Earnings Call: Q4 2013

Feb 19, 2014

Good day, ladies and gentlemen, and welcome to the Tesla Motors 4th Quarter call over to your host, Jeff Evanson. Please go ahead. Thank you, Patrick, and good afternoon, everyone. Again, welcome to our Q4 financial results Q and A webcast. I'm joined today by Elon Musk, Tesla's Chairman and CEO and Deepak Ahuja, Tesla's Chief Financial Officer. We announced the financial results of our Q4 and full year 2013 results shortly after the close of trading today. The shareholder letter, financial results and webcast of this Q and A session are all available at our Investor Relations website at ir. Teslamotors.com. A replay of this webcast will be available at the same site later today. Please note that certain financial measures that we use on the call such as revenue and income are expressed on a non GAAP basis and have been adjusted to exclude the effect of lease accounting on Model S sales and charges related to stock option compensation. Our GAAP results and reconciliations of non GAAP to GAAP measures can be found in our earnings release. During the course of this call, we may discuss our business outlook and make forward looking statements. Such statements are predictions based on management's expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties including those mentioned in our most recent SEC filings. We'd ask you all to log in now for questions. And with that Patrick, let's turn it over to the first question. Actually before we do that, I do want to say, if you could please limit your to one question and one follow-up, we do want to try to end this call in about 45 minutes. All right, Patrick. Let's have the first question please. Our first question comes from Adam Jonas with Morgan Stanley. Your line is open. Hi. Thanks, everybody. Elon, the stock price and the results have been obviously performing very well lately. You got some great investment opportunities and some growth opportunities ahead of you, not only in the auto but also in the non auto business and the battery business. So I'm just wondering how are you thinking about being opportunistic and pulling in some fresh capital to help de risk the plan, plan for a force majeure or to see some of these opportunities that you have? Thank you. Yes. I think that's a good idea. I would agree with that. I think that would be the smart move. We can talk more about that next week with and also discuss the Gigafactory plans. Unfortunately, I can't say anything right now. Except that I agree I think your advice is good. Okay. And I don't want to pre summarize anything here, but as a follow-up to that, I guess is a would a a capital raising be a prerequisite to launch the Gigafactory? Or is that just an understatement? I think it's necessary to have it occur in 3 years. It's not necessary if we allow that timeframe to expand. That's very clear. Thanks, Elon. All right. You're welcome. Thanks, Adam. All right, Patrick. Next question? Next question comes from John Lovallo with Bank of America Merrill Lynch. Your line is open. Hey, guys. Thanks very much for taking the call. First question would be Deepak on just on your kind of your outlook for free cash flow in 2014 and maybe in 2015 given the requisite investment that's going to go into the business. I mean, how are you guys thinking about that? Yes. I think in 2014, we certainly expect to generate significant cash flow from operations. And our CapEx then which then feeds into free cash flow will depend quite a bit. We'll continue to expand and what opportunities we see globally throughout the rest of the year. So it's a bit early for me to call and give you clear guidance for certainly 2015 and potentially all of 2014. But we see this as really a great year for growth as we look forward. Okay. Thank you. That's very helpful. If I could just follow-up on this Deepak, just kind of thinking maybe longer term, what do you think is an achievable kind of mid term or long term EBIT margin? I mean, taking gross margin aside, I mean, how are you thinking about just kind of from an operating profit longer term? Yes. I think we have in the past, even since the time of our IPO indicated that our long term target is to get to an operating margin, which is in the teens, low to mid teens. And I think that is still what our long term goal is to get there as we continue to grow the business. Yes. But it's I mean, I should emphasize that we expect the reinvestment opportunities to be very significant, I mean, for a long time. So our actual profitability will be quite a bit less than that. But if we were to just sort of level out the business at any given point, I think something like a mid teens type of number is very achievable? Exactly. And that's how we've always communicated. Right. Yes. Right. I think that's thank you. I mean, the car business is truly staggeringly big. It's over $2,000,000,000,000 a year in new car sales. That's just new car sales it's not taking into account servicing and used car sales and just accessories and all the other things. So there's just a pretty big ramp ahead in terms of reinvestment. Got it. That's helpful. I'm going to try to sneak one more in here, Jeff. I apologize. But in terms of distribution licenses in China, I mean, from what we understand, they're pretty difficult to obtain, particularly without a local partner. How are you guys able to kind of deal with this issue? Actually, saleable service is not a problem in China. It's more local manufacturing, where there's some expectation that you partner with a local entity. And since we're really just at the early stages of very early stages of upselling cars in China. And then we're