Another quarter, another record-breaking Tesla loss: Let's take a question from YouTube, eh, Mr Musk? Tesla CEO Elon Musk flamed Wall St analysts last night that dared to question his firm's finances, after his leccy car biz reported another set of record quarterly losses, burning through more of the cash pile. For Q1 ended 31 March, Tesla's revenues came in at $3.41bn, an increase of 26 per cent percent year-on-year. Sales of …
A little history is in order. Electric cars have been manufactured off and on since about 1900 with varying degrees of success and profitability. The primary problems they faced have been range, charging time, and replacement battery costs. Range has been more or less solved in that nominal range of many models is reasonable for most people. Charging time has been a weakness from day as a battery pack can only be charged so fast before you have problems. Different chemistries will be a little faster or slower but still somewhat slow. Battery replacement is expensive and the batteries can handling only so much discharge-recharge cycles These problems existed in 1910 and the still exist to some degree today.
”I must be unreasonable, looking at the dismal real world ranges in worst circumstance of most EVs (including Musky ones).“
If by ‘worst circumstances’ you mean driving with a lead right foot, braking heavily due to failing to read traffic conditions, and planting it at every traffic light just because you can, then the problem’s not with the car.
@Ledswinger
I'm with you here, I either need to do multiple short journeys, in which case EVs would suffice... or hundreds of miles, fully loaded pulling a caravan. Having two separate vehicles doesn't make financial sense, and even a Renault Twizy type effort for the short journeys wouldn't work, as I have on street parking, and claiming more real-estate would really irk my neighbours.
@GruntyMcPugh
Buy an EV for daily use, and rent a bigger car for the occasions you need it. I have the same problem on a smaller scale; most of my journeys are <25km so I just invested in an ebike; intending to keep the car for longer journeys. In practice, the car is sitting idle for 95% of the time, so I’m thinking of selling it and just renting one when I need to.
@Lord Elpuss
Sounds fine in theory, but like most people with responsibilities, the car is tailored to cater for them. I have dogs x 4. So the seats in my car are flat, and I've made a folding board that fills in the gaps to stop paws getting caught. I carry water, and a folding dog bowl, poop bags, wet wipes, a towel, first aid kit, etc. So I'd have to transfer that to a rental, and the rental would have to be big enough for four dogs, and I'd have to clean the bejeezus out of it if one of mutts shook in there. The whole car as a service thing sounds fine, and probably is for young urbanites with no kids or dogs, but for those of us with passengers that throw up, occasionally, not so much.
In april 2017 they where already sings about these tricks to bring the model 3 not finished on the market... now a year after its all confirmed
http://www.autonews.com/article/20170424/COPY01/304249926/teslas-big-model-3-bet-rides-on-risky-assembly-line-strategy
When Tesla will make a profit or bringing better numbers to please the market in coming months,
It would be very interesting to see how much Tesla&Co are postponing the payments of there suppliers ...
Looks like payments are being delayed to massage the cash burn rate, which is already pretty grim. But this is a problem:-
Reuters added that His Muskiness needs to "reverse what today amounts to a $22,584 pre-tax loss per vehicle built,"
They'll make it up in volume. It's kinda hard to keep selling at a loss and keep investors happy, especially when Tesla's going to need a lot of cash to fund it's trucks and roadsters. Some of the supplier payment challenges may be due to having orders in expectation of increased production numbers. But if the market stops throwing money at Tesla, it's got big problems. Cash given for Model 3 pre-orders, ie deposits should be restricted to fulfilling those orders & not general working capital. Then there's going to be a lot of used Teslas as leases expire, which will impact on new sales unless those customers opt for a new Tesla.. And of course there's increased competition from other car makers across all the ranges.
Also still no news about Tesla plant in China ...
and if you look at the Model 3 its at least a generation behind what BMW has done with its strange looking i3... (on market in 2014)
BMW has a functional production line which combine carbon fibre composites , glueing it on a aluminium frame ... this stuff you still don't find in mass-production ... only for the super-cars and aviation
Tesla Model 3 is on that regard still old school welding.
BMW i3 Factory Production Tour: https://www.youtube.com/watch?v=pa5_tudyAF8
BMW has a functional production line which combine carbon fibre composites , glueing it on a aluminium frame ... this stuff you still don't find in mass-production ... only for the super-cars and aviation
BMW's i3 carbon fibre isn't what we traditionally think CF to be; it's not CF fabric layered up in a mold, impregnated with resin and baked in an autoclave. Instead it's a half way towards injection molding, so it's fast.
Mclaren have their CF chassis process down to 4 man hours per chassis. They make a hollow section CF chassis tub in one step, so that's fast too, which is incredible.
The likes of Toyota can do a steel chassis using zero man hours...
Tesla has a mountain to climb. If Mclaren or BMW do an all electric car with their chassis tech, Tesla's are going to be slow and heavy.
