Tesla

[Craigy]

StarTrekDoc wrote:

Just addressing @burritos general question whether producing a unit of vehicle is anywhere close to profitability.  My over simplified answer is yes.

It’s like asking my cost of my salaried position as a primary care physician in the large institution is profitable to the wRVU that I bring in directly on a F2F visit.  There are so many variables to cost that one can easily say we a loss leader (get that one all the time) or if we’re really a benefit to the system.

It’s a durable good just like your refrigerator and washer machine and HVAC and home builders.

If you like the product, go buy it and enjoy it.

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At this point I would be worried that future warranty claims may not be fulfilled or that post-purchase service in general may be unavailable or difficult to come by.

[StarTrekDoc]

Just addressing @burritos general question whether producing a unit of vehicle is anywhere close to profitability.  My over simplified answer is yes.

It's like asking my cost of my salaried position as a primary care physician in the large institution is profitable to the wRVU that I bring in directly on a F2F visit.  There are so many variables to cost that one can easily say we a loss leader (get that one all the time) or if we're really a benefit to the system.

It's a durable good just like your refrigerator and washer machine and HVAC and home builders.

If you like the product, go buy it and enjoy it.

[jhenry]

My 2 cents: Regardless of how bullish somebody may be on Tesla, I don't think the expected gain in light of the expected (or historic) volatility justifies investing in the company by an amount larger than its % contribution to the domestic equities market. I am doubtful that even those who devote their entire careers to security analysis with a focus on a particular industry are able to consistently beat the market. (See https://amzn.to/2BjTwE6).

Certainly, contrary views make a market go round.

[Zaphod]

Tim wrote:

@startrekdoc,
Not once have I read Tesla’s financials or the Qtrly’s.
1) 20%’s is a cookbook number.
2) Investments don’t impact P&L
3) Building factories doesn’t impact P&L
4) R&D and screwups DO.
5) The technique is “proforma” excluding non-reoccurring items. If only this and that.
1,2,3, and 4 count. Don’t confuse reading a cash flow statement with an income statement. Solid investments, factories, R&D don’t scare investors. Cash burn and not covering S,G & A for operating profits does.
I remember some of Elon’s “tough mgt shoot for the stars”, 500k cars per year. Oops, production problems.
Cars on storage lots, closing the dealerships, suspending them. Yes volume is a problem. Elon hasn’t delivered consistently, that’s the bottom line. It hasn’t reached promised volumes. Possible, probable and likely is the investment risk. It’s been years that Elon pumps, right around the corner, but…. never hits it. Now it’s a credibility issue.

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Your suspicions are correct. They exclude many typical costs (r/d, etc..) and ignore the costs of the service centers and being your own dealer while recognizing the non discounted portion. It also allocates some supercharger costs to S, G, & A as "marketing", and funny lease accounting recognizing gross margin in first year then allocating losses to service and not revenue. Thats just the tip of the iceberg. They front load and pack the revenue side while excluding and moving costs normally associated with COGS to other areas, notably S,G,&A, services, etc...to come up with a good looking gross margin number.

Yet as they scale and sell more cars they lose more money, S, G, & A losses basically just rise in line with sales.

[Dont_know_mind]

Owning a Tesla if it goes BK could be like owning a SAAB or property which was under Realtyshares.

[Tim]

@StarTrekDoc,
Not once have I read Tesla’s financials or the Qtrly’s.
1) 20%’s is a cookbook number.
2) Investments don’t impact P&L
3) Building factories doesn’t impact P&L
4) R&D and screwups DO.
5) The technique is “proforma” excluding non-reoccurring items. If only this and that.
1,2,3, and 4 count. Don’t confuse reading a cash flow statement with an income statement. Solid investments, factories, R&D don’t scare investors. Cash burn and not covering S,G & A for operating profits does.
I remember some of Elon’s “tough mgt shoot for the stars”, 500k cars per year. Oops, production problems.
Cars on storage lots, closing the dealerships, suspending them. Yes volume is a problem. Elon hasn’t delivered consistently, that’s the bottom line. It hasn’t reached promised volumes. Possible, probable and likely is the investment risk. It’s been years that Elon pumps, right around the corner, but.... never hits it. Now it’s a credibility issue.

