Tesla Burns Through Record Cash to Bring the Model 3 to Market | Hacker News Reader

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

bloomberg.com

179 pointsbipr0208 comments

> The company burned through $1.16 billion in cash in the second quarter by spending on capacity for its cheapest model yet and boosting battery output.

This makes me very happy. It's very rare for a large company to literally risk their existence to bring a new product to market. Most prefer to just sit in the pile of cash and profit from margins...

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 taught us is that car buyers in huge percentages have fierce brand-loyalty and that anytime a new model is brought to market there's a huge uphill battle to create demand.

That's not to say that lots of people won't want a Tesla, clearly there's evidence that there's a market. But it remains to be seen whether that's a niche market or the better part of the auto market. To justify the current valuation, you'd have to believe its the latter.

Comparisons to the iPhone seem oversimplified. The iPhone on pretty much every metric was demonstrably better than every other phone on the market, and by a huge margin.

Tesla is better on some metrics- doesn't rely on fossil fuels, has some cool technology, and is a novelty because there aren't that many of them on the road.

But on most other metrics, there are lots and lots of better options. Some have more power, some are much cheaper, some have more storage space, and some simply have better brand awareness and loyalty.

Again, not suggesting that they aren't developing a great product. But there are huge risks to the survival of this company beyond cash burn that I don't think people are taking into account.

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.

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.

This seems like an availability bias. Are you saying that consumers don't regard Porsche, Audi, BMW, Lexus, Mercedes and Infiniti as innovative and high quality?

"What a century of observing the auto industry has taught us is that car buyers in huge percentages have fierce brand-loyalty and that anytime a new model is brought to market there's a huge uphill battle to create demand."

I think we could be at a point similar to laptop buyers in 2002/2003/2004.

Remember when there were multiple companies making laptops and you would comparison shop and read reviews and look ahead to some new line of Fujitsu vs. Sony vs. Panasonic laptops and maybe visit dynamism.com and see what was being sold in Japan and so on and so forth ?

And then 2-3 years later there was one laptop manufacturer: Apple. Everything else was irrelevant in the face of a solid block of metal with a glass screen that lasts 5-7 years and "just works". When was the last time you spec'd out different laptops - other than perhaps to read with mild interest about some Dell model built for Ubuntu that might possibly be an option but probably isn't.

I have mixed feelings about this ...

On the one hand, Apple laptops really are the best that has ever been and have largely "solved" the category.

On the other hand, without any competition we get strong-armed into certain design decisions that might not work for us ... glossy screens, no more full sized USB ports, maybe headphone jack goes away ...

Electric only drive, skateboard style battery platform (with dramatically lowered center of gravity) and AWD with multiple motors ... I want these innovations. But I would also like some choices in styling and design - especially since I dislike the Tesla interior design so much ...

> And then 2-3 years later there was one laptop manufacturer: Apple

Your view of Apple laptops seems to represent only a small segment of the market. While Apple was on the rise, they were still only 3rd behind Dell and HP in market share by 2007 [0] and are roughly 5th over the last few years [1]. They presumably look better on a revenue rather than units basis, but they were never the sort of singular force you described them as. They might have held that position among a certain segment of laptop buyers, but not the general market.

[0] http://www.macworld.com/article/1059616/appleshare.html

[1] https://www.digitaltrends.com/computing/apple-2015-notebook-...

"Your view of Apple laptops seems to represent only a small segment of the market. While Apple was on the rise, they were still only 3rd behind Dell and HP in market share by 2007 [0] and are roughly 5th over the last few years [1]. They presumably look better on a revenue rather than units basis, but they were never the sort of singular force you described them as."

Yes, that's correct - which is exactly how we are looking at Tesla.

I have no idea what laptops low end, price constrained buyers bought (and continue to buy).

This is a good analogy to Tesla cars which are also priced out of that category.

I am in the market for a very high end, full sized luxury car and I am troubled that by some measures there is only one supplier of those, currently. This is coming from someone who owned two successive A8s over an 8 year period and has lost all interest in that, and any other market entrant, based on an ICE. My current interest level in new press releases for A8/7/S feels exactly like how I suddenly felt in 2004 or so when news of new laptop models suddenly failed to register even a blip.

> My current interest level in new press releases for A8/7/S feels exactly like how I suddenly felt in 2004 or so when news of new laptop models suddenly failed to register even a blip.

If you think a Model S is way better overall than the high-end German fullsize cars, you were never actually in the target population for those cars in the first place. The things e.g. an S-class is renowned for - the attention to detail and quality of the interior, the ride quality, the ridiculous level of soundproofing, the rear legroom, the discrete rumble of the V8 - are on a level far beyond what Tesla delivers. Model S interior quality is on par with a VW Golf. And yes, I've ridden in both.

But of course the Model S has features that appeal very much to the tech crowd, like a big touchscreen and OTA updates and a CEO that can be worshipped.

It sounds a bit like someone who really enjoys off-roading complaining about how crappy the Model X SUV is because of the poor ground clearance and shitty tires.

They have half a million reservations for the Model 3, despite putting essentially no effort into signing people up, and spending the last year or so actively anti-selling it. They're currently adding 1,800 reservations a day, despite the fact that someone reserving today probably won't receive their car for 18 months or more.

I agree with your point as applied to a hypothetical generic car company launching an unknown model, but in this particular instance there's good reason to believe that Tesla will be able to sell every car they're capable of building.

You compare it to the iPhone saying that the iPhone was better on pretty much every metric. That wasn't the case at all. The original iPhone lacked 3G connectivity, support for more than one wireless carrier, support for CDMA networks, GPS, third-party apps, hardware keyboard, user-swappable battery, decent camera, FM radio tuner, multitasking, and removable storage.

The iPhone eventually gained many of these features, and most of the others turned out to be less important than people thought they were. But that was very much not obvious at the time.

one wireless carrier, support for CDMA networks, GPS, third-party apps, hardware keyboard, user-swappable battery, decent camera, FM radio tuner, multitasking, and removable storage

I don't know about you, but my clamshell Samsung flip phone didn't support any of that except a user-swappable batter and removable storage, both of which I would argue are not net positives, but negatives as they increase the form factor of the phone.

Also, what of the 65k or so of cancelled reservations for the Model 3?

Why are you comparing to your clamshell Samsung flip phone specifically? You said "The iPhone on pretty much every metric was demonstrably better than every other phone on the market" so I'm comparing to every other phone on the market, not one specific low-end model.

Every feature I mentioned there existed in contemporary smartphones. I even looked them up! The iPhone got a ton of criticism at the time for missing things like this.

65k cancelled reservations out of over half a million total, with net reservations increasing rapidly... what of them?

Right, on pretty much every metric. So do you think that the Motorola Razr was a better product than the iPhone because you could buy an extra battery and swap it out? I remember well when the first iPhone came out and people waited in line for hours to be able to buy one. It was just so different than any other phone available at the time. I don't really feel that applies to Tesla, and I think most consumers (not people who read and report for Bloomberg News, but the silent majority of people who are actually buying cars and keeping these companies in business) would agree. Yeah, it's cool and it's battery-powered. I get it. But pretty much every new car now is loaded with technology and can reliably get you from point A to point B. So the main differentiator is that it runs on a battery. Is that enough to get people to move en masse to Tesla?

65k cancelled reservations out of over half a million total, with net reservations increasing rapidly... what of them?

I think that's the question I posed to you. Doesn't seem like there's a good answer for it.

Why do you keep comparing to middling dumbphones? Compare the iPhone to contemporary high-end smartphones and you'll see that the iPhone was behind on pretty much every metric. The big exceptions were:

1. UI.

2. Web browser.

3. AT&T unlimited data plan.

It turned out that those three metrics were really important, and that being ahead on a few really important metrics is better than being ahead on a bunch of less important ones, but it's just not the case that the iPhone was ahead "on pretty much every metric."