very far away from very far by Tesla's time frame standards, away from manufacturing in China. But we do expect to do that in the long term. But at least for the short to medium term that there's not a need for a local partner. Okay. Thank you very much, Ben. All right, John. Patrick, let's have the next question, please. The next question comes from Brian Johnson with Barclays. Your line is open. Yes, good afternoon. Just want to look at the line of what you used to call reservations and now you call customer deposits, went from $140,000,000 to $163,000,000 close last year $138,000,000 and kind of been churning in the 130s. Can we infer from that? Should we be referring to take the unit order uptake? Or is it more currencies and the products that people put down there to make orders deposits not reservations for? I think the biggest thing we can attribute that sort of growth to is that the Model X demand is very high. There's a number of obviously, we don't disclose it. But even though there's zero marketing for the Model X, the I mean essentially it's like if you're going fishing, it's like the fish are jumping in the boat with respect to Model X. We're not actually trying to sell the Model X at all, but the demand seems to be remarkably higher. And we're seeing steady accumulation of Model X deposits. Which is on top of our ongoing Model S deposit coming exactly that grows the overall part. Yes. So if you look at your new guide for 35 ks units for 2014 and so the comment that a fair chunk of that will be in China and Europe. Just where it is I mean just directionally where does the order book stand in those geographies? What's trending maybe better than you might have expected? And where do you still need some marketing or education work? Well, we I think there's probably work to do in a number of locations in Europe, mostly because we still have to sort out a number of charging issues because even though the EU is sort of one market economically, it's certainly not one market from an electricity standpoint. So we're sorting through a number of charging issues over there. And I think that's slowing down our sales in Europe temporarily, but we feel confident about addressing those very near term. And I expect that sales will do will pick up quite a bit over in Europe. At the same time, we see very good demand in China in a lot of the emerging white and dry markets. Yes, absolutely. Yes, I mean, it's based on current trends, it seems unlikely that we will be able to satisfy demand in China this year. So there will be unmet likely to be I think unmet demand in China. Okay. Thanks. Our next question comes from Ryan Brinkman with JPMorgan. Your line is open. Hi. Thanks for taking my question. Congrats on the quarter. Thanks. I see that you're guiding to strong 28% gross margins by 4Q this year. Can you maybe talk about some of the drivers of that margin expansion? Is it more leverage of fixed COGS on higher revenue? Or is it still the case that you're realizing significant supplier purchase price reductions as your volume ramps? Yes. It's all of that. We are also continuing to make design improvements to the product, which is also helping us. And clearly, as we expand production, our suppliers see economies of scale and so do we. In addition, there's efficiency and as we continue to stabilize and mature our production processes. So all of that we feel is a contributor to getting to that gross margin improvement. Yes. I mean, it's not a huge difference here going from 25% to 28 And I think one could arguably achieve that just by scaling up. So in fact, I mean, the 28% number is assuming that the take rate of options decreases slightly. So we're not planning on lowering the price of the car, but we as we reach the broader market, the option uptake, for example, people ordering, say, Performance Plus, we expect will decrease. And there will be sort of more orders of the more affordable version of the car. So the 28% is assuming a lower average price because of a lower option take. Great. Thanks. And just last question on China. There's been a lot of talk of government incentives there to spur clean vehicle sales to try to improve the air quality. Have you been able to determine whether or not Tesla can be eligible for these types of subsidies? And then separate to that, I'm just curious what kind of volume assumptions do you have in China baked into that 35,000 delivery number and what do you think China could do for you over time? I don't think we want to break out the exact market percentages. And I think it's difficult for us to estimate them China that it seems unlikely that we'll be able to pricing in China that it seems unlikely that we'll be able to get everyone a car this year. And yes, I mean And in terms of the incentives, we are talking to the authorities and we're working to see how the Model S can be included. Clearly the initial round was or the expectation was this only applies to local manufacturers. But that is something we're working to include Model S in that list. Okay, great. Thanks. Congrats on the quarter. Thanks. Our next question comes from Andrea James with Dougherty and Company. Your line is open. Thanks for taking my two questions. Regarding the Gigafactory, are you guys prepared to say you've secured a partner yet? And can you give us a sense of what you mean by you said major reduction in pack costs? We actually expect there to be more than one partner in the factory. I mean, obviously Panasonic is currently our primary partner on cell production. And so the default assumption would be that Panasonic could continue to partner with us in the Gigafactory. But there are also likely