Tesla beats expectations with $3.4B in revenue(techcrunch.com)
techcrunch.com
Tesla beats expectations with $3.4B in revenue
https://techcrunch.com/2018/05/02/tesla-earnings-q1-2018/
175 コメント
I hope they do become profitable, but I'm skeptical they will.
1) Their losses are growing, not shrinking. From March 2017 to now, they lost $330M, $336M, $619M, $675M, and $785M. Maybe they hit a tipping point and there is an abrupt change, but it seems like the more natural trajectory would be for losses to become smaller and then turn into profits.
2) Tesla has said they'd be profitable before. https://www.reuters.com/article/us-tesla-results/tesla-expec...
Tesla is a really cool company, but it's hard to see a future where they justify their share price. Let's say that Tesla becomes the next Toyota 15 years from now. Toyota is only worth $213B. So, the kinda max value for Tesla is around 4x their current price. So, under really rosy conditions, Tesla appreciates at 12% per year over the next 15 years. That's not bad, but the likelihood that Tesla is the next Toyota is very small.
Let's say that Tesla is incredibly successful and becomes the next Volkswagen, Daimler, or BMW (the #2, 3, and 4 auto makers by market cap). They'd be a $106B, $85B, or $73B company. That doesn't leave much for price appreciation over their current $51B market cap.
Maybe Tesla can make a company that's way more profitable per vehicle and sell so many vehicles. But that's a bit of a moon-shot.
It seems more likely that Tesla will become a company like Subaru ($26B), Mazda ($8B), Nissan ($43B), Ford ($44B), Hyundai Motor ($40B), Fiat Chrysler ($34B), Renault ($32B), PSA Peugeot Citroën ($22B), Suzuki Motor ($26B), GM ($51B), or Honda ($60B). Those are all very successful auto companies. If Tesla becomes the next Mazda 15 years from now, that will be incredibly bad for investors. Basically, if Tesla doesn't become the next Toyota, it seems hard to believe Tesla won't underperform the market by a lot.
It's possible that Tesla will become the next Toyota, but unlikely. Comparing Tesla's market cap with that of most auto manufacturers makes you realize that investing in Tesla isn't just betting that Tesla will become a great volume car company like Mazda. They have to become the car company.
When investing, it's also important to note that money later is less valuable than money now and account for risk. Tesla is being priced like it's making $6B/year today and it's future is certain.
Beyond that, is the automotive industry long for this world? People are re-urbanizing and city traffic is only getting worse. Self-driving vehicles will mean that being driven unlimited places might fall to $50-100/mo which is significantly less than the $400+/mo of car payments, insurance, gas, parking, maintenance, etc. Why should I spend $631/mo for a $35,000 car plus insurance, gas, parking, maintenance when I can just get driven around for a fraction of that cost? Today, Uber's help is more limited since the human driver costs a lot of money per mile. If that future comes to pass, there will be a lot fewer cars manufactured and bought which limits Tesla's value.
If an autonomous car is serving 25 people a day, that's a lot fewer vehicles that need to be bought. World vehicle production is around 90M/year and Toyota and Volkswagen are 10M of that each. If the demand for vehicles falls to 4% of its current demand, that's only 3.6M vehicles per year. Even if Tesla makes 100% of those vehicles, they don't come close to being the next Toyota or Volkswagen. Even if an autonomous vehicle only serves 10 people a day, that cuts the vehicle market down to 9M. Even if an autonomous vehicle can only serve 4 people a day, that cuts the market to 22.5M. The future market for vehicles might be pretty small compared to the current one and so even if Tesla hits a Toyota or Volkswagen-like 10% of the market, it might not be a large market.
And self-driving services are likely to have stiff price competition. Unlike an Uber competitor that has the network effects of having drivers already signed up, it's relatively cheap to blanket a city with self-driving vehicles. $20,000/mo isn't a huge run rate to to buy 50 vehicles at $400/mo and that will let you place a vehicle within a short distance of everyone in a city like San Francisco (47 square miles). You could position them so that they're usually less than half a mile away to pick you up. $20,000/mo isn't a huge run rate to get your service started and you can buy more vehicles as you get riders. So, even if you think that Tesla might be that self-driving network and will make profits that way, I think it's more likely that the space will have a lot of competition that will push margins down. Waymo and GM/Cruze are well on their way. Nissan and Toyota are expecting to enter the game in a few years. Uber wants to be in this space.
It just seems like Tesla is more likely to become Mazda than Toyota and that the auto industry might be facing a large market-shrinking threat in self-driving cars. As such, it's hard (for me) to look at Tesla's market value and see the potential for a lot of appreciation over the long term. They're already worth more than most successful auto makers.
1) Their losses are growing, not shrinking. From March 2017 to now, they lost $330M, $336M, $619M, $675M, and $785M. Maybe they hit a tipping point and there is an abrupt change, but it seems like the more natural trajectory would be for losses to become smaller and then turn into profits.
2) Tesla has said they'd be profitable before. https://www.reuters.com/article/us-tesla-results/tesla-expec...
Tesla is a really cool company, but it's hard to see a future where they justify their share price. Let's say that Tesla becomes the next Toyota 15 years from now. Toyota is only worth $213B. So, the kinda max value for Tesla is around 4x their current price. So, under really rosy conditions, Tesla appreciates at 12% per year over the next 15 years. That's not bad, but the likelihood that Tesla is the next Toyota is very small.
Let's say that Tesla is incredibly successful and becomes the next Volkswagen, Daimler, or BMW (the #2, 3, and 4 auto makers by market cap). They'd be a $106B, $85B, or $73B company. That doesn't leave much for price appreciation over their current $51B market cap.
Maybe Tesla can make a company that's way more profitable per vehicle and sell so many vehicles. But that's a bit of a moon-shot.
It seems more likely that Tesla will become a company like Subaru ($26B), Mazda ($8B), Nissan ($43B), Ford ($44B), Hyundai Motor ($40B), Fiat Chrysler ($34B), Renault ($32B), PSA Peugeot Citroën ($22B), Suzuki Motor ($26B), GM ($51B), or Honda ($60B). Those are all very successful auto companies. If Tesla becomes the next Mazda 15 years from now, that will be incredibly bad for investors. Basically, if Tesla doesn't become the next Toyota, it seems hard to believe Tesla won't underperform the market by a lot.
It's possible that Tesla will become the next Toyota, but unlikely. Comparing Tesla's market cap with that of most auto manufacturers makes you realize that investing in Tesla isn't just betting that Tesla will become a great volume car company like Mazda. They have to become the car company.
When investing, it's also important to note that money later is less valuable than money now and account for risk. Tesla is being priced like it's making $6B/year today and it's future is certain.
Beyond that, is the automotive industry long for this world? People are re-urbanizing and city traffic is only getting worse. Self-driving vehicles will mean that being driven unlimited places might fall to $50-100/mo which is significantly less than the $400+/mo of car payments, insurance, gas, parking, maintenance, etc. Why should I spend $631/mo for a $35,000 car plus insurance, gas, parking, maintenance when I can just get driven around for a fraction of that cost? Today, Uber's help is more limited since the human driver costs a lot of money per mile. If that future comes to pass, there will be a lot fewer cars manufactured and bought which limits Tesla's value.
If an autonomous car is serving 25 people a day, that's a lot fewer vehicles that need to be bought. World vehicle production is around 90M/year and Toyota and Volkswagen are 10M of that each. If the demand for vehicles falls to 4% of its current demand, that's only 3.6M vehicles per year. Even if Tesla makes 100% of those vehicles, they don't come close to being the next Toyota or Volkswagen. Even if an autonomous vehicle only serves 10 people a day, that cuts the vehicle market down to 9M. Even if an autonomous vehicle can only serve 4 people a day, that cuts the market to 22.5M. The future market for vehicles might be pretty small compared to the current one and so even if Tesla hits a Toyota or Volkswagen-like 10% of the market, it might not be a large market.
And self-driving services are likely to have stiff price competition. Unlike an Uber competitor that has the network effects of having drivers already signed up, it's relatively cheap to blanket a city with self-driving vehicles. $20,000/mo isn't a huge run rate to to buy 50 vehicles at $400/mo and that will let you place a vehicle within a short distance of everyone in a city like San Francisco (47 square miles). You could position them so that they're usually less than half a mile away to pick you up. $20,000/mo isn't a huge run rate to get your service started and you can buy more vehicles as you get riders. So, even if you think that Tesla might be that self-driving network and will make profits that way, I think it's more likely that the space will have a lot of competition that will push margins down. Waymo and GM/Cruze are well on their way. Nissan and Toyota are expecting to enter the game in a few years. Uber wants to be in this space.
It just seems like Tesla is more likely to become Mazda than Toyota and that the auto industry might be facing a large market-shrinking threat in self-driving cars. As such, it's hard (for me) to look at Tesla's market value and see the potential for a lot of appreciation over the long term. They're already worth more than most successful auto makers.
I agree with most of your post, but here's where I disagree:
Yes, new car consumption will likely decline in the USA and Europe, but in the coming decades, more folks in China and India (and elsewhere) will enter the middle class and start demanding car services. In addition, as the cost of car services falls (due to self-driving), the quantity demanded will increase.
So I don't think the future market will be as small as you've projected. It might even increase.
Yes, new car consumption will likely decline in the USA and Europe, but in the coming decades, more folks in China and India (and elsewhere) will enter the middle class and start demanding car services. In addition, as the cost of car services falls (due to self-driving), the quantity demanded will increase.
