Tesla Third Quarter 2018 Update [pdf]
ir.tesla.com
ir.tesla.com
Every other electric car has to rely on a broken, sparse, expensive charger network. Blink chargers and some ChargePoint chargers are expensive in many places ($2 an hour!), and Blink is notorious for having broken charging stations. There's 4 ChargePoint stations in a garage near me that have been broken and unmaintained for years, and they're out of warranty and the mall doesn't have a financial incentive to fix them.
And then there's the DC fast chargers. I'm not aware of a single BEV (Volts or other PHEVs are excluded here) that can travel across the US with a reasonable route without worrying about finding chargers along the way. In fact, last time I looked, there was no physical way I could do a road trip I've been meaning to do through the western US in my i3 (my car, of course, has half the battery range of a Bolt) because of a lack of chargers.
Tesla's Supercharger build out is extremely important to their future. Until other companies step up and install DCFC stations everywhere (and figure out the CCS vs CHAdeMO format war), Tesla is going to have a massive advantage. Sure, not everyone is going to want to do a multi-thousand mile road trip, but driving one of Tesla's cars might make them.
I agree with Benedict Evan's point that electric charging will become a commodity: https://www.ben-evans.com/benedictevans/2018/8/29/tesla-soft...
https://www.history.com/this-day-in-history/gm-engineers-dis...
1: https://en.wikipedia.org/wiki/Thomas_Midgley_Jr.#Later_life_...
> Midgley participated in a press conference to demonstrate the apparent safety of TEL, in which he poured TEL over his hands, placed a bottle of the chemical under his nose, and inhaled its vapor for 60 seconds, declaring that he could do this every day without succumbing to any problems.
> One question posed during Wednesday's Tesla quarterly earnings call involved allowing other manufacturers to access Tesla's supercharger network and Elon Musk's response was surprising.
> "This is not a walled garden."
> By that Musk means that he's open to allowing other EV manufacturers to configure their vehicles to be able to use the Superchargers. He stipulates that these manufacturers would have to pay their fair share of the costs and would have to either adopt Tesla's plug standard or include an adapter in their vehicles.
The biggest difference here is that electricity, thankfully, is the same in any form, and the key differentiator is the speed at which you can deliver it. I definitely hope that we can agree on better, faster, common, charge delivery formats, but I wouldn't want to put a hamper on innovation, particularly when the electrical automotive industry is so nascent.
Hotels have facilities that aren't used after breakfast until the evening, however they still have to have a lot of staff on-site during these hours.
You could have nice food and coffee instead of motorway service station junk, with booking facilities so you can have that coffee ready as you walk through the door and your parking spot for the charging reserved.
This could work really well in the more scenic parts of the world where there is a lot of the infrastructure built out already, just the right plugs with the right volts and amps needed.
I've been out wine tasting and have run into Tesla destination chargers.
Let's be real here. I just did a 2500 mile road trip in my brand new Model 3. While it is true that 20-25 minutes will give me enough range to drive for 120-160 miles, 20 minutes does not give me a full charge. Charging my Model 3 from ~10% SOC to 80% SOC takes 40 minutes at a Supercharger. The car charges quite quickly from 0% to 50%, but slows down dramatically after that. If you pull in to a Supercharger with 10-20% SOC, 20 minutes will get you up to 50-60% SOC at best.
That being said, I generally didn't mind this. I came to like the slower pace of stops. I know my wife is looking forward to the first road trip we take together in the car, as she always wants to stop and stretch her legs more often than I do.
I just wish more Superchargers had convenient access to 24 hour bathrooms.
So, even if I just charged every time to the daily limit, I'd still have about the same range as a gas car and I can't fill up my gas car at home on a regular basis. That benefit alone outweighs the cons of a slightly longer trip for me.
PS. Slow down. ;). If you're only getting 160 miles from the daily charge, you're driving pretty fast or using up power in some other way.
But people tend to be dominated by edge cases instead of giving up a small amount of mobility.
What is this based on? I know several people with electric cars and none of us take planes and rent cars on trips unless they're to another country. I drive to California and Austin all the time and the Tesla is the first car that I don't have to stay the night charging for.
This is the "everything is Silicon Valley" view of the world.
Another hilarious one is: "why doesn't everyone just bike to work?"
But other car manufacturers, for whatever reason, don't get this. They build their compliance cars with a modest investment in EVs, but honestly, they aren't very good. The Leaf has its niche-- it's a good city car with low range and low cost. The Bolt really is one of the first non-Tesla players with a decent range, yet you can't drive it from Seattle to Yosemite because the lack of chargers and GM isn't investing anything in them. The same goes for BMW.
Volkswagen is forced to build chargers due to the diesel settlement, but ironically without their cheating and forced investment in EV, there would be fewer chargers out there than there are today (or in the near future).
Maybe I'm wrong and hydrogen or some other form of fuel will win, but if EVs do, car manufacturers will be scrambling to catch up and invest in chargers. I don't think this will happen soon, but maybe in 5 years they'll start thinking about it. Really, if they wait until the Model Y in 2020 and Tesla starts eating their lunch in the biggest segment in the US (CUVs), it might wake them up sooner.
Meanwhile, the closest Tesla superchargers are nearly double-digit miles away, far from the freeways, so at best 30 minutes away without traffic and up to 3 hours away with traffic. And since there are so few of them, you basically cross your fingers and hope that one of them is free when you get there.
That means that even with absurd 6mph traffic that takes 3 hours to get 30mi, you might still finish charging first on the SuperCharger (15min vs 3hours).
I have no doubt the'll start building chargers but I think the ramp up will be slower and the power levels will be lower than what people think. Most cars can't even charge at 350kW because their batteries are too small. You'd damage the batteries.
I don't think it will take more than a couple of years for well-maintained superchargers to be ubiquitous, and that's if you give away the power for free with government subsidies. If you charge customers for the energy, it might happen even faster.
Or about 1/7th of a windmill.
I have no doubt that they are serious and ambitious, but they are so far behind Tesla that it‘s not likely that they will catch up until 2020. Also, they are planning to place their fast chargers only 120 Km apart to accommodate for a wider range of vehicles, which puts them at a disadvantage too.
It is why teslamotors.com is now tesla.com
So far I have heard a lot of announcements about great cars and great charging networks from these companies but nothing they have actually done gives me any confidence.
People also said that the other car makers will switch the electric and start building electric cars in mass easily and quickly. So far however most of these projects have seen delays and other problems.
I would also say that all the 'lower' level chargers will benefit Tesla equally to everybody else, so its no intensive to buy a non-Tesla.
CHAdeMO is the better standard for fast charging, IMHO, since it allows bidirectional charging.
They choose not to make such an update though...
https://shop.tesla.com/ca/en/product/vehicle-accessories/mod...
Alas, I would have thought the same for ISPs. Any reason why EV charging won't naturally evolve into a similar overpriced, regulator capturing, locale-by-locale monopoly?
I'm talking about the subset of the EV owners without home charging. Currently this number is small, but as battery prices drop and EVs become the de-facto 'regular car,' there's ~60% of the population who have no "at-cost" home charging (being locked-in to whatever exclusive vendor their apartment complex chooses).