> I think that's the question I posed to you.

Can you be more specific? I don't know what you're actually asking. Are you asking why anyone would cancel? That's because sometimes people change their minds, especially when it involves giving a $1,000 interest-free loan. Are you asking if the cancellations are a counterpoint to the idea that the Model 3 will sell well? The fact that the cancellations are a small proportion of the overall reservations, and net reservations are still rapidly increasing, suggests the answer is "no." Or something else?

Because the middling dumbphones are what comprised the majority of the market, the market that Apple completely took over. How many people were using smart phones as a % of overall market in 2007? The only real players that I can remember were Palm and Blackberry, and both those were terribly executed in comparison to the iPhone.

And yeah, more than 10% of reservations were cancelled but that couldn't possibly be because people don't actually want the car at a large scale, could it? I tend to pay attention to what people do and not what they say, and the fact is that consumers purchase ICB autos at orders of magnitude higher numbers than EV. When push came to shove, 65k people who actually made the conscious decision to spend $1k to reserve a car suddenly decided they no longer wanted it. But your only reason is that "sometimes people change their minds." To me that's a nice way of saying a lot of people don't want to spend $35k on this car.

If you intended to say that the iPhone was far superior to the typical dumbphone of the day, then I can accept that. I was responding to what you wrote, though.

If 65,000 cancelled reservations translates to "a lot of people don't want to spend $35k on this car," then the nearly half a million remaining reservations must translate to "a shitload of people want to spend $35k on this car." No?

Not really. First of all, they are reservations, not purchases. And the outstanding orders represent everyone who follows this company the most closely and who are the most enthusiastic about these cars. Once that demand is exhausted, can we be certain that the demand will continue?

I'm not saying that it's certain that it won't, but it does remain to be seen. In the automotive industry, a half a million cars just isn't a lot. Certainly not enough to proclaim that "a shitload of people" will want one for many years to come. Ford sells 750k F150s each year. That's just one model. And those aren't reservations, they're sales.

I think you need to make up your mind here. If 65k cancelled reservations is a lot, then so is nearly half a million remaining reservations. If half a million remaining reservations aren't a lot, then 65k cancelled ones aren't relevant.

> 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.

This is a legit worry, but well-designed electric cars are better than gas cars by a large margin, without question. Ultimately this is the only requirement, and it's one of the reasons Tesla is so extreme in its design aspirations.

So this risk is not a risk at all in the case of Tesla. It is certainly a risk for other companies (see Chevy Bolt).

Why is it not a risk for Tesla but a risk for Chevrolet?

Because Tesla is good at design, and Chevrolet is not.

> it's very possible that most car buyers simply don't want [a Tesla/electric car].

Many surveys have shown that people want electric cars [1, 2]. While the car industry overall has declined [3], the EV segment has continued to grow [4]. While it's possible that people don't want to own an EV, the available evidence hints at future growth in the EV segment [5].

[1] https://www.fool.com/investing/2016/09/20/consumers-are-more...

[2] https://arstechnica.com/cars/2017/02/30-of-us-buyers-conside...

[3] http://money.cnn.com/2017/08/01/news/july-car-sales/index.ht...

[4] http://blog.ucsusa.org/peter-oconnor/electric-car-rolling-sa...

[5] https://www.bloomberg.com/news/articles/2017-04-25/electric-...

>They created a product that is way differentiated from every other car out there and people want to buy it.

What? The Bolt has slightly better range, and probably much better build quality. The difference in price is $2k on a base price of $30k.

And if Chevy could do it, I'm positive most others can too.

And Renault Zoe, and BYD ev300. There are electric cars available all round the world, but somehow Tesla got the hype up that they are the only one.

I'm a huge Elon Musk/Tesla/SpaceX fanboy, but I make it a point to reinforce this.

Especially with Tesla, the hype is way, way overboard. It's not connected to reality.

I say that as someone who reserved a Model 3 on the first day, and will be buying one hopefully in a few months. And I also believe the Tesla Motors will very likely become a global, major auto-maker, not based on stock price, but based on how many cars they make.

I do think Teslas are either the best cars in their class or close to it. But the alternatives aren't that far behind, and there's no reason to believe they won't catch up or even surpass the Teslas.

I will end by noting that I believe Elon Musk when he states his goal for Tesla: to 'push the ball forward' regarding the production and use of sustainable energy. He fully expected Tesla Motors to fail, and it nearly did.

So Musk's primary goal isn't to become the largest auto maker in the world. His goal is see the vast majority of new cars being electric, whoever sells them.

I think that kind of straightforward, honest and pragmatic perspective is a big piece of what drives the often rabid fanboyism, and the irrational stock price.

I really like the Bolt and agree as an electric vehicle it is super competitive.

But can I buy a Bolt today and get self driving capabilities on the same car in a few years? That's a pretty massive pull towards the Tesla even if you consider everything else equal.

You don't even have to pay for it now, you can wait it out and pay for the self driving to be activated later once you are sold, but not having to buy an entirely new car to do so is crazy.

I'm hugely bullish on Tesla because they just have so many different angles to win. They have the most experience with electric, they have a massive (and fast) charging network that continues to grow, their electric cars are the priority not a hedge and as mentioned above, they are moving fast into self driving.

I'm not sure if I'd buy a vehicle with promised "self-driving capabilities" (especially if we are talking about full replace-human-pilot watch-movies-instead-of-driving capabilities) in mind until the manufacturer has positively demonstrated that yes, they are able to create that kind of capability with the sensors and hardware vehicles are equipped with.

For example, turning on a self-driving feature that still requires constant vigilance and treating it like it does not ... sounds accident-prone.

You get a lot more car with the Model 3 than with the Bolt. Not only do you save $2,000, but you get somewhat better performance, better looks[1], access to Tesla's excellent fast-charging network[2], and excellent active safety systems. If you're willing to pay the extra $5,000 to activate it, you can get Autopilot, which is a game-changer for long highway drives.

Chevy seems to agree with this assessment, planning for an annual production of around 50,000 units.

[1] Subjective, I know, but I think I've yet to see anyone say the Bolt looks better.

[2] You have to pay an extra $750 just to get fast charging enabled in a Bolt, and it only gives you access to CCS chargers, which suck pretty hard as a network currently and are significantly slower.

There is a long list of companies that are planning to go all electric or to significantly electrify their offerings in the next few years [1, 2, 3]. Chevy/GM is an early entrant into the market because they -- much like Nissan -- need to gain a competitive advantage over VW and Toyota [4].

[1] https://www.theatlantic.com/news/archive/2017/07/volvos-elec...

[2] https://www.usatoday.com/story/money/cars/2017/07/29/italian...

[3] https://www.ft.com/content/a43ac2ce-3198-11e7-9555-23ef563ec...

[4] https://www.forbes.com/sites/bertelschmitt/2017/01/30/its-of...

I think a slower roll out would be prudent. If you burn all your cash and you are forced to raise cash it puts you in a bad situation. This is brand new car. Companies like Toyota have issues with their cars and they generally only make incremental changes to each model, and Toyota Production System is probably one of most taught and studied system for production.

If you haven't seen a review on the model 3 I highly suggest MKBHD's review. He goes over how a lot of pieces of a standard car are stripped out (I.e. No physical buttons) this was to reduce manufacturing complexity and increase production speed. Toyota does not build cars like the way Tesla has engineered this end to end.

Speed is different than labor time per vehicle.

Complex manufacturing is typically a highly parallel process.

