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Discussion Starter #1 (Edited)
• Tesla (NASDAQ:TSLA) is warning of production risks associated with the Model 3, the mass-market sedan the electric car maker expects to begin building within the next 18 months.
• "We have no experience to date in manufacturing vehicles at the high volumes that we anticipate for Model 3...and plans for the build out of our production facilities...and various aspects of component procurement and manufacturing plans have not yet been determined."
• Tesla also cautioned that if one or more of its "many assumptions" turns out to be incorrect, its "ability to successfully launch on time and at volumes and prices that are profitable...may be materially and adversely impacted

Tesla's FORM 10-Q filed with the US SEC

https://www.sec.gov/Archives/edgar/data/1318605/000156459016018886/tsla-10q_20160331.htm

Remember these are Tesla Corporate's words...NOT a stock shorter...
Item 1A. Risk Factors

Risks Related to Our Business and Industry
We have experienced in the past, and may experience in the future, significant delays or other complications in the design, manufacture, launch and production ramp of new vehicles and other products such as our Tesla Energy products, which could harm our brand, business, prospects, financial condition and operating results.
We have experienced delays or other complications in connection with new vehicle models in the past, such as production ramp delays for Model S in 2012 and the All-Wheel Drive Dual Motor Model S, and the launch and ramp of Model X. For example, while we commenced Model X deliveries late in the third quarter of 2015, we have encountered unanticipated challenges in ramping production of Model X vehicles that forced us to decrease the production of these vehicles from our initial expectations. If these challenges continue or issues that we have previously resolved, such as certain supply chain constraints, recur, we may experience further delays in the Model X production ramp. In addition, since Model X shares certain production facilities with the Model S, the volume or efficiency of Model S production may be impacted by any Model X production ramp issues.
We may experience similar delays or other complications in bringing to market and ramping production of new vehicles, such as Model 3, and other products such as our Tesla Energy products. Any significant additional delay or other complication in the production of our current products or the development, manufacture, launch and production ramp of our future products, including complications associated with expanding our production capacity, supply chain or regulatory approvals, could materially damage our brand, business, prospects, financial condition and operating results.
We may experience delays in realizing our projected timelines and cost and volume targets for the production, launch and ramp of our Model 3 vehicle, which could harm our business, prospects, financial condition and operating results.
Our future business depends in large part on our ability to execute on our plans to develop, manufacture, market and sell the Model 3 vehicle, which we intend to offer at a lower price point and to produce at significantly higher volumes than our present production capabilities for the Model S or Model X vehicles. We unveiled a prototype of Model 3 in March 2016 and have announced our goal to achieve volume production and deliveries of this vehicle in late 2017.
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We have no experience to date in manufacturing vehicles at the high volumes that we anticipate for Model 3, and to be successful, we will need to develop efficient, automated, low-cost manufacturing capabilities, processes and supply chains necessary to support such volumes. Final designs for the Model 3 are not yet complete. Additionally, plans for the build out of our production facilities for Model 3 at the Tesla Factory are still in process, and various aspects of the Model 3 component procurement and manufacturing plans have not yet been determined. We are currently evaluating, qualifying and selecting our suppliers for the planned production of the Model 3. We will also need to do extensive testing to ensure that the Model 3 is in compliance with our quality standards and applicable regulations prior to beginning mass production and delivery of the vehicles. Moreover, our Model 3 production plan will also require significant investments of cash and management resources.

Our production plan for the Model 3 is based on many key assumptions, including:

