2017 Investor Roundtable:General Discussion

[TradingInvest]

I remember when 100% of GM cars were *delivered* with multiple defects.

So I'm not sure what the point of this article is, unless it's to point out that the *industry leader* in quality control, Toyota, still has 10% coming off the line with defects.

It's standard in a car review to document the defect rate at delivery, and I believe it's still normal to have a couple of factory defects on every car. Most of these defects are somewhere between minor and insignificant -- paint blemishes, typically. I am not hearing reports of *major* defects.

The point of the article is to paint a negative picture that Tesla has bad quality. It's part of the stock manipulation. "If they don't have bumpers at the moment, they just continue production and add bumpers later." There is nothing wrong about that. Reuters happily listed that as a quality issue.

A friend called me today said "I heard 90% of Tesla cars have quality issues." The article apparently worked.

 

[ValueAnalyst]

Roadster Reservations Poll

 

[generalenthu]

I'm skeptical for two reasons:
1) You can still reserve one of the 1000 Founders Edition Roadsters. Certainly the regular reservations will be more popular, but a ratio exceeding 45:1 is hard to believe. My guess is that 10-20% of reservations will be for the Founders, so based on that guess, since the Founders are <1k, the total reservations should be <5-10k.

2) If this employee didn't have the good sense to know the reservation count wasn't to be disclosed publicly, she's not the kind of person Tesla would be sharing sensitive information with. I highly doubt they email all their sales staff and say "hey we have 45k reservations, but don't tell anyone". There's no need for them to know, so they don't.

She might have been sincere in what she said, but she was probably confused. Maybe 45k is the number of California M3 reservations.

45k is how much you need to wire in for a regular roadster reservation after paying the initial 5K. Anyone remember the 4416 cell format for the Model 3?

 

[neroden]

Did you count this one : Dead Battery ?

Ooh, that's number five. In five years and >100,000 cars.

The thing is, this is a sufficiently low count that it's essentially immaterial. Tesla can afford to give perfect concierge service to this tiny number of people -- which might increase to as much as 50 people per year when Model 3 goes to 1 million cars per year! It won't even be visible on the P&L statement. In terms of Semis, this might be one person per year who they have to refund the money to due to a breakdown. Maybe less.

 

[mongo]

Ooh, that's number five. In five years and >100,000 cars.

The thing is, this is a sufficiently low count that it's essentially immaterial. Tesla can afford to give perfect concierge service to this tiny number of people -- which might increase to as much as 50 people per year when Model 3 goes to 1 million cars per year! It won't even be visible on the P&L statement. In terms of Semis, this might be one person per year who they have to refund the money to due to a breakdown. Maybe less.

well.. only if they combine all the semi packs into one. If they are independent, then odds of all packs failing go down by the 4th power.
edit:

 

[Yggdrasill]

Ooh, that's number five. In five years and >100,000 cars.

The thing is, this is a sufficiently low count that it's essentially immaterial. Tesla can afford to give perfect concierge service to this tiny number of people -- which might increase to as much as 50 people per year when Model 3 goes to 1 million cars per year! It won't even be visible on the P&L statement. In terms of Semis, this might be one person per year who they have to refund the money to due to a breakdown. Maybe less.

How about the dozens (hundreds?) of main contactor failures? And the DU issues from 2012-2015, where if you drove for long enough with weird noises from the motor, you would eventually grind down the splines of the motor shaft until no mechanical connection remained? Or what about all the 12V issues, where you simply wouldn't be able to start up the car?

Tesla is pretty good when it comes to serious faults, but the amount of faults is certainly greater than you indicate. 2012-2015 were pretty rocky. While newer cars are quite reliable. I don't know about any more common issues with newer cars.

 

[Bobfitz1]

Bobfitz1 said: ↑
A back of envelope calculation shows that selling each Semi is a much less profitable proposition for Tesla than selling 13 M3.
The 180K priced Semi will need a 1000 KWh battery. LR M3 at the moment needs a 75 KWh battery. So if you have 1 MWh of Mcells, that is enough for 1 Semi or 13 M3. But if we assume each will have a similar gross margin, say 20% to keep it simple, then the gross profit from 1 Semi is $36K. But gross profit from 13 M3/MY would be $130K (assuming avg price is $50,000). The gross profit to be made from selling 13 M3/MY is 3.5 times the profit from 1 Semi.
M

Are you forgetting the facts that when the Gigafactory is completed that batteries will cost a lot less. The prices for the M3 will be reduced accordingly, but the semi prices we have incorporate those reductions.