In this respect EVs are very different from gasoline vehicles, and I say this as a big supporter of EVs. I can drive across town to buy gas, but I can't park my car across town overnight.
The problem with competing firms is that eventually someone wins.
That's why the fight for net neutrality is so important.
Not for the tenants themselves.
Tenants need permission from the owner to install charging infrastructure, and the owner has little incentive to allow competition because the vendor gives them a cut of the [overpriced] charging fee. Even California's progressive tenant EV charger law[1] doesn't apply if 10% (!) of parking spots already have chargers.
Your example of pay laundry is instructive. In theory laundry service remains interchangeable (after all, "water/electric service is already running to the buildings"), but in practice the owner simply forbids tenants from installing their own laundry machines (typically citing flood risk).
[1] https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml...
To the contrary, user experience at Tesla superchargers is great. There are enough of them, evenly distributed, that I never have range anxiety, they work, they are usually not over crowded (although getting busier), they are free or at cost, they are high powered, usually located near nice amenities, and they are simple - pull in, plug in and wait 15-45 minutes. I don't see anything on the horizon from other manufacturers that will even remotely approximate what Tesla offers today with supercharging. Partnership/expansion of for-profit networks will never get there.
So people believe that Tesla is going to upend the entire auto industry, but can't believe that some company will figure out how to build nice charging stations?
So many contradictions in the arguments here. Yes, the Supercharger network was, basically, necessary for Tesla to reach a critical acceptance level. But operating and maintaining those stations is not free.
The idea that the major fuelling stations won't start adding fast chargers is incredibly naive. They already have the infrastructure and real estate. It's a no-brainer. If/when EV demand reaches those levels, it will happen.
Do they?
I was under the impression most fueling stations had standard single-phase 200A hookups to the grid.
So, at minimum, that would mean an electrical upgrade, no?
If you don’t have an electric car (I have two, a Volt with no quickcharge and a Leaf with a quick charge), it’s hard to understand just how strong Tesla’s position in the market is here. It’ll probably be a decade before others catch up. Less if they partner with Tesla.
But here’s the thing: the market for electric cars is enormous, as big as the market for regular ICE cars. It’s not a niche. That’s why the “Tesla killer” argument is dumb: if your target is Tesla, you’ll lose because you’ll always be behind, fighting over a niche that Tesla created. Because Tesla wasn’t targeting other EVs, or even hybrids, they are targeting the entire market. If your target is ICE vehicles, then you may win because there will be plenty of market to go around.
The only chance to beat Tesla is to beat ICE cars.
I think you're underestimating Tesla's first-mover advantage. My father works for a city in LA county and when Tesla decided to build a supercharger there, they initially asked the city to not only provide free real estate and grid connection, but to pay them to do it. Now, the city didn't pay, but it did incentivize in the form of free spaces in a prime shopping center because both city and property owner knew superchargers will bring a steady flow of well-to-do captive audience customers. I'm guessing this scenario is repeating itself all over the country wherein Tesla is building out superchargers for very low upfront and recurring cost.
No other charge network or automobile manufacturer has this type of leverage, nor will they for likely many years. If Electrify America were to approach that same city with the same request they'd likely have to pay/lease real estate, or install in sub-optimal locations (like Walmart parking lots), because they will not bring even remotely close to the same amount of traffic and economic activity as superchargers.
I've never heard charging speeds referenced in this way, but it's a really clever way to take into account the charging rate and vehicle efficiency, while being very intuitive! Is this a common "unit" in the EV space?
It’s not that hard for Tesla to adapt to a new standard, too. The power electronics are the same, just a different plug and protocol. Tesla’s can connect to a CHAdeMO charger with a relatively cheap adapter.
What I mean to say is, every product that is used by almost everybody will become a commodity at some point. That is not the question. The question is
a) How long can you keep it from not becoming a commodity?
b) How can you build your business model as market leader around it being a commodity?
E.g. gas stops can be considered a commodity at this point, but the powerhouse oil companies still own the whole thing and make hundreds of billions out of gas sales. If Tesla can use their leverage and tech-know-how to get into that position for electrical gas stations they might be in a good position to take that leadership position for a generation or two in providing electricity for the cars, making more money than with actual car sales.
So for Tesla, as much as for the not-yet-existing space station business, the fact that they will become commodities at some point is more of a strategic detail than a kill factor.
Disclaimer: I am long TSLA
I hightly doubt other car companies are gonna do this in a reaonable time frame (3-4 years). They will rely on the dealer network to build out the chargers and suck up the setup cost. Now dealers can potentially finance this with debt and get this done, but I doubt GM or any car company will be able to get consensus from the dealers and roll this ouut fast.
I live in the southeastern US. I have been saying for two years now that Cracker Barrel should be adding DC Fast chargers to each of its restaurants' parking lots. Who cares if the car takes 45 minutes to charge if I can grab a nice meal while I wait.
I used this strategy on my recent Florida-Texas roundtrip in a Model 3. The Baton Rouge Tesla Supercharger is located next to an Acme Oyster House location. I ate a nice lunch while the car charged. I pulled in with a 10% charge and pulled out with about a 90% charge. It was a heck of a lot nicer than eating a hamburger while driving.
Laughable, isn't it? Once second of Google would prove it wrong. People literally don't care about reality when it comes to this company. Some PR site says it, and it becomes "fact". The list of things people claim Tesla has done/can do that has no basis in reality is long and growing longer.
In that regard Tesla is having, fir now, clear advantage over traditional car makers. Until, that is, these car makers agreed on a common standard for charging their cars. Once that standard is established (supercharger-like solutions) the risk for third parties to set up charging networks comparable to gas stations became very low.
It is great to see Tesla turn a profit. But it seems to have some down sides, quality for example. Lets hope it is sustainable. I for my part am not convinced it is. We will see who is faster, Tesla at getting mass production right or competitors getting EVs developed and sold.
For all the talk about "range anxiety", it is a real concern that only Tesla seems to be actively working towards eliminating.
I've needed to drive across the country every year for the past 4 years, and allocating extra days to stop and charge was never an option. That's one aspect where my cheap Honda beats most electric vehicles. For EV to go truly mainstream, that should not be the case.
A long road-trip is not an edge case. It's the most affordable - and one of the most popular - ways to have a vacation[1]. National parks alone get over 300 million visits, but they're by far not the only destination. Overall, road trips account for an astonishing 39 percent of vacations[2].
As both articles note, the reasons to choose a road trip over flying include economical considerations; most people travel in their own cars.
Does it mean that EV aren't good? No. But to prevail, EV need to be better than ICE cars at the same price point. And as of today, they are really not the best vehicle for most people, by far.
Without the supercharger network, EV are not practical for most. See this thread[3] for examples of when Tesla owners use ICE cars.
All that is to say that how good an EV is for most people is determined a lot by the available infrastructure. So good on Tesla for being way ahead of the competition here.
[1]https://skift.com/2018/05/22/how-driving-defines-us-the-futu...
[2]https://www.nytimes.com/2018/02/16/travel/road-trips-in-the-...
[3]https://www.quora.com/Do-Tesla-Model-S-owners-and-primary-dr...
