Tesla's Future

[S'toon]

Wait a minute. That article is from February 2015, and a lot of the assumptions, based on nothing but speculation and misinformation, have been proven wrong with time. It even cites Seeking Alpha as a source.

The Model S isn't profitable and the Model X crossover won't be either, that article says, although Tesla does make money selling California zero-emission credits to other carmakers.

No, that is wrong. The Model S has about a $20,000 profit per car. They're just spending money building the company's infrastructure like the Gigafactory, expanding their Freemont factory, building a Supercharger network, etc. faster than the money's coming in.

Idiots.

 

[wdolson]

I wrote this a while back. Tesla could fail, but basically the only two scenarios are they do something to shoot themselves in the foot like the Model 3 ends up being a massive turkey nobody wants, or the economy craters and the entire car industry hits the skids.

Why I Think Tesla is Unlikely to Fail

 

[Brovane]

I wrote this a while back. Tesla could fail, but basically the only two scenarios are they do something to shoot themselves in the foot like the Model 3 ends up being a massive turkey nobody wants, or the economy craters and the entire car industry hits the skids.

Why I Think Tesla is Unlikely to Fail

Excellent write-up you did at the end of last year.

The points you made about #4 and Tesla being the only company that has the ability to scale up to make 500,000 EV's a year by the end of the decade because of the investment they are making in battery production is spot on. Even if the Bolt is a hit and GM has the demand for 100,000 cars a year they just cannot build this many.

Running down your list I would say #2,#16 are both a real concern for Tesla right now. Tesla is spending a lot of money on the Model-3 production and the Solar City merger isn't going to help Tesla hold onto cash on-hand. If opinion turns against Tesla their is a possibility of strong sell off which could crash the price of the stock which would impede their ability to raise cash. This get's more likely if the Model-3 is delayed, which Tesla isn't known for being on time for new vehicles.

This brings me to point #11, With how much Tesla has to do right to bring the Model 3 into production by the end of 2017, how much is Solar City a distraction for Elon and Tesla? Not even mentioning that 2017 is also set to be a big year for SpaceX with the first Commercial crew flights scheduled for the end of 2017, first Falcon Heavy flight. We have already seen how distracted he got when a SpaceX rocket exploded during a static fire and the impact on the Auto-pilot announcement.

What happens if next year the first Commercial Crew flight goes wrong on the same week that the first production Model-3's are being delivered to customers?

 

[wdolson]

I think the Solar City merger is a necessary step in the plan and not a distraction. Tesla is going to pay-as-you-go supercharging as an option instead of bundling it into the price. We don't know exactly how that will shake out, but it's pretty clear that's coming by Model 3 launch, but probably earlier on the lower priced S and X at minimum.

In many states, you aren't allowed to charge per KWh for electricity unless you are a utility. A lot of companies running chargers just charge by the minute instead in those states. I believe Solar City is classified as an electric utility. After the merger, the supercharger network becomes attached to the Solar City division of the company and Tesla can then charge per KWh in every state.

 

[Brovane]

I think the Solar City merger is a necessary step in the plan and not a distraction.

I am more thinking that it is a financial distraction. Solar City is loosing money and the purchase of Solar City will require stock from Tesla and it isn't like Tesla has a bunch of extra cash laying around with what they are going to have to spend on Model 3 Mass Production.

 

[PtG62901]

Solar City's version of the megafactory is about to come online. I'm looking forward to having their solar panels in the marketplace.

 

[googlepeakoil]

I recently read an article saying that Tesla will likely not survive and will fold within the next ten years, I know that everyone has been saying that since Tesla first started but I was just wondering if it could be true this time. I read that they tanked Model S productions by around 2000 in Q3 2015 and took out a loan from the Bank of America for $300 million. But Still I have faith in Tesla and I hope they survive.

My analysis - as somebody who's followed their share price since the start...
$300mn is really a small part of their finances.
Tesla has $3.2bn in cash.
They have a market cap of aprox $25bn - half of Ford and GM. More than Mazda and many other car companies selling fewer cars. So have ability to tap capital markets for another few billion - which they plan to do later this year to build more cash for below activities. The share price prices in a lot of over-confidence IMHO so has deservedly fallen from $298 to high $190s. When GM can price electric cars as loss-leaders then they have a lot of competition.
They're losing money because of investment + growth (building a $4bn + Panasonic's 1.5bn ish) Gigafactory + retooling their factory for production at 5x current volume.
They have a gross margin of about 20-25% on cars.
Really they're also a battery company with stationary storage products as well.
They'd have to do some really stupid things to mess up - but so far are doing pretty good - the Model 3 has impressed most and they've taken many more reservations than predicted. I personally predicted this kind of volume of pre-orders... after all if a Model S acceleration video going viral can get 4million hits in a week then there's a lot of fans out there!
A few risks:
- losing Panasonic as a partner (but they are both investing heavily in the GF)
The greatest risk for them is freak events:
- a massive earthquake / fire destroying one of the factories - competitors like Ford have dozens.
- If all the Tesla's drove away from their owners on autopilot and accelerated into the nearest school bus... or some other massive "loss of faith" incident. The autopilot deaths is a small blip but could get away from them. I imagine the autopilot 8 changes to use radar will help satisfy the "not seeing that lorry crash" investigation.
- Elon quitting (or worse)

 

[erthquake]

The earthquake possibility really concerns me. It's only a matter of time before the Hayward fault goes, and the southern section of the fault is only a mile away from the factory.