  • that we will be able to develop, build and equip a new dedicated final assembly line for high volume production of Model 3 at the Tesla Factory without exceeding our projected costs and on our projected timeline;
  • that we will be able to build and bring online the Gigafactory in a timely manner to produce high volumes of quality lithium-ion cells and integrate such cells into finished battery packs for the Model 3, all at costs that allow us to sell the Model 3 at our target gross margins;
  • that the equipment which we select and install for Model 3 production will be able to accurately manufacture high volumes of Model 3 vehicles within specified design tolerances and with high quality;
  • that we will be able to engage suppliers for the necessary components on terms and conditions acceptable to us and that we will be able to obtain components on a timely basis and in the necessary quantities to support high volume production;
  • that we will be able to complete our design and engineering plans for Model 3 and deliver final component designs to our suppliers in a timely manner; and
  • that we will be able to attract, recruit, hire and train skilled employees, including employees on the production line, to operate our planned high volume Model 3 production facilities at the Tesla Factory and the Gigafactory.
If one or more of the foregoing assumptions turns out to be incorrect, our ability to successfully launch Model 3 on time and at volumes and prices that are profitable, as well as our business, prospects, operating results and financial condition, may be materially and adversely impacted.
We may be unable to meet our growing vehicle production and delivery plans, both of which could harm our business and prospects.
Our plans call for significant increases in vehicle production and deliveries to high volumes in a short amount of time. Our ability to achieve these plans will depend upon a number of factors, including our ability to add production lines and capacity as planned while maintaining our desired quality levels and optimize design and production changes, and our suppliers’ ability to support our needs. We have limited experience developing, manufacturing, selling and servicing, and allocating our available resources among, multiple products simultaneously. If we are unable to realize our plans, or experience any delays or disruption in our production of our vehicles, our brand, business, prospects, financial condition and operating results could be materially damaged.
In addition, we have used and may introduce in the future a number of new manufacturing technologies and techniques for our vehicles, which we must scale for high volume production. For example, we have introduced aluminum spot welding systems and high-speed blow forming of certain difficult to stamp vehicle parts. Our vehicles also have unique design features, such as a 17 inch display screen, dual motor drivetrain and autopilot hardware introduced in Model S and falcon-wing doors and other unique features introduced in Model X, each of which poses different manufacturing challenges.
Concurrent with the significant planned increase in our vehicle production levels, we will also need to continue to significantly increase deliveries of our vehicles. We have limited experience in delivering a high volume of vehicles, and no experience in delivering vehicles at the significantly higher volumes we anticipate for Model 3, and we may face difficulties meeting our delivery and growth plans into both existing markets as well as new markets into which we expand. If we are unable to ramp up to meet our delivery goals globally, this could have a material adverse effect on our business, prospects, financial condition and operating results.
 

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This will be a pivotal moment in automotive history. With incredible demand, this is Tesla's time to either shine or lose it. I won't be shorting the stock since I know I have no ability to time the market. But I won't be going long either, unless I see a huge tumble way in advance of any tesla bad news.
 

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Discussion Starter #3
This will be a pivotal moment in automotive history. With incredible demand, this is Tesla's time to either shine or lose it. I won't be shorting the stock since I know I have no ability to time the market. But I won't be going long either, unless I see a huge tumble way in advance of any tesla bad news.
Well...that is quite a litany of key assumptions in their 10-Q...:rolleyes:
 

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Well...that is quite a litany of key assumptions in their 10-Q...:rolleyes:
Agree, as much as I love and support what Tesla (own some stock and would love to buy a CPO MS) has done and want's to do going forward I wonder if their self imposed timeline is achievable and they can build quality vehicles in the numbers and time they have set for themselves.

They didn't leave much wiggle room. But you have to give them credit, they are swinging for the fences.
 

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The Math is Challenging

Last I looked Tesla had $1.2B of cash and was losing $400B-$500B a quarter. Now it also has a revolving line of credit, so it's not likely to go bust before the Model 3 hits the production line, but it's difficult to see how Tesla can continue losing so much money and keep it's incredibly high P/E ratio.

The bigger issue is that the narratives keep changing. Last quarter Musk said there would be no need to raise new capital. Now he says there will be. Having the CEO change so dramatically shouldn't give you warm and fuzzy feelings. The story on production is likewise changing. Mush has continually said, and for that matter still says, that Tesla isn't selling more cars not because of limited demand but because it is production limited -- it simply can't make 100,000 cars a year. But now he's saying Tesla will make 500,000 cars in 2018. You have to scratch your head if it's not spinning, because one would think that Tesla would be filling orders for the $100K+ models where it can make money before devoting production to making $35K cars which likely won't.

Having key executives leave also doesn't help. And for those who understand production, having your CEO claim he'll sleep at the end of the production line tells you he's completely clueless.
 

