Tesla Is Facing a Crucible(bloomberg.com)
bloomberg.com
Tesla Is Facing a Crucible
https://www.bloomberg.com/news/articles/2018-03-16/tesla-is-facing-a-crucible
115 comments
Since the CNBC article is by far the most factual, and doesn't seem to have been discussed yet on HN, I'm going to try burying this submission and rolling back the clock on the first post of that one: https://news.ycombinator.com/item?id=16587249.
The Bloomberg article isn't bad, but it's so generic that the discussion is generic as well (Tesla in general, short selling in general). That's the main trouble with articles that don't contain enough factual fiber.
The Bloomberg article isn't bad, but it's so generic that the discussion is generic as well (Tesla in general, short selling in general). That's the main trouble with articles that don't contain enough factual fiber.
My bullish position on Tesla goes like this:
They had the same production problems on the roadster, the Model S, and the Model X. Each time, the new vehicle was a “make or break” for the company. Each time, there were reports of how these production problems would sink the company. The company never sank. Tesla is now apparently “good” at making the Model S and Model X. I always assumed they would have similar nightmarish production problems with the Model 3, so all of these reports are sort of expected for me. But I also know that Teslas are extremely popular in Silicon Valley, where I live. That to me indicates that those with the means really like the cars. So it stands to reason that once they are good at making an affordable car, they’ll sell like hot cakes.
Musk mentioned recently that two things really stress him out: Artifical Intelligence and what to do about the risks is poses for humanity, and the Model 3 launch. I still have a lot of faith that Elon can make it happen.
And personally I really want Tesla to succeed. I think a lot of other people do too.
They had the same production problems on the roadster, the Model S, and the Model X. Each time, the new vehicle was a “make or break” for the company. Each time, there were reports of how these production problems would sink the company. The company never sank. Tesla is now apparently “good” at making the Model S and Model X. I always assumed they would have similar nightmarish production problems with the Model 3, so all of these reports are sort of expected for me. But I also know that Teslas are extremely popular in Silicon Valley, where I live. That to me indicates that those with the means really like the cars. So it stands to reason that once they are good at making an affordable car, they’ll sell like hot cakes.
Musk mentioned recently that two things really stress him out: Artifical Intelligence and what to do about the risks is poses for humanity, and the Model 3 launch. I still have a lot of faith that Elon can make it happen.
And personally I really want Tesla to succeed. I think a lot of other people do too.
I do wonder if Tesla's biggest problem around the Model 3 launch was starting by establishing very aggressive production targets. According to Bloomberg's Model 3 Tracker linked in that article, the Model 3 already is the top selling electric car in the country. It outsold the Chevy Bolt by over 2x in January and February. That should be a huge accomplishment, but it is viewed as a failure because it is a small fraction of what Tesla initially predicted.
> That should be a huge accomplishment, but it is viewed as a failure because it is a small fraction of what Tesla initially predicted.
It's a failure because Tesla made financial bet that they deliver high volumes of Model 3. It does not matter if Model 3 is good car and customers love it. Tesla must ramp up their production very fast or Tesla runs out of cheap money.
Tesla has no problems with customers love the car with passion. It's the investors who will choke Musk to death later this year if he has to ask more money to continue with struggling production. He will get the money but it will have high interest rate and Tesla stock will come down 20-50 percent.
Currently Tesla is producing 20% of it's target. Their production curve is not growing steeply enough. In fact it's slowing down.
https://www.bloomberg.com/graphics/2018-tesla-tracker/
It's a failure because Tesla made financial bet that they deliver high volumes of Model 3. It does not matter if Model 3 is good car and customers love it. Tesla must ramp up their production very fast or Tesla runs out of cheap money.
Tesla has no problems with customers love the car with passion. It's the investors who will choke Musk to death later this year if he has to ask more money to continue with struggling production. He will get the money but it will have high interest rate and Tesla stock will come down 20-50 percent.
Currently Tesla is producing 20% of it's target. Their production curve is not growing steeply enough. In fact it's slowing down.
https://www.bloomberg.com/graphics/2018-tesla-tracker/
Those production targets were established for a reason. Tesla is burning unbelievable amounts of cash [0], and they need to convince investors and bond holders that they will break this trend soon. Showing very agressive production targets for M3 is the only way to do it.
[0] https://arstechnica.com/cars/2018/02/tesla-loses-another-675... "Tesla loses another $675 million in Q4, its biggest quarterly loss yet"
[0] https://arstechnica.com/cars/2018/02/tesla-loses-another-675... "Tesla loses another $675 million in Q4, its biggest quarterly loss yet"
Tesla's bond offerings are routinely oversubscribed. The market is clearly willing to continue to give them more and more money. I therefore find the idea dubious that Tesla needed to be super aggressive with their production targets or else they would run out of cash.
If I recall correctly, their last offering was more or less positioned like "according to our production estimates, this is, probably, last time we ask capital markets for cash infusion", and it was at the height of excitement about the Model 3.
As of now, however, these bonds (1.8bln, issued last August) are trading underwater [0]. They will probably tap the market once again this year, and we will see what happen.
[0] https://www.marketwatch.com/story/teslas-junk-bonds-are-trad...
As of now, however, these bonds (1.8bln, issued last August) are trading underwater [0]. They will probably tap the market once again this year, and we will see what happen.
[0] https://www.marketwatch.com/story/teslas-junk-bonds-are-trad...
Those were junk bonds in August. Tesla is still having success with other types of bonds. Here is a more recent offering from January with lease backed bonds [1]. Tesla sold $546m worth but had orders for roughly $7b.
[1] - https://www.bloomberg.com/news/articles/2018-01-31/when-it-c...
[1] - https://www.bloomberg.com/news/articles/2018-01-31/when-it-c...
Lease backed bonds don't scale. He can't tap to lease again and again.
Tesla is burning $4.2 billion per year now.
Tesla is burning $4.2 billion per year now.
>Tesla is burning $4.2 billion per year now.
Where is this number is coming from? Their 2017 loss was around 2 billions, half of what you say.
Where is this number is coming from? Their 2017 loss was around 2 billions, half of what you say.
It comes from Barclay's analysis (they are very bearish).
