back to article Subsidy-guzzling Tesla's Model 3 volumes a huge problem – Wall St man

Stocks sleuth Toni Sacconaghi Jr. has shed some light on why the market reacted badly to Tesla Inc's financials this week. The protracted launch of the Model 3 sedan, unveiled 18 months ago, has already seen Tesla's stock repeatedly bashed. Founder Elon Musk boldly predicted that the company would sell 100,000 Model 3s this …

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No change

Transfer of wealth to th rich, at the expense of the poor.

That's modern capitalism at its finest

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Re: No change

What complete and utter nonsense. The transfer is due to capital redistribution rules “justified” by politicians implementing environmental policies. The very opposite of capitalism. It’s pure environmental socialism. As is so often the case the politicians distorting the market, thinking they can do such a clever job of “fixing society” are the culprits who have created the market imbalances that allow for the inequity.

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Re: No change

While it is politicians distorting the market (and I agree with it being contrary to capitalism) the justification for this is being a compensation for the unaccounted for external costs.

Every time I start an ICE I create external costs for everyone, that are way way worse than those that come from an electric car.

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Re: No change

Every time I start an ICE I create external costs for everyone, that are way way worse than those that come from an electric car.

In the UK roughly 2/3 of the price of fuel goes in taxes. I think that ought to cover any externalities.

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No welfare for billionaires. Please.

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Tesla also came out poorly in a reliability survey.

http://www.independent.co.uk/life-style/motoring/most-reliable-cars-2017-a8029056.html

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"reliability survey..."

The real shock in that survey is Alfa Romeo at #5 out of 32!!!. Mercedes at #23 is a bit of a surprise too

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Anonymous Coward

For people my age

it's impossible not to remember a certain (Sir) Clive Sinclair ....

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Re: For people my age

certainly a visionary. looking back, his ideas would have flouriahed with better tech and modern marketing.

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Re: For people my age

Certainly a visionary,....just unfortunate timing, what with Yuppies indulging in vulgar displays of wealth at the time, a modest transport was a hard sell.

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Anonymous Coward

Musk, the new Jobs?

Well, that's what some Tesla fanatics seem to think. They hang on his every word and action.

They spout forth supporting him on things like his vanity tunnel in LA.

He can do no wrong. SpaceX is going to save the world (after Tesla's have done it the first time) and unless an Electric car has a 'T' on the front, it is merely a concept or a compliance car.

Their deviotion seems to knock Apple Fanbois into a cocket hat.

Yet they seem oblivious to the fact that Tesla as it stands is a basket case from a financial POV.

The Jury seems to be out the quality of the Model 3. It will probably be 2019 before we see any RHD ones here.

I am an EV owner. I've had a Leaf for two years. Done 28,000 miles in it.

Could it be better? Certainly but it does what it says on the tin.

Do I want a Tesla? No thanks. Far too expensive.

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Re: Musk, the new Jobs?

"I've had a Leaf for two years....... but it does what it says on the tin."

It leafs?

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JLV
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Re: Musk, the new Jobs?

ah, how far the mighty have fallen. critics (AC) are popping out if the woodwork.

I'm a moderate fan of Tesla, the car, a doubter of Tesla's, the company, financials and an opponent of excessive electric car fiscal carrots.

But Musk's endeavors, which you so breezingly dismiss, are pretty impressive and pushing lots of engineering boundaries. In hindsight, moving electric cars from stodgy green perceptions to objects of (unwarranted?) desire was a marketing/engineering coup.

Not many "captains of industry" have shaken things up quite so much, even if I am sure Musk also relies on reality distortion fields a bit.

i.e. no problem with the article, but I sense a little tiny bit of unjustified peevishness on your end, dear.

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Re: Musk, the new Jobs?

I'm a moderate fan of Tesla, the car, a doubter of Tesla's, the company, financials and an opponent of excessive electric car fiscal carrots.

Got to admire Musk for his real entrepreneurial spirit and often putting his money where his mouth his. The conventional wisdom was always against the Model 3 and the financial engineering only seem to have confirmed this. The initial Tesla's were based on getting a Toyota car plant cheaply and the subsidies continuing to flow. This was always going to be difficult to repeat for the mass market.