 

[Lex]

It's a thrill ride, I sometimes search for Tesla news AM, noon, and night and see new stories constantly, and still miss some stories, though the echo chamber effect is strong -- adding "Tesla" to your title makes it sell. For all these "Tesla killer" models out there, according to the headlines, you'd think my choice for a practical modern connected EV sedan would have been a difficult one, hmm...

Overall, I've noticed that Tesla news is a constant stream of awesomeness, book-ended by some very tough times. Seems we're going through those right now as we're low on awesomeness, but it's an odd lull if you ask me, well, except for the loss of lives, we all pause for those, but overall things seem to be progressing generally as planned, and with an accelerated schedule.

Having no stock in either company, I'd say I like the SolarCity acquisition if it brings the new solar roof to Canada, as it seems that SolarCity alone would struggle to open the Canadian market, while manufacturing at their "gigafactory" just across the border. I also am disappointed to not see more (any ?) Superchargers self-powered by solar, and that would hopefully change quickly, along with solar at the stores etc.

 

[PtG62901]

If they can pull off the solar roof, things will get exciting. Looking forward to the NY solar panel plant coming online, and seeing the effect on the market. Solar needs to happen.

 

[22522]

There is a lot of money sloshing around. Elon is more comfortable with robots building things than with people building things. The capital acquisition of robots could compete with paying people and a company could have trouble making payroll. Companies in this position struggle to pay their suppliers,... they borrow from suppliers to meet payroll.

I don't know anything about Tesla finances, but I think they I'll make it. As long as Elon does not do anything despicable or deplorable that causes people to call their "goodwill" loans. He is kind of like Blanche...

 

[wdolson]

The earthquake possibility really concerns me. It's only a matter of time before the Hayward fault goes, and the southern section of the fault is only a mile away from the factory.

NUMMI survived the Loma Prieta quake with no damage I can find. The risk is there, but I think the factory will be fine when the fault moves.

There is a lot of money sloshing around. Elon is more comfortable with robots building things than with people building things. The capital acquisition of robots could compete with paying people and a company could have trouble making payroll. Companies in this position struggle to pay their suppliers,... they borrow from suppliers to meet payroll.

I don't know anything about Tesla finances, but I think they I'll make it. As long as Elon does not do anything despicable or deplorable that causes people to call their "goodwill" loans. He is kind of like Blanche...

Tesla almost went out of business in 2008, but even at that dark hour Elon didn't do anything illegal to meet payroll.

At this point in Tesla's history, payroll is probably a relatively small percentage of their bills. Their capital expenditures are pretty big. Of their personnel I think their manufacturing employees are probably a much smaller percentage of their workforce than most car companies. They have their hands in the energy sector, their own "gas stations" (superchargers), high expenditure on R&D as well as capital expansion. Their total R&D budget is less than big car companies like VW and GM, but as a percentage of company revenue, their R&D budget is one of the largest in the car business.

 

[erthquake]

NUMMI survived the Loma Prieta quake with no damage I can find. The risk is there, but I think the factory will be fine when the fault moves.

But Loma Prieta was centered 29 miles away from the NUMMI, and the much closer Hayward Fault is capable of a similar magnitude, 6.8 - 7.2. While the plant might survive the shaking, critical infrastructure (water main, power lines) crosses the fault and would likely be severely disrupted. Supply lines in and out of the plant would also be significantly affected. How long could Tesla survive a complete shutdown of operations at the factory assuming a quake occurs before Tesla brings any other factories online?

 

[PtG62901]

But Loma Prieta was centered 29 miles away from the NUMMI, and the much closer Hayward Fault is capable of a similar magnitude, 6.8 - 7.2. While the plant might survive the shaking, critical infrastructure (water main, power lines) crosses the fault and would likely be severely disrupted. Supply lines in and out of the plant would also be significantly affected. How long could Tesla survive a complete shutdown of operations at the factory assuming a quake occurs before Tesla brings any other factories online?

I can imagine the problem, a big earthquake hits CA, Tesla factory greatly slows down, falls behind for a month extra and I have to decide... cancel my order of a Tesla, and buy a Bolt? I think I would wait. lol

 

[dauger]

This Guy Says Tesla Will Fail ...
couldn't find the exact one but here is one.