Model 3 is not small volume luxury car as previous models. They are investing wast sums for large scale production. Burning trough vast amounts of cash is OK only as long as the production volume ramp up really happens in limited time frame and quality and recall numbers are similar to Audi 4A.
Tesla must ramp up the production volume within a year or Tesla is financially in the ropes.
If Tesla pays back debt $1000 for every car it sells. It must sell 4 million cars to pay this year's projected cash burn. Tesla made a bet that it can become large car manufacturer with Model 3, there will be no second changes.
Model 3 is not small volume luxury car as previous models. They are investing wast sums for large scale production. Burning trough vast amounts of cash is OK only as long as the production volume ramp up really happens in limited time frame and quality and recall numbers are similar to Audi 4A.
Tesla must ramp up the production volume within a year or Tesla is financially in the ropes.
If Tesla pays back debt $1000 for every car it sells. It must sell 4 million cars to pay this year's projected cash burn. Tesla made a bet that it can become large car manufacturer with Model 3, there will be no second changes.
> Tesla's bond offerings are routinely oversubscribed.
Historically, this does not count for much. Business history is littered with the bones of infallible stars that just needed a little cash to tide them over.
Historically, this does not count for much. Business history is littered with the bones of infallible stars that just needed a little cash to tide them over.
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Cherry-picking Jan and Feb obscures the fact that the Bolt seems to be extremely competitive. Bolt outsold Tesla Model 3 by 3x in Dec (3,227 versus 1,060). And it's true that January was down for the Bolt, but not by 2x (1,177 versus 1,875).
Tesla's production woes are a serious problem. My i3 lease is up in a couple of months and I can't even consider replacing it with a Model 3, since the end of the reservation line is years out.
Tesla's production woes are a serious problem. My i3 lease is up in a couple of months and I can't even consider replacing it with a Model 3, since the end of the reservation line is years out.
According to the previously mentioned Bloomberg tracker, Tesla built 5,933 in January and February. Tesla is selling and delivering the Model 3 as fast as they can built them. GM delivered 2,601 Bolts in January and February.
Choosing January and February is not cherry picking because Tesla is ramping up production of the Model 3. That said, I acknowledge that the Bolt may have some seasonal effect that greatly increased sales at the end of last year when compared to the beginning of this year. Let's expand the January-February window back another month to account for that. We get 6,993 Model 3s versus 5,828 Bolts. No longer over 2x but still clearly outselling the Bolt.
Choosing January and February is not cherry picking because Tesla is ramping up production of the Model 3. That said, I acknowledge that the Bolt may have some seasonal effect that greatly increased sales at the end of last year when compared to the beginning of this year. Let's expand the January-February window back another month to account for that. We get 6,993 Model 3s versus 5,828 Bolts. No longer over 2x but still clearly outselling the Bolt.
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It's also worth mentioning that the Bolt is a loss leader for GM, so they are actually losing money on those cars. I think it's reasonable to worry that the economics for Tesla, who have far less experience manufacturing cars at scale, could be even worse.
I am bearish on Tesla, but I never thought they would get this far, so obviously I've been wrong before. My suspicion though is if Tesla isn't self-sustaining before the next economic downturn, they're fucked.
I am bearish on Tesla, but I never thought they would get this far, so obviously I've been wrong before. My suspicion though is if Tesla isn't self-sustaining before the next economic downturn, they're fucked.
I think most Bolts are leases, so it probably works out in the end for GM.
Works out how?
Bolts are compliance vehicles, sold by GM to meet fleet fuel efficiency and emissions requirements. Selling Bolts at a loss enables them to continue selling larger vehicles which actually turn a profit. Hopefully in a few more years battery costs will drop enough to make electric cars profitable in their own right.
Bolts are compliance vehicles, sold by GM to meet fleet fuel efficiency and emissions requirements. Selling Bolts at a loss enables them to continue selling larger vehicles which actually turn a profit. Hopefully in a few more years battery costs will drop enough to make electric cars profitable in their own right.
All the previous models and problems with them happened in small production volume luxury car segment. Luxury car customers tolerate more defects and it's economical to repair them quickly with good service.
Model 3 is completely different animal. Learning from history does not help here. Model 3 is 'entry level luxury' similar to Audi A4 and BMW 3 Series.
Tesla is very creative and innovative in every level, not just in their technology. Their financial innovation has finally reached it's limit with Model 3 and it's the breaking point. They can't afford large setbacks or partial delivery and gradual development over the years. They are running out of cheap money.
Tesla is leveraged to the gills and there can't be another year or two until delivery or Musk loses the company and some other car maker or PE firm buys them cheap and finishes the product. I wouldn't be surprised if Tesla is GM or Toyota brand within next five years.
https://www.bloomberg.com/graphics/2018-tesla-tracker/
Model 3 is completely different animal. Learning from history does not help here. Model 3 is 'entry level luxury' similar to Audi A4 and BMW 3 Series.
Tesla is very creative and innovative in every level, not just in their technology. Their financial innovation has finally reached it's limit with Model 3 and it's the breaking point. They can't afford large setbacks or partial delivery and gradual development over the years. They are running out of cheap money.
Tesla is leveraged to the gills and there can't be another year or two until delivery or Musk loses the company and some other car maker or PE firm buys them cheap and finishes the product. I wouldn't be surprised if Tesla is GM or Toyota brand within next five years.
https://www.bloomberg.com/graphics/2018-tesla-tracker/
I also see more Teslas than I would expect here in Florida. It's apparently catching on with the retirees-with-money demographic. Along with all the old boomers buying sports cars - porsches, corvettes, etc., it's getting harder to identify and avoid all of the older, dangerous drivers anymore. They used to have the courtesy to identify themselves by driving giant full-size Cadillacs and Buicks :(
I'm in Tampa, and I can't tell you how many times people ask me about my Model S when I'm parked somewhere. I made a flyer, ran off 500 copies, and just hand those to people when they ask instead of spending 15-30 minutes explaining everything. I can tell its moving the needle based on my referral code stats.
Yeah, my bull case is similar.
People forget just how bad the Model X launch was. It was a complete disaster. They had I think literally three of them ready for launch and then total silence for weeks. Then took months to get any sort of small run volume off the ground.
And because people have totally forgotten about that, people will probably totally forget about just how (comparatively mildly!) bad the Model 3 launch is going. It will stutter for a year, and in three years everyone will want one.