to be other suppliers in the factory that provide the precursor materials to the cell, so the anode and cathode materials, separator, electrolyte, that kind of thing. And so I don't want to talk too much about the Gigafactory because we're going to talk about that next week and there's a lot of stuff to talk about besides that in the surnames release. Yes, so I think we'll have to just punt that answer in detail to next week. Okay, fair enough. And then the next question, obviously customer deposits are up 16%, so demand looks good. But I think it would be helpful if you could address the effect on demand that was caused by the vehicle fires last fall and the subsequent media firestorm regarding all that. And then is it measurable? What did you see? Yes. So at first we saw a significant drop in demand and we're quite worried about it. And then as consumers came to understand that this was really kind of a media driven thing and not a real danger with the car, they our sales improved steadily since then and have continued to improve since that initial news. Basically consumers have come to understand that actually our car has a far lower propensity to fire than a gasoline car by at least sort of a half order of magnitude. And so, yes, as consumers became aware of that, their fear has subsided. I think it's great that we live in an era where there's the Internet and social media, so that when something is when the fans are flamed literally by media, there's at least a path for consumers to understand what is really going on. I think in the absence of social media, I'm not sure we would have been able to correct the misperception. Do you need the NHTSA report then to come out then? Or do you think it will have no effect when it does? Or I'm assuming it will clear the cart completely. We anticipate a positive result and I think it will certainly help some number of people out there. And it's worth noting that, I mean, we've been cleared by regulatory agencies in every other country. So Germany, Britain, Japan, China, everyone else. So it's actually just the U. S. Regulatory authorities kind of the learn holdout at this point. But we're provided NHTSA with all the information that they've requested and we're awaiting a decision from them, which hopefully would come soon. And yes, probably to some number of consumers out there. Thank you so much. Our next question comes from Elaine Kuei with Jefferies. Your line is open. Yes. Hi. Thanks for taking my question. First on the production guidance for ending the year at 1,000 car a week rate, that sounds like it's two lines going full time at roughly a 20,000 a year type of rate and pretty good step up from I think some of the previous guidance. Could you help shed some light on what's getting you there? And is that pretty much where you'd be maxing out? So we are constructing a new line in the factory. So it's a little the full answer is a little complex because there are many pieces that go into making a Model S, some of which are production constrained and some of which are not. So to get to the sort of the height, the sort of 1,000 plus production rate, we do need a sort of a new final assembly line, which we're in the process of constructing. And then we'll transition the final assembly to that hopefully around the end of Q3 or thereabouts. Then there's sort of separately a body construction line, which is where you create the body in white, the sort of welded assembly, welded and bonded assembly. That's also taking place. That's not needed to achieve the production rate, but will help with the production efficiency. And will also be the where the Model X is it will be a sort of a next generation body assembly facility for the X and then the S. So I'm not sure if it's quite it would be quite a long answer to give you sort the full story, but that's maybe those are the highlights. Sure. That's really helpful. And with that 1,000 a week with the new final assembly line, is that with that I assume that's not with that maxed out and that's sort of using part of their capacity and then there's there would be additional capacity beyond that once the construction is completed? Would that be fair to assume? It's fair to assume that we would be able to go to higher numbers if the demand is there to yes, yes. Okay. Thank you very much, Johan. All right. Our next question comes from Ben Kallo with Robert Baird. Your line is open. Hi, Elon. Hi, Deepak. Hi, Jeff. Just building on Elaine's question, you said if demand is there, could you just talk about the evolution of what you see in demand if you look back a year ago and where you think it could be 2 years from now 2016 just for the S? And then if you could loop that in with your production expansion and where that could get you with the 2 different factors that you mentioned and to answer Elaine's question? Well, I mean, it's really difficult to predict where the demand really settles out for the S. And I can say with the in relative terms, it appears that the X will see at least as much demand as the S. And if I was to guess and this is just a guess, I think the X demand may exceed the S demand. I mean, this is very speculative. So I've been hoping to it. But that's my best guess. I think X demand will exceed S demand. And as far as S demand, of course, I mean, there are a lot of factors here, because it's not just demand for the estimate like, let's say, the world were to go into a recession in 20 16. It's difficult to say what the estimate, how would we be affected and that kind of thing. So just as you start to encounter macro factors. But it seems like it seems pretty likely that we could sustain demand of around 