Roadster sales - Tesla business model profitable?

[graham]

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 ...

It is true that Tesla has not needed to be "bailed out" like the other manufacturers. And with current funding, I seriously doubt Tesla will go under in 2009. But 1000 Roadsters a year is still a large increase in sales from where they are right now. It may be difficult to increase sales 40% at a time everyone else is decreasing sales by 40%.

 

[WarpedOne]

Tesla needs to sell worldwide and there should not be any problem finding 1000 buyers per year. Make righthand drive version for UK, AUS and Japan and sell there also.

Don't forget everyone is not always really everyone. I doub't Ferrari is seeing 40% drop in sells.

 

[dpeilow]

Maybe they are...

Mama Mia! Ferrari Will Reportedly Cut Jobs as Global Economy Worsens | Automotive News Blog - Wide Open Throttle

 

[malcolm]

Ouch

Only 92 Ferraris sold worldwide back in November. But I can see the Roadster continuing to be the must-have "gadget" for 2009.

The slow ramp-up has helped in that Tesla are still able to sell everything they make. Do the orders currently stand at something like 1600? Any increase on this?

There was talk of a righthand version, but I would expect that this is now postponed. Likewise the redesign of the car's instrument panel and VDS.

 

[graham]

The slow ramp-up has helped in that Tesla are still able to sell everything they make. Do the orders currently stand at something like 1600? Any increase on this?

We have heard no official updates on this. However, the plan was to make 600 2008 and 600 2009, then start taking orders on 2010. I have not heard that they are taking 2010 orders yet. And as of a few weeks ago, you could still buy a 2008 slot. So my guess is they are still under 1200 total.

 

[Palpatine]

We have heard no official updates on this. However, the plan was to make 600 2008 and 600 2009, then start taking orders on 2010. I have not heard that they are taking 2010 orders yet. And as of a few weeks ago, you could still buy a 2008 slot. So my guess is they are still under 1200 total.

I think they have had a few requests for refunds of deposits. With the financial crisis, if someone needed $60,000 quickly to cover their margin calls or short term cash crunch for a business, cancelling the Tesla Roadster order would be very high on the list of cuts.

I am sure that Tesla is still selling Roadsters and taking deposits.
But are they selling at the rate of current production? 15 per week?
Or is the backlog shrinking?

If they are production 15 per week and scaling up to production of 30 per week, but at the same time they are only selling 10 per week, that works out to a big problem by early 2010.

 

[Cobos]

Not necissarily. They might se a pretty big boost in sales when the financial crisis settles down and you can get the car within a month or two instead of waiting an unknown amount of time. That's a scary risk to take,but I suppose they've got some projections. In Norway when you buy a car waiting 1-3 months is standard. Unless you are buying a discounted car that someone usually cancelled at the last minute.

Cobos

 

[doug]

Greentech Media | Should Tesla Motors Sell Out?

 

[graham]

From doug's linked article:

When the company tries to release a $30,000 economy car in four years, tradeoffs between price and performance will be front and center. Buyers will ask themselves questions like, “Do I really want to spend $30,000 on a car that can’t make it to L.A. without stopping for a few hours to charge?

This kind of work is not a million laughs. It involves installing project managers and sales reps in glamour spots like Chengdu or Taiyuan to negotiate over the price of synthetic floor mats or cup holders at 2 a.m. in a “gentlemen’s club” on a Tuesday night. It also means going to Detroit and Ohio to meticulously study the intricacies of batteries and drive trains.

This may be true, but it is also true that Tesla has publicly stated they intend to partner with a larger player to produce the BlueStar. The author is either unaware of this or is ignoring it.

It still may be true that Tesla should sell out to a bigger fish... but I think they have more options at their disposal than the author is considering. A partnership may work better for them than a buyout.

 

[vfx]

Also from Doug's link:

Didn’t Silicon Valley master mass manufacturing? Yes, but ...

..., chip makers were replacing vacuum tubes and have had decades to build up their manufacturing footprint.

