breakthrough technologies” in 2016, now calls it a “flop.” In a recent analyst note, JP Morgan warned that Solar Roof will be a “niche” product at best. Musk has “sustained a kind of Kabuki theater in which the Solar Roof ramp is always imminent, but never here,” wrote investor John Engle, a #TSLAQ member.

Another #TSLAQ member, a Yale-trained lawyer and investment manager named Lawrence Fossi, made a discovery while combing through SolarCity’s financial statements. Without fanfare—and with no input from constituents—state officials had quietly issued a series of 10 amendments that watered down the requirements SolarCity must meet in exchange for the $1 lease on the Buffalo factory. The 1,460 “high-tech” jobs at the factory became just plain old jobs, as did the 2,000 jobs to support solar sales and installation in New York. The agreement to employ 900 people at the factory within two years shrank to 500. And the timing for the additional jobs was extended to 10 years after the factory was completed—at which point the lease would also be expiring. (Tesla argues that the company is now responsible for all 5,000 jobs, instead of being able to fulfill them through suppliers.) The governor’s office declined to comment on who authorized the changes, and state officials have yet to provide any public explanation as to why they opted to let a big corporation like Tesla off the hook.

In fact, the Buffalo deal turned out to have been tainted by corruption from the very start. Just one day after Tesla finalized its acquisition of SolarCity, Preet Bharara, then the U.S. attorney for the Southern District of New York, announced criminal charges against a handful of Cuomo staffers for rigging the construction bids for the Buffalo Billion program to favor the governor’s campaign donors. The man tapped by Cuomo to oversee the taxpayer subsidies, as well as a leading donor who received a $225 million contract to build out the Buffalo factory, were both convicted last year of conspiring to rig the bids

Lyndon and Peter Rive have both left SolarCity, and the company’s original business of installing solar roofs has all but evaporated. The company once controlled two-thirds of the residential market; now, according to the consulting firm Wood Mackenzie, its share is less than 7 percent. In the second quarter of this year, SolarCity installed only 29 megawatts of solar panels—far below the 10,000 megawatts in annual installations that Musk had promised. “Total implosion” is how one SolarCity insider describes it.


[ . . . ]


When Tesla bought SolarCity, it said the deal would “add more than half a billion dollars in cash to Tesla’s balance sheet over the next three years.” But it appears to have had the opposite effect. “I think it’s a big source of the cash-flow deficit,” says one longtime analyst. “I think it is a big thorn inside of Tesla.” The company has paid back some of SolarCity’s debt, including the Solar Bonds owed to Musk and SpaceX. But this fall, another $556 million is coming due. In a characteristic tweet, Musk once vowed he would “personally” repay the SolarCity debt if need be.

There may be another cost. By next April, Tesla is required to start paying an annual fine of $41.2 million if it fails to employ 1,460 people in Buffalo. Tesla says it currently has 636 employees statewide in New York, including 329 at the plant, and that it has invested almost $400 million in New York. Engle, the TSLAQ member, argues that Tesla cannot afford to admit that SolarCity has been a fiasco, because doing so would open the company to significant liability in the ongoing lawsuit over the acquisition.


[ . . . ]

Tesla Model 3, S & X Sales In U.S. In August 2019

Sep 04, 2019 at 2:52pm

Tesla Model 3 Deliveries In U.S.

Our estimates show that Tesla delivered some 13,150 Model 3 to U.S. buyers in August 2019. That's a wee bit down from the 13,450 Model 3s to U.S. buyers in July 2019. And it's substantially down from the 21,225 delivered in June (end of the quarter month) and below the 13,950 Model 3 delivered to U.S. buyers in May 2019, but well above the 10,050 Model 3 delivered to U.S. buyers in April 2019.

The 13,150 is down a lot compared to the year-over-year figure from August 2018 (17,800 Model 3 estimated sales in the U.S.)

Moving on to the Tesla Model S and Model X

For August, we estimate the following for U.S. sales of these two Teslas:

Tesla Model S - 1,050
Tesla Model X - 1,825

These combined figures are far below the August 2018 numbers of 2,625 for the Model S and 2,750 for the Model X. However, both figures are an improvement over July when we estimated Model S U.S. sales at 975 and Model X at 1,225.

Quarter over quarter growth

We should point out that if we're looking for a proper comparative set, then the second month of Q2 (May) is perhaps where we should put our focus. In May 2019, Tesla's estimated sales are as follows:

Model 3: 13,950
Model S: 1,025
Model X: 1,375

Comparing August 2019 to May 2019, Model 3 sales in the U.S. are down, Model S is steady and Model X is up.