These sorts of claims pop up about pretty much about any company, Apple, Amazon, whatever. In the case of Tesla this is the argument I offer to say they and TSLA's short sellers are utterly wrong:

Tesla Disrupts Different

 

[GoTslaGo]

But Loma Prieta was centered 29 miles away from the NUMMI, and the much closer Hayward Fault is capable of a similar magnitude, 6.8 - 7.2. While the plant might survive the shaking, critical infrastructure (water main, power lines) crosses the fault and would likely be severely disrupted. Supply lines in and out of the plant would also be significantly affected. How long could Tesla survive a complete shutdown of operations at the factory assuming a quake occurs before Tesla brings any other factories online?

Based on your screen-name I assume you have expertise in earthquakes. So quick question. What is the fault situation with the gigafactory in Nevada? I recall from the gigafactory tour videos that they've installed massive quake-resistance units in that factory. Thanks!

 

[Canuck]

The fact that Tesla hasn't failed is the real story. Not that long ago, it was difficult to imagine that a new American car company would not only be competing with, but outselling Mercedes, BMW, Audi, And Porsche In US. That was just so far outside of the realm of what was thought to be even remotely possible. In fact, it was thought that starting a new car company and surviving was nearly impossible, let alone one that could out-compete many major brands.

Failure is easy to predict, predicting success is much more difficult. Few, if any, could have predicted Tesla's success. Even Elon Musk predicted it would fail.

 

[mhan00]

I lately find myself wavering on the outlook of Tesla and the Model 3. They have to get the Model 3 perfect, and I mean perfect in terms of quality, fit, finish, and reliability or it could be the end of Tesla. I don't know if they have the quality controls in place to make that happen.

People today have zero patience for growing pains, and they won't understand that it's not going to be like a Honda Civic, where you just take it somewhere local and they take care of most issues within a week. The most vocal will take to the infosphere of social media to bitch endlessly and it will honestly shape opinions, whether the concerns are valid or not.

It's a little scary to think that you could spend $40-60K on a car that might not even have a supporting infrastructure left in 5-10 years. What happens if the cash dries up and they have to close many or most of the service centers? Your resale value would be non-existent as well.

I also was a little put off by Elon's directive to get every possible car finished and delivered before another round of raising capital. There are already occasional fit and finish issues with the Model S/X and rushing doesn't seem like it will help in that regard.

That being said, I'm not even thinking of giving up my Model 3 reservation at the moment, so don't ask. But I'll definitely need to evaluate where Tesla is in the marketplace when they give me the option to configure my Model 3.

The chances of Tesla folding completely to the point where cars can't be serviced is extremely low at this point. They've built enough brand equity now that even if Tesla does tank, some company with cash to spare will pick them up.

 

[Lex]

Agreed, the Tesla brand alone is extremely valuable today. There will be no folding at this point, even if sometimes the Service capabilities and other infrastructure seem so stretched to the extreme at times. They are growing by leaps and bounds. I'm astounded and all I'm trying to do is keep up with the news articles.

With regards to Tesla's future, I've recently had my opinions influenced, here's what I just posted in the 8.0 thread:
Firmware 8.0

As much as the tech crowd loves Tesla today, future tech fanatics might look elsewhere for their EVs... and that's a good thing.

 

[erthquake]

Based on your screen-name I assume you have expertise in earthquakes. So quick question. What is the fault situation with the gigafactory in Nevada? I recall from the gigafactory tour videos that they've installed massive quake-resistance units in that factory. Thanks!

First off let me say that I studied the earth imaging aspect of seismology. I wouldn't consider myself an expert in earthquakes, though I do love the subject. Maybe I am compared to a layperson, but not compared to a PhD that studies earthquakes.

That said, the Gigafactory's earthquake risk is significant. Here's a map of faults that have moved in the last 15,000 years.

The factory is less than five miles from the Olinghouse fault zone (the red lines) which produced an estimated 6.7 magnitude earthquake in 1869. However, the USGS estimates the recurrence interval as 8,000-16,000 years so another event on that stretch of the fault doesn't seem likely.

The Pyramid Lake fault zone (the orange north-northwest trending lines at the top of the map) appears to have quakes every 1,500 years or so, with the last event probably being a magnitude 7 - 7.3 around 1850.

In 1954, two earthquakes (7.3 and 6.9) occurred four minutes apart, located 67 miles to the east in Dixie Valley. That's about the same distance as San Francisco from the epicenter of the 1989 Loma Prieta earthquake. It's another slow-moving fault zone, so repeat events appear to occur only every 3,400 - 50,000 years.

So the area is seismically active. It seems there's a pretty good chance the factory will experience an earthquake during its lifetime, though I'm sure it's adequately designed to handle anything mother earth is capable of throwing at it. While these could be major earthquakes, they'd still be rather small compared to the devastating quakes that will eventually happen on the San Andreas or in the Pacific Northwest.

If you want to look at the faults in more detail in Google Earth, here are the kmz files from the USGS.

This is probably more info than you wanted, but like I said, I love the subject