Tesla seeks to raise $1.5B to fund Model 3 production(reuters.com)
reuters.com
Tesla seeks to raise $1.5B to fund Model 3 production
https://www.reuters.com/article/us-tesla-offering-idUSKBN1AN13I
129 comments
Meanwhile, Toyota and Mazda quietly announced a tie-up specifically for all electric vehicles. I know it's not as much fun as rooting for Tesla, but the odds are on the German and Japanese incumbents in the long run. It's very Japan Inc to wait until consumer interest proves itself, and then start the long game in extreme earnest with cross-brand cooperatives and government backing.
Let's see. I hope they will become competitive. They know how to produce quality combustion engine cars at scale, that's for sure.
But that the world's largest car manufacturer has to team up with another of the large manufacturers just to get a viable EV competitor on the market doesn't bode well. Right now they really don't have any decent EV on the market, any of them.
Toyota hopes to introduce a solid state battery type at some point in the early 2020s. Check it out here, where you can also see their latest EV concept car for ride sharing: prototype:https://www.engadget.com/2017/07/25/toyota-future-ev-battery...
At that time, Tesla's Model 3 will have been on the market some 3-7 years. Will they be able to catch up? I am not sure - To me it seems like the usual traditional car company in denial thinking it needs to make weird cars for weird EV fans. This is Mazda's much better looking concept: http://www.stuartsgarages.com/web/mazda-electric-car-planned... No vital specs such as range has been provided, though.
Both the Asian, European and American competitors will not only be 3-4 or even 5-6-7 years behind. They will be hundreds of millions of miles behind in terms of autonomy, and thousands of charging stations behind. And so far, they are still stuck with the old structure of dealerships when accessing the markets; dealers that in many of the markets used to make a good chunk of their income on repairs and spare parts, both which is likely to be less important with EVs. And a large part of their manufacturing infrastructure and employees can only be used for combustion engine cars.
For each of them, if they flunk their first serious attempt at launching a competitive EV, you can add another 3 years or whatever the developing to production cycle is for vehicles. Right now, I have seen no-one - not a single one of them - with specs and design for even as much as a concept car that compares to the long range Model 3 now in production.
My bet is that those of the traditional combustion engine manufacturers that flunk their first attempt (and right now they all look as if they try to fail), will suffer huge losses from 2020- 2025 and that some of them may never recover.
But that the world's largest car manufacturer has to team up with another of the large manufacturers just to get a viable EV competitor on the market doesn't bode well. Right now they really don't have any decent EV on the market, any of them.
Toyota hopes to introduce a solid state battery type at some point in the early 2020s. Check it out here, where you can also see their latest EV concept car for ride sharing: prototype:https://www.engadget.com/2017/07/25/toyota-future-ev-battery...
At that time, Tesla's Model 3 will have been on the market some 3-7 years. Will they be able to catch up? I am not sure - To me it seems like the usual traditional car company in denial thinking it needs to make weird cars for weird EV fans. This is Mazda's much better looking concept: http://www.stuartsgarages.com/web/mazda-electric-car-planned... No vital specs such as range has been provided, though.
Both the Asian, European and American competitors will not only be 3-4 or even 5-6-7 years behind. They will be hundreds of millions of miles behind in terms of autonomy, and thousands of charging stations behind. And so far, they are still stuck with the old structure of dealerships when accessing the markets; dealers that in many of the markets used to make a good chunk of their income on repairs and spare parts, both which is likely to be less important with EVs. And a large part of their manufacturing infrastructure and employees can only be used for combustion engine cars.
For each of them, if they flunk their first serious attempt at launching a competitive EV, you can add another 3 years or whatever the developing to production cycle is for vehicles. Right now, I have seen no-one - not a single one of them - with specs and design for even as much as a concept car that compares to the long range Model 3 now in production.
My bet is that those of the traditional combustion engine manufacturers that flunk their first attempt (and right now they all look as if they try to fail), will suffer huge losses from 2020- 2025 and that some of them may never recover.
> Right now they really don't have any decent EV on the market, any of them.
Toyota has the Prius, which is the car model that basically equaled "electric car" before Tesla even though it's "just" a hybrid. I wouldn't put Toyota out of the game yet.
> Both the Asian, European and American competitors will not only be 3-4 or even 5-6-7 years behind.
Where they will be in front of Tesla, however, and that for at least a decade: scaling and support. Once a car manufacturer figures out how to build a decent electric vehicle, it's easy to retool the factories. BMW with its i3/i8 series has experience with electric cars and with scaling while maintaining quality. Also, the big manufacturers have huge networks of dealers and service centers, which means that customers who value reliability and/or stress-free repairs are more likely to buy a BigCo car instead of a Tesla.
> They will be hundreds of millions of miles behind in terms of autonomy, and thousands of charging stations behind.
In Europe, charging station connectors should be standardized so there won't be a major advantage there. And autonomy... I would be surprised if big truck/bus vendors like MAN, Scania, Volvo and others don't have their newest fleet models send telemetry data back to home like Tesla does. Especially buses can deliver mountains of data about city travel back home.
tl; dr: I would not count on BigCar going belly-up, Tesla will imho just be a powerful competition but nothing like BigCar in scale.
Toyota has the Prius, which is the car model that basically equaled "electric car" before Tesla even though it's "just" a hybrid. I wouldn't put Toyota out of the game yet.
> Both the Asian, European and American competitors will not only be 3-4 or even 5-6-7 years behind.
Where they will be in front of Tesla, however, and that for at least a decade: scaling and support. Once a car manufacturer figures out how to build a decent electric vehicle, it's easy to retool the factories. BMW with its i3/i8 series has experience with electric cars and with scaling while maintaining quality. Also, the big manufacturers have huge networks of dealers and service centers, which means that customers who value reliability and/or stress-free repairs are more likely to buy a BigCo car instead of a Tesla.
> They will be hundreds of millions of miles behind in terms of autonomy, and thousands of charging stations behind.
In Europe, charging station connectors should be standardized so there won't be a major advantage there. And autonomy... I would be surprised if big truck/bus vendors like MAN, Scania, Volvo and others don't have their newest fleet models send telemetry data back to home like Tesla does. Especially buses can deliver mountains of data about city travel back home.
tl; dr: I would not count on BigCar going belly-up, Tesla will imho just be a powerful competition but nothing like BigCar in scale.
>it's easy to retool the factories.
I don't work in an automotive factory, but everyone I've asked about process engineering and factory tooling, has told me the opposite, that it is in fact quite expensive, both in capital and time, to retool.
>huge networks of dealers and service centers, which means that customers who value reliability and/or stress-free repairs are more likely to buy a BigCo car
It could be that I've simply had a completely different experience from you, but I've never really heard anyone I know say that the dealer experience was stress free or that the repairs made at dealers were reliable. In fact, almost everyone I know who is knowledgable about cars stays away from dealer service centers like the plague.
For some context I drive a 17 year old Civic that I mostly work on myself, although I do take it to a trustworthy independent shop for bigger repairs.
I actually think the current dealer network as well as the current private car ownership system might prove to be the biggest risks for the established players.
I don't work in an automotive factory, but everyone I've asked about process engineering and factory tooling, has told me the opposite, that it is in fact quite expensive, both in capital and time, to retool.
