That sounds better than what Tesla claims. http://files.shareholder.com/downloads/ABEA-4CW8X0/549293785... (emphasis added):
”Other lines, such as battery pack assembly, body shop welding and final vehicle assembly, have demonstrated burst builds of about 500 units per week and are ramping up quickly.”
If you can do burst runs of 15 km/hour, that doesn’t mean you can run a three hour marathon.
”The company burned $1.4 billion and has $3.5 billion in cash. Raising money shouldn't be necessary.”
To get that $1.4 billion in revenue, they will need to sell 40k Tesla 3s at $35k each, or 3,000 a week. To get it in margin, even assuming the average model 3 will sell for $50k, they will have to sell 12,000 a week or so (at 20% margin)
=> If things go as planned, I guess they will need about half their money in half a year or so before turning a profit. That doesn’t leave very much in case things go worse than planned (for example, they plan for 25% margin on model 3, but currently don’t have that on their more expensive models, and they plan to sell more of their expensive models, but can decrease production, so, presumably, they have quite a few of them in inventory)
Tesla may have a fantastic future ahead of it, but it also may fail spectacularly fairly soon, or just have a decent future ahead of it that doesn’t warrant its current share price.
Something is terribly wrong in Fremont.
If Tesla is stuck on a battery bottleneck it's just as silly as if Mercedes were stuck on a sheet metal bottleneck. Yes, you need reliable component suppliers that can scale with you as you grow and provide the quality you need. If you don't have that, you have a big problem that vertical integration isn't going to solve.
The Mercedes E-class is monocoque, like almost all cars. They build the body/frame and then add the powertrain and wheels. Here's the body/frame and the powertrain/suspension coming together.[1] The powertrain and suspension aren't self-supporting; they're a collection of parts held in a fixture. That's very clear in the video of the parts coming together.
The Tesla Model S, though, is body on frame. If it can sit on its wheels without a body, as the Tesla Model S can, it's body-on-frame. Here's the Tesla Model S platform sitting on its wheels, with the powertrain installed.[2]
So is the Tesla Model 3.[3]
[1] https://youtu.be/lPKnM9vC6V0?t=395 [2] https://www.youtube.com/watch?v=l8WUIkD7xxI [3] https://jalopnik.com/why-tesla-needs-to-sell-the-model-3-wit...
If you want to compete in a market, you got to play at the speed/quality/prices of the market -- there is no slack given for being new.
In the end, unless they get profitable, if they burn their stash, they're toast.
Their real risk is if the Model 3's reliability is bad or they need a recall thus reducing their profits significantly.
"The truth is the Model 3 costs $40,000 if you want a standard version with autopilot (an extra $5,000) in black with no other options. If you want a different color, add $1,000. And if you want a longer range ($9,000) to get over 300 miles per charge instead of 220, well now we’re at $50,000. $50,000 for a midrange car."[1]
[1] https://www.theverge.com/2017/7/31/16069960/tesla-model-3-no...
"Enhanced Autopilot adds these new capabilities to the Tesla Autopilot driving experience. Your Tesla will match speed to traffic conditions, keep within a lane, automatically change lanes without requiring driver input, transition from one freeway to another, exit the freeway when your destination is near, self-park when near a parking spot and be summoned to and from your garage."
You can get adaptive cruse control for more reasonable costs, but lane changing takes a lot more awareness around the car.
It seems like you're assuming that the cash burn will stay at 1.4billion. Expenditure should go down once the production line tooling is complete.
This leads me to expect it's reasonable their burn will continue at the same rate.
Furthermore, it's estimated they won't reach 3k a week till the end of 2018.
https://dailykanban.com/2017/10/source-tesla-responsible-mod...
lol. "it might go up, might go down, or might stay the same!"
Once you're in 3 hour marathon territory, what you can do for 1 mile is a lot more relevant to what you can do for 26.2 miles than you might think. One of the tent poles of effective marathon/half marathon training is to make your race pace into a drumbeat. You want to feel your race pace in your bones. Very effective workouts look like: take your marathon race pace, and run 5 minutes easy/5 minutes hard (~race pace) for 60, or 10 easy/10 hard for 80.
Tesla is talking about burst builds that last for a week. That sounds like very effective training that will prepare them for race day.
Was that in the call? Their statement says "Several manufacturing lines [...] have demonstrated a manufacturing ability in excess of 1,000 units per week during burst builds of short duration. Other lines, [...] have demonstrated burst builds of about 500 units per week...". AFAIK, "short duration" != "a week".