... three, most importantly, most of those companies – except for heavyweights like Intel and Samsung – don’t manufacture anymore. They go to foundries like TSMC.

I don't understand why Tesla can't capitalize on these shifts just like the rest of SV.

 

[Tim]

From doug's linked article:


This may be true, but it is also true that Tesla has publicly stated they intend to partner with a larger player to produce the BlueStar. The author is either unaware of this or is ignoring it.

It still may be true that Tesla should sell out to a bigger fish... but I think they have more options at their disposal than the author is considering. A partnership may work better for them than a buyout.

Also, I think it isn't appropriate to make statements about an average buyer making a decision regarding tradeoffs for that person. Any BEV marketed in the next ten years will be a niche vehicle. Arguments that state that a bev must satisfy all requirements of all buyers to be successful misses the point entirely. There are plenty of buyers for whom the range and price limitations are not important. These authors just don't get how technology adoption works.

I wonder what Tesla's margin is on the roadster now that the pound has crashed vis a vis the dollar and commodity price deflation has set in with force. I have to think that they are making a tidy profit per roadster.

Plus, with no real competitors in the BEV space for the next couple of years they should continue to have pricing power. I remain skeptical of legacy car companies efforts to sell BEVs as loss leaders in this environment and their capacity to engineer them. FWIW, I'll be quite surprised to see Fisker actually make a production vehicle too. They simply don't have the funds. Musk was right in saying that it is an engineering problem not a styling one. We know from Tesla's history that $70 million isn't enough. If Dodge ever tried to sell the Circuit, I think it would actually benefit Roadster sales since the Roadster will beat on almost every metric.

 

[Palpatine]

I wonder what Tesla's margin is on the roadster now that the pound has crashed vis a vis the dollar and commodity price deflation has set in with force. I have to think that they are making a tidy profit per roadster.

I had not considered that aspect, but you are likely correct. If the contract is set in pounds, the cost of the glider has become MUCH more affordable in the past few months.

Plus, with no real competitors in the BEV space for the next couple of years they should continue to have pricing power. I remain skeptical of legacy car companies efforts to sell BEVs as loss leaders in this environment and their capacity to engineer them. FWIW, I'll be quite surprised to see Fisker actually make a production vehicle too. They simply don't have the funds. Musk was right in saying that it is an engineering problem not a styling one. We know from Tesla's history that $70 million isn't enough. If Dodge ever tried to sell the Circuit, I think it would actually benefit Roadster sales since the Roadster will beat on almost every metric.

I believe that most of the EVs announced this week will never reach production. I have my doubts about the GM Volt ever being produced. GM is in big trouble and $15 billion in new debt doesn't really help. They still have to pay interest on that new debt.

Chrysler is even worse. Their December sales were down over 50% year over year. How on earth do they even begin to survive that?

The Fisker plug-in hybrid does not appeal to me at all. They are aiming for 15,000 per year at $87,900. To build that kind of volume requires a manufacturing volume 10x larger than the Tesla Roadster. Yet they are trying to raise capital in this market? And Tesla took a major shortcut by getting their glider from Lotus.

I will be impressed if Fisker survives. Has anyone heard what their order backlog is?

 

[siry]

James - an article I read today quoted Fisker saying he had 1300 orders.

 

[j-g]

I think you have to temper the reports of 1300 orders since it only took a $1000 deposit to create an order. When it comes down to paying the balance on delivery, the 1300 claim could change radically.

 

[graham]

I believe that most of the EVs announced this week will never reach production.

I agree!

I have my doubts about the GM Volt ever being produced. GM is in big trouble and $15 billion in new debt doesn't really help. They still have to pay interest on that new debt.

I think the Volt will be produced. GM has bet their company PR on that vehicle. If GM does not completely go out of business (and I don't think it will) there will be a "Volt". Now to do it they may just rebrand a Chevy Cruze as Volt, and forget the batteries or plug... but they will come out with something called a Volt.

