Musk Declares Tesla Free of Factory Hell with Targets Intact
bloomberg.com
bloomberg.com
I can never decide whether the people who write these stories can't be bothered to do even the most minimal digging past the first number they see, or if they're doing this on purpose. Probably a mix, I guess.
But the stories I saw were, "Tesla sales are down, Tesla demand is falling off, Tesla is dying." Which is not remotely supported by the numbers, missed expectations or not.
I can answer this one!
Because when you underpromise, you are undervalued, and if you are undervalued, then you often won't receive needed investment/trust/means/etc. Meaning that while underpromising and overdelivering is a GREAT plan for an individual most of the time, if you do it habitually as a company, you can wedge yourself into a situation where, for example, your product is THE BEST, but you've underpromised enough that you only get 15 million bucks to hire new engineers, buy up hardware/cloud virtualization space, etc., and that isn't enough - you run out of money early and go broke! Where your competitor, who overpromised, got 30 million in investment and while their product wasn't intially as good as yours, they invest time and money into it, and then they just buy you and your team at a fire-sale price when you go broke.
The market is inept at these optimization functions overall, but it is still tuned to TRY and get them right- to take promises, expected performance, indicators, and all that and rough out a risk vs. reward equation and then plug funds into it. Underpromising and overdelivering is a method by which you can sometimes 'hack' the power of the market to 'price' your efforts, but it can backfire hilariously if you use it in the wrong space, against the wrong opponents.
Tesla explicitly stated the reason for the missed deliveries. The published production and delivery numbers match the explanation. I suppose they could be lying, but I haven't seen anybody go so far as to accuse them of that here.
I'm not lamenting the press for criticizing Tesla for missing expectations. I'm lamenting the press for taking a number that clearly indicated a slightly delayed production ramp and publishing articles talking about how the company is doomed because people aren't buying their product anymore.
Because that is illegal. You cannot just pump out bad numbers then surprise the market. Those bad numbers are a lie. Deliberately lowering expectations, driving down stocks, is the first step of an insider trading fiasco.
A company that cannot properly keep shareholders informed is an unpredictable company. Maybe that is tesla. But deliberately keeping shareholders in the dark is criminal.
Look at the IR first page, paragraph 5. They missed their "delivery goals".
But then, I cannot understand how Whats App could be valued 19 billion...
I suppose that is slightly unfair since I happen to think Tesla is fairly well valued, maybe slightly undervalued currently, and obviously investors are the ones supporting that price. It seems like it is mostly a few institutional investors and the general public propping them up right now though, not the sell side firms that can dominate coverage and mentality sometimes.
Tesla, on the other hand, can't do that. They manufacture a tangible product and have a lot of established competition to which they can be easily compared.
Currently Tesla's market cap is 150% that of Renault's. A company that sells millions of vehicles, has factories all around the world and makes a very healthy profit for its shareholders.
So, Tesla, instead of trading at a discount to reflect the risk involved, is traded as if it's already a successful company 1.5 times the size of Renault. So, if you think Tesla is valued "fairly" now, please, tell me what should be its market cap when it actually starts making profit? $300B? $3T?
Renault's size isn't expected to change significantly over the next decade. Tesla's is. This means that if you own Tesla shares now, 10 years later they are going to be worth a massive amount because Tesla will be much bigger than Renault, so the price naturally rises to that expectation, only abetted by the possibility that Tesla collapses.
It isn't about where the company is at the moment. It is about where you think the company will be in "the future" (at whatever point that is relevant to you) reduced by the probability that you think they will fail (and most people think that chance is tiny). So when Tesla starts making a profit, its market cap probably won't have grown that much, because it was expected behavior priced into today's valuation.
That sentence doesn't make sense. I think you're conflating worth/value (subjective measures) with price (objective). I can't pay more for an item than what's it worth to me
You're comparing the valuation of horse and buggy companies in the 1910s to Ford.
You mean there are no other companies selling electric vehicles? And clearly, if, say, Mercedes, doesn't have electric model now, it's absolutely impossible that they have one in 5 years, just like a horse & buggy company, right? But forget about Mercedes, how about Nissan Leaf, which exists now and is the world's best selling electric car? Shouldn't Nissan be valued at similarly crazy valuations? Or they won't be part of this new brave world and don't get to eat from the "new slice of pie"?
Tesla has just changed the world, whether you realize it or not, and tables have turned against the petrol industry. The other brands have long bet the electric cars were impossible, they belong in history books together with our other guilty actions like inquisition, native americans and slavery.
Anyway, there's the obvious notion that capturing pollution from one central energy source (a coal or gas plant) is far more likely to reduce pollution than trying to reduce pollution from every car.