If you plot "number of long road trips per car per year", the mode is probably zero and I'd wager that fewer than 10% of cars are taken on a long road trip more than one time per year and fewer than 5% more than two times per year.
Taking your one-year figure of 39% of vacations as road trips, that's still fewer than one road trip per car per year. There's little over 1 car registered per adult in the US. Assuming an average 1 week vacation 1 time per year, with 39% being road trips, and 2 adults per road trip, that's one road trip per year for every 5 cars. If the average car is driven 8000 miles per year (lots of cars driven under 1000 miles to offset the more typical 12-15K/yr figure) and a road trip is 500 miles, it's about 100 miles of road trip usage against an average of 8000 miles, or about 1.25% use for road trips. Considering most of the road trip car use would be on cars used a more typically 12-15K, it's under 1% of usage.
It would take some significant errors in the Fermi estimates above to suggest that road trip usage is a typical use. If you have a battery electric and don't want to or can't road trip in it, rent a gas car one week a year. If you do more frequent road trips, a gas car or hybrid is a better bet probably.
Here's some quotes from their plan:
"Electrify America is investing in roughly 900 charging stations across the United States by mid-2019. These stations have multiple dispensers with more than 5,000 charging ports available."
"Electrify America’s DC Fast EV charging stations will be located along high-traffic corridors in 39 states, including two cross-country routes. Locations will accommodate between four and ten chargers, with charging power levels up to 350kW available at every station, capable of adding 20 miles of range per minute to a vehicle. Nationally, each planned station site will be located no more than 120 miles apart and, on key East and West Coast highways, planned locations average only 70 miles apart."
Don't get me wrong. There are gaps in their planned build-out, but they should be able to quickly build out to a point where their charging network suffices for the vast majority of Americans typical long distance driving needs. For everything else, rental cars are still an option, and the future should bring even more DCFC infrastructure build-out.
Their response is to build more, of course, and to expand the current ones. I agree with the sibling that this is a good problem for Tesla to have, particularly as new Teslas are paying into those costs.
Because it's not prohibitively expensive, Model 3 owners will use them fairly regularly, but not to replace home charging in a way an S/X owner might. For the most part.
Right before our 3 arrived new superchargers went in within 5mi from my house; 1 in East Palo Alto and 1 in San Carlos. They're virtually everywhere around the bay area now, so they've been pretty good at quick rollout of urban superchargers, and it FEELS LIKE they can keep up with demand, here at least. When I check on the map they're busy but never full.
Yeah. Only time I got stranded was because the only reachable station was a Blink one.
Sometimes I wonder if the name wasn't deliberately chosen.
Plus, what about the Bolt, Volt, i3, Soul EV, or any number of other EVs? They wouldn't be comfortable or possibly even welcome at a Nissan dealership to charge.
Only teslas can charge on the supercharger network afaik. And, Nissan dealers will let other manufacturers car's charge if you pay, ymmv but it happens.
Listen, I'm not defending Nissan's setup, I'm just countering the point that there's only the supercharger network.
Where I live we have 2 Nissan dealers and zero Supercharging stations.
First, I said they're not as accessible.
Second, not all journeys are between cities. In fact...
For normal usage you charge at home.
Not everyone lives in a house with dedicated electrical outlets.
Besides using supercharger is not free as well. As more and more cars go electric, charging stations are going to be as common as gas stations and there will be competition with pricing etc. Not sure if I want to rely on one company's charging network.
So every time you go on a road trip, what do you do? Get a ride to a rental car place, initial a stack of paperwork denying a half-dozen $10-25/day charges on top of whatever base rate you agreed to, finally get the keys to a super-bare-base-model of some car that looked good from the outside, drive it back to your house, then load everything up and hope for the best?
Or would you rather just load up in the car you already own, and are comfortable and familiar with driving, and not need to budget an extra hour or two on either end of the drive for rental company nonsense?
> Besides using supercharger is not free as well. As more and more cars go electric, charging stations are going to be as common as gas stations and there will be competition with pricing etc. Not sure if I want to rely on one company's charging network.
Tesla's supercharger network is a huge advantage precisely because no one else has anything like it. It also now has a fair amount of redundancy along major routes. It would be wonderful if competing networks actually existed, but they meaningfully don't. Tesla realizes that you actually need the network, and that having it allows a Tesla car to be your only car. Everyone else just thinks they can sell something with X miles of range, wipe their hands, and thinks spending 8 hours at a ChargePoint station in a grocery store parking lot is actually acceptable.
[0]: https://www.dr.dk/nyheder/regionale/syd/europas-foerste-supe... In Danish
Its electric scooters rather than electric cars but Gogoro in Taiwan has built out a network of charging stations for the vehicles they sell. 810 "gostations" according to their website.
As somebody who will be in the market for a EV in the coming months, I've already discounted Tesla as an option for this reason.
I understand if this drives you away on principle, but you’re not representative.
Now. The fact they do it at all is cause for concern.
50 cents says there is some terms you have to agree to that gives them the ability to blacklist for any reason.
Why would anybody want to buy a car where the primary and sometimes only source of filling it up can blacklist your car world wide.
That's assuming they don't become travel centers themselves.
That's actually another advantage. If they build travel centers around their superchargers, anyone with free supercharging (which is a large fraction of the current installed base) would prefer theirs over ones they have to pay for. But then they get all the people milling around buying coffee, burgers, phone chargers, sunscreen, etc.
For that matter they could go into business with the truckstop companies. Supply the charging hardware and expertise to install/operate/maintain them at the truckstops in exchange for a share of the overall take.
Several of the Tesla superchargers I use are at independent gas stations just opposite the gas pumps.
Once store owners see the value and demand, they'll likely support infrastructure for EV clients.
Given that the amount of Teslas on the roads is growing exponentially these months, Tesla will probably have to grow the supercharger network too. Until recently, there were around 300,000 Teslas on the roads worldwide sharing some 11,000 charging points at 1,350 super charging stations. Soon there are twice as many Teslas on the roads. Next Christmas maybe close to 1 million Teslas in total. They will need to expand with new locations, more charging points per location and faster charging times.
Also, in 3-4 years there will be millions of old Teslas with today's "short" range that still will have to be serviced by super chargers.
Most importantly, many apartment dwellers, i.e. the younger buyers in the cities that will constitute a great deal of the core customer base for Model 3 and Model Y once prices drop to $35,000 or below, may find it more convenient to use super chargers in stead of charging at home. This is especially true, if charging times can be reduced a bit.
Going forward, Tesla can use the charging stations for all kind of things like promoting other products (solar tiles, powerwall batteries etc.) and even selling third party products, just like regular gas stations.
There's nothing exponential about the rate of growth of Teslas. Fast != exponential.
On a side note, I doubt that you would ever find a growth rate in business or economy that truly followed a mathematical function.
If your route allows, you can also take advantage of what Tesla calls "destination chargers" - Tesla chargers at hotels that are free-to-use for patrons.
1) Charge rate is 50kW peak, less than half of Supercharger’s 120kW.
2) Leaf battery is small, so you need to stop like every hour or so to charge.