1,000 units a week. That's my best guess, but for the yes. Okay. Great. And I'm going to ask on the Gigafactory, try my best here. You talked about partners and really supply partners. Should we expect also I guess people that would use the cells so customer offtakes or partners in that aspect of people that would use lithium ion batteries in the announcement? Yes. It's tempting to sort of get into the Gigafactory stuff, but I think we could quantify the whole call talking about that. And we want to have more of a sort of a dedicated call next week to talk about it. But I mean, I think that the Gigafactory would absorb all of the cells produced and that we would probably even need to bring in cells from other factories around the world. Okay. Fair enough. And then just housekeeping for Deepak. Q1 as we flex it, we're kind of right on the verge of profitability. How should we think about that and you guys' goal for Q1? Sorry, could you clarify that further? If I flex the numbers in Q1 and what you said operating expenses and then your deliveries, I can kind of be on the verge of being profitable or not profitable. So how are you guys leaning in that aspect as we model Q1? I see. Yes, we definitely should be profitable on a non GAAP basis even in Q1. Great. Thank you very much guys. Great quarter. Thanks. I do want to emphasize something that it would be we could have tried to aim for a higher delivery number in Q1 if we were to kind of gain deliveries and not try to sort of be a bit of a contortionist and in terms of vehicles in transit. But I made a decision that we shouldn't try to do that and we should just try to produce cars in the right way for the various markets. And so our actual revenue number for Q1 is going to be less than it would be if we did try to sort of play all sorts of games with delivery between domestic and international markets. So I think it's the right decision for the long term, but it means that our Q1 actual recognized revenue will be lower than it might otherwise be. Thanks, Patrick. We're ready for the next question. The next question comes from Dan Galves with Deutsche Bank. Your line is open. Good afternoon. Thanks for taking my questions. Just thinking about your comment on 1,000 per week Model Ss and kind of putting that together with your comment that Europe and Asia could be about double the U. S. Deliveries by Q4 this year. I guess if you think about 12,000 units like something approximately for Q4, 44 and 4 between the three markets. Is that where you're seeing U. S. Demand now? Is that where you think it'll settle out? Or is that basically trying to kind of balance getting vehicles to each region? I sort of answered this question earlier, which is like it's very difficult to predict with precision the exact division of sales. Actually, the best fidelity that we can forecast right now is really that we think non North American sales will be about twice the size of American sales roughly speaking. This is not to say it will be exactly twice the size, but it's roughly. And And I mean, something we try to do is to try to balance customer wait times, because for example, like last quarter, we actually did quite a few European deliveries because customers in Europe have been waiting for a really long time to receive their car. And so we just had to balance that with slowing down U. S. Deliveries and trying to make people as happy as possible given the production constraints. I imagine it's a difficult task. The second question is related to China charging. What's your view on I mean in the U. S. Most people are just charging at their home. Is that a viable option based on kind of where Chinese consumers are living? What is an option for a Chinese consumer that may live in an apartment building? And how much work have you guys done on that? Yes, we're working pretty hard on that and we believe we've got some good solutions. We're going to talk more about that in the coming months. Okay. Thank you. Yes. We're going to make sure that that's not a limitation. Okay, great. Thank you. Our next question comes from Patrick Marchambaugh with Goldman Sachs. Your line is open. Great. Thank you. Just a couple for me. Maybe starting with OpEx. Deepak, you said that OpEx is, I believe, up 15% in Q1 and I think increasing thereafter based on the investments. And can we put some parameters around that? Is there still as we think about operating profit, is there still some ability to leverage OpEx? Or is investment cost next year really kind of offsetting this fixed cost component for now? I mean, we are very mindful of OpEx. We are we continue with our culture of being frugal, but investing where it makes sense for the business. So I think it's a bit early or premature for me to give you sort of longer term guidance beyond Q1. But our approach really is to be focused in the most cost efficient manner to achieve our growth and also try and over time bring our percentage our OpEx percentage of revenue down and contribute to the bottom line. So I think that's the longer term trend that you will continue to see. Okay. Just I guess one quick housekeeping one for me. I don't know if I missed it, but did you give the U. S.International split on the 6,000,829 4th quarter and 22,000 and change for the full year in terms of deliveries? No, we didn't provide that. We haven't done that in the past and we have I think no, a lot I'll just put it this way most of the growth that came in Q4 is from Europe to U. S. And North America continued at the same pace as Q3. I think that's the more relevant Okay. In Q3 to Q4 U. S. Deliveries were very similar, but the increment went to Europe. Yes. Okay. Can I