[StarTrekDoc]

Tesla has made profitable cars.  Margins on their cars are 20%+

The issue is that they made an awful investment in SolarCity and they keep expanding and growing the company to make more vehicles; and that takes capital investment --- can't make Model Y, Semi, and Powerwalls without factory expansions.

The primary cost of the EV that folk not Tesla can't control --- Battery costs.

That's why Tesla did what they did.  Build great fancy eye candy cars with huge profit margins and cache to get investors hooked and funding to build Gigafactory.  Secure the battery supply and development and SCALE to reduce costs to level where mass production of vehicles are feasible and profitable.   Build the modern cost efficient performance EV sedan with sustainable margins.   They got there -- at least from the manufacturing side, the plan has worked despite the growing pains of scaling production.

[burritos]

Are any ev vehicles worldwide profitable per unit? If tesla was a profitable ICE company first and then switched to EV(as other car companies are planning to do (so they say)) using the equity of the ICE arm of their company would people still be shorting them? Do the shorters all presume that EV is just a non starter? Cause I don't think anyone is making money per EV sold.

 

https://electrek.co/2019/02/08/gm-electric-car-profitable-next-decade/

 

GM doesn't think that their EV's aren't going to be profitable till early next decade which means till mid or late next decade. So it's ok for them to lose money now and we just presume the will make money later? By later next decade will GM be selling multiples of 100,000s of EV's per year? I you had a crystal ball and told me that tesla would be locking down that narrative by next decade, I wouldn't be surprised.

[Tim]

“They could be taken out piecemeal or for higher than anticipated if companies are trying to scoop other bidders ofc.”

Buyout would be doubtful because Tesla is a “problem child” that has had access to capital, so that’s not the issue. However, there is definitely a tremendous value that pieces would produce tremendous synergies with development plans. Patents, plants, batteries, engineering talent there is a ton that others would cherry pick for sure. Usually a buyout comes with “being able to fix a problem” or obtain synergies. Don’t see a large organization thinking they can integrate it or “fix it” if Tesla hits the market . It certainly would be interesting to see merging of two different “corporate cultures “.

[BCBiker]

Tim wrote:

@bcbiker,
Not sure the premise that the energy and automive industries are so inherently bad one should get angry sitting at a traffic signal. Yes, coal was the primary source of electricity and all types of comforts of life.
I agree we as a civilized nation can do better.
However, Elon’s personal stake is not “save the world”.
Money and fame.

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I understand their motive. I am not "angry" at them. Just feel we can do better as you say. I don't consider Elon a Messiah. It is hard to point to someone who has done more. I wish there were a dozen people like him who think big and execute.

[Tim]

@BCBiker,
Not sure the premise that the energy and automive industries are so inherently bad one should get angry sitting at a traffic signal. Yes, coal was the primary source of electricity and all types of comforts of life.
I agree we as a civilized nation can do better.
However, Elon’s personal stake is not “save the world”.
Money and fame.

[StarTrekDoc]

I'm a Lorax, and I love that EV and Solar both meet my financial and social goals and Tesla specifically my driving preferences.

ICE cars - tailpipe emissions accounts for 40% of pollution and the vast majority of household generated pollution.   Another 30% comes from electricity generation.   So going solar AND EV cars will in tandem improve emissions by massive factors.

The KEY though is affordability.  The masses care about #1 - finances, they vote and buy that way.  If it's not affordable---pass.   Solar become affordable to the masses over the past decade.  Result?   California is now moving to TimeOfUse billing and peak costs are now in the evening --because of SOLAR.  That's a huge impact and when folk start switching to TOU with those peaks and prices rise --- what's the best way to shift those usage to low times?   --- yep  Batteries.   -- Who's got them cheap?   Tesla.

Dovetail that with EV cars.   Tesla happens to build efficient good sports cars with good efficient and CHEAP BATTERIES.  That's the key to the masses.  and I'm happy they've achieved it to the point of being able to hit the Top 5 selling cars in California this past quarter.   That's impressive.  No American Company is doing that for any recent memory --- looking at you GM and Ford.  The price point looks right and let's see if the masses will adopt it in sustained manner.   That's Curve 3.