So I don't think the future market will be as small as you've projected. It might even increase.
China will want to manufacturer most of those cars themselves. India probably too but they're not as aggressive about it as China is. I doubt any of the large car manufacturers can make much more money in India/China than they're already making (unless via local subsidiaries).
> It's possible that Tesla will become the next Toyota, but unlikely
Keep in mind how broad Tesla's vehicle goals are.
- World's fastest hypercar (by a VERY long margin) (new Roadster)
- Heavy duty transport trucks (Semi)
- luxury sedans (Model S)
- affordable smaller sedans (Model 3)
- luxury SUVs (Model X)
- affordable smaller SUVs (Model Y)
- possible pickup truck
If they do well on most of those, I think they really do have the chance to become the next Toyota, maybe even bigger.
Keep in mind how broad Tesla's vehicle goals are.
- World's fastest hypercar (by a VERY long margin) (new Roadster)
- Heavy duty transport trucks (Semi)
- luxury sedans (Model S)
- affordable smaller sedans (Model 3)
- luxury SUVs (Model X)
- affordable smaller SUVs (Model Y)
- possible pickup truck
If they do well on most of those, I think they really do have the chance to become the next Toyota, maybe even bigger.
Which is still less than Volkswagen builds, just to put it in scope:
- World's fastest hypercar (by a VERY long margin) (Bugatti Veyron)
- Heavy duty transport trucks (MAN/Scania)
- luxury sedans (Audi/Porsche)
- affordable smaller sedans (Golf/Passat/Skoda/Seat...)
- luxury SUVs (Porsche Cayenne/Audi Q7)
- affordable smaller SUVs (T-Roc/Skoda/Seat)
- possible pickup truck (Amarok)
- World's fastest hypercar (by a VERY long margin) (Bugatti Veyron)
- Heavy duty transport trucks (MAN/Scania)
- luxury sedans (Audi/Porsche)
- affordable smaller sedans (Golf/Passat/Skoda/Seat...)
- luxury SUVs (Porsche Cayenne/Audi Q7)
- affordable smaller SUVs (T-Roc/Skoda/Seat)
- possible pickup truck (Amarok)
Good point, I had forgotten VW owned so much.
Thanks for the useful comparison to existing valuation.
One issue which I never see addressed is the established automaker liabilities (pensions & debt?)?
Is it possible that once you take these into consideration the TSLA is (slightly) less unrealistic ?
One issue which I never see addressed is the established automaker liabilities (pensions & debt?)?
Is it possible that once you take these into consideration the TSLA is (slightly) less unrealistic ?
> Tesla is a really cool company, but it's hard to see a future where they justify their share price. Let's say that Tesla becomes the next Toyota 15 years from now. ...
There is one future that I can imagine, in which Tesla is a wildly profitable buy today.
If the company is using the car business to bootstrap itself into a space manufacturing company. I honestly think that this is the only reasonable explanation for some of the weird decisions that Tesla is making on the production line - trying to get to full automation, for example.
There is one future that I can imagine, in which Tesla is a wildly profitable buy today.
If the company is using the car business to bootstrap itself into a space manufacturing company. I honestly think that this is the only reasonable explanation for some of the weird decisions that Tesla is making on the production line - trying to get to full automation, for example.
All good points but, I think you're missing one (extremely unlikely) scenario, which is the bet that Tesla to cars will be like Apple was to phones. Not just supplanting existing phone manufacturers, but redefining what the market means and how big it is.
Nokia was a $90b phone company in 2007. The best-case scenario for a new phone company could in 2007 be expressed as a topping out at Nokia's size (Toyota in your example), but it'd be a moonshot. It'd more likely be an Ericson or Motorola, whose phone divisions weren't half as big as Nokia's. So the best case scenario is $90b, and more likely to be around $30b. And that would've made sense, until you figure Apple drove a market cap approaching $900b, mostly on the basis of its phones, all within 10 years of 2007.
So there's something to be said about the possibility that Tesla doesn't just supplant Toyota to become the car company, but also redefining cars and the size of its market, just like with smartphones. I see some people making that bet. That having been said, I personally think the chance of that happening approaches zero. The points you make are very apt. Self-driving cars means we can increase utility rates of cars (which sit still for 90% of the day) from 10% to say 90%, and that will completely destroy sales volume.
Nokia was a $90b phone company in 2007. The best-case scenario for a new phone company could in 2007 be expressed as a topping out at Nokia's size (Toyota in your example), but it'd be a moonshot. It'd more likely be an Ericson or Motorola, whose phone divisions weren't half as big as Nokia's. So the best case scenario is $90b, and more likely to be around $30b. And that would've made sense, until you figure Apple drove a market cap approaching $900b, mostly on the basis of its phones, all within 10 years of 2007.
So there's something to be said about the possibility that Tesla doesn't just supplant Toyota to become the car company, but also redefining cars and the size of its market, just like with smartphones. I see some people making that bet. That having been said, I personally think the chance of that happening approaches zero. The points you make are very apt. Self-driving cars means we can increase utility rates of cars (which sit still for 90% of the day) from 10% to say 90%, and that will completely destroy sales volume.
The problem with this is that for many people, cars are already one of the biggest expenses and they're at their limit with what they can spend on their car. Apple's success was possible because a lot of people afforded the extra $600-800 every 1-2 years. You cannot really expect people to spend an extra $50,000 every few years, that won't work for most.
This thought crossed my mind too but then remembered an old stat. The difference is Apples margin. At one point they had something like (these are estimates as I couldn't find on a quick google) 20% smartphone market share for 90% of the profits made from the market.
Tesla is unlikely to take that margin or share of profit from the market.
I feel the bet on Tesla is Elon Musk. And I recognise there is a cult following but consider, how many people in the world have a better chance of opening a new multi-billion dollar category within their company from scratch? If you are going to be on someone, he's not a bad choice.
Tesla is unlikely to take that margin or share of profit from the market.
I feel the bet on Tesla is Elon Musk. And I recognise there is a cult following but consider, how many people in the world have a better chance of opening a new multi-billion dollar category within their company from scratch? If you are going to be on someone, he's not a bad choice.
I'm not sure how that last part plays out. If you need 100 cars active at rush hour and 10 active the rest of the day, then sure those 10 might have 90% utilization but the other 90 wont.
Well, suppose you have a fleet of 100 cars. In the morning and evening, 100 people travel for 1 hour to work and back during rushhour. That's 2 hours in total, or 100% utility of the fleet during 8% of the day.
Now suppose that every hour of the rest of the day, there's only 10 people making a trip of 30 minutes. That means there's only 10% of the traffic volume compared to rushhour on the road. But you're seeing 22 hours of two groups of 10 people making a trip every hour. That's 440 trips.
Now suppose that the two groups of people, rush and non-rush, all used their own cars. You'd have 100 cars for the rushhour group and 440 cars in the non-rushhour group. You get to 540 cars needed.
Now suppose the two groups shared vehicles. You just need 100 cars still to make the same amount of trips.
Under these (made up) assumptions, you can reduce the amount of cars needed by 5x.
Then there's the notion that you can get dynamic pricing, e.g. look at Uber, but for semi-public transport. This incentivises people and companies to distribute their travel in a better manner, which also allows a system where producers of congestion pay for it. Thereby you can distribute load better, increase utilization, decrease the number of vehicles needed even further.
But indeed, you're unable to get to 100% utilization because demand fluctuates during the day. But even increasing it from 10% to 20%, or 30%, would introduce massive changes to the market size.
Now suppose that every hour of the rest of the day, there's only 10 people making a trip of 30 minutes. That means there's only 10% of the traffic volume compared to rushhour on the road. But you're seeing 22 hours of two groups of 10 people making a trip every hour. That's 440 trips.
Now suppose that the two groups of people, rush and non-rush, all used their own cars. You'd have 100 cars for the rushhour group and 440 cars in the non-rushhour group. You get to 540 cars needed.
Now suppose the two groups shared vehicles. You just need 100 cars still to make the same amount of trips.
Under these (made up) assumptions, you can reduce the amount of cars needed by 5x.
Then there's the notion that you can get dynamic pricing, e.g. look at Uber, but for semi-public transport. This incentivises people and companies to distribute their travel in a better manner, which also allows a system where producers of congestion pay for it. Thereby you can distribute load better, increase utilization, decrease the number of vehicles needed even further.
But indeed, you're unable to get to 100% utilization because demand fluctuates during the day. But even increasing it from 10% to 20%, or 30%, would introduce massive changes to the market size.
At around $1B negative cash flow a quarter, with a little over $3B in the bank, they _have_ to do this. I'm not a bond expert, but the debt markets seem tapped out for them, and another stock offering wouldn't look so good either (but is likely).
The skeptics should be saying, "what a coincidence that they project to achieve profitability _just_ before they go bankrupt."
The skeptics should be saying, "what a coincidence that they project to achieve profitability _just_ before they go bankrupt."
Tapping out capital is a "Musk equilibrium." If there's too much runway, he considers it inefficient use of available capital and invests that extra available capital in some new project.
He operates close to the edge intentionally. It's a risky strategy that could easily blow up in his face, but it has also paid off very well in the past.
If they somehow had a bunch of extra cash in the bank right now, you'd find Musk simultaneously pushing hard on, say, Model Y right now, too.
He operates close to the edge intentionally. It's a risky strategy that could easily blow up in his face, but it has also paid off very well in the past.