squeeze one last one in? It sounds like the your expectations for the X are perhaps higher than many of us had thought. How can we from a profitability standpoint, how can we think about the accretion of that platform? It sounds like the volume is going to be pretty high. You're leveraging infrastructure that's in already. Presumably, there's things you've learned in the manufacturing process, yes, that you can apply and that your suppliers have learned as well. So how should we think about that as kind of a tailwind or impact on the overall mix? Not sure I fully understand the question, but yes. I can rephrase it. It's just that you're launching a new vehicle having garnered considerable efficiencies and learnings through the process of ES. And presumably also your suppliers have done as well. So with the launch in addition to just the kind of leverage, is there kind of a margin tailwind that you can expect just from launching the X and having applied all the stuff that you've kind of learned in the process of developing the F? Okay. So basically do we expect gross margins to be higher with the EX and maybe flowing back into the S as well? Yes, yes. That would be the and I'm not talking about just on a fixed cost. I'm talking more on a variable cost basis actually. Right. There could be. Although as I said, we do expect the option take rate to reduce. So that's why we're being we're saying for 20% gross margin. But if the option take rate doesn't reduce, obviously, it will be higher than that. Okay. And then what about like as I know we're looking at the $15,000,000 for when the X is going to be in well in launch mode and have some volume on it. But from is there some kind of mix tailwind to be garnered just from the launch of that product just applying again all of the sort of efficiencies that you've learned and supplier relationships and all those benefits that you've accrued through the launch process of the S? S? I'm sure there will be efficiencies. Yes. We don't want to predict something better than a 20% gross margin, but I think there probably will be efficiencies, it's likely. All right, Fat. We got to get on to the next question please. Our next question comes from Colin Rusch with Northland Capital. Your line is open. Thanks so much. Can you guys give us an update on the tack time that you're seeing right now? And the transition towards running 2 full shifts, how do you see that playing out just in terms of hiring and how many people are you going to have to add to do that? Colin, so just to clarify, I mean, we are running a 2 shift operation in a lot of our factories. And again, the factory is very complex as Elon said and different shops run under different operating patterns. And there's no single tact time per se that we can share with you. And our focus is just to continue to improve efficiencies. And then the significant ramp up in the second half will come as Ilan indicated with the move to the new final assembly line and the body construction line. So I think the broader factors which help us get there and tell me if I'm answering your question satisfactorily. Are you thinking like we would need to add a ton of people to achieve the 1,000 car per week rate? Is that what you're asking? No. More of what I'm thinking about is standardization and the leverage that you guys are going to get off of the process improvement. It seems like you've done an awful lot of prep work in terms of setting a foundation for the process and then are making ongoing improvements to that and then potentially locking in processes that then just basically speed up and you're going to get more leverage out of that. So that's what I'm trying to get after. Yes. So I think I think we'll be able to ramp our production rate quite a bit with a fairly small increase in hiring. So yes, I mean our labor efficiency essentially is likely to improve a lot over the course of this year. Okay, great. I can take a little bit some of that offline. And then can you just give us a bit of an update on the trend line for shipments into North America from 3Q into 4Q and your expectation into the Q1? Yes. I think it's going Q4 to Q1 sorry or is it from Q3 to Q4? Could you clarify that? Both if you don't mind. Yes. I think Q4 to Q1 as we indicated in the shareholder letter and as Elon mentioned, we are ramping up even further into Europe and China. And we could have played games and tried to shift the mix and delivered more cars in the U. S. To hit a higher delivery number in Q1. But we decided to smoothen the flow of cars and our operational issues. And that's why you see the small reduction in Q1 deliveries and the mix shift a little bit more into Europe and Asia and from a production point of view. Okay. I wouldn't try to read too much into Russia essentially. Yes. Great. Appreciate it. Our next question comes from Aditya Sadgari with FBR Capital. Your line is open. Thank you. My first question is on China. So your pricing in China is pretty unique, first of its kind. But did you expect any kind of competitive response in the market? And maybe if you could elaborate on how that pricing is translating into demand for the vehicle? Well, I mean, hopefully, other manufacturers will adjust their pricing to not exploit Chinese consumers. I think that's the right thing for them to do. And that's what they I think ought to have been doing from the beginning. But I don't know that they will do that, but that's what they probably should do. And we are seeing really strong demand, which hopefully will continue, but it's been very strong since we announced pricing. And I think our bigger challenge will be trying to satisfy that demand. Got