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colettimj
Member
Tesla Motors needs to move to profitability ASAP. It will be best in the long run.
I wrote several paragraphs about why this is important in May 2016, but it was boring.
It can be done. Tesla CAN be profitable AND grow. Anyone who says otherwise is short-sighted.
This is the same thing I heard people say about Amazon. They kept plowing money into building their warehouses and (what seemed strange at the time) building out an over-sized IT infrastructure. Seems to have worked out for them, no?
Tesla is spending money on their supercharger network and battery factory and people wonder why? Can't they just get batteries from LG like Chevy? Well, these are the competitive moats that you might call "cash burn" but I see as an investment that will pay off in spades. Stopping this investment today for short-term profitability is what is short-sighted.
Maybe I'm just wishing but I don't think they'll settle for that even though it wouldn't be the end of the world. They don't need cash tomorrow and my hunch is there are some surprises on the horizon. It blows me away how they can report something that is pretty much 99% positive and the FUD wins out in the short-term.
Panasonic is committed they have said they were waiting on demand which the M3 reservations proved it.
Elon has built a Tesla into a $27 Billion dollar company by pursuing a strategy to take leadership in EVs. The cars, charging infrastructure, battery production, dealerships...the whole thing.
No way that this could have been and stayed profitable through the whole trajectory.
McRat, I'm happy for your successes but I can show you 10 massively successful companies that used growth capital (read: not profitable) to any one company you would point out that was completely funded from cash flows.
Read the master plan, Elon isn't trying to build the most profitable company in the world (although this might be a by-product), he is trying to fundamentally shift the human race to renewable energy and become a multi-planet species.
This puts a very different framework on the scope and timing of his actions vs. others in the corporate world.
No way that this could have been and stayed profitable through the whole trajectory.
McRat, I'm happy for your successes but I can show you 10 massively successful companies that used growth capital (read: not profitable) to any one company you would point out that was completely funded from cash flows.
Read the master plan, Elon isn't trying to build the most profitable company in the world (although this might be a by-product), he is trying to fundamentally shift the human race to renewable energy and become a multi-planet species.
This puts a very different framework on the scope and timing of his actions vs. others in the corporate world.
I completely disagree with McRat.
Tesla's story is about accelerating EVs before the technology has obviously arrived. One of the big questions I asked myself when looking at Tesla and TSLA for the first time in 2012 was why can Tesla do this and the big automaker could not? I read a lot of Seeking Alpha back then and looked at the criticisms from a number of Tesla bears. What technological moat did Tesla possess? Was it something that the other major automakers, which are technological and manufacturing powerhouses at unprecedented scale, could not do? The answer isn't doesn't lie in the fact that the big automakers couldn't do what Tesla did. Instead, it was that building EVs was unappetizing. They didn't want to do it, they didn't believe in it, and they were perfectly happy let it sit in a corner to satisfy government officials and a few greenie wackos.
For Tesla to succeed in its mission, and making money is only part of their mission, is to build compelling sustainable transport, which means BEVs. But compelling by itself wasn't enough. You can build $2 million dollar supercars that are compelling. You have to build better cars than ICE and build enough of them to influence the industry. Therefore, they have to foster a movement and solve every chicken and egg problem along the way. To do that with automobiles is extraordinarily hard and capital intensive. Hence the grand plan laid out for us in 2006. No one else has proven thus far deserving of our trust to accomplish this task. Not GM. Not Nissan. Not BMW. Without Tesla's presence to drive this movement forward, the other automakers can breathe a sigh of relief... the management of these companies can serve their next 5-10 years and not worry about EVs. Sure, they'll make a few. Offer mostly some PHEVs to comply with requirements. But they'll wait until it was painfully obvious that the technology had more than arrived before mass adoption.
If Tesla was only shipping the Model S and was happy to be a boutique automaker, shipping the original estimate of about 20,000 vehicles a year, then they'd already be profitable. No need to build the Gigafactory. No need to build out so many Superchargers criss crossing the several continents on their own dime, sized for many more vehicles on the road than are currently operating. No need to massively hire at each step increment. Tesla could have been satisfied to grow organically after the initial success of the Model S. And a more conservative, tentative leader probably would have done so.
