My prediction on Model 3/Tesla

[erthquake]

Tesla is burning cash at a serious rate. In the past, capital was raised by issuing equity-based stock. Most recently, however, unsecured grade B junk bonds totaling $1.8 billion were issued. At a 5.25% interest rate, interest payments will be almost $100 million per year and at the end of term (8 years), $1.8 billion will be due. The Model 3 will prove to be a make-or-break effort for Tesla. Haven't cancelled my reservarion, but starting to get nervous.

Tesla got a steal-of-a-rate for those bonds. Avoiding stock dilution was icing on the cake.

Tesla will be fine. We know from one parts supplier that Tesla reduced their orders to a rate of 3,000/week for December. This indicates Tesla's confidence that they will be producing Model 3s at a rate of at least 3,000/week by the end of December. Given the parts they already have on hand because of the contracted October and November order rates, there's good chance they will produce more the 3,000/week in December.

People, this is not the Model X. Tesla learned from that debacle and plowed those lessons into the Model 3. Go back and look at all the naysayers who "expertly" said Tesla couldn't produce the S in volume. And then the X. Or that SpaceX couldn't compete with ULA, or land rockets, on a floating platform, in 1-meter seas; and then reuse those rockets, and land them again, on a floating platform, in 1-meters seas.

 

[electracity]

Here's a quiz: One of these companies declared bankruptcy in the last 10 years

• GM
• Tesla

Tesla might or might not struggle to get the Model 3 up to production volumes
GM certainly does not have a problem scaling mfg.

If I were to bet with my $$ on a company that I think has a better business strategy for the future, it's Tesla.. not GM. You are free to bet on whomever you'd like

What an ignorant argument. Take a look at Tesla's balance sheet and tell me what would happen if the Great Recession occurred today.

 

[jhs_7645]

What an ignorant argument. Take a look at Tesla's balance sheet and tell me what would happen if the Great Recession occurred today.

What part of my argument was ignorant. Please.. detail it for me.

I'm making the point that being good at production does not mean you're business is sound. And conversely, having a sound business model can be important even when you have 'learning' to do to ramp production.

P.S. Ford made it through without bankruptcy.. I'm not trying to pick on GM, I'm just trying to point out the flaw in the logic of the original poster whereby you tie the company's ability to ramp production with them being solvent. I think I made a pretty good point. You might not agree, that's your prerogative, but it doesn't make my argument ignorant.

 

[Jayc]

I wouldn't say the model 3 is my ideal car… there's a lot I'd change about it, if they wanted to let me dictate a bunch of changes without regard for the wants of others, but it's pretty good on paper.

But Tesla Model 3 IS my ideal car because I don't think there is anything I'd change about it and because I cannot see myself getting any other car.

 

[ModelNforNerd]

What an ignorant argument. Take a look at Tesla's balance sheet and tell me what would happen if the Great Recession occurred today.

they'd all be bankrupt?

but Tesla might last longer, because their demographic, at least on the higher end, would be somewhat insulated from the short term effects of the recession?

(not a whole lot of 1%ers were out of work for a very long time, so S's and X's will still sell.....maybe even moreso in the early stages, as those tightening their belt realize electricity is cheaper than gas)

 

[MotoEvCA]

What an ignorant argument. Take a look at Tesla's balance sheet and tell me what would happen if the Great Recession occurred today.

All the domestics would be brought to their knees. GM and Ford would be worse off. They are both heavily dependent on consumer and commercial truck sales (high margin sales) and in a great recession the 1st thing put on hold is capital spending. Guess which manufacturer skews to a more affluent customer base (GM or Tesla)?

More affluent customers can usually weather hard times better than folks living paycheck to paycheck.

FACTS MATTER

 

[run-the-joules]

But Tesla Model 3 IS my ideal car because I don't think there is anything I'd change about it and because I cannot see myself getting any other car.

