What To Expect From Tesla’s Automotive And Energy Businesses In 2018

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2018 is likely to be a crucial year for Tesla. While 2017 was all about new product launches for the company (Model 3, Roadster, Semi, Solar Roof), this year will be all about execution, particularly on the Model 3 and solar energy business front. In this note, we take a look at what to expect from the company’s major business segments over the year. We have also created an interactive dashboard analysis which outlines our expectations for Tesla over 2018. You can modify the drivers (in blue dots) to arrive at your own estimates for the company’s revenues and earnings.

Model 3 Will Drive Automotive Sales As Model S And X Sales Remain Steady

Tesla launched its first mass-market sedan, the Model 3, in late 2017. Demand for the new vehicle has been robust, with the company estimated to have garnered more than 500k reservations as of July 2017.  Although production of the new vehicle has proven more difficult than anticipated, with the manufacturing process deploying significantly more automation compared to the process for the higher-end vehicles, the company has made some progress recently in scaling up production. Tesla said that it produced 793 Model 3s in the last few days of 2017, indicating that its weekly production run rate exceeded 1,000 units. If we assume that Tesla improves on this 1k per week production rate over the quarter, its Model 3 deliveries could reach 14k units for Q1. As Tesla expects deliveries of its premium Model S and X vehicles to remain essentially remain flat from the 2017 figures, the Model 3 should eclipse deliveries of the Model S early this year, significantly driving the company’s revenues (while the Model 3 deliveries have surpassed Model S already on a monthly basis, it remains to be seen if that is a product of pent-up demand or a longer-lasting trend).

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Energy Business Could Scale Up This Year

Tesla’s energy business has been underperforming somewhat after its acquisition of solar installer SolarCity in 2016. However, the company is focusing on restructuring SolarCity’s operations, to transform its sales and marketing model while introducing new products such as the solar roof. Tesla is also ramping up production of solar cells and panels at its Gigafactory 2 facility. The facility will be the largest producer of photovoltaic modules in North America, and it’s possible that it could give Tesla a competitive advantage at a time when imported silicon-based solar cells and panels are subject to tariffs. Tesla’s Powerwall storage products could also drive growth for the energy division, as Tesla improves battery production.

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