TMC is an independent, primarily volunteer organization that relies on ad revenue to cover its operating costs. Please consider whitelisting TMC on your ad blocker or making a Paypal contribution here: paypal.me/SupportTMC

Roadster sales - Tesla business model profitable?

Discussion in 'Tesla Motors' started by Palpatine, Dec 23, 2008.

  1. Palpatine

    Palpatine Banned

    Joined:
    Sep 6, 2008
    Messages:
    1,357
    Location:
    Seattle
    #1 Palpatine, Dec 23, 2008
    Last edited: Dec 23, 2008
    The math just doesn't work for Tesla when the backlog of deposits are caught up. Unless Tesla is bringing in 30 new deposits per week, which I doubt in this economy, they will be caught up by the end of 2009.

    Lamborghini has 100 dealer locations as a sales channel for their 2,000 cars per year.

    Ferrari has 200+ dealer locations as a sales channel for their 6,000+ cars per year.

    Tesla has 2 dealer locations and perhaps a handful of new locations planned for 2009. I think between 6 to 8 locations are in the works for Miami, New York, Chicago, Seattle, and the two existing locations in California. There will likely be a couple in Europe.

    So my question is, how does Tesla maintain that momentum (30 to 40 per week) with such a limited sales channel of locations? Lamborghini has 100 dealers they can send cars to. Ferrari has 200 dealers to handle this. These dealers each have their own floor financing to buy cars and have on the showroom. So Lamborghini and Ferrari are already paid when the cars ship to their dealers. The dealers carry most of the risk of unsold inventory. The dealers have the carrying costs of financing their floor inventory.

    Tesla is not building that model. Tesla owns the sales locations. Tesla could get buried in unsold inventory VERY quickly.

    In Seattle (Sept 2008), Darryl Siry mentioned that a sales location won't make sense with only the Tesla Roadster. They also need the Model S to have enough volume for a showroom location to make sense financially. But that was before the Model S was delayed even further and before the $9 million in the bank crisis. Also they did not raise the $100 million they were expecting and the IPO market died.

    So here is my question (Siry?). Have they even thought this far in advance? How does Tesla plan to handle this in late 2009 when the backlog is caught up? There is no dealer sales channel to share the risk of inventory carrying costs. And there is no Model S that can justify the costs of Tesla going solo and building dealer showrooms.

    I think Tesla will need partners to expand their sales channel quickly. I believe that Tesla will have to find local dealers in all of the major cities and allow them to sell the Roadster as part of their inventory.

    You read it here first.
     
  2. graham

    graham Active Member

    Joined:
    Dec 2, 2007
    Messages:
    1,572
    Location:
    Aptos, California
    #2 graham, Dec 23, 2008
    Last edited: Dec 23, 2008
    You are not wrong... But I don't know that that is the whole picture either.

    The Roadster is not where Tesla has its sights. The Model S will really be where it is at. They plan to sell around 10 times the number of Model S cars as the Roadster. That will justify their sales channel, when it comes to pass. However, you are very correct - the delay in the Model S means they have a lot of overhead to bridge until it comes out.

    For the immediate term and possibly intermediate term, I believe they plan to have in-store "inventory" of the Roadsters be the VPs. Even after they get through their backlog, I expect the majority of their Roadster sales to be build to order. The Model S, they will need inventory, but before that is out, I expect the "sales" offices to not carry much inventory that is not either a not-for-sale VP, or an already-sold car.

    I am assuming until the Model S comes out all of the "sales" offices will really be service centers which happen to showcase a few cars.

    They will also be supplementing their revenue with the drive train business and the BlueStar eventually. Those will both be with partners where they do not need a sales office - but will, in effect, be able to help shore up the sales/service centers as showcases for their technology and brand.
     
  3. Kardax

    Kardax Member

    Joined:
    Jun 8, 2007
    Messages:
    258
    Location:
    Minnesota, USA
    You're assuming that Tesla's current sales rate will remain flat as they work through their backlog and increase production rates.

    That seems very unlikely to me. I think it's genuinely possible that demand will "snowball" as more and more rich Tesla owners are giving their rich friends rides.

    I think the biggest thing holding Tesla back right now is the delay between order and delivery... 12 months is a very long time to wait for a product from a young company. Shortening that delay could lead to quite a boost in sales, especially as you get closer to an "impulse buy" time frame. After that, I agree that a lack of sales facilities is a limitation; they could sell a lot more if they could offer more test drives... but this is relatively easy to fix.

    -Ryan
     
  4. WarpedOne

    WarpedOne Supreme Premier

    Joined:
    Aug 17, 2006
    Messages:
    2,657
    Location:
    Slovenia, Europe
    But there is only one way of doing this and it tops out at 40 new cars produced per week. They are almost half way there. Delay will always be there, if not it would only mean there is no demand.
     