Still I suspect it's a win-win for Musk even if it fails: he'll easily be able to sell Tesla to another manufacturer, though I suspect some investors might well find themselves out of pocket.

And he's bound to be back with another idea. Might be more shit like hyperloop but could also be something magical and revolutionary and personally I'd rather see a hundred more Teslas than another Facebook.

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ST
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Re: Musk, the new Jobs?

> I sense a little tiny bit of unjustified peevishness on your end, dear.

Not when there are questions popping around about the quality of Tesla's product, and not when Tesla's ability to manufacture said product is directly correlated to the amount of subsidies it receives from the federal government.

I'm all for the federal government subsidizing EV R&D and EV manufacturing. On the surface, it sounds like a socially and environmentally responsible and sound policy. But at some point, I'd like to see a viable and useful product as outcome of al that R&D money, and not just status symbol hype.

The only things we've seen thus far is are two models of overpriced vehicles labeled as "Luxury" - Model S and Model X - that are viable only in densely populated high-income tax bracket markets. I.e. the Bay Area, Silicon Valley, LA, and the Northeast Coast. Plus some minuscule numbers for urban areas in other parts of the US. If you want to have a good laugh, take a look at Teslarati's Demographics.

With a starting sticker price of USD $70,000 these are not mass-market cars. And just like an iPhone X, their main function is that of a status symbol, not utilitarian.

It's perfectly OK for Tesla to make $80,000 electric cars for rich people. I just don't see why rich people should have their luxury car - i.e. status symbol toy - subsidized.

As of March 2017, we still have 10% of Americans who can't get any health insurance at all, and who face bankruptcy in case of an unexpected medical expense.

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Re: Musk, the new Jobs?

Sell Tesla to another manufacturer? Like who?

It certainly won't be a car manufacturer, unless Tesla continues to experience massive share price falls.

Apple? Why would Apple want to buy a massive money losing enterprise?

Can anyone else afford Tesla?

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JLV
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Re: Musk, the new Jobs?

Don't get me wrong. I don't disagree with anything you say. Or what the article says.

I find the OP on the other hand is a bit over the top in his criticism ;-) Not everything Musk touches turns to gold, that's pretty obvious. You could add the Solar City merger to iffy endeavors.

But he's not only a huckster hack either, like genius boy makes him out to be.

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Re: Musk, the new Jobs?

"Certainly but it does what it says on the tin."

A voice from way back in the depths of time - a Leitz salesman commenting on a rival's microscopes. "Tin. Good quality but tin.".

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Re: Musk, the new Jobs?

But Musk's endeavors, which you so breezingly dismiss, are pretty impressive and pushing lots of engineering boundaries. In hindsight, moving electric cars from stodgy green perceptions to objects of (unwarranted?) desire was a marketing/engineering coup.

It helped that the Musk launched EV's into a market that had no memories of milkfloats. EV's aren't really anything new, and sadly for Tesla, the boundaries are pretty rigid and inflexible. Tesla would use 'smart' processes to revolutionise car production in ways that no other manufacturer since Henry Ford could have imagined. OK, so Ford managed to produce somewhat more Model T's per quarter than Tesla can manage, but hey, that's progress! I'm sure once those pesky battery production and supply chain issues are sorted, the build quality will improve.. And once non-Tesla employees get to drive away their $30.. I mean $45k+ Model 3's, they'll be ecstatic about all the features and options in their new dream car!

(Is it available in black?)

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Re: Musk, the new Jobs?

Careful now, you're not allowed to criticise The Anointed One here.

Apparently because he's Doing Something he can do no wrong.

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Linux

Re: Musk, the new Jobs?

At least he's doing something versus inventing a new form of financial derivative. You want to whine about wealth transfer from the middle class to the rich, then complain about that kind of shenanigan.

Money thrown at people like Tesla might actually result in something real coming out of the ashes.

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Re: Musk, the new Jobs?

No, it doesn't leaf, but its owner can make like a tree and leave.

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Joke

Re: Musk, the new Jobs?

"I've had a Leaf for two years....... but it does what it says on the tin."

It leafs?

