Roadster sales - Tesla business model profitable?

[rolosrevenge]

I am sure the employees are making $5,000 per month or more. The local service manager is excellent and VERY qualified. So I would guess that we are talking $20,000 to $30,000 per month just for the Seattle store and two or three local employees to be hired. So at least $250,000 to $350,000 per year.

But you need to factor in how many extra Roadsters they will sell because of their store. If they can sell an additional 2 to 3 per month at each location (it is a lot easier to sell when you have an experianced salesman on the floor) then they about break even every year. Then by the time the Model S comes out they are firmly established and can start to make profits off their locations.

 

[Cobos]

Yes I see your point James, but as VFX said for something as strange as a pure EV you need local stores. I believe that might be even more true for the Model S which will also try to sell to non early-adopters. They need to see it and drive in it to really want to put down money for this. Considering how long time it does take to create a store I think they want the basis for the store network already well established when they start producing the Model S. And as has been said they don't need that many extra Roadster sales or Model S deposits before the shop almost pays for itself.

Cobos

 

[TEG]

If they can sell an additional 2 to 3 per month at each location then they about break even every year...

Huh? I thought the profit margins on Roadster sales were rather slim.
(And reportedly negative on the 2008s).

You think selling 15 Roadsters per year will pay for all the expensses of running a sales/support office? Personally I don't think they will make financial sense until Model S is selling in volume.

 

[Arnold Panz]

Huh? I thought the profit margins on Roadster sales were rather slim.
(And reportedly negative on the 2008s).

You think selling 15 Roadsters per year will pay for all the expensses of running a sales/support office? Personally I don't think they will make financial sense until Model S is selling in volume.

I'm pretty sure they said they had the cost of each Roadster down to $80k or so now. Without including other expenses (corporate overhead, marketing etc.), you could give Tesla a top range of around $40k per Roadster "profit" (assuming around a $120k average sales price), so it would take at least 125 extra Roadster sales per year to cover the extra $5mm nut. And I don't think Tesla can claim anything close to a "true" $40k profit per Roadster sale, so the number should really be higher than that for the stores to pay for themselves now.

That said, $15mm total for 3 years to have all of these stores in place now seems like a pretty good investment to me, especially if, once the S gets off the ground, each store is at least paying for itself, and Tesla is not forced to dilute its own profits by sharing with any franchisees. The optics of having real live stores in place, especially if they are enjoyable to visit and well run, should pay big dividends for Tesla in the future, so assuming they can get the float, it's a very smart investment.

 

[Palpatine]

That said, $15mm total for 3 years to have all of these stores in place now seems like a pretty good investment to me, especially if, once the S gets off the ground, each store is at least paying for itself, and Tesla is not forced to dilute its own profits by sharing with any franchisees. The optics of having real live stores in place, especially if they are enjoyable to visit and well run, should pay big dividends for Tesla in the future, so assuming they can get the float, it's a very smart investment.

I am gradually starting to think that $5 million per year ($15 million till Model S arrives) might be worth it also. That assumes that our wild ass guessimate is close to accurate for the cost per store. The visibility of the stores in a limited number of major cities is a good message to send.

If they get an extra 3,000 Model S reservations in the next 2 years, that might justify the store expenses also. Just having the Model S test mules in the stores could make those reservations happen.

 

[doug]

To the Moon: Elon Musk's High-Powered Visions - BusinessWeek

Tesla is profitable—at least this quarter—but will soon plunge into the red, he [Musk] says, when it ramps up production and fills out a dealer network that will have outlets in New York, Los Angeles, and other cities.

 

[vfx]

DO NOT underestiamate what Tesla is making on on all the afterbits for the Roadster. Doubling the price on paint and floormats really has got to make a difference in the bottom line.
I don't begrudge them though, after all if you have a car that needs no maintenance, you have to make money somewhere.

It's nice to see Tom is back in form. I how we get to see the article he was misquoted in.

To the Moon: Elon Musk's High-Powered Visions - BusinessWeek

and fills out a dealer network that will have outlets in New York, Los Angeles, and other cities.

"Will be in LA and NY?" I guess I have been traveling through time...

 

[tomsax]

My more verbose commentary on the BusinessWeek article got moved to a more appropriate thread here. (vfx: I'll post something on the San Juan Journal article if they ever get it online.)

What does "ramp up production" mean? Are they going to start making a ton of Roadsters on spec? Or is that referring to building the production facility for Model S? The former seems unlikely and that's a weird way to describe the latter.

The real question is: does Tesla have sufficient Roadster orders to remain profitable without the Model S design and production facility costs? Obviously, Grover didn't think to ask that question. To bad he hasn't been reading this thread.

 

[Palpatine]

Speaking of lousy reporters with bad info, Dan Davids (Plug In America President) and I did a joint aritcle for the Seattle PI a few weeks ago. That one got mangled also. We decided to start insisting on the right to review for accuracy before agreeing to any more interviews. The reporters are just sloppy, stupid or both. A horribly inaccurate acticle is worse than nothing at all.

 

[TEG]

The Dan Rather HDnet show was fairly accurate, but I recall at one point they said the Model S was "in production"...

