The future of Tesla

[Oerdin]

The cost of production for a model 3 is currently around $38k (average sales price is pushing almost $70k so they are one of the most profitable cars in the entire industry right now). Remember they still have a two year backlog of customers who have plunked down their earnest money just in North America. They are building about 6k a week now and have hit the 7k a week number on a few weeks. It will not be long before 10k a week is hit plus in two years the factory in China will open easily doubling production.

That is half a million a year just one the Model 3 in North America and another half million per year in China (again just with the model 3) for a million per year just on one model. So, yeah, I'd say they can fairly be called a mass market producer at this point especially when you add in 120,000 a year Model S and 70,000 per year Model X production. That is before the new roadster or the SUV hit the market.

Is it endless success for Tesla now and forever? No, but it is the greatest success in the industry since the release of the first Chrysler in 1925 or perhaps since the release of the first VW in 1938 or so. A whole new brand that went from zero to taking over much of the premium segment in no time flat when the so called experts all said it was impossible. I would call that notable.

As for the $35k base model... It will come. It is just a matter of amortization design costs over enough volume of units built. They are very close now to break even at $35k and eventually the economies of scale will bring it down low enough.

 

[innonimatu]

I'm not saying anything soon on Tesla, because I'd be only repeating myself. But I will say now that time will tell and it'll take about 6 months more, or less.

 

[hobbsyoyo]

They are building about 6k a week

They are actually building less than 5,000 a week. They hit the 5,000/week target once and have been cruising at about 4,500 since then.

In any case it is good that they are maintaining high-rate and steady Model 3 production. The issue is that they're trying to do to many other things and burning through a lot of upper-management (and likely mid and lower management and their labor force) in the process. The other products they are trying to push will diversify the company but are all insanely capital intensive and are in contested, competitive markets.

I don't think the investment in Solar City has paid off either, yet.

 

[Oerdin]

They are actually building less than 5,000 a week. They hit the 5,000/week target once and have been cruising at about 4,500 since then.

In any case it is good that they are maintaining high-rate and steady Model 3 production. The issue is that they're trying to do to many other things and burning through a lot of upper-management (and likely mid and lower management and their labor force) in the process. The other products they are trying to push will diversify the company but are all insanely capital intensive and are in contested, competitive markets.

I don't think the investment in Solar City has paid off either, yet.

Wrong. They built an average of 4,600 over the last three months but there was several holidays (Holloween, Thanksgiving, Xmas, New Year) and they spent 2.5 weeks upgrading the lines to reach a higher weekly production rate. So, no, you are just wrong. On at least two weeks the reaches 7000 and we can easily expect it to grow from there.

 

[hobbsyoyo]

Wrong. They built an average of 4,600 over the last three months but there was several holidays (Holloween, Thanksgiving, Xmas, New Year) and they spent 2.5 weeks upgrading the lines to reach a higher weekly production rate. So, no, you are just wrong. On at least two weeks the reaches 7000 and we can easily expect it to grow from there.

Everyone else upgrades their production lines in a week.

See how I moved that goal post? Familiar?

 

[Oerdin]

No, everyone else does not. Also they were replacing virtually all the machinery so it was a very large upgrade. You can keep pretending there is nothing to see but you will keep being shown to be a clueless person. That is just the reality here, my friend.

 

[hobbsyoyo]

No, everyone else does not. Also they were replacing virtually all the machinery so it was a very large upgrade. You can keep pretending there is nothing to see but you will keep being shown to be a clueless person. That is just the reality here, my friend.

Why are you being rude to me?

And on point -
Tesla has a fraction of the plants of the big guys. Every shut down for them, no matter how trivial, is an order of magnitude larger than what Tesla undergoes.

And it's not like the big companies don't have their own major upgrades. It's typical practice for very major factory to have two shut downs and re-tooling per year - but they usually do this in a week. Huge swathes of factories are being rebuilt to build electric cars.

Tesla has a ton of potential. It's not a shinning city on capitalist hill.

 

[Oerdin]

Rude? Please quote what is rude.

 

[hobbsyoyo]

Tesla laid off about 7% of their staff recently. I believe there was also a smaller preceding round of job cuts as well.

https://www.cnbc.com/2019/01/18/elon-musk-tesla-email-to-employees-about-job-cuts.html

 

[Oerdin]

The Model Y sounds very interesting as it has a 75% parts commonqlity with the Model 3 but is an SUV. SUVs are now the largest passenger vehicle segment behind trucks.

