Is Tesla TOAST ?

[GRG55]

Re: Is Tesla TOAST ?

Would Apple buy what remains of Tesla and come up with an iCar?

What does Tesla really offer?

Ground breaking, disruptive technology? No.
An assembly plant in a high cost jurisdiction (California)? Yes
A backlog of unfulfilled Model 3 orders? Yes
The workforce, component supplies, manufacturing capability to meet those orders in the time frame and at the price point promised? Not a chance. (Model 3 price increase coming!)
The opportunity to overpay for all this? Theoretically yes, but Musk isn't going to sell voluntarily. Remember that pay package of his. It's his greatest defence against a take out. https://www.bloomberg.com/view/artic...s-tesla-s-love

[dcarrigg]

Re: Is Tesla TOAST ?

What does Tesla really offer?

Ground breaking, disruptive technology? No.
An assembly plant in a high cost jurisdiction (California)? Yes
A backlog of unfulfilled Model 3 orders? Yes
The workforce, component supplies, manufacturing capability to meet those orders in the time frame and at the price point promised? Not a chance. (Model 3 price increase coming!)
The opportunity to overpay for all this? Theoretically yes, but Musk isn't going to sell voluntarily. Remember that pay package of his. It's his greatest defence against a take out. https://www.bloomberg.com/view/artic...s-tesla-s-love

Toyota and GM opened that assembly plant in 1984, when Silicon Valley was affordable and dreams were made (instead of crushed) there.

They sold it to Tesla in 2010 when it got to expensive to operate. Who's the bigger sucker who'd buy it 8 years later?

Plus those unfulfilled Model 3 orders are probably mostly from people expecting to buy a $35,000 car and assuming they'll get a $7,500 tax credit.

Not a single Model 3 that has been manufactured so far has sold for less than $50,000. The $35,000 Model 3 does not exist. At least not yet. And it may never exist. Just like the $49,000 version of the Model S that was promised never came to fruition either.

Oh, and that $7,500 tax credit is going away.

Plus tons of direct competition from multiple countries is incoming in the next 2 years.

And they don't seem to even have 2nd generation plans for the stale old Model S, which looked fresh when they came out with it in 2009, but not so much any more...

[thriftyandboringinohio]

Re: Is Tesla TOAST ?

That's how I see it too.
Sometimes it can be very good business to buy a bankrupt operation at fire sale prices, then run it at a profit after you have shed the excess costs.

We had a local manufacturer of city transit buses that did just that. Grumman aircraft tried to enter the market, and spent traditionally huge aerospace budgets for engineering and tooling. They went bust, there was no hope of recouping those huge costs. Flxible Corp bought it for pennies on the dollar and ran it for decades; the over-engineered design and exotic tooling were rock solid.

But Apple - Tesla is different. Passenger cars tooling is useless after five years or so, and Apple has more cash on hand than anyone has ever seen. They can start fresh from scratch and get exactly what they want, wherever they prefer. I might be willing to buy that auto plant and that battery plant at a low price, if I had tons of cash for renovations.

[GRG55]

Re: Is Tesla TOAST ?

Toyota and GM opened that assembly plant in 1984, when Silicon Valley was affordable and dreams were made (instead of crushed) there.

They sold it to Tesla in 2010 when it got to expensive to operate. Who's the bigger sucker who'd buy it 8 years later?

Plus those unfulfilled Model 3 orders are probably mostly from people expecting to buy a $35,000 car and assuming they'll get a $7,500 tax credit.

Not a single Model 3 that has been manufactured so far has sold for less than $50,000. The $35,000 Model 3 does not exist. At least not yet. And it may never exist. Just like the $49,000 version of the Model S that was promised never came to fruition either.

Oh, and that $7,500 tax credit is going away.

Plus tons of direct competition from multiple countries is incoming in the next 2 years.

And they don't seem to even have 2nd generation plans for the stale old Model S, which looked fresh when they came out with it in 2009, but not so much any more...

The Model S was a "country clubhouse" ornament; something to talk about in the bar after playing golf. The Model X was a drop-off-the-kids-at-private-day-school ornament with novelty rear doors; something to talk about after the Pilates class (remember Pilates?). I was struck by the chart in this article: https://www.bloomberg.com/news/artic...ressures-mount Model S production is dead flat quarter after quarter after quarter, and Model X production is up modestly, at best.

$35,000 - a $7500 tax credit = $27,500 is a mass market price point. You are absolutely right that the scaling back of the Federal tax credit and the inevitable escalating price of the Model 3 puts it out of reach of many of its target "mass" market. Rising interest rates for car loans and leases won't help. Will Tesla come out with another creative finance scheme like this one from a few years back? Or will the market finally wake up to the fact Tesla is a (very) small volume, niche vehicle producer that must sell for a generous premium?

Elon Musk will personally guarantee Tesla buyback values
2:29 p.m. ET April 3, 2013

https://www.usatoday.com/story/money/cars/2013/04/02/elon-musk-tesla-lease/2047863/

...Tesla CEO Musk unveiled the new financing plan Tuesday in an effort to make Tesla Motors' pricey electric cars a bit more affordable. In the twist that makes the deal special, Musk will personally fork over the percentage difference between a Tesla Model S sedan depreciation at the end of three years and the depreciation over that time of the benchmark to which it has been pegged, a Mercedes-Benz S Class sedan...