3) 1st gen Leaf battery has no cooling. That’s right, none. Not even air cooling. It relies on thermal mass of the battery & very slow leakage of heat through the structure of the car. This is sufficient for daily commute usage, but Quickcharging produces heat. After 2 or 3 quickcharges, the battery is hot so quickharging rate reduces to more like 15-20kW to reduce heat production (power lost to heat is proportional to current squared, so halving charge rate halves the total heat per unit energy). Teslas and Bolts don’t have this problem as their batteries are liquid cooled.
So you end up only being able to travel 200-300 miles in a day even with Quickcharging. And because of the small battery, Nissan needs a lot more chargers to enable a given trip.
The new Leaf is supposed to have a >200 mile battery and 100kW charger. So about where Tesla was in 2012. But the existing charger network for CHAdeMO is only 40-50kW. Not too bad for an emergency stop, but if your whole trip is that slow charging, it’s significant.
BTW, Teslas can use Chademos with a $500 adapter since the CHAdeMO standard is the basis for the Supercharger standard. Also, CHAdeMO is capable of bidirectional charging, so it’s possible to do vehicle-to-grid with a Nissan Leaf. CHAdeMO is a better standard than the CCS one, but unfortunately most other EVs are using CCS.
And one big advantage Tesla’s Supercharger has is the plug is much smaller (and I believe cheaper to make!). CHAdeMO and CCS plugs are huge and unwieldy. And no one seems to be seeking a more sleek design like Tesla’s.
Fortunately, though, it’s not TOO expensive to provide both a CHAdeMO plug and CCS plug, since the expensive power electronics are the same, just a different protocol and plug, so many DC fast charging stations have both.
You mean Musk gained control through that, not lost it? How so? That's quite different an assumption from what I expected.
Yes, it's an interesting result of corporate mismanagement, that he gets to sign off (with board approval, but let's be honest about the control they have) on even more equity stake. However, he did have to give up the chairmanship, so overall he lost control of the company though in this dimension (portion of equity ownership) it is an interesting curiosity and contradiction.
Good:
$1.3B cash from ops, $1B increase in receivables
Bad:
$2B current portion of debt coming due, $1.2B increase in payables
Still need stellar numbers (and cash) in Q4.
> $1.2B increase in payables
That's a yearly increase. $500M-ish increase between Q2 -> Q3. I think its reasonable to expect payables to go up as they ramp up from 2000 M3/week to 4000 M3/week, but the number still gives me worry.
I think you're right to worry about these numbers. But its important to worry about the CORRECT numbers.
Per http://ir.tesla.com/static-files/6db4f56e-1532-4cd6-b8dc-3ff... they have $230 million due in Nov 2018, $920 million due in March 2019, $560 million due in Nov 2019, $113 million due in Dec 2020, $1,380 million due March 2021, and $977.5 million due in March 2022. Plus coupons on all of these payable regularly between now and then.
By my count this totals $4.1805 billion. They claim to currently have $3 billion in cash and cash equivalents on hand. But there are various outstanding liabilities.
Given a GAAP profit in the $300 million+ range this quarter, and a projected European market twice the size of the American one, this may all be doable. But it is still a balancing act.
Elon will have to roll over the debt somehow: either into stock offerings or maybe into new bonds. The meager profits reported this quarter aren't anywhere near the amount they need to pay off those debts... even if the profits grow 2x or 3x larger in Q4 and Q1-2019.
But, paying off some of those debts will put the company into a stronger position.
Financial theory and reality tend to agree except in a crisis. Unfortunately crises do tend to come along periodically. How TSLA weathers the next one will be interesting to see.
From Wikipedia "The basic theorem states that in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the value of a firm is unaffected by how that firm is financed". See anything wrong with this picture?
"These results might seem irrelevant (after all, none of the conditions are met in the real world), but the theorem is still taught and studied because it tells something very important. That is, capital structure matters precisely because one or more of these assumptions is violated."
The Tesla bonds in question have a coupon of 5.3% and were sold into one of the lowest interest rate environments in history. They currently have an 8.5% yield. Rolling debt over on those terms is not fun.
Yes, it is possible that in March Tesla could be trading around over 20% above what it was most of today, but it would be unwise to depend on it.
If its a mandatory convertible, then Tesla pays it off in shares proportional to the value assuming Tesla was $360ish in price. So you "can't lose", you'll get 33% more stocks if TSLA was only $270 to ensure the bond-holder doesn't lose money.
I haven't been able to verify the status of the March 2019 convertible however. But just note that mandatory convertible vs non-mandatory is a big detail.
First because articles like http://www.latimes.com/business/la-fi-musk-convertible-bonds... indicate that they are not. And also because the potential dilution indicated in the Tesla statement that I linked to shows zero dilution if the stock prices is not sufficient for them to convert.
But realizing the huge financial consequences for the company of having the stock price high does shed light on why Elon is so eager to push his stock price up. He would much rather pay in stock than cash.
Incidentally the LA Times article indicates that there is a lot more debt than just the issues I listed. That's a list of all of Tesla's convertible debt. But not all of it is convertible...
There must be some special case here.
Who would loan money to Tesla below the rate they could get in risk free t-bills?
This is the bond in question. https://markets.businessinsider.com/bonds/tesla_inc-bond-202...
Furthermore, it was sold below par value. There's 1.25% coupon, but the overall yield is closer to 5% IIRC.
There's a LOT of assets / liabilities to juggle. Tesla also has $1.5 Billion of incoming cash (Accounts receivable), which is basically people who are currently in the process of paying Tesla right now.
But in any case: Tesla's liquid liabilities are larger than their liquid assets. Its a bad spot to be in for sure. Its solvable though, but the question is what does Tesla lose by solving it.
Subtract the $3 billion in cash and they'll need to come up with $2.9 billion between now and March of 2022, which is $.2+ billion per quarter.
Edit - Double counted cash. It should be $.4+ billion per quarter.
> Their liabilities are greater than their assets to the tune of $1.7 billion. That plus the $4.2 billion in bonds is $5.9 billion in debt.
You're double-counting. Liabilities include debt. No need to double-count.
> Subtract the $3 billion in cash
You're double-counting, again. Assets include cash. Lets do this once, and correctly, shall we?
* Total current assets: $7,920,491 (thousands)
* Total current liabilities $9,775,324 (thousands)
That's a total shortfall of $1.85 Billion. Again, page 8 of the PDF provides these numbers.
> they'll need to come up with $2.9 billion between now and March of 2022, which is $.2+ billion per quarter.
Elon Musk has raised capital ever year, roughly to the tune of ~$1 Billion/ year. Either by convincing people to take on more debt for the company... OR by selling more shares out.
The only issue is if a recession hits between today and then, which would close capital markets.
In terms of capital raises, this SA article posits why Tesla may not need as much capital going forward.
https://seekingalpha.com/article/4100718-teslas-unusual-sour...
Convince congress to extend the federal tax rebate (no real increase in spending just keeping what’s already there) by like 2 years which is just maybe $1-2B more and electric will be the way to go for good!
Time will tell how good of a choice it is.
But it is good enough.
And now we're plugging high-powered LED bulbs into them. Technology finds a way. Be first!
