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Comment by chollida1 | Hacker News Reader

Since this came out as part of the Tesla earnings, here's my recap from their earnings release and call....

- Tesla will be late getting up to 5,000 units a week of Model 3. It will happen at the end of Q1 instead of the end of this year. The bottleneck is batteries.

- Some lines are at only 500 cars a week. Namely the battery pack assembly, body shop welding and final vehicle assembly.

- The $2.92 a share loss was much bigger than the $2.27 analysts expected.

- The company burned $1.4 billion and has $3.5 billion in cash. Raising money shouldn't be necessary.

- Automotive gross margins fell from 28% to about 18% and will slip to 15% next quarter.

- Auto revenue grew 10% to $2.4 billion as sales of Model S and X grew. Revenue is at risk, though. Tesla will divert resources from Model S and X to the Model 3.

- Tesla didn't say much about China. The company added a supercharger station with 50 chargers in Shanghai, but no word on a new plant.

- Musk expects to spend $1 billion on capital expenditures next quarter. That's consistent with expectations for ramp up for Model 3.

- Tesla installed 109 megawatts of ``energy generation systems'' in the third quarter. It acknowledges this is an underwhelming figure: ``the lower deployments are in large part a result of deliberately de-emphasizing commercial and industrial solar energy projects with low profit and limited cash generation.''

As to the battery delay.... Tesla says it's the suppliers fault. "key elements" of the battery module assembly had to be taken over and redesigned, Musk says.

EDIT

- most importantly, Elon has moved his desk to the giga factory as that is where the largest bottleneck is.

View on HN

”Some lines are at only 500 cars a week.”

That sounds better than what Tesla claims. http://files.shareholder.com/downloads/ABEA-4CW8X0/549293785... (emphasis added):

”Other lines, such as battery pack assembly, body shop welding and final vehicle assembly, have demonstrated burst builds of about 500 units per week and are ramping up quickly.”

If you can do burst runs of 15 km/hour, that doesn’t mean you can run a three hour marathon.

”The company burned $1.4 billion and has $3.5 billion in cash. Raising money shouldn't be necessary.”

To get that $1.4 billion in revenue, they will need to sell 40k Tesla 3s at $35k each, or 3,000 a week. To get it in margin, even assuming the average model 3 will sell for $50k, they will have to sell 12,000 a week or so (at 20% margin)

=> If things go as planned, I guess they will need about half their money in half a year or so before turning a profit. That doesn’t leave very much in case things go worse than planned (for example, they plan for 25% margin on model 3, but currently don’t have that on their more expensive models, and they plan to sell more of their expensive models, but can decrease production, so, presumably, they have quite a few of them in inventory)

Tesla may have a fantastic future ahead of it, but it also may fail spectacularly fairly soon, or just have a decent future ahead of it that doesn’t warrant its current share price.

"Tesla may have a fantastic future ahead of it, but it also may fail spectacularly fairly soon, or just have a decent future ahead of it that doesn’t warrant its current share price."

lol. "it might go up, might go down, or might stay the same!"

Hey at least you know it's not certain to be only one or two of those options.

"To get that $1.4 billion in revenue, they will need to sell 40k Tesla 3s at $35k each, or 3,000 a week. To get it in margin, even assuming the average model 3 will sell for $50k, they will have to sell 12,000 a week or so (at 20% margin)"

It seems like you're assuming that the cash burn will stay at 1.4billion. Expenditure should go down once the production line tooling is complete.

I don't think any of the upfront investment or capital expenditure is included in the 1.4 billion calculation. Thats purely operating loss.

The $1.4bn is $300mn cash flows used in operating activities + $1.1bn capex.

So, can we assume that if the production has to be multiplied by 10, the cash flow used for operating activities should also be multiplied by almost 10, giving expenses of way more than $1.4bn?

No, because a huge cost for them right now is underutilization of assets (factory, tooling, some workers, etc.). Their utilization rate will improve, and so operating costs should not scale linearly with revenue growth. "Should" being the key word.

much of those expenses are one-time cap ex

Tesla originally planned to run two production lines but had to drop to a single one, and they're doing it in an expensive and unusual manner, and a second won't fit in their fremont plant, and they still plan to build out the second line in the same unusual 'cold' manner.