Fair enough I suppose. You wouldn't change ANTYHING, though?

 

[internalaudit]

they'd all be bankrupt?

but Tesla might last longer, because their demographic, at least on the higher end, would be somewhat insulated from the short term effects of the recession?

(not a whole lot of 1%ers were out of work for a very long time, so S's and X's will still sell.....maybe even moreso in the early stages, as those tightening their belt realize electricity is cheaper than gas)

Stock price is lofty too if in the worst case it needs to raise cash.

 

[electracity]

More affluent customers can usually weather hard times better than folks living paycheck to paycheck.

FACTS MATTER

Facts matter? Luxury sales stop in a severe recession.

 

[igotzzoom]

Fair enough I suppose. You wouldn't change ANTYHING, though?

I've already beat a dead horse over the fact that I wish it was a liftback instead of a conventional trunk. That's my biggest gripe. Other than that, I think it's pretty spiffy.

 

[Esme Es Mejor]

What an ignorant argument. Take a look at Tesla's balance sheet and tell me what would happen if the Great Recession occurred today.

If the Great Recession occurred today, GM would go bankrupt again. Period.

If the Great Recession occurred today, Tesla would sell every Model 3 and TE product they could supply. The threat for Tesla would be how big of a hit Model S and Model X would take. Maybe big enough to push them into bankruptcy, maybe not.

Edit: in your GR scenario, how does the Chinese market look? If growth keeps up there, not even a repeat of the Great Recession pushes Tesla into bankruptcy.

 

[30seconds]

I'm starting the see the model 3 on the streets around here. Same way the S started as a trickle and the X. Now I see a dozen Teslas a day.

The S and the X are breakeven at something like 500-700 units a week. Unless you think that Tesla is selling these at less then manufacturing cost then the 3 lines should be breakeven around 1000, maybe 1500 / week. Yes lower price, but now the GF and Fremont factory get amortized over three vehicles and at higher production levels.

 

[T34ME]

What an ignorant argument. Take a look at Tesla's balance sheet and tell me what would happen if the Great Recession occurred today.

Great Recession? GM would tank = bankrupt again. Tesla would be fine because they are the future and well positioned by diversification to weather any attack from any ideology.

 

[T34ME]

I am buying a model 3. I like everything about it and wouldn't change a thing. Although I have a Dec/Feb delivery date, I am willing to wait as long as it takes to get one. I have PV on my roof to recharge at home, the range works perfectly for my needs, I am immune from the manipulation of the oil industry, I am future-proofing myself................it is not a difficult decision for me. I confess, I am a "complete enthusiast".

edit: I have expressed reservations about the smartphone/key card operation, but I do believe that is the future of vehicle access and i am okay with that. I do believe that alternative implements will be developed (like smartwatches) to accommodate a variety of lifestyles.

 

[03DSG]

I am buying a model 3. I like everything about it and wouldn't change a thing. Although I have a Dec/Feb delivery date, I am willing to wait as long as it takes to get one. I have PV on my roof to recharge at home, the range works perfectly for my needs, I am immune from the manipulation of the oil industry, I am future-proofing myself................it is not a difficult decision for me. I confess, I am a "complete enthusiast".

edit: I have expressed reservations about the smartphone/key card operation, but I do believe that is the future of vehicle access and i am okay with that. I do believe that alternative implements will be developed (like smartwatches) to accommodate a variety of lifestyles.

My current Apple Watch has bluetooth 4.2. Hopefully Tesla develops an app for it. I also have no issue using my phone but using the watch alone would be cool.

 

[Canuck]

I want to document this right now so that the Tesla cheerleaders can jump all over me but then I can refer back to this post in one years time. The Model 3 will bankrupt Tesla.

I wish I could legally bet you that Tesla is solvent one year from now. I'd even give you 10:1 odds. Then I could come back here in one year and collect my money. But something tells me your smugness would end at your wallet.

