Long-Term Fundamentals of Tesla Motors (TSLA)

[lolachampcar]

This seemed an appropriate place to bring this up.

My last two converts picked their cars up on Friday and Saturday. The Friday delivery had a long list of quality related problems (Door panels not aligned, trim panels not in place, GPS not working, charge cover indicated as open when it is not....). The Saturday delivery only had one small quality issue. Both said the delivery process was awful. The Friday delivery knew more about the car than the Delivery "Specialist". The Saturday delivery showed up with his whole family at fifteen till two for a two delivery and did not make it out of the SC until five. Both have come away with a very bad taste in their months while still saying the car is absolutely wonderful.

I expect startups to have issues. Lord knows I've had my share and customers are forgiving in the beginning. However, the beginning has passed (and having taken delivery of three cars during that time, Tesla was doing a reasonably good job) and now we are into the controlled growth stage. Tesla could very well see the current growth for the next few years then be hit again with a huge bump when they do G3. If this is how Tesla is going to handle sustained growth, I'm no longer worried about funding but more about middle management competence and upper management's inability to asses middle management and know not to push end of quarter volume up so high.

Rant over..... I just feel like an idiot because I set these guys up to go buy the car. It's a shame as the first six I sent down went so well.

 

[jeff_adams]

This seemed an appropriate place to bring this up.

My last two converts picked their cars up on Friday and Saturday. The Friday delivery had a long list of quality related problems (Door panels not aligned, trim panels not in place, GPS not working, charge cover indicated as open when it is not....). The Saturday delivery only had one small quality issue. Both said the delivery process was awful. The Friday delivery knew more about the car than the Delivery "Specialist". The Saturday delivery showed up with his whole family at fifteen till two for a two delivery and did not make it out of the SC until five. Both have come away with a very bad taste in their months while still saying the car is absolutely wonderful.

I expect startups to have issues. Lord knows I've had my share and customers are forgiving in the beginning. However, the beginning has passed (and having taken delivery of three cars during that time, Tesla was doing a reasonably good job) and now we are into the controlled growth stage. Tesla could very well see the current growth for the next few years then be hit again with a huge bump when they do G3. If this is how Tesla is going to handle sustained growth, I'm no longer worried about funding but more about middle management competence and upper management's inability to asses middle management and know not to push end of quarter volume up so high.

Rant over..... I just feel like an idiot because I set these guys up to go buy the car. It's a shame as the first six I sent down went so well.

Sorry to hear that, hope they don't see it as a reflection of you. I suspect Tesla feels under pressure to do the end of the quarter blitz to please the stock holders and beat guidance. I think that pattern will continue until next year.

 

[lolachampcar]

Yes, I understand and as a shareholder I can appreciate the sentiment. It just can not be done at the expense of quality.

I need everyone I place in a car to do exactly as I did and go sell more of them (as does Tesla). This puts an unnecessary obstacle in the path of Tesla's success. They started off with a fantastic customer experience and there may even be truth to the idea that a three hour cluster **** to sign title work and hand over a check is still better than even the best traditional dealer delivery. Then that misses the point that Tesla has been and should continue to be much better not just a little better.

As for me personally, its no biggie. I've known these guys for a while and they both spent a lot of time in both my Model S'. They know my cars showed up without issues and thus have faith in long term ownership.


I really wish they would not follow the Apple Store plan verbatim.

 

[jeff_adams]

Yes, I understand and as a shareholder I can appreciate the sentiment. It just can not be done at the expense of quality.

I need everyone I place in a car to do exactly as I did and go sell more of them (as does Tesla). This puts an unnecessary obstacle in the path of Tesla's success. They started off with a fantastic customer experience and there may even be truth to the idea that a three hour cluster **** to sign title work and hand over a check is still better than even the best traditional dealer delivery. Then that misses the point that Tesla has been and should continue to be much better not just a little better.

As for me personally, its no biggie. I've known these guys for a while and they both spent a lot of time in both my Model S'. They know my cars showed up without issues and thus have faith in long term ownership.


I really wish they would not follow the Apple Store plan verbatim.

Do you believe that perhaps they shift employees from other departments into "delivery specialists" roles for the end of quarter push? I've heard some crazy numbers like 50 cars dropped off at the Atlanta SC to be delivered. They can't have that many DS trained people to handle that workload.