Despite this disadvantage the Telsa battery cost, power density, cost per kwh, peak power, and longevity are unmatched. Especially as measure by real people driving real cars on real roads.
So sure in theory batteries with more surface area would have greater package efficiencies. So far nobody has managed to.
There's way more to a battery than just density; however, one of the things that needs to be managed is the heat generated during charging. There might be a case to be made for slightly suboptimal packaging strategies if it makes cooling all those cells that much easier.
Automakers putting battery packs in the trunk of their cars are complaining about battery size.
Is anyone complaining the floor on a Tesla is too thick and compromises interior space? Of course not.
The packaging probably DOES add a not-insignificant amount to the total weight of the pack vs an ideal battery of some custom design. But again, you have to weigh (ha!) all of the factors.
However, http://jes.ecsdl.org/content/163/9/A1846.full points out some of the details.
Money quote: For automotive applications where 80% capacity is considered end-of-life, using tab cooling rather than surface cooling would therefore be equivalent to extending the lifetime of a pack by 3 times, or reducing the lifetime cost by 66%.
Meaning battery packs that last not 150,000 miles, but 450,000 miles.
If you do, suddenly that empty space becomes precious.
The fact that other carmakers started using it is a good sign.
They are able to make the cheapest batteries for cars and have seemed to be pretty successful...
18650 is the cell form factor, not a specific anode/cathode/electrolyte combo. There have been leaps and bounds in cell chemistry over the last 10 years which have made it possible to build high-end expensive cars, but we still need about double the performance of current tech to achieve true low cost mass adoption. A $45,000 car with 300 miles range is just barely enough to convince well off people to buy a new toy. The first $20,000 EV with 300 miles range will change the world.
I'm going to guess it will be a mix of both, but the govt(s) will be slow to do either, until they realize, too late, that they didn't meet their income goals on fuel taxes last year and suddenly have a shortfall in the budget :)
I suspect most states/countries will eventually adopt a combination of higher annual registration fees and mileage-based road user charges.
As for the charging @ home vs a supercharger(and the like) I agree with you, but the government is not known for always being wise or letting facts get in the way of something they want to do :) They understand a "Gas tax", so including EV chargers as part of the gas tax is easy to understand and easy to approve.
Also it's likely to be evened out by someone who's registered in Idaho, but is driving in Washington. And in any case, the taxes can be adjusted to account for a fraction of cases like that.
This is also more fair than fuel taxes because low-efficiency vehicles aren't necessarily doing more road damage.
https://en.wikipedia.org/wiki/Energy_subsidies#United_States
"""
Renewable energy: $7.3 billion (45 percent)
Energy efficiency: $4.8 billion (29 percent)
Fossil fuels: $3.2 billion (20 percent)
Nuclear energy: $1.1 billion (7 percent)
"""
Perhaps not for you, but it sure did[1]
[1]https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reor...
Is that really feasible? That's roughly BMW and Mercedes combined in the US.
It's really easy to forget on the West Coast of the US that BWM, Mercedes and the like are actually rare in the rest of the country.
US consumer auto sales per year are in the 16-17 million range. I personally wouldn't consider 3% to be "almost 10%", do you?
But I don't think they realistically can hit 500,000 cars next year, either. They moved 70k cars in Q3. There's no reason to believe they can double that in 6 months or so particularly as the Model S & X sales have been fairly stable. So that means the Model 3 needs to somehow grow to around 400k/year in order to get to 500k cars next year.
They state production of Model 3 was up to 5,300 per week and that the production system had stabilized with gradual monthly improvements. So currently Tesla can only even build 275k Model 3's a year. I don't think doubling that in such a short time frame meshes with Tesla's comments of "gradual monthly improvements."
350,000 cars in 2019 seems much more likely assuming Model 3 demand holds strong.
The parent comment said "cars." You switched that to consumer auto sales. 6.3 million passenger cars were sold in the US in 2017. With passenger car sales declining and generally losing popularity in the US (dropping from 7.9m in 2014), it's plausible that 500,000 will in fact be "almost" 10% of total cars sold in the US in 2019.
But not all of those sales will be in the US. According to the Q3 update document:
"The mid-sized premium sedan market in Europe is more than twice as big as the same segment in the US. This is why we are excited to bring Model 3 to Europe early next year. "
Which would make it even less likely Tesla can hit 10% of US passenger car sales as they'll be sacrificing what little production they have to try and break into other markets.
Anyway just hitting 10k/week in 2019 isn't sufficient for the 500k number. They'd need to average 10k week for the entirety of 2019. Very different things.
They're so far beyond anything anyone else is making.
"Global annual sales of EVs surpassed one million for the first time in 2017, and China (where EV sales doubled in 2017) accounted for more than half of those."
https://www.wired.co.uk/article/electric-car-sales-china-vs-...
This is only natural if you accept that batteries are the key technology here, and China is bringing far more battery tech online than anyone else:
http://www.visualcapitalist.com/china-leading-charge-lithium...
some of the ones that i have personal experience with are nio, geely, saic roewe, and byd. there are many, many more. i have ridden in the last three brands multiple times and saw the nio showroom cars. the three brands i rode in were very nice cars and obviously affordable since most of my rides in them were with didi drivers, china's uber.
hacker news, along with many in technology in the u.s., has a huge bias against china. but this is going to catch up with the u.s. in a bad way. china is catching up, and in many cases, exceeding, the u.s. in many industries.
https://www.wired.co.uk/article/electric-car-sales-china-vs-...
https://www.bloomberg.com/news/features/2018-04-23/china-s-c...
When you make claims you should provide examples to support them, it also doesn’t help that your comments come across as hostile.
Both of those links talk a lot about Chinese ambition and not a lot about any cars being manufactured.
Of course, the fact that our market is (probably) smaller than theirs with way more red tape (including the aforementioned safety standards) doesn't hurt.
edit: and you can see my other reply or do a google search to see that china's car manufacturing revolution, including their massive and unparalleled surge into electric vehicles, is something one cannot simply write off. i don't know why people like you hold your opinions in the face of the history of brands like hyundai and kia. kia used to make terrible cars, but is now one of the top auto manufacturers in terms of value, execution, and design. just take a look at the new kia stinger and huge success of the optima model line.
Is this common among the anti-Tesla crowd? I think you're the first crash rating conspiracy theorist I've come across. If anything I'd assume that the organisations doing the testing would be deeply connected with traditional car manufacturers and that Tesla (as a newcomer) would actually be at a disadvantage.
Perhaps you know something we don't?
Non the less does Tesla seem focused on safety and I also haven't come across credible reports finding them unsafe, as GP is implying.
I never said they wouldn't be able to catch up, I said they would not be able to sell in the US today for many reasons, one of which is the small size of the US market compared to the domestic market. I'm not sure why i'm still typing, I'm just restating what was clearly apparent in my original comment that you ignored.
I'm sorry you're not willing to believe a thing called 'data'. Yes, I believe Tesla vehicles are precisely as safe as the results show they perform on the various crash tests. Crash tests that every automaker designs their cars to perform well on. Crash tests whose parameters every automaker knows full well.
Tesla has the worst fit & finish in the industry. It always comes up with every tear down & deep review of a Tesla car.