If they somehow had a bunch of extra cash in the bank right now, you'd find Musk simultaneously pushing hard on, say, Model Y right now, too.
In other words, Elon Musk plays CEO like professional gamers play Starcraft.
If you have resources, you should spend them. If you're flush with cash, you're losing.
If you have resources, you should spend them. If you're flush with cash, you're losing.
Depending on how you want to view Musk's ambitions, he wants/needs to get Tesla big before the EV market is flooded with large scale competition and or he's looking to accelerate a switch to renewable energy and away from the murderous fossil fuel, gasoline burning nightmare we're currently living with. Regardless of what one believes about Musk, speed is critical here.
Tesla needs to get very large if it's going to compete with GM, Ford, BMW, Mercedes, Toyota, etc. long term in EVs. They need a certain minimum scale to survive as a meaningful volume independent auto maker.
Tesla needs to get very large if it's going to compete with GM, Ford, BMW, Mercedes, Toyota, etc. long term in EVs. They need a certain minimum scale to survive as a meaningful volume independent auto maker.
I have no idea why people talk about Tesla going bankrupt. It will never happen in this liquid market. Even Uber raised $10bn from SoftBank. There is a ton of liquidity in the market and a lot of it is coming from middle East sovereign funds. It should be easy to do a stock sale with that kind of revenue and demand numbers.
As someone mulling buying a Model 3, I'm keeping an eye on their solvency. One thing that occurred to me is that, to expect a bankruptcy, you'd have to completely disregard the efficient market hypothesis. Sure, there are plenty of crazy fanboy retail investors out there, but there SHOULD be more than enough shorts if that's truly where the smart money was.
Agreed, a dilution event like that seems more probable than bankruptcy.
Though dilution has already been happening anyway. Just look at a graph of shares outstanding.
Though dilution has already been happening anyway. Just look at a graph of shares outstanding.
Not only that, but rich Arabs may want to hedge against a switch away from oil, and a company like Tesla is the perfect way to do that.
That would be amazing if they did achieve GAAP profitably, considering that GAAP earnings include stock-based compensation, non-operating expenses, and R&D expense.
OTOH, GAAP because generally requires R&D to be expensed in the period incurred, Tesla may really be saying that R&D expenditures are expected to drop to near $0 in Q3 (R&D being their biggest non-operating expense). That should worry investors if that's really what's happening.
OTOH, GAAP because generally requires R&D to be expensed in the period incurred, Tesla may really be saying that R&D expenditures are expected to drop to near $0 in Q3 (R&D being their biggest non-operating expense). That should worry investors if that's really what's happening.
I’m a Tesla skeptic but at this point they just need to put cars on the road. They can ramp up R&D later. They’re pretty far ahead of their competition right now so can afford a pause.
"Tesla also expects to achieve full GAAP profitability in Q3"
This is essentially saying "we don't expect to go insolvent". But no company would announce that they expect to go insolvent, so the statement is mostly meaningless.
This is essentially saying "we don't expect to go insolvent". But no company would announce that they expect to go insolvent, so the statement is mostly meaningless.
> Q3 is almost around the corner (I wasn't even expecting it to happen this year),
Doesn't Q3 happen every year?
Doesn't Q3 happen every year?
Does GAAP exclude one-time-effects? I can see them selling their grounds, offices and renting it again and the like.
Interestingly, I think nearly all people in Ontario on the Tesla waitlist got their option to buy cars in the last few weeks. I believe it is because the likely new provincial leader is going to revoke a huge tax break to electric cars, so Telsa is trying to get all of its Ontario customers to buy in before the rebate is gone.
I know 3 people on the waitlist who just all of a sudden got told they can now buy a car immediately. That is likely not a coincidence.
I know 3 people on the waitlist who just all of a sudden got told they can now buy a car immediately. That is likely not a coincidence.
Numbers:
- 1Q Adj Loss/Shr $3.35, Est. Loss/Shr $3.41
- 1Q Rev. $3.41B, Est. $3.32B
- Tesla reported 19.7% gross margins for Q1, beating Wall Street estimates. Model S and Model X are now above 25%,
- Cash burn in the quarter looks to be $1.05 billion
Misc:
- Customer deposits up to $984 million from $854 million
- says it will reach full GAAP profitability in Q3 and
- company had $3.2 billion in cash on hand.
- says it can get to 5,000 Model 3 units a week in about two months.
- Solar City seems done as a consumer product, After installing just 87 megawatts in the fourth quarter, it deployed even less in 1Q -- 76 megawatts.
- Tesla's 5.3% bonds are unchanged at 89 cents on the dollar,
- Tesla will not offer a leasing option on the Model 3 this year. Translation, Telsa needs cash and needs it right now in a big way.
- "Our Model 3 general assembly line consists of fewer than 50 steps, which is about 70% less than conventional assembly lines. All Model 3 vehicles use only one standard body frame, down from more than 80 for Model S, a wiring harness that has 50% less mass than average vehicles, and a fraction of the number of controllers, connectors and CPUs."
- "At this stage, we are expecting total 2018 capex to be slightly below $3 billion, which is below the total 2017 level of $3.4 billion." Open Question... how do you ramp up car manufacturing from 2500 to 5000 to 10,000 per week and reduce CapEx at the same time. Seems like eithr Capex estimates will blow out or prodcution will but both can't coexists. Check bond yields....
- Tesla spent $146 million on interest payments in 4Q -- roughly the same interest expense as GM, a company with approximately 10 times more revenue. Interest expenses rose to $149.5 million last quarter.
- 1Q Rev. $3.41B, Est. $3.32B
- Tesla reported 19.7% gross margins for Q1, beating Wall Street estimates. Model S and Model X are now above 25%,
- Cash burn in the quarter looks to be $1.05 billion
Misc:
- Customer deposits up to $984 million from $854 million
- says it will reach full GAAP profitability in Q3 and
- company had $3.2 billion in cash on hand.
- says it can get to 5,000 Model 3 units a week in about two months.
- Solar City seems done as a consumer product, After installing just 87 megawatts in the fourth quarter, it deployed even less in 1Q -- 76 megawatts.
- Tesla's 5.3% bonds are unchanged at 89 cents on the dollar,
- Tesla will not offer a leasing option on the Model 3 this year. Translation, Telsa needs cash and needs it right now in a big way.
- "Our Model 3 general assembly line consists of fewer than 50 steps, which is about 70% less than conventional assembly lines. All Model 3 vehicles use only one standard body frame, down from more than 80 for Model S, a wiring harness that has 50% less mass than average vehicles, and a fraction of the number of controllers, connectors and CPUs."
- "At this stage, we are expecting total 2018 capex to be slightly below $3 billion, which is below the total 2017 level of $3.4 billion." Open Question... how do you ramp up car manufacturing from 2500 to 5000 to 10,000 per week and reduce CapEx at the same time. Seems like eithr Capex estimates will blow out or prodcution will but both can't coexists. Check bond yields....
- Tesla spent $146 million on interest payments in 4Q -- roughly the same interest expense as GM, a company with approximately 10 times more revenue. Interest expenses rose to $149.5 million last quarter.
In case you ever feel like its a waste of time, I, for one, appreciate your posts with notes + numbers.
Its so easy for conversations about these things to get derailed about, oh, I dunno, flying cars, that its great having your post with hard numbers there to keep the discussion grounded.
Its great that companies have big dreams and grand visions, but how will it work out in the numbers?
Its so easy for conversations about these things to get derailed about, oh, I dunno, flying cars, that its great having your post with hard numbers there to keep the discussion grounded.
Its great that companies have big dreams and grand visions, but how will it work out in the numbers?
Thx, that's appreciated.
It's really something I do for my job, I just put them here as well. I think I often get penalized by the HN algorithms because a post can get edited 4-5 times.
It's really something I do for my job, I just put them here as well. I think I often get penalized by the HN algorithms because a post can get edited 4-5 times.
We'd never penalize anyone for editing. The world could use more of it.
Maybe widen the edit window?
There are times I’d like broaden a comment.
Reddit has a visual indicator for edited posts, I’ve often thought a git diff style view would be interesting.
There are times I’d like broaden a comment.
Reddit has a visual indicator for edited posts, I’ve often thought a git diff style view would be interesting.
> I’ve often thought a git diff style view would be interesting.
I used to think so to but I no longer think having the history of a comment has much value.
If someone is consistently making dishonest edits people will call them out on it without needing to point to an integrated version history.
Mist edits are made probably to fix grammatical and factual mistakes. Who cares about the history for that.
What I do wish for instead would be that you could request deletion of a response to your comment after you’d remedied some error that they pointed out because once fixed that comment is no longer needed. So A writes a comment, B corrects them. A fixed their comment and attributes B then sends a deletion request to B.
However at that point perhaps full collaborative editing would be useful, like they have on the Stack Exchange sites and Wikipedia. Then comment history would be useful so that you could inspect individual comments and revert them.
I have a specific type of collaborative editing in mind for sites like HN, and Reddit, namely that threads of multiple comments would be summarized and condensed into single comments so that they are fast to read through for people that visit the thread in the future. Again, contributors would be attributed and would get a share of the karma when the summary is upvoted corresponding to how much information they contributed.
Of course that is a nice idea in theory but probably not realistically doable. It would be impossible to find enough people that are both willing to do this work and at the same time do so with an “objective” eye, and to not even get paid for it.
