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Tesla Deliveries Mark a Turning Point for Underlying Demand

Tesla Deliveries Mark a Turning Point for Underlying Demand

Tesla shares are up 7% after reporting second-quarter production and delivery numbers well ahead of expectations. Deliveries totaled 95,200 vehicles (77,550 Model 3, 17,650 S&X) vs. expectations of 85k (69k Model 3, 16k S&X). This represents a record for both production and deliveries and a strong sign that the demand for Tesla vehicles, especially Model 3, is as strong as ever.

The crux of the bull-bear debate has shifted from production to demand and, most recently, has fallen on the question of baseline demand for Model 3. How many vehicles can Tesla sell each quarter in a sustainable manner once the “pent up” demand from early adopters and EV enthusiasts has passed?

In the March quarter, Tesla delivered 51k Model 3s, down from the previous high of 63k in Dec-18. This dip in deliveries made a strong case that pent-up demand and tax incentives were the primary drivers of sales. Investors feared everyone that wanted an EV had already bought one and deliveries would continue to fall. The stock was down 22% since reporting those numbers on April 3rd.

Today’s record-high Model 3 production and deliveries should largely put an end to those fears. It’s clear that demand is strong and growing as they continue to enter new markets. This record occurred despite headwinds like a declining US tax credit and trade tensions in China (with help from the tailwind of beginning right-drive deliveries). The March quarter likely marked the end pent up demand for Model 3, but the rebound to this quarter’s higher deliveries (up 52% sequentially) is an indicator that there is growing and sustainable demand.

Additionally, the company indicated a growing order backlog due to orders exceeding production. Tesla expects to further increase both production and deliveries in Jun-19. We interpret these comments as further evidence of growing, sustainable demand, and we expect the company to reiterate its target of a minimum of 360k deliveries for 2019.

As a reminder, Tesla has set ambitious guidance of 360k-400k vehicles delivered in 2019. This quarter brings them to 158,219 total deliveries at the midway point of the year, with 201,781 deliveries remaining to meet the low end of their guidance. That implies about 100k deliveries in each of the next two quarters, so this all-time high needs to be followed up with another record next quarter. That said, investor expectations call for closer to 300k 2019 deliveries, which the company should comfortably exceed.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.

Tesla
2 min. read Show less
Shifting the Paradigm from Square to Cubic Feet with Bumblebee Spaces

Shifting the Paradigm from Square to Cubic Feet with Bumblebee Spaces

A year ago, we announced our investment in Bumblebee Spaces, a company that is creating a new way to live by unlocking the third dimension in your living space. Bumblebee hopes to alleviate escalating housing costs and rapid urbanization by making your space more useful with robotic, modular ceiling system. Users can store a desk, bed, closet, clothes and everyday items in the ceiling, which multiplies the usability of living space. For example, a small room can be a workout room in the morning, office during the day, a living room in the evening, and a bedroom at night. Here is a video of CEO Sankarshan Murthy explaining how it works.

The Bumblebee platform offers three core competencies:

  1. Modular: The hoist robot can be extended to add additional storage modules or furniture. The exterior skin of the robot and lighting can be customized.
  2. Safe: Safety is built in via software, electrical, and mechanical redundancies.
  3. Intelligent: Sensor fusion and AI systems enable users to store, search, and retrieve items contextually and on-demand through an intuitive onboard UX.

Today, housing is defined in square feet. In the future, it will be defined in cubic feet.

In the past year, Bumblebee has launched several outfitted units in San Francisco and Seattle that are being rented today. The company was also selected as one of 18 (among over 1,100 applicants) to participate in Ikea’s Startup Bootcamp, working on developing a seamless experience to organize home storage.

Today, Bloomberg is reporting that Rico Zorkendorfer, a key industrial designer from Jony Ive’s team at Apple, has joined Bumblebee. Rico’s presence at the company will bring both design expertise and credibility. It’s hard to understate the importance of design to Bumblebee’s product. The appearance and functionality of one’s living space are extremely personal elements, and the more personal a product is, the more critical design becomes. While Sankarshan, a former Apple and Tesla employee himself, is no stranger to design, a seasoned expert like Rico on board will ensure that Bumblebee’s living spaces are desirable, the key to broad adoption.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.

Apple, Artificial Intelligence, Portfolio Company, Robotics
2 min. read Show less
Jeff Williams Steps Forward, but the Jury Is Still Out

Jeff Williams Steps Forward, but the Jury Is Still Out

The news of Jony Ive leaving Apple came as no surprise, as he has been less involved in products over the past four years. Given Ive’s iconic contribution to Apple’s success, the takeaway from yesterday’s announcement has been largely overlooked. Jeff Williams has taken a step closer to succeeding Tim Cook. While Williams is the logical heir to the CEO role, the jury is still out on whether or not that comes to fruition.

Moving Williams Up

Apple is using Ive’s departure as an opportunity to elevate Jeff Williams’ role instead of prioritizing clear design leadership. We believe this is an early step toward Tim Cook laying the groundwork for his succession plan, which is five to ten years away. Having the design team report to Williams fulfills a prerequisite for eventually assuming the CEO role.

A Sub-Optimal Structure

However, the just-announced design team structure is sub-optimal. With no clear direct successor to Ive, leadership is split between Industrial and Human Interface Design, led by Evans Hankey and Alan Dye, respectively. Additionally, those two leaders will report to Jeff Williams, an operations person, begging the question of how the design-heavy culture will mesh with Williams’ strong operations focus. Eventually, under Williams’ leadership, we expect an individual to emerge as the leader of the design team and report directly to Tim Cook.

Is Jeff Williams the Right Fit?

The simple answer is maybe – the jury is still out. On one hand, the company is making a clear move to expand his responsibilities and broaden his skill set. Even more so than when Tim Cook took over, operations are key to Apple’s success – they are selling more devices of more types in more places than ever before. On the other hand, Williams is untested leading multiple disciplines. He is also only two years younger than Cook (56), leaving us to question whether he would want to start a long-term tenure as CEO in his mid-60s.

This move is consistent with Cook’s steady-handed approach to leadership. On the flip side of his steady hand, Cook is more risk-averse and potentially missed an opportunity to elevate fresh leadership on the design team.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.

Apple
2 min. read Show less