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I just finished listening to the book on Elon Musk by Ashlee something or other, and the impression I took away from it is that Tesla *isn't* running a highly profitable business... yet, anyways. I haven't looked up recent numbers for them, but the delays in bringing things to market stretch them thin. Mass producing the Model 3 should present significant challenges for them, but based on what they've accomplished so far, they have a decent chance of succeeding.
I think the other big automakers are looking at how thin Tesla has been stretched in the past, and assuming that the shift to go to full-scale mass production will finally break the camel's back.
I'd never heard of the Chevy Bolt until the other day when I was reading some stuff on the Model 3. I laughed when I saw the picture... I love hatchback cars, but I don't find it the least attractive, and no way I'd spend comparable money on it over a Model 3. Even if it looked better, for my money, I'd bet on Tesla making a reliable EV over General Motors.
I've always wanted a Tesla but could never afford one. This Model 3 is finally going to be the one that I buy.
The key is the Gigafactory. No one else can make a $35,000 EV as compelling as the Model 3 today because all of them are having to BUY their batteries, instead of building their own. Even Tesla can't do it TODAY, which is one reason I think they have deliberately pushed off the Model 3 launch date so far into 2017. They MUST do their own manufacturing and have the economies of scale of the GigaFactory to make the Model 3 a reality.
Also, isn't part of Musk's "secret plan" to have the Gigafactory produce enough batteries to be able to also sell them to other EV manufacturers? If they are ever able to produce enough batteries so as to have a surplus, other manufacturers WILL be able to build cheaper EV's. If they do that, and, as vjason said above, sign on to the SuperCharger network, they could be up and running rather quickly.
I read that book too, but yeah tesla is definitely running a highly profitable business with about 25 percent gross margins. If they stopped investing for future growth they'd show healthy profits. Like any growth company, they reinvest all profits plus additional funds to provide for the future.
Red Sage
The Cybernetic Samurai
This is the guy that says Fiat is losing $14,000 on every one of the 500e they sell or lease. That is a 24 kWh plugin BEV with an 84 mile range offered at $31,800. So he would feel better if no one bought them at all. That is the reason for his incredulity.
He doesn't realize the benefit of not having to sell through 'independent franchised dealerships' or purchase traditional advertising. He is too busy dismissing the viability of electric cars outright to study what works. Even if you prove it to him, he still won't believe you.
It is attitudes such as his that led to Lee Iaccoca claiming that the Japanese were 'dumping' cars on the US market during the 1980s. I would not at all be surprised if Chrysler, Ford, and General Motors go crying to Federal authorities with claims that Tesla Motors is engaged in 'technology dumping' as well. They'll all be saying there is 'no way' that anyone could possibly be offering reasonably priced long range electric cars for so little and still be profitable.
He doesn't realize the benefit of not having to sell through 'independent franchised dealerships' or purchase traditional advertising. He is too busy dismissing the viability of electric cars outright to study what works. Even if you prove it to him, he still won't believe you.
It is attitudes such as his that led to Lee Iaccoca claiming that the Japanese were 'dumping' cars on the US market during the 1980s. I would not at all be surprised if Chrysler, Ford, and General Motors go crying to Federal authorities with claims that Tesla Motors is engaged in 'technology dumping' as well. They'll all be saying there is 'no way' that anyone could possibly be offering reasonably priced long range electric cars for so little and still be profitable.
Red Sage
The Cybernetic Samurai
Actually, no... There are several pundits, analysts, talking heads, naysayers, shorts, and bears that have led various journalists to believe the purpose of the Gigafactory is to get other manufacturers under Tesla Motors thumb with electric cars. That isn't the case at all. Amazing how journalists will listen to anyone's opinion at all, except Elon Musk's...
The Gigafactory was designed solely to fulfill Tesla Motors' own needs and nothing else. The output was supposed to be 50 GW worth of battery cells from the outset. Of those, 35 GW were to be used for automotive applications, and 15 GW were to be used for stationary storage. However, there would be another 15 GW of battery cells from another source as well (likely Panasonic, Japan by way of China), because a total of 50 GW would be used to make automotive battery packs. The notion was that the Gigafactory would expand in stages to reach that maximum output around 2020, and that would allow them to manufacture 500,000 battery packs per year for cars.
I expect that those plans have changed somewhat with the extreme response to the Model ☰ unveiling. More than likely they will expand the location to ultimately build a lot more battery packs than they originally intended, and to reach the 500,000 unit rate at least two years earlier than originally targeted. That is the only way they will be able to meet demand in a reasonable time frame. No one should have to wait four years from now to get their car. Three years is probably too late too, but still barely acceptable.
And for any new orders that are placed after release, a two-year backorder would not be acceptable either. They must get that down to 12 months immediately, and steadily narrow the range to 6 months, and then only three months. People in right hand drive territories, United Kingdom, Japan, and Australia, cannot be kept waiting indefinitely either.
Shareholders like the idea of Tesla Motors becoming the battery supplier to the world. But they aren't paying close attention to what Elon actually says or what the company plans to do. This is similar to those Tesla Enthusiasts that look forward to Tesla becoming 'The Next EXXON!' by offering a pay service for Superchargers. That isn't in the cards either. All of Tesla Motors incoming supply of battery cells is covered by their own Production of cars and Stationary Storage, and will be through at least 2020... or whenever the second Gigafactory is operational.
I don't know the book, but a highly profitable business doesn't rack up over $2 billion in net losses and only have a single profitable quarter.
