Why almost everyone was wrong about Tesla’s cash flow situation • Hacker News Board

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

#141

Post by Certhas » Fri, Oct 26, 2018, 3:43 PM UTC

notaki wrote: post #130

Certhas wrote: post #117

Earlier quoted context omitted.

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 sil…

But no one else is mass producing EV's. VW is just starting to talk about building a gigafactory. Everyone is doing a lot of talking, but they are all years behind Tesla. And even if they stop talking and start doing, they'll need to build a more compelling product than Tesla. That will be very very difficult. Tesla FTW.

"Chinese sales of domestically-built new energy vehicles in 2017 totaled 777,000 units"

To first approximation none of these were Teslas. EVs are being mass produced.

Mass producing a car might be difficult. But the others manufacturers are already doing that.

They need to figure out how to mass produce electronic drive trains (vastly simpler than what they are building now) and batteries. Batterys are more complex, but most of battery production coming online in the next years is Chinese. Tesla is a fraction of what the Chinese are bringing online.

I don't see any reason why Teslas long term potential should be higher than, say BMWs. Mind you, creating a BMW size company from scratch while driving the electric transition and a pace faster than we otherwise could have hoped for are amazing achievements.

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

#142

Post by kurtisc » Fri, Oct 26, 2018, 3:43 PM UTC

ansible wrote: post #73

kurtisc wrote: post #26

Earlier quoted context omitted.

How selfless.

The people buying $35K USD cars aren't likely thinking about selflessness, true. But the question remains, if everyone who bought new cars kept them for 20 years and drove them a lot, what would the used car market look like?

Similar the rental market, I'd guess. Mostly done by those who couldn't afford to buy new but at a greater long-term cost.

I've seen people commenting that the money you save on buying new just goes on repairs instead: I don't agree. There's a fashion and entertainment value to driving something that works just as well as a new car but is newer, so the market gets pushed down.

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

#143

Post by csomar » Fri, Oct 26, 2018, 3:46 PM UTC

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 would anyone rent a downtown apartment with heating, air-conditioning and a Jacuzzi? Might as well live in the jungle.

The answer is simple. People are different. Some prioritize travel. Some prioritize Home-ownership; and some require a nice car.

You are neither a genius nor frugal. Different people will have different priorities.

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

#144

Post by PeterisP » Fri, Oct 26, 2018, 3:47 PM UTC

jjoonathan wrote: post #104

seer wrote: post #91

Earlier quoted context omitted.

I'm not sure how much it varies country to country - I'm in Eastern Europe myself (lower labor costs, higher import / taxes etc) but my trusty toyota corolla was bought for about $3000 with no "friend discounts", just a general recommendation that Japanese cars are reliable and a bit of quick looking around the local car craigslist equivalents. I've been driving it for about 7 years (12 years old in total) with no ma…

> Eastern Europe Geographic variation in pricing not only fully explains the difference but actually leaves me mildly surprised that the difference is so small.

Arbitrage exists - the difference can't be that big because if it becomes so, then lots of people just drive used cars across half a continent to resell them.

International movement of used cars is a big business, generally from more wealthy countries (where more people buy new cars) to less wealthy ones, but also to cover gaps in the market if there's a disbalance in some sector e.g. a surplus of used vans because of some large company selling them off, or a lack of a particular model that's randomly gotten in fashion somewhere.

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

#145

Post by amluto » Fri, Oct 26, 2018, 3:48 PM UTC

There is nothing in this article that suggests any error in the naysayers’ reasoning. None of the analysts were so dumb as to say that Tesla’s massive capital expenditures should be instantly depreciated and were thus worthless. The issue had always been cash flow: Tesla’s cash flow was negative enough that there was a serious risk that they would run out. Fortunately, they seem to have turned the corner without running out of cash first.

I think they still have considerable risks ahead:

- All the Model 3 cars they’ve recently sold represent potential liabilities for repairs. My neighbor’s has spent weeks in for repairs due to poor QC, and is probably a lemon under CA law. Even ignoring the lemon law, warranty repairs are expensive.

