Tesla May Be Seeing Limited Demand For Its Current Production

Two weeks ago, Tesla changed its policy on allocating Model 3 sales to reservation holders. Instead of inviting reservation holders to configure their cars and place a firm order based on their position in the reservation queue, Tesla (TSLA) opened the “Model 3 design studio” to all reservation holders in the USA and Canada.

I interpreted this as a sensible move by Tesla. Opening the system to all reservation holders provides Tesla with firm data for orders and allows them to schedule production more easily. It is also a necessary move if they want to load the sales of the more expensive options into Q3 to help fulfill Elon Musk’s prediction of a GAAP profit.

However, on July 9th, Tesla opened the Model 3 design studio to all prospective buyers, irrespective of whether they had a reservation. Orders can now be placed for a Tesla Model 3 by paying a $2,500 non-refundable “order processing fee.” New buyers pay only $2,500 whereas reservation holders pay a total of $3,500 (including the initial $1,000 deposit) to order a Model 3. News of this move on SA has attracted several comments and much speculation about the depth of Tesla’s order book.

I see this latest move as an indication of a poor response to the earlier move, and an indication that Tesla does not have enough firm orders for the long-range RWD Model 3 to sustain production through the rest of 2018. If Tesla has to start making the lower priced Model 3 variants to sustain production in Q4, this will have a negative impact on Q4 revenue and profits (or losses).

The graph below shows daily configurations reported to a survey on the Tesla Motors Club website:

The graph shows a spike in configurations on June 26th and 27th when orders were opened up to all reservation holders, which quickly fell to only a dribble of configurations after the first four days. The total number of configurations is quite a bit lower than the totals for March and April.

However, this does not show the full picture because Tesla also opened up orders for the AWD and Performance options. The graph below is filtered to show only the configurations for the long-range RWD option, which Tesla is currently producing:

The number of reported configurations since June 26th is only about 15% of the number of configurations reported between the last week of April and the end of May (cars that would have been delivered in Q2).

Of course, there may be some bias in the results. People who enter data in the TMC website spreadsheet are more likely to be Tesla fans who lined up on the first day to make reservations. Now that configurations are open to everyone, the proportion of people filling in the spreadsheet may have dropped.

Let’s take a look at what has happened to the most recent configurations.

Over half of the reported orders have already been given a VIN and almost half have been given a scheduled delivery date. Almost all of those scheduled delivery dates are in July, and Tesla is still allocating dates with nearly three weeks left in the month. It appears, based on those buyers who have entered data into the TMC spreadsheet, that those who have ordered a long range rear-wheel drive Model 3 will have their car by the first week of August.

The TMC spreadsheet is a small sample (about 5% of all buyers) but there is no reason why it should not be a representative sample in this case. The only logical conclusion is that Tesla is running out of firm orders for the long-range RWD Model 3.

It is possible to argue that most reservation holders are waiting for options that are not yet available (standard trim, short range battery, white interior etc.). However, that would not account for anywhere close to the lack of orders that we see here.

It is also possible that reservation holders are delaying their purchase until Tesla resolves some of its quality and service problems. Some buyers may be holding off because they don’t want to get one of the cars that were made during the big push for 5,000 in the last week of July.

In any case, the lack of response to the opening up of Tesla’s order book should be a concern to investors.

What does this mean for Tesla financials?

The anticipated capital influx

Some analysts have speculated that Tesla will have a large influx of capital from the $2,500 non-refundable “processing fees.” One analyst even went so far as to estimate a figure of $1 billion assuming that all 420,000 reservations have been converted to firm orders. I don’t think that will happen. I believe, based on my conclusions above that Tesla will only take in enough “processing fees” to cover the Q3 production.

In fact, there may be a spate of cancellations, since buyers can now cancel, get their $1,000 back and order a car next day for a total down-payment of $2,500 instead of $3,500. We may see a capital outflow instead.

The effect on Q3

During Q3, Tesla will be building a mix of rear-wheel drive, all-wheel drive and performance variants, all with long range batteries. I expect production of AWD and Performance to start in August with first deliveries in mid-August. (I base that on the earliest reported delivery date for an AWD being August 18th)

Tesla has reduced the price of the AWD option from $54k to $53k, and the performance version is now available starting at $64k, versus a previously announced $78k. There are indications that sales of those options have increased since the price change, particularly the performance option. However, I will leave that analysis for another article.

Assuming 420,000 reservations, 30% choosing AWD or performance options, 60% in the USA or Canada and 50% converting to firm orders, Tesla would end up with 38,000 orders for the AWD and Performance options. If they make 5,000 per week for the last 8 weeks, along with the RWD cars they are making in July, there will be enough orders to fill the Q3 production plan.