>huge networks of dealers and service centers, which means that customers who value reliability and/or stress-free repairs are more likely to buy a BigCo car
It could be that I've simply had a completely different experience from you, but I've never really heard anyone I know say that the dealer experience was stress free or that the repairs made at dealers were reliable. In fact, almost everyone I know who is knowledgable about cars stays away from dealer service centers like the plague.
For some context I drive a 17 year old Civic that I mostly work on myself, although I do take it to a trustworthy independent shop for bigger repairs.
I actually think the current dealer network as well as the current private car ownership system might prove to be the biggest risks for the established players.
> I don't work in an automotive factory, but everyone I've asked about process engineering and factory tooling, has told me the opposite, that it is in fact quite expensive, both in capital and time, to retool.
But it's certainly way cheaper and faster than to build a new factory like Tesla will have to do, which is what I wanted to say.
> It could be that I've simply had a completely different experience from you, but I've never really heard anyone I know say that the dealer experience was stress free or that the repairs made at dealers were reliable.
Different country maybe - I'm German. We don't have the kinds of issues the US has.
But it's certainly way cheaper and faster than to build a new factory like Tesla will have to do, which is what I wanted to say.
> It could be that I've simply had a completely different experience from you, but I've never really heard anyone I know say that the dealer experience was stress free or that the repairs made at dealers were reliable.
Different country maybe - I'm German. We don't have the kinds of issues the US has.
Thanks for responding and clarifying some points. I agree that from what I've heard Germany doesn't suffer the same kind of problems the US does in regards to the dealer experience.
Not to pile on here, but I think this is one of the things that many Europeans underestimate with regards to Tesla in the US market. If Tesla can continue to sidestep the traditional dealer franchise network, and their lobbying efforts, while scaling, I think this could be one of their biggest advantages going against the established auto companies. Unless you've been subjected to it first hand I think it's difficult to understand just how awful the US dealer experience is. From what I've heard the transparency of the Tesla buying experience is a consistent selling point.
Not to pile on here, but I think this is one of the things that many Europeans underestimate with regards to Tesla in the US market. If Tesla can continue to sidestep the traditional dealer franchise network, and their lobbying efforts, while scaling, I think this could be one of their biggest advantages going against the established auto companies. Unless you've been subjected to it first hand I think it's difficult to understand just how awful the US dealer experience is. From what I've heard the transparency of the Tesla buying experience is a consistent selling point.
> If Tesla can continue to sidestep the traditional dealer franchise network
The problem is: a Tesla is radically different from any other car. You need specialized knowledge (especially in HV distribution) to properly repair it, and most likely also ultra-special tools, and from what I've heard (eg https://forums.tesla.com/forum/forums/replacement-parts-why-...) spare parts are extremely hard to come by, even for official Tesla shops.
So basically you need a massive network of official shops and dealers in order to assure the customers that their damaged/broken car is going to get fixed... and that's where BigCar has an advantage: all they need to do is to train one or two employees at each existing shop/dealer in how to service/repair an electric car, and they have the entire country serviced. Tesla on the other hand has to build the stores, hire and train personnel on their own... and that's a significant hit on capex.
The problem is: a Tesla is radically different from any other car. You need specialized knowledge (especially in HV distribution) to properly repair it, and most likely also ultra-special tools, and from what I've heard (eg https://forums.tesla.com/forum/forums/replacement-parts-why-...) spare parts are extremely hard to come by, even for official Tesla shops.
So basically you need a massive network of official shops and dealers in order to assure the customers that their damaged/broken car is going to get fixed... and that's where BigCar has an advantage: all they need to do is to train one or two employees at each existing shop/dealer in how to service/repair an electric car, and they have the entire country serviced. Tesla on the other hand has to build the stores, hire and train personnel on their own... and that's a significant hit on capex.
I love the Prius but it's a hybrid, not a full EV. Now when we've seen that full EVs can have long range why would we bother with internal combustion engines at all?
"Long range" is a marketing term. Right now I couldn't take a "long range" Tesla into rural North Carolina to see my relatives without serious range anxiety and/or careful routing.
Charging station coverage in the US is about where digital cellular coverage was in the mid-2000s. It exists in most places and in major population centers, but there are clear holes. Gas stations meanwhile are still ubiquitous.
The outlook may be different in 5-10 years, but right now in the US a plug-in hybrid is the best of both worlds IMO. Assuming your round-trip daily commute is within the electric range it's a de-facto pure EV, with the gasoline only kicking in for occasional longer trips.
Charging station coverage in the US is about where digital cellular coverage was in the mid-2000s. It exists in most places and in major population centers, but there are clear holes. Gas stations meanwhile are still ubiquitous.
The outlook may be different in 5-10 years, but right now in the US a plug-in hybrid is the best of both worlds IMO. Assuming your round-trip daily commute is within the electric range it's a de-facto pure EV, with the gasoline only kicking in for occasional longer trips.
Charging station coverage in the US is about where digital cellular coverage was in the mid-2000s
Even this may be optimistic. I can name the 5 closest gas stations to my house (even though the closest is about 8 miles away), but I couldn't name a single charging station. Not one. I see Teslas on the road, so they must exist, but I haven't a clue where they are.
Even this may be optimistic. I can name the 5 closest gas stations to my house (even though the closest is about 8 miles away), but I couldn't name a single charging station. Not one. I see Teslas on the road, so they must exist, but I haven't a clue where they are.
Check this map out, you might be surprised:
https://www.plugshare.com/
And Tesla's supercharger map: https://www.tesla.com/supercharger
I've found they tend to be out of the way or attached to shopping centers/big box stores/other places you wouldn't expect. It's rare to find a charging station with gas-station-like visibility, the numbers just aren't there yet I guess.
And Tesla's supercharger map: https://www.tesla.com/supercharger
I've found they tend to be out of the way or attached to shopping centers/big box stores/other places you wouldn't expect. It's rare to find a charging station with gas-station-like visibility, the numbers just aren't there yet I guess.
The closest Supercharger is about 40 miles away, but that other map shows a 120V charger about 12km away at a golf course. I wonder if it's specifically for car charging, though. Even this far south in Minnesota, some places do have plug-ins for engine heaters in winter.
> I love the Prius but it's a hybrid, not a full EV.
Indeed, it's much more complex than an EV. Yet as of February 2017 Toyota alone had delivered ten million hybrid vehicles, with 80,000 mile drive train warranties - better than Tesla offer and on a scale magnitudes greater.
Indeed, it's much more complex than an EV. Yet as of February 2017 Toyota alone had delivered ten million hybrid vehicles, with 80,000 mile drive train warranties - better than Tesla offer and on a scale magnitudes greater.
The Kia Niro hybrid SUV is rated at 50 miles per gallon. With an 11.9 gallon tank, that's about 600 miles range. It retails for 2/3's the price of a Tesla 3.
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Toyota also have their Lexus marque which has long-offered hybrids to the high end/non-taxi demographic.
> They will be hundreds of millions of miles behind in terms of autonomy, and thousands of charging stations behind
Can charging stations not be standardized, like gas stations?
Can charging stations not be standardized, like gas stations?
In theory, perhaps. The real-estate economics of charging stations versus gas stations seem to work against a similar model. In part because:
1. The fastest turn around times for charging are about 10x the fastest turn around times for fossil fuels. This presents a queuing problem limited by real estate.
2. The typical fossil fuel refilling time allows high turnover in supplemental facilities such as a Quickie Mart (or in many cases the fuel pumps are auxiliary to retail sales as the primary business). The recharge time of an electric vehicle does not support as high a turnover.
