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Why almost everyone was wrong about Tesla’s cash flow situation

arstechnica.com

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Re: Why almost everyone was wrong about Tesla’s cash flow situation

#111

Post by SeanAppleby »

madeuptempacct wrote: post #15
anoncoward111 wrote: post #3

Serious question, and I'm not a Tesla hater either: Why does anyone spend $35,000 - $50,000 on a car? It just feels like a number that is at least 5x too high. A used car from a fairly reputable source can be had for between $3,000 - $6,000, depending on mileage and cosmetic appearance. My 2005 Ford Focus sedan was $3,000 and should last me about 3 years before I need to make a decision about major repairs, so that's…

"Why does anyone spend $35,000 - $50,000 on a car? It just feels like a number that is at least 5x too high." If someone makes $250,000+ a year, it's not unreasonable. "My 2005 Ford Focus sedan was $3,000 and should last me about 3 years before I need to make a decision about major repairs, so that's less than $100 a month in ammortized costs." That's completely unrealistic. You have some sort of competitive advantag…

Not quite $3k, but I paid $4500 for a 2012 Chevy Sonic a year ago with a clean title, a bit over 50k miles and no real issues.

I brought it to the mechanic once for a check engine light and I had it back by lunch with a trivial fix for like $150, and other than that am just doing normal maintenance.

I could buy a Tesla or whatever if I wanted to without it really noticeably effecting my immediate position, but from the perspective of my car being an appliance that does its job, I see no reason to spend more than I did, at least until I can get something that I can go to sleep in and wake up 100s of miles away at a beach or ski resort.

There are other ways to incinerate 50k that I'd get more joy out of than buying a car, but even beyond that I'd rather just leave it all in investments to get my capital gains above my expenses as fast as possible.

If you had enough in capital gains to buy the car from just those gains, or if you are a person that is really genuinely going to get $50k worth of joy out of it and make enough that the expense won't add any stress then I would start to not be able to argue with it financially, but I think both of those are very few people.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#112

Post by buboard »

InTheArena wrote: post #41
anoncoward111 wrote: post #3

Serious question, and I'm not a Tesla hater either: Why does anyone spend $35,000 - $50,000 on a car? It just feels like a number that is at least 5x too high. A used car from a fairly reputable source can be had for between $3,000 - $6,000, depending on mileage and cosmetic appearance. My 2005 Ford Focus sedan was $3,000 and should last me about 3 years before I need to make a decision about major repairs, so that's…

There are both sociological and economic reasons for it. On the sociological - new cars can be a status symbol - especially in the Luxury markets. Interestingly enough - the European luxury car market is roughly twice that of the United States, despite per-capita earnings being lower then the United States. Are you German and driving a beat up Honda Civic? Not a good look. Tesla is benefiting from this - the cars are…

The status thing must be important for tesla sales, considering that for its price point it s not a luxurious car, but rather mediocre. The novelty and eco factor however are guaranteed to keep its status icon for a few years, or until the first better competition comes along.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#113

Post by binarybits »

TekMol wrote: post #2

Short version: They never had a cash problem. They invested the money they had into developing a car. Turned it into a success. Then invested even more into the next car. Turned it into an even greater success. And so on. I wonder how profitable this type of 'short opinion piece' journalism is. How much does a journalist get paid to write something like this? Running some content websites myself which make like $0.00…

Author here. What do you mean by "short?" The piece is 1,500 words, which is about double the length of a typical newspaper column.

I'm not going to get into the exact economics, but Ars writers write about a piece a day, and the average piece gets tens of thousands of visitors. Revenue per article (for most mainstream news site, not just Ars) is significantly better than $0.001 per visitor. High-end advertisers are willing to pay a premium to put their ads next to high-quality content and to know the demographics of the people seeing their ads. None of us is getting rich doing this though!

We're also fortunate to have a significant base of paying subscribers, which makes it easier for us to write in-depth pieces that might not generate enough revenue from ads alone.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#114

Post by Retric »

ryandrake wrote: post #90
InTheArena wrote: post #7

This seems like a good breakdown - but it's also that Tesla (like SpaceX) runs really really close to the edge every time they do a product launch. How many people doubted SpaceX until the Falcon 9 flew? How many until the Falcon 9 landed on land? How many until Falcon 9 Heavy launched? How many are still doubting until Falcon 9 completes it's first manned mission? How many doubted Tesla until the Roadster shipped? T…

I'd love to see Tesla succeed, but cynical part of me thinks that old stogy BigAuto is simply watching them and taking notes. Waiting for Tesla to take all the arrows and blaze the trail, and then they'll swoop in and copy once Tesla's done all the hard work for them. They're not creative enough to do a Model 3, but once the formula looks sound, they can slap together a half-assed version and flood the market with it…

Tesla is already ~2% of US car sales based on their current rate. BigAuto does not have that much room to swoop in and they don't have much time as they need vast infrastructure for battery manufacturing or a charging network among other things. My guess is we are going to see a round of car companies fail as not all are going to make the jump.