For instance, as Tesla ramps up to 5,000 vehicles a week sometime this year, Toyota will sell 30 to 40 thousand vehicles a week just in the US. One of them is obviously producing vehicles faster.

Toyota has 6 factories in the US while Tesla has one. 30,000 Toyota vehicles divided by 6 factories gives you 5,000 a week. Which is what Tesla is doing.

Tesla is planning to produce 5000 vehicles a week.

But my point was that removing buttons isn't the only way to quickly produce cars and it is awkward to praise them for their relatively slow production rate. Praise them for reducing the time devoted to assembling each vehicle.

The only you can make statement like this is based on data. We will see how the quality of the car once they have a few thousand on the road. Model S has had a bunch of quality issues.

An electric car is theoretically simpler than a gas powered car. It has a battery and a motor. Electric cars were popular before gas cars in early part of the 20th century.

I watched that video as well and some of the stuff just doesn't make sense.

It is "cheaper and simpler" to have a software button actuate a relay to open my glovebox than having a simple latch? It is going to be easier to have electric actuators for redirecting air than having plastic blades I move myself?

It doesn't hold water. These are crazy Musk fantasies being realized like the gull wing doors, not because they are cheaper, easier or more reliable.

Don't get me wrong, I love Tesla, Musk and really love the model 3, but the reasoning just doesn't make sense.

the federal tax credits are structured to expire x months after shipping y units, tesla is working to those constraints.

https://cleantechnica.com/2017/01/20/predicting-us-federal-e...

To sit in your pile of cash and profit from margins, you need to make money and have positive margins. You make it sound as if they could have chosen that path...

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

Gross margin doesn't give you the full picture. SG&A (20% of sales) eats most of that margin and R&D is 12% of sales. I'm not sure how profitable Tesla could be cutting this additional costs without going too far (to avoid compromising the viability of the company).

If they were just going to churn out Model S and X, they wouldn't need to do much R&D. They could have a handful of people sit around and draw new headlight designs like the other car companies.

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%

Gross margins are significantly higher than that (maybe below Tesla's 25%, but they sell many cars cheaper than the model S).

So a company that has widening losses claims a 25% margin on its cars. Sounds like some interesting accounting is at work.

Ask Bob Lutz whether margins are greater on a Chevy Camaro or a Cadillac ATS (exact same platform, one sells for about $10k more than the other).

Its rare for big companies, but not rare for still-unprofitable companies.

> “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 want to do, you get the money and spend it.[1]

This seems to be constantly framed as negative ("they aren't making any money!"), but that's the correct growth strategy for what Musk wants to do. Nobody adds tons of debt just to not use it. Cribbing from my comment yesterday:

I've owned TSLA a long time and I hope they don't start making money, and continue the Amazon model and actually build something with years of minimal or no profits, re-investing vigorously. Amazon had almost 20 years in business without "making any money" except a few quarters where they accidentally eked out some non-trivial profit.

But without their spending, they wouldn't have become Amazon. Without Tesla's spending, they won't be a future company, they'll just be a tiny car company.

For some historical comparison: Amazon added $6bn in debt as recently as 2014. Even very large and very successful companies take on debt to fuel growth far beyond "bootstrap" numbers. Both companies leverage as much investment money as they can to build and expand as fast as they can. If you look at Amazon's raises in the late 1990's you'll find something more comparable to Tesla today relative to revenue. In 1999 Amazon raised $1.25 billion, and their revenue for the year was $1.64 billion. So they raised proportionally way more money than Tesla has so far this year. And spent it all!

full comment here: https://news.ycombinator.com/item?id=14915317

[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.

Musk and Bezos, on the other hand, have clear ideas of what to spend money on to build something.

Yes, I learned this fact painfully. I bailed on my IPO AMZN shares because they kept taking on massive debt. Just didn't have the stomach for it.

Of course, that was 2004, about 1/20 of today's price. <sigh>

I wouldn't take it too badly,* its not as if there's no risk to taking on billions of debt, so if you feel something is too risky for your investing dollars, maybe you did the right thing for you at the time. If you don't think they (Musk, Bezos, I wish I could think of a failed example![1]) can spend it wisely.

The interesting thing to me is that we know that Tim Cook (and other cash rich companies sorry to pick on Apple) cannot spend the money wisely. And they know it too. That's why it's sitting there, where "sitting there" is the best ROI they can think of so far. I think the existence of such large cash piles should worry us all more than it does.

* just kidding if I bought AMZN at IPO and sold it I'd take it pretty badly.

[1] thought of one. If you don't remember pets.com, you owe yourself a treat: https://en.wikipedia.org/wiki/Pets.com

I guess today's theme is "how to flagellate oneself with memories of painful investing lessons". Not only remembering Pets.com, which I avoided, how about TGLO or CMTN, which I did not... I had to sell CMTN at a 101% loss. Figure that one out. TheGlobe.com was as much a laughing stock as Pets. The best thing to come out of The Bubble was this eTrade commercial:

https://www.youtube.com/watch?v=E0_tfoTTGOQ

At least the absolute $s weren't that big for me at the time. And the lessons formed a base of experience that served me well as I had more to invest. It's been much better since.

For a few select few companies, I see the constant investment (and increasing debt) as an opportunity. The general market will undervalue the performance of the company. AMZN was undervalued for years, and potentially still is, for this reason.

I passed up a job there when they were opening up for the first time. That's life.

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.

Fair enough, but Bosch only trades at a 44 PE, which is about double the market's PE, but not crazy high.

the reference is to Germany's privately held Robert Bosch GmbH: https://en.wikipedia.org/wiki/Robert_Bosch_GmbH

Robert Bosch GmbH, the - amongst other things - automotive supplier is not a publicly traded company, but the German equivalent of a LLC. (Some subsidiaries are traded on the stockmarket, though)

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!

Gas prices and EV sales are, perhaps counter-intuitively, unrelated [1]. It has been widely reported that low gas prices do not affect EV sales [2].

[1] https://www.cnbc.com/2017/04/17/demand-for-electric-vehicles...

[2] https://www.scientificamerican.com/article/electric-car-sale...

More like how IBM held off Sun Microsystems.

> The automotive industry isn't going to let a company like Tesla bully them around.

They already have. Its too late. Who else is going to be producing 500k EVs a year in the next 3-5 years? No one.

To be honest, I'll be surprised if Tesla is producing EVs at that rate too... They have 3 models of cars. I'm not even sure there is a market for 500k/year of those three models. Even expanding that to 4 models (Y) would still leave those numbers hard to hit.

17 million new cars are sold each year in the US alone. The market is there and proven.

And how many of those new cars sold for > $35-40k?

Tesla certainly has a market, but it isn't competing for the same consumers that Honda is. The market Tesla is competing for is significantly smaller than 17M.

The amount of people who can afford any new car is not the same as the number of people who can afford a new Tesla.

Have you driven a Tesla? If not, then you should. Might change your view.

I've had my Model 3 reservation since the day they opened... but it's highly unlikely to assume that Tesla can hit those production marks with the (admittedly) limited line up it has.

Across their entire lineup BMW sold 2.4M cars in 2016 (including MINI) [1]. I just don't see them selling 500k/year in the immediate future. Once they add models (the Y, a replacement for the Roadster, and a Truck), then they very easily could blow through that rate. But baby steps... I'd rather see Tesla exceed modest expectations than fail to meet unrealistic ones.

[1] https://www.press.bmwgroup.com/global/article/detail/T026708...

Elon rarely makes categorical statements about future goals, usually throwing in a few weasel words, or "we project" or "we plan", but during Tesla's last earnings call he said:

“What people should absolutely have zero concern about, and I mean 0, is that Tesla will achieve a 10,000 unit production week by the end of next year. […] I think people should really not have any concerns that we won’t reach that outcome from a production rate.”