3. Fossil fuels allow better arbitrage for business operators. Cheap gasoline can sit onsite or in transit in tanks to be sold later at a higher price. Electricity prices are typically set by a single local provider and electricity cannot be stored.
The real-estate is the real problem. The Tesla charging station near me is on the parking lot perimeter of a shopping mall. It's almost certainly cheap, but not exactly convenient to either the nearest interstate (ten minutes in traffic) nor the stores in the Mall (1/4 mile each way across a sea of asphalt and it's not really a shopping mall anyone would pull of the interstate for).
1. The fastest turn around times for charging are about 10x the fastest turn around times for fossil fuels. This presents a queuing problem limited by real estate.
2. The typical fossil fuel refilling time allows high turnover in supplemental facilities such as a Quickie Mart (or in many cases the fuel pumps are auxiliary to retail sales as the primary business). The recharge time of an electric vehicle does not support as high a turnover.
3. Fossil fuels allow better arbitrage for business operators. Cheap gasoline can sit onsite or in transit in tanks to be sold later at a higher price. Electricity prices are typically set by a single local provider and electricity cannot be stored.
The real-estate is the real problem. The Tesla charging station near me is on the parking lot perimeter of a shopping mall. It's almost certainly cheap, but not exactly convenient to either the nearest interstate (ten minutes in traffic) nor the stores in the Mall (1/4 mile each way across a sea of asphalt and it's not really a shopping mall anyone would pull of the interstate for).
Speaking of real estate the EV might actually save a lot of malls since they could convert their parking lots to charging stations and get people to walk around and buy things while they wait
In places outside of the valley, it's not uncommon to see traditional vehicles taking up electric spots if it's a convenient parking spot.
It's also not uncommon to see those towed and the language "Parking while charging ONLY" to appear, too. It is a solvable social problem.
Of course that's an option. I've never once seen a tow truck anywhere near a charging station, or that kind of verbiage. It says "reserved for EV", but it seems as strongly enforced as the parking spots reserved at retailers for online pickup.
That might work for Tesla because it targets the leisure class...or at least people with plenty of disposable income. That's not everyone. In the case of the charging stations near me, right now it is 34C and 80% humidity and sunny and the doors are ~0.4 km across a shadeless asphalt parking lot. You could shop for a fresh shirt because you'll want one by the time you reach the air conditioning. Maybe get two because you'll want another when you get back to your car that's been sitting in the sun for an hour or so. But at least it's not currently raining.
Shopping at the mall is great if I don't have to be anywhere any time soon and I've got some money to spend on things I probably don't really need. But having to do so every two hundred miles smells more of nuisance than of pleasure.
Shopping at the mall is great if I don't have to be anywhere any time soon and I've got some money to spend on things I probably don't really need. But having to do so every two hundred miles smells more of nuisance than of pleasure.
> your car that's been sitting in the sun for an hour or so.
Just an FYI, you can set a Tesla to keep the interior of the car cool even when you're not in it. I've seen pictures of people leaving notes on their windows telling people not to smash the window to save the dog left inside because the A/C is still running.
And if you're going to be at your destination for several hours, you can still remotely turn the A/C on in preparation for leaving.
Just an FYI, you can set a Tesla to keep the interior of the car cool even when you're not in it. I've seen pictures of people leaving notes on their windows telling people not to smash the window to save the dog left inside because the A/C is still running.
And if you're going to be at your destination for several hours, you can still remotely turn the A/C on in preparation for leaving.
It's the idea that I'll be spending two hours at the mall when I'm out of go juice, is part of what makes me think the use cases for all electric vehicles are limited. I can fill up a hybrid in ten minutes and get 500 miles of range and I can fill up just about anywhere.
Tesla had a battery swap system that was faster than filling a normal car - but it turns out the demand wasn't there. Granted, there is still a disadvantage to doing long distance runs on battery, but it accounts for a relatively small percentage of driving.
For some people, 200 miles is long distance. My next door neighbor on one side commutes fifty miles each way and uses their car at work. My next door neighbor on the other side commutes about 240 miles round trip three or four days a week. My friend Bill, lives in Montana and drives 130 miles each way to taking his children to the dentist or shopping at Costco. The nearest Tesla super charger is about two hours away from his house. The road to it is closed in winter...from about October until May...but then even sometimes until it gets plowed.
Sure most of my trips are less than 200 miles. But the majority of the miles I drive are on trips of 200+.
Sure most of my trips are less than 200 miles. But the majority of the miles I drive are on trips of 200+.
Right, one person's slow turnover (quick buy convenience stores) may be another's high turnover (malls).
They probably will be, long term. Short term either everyone will support the market leader's charger, or the market leader will patent the charger and charging stations will become pluggable/universal.
I can see no reality in which make-exclusive charging stations are viable.
I can see no reality in which make-exclusive charging stations are viable.
This implies traditional car manufacturers are not already working on EV vehicles.
Sure some will be left in the dust because they missed the good wagon, but a large chunk of them will survive and thrive.
Right know Tesla's production is quite small compared to other manufacturers, and even the Model 3 is quite expensive. Most people want a car to go reliably from point A to point B, for a relatively small cost. At 30000 to 35000 dollars, the Model 3 is 50% more expensive than a "good enough" car that fulfills basic needs like daily commutes and a few long trips a year. The Model 3 is still a car for people who likes interesting cars and have the money to buy it.
Also right now, even "quite expensive" electric cars are not yet as convenient as traditional cars. IMHO, EV will become a truly viable alternative when they reach the 3 twos: 20 minutes recharge for 200 kilometers of autonomy, at price of 20000 dollars.
~200 km is the distance traveled between pauses on long trips, ~20 minutes is the duration of the pauses, ~20000 dollars is a bit arbitrarily, but I think it's the average price a middle class family is willing to pay for its main car. Of course it's a general approximation, but I think it's still a quite generous target for EV.
Another possible outcome might not come from the traditional car manufacturers but from China or maybe India. Pollution is a huge issue there given the population density and these countries might need EV to reduce it. "Necessity is the mother of invention", local manufacturers might take a lead because of it.
Sure some will be left in the dust because they missed the good wagon, but a large chunk of them will survive and thrive.
Right know Tesla's production is quite small compared to other manufacturers, and even the Model 3 is quite expensive. Most people want a car to go reliably from point A to point B, for a relatively small cost. At 30000 to 35000 dollars, the Model 3 is 50% more expensive than a "good enough" car that fulfills basic needs like daily commutes and a few long trips a year. The Model 3 is still a car for people who likes interesting cars and have the money to buy it.
Also right now, even "quite expensive" electric cars are not yet as convenient as traditional cars. IMHO, EV will become a truly viable alternative when they reach the 3 twos: 20 minutes recharge for 200 kilometers of autonomy, at price of 20000 dollars.
~200 km is the distance traveled between pauses on long trips, ~20 minutes is the duration of the pauses, ~20000 dollars is a bit arbitrarily, but I think it's the average price a middle class family is willing to pay for its main car. Of course it's a general approximation, but I think it's still a quite generous target for EV.
Another possible outcome might not come from the traditional car manufacturers but from China or maybe India. Pollution is a huge issue there given the population density and these countries might need EV to reduce it. "Necessity is the mother of invention", local manufacturers might take a lead because of it.
