Take off your Tesla blinkers, the growth story is intact | The Driven
The Model Y shares 3/4 of its architecture with the Model 3. Source: Tesla
The Model Y shares 3/4 of its architecture with the Model 3. Source: Tesla

It appears to be a fashionable debating trick to bring the future forward, as though it were certain history. First Morrison: “I said we brought the budget back to surplus next year.” And now Danny Forston, journalist at the The Australian, declares “Tesla left behind in the electric race it pioneered.”

Danny seems to have missed that, according to real-world data and not “feelpinion”[1], Tesla is not just still winning the electric race, it is crushing the so-called Tesla killers and even a broad swathe of ICE incumbent competition.

Here are some facts:

  • Tesla Model 3 was the top-selling EV in Europe for Q1, despite deliveries only starting in February, and despite Q1 being widely acknowledged as a soft quarter for Tesla;
  • Model 3 wasn’t the top-selling EV in Europe by a slim margin mind you, it sold about 90% more than its nearest competitor, the Renault Zoe, more than 3x the VW e-golf, and 6x the Jaguar I-Pace (albeit I-Pace is from a different segment).

Are they the data points you would expect from a company being left behind? Or even a brand on the wane? Here is some more data from Q1 2019 (again, a quarter acknowledged as soft for Tesla):

Note: the “car” segments referred to above exclude SUV, 4WD and “Utes”.

Are these data points you would expect from a company that has been left behind?

Q1 2019 saw 110% growth on Q1 2018, a growth rate any company would die for.

Yet the media’s focus has been on Tesla’s Q4 2018 – Q1 2019 drop of 30% in deliveries, ignoring the seasonality of Tesla’s results (Tesla Q1 is almost always their worst quarter for the year), the 10,000 vehicles in transit end of March making Q1 look worse than it was, and the artificially high Q4 2018 result due to tax incentives unwinding in the US.

Perhaps worse than these leaps of imagination to the future past, is the repeat of what is very lazy journalism doing the rounds on Tesla’s cash position.

An email was sent by Musk to employee’s, where he says in reference to the $2.7b recently raised “This is a lot of money, but actually only gives us about 10 months at the Q1 burn rate to achieve breakeven!”, has been widely interpreted as “Tesla will be out of cash (i.e. bankrupt) within 10 months. Even Aunty ABC ran the headline.

Here is what the headline misses:

  • Tesla actually ended Q1 with $2.2b cash on hand. So after the capital raise, it had approximately $4.9b cash (not the $2.8b Danny says it had).
  • It is extremely unlikely that the Q1 burn rate will be maintained. Approximately 10,000 cars were stuck in transit at the Q1 end (worth about $500m to Tesla), with one-off re-tooling costs of ~ $250m and a one-off debt payment of ~ $900m also incurred. Ergo – the cash burn of $1.5b+ for Q1 was due to one-off factors, a point made by the company itself on the release of the results;
  • Tesla is forecasting Q2 break even, and return to profit in Q3 and Q4. Before the sceptic’s froth at the mouth, this is exactly the same forecast made this time last year, which Tesla delivered on handsomely as Model 3 sales surged.And the exact same arguments were being made in 2018, about Tesla not being able to pay its upcoming debts. Those arguments were run before Q3 2018, which analysts forecast to be a net loss, but in which Tesla delivered $880m free cash flow before repeating the dose in Q4.

Danny ignores those facts above and says Tesla has another $1.1b debt payment due later this year (implying they may not be able to pay it), a $ figure I simply cannot find evidence of. I can find that Tesla has a US $560m debt due in November 2019 relating to its solarcity acquisition.

In considering Tesla’s future profitability and ability to pay off debts,Danny seems to have also missed a $2b payment coming to Tesla from Fiat in 2020.

There are two more errors the article makes, which are also common in Tesla coverage.

Next up is the “Tesla Killers” are around the corner argument – no concrete examples, mind you, just a list of car brands that are bringing out electric options.

You may remember when Jaguar I-Pace debuted, it crushed Tesla in its first month and was hailed as a Tesla killer. Turns out everyone forgot Tesla delivers cars in the 2nd half of each quarter, not the first.

Now Jaguar is reportedly experiencing capped production due to battery supply constraints.

It is one thing to have a car that competes on paper, it is another to have the production capacity to achieve meaningful market share.

Here is an interesting data point. Jaguar I-Pace sold about 1,500 cars globally in April. Tesla did over 25,000 cars for the same month.

For all the criticism of Tesla missing forecasts, we see perishingly few articles highlighting that VW, Audi, Jaguar, and others are missing production timelines and volume targets.

By way of example, VW will be (finally?) producing their Tesla Model 3 killer (the Id.3) from mid-2020, with a target price of €30,000.

Reportedly they have 15,000 pre-sold cars and targeting production of 100,000/pa. Yet Tesla is already doing 50,000+ Model 3 per quarter (200,00+/pa) and ramping steeply with more to come from the Shanghai Gigafactory (construction ahead of schedule, pre-orders reportedly crashing their website).

You could say Tesla is already more than 2x and 12 months ahead of this Model 3 killer’s aspirational targets, does that make it 4x ahead given its doubling year to year?

If we were to borrow debating techniques from Scott Morrison, we could even say “Today, Tesla delivered it’s final crushing blow to the 2021 competition from VW”.

Of all Tesla’s competition, the Forston article misses the only company globally that can compete with Tesla on volume right now, and that’s BYD.

It also misses the oldest wisdom in commerce – if you want to set up a burger joint, set up next to McDonald’s. Foot traffic is king, and if you have a better product, you win sales from competitors.

We are seeing sales of conventional ICE vehicles falling year on year now globally, as consumers put off purchases for future EVs, or simply switch to EVs today.

The more competitors come out with their own electric vehicles, the more it validates the idea of an electric car, and the more Tesla’s competitive advantage on price, performance and user experience becomes more apparent (hint: EV buyers care about charging).

Finally, the last mistake in The Australian article is an error of omission.

Danny has juicy quotes from two analysts that are all of a sudden bearish on Tesla. If you take a sweep of all analysts covering Tesla, and the beauty of the internet is that it takes about 5 seconds to do this, from last month there are give or take 2-3 analysts that have gone from buy ratings to sell ratings, with the overall consensus of hold, not changing.

If you look back 3 months, the change in analysts ratings is even smaller – three more analysts saying a hold, one less analyst saying underperform, two more analysts saying a sell. Out of 28 analysts, that’s equivalent to a rounding error.

The bottom line?

If you are reading the papers hoping for an insight into Tesla, electric vehicles, or perhaps anything more complex than the crime report for the week, then good luck to you.

Tosh Szatow is co-founder and director at Energy for the People, and the soon to be launched BOOMPower.

*Any errors or omissions are entirely my responsibility, as this was written in the 1hr I had spare before dropping the kids at school this morning.

[1]A feeling dressed up as a strong opinion, made to sound a bit like a fact.

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