Lets hope Tesla doesn't go bankrupt with 35K model 3

[Garlan Garner]

Way too many changes, closing most of the store to offset the cost of a negative margin 35K model 3... I don't know if that's a great idea. They need to keep galleries for sure so people can see these cars. They should announce model Y ASAP and at least get some cash in with reservations

Well. Tesla just cut employee bonuses. I hope they didn't do this to force employees to just leave - thereby avoiding having to pay severance.

Tesla slashes retail employee compensation, seemingly pushing them out instead of layoffs

 

[sperkin]

Tesla was weeks from dying last summer and they didn't any close stores or layoff anyone. They acted like nothing happened and Elon only revealed it much later how close they were on going bankrupt.

What Tesla is doing now seems very desperate so I think they are back in that same situation but much worst. Re-org of EAP and FSD features seems like a way to boost revenue because it hits more users' needs. Many more will be happy to pay less for autosteer and many will be happy to pay more for NOA. Also, all the Tesla NA fans who wanted a Tesla ordered and online orders may have stalled after core users got their cars. They had to act fast and get the rest onboarded and monetize them ASAP. To make it happen they have to cut cost at retail. The store fronts are burning cash. The store near me has a 20 person team standing around and they don't convert anyone into buyers. Maybe less than 10% of the people that came in actually buys the car. They have to keep a fleet of Teslas for test drives and pay insurance on them along with paying rent for the stores. This is a good call by Tesla to close the stores, but poor ethics when calling out the employees that stood by the frontlines and pushing for Tesla's mission. Now they are losing bonuses and losing work hours so they will quite on their own instead to save even more money.

Tesla is clearly sending a message they don't care about people that stood by their brand. I can tell you after my family buying Toyota brand at the same dealership since 1982, we are very well taken care of.

 

[OCR1]

The Tesla salespeople are people who go to work to earn a living. Are they all Tesla enthusiasts and brand ambassadors? I don't know about that. I don't like the idea of the bonus cuts but at this point the decision has been made to move sales online and eliminate retail stores and salespeople, so I can't say I'm surprised that bonuses have been eliminated. The writing was on the wall once the announcement about store closures came out.

 

[mattjs33]

The cheapest models say delivery in 2-4 weeks. That shows the more expensive demand has mostly been fulfilled. We have to hope the lower configurations have massive demand.

I think it’s fine they released the $35k versions but I do not like or understand the drastic price drops on the other models. Either they are REALLY hurting for sales or they are doing just fine to be able to do that.

If they were "doing just fine", they would not have to purge most of the sales and marketing people. Per Elon on Thursday, this is what they have to do to sell the $35K profitably. That's not a direct quote but pretty much as I remember reading it.

It raises the question though, why also lower the prices on the higher level cars? If demand for them is still strong, it's not as if price was a barrier to those customers. In other words, they were selling all the expensive ones they could build. The $35K car was Elon's stated goal but that doesn't by definition require lowering prices across the board and firing everybody. They were doing fine selling the MR and LR cars with the stores open and everyone on staff. At least as it was told. Aren't they supposed to be filling massive demand overseas?

If you were concerned about margins on the SR, wouldn't you maintain the margins you had on the MR and LR cars, to make up the difference?

Their latest moves don't make sense, and that's what gets me thinking.

 

[electrictorque]

People are over reacting. I bet service centers will grow and if someone wants to see and test drive it can be done there. That is how it's currently being done in NJ where they are working with NJ gov to open more locations.

It looks to me that this thread was possible created by a short just to push FUD.

 

[focher]

If you were concerned about margins on the SR, wouldn't you maintain the margins you had on the MR and LR cars, to make up the difference?

Their latest moves don't make sense, and that's what gets me thinking.

Unless...Tesla saw it's mission to help the transition to sustainable transportation. But how would we know?

 

[OCR1]

We have not seen any published figures that I'm aware of for actual sales past 4Q 2018. Once they publish 1Q2019 figures we will have some idea of how much the reduction in federal tax credit has impacted their sales. I have to imagine that sales in North America have been impacted significantly though just based on the stories we've seen about headcount reductions on the delivery team side.

 

[jpk195]

If they were "doing just fine", they would not have to purge most of the sales and marketing people.

If you were concerned about margins on the SR, wouldn't you maintain the margins you had on the MR and LR cars, to make up the difference?

Their latest moves don't make sense, and that's what gets me thinking.

Well said. I’m concerned also. My hope is that they are doing this in part because they need more cars on the road to keep FSD efforts moving by collecting more data. Long term, this is how they make money. Instead of dealership service revenue, they have feature revenue. I believe in what Tesla is doing, and am planning to buy at least upgrade to basic autopilot for the good of the cause.

 

[focher]

We have not seen any published figures that I'm aware of for actual sales past 4Q 2018. Once they publish 1Q2019 figures we will have some idea of how much the reduction in federal tax credit has impacted their sales. I have to imagine that sales in North America have been impacted significantly though just based on the stories we've seen about headcount reductions on the delivery team side.

NA sales in Q1 will absolutely be lower, but it will be challenging to assess if that's a demand or supply issue. Tesla has started shipping a significant number of the Model 3s to Europe (and some to China). The in-transit delay will create a lost 6 weeks of sales on those cars alone. The impact is only softened by any production increases.

