Waiting4M3
Active Member
And the Founder Series Roadster costs <20% of a Bugatti, and Tesla is probably going to have a fat margin on it
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Waiting4M3
Active Member
Another possibility is that M3 battery module bottleneck actually lead to them coming up with a new production automation design that is 3x the throughput of the design used by the supplier, and the cost reduction in battery pack is larger than Tesla originally anticipated even 6 months ago.
I think the simple answer is that the Roadster will have something like 50% margin, while the Semi will have something like 10% margin. Plus the Semi will likely be made out of steel.
At 60 USD/kWh (plus margins); what you're paying for is the material costs...
I'm thinking Tesla is confident they'll be able to commercialize lithium sulphur or something similar. That would mean no more expensive Nickel or Cobalt.
Waiting4M3
Active Member
Semi may be 10% margin, but if it lead to recurring 7c/kWh megacharger revenue, and if Tesla can make 1c/kWh, 1 million miles * 2kWh/mi * 1c/kWh, that's another $20K, and 10% of the price of the semi.
Interesting, Lithium Sulfur batteries uses a boron nitride nanosheet, it gives them ultra high cycling ability. And guess who has 72% of world's boron reserve, Turkey. Elon was just in Turkey...
mmd
Active Member
The long range price was announced only recently, when the first 30 production M3s were delivered on July 29th. That's not too long ago.There is one thing you forget: The Model 3 Price was what Tesla expected the battery pricing to be at the time of introduction, everyone knew that the LR will be a better margin model as the 35k was the hard thing to do.
Now the Semi is of course priced with the battery prices start of 2020 in mind, maybe even mid 2020. So while I do understand that you have to do your utmost to make them look bad, you failed quite miserable there
The funny thing is that Elon figured out the battery pricing just last week right after the truck reveal, and felt obligated to announce it right away, instead of keeping the savings to boost profits. If Tesla really had such foresight and cost control, it won't be losing over $600M a quarter selling its high margin cars.
That is the biggest puzzle for me. Elon and the bulls say, Tesla will soon be producing 500k-1M model 3 a year at $42k ASP with 30% margin. That's a massive $9.5B gross profit a year. Yet we don't hear a peep about model 3 anymore. Now Tesla is chasing after crumbs in the low margin, low volume semi business that needs another big round of capex. It begs the question, does this guy look like prepping for 500k-1M car sales in the near future? I think not.
Price your goods not at cost but at what the market is willing to pay.
jeewee3000
Active Member
Wrong assumptions you made:
1) the semi business is low volume
2) the semi business is low margin
We don't know the cost for TSLA to produce the semi, so we don't know the margin. Period.
bambam4171
Member
Again, fundamental misunderstanding of financial realities. They don't lose money selling cars. They lose money because of heavy investments that are concurrently ongoing. Examples? One of the largest and still fast expanding charge network, R&D for Batteries, 3 new cars (Roadster, Y, Pickup), Tech like FSD, Gigafactory expansion plus some other bits and pieces. It should be pretty clear to anyone that all this cannot be funded with 2 different cars being sold at low volume.
Just take a short look how the biggest car manufacturers from germany all agree that they cannot afford to build a gigafactory. And that is just one little bit of Teslas investment into the future.
No, they do lose money selling cars, currently. Though only when it comes to the Model 3. I would be surprised if the Model 3's sold now don't have several hundred percent of negative margin. But this is just the effect of using a production line designed for 5000+ cars per week to produce more like 50 cars per week. It's like using a massive container ship designed for 5,000 containers to carry 50 containers. Of course you'll be losing ridiculous amounts of money.
This will pass. Production will likely come too late in Q4 for the Q4 numbers to look good, but Q1 should be quite good.
I have no doubt Tesla will be at more than 200k Model 3's per year at some point in 2018 (hopefully Q1). Already at that point, the Model 3 program will be quite profitable. And then Tesla will scale from there.
