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Tesla Viability?

Discussion in 'Rumour Mill' started by Dan Detweiler, Apr 12, 2016.

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  1. Dan Detweiler

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    OK, I almost feel like I need to apologize for this thread. I know that this whole site is full of Tesla fans and owners and I am certainly a fan as well seeing as though I plan on buying a Model 3. This being said, while doing my research on all things Tesla, I am seeing a lot of videos and articles questioning the financial viability of the company.

    I realize that there will always be haters. I am fine with that. There were (and still are) plenty of those regarding the Volt which I have been happily driving for 4 years now. I am interested in your take on all of this negativity towards the sustainability of the business model Tesla has put forth. There is no question the company is spending money hand over fist to get the Gigafactory up and running as well as ramping up Model 3 production, etc. Many are seeing this as a doomed company in 5 years or less.

    Those of you that are current owners and have had personal experience with the company, please share with me your thoughts on these issues. Believe me, I am a full on Tesla fan. I am not in any way trying to troll this site of dirty up the water with negativity. Just trying to get as much information as I can before investing in their product.

    Thanks a Ton,

    Dan
     
  2. TrevP

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    Personally I'm not worried about Tesla. They're established and can garner funding as they need.

    Everyone needs to remember the forest from the trees here. This is the FIRST American car company to survive and thrive since 1925. The last one was Chrysler and it went bankrupt TWICE. It is *monumentally* expensive to start a car company so Tesla is reinvesting all profits from the company back into growth. This is why it appears on paper that they are not making any money.

    Once their capital expenditures plateau, Model 3 is in production for 3 years or so then we will see the real profits start to roll in. This is a long-term game. Wall Street and investors who are not into the goal are only interested in making money NOW. They're very short-sighted.

    This is the only reason why SpaceX is not public. Wall Street is not interested in goals 30 years out. They want $$ now.
     
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    • Dan Detweiler

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      Thank you for the feedback TrevP. I appreciate it.

      Dan
       
    • teslaliving

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      Tesla is in a build/growth mode and has been since the start. Growing and adding new products takes huge investment and it messes with the profitability numbers. Tesla has shown that they're able to go back and refine costs and design and optimize the product and improve the margins. After the 3 Tesla will need to show some restraint from starting too many new designs/product launches too quickly as they monetize the model 3. A new roadster will be in the works and they'll need to balance that against optimizing their business but they've shown already that they know these things and will work on them. I'm very bullish on them as a company as both a shareholder and Model S owner.
       
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      • Stephane Lamarche

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        There's also a lot of manufacturers that would love to see Tesla go away....
        Tesla is creating A LOT of waves and they don't like it.
         
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        • WaitingForTesla

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          I setup google alerts for the model 3 and it's clear to me now that just like politics most publications have a bias one way or another and then some just look to stir the pot just get clicks. Many qualify for both.

          I get the feeling Musk is playing the long game and isn't going to let a few day traders and bloggers deter him from his vision.
           
        • TrevP

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          There's a lot of click baiting happening on the net with Tesla articles. The media knows it's a touchy topic since the owners and enthusiasts are very vocal, much like Apple owners (I am one of those as well).

          Publishing negative articles get a lot of eyeballs and the media consistently gets Tesla facts wrong. Both of these things get the proverbial waters boiling.
           
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          • Gary Moore

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            I am not yet a Tesla owner. I do have an engineering degree from Kettering University, Flint, Michigan, and I've been inside Fortune Ten auto plants and tech companies as a professional.

            Technology changes things. The punch-card-driven Jacquard loom came out in 1801. The battery powered electric car goes back to 1834. The man whose face now adorns the $20 bill was then still President of the United States of America, and the U.S. flag had 24 stars on it.

            If you had asked folks back then about microchips, software development, lithium ion batteries, electric lamps, man-made satellites, or fusion reactors, they certainly would have locked you in the attic, never to be seen again publicly. (Or, if your family was especially cruel, they might have fed you to the hogs.)

            People shorting TSLA stock do not want to say nice things about the Tesla business plan, but that does not prevent them from being on the wrong side of history.

            As some may recall, the late John DeLorean, formerly having worked at Chrysler and Packard, and a former GM executive at Pontiac and Chevy, decided to get involved with ramping up a car company for building stainless steel cars with gull winged doors in a venture in Northern Ireland in 1973. Unfortunately, the ramp up took longer than he had expected--his knowledge of building cars not withstanding, he ran into a recession in the Eighties, an old song, often the dirge of automakers and other ventures. His Plan B involved acquiring some financing via cocaine transactions. C'est la vie, eh Doc Brown? Enough to make you want to kick the flux capacitor across the garage.