Having Tesla bankrupt in a year is a near impossible task even with the worst bottlenecks in production imaginable. Anyone who says anything to the contrary just needs to take a look at Sirius and its flirtation with bankruptcy and how hard that is to do when so much has been built up, since creditors will work out deals, and people will come in and buy it out and take over. No one will throw this baby down the drain within a year. Of course, Tesla is not past potential difficult times, and even possible buyouts, restructuring, etc. But bankruptcy in a year is utter nonsense that insults the intelligence of anyone with even a rudimentary understanding of how big business and bankruptcy work.

 

[kevinof]

Ok I'll add my 2 cents.

Tesla bankrupt in a year? not a chance. If Tesla was a "regular" car company then yes, it would be a possibility. But Tesla is now more than that - they are a solar business (growing and will be huge in the next 5/10/15 years) and power storage (still in it's infancy but going to be huge in 1/5/10 years). This is the story that investors love and they will keep putting cash into the business just on these 2 pieces alone.

Then there's the cars. Tesla has done what no other car manufacturer has ever come close to. They have created a buzz around their cars - it's almost like what Apple did with the iphone. People queue up for one. People wait years for one. Ford/GM/BMW/MERC etc don't come anywhere close to this kind of customer following. They have also created a buzz around their cars that you never get with anything other car manufacturer. Forums are full of discussions about them, Youtube is full of videos on them. People want to own a Tesla and want to talk about it all the time.

Tesla has problems with production, with quality and lots more but I would give my right arm for a bit of their customer following and devotion. This is a marketeers wet dream and that's worth cash in the bank.

 

[Hitman007]

Those of you who can read and understand company financials understand. Let’s revisit this topic in Nov 2018

 

[Hitman007]

I wish I could legally bet you that Tesla is solvent one year from now. I'd even give you 10:1 odds. Then I could come back here in one year and collect my money. But something tells me your smugness would end at your wallet.

Having Tesla bankrupt in a year is a near impossible task even with the worst bottlenecks in production imaginable. Anyone who says anything to the contrary just needs to take a look at Sirius and its flirtation with bankruptcy and how hard that is to do when so much has been built up, since creditors will work out deals, and people will come in and buy it out and take over. No one will throw this baby down the drain within a year. Of course, Tesla is not past potential difficult times, and even possible buyouts, restructuring, etc. But bankruptcy in a year is utter nonsense that insults the intelligence of anyone with even a rudimentary understanding of how big business and bankruptcy work.

Smugness? You should guard against making opinions of people on the internet that you know nothing about.

 

[T34ME]

Those of you who can read and understand company financials understand. Let’s revisit this topic in Nov 2018

I bet I am better at reading financials from both education and experience than you are! But it takes more than just reading financials to make a successful company. It takes vision, passion, commitment and as @kevinof says, "buzz", excitement, and anticipation among the general public. If Tesla can get ~500K reservations from us complete enthusiasts, then what does that mean about the inevitable macro-marketplace for mass appeal of imaginative EV cars of the future to the legacy automakers, progressive countries, and the petroleum industry? That's right, they realize that the next step in the EV concept has arrived for future personal transportation and they realize Tesla is well positioned to take advantage of that future unless they somehow slow down the Tesla juggernaut by spreading FUD, unrealistic concept cars, or phasing out EV incentives (hello USA). AND I know Tesla is doing something right when we have so many naysayers on these "complete enthusiast" Tesla fora that are shorts or heavily invested in the legacy automakers and petroleum industry or just hanging around on a forum that has no impact on someone who is committed to ICE, GM, Ford, Bummer, MBZ, Porch, & Audi and just want to flap their gums.

Go ahead and purchase more ICE if you wish and you will pay for all the hidden costs of ICE in increased personal health care from pollution, global warming impacts on your personal community, and personal loses from wars for petroleum resources. But most important, you will have to explain to your children and grandchildren why you left this world a worse place than you inherited.