No, but I think you may have forgotten that JB Straubel is on the record a year ago saying there was a 30% reduction from MS/MX cell cost to those in M3. Those less costly cells are in the 3 today. Everyone expects that there will be additional cell cost reductions by time Semi goes into production. I don't doubt that Tesla's Semi pricing reflects that additional reduction in cell costs. Exactly what % further reduction and how much is due to further scale up of GF1 versus add'l improvement to cell chemistry (not Goodenaugh cells! ) isn't known for sure.

These 2 - 3 year off better cells will be in M3 and the Semu, It will be up to Tesla to decide if M3 sale prices will be lowered when the better cells are used or if they will just take the cost savings as higher profit. Maybe they split and do both.
Regardless, you are ignoring the point of the original post that the profit using 1 Mwh of cells for M3/MY would generate 3+ times the profit than using them in 1 Semi. Good postings today have established there may be far greater money to be made if Tesla can be the utility providing electricity to companies running Semis. My post only spoke to profits from vehicle sales.

I believe that the biggest challenges are building and trouble shooting the first phases of Gigafactory 1 and the first phases of the transition to the Goodenaugh cells.

The build and trouble shooting of first phase GF1 is going on as we speak and Musk's belief is they will be resolved by end of Q1. Therefore not such a big challenge. Tactical not Strategic. Mouse nuts compared to building dozens of GFs around the world.
Why even bother talking about the size challenge a transition of GF to Goodenaugh cells when it's not yet been proven they will work outside the laboratory and Tesla will move to them?

 

[neroden]

How about the dozens (hundreds?) of main contactor failures? And the DU issues from 2012-2015, where if you drove for long enough with weird noises from the motor, you would eventually grind down the splines of the motor shaft until no mechanical connection remained? Or what about all the 12V issues, where you simply wouldn't be able to start up the car?

Tesla is pretty good when it comes to serious faults, but the amount of faults is certainly greater than you indicate. 2012-2015 were pretty rocky. While newer cars are quite reliable. I don't know about any more common issues with newer cars.

I was specifically referring to on-road breakdowns. Almost all of the DU issues (which were actually universal, they happened to every single car with a drivetrain prior to a particular revision -- I had them) were caught *prior* to on-road breakdown, when the noises started; only two people, IIRC, broke down on the road with that failure.

I believe one or two people broke down with the main contactor failure. (Again, others reported the noise and had their packs replaced before breakdown.) I think they haven't replaced all of those yet, so that breakdown may still happen in some of the older cars.

Actually, although 12V failure would prevent the car from starting -- and I probably am not counting all of those because many may not have made it to the Internet -- even most of the 12V issues threw warnings and were fixed days *before* they prevented the car from starting. (I had the 12V problems, twice.)

Tesla's had lots of *faults* -- definitely -- but few *breakdowns*, and I think that's a very important distinction when we're talking about the Semi "no breakdown guarantee". There might be some sort of "call service when the weird noises start and the error lights come on" restriction in that guarantee!

I've had a major laundry list of things which needed to be replaced on my car. But I can't think of one which rendered it undriveable before the service techs got there. (The worst was the one which rendered it un*charge*able -- while not a breakdown that would probably be considered just as bad by a truck owner.)

This is an interesting distinction: it's one present in gasoline cars too, and I actually have had only a few "stop driving ASAP" breakdowns in gasoline cars -- where the "check engine" or "check transmission" light came on or the car stopped and refused to restart -- though I've certainly had plenty of "yah, you can keep driving until your service appointment" faults.

 

[dhrivnak]

I was specifically referring to on-road breakdowns. Almost all of the DU issues (which were actually universal, they happened to every single car with a drivetrain prior to a particular revision -- I had them) were caught *prior* to on-road breakdown, when the noises started; only two people, IIRC, broke down on the road with that failure.

