Roadster sales - Tesla business model profitable?

[doug]

Green Fuels Forecast

Tesla has brought down the cost of building the Roadster to $80,000 from a high of $140,000 prior to production launch in 2008. Unfortunately, Sales of the Roadster seem to be lagging. When production started in 2008 the company had approximately 1,300 orders for the electric sports car. Earlier in June 2009, Tesla delivered Roadster #500 to a customer, and is generating revenue with every delivery. However, when asked during today's call, Musk acknowledged that the order backlog for the Roadster currently stands at about 700-800 units which puts total sales at about 1,200-1,300 units.

In spite of launching sales in Canada and Europe over the last year, the pace of new orders does not appear to be exceeding the cancellations. When Musk spoke to Green Fuels Forecast in January, he acknowledged that the global recession had caused some customers affected by the financial meltdown to cancel orders as they approached the build date. That situation does not appear to have changed in the past six months.

Musk did say the company expects to maintain a sales pace of approximately 1,000 Roadsters annually for the next several years. Unless the economy turns around soon, that could be a difficult goal to achieve.

 

[dpeilow]

O'Brien: A Look At My '09 Predictions At Mid-Year

Tesla will turn off the lights. Wrong. I worried that "the San Carlos company will get lost in the shuffle as the government bails out the old automakers." In fact, late last month, Tesla announced it was getting a $465 million loan to help manufacture its new sedan. So it's a no-brainer this company will make it through the year, and let's hope, well beyond.

 

[johnr]

O'Brien: A Look At My '09 Predictions At Mid-Year

For some strange reason that link doesn't work for me - a quick Google search brought me to this link, which does work:

O'Brien: A Look At My '09 Predictions At Mid-Year - San Jose Mercury News

Thanks

 

[Alpine Driver]

Hmm. There is a Problem.
The problem is: What is Tesla staff doing in a few month?

I dont want to make a dissertation out of it, but lets overview the data:

• last reports, a while ago, were "total of 1300 roadsters sold". This reports were going up at some Tesla Rep comments up to 1400. But lets assume 1300 was reported.
• last reports say that 130 european roadsters are sold. Lets assume this 130 europeans are included in that overall amount of 1300.
• Deliveries in the US are now at about 600 cars delivered (excluding FS), so at about VIN 600 (+/-)
• They delivered about 109 cars in July. This corresponds with the reported maximum output of 30 cars a week from Hethel.
• Lotus Factory is closed for the first 3 weeks in August. This was the same last year, and so it is this year. I dont have the exact dates, but it should be from 03.Aug to 21.Aug.
• None of the european cars are delivered (and/or built?)
• I ordered one US Roadster in February 2008 (this 5k deposit orders). At this time, there were press releases out that "more than 1000 roadsters are ordered" (order was cancelled later and new order of EU signature was placed)
• I drove with Darryl in Monaco (April 2008), and at this times the "number sold" was 1150. I think I remember having read this statement from Zeev also sometimes.
• bolosky ordered his car mid April 2009, and was confirmed and told that his car is in Hethel final stage at the production line end of July. 4 weeks later, end of august, is his sheduled delivery.
• ChadS placed his order on July 15th 2009
• Lets assume, that both bolosky and ChadS are not High-Style-Grade-A-Celebrities, which means at the time placing their order, they were at the end of the order line. (sorry guys) :wink:

Now lets analyse this data:

a)
Lets begin with ChadS: the start-of-production-Date given to ChadS cant be correct, because in one week on estimated production begin (17.August), no one from Lotus is at the factory. Lets assume, that ChadS´s Tesla Rep did not know that the factory is on holiday. This would still implement, that they wanted to START ChadS roadster AFTER 4 WEEKS he has finalised the order!
About 3 weeks for the built in Hethel, shipping, and about 2 weeks finishing the car in the US. This would make an about 2,5 month wait for a new order.

b)
bolosky ordered Mid April - end of July his car is in final stage at Hethel. (I keep my fingers crossed for you that they could ship it before their holidays). This would implement that it was started at about 3 weeks before, maybe at about July 13th (Mid July) - this means 12 weeks from order date to start of production.

c)
but one thing is for sure: both guys with ordering dates Mid April 2009 and Mid July 2009 should have numbers far north the 1000. But they dont.
When the official number in April 2008 was 1150, this guys ordering a minimum of one year later should be far beyond that numbers.

