Musk: Great salesman. Tesla: Least capable automaker?

6691 Views 36 Replies 15 Participants Last post by Upper5Percent, Feb 26, 2018

Steverino

Discussion Starter · Jan 6, 2018

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.

http://www.businessinsider.com/tesla-model-3-problems-threaten-company-future-musks-job-2018-1

21 - 37 of 37 Posts

scottf200

· #21 · Jan 7, 2018

DonC said:
I can see your point here but the issue is whether Tesla can sell the Model 3 and stay in business. Last quarter Tesla lost something like $28K on every vehicle is delivered. If GM took even $20K off the price of the Bolt how many do you think it could sell? That's not to say the Model 3 costs a lot more than the Bolt EV to build. It won't. But the models Tesla will be selling won't be $35K with a $7500 tax credit. And how many of those "clamoring" for what has been marketed as a smaller version of a Model S for $35K will still be clamoring when they see what they get for $50K. This isn't a problem for Tesla alone. For GM and Tesla and every other auto manufacturer the problem is that BEVs are too expensive given the alternatives.

So to answer your question: I don't think Tesla will sell 200K or 300K Model 3s a year, both because it won't be able to make that many and because the demand won't be there. Demand for the Model S and Model X is not exactly going through the roof. These models, especially the Model S, had a nice run, but Tesla is looking at steady or even declining demand. How many small sedans for $50K do all manufacturers combined sell in the US? (The US is the relevant market because Tesla's business in Europe is "Meh" and in China it's downright lousy).

A journalist for the WSJ and NYTimes once remarked that, for technology companies, "it seems that it's the true believers who sometimes don't get something very basic -- addition and subtraction".

Thank you for your considerate reply. The 'master plan' had a goal of the Model 3 and certainly they have worked those configuration pricepoint numbers (LR/SR, options, RWD/AWD, etc) with many forecast models that get revised regularly. Certainly their avg (config opts) sold Model 3 will make money. The battery material and tech is one of the major components and that is a major the point of the gigafactory (along with powerwall/powerpacks).

Re: How many small sedans for $50K do all manufacturers combined sell in the US?
IMO, at a highlevel the Model 3 and the Bolt are competitors only because they are > 200 mile BEVs. They are very different and the Bolt is not the competitor. There are *many* articles on this using lower BMWs, Audis, etc as the real comparisons. As to your question, you would have to define what small sedans are the competitors and then look at goodcardbadcar to see what they sell. I suspect there are articles about this. I'll search.

I really like the blue line with the circles here:

Via: https://www.reddit.com/r/teslamotors/comments/7ohclp/i_did_some_graphs_on_model_3_production_rates/

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scottf200

· #22 · Jan 7, 2018 (Edited)

Re: I'll search -- I had a tough time getting tables to come up in goodcarbadcar to add some annual numbers to the below list of competitors.

NOTE -- Reminding myself that a *lot* of people stretch themselves (mental (and budget) threshold) for cars they really want. I did with our 2011 Volt. Never spent that much money on cars. (gateway drug to electric as we got a 2016 Volt and 2016 X).
To me that means that the below is just not the competition because others that would only spend 25-30 before may now spend 40-45 if they rationalize less brake jobs, gas, oil changes, etc!!!

scottf200 said:
Re: How many small sedans for $50K do all manufacturers combined sell in the US?
... As to your question, you would have to define what small sedans are the competitors and then look at goodcardbadcar to see what they sell. I suspect there are articles about this. I'll search.

Via: http://redgreenandblue.org/2017/08/09/tesla-model-3-comparison-vs-22-ev-competitors-straight-specs/

UPDATE

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CurrentEvent

· #23 · Jan 7, 2018

If something happens to Tesla, it would be a terrible blow to the entire electric car concept. Let's hope they do well.

scottf200

· #24 · Jan 7, 2018

Steverino said:
...
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.

This was in my youtube suggestion list tonight. It turned out to be a GREAT (IMO) video on many of the financials and philosophies. Tip: I watched at x1.25 speed (gear icon).