I lived through my dad owning 4 Jaguars, totally inexplicably. One of them he carried around a box of brake fluid because he had to add a little each day. If a car is that special to you, you just mentally set aside production issues. Electric cars are even more special.
Enzo Ferrari probably never said the apocryphal quote: "I don't care if the door gaps are straight. When the driver steps on the gas I want him to shit his pants." But for a big demographic its essentially true.
So Tesla will make it out of this year, and then everyone will forget that the Model 3 ever had problems in the first place, just like with the X.
People forget just how bad the Model X launch was. It was a complete disaster. They had I think literally three of them ready for launch and then total silence for weeks. Then took months to get any sort of small run volume off the ground.
And because people have totally forgotten about that, people will probably totally forget about just how (comparatively mildly!) bad the Model 3 launch is going. It will stutter for a year, and in three years everyone will want one.
I lived through my dad owning 4 Jaguars, totally inexplicably. One of them he carried around a box of brake fluid because he had to add a little each day. If a car is that special to you, you just mentally set aside production issues. Electric cars are even more special.
Enzo Ferrari probably never said the apocryphal quote: "I don't care if the door gaps are straight. When the driver steps on the gas I want him to shit his pants." But for a big demographic its essentially true.
So Tesla will make it out of this year, and then everyone will forget that the Model 3 ever had problems in the first place, just like with the X.
I think you are applying the software startup metric to industrial company. For typical SV startup lack of demand is the single most critical issue (hence the "make something people want" YC motto), nothing comes close. Tesla has plenty of demand.
But being industrial company, Tesla is not solely about making something people want. It's about making it on scale, and showing profit.
So far, each model Tesla made meant more debt on balance sheet, and bigger quarterly losses. Once they break this trend, they are golden. But this moment is not yet, and not even on the horizon, meaning another capital rise this year.
But being industrial company, Tesla is not solely about making something people want. It's about making it on scale, and showing profit.
So far, each model Tesla made meant more debt on balance sheet, and bigger quarterly losses. Once they break this trend, they are golden. But this moment is not yet, and not even on the horizon, meaning another capital rise this year.
I'm indifferent on whether Tesla succeeds. I do appreciate that they sparked a modern revival of EV technology, and I'd be happy if some day an EV made sense for me. At this time, it does not. Range is still too short and charge times too long.
Do you travel more than 200 miles in a day frequently?
For me, an EV is so much better because I can charge every night and I won't have to go anywhere to fill up my tank ever again.
For me, an EV is so much better because I can charge every night and I won't have to go anywhere to fill up my tank ever again.
Depends. At least a couple of times a month. And arranging rentals or owning another car for those trips is not really appealing.
Another big reason is that I don't buy new cars. So for an EV to make sense for me it would need to be a used one, at least 5 years old, and still have useful range and battery life.
Another big reason is that I don't buy new cars. So for an EV to make sense for me it would need to be a used one, at least 5 years old, and still have useful range and battery life.
Many EV owners who moved back to gas or hybrid cars find the hunt for gas stations and time spent on fill ups infuriating. You can charge an EV from any mains, very quickly on the special mains installed in your own garage.
If you're commuting hundreds of miles per day, my heart goes out to you regardless.
If you're commuting hundreds of miles per day, my heart goes out to you regardless.
> So it stands to reason that once they are good at making an affordable car, they’ll sell like hot cakes.
For me, this puts the cart very much before the horse. Once they're good?
Making an expensive car is much, much easier than making an affordable one. The fact that they previously struggled with making an expensive one could just as well be a sign that their process improvement and cost reduction skills just aren't good enough to play in the big leagues.
Their being at 15% of projected output sure doesn't conflict with that; if they learned a lot from S and X, I'd think they'd be doing much better.
For me, this puts the cart very much before the horse. Once they're good?
Making an expensive car is much, much easier than making an affordable one. The fact that they previously struggled with making an expensive one could just as well be a sign that their process improvement and cost reduction skills just aren't good enough to play in the big leagues.
Their being at 15% of projected output sure doesn't conflict with that; if they learned a lot from S and X, I'd think they'd be doing much better.
I find it amusing that in a forum that gets angry about cults of personality, this comment is on top
Tesla is the bitcoin of EVs :) or maybe it's the other way around.
I think Musk persona and SpaceX makes many want to bet on high risk but high gains project. I wonder how Tesla stock did after the dual rocket landing.
I think Musk persona and SpaceX makes many want to bet on high risk but high gains project. I wonder how Tesla stock did after the dual rocket landing.
Please explain the relationship between Bitcoin and Tesla, other than "high risk but high gains".
> The company never sank.
The company refreshed its financing.
This is always possible, until it isn't.
> That to me indicates that those with the means really like the cars.
Cashflow is no respecter of brand power.
The company refreshed its financing.
This is always possible, until it isn't.
> That to me indicates that those with the means really like the cars.
Cashflow is no respecter of brand power.
Brand power can result in more sales, though, which usually does increase cash flow? We don't know yet at what point they'll transition from being supply-limited to demand-limited.
Tesla owners seem to be pretty forgiving of quality issues so far. We'll see how well that holds up.
Tesla owners seem to be pretty forgiving of quality issues so far. We'll see how well that holds up.
> Brand power can result in more sales, though, which usually does increase cash flow?
Yes, when you can get to the point where cash changes hand (this may be a very different moment from the "sale"). If cash shows up too late, then it doesn't matter how much demand there is, the game is over.
Endings from cashflow crunch can be very abrupt. A very dangerous time for many companies is under conditions of growth, because very often your outgoing cash happens now and your incoming cash comes later.
Tesla has to pay its employees each month, has to pay its suppliers on time (or lose them), pay its utility bills etc etc. The outgoing cash does not stop going out. But the bulk of the cash comes in only when they can hand a car over. And that's not happening very fast right now. The monthly outgoings per-car appear to be negative.
Yes, when you can get to the point where cash changes hand (this may be a very different moment from the "sale"). If cash shows up too late, then it doesn't matter how much demand there is, the game is over.
Endings from cashflow crunch can be very abrupt. A very dangerous time for many companies is under conditions of growth, because very often your outgoing cash happens now and your incoming cash comes later.
