they have an independent big four accounting firm signing off on their financials
Sigh
Tesla's reported margins are acceptable under GAAP.
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Sigh
Tesla's reported margins are acceptable under GAAP.
Okay... while not an actual accountant, I have a pretty reasonable operating knowledge of accounting. I'll concede that there is latitude for Tesla to move OPEX to CAPEX and fudge the margins. But where is the evidence that they're actually doing that? And please explain how you've been able to quantify that and hence recalculate the actual gross margin.
I'm not an accountant either. But I did go to business school, and I have worked in a factory.
Tesla would need to add R&D and SG&A to the expense side of their car margin calculation to be comparable to traditional automakers.
1) Traditional automakers intentionally expense R&D in direct car costs. They want to reduce taxes, and they don't want to push costs to later years when those old R&D expenditures could make a bad year worse. Tesla capitalizes R&D in part to show better margins and also to push the recognition of those costs onto a future larger company.
2) Traditional automakers sell wholesale. Tesla sells retail. The cost of Tesla stores and other selling costs is not in Tesla margin calculations. An apples to apples comparison would put sales and related costs into Tesla's margin calculation.
Tesla will lose money on the model 3 until they get to high volume, just as GM loses money on the Bolt.
Reciprocity
Active Member
They are actually, when compared to a traditional automaker. But I want to give everyone here a big clue, maybe something not everyone is aware of. Tesla is not a car company. Its not even an Energy company. Its really a technology company and their main business is software and manufacturing. This is why OPEX for Tesla does not include R&D spending in the Auto gross margin. One concrete example for why is the Battery Management systems and inverter technology used in the cars is the same that is used in the Energy products so why would it the technology part of those systems belong as part of the cost to manufacture the car? Now the BMS and inverter are included in the cost of goods, but R&D are not. At GM, this would be included in the cost to manufacture the product, because it was only used in that car. If they used the same tech across many cars, they would find a way to amortize the costs related to those cars.
Another place Tesla excels is that they do not have marketing and advertising expenses, or extremely low when compared to the competition. This might change over time, but not when they have a half million reservations for a car that doesn't even yet exist.
I am suspect of whether Tesla can see 30% margins from the 3, but the competition is around 9% for the average BMW, which more then likely means the 3-series is closer to 5-7% as the 5-7 Series would have higher margins. I would guess that margins from the 3 will hover around 20% until they get closer to the 1 million per year range and then things will be running so smoothly that they can squeeze a bit more. Also as they sell more EAP/FSD and other higher margin upgrades as part of the overall mix of cars sold. This should get them closer to 25%+ and when combined with the other products, services and brands, Tesla's overall margins will be 30% on average.
At the end of the day, you can think of Tesla as trading Marketing and Advertising which part of the SG&A for R&D which is usually OPEX when compared to other auto manufacturers. You dont even want to get into Solarcity and how those books impact Tesla, it is a damn mess and will take several years to clean up. It doesnt make Solarcity a loser, it just makes it hard to know how much money they are making from the Solarcity legacy business. Business going forward will be less leases and more cash sales (financed) which allows the funds to contribute directly to cash flow and realize gains right away.
Note: If somebody wants to move these posts to another thread, that's fine. I'm good. For continuity I'll post here, and continue elsewhere when it is moved.
R&D:
Yes, but R&D, with Tesla is qualitatively different than it is for traditional automakers. They're in startup mode with non-evolutionary product. This is not the next iteration of the Ford Focus and it wouldn't make sense to treat it that way. A lot of the new systems/hardware will be applicable to future product lines, and arguably add significantly to the capital of the corporation, in a way that is not true for development of the tooling for the next Focus.
That's not to say that Tesla shouldn't, objectively, be moving some costs to OPEX. But that's a fuzzy line and nobody outside the company will be able to pin that down.
Sales:
Hmmm... that's interesting. I wasn't aware of that. I would have assumed that Tesla had some sort of transfer pricing arrangement with the stores/service centers and that the service centers were responsible for staying at least revenue neutral. Are you certain that they don't?
garsh
Re Member
Of course. But GM reportedly hasn't been able to bring their costs down enough on the Bolt to do that.
Report: GM will lose ~$9,000 for every Chevy Bolt EV it sells before ZEV credit
It's still beneficial for GM to have an EV to offer in some locales - even if they have to sell them at a loss - because if they DON'T sell enough zero-emission vehicles, they will be barred from selling ANY vehicles in that locale.
"California's current standards will require 15% of sales to be zero emission vehicles by 2025"
Do they? Please provide a citation for that information. From what I've read, GM is just creating the rolling chassis, while everything that makes it an electric car is being designed & produced by LG.
LG is producing the electric drive motor, power inverter module, battery pack, battery heater, onboard charger, high-power distribution module, accessory power module, and power line communication module. The South Korean company is also making the electric climate control system compressor, the instrument cluster, and the infotainment system.
Oh yes, that's the plan. But I've got a strong feeling that those in the market for a 3-series/A4/C-class are going to have a serious "WTF" moment when they sit in Model 3. Time will tell.
