Tag Archives: Delays
SAO PAULO (Reuters) – Amazon.com Inc is launching its long-awaited in-house fulfillment and delivery network in Brazil after months of delays caused by complicated logistics and a highly complex tax system in the largest Latin American economy.
FILE PHOTO: The logo of the web service Amazon is pictured in this June 8, 2017 illustration photo. REUTERS/Carlos Jasso/Illustration/File Photo
Amazon, which some rivals had expected to kick off direct sales of items beyond books as soon as the Christmas selling season, said it will directly sell 11 categories of merchandise from over 800 suppliers from L’Oreal to Black & Decker as of Tuesday.
Its shift to stocking and delivering goods itself from acting mostly as a marketplace is expected to intensify competition for fast delivery of goods in Latin America’s largest economy as it exits a painful recession.
“We are launching (our direct sales platform) with 320,000 different products in stock, including 200,000 books… Our obsession is always to increase this catalog and to have everything Brazilian consumers seek and want to buy on the internet”, Amazon’s Brazilian country manager Alex Szapiro told Reuters.
In November, Reuters reported that Amazon’s attempt to advance with its so-called Fulfillment by Amazon program in Brazil had run into difficulties such as the nations’s tangled tax system, complicated logistics and testy relations with some prominent vendors.
“As in every negotiation, you take a seat at a table and you want to agree on the best possible terms”, said Szapiro when asked on the tone of conversations with suppliers, without entering in details.
Amazon entered Brazil quietly in 2012, selling e-readers, books and then streaming movies in the fast-growing Brazilian market. The company made its first big move into merchandise in October 2017, when it began offering the use of its Brazilian website to third-party merchants to sell electronics.
The company does not reveal the number of sellers in its marketplace, which it has slowly expanded over the past year, adding new categories while laying the ground for a direct sales platform.
As part of the fulfillment program, Amazon leased a 47,000 square-meter (505,904-square-foot) warehouse just outside of Sao Paulo, as first reported by Reuters almost a year ago.
Szapiro, who previously worked as Brazil country manager for Apple Inc, declined to say how much the company is spending on the new distribution center or how many people it is hiring, but said Amazon employs directly and indirectly over 1,400 people in Brazil.
In a report published on Monday, analysts at investment bank BTG Pactual said the expected direct sales launch signaled the company was ready “to strengthen investments, potentially via more partnerships with fulfillment operators and last-mile carriers.”
Even though the bank predicted Amazon would take a “gradual approach” and was likely to vye for a “low double-digit market share,” shares of Brazilian retailers reacted negatively to BTG’s report, with B2W, Magazine Luiza e Lojas Americanas among the biggest losers in Monday’s session.
Reporting by Gabriela Mello; Editing by Sandra Maler
Tesla’s (TSLA) Q1 production update had me singing and dancing with joy. I encourage you to read the whole thing. Or if you prefer, watch this video from HyperChange covering the update:
The top three updates are on Model 3 production, Tesla’s cash flow, and Model 3 quality.
Model 3 production is at a burst rate of 2,000/week
After six months of delays, Model 3 production is finally on track:
In the past seven days, Tesla produced 2,020 Model 3 vehicles. In the next seven days, we expect to produce 2,000 Model S and X vehicles and 2,000 Model 3 vehicles.
If this rate can indeed be sustained into April and even increased, then Tesla is just shy of its goal to produce 2,500 Model 3s/week by the end of March. Bloomberg’s independent model has production about a month behind that target. For Tesla, a month late is basically on time! Moreover, in light of this update, Tesla might only be a few weeks behind.
As always, it bears reminding that this is an arbitrary, self-imposed goal largely designed around motivating employees. It’s not required for any financial, competitive, or technological purpose. A line in the sand just has to be drawn somewhere.
Model 3. Photo by Carl Quinn.
Tesla says it doesn’t need to raise cash this year
Recent alarm about Tesla’s solvency seems to be misplaced:
Tesla continues to target a production rate of approximately 5,000 units per week in about three months, laying the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow. As a result, Tesla does not require an equity or debt raise this year, apart from standard credit lines.
Boom! That’s what I love to hear! Barring further delays, Tesla is about six months out from achieving massive positive cash flow from Model 3 sales. If targets are met, Model 3 will generate quarterly revenue on the order of $ 3.25 billion and quarterly gross profit on the order of $ 810 million. (That’s assuming a $ 50,000 ASP and 25% gross margin about a quarter after a 5,000/week production rate is achieved.) Previously, Tesla has guided that it will post sustained operating profits starting by the end of 2018, with a possibility of net profit before 2019 as well.
