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Tesla Burns Through Record Cash to Bring the Model 3 to Market

bloomberg.com

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Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market

#41

Post by balance_factor »

jgalt212 wrote: post #15
simonsarris wrote: post #7

> “He’s going to need capital,” said Ross Gerber, chief executive officer of Gerber Kawasaki Wealth & Investment Management, which holds Tesla shares. “That’s the one part of the financials that are a little bit troubling. To underestimate the cash burn over the next six months will be a mistake.” It's not that troubling. Even massive companies (AMZN in 2014) need to raise big capital. When you have something you wan…

The AMZN model won't work b/c no matter how good Tesla's products are, he won't be allowed to create a monopoly. The zeitgeist has shifted, and VC's and investors who are betting on future market domination or monopolies are going to be disappointed.

The zeitgeist has shifted? The zeitgeist hasn't changed since 1847, when Marx wrote about the character of monopoly in The Poverty of Philosophy. It hasn't changed since President Harrison signed the Sherman Antitrust Act in 1890. It hasn't changed since Standard Oil was broken up in 1911, over a century ago (with Standard Oil of New Jersey and Standard Oil of New York recombining in 1999, the broken up monopoly come back to life).

It hasn't changed since the breakup of Ma Bell in 1982, the Baby Bells having re-formed into two companies: Verizon and AT&T, who control the last mile of wire and wireless, the network neutrality of which they have been fighting against. It hasn't changed since the big eight accounting firms became the big four accounting firms. It hasn't changed as Google and Facebook swallowed up all online advertising, search, social networks etc.

The idea that the zeitgeist has shifted from monopoly is absurd. Billionaires from Warren Buffett to Peter Thiel seem to think otherwise. In every industry, mergers and acquisitions leave an increasingly fewer companies with control of more and more of their markets. The data is out there and quite obvious, you really have to put on some kind of ideological fantasy land kool-aid trip to see otherwise.

Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market

#42

Post by abritinthebay »

simonsarris wrote: post #39
abritinthebay wrote: post #32

Earlier quoted context omitted.

Your point about companies with large cash hoards is true but breaks down at the sheer scale of Apple & it’s cash reserve. Apple is routinely making several billion dollar bets. They invest Amazon & Tesla debts regularly but it just doesn’t make a dent . At some point a cash pile is so large it’s basically impossible to spend responsibly. Even with big bets. They have so much cash they could buy Disney outright if th…

> They have so much cash they could buy Disney outright if they wanted to. Think about that for a second... Yeah and they don't. Why don't they buy Tesla? Why don't they buy Disney? Why don't they attempt to reinvent home construction which is a stagnant for the most part? Why aren't they the next Bell labs? Why not reinvent major home appliances most of which are a huge drag and a dumpster fire of usability? "This c…

I’m trying to work out if you’re serious or satirizing someone who believes this nonsense.

That’s not a failure of imagination - that’s business focus.

Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market

#43

Post by Diederich »

rohit2412 wrote: post #34
lumberjack wrote: post #29

Earlier quoted context omitted.

>They created a product that is way differentiated from every other car out there and people want to buy it. What? The Bolt has slightly better range, and probably much better build quality. The difference in price is $2k on a base price of $30k. And if Chevy could do it, I'm positive most others can too.

And Renault Zoe, and BYD ev300. There are electric cars available all round the world, but somehow Tesla got the hype up that they are the only one.

I'm a huge Elon Musk/Tesla/SpaceX fanboy, but I make it a point to reinforce this.

Especially with Tesla, the hype is way, way overboard. It's not connected to reality.

I say that as someone who reserved a Model 3 on the first day, and will be buying one hopefully in a few months. And I also believe the Tesla Motors will very likely become a global, major auto-maker, not based on stock price, but based on how many cars they make.

I do think Teslas are either the best cars in their class or close to it. But the alternatives aren't that far behind, and there's no reason to believe they won't catch up or even surpass the Teslas.

I will end by noting that I believe Elon Musk when he states his goal for Tesla: to 'push the ball forward' regarding the production and use of sustainable energy. He fully expected Tesla Motors to fail, and it nearly did.

So Musk's primary goal isn't to become the largest auto maker in the world. His goal is see the vast majority of new cars being electric, whoever sells them.

I think that kind of straightforward, honest and pragmatic perspective is a big piece of what drives the often rabid fanboyism, and the irrational stock price.

Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market

#44

Post by bryanlarsen »

dingo_bat wrote: post #22
frenchie4111 wrote: post #16

Earlier quoted context omitted.

Would much prefer to run into a wall driving a Model 3 than a Prius

Is Prius a bad car safety-wise? I thought Toyota cars are very reliable and well-engineered.

I think it's less that the Prius is bad but that the parent is assuming that the Model 3 will be great.

Which is a good assumption based on Elon's statements and the track record of the S, but the Model 3 is an amazingly light car for something with more steel, a glass roof and so many pounds in batteries, so it may not be the class leader that the S is.

Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market

#45

Post by dev1n »

maxerickson wrote: post #12
dev1n wrote: post #6

Earlier quoted context omitted.

If you haven't seen a review on the model 3 I highly suggest MKBHD's review. He goes over how a lot of pieces of a standard car are stripped out (I.e. No physical buttons) this was to reduce manufacturing complexity and increase production speed. Toyota does not build cars like the way Tesla has engineered this end to end.