 

[OCR1]

NA sales in Q1 will absolutely be lower, but it will be challenging to assess if that's a demand or supply issue. Tesla has started shipping a significant number of the Model 3s to Europe (and some to China). The in-transit delay will create a lost 6 weeks of sales on those cars alone. The impact is only softened by any production increases.

Fair enough, but if the lead time for me to buy a new one is 2 weeks, how much of a supply crunch could they have? They are all coming from the same Fremont factory, so if demand in Europe was creating a substantial backlog wouldn't our lead time have to be more than two weeks?

 

[mattjs33]

Unless...Tesla saw it's mission to help the transition to sustainable transportation. But how would we know?

The mission becomes moot if they don't have the resources to see it through.

(If Elon really wanted to save the world, he wouldn't be also screwing around with SpaceX. He'd be coming up with a solution to our plastic waste problem.)

Fair enough, but if the lead time for me to buy a new one is 2 weeks, how much of a supply crunch could they have? They are all coming from the same Fremont factory, so if demand in Europe was creating a substantial backlog wouldn't our lead time have to be more than two weeks?

Exactly.

 

[Vitold]

It is likely that $35k Model 3 is already profitable, even w/o stores closed yet. I also think even if stores will disappear Galeries and Service Centers will pickup some of consumer facing functions that SC did. Biggest change will be centralized, online, presence and Tesla app.

 

[YusufT]

Relax, you think the company doesn't have a bunch of accountants calculating everything? Tesla is trying to survive, and they let go of all their bad RoI assets. It isn't rocket science. Elon wouldn't do something that will hurt him later on. He saw the need to announce the $35k Model 3 and dropping the price of AP and FSD while knowing he will piss off all the existing owners. He knows stuff we don't (Actual data) so stop speculating and just enjoy the product.

 

[mattjs33]

Relax, you think the company doesn't have a bunch of accountants calculating everything? Tesla is trying to survive, and they let go of all their bad RoI assets. It isn't rocket science. Elon wouldn't do something that will hurt him later on. He saw the need to announce the $35k Model 3 and dropping the price of AP and FSD while knowing he will piss off all the existing owners. He knows stuff we don't (Actual data) so stop speculating and just enjoy the product.

The people in charge of TWA and Circuit City had accountants and data and knew stuff also.

 

[dww12]

It’s the last dash to get every last ounce out of the $3750 tax rebate. There won’t be an easy price lever after this, so if price is a an issue order one soon. I really hope they have been adding a secret line at GF1 and that orders go parabolic, they can produce them and that ICE car sales are severely cut into by Tesla. The levers after this are small price reductions, relaese of FSD, financing and release of the Y.

 

[mattjs33]

You can "Disagree" with me all you want, but that's business reality. Market forces are a thing. Unexpected costs are a thing. You mean to tell me the CEOs of all the failed corporations in history had no idea what they were doing?

For the record, I don't think Tesla will go bankrupt. But these latest moves kind of indicate there are things going on that were not aware of.

Time will tell.

 

[Uncle Paul]

In the beginning, showrooms and test drives were helpful to teach people about the brand new cars. They were strange and had little exposure to the public.

Now most everyone has heard about Tesla and they have become as aspirational brand.

Tesla has noted the fewer and fewer people are taking test drives or visiting showrooms before they order. Almost all the Model 3s are ordered on line and less and less Model S/X are being sold at the showrooms.

Tesla knows that they will loose some orders by not having showrooms, but they will still sell all they can make via On-Line ordering. The showrooms will not pay for themselves any more. An expensive luxury.

 

[Garlan Garner]

People are over reacting. I bet service centers will grow and if someone wants to see and test drive it can be done there. That is how it's currently being done in NJ where they are working with NJ gov to open more locations.

It looks to me that this thread was possible created by a short just to push FUD.

Now that's a good thought.

 

[roblab]

So your interpretation of his statement at the time was that it would be forever true? He has stated that their intention was to sell a $35k version when their costs made that possible. The assertion that they're selling a negative margin vehicle is patently ludicrous. GM does things like that because they're just using it to get ZEV credits, and they cover the loss with huge margins on Escalades. Tesla doing that? Not likely.

Yes, no one here knows that Tesla's pricing is unprofitable. To pretend it is, is ludicrous. Tesla has never sold anything at a loss, and they aren't starting now.

It is interesting that some people who pretend to be "in the know" or think they are professional car pricing personnel, can somehow "know" that Tesla is losing money. Just like the shorts that post every day that Tesla is failing, or has been losing money on every car they've made now for, what, six plus years. If it weren't so funny, it would be sad.

I invested in Tesla in 2006. My investment has increased nearly 2000 percent. Yes, twenty times. Tesla profits bought me my three Teslas and then some. Hard to believe that they are folding after all this time. I don't believe it, and no one else does, either.

 

[MagnusMako]

If you were concerned about margins on the SR, wouldn't you maintain the margins you had on the MR and LR cars, to make up the difference?

Their latest moves don't make sense, and that's what gets me thinking.

I do think that they didn't really need to lower the cost again on the rest of the upper models and could have kept them to maintain margins on those and also help make up for losses on the SR. LR AWD and P3D probably would still have sold as well at the 50/60k marks, especially if they gave the LR AWD a bit more power to differentiate more from the LR RWD. They are still a deal at those prices. I can understand SR/SR+/MR/LR-RWD pricing.