Lack of firm orders for the long range RWD variant will therefore only have a minor impact, if any, on Q3.

The crunch will come in Q4

After completing all of the orders for the AWD and performance variants, Tesla will be facing a dilemma. Do they open orders up to overseas buyers and have some US customers lose out on the full $7,500 FIT credit, or do they start making the lower-priced variants, which Musk has told us he cannot afford to make right now?

In any case, expect a huge drop in average selling price and margins for the Model 3 in Q4, which means that any small profit they manage to eke out in Q3 will almost certainly be reversed in Q4.

Disclosure: I am/we are short TSLA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Short via long dated puts

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Medicare May Soon Pay Doctors For Diagnosis Via Text Message

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</div> </div> <p>Medicare may soon pay physicians for evaluating patient illness and ailments via text and other digital means, the <a href="https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2018-Press-releases-items/2018-07-12.html" target="_blank" data-ga-track="ExternalLink:https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2018-Press-releases-items/2018-07-12.html" rel="nofollow">Trump administration announced Thursday.</a></p> <p>In an effort to reduce paperwork and “increase the amount of time that doctors and other clinicians spend with their patients,” the Centers for Medicare &amp; Medicaid Services proposed new rules to improve quality and lower costs by allowing doctors to be paid when communicating with patients via more modern technologies.</p> <p>“CMS is committed to modernizing the Medicare program by leveraging technologies, such as audio/video applications or patient-facing health portals, that will help beneficiaries access high-quality services in a convenient manner,” CMS administrator Seema Verma said.</p> <p> </p> <p>As part of the <a href="https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2018-Press-releases-items/2018-07-12.html" target="_blank" data-ga-track="ExternalLink:https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2018-Press-releases-items/2018-07-12.html" rel="nofollow">newly proposed 2019 physician fee schedule</a>, the Trump administration is proposing to advance “virtual care” as many other commercial insurers have already done, allowing doctors to bill for texts and telehealth consultations. Commercial insurers&nbsp;Aetna, Anthem, UnitedHealth Group&nbsp;and Blue Cross plans are already working with telehealth companies including Teladoc, American Well and MDLive so reimbursement for treatment via digital health has taken off in the private health insurance sector.</p> <p>By allowing doctors to bill Medicare for a text, it could cut down on an unnecessary and more expensive trip to a hospital emergency room or help a patient save time and money by making an unnecessary trip to the doctor’s office for something that can be treated or evaluated remotely. In a conference call with reporters Thursday, Verma cited the use of Skype as one example where a physician could be paid for evaluating and consulting with a patient.</p>

<p>The following provisions are proposed in the 2019 physician fee schedule that would allow Medicare to:</p> <ul> <li><span class="tweet_quote"> <a href="https://twitter.com/intent/tweet?url=http%3A%2F%2Fwww.forbes.com%2Fsites%2Fbrucejapsen%2F2018%2F07%2F12%2Fmedicare-may-soon-pay-doctors-for-diagnosis-via-patient-text-message%2F&amp;text=Pay%20clinicians%20for%20%22virtual%20check-ins%20%E2%80%93%20brief%2C%20non-face-to-face%20appointments%20via%20communications%20technology%2C%22%20CMS" target="_blank" data-ga-track="ExternalLink:https://twitter.com/intent/tweet?url=http%3A%2F%2Fwww.forbes.com%2Fsites%2Fbrucejapsen%2F2018%2F07%2F12%2Fmedicare-may-soon-pay-doctors-for-diagnosis-via-patient-text-message%2F&amp;text=Pay%20clinicians%20for%20%22virtual%20check-ins%20%E2%80%93%20brief%2C%20non-face-to-face%20appointments%20via%20communications%20technology%2C%22%20CMS" rel="nofollow">Pay clinicians for &quot;virtual check-ins – brief, non-face-to-face appointments via communications technology,&quot; CMS<span data-ga-track="ExternalLink:https://twitter.com/intent/tweet?url=http%3A%2F%2Fwww.forbes.com%2Fsites%2Fbrucejapsen%2F2018%2F07%2F12%2Fmedicare-may-soon-pay-doctors-for-diagnosis-via-patient-text-message%2F&amp;text=Pay%20clinicians%20for%20%22virtual%20check-ins%20%E2%80%93%20brief%2C%20non-face-to-face%20appointments%20via%20communications%20technology%2C%22%20CMS"></span></a></span> said.</li> <li><span class="tweet_quote"> <a href="https://twitter.com/intent/tweet?url=http%3A%2F%2Fwww.forbes.com%2Fsites%2Fbrucejapsen%2F2018%2F07%2F12%2Fmedicare-may-soon-pay-doctors-for-diagnosis-via-patient-text-message%2F&amp;text=Pay%20clinicians%20for%20%22evaluation%20of%20patient%20submitted%20photos%2C%E2%80%9D%20CMS%20said" target="_blank" data-ga-track="ExternalLink:https://twitter.com/intent/tweet?url=http%3A%2F%2Fwww.forbes.com%2Fsites%2Fbrucejapsen%2F2018%2F07%2F12%2Fmedicare-may-soon-pay-doctors-for-diagnosis-via-patient-text-message%2F&amp;text=Pay%20clinicians%20for%20%22evaluation%20of%20patient%20submitted%20photos%2C%E2%80%9D%20CMS%20said" rel="nofollow">Pay clinicians for &quot;evaluation of patient submitted photos,” CMS said<span data-ga-track="ExternalLink:https://twitter.com/intent/tweet?url=http%3A%2F%2Fwww.forbes.com%2Fsites%2Fbrucejapsen%2F2018%2F07%2F12%2Fmedicare-may-soon-pay-doctors-for-diagnosis-via-patient-text-message%2F&amp;text=Pay%20clinicians%20for%20%22evaluation%20of%20patient%20submitted%20photos%2C%E2%80%9D%20CMS%20said"></span></a></span></li> <li>Expand covered telehealth services to include “prolonged preventive services,” CMS said.</li> </ul> <p>Before the proposal can be implemented, it is open for public comment. But Verma believes it will go over well among physicians and their patients.&nbsp;&nbsp;“Physicians tell us they continue to struggle with excessive regulatory requirements and unnecessary paperwork that steal time from patient care,&quot; Verma said.</p> <p>Public comments on the proposed rules are due by September 10, CMS said.</p> <p>&nbsp;</p>” readability=”46.4729299363″>