This leads me to expect it's reasonable their burn will continue at the same rate.

Furthermore, it's estimated they won't reach 3k a week till the end of 2018.

https://dailykanban.com/2017/10/source-tesla-responsible-mod...

"Capital expenditures were $1.1 billion in Q3. The majority of capital expenditures were attributable to Model 3 and Gigafactory 1 production capacity increases. "

During the conference call, Musk himself said that CapEx in Q4 could be as high as in Q3.

"If you can do burst runs of 15 km/hour, that doesn’t mean you can run a three hour marathon."

Once you're in 3 hour marathon territory, what you can do for 1 mile is a lot more relevant to what you can do for 26.2 miles than you might think. One of the tent poles of effective marathon/half marathon training is to make your race pace into a drumbeat. You want to feel your race pace in your bones. Very effective workouts look like: take your marathon race pace, and run 5 minutes easy/5 minutes hard (~race pace) for 60, or 10 easy/10 hard for 80.

Tesla is talking about burst builds that last for a week. That sounds like very effective training that will prepare them for race day.

"Tesla is talking about burst builds that last for a week".

Was that in the call? Their statement says "Several manufacturing lines [...] have demonstrated a manufacturing ability in excess of 1,000 units per week during burst builds of short duration. Other lines, [...] have demonstrated burst builds of about 500 units per week...". AFAIK, "short duration" != "a week".

”In Q3, we delivered […] 222 Model 3 vehicles”

Assuming they didn’t produce a lot more than they delivered, if they had even one week in which they produced 500 Model 3s, they also must have had weeks in which they destroyed them.

Probably has something to do with pair particle production [1]: 500 virtual Model 3 is produced along with 500 anti-Model 3 then they are immediately annihilated.

[1] - https://en.wikipedia.org/wiki/Pair_production

Most auto production lines produce nearly 500 cars per shift. Normal cycle times in an auto plant are about one minute. Here's a Mercedes production line.[1] That's a vehicle on a par with Tesla's products.

Something is terribly wrong in Fremont.

[1] https://www.youtube.com/watch?v=fbfTlwm248k

Most auto production lines don't need EV-size batteries. The post above specifically says batteries are the bottleneck, so it isn't really evidence that something is "terribly wrong"

Since batteries are the whole selling point of a Tesla, I'd say it remains evidence that something is "terribly wrong".

It's almost like Mercedes has been doing this for a long time.

That's a moot point though.

If you want to compete in a market, you got to play at the speed/quality/prices of the market -- there is no slack given for being new.

Tesla's profit margins are fine, this is all a question of ramping up to cover demand. Which tends to be much simpler when you are already a huge company.

Their real risk is if the Model 3's reliability is bad or they need a recall thus reducing their profits significantly.

What they've been ramping up is the Model 3's price point.

"The truth is the Model 3 costs $40,000 if you want a standard version with autopilot (an extra $5,000) in black with no other options. If you want a different color, add $1,000. And if you want a longer range ($9,000) to get over 300 miles per charge instead of 220, well now we’re at $50,000. $50,000 for a midrange car."[1]

[1] https://www.theverge.com/2017/7/31/16069960/tesla-model-3-no...

Autopilot is not a standard mid range car feature.

"Enhanced Autopilot adds these new capabilities to the Tesla Autopilot driving experience. Your Tesla will match speed to traffic conditions, keep within a lane, automatically change lanes without requiring driver input, transition from one freeway to another, exit the freeway when your destination is near, self-park when near a parking spot and be summoned to and from your garage."

You can get adaptive cruse control for more reasonable costs, but lane changing takes a lot more awareness around the car.

Seems like there's a lot of slack given for being new. They have had relative ease raising capital, their market cap is still enormous relative to the number of cars produced, and lots of people are still on the waiting list for a car that they won't get for years.

That's just money burned from people investing -- there's no slack from the market, and none of this does much good if you can't compete on the market.

In the end, unless they get profitable, if they burn their stash, they're toast.

They aren't stopping at 500\week. They are admitting it's broken.