  5. Kardax

    Kardax Member

    Joined:
    Jun 8, 2007
    Messages:
    258
    Location:
    Minnesota, USA
    Reaching the limit of Lotus's production capability would be a nice problem to have :)

    -Ryan
     
  6. doug

    doug Administrator / Head Moderator

    Joined:
    Nov 28, 2006
    Messages:
    15,914
    Location:
    Stanford, California
  7. Cobos

    Cobos S60 owner since 2013

    Joined:
    Jun 22, 2007
    Messages:
    1,267
    Location:
    Oslo, Norway
    And I'm pretty sure, when they get their European shops/service centers up and running selling 1000 a year shouldn't be that hard, how many Vipers are sold each year? And that from a producer with as uncertain a future as Tesla at least.

    Cobos
     
  8. dpeilow

    dpeilow Moderator

    Joined:
    May 23, 2008
    Messages:
    8,572
    Location:
    Winchester, UK

    So they could possibly end up outsourcing the manufacturing of Model S, like Fisker did? That would be a way to get the car into production without having the access to capital needed for a factory.
     
  9. dpeilow

    dpeilow Moderator

    Joined:
    May 23, 2008
    Messages:
    8,572
    Location:
    Winchester, UK
    O'Brien: Nine predictions for Silicon Valley in 2009 - Mercury News

    O'Brien: Nine predictions for Silicon Valley in 2009

     
  10. Cobos

    Cobos S60 owner since 2013

    Joined:
    Jun 22, 2007
    Messages:
    1,267
    Location:
    Oslo, Norway
    I'd hope not as I'm pretty sure there is money to be made in building the car. Money I'd rather see Tesla get than some external contractor. Especially since that kind of deal will make the margins smaller on the Model S, and I want it cheap when the competition hits. Not Tesla going belly up.

    Cobos
     
  11. dpeilow

    dpeilow Moderator

    Joined:
    May 23, 2008
    Messages:
    8,572
    Location:
    Winchester, UK
    Yes, but it may be a way to get market quicker (which they need to do). Then when things pick up again (and the product is a proven winner), they can raise the money to build the factory and move production in house.
     
  12. doug

    doug Administrator / Head Moderator

    Joined:
    Nov 28, 2006
    Messages:
    15,914
    Location:
    Stanford, California
    #12 doug, Dec 28, 2008
    Last edited: Dec 28, 2008
    Perhaps then model #3 (which was announced to be built by a 3rd party) will arrive before model #2. I would like to see them go ahead with the central campus and factory in San Jose, at least when the time is right. If Tesla is ever to become more than a minor player, at some point they'll have to do their own manufacturing.

    The success of model #3, however, is likely predicated on battery advances (including lower cost) expected in the next few years, and the establishment of Tesla as a brand (through the success of model #2 (Model S)).
     
  13. vfx

    vfx Well-Known Member

    Joined:
    Aug 18, 2006
    Messages:
    14,792
    Location:
    CA CA
  14. TEG

    TEG TMC Moderator

    Joined:
    Aug 20, 2006
    Messages:
    17,252
    Location:
    Silicon Valley
  15. graham

    graham Active Member

    Joined:
    Dec 2, 2007
    Messages:
    1,572
    Location:
    Aptos, California
    I hope Chris O'Brien is wrong in these predictions (personally, especially the Tesla and Apple ones).

    Here is a different link if dpeilow's is not working properly for you:

    http://www.mercurynews.com/vc/ci_11304174
     
  16. vfx

    vfx Well-Known Member

    Joined:
    Aug 18, 2006
    Messages:
    14,792
    Location:
    CA CA
  17. graham

    graham Active Member

    Joined:
    Dec 2, 2007
    Messages:
    1,572
    Location:
    Aptos, California
    1000 a year is around 20/week (more assuming the line won't run every week) which is still slightly higher than they are producing today. In theory there would be a ramp up to their 30 or 40/week to get rid of the backlog, and then they would have to back off to 20/week if only that minimum goal were achieved.
     
  18. rsquared99

    rsquared99 Member

    Joined:
    Jan 10, 2008
    Messages:
    239
    Location:
    Surprise AZ
    Had the 1000 Roadsters a year figure to break even been mentioned before? I know there was some discussion a couple of days ago on one of these threads discussing the number.
     
  19. vfx

    vfx Well-Known Member

    Joined:
    Aug 18, 2006
    Messages:
    14,792
    Location:
    CA CA
  20. WarpedOne

    WarpedOne Supreme Premier

    Joined:
    Aug 17, 2006
    Messages:
    2,657
    Location:
    Slovenia, Europe
    I don't get this. Tesla needs bailout money just to survive? I don't think so.
    Last I heard they only need to sell 1000 roadster per year to survive. Analytics ...
     

Share This Page