And I have no doubt that they will reach a 10000 unit week. And they will probably have that production capacity. But once their backlog of orders has been filled, how many orders will they realistically have per week? I think that is the outstanding question.

Eh... assuming demand is there. I guess it could be, but price of the car matters, prices of oil matter, politics and lobbyists matter, success of this rollout matter. There's some risks here before you call it "too late".

Also... nissan has an interesting play here. Waiting to see what they do.

Who else is going to be producing 500k EVs a year in the next 3-5 years? No one.

Renault-Nissan already produce around 100k EVs per year. Is it that hard to imagine them doing 500k in 5 years?

What about China? They're certainly making plans for these kinds of volumes.

Audi already had to scrap one of their EV models, because its technology was so far behind Tesla's by the time it was ready to hit the market.

Traditional car makers are just extremely slow to adjust, because they have never faced any real disruption. They've effectively been selling the same product for decades with only some marginal and incremental improvements. Tesla, on the other hand, is using the SV model of doing business: First create an MVP, then iterate rapidly until you have something that is so good, it can steamroll the market. When Tesla was founded, traditional car makers laughed at them, claiming they would never be able to even build a proper car. These comments are eerily similar to what the Palm CEO had to say about Apple and the IPhone ten years ago: That a couple of computer people from SV would never be able to build a proper phone.

Traditional car companies are entirely unprepared to deal with the kind disruption that is coming to their market. And that does not only concern EVs but also self-driving cars and the sharing economy. I don't think they can stop Tesla. The real question is how much of their business they will be able to save.

> Traditional car makers are just extremely slow to adjust, because they have never faced any real disruption

Is there a term for the dismissive attitude tech people have for any older company?

I think the term you're looking for is "history" [1] as in, "tech people tend to adopt a historical view of older companies." With extremely few exceptions, the older a company gets the more obsolete it becomes [2].

[1] https://www.forbes.com/sites/adamhartung/2017/03/22/sears-to...

[2] http://io9.gizmodo.com/25-obsolete-technologies-that-future-...

Motors aren't a secret technology. And Panasonic makes the batteries and sells to Tesla. The only thing Tesla can sell as technology is Autopilot, which is just hyped up driver assistance.

Have you even heard of electric cars like Renault Zoe, Chevy Bolt, BYD ev300? All with range from 180-230 miles, selling since 2016.

Er... you cannot use future tense to claim that.

It can be your fantasy, your dream, your oprinion, that's all very fine. But you cannot say that is what is going to happen, that's just one bet, one possibility (and not the most likely IMO) amongst several possibilities.

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.

This is exactly the kind of junk that makes HN the cesspool that it has become. Do you really think that only Tesla can make electric motors, despite it being a mature, 150-year-old industry in which Tesla ships only about 15% of the electric cars? Where Nissan ships product at a dramatically lower price? Did you know that trains and elevators and blenders are also electric, and companies like Alstom and Kawasaki and Bosch make them?

By the way Tesla hasn't made a battery, ever. They are made by Panasonic. Tesla packs them into little metal boxes.

Musk already stated Tesla will be a battery company. If he's telling his investors that, what do you think he's going to do?

Make same batteries but cheaper than Chinese?

Most people will be driving either a Tesla or a Chinese-made electric car in a couple of years, and like with the iPhone vs. cheap Androids there is a good chance that people will prefer Teslas for their familiar UI, American design, or some other reason we currently don't even have on our radar.

Why are people so sure of this, especially given the recent plummet in oil prices? Car sales are at all time highs. Why do people assume that there's going to be a mass exodus to Tesla and EV's in the next few years?

Because many think they will be more comfortable to use, have better entertainment systems and everyone can experience sportscar-like acceleration for spending less money than a gas-powered car.

What about environmental factors? Or is new-shiny-fast the only way to coerce people to be more eco-friendly?

The plummet in oil prices might be anticipating that future?

Electricity will be cheaper than oil in 5-10 years. For many applications, it already is now actually.

The lost gas-tax revenue streams will be replaced. It’s highly likely the TCO will reach parity with gas in short order - same happened with diesel.

Oil companies recently raised their projections on EV adoption by 40% [1]. Many countries are setting aggressive EV quotas, targeting 100% EV adoption in the near future [2, 3]. Perhaps counter-intuitively, oil prices have not historically affected EV purchases [4]. Detailed sales trackers have shown consistent year-over-year growth in the EV segment for the past 22 consecutive months [5], a time when oil prices have been relatively low [6]. Even with low gasoline prices, driving an EV is reported to be less expensive per mile [7].

[1] https://www.bloomberg.com/news/articles/2017-07-14/big-oil-j...

[2] https://www.forbes.com/sites/timworstall/2017/04/30/indias-a...

[3] https://thinkprogress.org/norway-aims-to-end-sales-of-fuel-b...

[4] http://www.fleetcarma.com/buying-ev-low-oil-prices/

[5] http://insideevs.com/monthly-plug-in-sales-scorecard/

[6] http://www.infomine.com/investment/metal-prices/crude-oil/5-...

[7] https://www.pluglesspower.com/learn/driving-electricity-chea...

Why do you say that? When's the last big American antitrust action you can remember?

The zeitgeist has shifted? The zeitgeist hasn't changed since 1847, when Marx wrote about the character of monopoly in The Poverty of Philosophy. It hasn't changed since President Harrison signed the Sherman Antitrust Act in 1890. It hasn't changed since Standard Oil was broken up in 1911, over a century ago (with Standard Oil of New Jersey and Standard Oil of New York recombining in 1999, the broken up monopoly come back to life).

It hasn't changed since the breakup of Ma Bell in 1982, the Baby Bells having re-formed into two companies: Verizon and AT&T, who control the last mile of wire and wireless, the network neutrality of which they have been fighting against. It hasn't changed since the big eight accounting firms became the big four accounting firms. It hasn't changed as Google and Facebook swallowed up all online advertising, search, social networks etc.

The idea that the zeitgeist has shifted from monopoly is absurd. Billionaires from Warren Buffett to Peter Thiel seem to think otherwise. In every industry, mergers and acquisitions leave an increasingly fewer companies with control of more and more of their markets. The data is out there and quite obvious, you really have to put on some kind of ideological fantasy land kool-aid trip to see otherwise.

Tesla is raising money and is valued like it's a growth stock and it should. Amazon has been and arguably still is valued as a growth stock but has been internally financed to a much larger degree.

There's a massive difference in Amazon raising cash vs Tesla and the form of capital raise is also huge. Amazon has only had one secondary offering (2003) while Tesla has had an offering every year except 2014. The Amazon "big capital" raise you point out was in the form of vanilla corporate bonds while Tesla has only issued convertible bonds. Had Tesla wanted to issue regular corporates (more than likely junk rated if their convert ratings are any indication), I'd imagine they would struggle to meet the interest payments. Additionally, any large corporate issuer with good cash flow has been taking advantage of low interest rates and Amazon is among them.

Tesla is raising money and is valued like it's a growth stock and it should. Amazon has been and arguably still is valued as a growth stock but has been internally financed to a much larger degree.

This is not to say that Tesla is doomed blah blah blah. It's to illustrate that Amazon has cash flow while Tesla doesn't and is much more susceptible to the whims of capital markets. I'd also like to point out that Amazon is probably more able to weather economic cycles than Tesla is and that's primarily when cash flow poor companies either aren't able to raise or raise at ridiculous terms.

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 they wanted to. Think about that for a second...

> 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 changes everything" was their tagline for a phone. Why stop at the phone? Why not redesign everything?

