Tesla's Pending China Sales and Model S Plaid—with an Asterisk
Tesla's Pending China Sales and Model S Plaid—with an Asterisk
Tesla wants you to see Plaid, not The Asterisk. Not that it matters much in sales. May monthly deliveries in China are far more important—and concerning.
The first “refreshed” Tesla Model S will roll out in a “delivery event” on Thursday, unless it gets delayed again.
Either way, it’s not likely to move the needle much on second quarter deliveries.
For that we look to China, arguably Tesla’s most important market. This week we find out how well Tesla’s monthly deliveries recovered in May versus dismal April results (see Tesla's Troubles in China Are Heating Up on 5/12/21).
Plaid Claims Are Probably Ludicrous
Model S updates were unveiled back in January to mixed to negative reviews, including from me.
As I noted again in Tesla Reports Solid Beat With Strong Q121 Deliveries, But... on 4/4/21, the redesigned Models S & X revealed dubious gimmicks like a yoke steering wheel which may be unsafe, letting the car “guess” at gear shifting and direction using Tesla’s problematic Autopilot sensors, and moving key driver controls into Tesla’s touchscreen which recently was recalled for going dark while driving, among other issues.
The new Model S Plaid will come with 1,020 horsepower and 390-mile range, with 1,100 horsepower and 520 miles of range projected for the Plaid+ which was suddenly canceled on Monday.
Musk tweeted “Plaid+ is canceled. No need, as Plaid is just so good. 0 to 60mph in under 2 secs. Quickest production car ever made of any kind. Has to be felt to be believed.”
We’ll see.
Tesla has claimed Plaid can achieve a 0-60 mph acceleration time of 1.99 seconds and “<1.99” seconds for Plaid+.
Except, of course, such claims are not true. And Tesla knows it.
Here, for example, is the current spec page on Tesla’s web site for Model S Plaid (the Plaid+ page has disappeared, but I kept screen shots for comparison).
There it is. Twice. 0-60 mph in 1.99 seconds for Plaid.
The innocuous "Feature Details” button, mid-page, actually directs the reader to a different story on another page where 0-60 mph projected acceleration times for Plaid appear with an asterisk. Here’s how it looked just before Plaid+ was dropped and all three model versions were presented together:
Plaid+ performance specs have since been removed, but that doesn’t fix Tesla’s misrepresentations.
Plaid times are reported with a “rollout” allowance, which is a drag strip term to describe the one foot distance the car moves between the yellow light count down mark and the green light mark which starts the clock—a rolling start which provides free, untimed acceleration.
Motor Trend calculated that a 2017 Tesla Model S P100D with Ludicrous mode was already traveling at 5.9 mph at the end of the rollout distance—which shaved 0.3 seconds off its timed result.
Rollout is best used to time quarter-mile runs—a standardized distance. The problem comes when rollout is used to shave acceleration time for 0-60 mph, as Tesla does here with Plaid. The reported metric is not, say, 5-60 mph. It’s the time beginning from a dead start: 0-60 mph.
So, we need to add back at least 0.3 second rollout allowance to get closer to the truth. Does this mean a Plaid purchased today will do 0-60 in 2.3 seconds? Nope. Not only is the number is subjective given variable conditions, but Tesla’s fine print above also says “the indicated Plaid top speed requires proper wheels and tires which will be available in Fall 2021.”
Translation: pays us even more for additional optional equipment that may be available at some point and maybe you can achieve performance near what we posted.
But probably not, since:
the reported performance numbers are dubiously juiced, and
Tesla does not explain what constitutes “proper” wheels and tires versus what it’s selling on Plaid now, and
Tesla is notorious for failing to produce vehicles and equipment as promised, or at the time projected, or, like Plaid+, not at all.
Why make so much of such discrepancies? Because Tesla seems to have deliberately misrepresented Plaid which otherwise has little more to offer than a comparatively nominal speed advantage versus Model S—for an exorbitant premium.
Plaid Model S costs $40,000 more versus the Long Range Model S, which Tesla reports as 3.1 seconds for 0-60—without an asterisk. And remember those asterisks don’t appear unless you look for them. Otherwise, Tesla deliberately overstated the margin of speed advantage in its presentation of models to justify excessive price increases.
Plaid+ was an ludicrous $70,000 price bump versus this same Model S—no wonder it was cancelled (not to mention it may have been planned with Tesla’s proposed 4680 battery which may not be commercially viable for years, if ever).
While we’re at it, it’s a good idea to remain wary about Plaid’s estimated range. Tesla has consistently failed for years to deliver mileage range near its inflated estimates—including Model S—as I reported again Tesla Is Falling and It Can’t Get Up on 2/27/21.
So I’m not a fan of Plaid, which seems to be a poor value proposition even versus Model S. And Model S sales have been falling for years versus a growing field of superior luxury rivals (see We're Not Surprised Tesla has Quietly Delayed Deliveries of "Refreshed" Models S & X on 4/7/7). I remain skeptical the refreshed Models S & X will improve this trend.
Too bad, Tesla could use the help.
Eyes To The East
Tesla’s most important news this week will be May monthly deliveries in China.
I agree with most estimates that Tesla likely rebounded in May versus weak April results when total deliveries dropped 67% versus March to just 11,671 (see Tesla's Troubles in China Are Heating Up on 5/12/21).
April Model 3 deliveries fell 75% to 6,264 and the lowest since April 2020 (which were down 59% vs March 2020). Another 14,174 in excess production of MIC Model 3s was exported to other markets—though most apparently went unsold. Model Y deliveries fell 47% to 5,407 versus March reportedly because production was down for 2 weeks. Yet, as I observed, even the implied 9,000 run rate of Model Y deliveries for the month indicated a decline of more than 10% versus March.
Market estimates for May deliveries range from 20,000-24,000. I expect that QTD sales recovered to 34,000 at best, at or slightly lower versus the first two months of the first quarter. Plunging order trends suggest deliveries remain pressured, as I expected, particularly Model 3 where deliveries may be down 5-10% y/y with 5,000-10,000 more excess MICs exported and parked elsewhere. Similarly, Model Y may be already approaching peak monthly average levels just as it topped faltering Model 3.
If so, this suggests tempered June deliveries at roughly 30,000, down 15% versus 35,478 in March. This pegs the quarter at 63,700, down 8% versus the March quarter.
Tesla's 5.3% senior notes due 2025 inched lower since my last report and continue to trade near the call price at 103.5 (0.63% ytw; -16. bps). This offers no credible upside, particularly given good odds that the bonds get refinanced soon and likely at an inordinately cheap, unappealing yield. There’s perhaps 5 points or more in downside risk in the old or refinanced bonds if Tesla’s operations & financial condition deteriorate as I expect. The bonds remain excessively valued versus, for example, even the BoA High Yield general index yield of 4.21% as Tesla is a weak B3/BB- issuer with “CCC” quality metrics on its underlying core profitability and leverage. Maintain "Underperform."
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