Record Tesla Q4 Deliveries Boost Q4 Revenue & Profit Estimates
Tesla's Q4 deliveries trounced market estimates thanks to a strong yearend push. Also true, Tesla's easy comps may be coming to an end.
Tesla (TSLA) started off the new year by reporting record deliveries for the fourth quarter at 308,600, up 71% y/y.
This was solidly higher versus increasing market consensus and my own estimates as affirmed in October and discussed again last week in Look Away From Elon Musk To Gauge Tesla's Prospects—and Looming Risks.
The beat didn’t come from Models S&X which came in low at 11,750, down 38% y/y. This indicates a substantial drop in December by roughly 78% y/y to close out already tepid results for October and November.
Model X sales remain nominal, and the reception to the pricey (but otherwise not so remarkable) refreshed Model S continues to be comparatively lukewarm after peaking at just 6,737 in September, much as I had warned when it finally was released (Tesla's Pending China Sales and Model S Plaid—with an Asterisk, 6/7/21).
The juice came from Models 3 & Y deliveries at 286,850, up 84%. Tesla doesn’t provide the break down between models, but I have attributed much of the surge to expanding ramp up of new Model Y sales which have rapidly overtaken fading Model 3 over the past two quarters.
That has been particularly evident in China where Model 3 sales were down 74% in the first two months of the fourth quarter, and down by high double-digits in 5 of the past 7 months through November. This is further evidence of Tesla’s persistent
struggle to sustain same store sales that I have tracked for years.
Indeed, I have speculated that Model Y may begin to struggle by the second half of this year to match strong results from this quarter.
China deliveries also were likely boosted by the late rush to buy before subsidies were slashed. China will reduced NEV subsidies by 30% as of January 1st, and plans to end the subsidies altogether by December 31st.
This also boosted Tesla’s robust local competitors, an already increasing threat well into and beyond this year. Unlike Tesla, China industry EV sales have jumped by triple-digits y/y in each of the past several months as aggressive rivals like Chinese giant BYD (1211 HK) and local EV startups Lixiang, Xpeng (XPEV US) and NIO Inc (NIO US) strip away Tesla’s market share.
Surging Europe deliveries definitely helped. Model 3 sales have picked up in Europe in recent quarters after Tesla began exporting cheaper (in price and quality) Made-In-China (MIC) versions. That momentum likely slowed in the fourth quarter since Tesla started exporting MIC Model Y late in the third quarter. Surging Model Y sales will mask fading Model 3, but not eroding market share. I have warned for months that Tesla is losing share in Europe to Volkswagen (VOW GR) and others even before it gets new Berlin-based capacity online (delayed again).
But for now, Tesla’s fourth quarter numbers just got higher. A lot higher.
Higher Revenue, Profits
I now estimate fourth quarter revenue at $17.4 billion, up 62%, and EBITDA just under $3.5 billion (20% margin, up 290 bps).
This indicates full year revenue at $53.5 billion (up 70%) on 936,172 deliveries (up 86%) and EBITDA at $11 billion (20.6% margin, up 220 bps). Leverage is indicated at 1x, in line with my estimate, on roughly $10 billion in debt—investment grade credit quality.
I expect the stronger pace of deliveries to spill into the first and potentially the second quarter before Tesla begins to slide versus strong results in 2021. I estimate first quarter revenue at $14.1 billion (up 35%) on roughly 250,000 deliveries (up 35%) and EBITDA at $2.8 billion (20.6% margin, up 230 bps).
If so, results for the full year could prove more challenging if sales momentum slows and cost pressure rises as I suspect.
I estimate 2022 revenue at $69.5 billion (up 30%) on roughly 1,250,000 deliveries (up 34%) and EBITDA at $13.2 billion (19% margin, down 160 bps).
This still implies another strong year, but lower versus market expectations.
Tesla repurchased its 5.3% senior notes in the third quarter of 2021 as I projected, though I doubt we’ve seen the last of Tesla as a bond issuer:
Now stay tuned for the second step I described: a quickly shopped, likely $2-4 billion inordinately low coupon bond deal, accompanied by a bump in credit quality ratings potentially to low investment grade (see Tesla's Car Business Finally Turned A Profit. Really. Time For A Big Bond Deal). It could even be appealing... if it’s priced at T+100 bps or better.
Until then, I have Tesla: Not Rated.
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