It leaves, surely?

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Re: Musk, the new Jobs?

Let's hope that Rameses Niblick the Third Kerplunk Kerplunk Whoops Where's My Thribble?

there doesn't turn over a new Leaf!

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Unhappy

Electricity always flow toward ground

Pity that electric cars end up consuming more resources isn't it, including tax dollars, newsprint, video time, social media posts and those unproductive hours spent charging and towing.

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Paris Hilton

Re: Electricity always flow toward ground

Well to move anything it will need energy of some form?

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Def
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Headmaster

Re: Electricity always flow toward ground

...those unproductive hours spent charging...

Unlike filling a traditional car, you don't have to stand around like a chump waiting for an EV to charge. You can just go and do other things instead.

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Anonymous Coward

Re: Electricity always flow toward ground

You can just go and do other things instead.

Like enjoying the range of quality food and reasonably priced merchandise at any UK motorway services area.....

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Linux

Re: Electricity always flow toward ground

...assuming there's enough room. Make refueling into an extra high latency experience then you're likely to be stepping on a bunch of extra people waiting around for no good reason.

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Anonymous Coward

Electric cars ...

are the one half of the autonomous car coin. So we'll need a halfway house.

"JohnnyCabs" weren't that far from where we'll be. Except you won't be able to manually drive them at all.

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Re: Electric cars ...

But...but...but Arnold ripped up the Johnny and drove it like a stick!

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Guzzling?

I'm a fan of The Register but "Subsidy-Guzzling" really? Frankly, I think that electric cars deserve a subsidy. I lived in the UK for a couple of years too long ago. I had two cars that had very small engines. One was under 1 Liter the other barely over. Engine sizes may have changed but It's a different story in the States. I have a 2004 Honda civic, it's a very energy efficient car by U.S. standards but it has a 4.3 liter. I live in Texas were Trucks and Suvs rule. We basically subsidize 18-wheelers by not charging them for registration near what we should. The highways are almost never not 'under construction'. More 18-wheelers on the roads tearing them up every year.

Sorry a bit of a flame... but I agree with JLV. They have done wonders for the boundaries of car manufacturing and frankly I don't think there would be Leaf's without Tesla. Also, Like you said they are not able to supply in large quantities so subsidies are not going to be large (as a whole). Why are you 'hating' on Tesla? Read Der Speigal. I've seen many articles that are worried they are falling behind. Here I've seen several anti-Telsa articles... why?

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Re: Guzzling?

"... 2004 Honda Civic ..... 4.3 liter ..."

I find than amazing, the Civic is a small car. I have a 2.0 litre engine in my 2000 Ford Mondeo and it pulls like a train and can cruise comfortably at 80mph for hours on the motorway. About 10 years ago, I drove my neighbour's 2.5 V6 Mondeo and it went like a rocket. Why do american cars have such large engines?

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Re: Guzzling?

so now that there IS a Leaf and others, why continue the subsidies?

the "goal" is completed. Everything after the Model S is merely transferring money without generating any significant engineering. Paying for what is essentially "marketing" or "changing driver's minds about what an EV is" could be done a lot cheaper by hiring ad agencies instead of helping the wealthiest Silicon Valley residents get a 100K car for 80K.

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Re: Guzzling?

oh really sorry. I was wrong. My honda is a 1.7. I was thinking of another vehicle I used to own but realize it was one of the must fuel efficient cars in 2004. Those Mondeo's are in a different class. A friend had one a long long time ago and it wasn't meant as a fuel efficient car :)

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Re: Guzzling?

Part of it, I believe is just we're afraid to go too small. If you come to the states and get sandwiched between two 18 wheelers, you'll know what I mean. I envy the small efficient European cars. We need electric cars. If nothing else to start minimizing these large oil and gas corporations.

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Re: Guzzling?

I wouldn't say the goal is complete at all. All the major car companies hate the idea of electric cars. Gas cars have a huge market on after-market parts and maintenance not to mention the huge oil/gas industry. Until electric cars are affordable and have a large enough market share this trend could be reversed. The battery is still limiting on rage as well.

The goal is complete when electric cars are the main car on the road.