But you -did- say that Tesla is working this "completely new slice of the pie". Which they're not. Unless you artificially constrain it to a segment where only Tesla exists. Whilst the current Tesla models might well be "luxury electric", the upcoming stuff is entirely in the same segment as Nissan, hence the reply to you.
Tesla is not just a car company. They are going to be the largest li-ion battery manufacturer, distributed energy provider(with the solarcity acquisition), energy storage provider, supply grid stabilization services(important when more of the generation is not base-load), and compete in the autonomous car sector.
Its fine with me if people don't think those other areas are going to be profitable for Tesla, but thinking of them as just a car manufacturer is kind of missing the point. And those other areas I mentioned do make up a largely untapped pie that Tesla is poised to tap into.
Energy storage provider is "battery at a bigger scale", similar with supply grid stabilization. And as far as I am aware the PowerWall has been a commercial failure, even among Tesla owners. I'm not sure how that will magically do a 180 now that Musk is going from "influential adviser" to "owner".
There is the other side of Tesla Energy, which is the Powerpack. The Powerpack is the commercial/utility-scale product, available in quantities suitable for grid-level storage. They had over $1b worth of orders[1] for the Powerpack as of late last year, far more than they are capable of manufacturing currently. The Gigafactory opened slightly early to start producing those packs using Samsung cells, but eventually those will move to Panasonic cells as well. There is huge untapped demand just in batteries here that is only starting to surface and be fulfilled.
Grid supply stabilization has more to do with smart grids/smart inverters applied to solar panel + battery installs. SolarCity has detailed it in some of their more recent town halls[2].
1. http://fortune.com/2015/08/10/tesla-grid-battery/ 2. http://www.ustream.tv/recorded/87401050
Over a billion monthly users... Not exactly small potatoes.
Wierd. Someone should do a study...
I guess a more accurate thing to say would be that the group you are talking about is obsessed with scheduled reports.
In Tesla's case, so much of their value is discounted into the future, and if the company was purely valued on quarterly results, would not be worth very much at all. Obviously a lot of the investing world disagrees with that and chooses to value Tesla a bit more highly based on the investment they are undertaking and demand they have demonstrated. Their stock is modestly up today after these results and news of the solarcity merger(also reported as disastrous in the media). Their quarterly results would generally be accepted by most methods of valuing companies as disastrous, and is being reported like so by most of the financial media. Maybe the shorts will win out eventually, but lots of people seem to be willing to finance Tesla despite their constant fundraising, unprofitably, and missed expectations. I wonder if the reasons might not be reflected in their 10-qs?
They had about 2,500 more cars in transit at the end of Q2 than at the end of Q1. They were producing about 1,000 more cars per week at the end of Q2 than at the end of Q1. If it takes their cars an average of 2.5 weeks to be delivered from the factory (which is a reasonable number) then everything lines up. I don't see any need for a grain of salt or thinking it's mysterious.
Source: http://ir.tesla.com/common/download/download.cfm?companyid=A...
Edit: fixed link to correct source, as pointed out below. In this pdf, it's on bottom of page 3, under "Outlook".
Edit: I guess you mean this one: http://files.shareholder.com/downloads/ABEA-4CW8X0/200707627...
That does indeed say 20,000. They actually produced 18,345, for a miss of about 8%. They ramped up production from about 1,000 cars/week to 2,000 cars/week, so being short 1,655 indicates that their production ramp-up was delayed by about 10 days. Doesn't seem like a very big deal to me, and a slight miss of estimated production increases is way different from the "sales are down, Tesla is doomed" that got reported.
[1] http://insideevs.com/teslas-2nd-production-line-capable-pump...
Here's a long video of the assembly process in 2015.[1] This is useful, rather than the usual quick montage of cool robot scenes. There was a surprising amount of manual assembly in areas where other manufacturers are automated.
Edit: see below for slightly more accurate numbers, 4,000 in transit is not entirely correct.
https://en.wikipedia.org/wiki/Tesla_Motors#Production_and_sa...
The delta was about 2,500 cars. Adding cars in transit from Q1 to the Q2 production numbers, then subtracting sales and cars in transit, there are about 1,400 missing cars. I'm not sure exactly what those would be, perhaps filling out their Model X loaner and showroom fleet or something.
Tesla can do no wrong with the SV crowd, as evidenced by your statement of fact being down-voted.
If you step away from the hype for a second, Tesla are building some great products, but they play a little fast and loose with their numbers. That's why the Street is skeptical. First it's all about deliveries. Then deliveries falter a bit, so the focus moves to production. Then those numbers are low, so the focus moves to the fact that cars are in transit.
If there was some consistency with how Tesla represented their financials maybe there would be less scrutiny and skepticism. We hear about things (battery swamp, PowerWall), then they are hardly mentioned. But I think the Tesla fans consider this "sticking it to the man" (Wall Street), even though Tesla and some major banks are tight.