Based on my own review of the numbers, I think that Tesla’s cash “crunch” is being exaggerated. There are aspects of Tesla’s finances that are opaque to outsiders (such as the composition of accounts payable), however, so it is encouraging to get confirmation from Tesla on this. Here’s the basic math: As of the end of Q4 2017, Tesla had a cash balance of $ 3.37 billion. In Q4, it burned $ 277 million. At that rate of cash burn, it wouldn’t run out of cash until the beginning of 2021.
Several one-time factors contributed to cash burn for Q4 being so low, such as customer deposits for the Tesla Semi and next-gen Roadster. However, there were repeatable factors as well, perhaps most notably slowing discretionary capex. Tesla can slow expansionary spending to be in line with growth in revenue and gross profit. This makes particular sense when it comes to the sales, service, and charging infrastructure for the Model 3 fleet. We’ll have more hard data in about a month when Tesla releases its Q1 earnings.
The key here is the threshold beyond which Model 3 production goes from a net cash incinerator to a net cash generator. If all goes according to plan, by the end of this year, Tesla will likely have the ability to have positive free cash flow. However, that doesn’t seem to be the plan.
From the sounds of it, Tesla wants to finance capex for Model Y, Semi, Roadster, Solar Roof, Powerwall, Powerpack, and future products with debt and perhaps even equity, plus other sources of cash like customer deposits and securitizing leases. Note that Tesla says raising cash this year isn’t “required.” That doesn’t rule out raising discretionary cash to fund faster expansion.
Tesla has a total of $ 330 million in debt coming due in 2018. Given Tesla’s end of Q4 cash balance of $ 3.37 billion and ramping Model 3 production, $ 330 million is a manageable amount to repay. Heck, Tesla could probably wipe that debt away by collecting Model Y deposits. Because Elon Musk is a rock star.
Some convertible bonds to the tune of $ 920 million are set to mature in March 2019. The conversion price is $ 359.87. I can’t predict the ebb and flow of the markets, but it seems well within the realm of possibility that Tesla’s share price will exceed that $ 360 a year from now. If not, with approximately $ 810 million in quarterly gross profit from the Model 3, repayment will be no problem.
Tesla Semi. Photo by Korbitr.
Tesla’s internal data shows high Model 3 owner satisfaction
Finally, Tesla again shared internal survey data of Model 3 owners:
The quality of Model 3 coming out of production is at the highest level we have seen across all our products. This is reflected in the overwhelming delight experienced by our customers with their Model 3s. Our initial customer satisfaction score for Model 3 quality is above 93%, which is the highest score in Tesla’s history.
Although this is somewhat encouraging, Tesla is of course incentivized to present the Model 3 in the best possible light. Before I consider this matter settled, I want to see data from an independent source like Consumer Reports. Consumer Reports has yet to publish survey data on the Model 3. So, for now, we wait.
What is not particularly informative are anecdotes about Model 3 quality. If you, like me, believe in the Enlightenment values of science and logically rigorous thought, then you’ll agree that anecdotes plucked from large samples seldom reveal the truth and often mislead. Statistics reveal the truth. It is surprising and disconcerting to me that so much investment and media analysis — particularly of Tesla — seems to exist in a pre-scientific, pre-Enlightenment mode of thinking in which fact and conjecture are haphazardly mixed, cherry-picked anecdotes are held up as representative, and rumour and hearsay are credulously accepted. So much of what you’ll read and hear about Tesla is either essentially made up or grossly exaggerated because there is little to no application of Enlightenment criteria of truth.
The way I think about companies is to try to approximate as best I can the scientific method. Any way I can remove my own subjective bias is a relief. Hard data is always a breath of fresh air. So is any other empirical test that can serve to falsify an idea. Without scientific discipline, we will inevitably fool ourselves, and wander around in the darkness.
So, I don’t consider a photo of a Model 3 with egregious panel gaps to be informative. A photo of a Model 3 with seamless panels is equally uninformative. Ignore anecdotes. Find statistics. For now, we simply don’t know the level of quality of the Model 3.
Panic and doomsaying about Tesla may never stop entirely. However, it has taken another step toward demonstrating that it has a sustainable business model capable of long-term growth and profits. A year from now, we will probably be having a very different conversation about this company. I look forward to it.
Disclosure: I am/we are long 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.