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

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

#51

Post by toomuchtodo »

dkrich wrote: post #28
jotjotzzz wrote: post #4

Earlier quoted context omitted.

I don't think it's much of a risk. They created a product that is way differentiated from every other car out there and people want to buy it. It's like seeing the iPhone for the first time, and all the other flip-phones out there is simply just not enough anymore. They will succeed. If I'm in the market for a new car, I would totally line up for this one.

This is where I disagree with most people who are bullish on Tesla. I think there's a huge risk for Tesla that most people don't factor in- that it's very possible that most car buyers simply don't want one . The interesting thing about that is that most people seem to assume that making them at enormous scale and meeting the overwhelming demand is the only risk. What a century of observing the auto industry has taug…

The Gigafactory is specifically designed to balance vehicle and stationary storage cell production. Not enough cars selling? More batteries for utility scale energy storage. And the demand for energy storage isn't going away.

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

#52

Post by toomuchtodo »

dkrich wrote: post #30
bryanlarsen wrote: post #11

Earlier quoted context omitted.

The gross margin on the Model S is over 25%.

For a luxury car, that's not really good. As you move down-market, margins only get lower, so you have to rely on volume to make significant amounts of money. If people don't buy Model 3's by the hundreds of thousands every quarter, they are going to have problems squeezing profits from this car.

Legacy luxury margins.

BMW: 8%

Mercedes: 11%

Audi: 7%

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

#53

Post by sremani »

ramphastidae wrote: post #47
meddlepal wrote: post #25

Earlier quoted context omitted.

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?

Tesla has been around for a while and GM actually has a car that directly competes with Tesla Model 3, and many are coming. Sure Model 3 will be marquee model, but it did not have surprise element of iPhone nor people buy Cars every two years. Even to this day, building EVs with big batteries is not economical or profitable, that may change now, but building EV is not a rocket science. Every major Auto manufacturer has the know-how, they may be constrained by the supply-chain in the future. With low gas prices, people want SUVs not Sedans, if Model 3 was economic SUV, Tesla would have voraciously eaten couple of Car companies, its a Car and so the rest of the ICE world, will survive them!

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

#54

Post by simonebrunozzi »

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…

> [1] The flipside of this is that it's an indictment of companies that hoard huge amounts of cash, like Apple. That they can't find a way spend it building future stuff is a signal that they are out of big ideas, and (in the case of Apple) have been for some time.

I partially disagree on this. Apple's $250 Billion dollars stashed in Europe is both a way to defer paying taxes on these profits (the main reason), and a huge gun pointed at the head of the US government (a secondary, but important reason). That amount of money is now big enough to count as a constant threat to market stability, currency stability, etc.

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

#55

Post by ZenoArrow »

simonsarris wrote: post #46
abritinthebay wrote: post #42

Earlier quoted context omitted.

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 inte…

In the case of Apple not branching out more quickly, I'd say they're doing it to protect their brand image. For better or for worse, that's probably their strongest asset.

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

#56

Post by Shivetya »

feld wrote: post #17
jgalt212 wrote: post #15

Earlier quoted context omitted.

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.

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 am not convinced they have the best battery technology or even EV technology. They are certainly best at touting their technology. They make choices and when questioned on it they talk over the subject.

I do hope they succeed this is a major market; automobiles and such; that needs new infusions to move forward both in technology and design. However they are at a very dangerous point in their history and how they execute over the next six months is most important.

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

#58

Post by loueed »

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…

Just because we can't publicly see what Apple is developing doesn't mean they're not being innovative. Apple, Microsoft, Facebook, MagicLeap and Google are all betting big on Augmented Reality. Apple has acquired Primesence, the company behind the Kinect, HoloLens sensors and Project Tango. Everyone else bought licences to use Primesence IP.

In September, iOS 11 will allow 100s of millions of iPhones and iPads to use AR apps which is important for when they eventually want to sell these customers Smartglasses. I also expect Apple to build a next-gen Siri in the near future. One that can intelligently program its way out around natural language. Similar to the Samsung acquired Viv.ai

I plan on buying a Model 3 in a few years but I think Apple has bigger plans for autonomous driving. Their physical car project has been shelved, for now, turns out it's pretty hard to build a car company with in an already established computer company. Autonomous driving system in the works, which could put them in the position to partner with other car companies, implementing CarKit and Self driving branded by Apple.

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

#59

Post by smokeyj »

dkrich wrote: post #28
jotjotzzz wrote: post #4

Earlier quoted context omitted.

I don't think it's much of a risk. They created a product that is way differentiated from every other car out there and people want to buy it. It's like seeing the iPhone for the first time, and all the other flip-phones out there is simply just not enough anymore. They will succeed. If I'm in the market for a new car, I would totally line up for this one.

This is where I disagree with most people who are bullish on Tesla. I think there's a huge risk for Tesla that most people don't factor in- that it's very possible that most car buyers simply don't want one . The interesting thing about that is that most people seem to assume that making them at enormous scale and meeting the overwhelming demand is the only risk. What a century of observing the auto industry has taug…

Tesla is the Apple equivalent for cars. Consumers see the Tesla brand as innovative and high quality regardless if it's true. Even if other manufacturers make a Tesla equivalent, that's like iPhone vs Android. It's a status thing for many, and for that alone I'd bet on the Tesla brand.

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

#60

Post by bmh_ca »

People often think of the electronic-nature of their cars as Tesla's key advantage.

Other elements factor into share/debt cost analysis:

1. Culture — They appear to still have a startup "let's solve the problem" mentality

2. Distribution — There are no networks of dealerships taking a cut

3. Marketing — They don't need to pay for it at all right now

4. Legacy — There are no pension funds and other obligations on them

5. Environmental icon — There is a lot of political support for them

Tesla is still high risk, but they have a big potential upside.

Contrast with e.g. GM:

1. Old-school Culture of "if you build it, they will come"

2. Mandatory dealerships

3. Big marketing costs

4. Pensions are underfunded and they have a huge inventory buildup (and defaulting subprime leases are mounting)

6. They have a lot of political support, but it's not for environmental reasons

That's pretty cursory, but illustrates a few factors besides just the product.

Tesla's burn rate is a marginal-risk long factor, if/when they get past their manufacturing bottlenecks.

[edit]: Newlines.

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