try applying your method to the Tesla of two or four years ago and see what you would have predicted for today.
For two years ago, that would have been incredibly stupid to attempt. It would have been the 3rd quarter of 2020, when the pandemic was raging. All bets were off at that point. Who knows what the finances would do. Also, Tesla was just turning the corner from unprofitable to profitable. That is a much different stage of the business, requiring different techniques for projecting the finances. It would take a much deeper dive into the gross profits and operating expenses. I am not willing to do that.
However, even with the pandemic uncertainties of the day, projection production seems more reasonable - at least to see what might be possible assuming the pandemic didn’t shut down production any further. So let’s do that.
In their Q2 2020 shareholder deck, they say their current annual capacity was 690,000 vehicles. That is my projection for the 12 months ended Q2 2021. Simple. Straight forward. It’s really just their number, as I said. So I’m using it.
Now the harder part. And you’re going to have to trust that I’m not cheating here. Projecting the second year out. So back to the Q2 2020 report. And earlier.
From Q4 2019, the Shanghai plant was planned to start producing Model Y in 2021. It was already doing Model 3. And they say the Model Y capacity should be equivalent to Model 3 capacity. The Q2 2020 report mentions an increase in capacity at Fremont to 500k for the 3/Y cars. So we’ll add that in as well. Let’s build up a number.
Start with the Q2 2021 projection of 690k. Add in an extra 100k at Fremont and 200k at Shanghai for the Model Y startup. Lets round that to 1,000k. And because I don’t think Model 3 production at Shanghai will stay static for that long, I’ll toss in an extra 50k for that. So my projection is 1,050k for the 12 months ended Q2 2022.
So what were the actual results?
They produced 711,552 vehicles in the 12 months ended Q2 2020. About 3% over their own expectations and my projection. That’s a pretty good projection. ***
And the 12 months ended Q2 2021? 1,107k cars produced. About 5% over my projection. Still, for a 20 minute back of the envelope projection, it’s not too bad. It looks like I should add about 5% to my projections using these simple methods to tweak them and make them a bit better.
I really do know how to read and research and make reasonable projections. Us MBA bean counters get maligned a lot around these parts, but we do know how to do our part of the job pretty well. When you’ve learned projection techniques and put them in to practice for many years, you can get pretty good at this.
So I’m going to stand by my earlier projection for the next couple of years. Beyond that, things get dicier, and the necessary information gets more scarce. Companies don’t like to talk publicly about plans that far out. So any projections must of necessity get fuzzier. But it is possible to take publicly available information and look with some accuracy into the not-too-distant future.
Now that I’ve done more work just for you, how about you share your work. Explain to me how you think that Tesla will have more net income in two years than the rest of the auto industry combined. Show me the numbers. If you are so confident in them, lay them out for all to see.
–Peter
*** Do you really think I used this method without checking out their history? Of course I did. I checked a couple years’ worth of these reports to see how well their figures stacked up to actual future results. Their statements of annual capacity in the shareholder deck are pretty good projections of the production for the following year.