 

[adiggs]

I've been commenting to our local Portland area store and service people about the need for the company to get out of the maniacal end-of-quarter rush, each and every quarter. The effect is to shift a delivery from q+1 into q, thereby creating a need at the end of the next quarter to shift q+1 deliveries into q, and on and on. As an investor, sure I like the bigger numbers at end of quarter. But the increase in quarter end numbers from what they would otherwise be is a mirage - get the business onto a footing where the deliveries happen when the deliveries happen. This quarter or next, it's a delivery - do it right; build it with quality, deliver it in a quality fashion, keep the SCs and stores stocked with loaners, and don't let quarter end short term thinking become the norm for the business.

It's the one thing about Tesla's business that I worry about (and frankly, that's a great problem to have, as the problem and the resolution is entirely within their control).

 

[Yuri_G]

I've been commenting to our local Portland area store and service people about the need for the company to get out of the maniacal end-of-quarter rush, each and every quarter. The effect is to shift a delivery from q+1 into q, thereby creating a need at the end of the next quarter to shift q+1 deliveries into q, and on and on. As an investor, sure I like the bigger numbers at end of quarter. But the increase in quarter end numbers from what they would otherwise be is a mirage - get the business onto a footing where the deliveries happen when the deliveries happen. This quarter or next, it's a delivery - do it right; build it with quality, deliver it in a quality fashion, keep the SCs and stores stocked with loaners, and don't let quarter end short term thinking become the norm for the business.

It's the one thing about Tesla's business that I worry about (and frankly, that's a great problem to have, as the problem and the resolution is entirely within their control).

I don't see this as an issue because Tesla increases production by a substantial amount each quarter. If production was flat this would be a problem, but it isn't.

 

[Citizen-T]

We hear these kinds of stories at the end of every quarter. They are at a fragile time right now, hopefully soon they will have enough confidence from investors that they don't need to play these games.

 

[lolachampcar]

Letting the street control your product quality is like letting the little head think for the big one. I do not know about you folks but that has never turned out very good for me in the past.

BTW I just got a call from my Saturday delivery buddy (the one that did not have quality problems) and he has a battery coolant leak along with a window that clunks when raised or lowered. That makes two for two. Arg!!!!!!

 

[ggies07]

So question, as the production ramps up, month over month, year after year, will Elon be able to bounce back and forth from SpaceX to Tesla like he does now? If they have a hard to with quality at the end of a quarter, I can't imagine what it would be like for hundreds of thousands of cars being produce.

 

[Citizen-T]

Letting the street control your product quality is like letting the little head think for the big one. I do not know about you folks but that has never turned out very good for me in the past.

BTW I just got a call from my Saturday delivery buddy (the one that did not have quality problems) and he has a battery coolant leak along with a window that clunks when raised or lowered. That makes two for two. Arg!!!!!!

Agreed.

 

[adiggs]

I don't see this as an issue because Tesla increases production by a substantial amount each quarter. If production was flat this would be a problem, but it isn't.

As I see this Yuri, the issue isn't the numbers themselves that are the issue, or the possibility of a miss on the numbers in the future that is somehow related to this. The issue is the priority shift that happens inside of the company that is suggested by these stories at the quarter end. Most of the time, Tesla prides themselves on doing it right, building a quality product, and generally doing right. Then end of quarter arrives, and the culture shifts to pushing deliveries out the door, and we'll deal with the consequences later (an admittedly strong statement - it's a personal impression, than a belief that this is a stated priority
of the company).

And what I really worry about is that the short term perceived need for this approach becomes embedded in the culture - a badge of honor around how hard and how tired people get at the end of the quarter, and it's expected and accepted, as part of doing business the Tesla Way.


For my own part, one solution I can apply as an individual is to try and time my car (Model X - I would prefer that this just stop happening in the next year) so that it gets built in the first or up to the middle of the second month of the quarter, and then have delivery happen in the second month or early in the third month. If delivery starts to look like end of quarter, I would just schedule it for early the next quarter, specifically to avoid the window when the delivery specialists are being slammed to push out cars. One individual taking this approach doesn't change the business - but if enough of us start behaving like this, that becomes a business process problem for Tesla, and it's entirely self-inflicted.

The good deal with self-inflicted wounds - if they don't kill you, then the solution is entirely under your own control


Note: This is all my personal impression of Tesla and Tesla's business. I am long TSLA (second largest position I have), and expect to be an owner/driver for the remainder of my life.

 

[ongba]

Note: This is all my personal impression of Tesla and Tesla's business. I am long TSLA (second largest position I have), and expect to be an owner/driver for the remainder of my life.

May I ask, what is your largest position?

