Tesla model 3.........discuss

[Mega]

http://www.bbc.co.uk/news/technology-35940302

Your thoughts?
Mike

[santafe2]

Re: Tesla model 3.........discuss

http://www.bbc.co.uk/news/technology-35940302

Your thoughts?
Mike

He, [Musk], added that, if the average price tag ended up at $42,000 (£29,500), this would equate to $7.5bn in one day.

It's great to take orders for $7.5B in a day but not so great if it will cost $8.5B to produce those vehicles. A company that always loses money is not a business, it's a hobby. It will still take several years to understand if Musk can turn this into a business. Clearly today, it's just a clever guy getting other people to pay for his hobby.

[jk]

Re: Tesla model 3.........discuss

musk got about 200k pre-orders, each putting down $1000. so that $200million of working capital at no cost. not bad.

[BK]

Re: Tesla model 3.........discuss

Doesn't even cover a quarter of operating spend, now imagine the parts order that Elon needs to place to build these units. What other business will build a $35,000 in product for a deposit of 4% of honest money??

[jk]

Re: Tesla model 3.........discuss

Doesn't even cover a quarter of operating spend, now imagine the parts order that Elon needs to place to build these units. What other business will build a $35,000 in product for a deposit of 4% of honest money??

i doubt he'll build all 200,000 the same week. he uses the operating capital to build the first tranche which he's then paid for, lather, rinse, repeat.

[DSpencer]

Re: Tesla model 3.........discuss

i doubt he'll build all 200,000 the same week. he uses the operating capital to build the first tranche which he's then paid for, lather, rinse, repeat.

It's hard to find neutral observers on Tesla. On one hand there's the Tesla fanboys saying that Tesla has generated $7.5 billion in revenue in a single day based on a people putting down a $1,000 refundable deposit for a car that isn't even supposed to be available for over a year. On the other you have people claiming that Tesla is somehow doomed by its own success. As if getting $200 million in pre-order deposits is somehow a huge disadvantage compared to the industry norm of getting nothing and hoping that people want to buy the cars after they are made.

The big question I have is: Can Musk work his real magic and get the government to offer additional tax incentives?

[BK]

Re: Tesla model 3.........discuss

DSpencer,

A deposit creates more of a liability than an asset for a company.

Consider the orders the Tesla Motors has to place for raw materials? Who will finance these order or are there suppliers who will do this on credit while knowing the large debts that Tesla has? If the suppliers don't get paid for the raw materials then they need to ask their suppliers to send raw materials to build the Tesla sub components? Many of the Tesla suppliers are in Taiwan and credit is a wee bit constrained in the Chinese markets at the moment.

[jk]

Re: Tesla model 3.........discuss

DSpencer,

A deposit creates more of a liability than an asset for a company.

Consider the orders the Tesla Motors has to place for raw materials? Who will finance these order or are there suppliers who will do this on credit while knowing the large debts that Tesla has? If the suppliers don't get paid for the raw materials then they need to ask their suppliers to send raw materials to build the Tesla sub components? Many of the Tesla suppliers are in Taiwan and credit is a wee bit constrained in the Chinese markets at the moment.

it appears you didn't read my post above.

[BK]

Re: Tesla model 3.........discuss

Costs of cogs assumming 50% profit margin = $3.5 Billion - to order supplies to build all at once or 10,000 at a time... this could take several years to fill the back log.

[DSpencer]

Re: Tesla model 3.........discuss

DSpencer,

A deposit creates more of a liability than an asset for a company.

Consider the orders the Tesla Motors has to place for raw materials? Who will finance these order or are there suppliers who will do this on credit while knowing the large debts that Tesla has? If the suppliers don't get paid for the raw materials then they need to ask their suppliers to send raw materials to build the Tesla sub components? Many of the Tesla suppliers are in Taiwan and credit is a wee bit constrained in the Chinese markets at the moment.

Please explain the accounting transaction where a deposit creates more of a liability than an asset.

I understand that you believe Tesla is DOOMED. You may ultimately be correct. However, it's a bit naive to think that they have absolutely no plan on how to finance the cars they are planning to manufacture. How do you think they are currently manufacturing vehicles given the "large debts that Tesla has"?

I fail to see how the deposits do anything other than help them with cash flow. Read jk's post.

None of this is to say that they don't have a risk of failure. They might not be able to produce the Model 3 at a cost low enough to make a profit. They might not be able to produce it in the volumes and time frames expected which could lead to many people asking for their deposit to be refunded. The Model 3 might have performance or safety issues leading again to mass deposit refunds.