Assuming they didn’t produce a lot more than they delivered, if they had even one week in which they produced 500 Model 3s, they also must have had weeks in which they destroyed them.
Tesla seems to be taking the opposite approach to Apple here. In my observation, Apple drives its suppliers extremely hard to achieve the quality it requires. Tesla, on the other hand, is too eager to bring any sundry part in house (e.g. car seats). Apple's approach appears to work in that it pushes suppliers to do what's necessary. I worry that Tesla, having already bitten off a large bite to chew, is inviting too much distraction that will, in the long run, not put Tesla in a stronger position (there is a reason most automobile manufacturers outsource their seats after all).
Sometimes forcing your supply chain to pinch every penny works out the best for your shareholders.. sometimes focusing on quality products pays off more in the long run.
Time will tell.
I'm thinking about the different ways to structure a business to achieve a quality product. Is there a good example of a company that produces, in-house, an entire non-trivial (i.e. there are some systems to be integrated) product?
Other point Boeing had years long delays with the 787 partly due to developing a new technology while also trying to outsource much of their production.
No, it wouldn't. The OP asserted that Apple holds their supply chain to rigorous quality standards. You're asserting that Walmart holds their supply chain to the lowest possible pricing.
Apple earned this right by helping those suppliers get off the ground. With introduction of iMacs/iBooks (~1999) Apple helped build wireless card manufacturing plant in Taiwan from nothing ('few dusty rooms' at their modem supplier manufacturing facility). They did similar thing while shopping for Camera supplier, instead of going with someone established like Sony Apple chose Taiwanese bottom of the barrel volume suppliers (Primax/Micron) and grew their camera module divisions with each iteration of iPhone.
Apple in particular understood lomg before competitors that battery life is an extremely important real world metric. Doing their own SOC helps them optimise that.
Anyway, you are comparing the battery life of touch-based smartphones with its non-touch predecessor which isn't a fair comparison. Besides, mobile phones that could last for a week from a single charge are definitely not considered smartphones, those are feature phones.
Ah, the Kim Jong Il approach. The presence of Dear Leader will surely inspire the peasants as they work towards the Juche Ideal.
- Non-GAAP automotive gross margin temporarily declined to 18.7%, which was in line with our expectations. The gross margin declined primarily because of a significant increase in Model 3 manufacturing costs to support the limited initial level of production.
- Model S and Model X gross margin declined from Q2 primarily due to one-time price adjustments for discontinued trims and unfavorable trim mix. Numerous actions to improve Model S and Model X gross margin are underway. Consequently, we expect Model S and Model X gross margin to improve in upcoming quarters.
The S/X and are old now and the car market requires new models to keep sales going.
That combined with the approaching launches of other high end luxury electric cars does not bode well for future S/X sales.
The negative press on autopilot and failure to deliver on autopilot 2.0 could certainly be a factor as well.
Maybe the market for electric cars is larger than the market for a tesla specifcally.
1) They had done the paperwork wrong and hadn’t informed his bank about some additional charges so it required an additional hour for them to get that sorted before my cousin basically just paid that additional amount upfront. 2) There were scratches in quite a few places that were noticed by us and cleaned up once we mentioned them. My cousin has purchased a couple of BMWs in the past for a lot less and never seen that before. 3) Some parts were not fitting well and had to be adjusted. 4) The autopilot to remove the car from the garage doesnt work because the garage is at the top of a slight incline. This is pretty common in many US garages. Hopefully this is just a software fix. 5) The overall car quality simply doesn’t match up to what you’d expect from a 100k car.
That being said, it’s still a pleasure to drive and a really nice car. He can’t go back to driving an ICE anymore.
Tesla does seem to have a lot of quality control issues which may have been to,reared by the initial set of buyers that will become more of a problem with a less forgiving next wave of potential customers. And a lot of their solutions currently appear very manual and ad hoc. Hopefully they can improve on them soon.
Was there more than that accident with the old version? I havent heard much about this...
It's November and they don't even have automatic windshield wipers working.
See: https://docs.google.com/spreadsheets/d/1FGexNNm8rOXB24qQ1bdI...
But the failure to deliver is real. The entire Autopilot project is way behind schedule. AP2 was supposed to reach feature parity last year, but it didn't until quite recently, and it's still widely considered not to be as good as experience as the original Autopilot yet.
This is a sample of the first 100 articles from Google News on "Tesla Autopilot Crash" - in total you have about 10 unique incidents with 100s of stories in different outlets written about it.
Lots of sensational headlines and a lot of the incidents are pretty dubious about what the actual cause is but to casual readers its adds up to a cloud of doubt about Tesla repeated across many big name media sources.