Considering they don't sell pickup trucks, vans, etc things look even worse for existing companies. Who also have legacy concerns like dealerships and pension obligations dragging things down.

PS: ~30k/month * 12 months / (0.02) = 18 million per year. (Though not all these sales are in the US.)

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#115

Post by InTheArena »

ryandrake wrote: post #90
InTheArena wrote: post #7

This seems like a good breakdown - but it's also that Tesla (like SpaceX) runs really really close to the edge every time they do a product launch. How many people doubted SpaceX until the Falcon 9 flew? How many until the Falcon 9 landed on land? How many until Falcon 9 Heavy launched? How many are still doubting until Falcon 9 completes it's first manned mission? How many doubted Tesla until the Roadster shipped? T…

I'd love to see Tesla succeed, but cynical part of me thinks that old stogy BigAuto is simply watching them and taking notes. Waiting for Tesla to take all the arrows and blaze the trail, and then they'll swoop in and copy once Tesla's done all the hard work for them. They're not creative enough to do a Model 3, but once the formula looks sound, they can slap together a half-assed version and flood the market with it…

I heard the same arguments about SpaceX though. Building new cars are large, complex engineering projects, that have insane complexity around operations, manufacturing and technology. Plus things like Brand awareness and identity.

So image that GM wants to really compete with Tesla. They want to go Electric only. How do they: 1) Deal with dealers - which aare independent, and have their own view as to the product mix? 2) Develop efficient batteries and capacities - Tesla has a insane percentage of this capacity right now. 3) Deal with their unions, who definitely have a opinion about things, and are not going to let the company try anything new without their blessing and buy in? 4) Change their marketing image / brand identity? 5) Develop a electric drive-chain that is as efficient as what Tesla has? 6) Develop a network of chargers?

All without taking their current business model?

Note, VW really is trying to do it this way, and I am very skeptical. There are already a lot of signals that their plans are foundering despite a lot of hype around their battery contracts for example, they had to change tact yesterday and announce their own Giga-factory. Nevermind that VW's brand in the US is just slightly north of Enron's.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#116

Post by jjoonathan »

Marsymars wrote: post #87
simonebrunozzi wrote: post #39

Earlier quoted context omitted.

It's a good question. Three things: 1) Your TCO (Total Cost of Ownership) for a cheap used car can't be $100/month. If you look at Kelley Blue Book or similar websites, they'll tell you that even super cheap cars like that 2005 Ford Focus will still cost you $300-400/month, all included. 2) I almost died in a car accident two years ago, and a result, I value car security way more than before, which means I wouldn't m…

> Your TCO (Total Cost of Ownership) for a cheap used car can't be $100/month. If you look at Kelley Blue Book or similar websites, they'll tell you that even super cheap cars like that 2005 Ford Focus will still cost you $300-400/month, all included. My personal econobox, which I've had for a bit over five years, has so far run around 0.17 cents per km, or $155/month, with around 12,000 km/yr. Fixed costs (insurance…

So you either won the car maintenance lottery or DIY'd it and disingenuously priced that at nothing. Good for you -- but not good for planning purposes.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#117

Post by Certhas »

InTheArena wrote: post #7

This seems like a good breakdown - but it's also that Tesla (like SpaceX) runs really really close to the edge every time they do a product launch. How many people doubted SpaceX until the Falcon 9 flew? How many until the Falcon 9 landed on land? How many until Falcon 9 Heavy launched? How many are still doubting until Falcon 9 completes it's first manned mission? How many doubted Tesla until the Roadster shipped? T…

I'm not convinced about the multi year advantage. Everyone else has EVs out. They are not pushing them, probably because they are reaping the profits on past ICE investments, but the next tech platforms under development for years now at VW/Mercedes/BMW are electric.

VW is planning to get to 10 million EVs by 2022. I'd give credit to Musk and Tesla for bringing forward this point by several years, but it would be silly to write that goal off as empty bluster. (After all they have been selling a well reviewed plug in electric vehicle since 2014, even if no one ever heard about it, and it was priced relatively high. Maybe so as to not interfere with ICE profits).