"20 minutes recharge for 200 kilometers of autonomy, at price of 20000 dollars"
Totally unacceptable. 5 minutes for 4-500 kilometers of autonomy is where it's at. I will not but EV until that happens. I am willing to sacrafice 200km of autonomy ( from my current 600-700km with Civic 1.6 diesel ) for EV.
Everything else is just annoyance for my style of life with daily commute and kids. I don't want to charge for 20 minutes every week at some random charge station.
Considering my friends and family who feel the same I don't think other manufacturers will have any issues catching up with Tesla in 10-20 years.
Totally unacceptable. 5 minutes for 4-500 kilometers of autonomy is where it's at. I will not but EV until that happens. I am willing to sacrafice 200km of autonomy ( from my current 600-700km with Civic 1.6 diesel ) for EV.
Everything else is just annoyance for my style of life with daily commute and kids. I don't want to charge for 20 minutes every week at some random charge station.
Considering my friends and family who feel the same I don't think other manufacturers will have any issues catching up with Tesla in 10-20 years.
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First to market advantage isn't especially important in this area: the price of gas is low and all estimates forecast it will remain that way for many years to come, while the price of an electric car still far exceeds the cost of the most popular gas cars. The cost calculus still doesn't work for most consumers.
Not only are they behind on time, they are slower to accelerate than a smaller company. The automotive industry is a textbook example of a lumbering behemoth that resists change and takes forever to get anything done.
When they do get rolling, they'll develop a lot of momentum, but it may be too late for some.
When they do get rolling, they'll develop a lot of momentum, but it may be too late for some.
How many times can governments bail out autos?
The thing is, even without Tesla in the picture, the auto market looks like crap. Yet somehow, Tesla is able to attract private capital (or at least better press)…
The thing is, even without Tesla in the picture, the auto market looks like crap. Yet somehow, Tesla is able to attract private capital (or at least better press)…
> but the odds are on the German and Japanese incumbents in the long run
I'm not so sure. Toyota and Volkswagen are huge multinational organisations with extreme beurocracy and institutional inertia. The history of large incumbents facing small nimble upstarts doesn't bode well for them: consider Walmart vs Amazon: Sony Pictures vs Netflix; Nokia vs iPhone; Toyota vs General Motors
Last year Tesla produced 84,000 vehicles. Next year they aim to produce 500,000. For reference, Mazda produces about 1.5 million and Toyota 10 million cars per year. Traditional car companies are standing on a burning platform and have only a few years to act.
I'm not so sure. Toyota and Volkswagen are huge multinational organisations with extreme beurocracy and institutional inertia. The history of large incumbents facing small nimble upstarts doesn't bode well for them: consider Walmart vs Amazon: Sony Pictures vs Netflix; Nokia vs iPhone; Toyota vs General Motors
Last year Tesla produced 84,000 vehicles. Next year they aim to produce 500,000. For reference, Mazda produces about 1.5 million and Toyota 10 million cars per year. Traditional car companies are standing on a burning platform and have only a few years to act.
How can you call "iPhone" a nimble upstart and compare it to Nokia, the multinational corporation. Wouldn't "Apple" be more of an apples to apples comparison?
Yep, in fact I think apple might been bigger than nokia in 2007
Nokia was twice as big as Apple.
Nokia's sales for fiscal 2006 were close to $50 billion with $5 billion in profit (in 2006 Euro/Dollar terms). For fiscal 2007, their sales jumped to closer to $60 billion (for 2008 as well).
Apple's sales for fiscal 2006 were $19.3 billion. Apple didn't pass Nokia in size until the end of 2010; as Nokia began the drop that saw 40% of their sales disappear in just four years.
Nokia's sales for fiscal 2006 were close to $50 billion with $5 billion in profit (in 2006 Euro/Dollar terms). For fiscal 2007, their sales jumped to closer to $60 billion (for 2008 as well).
Apple's sales for fiscal 2006 were $19.3 billion. Apple didn't pass Nokia in size until the end of 2010; as Nokia began the drop that saw 40% of their sales disappear in just four years.
The problem with this thinking is that the incumbents don't just face a technical challenge, but a cultural one.
They effectively have to destroy most of their own businesses to survive. It's so hard to do, politically, logistically, that most incumbents fail.
They effectively have to destroy most of their own businesses to survive. It's so hard to do, politically, logistically, that most incumbents fail.
Why? In all seriousness why? Neither Mazda nor Toyota, has an electric car, competetive batterytech, a charging network or practicly anything, that will give them an edge.
I wouldn't underplay their battery tech. They have a competitive race team using a hybrid design https://en.wikipedia.org/wiki/Toyota_TS050_Hybrid. They have quite a bit of r&d going into battery tech and racing in general which has a history of pushing automotive breakthroughs, they just don't make headlines like Tesla.
They both have combustion/electric hybrids. The operational logistics of battery powered vehicles restrict the range of use cases relative to vehicles that can be quickly refueled using ubiquitous infrastructure -- It is much easier to drive a Tesla into Wyoming than to drive out the other side, while it is no more difficult to drive a Prius across Wyoming than a non-hybrid combustion vehicle.
For a while, when I was more bullish on all electric cars, I think it was because I drew the wrong analogy from my smartphone. Sure, smartphone battery life is inconvenient, but unlike an electric vehicle, I can still use it while it recharges. An electric vehicle isn't useful while plugged in; I cannot run to the hardware store for a new flapper when the toilet is leaking when the battery is low. It's similar to railroad motive power trending toward diesel electric...there are use cases where all electric makes sense and justifies the infrastructure, but not the general case.
For a while, when I was more bullish on all electric cars, I think it was because I drew the wrong analogy from my smartphone. Sure, smartphone battery life is inconvenient, but unlike an electric vehicle, I can still use it while it recharges. An electric vehicle isn't useful while plugged in; I cannot run to the hardware store for a new flapper when the toilet is leaking when the battery is low. It's similar to railroad motive power trending toward diesel electric...there are use cases where all electric makes sense and justifies the infrastructure, but not the general case.
Mazda has no hybrid technology. The recent deal to badge-engineer the Mazda 2 as the Toyota iA in the states is in exchange for Toyota's hybrid technology for some future model.
Mazda has traditionally been extremely negative on electric or other non-ICE powerplants.
Mazda has traditionally been extremely negative on electric or other non-ICE powerplants.
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Mazda and Toyota sell vehicles that I could actually afford to buy. I'm not sure Tesla will be able to get to that price point.
This will be harsh. But if you cannot afford a Tesla Model 3, you are not a valuable customer (financially speaking). The earning on "low end" cars are almost non existant.
Yeah, but the next car I might have the money, and I won't move to them. Its amazing how many people learn to grow with a brand and folks who do right by them.
[edit] This works in other areas. It seems like Apple is going upmarket fast and killing anything on the low end. Its already affected market share. I wonder if it will eventually get into profits.
[edit] This works in other areas. It seems like Apple is going upmarket fast and killing anything on the low end. Its already affected market share. I wonder if it will eventually get into profits.
nope "Cupertino, California — Apple today announced financial results for its fiscal 2017 third quarter ended July 1, 2017. The Company posted quarterly revenue of $45.4 billion and quarterly earnings per diluted share of $1.67. These results compare to revenue of $42.4 billion and earnings per diluted share of $1.42 in the year-ago quarter. International sales accounted for 61 percent of the quarter’s revenue." https://www.apple.com/newsroom/2017/08/apple-reports-third-q...
