-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
RobStark
Well-Known Member
Really insightful article.
Looking at Texas for the Giga Factory?
REally? I have read elsewhere SpaceX is looking at Texas for building a facility as well.
I hope Musk can leverage those job creation engines into freedom to sell Teslas from a factory store in all of Texas from the TX Governor and Legislature .
Looking at Texas for the Giga Factory?
REally? I have read elsewhere SpaceX is looking at Texas for building a facility as well.
I hope Musk can leverage those job creation engines into freedom to sell Teslas from a factory store in all of Texas from the TX Governor and Legislature .
SebastianR
Active Member
I'm not so sure. After reading the article, I want to buy more TSLA - it seems as if all "industry sources" had only disbelief to offer. If you read the article, for every single aspect, they went through the following chain:
1) Getting Tesla from A to B was impossible.
2) They achieved it - they are at B now.
3) Now they want to go from B to C. That's impossible.
4) "Industry sources" say going from B to C will be very hard. Musk says it can be done, other experts don't quite believe it.
And there are so many items that they seemed to have missed: From the point of Tesla being to change transportation (i.e. one of the reasons to invest in Germany is exactly to stimulate some German competition), to using the car industry standard approach to retailing (did anybody ever see Tesla advertise on TV?), to other issues of scale-ability.
I'd say the article makes the "automotive experts" cited look rather foolish. History is full of statements that dispel the possibility of change.
Then there is cherry picking of numbers. They compare the hypothetical $3.5b investment to start a new car maker with the $795m cash in Tesla's bank account. This discards all the efforts Tesla has already spent and the objectives already fulfilled. I think it is very remarkable that Tesla has cash in the bank, no debt!
The fact that not every Chinese can park and charge an electric car is described as a hurdle to enter China. But MS is designed for premium segment, that was a market 1m cars in 2012 in China. They will find a way to charge their new EV.
IMHO this article illustrates the limited capability of experts to think outside their box.
Then there is cherry picking of numbers. They compare the hypothetical $3.5b investment to start a new car maker with the $795m cash in Tesla's bank account. This discards all the efforts Tesla has already spent and the objectives already fulfilled. I think it is very remarkable that Tesla has cash in the bank, no debt!
The fact that not every Chinese can park and charge an electric car is described as a hurdle to enter China. But MS is designed for premium segment, that was a market 1m cars in 2012 in China. They will find a way to charge their new EV.
IMHO this article illustrates the limited capability of experts to think outside their box.
artsci
Sponsor
"The Automotive News mission is to be the primary source of industry news, data and understanding for the industry's decision-makers interested in North America.Automotive News servers the community of the top executives of the auto industry -- vehicle manufacturers, their original equipment suppliers and franchised dealers -- plus others allied with the industry."
These are folks who's industry Tesla is disrupting, so it shouldn't be surprising that the article is skeptical of Tesla's future.
These are folks who's industry Tesla is disrupting, so it shouldn't be surprising that the article is skeptical of Tesla's future.
"If Tesla wants to be perceived as a viable automaker, they say, it has to play by the same rules as all automakers."
And there you have it. Apparently the established automakers are doing everything in the best possible way with no room for improvement. Tesla should clearly just do things the way they did, or just pack up and go home.
I don't know anything about standard accounting practices, but I don't think anyone is arguing that Tesla isn't making money on the model S, they have money in the bank, they've repaid their loans ahead of schedule. They may be investing in further infrastructure at a rate that exceeds the money they bring in through sales, but that isn't any deviation from what they have been saying they would do all along.
There are challenges of course, but doing what Detroit did isn't always a good plan.
And there you have it. Apparently the established automakers are doing everything in the best possible way with no room for improvement. Tesla should clearly just do things the way they did, or just pack up and go home.
I don't know anything about standard accounting practices, but I don't think anyone is arguing that Tesla isn't making money on the model S, they have money in the bank, they've repaid their loans ahead of schedule. They may be investing in further infrastructure at a rate that exceeds the money they bring in through sales, but that isn't any deviation from what they have been saying they would do all along.