Tesla's powertrain is largely the only thing they are good at, and has so far been the thing other car manufacturers have struggled to match.
The seats they’re making in house now are also very comfortable and I like the minimalist interior of the 3, but that’s personal preference. The buying experience was also nice not having to deal with dealers.
Their power train and supercharger infrastructure is awesome but it’s not the only thing they’re good at.
If they can retain the engineering talent that has been making their cars (which is by no means guaranteed, from the stories I’ve heard of working conditions) then I think they have a good chance of catching up in the areas where they currently lag behind other companies.
Really the only thing they are not great at is some part of the interior (and not the important console part at the front) and that they have a somewhat cumbersome heavy body.
Pretty sure you're oblivious to what fit and finish means based off of this comment. You listed a bunch of stuff that's not fit and finish followed by acknowledging that stuff that does contribute to fit and finish is poor.
Fit and finish are things like panel gaps, paint job quality, interior quality, etc...
And Tesla regularly is pitiful at it.
Would have been interesting what would have happened if Elon hadn't fucked up.
And HN. Good lord, some of our threads here were hard to read.
The most important for Tesla now would be to keep production stable. Reports about bad quality might hint at some issues on that front. The other risk I see is how debt is structured. With debt converting to stock above certain values means Tesla is much more reliant on stock courses than other companies. So Tesla needs to keep production stable to keep the cash flow positive and keep the valuation high to be able to cover debt. Riky position if you ask me.
Does the reporter genuinely believe that a business like Tesla could be built without doing those things? If you had to recreate Tesla from scratch tomorrow, how much would it cost? And wouldn't you have even bigger loans and debt than the business does?
There is just so much context that is not merely left out, but replaced with confusion.
Elon Musk nailed his colours to the mast earlier in the year by saying Tesla would not take on any new debt in 2018. And issuing shares has gotten a bit less simple since his "taking Tesla private" tweet. Which leaves renegotiation or bankruptcy. It remains to be seen whether creditors will renegotiate to avoid the hassle of bankruptcy and the possibility of significant upside through some kind of debt/equity deal. Or whether they will look at the $10Bn of PPE on the assets side of the balance sheet and say "well we can probably get $5Bn for that in a firesale to Toyota, Ford or GM and come out ahead".
Just a side note that Tesla received a ~$500m loan from the US government back in 2009, which was paid back in 2013 (the loan went out to some other automakers for electric vehicle R&D), and I believe the tax break on electric cars are still valid. Tesla is a really nice example of there being a problem that is both in the interest of the public and private sector to solve, and those sectors working together to innovate.
Note: I have a very shallow understanding of the US-SA relationship.
Not really; the issue with Saudi oil has mostly not been direct imports US has (both as a net importer and net exporter) for some time gotten more of it's gross imports from other, nearer sources.
The issue for the US with Saudi oil has been global oil prices and the knock-on effects on, well, everything else.
The upside to citizens was probably evaluated under different terms - the development of a nascent industry that could pay social dividends over time in the form of jobs, oil security, etc... (whether that's an appropriate function for government is an entirely different concern).
In general it should also muzzle a lot of the nay sayers, it isn't easy to lie about money in the bank.
Solar City is a disappointment. I keep watching the solar roof tile business to see if that goes anywhere. I'm getting close to putting in Powerwalls and getting off the grid completely, the PG&E shenanigans are just that annoying for grid tied solar systems.
Here we’re mandated by the city to be connected to the grid at ~$10 a month, which (along with net metering) pretty much disincentives a powerwall.
When you say 'mandated by the city' do you mean to say that you can't get a permit to put up solar unless you grid tie it? And if so does your power company allow for an even 'watts in vs watts out' scheme?
[1] And yes it has paid for itself and is nominally cash flow positive at this point.
To me, this seems very promising for a company developing tech that can be used, to a significant degree even through software/policy changes, to greatly reduce grid dependency. If utilities keep squeezing adopters of renewable energy by charging ridiculous connection fees, there's a significant risk they will have a nasty surprise once storage adoption is high enough.
Installation requires a local entity, either in-house or a third party, to plan it, visit the premises and so on. Offering a fixed rate up front (some companies in Germany do that, not sure whether Solar City is doing the same) carries risk for bith parties. In a nutshell, sales is expensive and capital intensive.
Regarding tech, solar modules are a commodity by now, they get cheaper basically every quarter. And more efficient ever year at least. So on that front there is not a lot to gain. Also, full grid independence is still not achievable for reasonable prices. Smart grids are better solution, inverter producers and utilities are in a better position than the company produucing and installing solar modules.
The technological curve results in guaranteed obsolescence. For solar roofs that means either to keep production for older models up or reliability high enough for the full life time of a roof.
Just a couple of thoughts.
That's not how Elon works. He's likely to get a capital raise to fund Model Y development.
The Gigafactory was built on millions-of-shares being sold between 2013 and 2015, plus some loans (the 2014 5-year convertible which is now due 2019).
The thing about Q3 profitability was that it was necessary for Elon to achieve Q3 profitability... so that he can now start to push for the Model Y funding. Shareholders/ Investors need to be convinced that giving more money to Elon is worthwhile. So I think this Q3 profitability is very important to the message and plan that Elon is trying to build here.
These numbers though are really exciting.
It's been enough of a spread that I suspect it's just normal "my manager is bad" type of variety.
Sounds awful, but in some ways isn't that how manufacturing has sort of always been?
Sounds better than bustin' ass for 60 hours/week for my base salary. Your friend is getting paid 1.5X for every hour over 40. And, yes, it is not uncommon over the years. My dad would seemingly work every overtime hour given. And at time-and-a-half, so would I.
You working salary at your local tech whatever? How much are they paying you to come in on Saturday? I ask because you seem to have missed the point.
And 1.5x is the employer discouragement. Who wants to pay 50% more because of poor planning?
And there are many positions where the cost of hiring/training/retaining employees is higher than 50%, so it’s more advantageous for employers to just give overtime, which employers obviously utilize. But because an employer can force the employee to work overtime, it’s not clearly a beneficial arrangement to both.
You either do it or be forced to quit.
It was absurd. Sensible people hated that place, while a lot of other folks just accepted it as normal.
I suspect the conflicting accounts of life at Tesla work out similarly.
Simplifying the process means better quality control, which means more predictability, which means less stress for employees.
I'd love to see them get on par with other car manufacturers on cars produced per employee per factory.
Tesla is not planning to get on par with manufacturers that outsource a lot more than Tesla does. In fact their new Chinese factory is planned to be even worse, because it will produce battery cells and car motors in-house.
For instance, John McNeill was Tesla's global sales and service VP and is now COO of Lyft. I wouldn't be surprised to learn about some deals between the two companies in the future.
I was personally told to slow down because I was making my job look too easy, IE not as many workers were needed.
Those type of people would find working for Tesla a living hell where you are expect to work and not laze off. I am sure working at Tesla is hard work, but lots of people love working like that, however there are tons of people who will whine and complain if you try to get them to work properly.
Musk can’t tweet about going private. So a major short seller sue him and Tesla. Stock ”crash” during two months. Short seller completly turn around and now long the stock which rises A DAY before this report?