I hardly think the iPhone 8 with its higher price (rumor) and the iPod cancellations informed last quarters financial reports. It will take a bit for the effects to be known.
Unlike Tesla they both know how to make cars at volume.
It very important to be able to control your sourcing of parts and materials, and this will be Teslas biggest challenge. However I really believe thats the only thing they have on Tesla, and if Tesla solves this, it will bring a world of hurt on the incumbents.
With a process heavy on manual labor and a huge complicated supply chain making vehicles with over 2000 parts.
Tesla are working on making a dark factory. Completely automated and that moves a car along at 1M per minute.
Tesla are working on making a dark factory. Completely automated and that moves a car along at 1M per minute.
One of the hardest lessons learned at Toyota, according to their management, is that fully automated assembly lines eliminate a crucial opportunity for human ingenuity to intervene. That's why Toyota made a deliberate effort to retain and reintegrate 天才 engineers and mechanics on the line.
From a Quartz article in 2014:
So far, people taking back work done by robots at over 100 workspaces reduced waste in crankshaft production by 10%, and helped shorten the production line. Others improved axel production and cut costs for chassis parts.
“We cannot simply depend on the machines that only repeat the same task over and over again,” project lead Mitsuru Kawai told Bloomberg. “To be the master of the machine, you have to have the knowledge and the skills to teach the machine.”
From a Quartz article in 2014:
So far, people taking back work done by robots at over 100 workspaces reduced waste in crankshaft production by 10%, and helped shorten the production line. Others improved axel production and cut costs for chassis parts.
“We cannot simply depend on the machines that only repeat the same task over and over again,” project lead Mitsuru Kawai told Bloomberg. “To be the master of the machine, you have to have the knowledge and the skills to teach the machine.”
It's easier to learn old tech than new tech. Copying manufacturing is easier than making new software.
This mentality highlights the hubris of Silicon Valley. Manufacturing is not easy, and the "tech" that Tesla has isn't unique. Their main advantage is good design which is arguably easier to copy than manufacturing or software.
I live in an area with an automotive industrial base. There are hundreds of tier 1, 2 and 3 suppliers in addition to the five vehicle assembly plants within 150 miles. Each required real-estate acquisition and development entitlement and tax incentive pursuit and contract negotiations. There were roads and highway interchanges. Sewer lines were laid and power lines run and electrical substations and ordinary fire stations built.
All those suppliers built manufacturing capacity because of established relationships with the automaker. It's why there will be German owned suppliers associated with a German manufacturer and Japan owned suppliers associated with a Japanese manufacturer, etc.
Manufacturing at scale happens by outsourcing. It's not the technology that limits, it's business capacity.
All those suppliers built manufacturing capacity because of established relationships with the automaker. It's why there will be German owned suppliers associated with a German manufacturer and Japan owned suppliers associated with a Japanese manufacturer, etc.
Manufacturing at scale happens by outsourcing. It's not the technology that limits, it's business capacity.
> Copying manufacturing is easier than making new software.
That's a good one. Next you'll tell me supply chain and logistics is just as simple as buying SAP or even better, that SAP is for fools and you're betting off rolling your own solution.
That's a good one. Next you'll tell me supply chain and logistics is just as simple as buying SAP or even better, that SAP is for fools and you're betting off rolling your own solution.
This is definitely wrong. Easiness of tech is determined by their complexity not age.
This explains why there are so many companies that make passenger jets.
Eh? Modern jets of all types are full of software.
An unattributed quote my father told me back in the 80s: "Software saved the aerospace industry. Every other way of adding expense to an airplane also adds weight."
An unattributed quote my father told me back in the 80s: "Software saved the aerospace industry. Every other way of adding expense to an airplane also adds weight."
And you really think Elon will not figure out a way to do the same? SpaceX has already accomplished a much harder task (reusable rockets), which not even nation states have been able to do.
Elon's main focus right now is "building the machine that builds the machines", he says they will have the most advanced manufacturing in the world, vehicle or not, and based on his past successes, I don't see anything that will stop him other than death or illness.
Elon's main focus right now is "building the machine that builds the machines", he says they will have the most advanced manufacturing in the world, vehicle or not, and based on his past successes, I don't see anything that will stop him other than death or illness.
> And you really think Elon will not figure out a way to do the same?
Scaling car factories across the world is something that took BigCar decades and billions upon billions of dollars. And the level of automation expertise BigCar has is something that Tesla won't have for years to come.
> SpaceX has already accomplished a much harder task (reusable rockets), which not even nation states have been able to do.
SpaceX had three advantages:
1) no political bullshit like NASA has to suffer from with political aims shifting at least with every new POTUS, only Elon at the top with a clear, extremely long term vision
2) they were free to research in any direction they wanted and in the workflow they wanted, without being stuck on technologies, suppliers etc. due to unions, political collusion or other "government-only issues"
3) massive increase in technological capabilities: SpaceX came at perfectly the right time to enjoy the combination affordable super computing, 3D printing and especially decades of material science and rocketry research, while the Russians were/are stuck due to a lack of money and the ULA was hampered by being stuck on Waterfall-style development and general government issues.
Scaling car factories across the world is something that took BigCar decades and billions upon billions of dollars. And the level of automation expertise BigCar has is something that Tesla won't have for years to come.
> SpaceX has already accomplished a much harder task (reusable rockets), which not even nation states have been able to do.
SpaceX had three advantages:
1) no political bullshit like NASA has to suffer from with political aims shifting at least with every new POTUS, only Elon at the top with a clear, extremely long term vision
2) they were free to research in any direction they wanted and in the workflow they wanted, without being stuck on technologies, suppliers etc. due to unions, political collusion or other "government-only issues"
3) massive increase in technological capabilities: SpaceX came at perfectly the right time to enjoy the combination affordable super computing, 3D printing and especially decades of material science and rocketry research, while the Russians were/are stuck due to a lack of money and the ULA was hampered by being stuck on Waterfall-style development and general government issues.
Which is why you hire-in talent, as Tesla have done with ex-Audi honcho Peter Hochholdinger to head up their production...
https://electrek.co/2016/10/13/tesla-vp-vehicle-production-i... (yes, yes - it's electrek, a less than unbiased source...)
https://electrek.co/2016/10/13/tesla-vp-vehicle-production-i... (yes, yes - it's electrek, a less than unbiased source...)
OK, if you feel so strongly, care to make a bet?
If anything, it's getting them to spend on R&D at least///
http://jalopnik.com/toyota-is-developing-new-solid-state-bat...
http://jalopnik.com/toyota-is-developing-new-solid-state-bat...
They do have strength in manufacturing. That's gonna matter too.
It's the "Intel will win in mobile because it's so big and powerful!" mentality.
The incumbents tend to lose out in such scenarios, especially when they don't go all-in with the new tech and don't do it quickly before the new entrant establishes itself as a powerful player to be followed in the market.
So far, virtually all car makers have failed on all of those points.
The incumbents tend to lose out in such scenarios, especially when they don't go all-in with the new tech and don't do it quickly before the new entrant establishes itself as a powerful player to be followed in the market.
So far, virtually all car makers have failed on all of those points.
Hmm, an electric Mazda 3 would be awesome. A majority of my trips are short (<30 min) and mostly city driving, so stop and go.
For me, I want to go electric, but I need a few things: 1. Affordable (as in not much more expensive than a comparable gas counterpart) 2. Decent Range (200 mi+, none of this 30-50 mile stuff.) 3. Normal appearance (I don't need the world to know I have an EV.) 4. Fast charging (To give the option of longer trips.)