Tesla has to pay its employees each month, has to pay its suppliers on time (or lose them), pay its utility bills etc etc. The outgoing cash does not stop going out. But the bulk of the cash comes in only when they can hand a car over. And that's not happening very fast right now. The monthly outgoings per-car appear to be negative.
> And personally I really want Tesla to succeed.
That, instead of a sound financial analysis, seems to be the cause of your bullish position. I hope you’re not calling what you’re doing with your money “investing”.
That, instead of a sound financial analysis, seems to be the cause of your bullish position. I hope you’re not calling what you’re doing with your money “investing”.
Would you please read https://news.ycombinator.com/newsguidelines.html and abide by the rules when commenting here?
We don't want snark—it's both a poison and a fertilizer. I'm dismayed to see that you've posted uncivil comments in the past as well.
We don't want snark—it's both a poison and a fertilizer. I'm dismayed to see that you've posted uncivil comments in the past as well.
How many times have you predicted Tesla's demise over the past 10 years? Just like those people on radio shows believing they've identified the impending end of the world.
I’m not in the finance industry, hence I’m not predicting anything. I rather read analyses some pros do.
And how many times have these 'pros' predicted Tesla's demise in the last 10 years? How many times does someone have to be wrong before you stop standing behind their opinions?
If you listen to Graham&Dodd types, I can’t recall a case where they’ve been totally wrong. Btw Tesla is a public company for less than 10 years.
I have a model 3 and it basically feels like the iPhone of cars. Financial issues could take them down, but you'd have to be a fool to bet against them.
Comparing the model 3 to other electric vehicles reminds me of when people were comparing the iPod to other MP3 players based upon tech specs. At this stage, the electric nature of the car just bolsters the design and UX of it. Comparing it to other EVs because they happen to share the same type of motors is stupid. They should be comparing the Model 3 to high end luxury combustion vehicles because from my vantage point you're getting that kind of driving experience, better even, for half the price. The only place where the electric nature of the car creeps into your life in a negative way is when you consider long trips. And even then, the impact is minimal because of the supercharger network. (You are going to stop regularly on long trips for breaks anyhow, so just charge the car.)
Beyond that, the only way the electric nature of the car impacts your life is beneficial -- no more trips to gas stations and less cost of ownership. At some point you stop even making the comparison because it's just a plain better ownership experience so you don't think about it anymore.
Comparing the model 3 to other electric vehicles reminds me of when people were comparing the iPod to other MP3 players based upon tech specs. At this stage, the electric nature of the car just bolsters the design and UX of it. Comparing it to other EVs because they happen to share the same type of motors is stupid. They should be comparing the Model 3 to high end luxury combustion vehicles because from my vantage point you're getting that kind of driving experience, better even, for half the price. The only place where the electric nature of the car creeps into your life in a negative way is when you consider long trips. And even then, the impact is minimal because of the supercharger network. (You are going to stop regularly on long trips for breaks anyhow, so just charge the car.)
Beyond that, the only way the electric nature of the car impacts your life is beneficial -- no more trips to gas stations and less cost of ownership. At some point you stop even making the comparison because it's just a plain better ownership experience so you don't think about it anymore.
Out of curiosity, what’s a car you had before the Model 3 that you’d compare as the “MP3 player”, and is it a recent car?
I ask because the Model S can’t compare with the S Class or 7 series on comfort and luxury, yet you’re saying the model 3 should be compared
I ask because the Model S can’t compare with the S Class or 7 series on comfort and luxury, yet you’re saying the model 3 should be compared
I've never owned but have been in a relatively recent S class. It's personal but the 3 is basically a pretty pure distilled car. If you hate buttons and like symmetry and simplicity they basically took the car to what feels like the logical extreme. Reminiscent of Apple it's a design that shows they agonized over every button and additional degree of freedom for the user.
There is no dashboard, no key, the whole car is controlled through the center console. The only buttons are entirely flush with the surfaces they are on. They don't even have door release handles on the inside the door pops open when you grab and depress the button flush on the handlebar to exit. Rip the steering wheel out and there is no longer a clear driver's seat just two symmetric front passengers. I find the design refreshing enough and the torque of the engine responsive enough (with no transmission pullback) to say it outweighs other potential creature comforts on a feature level. My last car was a BRZ and I don't miss it too much :)
There is no dashboard, no key, the whole car is controlled through the center console. The only buttons are entirely flush with the surfaces they are on. They don't even have door release handles on the inside the door pops open when you grab and depress the button flush on the handlebar to exit. Rip the steering wheel out and there is no longer a clear driver's seat just two symmetric front passengers. I find the design refreshing enough and the torque of the engine responsive enough (with no transmission pullback) to say it outweighs other potential creature comforts on a feature level. My last car was a BRZ and I don't miss it too much :)
... going from a BRZ to a Model 3 would give someone a little bit of bias.
All the things you described are very subjective. It's not "pure" it's barebones. It's not "distilled" it's optimized for cost savings in a way that would insult the average luxury car driver.
A mid-range luxury car these days often comes with a DCT or a very advanced non-DCT transmission that's capable of mind blowingly quick shifts and creamy smooth power delivery.
This is all coming from a guy who had a first month reservation for a Model 3 and went for a Volt instead after some hard thinking and a few... Tesla antics... I disagreed with, so it's not like I'm one of the people who thinks EVs "can't be enthusiast cars" like some people.
I feel like people are overstating what a change in drivetrains will do to car manufacturers. It's true this drivetrain adds requirements for space for batteries and infrastructure for charging, but car making will still be car making (ironically, as Tesla has shown with it's production issues).
My money is on Tesla becoming the next Porsche as far as volume and market. That's not a bad place to be, but it's not where the market has priced them at.
All the things you described are very subjective. It's not "pure" it's barebones. It's not "distilled" it's optimized for cost savings in a way that would insult the average luxury car driver.
A mid-range luxury car these days often comes with a DCT or a very advanced non-DCT transmission that's capable of mind blowingly quick shifts and creamy smooth power delivery.
This is all coming from a guy who had a first month reservation for a Model 3 and went for a Volt instead after some hard thinking and a few... Tesla antics... I disagreed with, so it's not like I'm one of the people who thinks EVs "can't be enthusiast cars" like some people.