I believe one or two people broke down with the main contactor failure. (Again, others reported the noise and had their packs replaced before breakdown.) I think they haven't replaced all of those yet, so that breakdown may still happen in some of the older cars.

Actually, although 12V failure would prevent the car from starting -- and I probably am not counting all of those because many may not have made it to the Internet -- even most of the 12V issues threw warnings and were fixed days *before* they prevented the car from starting. (I had the 12V problems, twice.)

Tesla's had lots of *faults* -- definitely -- but few *breakdowns*, and I think that's a very important distinction when we're talking about the Semi "no breakdown guarantee". There might be some sort of "call service when the weird noises start and the error lights come on" restriction in that guarantee!

I've had a major laundry list of things which needed to be replaced on my car. But I can't think of one which rendered it undriveable before the service techs got there. (The worst was the one which rendered it un*charge*able -- while not a breakdown that would probably be considered just as bad by a truck owner.)

This is an interesting distinction: it's one present in gasoline cars too, and I actually have had only a few "stop driving ASAP" breakdowns in gasoline cars -- where the "check engine" or "check transmission" light came on or the car stopped and refused to restart -- though I've certainly had plenty of "yah, you can keep driving until your service appointment" faults.

Sorry that is not my experience as I have been flatbedded twice due to electrical part failures. That is FAR higher than I ever had with an ICE.

 

[neroden]

Sorry that is not my experience as I have been flatbedded twice due to electrical part failures. That is FAR higher than I ever had with an ICE.

All right, you've just raised my count of reported cases to seven! Bad luck. :-(

 

[RobStark]

The gross profit to be made from selling 13 M3/MY is 3.5 times the profit from 1 Semi.

Tesla will likely sell over 13x kWh of energy and replacement packs to Semis rather than to M3.

I also think it will be more cost effective and profitable to refurbish Semis than M3.

 

[Yggdrasill]

I was specifically referring to on-road breakdowns. Almost all of the DU issues (which were actually universal, they happened to every single car with a drivetrain prior to a particular revision -- I had them) were caught *prior* to on-road breakdown, when the noises started; only two people, IIRC, broke down on the road with that failure.

No, at least in Norway, there was a period where they didn't have spare DUs, so they had to prioritize them for those who actually broke down, even if almost all the cars had grinding noises and clunking. That's when Musk got involved and airlifted a few hundred DUs to Norway. There were many people who experienced on-road DU breakdowns.

I believe one or two people broke down with the main contactor failure. (Again, others reported the noise and had their packs replaced before breakdown.) I think they haven't replaced all of those yet, so that breakdown may still happen in some of the older cars.

There was no advance warning, you'd just hear a pop and you'd be stranded. And "one" person? Seriously? That person would have to be Tesla-Bjørn, because he experienced it and was flatbedded. My impression is that dozens or hundreds of people have experienced this fault. It would have been more if they hadn't started preemptively replacing the bad batch of main contactors.

Actually, although 12V failure would prevent the car from starting -- and I probably am not counting all of those because many may not have made it to the Internet -- even most of the 12V issues threw warnings and were fixed days *before* they prevented the car from starting. (I had the 12V problems, twice.)

In 2013, it was extremely common for a Model S to be dead some morning a few days after delivery. Eventually they got a system in place to monitor for the fault and preemptively take action. (This may have been especially bad in Norway - Model S deliveries really only started going strong when winter was approaching, and the 12V batteries likely didn't appreciate the cold.)

Tesla's had lots of *faults* -- definitely -- but few *breakdowns*, and I think that's a very important distinction when we're talking about the Semi "no breakdown guarantee". There might be some sort of "call service when the weird noises start and the error lights come on" restriction in that guarantee!

I've had a major laundry list of things which needed to be replaced on my car. But I can't think of one which rendered it undriveable before the service techs got there. (The worst was the one which rendered it un*charge*able -- while not a breakdown that would probably be considered just as bad by a truck owner.)

This is an interesting distinction: it's one present in gasoline cars too, and I actually have had only a few "stop driving ASAP" breakdowns in gasoline cars -- where the "check engine" or "check transmission" light came on or the car stopped and refused to restart -- though I've certainly had plenty of "yah, you can keep driving until your service appointment" faults.

