Tesla (NYSE:TSLA) is expected to publish its Q1 2018 results on Wednesday, May 2, reporting on a quarter that saw the company significantly ramp up production of its mass-market Model 3 sedan. Although the company’s revenues are expected to scale up over the quarter, we expect it to remain in the red, amid high costs associated with its Model 3 ramp. Below, we take a look at some of the trends that are likely to drive the company’s results.
We have 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.
Automotive Revenues Will Scale Up On Model 3 Ramp
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Tesla already published its production figures for Q1 2018, indicating Model 3 production rose fourfold quarter-over-quarter to 9,766 units. The manufacturing process for the Model 3 deploys more automation compared to higher-end vehicles, making it challenging to bring processes online at the early stages of the production ramp. However, Tesla said that it was able to increase its weekly production rate to 2,020 units as of April 3, as it quickly addressed production and supply chain bottlenecks over the quarter. The company is apparently eyeing weekly production capacity of as much as 6,000 units by the end of June. The production figures for Tesla’s luxury vehicles was more mixed, with the company producing 24,728 were Model S and Model X vehicles, marking a slight decline over the last year. It’s possible that the higher mix of Model 3s in the company’s automotive sales mix could temporarily drag down gross margins.
Updates On The Energy Business
Tesla’s energy business has been underperforming somewhat following 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, which will be the largest producer of photovoltaic modules in North America. It’s possible that this factory could give Tesla a competitive advantage at a time when imported silicon-based solar cells and panels are subject to tariffs. We will be looking for updates on how the business is doing.