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Medicare may soon pay physicians for evaluating patient illness and ailments via text and other digital means, the Trump administration announced Thursday.

In an effort to reduce paperwork and “increase the amount of time that doctors and other clinicians spend with their patients,” the Centers for Medicare & Medicaid Services proposed new rules to improve quality and lower costs by allowing doctors to be paid when communicating with patients via more modern technologies.

“CMS is committed to modernizing the Medicare program by leveraging technologies, such as audio/video applications or patient-facing health portals, that will help beneficiaries access high-quality services in a convenient manner,” CMS administrator Seema Verma said.

As part of the newly proposed 2019 physician fee schedule, the Trump administration is proposing to advance “virtual care” as many other commercial insurers have already done, allowing doctors to bill for texts and telehealth consultations. Commercial insurers Aetna, Anthem, UnitedHealth Group and Blue Cross plans are already working with telehealth companies including Teladoc, American Well and MDLive so reimbursement for treatment via digital health has taken off in the private health insurance sector.

By allowing doctors to bill Medicare for a text, it could cut down on an unnecessary and more expensive trip to a hospital emergency room or help a patient save time and money by making an unnecessary trip to the doctor’s office for something that can be treated or evaluated remotely. In a conference call with reporters Thursday, Verma cited the use of Skype as one example where a physician could be paid for evaluating and consulting with a patient.

The following provisions are proposed in the 2019 physician fee schedule that would allow Medicare to:

Before the proposal can be implemented, it is open for public comment. But Verma believes it will go over well among physicians and their patients.  “Physicians tell us they continue to struggle with excessive regulatory requirements and unnecessary paperwork that steal time from patient care,” Verma said.

Public comments on the proposed rules are due by September 10, CMS said.

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Starting &quot;Next For Me': Always Be Publishing

In the previous articles in this series I wrote about the beginnings of my company ‘Next For Me.’ From inspiration, collaborators, the law, broadcasting, money, conversion-ing and the company as a movement. Then a family emergency caught me off guard. We got introduced to just the right venture capitalists. I moved to a tiny office and acknowledged the lonely days of startup-land. We’ve started talking to and analyzing our audience needs and worked on our brand architecture. With some guidance we launched our decision to go forward to raise an angel round and how we updated our pitch deck. Then, we simply had to wait and see what would happen with an investor.

Next For Me publishes a weekly newsletter for 50+ audiences. We host events across the country to discuss work, our communities, and what’s next.


Keep On Publishing. (AP Photo/Thibault Camus)

Through a mentoring program with the nonprofit StartOut, I’m working with a firecracker named Steve.

I’m telling you this cat Steve is on fire. He’s pulling together the biggest deals for a big San Francisco tech company. We meet by phone every two weeks and yet have never met in person. He’s all business and I appreciate that in the exchange. But he is intense.

He’s also full of young me-ness, so I know where he’s coming from. Having been a young star myself, the world doesn’t always welcome you and your big sense of self.