Encyclopedic articles and Q&A sites are a good fit as we’ve seen with Wikipedia and the Stack Exchange sites. For general discussions I think it would not.
I used to think so to but I no longer think having the history of a comment has much value.
If someone is consistently making dishonest edits people will call them out on it without needing to point to an integrated version history.
Mist edits are made probably to fix grammatical and factual mistakes. Who cares about the history for that.
What I do wish for instead would be that you could request deletion of a response to your comment after you’d remedied some error that they pointed out because once fixed that comment is no longer needed. So A writes a comment, B corrects them. A fixed their comment and attributes B then sends a deletion request to B.
However at that point perhaps full collaborative editing would be useful, like they have on the Stack Exchange sites and Wikipedia. Then comment history would be useful so that you could inspect individual comments and revert them.
I have a specific type of collaborative editing in mind for sites like HN, and Reddit, namely that threads of multiple comments would be summarized and condensed into single comments so that they are fast to read through for people that visit the thread in the future. Again, contributors would be attributed and would get a share of the karma when the summary is upvoted corresponding to how much information they contributed.
Of course that is a nice idea in theory but probably not realistically doable. It would be impossible to find enough people that are both willing to do this work and at the same time do so with an “objective” eye, and to not even get paid for it.
Encyclopedic articles and Q&A sites are a good fit as we’ve seen with Wikipedia and the Stack Exchange sites. For general discussions I think it would not.
> If someone is consistently making dishonest edits people will call them out on it without needing to point to an integrated version history.
I've gotten into the habit of quoting the previous comment to prevent just that. Seems to work pretty well.
I've gotten into the habit of quoting the previous comment to prevent just that. Seems to work pretty well.
>Mist edits are made probably to fix grammatical and factual mistakes
Doubt it was on purpose, but enjoyed it none hte less. ;)
Doubt it was on purpose, but enjoyed it none hte less. ;)
I actually assumed that it was a term I hadn't heard yet for a ghost edit that doesn't change the substance. Not a ghost, just a little mist.
Whoops lol
Edit has a tamper seal which I thought was cool. If you edit your comment under some time (maybe 5 min) you won't get that edit Astrix
Ahh, I was under the assumption that multiple edits get "deprioritized" in the rankings.
Thanks for the clarification.
Thanks for the clarification.
I really enjoy your posts too, thanks! Stupid questions: can you explain 'wall street estimates'? I've heard it a million times, and I get that there are people at the company that make estimates and also analysts at financial firms (investment banks?) that supposedly take a stab at what the earnings per share will be, but-- who are they? What determines if somebody 'counts' as an analyst? How are estimates recorded so that they show up in yahoo finance? What are the motivations and abilities those analysts have to be right?
There are a number of providers that aggregate analysts forecasts (including financial information giants like Bloomberg, Factset and Thomson Reuters and small companies specialised in this business).
Sometimes the investor relations departments give an “official” consensus that they use as reference (at least some ex-US companies do so). For example, see the link to the Vara-provided consensus at https://www.investor.bayer.de/en/stock/analysts/consensus/
The whole business of beating consensus is a bit of a farce, as the forecasts are continously revised (sometimes the company will directly tell analysts that expectations have to come down). So it can happen that the results are 1% above the current forecast, but the current forecast is 10% below where it was one month ago.
For example, looking at the evolution of Q2 estimates for Tesla:
One year ago, the EPS forecast was -0.37. Two months ago it was -2.19, last month -2.26. Now it stands at -2.29, and it may be revised down now that Q1 results are available.
As we get closer to the end of the quarter the trend may continue. If, for example, right before the earnings announcement the consensus estimate is -3.25 and the actual EPS is -2.90 then it will be a strong beat...
https://www.reuters.com/finance/stocks/analyst/TSLA.O
Sometimes the investor relations departments give an “official” consensus that they use as reference (at least some ex-US companies do so). For example, see the link to the Vara-provided consensus at https://www.investor.bayer.de/en/stock/analysts/consensus/
The whole business of beating consensus is a bit of a farce, as the forecasts are continously revised (sometimes the company will directly tell analysts that expectations have to come down). So it can happen that the results are 1% above the current forecast, but the current forecast is 10% below where it was one month ago.
For example, looking at the evolution of Q2 estimates for Tesla:
One year ago, the EPS forecast was -0.37. Two months ago it was -2.19, last month -2.26. Now it stands at -2.29, and it may be revised down now that Q1 results are available.
As we get closer to the end of the quarter the trend may continue. If, for example, right before the earnings announcement the consensus estimate is -3.25 and the actual EPS is -2.90 then it will be a strong beat...
https://www.reuters.com/finance/stocks/analyst/TSLA.O
That's like asking what counts as art. There are some major museums who hire curators, who in turn buy art. Similarly, there are some large financial companies that publish advice, who hire analysts. You "count" if people listen to you.
But don't they have a conflict of interest since their "estimates" affects the same market they are investing in?
Any conflict of interest could be seen as an illegal pump-and-dump scheme. It's a fuzzy line, but disclosing one's positions helps avoid the wrath of the SEC.
In theory there's a strict separation between trading and research departments. (People on the trading floor cannot even enter the area where research sits.) This doesn't mean that there isn't some conflict of interest, but the industry and regulators are aware of it and at least in principle there are ways to mitigate it.
An example of “Wall Street Estimates...” is Seeking Alpha - a kind of a “Rotten Tomatoes” site for analysts.
"What determines if somebody 'counts' as an analyst? How are estimates recorded so that they show up in yahoo finance?"
I'm no insider, but I feel like a lot of this comes down to Bloomberg terminal. That seems to be where lots of people get their aggregates of estimates, at least as a common starting point.
I'm no insider, but I feel like a lot of this comes down to Bloomberg terminal. That seems to be where lots of people get their aggregates of estimates, at least as a common starting point.
> I think I often get penalized by the HN algorithms because a post can get edited 4-5 times.
They should be boosted, not penalized.
They should be boosted, not penalized.
I second this! I always look for the chollida post in any kind of earnings release.
Ditto. I'm surprised u/chollida1 hasn't considered making a little newsletter/blog for this content (with the advantages that HTML/etc provide for text and data formatting) and then submitting the link to HN. Even just writing and posting in Github Markdown would feel easier than using HN's plaintext editor.
”how do you ramp up car manufacturing from 2500 to 5000 to 10,000 per week and reduce CapEx at the same time.”
That could be possible if the production line for the larger production rates is mostly done, and all that’s needed is fine-tuning robots, training personnel, and starting to run the factory 24/7.
That could be possible if the production line for the larger production rates is mostly done, and all that’s needed is fine-tuning robots, training personnel, and starting to run the factory 24/7.
> - Tesla will not offer a leasing option on the Model 3 this year. Translation, Telsa needs cash and needs it right now in a big way.
This doesn't necesarily follow, as it'd be fairly straightforward to run the leases through a third party who would give Tesla cash.
This doesn't necesarily follow, as it'd be fairly straightforward to run the leases through a third party who would give Tesla cash.
But then Tesla isn't offering it, the 3rd party is
Yeah but that’s already how they do it. It’s through a third party for the S and X.
I think Tesla will push it's own lease with car sharing options.
I also see the quarterly cash burn of $1.054 billion, and also don't understand how the company could reduce capex by $0.4 billion this year at the same time it aggressively ramps up Model 3 production... seems optimistic.
Looks like Tesla will need to raise more cash fairly soon.
Looks like Tesla will need to raise more cash fairly soon.
That is fairly simple. The main CapEx is installing a new line, setting up supply chain, acquiring robots, programming robots. Once you are done with that, you then just need to crank out cars.
> you then just need to crank out cars
To my ignorant but cynical ears, that sounds like a developer saying “then we just need to deploy it”.
To my ignorant but cynical ears, that sounds like a developer saying “then we just need to deploy it”.
More like saying that once you have the chairs, desks and computers, you just need to write the software. The developer salaries are operating expenses (opex.)
Isn't that the point though? That for building this kind of plant, you spend the money up front and then spend a lot of time, but less money, actually making it work.
From the outside that will look like a reduction in CapEx (once the up-front spend is done) followed by a "mysteriously" cheap ramp-up in production volume.
From the outside that will look like a reduction in CapEx (once the up-front spend is done) followed by a "mysteriously" cheap ramp-up in production volume.
Yes. Deploy at internet-scale while debugging a completely new approach. Which could work - or not.
I saw a chart showing the same periods from S and X production. Apparently the highest capex comes right before ramp up since they have bought new equipment, tuned the process etc. As those issues are resolved you need less and less capex. But I am not an expert.
Elon promised they wouldn't need to raise cash this year.
Elon has promised things that didn't happen quarter after quarter. Nobody trusts forward-looking statement from Tesla anymore.
I say that Tesla has to raise money in Q4 and you can trust me more than Elon.
I say that Tesla has to raise money in Q4 and you can trust me more than Elon.
random thought: they said most of the cash was to start the gigafactory, now that they've changed to expansion from "near"(c) full production, maybe they really need none or near none ?
Elon has promised a lot of things that didn't happen.
>- "Our Model 3 general assembly line consists of fewer than 50 steps, which is about 70% less than conventional assembly lines. All Model 3 vehicles use only one standard body frame, down from more than 80 for Model S, a wiring harness that has 50% less mass than average vehicles, and a fraction of the number of controllers, connectors and CPUs."
There is a lot to unpack in this statement...