There are challenges of course, but doing what Detroit did isn't always a good plan.
SebastianR
Active Member
In other words: "You should try to do all these things that didn't work for us in producing a viable electric car - then you will see how it is impossible to produce a viable electric car...."
MartinAustin
Active Member
Ford Production
Ford did more or less exactly what Tesla is planning, in terms of production expansion, between 1909 and 1916.
Saying it's "unprecendented" is very cool to read, but not really accurate.
Ford did more or less exactly what Tesla is planning, in terms of production expansion, between 1909 and 1916.
Saying it's "unprecendented" is very cool to read, but not really accurate.
Automotive News
This part of the article made me laugh:
QUOTE: "In interviews with Automotive News, top automotive executives dispassionately analyzed Tesla's enormous strategic and tactical hurdles. Speaking on condition of anonymity, because they were commenting as individuals and not as representatives of their companies, the executives pieced together what Tesla would have to do to succeed.
These executives don't wish to see Tesla fail. They respect and admire what Musk has done. But each expressed concern that the auto-maker's ambitions may overreach its abilities."
---------
So speaking anonymously, they spread fear, doubt, and uncertainty about a company that they are terrified will succeed and blow away their existing business model and put them out of work.
This part of the article made me laugh:
QUOTE: "In interviews with Automotive News, top automotive executives dispassionately analyzed Tesla's enormous strategic and tactical hurdles. Speaking on condition of anonymity, because they were commenting as individuals and not as representatives of their companies, the executives pieced together what Tesla would have to do to succeed.
These executives don't wish to see Tesla fail. They respect and admire what Musk has done. But each expressed concern that the auto-maker's ambitions may overreach its abilities."
---------
So speaking anonymously, they spread fear, doubt, and uncertainty about a company that they are terrified will succeed and blow away their existing business model and put them out of work.
RobStark
Well-Known Member
The information from Elon/Tesla was something I had not read before just speculation. Elon said most funds needed for future expansion could be generated internally. The future model introduction schedule. That Elon does not believe a dealer network is necessary for the next phase of expansion, he said in the past one may be necessary at some point. Evidently not in the next 6 years. Looking at TX site for Giga Factory. Addressing battery pack longevity directly in comparison to LEAF. We have had other Tesla executives reference 500k plus unit expansion plans but this is the most direct from Elon I can remember.
The continued and persistent disbelief by the legacy ICE automobile industry that Tesla is a viable competitor. GM set up a commission to study Tesla and others have made similar noises but this tells us they will be unprepared for Tesla's onslaught. Bad as a fan of EVs but good as a Tesla investor.
callmesam
Member
I don't know where they got this nugget of information:
"People who buy a $35,000 car drive it differently than people who drive a $100,000 boutique car," said a veteran executive of Detroit and Japanese companies. "It will be a daily driver. That's an entirely different expectation."
I think the majority of Model S owners use their car as a daily driver and is not a "boutique-car" that just sits at home. Maybe for some of those in business that are constantly traveling and therefore not home, but that is probably the exception rather than the norm.
There were a few valid points from the "industry experts", but it does seem that they are overlooking the fact that Tesla is NOT the same as any other automotive start-up and has some very distinct advantages. Mainly, that Elon Musk is heading it up. Building cars and their operating infrastructure isn't rocket science, but Elon's other company is and he seems to have been able to figure that out. No wonder Elon has the moxie to state:
Musk doesn't see Tesla requiring any "eureka" moments.
"Destiny is in our own hands," Musk said. "If we don't succeed, it's our own fault."
We believe, Elon. We believe.
"People who buy a $35,000 car drive it differently than people who drive a $100,000 boutique car," said a veteran executive of Detroit and Japanese companies. "It will be a daily driver. That's an entirely different expectation."
I think the majority of Model S owners use their car as a daily driver and is not a "boutique-car" that just sits at home. Maybe for some of those in business that are constantly traveling and therefore not home, but that is probably the exception rather than the norm.
