Yes, we are starting our valuation for the what Tesla will be worth by the end of the
year.
This is a model based on what Elon has told us, and what we have heard from credible insider
sources.
These are not necessarily my predictions, but going from all the massive amount of information
we were just handed from the Q2 earnings call and shareholders meeting.
So I am creating production estimates, based on my inference of all the numbers we were
told then.
From there I will do my best to then calculate how much revenue and profit that might generate.
VALUATION To be clear this an end of the year valuation
of Tesla.
It is not dependent on Q4 results, it is not a stock price prediction, it is the best job
I can do to assign the most accurate value I feel for the company.
We are essentially creating an imaginary quarter if every day was as good as the end of Q4.
From there we can use that figure and relate it to the current stock price, which may aid
us in our investing, trading, conviction and confidence in holding our Tesla stock.
But the market assigns it's own value on to Tesla, which is not so rational.
So let's begin.
FACTORIES We will start by estimating the production
from each factory.
We will do all our numbers in a quarterly fashion, like we always do, and it will serve
as a great way to compare other quarters, but it will be based on the run rate obtained
by the end of the year.
FREMONT Let's start with Fremont.
Not that they play as much an important part for the company any more, but the Model S
and X should be up to at least 20,000 units a quarter run rate in Q4,
so perhaps 22,000 by the end of the quarter.
A lot of people have been telling me they finally got their X, some earlier than expected,
so perhaps that's a good sign.
Anyway, it won't have a huge impact, if we are off by a thousand or 2.
There aren't too many reasons as to expect any major jumps in Fremont 3 or Y production,
so I am just going to add about 1,000 on to each of those for good measure, compared to
we were seeing last quarter.
Giving us a total quarterly run rate from Fremont of 141,000 vehicles.
Up from around 135,000 in Q2, and also given we are still expecting 10,000 units growth
from the S and X still, I feel that this is not too far a stretch.
SHANGHAI
Alright, let's do the fun one next, Shanghai.
Lots of hope here, coming from these amazing line upgrades.
According to insiders the Shanghai Model Y line is meant to hit 2,200 vehicles a day
in August, up from 2,000 a day in July, just after the line upgrade.
After August there are still 4 more months from this forecast.
Is it not possible that the line could improve on speed even further over that period?
Well I am sure it is, but let's stick with 2,200, as I think that will please us enough.
And lets give our imaginary quarter 91 days.
Which comes to a total of 200,000 Model Ys from Shanghai alone, not far off the total
produced from all factories in Q2.
Then we have the less discussed Model 3 Shanghai line upgrade which started on the 17th of
August, once the Model Y upgrade was completed.
The Model 3 upgrade was expected to be completed on the 7th of August.
Now if the Model Y upgrade started in July and was complete on the 16th of July, that
would mean the line upgrade took a maximum of 16 days.
If the Model 3 upgrade started on the 17th of july and took until the 7th of august,
then that is 21 days.
The Model 3 upgrade, took at least 5 days longer to upgrade than the Y.
That is potentially quite a large upgrade.
The Model 3 line was previously achieving 1,000 to 1,200 a day with 3 shifts.
After this upgrade, they are expecting 500 to 600 per shift, or 1500 to 1800 vehicles
per day.
That's a big jump.
I think there are some long overdue line upgrades on the Model 3, that perhaps were not worth
doing before, due to insufficient cell supply, and the Model Y taking priority due to it
being more profitable.
But I think now with CATL's growth in cell production, that Tesla are now upgrading both
lines in order to be able to accept the additional cells.
I guess even the almighty Model Y Shanghai line has it's limits too, so the over spill
will be transferred to the model 3 line.
Anyway, 500 a shift equates to 1500 a day which would be 136,000 Model 3s in a quarter.
Which I think is good enough.
Wow, these numbers are getting big.
Imagine what it's going to be like when we deal with production numbers about 3 times
this size.
This gives us a total run rate for Shanghai of 336,000 a quarter.
BERLIN & TEXAS As for Berlin and Texas, well Elon has said
that he still expects them to hit volume production, which is 5,000 units a week.
In our imaginary quarter we have 91 days, which happens to be exactly 13 weeks.
Well that would then mean a total of 65,000 unit quarterly run rate, each.
Which comes to 130,000 total.
Wow that's coming up quick.
130,000 additional vehicles delivered, that is huge.
What an addition these factories will be on top of what we already have.
And this is still the start, these factories have a long way to go still, expected to hit
about 500,000 units/yr run rate by the end of next year.
Oh and Texas even has a whole other model still to be added to this factory.
Yea, lets not forget that the most pre-ordered vehicle in history is still yet to start production
in that factory.
Now with people starting to think it may begin production earlier next year, and possibly
even hit volume production mid next year.
I think that it will come down to the 4680 cell production, and Tesla can't quite guarantee
when that will hit high volume production.
I think Tesla are starting to get the Cybertruck line ready, perhaps in case they do have a
break through on the 4680 line.
TOTAL When we put all those numbers in there, then
we get just over 600,000 vehicles produced.
Just to remind you again, this is not my Q4 prediction, this is the run rate at the start
of Q1 2023.
But bear in mind this is only subject to Tesla having enough 4680 cells to continue that
rate.
There could also be some downtime transitioning from 2170 batteries to 4680 batteries.
I know this is likely a lot higher than possibly all other estimates, but what do you want
me to change?
I have done what Elon has said.
On the Q2 earnings call he said "And so that's why I'm confident we'll get to 5,000 cars
a week at -- in Austin and Berlin by the end of this year or early next year".
We have been told though that Berlin alone should be 3,000 a week by October.
We would assume if that was the case then Austin shouldn't be far behind.
If both factories were still at a 3,000/wk run rate by the end of the year then that
would be 26,000 fewer vehicles per factory per quarter.
We could play with some numbers perhaps when we do the financials, and see what difference
this might make.
1.5 MILLION However, in the meantime, we can also relate
back to the other piece of information we have, in that Tesla could also still reach
1.5 million units for the year.
With 564,000 vehicles produced in the first half, it leaves 936,000 for Q3 and Q4.
I will do some numbers on those later, but given that the ramping for the new factories
appears to be happening in Q4, and with Shanghai losing half of July in Q3, for one and a half
million units to be reached, it has to be carried mainly by Q4.
Q4 would have to be around 550,000 if that was the case.
And if the total of Q4 is 550,000 for the overall quarter, then by the end of the quarter
600,000 run rate probably does fit.
So let's stick with that, and see what it comes to at least, we can play around with
it a bit later.
Remember we are also not factoring in any more improvements in Shanghai from August
all the way to December, which there likely could be.
4680 This valuation will be real at the end of
the year, but it may not be sustainable.
There is a chance Q1 could see a drop in production.
This is entirely down to the 4680 ramp, which is an S curve, except we don't quite know
where on the S curve we are.
So it is possible that Tesla may not be able to obtain this run rate again until perhaps
in Q2.
I doubt the market will know the difference either way.
If we do have a slump in Q1, then I would imagine the stock price will run with the
Q4 results, and then drop if we discover 4680 issues still remaining.
Then to recover when 4680s finally can carry the Model Ys through volume production.
These could just create more buying opportunities, as even Elon says.
FSD Although on top of that, according to Elon,
it is likely that FSD will also be complete this year, but what affect that will have
on the stock, is hard to tell to be honest.
I think Elon has lost credibility with the market as to what that actually means.
I mean it's a huge deal for us, but will the market even care any more is another question.
SUMMARY Alright, we have our production run rate for
the end of the year that we were after, the next task is to try and calculate the revenue
and profit it will produce, and see what sort of value we might place.