BTW the main reasons for the modest staff trimming of 7% was 1) To get get the amount of man hours per car built down to industry standards and 2) Save cash so they can divert it to building both the Model Y assembly line as well as pay for the Shanghai factory.

 

[Oerdin]

This is going to be a big deal. Tesla is aquiring Maxwell Technologies, a San Diego based company ehich has been around since 1965 specializing in batteries and supercapacitors mostly for the U.S. Military. They have a dry cell battery which has less weight and a higher energy density then even the best battery cells Tesla currently makes plus they are a world peader in supercapacitors which will team extremely well with battery technology.

Further more all of Maxwell's tech is currently in production (mostly for U.S. Navy submarines) and Tesla is aquiring them in an all stock deal do it doesn't cost them any cash on hand. This is a big leap in battery tech, it will be 100% owned by Tesla, and it is going to be big. The new Shanghai gigafactory will not have Panasonic as a supplier and that means Tesla will be cutting Panasonic out of its supply chain; meaning Tesla is going to be producing 100% of its own batteries and it seems certain Maxwell's tech is going to be at the heart of it.

 

[Goodfella]

I don't think the investment in Solar City has paid off either, yet.

I don't think the investment in Solar City has paid off at all, and I further think it was mainly done to save his cousins/his reputation by preventing it from going bankrupt on its own. Since then, I think Tesla's growing profit margins in the last two quarters have been driven, in-part, by Tesla gutting the Solar City business.

 

[Oerdin]

They have been trying to make Solar City profitable and that has meant ending the debt financing offers for buyers of Solar City solar panels as well as paying down Solar City's debt. It did save his cousin though it also does fit long term into Tesla's business plan. It will certainly not be a profit center any time soon for them though.

 

[innonimatu]

Tesla paid out a rather large bond today, after Musk's gamble to raise the stock pcie and convert it to stock failed. I wonder how much cash it has remaining, and whether it got some new loans?

 

[hobbsyoyo]

They are also closing nearly all of their stores in a bid to cut costs on the Model 3. They did cut the cost but it still isn't at $35k and it seems that may never be.

 

[Goodfella]

They are also closing nearly all of their stores in a bid to cut costs on the Model 3. They did cut the cost but it still isn't at $35k and it seems that may never be.

Yes, which seems like a bad sign. If they had strong demand at the more profitable pricepoint, why would they take drastic steps to lower the price?

 

[innonimatu]

The past quarter's profit was very, very suspicious, and they no longer have enough demand at those higher prices.

But I keep wondering how these companies: Tesla, Uber, etc, continue to go on doing things at a loss, year after year. It's truly amazing, the contrast between theory and practice, on how big money business operates. Capitalism and the market economy are two different things...

 

[astrallite]

The thing with Tesla is their ratio of assembly line workers per car built is multiples of that of the traditional car manufacturing industry, it's just ridiculously inefficient due to the crazy ramp up they had with the Model 3. You have to think as they mature over time they shouldn't have a problem cutting costs simply by trimming down the workforce and improving workflow. Uber's long term prospects are a bit more dubious since they seem to be technologically behind.

 

[innonimatu]

Uber has a business model that loses money, seems to have mildly negative scale effects... and their claimed plan is go make up for the losses on volume? Technology as in flying/self-driving/whatever new cars is just a fig leaf, it's impossible to deploy reliably and en masse.

Tesla also has that self-driving deception going but they didn't depend on it for survival. Their problem is that they are just worse at manufacturing than the already established corporations. Even if they do improve they can't hope to catch up or surpass them quickly enough now that electric cars are no longer new. Concentration and scale effects are big on the auto industry.

Perhaps the big auto recession will hinder those larger companies and give Tesla some breathing space. But if that recession is indeed big I don't see how Tesla can escape its effects either. Prices of cars from other companies will be cut, Tesla remains too expensive to sell. If they reduce the price further, they'll just go bankrupt faster.

 

[Goodfella]

I don’t think it contradicts theory and it makes a lot of sense. They can operate at a loss because they can continue to fund raise. Investors will overlook losses for a definite period of time if they expect the company to eventually become profitable (or very valuable). This is especially true of operating at a loss facilitates growth and market capture. Amazon operated this way for most of its existence. But at some point, investors run out of confidence when things, especially if things fail to pan out. That’s the problem Elon might have on his hands soon.