            One might find DeLorean's attempted solution seemingly rash, but if you start an automobile company, you do need to acquire tons of cash, to get to the economy of scale at which sales at the prices which customers consider reasonable allow you to make a go of it all.

            Capitalism (in theory) involves entrepreneurs taking risks for which they are rewarded if successful.

            If you read scientific papers about what is likely to happen should we heat the only planet we occupy up enough for methane to be sublimated out of Siberia and the ocean floors and into the air, you will understand that doing things which have always worked before does not in any way qualify as not taking risks.

            We're not doomed. Nobody knows how far off fusion power plants are, but Lawrence Livermore Labs and Lockheed think they're probably closer than many people imagine.

            Tesla is not doomed either. History notes that early drivers of internal combustion vehicles we're told to "get a horse!", ignoring scientific predictions that the streets of London would become waist deep in excrement at projected growth in pollution rates.

            In any paradigm shift, the old rules stop working. The average person on Wall Street has never been inside an auto factory, let alone comprehended what was on display during the tour. Many of them still don't understand the dot.com bubble or even why the CDS was a dangerous animal to unleash upon the globe.

            You can hire professional consultants regarding ramping up vehicle production. When 400,000 people will pony up a grand to reserve a seat to play in the game you have going, the professional people in Vegas will tell you that this is a very good sign.
             
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            • Stephane Lamarche

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              o_O Not sure I'm smart enough to understand all you just said, but.....Sounds good to me!!;)
               
            • Gary Moore

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              That's the problem with having been inside industries and trying to explain things which might be not commonly known. One merely learns things that cannot be communicated in a post, let alone a tweet.

              The net of it all is that being in the auto industry is a risky business, but Tesla has a good shot at success, because their business model is less tied to the past, which of course, was itself tied to the past that existed before that..

              From an engineering and economic viewpoint, electric cars make way too much sense, and building a gigantic battery factory and a network of highway Supercharger stations shows strong awareness of what the obstacles to the coming age of transportation are.

              Once a company gets the right vision, the rest is a matter of luck (whether the wind of the economy holds), PAC (plug and crank), and ASMOP (a simple matter of programming).
               
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              • Badback

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                The Detroit automakers, having made every conceivable mistake (I won't bore you with the long list of things that you are already aware of) are still here. And, still getting in the way of their's and everyone else's progress.
                 
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                • Andreas Stephens

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                  #12 Andreas Stephens, Apr 19, 2016
                  Last edited: Apr 19, 2016
                  Similar to Gary Moore above, at this stage I have not invested in Tesla, but I used to work as a financial analyst * and there are just a few things that might be worth adding to some of the things already mentioned above.

                  My 2 cents worth...

                  Yes, the risks Tesla is facing are mind blowing and I would not put all my money into it. But not investing in Tesla might also represent a massive opportunity cost - and I am not just talking in a purely financial sense, but in an environmental/historic sense.

                  Listening to the "Fourth Quarter 2015 Financial Results Q&A Conference Call" (see http://edge.media-server.com/m/p/nswqxjz3 ), I find it amusing how Tesla management are pained trying to explain to analysts obsessing about quarterly sales numbers, that Tesla is on an exponential growth curve, which makes accurate forecasting extremely difficult ("meaningless" might be too harsh a word, though in fact more appropriate).

                  While potentially being accused of lack of analytical rigour, I prefer to take a step back and look at what Tesla management have accomplished to date in an attempt to consider what they might be capable of achieving in future. In that I can also look at what has happened over at that other little company "SpaceX":

                  First I note an amazing accumulation of talent in the business (tick). Then I consider that in each company already the most unbelievable technical advances have been made, creating outstanding IP (tick). Not only that, but they have been made with a near unhealthy obsession on cost control (tick, sort of important if you are concerned about long-term financial performance of the business or even if you are thinking about company "culture" down the road). Importantly, each technical breakthrough has not been achieved as a stand-alone feat, but as part of a carefully orchestrated strategic plan (tick).