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If media sources pick up on this most recent 10-Q and convert it into sound bites I would not be surprised to see at least some of those reservations disappear.

And while the admissions of risk might help to inoculate the company against a successful shareholder law suit, they will serve as ammunition for Nissan, GM or any other BEV manufacturer whose sales could be argued to have suffered as a result of market overhang.

I think Musk has dug a hole for Tesla. He should have gotten better legal advice before making promises the company has little likelihood of being able to keep.

KNS
 

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Discussion Starter #8
Seriously guys, this is nothing out of the ordinary.
Go look at the risks in any 10-Q.
Yes...but most corporate 10-Qs are not bleeding red every quarter as Tesla is...:(
 

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GM says the same things to wall street all the time:
It's production lines are inadequate,
Design and production issues of one model are slowing production of the other,
It doesn't know how to ramp up production,
It needs to figure out less expensive production techniques,
It doesn't know what the production car will actually be,
It can't hire employees, and
It's price is dependent on the successful completion of it's own battery factory
It's not profitable.

Oops, no, I was thinking of someone else...
Seriously, sometimes the drug label warning should be taken seriously.
 

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GM's 10-K lists a number of risks as well. I count 19 of them, including such statements as "We operate in a highly competitive industry" and "Our profitability is dependent upon the success of full-size pick-up trucks and SUVs."

Tesla, on the other hand, is struggling with the basics of automotive manufacturing: design for manufacturing, supply chain management and production planning.
 

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Interestingly, it seems the mainstream media largely ignores technical financial reports like 10-Q's or the quarterly earnings conference call transcripts. If you want a long but eye-opening Q/A session between investment analysts with a lot of automotive industry experience and with Tesla's top management (Musk, Straubel, et al) see the following link to the transcript of the most recent earnings conference call:

Tesla Q1 2016 earnings conference call transcript

Tesla is between a rock and a hard place regarding the Model 3, with cash, with schedule, with manufacturing. Their schedule to go from design-freeze to full production is one that even the largest and most experienced global mass-market auto manufacturers, who have been doing it continuously for 100 years, struggle to meet. Tesla has never done it before. Not to mention supporting all the other items, like sales, service, or profit.
 

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I get a kick out of Elon, a man I admire, but is a little dysfunctional:

"Our suppliers are to blame for late deliveries, so I will sleep at the end of our production line instead of camping out at our problem suppliers."

Dude. You put the hay in the end of the horse with the teeth, not the tail ...

No, it is unlikely Tesla will hit their latest goals. If their losses today climb every time they up production, they need to fix that first. As production climbs, losses should fall.
 

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GM's 10-K lists a number of risks as well. I count 19 of them, including such statements as "We operate in a highly competitive industry" and "Our profitability is dependent upon the success of full-size pick-up trucks and SUVs."

Tesla, on the other hand, is struggling with the basics of automotive manufacturing: design for manufacturing, supply chain management and production planning.
Exactly. So you look at how they are doing in competing with their trucks and SUV's. The answer: they are doing well.

Then you look at how Tesla is dealing with their issues. I would not say they are failing, but "struggling" does seem apt. I love the fact they are shaking things up, being innovative and pushing the envelope. But they do have warts that are often glossed over.
 

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I sincerely wish Tesla the best of luck. A lot of people want the new Model 3. Sadly, I think they will have a longer wait than expected. The Model S was late. The Model X was late. I have no reason to believe the model 3 will not be late as well. But it looks like an interesting car if they can pull it off and remain in business.
 

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The real question is how much "interference" will Tesla's competitors (including GM) run to limit or delay their manufacturing capabilities (i.e. availability of parts). As evidenced by the various states requirement of dealerships, it is clear they are not above dirty tricks.
 

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The real question is how much "interference" will Tesla's competitors (including GM) run to limit or delay their manufacturing capabilities (i.e. availability of parts). As evidenced by the various states requirement of dealerships, it is clear they are not above dirty tricks.
Dealership laws have absolutely 200% nothing to do with Tesla Parts Procurement. Dealership laws have been in the US longer than Elon Musk has, and existed when he joined Tesla Motors. If Tesla is surprised Dealership Laws exist, they need to hire an attorney who does more than just sue people Elon is angry with. Tesla is selling all the cars they can make without dealerships, heck in most areas, without any repair facilities either.

