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Musk: Great salesman. Tesla: Least capable automaker?

6653 Views 36 Replies 15 Participants Last post by  Upper5Percent
The auto industry admires Tesla, envies Tesla, and ultimately wants Tesla to succeed. But the Model 3 proves that something the wider industry always suspected is true: Elon Musk is the greatest car salesman who has ever lived — but Tesla is currently one of the least capable automakers on Earth.

Tesla is spending as much as General Motors every quarter — about $1 billion — to produce and sell a fraction of the vehicles that GM does. GM is also turning that invested capital into steady profits, while Tesla in the third-quarter of 2017 posted the biggest loss in its history. GM has a $25-billion war chest. Tesla only has enough cash to operate through 2018.
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From the article:

To make matters worse, Tesla is striving and failing to build a pretty simple vehicle. The Model 3 is basically an electric Honda Accord. And Honda without noticeable effort builds and sells over 100,000 of those every single month in the US alone.

Of course, the game plan from Musk's perspective with the Model 3 is to pioneer a third revolution in auto manufacturing. Henry Ford created the first, with the mass-production assembly line. Toyota delivered the second, with its widely imitated, quality-obsessed production system in the 1970s and 1980s.

Musk's dream is to massively automate the Model 3 assembly and take advantage of the simpler engineering requirements of electric vehicles. It's a noble dream. Tesla should continue to pursue it. But at this point Musk is asking all those Model 3 reservation holders to patiently await Tesla's ability to reinvent manufacturing — they've become unwitting participants in a science project.

I'm not sure if the reservation holders are "unwitting". I think many are willing to wait years. I have seen a number basically say as much.

For several years, Tesla has said that it would deliver 500,000 vehicles in 2018 and a million by 2020. Assuming that the company can repeat it 100,000 Model S and Model X totals in 2018, to hit the half-million mark would require 400,000 Model 3s, an impossibility at this juncture.

Others may argue that Tesla will surprise everyone and it will produce 400,000 Model 3's in 2018. That would require producing 7700 per week starting this week. But Tesla also pushed back its production plans for the Model 3 and is now saying a 5,000-unit weekly run-rate won't be achieved until July of 2018. Of course, Tesla has never been reliable in it's production forecasts, so who knows?
What if Tesla only does 200K or 300K .... Is that still a fail?
Not for me. Compared to the Musk hype machine claims, yes a fail.

Assuming 1,000/week for 12 weeks, 2,500/week for 12 weeks, 5,000/week for 12 weeks and 7,500/week for 16 weeks Tesla could achieve 222k Model 3's in 2018. Whether they will is still an open question.

I think it would be cool if they actually pull off the "3rd" auto revolution by having a hands-free "machine building a machine" production line. Whether they can? I have no idea, but kudos for trying. If they succeed, the majors will follow suit just like they did with the previous 2 revolutions. Everyone would benefit I think.
Looking at the "US Sales of Midsize Luxury Vehicles" chart seems to show that the entire market is about 500k vehicles.

That Tesla has reservations totaling the equivalent of almost the entire yearly sales in this market segment should be of concern to the other automakers in this segment. Of course we don't yet know how many will translate into sales, but let's assume 80-90%.

So, after the backlog of reservations is addressed in 2018 and 2019 (assuming production issues are resolved), how much of this market can Tesla expect to take? 10% would be 50,000 cars per year. Based on how many cars the other brands are getting, 50k sales per year seems like a little bit of a stretch, but achievable. That's would be what I expect Model 3 sales to be in 2020.
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