That E-class production line video is interesting, it's basically the same assembly strategy Tesla uses: all bits of the engine, drivetrain, suspension etc. is assembled into a "skateboard" in one line, while the body gets fitted with all the trim, interior, doors etc. on another line and then dropped onto the skateboard (which you see from 6:30 and out in the video).

If Tesla is stuck on a battery bottleneck it's just as silly as if Mercedes were stuck on a sheet metal bottleneck. Yes, you need reliable component suppliers that can scale with you as you grow and provide the quality you need. If you don't have that, you have a big problem that vertical integration isn't going to solve.

Well that's what the redesign is meant to fix, no? Supplier can't keep pace so they're either building it in-house or they've designed something that can be supplied easier/by another vendor.

The Mercedes E-class is monocoque, like almost all cars. They build the body/frame and then add the powertrain and wheels. Here's the body/frame and the powertrain/suspension coming together.[1] The powertrain and suspension aren't self-supporting; they're a collection of parts held in a fixture. That's very clear in the video of the parts coming together.

The Tesla Model S, though, is body on frame. If it can sit on its wheels without a body, as the Tesla Model S can, it's body-on-frame. Here's the Tesla Model S platform sitting on its wheels, with the powertrain installed.[2]

So is the Tesla Model 3.[3]

[1] https://youtu.be/lPKnM9vC6V0?t=395 [2] https://www.youtube.com/watch?v=l8WUIkD7xxI [3] https://jalopnik.com/why-tesla-needs-to-sell-the-model-3-wit...

Relevant Jean-Louis Gassée commentary - https://mondaynote.com/teslas-new-car-smell-315c72c955d3 - referencing BMW Spartanburg's 1500 car per day output, and discussing Tesla's factory.

Based on second hand information from people working with tier-1 Tesla suppliers, it seems that Tesla demanded they set up the Model 3 production in about half the time as other manufacturers. The suppliers knew that the promised dates and production volumes were a total joke but went along anyway just to get the business. The Tesla reality distortion field only goes so far; it doesn't help accelerate the creation of big, complex physical objects like dies and molds.

Apparently the suppliers told Tesla that the dates were impossible, but Tesla management didn't want to hear that and continued to pass on nothing but good news up the chain. It wouldn't surprise me if Elon only recently learned just how bad it is all going.

"key elements" of the battery module assembly had to be taken over and redesigned, Musk says.

Tesla seems to be taking the opposite approach to Apple here. In my observation, Apple drives its suppliers extremely hard to achieve the quality it requires. Tesla, on the other hand, is too eager to bring any sundry part in house (e.g. car seats). Apple's approach appears to work in that it pushes suppliers to do what's necessary. I worry that Tesla, having already bitten off a large bite to chew, is inviting too much distraction that will, in the long run, not put Tesla in a stronger position (there is a reason most automobile manufacturers outsource their seats after all).

Then how do you explain Apple making their own SoC?

Perhaps that is their secret sauce?

Because they bought an entire company to do it with, because the value proposition of doing that was better than continuing to pay the Qualcomm tax, or conversely siding with Samsung to bring Exynos LTE to the US (and they already have too much of a complex relationship with Samsung; to the point that even on the iPhone 8 and X, if you bought an iPhone instead of a Galaxy S, Samsung still makes a profit).

As in: they earn more if an iPhone X is bought than if a S8 is bought? If not, do you know the relative size of the profit?

Not more, afaik, although some headlines seem to have reported it. All I know is Samsung is happy no matter if you buy an S8 or an X.

Well, I guess it's apparent now that it fell outside of my immediate observation. I would be curious what the risk calculus on that decision was. I think it still fits in to the same narrative that I was building though: Tesla seems like they want to bring everything in house while Apple has only brought one piece, the jewel of the system, in house.

It is a part of their core product differentiation. They can get better performance and longer battery life by owning the hardware design and OS design and being good at it.

Apple in particular understood lomg before competitors that battery life is an extremely important real world metric. Doing their own SOC helps them optimise that.

Seems like revisionism to me? Before the iPhone/smartphones in general, battery life on a mobile phone of a week was not uncommon. One of the first criticisms of the iPhone was that you had to charge it every night. I'm not sure I'd say that they had some unique insight into the importance of battery life.

