Tesla should have over 20% auto gross margin in Q2 2023. This is a big factor for whether the share price of Tesla goes up for the next few months.
Tesla Model S and X have an average selling price about twice the Model Y. The Model S and X sales and deliveries in Q1 2023 were a huge factor in dropping the auto gross margin for Tesla in Q1 2023. Tesla built 19.4k Model S and X in Q1 but only delivered 10.7k in Q1. This meant 8700 Model S and X were built but were not sold. Tesla broke even or had a loss on 10.7k S/X. Tesla sold every Model S/X in Q2. They built over 19000 and sold 19000. There was extra inventory but the level was the same at the end of the quarter as at the start.
The S/X situation is super huge margin thing in Tesla favor this quarter. The Q1 situation with S and X hit margin by about 4% in Q1. This causes Tesla just miss 20% as margin target with 19.3% margin. The Q2 situation with S and X moves it back to 24% margin. There were price cuts in April 19 in North America. The prices are a complex global situation and there are other cost and financial moving parts.
Price decreases in q1 made things worse. Price decreases hit us again but if it is mainly in the USA for about 30% of Tesla global cars. I think price decreases take back $500-600M out of +$850M S/X, +$300M extra 3/Y in Q2.
Only cars in US delivered after April 19 had the bigger price cut and maybe later with the order backlog lag. My best guess for Tesla Q2 is 22-23% auto margin. Best case is 24%, reasonable worst case seems to still be 20-21%. But detailed model by model and region by region price changes Q2 vs Q1. But people talking 15-16% margin seem to wrong with S/X having no inventory build up in Q2.
Inventory management is a big factor. I performed sensitivity analysis and a 5000 car buildup in model Y inventory offsets the profits for an extra 20,000 cars selling in a quarter. Eventually, the days of inventory builds up to a steady state and the cars built in one quarter are mostly sold in the next quarter. However, inventory build up in one quarter can hurt the financials of that quarter.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
Known for identifying cutting edge technologies, he is currently a Co-Founder of a startup and fundraiser for high potential early-stage companies. He is the Head of Research for Allocations for deep technology investments and an Angel Investor at Space Angels.
A frequent speaker at corporations, he has been a TEDx speaker, a Singularity University speaker and guest at numerous interviews for radio and podcasts. He is open to public speaking and advising engagements.
Covid and war did increase prices a lot, so their margin decreased.
IMO the factor for future growth is how fast can they ramp up new battery cell production. I think this is the main issue limiting their growth. The batteries are condition for Cybertruck and semi and other models. If they rush it the batteries could be low quality and cause problems. Now it is taking very long time. One would think the batteries are way simpler to build than cars and that ramping up wouldn’t be such an issue. Most likely problems with dry electrodes(Faster, cheaper manufacturing without so much chemicals).