I don't care of Expensive High end eye candy cars that Tesla built early on.  They looked nice.  Like a Ferrari or Porsche -- not in my desired category nor the masses.  It's a niche and Tesla did GREAT in it building fantastic cars with high margins.  But the plan was ALWAYS to get to Curve 3.    The great high end cars were essentially the Proof In Concept to get funding to build Giga to allow for mass production of an affordable vehicle---Model 3.     .

I'm hoping more companies are able to get into affordable EVs, but none can do it in volume to date cause they didn't do Giga themselves.

The Model 3 has eaten the Entry Luxury MidSize segment.   That's not enough.   Model 3 needs to eat Camry's loaded segment and Toyota's Prius segment.   and it appears to be happening with the sales reporting.   That's curve 3

[Zaphod]

responded in other thread to keep it clean, but cant fight the masses too long.

[BCBiker]

Zaphod wrote:

BCBiker wrote:

@zaphod For me upside vastly outweighs the downside in my portfolio. Like @White.Beard.Doc my stock ownership hold strategy is at least partially a vote of support for the technology and that I want it to change the world for the better.  Tesla could fail, I lose this money but if ICE goes away I will be satisfied.  My goal is to never own another car so probably won’t ever buy a Tesla. I actually have never drove or rode in a Tesla but I’m glad others enjoy it. I bike to work every day and observe how ICE cars are used from the sidelines, usually 5-10X size necessary for the 1 passenger. When cars are lined up at a stoplight and soot pours out of the tailpipes it makes me sad/angry. And I know that that soot is lodged in all of our lungs (I’m a pathologist), mostly because these vehicles still exist. If not for Tesla, there would be no hope for the elimination of street-level smog, which is probably under-estimated for the effects it has on population health. If I lose a small portion of portfolio, so be it. I agree that it is a very emotionally traded stock and I admit that in myself. I guess one would expect it for a company that has potential to completely disrupt a major industry (cars) that feeds the arguably the most entrenched industry (oil). There are trillions of dollars at stake in success or failure of Tesla and we live in the age of covert anti-information. The things that @zaphod says could be completely correct. Although many arguments I have never seen and I even sometimes indulge in SeekingAlpha article written by the most belligerent Tesla Shorts. For example, I have never read anywhere else that there are perpetual negative margin concerns.  Perhaps when Elon says things that have a 50% chance of being true it is the rationale approach when the things the shorts say are similarly outrageous. What I like about Elon is that he has 100% of skin in the game and fights for his ideas and vision. He could have taken his >$100M windfall from Paypal and lived a happy life, but he didn’t.

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This is just emotional attachment. Buying any stock on the secondary market is not investing or helping the company in any way, including some vision.

You are frankly buying into a us vs. them mentality that really affects both sides strongly. This is a business and Elon Musk doesnt give two craps about the environment or he wouldnt be using a G6 to travel 25 miles in the city. This is simply a narrative. He has some skin in the game but he has already extracted billions from tesla and will be rich when it goes under no matter what happens to everyone else.

The only money at stake in Tesla is whatevers out there right now. If it fails the world goes on, the mission goes on. Everyone who cares about the environment doesnt just quit. Whats your stance on nuclear? Thats the biggest easiest move to do the most good, not expensive cars for rich people. Air pollution is serious, but tesla is not the answer and never was. You dont solve a global problem with a niche solution for the rich, thats ridiculous.

If you’ve never seen these arguments I dont know what to say theyre pretty basic and obvious. Theyve never made money outside of financial engineering, that is, when they did not have accountants or finance teams and they lumped all ZEV credits together for maximum stock reaction instead of recognizing them sequentially as they come. When you average them out, they never make money. Never. Even their 700M loss last qtr was tempered by 200M in credits. That can only go on as long as people are willing to fund them which has been and can go on for quite some time (see uber, etc…).

This constant us/them bs, and painting people with differing opinions as if they are villians working for the bad guys is simply narrative, and frankly propaganda. If you need propaganda then something stinks.

Everyone would be much better off to be as completely objective as possible in all walks of finance/etc…as they can. Impossible, yes, but a goal to strive towards nonetheless.

I do find it fascinating that even on this board which is more disciplined and emotionally controlled than 95+% of people financially, that things like this (tsla stock) and debt pay down preference still highlight our irrationality and susceptibilities.