I find it hard to believe there were 80 unique body models for the model S. The S has 3 major trims and about 3 major options that could even theoretically change things like wiring harnesses or body panels. This seems to me another Elon overstatement (air resistance and heat and robots oh my...).
also, re his later subcontractors comment. I have been given the impression here and by industry friends that subcontractors are increasingly unwilling to work with them.
There is a lot to unpack in this statement...
I find it hard to believe there were 80 unique body models for the model S. The S has 3 major trims and about 3 major options that could even theoretically change things like wiring harnesses or body panels. This seems to me another Elon overstatement (air resistance and heat and robots oh my...).
also, re his later subcontractors comment. I have been given the impression here and by industry friends that subcontractors are increasingly unwilling to work with them.
I seriously doubt that Tesla would make a misstatement in an earnings announcement given the massive penalties that would incur...
To be honest, I'm not sure if you're being sarcastic or serious. I'm guessing serious?
I don't think it would be unusual for them to make a statement that while technically true is misleading.
I don't think it would be unusual for them to make a statement that while technically true is misleading.
> I seriously doubt that Tesla would make a misstatement in an earnings announcement given the massive penalties that would incur...
Not really, a lot of the statements are covered by the safe harbor "forward looking statements".
Not really, a lot of the statements are covered by the safe harbor "forward looking statements".
The number of unique Model S body frames is not a forward looking statement by any reasonable definition.
It is when you're implying that ramping up model 3 production will be easier because of what you previously accomplished.
No, the claim about future Model 3 production may be forward looking, but the claim about the number of Model S body frames that do (not will in the future) exist and the comparison to the number of Model 3 frames that exist doesn't magically become forward-looking because it supports a forward looking claim.
I’m not a lawyer, but I doubt many statements in the past tense would fall under the “forward looking” umbrella.
There's also a lot of different homologation requirements to sell in different markets. That could blow out the number of models.
fair, hadn't considered that.
Still...80...? He's not saying exterior panels or different parts...he basically said frames. Even if we assume that they (insanely) have significant different bodies for each trim of the S, that means they have >25 different version of the design. That can't be right.
This is all the reason why major auto manufacturers have product 'architectures'.
Still...80...? He's not saying exterior panels or different parts...he basically said frames. Even if we assume that they (insanely) have significant different bodies for each trim of the S, that means they have >25 different version of the design. That can't be right.
This is all the reason why major auto manufacturers have product 'architectures'.
Could he be including revisions in those numbers?
There were six battery sizes on this vehicle. The largest is almost twice the size of the smallest. They may have modified the design several times to either fit or support different battery configurations.
Maybe some unplanned changes around 120/230V and safety?
There were six battery sizes on this vehicle. The largest is almost twice the size of the smallest. They may have modified the design several times to either fit or support different battery configurations.
Maybe some unplanned changes around 120/230V and safety?
Also 2wd/4wd powertrains that could require chassis mods too. In combinations with above could easily be dozens of versions.
> Tesla's 5.3% bonds are unchanged at 89 cents on the dollar
Can anyone explain this like I'm 5?
Can anyone explain this like I'm 5?
The bonds pay 5.3% of their $1000 face value in interest every year, or $53.
You can buy this bond for $890, so the effective interest rate is actually 53 / 890 = 5.96% per year.
The fact that the price of the bonds is unchanged indicates that Tesla's earnings report didn't cause any change in market expectations of the company's ability to repay the bonds in full.
The price could drop to, say, 79 cents on the dollar if there's a greater probability that Tesla goes bankrupt and the bonds won't be repaid.
Bond prices also fall when market interest rates increase since that $53 per year isn't as competitive if other investments yield more.
You can buy this bond for $890, so the effective interest rate is actually 53 / 890 = 5.96% per year.
The fact that the price of the bonds is unchanged indicates that Tesla's earnings report didn't cause any change in market expectations of the company's ability to repay the bonds in full.
The price could drop to, say, 79 cents on the dollar if there's a greater probability that Tesla goes bankrupt and the bonds won't be repaid.
Bond prices also fall when market interest rates increase since that $53 per year isn't as competitive if other investments yield more.
Thanks for your explanation, let me see if I understand.
They promise to give $1,000 in some years, plus $53 per annum until that happens. That promise is currently worth $890. But if people were worried about the repayments, that might fall to $790. So they get less money for taking on the same debt.
Have I understood?
What are the rates at companies like Apple or Exxon?
They promise to give $1,000 in some years, plus $53 per annum until that happens. That promise is currently worth $890. But if people were worried about the repayments, that might fall to $790. So they get less money for taking on the same debt.
Have I understood?
What are the rates at companies like Apple or Exxon?
Apple has bonds that pay 3.85% that mature in 2043.
They're currently trading at about 95 cents on the dollar, for an effective yield of 4.05%.
There's nearly zero risk that Apple will default. Their bonds sell at a discount because market interest rates have increased since the bonds were issued, making them worth less.
Note that Tesla's bonds yield almost a full percentage point more than Apple's bonds, which reflects Tesla's higher probability of default.
But if investors were really worried about default, they'd demand a lot more than an extra 1%.
See --> https://imgur.com/a/OLKqgga
They're currently trading at about 95 cents on the dollar, for an effective yield of 4.05%.
There's nearly zero risk that Apple will default. Their bonds sell at a discount because market interest rates have increased since the bonds were issued, making them worth less.
Note that Tesla's bonds yield almost a full percentage point more than Apple's bonds, which reflects Tesla's higher probability of default.
But if investors were really worried about default, they'd demand a lot more than an extra 1%.
See --> https://imgur.com/a/OLKqgga
It's worth noting that a 2043 bond is a very very different beast to a 2025 bond. The further in the future maturity happens, the more risk there is of a change in circumstance which results in default.
> What are the rates at companies like Apple or Exxon?
Anytime they issue a new bond, figures change so difficult to give a straight answer. For Apple, bonds typically range around 3/3.5% yield. And prices of the bond usually stay above 90 cents on the dollar, AFAIK (not an expert)
Anytime they issue a new bond, figures change so difficult to give a straight answer. For Apple, bonds typically range around 3/3.5% yield. And prices of the bond usually stay above 90 cents on the dollar, AFAIK (not an expert)
[deleted]
For 89 cents you can buy a Tesla bond with a face value of $1 which accrues at a rate of 5.3% per annum (so would have a face value of 105.3 cents after one year). Tesla will hopefully pay back the face value but they may not if they go bankrupt.
Bonds pay a coupon, or interest, directly rather than accruing face value.
Some bonds don't but you are correct these bonds do. However it isn't guaranteed that coupons will be paid on time especially if a company is in financial difficulty.
depends on the type of bond. not all bonds are coupon bonds.
What is the minimum of these bonds one can buy?
Ask your broker. I would guess one so that would be $89 at the current price
The bond denomination is 1000 and usually brokers have minimum lot size of 10, so it would be $8900. However many brokers have minimum trade size of $10K on bonds as well, so the "ask your broker" is the best advice :-)
Minimum investment size is $2k face value (i.e. you'd pay ~89% of $2,000).
https://www.bondsupermart.com/main/bond-info/bond-factsheet/...
https://www.bondsupermart.com/main/bond-info/bond-factsheet/...
You can buy a bond that forces Tesla to repay you $1 in X years, for 89 cents.
Bonds trading below value happen when there is uncertainty whether it can actually be repaid in the future by the company (e.g. maybe it is unsecured debt).
If repaid the yield would have been 5.3% per annum + the 11% difference it trades below value
Bonds trading below value happen when there is uncertainty whether it can actually be repaid in the future by the company (e.g. maybe it is unsecured debt).
If repaid the yield would have been 5.3% per annum + the 11% difference it trades below value
Is it not also that they will pay you a 5.3 percent dividend every year until repaid? Not that I really know much about this so likely wrong!
The coupon (dividend) is 5.3% per year, and the bond repays in about 7 years, while trading at a 11% discount.
As a first-order approximation, you can imagine that you are getting paid 5.3% + (11% / 7 years) = 6.87%.
A slightly more accurate calculation shows that yield is actually closer to 7.36%. You can find the bond here:
http://markets.businessinsider.com/bonds/tesla_incdl-notes_2...
As a first-order approximation, you can imagine that you are getting paid 5.3% + (11% / 7 years) = 6.87%.
A slightly more accurate calculation shows that yield is actually closer to 7.36%. You can find the bond here:
http://markets.businessinsider.com/bonds/tesla_incdl-notes_2...
Yes Tesla's latest unsecured bonds have a coupon rate of 5.3% which they pay biannually. So for a bond with a face value of $1 they will pay you ~2.6 cents every 6 months.
Yes, they pay interest + will (hopefully) repay capital at the expiration date.
Solid cash burn of ~12 million per day.
How do you understand the lease-vehicles line in the balance sheet? From $4.1bn down to $2.3bn. I understand there's some accounting change, but I don't see where the other side of that missing $1.8bn shows up.
Am I reading this right? over 1/4 of revenue attributed to customer deposit?
It has been a while since I have taken an accounting class, but I am pretty sure the deposits can't be recognized as revenue since they also count as a liability. They are only recognizable as revenue once that liability has been cleared, basically once Tesla has delivered the car. It would be like issuing a bond, a positive cash flow event that doesn't alter the company's revenue or total value.
You're describing accrual accounting, as opposed to cash accounting, and all public companies in US do indeed use accrual accounting.
Solar City is 'done', does that include the Powerwall?
