With so much going on in Tesla and Elon right now, it can be hard to keep and make videos in time,
maybe it would be easier as a live talking head, it would sure save me a lot of time.
But anyway, we have to talk about these China numbers,
we have to go through all the math behind them, because this could be game changing.
As you know I have been waiting for these numbers for some time.
In fact I have been waiting for these numbers so I can finally re-do all my forecasts, which you
should hopefully expect over the next couple of weeks, something I am very excited to work out.
The main reason why I was so keen for these numbers,
were that we had reported rumors that the Model Y production could
be up to as high as 1600 a day. Although these rumors sound too good to be true,
we did have phase two of Shanghai open and this contributed to such a potential ramp up of the Y.
Well we finally got the number of deliveries for the month, at it came in at just over 54,000
total, this is down from 2,000 in September at 56,000. This is perhaps somewhat disappointing
and unfortunately does not seem to validate our hope of an even further ramped Model Y.
But wait, it's not over yet. This is no ordinary month in China.
October the 1st is National Day of the People's Republic of China. According to my research it's
a de facto public holiday comprising seven consecutive days also known as Golden Week.
There are 31 days in October, therefore we might assume that Tesla was only in production for 24
days. Of course there would have been other issues in getting the production line back up to speed
whilst it was down, so the actual impact may have been slightly higher even.
At 24 days, and 54,000 vehicles, it comes in at 2267 vehicles a day. Which if we scaled to a full
month, would be 70,000 vehicles for the month. If we take the Model 3 at 800 vehicles a day,
which is the rate we have been seeing, that would then leave 1466 Model Ys a day.
Not too far off the 1600 a day rumor, but anything remotely close is still mind blowing.
If Shanghai production was down for a whole week, which sounds very likely,
and was also further validated by Wu Wa, who says the whole country will have 7 days off. Then
this is the data I have been waiting for since I first heard this rumor.
This is absolutely incredible. It's totally crazy. This was not expected at all from this factory,
at least any time soon. Let alone in its first year. That's right, we are not even one year
into production yet and we have already his this rate. Right the rate, what is the actual annual
capacity at this rate? Well at 1466 Model Ys a year, scaled up annually we hit a whopping 535,000
units a year. No I am not necessarily including downtime, as I wanted to know the capacity.
Because we can compare it to the initial capacity we were told, which was 200,000 units.
Alright, lets just do a quick tally up of Shanghais potential Q4 deliveries then.
We have 54,000 for October, even though we are at potential run rate of 70,000
a month for Model 3 and Y in Shanghai, and we may even see some more possible ramping,
there could be a bit of downtime, so what if we just adjust November and December to 65,000 each.
Then that's a total of 184,000 deliveries for Q4 just from Shanghai. But FYI, if they do average
70,000 for November and December, then we are at 194,000, again just from Shanghai,
as hard as that is to believe.
Now last quarter Fremont delivered around 106,000 units. Only 10,000 Model S,
and virtually no Model Xs. Along with lines down due to the transition of 2170 batteries to LFP
batteries for the Model 3 line, resulting in 8,000 fewer Model 3s from Fremont for Q3 compared to Q2.
So perhaps at a guess we might see 120,000 units from Fremont. And that doesn't factor
in any more Model Y ramping, as we know, although Shaghai is way above capacity, Fremont is still
below alleged capacity. The Model Y now has more 2170 batteries available, due to less being used
in the Model 3 standard range, or rear-wheel drive version as its now referred. Therefore,
it is not unlikely there will be some Model Y ramping there too. Either way if its just 120,000,
with 186,000 from Shanghai. That comes to a total of 306,000 units. Production numbers in Q3 were
237,000. That is 69,000 more units, or about a 30% increase in production, quarter-over-quarter.
Yet most investors are thinking 50% annual growth. 30% growth quarter over quarter
is 180% annual growth, as remember each quarter's growth would compound.
We are currently at 627,000 deliveries for the year,
so add a further 306,000 will take us to 933,000 deliveries. Ok, we didn't achieve a million, but
this is still a lot higher than people expected. And we are excluding any possibility from Texas,
which I have to say feels unlikely. But perhaps a few semi trucks maybe.