[patrikkorda]

Re: Tesla model 3.........discuss

Please explain the accounting transaction where a deposit creates more of a liability than an asset.

I understand that you believe Tesla is DOOMED. You may ultimately be correct. However, it's a bit naive to think that they have absolutely no plan on how to finance the cars they are planning to manufacture. How do you think they are currently manufacturing vehicles given the "large debts that Tesla has"?

I fail to see how the deposits do anything other than help them with cash flow. Read jk's post.

None of this is to say that they don't have a risk of failure. They might not be able to produce the Model 3 at a cost low enough to make a profit. They might not be able to produce it in the volumes and time frames expected which could lead to many people asking for their deposit to be refunded. The Model 3 might have performance or safety issues leading again to mass deposit refunds.

I agree that BK has a one-sided view on Tesla: everything they do is bad.

With that said, there are two glaring problems I see with the company.
1. They keep losing money, a lot of money. I personally don't see how they can stop losing money selling an even cheaper car.
2. The company has a lot of debt on the books.

Ultimately I think this boils down to thermodynamics. I've been told that the cost per kilowatt hour of lithium-ion battery packs has been falling dramatically over the past 10 years. If this continues, then I do not see why Tesla can't continue to exist and expand. In the event of financial trouble but clear viability, I can also see the possibility of Tesla being bought over by the likes of Apple or Alphabet.

[BK]

Re: Tesla model 3.........discuss

I have a degree in accounting. A deposit creates an obligation - to deliver a $35000 automobile. Car companies make their money on luxury and SUV or higher end cars. The low end cars also help the large automotive manufactures to meet their CAFE obligations of their fleets. This is why Nissan has dropped the price of the LEAF to $20K or 40% cheaper than the Model3. Nissan wants to sell lots of LEAFs in order to allow it to sell more profitable higher end cars that consume large amounts of gasoline.

This obligates Tesla Motors to build 200,000 cars in an accounting sense.

Tesla being bought out by Google or APPLE is insane. Come'on. Look at the history of GM and how they destroyed all the EV-1a and ask why!

Cars are massive liabilities of who ever produces the automobile because of the humans that may die while operating the automobile. Why in gods name would Apple or Google have any interest in a low gross margin and high liability business like automobiles???

[patrikkorda]

Re: Tesla model 3.........discuss

Why in gods name would Apple or Google have any interest in a low gross margin and high liability business like automobiles???

Perhaps you are unaware, but both companies are already working on EVs. This is particularly true when it comes to Apple.
http://www.bbc.com/news/technology-35280633

[BK]

Re: Tesla model 3.........discuss

No they are working on software systems for cars.... Bose has made a ton of money selling to car companies.... and R&D doesn't always end up in product. In fact, many of the new products come into Google and Apple through acquisitions. I will bet a $1000 no Apple or Google car. ;-)

[santafe2]

Re: Tesla model 3.........discuss

It's hard to find neutral observers on Tesla. On one hand there's the Tesla fanboys saying that Tesla has generated $7.5 billion in revenue in a single day based on a people putting down a $1,000 refundable deposit for a car that isn't even supposed to be available for over a year. On the other you have people claiming that Tesla is somehow doomed by its own success. As if getting $200 million in pre-order deposits is somehow a huge disadvantage compared to the industry norm of getting nothing and hoping that people want to buy the cars after they are made.

The big question I have is: Can Musk work his real magic and get the government to offer additional tax incentives?

I think there are several calm observers here on iTulip. That's what has made the Tesla discussion so interesting. As I said initially on the subscriber thread, I don't think they'll make it long term but they've done a good job executing their business plan and Musk can carney-up as well as any CEO. No one should discount that value in the early years. Suckers love to give their money to a good preacher.

If during the ramp up, Tesla loses 10% on every Model 3 they build, they can build about 60,000 of these vehicles and break even given the deposits. And assuming Musk is hawking the bearded lady in the carnival tent over the first year, they should easily double those deposits and buy themselves another 6-12 months. Possibly oil prices are much higher by then. Possibly the Tesla battery factory produces exceptional batteries and lowers costs. I don't think it will matter, but that's just my opinion. I've nothing against this company, they're making important strides forward in 21st Century transportation.

As for your last question, this has already happened in the US. Incentives have been moved out from 2016 to 2020.

And a final observation. This is a public company with a CEO that can whip up enthusiasm like a Baptist revivalist. If he can raise $3-4B, he can continue to lose money, build a million Model 3s and break even.

Will Tesla ever make money? I don't think so. Will one go broke betting against them? I'm afraid so.