There were a few valid points from the "industry experts", but it does seem that they are overlooking the fact that Tesla is NOT the same as any other automotive start-up and has some very distinct advantages. Mainly, that Elon Musk is heading it up. Building cars and their operating infrastructure isn't rocket science, but Elon's other company is and he seems to have been able to figure that out. No wonder Elon has the moxie to state:
Musk doesn't see Tesla requiring any "eureka" moments.
"Destiny is in our own hands," Musk said. "If we don't succeed, it's our own fault."
We believe, Elon. We believe.
Yes, I think they crossed this bridge in going from the Roadster to the Model S. It's a fair criticism to level against the Roadster, but against a 7 seat hatchback? Come on. I drive my car every day--and it replaced a station wagon.
Yes, that is pecularly true since many wealthy Chinese are in the government. The government has shown the ability to make rapid change. How about free charging at party headquarters. LOL.
Seriously...I have driven my wife's car exactly two times and very begrudgingly since I got my Model S 10,000 miles ago. And she drives my car more than hers now! If someone is not using it as their daily driver, I can't imagine why--either why they bought the car that obviously wasn't a fit, or why they don't love their car as much as they should. As my wife frequently says, "I never understood before when people talked about enjoying driving." My neighbor's kid is always looking for an excuse to ride in my car...that never happened before, and doesn't in most daily drivers...that's what makes this car so great is that it is an exotic, beautiful daily driver that's also cost-effective from a maintenance and "fuel" perspective, environmentally sound, roomy, etc. no compromises other than range, which is 80% addressed for me (Texas) by superchargers.
This is the precisely the reason I wonder why a few owners here in this forum who speak so highly of Model S have actually driven less than 1000 miles in over 7 to 8 months of ownership. How is that possible ? Something doesn't smell right in that scenario...
My jaw dropped when I learnt that one of the famous posters in this forum from Texas, who had over a 1000 posts in a short span of 3 to 4 months drove his P85+ for only 600 miles, before he sold it and apparently moved abroad.
My jaw dropped when I learnt that one of the famous posters in this forum from Texas, who had over a 1000 posts in a short span of 3 to 4 months drove his P85+ for only 600 miles, before he sold it and apparently moved abroad.
adiggs
Well-Known Member
For my own long term investment thesis regarding Tesla, I continue to read articles like this, but what I'm really looking for is an article written by somebody that clearly owns and drives EV's, and understands the nuances and how life changes when you own an EV, to write something like this. That will be my first clue that the stock run, and possibly the company's run, might be coming to an end.
In the meantime, it's not the only thing I'm looking for, but as long as the negative and "balanced" articles are being written by people that demonstrate how little they understand of the EV paradigm, I rest comfortable in the idea that the revolution hasn't arrived yet.
My conclusion - not an insightful article. Rather a heavily slanted article revealing ignorance on a number of points. If the writing was truly neutral, and the ignorance was sourced from the industry sources, then all the better for TSLA (the company and stock), and all the worse for us as a species.
- - - Updated - - -
On the topic of cash and comparing back to the traditional auto industry, people aren't making nearly enough of Tesla's cash conversion cycle. Tesla purchases raw materials and receives income from the sale of a finished car at approximately the same time. Whether it's really -1 month or +2 months, it's a ridiculously fast cash conversion cycle relative to the rest of the automotive industry. Unlike the rest of the industry, the growth of the company funds the growth - there is no gargantuan and growing inventory to finance in order to support the growth.
Other companies have made a business model around optimizing their industries cash conversion cycle, and doing nothing else particularly well
- - - Updated - - -
The confusion around the "lease accounting" that Tesla has adopted in order to account for the 36-39 month repurchase guarantee is huge (and is yet another thing I am keeping an eye out for - when that starts being clear, and people have arguments using the reality and the troubles, ..). Tesla receives full cash for the sale up front, as its not really a lease (for those that elect to purchase so that they have the residual guarantee) - it's a financed sale with the loan provided by a bank. Tesla receives the full cash amount of the sale up front - I've read they also receive a finder's fee for putting bank and buyer together (as an auto dealer would receive).