d)
now see what is reality in the US: VIN600 (+/-) was delivered a few days ago. See beakmeister´s VIN596 delivered on 31.07.2009, while rsquared´s VIN562 delivered on 06.08.2009. Lets assume that they have gone a few numbers over 600, while a few numbers under 600 are still not delivered. So 600 (+/-) is a good value.

e)
how much can they deliver per month? July was the record with 109 roadsters.
There were reports that they did not meet their goals in June (no wonder, with transition problems to Roadster 2.0), and some reports that customers were asked to have their invoice dated 31.07.2009 prior to "real" delivery of their car.
But lets hope the best for Tesla: assume they can deliver 100 cars in August, which would mean that we are near VIN700 at the end of August.
I see this as a very positive assumption, I would more vote for 680 or something.

f)
in September in the US, they can deliver nearly nothing. Because when Hethel has no output in the first three weeks of august, there is nothing to ship and nothing to deliver.

g)
and then, end of september, beginning of october, ChadS might get his car. This nice guy ChadS, who has placed his order a few weeks ago, on July 15th!

Conclusio:

1. They are nearly completely through their US Roadster backlog orders! Maybe only a few less weeks puffer, but not much more than two!
2. There is a gap of 400 Roadsters "missing". I am sorry for Tesla. With 600 cars deliverd now, 700 cars if possible delivered at the end of August, and very less possible deliveries in the US in September due to Lotus factory holidays, would result in a VIN smaller than 800 for the guy ChadS ordered his car on July 15th 2009.
3. So we have to face the fact that US Roadster orders might be about 800 (+/-), and not 1150, 1200 or something similar.
4. Together with the 130 unfulfilled european orders, overall Roadster orders may be at 900 to 950.

How will it likely go on:

• The US Roadster Backlog is near empty. Due to hot having ready the homologation for the european Roadster, they pushed out the US versions nearly to their end.
• At all, Lotus holidays were not so bad for Tesla. Bad for me as an european customer, but ok for tesla and their shedule.
• After Lotus holiday, in the forth week of august, they will massively focus on EU deliveries. This corresponds with Rachel Konrads statement that they will "significantly increase EU deliveries" (which is not so complicated when you a) have only one car delivered in the EU till now and b) have not so many other cars waiting in your order line).
• With the factory capable of an output of 30 cars/week, they will need about 5 weeks of fullfill all the european orders. But then, at the middle of october, they are through all the backlog they have.
  One indication for this plan is that while my car was ordered in May 2008, sheduled now for "mid to end of september 2009" is only a few weeks ready before RGB´s car, ordered in June 2009 (?, I forgot the exact date), is still sheduled for the end of september, maybe a little bit later. So only a few weeks difference in delivery, while over ONE YEAR difference in order date!
• I am not into that kind of manufacturing business. I dont know how difficult it is to switch an assembly line from 30cars/week to 10 cars/week, or if it is better to keep the 30cars/week throughput, and then make 2 weeks holidays :wink:
• But sooner or later, Tesla has to significantly slow down their production. I hope they can keep their speed up till all the orders (especially mine :wink are fullfilled, but surely this also is a contract thing with Lotus.

End Statements:

• The gap of 400 lost Roadster "orders" indicates that from this typical 5k deposit orders, which were created shortly before real economic crisis was there, a lot of customers did not go their way with tesla and canceled their orders en masse.
• From a few aspects, this "strange" tesla programs "stay with us, get your deposit back now when you need it, but accept delivery after november 2009" maks sense in the way that they seek for something to deliver in the US after November 2009.
• Tesla (Elon) did not tell anything wrong. In the last time, it was always said that the Roadster is sold out till November. This is true. Lotus is on holiday now. In september to mid october, they may build the majority of the EU cars. So new orders from the US may not start before the middle of october - which means that they are ready in Hethel at the end of october/beginning of november, and therefore DELIVERED in the US not much before the end of november.
• Tesla PR is working fine. All the poitive news now (109 roadsters delivered, turned a profit in July 2009), may be good for the upcoming period, and in september, there are less US deliveries but events (Chicago store opening), and you should expect a lot of PR from european deliveries and store openings.
• I really hope that when cars are out on the streets, more and more people get convinced and orders are coming in. But for Europe, with all the snow and cold time, this is not a good timing.

Hmm, this really got a long posting. And I think it was not necessary, as it contains no new information. You all knew this, as its just a summary of the data being out there ...

 

[vfx]

...
I dont want to make a dissertation out of it ...

Too late!

_________________

Seriously. I hope you get your car soon.

