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Comment by dogruck | Hacker News Reader

As an engineer who has zero investment in Tesla, I truly hope they overcome this setback. Simultaneously, I know from experience that failure is a real possibility.

At this point, it’s nice to have the additional transparancy into the current production bottleneck.

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What would failure look like? Worst case outcome to me seems that they would just take longer to get to their goals rather than not achieve them at all. They have enough money in the bank and no unsolved technical issues - it's not black hole physics. I mean they've delivered cars already. They just are slower than expected at scaling up.

Their burn rate is incredible. If they run out of money and nobody is there to give them more, they file for bankruptcy.

They burn it that fast because it brings more money in the future and they have funds reserve. Their net loss is getting smaller proportionally to the revenue constantly. They could stop capital investments any moment and be profitable, but that would mean much slower growth later.

Not sure that's the case as looking at this graph from The Verge, their revenues are growing but their losses are also getting larger proportionally to their revenues.

https://www.theverge.com/2017/11/1/16593582/tesla-model-3-pr...

The burn rate numbers need more scrutiny as they include recurring expenses (salaries and materials) as well as one-time investments into Gigafactory and automated production lines for Model 3.

Failure looks like bankruptcy.

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

If you don’t think it’s possible, then I suggest putting all of your available assets into their equity.

With a declared mission to "accelerate the advent of sustainable transport", I'm not sure a bankruptcy would constitute failure at this point.

The momentum Tesla's created toward electric cars may be sufficient that mass-market producers can take it from here.

Then, they should just shut down the company now, donate the remaining billions to charitable causes, and enjoy their “success”?

Of course it would.

but I'm sure Elon could spin it.

They'd certainly try to spin it that way, but were I an investor I'd still call it a failure.

The production line is the ultimate in multiple single points of failure, and Tesla has exacerbated this by using advanced automation. [0]

Advanced automation promises great benefits, including reduced headcount and more repeatable (and thus higher quality) processes.

Advanced automation has some pretty serious drawbacks as well. In addition to the HUGE cost to set it up in the first place:

* Every station has to run at the same rate.

* Every station has to have material delivered at the same rate.

* Every fastener has to go on correctly the first time.

If the advanced automation cannot run at a sufficient rate, it may not pay for itself. Additionally, the Model 3 has lower margins than the Model S and Model X, so if the run rate is not high enough, the margins may not cover overhead.

0. see videos: https://electrek.co/2017/11/01/tesla-model-3-production-dela...

Disclaimer: I work for a Tesla competitor.

To be fair, they did manage to pump out S and X models for years, it’s not like this is their first attempt at advanced automation.

To my understanding it is more integral to the Model 3 production process, but I don't have any solid source for that.

Continuing to move the deadline back by three months every quarter would constitute failure. This is a classic death march pattern. Tesla’s observables currently match this pattern. This doesn’t mean it’s in the pattern or will continue to hold, but it does increase the likelihood.

They are still smaller than the competition. They can't really afford to be slower as well. They need to show they can get the Model 3 out and that it's a real success.

I think the worst case scenario is that they can't muster the money to continue on in the face of seemingly endless losses and setbacks.

Many companies think that the economics will work out for them once they've achieved a certain scale or years of efficiencies. It doesn't work out for all of them. The worst case scenario is that Tesla keeps losing money, investors lose faith in the company, they spend what money they have left, no one will give them more funding, and they close up shop selling the assets to another.

A more likely scenario is that the tech is years away, they spend a lot of money before the tech is ready, and then someone else who is better at manufacturing and distribution swoops in once the tech is ready and cleans their clock.

Right now Tesla has no competition and doesn't have to negotiate and compete on price; when they do, their margins will suffer and holes in their efficiency hurt them.

In the future, self-driving cars will decimate the market for vehicles. If we didn't have to worry about the issues around sharing cars, we might need a tenth of the vehicles we currently have. Even if Tesla becomes the Toyota of that era, it's 1/10th of what Toyota is today and it shrinks to less than half its market cap. Plus, with fewer sales, maybe they can't make themselves profitable, they fold up shop, etc.

Maybe self-driving vehicles will create really great mass-transit systems where you can hop on and off ad-hoc routes with well-appointed 10-20 passenger vehicles and get picked up and dropped off conveniently with little added time - probably a lot less time than our current situation with traffic.

This isn't to say that Tesla won't achieve its goals, just to point out that many things could happen to impact Tesla's future. It's not just about making an electric vehicle - Tesla has done that. It's about being able to effectively compete with a market that isn't going to stand still. If Tesla can't manufacture with the efficiency that other auto-makers can, they'll fail over the long run. Heck, GM had a lot of trouble keeping up with Toyota. Will Tesla become efficient enough to compete? Will the auto market dry up as autonomous vehicles come into play? Will we just get transportation from A to B via a transit network rather than owning a vehicle?

Again, this isn't to say that Tesla can't succeed. This is merely to point out that it's far from assured. If electric vehicle economics improve, competitors will come in and fight for those dollars which will drive down prices and profits. If autonomous vehicle technology becomes a reality, Uber, Lyft, and others will be ready to make the case that you shouldn't even own a vehicle and they'll be able to transport the same number of people with a fraction the number of vehicles.

With self-driving cars the total number of cars will shrink by an order of magnitude or two, but so too will the number of manufacturers, because there will be several orders of magnitude less buyers. So the players that are left may end up with a bigger piece of a smaller pie shared by less players.

I'm hoping that Tesla's current manufacturing difficulties will eventually look like the early days of SpaceX and that over time they will improve their rate of manufacture, as well as the rate that they can make changes.

Scaling up assembly of a high quality product is a technical issue that they haven't solved yet.

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