Eyebrows should be raised so high everyone go bald. Where Will this end with SEC? And How is this not manipulation from both sides?
Disclaimer: Sure I am a fan boy and we all ”knew” they were going to make a profit soon. Great work and this is promising for the future!
I've been through two of them, things get crazier.
As a CEO in charge of the company, he doesn't get to lie to the public, his shareholders, or putative shareholders, about what he plans to do. He doesn't have to tell them everything--but he absolutely cannot lie to them.
A shortseller not connected to the company isn't in the same position. Since they're not a company insider, they don't have any knowledge of what the company is doing and others follow their advice at their own risk. It's only a problem when they make false claims that aren't supportable by data or reasonable (if not necessarily accurate) analysis.
"Funding secured" after the Saudi repeated multiple times that they would pay cash for the operation – which was refused repeatedly in the past by Elon himself? Since most shareholders wanted to remain, the cost of the operation was estimated to be below $20B so who doubt that the funding wasn't secured?
[0] https://www.bloomberg.com/view/articles/2018-08-13/funding-f...
Now if it turns out that Elon was just pulling a joke and a few days later he tweeted, just kidding guys. The stock would tank. Everyone that had purchased at the higher and higher price would take a massive loss, including all of those retirement accounts. That's why executives of publicly traded companies cant lie because people make financial decisions based on those lies. Some of those buyers control billions in retirement funds (maybe even your 401k). If Tesla happened to be in the process of negotiating a loan or bond at the same time, it's massively fraudulent if they get better rates off the lies that were tweeted out.
In addition, anybody shorting the stock faced a real risk of being liquidated due to the stock sky rocketing due to a lie.
I am a huge fan of Musk, and think he is doing incredible things but he really should not have done that.
The Model 3 is a game-changer for the masses. I walked past 6 of them just on my way to get coffee this morning. We're truly witnessing the EV revolution.
They exist for every company. And the majority of them would have hedged their bets in some form so it's not like they are likely to lose substantial amounts of money. Tesla almost seems to be similar to Trump in that they need a fictitious enemy to distract the attention away from themselves.
Second, yes, they are probably hedged. But usually they hedge against correlated securities such as industry competitors so they can hedge away risk they don't want to take (i.e., they have a position against Tesla, but no position about car sales in general, so they hedge against the rest of the industry to protect themselves against economic growth raising all car sales). So if Tesla reports good numbers relative to the industry, it will absolutely impact shorts and they are likely to lose substantial amounts of money. What else would they be hedging with? Maybe their bonds, if you had some sort of complicated capital structure arbitrage play, but I haven't seen much of a case being made about the bonds being undervalued relative to equity.
Having said that, I think shorts play an important role in the economy to keep companies honest.
Auto comparisons are worthwhile, but equally valid are comparisons to companies of a similar age, not just established stalwarts (for better or worse).
https://electrek.co/2018/07/24/tesla-troll-short-doxxed-oil-...
But I think Musk is a bit of a wanker and I have an allergic reaction to the hero-worship that's grown around him.
But I find it amusing that people are so quick to point out his faults and criticize the guy when he's accomplished more in his life to date than any single one of his critics, with at most a couple exceptions, like Bezos.
Basically if he's a wanker, what's that make you? I don't think it's fallacious reasoning here at all to say that. Basically your standards for a non-wanker must be so high as to include almost nobody. I'm not just talking about his financial success, I'm talking about changing the world for the better with his companies, for raising 5 children, etc. The guy has his faults, but so do we all. If he's a wanker, than really who isn't?
In my estimation, most people are not wankers. I think we have different estimations.
And accomplishment is not a defense against wankerdom.
It makes any kind of discussion impossible.
Look at the person you relied to, his post is already grey.
The guy is kind of a wanker:
https://www.marieclaire.com/sex-love/a5380/millionaire-start...
https://www.theguardian.com/technology/2018/aug/29/elon-musk...
Everyone just give him a free pass which is bullshit.
Personally I think the guy is a narcissist given how much he loves attention. Like most narcissists he will shit on you if you get in his way, right and wrong be damned - something to keep in mind.
So all we are suppose to do is sing his praises on this site?
On this site, please neither sing praises nor vent ragefully. Both are boring.
(sorry)
Which makes it difficult to have the discussion about Tesla-as-Tesla. Admitting that I have an emotional reaction to an individual is the honest response.
My policy, in your position, would be to just ban Tesla posts. When a conversation topic becomes repetitively boring, I ban it, as there are plenty of places to discuss Tesla or Elon Musk or any other topic.
I don't own any stock, but I have vested interest in seeing them succeed as I own a car that I would prefer not to see turned into a paperweight; of course, I have always recognized that this is a gamble I am choosing to make.
Every hedge fund will talk their book. Short, long or upside down flying purple sunblock, they will talk their book.
Congrats Tesla. Your growth is a source of inspiration for me.
[0] https://www.marketwatch.com/story/tesla-stock-skyrockets-aft...
Pre Close:
- bit of a perfect storm for Tesla to make a profit
- Model X ramp up spend is mostly done, Model Y ramp up spend hasn't really started yet.
- Model Y ramp up could be $250 million/quarter drag
- Started selling dual motor Model X, more than single motor, (probalby push for more expensive cars first to try and get profitable)
- this will mean we'll ahve to watch per car margins going forward as less profitable models are rolled out.
- solar installations have fallen through the floor since then,
- Tesla is no longer largest solar company in the US
- with multiple layoffs in Solar City division
- Tesla Junk Bonds trading at 86 cents on dollar, an 8% Yield, not too spicy, probably means bond market expects to be paid off in cash not shares.
- Good quote from car analyst "So Tesla going from 0% to 1% U.S. market share and not profitable or cash-flow positive for the ytd -- `Yay, Tesla!' -- but let's not get crazy. This is still a niche brand building vehicles by hand in a tent."
Numbers:
- 3Q Adj EPS $2.90, Est. Loss/Shr 15c
- 3Q revenue $6.82 billion, estimate $6.31 billion
- 3Q capex $510.3 million, estimate $612.9 million
- 3Q adj. automotive gross margin +25.5%, estimate +19.5% (BD
- 3Q Free Cash Flow $881.0M, Est. $280.0M holy shit that's incredible
- Tesla has made money!!! net income of $300 million, now can they show that they didn't just cook the books for a quarter?
- back to 3 Billion of cash in the bank
- even without ZEV(Zero emission credits) Tesla would still be well into the black
Misc:
- 15 days of inventory, for Model 3, about a quarter of what other companies have
- building an average of 4,300 Model 3's per week
- labour hours are down on the assembly line by 30%
- little under 20% of Model 3 pre orders have cancelled
- Musk said he wants to start producing cars in China next year, this is a put up or shut-up situation as they've sat on the factory and done nothing since announcing it.
- China acceleration seems to be pretty darn Tariff driven
AutoPilot:
- now on software upgrade 9.0, which can change lanes and exit highways on its own.
What? They only just announced it a few months ago. Jesus...
"why haven't you colonized the moon yet, it's been a decade you've been working on this and you have nothing to show"
Market share is a sales based number, which according to the document the Model 3 is the number 1 selling car in America by revenue over the last quarter.