Title: I Love That Tesla Is Losing Money CHEDDAR
HyperChange founder Galileo Russell goes on Cheddar to talk about Tesla's new Semi, Roadster, cash burn and grand vision to transition the world off fossil fuels. Interview took place on 11/22/2017 live from the NYSE.
http://www.youtube.com/watch?v=BTHVoq5Z6kI

Steverino

Discussion Starter · #25 · Jan 7, 2018

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.

scottf200

· #26 · Jan 7, 2018 (Edited)

Steverino said:
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.

I noticed that as well (Note/aside: it was a 2015 chart). I'm not sure about your 'expect to take' 10% number. What did they take from the higher luxury vehicle market? Not sure if that translates directly but interesting. (and did that wake-up/push those manufacturers into EV market for mid/low end cars - thx Tesla

) -- UPDATE -- added 2015 chart below

Also what about the people that were in the market just below the mid-luxury? Did you, I, many others buy a car 'above' their typical/historical high-water-mark purchase price to get a Volt or a Bolt? No doubt that happens. So this opens up more than the 500,000 mid-lux market right?

Aside: What about the Model Y (mid/smaller SUV/CUV) coming out? Elon indicated in a tweet in the past month that the pickup truck would be right after that too.

I alluded to this in an update to my above post but not sure if you saw it.

NOTE -- Reminding myself that a *lot* of people stretch themselves (mental (and budget) threshold) for cars they really want. I did with our 2011 Volt. Never spent that much money on cars. (gateway drug to electric as we got a 2016 Volt and 2016 X). To me that means that the below is just not the competition because others that would only spend 25-30 before may now spend 40-45 if they rationalize less brake jobs, gas, oil changes, etc!!!

Via: https://cleantechnica.com/2016/02/10/tesla-dominates-large-luxury-car-market-in-us-updated-figures/

P.S. Hope you/people had a chance to see the youtube video in my previous post. very interesting perspective.

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BAZINGA

· #27 · Jan 7, 2018

So how many BOLT's does GM really want to sell in 2018 and beyond? 30K seems lame.

Foxtrot

· #28 · Jan 7, 2018

Just to add a bit of personal experience to Scott's brave and persistent data presentations, I thought I'd share info about the 3 model 3 reservation holders that I know. One, my wife, would be looking for another mid-luxury to replace her Infiniti so she is in that target group. One woman we know is is going for the LR is coming from a Camry. That's a big expansion of possible buyers. And a guy that we know who is waiting for an SR is coming from a Honda Element. As Scott has emphasized, this vehicle has a huge "aspirational" pull. Virtually everyone we know wants to see the car when we get it. The Volts have elicited mild interest at best in the past.

So the Model 3 market segment is potentially very wide. I think worrying about demand is silly. Whether they can keep running fast enough to stay ahead of the creditors while building manufacturing capacity is the real question now that the 3 appears to be a home run in terms of the reception of the car by early buyers and testers.

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Tomt

· #29 · Jan 7, 2018

The password is Credits!

PrivatePilot said:
But alas, for some reason, GM still wants to stockpile them in lots in California instead of shipping them to places with high demand.

Tomt

· #30 · Jan 7, 2018

GM has also beaten Tesla in one other area: They managed to go bankrupt and Tesla (at least to date) has not...

Foxtrot

· #31 · Jan 7, 2018

Mister Dave said:
With the lack of a market for these cars beyond the initial reservations this sort of idealistic compulsion for full automation makes very little sense.

I'm curious as to your source showing that the "market for these cars" is limited to the initial reservations.
I know quite a few people who haven't reserved but are quite interested in the car.

sosmerc

· #32 · Jan 7, 2018

Foxtrot said:
I'm curious as to your source showing that the "market for these cars" is limited to the initial reservations.
I know quite a few people who haven't reserved but are quite interested in the car.

