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My prediction for Q4'19 turned out to be very close. I was off by ~$40M on gross profits, because Energy margins took a hit. This was most likely due to negative Solar Roof margins in Q4'19. I was also very close on my EBIT prediction (off by ~$100M), if you exclude the $70M expense related to the CEO compensation package.

This Q1'20 forecast will be a little bit harder however, because it's hard to predict exactly what margins will be like for the MiC M3 in these early stages, as well as those of the Model Y. Solar Roof is also still ramping, and we lack official installation numbers. On top of all this, we're also dealing with some effects from the COVID-19 crisis that lead to 1-week unplanned shutdowns of all of Tesla's factories.

Nonetheless, I've done my best to take all of this into consideration in my forecast, but this quarter is a little harder to predict than others.


Energy is almost pure guesswork to be honest, because we don't have any official numbers. I'm expecting Storage and regular Solar to be down a little bit, because Q1 is usually seasonally weak and there may have been slight impacts from the COVID-19 crisis.

However, Solar Roof should be a bright point in terms of revenue. Tesla's official account tweeted in mid-March that the Giga New York team achieved production of 1k roofs in a single week. That doesn't necessarily mean that a thousand roofs were installed that week, but it's a very bullish sign.

There were likely COVID-19 disruptions in late March, but I wouldn't be surprised if Tesla managed to install something on the order of ~300 roofs per week leading up to mid-March, for a total of a little over 3,000 roofs installed in Q1. I put margin at 0%, because they're still in the early ramp-up stages and were nowhere near their target of >1k roofs/week in Q1.

Even so, you can already see that the Solar Roof has a lot of potential. In the second half of 2020, the Solar Roof could easily double the Tesla Energy business' revenue and profit, if Tesla manages to install 1k roofs/week at a ~20% gross margin.


I believe margins will hold fairly steady in Q1. Production in Fremont was a little bit lower than Q4, but not too far off of Q3. A lot of vehicles ended up in inventory, but that does not hurt margins. Fixed costs are all split between vehicles produced in the quarter those fixed costs occurred.

I believe M3 margins in Shanghai should still be lower, because they've still been ramping production throughout this quarter, but I believe that they'll shoot up to around 25% in Q2, and eventually will reach close to 30%. I base this on having calculated the ASP for MiC M3 SR+ being sold in China netting Tesla about $48,250 in revenues, inclusive of government subsidies, and also calculating the COGS based off of what it costs Tesla to make one in Fremont. Even then, before accounting for the fact that COGS should be cheaper in Shanghai than in Fremont, I end up with ~30% gross margins.

But for now Tesla is still ramping production in Shanghai, so I've stuck to 15% gross margins.

As for the MY, it's anybody's guess exactly how many they managed to sell, but it shouldn't affect profits much, because I expect gross margins on the MY to be negative this quarter. I don't believe Tesla will have been able to cover fixed costs with just 1 or 2 thousand units produced. I'd guess the break even point will lie somewhere around 5-10k vehicles produced in a quarter, so hopefully in Q2 margins will be break even or slightly positive, and then in Q3 and Q4 the MY should start to contribute significantly to Tesla's bottom line.

With regards to credit sales, I have not accounted for any FCA credits, because nobody knows the exact details of this deal, and whether payments will be spread out across quarters, or whether they'll all be in a lump sum at the end of the year. We could see a $100-200M surprise here, but I'm not counting on it.

Leasing should trend up slightly, because Tesla should be increasing the size of its operating lease vehicles fleet now that it's leasing out M3s.


Although I believe Tesla is generally expanding service, I'm expecting service & other revenue to be slightly down due to COVID-19 shut downs, and less deliveries leading to less revenue from trade-ins.

I expect Tesla continued to increase R&D spending in Q1'20, and that they will continue to do so going forward.

In terms of SG&A, if my source is accurate, the one-time expense related to the CEO compensation package means that $60M of the $700M in Q4'19 will not return in Q1'20. From that remaining $640M I believe Q1'20 will be up slightly. COVID-19 probably weighs down on SG&A expenses, but I believe this will be outweighed by the current increasing trend in Tesla's SG&A as part of its expansion into China and with the MY in the USA.

I've also accounted for -$35M in other expenses, because it seems like FOREX will have weighed negatively on Tesla in Q1'20. An example of this is Norway, where Tesla just increased the prices of all its cars last Friday by 2-12%.

Cash Flows

I'm not going over these in detail, because they're pretty hard to predict. However, I will say that Free Cash Flow is likely to take a very large hit mainly due to the increase in inventory, and partially because I expect a further increase in CAPEX.

Construction in Shanghai has not slowed down, construction has started in Berlin, MY is ramping in Fremont, Solar Roof is ramping in New York, and I wouldn't be surprised if Tesla is already starting to manufacture some battery cells in house. All of these are great investments for Tesla's future, but will obviously weigh negatively on short term cash flows.


  • Automotive Revenue = $4.96B
  • Automotive Sales Gross Margin Excluding Credits = 18.3%
  • Automotive Sales Gross Margin Including Credits = 20.9%
  • Total Revenue = $6.05B
  • Gross Profit = $1.08B
  • EBIT = $70M
  • GAAP Proft = -$150M
  • GAAP EPS = -$0.78
  • Non-GAAP EPS = $0.78
  • Free Cash Flow = $25M
Wall Street is currently expecting Non-GAAP EPS of -$0.10, although it's possible that not all analysts have updated their estimates yet. Compared to that, I am bullish and I believe Tesla should be able to beat this relatively easily, but it's a hard quarter to predict, and things could swing either way.

We should know in a week or two. I'm expecting earnings to most likely be the 29th, because Tesla will likely be able to offer more guidance about how COVID-19 is impacting the company, and perhaps give firm dates on restart of US production and battery day.

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