But it's also disingenuous to compare a single electric car from a single carmaker to the entire body of every kind of passenger car for sale in the US. At least compare ALL electric car sales to ALL gas car sales.
They've bought the land and started grading it, as of a few days ago, I think.
Sure, look at their balance sheet from the 8-k filing. How many quarters in a row showing a $1.2 billion increase in accounts payable will their suppliers tolerate?
The staff screwed it up badly enough that I don't think they got the money for our car for at least 6-8 weeks after we took delivery. I kept wondering if it would ever fund.
I'm not sure "perfect storm" is quite correct; we've seen these cycles with every model launch and there are a few profitable quarters, but this one is much more so than most, and should last longer than most, BUT you're absolutely correct that they need to ramp up Model Y spend, then Roadster spend, then.. every other model refresh.
* Free cash flow of $881M for the quarter equates to $3.5B annualized. Current market cap is around $50B, so Tesla is trading for $50B / $3.5B = 14.3x annualized free cash flow. Even if this figure is not sustainable in the short to medium term, Tesla no longer looks that expensive.
* $3.0B of cash and cash equivalents at quarter-end, increasing by $731M during the quarter -- consistent with reported free cash flow. Tesla no longer seems to be facing a cash crunch in the near term.
Very impressive.
It remains to be seen whether this kind of profitability is sustainable, especially as more competition enters the market for EVs... but for now, Musk, his team, and his shareholders are looking like big winners.
I agree these numbers are, essentially, a spectacular turnaround over the past 6 months for which Tesla deserve enormous credit.
That said, current assets are $7.92 billion and current liabilities are $9.77 billion. It's one thing to have around three billion dollars of cash at hand, but not as great if you have three and half billion dollars of bills falling due soon.
Tesla's current ratio is below 1, they will need that positive cashflow to remain consistent to deal themselves out of debt in time.
Tesla's debt structure over the next year is complicated, with March 2019 convertibles coming in soon. But in either case, Tesla has to build $920 Million to pay back that loan... among many others in the coming years.
Elon Musk really needs another round of capital raises, either stock offerings or bond offerings. If those are successful, then the company will be in a much better spot. Their cash-on-hand is very weak and is definitely a valid point of criticism at the moment.
Do you realize stock price is still well below the highs? How are the shareholders winners here?
Where things get unhealthy is when people start to push conspiracy theories with "the shorts" controlling media. And Tesla discussions consistently cross the line into conspiracies.
With that being said, this particular comment you've replied to seems relatively tame compared to what I normally see around the internet (and its tame even by the standards of this Hacker News discussion! I'm seeing some "conspiracy level" comments elsewhere in this discussion right now...) . There's nothing really wrong with claiming that the shorts were wrong on Q3 predictions IMO, as long as the author doesn't go full-on conspiracy theorist... it isn't too bad to push the classical bulls vs bears discussion which have gone on for over a century.
I've been quite bearish on Tesla and Q3 changed my mind to some extent. But, it's just one data point, people are biased to extrapolate short-term trends. Does Q3 really change our understanding of Tesla's financial situation?
This is a good big picture analysis (the author is very knowledgable about equity valuation, check him out on wikipedia): http://aswathdamodaran.blogspot.com/2018/06/twists-and-turns...
Positive Q3 was widely expected. Citron Research (one of the more well-known Tesla shorts) was among those who saw this coming and publicly not only took profits on their short position but moved into a long position ahead of earnings.
The scale of the positive FCF is however a big shock. It's not clear at this point how much of this was "real" and how much short-term timing or one-off factors. As a big part of the short case was/is a short-term free cashflow/need for funds story, I'm sure this will be picked over in some detail over the next few days.
The longer-term bear case is simply about relative value and harder to assail with one good quarter. Difficult to take a short position on that basis though.
Hopefully this will give pause to the hate campaign, but for some reason I think it’ll just make them scream louder.
Couldn’t be happier to be scheduled to take delivery of my Model 3 in 2.5 weeks. Should have bought shares too!
>Management also believes that presentation of the non-GAAP financial measures provides useful information to our investors regarding our financial condition and results of operations because it allows investors greater transparency to the information used by Tesla management in its financial and operational decision-making so that investors can see through the eyes of Tesla management regarding important financial metrics that Tesla management uses to run the business as well as allows investors to better understand Tesla’s performance.
as they put it
Edit: Congratz!
Here are the things from wikipedia:
Risks and rewards have been transferred from the seller to the buyer
The seller has no control over the goods sold
Collection of payment is reasonably assured
The amount of revenue can be reasonably measured
Costs of earning the revenue can be reasonably measuredThey claim to remain profitable next quarter. Which is a good sign. I just couldn’t help noticing. I also don’t see an expected revenue for next quarter.
Crossing my fingers for them.
One massive advantage that I'm not sure most people realize quite yet is the Supercharger network. No manufacturer (other than Porsche talking about it recently) has actually built out chargers for their cars. Every other electric car has to rely on a broken, sparse, expensive charger network. Blink chargers and some ChargePoint chargers are expensive in many places ($2 an hour!), and Blink is notorious for having broken charging stations. There's 4 ChargePoint stations in a garage near me that have been broken and unmaintained for years, and they're out of warranty and the mall doesn't have a financial incentive to fix them.
And then there's the DC fast chargers. I'm not aware of a single BEV (Volts or other PHEVs are excluded here) that can travel across the US with a reasonable route without worrying about finding chargers along the way. In fact, last time I looked, there was no physical way I could do a road trip I've been meaning to do through the western US in my i3 (my car, of course, has half the battery range of a Bolt) because of a lack of chargers.
Tesla's Supercharger build out is extremely important to their future. Until other companies step up and install DCFC stations everywhere (and figure out the CCS vs CHAdeMO format war), Tesla is going to have a massive advantage. Sure, not everyone is going to want to do a multi-thousand mile road trip, but driving one of Tesla's cars might make them.
Please don't. It lowers the signal/noise ratio and makes it harder (a lot harder!) to merge threads.
Instead, let us know at hn@ycombinator.com if there are two discussions going on about the same thing. We'll happily move your comment over along with the other on-topic ones.
This is HILARIOUS to see after the thousands and thousands of negative articles and press over the last year.
I wouldn't hold your breath just yet, the last quarter posted a loss, the one before a gain, and the one before that was a loss.
Tesla is showing some signs of long-term capability here, but they're far from out of the woods and into a complete success story.
They need sustained demand domestically, though.
Followed by international sales (lots of pent-up international demand already, so that's not an issue in the short-mid term)
Of course, then they need to start gearing up (read: sink massive piles of cash into) to produce the Model Y, and the Roadster, and refresh/redesign the S and the X.
And scale superchargers.
And scale the repair network.
They're certainly not out of the woods, but I think this is one of the best signs yet that they will make it.
https://pbs.twimg.com/media/DqTLT1SU8AA92uB.jpg
My prediction is they ramp up R&D spend and hoist a slew of consumer products. Or even get into aviation. Such as this drone spinoff from a former battery engineer.
If you are a recent engineering grad, next couple of years will be a great time to join ;)