Not revisionism. Prior to the launch of the iPhone, "smartphones weren't very smart" to quote Steve Jobs.

Anyway, you are comparing the battery life of touch-based smartphones with its non-touch predecessor which isn't a fair comparison. Besides, mobile phones that could last for a week from a single charge are definitely not considered smartphones, those are feature phones.

Batteries are part of Tesla's core differentiation as well. Even if one might argue they make too much in house, taking batteries on seems like a reasonable move to me.

I think Blackberry cared a lot more, but it didn't work out well for them.

They don't make their own chips, though, do they? Or screens, or whatnot. Making their own SoC is like Tesla making their own drivetrain, not like making their own seats.

I don't think Apple designing (not making, designing) their own SoC is comparable to Tesla making their own seats.

You could substitute Apple with Wal-Mart in your comment and every bit would be just as true.

Sometimes forcing your supply chain to pinch every penny works out the best for your shareholders.. sometimes focusing on quality products pays off more in the long run.

Time will tell.

Insourcing some things also helps pose a credible threat to suppliers in the future when you tell them to straighten something up or you will insource it.

Hmm, I think I do agree with you that it would be true, but in my estimation it does shift the meaning. I was thinking of how Apple is known to specify extremely rigorous quality standards on cutting edge technology and really push its suppliers to advance their craft. Whereas Walmart I would associate more with outright penny-pinching.

I'm thinking about the different ways to structure a business to achieve a quality product. Is there a good example of a company that produces, in-house, an entire non-trivial (i.e. there are some systems to be integrated) product?

First companies that come to mind as plausibly fulfilling this would be Samsung/LG types. Not sure of an example of a company on a smaller scale.

Intel.

Other comment mentioned Intel. Intel does their own fab.

Other point Boeing had years long delays with the 787 partly due to developing a new technology while also trying to outsource much of their production.

You could substitute Apple with Wal-Mart in your comment and every bit would be just as true.

No, it wouldn't. The OP asserted that Apple holds their supply chain to rigorous quality standards. You're asserting that Walmart holds their supply chain to the lowest possible pricing.

The difference is that Apple has its supply chain and manufacturing processes down to an exact science and has for years. Tesla is clearly still learning how to put everything together in a profitable way.

Apple does have a great deal more leverage over their suppliers though, just by virtue of their size. It may not be the most efficient thing for Tesla to bring so much stuff in house, but it may be their only option if they don't want to left at the whims of their suppliers.

Wendover Productions recently did a Youtube episode on Elon Musk that was citing doing things in-house as a way to keep costs low. Seemed a bit counter-intuitive, but they had some interesting numbers.

If you're not good at it, doing things in-house can be multiples more expensive than buying from the market.

Apple and... every successful mass-market car maker. So it's interesting that Tesla are inhousing like Morgan rather than setting high standards like Toyota.

I'm not sure about the "too" part. This approach has worked quite well for SpaceX - it might not work out for Tesla, but it's too early on this period of massive transition to know for sure.

>Tesla seems to be taking the opposite approach to Apple here. In my observation, Apple drives its suppliers extremely hard to achieve the quality it requires.

Apple earned this right by helping those suppliers get off the ground. With introduction of iMacs/iBooks (~1999) Apple helped build wireless card manufacturing plant in Taiwan from nothing ('few dusty rooms' at their modem supplier manufacturing facility). They did similar thing while shopping for Camera supplier, instead of going with someone established like Sony Apple chose Taiwanese bottom of the barrel volume suppliers (Primax/Micron) and grew their camera module divisions with each iteration of iPhone.

> most importantly, Elon has moved his desk to the giga factory as that is where the largest bottleneck is.

Ah, the Kim Jong Il approach. The presence of Dear Leader will surely inspire the peasants as they work towards the Juche Ideal.

Genchi Genbutsu

The most worrying is the slowing production of models S and X, coupled with what I'd call a collapse in the gross margins of those products. Why is the margin declining so drastically?