it. My second question was on the Model X. So if we think about the Model X coming out with an improved powertrain and board capabilities, should we expect some of those improvements to be translated into the Model X also when the X is launched? Actually, I'd rather not comment on too much on future Model S changes except to say that obviously we add features to the vehicle all the time every month. It's something that's been added or improved. It's sort of a continuously improved vehicle. All right. Thank you. That's all I had. Thanks, Luc. The next question comes from James Albertan with Stifel. Your line is open. Thanks for taking the question and good afternoon everyone. Just wanted to get a sense for over the clarification first on the commentary you made with respect to the construction you're undertaking at the facility in California. Will any of that construction be leverageable for the 3rd generation car or is this primarily dedicated to the X and S at this point? It's dedicated to the X and S. So the 3rd generation vehicle, we certainly will learn from those lines, but our 3rd generation vehicle will have a completely separate production process. Okay. Thank you. It's geared to a higher volume. So yes. And the C1 factory is big enough to accommodate our growth. Yes. Absolutely. Should mention that. We do anticipate being able to do the 3rd generation vehicle production in that Fremont facility. When it was owned by Toyota and General Motors, it was able to produce 500,000 vehicles a year. I feel like we could get there with our vehicles as well. Understood. And then sort of a related question or follow-up. Over the course of sort of the next 3 years, you've alluded to and I guess we'll hear next week more about the Gigafactory. Obviously that overlaps with what we had understood the expectation for the 3rd generation timeline. Is it fair to say there's been a shift in or reprioritization above and beyond sort of the 3rd generation car that's again more focused on the importance and relevance of the Gigafactory and its contribution? Well, the Gigafactory is really there to support the volume of the 3rd generation car. And yes, that's really it's happening in parallel with development of the generation car. We want to have the vehicle engineering and tooling come to fruition at the same time as the vehicle factory. And yes, so it's already part of one strategy, one combined effort. So there's no movement in other words on the expectation for sort of a 2017 launch on that 3rd generation? No. Okay. No. All right. Appreciate. Thanks for taking the question. Good luck. Thanks. Our next question comes from Craig Irwin with Wedbush Securities. Your line is open. Most of the things that I wanted to ask have already been pretty thoroughly raked through. But maybe, Elon, if you could clarify us for us what you said, I think on the last call, where you discussed a preference for battery manufacturing technology with a significantly lower environmental footprint than what's conventionally used today. Are you possibly referring to maybe some of the solvent free manufacturing approaches? Or are you referring to some of the more advanced recovery systems? Maybe could you clarify for us a little bit sort of what you're referring to and what you prefer as far as technology approach? Sure. Well, I mean, first of all, I don't think it's the case that current lithium ion production is particularly bad environmentally. I think if you visit, say, the Panasonic cell factories in Japan, they're I mean, they're super clean. And I mean they don't have like terrible emissions or waste or anything like that. But I think we can also take it a step further with the Gigafactory and have a plant that is heavily powered by renewables, wind and solar. And that has built into it the recycling capability for old battery packs. So you can really look at the whole lifecycle of the battery pack and be in the best possible situation from an environmental standpoint. And I should point out also though that ethylene Vectra Paks are recycled today. There's a recycling facility in Vancouver and one in Belgium for U. S. And Europe. And they have quite a bit of value. So it's not as though they are sent to landfill even as it is. But for the Gigafactory, we'd like to sort of combine the whole thing. Okay. And then one other clarification. So your ASPs have been trending positive the last couple of quarters, but you seem to be conservative about the progression in 2014. Do you expect the sequential increases in ASPs to continue for the next couple of quarters and then of it? Or when you look at your current order book, are you seeing a flattening out of the curve already? Well, it's definitely flattening out in terms of the purchase price. We're flattening out to I'd say maybe slightly reducing, but I mean it's within like a percent or 2. But we do I mean I do think that there's a good it seems like the prudent thing is to assume that there's a reduction in the option take rate as we get to more of a mainstream market and fewer people take the high performance options on the car, which generate quite a bit of margin. So we're just trying to be conservative on this front. And maybe that maybe the average selling price doesn't decline, but we want to protect for a scenario where it is. Okay. Thank you very much everyone for joining us this afternoon. We look forward to seeing many of you in early March at Barclays BNP Paribas Auto Conference in Geneva or on any of our upcoming investor events. Have a great day. Thank you. Ladies and gentlemen, thank you for participating in today's program. This concludes the program. You may all disconnect.