Published in November 9, 2019 |
by Guest Contributor
November 9th, 2019 by Guest Contributor
EVANNEX was originally posted.
by Shankar Narayanan
The biggest threat to Tesla's existence was not not the so-called "Tesla Killers" from the competition, but rather Tesla's reliance on the capital market to fund its growth. Lack of long-term profits the company relies on in financial markets to raise equity and debt at regular intervals to fund its operations. for short sellers. Data from Marketbeat shows that on October 15, 2019, one week before the release of Tesla's third quarter earnings, a massive 36.06 million shares of Tesla were short.
In terms of dollars, Tesla's short pileup is worth $ 12.15 billion, nearly double the amount of dollars sold by Netflix (NFLX).
Tesla's third-quarter results showed that the electric carmaker's gross margin grew while the average sale price slowed. This is not a coincidence that Tesla had only two profitable dwellings before 2018 and three profitable residences in the last seven quarters. If my prediction in Q4 for Tesla could come true, Tesla could hit a 50% strike rate – four profitable rooms of less than eight.
Tesla's automotive journey must be divided into two periods: before 2018 and after. In 2017, Tesla delivered 103,000 cars, up from 245,000 units in 2018. Tesla targets deliveries of 360,000 to 400,000 units this year. Although Tesla manages to hit the lower end of its guide, it means Tesla has increased its 3.5-fold production in two years.
Tesla Factory in China, with a planned initial capacity of 150,000 units, is expected to be online soon, increasing Tesla's overall capacity. If a five-year capacity increase in three years does not have any impact on the gross and operating margins for a manufacturing company, nothing more.
"Scale economies are cost advantages that companies experience when production becomes efficient, as costs can spread to a larger amount of commodities." – Wiki
Rising production volume has begun to pay dividends for Tesla in the form of margins, as evidenced in Tesla's third-quarter report. But, besides the volume, there is a factor that is often overlooked, and that is the cost of labor and construction in China.
As stated by Statista, “In 2018, labor costs in China were approximately $ 5.51 per hour.” By comparison, the minimum wage per hour in California was $ 11 in 2018. According to Tesla , the Shanghai Gigafactory "is about 65% cheaper to build than the Model 3 production facility" in Fremont, California in the United States.  The auto parts market is larger than the United States and costs less to manufacture Tesla vehicles there. A quick visit to Tesla China's website revealed that Tesla's "Made in China" Model 3 price is only 3% lower than its price in the United States.
Model 3s rolling out Tesla's China Gigafactory will be eligible for EV subsidies and will not be subject to the current 15% tariff on imported cars. Tesla could pass on some of the company's savings to Chinese customers as an increase in volume. That said, it is unlikely that we will see a huge price difference between price stickers in the United States and China.
In short, the cost benefits from rising production in China will see its way down the Tesla line. Don't forget that Tesla's next launch, the Model Y, shares nearly three-fourths of its components with the Model 3. This will help reduce Tesla's plant costs in Fremont.
Tesla's third quarter revenue was not ] A flash in the pan. They are a sign of change.
Related: The Chinese Tesla Model 3 "Super Margin" (Forecast)
Author Bio: Shankar Narayanan is the editor of 1redDrop.com. Has an MBA from Kent State University and a degree in engineering from Madurai Kamaraj University. He has been an active contributor to leading financial sites such as SeekingAlpha and GuruFocus, and has a mentor for business, financial, and technology communication.
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