Friday, April 15, 2016

A plan for credits and Tesla production

A Tesla rebate and production SWAG (Scientific Wild Ass Guess).  Speculation on the federal rebate and production of the Tesla Model 3.  Sources are below but the guesses are pure author speculation. Hang onto to your hats the going gets thick.

Plug-In Electric Drive Vehicle Credit (IRC 30D)

The credit begins to phase out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009). 

Ramp up production plan table based on this IRS information and sources below.

 Date     Roadster       Models S  Model 三   Model X   Annual   ~ 55% US cumulative

2015       2000   (0)   107,228                         206        109,434   60,189 thru 12/2015

2016 Q1             (1)    12,420                         2400        14,820    68,340 thru 3/31/16
2016 Q2-4         (2)     ~40K                          ~35K        75,180   109,689 thru12/31/16

2017                   (3)     ~60K        15000        ~60K        135K     184K thru 12/31/17
2018              (4)(5)     ~60K          85K          ~60K        205K    Q1-199,999cum /15K
2018                   (6)                                                                          Q2 / Q3 40K  Full Fed
2018                   (7)                                                                          Q4 30K  Half Fed

2019                   (8)     ~60K         190K        ~60K        330K     Q1 40K  Half Fed
2019                                                                                                   Q2/3 100K  Qtr Fed

2020                   (9)     ~65K         330K        ~65K         500K     No Fed Q4 2019 on

(1) estimates, my guess of S to X ratio.
(2) Tesla 2015 Q4 report 80-90k (using 90k) estimate for 2016 production less 1st Q 2016.
(3) SWAG time. Based on target Tesla 500K 2020 met via ~50% ann growth
(4) 2018 -2020 increases shift to the Model  . S & X numbers may flatten some 2018
(5) 2018 Q1 Surges world deliveries of S & X
(6) My estimate for Full rebates on  employee/QA in 2017-Q4, plus 2018 through Q3 = 70K.
(7) Half rebate 2018-Q4 - 2019-Q1 Model  - 70K,  Quarter rebate 2019 Q2/3 Model  100K.
(8) 2019 NUMMI (only) 310K - (Overseas production 20K - S&X growth resume ~10% )
(9) 2020 NUMMI 460K + (Overseas 40K) - Tesla goal of 500K annual production met.

The estimate above of all Tesla vehicles sold 2010-2015 is about 110K and of those a percentage of 55% are estimated to be US sales for a US sale total of 60K.  Using a combination of Q1 reports, high end Tesla production estimates (90K) for the year, and the 55% US estimate I get a cumulative US sales total of 110K through year end 2016. The 55% estimate was in online reading but I'm unsure of the source and willing to look at any more accurate figure out there.

Next for 2017 and on, I start with the announced goal of a half a million annual vehicles for Tesla in 2020 and make some rough ( and optimistic ) guesses on about a 50% growth rate.  I also believe some strategic moves come in here.  Tesla needs testing for the 三 beyond the crash labs and track to assure their concierge level of service is not overwhelmed by problems with the .  I believe they are farther along than we think. They will deliver 2017-Q4 15,000 Model 三 vehicles to employees and a few to press and special friends. They can control feedback as they get fit and finish ironed out for ramp up. My guess is 184K cumulative all model US sales ending 2017.  This will also begin a period of carefully controlling US vs Overseas sales to maximize incentives.

In 2018 this strategic balance will be used in the first quarter to divert anything over 15K of the new Model 三 and 900 or so can't say no US S and X deliveries. This gives a cumulative 199K US at the end of the quarter 1.  2018-Q2 and Q3 will be unconstrained US sales and somewhat constrained overseas. My guess -  Q2 20K and Q3 20K of the Model  and most if not all S & X sales in the states for an additional 100K vehicles eligible for full credit.  A good chance of the total 70K Model 三 sales covering all of employees, Tesla owners, and line standing US public reservations will be eligible for a full US federal rebate.  The awesome part is Tesla could end with a total of 300K cars receiving the full federal credit. Of those in 2018 Q2 & Q3, 60K would still be the high end S & X owners with high end margins. This would also keep S & X rushing to reserve in 2017/2018 for whatever credits remain to counter low end cannibalization.

The next two quarters 2018 Q4 and 2019 Q1 are the 50% Federal $3750 rebate.  With a guess of 70K Model 三 owners and large quantities of S & X (about again 60K). this is extended to additional 130K owners.  It should cover all the pre unveiling reservations left - mainly online.  The faithful are rewarded - grin.

Finally the rebate plan ends with another 100K of Model  in 2019 Q2/Q3, with a total of 160K eligible for the quarter federal rebate of $1750. Total possible US rebates - 590K. Not bad for a 200K program.  A large number of the Model  reservations - 240K,  get some level of rebate.  

I would guess 2019 will also see an overseas plant come online with the three or more of the product lines at 20K initial production to help overseas sales shorted during the rebate production. This could reasonably expand to 40K in 2020 and with NUMMI fulfils the amazing "500,000 in 2020" Tesla target production goal.  Just like Henry Ford but with models S 三 X instead of model T.

Finally Elon Musk is not big on disappointing people. I believe (another SWAG here) he will make lane and parking Autopilot a freebie on his cars during the phase out.  Safety Autopilot is already free. Now he offers value to offset the loss of rebates.  At that time he could offer a paid option for fully autonomous driving Autopilot, with that upgrade discounted for those who already bought lane/parking autopilot.  This makes his discount mostly software and mostly amortized, with a good level of value to drivers. It also doesn't alienate present autopilot owners with a discounted upgrade.

Well that's it. All today's Model  reservations cleared by 2020.  All it takes is insane growth in the world's most competitive business by a little upstart called Tesla.

I wouldn't bet against them.

(Disclaimer - I'm a retiree with a modest amount of Tesla stock I hold for the long term.)

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