Why stop at a nice looking HQ, why not create Castalia? Why not create a house of study and give one hundred architects and designers a rest-of-their-life pension and see what they come up with? Because it might cost too much?

Why not pick a hard problem of any kind and actually tackle it? Because Q3 might look bad? Is that why?

Why don't they do anything ambitious with that hoard? Really ambitious. Not hire more CS students for machine learning and deciding which iPad to kill next to make Q3 look the best.

If you ponder the existence of money-to-imagination ratio, Apple is dead last. They are guilty of all the interesting things they do not do. Just an astonishing lack of real vision.

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 internally must be able to be turned into a service. Almost every analyst in 2006 was against the idea, it was not at all a business focus at the time and Bezos himself admitted it would not be a forseeable revenue stream:

> Stifel Nicolaus & Co. (SF ) analyst Scott W. Devitt notes: "There's not going to be any economic return from any of these projects for the foreseeable future." Bezos himself admits as much. ... "We think it's going to be a very meaningful business for us one day," he says. "What we've historically seen is that the seeds we plant can take anywhere from three, five, seven years."

From this 2006 story: https://www.bloomberg.com/news/articles/2006-11-12/jeff-bezo...

Plenty of people call AWS obvious now, and it's easy to fall into that mindset. It's worth remembering that almost everyone back then thought it was a big folly. Why burn the cash making AWS? What's the business focus?

In 2011(or 2010?) AWS revenue was still listed in the "Other" column on their 10K, even though it was by then their #1 area of growth. Now? It's a sea of pure profit.

The scale of the success surprised even Bezos, but he had enough imagination to take real risks anyway.

What's the difference between a hobby, a folly, and the future?

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.

> What good does it do for AAPL's business focus to sit on cash for years?

To be able to vertically integrate at a moment's notice.

Apple has run itself as a functional org as opposed to a divisional org and regards that as a key differentiating factor that provides it sustainable competitive advantage.

But one of the key constraints of functional orgs is that they require incredible focus and discipline or the entire structure breaks down. Apple doesn't have iPhone marketing and iPad marketing that report to the boss of iPhone and iPad respectively, they just have Apple marketing that is in charge of making Apple better and reports to the boss of Apple.

That's a huge reason why they were able to self-cannibalize their most successful product so ruthlessly. Because there was no iPod boss who's bonus depended on iPod sales and would throw grit in the wheels of any rival projects. But you can only do this when every single employee is able to hold the entire corporate business model in their head.

You think Apple would do better under a more divisional structure. That's fine, the pros and cons of functional vs divisional have been debated for ages. But it's also a moot point because Apple is never going to switch to a divisional structure and without switching to one, they can't do all the things you want them to do.

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.

"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?"

I think it's worth considering that prices for assets just might be a little high right now.

I have no idea what Apple is doing and don't have any specific insights but I have, in the past few years, found myself passing on certain growth and investment opportunities because I felt the prices were quite high relative to what I think the prices could be in the next 3-5 years.

Why buy Disney now when you can buy two of them a few years from now ?

On the flip side, I think there is some political risk for Apple here in sitting on too large of a cash horde ... there is a point when the amount of money becomes too big to ignore, politically. Consider that a 1% taking of some form amounts to almost $3B. At some point someone will figure out how to structure such a taking ...

> I think it's worth considering that prices for assets just might be a little high right now.

Have you seen what Apple charges for their products?

> Why stop at a nice looking HQ, why not create Castalia?

Castalia was an isolationist academy where young men spent all their time studying glass toys they falsely believed modeled all art and history, while the rest of the world slowly collapsed around it.

Apple's already built that.

People use cash as a shorthand but it's not literally dead cash sitting in a bank account. That $250B is sitting in index funds and T bills where it's indirectly funding all of those businesses that are investing in sustainable housing and improved appliances and a billion other things.

Apple just believes those companies have a better shot at accomplishing those goals than Apple does and it's fine letting them continue.

>>Apple just believes those companies

You want us to believe Apple is a charity now?

Pretty sure it's more about paying repatriation taxes.

I wonder how much (if any) of their cash is invested in Tesla convertible debt? Apple has been bumping up their R&D spend (not even including their acquisitions) by 20% or more annually for quite a few years: it's now up to around 5% of revenue (hard to calculate exactly, given the seasonality of their revenue). So far they've created at least 4 absolute breakthrough products, 4 more than most Fortune 500 companies ever achieve, including the most successful product ever (1.2 billion sold).

The right thing for a company like Apple to do with extra cash (other than dividends and buybacks) is to invest it. There's only so much innovation it can do as a single entity… but as a VC firm (à-la Google Ventures) or as an LP (into Sequoia, KPCB, etc.) or as diversified fund (à-la Berkshire Hathaway) it can drive more value for its shareholder and more innovation through investing capital. Note, this is pretty much what Apple is doing.

> [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.

" That amount of money is now big enough to count as a constant threat to market stability, currency stability, etc."

I'm not sure what do you mean by market stability but I doubt very much about the currency stability thing.

The USA government (Fed included there) can issue or tax money whenever they want and have total control over the monetary economy.

For comparison's sake, the FED quantitative easing program was about $4.5 trillion

How would Apple threaten the markets/government with that cash? Suddenly bringing it all back to the US, giving the treasury a windfall year that Congress will squander foolishly?

Whether Tesla survives or not, these billions are some of the best spent money on the planet in the last 50 years.

What are the accumulated losses so far? $5-10B? Even if Tesla were to spend another $50B and go bankrupt, I would still maintain it's great.

What Tesla has achieved is so important in the long run for the environment, for ending the strategic dependence on oil dictatorships, and for renewing the belief in technology. And the cars are really nice too.

Speculating, as some do, that the EV revolution would end with a Tesla bankruptcy is silly, not just because Google and Apple (and probably other companies) would be more than happy to take over before or after a bankruptcy, but also because consumers and the the auto industry have now been shown where to go. None of us can unlearn what Tesla has taught us. There is no way back now. Tesla has already won.

I agree with my whole heart. I think we have a moral imperative to develop electronic transportation, sooner rather than later. We think about the future much too little.

Ever since we decide to concentrate farming and transport most food to mouths, we've relied on oil as a life-support system for 7.5+ billion people. There is no going back to pre-oil without a lot of those people dying, and oil will eventually be too pricey to extract. We should think harder about post-oil.

I've written about this before if you're interested: https://medium.com/@simon.sarris/the-moral-technology-6413ca...

> "It’s as if there’s a worldwide commitment to helping this company succeed"

This statement makes me so happy, (a) because I feel I've noticed the same thing, (b) because it gives me faith that people actually care about putting money in good/important places, and (c) it implies that the economy understands that sustainable transport is actually an important cause, to the tune of $50B. This is what investment should be about: People cooperating to improve the way things are.

The Wait Buy Why blog did an article on Neuralink and went into Elon's motivation and strategy for making a business that makes the world a better place. It's a really great model.

Model --> https://28oa9i1t08037ue3m1l0i861-wpengine.netdna-ssl.com/wp-...

Full Article --> https://waitbutwhy.com/2017/04/neuralink.html

Isn’t the mining of materials and making of electric cars more carbon producing than the ICE vehicles they replace?

No. Batteries can be recycled, as can the aluminium that makes up Tesla car bodies. You don't get anything back from 30 years of ICE emissions.

So what has been the net reduction of CO2 usage because of tesla to date?

A tiny reduction in the rate of increase of CO2 emissions. Every bit helps, but it's not saving the planet.

I'm going to venture that it's not even a rounding error.

In fact, in places it will likely have increased the CO2 emissions, again rounding error figures, due to the electricity generation mix and associated losses with generating that electricity (30-60% efficiency), plus transport losses (0.5 - 10%), plus charging loses, plus the efficiency of the motor itself.