But this also means we are at a run rate of 1.2 million vehicles a year,
JUST from Fremont and Shanghai. Yet we still have people predicting 1.35 million units total for
next year. Well Fremont and Shanghai will still be ramping next year. There is phase 3 at Shanghai,
and Elon says there is still 50% more potential at Fremont, granted over perhaps 2 years. But either
way shouldn't 1.35 million units be a possibility for just Shanghai and Fremont combined next year?
I think this number comes from people's amazing mathematics ability of taking a
900,000 production for 2021, and adding a further 50% on, being 450,000 plus 900,000,
comes out at 1.35 million. Brilliant maths there, has to be said.
Anyway, if this discrepancy between Model Y capacity
and run rate is not major sandbagging, then what is? What about Texas and Berlin,
is it plausible to assume there might be some potential sandbagging around these factories too?
At this trajectory Shanghai could be around a total production of 240,000 Model Ys for 2021.
If Texas and Berlin were at the same rate, then they would have reached a total of 480,000 units
combined in 2022. But these facilities are larger than Shanghai. Model Y Shanghai has likely hit its
current capacity, in the space of 9 months. Well these new factories have a much larger capacity.
In addition to that they are using newer, faster production techniques.
On top of that, these factories have had months of working and testing the production line,
and making a lot of die cast molds ready to go. Surely, it would not therefore be too unthinkable
that they could produce enough units in 2022, that we reach 2 million units total?
And dont forget potentially some cybertruck deliveries too These are some big factories.
[https://electrek.co/2021/11/03/tesla-battery-cell-manufacturing-equipment-gigafactory-texas/]
We already already seeing Tesla bringing in parts of the 4680 production line to Texas. Tesla can
ramp up 4680 batteries at a much faster rate than 2170 batteries. Although the gains in Shanghai I
believe are mainly attributed to the standard range Model Y, using CATL's LFP batteries. But
Tesla can still ramp up 4680 batteries faster than CATL can make LFP. And possibly Tesla will
also offer a standard range Model Y from these factories, using more of CATL's LFP batteries too.
After looking at these I thought about buying an option for Jan or Feb for these delivery
numbers and Q4. But to be honest options trading really is expensive at the moment,
I really need a split first. As the trades are too large relative to my liking. As I am doing
these trades on an asymmetric mindset, and if one goes well I will get 10x return. But I may
need to execute 4 losing trades, to hit that one winning one. So when you multiply the cost
of 5 options trades at these prices, it becomes more funds than I am comfortable parting with.
On the other hand, we just had a very nice dip. So I sold some shares and picked up another LEAPS.
I am still human, and spending $30,000 on a contract, is still a lot of money to spend.
But, these China numbers did help me find the courage, on top of what
could see with these new factories. [screenshot of my twitter account]
As soon as I bought this I shared it on Twitter, so be sure to follow me on Twitter
for my up-to-date trades in real time. Oh also I did feel like a little bit of fun,
and purchased a call option for February, at a $1300 strike price, as it was just $3k. A bit out
of the money, but if the wind goes in the right direction, $1500 might be on the table by then.
Q4 results will be crazy, the extra gross profit from these extra units and
all the price increases, will almost all go to EBIT,
through economies of scale, as the opex shouldn't be affected overly. Add on to that the bitcoin
gains too. I have a lot of faith in this Q4. Translation 30% increase in production,
could be over 50% increase in EPS. I am going to do a Q4 forecast soon, to get a better idea.
Not to mention all the other good news, like various analysts raising their price targets,
the semi truck possibly starting deliveries this quarter, Tesla supplying energy in Texas.
Therefore I am not ruling out $1400 to 1500 perhaps as early as February.
$1400 would put my call option $1000 in the money, with an intrinsic value of $10,000, 230%
ROI. $1500 would put my call option at $20,000 in the money, or a 560% ROI.
I felt like that was an asymmetric investment.
Thanks