The gross margin changing is fine and natural, I think. The Model 3 is a lower-priced good, so by being able to sell more of it, they can deal with somewhat lower margins. By that I mean, 100 cars * $12,000 gross margin each is definitely worse than 5000 cars * $4,000 gross margin (for Tesla at least, I suppose branding could come into play with other brands), even though the gross margins drastically collapse. It's just a different business model, and it's what Tesla wants to happen so they can get into the more regular-consumer market.

But the ratio of Model 3 to S+X units sold in Q3 does not support a 10% drop in Gross Margin for Q3, unless the cost of manufacturing the 3s they did ship was way higher than the associated revenue (significantly negative gross margins on the 3s). Maybe there are costs associated with the gigafactory that are getting assigned as cost of goods for the model 3s and throwing the margins out of kilter until the volume gets up? Or perhaps depreciation on the stamping equipment and fixtures that are largely idle?

I'm fine with the gross margin trending towards, say, 20% over the next few quarters since GM for example is at 12% (I'd expect Tesla's gross margin to be higher than GMs because Tesla keeps the revenue that GM has to give to its dealers).

Man hours aren't free. Nor is a huge amount of your production facility running idle because one of your parts is constrained. The parts that aren't automated are being done by hand for now.

So sure they might well be making a loss at the current rate of sales of the model 3, but will be quite profitable once the production rate increases.

They definitely seem to have hit a plateau in terms of demand which was declining before they started to slash prices in order to move inventory.

The S/X and are old now and the car market requires new models to keep sales going.

That combined with the approaching launches of other high end luxury electric cars does not bode well for future S/X sales.

The negative press on autopilot and failure to deliver on autopilot 2.0 could certainly be a factor as well.

> The negative press on autopilot and failure to deliver on autopilot 2.0

Was there more than that accident with the old version? I havent heard much about this...

HW2 has been out for over a year and has yet to reach feature parity with HW1. I would call that a "failure to deliver". Earlier this year Musk said “November or December of this year, we should be able to go from a parking lot in California to a parking lot in New York, no controls touched at any point during the entire journey.”

It's November and they don't even have automatic windshield wipers working.

See: https://docs.google.com/spreadsheets/d/1FGexNNm8rOXB24qQ1bdI...

The negative press was basically just 15000 different ways of saying "A car once crashed while on Autopilot, and I have a theory about how it means the whole product is a sham." There's really not much more to it besides me-tooing.

But the failure to deliver is real. The entire Autopilot project is way behind schedule. AP2 was supposed to reach feature parity last year, but it didn't until quite recently, and it's still widely considered not to be as good as experience as the original Autopilot yet.

https://www.fastcompany.com/4043602/a-driver-claimed-teslas-... http://www.dailymail.co.uk/news/article-4276810/Dashboard-ca... https://qz.com/783009/the-scary-similarities-between-teslas-... https://jalopnik.com/autopilot-blamed-for-tesla-crashing-and... https://electrek.co/2017/03/27/tesla-model-x-autopilot-crash... http://autoweek.com/article/autonomous-cars/tesla-autopilot-... http://fortune.com/2016/05/26/tesla-autopilot-crash/ https://www.theguardian.com/technology/2017/apr/03/the-custo... https://www.usatoday.com/story/tech/nation-now/2017/03/28/te... https://www.teslarati.com/rare-tesla-model-x-founder-series-... https://www.teslarati.com/lawsuit-alleges-tesla-death-not-ha... http://www.dutchnews.nl/news/archives/2017/04/self-driving-t...

This is a sample of the first 100 articles from Google News on "Tesla Autopilot Crash" - in total you have about 10 unique incidents with 100s of stories in different outlets written about it.

Lots of sensational headlines and a lot of the incidents are pretty dubious about what the actual cause is but to casual readers its adds up to a cloud of doubt about Tesla repeated across many big name media sources.

Most of these same media sources also run plenty of enthusiastic coverage on Tesla so it really depends on your pre-judgements what you take away from it. Tech enthusiasts will tend to minimize the negative stories whereas people not interested in tech who are more safety concerned will give them much more weight.

Thanks, that's why I asked, Googling it led me down a rabbit hole.

Anecdotally the Tesla brand is at an iteresection of wealth and Silicon Valley elitism that is incredibly unappealing to people.