The internal combustion engine in a car is around 20% efficiency while a coal power plant is around 55%. Gasoline powered drivetrains are also fairly inefficient leading to around 16% "tank to wheel" efficiency. Electric motors are about 90% efficient. An electric car is making more efficient use of the energy. It's also centralizing the source of the pollution rather than having to try to deal with it in every car on the road.

A coal power plant can reach up to ~60% if coupled with steam turbines, otherwise it's ~30%.

Petrol cars can do a lot better than 20%

There is a study, link below, showing what the subsidy should be for electric cars and in a lot of places in the US the subsidy should be negative.

Granted things might've changed since then, but probably not to overturn the gist of it, which is the point I'm making. In places, EV cars are not the solution.

Quite happy to be proven wrong, at the of the day I've only got a passing interest on the topic so I'm not exactly 100% up to speed with any new studies, etc ...

https://www.citylab.com/environment/2015/06/where-electric-v...

City Lab has debunked that notion twice [1, 2].

"[I]t’s important to realize that the situation reflected in this data represents the past, not the present. States across the country are rapidly cleaning up their grids, thanks to cap-and-trade programs, investments in renewable energy, tightened air quality standards, and more coal plants put to sleep." [2]

"Here’s the cool thing about electric vehicles in the U.S. right now: In many areas, the longer you own one, the cleaner it gets." [1]

[1] https://www.citylab.com/life/2017/06/electric-vehicles-are-c...

[2] https://www.citylab.com/transportation/2016/12/the-surprisin...

The idea that electric vehicles are "dirty" because of electricity produced from coal is now widely viewed as a myth [1]. The electric grid in the US (and worldwide [3]) is consistently and rapidly moving away from coal, which increases the "clean" factor of EVs over time [2].

[1] https://greentransportation.info/energy-transportation/evs-n...

[2] https://electrek.co/2017/06/05/electric-cars-cleaner-than-ga...

[3] https://cleantechnica.com/2017/05/16/coal-use-china-india-li...

If Tesla was actively working to prop up our fossil fuel based electricity grid, than I think this would be a fair argument. But they are not. Instead they are actively engaged in the solar+storage market, and they have stated multiple times that they believe the grid can be 100% renewable.

In the short term, yes, folks will need to rely on existing fossil fuel technologies to build factories, transport materials, and power the grid. That is because there is no other economically viable option. To expect the entire clean energy industry to bootstrap itself only using clean energy is a fallacy. In 20-30 years when the grid is more green and clean transportation is widely available, then arguments like these would be valid.

I'm just pointing out that both effects are, at this point in time, just rounding errors

That is a poorly phrased question to consider the value of the investment. Specifically, 'to date' is not appropriate for an investment. It is like looking at a half built widget factory and asking what is the net reduction in human labour for all widgets because of the factory, to date?

What is the net change in CO2 usage that results from the investments Tesla has made?

Tesla has made fewer than 190000 cars total, to date. Over 77 million cars were sold worldwide last year. And that's just cars.

Not eating meat is much more efective to saving the planet than buying a Tesla.

http://www.businessinsider.com/is-eating-meat-bad-environmen...

Well of course, doing almost anything is much more effective than buying a Tesla. More cars are not planet saving at all, and it is delusional to think so.

With more EVs, we won't breathe so much car exhaust in cities. This is important.

> what has been the net reduction of CO2 usage

I think it is too late and too optimistic to hope for CO2 reduction.

The world only aims for a moderate decrease in CO2 rate of increase.

This is literally the point of the Model 3. They need 500,000+ cars on the road in order to move the dial on petroleum dependence. Other car makers need to copy Tesla because electric cars are better and cheaper to own, etc. We're not at that tipping point yet. A lot hinges on the Model 3 being a success.

With some products it takes a while for the penny to drop, you mention Google, think of Street View and how there was that moment when this nice idea led to something bigger - Google owning maps with all their own cartography not copied from any other agencies. They got copyright on maps by doing them better. The task they undertook was something that most companies would petition their government to do, not do it themselves. There was a cash burn on driving those cars around too, plus privacy battles.

I know that 'anyone can make an electric car' (they did on Top Gear), however Tesla have worked with the toolmakers and component suppliers to build a factory to make cars, this is the main creation, the factory not the car.

Whilst older petrol hears have been sneering about range anxiety, something wonderful has happened to what is going to happen with the energy market and these electric cars. Soon you will be able to get a plug in the lamppost by your door fitted by your electricity company, this will be a bit like getting a satellite dish installed, except the lamppost will work for three cars. Then you get the option to buy cheap electricity from the windfarms when it is windy and sell it back to the grid at peak demand time, earning someone a profit. You won't need to go to garages and those extra long journeys would work out fine too - superchargers are there for that.

This fit - domestic energy demand, variable supply renewables and cars that have large batteries for range reasons - is all coming together nicely.

Tesla could make a 2CV grade electric car if they get the manufacturing sussed. In this situation the ICE dinosaurs just can't change quick enough and it becomes Nokia/iPhone again. This probably summarises it for me, what Tesla are doing is that revolutionary a change, much like what Apple did.

> Soon you will be able to get a plug in the lamppost by your door fitted by your electricity company, this will be a bit like getting a satellite dish installed, except the lamppost will work for three cars.

... and except that you need to have a bunch of guys with heavy machinery come dig up and re-lay the road, so that the electricians can come and lay the new 60 A cables for the lamppost, while another bunch of guys is upgrading the neighborhood distribution transformer which has reached max capacity, apart from those minor details, it's exactly like one guy screwing a parabolic piece of aluminium to your house wall.

> There is no way back now. Tesla has already won.

Elon has already won. His goal was to get the whole EV thing really going. Looks like the snowball is already rolling downhill now.

> What Tesla has achieved is so important in the long run for the environment

Yeah, one thing the environment definitely needs is our continued reliance on personal transport vehicles, more roads, and more mining.

How anyone can frame this as being good for the environment is a joke. Yes, it is better than a gas car. That is a long way for actually being green.

Don't just kill an idea because it only helps x% and wait for something that helps 100%. You'll be waiting a long time.

Anyone buying a new Tesla to replace their current car is bad for the environment.

Lets just not lie about what it is. Time to start having a real conversation about what we need, rather than slightly diverting course by a few degrees, hoping the iceberg is really thin.

Oil dictatorship will just move to renewables dictatorship. I was listening to the Bloomberg radio and some oil guy all on hype explaining how they are moving into the market and that 20% of their biz is now renewables and how they are the biggest solar electricity plant operator, etc. So, no, dictatorship as you say is kind of here to stay.

Also Tesla. BMW announced usable fully electric Mini and other manufactureres such as MB and Volvo are full on. I am sorry to say but Tesla will go down very soon....it's cool and everything but 'normal' businesses would already be down in similar position. You can't also really compare it to Amazon who actually formed the market. Tesla is competing with 100 years old manufacturers who nailed production down to the millionth of a cent.

Renewables can be used in almost any location over the entire world. It is incredibly hard to monopolise renewables in the same way you can monopolise oil.

Same could be said about feudalism and agriculture. And they did exist.

There will always be these monopolistic business practices and there is nothing much we could do about it.

BMW already have a fully electric car out, the i3. It costs ~$50k and has a range of, what, 120mi?

We'll have to wait and see if the fully electric Mini is going to be any better.

But we can look at the hybrid Mini Countryman S E, cleverly getting AWD from putting the electric motor on one set of wheels and ICE on the other set. Great idea. Except... it gets 27mpg. Terrible. The only excuse I can see is that it's a "performance hybrid", i.e. they weren't trying to be particularly fuel efficient.