I've never broken down in a fossil car. Even counting all the times I've been a passenger, all the way up through my childhood. The Model X can't do better, but I hope it won't do worse.

 

[elasalle]

Tesla Disputes Report Of Numerous Defects On Production Line

Tesla responded to Reuters, saying the majority of its post-assembly defects are minor and are resolved in a matter of minutes. A spokesperson said Tesla has a rigorous process that requires all cars to pass more than 500 inspections and tests. Rework on cars after assembly reflects the company's commitment to quality, the spokesperson said.

"Our goal is to produce perfect cars for every customer," Tesla said in a prepared statement. "Therefore, we review every vehicle for even the smallest refinement."

 

[Yggdrasill]

No, at least in Norway, there was a period where they didn't have spare DUs, so they had to prioritize them for those who actually broke down, even if almost all the cars had grinding noises and clunking. That's when Musk got involved and airlifted a few hundred DUs to Norway. There were many people who experienced on-road DU breakdowns.

There was no advance warning, you'd just hear a pop and you'd be stranded. And "one" person? Seriously? That person would have to be Tesla-Bjørn, because he experienced it and was flatbedded. My impression is that dozens or hundreds of people have experienced this fault. It would have been more if they hadn't started preemptively replacing the bad batch of main contactors.

In 2013, it was extremely common for a Model S to be dead some morning a few days after delivery. Eventually they got a system in place to monitor for the fault and preemptively take action. (This may have been especially bad in Norway - Model S deliveries really only started going strong when winter was approaching, and the 12V batteries likely didn't appreciate the cold.)

I've never broken down in a fossil car. Even counting all the times I've been a passenger, all the way up through my childhood. The Model X can't do better, but I hope it won't do worse.

Thinking back - it helps you realize how far Tesla actually has gotten.

 

[RiverCard]

The article apparently worked.

It seems to have motivated the "bots".

 

[Reciprocity]

Bobfitz1 said: ↑
A back of envelope calculation shows that selling each Semi is a much less profitable proposition for Tesla than selling 13 M3.
The 180K priced Semi will need a 1000 KWh battery. LR M3 at the moment needs a 75 KWh battery. So if you have 1 MWh of Mcells, that is enough for 1 Semi or 13 M3. But if we assume each will have a similar gross margin, say 20% to keep it simple, then the gross profit from 1 Semi is $36K. But gross profit from 13 M3/MY would be $130K (assuming avg price is $50,000). The gross profit to be made from selling 13 M3/MY is 3.5 times the profit from 1 Semi.
M


No, but I think you may have forgotten that JB Straubel is on the record a year ago saying there was a 30% reduction from MS/MX cell cost to those in M3. Those less costly cells are in the 3 today. Everyone expects that there will be additional cell cost reductions by time Semi goes into production. I don't doubt that Tesla's Semi pricing reflects that additional reduction in cell costs. Exactly what % further reduction and how much is due to further scale up of GF1 versus add'l improvement to cell chemistry (not Goodenaugh cells! ) isn't known for sure.

These 2 - 3 year off better cells will be in M3 and the Semu, It will be up to Tesla to decide if M3 sale prices will be lowered when the better cells are used or if they will just take the cost savings as higher profit. Maybe they split and do both.
Regardless, you are ignoring the point of the original post that the profit using 1 Mwh of cells for M3/MY would generate 3+ times the profit than using them in 1 Semi. Good postings today have established there may be far greater money to be made if Tesla can be the utility providing electricity to companies running Semis. My post only spoke to profits from vehicle sales.



The build and trouble shooting of first phase GF1 is going on as we speak and Musk's belief is they will be resolved by end of Q1. Therefore not such a big challenge. Tactical not Strategic. Mouse nuts compared to building dozens of GFs around the world.
Why even bother talking about the size challenge a transition of GF to Goodenaugh cells when it's not yet been proven they will work outside the laboratory and Tesla will move to them?

