RBC Capital Markets believes Model S/X gross margins are mid to-high 20s (higher end if enhanced autopilot revenue were able to be recognized). Management indicated there is still runway for improvement and 30% is still a good target driven by cost. Model 3 will initially be tough given lack of absorption (no surprise but sounds like they may help quantify inefficiencies as they occur) but at sustainable level of 5k/week target could be around 20%, and mid-to-high 20s at the 10k/week target.
I hate these close-doored meetings Tesla occasionally has with investors/funds because oftentimes important information is shared during these meetings that retail investors don't have access to. In this particular case, Tesla appears to have shared that they're aiming for 20% gross margin for the Model 3 at a 5k/week production rate and 24-29% at a 10k/week production rate. This is surprising in the sense that Tesla hasn't given such guidance before, yet this was shared in a private investor meeting. I have written to Tesla's investors relations multiple times asking them to audio record these investor meetings and publicly release the recordings so that retail investors have the same access that big fund investors do. I have yet to get a reply back from Tesla's investor relations regarding this.
Marc Andreessen on Tesla:
"If you squint at Tesla one way, it looks like Apple circa 2007, 2008 — where they've released the iPhone, they just haven't sold many yet. But they're going to sell a ton," Andreessen said. "Another way of looking at Tesla is they're Apple in 1992 with the MacIntosh. Yes, their integrated hardware-software is good, but other people are going to come up with software as well. ... And I think that's the big question on Tesla — which way does it tip?"
Tesla's ambition for an integrated product is truly breathtaking. Not only is Tesla owning their own dealership, service centers, superchargers, auto factory and even battery factory but also Tesla has developed their Autopilot (and soon-to-be autonomous driving) efforts in-house. They also own a factory creating solar panels and solar roofs, along with a sales, marketing, installation and service business for solar panels and solar roofs. In the near future, Tesla is likely to add on a ride-sharing network and also a business supplying semi trucks (and perhaps transportation services for trucking as well). But the big kicker is Elon's ambitions for manufacturing and how he wants to automate the assembly line beyond what anyone in the auto industry thinks is possible. If Tesla is able to use software and AI to program robots to build the entire car without any humans, then Tesla will be able to lower the price they charge and also grow their margins. I think we will be hearing increasingly more about Tesla's vision for manufacturing.
In the blue-sky, the firm models 1M units sold in 2020 (including a combination of Model S, 3, X, and Y), in line with TSLA’s target of 1M vehicles in 2020, at an ASP of ~$52k. Additionally, they model ~15 GWh of battery production sold at an average ASP of $500/kWh and 800 MW sold and deployed by Solar City at a 20% gross margin, and arrive at total revenue of ~$62.4B and total gross margin of ~$15.8B (equal to 25%). We assume OpEx of ~$8.4B (~14% of sales), which they believe is feasible as TSLA improves manufacturing efficiency and streamlines production, and provides an operating margin of ~11% (below TSLA’s long-term target of mid-teens).
It's difficult to look at Tesla's possible 2020 revenue/profit projections and not be impressed.