There is a debate about the future of Tesla. There is concern that the layoff of 3000 workers is a sign of weakness. There is the news that the fourth quarter was only mildly profitable. There are concerns that the federal US electric subsidies are cut in half now and will be phased later in 2019.
Auto Analyst Pierre Farragu, New Street Research, points out several ways that Tesla will do well in 2019 and 2020.
The Tesla Model 3 captured 60% of the luxury $55+K sedan market in the USA.
Worldwide there are 3 million cars sold at the $55K luxury car segment.
Worldwide there are 15 million cars sold at the $35K car segment.
New electric cars announced by competing car companies are higher priced and have inferior technology.
Leasing Tesla Model 3
Tesla Model 3’s only have 6% sold with a lease. Scot Hall, executive vice president of Swapalease.com and Jack Nerad described the gains for Tesla from more aggressive leasing.
A Tesla Model 3 that sells for $45,000 would have a $752 monthly payment on a three-year lease. This assumes the car keeps half of its value after three years. If someone buys Model 3 at $45,000 and finances it over three years, then the monthly payment would be $1,344. It would take a six-year loan to match the $752 per month cost.
Mercedes and other luxury cars lease 50% of their cars.
Cleantechnica Analysis of Tesla Profitability
Tesla had $300 million in profit the third quarter and should still have nearly $500 million in profit in the fourth quarter.
Sandy Munro Car Teardown
Sandy Munro gave a video report to Autoline after hours.
The Tesla Model 3 had the best electronics teardown expert Sandy Munro’s team has ever seen. It had the lowest number of hoses, 40% fewer harnesses, and the electric motors are smaller, lighter, and more powerful than the competition.
Munro says if Tesla optimizes the Model 3’s production in China, the electric vehicle will generate a lot of profit for the company. Tesla will fix the production line and bodywork issues.
Tesla will have lower labor costs in China.
At about 44 minutes, Munro says Tesla should be able to pull over 20% of the cost of out of the car in the China gigafactory. Tesla should already be able to make 30% gross margin on a $37,000 Tesla Model 3 car. If Tesla takes 20% out of the cost of building Model 3 cars in China, then Tesla would be able to sell Model 3s for $28,000 each.
Tesla has successfully glued together magnets to boost the power of the field and electric motors. A Halbach array is a special arrangement of permanent magnets that augments the magnetic field on one side of the array while canceling the field to near zero on the other side. This is achieved by having a spatially rotating pattern of magnetization.
Sandy indicates the Model 3 has an exceptionally efficient cooling system.
I am foreseeing a February, March resolution to the China-US trade issues. Although a delay to May is possible. If the trade war resolves, then this will help boost the US, China, and the World economy in 2019 and 2020.
The main upside for 2019 for ramping up of leasing, cost control, and new models at new price points, early completion of the China factory, and Europe and Asia sales.
Tesla Beyond 2019
For 2020, I think there will be significant production and sales in China.
For 2020, I think the model Y, pickup and Semi-truck will have significant sales.
Tesla should have 350,000 to 500,000 car sales in 2019.
When will Tesla ramp up to over 1 million car sales per year?
Tesla should pass 1 million cars sales in 2021.
When will Tesla surpass 2 million car sale per year?
Tesla should pass 2 million cars sales in 2022-2024.
A major factor in how successful Tesla will become is if they make their cars full self-driving cars. Fully self-driving cars means that Tesla would become super-Uber. Tesla would enable customers to ride-share. This would be massively valuable for Tesla and would be profitable for some Tesla car owners.
I have spoken to some Tesla car owners who currently make money renting out their Tesla cars. Inside EVS described how people have used Turo (the AirBNB of cars) to rent out their cars for profit.