I don't think anyone really has anything out there that meets these criteria yet. The Model 3 is close, but at $35k it is still a bit over what I would call reasonably priced, personally. With the $7,500 tax credit yeah...but I don't think many 3 buyers will be getting it unless it is extended.
For me, I want to go electric, but I need a few things: 1. Affordable (as in not much more expensive than a comparable gas counterpart) 2. Decent Range (200 mi+, none of this 30-50 mile stuff.) 3. Normal appearance (I don't need the world to know I have an EV.) 4. Fast charging (To give the option of longer trips.)
I don't think anyone really has anything out there that meets these criteria yet. The Model 3 is close, but at $35k it is still a bit over what I would call reasonably priced, personally. With the $7,500 tax credit yeah...but I don't think many 3 buyers will be getting it unless it is extended.
Have you considered a Chevy Volt or Toyota Prius Prime? Both could take care of most of your daily driving on full electric power, but have the hybrid mode available for road trips. The Volt actually looks pretty good too -- in my opinion, best looking car in GM's lineup right now. But with Toyota's aggressive pricing and tax incentives, the Prime is dirt cheap, especially the well-equiped model.
That's because Toyota really does not want an electric vehicle. It wants the Mirai to take off, so that it can have dedicated customers for the fuel.
https://ssl.toyota.com/mirai/fcv.html
Just a more expensive version of a Razor and Blades scenario.
https://ssl.toyota.com/mirai/fcv.html
Just a more expensive version of a Razor and Blades scenario.
Toyota will do what the market demands. It's hard to recall, but before the Cult of Musk lit up American patriotism for homegrown all-electric cars, Americans mocked electric cars mercilessly. Meanwhile, Japan perfected kei format ICE cars, but American protectionism and poor infrastructure and cultural bias toward huge, heavy cars made those a non-starter in the US market. (My kei car gets 80mpg and cost $13K brand new.) And let's not forget the all-powerful oil lobby, which has the US congress by the nuts.
So, can you blame Toyota for putting its chips on HFC--something that still has plenty of non-consumer applications and has otherwise positive implications for a nation without access to native oil reserves?
It's folly to think that Toyota can't compete now that the consumer winds have shifted to all-electric. Even today, Nissan has a tremendous charging network across Japan.
Hell, my Suzuki kei car is nicer, more convenient, and cheaper to buy and operate than a Model 3.
So, can you blame Toyota for putting its chips on HFC--something that still has plenty of non-consumer applications and has otherwise positive implications for a nation without access to native oil reserves?
It's folly to think that Toyota can't compete now that the consumer winds have shifted to all-electric. Even today, Nissan has a tremendous charging network across Japan.
Hell, my Suzuki kei car is nicer, more convenient, and cheaper to buy and operate than a Model 3.
Consumer interest is more so in Tesla the brand than it is in electric cars.
It's no different than Apple. Other companies can offer a similar, better, yet cheaper product, but consumers will still be lining up for Apple's iXxxxx.
It's no different than Apple. Other companies can offer a similar, better, yet cheaper product, but consumers will still be lining up for Apple's iXxxxx.
After 10 years of open competition, it can be reasonably concluded that Apple's products must offer some kind of extra value that others can't. The ease of use of Facetime, the convenience of getting a replacement device at a local Apple Store immediately and restoring with iCloud, the ability to send SMS/MMS/iMessage from macOS. And biggest of all, no worries about bloat ware and malware.
Branding alone won't work in the long term, you have to also provide a superior experience, which obviously apple's ecosystem does. Similarly, Tesla has the branding right now, and will enjoy their premium if they continue to deliver quality. But if they don't, and other manufacturers step up, then people will gradually buy something else.
Branding alone won't work in the long term, you have to also provide a superior experience, which obviously apple's ecosystem does. Similarly, Tesla has the branding right now, and will enjoy their premium if they continue to deliver quality. But if they don't, and other manufacturers step up, then people will gradually buy something else.
>And biggest of all, no worries about bloat ware and malware.
You mean you DON'T want "Candy Crush 9: We still exist" preinstalled, and a shortcut added to the front of your start menu?
You mean you DON'T want "Candy Crush 9: We still exist" preinstalled, and a shortcut added to the front of your start menu?
[deleted]
I have a Porsche Hybrid. Except for the green outlines, noone knows it is an hybrid. Porsche has a racing EV and a lot R&D into EVs. if They release a full EV PAnamera or Cayenne, noone will know except for the small details.
Only people that care about Tesla are nerds and Musk fanboys. 98% of the rest of the people will prefer a Porsche (or Audi or BMW or whatever).
Get out of the USA and outside tech circles, NO ONE (not in tech) knows or cares what Tesla is. Not the same with Apple where even before the iPhone it was a well known brand (know to be mostly a designer's machine, but still known)
Only people that care about Tesla are nerds and Musk fanboys. 98% of the rest of the people will prefer a Porsche (or Audi or BMW or whatever).
Get out of the USA and outside tech circles, NO ONE (not in tech) knows or cares what Tesla is. Not the same with Apple where even before the iPhone it was a well known brand (know to be mostly a designer's machine, but still known)
They're facing stiff competition, so maybe they're just retreating for now. Tesla's probably not their biggest concern, Nissan and Volvo are both far ahead of them as well.
How does Tesla technologies compares to Toyota's and Mazda's? If they are inferior, are they actually bad? Can they catch up? (real questions)
I haven't been in the auto industry for a number of years, but the following is my educated impression. On most aspects (drivetrain, body, safety, etc), tech will be comparable.
Where Tesla tech wins is in battery technology (good chance Toyota and Mazda will start buying Tesla battery packs instead of developing their own), and Autopilot.
Other manufacturers are working on autonomous vehicles, and they will probably be pretty good, but Tesla has a first-mover advantage in terms of training data and real-world usage (which will be very valuable), and they're also much more culturally aggressive about deploying new software technology than the major manufacturers.
Yes, they can catch up in those regards, but likely not for the next ~5 years or so which is going to be the crucial time period in terms of capturing the market.
Where Tesla tech wins is in battery technology (good chance Toyota and Mazda will start buying Tesla battery packs instead of developing their own), and Autopilot.
Other manufacturers are working on autonomous vehicles, and they will probably be pretty good, but Tesla has a first-mover advantage in terms of training data and real-world usage (which will be very valuable), and they're also much more culturally aggressive about deploying new software technology than the major manufacturers.
Yes, they can catch up in those regards, but likely not for the next ~5 years or so which is going to be the crucial time period in terms of capturing the market.
Given that Tesla opened up all its patents to the public, it's safe to say that they are at least on a level playing field in terms of tech.
Toyota looks and Mazda reliability. That's what I'm expecting. Gotta love team efforts.
Even in this scenario, where Tesla is not the market leader in EVs, Elon still wins. That was his goal from the beginning to move automotive market toward EVs.