I would suggest reading the section on solar in Tesla's letter[1].
They put some of the blame for declining solar sales on the fact that customers are waiting for powerwall. They expect sales to pick up as powerwall sales pick up.
[1] http://files.shareholder.com/downloads/ABEA-4CW8X0/624020036...
They put some of the blame for declining solar sales on the fact that customers are waiting for powerwall. They expect sales to pick up as powerwall sales pick up.
[1] http://files.shareholder.com/downloads/ABEA-4CW8X0/624020036...
You're confusing editorializing and actual data. "Solar city is done" is an editorial opinion by the poster based on the lower installed Megawatts this quarter from last, it isn't necessarily reflective of Tesla's actual plans.
An equally valid perspective is it's currently a low priority compared to just getting Model 3 out the door. There are occasional comments by Musk that they're still very much interested in consumer solar roofs and certainly Powerwall. Granted, it's also a valid point to say "the proof is in the pudding" and point out the lower actual installed capacity this quarter.
An equally valid perspective is it's currently a low priority compared to just getting Model 3 out the door. There are occasional comments by Musk that they're still very much interested in consumer solar roofs and certainly Powerwall. Granted, it's also a valid point to say "the proof is in the pudding" and point out the lower actual installed capacity this quarter.
It seems like there’s a disconnect between expected revenue and the stock price. If people took the expected revenue from analysts seriously then they’d have to believe that Tesla was nearly insolvent.
CNBC business:
In the quarter ended March 31, Tesla's net loss widened to $784.6 million, or $4.19 per share, from a loss of $397.2 million, or $2.04 per share, a year ago.
Revenue rose to $3.41 billion from $2.7 billion a year ago, and outpaced analysts estimates of $3.22 billion.
It's deceptive to list the revenue in dollars and the loss in dollars per share. Reality is a loss of $785 million on $3.41 billion revenue.
In the quarter ended March 31, Tesla's net loss widened to $784.6 million, or $4.19 per share, from a loss of $397.2 million, or $2.04 per share, a year ago.
Revenue rose to $3.41 billion from $2.7 billion a year ago, and outpaced analysts estimates of $3.22 billion.
It's deceptive to list the revenue in dollars and the loss in dollars per share. Reality is a loss of $785 million on $3.41 billion revenue.
> It's deceptive to list the revenue in dollars and the loss in dollars per share.
It's just convention. Earnings per share (EPS) is a very commonly used metric, sales per share much less so.
It's just convention. Earnings per share (EPS) is a very commonly used metric, sales per share much less so.
That just means the convention is deceptive.
It's actually very useful to know earnings or loss per share as you buy shares not the entire company.
Revenue provides different information, and is useful to figure out market share etc.
Revenue provides different information, and is useful to figure out market share etc.
Not really. In a conventional business revenue tells you how big it is so should be reported in absolute terms. And traditionally, dividends matter to the shareholders and that is directly related to earnings per share. Profits may increase in absolute terms but earnings per share could decrease as a result of issuing more shares (also known as stock dilution).
It's only deceptive to people who shouldn't be buying stocks based on those metrics in the first place.
http://files.shareholder.com/downloads/ABEA-4CW8X0/623988100...
If you look at the financial statement their cash flow used by operation went up 4x from the same quarter last year. Their margins on their cars are getting worse, I guess probably due to the model 3. Maybe Musk would have been better off just focusing on their high end cars and get all the processes ironed out.
If you look at the financial statement their cash flow used by operation went up 4x from the same quarter last year. Their margins on their cars are getting worse, I guess probably due to the model 3. Maybe Musk would have been better off just focusing on their high end cars and get all the processes ironed out.
> Maybe Musk would have been better off just focusing on their high end cars and get all the processes ironed out.
Tesla would never become a mainstream car maker focusing only on high-end cars, and would not justify the market cap.
Tesla would never become a mainstream car maker focusing only on high-end cars, and would not justify the market cap.
I think maybe he is saying they should have focused on high end cars only until all their automated manufacturing processes were ironed out.
You can't have the scale with just high end cars to justify same level and dedication to automation. Ferrari sells 7-8k cars a year, Tesla wants to sell more in a week.
You can be very successful just producing >$80k cars. You'll never be the largest car manufacturer but you can dominate a market. I think Tesla could've done that by producing more sports cars instead of affordable cars. There's a lot of wealth in the world, enough to justify a gigafactory.
[deleted]
Model S sales - allegedly down on April 2017.
Has America fallen out of love with the sedan? Even the Tesla version?
Ford announced they are not going to be selling sedans in America, Mustang excepted. GM are ditching the Bolt (or Volt?) and FCA aren't making a lot of regular cars in the USA.
From now on monster SUVs powered by oil is what the future is in America, thanks to fracking and easy credit. Can't wait for the invasion of affordable Chinese electric cars.
Has America fallen out of love with the sedan? Even the Tesla version?
Ford announced they are not going to be selling sedans in America, Mustang excepted. GM are ditching the Bolt (or Volt?) and FCA aren't making a lot of regular cars in the USA.
From now on monster SUVs powered by oil is what the future is in America, thanks to fracking and easy credit. Can't wait for the invasion of affordable Chinese electric cars.
This was essentially what happened in late 90s/early 00's, and the subsequent rise in oil prices and '08 recession led to the bankruptcy of American auto companies that had stopped producing fuel efficient cars. The taxpayer-funded bailout included a stipulation that increased their fuel economy standards; that part of the deal is now being reversed by the current administration.
Thanks for commenting about this - I don't understand why there isn't more commentary about Ford deciding to drop sedans. It seems like someone is way way behind on the forecasting game. Just as oil prices are going back up and the demand for fuel efficient vehicles will increase, they're doubling down on...gas guzzlers.
Crossover vehicles (misleading labeled as "SUVs" by the industry) have largely replaced sedans in the last few years. Think vehicles like the Nissan Rogue, Ford Edge or Honda CR-V. These vehicles are essentially lifted sedans or hatchbacks with a slightly taller body. They have nearly identical combined fuel efficiency compared to economy sedans.
I don't think there is much risk in the industry. Sales of full-size SUVs of yore (the gas guzzling V8s based on full-size trucks) are down, people want the newer, smaller, lighter 4-cylinder crossover and it will end the sedan era. Ford isn't alone here either -- every manufacturer is pumping out models of crossovers based on sedans. Sedans are either pivoting into territory that sportier cars used to occupy (Toyota Camry) or morphing into entry luxury vehicles (Honda Accord). Even with this pivoting, year-over-year sales of cars like the Nissan Altima and Honda Accord are significantly down.
Real example: Mazda 3 sedan vs Mazda CX-5 crossover SUV. They use the exact same 4 cylinder engine pushing 155 horses. The sedan gets 30/41 mpg and the crossover 26/35. People aren't going to give up their higher ride height and comfy seats for 5 mpg. Another example to consider is that sales of crossovers are way up in europe, despite having gas that costs nearly double that of the United States.
Ford is making a logical move. Their 4 cylinder ecoboost engines are efficient and they want to introduce hybrid drivetrains, even on their muscle car.
I don't think there is much risk in the industry. Sales of full-size SUVs of yore (the gas guzzling V8s based on full-size trucks) are down, people want the newer, smaller, lighter 4-cylinder crossover and it will end the sedan era. Ford isn't alone here either -- every manufacturer is pumping out models of crossovers based on sedans. Sedans are either pivoting into territory that sportier cars used to occupy (Toyota Camry) or morphing into entry luxury vehicles (Honda Accord). Even with this pivoting, year-over-year sales of cars like the Nissan Altima and Honda Accord are significantly down.
Real example: Mazda 3 sedan vs Mazda CX-5 crossover SUV. They use the exact same 4 cylinder engine pushing 155 horses. The sedan gets 30/41 mpg and the crossover 26/35. People aren't going to give up their higher ride height and comfy seats for 5 mpg. Another example to consider is that sales of crossovers are way up in europe, despite having gas that costs nearly double that of the United States.
Ford is making a logical move. Their 4 cylinder ecoboost engines are efficient and they want to introduce hybrid drivetrains, even on their muscle car.
And sedans like the Taurus have become fat pigs anyway. And a Ford Fusion is the same weight as a Ford Escape. (Yes, theoretically different size vehicles, but consumers LOVE pretending like their SUVs have more space than they do, and to a certain extent they 'feel' bigger due to greater distance between floor and ceiling.. and neither vehicle has 3 rows of seats, so....)
At least now, Ford has a very healthy international business where they will continue to sell what we would refer to as saloons and hatchbacks. This means that should they ever wish to start selling sedans in the US again, there is a much lower barrier to doing that.
Source: http://fortune.com/2018/04/02/donald-trump-epa-fuel-regulati...
> The Trump administration announced that fuel-efficiency regulations for cars and light trucks are too stringent and must be revised, beginning a process sought by the U.S. auto industry to roll back anti-pollution targets.
>The EPA also said it was considering whether to revoke the waiver that allows California to set its own emissions rules that are tougher than the federal standards.
> The Trump administration announced that fuel-efficiency regulations for cars and light trucks are too stringent and must be revised, beginning a process sought by the U.S. auto industry to roll back anti-pollution targets.
>The EPA also said it was considering whether to revoke the waiver that allows California to set its own emissions rules that are tougher than the federal standards.