But where would it have left Tesla if they didn't have the ambitions of the X and then the 3 they chose to "live within their means"? Well, the 3 certainly would take longer to come about. We don't know the depths of demand for the S alone, so they may not be able to make leap to the 3 without the X. Certainly, they wouldn't have had the confidence to build to 100,000 vehicle run rate without the X in the mix at this juncture. Then Tesla would struggle to continue to fund the fixed costs of service centers, Supercharger build out, and so forth. At their scale, cost efficiency would always be a problem. One slight misstep and they're done. And again, the other automakers would happily toast their demise and the management of those companies can likely retire without thinking of spending many billions on battery factories, motor factories, and the like.
But now... with the Model X and the 3, Tesla is shaking the industry. As it stands, Tesla has the lowest cost per kWh for battery cells and battery packs. Low enough that the ex-chief engineer of the Volt didn't get the pricing right. They have the highest specific energy cells. They already are the largest single consumer by kWh of lithium ion cells on the planet. They will be doubling that capacity in the next year, which will give them more than 40% of the battery production for automobiles by the end of 2017. Note that with GM's announcement of the Bolt, they did not announce investments large enough to produce hundreds of thousands of Bolts. Not even close. Tesla will be dragging this industry forward kicking and screaming.
You do not do this in the automotive industry by growing organically. Tesla has a limited time scale to make this impact on the industry. They have to grow to 100,000's of vehicles as soon a possible to both insure their own survival and the near term survival of the BEV movement.
McRat, you wrote that Tesla should make profit on $80,000 vehicles before trying $35,000 vehicles. I submit they have already demonstrated the ability to make overall profit on the $80,000 Model S as a business on its own. However, they have been building additional businesses well beyond the single $80,000 vehicle at the same time. They are building a business for $85,000 CUV/SUV BEVs. They are building a business for $35,000 sedans... the paint shop, stamping presses, phase 1 of the Gigafactory, sizing of the Superchargers, the amount of Service Centers, and hiring of the production labor all are geared towards the 100,000's of S, X, and 3's. Not just the S. Then, on top of all of that, they are building out Tesla Energy too, primarily to de-risk the Gigafactory, but nevertheless, that's a worthy business in of itself and incurring up front cost. Finally, the era of autonomous driving is upon us and Tesla is working hard on that... the eventual valuation of a company that has electric self driving cars is, at the moment, incalculable as we don't quite know how it will unfold.
Sure, there are plenty more investments of cash that need to come in the near future. This is not a time to shrink back. And yes, the optics look bad in the context of the Model X delays. But it this is actually the most rational course of action for Tesla and we are fortunate to be a part of this.
Tesla's story is about accelerating EVs before the technology has obviously arrived. One of the big questions I asked myself when looking at Tesla and TSLA for the first time in 2012 was why can Tesla do this and the big automaker could not? I read a lot of Seeking Alpha back then and looked at the criticisms from a number of Tesla bears. What technological moat did Tesla possess? Was it something that the other major automakers, which are technological and manufacturing powerhouses at unprecedented scale, could not do? The answer isn't doesn't lie in the fact that the big automakers couldn't do what Tesla did. Instead, it was that building EVs was unappetizing. They didn't want to do it, they didn't believe in it, and they were perfectly happy let it sit in a corner to satisfy government officials and a few greenie wackos.
For Tesla to succeed in its mission, and making money is only part of their mission, is to build compelling sustainable transport, which means BEVs. But compelling by itself wasn't enough. You can build $2 million dollar supercars that are compelling. You have to build better cars than ICE and build enough of them to influence the industry. Therefore, they have to foster a movement and solve every chicken and egg problem along the way. To do that with automobiles is extraordinarily hard and capital intensive. Hence the grand plan laid out for us in 2006. No one else has proven thus far deserving of our trust to accomplish this task. Not GM. Not Nissan. Not BMW. Without Tesla's presence to drive this movement forward, the other automakers can breathe a sigh of relief... the management of these companies can serve their next 5-10 years and not worry about EVs. Sure, they'll make a few. Offer mostly some PHEVs to comply with requirements. But they'll wait until it was painfully obvious that the technology had more than arrived before mass adoption.
If Tesla was only shipping the Model S and was happy to be a boutique automaker, shipping the original estimate of about 20,000 vehicles a year, then they'd already be profitable. No need to build the Gigafactory. No need to build out so many Superchargers criss crossing the several continents on their own dime, sized for many more vehicles on the road than are currently operating. No need to massively hire at each step increment. Tesla could have been satisfied to grow organically after the initial success of the Model S. And a more conservative, tentative leader probably would have done so.