> but the odds are on the German and Japanese incumbents in the long run
you kidding right? which good ev does any german car manufacturer has? plugin-hybrid does not count. besides that no german ev car can devlier the same range like the model 3 for the same price. well heck, the mini e starts at 35000 euro and only has a range of ~160-200km, audi e-tron still can't deliver more than 200-250km besides that they announced they can do more. bmw i8 is a plugin-hybrid, bmw i3 has a range 290km official (probably less) and starts at 35000 euro (btw. it's a really small city car), mercedes does not have any ev at all (at the moment). vw said they have a car that delivers more than tesla, but i think a lot of this is just blabla.
yes the japanese and prolly the chinese will drive the market. heck even the bolt ev looks more promising and deliverable than anything (we, i am german and it is sad) the germans announced. oh the only thing that german manufacturer said that they start producing new ev's for the chinese, cause of their emission strategy.
you kidding right? which good ev does any german car manufacturer has? plugin-hybrid does not count. besides that no german ev car can devlier the same range like the model 3 for the same price. well heck, the mini e starts at 35000 euro and only has a range of ~160-200km, audi e-tron still can't deliver more than 200-250km besides that they announced they can do more. bmw i8 is a plugin-hybrid, bmw i3 has a range 290km official (probably less) and starts at 35000 euro (btw. it's a really small city car), mercedes does not have any ev at all (at the moment). vw said they have a car that delivers more than tesla, but i think a lot of this is just blabla.
yes the japanese and prolly the chinese will drive the market. heck even the bolt ev looks more promising and deliverable than anything (we, i am german and it is sad) the germans announced. oh the only thing that german manufacturer said that they start producing new ev's for the chinese, cause of their emission strategy.
How much is the Model 3 in europe? Not trying to start a pissing match, but at least in my country, 30-40% of the car price is taxes that don't exist in the US. If you compare prices, make sure the Model 3 + all taxes are factored in.
on the page it says 40.000€ (smallest model), but in germany you get 4k (probably 3k if it is shipping in 2018) off.
btw. there is still an all ev that is produced by a "german" automaker, with a good range, it's the opel amera-e (well not that german, more like gm and soon peugot), price is the same as tesla model 3, but less max speed and torx, but 100km more range (at least what they said), coming 2017q4.
btw. there is still an all ev that is produced by a "german" automaker, with a good range, it's the opel amera-e (well not that german, more like gm and soon peugot), price is the same as tesla model 3, but less max speed and torx, but 100km more range (at least what they said), coming 2017q4.
Can someone explain the best method to purchase some of these bonds? I want to purchase a small amount that I am willing to lose ($3K - $10k).
Typically though your broker. Curious as to why you'd specifically want these bonds? Unlike stocks they have a fixed upside (5ish percent) and yet can still go to 0.
Why would anybody buy them?
Bonds are a healthy part of a diversified portfolio. There of course is risk to bonds. The bond market is less volatile than the stock market, which is what draws most investors to them. In poor market years bonds can yield more than equity.
Bonds have a higher liquidation preference than equity, so if a company is going under you have a better chance of recouping some money. Bonds also pay their coupons on an annual or semi-annual basis and become income. Bonds can also be traded on the secondary market just like stock.
Just like equity there's a ton of downsides to bonds as well, like interest rate risk, prepayment risk, credit/default risk.
Bonds are rated by credit agencies, equity is not. In theory (though we've seen credit agencies fail time and time again), bond risk is better-understood and communicated than stock risk. Highly-rated corporate and government bonds are a good, stable place to store capital to protect against market volatility and inflation depreciation.
For instance, when the global market took a hit last year, a ton of demand for US Treasury bonds was created. Investors bought US bonds at a loss (both on primary and secondary markets) because the loss was a well-understood, small amount (something like 1-2% over 10 years), rather than the totally unknown loss that the stock market would suffer.
Junk bonds like this one are higher risk in exchange for higher yield. Junk bonds usually are issued either by companies on the way down (low confidence) or companies on the way up (no credit). If you're long on Tesla and believe they're in the "on the way up", adding these bonds to the portfolio could be a decent source of low volatility income.
This isn't advice. Just explaining why people buy bonds!
Bonds have a higher liquidation preference than equity, so if a company is going under you have a better chance of recouping some money. Bonds also pay their coupons on an annual or semi-annual basis and become income. Bonds can also be traded on the secondary market just like stock.
Just like equity there's a ton of downsides to bonds as well, like interest rate risk, prepayment risk, credit/default risk.
Bonds are rated by credit agencies, equity is not. In theory (though we've seen credit agencies fail time and time again), bond risk is better-understood and communicated than stock risk. Highly-rated corporate and government bonds are a good, stable place to store capital to protect against market volatility and inflation depreciation.
For instance, when the global market took a hit last year, a ton of demand for US Treasury bonds was created. Investors bought US bonds at a loss (both on primary and secondary markets) because the loss was a well-understood, small amount (something like 1-2% over 10 years), rather than the totally unknown loss that the stock market would suffer.
Junk bonds like this one are higher risk in exchange for higher yield. Junk bonds usually are issued either by companies on the way down (low confidence) or companies on the way up (no credit). If you're long on Tesla and believe they're in the "on the way up", adding these bonds to the portfolio could be a decent source of low volatility income.
This isn't advice. Just explaining why people buy bonds!
Can you clarify what you mean by a loss here?
> Investors bought US bonds at a loss
US Treasuries did not have negative yields last year which is the the closest thing I would consider a loss but would depend on the context.
> Investors bought US bonds at a loss
US Treasuries did not have negative yields last year which is the the closest thing I would consider a loss but would depend on the context.
I looked at the prices again, you're right that yields on the primary were positive.
Yield on the secondary however was -1.7% in April 2016, for instance.
I'll update my post above to specify losses were for the secondary market.
Edit: can't edit the OP anymore, so hopefully this comment serves.
Yield on the secondary however was -1.7% in April 2016, for instance.
I'll update my post above to specify losses were for the secondary market.
Edit: can't edit the OP anymore, so hopefully this comment serves.
Can you link what you're looking at? It sounds like you're conflating yields with returns.
I don't think I am, but I could be wrong (as always). Specifically I'm talking about yield to maturity which is one kind of return calculation (just like mean is one type of average calculation).
Total return can only be calculated after the fact once capital gains are factored in. Since this is a forward-looking calculation we can't do that. I'm using the term "yield", more specifically "yield to maturity" because I'm assuming bonds were held until maturity. In that situation yield to maturity should be the same as total return; ie, total return is equal to yield to maturity in the special case that there are no capital gains or losses and the bond is held to maturity. So in this case I'm not conflating them, they are the same thing.
Yield to maturity is based on par value, coupon rate, term, and purchase price. The yield to maturity formula is:
YTM = (C + ((F-P) / n)) / ((F+P) / 2)
Where C = coupon, F = Face/par, P = price, n = years to maturity.
Looking up historical data for Apr 2016 you get P = $137 (secondary) and C = 1.7%. Plug it all in and you get a yield to maturity / rate of return of -1.7%.
Total return can only be calculated after the fact once capital gains are factored in. Since this is a forward-looking calculation we can't do that. I'm using the term "yield", more specifically "yield to maturity" because I'm assuming bonds were held until maturity. In that situation yield to maturity should be the same as total return; ie, total return is equal to yield to maturity in the special case that there are no capital gains or losses and the bond is held to maturity. So in this case I'm not conflating them, they are the same thing.
Yield to maturity is based on par value, coupon rate, term, and purchase price. The yield to maturity formula is:
YTM = (C + ((F-P) / n)) / ((F+P) / 2)
Where C = coupon, F = Face/par, P = price, n = years to maturity.
Looking up historical data for Apr 2016 you get P = $137 (secondary) and C = 1.7%. Plug it all in and you get a yield to maturity / rate of return of -1.7%.