I feel like people are overstating what a change in drivetrains will do to car manufacturers. It's true this drivetrain adds requirements for space for batteries and infrastructure for charging, but car making will still be car making (ironically, as Tesla has shown with it's production issues).
My money is on Tesla becoming the next Porsche as far as volume and market. That's not a bad place to be, but it's not where the market has priced them at.
Yeah that's why I said it's personal. I feel the design of the car is extremely forward looking and was primarily driven by good taste not cost constraints. I hate to keep making the comparisons but it reminds me of Apple ripping out all but essential components -- easy to see through the lens of costs in the short term but in the long term provides freedom to take the design further in the next iteration. The 3 represents a foundational design that transitions elegantly to autonomous control (imho) and will provide the vantage point Tesla needs to design their first from-the-ground up autocar.
The problem for me is it feels like the market (and Tesla to an extent) has jumped the gun.
Tesla hasn't demonstrated enough self-driving progress (and imo, no one has yet) to justify the car's design to me, nor being a company with a 54 billion dollar market cap.
It's one thing if FSD was just on the horizon, but there are an incredible number of very hard problems to solve before we get there. Yet Tesla is designing a car that requires FSD for justification of it's interior and charging for FSD as a feature.
Tesla hasn't demonstrated enough self-driving progress (and imo, no one has yet) to justify the car's design to me, nor being a company with a 54 billion dollar market cap.
It's one thing if FSD was just on the horizon, but there are an incredible number of very hard problems to solve before we get there. Yet Tesla is designing a car that requires FSD for justification of it's interior and charging for FSD as a feature.
>They should be comparing the Model 3 to high end luxury combustion vehicles because from my vantage point you're getting that kind of driving experience, better even, for half the price.
The Model 3 can't compare to high end luxury combustion vehicles.
The Model 3 can't compare to high end luxury combustion vehicles.
In the run up to model 3 production Musk mentioned that "the production line is the product" because it was needed to be highly automated to make a great car at a low price.
Clearly getting the production line wrinkles ironed out has been a much bigger challenge than Musk expected but that is typical of almost every thing that Musk as done: Envision a way to make things an order of magnitude better. Work like a bugger (while blowing through a dozen deadlines) to make that happen. Eventually, come out the other side smelling like a genius -- because the original vision had merit and was not just a pipe dream. The model 3 fits this mold.
In terms of finance and cash flow, unlike previous near death experiences with Tesla and SpaceX, now Musk could quite easily sell of a chunk of equity in SpaceX to finance what's yet to be done in debugging the production line if the markets won't oblige. But likely the bigger problem right now is time rather than money before things come right. Most of the upfront production line expenses will have already been spent, now it's a learning curve to make it tick along as expected.
Clearly getting the production line wrinkles ironed out has been a much bigger challenge than Musk expected but that is typical of almost every thing that Musk as done: Envision a way to make things an order of magnitude better. Work like a bugger (while blowing through a dozen deadlines) to make that happen. Eventually, come out the other side smelling like a genius -- because the original vision had merit and was not just a pipe dream. The model 3 fits this mold.
In terms of finance and cash flow, unlike previous near death experiences with Tesla and SpaceX, now Musk could quite easily sell of a chunk of equity in SpaceX to finance what's yet to be done in debugging the production line if the markets won't oblige. But likely the bigger problem right now is time rather than money before things come right. Most of the upfront production line expenses will have already been spent, now it's a learning curve to make it tick along as expected.
And how many times has this happened before?
Musk plays the edge of these things. If it wasn't way too ambitious it doesn't seem like he'd do it.
Musk plays the edge of these things. If it wasn't way too ambitious it doesn't seem like he'd do it.
Tesla is facing a test. There are some bad signs that point to deferring profitability longer than expected, such as high defect and rework rates.
On the one hand, despite the challenges, Tesla has built more Series 3s than Chevrolet has built Bolts. On the other hand that's about 15% as many per week as Tesla thought they could do. The reason this isn't a fatal disaster is that nobody else is yet willing to try to beat that. There is no real replacement for a Model 3 available.
Building hundreds of thousands of cars per year is not something that industry newcomers have managed to do for a very long time, nevermind electric aluminum cars. This is a different challenge than competing against high-end BMWs and Mercedes that also have relatively small production runs.
The advantage Tesla has is that they started the learning process early. The competition is still a couple years from profitably selling a direct alternative. But every month Tesla is late is a month of sales runway and revenue gone.
On the one hand, despite the challenges, Tesla has built more Series 3s than Chevrolet has built Bolts. On the other hand that's about 15% as many per week as Tesla thought they could do. The reason this isn't a fatal disaster is that nobody else is yet willing to try to beat that. There is no real replacement for a Model 3 available.
Building hundreds of thousands of cars per year is not something that industry newcomers have managed to do for a very long time, nevermind electric aluminum cars. This is a different challenge than competing against high-end BMWs and Mercedes that also have relatively small production runs.
The advantage Tesla has is that they started the learning process early. The competition is still a couple years from profitably selling a direct alternative. But every month Tesla is late is a month of sales runway and revenue gone.
Worse comes to worst, Tesla is bought out by whatever car company that has the biggest gap in autonomous and electric tech.
At what price? According to google, market cap of Ford: 44.30B, GM: 53.14B, Tesla: 54.28B.
The "worst comes to worst" scenario will not likely be priced at 54.28B
I imagine if they went bankrupt, those numbers would change.
Maybe.
A lot of the value in buying a company like Tesla is the patent portfolio. In 2014 Musk announced that these would be "open source", but I can't actually seem to find any legalese with the details.
As for the rest, I imagine the residual value is brand, a lot of which is deeply entangled with Musk himself. As a buyer I'd be asking for a hefty discount because I would expect Musk wouldn't stick around to spruik the goods.
A lot of the value in buying a company like Tesla is the patent portfolio. In 2014 Musk announced that these would be "open source", but I can't actually seem to find any legalese with the details.
As for the rest, I imagine the residual value is brand, a lot of which is deeply entangled with Musk himself. As a buyer I'd be asking for a hefty discount because I would expect Musk wouldn't stick around to spruik the goods.
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I think is it more likely that Elon will use his equity from SpaceX to take it private.