But where would it have left Tesla if they didn't have the ambitions of the X and then the 3 they chose to "live within their means"? Well, the 3 certainly would take longer to come about. We don't know the depths of demand for the S alone, so they may not be able to make leap to the 3 without the X. Certainly, they wouldn't have had the confidence to build to 100,000 vehicle run rate without the X in the mix at this juncture. Then Tesla would struggle to continue to fund the fixed costs of service centers, Supercharger build out, and so forth. At their scale, cost efficiency would always be a problem. One slight misstep and they're done. And again, the other automakers would happily toast their demise and the management of those companies can likely retire without thinking of spending many billions on battery factories, motor factories, and the like.
But now... with the Model X and the 3, Tesla is shaking the industry. As it stands, Tesla has the lowest cost per kWh for battery cells and battery packs. Low enough that the ex-chief engineer of the Volt didn't get the pricing right. They have the highest specific energy cells. They already are the largest single consumer by kWh of lithium ion cells on the planet. They will be doubling that capacity in the next year, which will give them more than 40% of the battery production for automobiles by the end of 2017. Note that with GM's announcement of the Bolt, they did not announce investments large enough to produce hundreds of thousands of Bolts. Not even close. Tesla will be dragging this industry forward kicking and screaming.
You do not do this in the automotive industry by growing organically. Tesla has a limited time scale to make this impact on the industry. They have to grow to 100,000's of vehicles as soon a possible to both insure their own survival and the near term survival of the BEV movement.
McRat, you wrote that Tesla should make profit on $80,000 vehicles before trying $35,000 vehicles. I submit they have already demonstrated the ability to make overall profit on the $80,000 Model S as a business on its own. However, they have been building additional businesses well beyond the single $80,000 vehicle at the same time. They are building a business for $85,000 CUV/SUV BEVs. They are building a business for $35,000 sedans... the paint shop, stamping presses, phase 1 of the Gigafactory, sizing of the Superchargers, the amount of Service Centers, and hiring of the production labor all are geared towards the 100,000's of S, X, and 3's. Not just the S. Then, on top of all of that, they are building out Tesla Energy too, primarily to de-risk the Gigafactory, but nevertheless, that's a worthy business in of itself and incurring up front cost. Finally, the era of autonomous driving is upon us and Tesla is working hard on that... the eventual valuation of a company that has electric self driving cars is, at the moment, incalculable as we don't quite know how it will unfold.
Sure, there are plenty more investments of cash that need to come in the near future. This is not a time to shrink back. And yes, the optics look bad in the context of the Model X delays. But it this is actually the most rational course of action for Tesla and we are fortunate to be a part of this.
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Yet, you're still a small business so why are you saying you're better than Elon?
Literally all management at Tesla could disappear and they would turn a profit, because their cars are running at 20%+ profit margins right now. No future plans/expansion and boom, Tesla is profitable. A toddler could become CEO of Tesla and also be able to turn a profit within a quarter because no further change would happen.
That's like T-Mobile claiming they're the best network because they improved their coverage by 400% compared to what they used to be. While they're an awesome company, they're still dead last on network quality
Interesting story and especially what you got in your warehouse but you completely avoided to comment on the analogy you started.
Also, young people are very often the ones that do change things. Elon has a track record of doing that exponentially with respect to time starting at a young age.
Why have we wasted 2 pages on this? Everyone should have realized his arguments are invalid after he said Tesla needed to spend more on advertising. This isn't worthwhile.
Panasonic to make push into autonomous tech
It's not a sure thing yet. So far GF construction is much lagging behind the original schedule. Not to mention the recent 2018 push, GF certainly will be one of the critical paths.
There is just one critical path in practice and Tesla has said GF construction is not on the critical path for Model 3. This is strange to me as well but I think an explanation is that they are going to sell the higher option versions of Model 3 for a while and have gotten better deal with batteries from Japan. Another explanation is that GF actually will decrease cost even if it only operates at 15% of it's size and that will start end of this year.
I can't say Tesla is cheating but it's certainly misleading. Back to 2014, the whole purpose of GF and capital raise was for future model 3. First time this words came out of Q4 ER/CC, and you've already found many conflict statements from Tesla in Q1 ER/CC which is just 3 months apart.
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
I go to bed, wake up again and see that McRat has now been able to mention Microsoft vs. Apple (hint: neither is in manufacturing) and some old Xerox computer he once had, all of which are completely irrelevant to the original premise which was that Tesla must become profitable here and now and somehow grow organically with full funding of the growth from operations. I still say this is both impossible and unimportant and haven't heard anything to convince me otherwise.