Up to this point their emphasis has always been on deliveries. But, since that missed, the focus turns to production numbers, which they just happened to outperform on (after a big miss in Q1 on the same metric).
What numbers matter, then? They promote whatever "looks best". It's not unusual, but it induces skepticism.
They roughly doubled their production rate near the end of the quarter. They have a product that takes weeks or months to ship to the customer. What happened is exactly what you'd expect.
Historically, Tesla has been constrained by production, not demand. The numbers show that production has substantially improved, and demand has not weakened, so it's good news all around. Why should that induce skepticism? Just because of what they "promote"? If you're skeptical just based on what they emphasize, are you not allowing your thinking to be controlled by them just as much as the mindless fanboy who parrots their lines without thinking?
What metric are you basing this off of? Did they not miss sales expectations?
Tesla doesn't build many cars without a buyer already lined up. They build a few for showrooms and service center loaners, but it's not a big number.
You might say that demand is falling off and Tesla is just producing a bunch of cars without corresponding orders to try to hide that fact, or whatever. But that's a rather conspiratorial interpretation, and would directly contradict Tesla's statement that the delivery miss was due to the sudden increase in production rates near the end of the quarter and resulting large number of cars still in transit.
As a tesla shareholder (forget upside and commercial value), that's a small price to pay for funding a sci-fi future.
Not everything needs to be about ROI.
The stock price would probably drop a bit after that, but it may be for the company's best interest in the long term. Tesla needs visionary investors, too.
https://www.theguardian.com/environment/2014/mar/03/tim-cook...
Sounds like he is quite pleased with the progress of their autonomous driving algorithms.
That's the money quote.
I still think the Model 3 will be fully autonomous without a traditional steering wheel. It will probably have some ability to take over very rarely.
That's a really silly idea, starting with how self-driving systems that can even theoretically handle the worst of New England winters don't actually exist yet.
If you can get your car to self drive here, I assure you, your car will run anywhere on earth.
Laying down some RF reflective paint/markers on the road wouldn't be nearly as expensive as other proposals (like embedding electronics or special wire underneath the road surface), it would be similar in expense to pavement markers[0] that are applied to some roads today, plus with a HUD it could even help human drivers in snow environments. Lots of places make special modifications to the road specifically for snow, and especially for snowplows.
[0]: http://www.highway-markers.com/pavement-reflectors/PM290.htm...
Let alone the seemingly indefinite construction zones that have become commonplace across America - often with the lane markers missing or going off in directions that do not exist anymore (old lanes now blocked, etc...).
I had not heard about that but that sounds interesting and I would love to learn more. Any sources you can point me at?
What sort of "source" do you expect would exist for this? It's just the day-to-day job of DOT.
That seems highly unlikely; most regulators thus far have been (unsurprisingly) unwilling to let autonomous cars on the road without some form of manual control. Given how early we are in the technological development cycle for autonomous cars, this seems prudent and logical.
Tesla is pushing hard to get the Model 3 out the door on time. They may not succeed, but they're going to do everything they can to try. Requiring the Model 3 to incorporate full autonomy from day one would be an enormous and unnecessary risk to their ship date.
They're pushing reservation conversions because the more cashflow they can have now the better terms they'll be able to get financing as they move down their roadmap.
A bug was just discovered (a glaring blindspot, literally) in existing Model S. The workaround was to disable that feature until a solution is found. That workaround involves a steering wheel. If another bug is found that is similar to this one than those cars without a wheel will sit in driveways until the both the NTSB and NHTSA are satisfied. These investigations can take years and Tesla owners will not be happy about it.
There was a period for a few months where part of that algorithm seemed to include a timer, such that the car would always lose confidence after 3-5 minutes hands-free. But that was long before the current media fluff, and they changed it back to be more dynamic.
I think the Model 3 will not be fully autonomous, and it will have a traditional steering wheel.
In the same conference call[1] Musk mentions that the Model 3 factory, aka Alien Dreadnought v1.0 (their internal name for "the machine that builds the machine") will be fully automated, running more like a high speed bottling plant or an automated pick-and-place machine than a traditional car factory.
Their stated rationale is that as soon as humans are involved with the actual assembly, it has to slow down to human speeds. There will still be plenty of people working in the factory, they'll just be maintaining on the machines, doing continuous improvement, dealing with anomalies, etc.
then comes the next phase, the car knows the speed limit, so who is liable for the speeding ticket? After all we are here for safety so why would we accept "self driving" cars breaking driving laws? Also, motortrend demonstrated that all such current implementations tail gate, some with barely more than a second of difference.
I would be happy if the 3 comes in quantity before 2020 but I doubt even that. I would never bet on it not having a steering wheel or more advanced driving capabilities than the S
What's the motivation here? Are people talking their book, or is it idolatry of Musk?