Well, that number needs a bit of context. I don't *think* it's literally the case that it costs them $22k more to build a car than they can charge to buy that car, exactly. I think the analyst just took the overall company's losses and divided them by the number of cars produced during the same period, I think. It's not an invalid number, but it's not exactly precise, either, as it's really counting in things that don't have anything directly to do with the precise work of building those individual cars, like R&D and marketing costs.
I suspect that you've identified the issue. Most analysts seem to be locked into the "short term" views... even the big companies have fallen into this trap. It's all about the "last quarter" and not about what the long term solutions and issues are. We've seen a lot of good companies fall into this where layoffs, cost cutting, etc. to make the bottom line look good for the quarter is the rule.
Well, that number needs a bit of context. I don't *think* it's literally the case that it costs them $22k more to build a car than they can charge to buy that car, exactly.
It pretty much is. Tesla's mostly a car company, give or take it's purchase of Solar City. And getting into the roofing business. And piling battery packs in a field in Australia. So it's a reasonable metric to do a quick calc of revenues vs sales and come up with that $22k figure. R&D and marketing costs are a consideration, and they're front-loaded with any startup. But Tesla's been in the car business a good few years now, and it's still losing a lot of money.
The billion dollar question is if Tesla can close the gap and turn a profit by making it up in volume, ie create a positive margin per vehicle without excessive financial engineering. If none of it's business units can do that, then Tesla's going to need to keep tapping the market for cash to fund expanding production lines, or reworking existing lines to get costs down. Currently, it's struggling to do that, and shutting down Model 3 production is just going to make the quarter's sales look worse. Investors may decide they're no longer wowed by Musk's new product announcements, and instead ask for Tesla to focus on making existing products profitably. Which could mean investors asking for a Musk's replacement.
After the performance on the latest call, I suspect big investors may be thinking about insisting on a new CEO & COO as a safe pair of hands. And if Musk won't step aside willingly, there's always the potential to trigger a margin call. Musk's only taking a 'modest' salary from Tesla, but has an extravagent lifestyle funded by around $800m in loans secured by his stock.. Which can be a precarious position to be in as other CEO's have discovered when margin calls are made.
"Then there's going to be a lot of used Teslas as leases expire"
from what I remember reading, you don't actually own the batteries, They lease you the battery. So the fleet of 2nd hand ex leased cars are all gonna come without batteries....
when it comes to buying a 2nd hand car, by the time you add the batteries on top you will most likely be looking at close to the cost of a new car.
and that battery lease is where another income stream will come from....
although that may not be tesla, it may have been the Nissan leaf I read about...
Elon Musk got the EV market kickstarted, he will always be remembered for that, and I have a lot of respect for the guy, he is a visionary when it comes to new products. But. He tried to over-automate production, the likes of VW and Toyota are on the cutting edge of mass production using automation, however they have the experience to know which jobs are better served by human hands. I do quite a bit of work for a company which designs and produces automated production lines for car companies, customers include, VW Group, Kia, Jaguar/Land Rover. Unfortunately, Tesla doesnt have long term experience with mass production, it is still very much in a learning process. In the meantime, the big auto makers, who have been doing a ton of research into EV's, are getting ready to launch their own vehicles, the difference being, they have the mass production experience, the economies of scale and already profitable businesses and, will, in my opinion, eat Tesla's car business for breakfast.
I would also be closely watching the Chinese EV makers, they have been experimenting with electric taxis and buses in the big cities and are getting ready to hit the international market big time in the next couple of years.
In the middle of all this is the minnow, Tesla. Forget the cars, their build quality is similar to that of Kia 10 years ago, Tesla will probably licence its car name to one of the big car makers. Part of the problem arises from a person being a visionary running a company of growing complexity. They are too focused on the ideas and big changes, but have little grasp of the detail needed to make a company of growing complexity, work. SpaceX however, that is very hard engineering and is the future I see for Tesla, in this way Musk can focus on one big product and make it work beautifully. The car business is a different kettle of fish, not suited to his psychology.
No need to wait for China to introduce electrical busses. They are here: http://www.vdlbuscoach.com/Producten/Openbaar-vervoer/Citea-The-E-Worker/Product-range/Citea-Low-Floor-Electric.aspx
Already running quite successfully in Eindhoven (in the SLFA config), and there is a lot of interest from other parts of the world. And unlike Chinese manufacturers, that company actually provides long term support, spares and development.
Part of the problem arises from a person being a visionary running a company of growing complexity. They are too focused on the ideas and big changes, but have little grasp of the detail needed to make a company of growing complexity, work.
I wouldn't say it's "part of the problem". In this case, I think it is the problem. Visionaries are good and great, but somewhere they need some advisors on how to implement that vision. Lately, things go the other way.. the bean counters run things and nothing happens.
Tesla, entering a market that others are struggling or exiting,
https://www.investors.com/news/ford-motor-exiting-passenger-cars-more-trucks-suvs-new-lineup/
https://www.ft.com/content/cc450f3e-ef72-11e7-b220-857e26d1aca4
There is some question over long term demand especially with US government dropping subsidies for EV and power companies wanting to charge a higher rate for EV charging.