The Fisker plug-in hybrid does not appeal to me at all. They are aiming for 15,000 per year at $87,900. To build that kind of volume requires a manufacturing volume 10x larger than the Tesla Roadster. Yet they are trying to raise capital in this market? And Tesla took a major shortcut by getting their glider from Lotus.

Well, Fisker took some shortcuts too. I believe the drive train from Quantum was originally developed for the military, and they have gotten the ICE and other pieces from GM. And of course the manufacturing from Valmet. It isn't to say that they don't have an enormous amount of work still... but I think in many ways they did less work than Tesla. And if they can avoid some of the mistakes Tesla made, they should be able to save some money that way.

I will be impressed if Fisker survives. Has anyone heard what their order backlog is?

Only that they are sold out through "mid-2010"... Last June they announced that they had received over 800 orders in Europe. http://www.topspeed.com/cars/car-news/fisker-received-800-orders-for-karma-in-europe-ar59337.html But I have no idea what their total orders are today.

ETA: Ah... took so long writing this, siry replied with real numbers!

 

[siry]

@j-g it cuts both ways. While I agree that a $1000 deposit amount is relatively small so you can't necessarily count on it for a sure sale, it is also the case that there are many people who will only buy this car when it is sitting at a dealer and they can take immediate delivery. It makes it hard to project actual demand with great accuracy.

@james - of course GM will deliver the Volt! They are way too far down this path to not deliver it. The only real question is whether they hit their timeline and how many they ultimately produce or sell.

 

[Palpatine]

@j-g it cuts both ways. While I agree that a $1000 deposit amount is relatively small so you can't necessarily count on it for a sure sale, it is also the case that there are many people who will only buy this car when it is sitting at a dealer and they can take immediate delivery. It makes it hard to project actual demand with great accuracy.

I think Tesla has a much more reliable deposit base in that they required a serious deposit of $60,000. I understand it was even higher for earlier orders.

I think the Aptera order backlog of 4,500 is extremely soft because it is only $500 and it is in escrow and it is full refundable.

The Fisker Karma backlog looks soft to me if it is only $1,000. In addition, based on our experience watching Tesla, does anyone really think that $70 million in capital is enough to produce that vehicle? A Plug-In Hybrid is much more complex than a pure EV.

 

[vfx]

I think you have to temper the reports of 1300 orders since it only took a $1000 deposit to create an order. When it comes down to paying the balance on delivery, the 1300 claim could change radically.

Exactly.

We put the 1K down and after the 2nd of 3 majoe price jumps we decided to pass on the car even though we love the look and like the Sunset features even more..

And here's the thing. they still have our money while we keep a wait-and-see attitude. There may be many more like us.

 

[DDB]

Nothing really said about all the cancellations. By my count 6 to 40 (depending on criteria)

That's one question I had; why not sell new vehicles at the higher prices, or look to Europeans to raise the cash (sorry to those that trade in the Euro and Pound)? I mean we all know that GM is planning on losing money on the Volt for the first year or so, so why not expect the same from the Roadster? And yes, I'm aware of the theory regarding government loans.*



*I believe if a company is truly profitable there isn't a dire need for the government loan. Nice, but not required.

 

[graham]

That's one question I had; why not sell new vehicles at the higher prices, or look to Europeans to raise the cash (sorry to those that trade in the Euro and Pound)? I mean we all know that GM is planning on losing money on the Volt for the first year or so, so why not expect the same from the Roadster?

This got covered at the Town Hall meeting. It had been the plan to sell the 2008s at a loss, then raise the price above the break even point for the 2009s and European markets. Unfortunately, they could not continue to get anyone to finance them with a business plan of selling the cars at a loss. They needed that last round of financing (the $40 million reported last Fall) to fund the company until the Roadsters were profitable, and the government loans came available to make the Model S. To finish that last round of financing -- which negotiations went up until Christmas Eve -- they had to agree to stop losing money on the 2008s. If they had not done so, they would have had to shut down the company after Christmas.