I also notice that Dr Shorty took another stab at posting the "Bonfire of vanities" article, which is as irrelevant as it was the first time.
Man I'm done with debating people who lack the mental capacity to fathom exponential growth.
I also notice that Dr Shorty took another stab at posting the "Bonfire of vanities" article, which is as irrelevant as it was the first time.
Man I'm done with debating people who lack the mental capacity to fathom exponential growth.
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it is a bit of a mystery, but I am going to assume they got the prices down. Shipping 45 KWh of batteries from Japan is not that expensive by boat compared to the value of those batteries so maybe Tesla has entered a new contract with Panasonic about large volumes from Japan or as I said before GF 1 will be able to get prices down even at a low scale compared to when it is producing 45 GWh per year.
Anyone is free to believe they are lying or misleading and invest or not invest accordingly.
Hear, hear. So don't. Let's hope this ends that little diversion back to fundamentals.
Ah, what evidence is there that the Gigafactory is lagging behind schedule?
Here is an example of what was said in 2014:
Tesla Giga Factory: $4B to $5B Price Tag, With Battery Production Slated for 2017
From that article in 2014, it says, "The plan is for construction to start in 2014, with production beginning in 2017." Tesla is now saying that production will begin in late 2016. How is that late?
It seems that a lot of people assumed that the start of cell production in 2017 meant that the entire shell for the rest of the factory had to be done by then. But why is that the case? Are they really late if they don't build the rest of the empty shell by then? The shell only needs to exist just in time before cell production equipment needs to be installed to bring that phase online.
At the moment, we need about two more phases of the Gigafactory to be online by spring of 2018. That's one shell phase completion per 9 months or so, which seems very reasonable. The first is this early summer 2016, the next sometime next early spring 2017. That should provide enough cells for at least 14 GWh by end of 2017, or a run rate of 220,000 Model 3's on an annual basis. The 3rd phase shell by late 2017 or very early 2018 with cell production by fall, 2018. 4th phase shell by fall of 2018. 5th phase shell by early 2019. The entire Gigafactory pulled forward by about 18 months or more. Maybe they can push the shell completion to 6 months, basically working on the next phase shell while the equipment install is being done on the last phase. Obviously, if they had a lot more capital of front, they could start much more up front. But thus far, they aren't late.
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This isn't the game the large institutions play. They have a mutual relationship with the shorts (especially the large players). They make interest off lending shares which they plan to hold onto for a long time anyways. At the same time, the shorts make money in the fluctuating stock price. So it's really a mutual relationship where both sides make money. Also, a short squeeze doesn't help institutions at all... it's not like they're planning to sell.
I like the thought of this angle, but I'm curious if you were already aware of the Google/FiatChrysler deal when you wrote this. And if you were, why did you think that deal was irrelevant enough for you to move forward with presenting this angle? I'm not disputing your thoughts at all, I'm just trying to rationalize why the Goog/FCH deal is irrelevant. Thanks.
Causalien
Prime 8 ball Oracle
We all love to be backseat CEO. I am pretty sure there are many CEO invested in TSLA so this stock brings more of us out. Elon only have the pressure of ownership to answer to. Which mean TSLA's investors. If McRat is a big enough investor and asks Elon to be cash flow positive, it will be done. However, I doubt any of us can surpass Elon's share.
I have a bigger stake than most people due to early investment. On the topic of burning cash to produce Model 3 faster I am a big torn. To be honest, I have probably reached some type of nirvana concerning stock trading. (Must be my ascension in India) so not everyone is like me and don't care if the stock price falls. This is just a game for me now.
In any case, between losing money and getting my Model 3 faster. I want my model 3 faster. I want to show it off to people. Look at this little thing I invested for 10 years so I can get made for me. C'mon Elon I want to brag and we are not getting younger. 2 years is 3% of most people's life. If you think about it like that money loses its meaning.
I have a bigger stake than most people due to early investment. On the topic of burning cash to produce Model 3 faster I am a big torn. To be honest, I have probably reached some type of nirvana concerning stock trading. (Must be my ascension in India) so not everyone is like me and don't care if the stock price falls. This is just a game for me now.
In any case, between losing money and getting my Model 3 faster. I want my model 3 faster. I want to show it off to people. Look at this little thing I invested for 10 years so I can get made for me. C'mon Elon I want to brag and we are not getting younger. 2 years is 3% of most people's life. If you think about it like that money loses its meaning.
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