Maybe the market for electric cars is larger than the market for a tesla specifcally.

I think what really damaged the Tesla brand was going with my cousins to pick up his >100k Model X.

1) They had done the paperwork wrong and hadn’t informed his bank about some additional charges so it required an additional hour for them to get that sorted before my cousin basically just paid that additional amount upfront. 2) There were scratches in quite a few places that were noticed by us and cleaned up once we mentioned them. My cousin has purchased a couple of BMWs in the past for a lot less and never seen that before. 3) Some parts were not fitting well and had to be adjusted. 4) The autopilot to remove the car from the garage doesnt work because the garage is at the top of a slight incline. This is pretty common in many US garages. Hopefully this is just a software fix. 5) The overall car quality simply doesn’t match up to what you’d expect from a 100k car.

That being said, it’s still a pleasure to drive and a really nice car. He can’t go back to driving an ICE anymore.

Tesla does seem to have a lot of quality control issues which may have been to,reared by the initial set of buyers that will become more of a problem with a less forgiving next wave of potential customers. And a lot of their solutions currently appear very manual and ad hoc. Hopefully they can improve on them soon.

Found the official answer from the shareholder letter, page 3:

- Non-GAAP automotive gross margin temporarily declined to 18.7%, which was in line with our expectations. The gross margin declined primarily because of a significant increase in Model 3 manufacturing costs to support the limited initial level of production.

- Model S and Model X gross margin declined from Q2 primarily due to one-time price adjustments for discontinued trims and unfavorable trim mix. Numerous actions to improve Model S and Model X gross margin are underway. Consequently, we expect Model S and Model X gross margin to improve in upcoming quarters.

Might have something to do with countries cutting the subsidies for electric cars. I know in Denmark the price of a Tesla is set to more than double in the next years as they normalice registration taxes which were previously omitted on electric cars.

Are you saying that registration taxes in Denmark amount to tens of thousands of dollars?

Yeah, they do. Luxury cars are taxed heavily in Denmark. Import tax on new cars can be up to 180%. After removing the subsidy on EVs, Tesla prices became comparable to other cars and sales dropped sharply.

Yes. A new car is subject to a registration tax of 105%, or 150% over ~$16,000. New cars in Denmark are very, very expensive.

http://www.skm.dk/skattetal/satser/satser-og-beloebsgraenser...

> electric car dealers were for a long time spared the jaw-dropping import tax of 180 percent that Denmark applies on vehicles fueled by a traditional combustion engine

https://www.bloomberg.com/news/articles/2017-06-02/denmark-i...

I don't want to be that guy, but there are specific Unicode characters for opening and closing quotes now, so we don't need to deal with the weird usage imposed by limited typesets anymore.[1] For some reason, the two separate backtick characters are really bugging me visually. That's all I wanted to say. Thanks in advance for bearing gracefully with my nitpicking, letting me express that makes me feel better.

1: https://english.stackexchange.com/questions/17695/any-refere...

That's a LaTeX habit for a lot of people, chill out.

Using backticks seems like an anti-pattern to me, where you want to be correct, but are only going half-way. If you want to be correct, you can use the Unicode characters that specifically denote beginning and ending quotations, in both single and double tick versions. If you don't care about being correct, just using the default ASCII single or double quote suffices. I wasn't sure why someone would purposefully use backticks in that way in what appears to be an attempt to accurately express themselves, and not appreciate the knowledge that there is a more correct way to do so.

That it's a LaTeX habit does provide an explanation, but then the information that there may be a better way when using Unicode might also be appreciated for someone that does not know. I would appreciate being informed of that if I wasn't aware.

In any case, I tried to be informative and relay that it was my own problem that compelled me to reply, but I wasn't aware I was being excitable enough to need to "chill out". I tried to word it in a way to avoid people thinking I was getting worked up, and show that I just felt compelled to contribute. Unfortunately that didn't seem to come across.

They do kern oddly, but smart quotes are too hard to type.

"I don't want to be that guy," says that guy, and promptly proceeds within the very same breath to be that guy just as hard as he can possibly find a way to be.

Have you considered not being that guy?

Tesla will also need to raise cash. Look at accounts payable.