All car manufacturers share a common supplier pool. The brake supplier for a Camaro supplies Tesla. Might even share some part numbers.
 

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Well, I jumped out of line for a model 3, but only a sliver of the reason was uncertainty about the model 3. I would love to see GM make bolder moves to electrify their vehicular lineup. Why not make an EV or voltec truck or suburban if that is where GM makes all its money? Conversely, why doesn't tesla make a pickup?
 

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The real question is how much "interference" will Tesla's competitors (including GM) run to limit or delay their manufacturing capabilities (i.e. availability of parts). As evidenced by the various states requirement of dealerships, it is clear they are not above dirty tricks.
Um, you mean like being a major client kind of interference? Can't remember the last time a parts supplier delayed a contract so they could bend over backwards for some fairly insignificant (by comparison) newcomer who is squishy on contracts.

From the Tesla Q1 conference call: Elon Musk on the supply chain and outside suppliers:

Elon Musk (Chairman, Product Architect & CEO): No, I think we're actually going to increase the amount of vertical integration that we have. I think it's very important for us to have the ability to produce almost any part on the car at will, because it alleviates risk with suppliers, where, going back to if 2% of suppliers aren't ready, we can't make the car. Having the ability internally to adapt and make that 2% of parts internally really massively reduces risks associated with the production ramp. That I think is a very important thing. Now if we get to a steady state, and maybe we talk to a supplier and they can do a very efficient job of making that part, we have no problem transitioning from insource to outsource. Our goal is not to insource for the sake of insourcing, but I would rather see insource if we think that it has meaningful improvement on schedule or cost or quality. One of the challenges we face is that for a lot of the supply chain (they are being matched) to the timeframe of the big OEMs, and Tesla just moves a lot faster than the big OEMs. And so if they're [being matched] to like a six-year development cycle, and we are on a two- or three-year development cycle, it just doesn't connect properly. Some suppliers can handle that and some can't.

Pat Archembault (Analyst - Goldman Sachs): It certainly seems to limit some of the people you could work with. Thanks for the clarification.
Ironic - Elon suggests that the problem with procuring parts from outside suppliers is because the suppliers are matched to the "big OEM's" slower development cycle and Tesla goes from concept to production so fast (2-3 years) that some of the vendors can handle it and some can't. The Goldman Sachs analyst's final comment really dripped with irony. You can't fool these analysts. They specialize in the automotive sector and know exactly what is required to be a successful automotive manufacturer.

When did GM start the Bolt development cycle? Spring 2013. Now in pre-production. Retail production to start this fall. Looks like about a 3-year development cycle. And it appears that GM has a lot of outside OEM vendors that are fully-on-board with this fast development cycle. (FYI, it isn't just LG. The special thin seats for the Bolt will probably be provided by Johnson Controls - a major OEM seat vendor).

When did Tesla start the Model 3 development cycle? Per Wikipedia - "The Model 3 (stylized as "☰") was codenamed Tesla BlueStar in the original business plan in 2007. In 2013, design chief Franz von Holzhausen stated that the Model 3 will "be an Audi A4, BMW 3-series, Mercedes-Benz C-Class type of vehicle that will offer everything: range, affordability, and performance with a starting price of US$30,000" that is targeted toward the mass-market". So it was in the business plan as far back as 2007 and it sounds like they had an internal design concept in 2013, with price, form, , class, etc. already in-mind. Due of in mass-market quantities in late 2017-early 2018. Does this sound like a two-three year development cycle that would send OEM vendors in a tizzy?

I'll let the readers here fill in the rest of the blanks and connect the dots regarding the real issues between Tesla and parts vendors who have issues with Tesla.

Bottom line - to understand Tesla, read the quarterly conference transcripts. Ignore the tweets.
 

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The general population is still largely ignorant of any of this. I had a coworker ask me how I liked my Volt today, and he said he was seriously thinking about getting an electric car. He was considering putting a $1,000 deposit on the Tesla Model 3. I asked whether he had heard anything about the Bolt. "What's that?"
 
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