Volvo currently sells only big cars that get bad gas mileage even in the hybrid versions.

I'm not holding my breath for any of these companies to save the planet.

putting 250mi range on a european car just feels like premature optimization.

my thinking is that bmw is going to sell electric cars with a diff spec in the US, same way bmw doesn't sell 1.5L 3 series there.

that said, given China's penchant for American sized cars, I feel like they're missing out on the two biggest economies in the world focusing on europe/asia exC.

People misunderstand corporate debt because they analogize it to household debt but the analogy doesn't work because most household spending is consumption whereas most business spending is investment.

When a business makes $1 of profit, it's that business saying "we couldn't find a single project across our entire organization that we believe would have given us a higher expected return than that dollar sitting in a bank account."

That's oversimplified. Expected return is not the only factor to consider when deciding whether to invest or not. There is also risk to consider. A 51% chance to to either double up or lose your investment has a positive expected return, but if losing could mean catastrophe, it would be foolish to make that investment.

Tesla is (was) a tiny company with a huge amount of room to grow. I would argue that Amazon already owns a LOT of its market.

In fact, I'm pretty sure it's now many times larger on its own than the entire online shopping industry was when it started.

I am skeptical, though, that it should continue on this trend. Maybe find new markets (like AWS), but they need to watch out for the tendency of organizations to attempt to grow themselves far beyond what makes sense.

Similarly, GM or Toyota do not need to take on huge investments to grow big. They are already very big.

There is a lot of question about whether Amazon's astronomical PE is warranted as well.

>>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.

Wasn't this expected after Steve Jobs passed away?

The real troubles for Apple will start when they will end up exhausted milking iPhone and its ecosystem of products.

The same will happen with Amazon if Bezos goes away and with Tesla if Musk goes away. These are largely companies driven by individual visions, take them away and they are no better than any other company.

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.

> Pensions are underfunded

That contrast issue is very weak. GM's pension was underfunded by $7.2 billion at the end of 2016. They had $24.7 billion in cash at that point. It's around 7% underfunded. It's a non-issue, particularly since GM has continued to successfully work at reducing it and has been solidly profitable since the great recession.

You may be right, and GM's revenue remains massive so it's a fraction of revenue.

The only area of concern is the growth presumptions in the pension fund. They are often around 7.5%, whereas real growth was 0.5%, putting a potential damper on the profit line (but I do not know that relative magnitude of that).

BREAKING: Building a car factory and battery supply chain requires a lot of up front capital.

“You’re holding it wrong”

Wonder if Tesla will have that moment. Recalling the Model 3 is probably their greatest fear. No product is perfect and they’re about to ship tens of thousands a month within a very short period of time

Which is one of the reasons why I agree with their strategy to sell to its own employees and investors first. Their feedback loop is so quick and they have a financial and personal interest in the product being perfect.

If they see any issue they will already have a lot of knowledge to debug it/know immediately who to contact to get it debug and have a financial and personal interest for it to be done quickly and correctly.

Which is also part of the reason why the ramp up is really slow at the beginning.

Cash flow is not a big problem as long as the product is selling well at a profit. The question with the Model 3 was whether Tesla could make money at $35K per unit. In practice, the cars are going out the door above $50K with options, and it's much easier to be profitable at that price. (This is an old Detroit strategy, called "more car per car". Profit comes from the add-ons.)

Fast Good Cheap. Choose two.

Jesus. Look at the top comment and the replies in this thread. I find it hard to believe it is real HN commenters and not a TSLA PR campaign here.

"What are the accumulated losses so far? $5-10B? Even if Tesla were to spend another $50B and go bankrupt, I would still maintain it's great."

Seriously? This is being voted up?

Also, the top commenter here "simonsarris" is a top commenter in the other TSLA thread.

https://news.ycombinator.com/item?id=14914310

It's like a TSLA/Elon cult meeting in this thread.

I don't see the jump from noting that the same enthusiastic fanboy is in the HN thread and the TSLA thread to "It's like a TSLA/Elon cult meeting in this thread." If you just note the connection without the inflammatory language, it's much more productive.

> I don't see the jump from noting that the same enthusiastic fanboy is in the HN thread and the TSLA thread to "It's like a TSLA/Elon cult meeting in this thread."

Have you read the comments and the replies?

Yes. The fact that HN is sympathetic to Tesla is not more surprising than it's unusual interest in bicycle lanes and life extension. But name calling doesn't help at all. Better would be to link to high-quality criticism, write it yourself, or minimally just point out imbalance without inflammatory language.

The comment you are quoting is a snippet out of context. I'm not sure why you're so upset.

'Whether Tesla survives or not, these billions are some of the best spent money on the planet in the last 50 years. What are the accumulated losses so far? $5-10B? Even if Tesla were to spend another $50B and go bankrupt, I would still maintain it's great. What Tesla has achieved is so important in the long run for the environment, for ending the strategic dependence on oil dictatorships, and for renewing the belief in technology. And the cars are really nice too. Speculating, as some do, that the EV revolution would end with a Tesla bankruptcy is silly, not just because Google and Apple (and probably other companies) would be more than happy to take over before or after a bankruptcy, but also because consumers and the the auto industry have now been shown where to go. None of us can unlearn what Tesla has taught us. There is no way back now. Tesla has already won.'

> I'm not sure why you're so upset.

I'm not. But it's interesting how I just got swarmed by 3 commenters.

> The comment you are quoting is a snippet out of context.

The context makes it even worse.

"None of us can unlearn what Tesla has taught us. There is no way back now. Tesla has already won.'"

I can't believe you think that the "context" makes it any less cultish. The comment is almost messianic.

Is he wrong? Did Tesla not prove to the rest of the auto industry that electric cars are not only viable but also profitable and inevitable? Would we have the Bolt, Spark, Fiat e500, eGolf without Tesla?

> Is he wrong? Did Tesla not prove to the rest of the auto industry that electric cars are not only viable but also profitable and inevitable?

From your "context": "What are the accumulated losses so far? $5-10B?"

$5-10B Losses doesn't translate into "profitable".

> Would we have the Bolt, Spark, Fiat e500, eGolf without Tesla?

Maybe? Electric cars existed before TSLA and electric cars will exist after TSLA.

What is with you? I'm a fan of TSLA. I like electric vehicles. I just don't believe in the cult of it.

Honestly, I don't expect crazy comments like "What are the accumulated losses so far? $5-10B? Even if Tesla were to spend another $50B and go bankrupt, I would still maintain it's great. "

to be upvoted on HN.

Maybe on reddit or some other social media, but I feel there is a higher quality of people here. And when I see something odd, I'll point it out.

So? Why does this bother you? Why can't people be fans of a person, company or product?

The grandparent's argument wasn't against fans, it was against cults.

Ya well calling it a cult is a pretty extreme exaggeration.

> Maybe? Electric cars existed before TSLA and electric cars will exist after TSLA.

Go watch "Who killed the electric car", then you'll understand what a travesty the EV1 was. Electric cars have always been compliance cars before Tesla. Heck, Bob Lutz credits Elon Musk with why they build the Volt.

Tesla is polarizing and, as always, both camps are making equally absurd statements:

> $5-10B Losses

$5-10B expenditure.

Which has not yet been shown to be a profitable decision, but unless the product flops it's not a loss either. $5-10B is merely a number that we're uncomfortable with - it is likely a necessary number because Tesla is now racing to grow in the EV market before bigger players (BMW, Toyota, etc.) enter it.

Isn't the parent's point that they are not profitable?

Sure, maybe for Tesla, (and other similar growth at all cost technology companies) it it's not immediately profitable. Let's check back in 10 years and see if this makes Tesla and their investors any money.