Most of these same media sources also run plenty of enthusiastic coverage on Tesla so it really depends on your pre-judgements what you take away from it. Tech enthusiasts will tend to minimize the negative stories whereas people not interested in tech who are more safety concerned will give them much more weight.
https://www.bloomberg.com/news/articles/2017-06-02/denmark-i...
http://www.skm.dk/skattetal/satser/satser-og-beloebsgraenser...
I'm fine with the gross margin trending towards, say, 20% over the next few quarters since GM for example is at 12% (I'd expect Tesla's gross margin to be higher than GMs because Tesla keeps the revenue that GM has to give to its dealers).
So sure they might well be making a loss at the current rate of sales of the model 3, but will be quite profitable once the production rate increases.
1: https://english.stackexchange.com/questions/17695/any-refere...
Have you considered not being that guy?
That it's a LaTeX habit does provide an explanation, but then the information that there may be a better way when using Unicode might also be appreciated for someone that does not know. I would appreciate being informed of that if I wasn't aware.
In any case, I tried to be informative and relay that it was my own problem that compelled me to reply, but I wasn't aware I was being excitable enough to need to "chill out". I tried to word it in a way to avoid people thinking I was getting worked up, and show that I just felt compelled to contribute. Unfortunately that didn't seem to come across.
So yes, they are probably more savvy than the average equity investor; the bonds falling doesn't mean they think a default is neccessarily on the horizon, just that a ratings upgrade is not (and potentially also that the company will come back for more money sooner rather than later, as that implies more supply vs demand which may not scale equally).
This would all seem to make a good case for the equity being overpriced, but to short the equity you need a conviction that the rest of the market will realise this sooner rather than later.
This is curious. If the S and X are profitable, why divert resources from them? Not enough? Well maybe they should not have just canned a bunch of people?
Yeah I know, the ones they let go may not be the ones they needed for the 3. But it still seems strange all these things taken together.
Just curious -- If they need to raise money afterall, how easy or difficult it would be for them to get the money cheaply?
Euphemism for government funding running out.
Those 'bugs' are a big problem for a company already behind in production.
I hope for Tesla this was just a single event. But new cars with new tech always have issues. You don't want that when you are already behind.
production could begin in three years. Source - https://techcrunch.com/2017/11/01/elon-musk-says-teslas-chin...
apparently he sleeps there sometimes too:
https://www.gearbrain.com/elon-musk-sleep-tesla-factory-2502...
Elon is the bottleneck
Great, the boss is in house...now I spend more of my time telling the boss why it isn't fixed yet and less of my time actually fixing it. I'm not saying those things are inherently at odds but they are definitely in tension with each other.
> Some lines are at only 500 cars a week. Namely the battery pack assembly, body shop welding and final vehicle assembly.
of those, the battery pack is the big issue.
From Gabrielle Coppola, bloomberg's auto analysts:
> The biggest production constraint by far is the battery module assembly. A systems integration contractor dropped the ball, and Tesla only realized they dropped the ball until very recently. Tesla had to rewrite all the software from scratch, Musk explains. That's what he and CTO J.B. Straubel have been focused on.
- Tesla will be late getting up to 5,000 units a week of Model 3. It will happen at the end of Q1 instead of the end of this year. The bottleneck is batteries.
- Some lines are at only 500 cars a week. Namely the battery pack assembly, body shop welding and final vehicle assembly.
- The $2.92 a share loss was much bigger than the $2.27 analysts expected.
- The company burned $1.4 billion and has $3.5 billion in cash. Raising money shouldn't be necessary.
- Automotive gross margins fell from 28% to about 18% and will slip to 15% next quarter.
- Auto revenue grew 10% to $2.4 billion as sales of Model S and X grew. Revenue is at risk, though. Tesla will divert resources from Model S and X to the Model 3.
- Tesla didn't say much about China. The company added a supercharger station with 50 chargers in Shanghai, but no word on a new plant.
- Musk expects to spend $1 billion on capital expenditures next quarter. That's consistent with expectations for ramp up for Model 3.
- Tesla installed 109 megawatts of ``energy generation systems'' in the third quarter. It acknowledges this is an underwhelming figure: ``the lower deployments are in large part a result of deliberately de-emphasizing commercial and industrial solar energy projects with low profit and limited cash generation.''
As to the battery delay.... Tesla says it's the suppliers fault. "key elements" of the battery module assembly had to be taken over and redesigned, Musk says.
EDIT
- most importantly, Elon has moved his desk to the giga factory as that is where the largest bottleneck is.