 

[bolosky]

[*]The gap of 400 lost Roadster "orders" indicates that from this typical 5k deposit orders, which were created shortly before real economic crisis was there, a lot of customers did not go their way with tesla and canceled their orders en masse.

My guess as to what's happened is that a bunch of these people are just hanging on, neither cancelling nor locking in, either because they're indecisive or else because they're having trouble coming up with the cash (or the will to part with it). Some of the mail that I got from Tesla around lock-in/pay-up time led me to believe that this was a common issue.

Maybe the BofA financing program will get some of these orders moving again.

 

[Vger]

One thing that Alpine Driver has not considered are Canadian orders. These began in March (I was one of the first, I am told) and have been accumulating at some (slow?) rate since then. Nothing can be delivered to Canada until homologation is complete, which may now drag out until December, I heard recently. I have no idea how many CDN Roadster orders there are, but I would guess somewhere between 25 and 50, or one to two weeks worth of production. This is not a major factor, therefore, but I thought I would add it to the mix.

 

[Palpatine]

I have heard that there are 300 or so people at the old Roadster $5,000 deposit level that have simply never moved beyond that. That has to be very frustrating for Tesla Motors if that is accurate. I was also told that the sales staff is focused 100% on the Tesla Roadster sales. The Model S deposits are on autopilot with minimal effort now that they have the government loan. This would make sense with maintaining production at reasonable levels of their only current product.

Also, it seems that Tesla Motors is definitely increasing their USA marketing efforts. We have the $500 referral program.

I also received an email today from Tesla asking me to fill out an online market study survey. It was a bunch of questions about what lead me to buy a Tesla Roadster, what magazines I buy, where do I vacation, etc.

Most of the questions were multiple choice, but one of them that I recall was a fill in the box asking why I bought a Tesla Roadster. My response was something like, "Temporary insanity and a lack of financial common sense."

They are clearly getting ready for some advertising and marketing plans. They are just trying to figure out where to aim those efforts.

Frankly, I think the things that I am doing with putting up real 1/4 mile numbers for the Tesla Roadster Sport are helpful for Tesla Motors. They should get out there and prove the performance. Having customers do this for them should be a top priority and validation of their product.

 

[vfx]

As I go out and about, some of the old rumors still exist. One woman ( a real potential buyer) was told by one of her students that the company had gone bankrupt or had been sued into oblivion. The TTAC site stuff seems to have gone away with no single entity as Tesla's foil except for that old writer guy who should not be a problem soon.

Still though, the Top Gear piece is my biggest adversary. Even to those who are clearly excited by the car they aways bring that segment up. I squelch it best I can but I'm just throwing buckets at a forest fire.

Maybe this is a Marketing thread.

 

[Palpatine]

That's OK. I just checked my celebrity ranking; apparently I am Grade Q. When my Roadster arrives, I will ask if I can move to Grade P.

Your car will be a higher grade celebrity ranking. You will still be a complete unknown. My car is somewhat famous and recognized. I am still the same nobody I have always been.

Originally Posted by Alpine Driver
There is a gap of 400 Roadsters "missing". I am sorry for Tesla. With 600 cars deliverd now, 700 cars if possible delivered at the end of August, and very less possible deliveries in the US in September due to Lotus factory holidays, would result in a VIN smaller than 800 for the guy ChadS ordered his car on July 15th 2009.

I was given VIN 690.

--ChadS

That is really bad news if this is accurate. Tesla is likely only selling a fraction of their production capability. Clearly the sales are not 100 per month. They really need some of these $5,000 depositors to convert to real production orders.

Does anyone think that at some minimum sales level it no longer makes sense to produce them? 10 per month? 20 per month?

I don't think Tesla can afford (reputation/image) to stop production completely. They need to have a product being produced during the next two years while the Model S production ramps up.

Perhaps Tesla just reduces their Roadster production staff to bare minimum for one car per day (or whatever the sales justify) and maintains that until the Model S rolls out.

 

[dpeilow]

That is really bad news if this is accurate. Tesla is likely only selling a fraction of their production capability.

Perhaps Tesla just reduces their Roadster production staff to bare minimum for one car per day (or whatever the sales justify) and maintains that until the Model S rolls out.

It's not just Tesla. From what I hear, Lotus must be really grateful for the Tesla work right now too. So let's say they clear the EU backlog and orders slow to a trickle. Lotus don't have the DOE loan and they don't have large perennial problem case factories in Labour (government) heartlands, so then what?

 

[vfx]

It's not just Tesla. From what I hear, Lotus must be really grateful for the Tesla work right now too. ... so then what?