If Elon had to chose between SpaceX and Tesla he’d choose SpaceX. He’s said as much many times.
Yea. But if giving up 20% of SpaceX gives him 100% of Tesla, he might go for it. Hope it doesn't get to this!
Let's say Tesla does go bankrupt. What would happen next? Would GM acquire it? Could they fix the production issues?
Also, would that endanger Musk's other projects? I seem to remember he's pretty leveraged in Tesla, but I assume financially each company is separate?
Also, would that endanger Musk's other projects? I seem to remember he's pretty leveraged in Tesla, but I assume financially each company is separate?
I’m guessing if it came down to it, Tesla would be sold of for their battery tech and battery manufacturing capabilities.
Warning: This page will automatically blast audio without asking, potentially ruining whatever you were recording, damaging your ears, waking the baby, annoying the boss, etc.
I'm with you on this, autoplay is evil. But I'm curious about the "ruining whatever you were recording" part. Why are you clicking random Internet links if you're in the middle of "recording" something (presumably, audio or video)?
Looking up stuff as needed is relatively common for the more free-form podcasts I've listened to in the past. There are also quite a few vlogs out there, a Tesla segment showing site content wouldn't be too surprising.
I assume there are other formats where this comes up too. Podcast-like stuff seems pretty natural tho.
I assume there are other formats where this comes up too. Podcast-like stuff seems pretty natural tho.
I know it's not your intent, but that comes across like one of those "blaming the victim" questions. But as one example, the host of a podcast could be scanning for relevant discussion material during an interview. Or the user could be capturing the audio from a conference call.
ublock origin w/Safari on OS X blocked the video automatically
I think that's just a Safari feature. Safari > Preferences > Websites > Auto-Play
"Stop Media with Sound"
I personally have all videos blacklisted, and I white list a few sites.
"Stop Media with Sound"
I personally have all videos blacklisted, and I white list a few sites.
Could be. For me, the video didn't even appear. Just a blank space on the page -- is that a components of this feature?
Or you could browse muted.
I find the concept of short selling a bit confusing, even though I've Googled. Can someone explain this in an easy to understand way?
You borrow stock from somebody. You say "I'll give these back to you next month".
You quickly sell these borrowed stock on the market for $100.
1 month passes. The stock goes down.
You buy the same amount of stock, but now for $50.
You return the stock to the person you borrowed it from.
You have profited $50 per stock.
You can now get a nice cold pint and wait for all this to blow over.
You quickly sell these borrowed stock on the market for $100.
1 month passes. The stock goes down.
You buy the same amount of stock, but now for $50.
You return the stock to the person you borrowed it from.
You have profited $50 per stock.
You can now get a nice cold pint and wait for all this to blow over.
Exactly right. But, if the stock goes up to $150, then you have to buy it back at $150.
The thing about short sales: the most the stock can go down is to zero, but there’s no limit to how high it can rise. So, you have limited upside with unlimited downside.
It’s also a leveraged position, since borrowing the stock is typically free and selling it generates cash. In the example above, you start with $0 and end up with $100 per share in cash and a corresponding $100 per share in debt. In theory, you can short an infinite amount of stock. In practice, you are limited by both margin requirements (debt to equity ratio), and the fact that the market would start moving lower to account for the sudden influx of stock for sale. However, even small moves in price can have a huge influence on the profit or loss of a short sale, since you can turn a small amount of cash into a large short position.
The thing about short sales: the most the stock can go down is to zero, but there’s no limit to how high it can rise. So, you have limited upside with unlimited downside.
It’s also a leveraged position, since borrowing the stock is typically free and selling it generates cash. In the example above, you start with $0 and end up with $100 per share in cash and a corresponding $100 per share in debt. In theory, you can short an infinite amount of stock. In practice, you are limited by both margin requirements (debt to equity ratio), and the fact that the market would start moving lower to account for the sudden influx of stock for sale. However, even small moves in price can have a huge influence on the profit or loss of a short sale, since you can turn a small amount of cash into a large short position.
If we want to be complete, the alternate situation is that the stock went up. Maybe $1000, maybe $1000000, and now we have lost money. Maybe quite a lot of money, the sky's the limit.
Short selling is not for the faint of heart.
Short selling is not for the faint of heart.
Yeah, short selling is scary: limited upside, unlimited downside. I've been tempted to short some stuff, but have always resisted, because the normal adage of "don't bet anything you can't afford to lose" doesn't apply.
EDIT: This is not the whole truth; see the replies below. You can essentially buy insurance to limit that downside (via a call option), or put up money that you lose if the shorted stock rises above a certain price (via a margin). I am not a lawyer or a financial advisor. I'm just some internet person.
EDIT: This is not the whole truth; see the replies below. You can essentially buy insurance to limit that downside (via a call option), or put up money that you lose if the shorted stock rises above a certain price (via a margin). I am not a lawyer or a financial advisor. I'm just some internet person.
I don't think you can actually have the "unlimited downside" at least as a casual investor.
Nobody trusts you to be able to pay up for the "unlimited downside", so when you short stock, you are required to provide some collateral. For example USD or other stock held in your trading account. When the price of the stock you borrowed rises enough to match your collateral, you need to either provide more, or it gets used to buy the stock and repay the stock debt. You lose your entire collateral but don't get stuck with unlimited debt.
This limits the amount you can lose in total - but actually makes losing some amounts more likely. If you short a stock, but it goes up for a brief while before dropping - then you can still lose your investment at the peak even if you were correct in the long term.
Nobody trusts you to be able to pay up for the "unlimited downside", so when you short stock, you are required to provide some collateral. For example USD or other stock held in your trading account. When the price of the stock you borrowed rises enough to match your collateral, you need to either provide more, or it gets used to buy the stock and repay the stock debt. You lose your entire collateral but don't get stuck with unlimited debt.
This limits the amount you can lose in total - but actually makes losing some amounts more likely. If you short a stock, but it goes up for a brief while before dropping - then you can still lose your investment at the peak even if you were correct in the long term.
In practice there is never unlimited downside. You should pair your short with a call option at the very least, so your downside is easily limited.
3. 1 month passes. The stock goes up.
You HAVE to buy the same amount of stock, but for $150.
You HAVE to return the stock to the person you borrowed it from.
