Tesla 2019 Q3 Update
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Sunday October 27, 2019 – Tesla 2019 Q3 Update - This
week Tesla released its 3rd quarter results and it came as quite a surprise to
many. It did contain some exciting new information about future products
so I thought I would share some of that information here.
The biggest news, which sent stock prices souring, is that while revenue was down slightly Tesla made a profit of $1.91 per share for the quarter while analysts were projecting a 46 cents per share loss. Revenue did fall a little short of analyst's expectations at $6.45 billion v an expectation of $6.6 billion. It appears that revenue was lower because of a shift to leasing rather than buying, and also a shift to selling more of the lower cost base version of the Model 3.
In all Tesla delivered a total of 97,000 vehicles during the 3rd quarter of 2019.
In other news, Tesla has begun limited production of the Model 3 in their new Gigafactory in China. This is ahead of schedule, something that is unusual for Tesla. Apparently Tesla plans on selling this early limited production to workers at the Gigafactory. Elon Musk has stated that it was physically impossible to produce more Model 3 cars during the quarter because of battery constraints. It appears that Panasonic has not set up the same production deal for batteries that it has in the Nevada Gigafactory so there is still an open question of who is going to supply the batteries for the Chinese produced cars.
In what is perhaps the biggest piece of news from the 3rd quarter results call was that Tesla indicated that the Model Y is now ahead of schedule with production expected to begin in the summer of 2020 instead of the fall. There have been many spy shots of the Tesla Model Y out on the streets undergoing testing so it would not be surprising that they hit this new production date. The Model Y is going to be produced in the US, China, and Europe. Tesla has said that it will announce the location where it plans to build the European Gigafactory shortly.
It also looks like the Tesla Semi will be going into limited production in 2020. Tesla has been operating these trucks successfully for a while now and word is that they have been exceeding the initial range estimates. They also have a lot of orders for the semi and it will be good to start and see them on the road. They didn't give much info on the upcoming pickup truck just to say that the design will not be traditional so it may not be for everyone.
One of the most significant challenges that Tesla still has to face is service. Electric Vehicles, of course, have significantly less service requirements than ICE vehicles. There are no oil changes that need to be done on a regular basis, they don't require tune-ups, and regenerative braking means that brake maintenance is required much less frequently. Still, mechanical failures do occur, and this requires service. In Q3 Tesla added 11 new service centers and expanded their fleet of Mobile Service vehicles with 68 additional vehicles. Still service at Tesla can take a long time which means that customers get loaner vehicles, rental cars, or credits they can use for rideshare services. This has to be a significant cost to Tesla.
Tesla has shown that it is a true car company and is still selling well even after their new vehicle tax credit has all but gone. They have already acquired a couple of battery manufacturers and it will be interesting to see if they can get enough batteries to continue to grow production, especially once the Model Y, expected to be a big seller, goes into production next year. It will also be interesting to see if Tesla can expand its service network to keep up with the number of new vehicles being produced, especially as the fleet begins to age.
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