So it was no surprise that he has a nemesis. This guy takes credit for his work, tries to undermine him and makes it generally unpleasant to work there. Those kind of downer people can really take the wind out of your sails. And you can’t always turn those situations around. If you can, your heart may be out of it by then. So, we’re agreed that he’s moving on.

He’s interviewing at all the usual mega-unicorns and they quickly see a talent they could use. He’s got this covered. Steve is confident, has the numbers to prove his value and I imagine presents well. You should see his polished LinkedIn profile picture.

And still a Google search on him shows little about his expertise. What will his next advocate find out about him beyond a good interview? Why is he exceptional? He has to change that by writing about what he does.

He’s working on a case study on his big win at the company. My challenge for him was to write another story with more about the process. Why are you the best at this? Break it out into a series of stories and publish something soon. It takes years for some of these things to find their way onto a search engine.

He’s agreed that if he wants to position himself as an expert in his field that he needs to always be publishing. We’re working through some articles together. My guidance is to get something up and then scramble to make it great. But get something out there.

Always Be Publishing

This theory is behind how we get the word out for Next For Me. Some of this may be obvious but it is worth repeating as a blueprint to keeping the awareness moving.

First of all, we are a publisher. We have our own platform via our website. Those stories are assembled with summaries into our weekly newsletter with links back to the full stories. Yes, that makes sense and is what you would expect us to do. But that is just the tip of the iceberg.

Each story is then summarized with a link back to our Facebook page. This is a separate audience that has ‘liked’ our page and may not necessarily be subscribers to our newsletter. Each ‘like’ and share propels the story to their networks and so on. Facebook’s ever-changing algorithm

We also create a video and podcast for each newsletter which also gets published to the Facebook page as well as to podcast networks and our YouTube channel. The video is not a highly polished video, but is representative of what we’re talking about each week.

Our co-founder Drew Domkus has been publishing podcasts and videos since the early 2000s. In fact he’s even in the ‘Podcast Hall of Fame.’ This is all second nature to him. I’m starting to see the benefits of these succinct audio and videos through expanded interest from other the channels. Essentially he reads (in a smooth broadcast voice) brief summaries from our newsletter for the podcasts, then takes that audio and adds some simple video for YouTube and Facebook. Facebook readers love video.

Every story and every newsletter is automatically published to our Medium profile too using a WordPress plugin. Medium has an entirely different audience, probably better suited to our fundraising and entrepreneurial networks. While we have a small audience on Medium, I have a larger audience so my interactions with our stories are exposed to my network and then it begins to spread again.

On Twitter we have a small but growing number of followers. We push out quotes and snippets from our stories with links back to our stories. Twitter is also a great tool to post articles that fit with our brand and are related to news of our mission. We also follow and retweet from important leaders in the movement. You’ve got to give love to get love.

LinkedIn is upping their game as a publishing platform since they were acquired by Microsoft. Again, our LinkedIn page is just beginning to have an audience. We publish to it (manually) and share it on our own feeds. I’ve had a LinkedIn profile since the 90s and have a network of 2,400 connections. When I share our posts we get broad exposure and good pickup. I will often republish our stories there as separate articles on LinkedIn.

It’s also worth noting that my LinkedIn profile has been honed to be very specific to what I’m  doing. The photos I use and language are very succinct extensions of me as the Next For Me brand. I use LinkedIn extensively to connect with partners or people who could help us along. When they come to my profile or see the small snippet referenced in a ‘like’ or post, there is no question about what I’m up to.

On Forbes, yeah here, we get the SEO juice of a credible, high volume website. Partnerships have happened because of what I write here or at least reinforced what we’re doing in those conversations. I’ve taken the approach to document everything we’re doing and why we’re doing it. If a prospective investor wants to really understand who we are and how we operate they have to look no further. The added benefit is that it forces me to articulate our plans and consider what we’ve done. Writing it down illuminates it in a way that just barreling through doesn’t.

Evergreen and Atomized

Finally, we’ve been writing and writing and writing. Within every paragraph is an atomic piece of ‘content’ that can be used to get someone’s attention in a post on one of the platforms above. We don’t have to always be publishing new things, just repurposing what we’ve already created. Same goes for our articles. They can be published again too.

I’m of the belief that you can’t post enough. People miss your posts, subscribers miss your newsletters. We are at the will of constantly changing algorithms. While it might seem that you are flooding your audiences, the chances are slim they will see much of what you put out there.  All of this gives us a much larger footprint online. The perception of the size and breadth of our company is made larger.

Just as I guided young Steve to invest in what people find when they search for him online, there is no question about who we are if someone searches for us, because we are everywhere.


Previous articles in the series:    Starting Next For Me

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