Tesla then agrees to buy the car back between month 36-39, where a 3 year lease would be terminating, at a particular price. In the example in the article, the assumption that seemed to be made was that a) all cars Tesla has sold have that residual guarantee (they don't - I believe it's about 30%), and that b) the exercise of the guarantee would result in a loss to Tesla of 10%.
End result - Tesla as measured on cash is immediately positive on these leases. Tesla has adopted the most extremely conservative form of accounting for this arrangement that is unique in the industry. If anything, I would be making the case that the accounting is misleadingly conservative. I guess since it's misleading in my favor, my outrage is muted
Here's my guess, to go alongside of their guess, of what the resale market will look like when those 3 year residual guarantees start resulting in used cars coming back to Tesla. My guess is that there is a gargantuan pool of people that want desperately to drive a Model S, but they can't afford a $100k car even if it was free to drive once they owned it. But if they could buy a $50k used Model S with 40k miles on it, they're standing in line and bidding up the prices on those used cars. The used Model S's (and later X's) become the initial version of the Gen 3 in the market if you will
But that's my guess - I don't know that's what will happen, anymore than people generalizing from a Leaf and it's resale to the Model S, without also articulating or understanding all of the ways that its different know what will happen (side disclosure - though I don't drive a Leaf, I love the car and the fact that it exists; I love that I'm seeing more and more of them, and I wish Nissan well with the car).
- - - Updated - - -
As an example riceuguy, if I see your name on an article like that, with the understanding that you have of what it's like to drive one of these cars and EV's more broadly - that's when I'll really be paying attention. An important part of my personal investment thesis is that disruption happens to companies and industries that don't "get it".
I haven't seen one of these articles yet.
(Not meaning to pick on you btw - just that I liked what you had to say, and the insight you have about how the changes ripple throughout one's life, so you became my guinea pig
).I don't disagree with you, but I wonder how long that can be maintained--and I don't think the answer is "forever."
One of the points from that article that I thought was well-taken had to do with the scaling of the retail experience from 20K (or even 40 or 80K) $70-100,000 cars per year to 250,000 $35K (or $50K) cars. I don't think that people use their Model Ss differently than they do "normal" cars, by and large, but the average Model S customer is likely different from the average $35K/year customer, in terms of financial resources.
I noticed this when buying mine. Put down $2500, non-refundable? Sure, I can swing that. Order a car without a firm commitment to sell the car that I've already got? I can do that, too, because if I have to have two cars for a couple of months it's not the end of the world. Sell my car privately rather than trade it in? It's kind of a PITA, but I'm a big enough car nerd that it doesn't bother me too much. Work out my own financing, because Tesla's affiliated banks aren't terribly price competitive? OK, I can do that. Forego leasing? Eh, sure; the RVG helps, but I can also swing a fairly substantial cash down payment to make it possible.
All of those things will be big challenges for Tesla moving forward. Some customers won't want to or can't wait to take delivery; tell them they have to stake Tesla $2500 and wait 8 weeks, and you lose that sale. Some customers can't swing a large downpayment. Tell them they have to and you lose the sale. Some customers can't order a car without guaranteeing that you'll take theirs for a fair price. Tell them you can't and you lose the sale.
That's not to say that there aren't ways around these issues. There are. Tesla has started to cobble together a few, though they are still not exactly "seamless" when compared to the competition. But when I think of the challenges Tesla faces, the thing I hit on first of all is retaining their unique retail experience while being able to accommodate less financially well-off consumers. There are reasons that car dealers across the country--even high-end car dealers--tend to have a lot of inventory sitting around. Tesla has so far managed to avoid having to do that, but I am not convinced that they can sell 250,000 cars a year and maintain the kind of cash conversion cycle that they have now.
SebastianR
Active Member
+100 - then again I feel sorry for the people working in an industry about to be gutted and not (wanting to) see it coming...
If we get to the stage that Tesla can sell 250,000+ cars/year, and the traditional ICE manufacturers stick to their guns, then I'm pretty sure Tesla can maintain that cash conversion cycle, given that 250,000 would still only be a tiny, tiny fraction of the 82.8 million+ cars sold globally each year.
http://www.cnbc.com/id/101321938 for the 82.8 million figure
