1) So, it’s clear. $TSLA‘s China factory (GF3) must churn out 12,500 Model 3s per month fairly soon. The CCP realizes what most $TSLA investors don’t: at the current price of $43K, the MIC M3 won’t see enough demand. So it appears like the CCP is eyeing $36K to “move the metal”. pic.twitter.com/lVAML9JpR3— @Motorhead (@BradMunchen) January 11, 2020
2) If the MIC M3 does come down to 36K at retail, the actual factory price will be $31K pre-VAT of 13%. This is exactly what I’ve modeled for Q4 2020, which would result in a -$226m loss at GF3 at full production *if* the RMB/$ rate stays at current favorable levels of RMB 6.9/$.— @Motorhead (@BradMunchen) January 11, 2020
3) If the RMB weakens to 2019’s low of 7.2, losses widen by 10% as much of the MIC M3 will still be relying on parts from the US. Higher USD vs RMB stings.— @Motorhead (@BradMunchen) January 11, 2020
But this bit of news from China’s Xinhua (the CCP’s official mouthpiece) implies that the Model 3 just isn’t selling well.
4) From the first big shipment of the Model 3 in China last March, avg monthly sales are only 3.2K units at a $51K price tag. $TSLA lowered the price by 9% & got a $3.6K “EV incentive”, so now it’s $43K. This prompted protests among customers who recently bought at higher prices.— @Motorhead (@BradMunchen) January 11, 2020
5) I’ll bet that even at $43K, M3 orders have not increased. The CCP likely knows this, prompting the comment of $36K by CPCA’s secretary-general in Xinhua. In fact, order cancelations by customers expecting a price drop likely prompted the CCP to push for a deeper M3 price cut.— @Motorhead (@BradMunchen) January 11, 2020
6) What the CCP is seeing is very simple: $TSLA signed an agreement to churn out 12K cars/month. But M3’s sales are only 3K/month. Only 1 thing you can do for Chinese workers & local suppliers: Lower the px to create 12K/month in demand. $36K is the 1st try of many more to come.— @Motorhead (@BradMunchen) January 11, 2020
7) The CCP is starting to get nervous about whether it will get a return on its investment in $TSLA. State-owned banks extended $1.6bn in loans at low rates; suppliers have boosted capacity, etc. They’ll all need diapers once they see GF3’s losses, which should be -$740m in 2020.— @Motorhead (@BradMunchen) January 11, 2020