 

[ChrisC]

We can do the math ourselves. What is the rent and the cost of two employees (sales and service)? ... I would guess that we are talking $20,000 to $30,000 per month just for the Seattle store and two or three local employees to be hired. So at least $250,000 to $350,000 per year. Multiply that by 10 to 12 stores around the world, some areas are likely much more expensive than Seattle.

Just a data point for you, my family in Munich says that the going rate for storefront space in the central district where the store is 100-300 Euros per square meter per month. Someone else can do the math on how that works out for the whole store.

Luxusobjekte in der Münchner Innenstadt - 7,8 Millionen Euro für eine Wohnung - München - sueddeutsche.de (in German)

 

[bolosky]

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 just talked with someone from Tesla (whose name I won't mention because I didn't ask him if I could quote him). He said that they're selling about 30 cars per week. The fact that people are getting pushed to lock in within hours of signing up is because Tesla switched the sales force to commission, and they get paid when you send in your payment after lock in. It's not that they're having trouble filling the queue.

He said that people from Tesla have been having to go to England to work on the Lotus line, because their business is up, too, and they don't have enough capacity to get all the cars out fast enough.

One additional nugget was that they're getting way more orders than they expected for the carbon fiber package, and the company that's producing the parts can only do 1/day. So, if you order carbon fiber highlights you might get a later production slot than if you don't.

The person who got a car 65 days after lock-in might have hit the best time to order. It was probably right before they switched to commission sales but at the tail-end of the early adopter queue.

This all makes me feel better than when I thought that no one else was buying.

 

[Palpatine]

If they are selling 30 per week, that is plenty. Over 1,500 per year would be more than enough to justify the Tesla Roadster continuing production.

But the evidence so far does not seem to point to 30 per week in new sales over a long sustained period.

Perhaps one week they did that after a new store opened. If they were selling 120 Tesla Roadster per month I think it would have shown up in other areas. More new owners announcing themselves here on this website would be a good indication of new sales.

You know how sales go. It can spike and decline based on any number of variables.

The evidence will be clear in about two months I think. If Roadster VIN #1,000 comes out with big press releases, then either new sales caused it to happen or they got a lot of those $5,000 deposits to finally pay in full.

 

[Tdave]

No way they're signing up 30 new buyers per week. I think that sales number represents the number of Bills of Sale they're writing per week currently. That's still only indicative of how many Roadsters they're delivering per week.

We know that someone that was assigned a production number in summer of 2009 got a number less than 200 away from someone that was assigned a production number in summer of 2008. That's less than 200 orders for that 12 month period. No way I'm believing new Roadster signups (deposits, sales, whatever you want to call it) have picked up to a pace of 30 per week now.

OK, let be back off a bit and say that the only way that could be explained that I could think of is that they're all European orders. Now that they're delivering in Europe, those orders are flooding in. Possible?

 

[Alpine Driver]

No TDave, not possible in my opinion. A CONTINUOUS pace af 30 orders per week (= 125 per month!) is not there and might never have been there.
I think it depends on a missinterpretion; surely they delivered 30 per week, maybe in a continous rate, over the last month(s).

btw, sent you mail in your inbox some time ago. Did you receive?

 

[raymond]

... the only way that could be explained that I could think of is that they're all European orders. Now that they're delivering in Europe, those orders are flooding in. Possible?

Small problem: AFAIK the 250 signature Roadsters have not all been sold yet.

 

[Palpatine]

I think they are right over 700+ right now and from what we know some of the recent USA deliveries ordered 65 days before their delivery.

I know one person in the Seattle area taking delivery this week. I will ask him for details and verify his VIN number.

At best they are within 1 or 2 months of their backlog being caught up. And it still takes at least 30-40 days for a customized order to start in England and get through Menlo Park and delivery.

Tesla has enough data to know the most common colors and option combinations. They might decide to stock 50 to 100 Roadster of the most common selections. They could have them in Menlo Park ready for immediate shipping to anywhere.

Then a customer could just make their selection. If it is available in Menlo Park, it would ship out right away. If they really want that option/color combo that is not on in inventory, then they can wait 5-6 weeks for delivery.

In the stores they could have 2 or 3 of the most common models also ready to go.

I think that is the strategy I would go with right now. So the factory could produce another 100+ Roadsters even beyond the current backlog.

 

[Roger Reid]

I am due to receive delivery of my Roadster hopefully this next week. The truck left Menlo Park on Friday (9-25-09). Delivery if this week would be at 65 days. The last 3 digits of my Vin # 704.

Sleepless in Seattle,,, OOps I'm near Boise.

 

[Lancelac]

I was just told that Tesla sold the entire marketing fleet over the last month. It'll be replaced by a new fleet of 2010s in a month or so. That probably makes for a serious profit since those cars were 100% written off as a cost.

 

[doug]

I was just told that Tesla sold the entire marketing fleet over the last month. It'll be replaced by a new fleet of 2010s in a month or so. That probably makes for a serious profit since those cars were 100% written off as a cost.

That is very interesting. I wonder if it matters that they had unique VINs (mostly labeled as VPs). I half expected them to do this in the future since VIN502 (red 2010 Roadster Sport with CF exterior accents) is being used as a marketing car, yet has a standard VIN.

Any word what price they were able to get for them?