[GRG55]

Re: Is Tesla TOAST ?

That's how I see it too.
Sometimes it can be very good business to buy a bankrupt operation at fire sale prices, then run it at a profit after you have shed the excess costs.

We had a local manufacturer of city transit buses that did just that. Grumman aircraft tried to enter the market, and spent traditionally huge aerospace budgets for engineering and tooling. They went bust, there was no hope of recouping those huge costs. Flxible Corp bought it for pennies on the dollar and ran it for decades; the over-engineered design and exotic tooling were rock solid.

But Apple - Tesla is different. Passenger cars tooling is useless after five years or so, and Apple has more cash on hand than anyone has ever seen. They can start fresh from scratch and get exactly what they want, wherever they prefer. I might be willing to buy that auto plant and that battery plant at a low price, if I had tons of cash for renovations.

That auto plant has an interesting history. It actually started as a GM plant in the 1960s. I visited it as part of an ASME event in 1977 when I was a Mech Eng student. At that time it already had a reputation as one of the least productive, lowest product quality plants in GM. I think they closed it a few years later. The Toyota-GM JV, NUMMI, that followed lasted longer than the pure GM operation that preceded it.

With the high cost of living in the Bay Area, the taxes, the regulations and all the other nonsense in California, only a company trading at a tech darling multiple could hope to produce anything out of that place. But as we all know, assembling and marketing automobiles is a brutally competitive industry with chronic overcapacity, in the USA and globally.

[thriftyandboringinohio]

Re: Is Tesla TOAST ?

Thanks GRG55, I didn't know that Tesla was in the old NUMMI plant. They made Toyota Corollas and Tacoma pickups and Pontiac Vibe cars there until 2009.

[GRG55]

Re: Is Tesla TOAST ?

Thanks GRG55, I didn't know that Tesla was in the old NUMMI plant. They made Toyota Corollas and Tacoma pickups and Pontiac Vibe cars there until 2009.

I recall Tesla bought the facility just months after NUMMI stopped production. IIRC, Tesla had some incentives from the local government (which was originally trying to keep NUMMI operating) and maybe State of California too as everyone wanted to maintain auto production in California - a losing proposition if there ever was imo.

[BK]

Re: Is Tesla TOAST ?

A car company is nothing but a low margin business that is the huge LIABILITY of insuring that their Cars don't kill an of the humans using their product.

Why would APPLE want to get into a low margin business like building cars. I'm sure they will continue to be involved with cars to please their customers,
see http://www.gmc.com/gmc-life/technolo...-apple-carplay

Funny, Elon Musk couldn't even get Apple CarPlay into Tesla Model S, X or 3!

see https://en.wikipedia.org/wiki/CarPlay

[Techdread]

Re: Is Tesla TOAST ?

A car company is nothing but a low margin business that is the huge LIABILITY of insuring that their Cars don't kill an of the humans using their product.

Why would APPLE want to get into a low margin business like building cars. I'm sure they will continue to be involved with cars to please their customers,
see http://www.gmc.com/gmc-life/technolo...-apple-carplay

Funny, Elon Musk couldn't even get Apple CarPlay into Tesla Model S, X or 3!

see https://en.wikipedia.org/wiki/CarPlay

Tesla needs its own entertainment stack so they don't have to share subscription revenue with the likes of Apple.

[GRG55]

Re: Is Tesla TOAST ?

https://www.forbes.com/sites/jimcoll.../#505d3c613d65

A Brief History Of Tesla: $19 Billion Raised And $9 Billion Of Negative Cash Flow

[BK]

Re: Is Tesla TOAST ?

Funny piece by Bloomberg on the rate of spend at Tesla https://www.bloomberg.com/graphics/2...la-burns-cash/

One writer has been very Pro Tesla for a very loooong time..... and seems to be repositioning for the inevitable conclusion.

[Mega]

Re: Is Tesla TOAST ?

Indeed
https://www.carscoops.com/2018/04/te...cash-end-year/

I also note that 2020 will see Audi/Porsche arrive with cars that will beat Tesla & take away market share from his most expensive models

[GRG55]

Re: Is Tesla TOAST ?

Indeed
https://www.carscoops.com/2018/04/te...cash-end-year/

I also note that 2020 will see Audi/Porsche arrive with cars that will beat Tesla & take away market share from his most expensive models

next month will mark six years since the debut of the Model S. Tesla is going to have to spend some development money soon to re-fresh that model or Audi/Porsche will crush an 8 year old design.
The squeeze is on.

[jk]

Re: Is Tesla TOAST ?

tesla will go down in history as an innovative company that burned a lot of cash, but in the process of making a big splash in the public's consciousness facilitated the mass market emergence of the ev. it has been a proof of concept and, as such, should never have been expected to turn a profit.

[dcarrigg]

Re: Is Tesla TOAST ?

tesla will go down in history as an innovative company that burned a lot of cash, but in the process of making a big splash in the public's consciousness facilitated the mass market emergence of the ev. it has been a proof of concept and, as such, should never have been expected to turn a profit.

To me the iMev or really the Leaf were the proof of concept so far as practical evs go. At the time, Tesla only had a few hundred Roadsters out there at over $100,000 a pop. Pretty sure anyone could have pumped out a six-figure electric car. I guess Tesla did give it some sort of cool factor, though.