That's just the thing. It can be the jack-of-all-trades, or at least closer than it is now. These extra features really aren't that expensive or particularly difficult to implement. If a Prius can incorporate a hatch into a $12k cheaper car, so can Tesla.
Model 3 has to be perfect and reliable when it comes out. Tesla can't mess this up. To ensure the ramp and initial production is smooth, Model 3 has been intentionally crippled to be as simple as possible. It's not just simple, it's overly simple. This is a bulletproof plan to make good on Elon's goals and promises, but it has resulted in a compromised car that doesn't have to be.
Nothing about this car screams what the consumer really wants. It was designed to be cheap and easy to build. That's disappointing and makes for a boring car.
Hi R.S.
I got the last e90 made out of the Munich factory. It is a great car. Please thank anyone who had anything to do with it.
GM has historically been run by accountants who take customers (and a lot of other things) for granted, so they have the costs optimized around an operating point. Not sure how attractive that is as a job.
If you look at Tesla, and more importantly Space-X, the management style is to move the operating point. And obtain low costs at the new operating point. While creating attractive jobs.
Let's look at the list of parts that GM will get less expensively on a 30K/year car vs. Tesla on a 500K/year car:
- Sheet steel in the rolled state.
- Wheels and fasteners.
- Wire on the reel.
- Steering rack.
- Springs.
- Wipers.
- Brakes.
- Steering wheel.
- Stereo system.
So for GM advantages, I see $20 in the steering rack, $20 on the brake system, $10 on the steering wheel, and $20 on the stereo and everything else. So less than $100 advantage to GM. (I don't know what they are doing for AC. It may be custom.)
Tesla has advantages in a moved operating point. $600 in the dash. $2000 in labor from a simpler design. And scale efficiency on every custom part including batteries.
There are huge scaling cost on how many units the development cost is spread over.
3Victoria
Active Member
Yes, get over it.
No it doesn't -- it just needs to appeal to enough people, and judging by the number that put up $1k there are lots of peole that were happy with the released *sedan*.
It is compromised only in your opinion (and likely lots of others). Sedans are popular in NA -- perhaps not in EU.
This is what the NA consumer wants, live with it.
Garlan Garner
Banned
It really doesn't seem like it should have taken Tesla this long to get to production. Its been 14 months since the first reveal and the 1st reveal hasn't really changed at all - except for small facelift and some additional cameras.
What have they been doing?
Building an assembly line to manufacture more EV's than all the other EV manufacturers combined 5x over? Just guessing here...
RT
Watch How it's Made: Dream Cars on television
it's overwhelming the amount of work that goes into creating stamping machines; laser cutting tools, robot that apply filler, maneuver panels into exactly the precise position, weld, sequencing of components that come together at precisely the exact moment; paint booth, inspections .... and etc. It's overwhelming what is required to set-up a new assembly line.
Then think about the suppliers that make glass, wheels, brake assemblies, shocks, steering wheels, instruments ... again, it's overwhelming.
The sequence on winding the electric motor is unbelievable.
it's overwhelming the amount of work that goes into creating stamping machines; laser cutting tools, robot that apply filler, maneuver panels into exactly the precise position, weld, sequencing of components that come together at precisely the exact moment; paint booth, inspections .... and etc. It's overwhelming what is required to set-up a new assembly line.
Then think about the suppliers that make glass, wheels, brake assemblies, shocks, steering wheels, instruments ... again, it's overwhelming.
The sequence on winding the electric motor is unbelievable.
eisbock says:
I disagree. In both cars you illustrate, the trunk extends to the back of the rear seats. The vertical red lines you've drawn just show where the rear glass ends, not where the front of the trunk is located.
It's quite clear that the 3-series has more depth into the car. The opening may be the same size from a straight-back profile, but the depth of the opening makes a huuuuge difference in practicality and overall size. Model 3 doesn't have much, if any depth into the trunk opening.
And it can't because of how far back the glass is. Just looking at a 3-series, you can see how much more trunk panel there is. The ass is longer and the window doesn't extend as far back to the end of the car. Both of these make for a larger trunk opening. Tesla isn't working any magic that somehow recoups the size lost from the design of the car.
And it can't because of how far back the glass is. Just looking at a 3-series, you can see how much more trunk panel there is. The ass is longer and the window doesn't extend as far back to the end of the car. Both of these make for a larger trunk opening. Tesla isn't working any magic that somehow recoups the size lost from the design of the car.
I disagree. In both cars you illustrate, the trunk extends to the back of the rear seats. The vertical red lines you've drawn just show where the rear glass ends, not where the front of the trunk is located.
hockeythug
Active Member
They only had to install over 400 highly advanced robots and other critical infrastructure.
Garlan Garner
Banned
They have only recently started installing them....right. There was a recent photo with a ton of them lined up in the factory - still in the boxes.
I'm not sure what everyone is disagreeing with.
T34ME
Active Member
Garlan Garner
Banned
Reciprocity
Active Member
You know what else the 3 series isn't? An affordable electric car with good range and styling. It's silly to compare the model T to modern cars it's silly to compare the 3 series to the model 3. More pictures please.