                  Tesla also represents one of those rare companies that are industry transforming (tick - if successful, this has a big bearing on potential valuation upside later on). Well, and as far as marketing is concerned - enough said (tick). Finally, while many companies nowadays can be accused of greenwash (i.e. paying mere lip service to environmental concerns), one thing that is clear is that Elon Musk is driven [quite literally it appears] by his broader concerns about the environment and humanity rather than the next quarterly financial result (TICK - again this has implications about company culture).

                  Yes, the massive number of pre-registrations represents both opportunity and risk, as it will most likely result in higher demands on both working capital and capital expenditure than originally planned. However, while I have seen other companies fail at this step, given track record and some of the above observations, I expect Tesla management to have the necessary skill and foresight to manage its balance sheet.

                  Finally, when I do invest in Tesla, just like when I registered for the Model 3, part of the reason will be the "triple bottom line". At my age, I have come to realize that I cannot eat money.


                  * The usual disclaimers apply. The above is not investment advice, as I do not know your personal financial circumstances.
                   
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                  • Stephane Lamarche

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                    Big Automakers need to understand we are TIRED of boring cars. We want to excited about the future. IMO the fact that Tesla is selling EV is not really relevant. We want to drive something different, something I could have dreamed of when I was a kid. That's the reason Tesla is so successful these days. Tesla is definitely here to stay because they understand that....

                    The fact that we are ready to wait 2-3 years for a car we haven't seen, instead of buying the boring stuff the other automakers are trying to shove down our throat with a big EV logo on it proves we are tired of BORING. Bring us the coolaid Elon we will drink it. :p
                     
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                    • Andreas Stephens

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                      Hi Stephane

                      To me it is ALL about the fact that it is an EV - i.e. better for the environment. I am actually not a car enthusiast at all.

                      However, as per the following article (found elsewhere on this Forum), Tesla enthusiasts represent a surprisingly broad church:

                      http://www.business2community.com/b...sla-model-3-fans-01514507#xelQxlzaZPHHdldd.97

                      It is wonderful that Tesla attracts all sorts of people.

                      By buying Tesla cars people like you help make the environmental aspirations of people like me come true (we could not do it without you!), and hopefully people like me likewise will allow people like you enjoy ever more advanced/futuristic cars.

                      I think the wisdom of Elon Musk was to realise that he needs all of us to make his vision come true.
                       
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                      • Dan Detweiler

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                        I think this points out something that is pretty unique to the Tesla marque. It really is cutting edge on a lot of different levels.

                        The performance enthusiasts love it for its impressive numbers. The techno lovers (like me) love the technological advances that nobody else in the industry can equal. The environmentalist crowd love its EV status as well as the growth of the supercharger network. The one group that has been pretty much excluded from the party has been those that couldn't afford the price of admission (that would also be me).

                        The last of these has been addressed, at least in part by the Model 3. While $35-50,000 doesn't address the Corolla budgeted potential owners, it definitely opens up a whole new market of potential buyers. Going to be very interesting to see what impact this car has on, not just the company, but the industry as a whole.

                        Dan
                         
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                        • garsh

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                          Me too!
                          Definitely not me. I'm actually fine with adding a little bit of global warming to the world. It's too cold. ;)

                          I first drove an EV back in 92 - a converted Ford Escort that we had at Penn State. I was studying electrical engineering, with a concentration on motors & generators. I interned at GE Transportation Systems, where I worked on diesel-electric locomotives. I've known for a long time that an electric car would be better than a regular car in every way. But battery technology was holding them back.

                          We've finally reached the point where battery technology is *almost* good enough to take on internal combustion. WE ARE NOT THERE YET. We are close enough that it works for some people, in some situations. It's definitely close enough for me. And we're making enough progress that new EVs will have enough range & be able to charge fast enough to work for even more people. I'm happy to support a company that is really pushing research and development in this area. Oh, and I end up with a kick-ass car in the process. :cool:
                           
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                          • Badback

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                            Stock analysts have always been the bane of innovation. Show me one thing that stock analysts have ever created.

                            Companies fail because of bad management. I don't think that Elon is a bad manager by ignoring the bleatings of Wall Street.

                            If Tesla stockholders don't trust Elon, they can sell their stock and there will be no shortage of buyers.

                            Keep the damn accountants out of the engineering department and Tesla will do fine.

                            The last thing that we need to worry about are the greedy bastards in the stock market.

                            We want our cars!
                             
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                            • JeffinAZ

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                              I love Tesla but will not be buying their stock--too much dilution risk (issuing more shares)...
                               
                            • AEDennis

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                              You can always rent it via options...
                               