I don't see the Semi or Rodster as diversions at all. I don't think Tesla/Musk would have even gone through with the Semi/Roadster reveal if the Model 3 wasn't back on track. Musk would still be at the Gigafactory, trying to fix things. And Tesla needs to plan both for the long term and the short term. These few weeks are about the long term. And that's fine. We still don't have a guidance for 2018, so anything that tells us what Tesla is planning is good.
I'm currently not impressed by the economics of the Semi, from Tesla's perspective, but Tesla does have two years to convince me. If they say in a few months that they've made very promising advancements on lithium sulphur, and they have used prototype cells in the Semi and Roadster, I'd be on board. If Tesla doesn't have the tech yet to make the Semi work, and it's pushed back a few years, that's okay too. Tesla could just keep focusing on the Model 3 and soon-ish the Model Y.
bambam4171
Member
Interesting, how do you know they lose money selling cars? Where do get this info?
ValueAnalyst
Closed
Doing math is simple.
Understanding when doing the math makes sense, is hard.
You take the cost of current M3 production line and divide by the number of cars produced to date. You get some number X that is way higher than the price of a single M3.
You conclude that Tesla is losing money with every M3 produced.
Disappointed cat is disappointed...
ValueAnalyst
Closed
A difference of $30K for 200 miles of range. Since the ranges are quoted at fully loaded weight, I'm assuming it's close to the upper range of 2kwh/mi consumption that Tesla told us, so the delta is 400kwh of battery, which is $75/kwh
Edit: Compared to M3, Tesla charges almost $360/kwh ($9K for ~$25kwh extra) for LR vs SR.
Does anyone have any idea why the two figures are so different?
Is it because M3 is being produced in 2017 and Semi in 2019/20?
bambam4171
Member
Agree, there is always an angle that will make a given situation look bad, one just has to look hard enough.
The Semi pricing is impressive. I did expect a much higher number given the astounding specs.
My thoughts are that the Truck market will be taken over quickly and Diesel Trucks very much on the defense and hard to justify for anybody who invests. We may experience a really very high reservation number and a fast take over of that market segment.
I wonder how the GM looks like for the Semi though. EM could have taken a higher price point for sure but obviously there is enough flexibility.
A couple of effects may come into play to make this Price possible. I don't want to speculate but do not believe they are calculating future and assumed improvements in Batterie costs or production improvements in without being very much certain that they will indeed kick in.
Its great news once again as the "disbelieve" we will experience the next days from the industry is another positive indicator for real disruption. I do imagine we will see a lot of press coverage the next days and weeks claiming that Tesla will lose money with every truck sold in the future. A ridiculous assumption....
My thoughts are that the Truck market will be taken over quickly and Diesel Trucks very much on the defense and hard to justify for anybody who invests. We may experience a really very high reservation number and a fast take over of that market segment.
I wonder how the GM looks like for the Semi though. EM could have taken a higher price point for sure but obviously there is enough flexibility.
A couple of effects may come into play to make this Price possible. I don't want to speculate but do not believe they are calculating future and assumed improvements in Batterie costs or production improvements in without being very much certain that they will indeed kick in.
Its great news once again as the "disbelieve" we will experience the next days from the industry is another positive indicator for real disruption. I do imagine we will see a lot of press coverage the next days and weeks claiming that Tesla will lose money with every truck sold in the future. A ridiculous assumption....
It's quite apparent from the Q3 Letter. Automotive gross margin was 27.9% in Q2 but dropped to 18.3% in Q3. What changed? Model 3 deliveries began. This means that you start calculating in depreciation of the production equipment and similar stuff.
In dollars, the drop was from 638 million to 442 million, or 192 million. Assuming 150 million of that is the Model 3, and factoring in that 222 Model 3 were sold at around 60.000 USD, the gross margin should be around -1126%.
They also basically say it in the letter:
"We expect Model 3 non-GAAP gross margin to reach breakeven by end of Q4, because of increased capacity utilization, and it should improve rapidly in 2018 to our target of 25%. Our recent production challenges may affect short-term costs, but they have no impact on our 25% gross margin target, since there has been no change to our projections for material, labor and overhead costs per vehicle."
If it will reach breakeven in the future, it is not currently at breakeven.
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