By that logic, any company not yet bankrupt could be called profitable.

Profit is a reflection of past performance, not future potential.

By this metric just about every single new business is a failure, including 100% of YC startups. At that point is it a useful distinction to draw?

Your conclusion is wrong.

A profit is a realized financial gain. In a given period, income surpassed expenses.

A business failure is a business that has failed, it has ended.

A lack of profit can lead to failure, but in no way implies it.

That doesn't jive with your original argument. So GM made the Bolt because Tesla proved (??) that they "would be profitable in 10 years"? That is what your argument amounts to.

"Is he wrong? Did Tesla not prove to the rest of the auto industry that electric cars are not only viable but also profitable and inevitable?" No, they didn't.

Nobody doubted they were viable or profitable, only desired. If TSLA accomplished anything, it was convincing people they are desired. That demand definitely did not exist before TSLA.

Your comment implies all these things were already the case. That electric was "always inveitable", and tesla just proved it. That's, IMHO, quite wrong.

as is this: "Would we have the Bolt, Spark, Fiat e500, eGolf without Tesla?"

You understand, for example, the bolt started design in 2012, right?

IE At the same time the model S did.

Others in your list are similar.

It's like saying success of the iPhone caused Google to release Android.

I'm with the OP, every single one of these threads seems some combination of cultish love for tesla and messianic adoration of elon.

As a complete outside observer, the distinct impression i get is of people who always loved electric cars, etc, who felt like the rest of the world was "wrong" about something, thinking they have now been proved "right" about something.

The only practical difference between TSLA and the other auto makers I see is that the others by and large followed demand (IE they wait for people to want a thing, then build that), and TSLA was able to create some demand.

That's awesome and a testament to great PR/etc. But it's pretty also pretty normal successful startup behavior,and may or may not be related to any of the "moral goodness" people see in electric vehicles.

You already got downvoted, but your info is pretty wrong. Let me clarify one thing. Tesla delivered the model s in 2012. I know because I got one in December then. I don't know when the bolt was designed, but starting in 2012 sounds about right. The Tesla was available for getting in line in 2011 and a little before (cause I put my money down to get in line in early 2011), but delivered in 2012. Other manuf. were not taking it as seriously as Tesla way back then. They already had experience with the roadster being on the road before then.

Toyota may have had a part in that... The stage was set before TSLA was a household stock symbol.

If any, I think it was baby steps made by Toyota Prius. Original poster specifically pointed that profitable part of your answer isn't there for Tesla, in reality.

The Bolt, etc. exist because of federal subsidies mostly, not because of some billion-dollar-losing company showing that the idea is viable.

>But it's interesting how I just got swarmed by 3 commenters.

Losing an argument? Better accuse the other side of being paid shills.

Putting Tesla anywhere near a list of factors for "ending strategic dependence on oil dictatorships" is pure hyperbole at best.

Maybe, but what about what Musk has done as a whole? If he can drive home-battery adoption, solar, and electric vehicles, and create markets where companies like GM, Ford, and the Euro manufacturers have to chase the new market, that has to make a huge impact. Obviously it's not going to completely remove our dependence (mainly plastics and shipping) but it will absolutely hit the bottom line of the most oppressive regimes funded by oil (Saudi Arabia). Also this will help us you know stop destroying entire mountain ranges and the largest CO2 sinks in North America for tar sands mining (Boreal Forest).

On the plastics front, just look at the news from earlier this week of Lego working to replace all of the plastics used in their toys with bio-plastics (or other non-oil based polymers). A few more efforts like that and plastics won't be anywhere near the driver of oil consumption they are now. That doesn't address shipping (which is horrendously polluting), but if that's the last one standing that's still a massive improvement.

Commercial aviation as well will never be electric. It would require two orders of magnitude energy to weight density, and quadruple flight times.

People also thought we would never get man into space :)

There is a big difference between simply thinking that something is too hard and having numbers to back it up.

Tesla has been proceeding according to his plan for a bit over a decade. He foresaw the value of it in 2006. At the very least, his insight accelerated the development and adoption of electric cars and solar power.

they have what appears to be a great product -- I am a lowly network security engineer and think I would enjoy working for them and interacting with their teams.

the reality is the tesla team has continually delivered (often later than expected) in spite of incredible odds including significant short interest in the company and the probably increase in short interest after articles like this.

I am rooting for them, despite the fact I probably will not buy one for a few years I like what they are doing and believe they are a net positive.

People can be very devoted to their brand. It doesn't mean they're automatically shills.

"OMG THIS GUY COMMENTED ON TWO TESLA THREADS, GET HIM!"

well seriously tesla is way way better than any german car company (and I'm from germany). Tesla burns trough cash (yes that's bad) and the germans "burn" (pollute) the cities. not that much better.

just looking at the diesel summit, what a big kind of joke.

Even accounting for recent VW emissions scandal, have you looked at their engines fuel consumption? Like a 170 hp diesel engine burning about 6 liters/100 km (47mpg? This is much better than any hybrid and much better than all EVs regarding CO2 emissions.. Just let this continue and we can forget about electric for a long time

Without resorting to hyperbole a reasonable case can be made that Tesla losing $5B is more utilitarian than SNAP,GRPN,ZNGA losing $5B.

It is all about how society allocates its capital/claim checks(to use Buffett's term).

Case is simple: we need to move away from fossil fuel economy at some point before it is too late.

We can argue whether TSLA approach is wrong and whether we have plenty of time to adapt.

And yet those comments are making more substantive points than yours. You are just expressing disbelief.

Accusations of astroturfing and shillage are not allowed on HN unless you have evidence. (Plenty of explanations of this in the comments via https://hn.algolia.com/?sort=byDate&prefix=true&page=0&dateR....) Not only do you have no evidence, you're seriously misassessing HN if you think it isn't replete with sincere Tesla fanatics.

Worse, you broke the HN guidelines badly by smearing a particular user. We ban accounts that do that, so please don't do it again.

Moreover, you've been engaging in the kind of tedious flamewar that I pray every day, in vain, will not appear today on Hacker News.

So: lots of reasons not to comment like this.

Edit: actually, this account has been using HN primarily for political and ideological battle and flamewar in general, so I've banned it. This isn't what HN is for. (No, this is not because of TSLA shillage or whatever immigration policy you disapprove of.)

Elon Musk's empire is a house of cards built on self promotion and empty promises. It's only a matter of time before the whole thing comes crashing down.

Really? Empty promises? Here you go:

https://en.wikipedia.org/wiki/History_of_SpaceX

And he's about to pull it off again with Tesla. I guess we'll have to wait and see.

I'll take the house of cards jab, but the "empty promises" thing means I'll have to see a shrink about all the imaginary Teslas I see every day, and the SpaceX landings that are obviously a hoax.

Those CG and Kerbel rocket launches they broadcast were incredibly realistic, I'm amazed that NASA, independent photographers and even competitors like ULA went along with such a complex charade.

I'm not sure what empty promises you are talking about. Tesla cars are pretty good and run great. Of course you cannot go country-wide trip with them but IMO that's not what they are made for in the first place.

The harder they will hit the wall

Would much prefer to run into a wall driving a Model 3 than a Prius

Is Prius a bad car safety-wise? I thought Toyota cars are very reliable and well-engineered.

I think it's less that the Prius is bad but that the parent is assuming that the Model 3 will be great.

Which is a good assumption based on Elon's statements and the track record of the S, but the Model 3 is an amazingly light car for something with more steel, a glass roof and so many pounds in batteries, so it may not be the class leader that the S is.

Not relevant, but model 3 cockpit looks like golf cart

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