I've pointed this the massive losses numerous times. Now with this latest software, there are reactions like dislike and funny to my post at Prediction: Model 3 Orders to reach 100k in 24 hours. Hmmm... is it that some people just don't like to hear reality and like to explain things away?
Let's see if Tesla is able to turn consistent profits (high or not) once Model 3 production is up at a healthy clip. If not, I don't think apologists and fanboys will have any more excuses about investment for R&D, future products, capital investment, etc. ALL major automakers do this ALL the time (and have WAY more models and product lines) and aren't standing still, yet they can and do turn profits.
Ford is managing to turn a profit while growing 3% a year. To paraphrase Elon, Tesla plans on "growing production 50% a year as far into the future as he can reasonably project." It would take about 137 years of 3% growth to match 10 years of 50% growth.
How can Tesla possibly be expected to turn consistent profits while growing that fast? New production lines and new factories take time and money to build and there won't be an immediate payoff.
It's not like Tesla is "losing money, but trying to make it up on volume." They are earning a healthy gross margin on each car and reinvesting that into future growth. Operating margin will come later.
SebastianR
Active Member
That's the same level of incompetence as VW's Winterkorn, who is on record stating that no EV can physically go further than 200km (124 miles) about 1 year after the Tesla Model S was available... Now look what happened to Winterkorn...
Longer the old manufactors wait to properly come on the EV wagon the more difficult it will be for them and the ones that come late will find them self's being the start up company. Regarding if Tesla does a profit? of course they will - a lot of financial modeling done to confirm that.
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But seriously, what can they do?
I mean, for like a 100 years they have marketed themselves and created their sales through their top models, where all the hype was on number of cylinders, engine noise, fast transmission, front-grille, mufflers and other stuff that from one year to the next became obsolete, together with less marketing-essential parts like the clutch, carburator, catalytic converter that are only awaiting their place next to the horse buggy in the museums.
Admittedly, one of the key performance numbers of performance ICE-cars is the number of horsepower (along with acceleration), but there they are also beaten by the EV, courtesy of Tesla Motors. Even the physical unit for power in cars (horsepower) itself is now being retired in favour of the Watt, which is the natural unit for an electrical motor.
Even today where (at least in the USA) Model S is outselling all the luxury car makers, the battery capacity and thus battery-only range of leading plug-in cars is pathetic and in no way a serious selling point.
I really cannot see my local Audi dealer who personally has been selling ICE's for 10+ years, just put all that behind him for the benefit of a near-silent car, with barely any parts that needs replacing nor regular, expensive oil-changes.
So I can understand why the traditional car makers are perplexed.
Bangor Bob
Member
Sergio, he already told you. You have all the tools, it's a very simple recipe:
Design and build a very expensive electric Ferrari to learn how to do electrics.
Design and build a segment-destroying electric Maserati to refine your skills.
Build a massive battery factory and a worldwide fast-charging infrastructure (or buy into the one Tesla built).
Now you're ready for that mass-market $42.5k ASP Alfa.
Good luck getting through all that in 12 months.
Design and build a very expensive electric Ferrari to learn how to do electrics.
Design and build a segment-destroying electric Maserati to refine your skills.
Build a massive battery factory and a worldwide fast-charging infrastructure (or buy into the one Tesla built).
Now you're ready for that mass-market $42.5k ASP Alfa.
Good luck getting through all that in 12 months.
i think it was more of a back handed comment ..
building the car is the easy part (well, ok relatively easy) The harder part is everything else.. Creating and testing the software to make it work, the OTA update backend,, battery..etc. There is no way that they are even capable of doing this any time soon. Fiat knows this and Tesla knows this . I assume its s why Tesla released the patents. best case scenario is that Fiat manufactures the car, tesla provides the rest (skateboard, battery, software)
The little google car kinda looks like a Fiat, so maybe they are more wiling to adopt new technology that we give them credit for?
building the car is the easy part (well, ok relatively easy) The harder part is everything else.. Creating and testing the software to make it work, the OTA update backend,, battery..etc. There is no way that they are even capable of doing this any time soon. Fiat knows this and Tesla knows this . I assume its s why Tesla released the patents. best case scenario is that Fiat manufactures the car, tesla provides the rest (skateboard, battery, software)
The little google car kinda looks like a Fiat, so maybe they are more wiling to adopt new technology that we give them credit for?
The $35,000 is not what will make it profitable. its the software / battery updates and new features hat will make it profitable. Give away the car at cost, sell the software later. $1000.00 for autopilot, $500.00 for summons feature, $ 500,00 for new feature 2 years from now..etc. they will continue to profit over the life cycle of the vehicle and OTA software updates.. if the vehicle lasts 1,000,000 miles even better!
Expand this concept to hardware as well. 1000.00 for new seats, $200 for new center council, 1000.00 for a new instrument panel?
Expand this concept to hardware as well. 1000.00 for new seats, $200 for new center council, 1000.00 for a new instrument panel?
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True. they could copy the car no problem. But they would not be even capable of copying the software. even if tesla provided all the details and blueprints I still dont think they would know what to do with them.
The five stages, denial, anger, bargaining, depression and acceptance.. sounds like they are still on stage 1
The five stages, denial, anger, bargaining, depression and acceptance.. sounds like they are still on stage 1
Nice. I also thought of Mahatma Gandhi:
First they ignore you, then they ridicule you, then they fight you, and then you win.
By that metric, I guess they have reached stage two, with a few preparing for stage three.