"Silicon Valley residents get a 100K car for 80K". I understand your sentiment but I think it's misplaced. Where still talking very small numbers here in government subsidies and it helps keep this emerging market going.

There are very large sums of money being wasted with little to no long term advantage to the average person. Why focus on this small emerging market? I am upset that we basically subsidize many businesses that don't need it. I mentioned the 18 wheelers but there's the whole corn industry and much much more. At least Tesla is working to make the world better.

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Re: Guzzling?

Frankly, I think that electric cars deserve a subsidy.

Your logic is, for anyone outside the US, somewhat perverse. Car engine sizes in the US are somewhat analogous to motor sizes in vacuum cleaners in the EU: a bigger motor used to be seen as correlating with a more effective cleaner. Cheap energy has become a holy cow in America and has led to perverse pricing: the duty levelled on fuel that is supposed to pay for motorway maintenance has not been raised for years because would mean people having to pay more for their gas guzzlers, which are kept popular by tax breaks. There is simply no incentive to drive something with a smaller engine and meanwhile road maintenance lurches towards bankruptcy. Of course, more gas sales means bigger profits for the oil majors and extra helping for all those on the gravy train.

So, what's the solution in the land of free enterprise and small government™? That's right, more subsidies.

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Re: Guzzling?

Why do american cars have such large engines?

A couple of reasons I can think of off the top of my head... There's a difference in operating RPM. Historically, American engines worked at lower rpm as we have miles and miles of nothing but miles and miles of highways. Big cubic inch engines, mid-range RPM and higher gearing for the highway. Europe.. smaller engine, higher RPM, and nominal gearing. As late as the '70's and some of the 80's, European cars (not the high performance types) wore out faster due to the RPM requirements and hours spent at speed. I believe that's changed quite a bit so smaller engines are happening here in the States due to better fuel management, turbocharging, etc.. Old habits die hard.

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Re: Guzzling?

I agree with most of what you said but again... this focus on Tesla subsidies seems wholly unbalanced. Those are tiny comparative to others and I believe that Tesla is helping change things in the industry world wide. Why is all this negativity directed toward a company that has been doing what it promised. It said it would start high end and then go lower. It's not affordable for the average person yet but they've taken on huge risk and almost all the responsibility. Other companies have stalled on electric cars for years.

I just don't agree with all this negative focus on Tesla. Especially in a world ruled by corporations, they seem to be one of the good guys.

All the others usually do the best to do the least R&D they can and still charge a premium

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Coat

Re: Guzzling?

"Why do american cars have such large engines?"

Compensation?

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Re: Guzzling?

"All the major car companies hate the idea of electric cars."

I doubt it. They just like anything that sells well. Stronger emotions, positive or negative, won't be worth bothering about.

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Re: Guzzling?

Where do you think the electricity to run these cars come from? Oil, gas, coal... Please research how the cobalt in the lithium-ion batteries used by EV's is mined by children as young as 10 years old.

The idea that these vehicles are somehow better for the environment than gasoline/diesel cars is pure hype.

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Linux

Re: Guzzling?

You really want to be squished by cement mixers and tractor trailers on the freeway?

Do you want to be going the same speed as the rest of traffic when you're ready to merge into it?

In some places (Germany, some places in the US) the on-ramps are insanely short.

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Anonymous Coward

Re: Guzzling?

"A couple of reasons I can think of off the top of my head"

Actually the reason US cars had big engines was they were cast iron and cheap. Because CI has poor thermal characteristics and doesn't like tension, cast iron engines tend to be low revs and low compression. Thus you need a big engine to get enough performance.

It really shows when you see the SAE figures versus the manufacturer horsepower. One common GM engine was manufacturer rated at about 220HP. Marinised, where people were going to run it at 70% or more of nominal power all day long, it was a 55HP engine.

Daimler and BMW always showed that with proper design and use of aluminium you could get much more powerful, lighter and reliable engines that could run for extended periods at near 70% of rated HP - I remember someone commenting that Mercedes made 200/200 cars, i.e. that could do 200kph for 200000km. And I've been in more than one of them. But these light, powerful, reliable engines come at a price - foundry technology and machine tools which would have required major capital investment in the US. So it didn't happen until foreign manufacturers started up in the US and, despite the cheerleading for US makers in the comics, started to dig into the market.