With a target of June for the 6,000 mark
Which carefully ignores that the target was originally 20,000 a month by the end of December 2017.
That burn rate is unsustainable and debt is no longer completely free. But Musk could still make a tidy profit by selling the company to one of the big car companies and let them grapple with what are obviously difficult problems. I think if this didn't look like a possibility we'd really see a meltdown in the stock price.
Why would one of the big car companies want it, other than for the brand name maybe? They're all launching their own EVs, engineered for mass production as they know how to do; why would they want to take on and sort out someone else's over-ambitious production system? When you take into account the enormous amount of debt Tesla's carrying, the company would be worth diddly-squat to an established car company.
Why would one of the big car companies want it, other than for the brand name maybe?
The usual reasons: one competitor less and to stop the competition, especially the Chinese, from getting it. Plus, there's no doubt that Tesla does have some good technology and people, though rumours abound that some of the best have left since Musk started micromanaging to try and get somewhere near the promised, and for investors essential, production rate.
Risks still abound: people could walk away from their orders. Giving them their $ 1000 wouldn't cripple the company but the numbers could make financing hard even for Musk.
Anyway, I expect we'll start to see rumours of bids or joint ventures over the next few months. Maybe this can count as the first? ;-)
"Why would one of the big car companies want it, other than for the brand name maybe"
Brand names are extremely popular in the industry. They get recycled. You can buy a Maybach, you will soon be able to buy a Jaguar made in Austria for an Indian company, you can buy an Indian motorcycle made by a new company in the US and you can buy a Royal Enfield made in India. And now you can buy an AJS made in China and a Porsche made in Finland (I think).
OK slightly Porsche-like badge, probably worth a few bob. It'll probably be the top of the market version of something made by Ford.
But the batteries may come from Tesla, which might survive as the name of a battery company.
Brand, exactly,... on UK TV there's an advert for some Vauxhall car at the moment,.... 'Vauxhall a British brand since (I forget the year)',... which is underhand marketing schtick I think, given Vauxhall / Opel are now owned by the French company PSA, having been offloaded by GM. They're no more 'British' than a Toyota made on UK soil.
I read a piece that basically said that Tesla needs a COO and Musk needs to step aside because he is too easily distracted and I agree. I think his performance really highlights that it is true. He wants to be the vision guy which is fine but he really isn't cut out for the daily grind type stuff. It likely would have saved the drop in the stock price to have a COO answering the questions that Musk finds too mundane to bother with. It would also probably get Tesla rolling along but the question is whether Musk's ego would allow for a COO.
Tesla share price today is based on expected earnings in the future, the P/E ratio. What that means is many shareholders of Tesla stock today, expect to see Tesla earn a lot of money in the future. If the shareholders lose faith in Tesla's ability to make money in the future, the share price will collapse. Share prices are not based so much on what a company is doing now, but what investors think it will do in the future.
RC Esq opined, "Share prices are not based so much on what a company is doing now, but what investors >>>think<<< it will do in the future."
I'm not convinced that the word "think" is precisely the optimum word choice in this context.
Perhaps 'believe' would be better.
Or 'hope' would arguably be even more accurate.
You wrote
-->I used the word 'think' because I 'hope' investors have done their research and understand the complexities of the market.
The mental process seems to be "the people I meet at the club are all buying them so should I".
Before being accused of cynicism I remind you of Bernie Madoff. Many of the people he conned were highly intelligent - doctors, lawyers, dentists. Some of them went to the same synagogue and the same country club. They were actually suspicious...but surely if all those other people were buying in, they must know something.
I have a relative like this. He is convinced that there are people who can get extraordinary returns on investments. He is an intelligent man who built up quite a big business. But these days his wife has got enough influence over him to stop him throwing money away. The last scheme he was invited to get involved in, but his wife stopped him, a bent lawyer went to prison.
Musk's insults to Wall Street questioners in his quarterly financial report seems to indicate that he's run out of excuses for the financial red ink, lawsuits for deaths via "autopilot", failed production volume on the model 3, lawsuits for QC issues on the model S and Tesla's inability to make a dime in profit resulting in them having to go back to the well time and time again for more operating capital. Now Musk wants to bring the next model online starting in Q4 of '18 yet he has no production capacity and is talking foolishness about building a new factory in China, when they are burning through a billion dollars or more per quarter in the U.S.
Well, back in 1975 automotive executive and engineer John Z. DeLorean attempted to build and sell an original new car (DMC-12) and take on the rest of the automotive industry. The company failed in 1982 when it went into into receivership and bankruptcy. Making and selling cars is a tough business to start from scratch even if you have an army of nerds working on the project. There is an overcapacity of car making worldwide. Tesla occupies a tiny segment of a soon to be large EV market. The fundamental problem is Tesla cannot possibly scale quickly enough to be successful with all of the excess car-making capabilities available to manufacture EVs. Mr. Musk would be smart to stick to making batteries and rocket boosters.
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