Can you link what you're looking at or provide the bond CUSIP?
There is a giant amount of money out there that essentially needs storage. A diversified bond portfolio is a good place to store a lot of it for a long time with the added ability to get a positive return.
As to why an individual would buy a specific company's junk bond offering at issuance... I have no idea.
As to why an individual would buy a specific company's junk bond offering at issuance... I have no idea.
Bonds are boring, leveraged bonds are adrenaline!
gimme gimme gimme
gimme gimme gimme
If you don't have a portfolio yet, consider building a balanced diverse portfolio (ie figure out your risk tolerance and buy funds in that proportion) with these bonds as a component, rather than building a portfolio with only one security.
For instance, rather than 10k of Tesla bonds, you might do something like 5k in a 500-index fund, 3k in a bond market index fund, and 2k in Tesla bonds.
For instance, rather than 10k of Tesla bonds, you might do something like 5k in a 500-index fund, 3k in a bond market index fund, and 2k in Tesla bonds.
Or even better, $0 in Tesla bonds directly. An individual investor should probably not have any company specific bonds as the default risk for a single bond is too high. If you really want junk bonds, the better choice would be a position in a junk bond ETF (HYG or something).
TLDR Cash burn, expected to top $2 billion this year, against $3b in cash means Tesla are raising $1.5b in junk bonds to help cash flow as they ramp up production and scale.
"High-yield junk bonds" is such an unflattering way of putting things.
It always seemed strange to me that banks/bonds/lending seems to have such a small role in financing risky ventures. Is it just that capital is a better deal? How does risk work here, are bondholders effectively de-risked compared to stockholders?
It always seemed strange to me that banks/bonds/lending seems to have such a small role in financing risky ventures. Is it just that capital is a better deal? How does risk work here, are bondholders effectively de-risked compared to stockholders?
Debt holders (bonds) have a higher liquidity preference than equity (stocks) in the case of financial trouble. An oversimplified example being if Tesla was liquidated with $3B in assets, and $2B in debt, the debt holders would be paid $2B first and equity holders would split whatever was remaining.
But debts to suppliers and bank loans still get paid first right?
It seems unlikely with someone like Musk at the helm that the company would be wound up before assets (and loans guaranteed on them) didn't pay the salaries. Hence, in the case of liquidation, I can't see bondholders getting any more than shareholders - ie. NILL.
Am I mistaken?
It seems unlikely with someone like Musk at the helm that the company would be wound up before assets (and loans guaranteed on them) didn't pay the salaries. Hence, in the case of liquidation, I can't see bondholders getting any more than shareholders - ie. NILL.
Am I mistaken?
Correct, suppliers etc are higher on the liquidity preference than debt. If something were to go wrong, its most likely that Tesla would get a soft landing (e.g acquisition by Toyota) that would pay debtors significantly more than equity holders, but doubtful it would be 100% of what is owed in that scenario.
In case of the company going belly up, creditors, bondholders etc. are first in line, and stockholders are last.
..what's the distance between beginning and end?
Is this risky venture generating enough cash-flow to pay the interests starting now and is it likely to return the principal back in a few years? If not, that's why it's not used more.
S&P B- corporate debt rating, and similar other ratings means Tesla are currently in junk bond territory.
awesome news for the company!
> Shares of Tesla, which have risen 67 percent this year, were down 9 cents at $356.82.
That's 0.025%. Why was it even mentioned?
That's 0.025%. Why was it even mentioned?
People are often interested in how the market reacts to major news/announcements by public companies. The fact that the news didn't move the needle significantly (i.e. investors don't seem to care) may be just as interesting to some as a major change in price...
It's standard procedure to quote the ticker price when a news article discusses a public company.
Seems like free advertising for the services of the NASDAQ stock exchange...
It's like those Twitter "storms" of 1000 retweets.
robo-journalism?
Tesla's biggest threat is itself. Overstretching or a major technical error could kill the company.
The next biggest threat is sabotage, legal attack, etc. from the old car manufacturers. Good old fashioned capitalism.
If the competition remains free and open, ain't no way in hell a big Goliath that produces controlled explosion vehicles is going to compete with a company that knows software. The future of cars is software with hardware attached.
The next biggest threat is sabotage, legal attack, etc. from the old car manufacturers. Good old fashioned capitalism.
If the competition remains free and open, ain't no way in hell a big Goliath that produces controlled explosion vehicles is going to compete with a company that knows software. The future of cars is software with hardware attached.
_The future of cars is software with hardware attached._
IMO this is wrong, yeah there will be software, but combustion cars have computers too.
I wouldn't buy a car that is connected 24/7 with closed source software monitoring me and my environment and sending data back to god knows where constantly as Tesla does.
I often feel like Tesla would be better off just selling cars that run on electric motors before worrying about the "hi-tech" parts so much, which to be honest make the cars seem gimmicky and will date very quickly.
This is probably the start of affordable "dumb" electric cars, which excites me more as person who cares for privacy and doesn't care for commuting long distances in a self-driving auto-carriage.
IMO this is wrong, yeah there will be software, but combustion cars have computers too.
I wouldn't buy a car that is connected 24/7 with closed source software monitoring me and my environment and sending data back to god knows where constantly as Tesla does.
I often feel like Tesla would be better off just selling cars that run on electric motors before worrying about the "hi-tech" parts so much, which to be honest make the cars seem gimmicky and will date very quickly.
This is probably the start of affordable "dumb" electric cars, which excites me more as person who cares for privacy and doesn't care for commuting long distances in a self-driving auto-carriage.
I see Ford offering up a Tesla drivetrain compatible body. The big boys just want to keep the lines pumping at current margins.
Look at AB 1184 in California. They are looking for more government money to offset their prices. Current stipends from Obama will reduce by half once they sell 200,000 cars. These reduced stipends will get cut in half after two quarters. They will go away after an additional two quarters. A majority of Model 3 preorders are actually for a $42,500 car instead of $35,000. They have to get that price back down.
The price is $35,000 before tax incentives.
Hell, at this point, why not an ICO? Would probably be the most reputable company to have one if they did…
1. Because you cannot dump 1.5 billion US-Dollar worth of any cryptocurrency on the market without crashing its price to zero.
2. No publicly traded company will step into the minefield of unregulated market that is cryptocurrency.
2. No publicly traded company will step into the minefield of unregulated market that is cryptocurrency.
With regards to 1), does anyone know the extent they all USD $1.5B right away (outside of their sec filings)?
Probably right on 2) to some (most?) degree, but big institutional players are making moves in cryptocurrency markets who might have pull over tesla and the ear of those at FINCEN/SEC, to get someone to give the rubber stamp green light on their "security"?
Then again with gov bonds being oversubscribed in general, people are looking for more in the private market and Tesla is a realistic option?
Probably right on 2) to some (most?) degree, but big institutional players are making moves in cryptocurrency markets who might have pull over tesla and the ear of those at FINCEN/SEC, to get someone to give the rubber stamp green light on their "security"?
Then again with gov bonds being oversubscribed in general, people are looking for more in the private market and Tesla is a realistic option?
The internet would downright explode if Τ became a digital currency of some sorts.
It the fundraising really necessary or just a way to sort of overproduce in anticipation of high demand? As it is, they pretty much have that $1.5B in preorder money alone right? Unless, he's just somehow pouring extra money into SpaceX instead.