By the start of 2024, we would expect that Tesla have ramped up the new factories. We would also
expect Fremont to be at perhaps 50% more capacity, and Shanghai, well at this rate, potentially a run
rate of 2 million a year. If Texas can reach 2 million a year, and Berlin 1 million a year,
in 2024. That is a total of 6 million. If we round down that capacity to 5 million,
then it's not too far fetched. It's very easy to see how I have arrived at all these numbers,
I would say at least half of the sales would be for the Model Y, and none of them would be
the compact, as I doubt that will be in volume production that early. But it could be, and if
it is, then the quantity would likely be higher. The compact will be the fastest ever production
line for an EV. The Cyber truck would also make up a large portion of these vehicle sales too.
I was wondering, if it might indeed be possible to hit 10x earnings by 2024.
Well likely a 10x earning from 2023 Q4's EPS. The 2021 Q4 EPS is going to be around $2.50.
This happens to be over 10x from the same EPS in Q4 2020, at just 25 cents. So can Tesla 10x again,
and reach a whopping $25 EPS. Let's keep the numbers quite simple and work that back to
a $25 billion net profit equivalent, for Q4 23. To be clear, this is not some
econometrics pricing prediction for 2024, I am merely seeing what might be possible.
If we have a 5 million vehicle a year run rate, then in Q4 that's 1.25 million vehicles delivered
for the quarter. Around 4 times as many as we had last Q4. Is that going to be enough to give
us 10 times as much profit as Q4 21. Well let's find out. I am working on
the assumption here, that the higher the volume of production
increasing, the higher the operating margins, and thus net profit margins will increase, due
to economies of scale. In addition to that, the extra vehicles that will be responsible for about
half of the vehicles will be the new factories, which will be making Teslas at a lower cost,
and selling them for a higher price. The margins are going to be amazing. Then most of the
remaining Teslas sold after that will be coming from China, which despite being lower priced,
will still have great margins. And then Fremont might make up for itself too, if it has ramped
up more Model S and X lines too. In other words, all in all, we should see improved gross margins,
and reduced OPEX per vehicle. All pointing in the direction of bigger profits.
Look, it is hard to argue with anything less than a run rate of 4 million. I mean clearly Tesla are
going to be close to 2 million deliveries this year. If next year is 50%, then that is a total
of 3m, and by the start of 2024, you would have expected they ramped up a lot more in a year,.
But, alright, even it's not quite that high by then, then it won't likely take an extra
6 months to longer. In other words, if this is a good rate within a couple of years,
even if takes 2 and half or 3 years, it's still likely to be a great return within that period.
I guess another this report could be viewed might
be how much profit can tesla make when they hit million deliveries.
Alright, either way, we have shown it could very well be possible to reach a run rate
of 5 million vehicles by 2024. Therefore we just need to gather a rough idea of how much
profit Tesla could potentially make from selling that many vehicles.
Now we are talking the start of 2024, but the latest numbers will be the Q4 2023. So perhaps
we could just work through some rough numbers with those. This will just be for indicative purposes
only, but it could be useful to get a feel of what is still possible in just a couple of years. This
might be particularly useful to anyone holding LEAPS that expire perhaps around this period too.
I have assigned the vehicles I believe to be a close break up of what is sold.
One thing I think is that the Model 3 is being under looked. How often are we hearing
it the best selling car in certain markets, like the UK recently, 8% market share, the Model 3
is expensive in the UK, as are gas prices. Yet Tesla still can't make enough for that UK market.
Elon tells us that the Model Y will be best selling model in the world,
implying in excessive of potentially 2 million units a year. Given the margins Tesla have to
work with, it could be over 3 million units for all we know. It is Tesla's most popular
and profitable model, especially when all the new manufacturing upgrades are complete.
But this somewhat distracts from the fact that the Model 3 may also sell 1 or 2 million units too.
Imagine a new version of the Model 3, with structural battery packs, etc. The cost of
the 3 has a lot more room to move. So don't underestimate the potential from that vehicle
too. As an owner of two, I can validate it is an exception vehicle, and product in any capacity.
I think the cyber truck has a good chance of beating the F-150 as the best selling truck
in the US. I mean we are seeing Tesla's other cars dominate every single category they are in,
despite still being restricted by batteries. Why should it not occur in the pick up market too.
This is the most pre ordered vehicle in history. It has so much use and purpose,
and the specifications are astounding. 2 million Cyber truck units it a year may
not be too unbelievable within time. But we will just lock in 120,000 for the quarter.
Now in order to sell this many vehicles, I would say it likely that Tesla
are offering the standard range version for the Model Y in all markets. In other words,
there will be a lower cost Model Y available, in order to help support the demand.