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I won't get ad hominem so will just say, do you think that everyone on the Tesla short side are acting under purely rationale equations? You don't think that the arguments Tesla short make are at all emotional? The Tesla shorts have an us v. them ethos and read the news with profound confirmation bias as well.  The bringing up of Elon's private jet is a perfect example. If an executive has to be somewhere it is rationale to spend money and pay environmental cost to get there. The perfectly emotional response with an us v. them mentality to that story is as you imply it -> Paraphrase: "Elon isn't doing this for the environment.  That is all just marketing/manipulation and he is doing it for the money and he is just extracting wealth from naive investors who he knows he is duping."

I am at least admitting that I do have an emotional attachment to a vision of the future that I find preferable to today. I don't claim that my opinions are 100% correct and that everything I read that supports my assumptions are correct.

A switch to all EV will be a serious change for ground level pollution. If you switch >80% of LA cars to EV and compare photos on a cloud free day from before and after, it will be different. We are not talking about a niche product if we are discussing total market preference changes. Solar and nuclear is part of the package for CO2 but I consider that a lesser concern for QOL at the moment.  My primary concern is the soot coming out tail pipes in everyone's front yard that means that all city dwellers live in a perpetual smog cloud. I honestly don't understand why environmental groups don't engage this argument instead of global warming? How is nuclear going to fix ground level pollution if everyone still has ICE?

If one thinks everyone else is emotional who hold a certain opinion, yet he, himself sees with perfect clarity, it is worth examining. I don't think anyone on this board who supports Tesla has said they can tell you what will happen to Tesla. On the other hand, what does the person do who predicts the end of the world on a certain day, and that day comes and goes? He modifies his argument and explains away that his calculations were a bit off but correct in the general direction. "Well they were able to raise capital but it was dumb the way they did it and that death spiral I was talking about, well it is going to happen because you see they can't reduce costs here and you know people will eventually realize that the cars are actually garbage... You see my point? I hope...?

BTW Kudos to you if you are right. I just put the probability this to be fairly low... say <10%

[Zaphod]

StarTrekDoc wrote:

Panscan wrote:

Charging for 30 min every 200 miles sounds not fun. That’s 30 min for every 3 hr you drive or perhaps less.

That’s for Generation 2.  Gen 3 gets it down to 20minutes.  And the next will be even faster.   Most reasonable folk will drive 3 hours and take a break and stretch.   Others can be DVT seeking long haulers and do 3+hours to empty tanks, but most travelers will stop every 3 hours.  There’s a reason for the placement of the locations of chargers.

With range of 300 miles, we comfortably get out and back to home on day trips without need of refueling outside of home base.   The efficiency and range and cost all will continue to drop as technology improves on this in really only its 2nd-3rd generation and already consistently outperforming ICE technology in:  performance, energy efficiency, and now cost.  The last leg is for infrastructure for those with distance travel needs.

We’re past curve 1 —early adopters and curve 2 – mass production.   Now it’s the interesting part to curve 3 –  mass adoption.    You can do this for any early tech.  eg: TRS-80,  Apple II, iMac.

Legacy manufacturers are burdened with needs to satisfy the folk today.  Tesla wasn’t burdened with that and pushed the envelope and glad they did.  The Tesla 3 is a wonderful fun drive that really does make any upper person looking at a car that’s Camry+ to wonder why NOT consider it seriously as their primary vehicle.

With the Model Y coming 2020, US masses really with be served and I do hope that there’s more competition from the rest of the industry to push the world to Curve 3.

Click to expand...

Recently and unfortunately did 2000 mi drives twice. One with family, and one without. Its much easier to crush it by yourself of course. In order to max drive time I started early and tried to drive as far as possible, I also timed fill ups, etc...Its shocking how hard it is to drive long without stopping. Impossible with a family you want to keep relatively happy.

What was the most shocking was how long a fill up takes. Even if right off the exit and in/out only gas, usually 10 mins easy. Thats break neck speed with everything going right for you location, open, etc....Averages were nearer to 20 mins. Couldnt believe it.

I dont like driving enough maybe, but those long stretches are terrible. For the DVT issue I think cruise control is key, allows you to keep legs mobile and pump those calves, etc....

I would love to see the second gen roadster, looks and would be amazing. They should have stayed more niche and produce these amazing vehicles.