You lost $50 per stock.
You HAVE to buy the same amount of stock, but for $150.
You HAVE to return the stock to the person you borrowed it from.
You lost $50 per stock.
That's not quite right. You can hold a short position for as long as you want. There is no contract saying you have to close the transaction in 30 days. In that sense the otherwise excellent analogy provided isn't accurate (which isn't a problem, it's meant to be a simplification).
What does happen if the stock goes up is that your brokerage company will ask you to put up the delta. In other words, if it goes from $100 to $110 you'll be required to deposit the equivalent of $10, the delta, times the number of shares you shorted. If you shorted 1,000 shares you'll have to deposit $10,000 for every $10 of upwards movement in the stock price. If you have long (traditional stock buying) positions in your account your broker might actually sell those automatically to cover this delta.
The other important point is that this is a loan. Which means you will pay interest on the funds, in this hypothetical $100,000. The interest charged can vary. If, for the sake of an example, we assume 5% simple annual this means $5,000 per year or just over $400 per month.
I used to day trade (about 20 years ago) and would use shorting multiple times per day. I am not sure I would consider shorting for long term (> 1 day) positions. As many have said, the potential for loss is great.
What does happen if the stock goes up is that your brokerage company will ask you to put up the delta. In other words, if it goes from $100 to $110 you'll be required to deposit the equivalent of $10, the delta, times the number of shares you shorted. If you shorted 1,000 shares you'll have to deposit $10,000 for every $10 of upwards movement in the stock price. If you have long (traditional stock buying) positions in your account your broker might actually sell those automatically to cover this delta.
The other important point is that this is a loan. Which means you will pay interest on the funds, in this hypothetical $100,000. The interest charged can vary. If, for the sake of an example, we assume 5% simple annual this means $5,000 per year or just over $400 per month.
I used to day trade (about 20 years ago) and would use shorting multiple times per day. I am not sure I would consider shorting for long term (> 1 day) positions. As many have said, the potential for loss is great.
The mechanics are that you loan shares, sell them at the price you think is too high, buy them at the lower price, then hand those cheaper shares back.
The argument for doing so is that humans err in favour of optimism -- ie, that prices will rise. But you can make money on the market moving either way.
Looking on it as a total outsider with limited knowledge, it seems like a fascinating niche in the financial world. But I imagine it is also even more stressful than betting on the price rise, because you're more often going to be outside the pack.
The argument for doing so is that humans err in favour of optimism -- ie, that prices will rise. But you can make money on the market moving either way.
Looking on it as a total outsider with limited knowledge, it seems like a fascinating niche in the financial world. But I imagine it is also even more stressful than betting on the price rise, because you're more often going to be outside the pack.
Kostolany became rich shorting. He wrote the worst of being a short-seller is that you are earning a lot of money while all your friends are losing it. You have to keep a low profile because everyone looks at you as the cause of their loses.
It is a lot more stressful because if you bet on the rise, the most you can lose is what you paid for the stock. Your loss potential with short selling is unbounded.
"Short selling" is the process of selling something you don't have, promising to deliver later, on the basis that you expect the price to go down. Then, later, when someone requires you to deliver the items you sold them, you buy them at the current market price and deliver them.
If the price has indeed gone down then you win. Problem is, the price may have gone up, and now you have to buy at a higher price, so you lose. The worst part of this is that the loses are unbounded, since the price rise could be arbitrarily large.
In practice it's not a problem, some you win, some you lose, and you are effectively betting on price market movements.
You can now deal with options. So when you promise to sell someone something in the future at price X, they have the option in the future of taking you up on that. If the price of X has gone down then obviously they will go and buy it directly, but if the price has gone up then they come to you and demand that you supply at the agreed price. In return for this option, they pay you when the deal is strike. Thus you are selling them the option of buying at a price.
Similarly you can sell them the option to sell you something at a price. These options are derivatives from the original concepts of buying and selling at given prices.
There's more, but I'll stop, not least because that's pretty much all I know.
If the price has indeed gone down then you win. Problem is, the price may have gone up, and now you have to buy at a higher price, so you lose. The worst part of this is that the loses are unbounded, since the price rise could be arbitrarily large.
In practice it's not a problem, some you win, some you lose, and you are effectively betting on price market movements.
You can now deal with options. So when you promise to sell someone something in the future at price X, they have the option in the future of taking you up on that. If the price of X has gone down then obviously they will go and buy it directly, but if the price has gone up then they come to you and demand that you supply at the agreed price. In return for this option, they pay you when the deal is strike. Thus you are selling them the option of buying at a price.
Similarly you can sell them the option to sell you something at a price. These options are derivatives from the original concepts of buying and selling at given prices.
There's more, but I'll stop, not least because that's pretty much all I know.
"Short selling" is the process of selling something you don't have, promising to deliver later, on the basis that you expect the price to go down.
Finance 101: You've just described a naked short, which is illegal in the US. You are required to cover the position.
Finance 101: You've just described a naked short, which is illegal in the US. You are required to cover the position.
I stand corrected. Perhaps then you can clarify how one can "sell short" if one doesn't initially own any of the product. Someone else has said that you borrow it. But if you then sell it you are selling something you don't own, so that is also surely illegal. And if not, it amounts to the same thing.
So it seems that when you don't initially own any of the product, the only way to "sell short" is to promise to buy it later which is still selling something you don't have.
Unless it really is a case of persuading someone to "lend" it to you, and then selling that, so you are selling something you don't own, and someone else is trusting that you'll return it.
Is that right?
So it seems that when you don't initially own any of the product, the only way to "sell short" is to promise to buy it later which is still selling something you don't have.
Unless it really is a case of persuading someone to "lend" it to you, and then selling that, so you are selling something you don't own, and someone else is trusting that you'll return it.
Is that right?
You must have the funds to borrow. Shorting is risky, even more so going naked. Which is why its been illegal since 2008. In practice, professionals use covered call options to manage their risk.
The standard thing everyone understands is you buy a stock S1 at time t1 and sell it later at t2 (let this be S2). The difference (S2 - S1) is your profit. You are hoping the stock price goes up. If it drops you lose money.
Time(t) : ---buy(S1)------------------sell(S2)----->
In short selling, the buy's and sells are reversed, so you are hoping the stock price drops.