 

[Bonken]

I think its interesting that every analyst out there seem to think that Tesla is just going to stand still and not improve on their products and lineup. So many analysts think that the competition will be able to catch up to where Tesla is today within a couple of years due to their enormous RnD budgets. I do not believe that any competitor will be able to catch up anytime soon due to the fact that any product mentioned such as the i8 is simply not able to compete in any criteria. But even if they did manage to catch up to where Tesla is today it is not like Tesla will not improve themselves, Teslas goal zone will keep moving forward and the competitors will have to chase faster and faster in order to catch up. This is also applicable to the future of the company. Many analysts seems to think that after the GIII car they are done and are just going to stop after that. I for one am super excited about the follow up products to the GIII, first the GIII SUV but then after that the F-series competitor that Elon mentioned during the Texas thing and then other vehicles such as a Van for industrial and delivery services etc where companies can save hugely on gas, especially as the batteries will be MUCH cheaper by then. These follow on products after the GIII will ensure massive growth potential AFTER THE GIII and will provide revenue growth as well as higher PE numbers far into the future and beyond the GIII.​

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[brg2290]

Letting the street control your product quality is like...

BTW I just got a call from my Saturday delivery buddy (the one that did not have quality problems) and he has a battery coolant leak along with a window that clunks when raised or lowered. That makes two for two. Arg!!!!!!

If these are isolated incidents, then I suppose statistically there will be some issues in even the best manufacturing processes. It does make one wonder how thorough the ready to ship inspection and test drive was on your friend's new deliveries, and how strictly it was adhered to if there is a push for higher 3Q numbers. At early ramp up, there certainly was a strong emphasis on quality over speed. Given the Model S price points and clientele, this ethos seems as important today as it was then. In general I think people experience less disappointment (and it is shorter lived) with the delay in delivery of what turns out to be a stellar product as opposed to quicker order fulfillment at the cost of quality, especially for a product in the Model S price range.

lolachampcar, will you please keep us informed on how and when these issues are resolved? Since the problems occurred, nothing can rectify the situations better than a quick resolution to the new owners' satisfaction.

 

[lolachampcar]

The Friday delivery returned his car and has been told he will receive another (different) car. I feel for Tesla as that was probably not a comfortable conversation. I suspect his next car will have been gone over with a fine tooth comb before delivery.

My Saturday delivery filled his wind shield washer bottle last night and check his floor this morning. The fluid was a diluted blue which indicates its a leaking WW fluid reservoir and not battery coolant. The Dania Service Center offered to bring him a loaner. He deferred suspecting more minor issues might crop up and he will get them all addressed in month when the West Palm Service Center opens. He has the leak, one window that "clunks" going up and down and the spinning maps that others have commented on. All in all he is a very understanding guy and very pleased with the car.

 

[AlMc]

The Friday delivery returned his car and has been told he will receive another (different) car. I feel for Tesla as that was probably not a comfortable conversation. I suspect his next car will have been gone over with a fine tooth comb before delivery.

My Saturday delivery filled his wind shield washer bottle last night and check his floor this morning. The fluid was a diluted blue which indicates its a leaking WW fluid reservoir and not battery coolant. The Dania Service Center offered to bring him a loaner. He deferred suspecting more minor issues might crop up and he will get them all addressed in month when the West Palm Service Center opens. He has the leak, one window that "clunks" going up and down and the spinning maps that others have commented on. All in all he is a very understanding guy and very pleased with the car.

Glad he is being very generous about it. But I feel your pain as the friend who recommended the car and as a stockholder/multiple model S purchaser.

 

[lolachampcar]

It may sound sappy but I just want so badly for them to get this right.

 

[Lessmog]

I'm sure most of us here understand: a sense of responsibility. Good on you.

 

[Zaxxon]

It may sound sappy but I just want so badly for them to get this right.

Ditto that. Hoping it's just growing pains, and wishing that the mothership will figure out how to correct them sooner rather than later.

 

[Convert2013]

Ditto that. Hoping it's just growing pains, and wishing that the mothership will figure out how to correct them sooner rather than later.

Model S may not be a JD Power 3 month initial quality hit yet. The company is so new, the whole process is a shock to the system for them, especially volume production & quality control. There are bound to be some amount of growing pains. When I supported new product introductions at the Detroit Cadillac plant, there were many more quality issues for years on the Deville and Seville models (fit and finish, non-integrated electronic components, powertrain component failures) and yet both models ended up on JD Power's Initial Quality list.