Speed is different than labor time per vehicle. Complex manufacturing is typically a highly parallel process. For instance, as Tesla ramps up to 5,000 vehicles a week sometime this year, Toyota will sell 30 to 40 thousand vehicles a week just in the US. One of them is obviously producing vehicles faster.

Toyota has 6 factories in the US while Tesla has one. 30,000 Toyota vehicles divided by 6 factories gives you 5,000 a week. Which is what Tesla is doing.

Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market

#46

Post by simonsarris »

abritinthebay wrote: post #42
simonsarris wrote: post #39

Earlier quoted context omitted.

> They have so much cash they could buy Disney outright if they wanted to. Think about that for a second... Yeah and they don't. Why don't they buy Tesla? Why don't they buy Disney? Why don't they attempt to reinvent home construction which is a stagnant for the most part? Why aren't they the next Bell labs? Why not reinvent major home appliances most of which are a huge drag and a dumpster fire of usability? "This c…

I’m trying to work out if you’re serious or satirizing someone who believes this nonsense. That’s not a failure of imagination - that’s business focus.

I am serious.

What good does it do for AAPL's business focus to sit on cash for years? The management paralysis is only made more obvious by the cash hoard. Even their existing products (pro desktop) they let languish.

If you don't have the imagination and need a past example, consider the success of AWS. The project was born out of Bezo's edict early on in the creation of Amazon that everything the company does internally must be able to be turned into a service. Almost every analyst in 2006 was against the idea, it was not at all a business focus at the time and Bezos himself admitted it would not be a forseeable revenue stream:

> Stifel Nicolaus & Co. (SF ) analyst Scott W. Devitt notes: "There's not going to be any economic return from any of these projects for the foreseeable future." Bezos himself admits as much. ... "We think it's going to be a very meaningful business for us one day," he says. "What we've historically seen is that the seeds we plant can take anywhere from three, five, seven years."

From this 2006 story: https://www.bloomberg.com/news/articles/2006-11-12/jeff-bezo...

Plenty of people call AWS obvious now, and it's easy to fall into that mindset. It's worth remembering that almost everyone back then thought it was a big folly. Why burn the cash making AWS? What's the business focus?

In 2011(or 2010?) AWS revenue was still listed in the "Other" column on their 10K, even though it was by then their #1 area of growth. Now? It's a sea of pure profit.

The scale of the success surprised even Bezos, but he had enough imagination to take real risks anyway.

What's the difference between a hobby, a folly, and the future?

Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market

#47

Post by ramphastidae »

meddlepal wrote: post #25
feld wrote: post #17

Earlier quoted context omitted.

They're not going to be a monopoly. They will be the only company on the planet that can produce the motors and batteries(!!) that are required for high quality and reliable EVs. Tesla will make some cars for Tesla fans. Tesla will make billions selling key parts to everyone else. So they'll be the new Bosch of EVs, really.

I really doubt the other car companies will let that happen. Either they'll work out the battery and motor tech themselves OR they'll push for hydrogen. The automotive industry isn't going to let a company like Tesla bully them around.

Just like how BlackBerry, Palm and Nokia held off Apple, right?

Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market

#48

Post by bflesch »

dkrich wrote: post #35
bflesch wrote: post #18

Earlier quoted context omitted.

Most people will be driving either a Tesla or a Chinese-made electric car in a couple of years, and like with the iPhone vs. cheap Androids there is a good chance that people will prefer Teslas for their familiar UI, American design, or some other reason we currently don't even have on our radar.

Why are people so sure of this, especially given the recent plummet in oil prices? Car sales are at all time highs. Why do people assume that there's going to be a mass exodus to Tesla and EV's in the next few years?

Because many think they will be more comfortable to use, have better entertainment systems and everyone can experience sportscar-like acceleration for spending less money than a gas-powered car.

Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market

#49

Post by toomuchtodo »

meddlepal wrote: post #25
feld wrote: post #17

Earlier quoted context omitted.

They're not going to be a monopoly. They will be the only company on the planet that can produce the motors and batteries(!!) that are required for high quality and reliable EVs. Tesla will make some cars for Tesla fans. Tesla will make billions selling key parts to everyone else. So they'll be the new Bosch of EVs, really.

I really doubt the other car companies will let that happen. Either they'll work out the battery and motor tech themselves OR they'll push for hydrogen. The automotive industry isn't going to let a company like Tesla bully them around.

> The automotive industry isn't going to let a company like Tesla bully them around.

They already have. Its too late. Who else is going to be producing 500k EVs a year in the next 3-5 years? No one.

Re: Tesla Burns Through Record Cash to Bring the Model 3 to Market

#50

Post by maxerickson »

dev1n wrote: post #45
maxerickson wrote: post #12

Earlier quoted context omitted.

Speed is different than labor time per vehicle. Complex manufacturing is typically a highly parallel process. For instance, as Tesla ramps up to 5,000 vehicles a week sometime this year, Toyota will sell 30 to 40 thousand vehicles a week just in the US. One of them is obviously producing vehicles faster.

Toyota has 6 factories in the US while Tesla has one. 30,000 Toyota vehicles divided by 6 factories gives you 5,000 a week. Which is what Tesla is doing.

Tesla is planning to produce 5000 vehicles a week.

But my point was that removing buttons isn't the only way to quickly produce cars and it is awkward to praise them for their relatively slow production rate. Praise them for reducing the time devoted to assembling each vehicle.

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