- To be worth their valuation, they need to sell massive numbers of cars for quite a few years. In particular, they need to continue leading after their competitors introduce serious EVs. Having driven Teslas and other cars, Teslas have a lot to be desired in terms of interior amenities and controls.

- The NTSB is investigating an autopilot fatality. The liability from that particular fatality is irrelevant to Tesla, but the NTSB could plausibly force a recall of Autopilot. That would be bad for Tesla. (And arguably quite good for transportation safety.)

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

#146

Post by calabin » Fri, Oct 26, 2018, 3:49 PM UTC

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…

Responsible cash management and investor relations are not mutually exclusive with innovation. There is absolutely no reason that TSLA shouldn't have raised cash with a relatively inexpensive bond issuance or moderate share issuance in the lead-up to the large expenditures required to begin Model 3 production.

As a consequence of this, analysts rightly discounted TSLA's stock price to account for the tremendous amount of risk he was taking by operating with little-to-no room for error. The fact that he was able to operate inside of that slim margin does not indicate that he should have.

Elon himself was so flustered by the consequences of his poor cash management (and resulting discount in the stock price) that he ended up plainly manipulating the stock price and nearly got himself banned as a D&O of a publicly-held company.

I'm tired of all of this hero-worship, and the smug "this is what it takes to change the world" discussion around his insane actions. The innovation and change brought about by the Model 3 is not a good excuse for Elon nearly killing the company to maintain his pride.

Last, the fact that raising money to ensure the financial stability of the company is seen as a pride-diminishing act by Elon is in itself worrying.

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

#147

Post by adonnjohn » Fri, Oct 26, 2018, 3:50 PM UTC

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…

3 months net?

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

#148

Post by paddy_m » Fri, Oct 26, 2018, 3:50 PM UTC

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…

I paid $5000 for a 2001 GMC 2500 with a lift gate and 56k miles. There are some dents and surface rust, but the truck is generally solid. Crank windows and only one working speaker. I call it my luxury vehicle because I have the luxury of not worrying about it.

I will be supplementing this with a 10+ year old hatchback for better gas mileage and less wear on the truck. I'm expecting to pay around $5k for that too.

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

#149

Post by randomsearch » Fri, Oct 26, 2018, 3:54 PM UTC

balabaster wrote: post #131

jklinger410 wrote: post #74

Earlier quoted context omitted.

Musk plays fast and loose like he's almost asking for failure. The amount of blog posts and confused short-sellers because of this one fact have been truly entertaining/infuriating to watch. Like when everyone thought they had won by removing him from the board of Tesla. Musk could eat Ramen in a 400sq ft apartment without a cent to his name, scheming on his next startup, and still be happy. They are fighting a straw…

The problem is that he plays like he has nothing to lose. He has a vision and a plan and he is willing to put everything on the line and sacrifice it all in the pursuit of that objective. He's a problem solver. He's not scared of being unpredictable. He's creative as fuck. He will do whatever he has to do to achieve his vision. He didn't make his plan haphazardly or on a whim. He made it having observed millions of o…

From one POV, Musk really has nothing to lose.

Even if all his companies crash and burn, he has taken a lot of resources and spent them on things that matter: space exploration, combating global warming, etc

No matter what happens, all that engineering talent will continue to exist. All that experience gained still exists. And some of the giant infrastructure that he’s built will inevitably be reused if his companies don’t work out.

I feel like he’s exploiting the capitalist system to get stuff done, and I think he is prepared for everything to collapse because much of what he has created will survive no matter what. Who cares about the numbers on some balance sheet now that we can reuse spacecraft and build great electric cars? Those numbers are a drop in the ocean anyhows.

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

#150

Post by greglindahl » Fri, Oct 26, 2018, 3:56 PM UTC

empath75 wrote: post #49

I’m skeptical that those are legit numbers and not just the result of pushing off payments to suppliers and booking revenue for cars they haven’t shipped yet.

Tesla books revenue when they deliver cars to buyers, not when they ship them.