This is one thing that is strongly in Tesla's favor. A pivot to SUVs and trucks has essentially zero geopolitical/oilprice risk, unlike every other domestic automobile maker which is gambling big time that gas prices don't continue to increase. I'm not sure Ford (focusing nearly exclusively on trucks) could survive a sustained $4/gallon gas price again, let alone whatever the gas price would be if the "$300 per barrel" scenario [0] happened (even for just a few months).
Gas prices are about $1/gallon higher than they were when the Model 3 was unveiled and Tesla got a huge backlog of orders. That's about $5000 in additional gas savings over the life of the vehicle (some of that in the form of residual used value). OPEC is still cutting back, and they want oil at about $80/barrel, up from the current ~$65. Gas prices arguably still haven't reached equilibrium for the current price of oil, and continued under-investment in oil capacity during the last slump could lead to significantly higher oil prices going forward, particularly if the global economy stays fairly strong. This is incredibly good for Tesla.
So I think Tesla has more going for it than a lot of people give credit. Theoretically, other car makers could've switched to electric tech, too (it's fairly simple, although it takes investment), but just about the only car makers who are TRULY serious about it (versus talking about it) are in China. Certainly when compared to other domestic car makers.
[0] http://www.businessinsider.com/300-oil-is-not-impossible-say...
Gas prices are about $1/gallon higher than they were when the Model 3 was unveiled and Tesla got a huge backlog of orders. That's about $5000 in additional gas savings over the life of the vehicle (some of that in the form of residual used value). OPEC is still cutting back, and they want oil at about $80/barrel, up from the current ~$65. Gas prices arguably still haven't reached equilibrium for the current price of oil, and continued under-investment in oil capacity during the last slump could lead to significantly higher oil prices going forward, particularly if the global economy stays fairly strong. This is incredibly good for Tesla.
So I think Tesla has more going for it than a lot of people give credit. Theoretically, other car makers could've switched to electric tech, too (it's fairly simple, although it takes investment), but just about the only car makers who are TRULY serious about it (versus talking about it) are in China. Certainly when compared to other domestic car makers.
[0] http://www.businessinsider.com/300-oil-is-not-impossible-say...
I don't feel like the risk is very high for Ford. The Ford Edge CUV gets 21/29 mpg. It isn't like in 2008 where a Ford Excursion got maybe 12 mpg. Giant SUVs just don't sell these days. Another factor is that Ford will continue to produce stuff like the Fiesta and Focus in Europe. If gas prices start climbing, they should be able to retool some factories and pivot back.
GM's CEO Mary Barra also just announced they are still committed to sedans and more efficient vehicles. They don't have much choice in the matter if I recall correctly due to the terms of their re-org / bailout.
I've no idea what Fiat-Chrysler is doing, as they seem to only produce gas guzzlers. They seem to have no plans whatsoever to produce a normal vehicle and just keep adding variants of models subject to the EPA gas-guzzler tax.
GM's CEO Mary Barra also just announced they are still committed to sedans and more efficient vehicles. They don't have much choice in the matter if I recall correctly due to the terms of their re-org / bailout.
I've no idea what Fiat-Chrysler is doing, as they seem to only produce gas guzzlers. They seem to have no plans whatsoever to produce a normal vehicle and just keep adding variants of models subject to the EPA gas-guzzler tax.
Aren’t electric vehicles more at risk of the reverse, ie. a big decline in gasoline prices?
They’re more costly so users usually hope to make some of it back due to lower operating costs.
It’s not a huge risk though.
They’re more costly so users usually hope to make some of it back due to lower operating costs.
It’s not a huge risk though.
The US has a radical cost difference in gasoline prices vs most of world.
Some reference per gallon prices right now: China $4.41, India $4.47, Japan $4.93, S.Korea $5.46, Spain $5.90, Germany $6.45, UK $6.59, Finland $6.83, France $6.99, Denmark $7.22, Italy $7.29, Netherlands $7.48
The US by contrast is at $2.99.
The US is now exporting immense amounts of oil and that is set to grow by a lot in the coming years. That hasn't occurred since the export law restrictions in 1975. The US is heading to 2 million plus barrels per day of exports this year. Chart:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...
More likely the price of US gasoline will continue to drift slightly higher toward the rest of the world, as the exports bring the US closer to a normalization with everyone else (emphasis on closer). Those exports are seeking higher prices internationally, which will result in at least somewhat higher domestic prices (dramatically less domestic captive supply).
Further, the dollar is on a longer term trajectory down, due to the vast US budget deficits that are set to continue perpetually. That will push up the price of commodities priced in dollars, ie oil, which will also push up domestic gasoline prices as a consequence.
Tesla is going to sell a lot of cars as domestic gasoline prices gradually head toward $5 as a normal level (combination of less captive oil supply, and a perpetually eroding dollar value base).
Some reference per gallon prices right now: China $4.41, India $4.47, Japan $4.93, S.Korea $5.46, Spain $5.90, Germany $6.45, UK $6.59, Finland $6.83, France $6.99, Denmark $7.22, Italy $7.29, Netherlands $7.48
The US by contrast is at $2.99.
The US is now exporting immense amounts of oil and that is set to grow by a lot in the coming years. That hasn't occurred since the export law restrictions in 1975. The US is heading to 2 million plus barrels per day of exports this year. Chart:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...
More likely the price of US gasoline will continue to drift slightly higher toward the rest of the world, as the exports bring the US closer to a normalization with everyone else (emphasis on closer). Those exports are seeking higher prices internationally, which will result in at least somewhat higher domestic prices (dramatically less domestic captive supply).
Further, the dollar is on a longer term trajectory down, due to the vast US budget deficits that are set to continue perpetually. That will push up the price of commodities priced in dollars, ie oil, which will also push up domestic gasoline prices as a consequence.
Tesla is going to sell a lot of cars as domestic gasoline prices gradually head toward $5 as a normal level (combination of less captive oil supply, and a perpetually eroding dollar value base).
> More likely the price of US gasoline will continue to drift slightly higher toward the rest of the world, as the exports bring the US closer to a normalization with everyone else (emphasis on closer). Those exports are seeking higher prices internationally, which will result in at least somewhat higher domestic prices (dramatically less domestic captive supply).
Crude oil prices are not that dissimilar, European Crude Oil trades only $5/barrel more than WTI (US Oklahoma) Oil. The main reason for the huge difference in prices is taxes. The US has hardly any tax on gasoline whereas in many European countries, taxes make up 60-80% of the fuel price (fuel taxes plus VAT). If you strip out taxes, gasoline in Europe isn't much more expensive than it is in the US. That's also why gasoline prices in the US react sharply in the US if crude oil prices fluctuate whereas in Europe, they usually don't move by more than 10-20%.
Crude oil prices are not that dissimilar, European Crude Oil trades only $5/barrel more than WTI (US Oklahoma) Oil. The main reason for the huge difference in prices is taxes. The US has hardly any tax on gasoline whereas in many European countries, taxes make up 60-80% of the fuel price (fuel taxes plus VAT). If you strip out taxes, gasoline in Europe isn't much more expensive than it is in the US. That's also why gasoline prices in the US react sharply in the US if crude oil prices fluctuate whereas in Europe, they usually don't move by more than 10-20%.
> GM are ditching the Bolt (or Volt?)
The Volt PHEV might be discontinued in 2020 but that makes sense if increasing battery capacity makes PHEVs moot. They are a bridge technology.
GM is supposedly planning to increase production of the pure Electric Bolt:
https://www.reuters.com/article/us-gm-autos/gm-plans-to-expa...
The Volt PHEV might be discontinued in 2020 but that makes sense if increasing battery capacity makes PHEVs moot. They are a bridge technology.
GM is supposedly planning to increase production of the pure Electric Bolt:
https://www.reuters.com/article/us-gm-autos/gm-plans-to-expa...
PHEVs seems like a great option the issue is their electric range is not enough. Someone that commutes say 60 miles each way or 120 miles a day might as well get a hybrid as they don't really gain much from that extra battery.
Push the range in the 100-150 mile range and people would see more significant cost savings.
Another option might be to add some solar panels. If you get say 6m^2 * 22% efficiency * ~7.5 hours per day that's ~10kwh for free each day or around 30 miles. Not really a major savings, but would make a smaller battery seem more useful.
PS: I suspect the downside is the IC engine really needs to run fairly regularly or you have issues.
Push the range in the 100-150 mile range and people would see more significant cost savings.
Another option might be to add some solar panels. If you get say 6m^2 * 22% efficiency * ~7.5 hours per day that's ~10kwh for free each day or around 30 miles. Not really a major savings, but would make a smaller battery seem more useful.
PS: I suspect the downside is the IC engine really needs to run fairly regularly or you have issues.
That's not really representative of the majority of commuters.
I have a Volt, and the range is definitely enough. I can commute twice round-trip on a single charge. I do about 90% of miles electric, so I'm working that extra battery very hard. And it makes a very good hybrid on road trips.
The engine doesn't have to run very often, maybe 30 seconds every month or two, which normally happens on long trips anyway.
I have a Volt, and the range is definitely enough. I can commute twice round-trip on a single charge. I do about 90% of miles electric, so I'm working that extra battery very hard. And it makes a very good hybrid on road trips.
The engine doesn't have to run very often, maybe 30 seconds every month or two, which normally happens on long trips anyway.
My commute is under 5 miles so I could defiantly use a Volt both ways. However, due to that short commute the cost savings would fail to offset the added costs.
Which is my point, they don't really provide significant savings over a hybrid if you drive a lot. And if you don't drive much then owning just about anything works fine.