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#118

Post by cptskippy »

anoncoward111 wrote: post #3

Serious question, and I'm not a Tesla hater either: Why does anyone spend $35,000 - $50,000 on a car? It just feels like a number that is at least 5x too high. A used car from a fairly reputable source can be had for between $3,000 - $6,000, depending on mileage and cosmetic appearance. My 2005 Ford Focus sedan was $3,000 and should last me about 3 years before I need to make a decision about major repairs, so that's…

We bought a Model 3 last week because we wanted to support a car company that was all-in on EVs and sustainable technology. We feel climate change will be the defining event of our generation and we want to support technologies and companies that seek to reduce our carbon footprint and combat climate change.

Most auto companies like GM and Ford are producing EVs to meet regulations that they're actively trying to get rid of. Others like VW are only doing it as part of legal settlements. Supporting them financially would be potentially to our benefit and not the planet as given the opportunity they'd dump EVs and go right back to the ICE. The remainder aren't investing in technology, they're just licensing it from the big 3.

We needed a larger sedan and considered hybrids like the Accord or Camry but older models only have efficiencies comparable to small sedans like the Corolla where as the 2019 models see much higher gains. Additionally the hybrid models are a premium approaching the $40k range.

With the full Federal Tax credit, the Model 3 we bought will cost around $44,000. This is the first new car either of us has bought and while it's a non trivial cost, it's something we can easily afford.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#119

Post by lscharen »

Marsymars wrote: post #87
simonebrunozzi wrote: post #39

Earlier quoted context omitted.

It's a good question. Three things: 1) Your TCO (Total Cost of Ownership) for a cheap used car can't be $100/month. If you look at Kelley Blue Book or similar websites, they'll tell you that even super cheap cars like that 2005 Ford Focus will still cost you $300-400/month, all included. 2) I almost died in a car accident two years ago, and a result, I value car security way more than before, which means I wouldn't m…

> Your TCO (Total Cost of Ownership) for a cheap used car can't be $100/month. If you look at Kelley Blue Book or similar websites, they'll tell you that even super cheap cars like that 2005 Ford Focus will still cost you $300-400/month, all included. My personal econobox, which I've had for a bit over five years, has so far run around 0.17 cents per km, or $155/month, with around 12,000 km/yr. Fixed costs (insurance…

That sounds about right -- my rule of thumb is that $200/mo TCO is about as low as you can reasonably go "in general".

My last two vehicles were

1. 2005 Chrysler Pacifica. Paid $16,500 in '07. Sold in '17 for $1,900. A few sets of tires, insurance premiums, and (gently) hitting a couple of deer put it around $225/mo over those 11 years.

2. 2009 Pontiac Vibe. Paid $14,500 in '11. Still have it and it's only needed minor repairs (knock on wood). Sitting around $250/mo TCO, but it's still worth a few thousand.

YMMV.

Re: Why almost everyone was wrong about Tesla’s cash flow situation

#120

Post by InTheArena »

buboard wrote: post #112
InTheArena wrote: post #41

Earlier quoted context omitted.

There are both sociological and economic reasons for it. On the sociological - new cars can be a status symbol - especially in the Luxury markets. Interestingly enough - the European luxury car market is roughly twice that of the United States, despite per-capita earnings being lower then the United States. Are you German and driving a beat up Honda Civic? Not a good look. Tesla is benefiting from this - the cars are…

The status thing must be important for tesla sales, considering that for its price point it s not a luxurious car, but rather mediocre. The novelty and eco factor however are guaranteed to keep its status icon for a few years, or until the first better competition comes along.

I am in the market for a new car. I looked at the BMW,Volvo, the Mercedes, Audi and Lexus. I am replacing a Honda CRV, but my needs have grown, and my disposable income is reasonable, so I am looking at this segment of cars.

I would (and in fact, am) taking the Tesla over any of the others, despite my early idea that I would get a BMW. I just didn't like the responsiveness of the car, the clutter and BMW nickle and dimeing me for repairs and things like carplay.

I really liked the Volvo, but the things in the Volvo that I liked - the technology, and the panoramic roof, I could get for cheaper with the Model 3.

I finally pulled the trigger when the Midrange ("Lemur") Model 3 became available. At that point, my out of pocket costs on the Tesla was cheaper then the Volvo and the BMW.

If you have not already tried it - go test drive a model 3. It's a lot of fun.

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