Small engines are the product of modern materials and CAD/CAM. Less friction, more efficiency, and easier thermal management.

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Anonymous Coward

Re: Guzzling?

There is no "4.3 litre" Honda Civic, the largest standard petrol engine fitted to a Civic is 2.0 litres (though there was a 2.2 litre 4 cylinder diesel available for a while from 2011). That is available in multiple markets, and is reasonably fuel efficient. This doesn't preclude a custom engine transplant, but the only "4.3" litre engines I can find are V8's from either Ford or GM, that seems unlikely. Custom Honda V6 installs have been done for racing/drag etc.

Of course, if one calculated the ecological footprint of a vehicle over its lifetime, electric cars don't stack up well at all. But it's not actually about "saving the world", it's all about virtue signalling and seeming to do something. Heaven forbid that we actually use logic and reason when deciding on these things...

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Anonymous Coward

Re: Guzzling?

You can make iron engines high power and high rev, maybe not up to the best you can do with alloy, but way past normal operating margins. Typical max revs for example in standard consumer grade engines are around 6-7,000 rpm, and I've certainly had some experience with iron engines that rev to 9-10,000 rpm (one even a BL A Series pushrod engine that was good for 9,500 rpm in limited bursts - in a road going Cooper S). So the ability to make and maintain engines with reasonable outputs is not reliant on alloy technology.

Far more likely that the reason is economy in manufacture and "good enough" syndrome. Large, lazy iron block 6 and 8 cylinder engines were quite adequate for the demands placed on them and they are/were cheap and easy to manufacture. Also they are very tolerant of poor maintenance and are easily serviced. Alloy blocks are far less tolerant of coolant variation and demand the use of specialty coolants mixtures to prevent corrosion though this is far less a problem now such mixtures are common.

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Re: Guzzling?

it's only in the US where renewable energy sources haven't been developed.

in the UK, there have been times this year when renewables have been producing so much power that the price of electricity has become NEGATIVE. That means you could have been paid to use electricity.

And there have been more times when renewables have produced all the electricity the UK was using at the time, with no need for any fossil fuels to be burned.

If that doesn't prove that renewables can provide for a non-trivial amount of a nation's needs, I don't know what can.

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Re: Guzzling?

If that doesn't prove that renewables can provide for a non-trivial amount of a nation's needs, I don't know what can.

The problem that still needs to be solved with renewables is providing sufficient power all the time. I'm a big fan of renewables but, as your example shows, we're moving into the problems associated with over-production. Negative market prices indicate that the market is failing. This is typically on sunny and windy days in spring and summer, because renewables producers are paid for every kwH the produce. But the grid has to be built to provide enough power also on cold, dark and still winter days.

We need storage options that are both big and resistant to manipulation so that excess generating power isn't wasted. You can, of course, use excess power to convert CO2 and H20 to methane and other hydrocarbons but you can't do it for less than the current cost of extracting them from the ground so they wouldn't be competitive unless you were able to sell them without duty. That would be an invitation to abuse. But we already have plenty of those: one of the reasons that electric cars are so cheap to run is that they're produced from duty-free fuel. The renewable gravy train has also opened a lucrative but ludicrous subsidy for oil because the fertiliser for subsidised maize that gets turned into E10 is itself made from oil…

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Anonymous Coward

Re: Guzzling?

There are renewable options that are very reliable in power output (tidal lagoons for instance), but energy storage options can arise when required. Pumped storage is possible if it can be politically acceptable to do it.

Nuclear - especially if you could utilise a cleaner power station technology that can utilise more of the fuel rod (although admittedly Nuclear seems to be moving backwards rather than forwards nowadays).

However If every car is electric, whatever you do at the power grid can instantly be reflected at the car level. You take one coal power station out of commision and replace it with a renewable alternative then the day it goes lie every electric car owner gets the upgrade to a 'greener' source of fuel.

"Where do you think the electricity to run these cars come from? Oil, gas, coal..."

How do you think the oil gets refined? Large amounts of electricity.

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