More on Apple Watch Ultra, Tesla 4Q23 Deliveries, EV Market Slowing in U.S.


We begin with additional comments related to the latest Above Avalon Report focused on Apple Watch Ultra. The update then turns to the auto space as we look at Tesla’s 4Q23 deliveries and signs of slowing EV growth in the U.S.

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Tesla 2Q23 Deliveries, Ford’s EV Strategy, Doug Field’s Odd Interview With the AP

Hello everyone. For today’s update, we will take a spin through the EV space. While headsets have grabbed the attention in recent months, the EV industry continues to evolve in an effort to find itself. We begin with Neil’s thoughts on Tesla’s latest deliveries numbers. The discussion then turns to Ford’s EV strategy, including quite the odd interview from Doug Field regarding Ford’s transition to EVs.

Let’s jump right in.

Tesla 2Q23 Deliveries

In a press release issued on Sunday, here’s Tesla:

“In the second quarter, we produced nearly 480,000 vehicles and delivered over 466,000 vehicles.”

Here are Tesla's 2Q23 deliveries broken out by model:

Analysts were expecting Tesla to report 445,000 deliveries in 2Q23 so 466,000 is a 5% beat to consensus. In 2Q22, Tesla deliveries were constrained due to COVID lockdowns in China. Backing out that one-time impact, Tesla deliveries were up around 45%. Given recent questions surrounding demand, that will be considered a good growth number.

The following chart shows delivery growth on a year-over-year basis (using a trailing twelve months basis).

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Tesla Earnings, Tesla Lessons for Apple (Daily Update)

Hello everyone. Earnings season is upon us.

The plan for this earnings cycle is to focus in particular on larger themes and base our discussions around any changes or developments to those themes. We will kick things off with Tesla and the auto space. After going over the main takeaways from Tesla’s earnings, we look at some lessons that Apple can learn from regarding how best to navigate the EV space.

Tesla Earnings

Here’s the WSJ:

“Tesla Inc. felt the pain of a recent wave of price cuts, as a reduction in the average price of its cars contributed to a 24% decline in first-quarter profit.

Elon Musk’s electric-vehicle maker has lowered prices for models in the U.S. by between 14% and 25% this year as it contends with weaker demand, higher interest rates and burgeoning competition. The latest round of reductions came on the eve of earnings.

‘We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin,’ Mr. Musk, Tesla’s chief executive, said Wednesday on an earnings call, adding that he expects to be able to harvest additional software revenue down the line.

Teslas sold for an average of around $46,000 in the first quarter, less than the company had forecast and down from some $52,200 in the first three months of 2022.”

Tesla's core automative gross margins – excluding ZEV credits – declined to 16% from 26% the previous year. While those are good margins for an automaker, many have spent years saying Tesla wasn't a regular automaker. Vehicle deliveries were

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Tesla Earnings, Goldman Sachs Pulls Back on Consumer Business, Apple Card’s Future (Daily Update)

Hello everyone.

Apple reports earnings next Thursday (Feb 2nd). We will go over my expectations early next week.

For today's update, we kick things off with Tesla and then switch to Apple Card.

Tesla Earnings

Heading into Tesla’s earnings, there was an increase in anxiety regarding demand for Tesla vehicles. While it was too early to say Tesla faced a demand “problem,” cracks were starting to form in the company's growth story.

Here’s Tesla kicking off its 4Q22 update:

“Q4-2022 was another record-breaking quarter and 2022 was another record-breaking year. In the last quarter, we achieved the highest-ever quarterly revenue, operating income and net income in our history. In 2022, total revenue grew 51% YoY to $81.5B and net income (GAAP) more than doubled YoY to $12.6B.

As we progress into 2023, we know that there are questions about the near-term impact of an uncertain macroeconomic environment, and in particular, with rising interest rates. The Tesla team is used to challenges, given the culture required to get the company to where it is today. In the near term we are accelerating our cost reduction roadmap and driving towards higher production rates, while staying focused on executing against the next phase of our roadmap.”

Thanks to 4Q22 price cuts, some weakness in deliveries, and inflation, core gross margins – excluding ZEV credits and FSD recognition – declined to 22% from 27% the previous year. The concern some have is that

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Apple’s Transportation Ambition, Tesla 4Q22 Deliveries, Tesla’s Problem (Daily Update)

We begin with some words on Project Titan. Two weeks ago, the newest Above Avalon Report, “Project Titan: Apple’s Transportation Ambition,” was published. The discussion then turns to Tesla. The company reported 4Q22 delivery data. We go over the numbers and what Neil views as a problem for Tesla.

Hello everyone. Welcome to 2023.

If you took time off, I hope it was a good and relaxing stretch. Some people are still away from the office this week, so we will use the next two days to return to a regular routine.

Several members emailed me over the break about Apple topics and developments that popped up in the news (China, stock price volatility, demand issues, risks in 2023). We will get to those topics, including my broader thoughts heading into 2023.

For today, we will focus on a topic that was initially not going to be on my “key discussion topics” list for 2023: electric vehicles.

Let’s jump right in.

Apple’s Transportation Ambition

Two weeks ago, the newest Above Avalon Report, “Project Titan: Apple’s Transportation Ambition” was published. You can find the report in your inbox – it was sent out December 22th at 10:48 pm ET. To those members who recently joined, you can access the report via the archive here.

Having a report dedicated to Project Titan has been on my to-do list for some time. It had become difficult for members to go through dozens of updates to piece together the history and motivation behind Project Titan.

Over the years, the Project Titan topic has become unwieldy at times. Periodic reporting has had a very short-term perspective, rarely providing readers the big picture. One is typically left with the impression that Titan is a revolving door within Apple with management constantly changing long-term objectives. That’s not reality.

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Nike 1Q23 Earnings, Tesla 3Q22 Vehicle Deliveries, Wall Street's Apple Anxiety (Daily Update)

Hello everyone. Welcome to a new week. Today's update will kick off with operating results from two consumer-oriented companies (Nike and Tesla). We will then bring Apple into the discussion when going over broader observations and takeaways.

Nike 1Q23 Earnings

Here’s the WSJ:

“Nike Inc. has said it didn’t have enough inventory to meet consumer demand for the past two years. Now, it has too much—and the sneaker giant needs to step up discounts to clear out items.

The company on Thursday said inventories rose 44% to $9.7 billion in the latest quarter, and higher discounts and freight costs squeezed profit margins. Executives said they would mark down more goods, especially apparel, heading into the holidays.

Shares of Nike tumbled about 10% in late trading following its quarterly report.

The results are the latest sign of how rapidly retailers and manufacturers of everything from fertilizer to furniture have found themselves with a surplus of goods, after two years where they scrambled to have enough to sell during the pandemic.

‘We are taking decisive action to clear excess inventory,’ Nike finance chief Matthew Friend said during a call Thursday to discuss the latest results."

Anecdotally, my most recent Nike purchase, which included some summer apparel, arrived faster than any previous Nike order. It would appear that whichever regional hub my items shipped from had plenty of inventory with the shipping company also having the required capacity as well.

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