Lets concede that the model 3 will be more profitable then the Semi. There is a set addressable market for that type of vehicle. This why Tesla is making an S/X and a Model Y at some point. Its not because its fun to make lots of different cars, its because the size of the market for each vehicle is finite. The Model 3 wont be the most popular vehicle Tesla could make. The Y and a traditional Pickup Truck would be more popular then the Model 3. So why not make them first? Because they cant barely make enough S/X as it is. This is why the Semi comes at an interesting time. I believe it is as much about offsetting dirty diesel as it is about establishing credibility with Truck people. Also, the Semi magnifies the economies of scale of both GF1 and GF2 in a way that no other vehicle platform can. The Model 3 nor the Y can drive the need for Solar + Battery + Vehicle packs more then the Semi. So for the price of 100,000 Semi's a year, Tesla can put 2 Gigafactories at 100% capacity in 2 years, about the time they are completed and up and running at full capacity. A gigafactory at max capacity is generating the absolutely maximum economies of scale that Elon has envisioned. I will throw in Fremont in that equation as well. This will be the model for future Gigafactories or maybe they will be called Terafactories by then because they will be making all 3 parts, cars, panels/tiles and batteries. Imagine an east coast factory the size of all 3 put together to make a million cars, trucks and semis. Now imagine them in several locations around the world, which each iteration running faster then the previous. There is zero point in building all those factories if they are not maximizing the economies of scale. And without the demand created by Semi's, they cannot fully maximize the economies of scale. Its like pure genius and people will understand why GF2 was required and not optional. a Million Semis will charge more at Megachargers then 34 million Model S3XY vehicles combined. And probably as much as 2-3x more then that because most of the charging will be at Megachargers instead of people charging at home in their garage most of the time. Use what ever scale you want, 100,000/Y Semi's are almost a complete Gigafactory worth of batteries and probably solar as well.

Putting aside which is more profitable, as you are correct, the model 3 will be more profitable, but will not command more total gross profit and will not help maximize the capex Tesla is investing into building all these factories. The Semi is like a force multiplier for the mission of Tesla as a whole as well. Each Semi will literally clean the air as they move through it.. ok maybe not.. but consumption from one Semi will offset more fossil fuels then 34 mid sized sedans.

 

[RiverCard]

Roadster Reservations Poll

Why bother?

"Romit Jitendra Shah - Nomura Instinet

Okay. And if I could ask, you said that the deposit balance for Model 3 strengthened. Can you give us what that actual balance was?

Deepak Ahuja - Tesla, Inc.

We don't give specific balance of – for deposits by car line. We just give the combined number, which you can see on our balance sheet for customer deposits."

Starting a poll on the "balance sheet [number] for customer deposits." would be far more meaningful, and the correct answer readily ascertainable. Last quarter it was $686 MM.

 

[RiverCard]

All right, you've just raised my count of reported cases to seven! Bad luck. :-(

Is this included in your count?

"During a test drive in a Model S 90D, the vehicle suddenly made a loud noise and sent a visual alert on the dashboard stating that there was a problem with “charging”. The Tesla employee giving the test drive made the driver park the car on the side of the road and all three (the driver, the Tesla employee and another passenger) exited the vehicle.

The Tesla Model S caught on fire only a moment later (pictured above), according to witnesses."


Tesla Model S catches on fire during a test drive in France

 

[BioSehnsucht]

Reuters is out with a very negative article on the Tesla S/X manufacturing process. Some of the claims seem far fatched, like a huge outdoor parking 'yard' with up to 2000 cars waiting for additional fixes. There should be some independent evidence of this but to my knowledge there is none. Sources are 9 current and former employees of which 5 were fired for cause. Still

Build fast, fix later: speed hurts quality at Tesla, some workers say

Sounds like pre-NUMMI Fremont, if anything.

 

[BioSehnsucht]

The M3 might still get a hud after the MS-MX.

The HUD on the Roadster prototype is very similar (but not quite the same - I was thinking simpler - just LEDs hidden in the vents, not actual screens) to what I had theorized as possible to implement after the initial Model 3 reveal and we saw that long skinny vent.

I felt vindicated that it became a thing, just sad it's not on the Model 3 (though it could be later... and if Tesla really wanted to be devious could have designed it for retrofit to the early models, if they were on the cusp of a S/X change to the 3/Roadster style vent with HUD, but wanted to keep up the "new features on top models first" mantra)