But outside of Asia I believe Tesla will likely only be making these with their own
in-house LFP batteries, which I will assume will be more energy dense, lower cost and faster to
produce than the CATL LFP batteries. By this stage hopefully Tesla have enough LFP batteries
to support this level of production. This means that the average selling
price of the Model Y could be less. However, the gross margin will be higher.
I have broken up all the vehicles which I think could be sold from each factory.
Fremont is meant to increase capacity 50% just this year, and if we are talking until 2024,
then perhaps we could expect another 20% increase again by that stage.
Elon did even say that Fremont was capable of a million vehicles a year at one stage.
As for Shanghai, we have been seeing a Model Y every 33 seconds, which is approaching 1 million a
year. Added to that the new CATL factory, I think China at 1.36 million a year run rate is possible.
Texas is huge, and with 2 years of ramping up, extensions, new facilities,
I think it could be at 2 million units a year. Same for Berlin at annual run rate of 800,000.
This gives us a total of 5 million vehicles a year. I think that is all a possibility,
I think Tesla are going to be continually expanding the existing factories.
What was the first thing Tesla did after they built Giga Shanghai?
They built the Model Y factory in Shanghai, and they haven't stopped expansion since,
relative to the amount of batteries they can supply.
I have then assigned an average selling price for each vehicle from each factory, and multiplied
them by the number of sales per factory. Remember this is not a full econometrics model,
trying to establish the most accuracy. We are more just using some common sense to try and establish
if there is a potential chance that Tesla could 10x their profit within a couple of years.
In addition to that, Tesla should be receiving all of the FSD revenue by this stage. I am going to
assume by this stage Tesla has reached a level 5 autonomy level, with high enough features to
warrant 100% of FSD revenue. And we will use a 25% adoption rate. And say the price is $15,000.
That brings in about $5 billion of revenue. Which actually is not huge. Only about 15%
of actual gross auto profit would come from FSD. This is with 25% adoption rate.
Which goes to show that FSD itself is not the make or break of the company.
The real value for FSD is the application for the likes to Robotaxis or autonomous semi trucks.
Insurance is the same, it is a very small money maker,
but merely a service required for Robotaxis. The most value in FSD is when it can replace labor.
Or FSD wont start making money until there are millions of subscribers.
Anyway, this takes us to about $77 billion in revenue.
I have increased the margin up to 38% for vehicles in 2024. For those of you
who think margins will have to come down by then, for Tesla to become more competitive.
[image 4 - keep image 3 showing until here too] This will not likely happen any time soon. Tesla
can most likely increase margins even further. Now bear in mind the margins are significantly
higher than today, as costs have come down, namely with the 4680 batteries. Not to mention
the majority of these ramped up factories are from the new facilities with lower production costs.
The higher FSD adoption, and raised prices would also add to margins too.
[image 5 - keep image 4 showing until here too] Energy will be up a bit higher, I am giving it
a reasonable boost, almost in the quarter what was achieved the entire last year.
I think energy will be close to breaking out at this stage. But probably not too much prior,
as the vehicles will still be taking priority for the batteries. No one can predict energy,
until we get more guidance from Tesla, particularly on the in-house LFP production.
Services would have expanded with so many more cars, but possibly still not making a profit,
as there would be too many new cars with warranties.
I have increased OPEX significantly. Although OPEX should reduce somewhat
once the new factories are depreciated and more amortized.
Anyway, this comes in at around $22 billion in earnings. This quarter we are expecting about
$2.5 to 3 billion in profits. Therefore, this is not far off 10 times profits in just two years.
It does require an average of about 4 times the run rate of Q4 2021 though. But it makes nearly
10 times the profits. It's not exactly 10 times profit, but its indicative that it is achievable.
But perhaps not in Q4 2023, maybe it will take all the way to Q2 2024. However,
this is not the point I am really trying to make. The point I am making is that this company, could
still 10x profits in about a couple of years. And I am talking about 10x the latest Q4 profits,
which will record breaking as it is. My point is, surely when a company of this magnitude already,
can 10x in profits in just a short period of time, then that's a big deal.
Now $22 billion, we can pretty much say about $100 billion
earnings annually. If Tesla has a p/e ratio of 50, then that's $5 trillion. The question isn't
if, but when can they reach this level of production? 2024 to 2025 feels about right to me.
Bear this in mind too, that very little of this profit came from FSD, or energy. Not to mention
that Tesla plan on reaching a run rate about 4 times the size of this just for vehicles.
Even at this stage, there is so much more potential left for this company,
for profits to possibly 10x again, over the next few years.
Now these numbers are just for the current factories at just about current capacity.
It is clearly obvious that Tesla will continue to improve and expand these sites.
We have seen the plans in Berlin. We have even had Elon tell us, he plans to spend over $10
billion on the Texas site alone. Which could make it something like 5 times the capacity
it already is. Just to put things into more perspective. Tesla is going to be big.