                            • Red Sage

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                              Posts such as this, meant for actual discussion and examination of such subject matter, are not objectionable. There are others that are rather obviously set up with leading rhetorical questions as if the author knows something that Tesla Enthusiasts are unaware of, but won't tell them what it is, that get under my hide. The ones that encourage us to 'do your research' or 'find out the truth' without pointing to any reliable sources or quoting any facts are especially horrid. They are in general even worse than the blatant FUD and [BOLSHEVIK] that true trolls post because at first, they may present their position in a manner that vaguely mimics reasonable inquiry, but have the same agenda as naysayers everywhere: to obfuscate the truth with a quagmire of rhetoric.

                              Fear. Uncertainty. Doubt. FUD. These are the tools that are used by those with a negative slant toward electric vehicles. Typically those who have such positions are deeply entrenched in those industries that will not benefit from the propagation of electric drive.

                              I suppose some may simply be longtime fans of Internal Combustion Engines (ICE) and truly love the best the technology has to offer. There are those who have immense respect for the engineering that goes into the designs and enthusiastically defend the best of those efforts with ICE. There are also those who honestly believe there is 'nothing wrong' with ICE vehicles at all, that 'they don't hurt anything' and are simply 'the best solution' we have for transportation.

                              There are those who simply don't care whether or not Peak Oil, or Anthropomorphic Climate Change, or anything related to those theories are true because they believe they have a fundamental right to consume anything and everything they can afford to purchase at any rate they want. They don't want to Save the World, for 'Our Children' or anyone else's. They don't want to Conserve, or Recycle anything. They don't care whether any lifestyle is sustainable even an hour beyond the moment they themselves keel over and die of a coronary attack, stroke, or failing liver and kidneys. And that's why they despise talk about 'The FUTURE!' as some conceptual notion that things may be different and possibly better, for someone else, at any point after their own demise. They are selfish, greedy, uncaring, and unsharing. It is the only thing about their own nature that they consider to be in any way virtuous, because to them, that is the same as being honest. And they wish others would be so. They are most likely to say, "[FOUL] the Environment!"

                              At the heart of it, there are those who absolutely FEAR that Elon Musk is entirely correct. They are afraid that electric drive is the way forward for transportation. That doesn't work for them, because their entire career, or entire investment portfolio, is based upon the notion that ICE and Petroleum are standards that cannot, will not, shall not EVER be surpassed in their dominance on the world scene. Those with a firm standing on those positions are not willing to shift or move quickly to another. They would rather stand fast and weather the storm, certain that their path is the proper one and all others are fad, fallacy, or fantasy.

                              There are those who are UNCERTAIN about the future that Tony Seba predicts. Their own charts and graphs do not pair well with his. They cannot conceive of the notion that after so much study into their chosen profession there could be something important they have overlooked, or diminished in its actual importance to the point that oversight might ruin them.

                              There are those that DOUBT all those they consider to be 'outsiders' or 'troublemakers'. Also known as 'visionaries' or 'dreamers'. People with their head in the clouds who need to be brought down to Earth. They decide to label them as con artists, snake oil salesmen, showmen, cult leaders... criminals. Anything at all to take away from the perception they might be reasonable individuals with a plan that even ~*might*~ work to bring about rapid change.

                              There are those who have been predicting the DOOM of Tesla Motors from the moment it was founded in 2003. There are those who have continually prognosticated that Tesla would FAIL in all aspects since before the first deposits were taken for the Roadster. There are those who have been calling Tesla a SCAM ever since they learned Elon Musk was a part of the project. There are those who have continually denied the progress of Tesla as a company and forecast their likely acquisition by a larger entity since before the investments made by Toyota and Daimler. And, no matter how often evidence appears to the exact opposite, none of those who propose such notions about Tesla ever admit they were wrong. Instead, they simply rephrase and repeat the same garbage as if nothing has happened.

                              There is a long held, oft repeated axiom of business that goes, "You have to SPEND money, to MAKE money!" It astounds me that for some reason, it is the decided opinion of ANALysts, pundits, talking heads, $#0r+s, and Bears on Wall $treet that axiom must be reversed when applied to Silicon Valley companies. The problem they have isn't actually with the fact Tesla is spending money, but HOW they are spending it. The reasons for Tesla's expenditures are perfectly fine and logical, but they leave the usual suspects out of the loop.

                              How often does anyone in media track the spending per vehicle that Ferrari does with a critical eye? Lamborghini? Porsche?
                               
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