Sure, for people that have a short commute but take long weekend trips it's a net gain. However, I suspect that's a relatively small segment.
Which is my point, they don't really provide significant savings over a hybrid if you drive a lot. And if you don't drive much then owning just about anything works fine.
Sure, for people that have a short commute but take long weekend trips it's a net gain. However, I suspect that's a relatively small segment.
Of course, if you have a hybrid, the question becomes: why not put a bigger battery in and plug it in? Batteries aren't even that expensive any more. Personally, I find a plug-in way more convenient because I don't have to go to the gas station. Also, there's essentially no maintenance besides tires. I've never worked so little on a car that I've owned as the Volt.
The modern Volt has a 50 mile range. That fits the vast majority of people's commutes, and if they can charge on both ends means a very large gas savings. But the biggest is convenience: no trips to the gas station, no oil changes, no brakes.
It's super odd to me why there are so many non-plug-in hybrids made. You already paid for most of what you need as far as complexity, but you don't go all the way and just about eliminate gasoline usage.
The modern Volt has a 50 mile range. That fits the vast majority of people's commutes, and if they can charge on both ends means a very large gas savings. But the biggest is convenience: no trips to the gas station, no oil changes, no brakes.
It's super odd to me why there are so many non-plug-in hybrids made. You already paid for most of what you need as far as complexity, but you don't go all the way and just about eliminate gasoline usage.
You'd save more by just owning a bike.
Likely quicker too on that distance. But without knowing the situation there may be other factors at play: weather, traffic safety.
There is no bad weather for biking, just being unprepared. If people can bike commute in Scandinavia all-year round I believe it's possible to do it in most of the developed world.
I'm avid cyclist, possibly a bit too avid. And even I do not bike 'year round' in the Netherlands. Falling can be a real risk, cycling in traffic can add to that risk. Snow and ice are an easy way to break a bone when you're on a bicycle.
Scandinavia and the Netherlands have the added advantage over 'most of the developed world' of having a lot of bicylce paths, NL being as flat as a pancake helps even more (though it can be very windy here).
Age, terrain, weather (temp, wind, precipitation), physical condition of the rider, traffic safety and so on are all contributing factors in whether or not you should take the bike or rather not. But under normal conditions in a place where cycling is safe and the weather is ok'ish 5 miles is biking distance.
Scandinavia and the Netherlands have the added advantage over 'most of the developed world' of having a lot of bicylce paths, NL being as flat as a pancake helps even more (though it can be very windy here).
Age, terrain, weather (temp, wind, precipitation), physical condition of the rider, traffic safety and so on are all contributing factors in whether or not you should take the bike or rather not. But under normal conditions in a place where cycling is safe and the weather is ok'ish 5 miles is biking distance.
I know someone who bike commutes every day in the Yukon. Snow's not a a big concern, he just has studded tires.
I'm sure he's not exceptional at all ;)
As someone who commutes by bike year around in Norway: No, he isn't. Studded tyres isn't rocket science.
[deleted]
Stop making cars but keep taking people's money. Is this a viable longterm strategy?
Yep, create company after company and not one is profitable...
Musk is where hype is going to die...
PayPal is not profitable ?
Hello, Musk was newer PayPal CEO
create company
Max and Peter created the PayPal predecessors... Musk was an obstacle before the IPO and was replaced...
By your definition, Musk wasn't a "creator" of Tesla, either. So why are you in this thread?
Musk isn't the "creator" or "founder" of Tesla by any definition: https://www.cnet.com/news/tesla-motors-founders-now-there-ar...
That link directly contradicts your claim:
> On Monday, a Tesla representative said that Eberhard and other principals in the dispute have come to an agreement. The company did not reveal any details of the resolution, except to say that there are now five, rather than two, agreed-upon "founders" of Tesla.
> In addition to Eberhard, other founders include current CEO and chief product architect Elon Musk, current chief technology JB Straubel, Marc Tarpenning, and Ian Wright.
> On Monday, a Tesla representative said that Eberhard and other principals in the dispute have come to an agreement. The company did not reveal any details of the resolution, except to say that there are now five, rather than two, agreed-upon "founders" of Tesla.
> In addition to Eberhard, other founders include current CEO and chief product architect Elon Musk, current chief technology JB Straubel, Marc Tarpenning, and Ian Wright.
Telling the inconvenient truth: Tesla bankrupt very soon...
You can listen to the earnings call here:
https://edge.media-server.com/m6/p/nwvzygvo
It was... pretty strange. This is being pegged as the reason for the 5% drop in after hours trading despite beating estimates. Some details, and a youtube link to a portion of the call here:
https://www.zerohedge.com/news/2018-05-02/musk-meltdown-tesl...
https://edge.media-server.com/m6/p/nwvzygvo
It was... pretty strange. This is being pegged as the reason for the 5% drop in after hours trading despite beating estimates. Some details, and a youtube link to a portion of the call here:
https://www.zerohedge.com/news/2018-05-02/musk-meltdown-tesl...
When a company has nominally good news for the world but the share price tanks after its release, this is usually a bad omen going forward.
I find it strange there hasn't been mention of what's being reported on here [1] in this thread. Anyone who actually paid attention to the earnings call care to comment?
[1] https://www.marketwatch.com/story/elon-musk-acted-like-a-jer...
[1] https://www.marketwatch.com/story/elon-musk-acted-like-a-jer...
I didn't hear the call but that article has a pretty clear agenda given how many shots it took. That was not a news story, it was a hit piece editorial. Furthermore only MarketWatch is reporting on it.
Reuters is covering it too. It's on the front page of Yahoo Finance.
"The price of Musk cutting off analysts? For Tesla, it's $2 billion"
https://finance.yahoo.com/news/price-cutting-off-analysts-te...
> In a note titled "The Importance of 'Boring' Questions," Morgan Stanley's Jonas called into question Tesla's financial standing.
> "While they may be 'dry' in nature, we argue such questions are extremely important for a highly-levered and cash-hungry company," Jonas said.
> Morgan Stanley's Adam Jonas said it was the most unusual call he had heard in 20 years in the business.
https://finance.yahoo.com/news/tesla-stock-takes-hit-elon-13...
"The price of Musk cutting off analysts? For Tesla, it's $2 billion"
https://finance.yahoo.com/news/price-cutting-off-analysts-te...
> In a note titled "The Importance of 'Boring' Questions," Morgan Stanley's Jonas called into question Tesla's financial standing.
> "While they may be 'dry' in nature, we argue such questions are extremely important for a highly-levered and cash-hungry company," Jonas said.
> Morgan Stanley's Adam Jonas said it was the most unusual call he had heard in 20 years in the business.
https://finance.yahoo.com/news/tesla-stock-takes-hit-elon-13...
> Furthermore only MarketWatch is reporting on it.
Untrue, I just didn't go out of my way to fill my comment with a pile of URLs considering news aggregators were chock full of them [1], all saying largely the same thing.
[1] https://news.google.com/news/search/section/q/musk%20tesla%2...
Untrue, I just didn't go out of my way to fill my comment with a pile of URLs considering news aggregators were chock full of them [1], all saying largely the same thing.
[1] https://news.google.com/news/search/section/q/musk%20tesla%2...
More than half of those weren't written when I said that 6 hours ago, and of the remainder the majority don't paint anywhere near the picture MarketWatch did.
For posterity sake: I didn't cherry-pick the MarketWatch link from the comment. It was one from several tabs I had open on the topic at the time from casual news consumption, and they all seemed similar enough for me to not particularly care.
The talent that Tesla has to spin bad results is amazing.
"In its letter to investors, Tesla provided some updates to its Model 3 production, noting it hit 2,270 cars produced per week for three straight weeks in April."
Seems pretty great, 2270 cars for three straight weeks! Looks like Tesla's production is going steady. However, in its early March press release about the Model 3 production, Tesla was still saying something else:
"The Model 3 output increased exponentially, representing a fourfold increase over last quarter. This is the fastest growth of any automotive company in the modern era. If this rate of growth continues, it will exceed even that of Ford and the Model T."
Exponential production increase! .. which they now say abruptly stopped after the press release.
"In its letter to investors, Tesla provided some updates to its Model 3 production, noting it hit 2,270 cars produced per week for three straight weeks in April."
Seems pretty great, 2270 cars for three straight weeks! Looks like Tesla's production is going steady. However, in its early March press release about the Model 3 production, Tesla was still saying something else:
"The Model 3 output increased exponentially, representing a fourfold increase over last quarter. This is the fastest growth of any automotive company in the modern era. If this rate of growth continues, it will exceed even that of Ford and the Model T."
Exponential production increase! .. which they now say abruptly stopped after the press release.
Yeah there comes a point where you stop rooting for the little guy doing little-guy marketing gimmicks and realise it's a billion dollar company making intentionally disingenuous statements.
The Model T reached around 70k per week. Tesla has no business referencing it. It's like saying I got a promotion growing my salary from $50k to $80k this year, a growth rate of income that, if continues, will exceed even that of bill gates. It's a joke.
The Model T reached around 70k per week. Tesla has no business referencing it. It's like saying I got a promotion growing my salary from $50k to $80k this year, a growth rate of income that, if continues, will exceed even that of bill gates. It's a joke.
That would be a massive hit at skeptics as Q3 is almost around the corner (I wasn't even expecting it to happen this year), but even being a fanboy myself I still doubt such bold statement.