I know alot of people that have interest in the Model 3 and all things Tesla, but not many of them (including myself) are looking forward to cars that drive themselves. That doesn't mean that there isn't growing demand for the Model 3 and other potential future models such as the Y and the truck.

scottf200

· #33 · Jan 7, 2018

Foxtrot said:
Just to add a bit of personal experience to Scott's brave and persistent data presentations, I thought I'd share info about the 3 model 3 reservation holders that I know. One, my wife, would be looking for another mid-luxury to replace her Infiniti so she is in that target group. One woman we know is is going for the LR is coming from a Camry. That's a big expansion of possible buyers. And a guy that we know who is waiting for an SR is coming from a Honda Element. As Scott has emphasized, this vehicle has a huge "aspirational" pull. Virtually everyone we know wants to see the car when we get it. The Volts have elicited mild interest at best in the past.

So the Model 3 market segment is potentially very wide. I think worrying about demand is silly. Whether they can keep running fast enough to stay ahead of the creditors while building manufacturing capacity is the real question now that the 3 appears to be a home run in terms of the reception of the car by early buyers and testers.

Thank you for your real-world input. I'm not in the Model 3 market so do not have personal exposure there.

I generally have been trying to stay away from most Tesla "discussions" on this forum but I didn't think Steve's post was really telling an accurate story. I'm fine with trying to back up Tesla with some data/videos/graphs/tables and there are many that are analyzing this to great detail so a lot to view.

Steverino said:
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.

sosmerc

· #34 · Jan 7, 2018

And I should have added.....I think alot of folks are eager to see how these factories that "drive themselves" are going to work out

.....

Bill Step

· #35 · Jan 7, 2018

Tomt said:
GM has also beaten Tesla in one other area: They managed to go bankrupt and Tesla (at least to date) has not...

took GM 70 odd yrs to get to bankruptcy,Tesla may be there in a yr or 3.

hellsop

· #36 · Jan 8, 2018

Steverino said:
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.

GM's cost of goods sold for 216 was $126 billion. So they spent ~$31 billion per quarter, compared to Tesla's $1 billion. (That also puts the "war chest" into slightly better perspective.)

http://www.businessinsider.com/tesla-model-3-problems-threaten-company-future-musks-job-2018-1

Upper5Percent

· #37 · Feb 26, 2018 (Edited)

scottf200 said:
Re: I'll search -- I had a tough time getting tables to come up in goodcarbadcar to add some annual numbers to the below list of competitors.

NOTE -- Reminding myself that a *lot* of people stretch themselves (mental (and budget) threshold) for cars they really want. I did with our 2011 Volt. Never spent that much money on cars. (gateway drug to electric as we got a 2016 Volt and 2016 X).
To me that means that the below is just not the competition because others that would only spend 25-30 before may now spend 40-45 if they rationalize less brake jobs, gas, oil changes, etc!!!

Via: http://redgreenandblue.org/2017/08/09/tesla-model-3-comparison-vs-22-ev-competitors-straight-specs/

You are going to need to change this spreadsheet...from Tesla's latest 10-K
http://ir.tesla.com/secfiling.cfm?filingID=1564590-18-2956&CIK=1318605
On page 2
Model 3
Model 3 is our third generation electric vehicle. We began deliveries in July 2017. Model 3 is produced at the Tesla Factory in Fremont, California and at Gigafactory 1. We will offer a variant of this vehicle at a starting price of $35,000 and expect to produce Model 3 vehicles at far higher volumes than our Model S or Model X vehicles.

Got that? The $35,000 Model 3 is no longer the mass-market raison d’être for the car, but has become merely a “variant” of the vehicle.

It is NOT the standard, but a variant...

Also...you will notice Tesla has abandoned AUTOPILOT...

Tesla now uses the topic heading “Self-Driving Development” rather than “Autopilot Systems.” page 4 of their latest 10-K filing

And, it has dropped this claim:

In October 2014, we began equipping all Model S vehicles with hardware to allow for the incremental introduction of autopilot technology.

The change from “Autopilot Systems” to Self-Driving Development is, I think, significant, and reflects Tesla’s recognition that its Autopilot claims have opened the door to litigation. And, including the word “Development” suggest that Self-Driving is a work-in-progress.

Similarly, dropping the claim about Model S vehicles being equipped with sufficient hardware for “autopilot” seems prudent, to say the least.

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