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welcome to the tesla economist please
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we knew this q2 wasn't going to be great
i think i was saying that probably back
a year ago it was obvious given that
tesla have two huge new large facilities
that will have low capacity to start
with yet high costs that would eat away
at margins we were prepared for this and
so was the stock price well we were
prepared for some of it however wars
created oil prices inflation and a
recession weren't quite factored in i
mean the stock had always priced in this
ramp up period it went without saying in
fact if berlin or austin hadn't even
been built today i'm not sure how
different the stock price would even be
there's a lot of value from those two
fabs still to come but now the economy
is taking the limelight as at the end of
the day the macro still has ultimate
control although elon's actions are
still able to stir things up personally
i do not like to look at the economy i
don't believe the fed has a large enough
arsenal to fix inflation at this stage i
just hope things transition peacefully
but i'm still expecting more inflation
to come either way we have a lot of
economic instability ahead economists
cannot predict the economic future this
is often supported with the rhetoric
that economists have predicted seven of
the last three recessions but this time
the writing looks like it's on the wall
or wall street perhaps there was a
recession ahead we just don't know how
the markets will react we don't even
know what will crash it could be the
markets or even currencies in uncertain
times it makes it harder for consumers
to purchase expensive items which is why
i've mentioned it may be beneficial for
tesla to explain just how much cost
saving is associated with a tesla
compared to an equivalent ice remember
when you buy electric although the price
tag may be higher it includes all the
fuel and servicing costs therefore the
actual sticker price is
disproportionately higher from the cost
of ownership compared to ice vehicles
our saving grace during a recession is
the fact that teslas are coveted so much
by consumers the demand will remain
strong or at least much stronger than
the competition now when it comes to
predicting the financials for q2 austin
is going to be tough in fact if any of
you have any idea on how to treat this
then let me know in the comments the
scenario is that tesla have been
delivering cars from texas this quarter
they started delivering to employees and
are now opening up to the austin area
therefore does that mean we have to
incur the running cost of this building
the entire quarter despite what is
likely to be just a few hundred
deliveries from the factory for the
entire quarter this factory is going to
produce some lucid type numbers well
maybe not quite that bad but it does
have the potential to really hurt
profits further berlin has been
operational through this entire q2 so
we're definitely going to feel the full
costs of running matfab unfortunately
their production rate has not been close
to producing the profits we need to
contribute to these costs therefore we
will need to incur all this additional
expense the model y performance they're
selling there will at least have a very
good margin or will do when the loans
are functioning better therefore we'll
see a reasonable loss in berlin as well
somehow i have to try and calculate the
cost of running that fab for a quarter
too and as we're in such a liquidity
crisis well people have had to sell
their crypto even bitcoin took a huge
hit so much so that it's going to leave
an impairment on the financials yep
another bitcoin lost this quarter to top
it all off ironically the intention for
tesla's bitcoin purchase was a hedge
against inflation and further irony it
feels like the best head for inflation
is having cash in down economies the us
dollar tends to strengthen as people see
more stability in the dollar as it's the
world currency well tesla is an american
company valued in u.s dollars the teslas
that are sold overseas are sold in local
currencies these local currencies are
now worth less yes even the yuan has
dropped seven percent against the dollar
therefore this is less overseas income
although tesla may have hedged the us
dollar at least tests are produced
locally too so unlike other us exporters
tesla's costs are coming down equally
and thus keeping margins intact of
course we can't discuss how much tessa
is struggling this quarter without
talking about shanghai this is what has
really worsened q2 the fact that on top
of all of this shanghai enters more
covert lockdowns even in this day and
age the ccp still insists on a zero
policy lockdown or who really knows what
they're playing at as a result tesla
only managed to produce about 10 000
units in april from shanghai yet managed
to get back to 80 capacity from the
lockdown in less than two weeks this is
very impressive ramping back up
especially at the run rates we see in
shanghai but then went from lockdown
issues to parts shortages meaning that
now they're still near back at about
half capacity we have been told that
tesla does have a target to get to 2 600
vehicles a day in shanghai hopefully
they can get there soon as that is a run
rate of 80 000 vehicles a month i know
it sucks that we lose a lot of
production in shanghai but the fact that
tesla are able to hit 2
600 vehicles a day more than makes up
for it and you know what i bet they can
beat that too sure shanghai will hurt q2
but hopefully make up for it in q3 with
perhaps as many as quarter a million
deliveries well you might be happy to
know that i can't think of anything
negative to say about fremont and q2
there are a lot of people reporting more
activity than usual coming out of there
hopefully the s and x lines are ramped
up a bit more but unfortunately fremont
isn't going to have much impact on the
company this quarter one way or another
three months margins may even be up a
little bit higher due to importing with
a stronger dollar for example tesla are
now saving about seven percent on
importing catl's lfp sales that are used
in the fremont model 3 standard range of
course it's not just tesla going through
bad times and the economy making it that
much harder it's also elon's antics on
top of that mainly i'm referring to his
distraction with twitter oh right and
selling billions of dollars of tesla
shares in order to do so this does not
help the q2 test the stock price either
there are a lot of investors unhappy
about elon's twitter involvements i've
expressed my thoughts on it and
ultimately i don't think it should
impact tesla negatively perhaps it can
even become an advertising medium for
tesla demand does seem to be very strong
still likely getting stronger which is
the main concern in the down market when
no one wants to buy or can afford to buy
your products anymore but perhaps tesla
is such a unicorn it can fight the grain
similar to apple after the global
financial crisis i'm not sure tesla's
demand is fully appreciated enough and
just what a buffer it may be in getting
through tough economic times and equally
add into that tesla's massive margins
and what are margins if not extra demand
buffer that's right margin is deferred
demand if tesla reduced margin it
increases demand i know we talked about
texas already but it does more than make
vehicles there is the battery cell
factory there too things haven't been
going great there either i mean i'm not
saying it's bad necessarily i'm just
saying we haven't had any great news to
help us out during this dark time there
could have been some good news to come
out of here that could have propped up
the stock price instead no news and
rampant speculation sorry if this sounds
like some sort of doom and gloom q2 it's
not intended to be we knew it would be
bad so we prepared for it as best as
possible so if we do see another big
drop we were ready and able to act
accordingly and rationally rather than
emotionally also the reason for most of
this q2 are temporary reasons that will
be sorted we just need to hold our
breath through them i just wanted to go
through some of the major issues we're
facing so we can relate it to the stock
price and perhaps judge from there how
much of this may be alleviated and when
in fact when i list all these issues
we're incurring right now all at once in
this concentrated period it makes you
think the stock is actually holding up
reasonably well even elements of the
almighty fang have fallen once you get
through this and come out the other side
you'll be a stronger tester investor for
it it may be a lot easier to say than do
but don't get emotional about money when
it comes to investing you may not always
buy at the bottom but the important
thing is to ride it to the top we may
see issues of some sort for a lot of
next year too but i really hope to see
some blue sky after that what this
company is capable of when there aren't
any major issues will be amazing if i
recall when tesla introduced the model y
it was actually a time when tesla wasn't
facing any major issues the model y
ended up being released months early to
the public sometimes tesla really can
pull rabbits out of hats
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