They have a few VP Evoras out right now and will ramp up production pretty soon.

 

[Tdave]

As somebody else noted, the holiday was apparently only 2 weeks long this year. I have been told that production on my car has indeed started. If there had been no holiday, it seems they would have started production just two weeks after I finalized my order.

I was given VIN 690.

I finalized my order a full year before ChadS and have VIN 618. Does this mean Tesla fully sold (finalized order) only 72 Roadsters in the past 12 months?

 

[BBHighway]

So, when they were losing money on each car, they were selling pretty well. Now that they are making a profit on the cars, they aren't selling.

The car business is brutal!

 

[stopcrazypp]

Perhaps Tesla just reduces their Roadster production staff to bare minimum for one car per day (or whatever the sales justify) and maintains that until the Model S rolls out.

Hopefully things pick up as the economy slowly recovers. I also feel Tesla needs to keep Roadster production running before the Model S is out. If they stop production then there's going to be little confidence they can get the Model S produced.

 

[doug]

... I was given VIN 690.

I finalized my order a full year before ChadS and have VIN 618. Does this mean Tesla fully sold (finalized order) only 72 Roadsters in the past 12 months?

Something like that, but you're missing the EU spec cars that have a separate VIN sequence. There are around 100 or more of those, but certainly less than the 200 set aside as a EU Signature series.

Clearly new sales have not kept pace with incomplete sales or refunds. July was possibly the first month in a while that there were more new sales than cancellations. With fall and winter approaching, I don't expect Roadster sales to get much better. Outside of Cali, people think about getting a sporty convertible in the spring.

The good news is that Lotus is flexible. They can change Roadster production rates at Tesla's request (within limits of contract), an advantage of being on the same production line as the Elise. (Though, Lotus certainly appreciates having Roadsters to build.) Also with the gov't loans, Daimler investment, and Model S deposits, the company should be able to weather soft Roadster sales for a bit while it shifts its emphasis to development and production of the sedan.

However, I'm sure Roadster sales, especially in the European market, are a high priority. That's a source of actual income for the company. The lost of Michael van der Sande was bad timing.

 

[Alpine Driver]

Seems to be really bad with the US sales numbers in the past year. This is one reason I do not understand why the focused on on getting the EU cars out there much earlier. By law (low production vehicle exeption on some rules), it would have been possible starting with may. But they were simply not ready with there homologation. And therefore, had to complete this before starting production. A big mistake in my eyes; as if the about 100+ EU cars will go out now somewhere in september and october (note: first planned: EU signature edition of 250 cars, then reduced to "we think about 200", last reported about 130 cars sold, but always be careful on the numbers); its the same as outside of california: winter is coming. And even if there will be a lot of early adoptors under the first EU customers, giving rides to friends and maybe other "interested" ones - with all the snow and salt on the streets, you may wait till march/april till you really want to purchase.
So that in the US there is (was) a timeframe from less than two weeks from order date to start of car production is nice, but does not help Tesla the same way as if they would already have cars out in several european countries in the summer. (Therefore, I am not so "sure" about the "timing" of MvdS dissappear, to say it carefully).

But lets hope that everything recovers soon. For canadian sales, we dont have confirmed numbers. But I dont believe the high ones. They are now selling more than one year in europe, and got 100+ orders. So for a few month sales in canada, I dont believe the "up to 50" number; I would suggest below 20 as a careful approach.

 

[malcolm]

Tesla is likely only selling a fraction of their production capability. Clearly the sales are not 100 per month. They really need some of these $5,000 depositors to convert to real production orders.

With reports of Germany starting to climb out of the recession it might be a good idea for Tesla to focus marketing efforts in and around the Munich store.

But I don't think anywhere is going to be strong sales territory.

 

[Serge]

Also with the gov't loans, Daimler investment, and Model S deposits, the company should be able to weather soft Roadster sales for a bit while it shifts its emphasis to development and production of the sedan.

An additional opportunity provided by said resources is Tesla's ability to finance production and delivery of Roadsters into actual showrooms. We may be seeing a plateau of patient buyers, but there should always be some walk in business. They can also run an analysis of which colors/combos sell best and "stock up" showrooms for an influx of buyers for spring/summer season in Winter country.
They also need to look at expediting the opening of dealerships in Florida/Texas/Arizona.

 

[vfx]

They also need to look at expediting the opening of dealerships in Florida/Texas/Arizona.

What does each store add to the overhead? How many cars does each dealership need to move each month to break even with rent/payrol/utilities/etc.?