Their bond prices are plummeting on this earnings release. The rope may be running out.

then the stock should be at $3 instead of $300 if insolvency is such an issue. obviously there is more than meets the eye here. or this is the short of the decade, more than even 2008.

Quite a few short sellers are making that very case. In fact, one of them said something to the effect that every shorter seller should short Tesla before any shorting other company.

In my general experience, bond traders tend to be a savvier (if more jittery) lot than stock buyers.

What's interesting is that at the level of rating that Tesla has, most bond investors are active traders of one form or another rather than "buy and hold" investors. The most common strategy is to look for credit migration (ie buy the bond when it's B-, sell it when it relatively quickly moves up to BB and benefit from the capital appreciation as the yield or spread drops in consequence). A lot of them are 2+20 hedge funds. The people who play in that market are all professional investors and if they play in enough size they have good access to management.

So yes, they are probably more savvy than the average equity investor; the bonds falling doesn't mean they think a default is neccessarily on the horizon, just that a ratings upgrade is not (and potentially also that the company will come back for more money sooner rather than later, as that implies more supply vs demand which may not scale equally).

This would all seem to make a good case for the equity being overpriced, but to short the equity you need a conviction that the rest of the market will realise this sooner rather than later.

So, has any car company called Elon for a buyout?

>> - Auto revenue grew 10% to $2.4 billion as sales of Model S and X grew. Revenue is at risk, though. Tesla will divert resources from Model S and X to the Model 3.

This is curious. If the S and X are profitable, why divert resources from them? Not enough? Well maybe they should not have just canned a bunch of people?

Yeah I know, the ones they let go may not be the ones they needed for the 3. But it still seems strange all these things taken together.

> "The company burned $1.4 billion and has $3.5 billion in cash. Raising money shouldn't be necessary."

Just curious -- If they need to raise money afterall, how easy or difficult it would be for them to get the money cheaply?

> "the lower deployments are in large part a result of deliberately de-emphasizing commercial and industrial solar energy projects with low profit and limited cash generation."

Euphemism for government funding running out.

Last week I saw a Model 3 where the back door thought something was in the way and just opened a little bit so the passenger had to squeeze out.

Those 'bugs' are a big problem for a company already behind in production.

I hope for Tesla this was just a single event. But new cars with new tech always have issues. You don't want that when you are already behind.

> but no word on a new plant

production could begin in three years. Source - https://techcrunch.com/2017/11/01/elon-musk-says-teslas-chin...

> - most importantly, Elon has moved his desk to the giga factory as that is where the largest bottleneck is.

apparently he sleeps there sometimes too:

https://www.gearbrain.com/elon-musk-sleep-tesla-factory-2502...

>Elon has moved his desk to the giga factory as that is where the largest bottleneck is.

Elon is the bottleneck

This is they type of figureheadism that I absolutely do not understand and which makes me very nervous about the future of a company.

Great, the boss is in house...now I spend more of my time telling the boss why it isn't fixed yet and less of my time actually fixing it. I'm not saying those things are inherently at odds but they are definitely in tension with each other.

The bottleneck is absolutely not batteries. From the document, they specifically state that they have multiple steps which are only able to operate for short periods at 500 cars per week, which basically means 500 cars could be produced if you take how things went for two hours and assume that rate can be maintained for a week.

Ummm

> Some lines are at only 500 cars a week. Namely the battery pack assembly, body shop welding and final vehicle assembly.

of those, the battery pack is the big issue.

From Gabrielle Coppola, bloomberg's auto analysts:

> The biggest production constraint by far is the battery module assembly. A systems integration contractor dropped the ball, and Tesla only realized they dropped the ball until very recently. Tesla had to rewrite all the software from scratch, Musk explains. That's what he and CTO J.B. Straubel have been focused on.

So basically, the whole thing about Tesla being more a battery company than a car company that was supposed to help justify their valuation was bullshit. They don't even have the in-house capabilities to tell that the company that they contracted the work out to had screwed up until well after they were supposed to be shipping.

Not necessarily. If making battery cells is going to be the global bottleneck, having some issues making battery packs out of them is likely a lot easier to fix than not having the cells.

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