Time(t) : ---sell(S1)-----------------buy(S2)------>
Notice that if the stock price drops S2 - S1 is positive. Conversely, if the price rises you lost money.
There are other technical details, but this is conceptually an easy and accurate enough way to think about it.
Time(t) : ---buy(S1)------------------sell(S2)----->
In short selling, the buy's and sells are reversed, so you are hoping the stock price drops.
Time(t) : ---sell(S1)-----------------buy(S2)------>
Notice that if the stock price drops S2 - S1 is positive. Conversely, if the price rises you lost money.
There are other technical details, but this is conceptually an easy and accurate enough way to think about it.
I understand short selling, but the guy in this story says he's been shorting Tesla for years. In that time, the stock as done nothing but go up, AFAIK. How can he afford to still be shorting? As I understand it, a short position is not something you can hold indefinitely... there's a point in time where you need to provide the shares.
Serious investors don’t typically trade in “naked” shorts. They usually cover the downside risk with an “at-the-money” call option (the right to buy shares at the current trading price). If the price goes down by an amount that exceeds the premium of the option, then they make money. If the price goes up, then they only lose the option premium, because they can use the call to re-buy the shares to return.
You can either run this strategy repeatedly, using 3-month options, or buy extremely long-term options and keep it open for as long as the options last.
You can either run this strategy repeatedly, using 3-month options, or buy extremely long-term options and keep it open for as long as the options last.
... also, a short sale doesn’t have a time limit. You can be short as long as you want. However, if prices go up, then the debt in your margin account also goes up, and you might get a “margin call” - either deposit more capital, or close out some leveraged positions.
Margin calls are the nightmare scenarios for short sellers, since they can force you to buy out at the worst possible time.
Margin calls are the nightmare scenarios for short sellers, since they can force you to buy out at the worst possible time.
As long as you meet the collateral requirements of whoever is lending you the shares, you can be short for as long as you like really.
You just buy a new short position. Also you can have a short position lasting a minute, an hour, a day, a week, a month.
(typically a broker will insist you have sufficient collateral period to indicate you can fulfil the short position).
Like a gambler, the next hand is always going to win.
short and long are both "buy low, sell high"
with long you buy, then sell.
with short you sell, then buy.
with long you buy, then sell.
with short you sell, then buy.
Basically you are selling something you don't have.
I read the entire article and didn't see anything about crucibles.
crucible
noun cru·ci·ble \ ˈkrü-sə-bəl \
2: A severe test
noun cru·ci·ble \ ˈkrü-sə-bəl \
2: A severe test
That's a pretty terrible article title, the mods should consider changing it from "Tesla Is Facing a Crucible" to e.g. “Tesla’s Make-Or-Break Moment.” which was the much better title of the article this article is based around.
I cannot tell if it was titled this to add an air of mystery or trying to be too clever for its own good, but it is pretty shoddy either way.
I cannot tell if it was titled this to add an air of mystery or trying to be too clever for its own good, but it is pretty shoddy either way.
Crucible isn't a super common word, but it's not a super uncommon word either. It means "a severe test where many things combine to influence the end result". It is an entirely correct word to choose for this situation.
The Model 3 seems like it was premature. It gets mediocre reviews ( https://www.caranddriver.com/tesla/model-3 ), they have 180,000 orders, and they're fulfilling them at about 3200 a month, i.e. 4.6 years to satisfy the current backlog. For scale, Toyota sold about 32,000 Camrys a month last year just in the US. Heck, BMW sold about 34,000 3-series a month.
Tesla should have stuck to high-end markets. It looks like their foray into mass production will end badly.
Tesla should have stuck to high-end markets. It looks like their foray into mass production will end badly.
And that's where some people were predicting Tesla would stumble. There are dozens of boutique high-end car manufacturers. Ferrari, etc. Price is not really too important for buyers of those cars -- in fact it can be part of the attraction (a Veblen good).
Making "mainstream" cars targeted at middle-class buyers is an entirely different thing. Sales price is a huge factor, and at that volume saving a dollar or two on any given component is something you spend time trying to do. Optimizing the manufacturing process is also critical. Chevy and Ford and Toyota know how to do all that. Tesla doesn't, yet.
Making "mainstream" cars targeted at middle-class buyers is an entirely different thing. Sales price is a huge factor, and at that volume saving a dollar or two on any given component is something you spend time trying to do. Optimizing the manufacturing process is also critical. Chevy and Ford and Toyota know how to do all that. Tesla doesn't, yet.
Tesla is another "solution looking for a problem" type of company. They make nice cars but the electric engine concept has yet to provide a real benefit over combustion. (They say less solution but that's not really true is it?)
Another concept looking for a problem is crypto; as the only problems crypto really solves are the ones faced when doing illegal transactions or hiding money.
Another concept looking for a problem is crypto; as the only problems crypto really solves are the ones faced when doing illegal transactions or hiding money.
They make nice cars but the electric engine concept has yet to provide a real benefit over combustion.
That comment has absolutely no merit whatsoever.
That comment has absolutely no merit whatsoever.
Less pollution from EV’s is real. https://www.ucsusa.org/clean-vehicles/electric-vehicles/life...
Benefits of an electric engine vs. ICE:
1. No oil changes. 2. Fewer moving parts, fewer repairs, longer life. 3. Instant acceleration. 4. Zero emissions. 5. Ability to be fully powered by renewable energy.
1. No oil changes. 2. Fewer moving parts, fewer repairs, longer life. 3. Instant acceleration. 4. Zero emissions. 5. Ability to be fully powered by renewable energy.
The medium-term future of the automobile industry is definitely in the electric engines and drivetrains. If you don't see that, you either live in some parallel universe or just don't understand the market at all. You're welcome to prove all of us wrong by shorting Tesla and all other elecric car companies.
Any real benefit besides being really fun to drive, mechanically simple, and not putting noxious gases in the air?
http://archive.is/wCQls
The WSJ article it refers to is called "Tesla’s Make-Or-Break Moment Is Fast Approaching":
http://archive.is/ucf9q
The CNBC article it refers to is called "Tesla employees say automaker is churning out a high volume of flawed parts requiring costly rework":
https://www.cnbc.com/2018/03/14/tesla-manufacturing-high-vol...