Musk to review all of Tesla's expenses in new cost cutting plan
reuters.com
reuters.com
This resulted in engineers that would purchase their own equipment and bringing it to work to use because they couldn't wait a month for a $200 piece of equipment. It was common to have lab benches full of used equipment from ebay that engineers purchased to get their jobs done. This created an interested dynamic in the lab when it came to sharing equipment (most of it was not shared). Also, scary to know that since a lot of used equipment was being relied on, a large portion was not calibrated and could be outside spec.
There is a lot of value in creating a thrifty company culture, but sometimes it goes too far and hinders the ability for engineers to do their job. In the end, everyone is responsible for ensuring the purchase they make are wise and necessary for the success of the company.
That's a mistake. You should never pay other people's costs. If the company wants to put itself in a position where work is delayed by a month for the sake of $200 then that is the company's cost to pay.
You're correct that the company should pay, but not everyone is willing to martyr their career over petty cash.
Choose your battles, as they say.
By paying the $200 you've already lost the negotiation. The work you should have done is to demand the resources to do the job the company claims it wants done.
Unfortunately this meant that we later had to fight management really hard to pay for cloud services. We lost that battle.
No, you don't. If the company won't fund the job then it doesn't get done.
I would expect that such a small amount would be approved by someone much closer to the engineers on the hierarchy.
Not to mention what a poor use of the CEOs time!
Not if it keeps him off Twitter.
High growth companies that rapidly expand as they try to penetrate the market and conduct plenty of R&D have lots of exploratory avenues and quickly-signed deals with partners that could easily result in cost saving without affecting the primary business model or the vast majority of workers.
This is different than an older company with zero growth potential trying to find more profitability by choking out their squeeze the pennies from an existing business in order to keep investors happy.
The second case was a company in which every single drop ship order from there customers had to be ordered individually from the dropshipper. Every such order had to created manually and needed managing director EMEA approval in writing.
It sounds like this is a retroactive review, not an approval process. Which should mostly get rid of any waiting for approval problems.
Also, there is no typewriter involved ;)
"It is important to bear in mind that we lost $700 million in the first quarter this year, which is over $200 million per month. Investors nonetheless were supportive of our efforts and agreed to give us $2.4 billion (our net proceeds) to show that we can be financially sustainable.
That is a lot of money, but actually only gives us approximately ten months at the first-quarter burn rate to achieve breakeven. It’s vital that we respect the faith investors have shown in Tesla, but it will require great effort to do so."
With relatively low gas prices at the moment, decreasing federal subsidies for electric cars, and more players entering the market, it seems like Tesla is in a pretty tough spot.
I’m not sure that gas prices matter all that much to Tesla though. Even with the low-end Model 3, it’s tough to save money over an efficient gas car. Tesla’s appeal is based more on their cars being fun, quick, quiet, clean, practical, and technologically sophisticated.
Nothing you couldn't see coming 5 years ago, however.
The trade war might be part of the problem. They need to get the Shanghai factory online.
Plus as an owner, their priorities are just whack. Next update we get a Sentry icon on the main display and, wait for it, animation of rain on the car if its raining. I guess that is better than video games.
A Toyota Camry, scratch that, Corolla, can respond to more voice commands than my TM3 and best yet, you can select through blue tooth or USB the music play list you want to play, and more, all without having to use your phone which is illegal in most states.
So love the car but I have my doubts about Tesla's ability to focus on what is required instead of pissing away resources on Easter Eggs like fart noises; I wish I were kidding
The alternative, potentially better, theory is that everyone is reacting to the same incentives and market structures. Governments are pushing electric vehicles through subsidies and mandates. Meanwhile, exploding use of portable electronics has led to massive improvements lithium ion battery technology. Tesla has targeted a flashy niche market, expensive sports sedans, but has largely avoided trying to compete in the markets where the sales really are: crossovers and SUVs. (Every year, Toyota sells as many RAV4s as all the vehicles Tesla has ever sold.)
In Beijing, I saw a lot of Model S’s on the road in the year before I left. These people would have been driving Audi A5+ or an S-class if it wasn’t for Beijing’s plate lottery (you can get a car quicker if it’s an EV). As far as that goes, the Model S is a good strategy outside of the USA where people aren’t so SUV crazed.
Tesla is maintaining a brand halo by keeping a reasonable minimum range, but the base Model 3 is relatively inexpensive compared to many competitors.
Specifically, isn't this because of CAFE[1]? Gas mileage compliance is calculated per manufacturer. So BMW can keep selling 17mpg M3s as long as they're selling enough of those i3s[2]
[1] - https://en.wikipedia.org/wiki/Corporate_average_fuel_econom
[2] - Which sell for $50K but are like $15K used!
Any comment on whether it's a car that would last to 150,000 miles? I see a warranty of "guaranteed at least 70% capacity for 8 years or 100,000 miles".
Edit: NM, had to widen my search params. I dunno if I'd want to trust a 2015 electric car, though. ;)
And meanwhile, Ford is selling a quarter million F-150 trucks every quarter compared to Teslas total units per quarter around 40k. I don't think the big automakers are worried yet.
[0] https://www.nytimes.com/2019/04/24/business/ford-rivian-inve...
While maybe not "worried" Ford sees a risk.
The difference between Tesla and others isn't that Tesla somehow was the first to come up with these ideas, they were the first to attempt to run a car company like a startup and marketing themselves as a disruptor.
Which in a sense is true because it brought the products to the forefront, but there's a reason that hadn't happened before, because a car manufacturer actually needs to make money on the existing markets. No use in pushing a good idea before the time is right.
Does it really matter?
Tesla is doomed. It’s run out of early adopters and its cool factor is diminishing. The last quarter’s results indicate that demand is down. Supply issues can be spun as a positive, but if demand is weakening...
Combine that with increased competition from a half dozen well established players and the writing is on the wall.
The transition isn't urgent due to oil prices. It's urgent due to greenhouse gases making the planet inhospitable for humans.
But a hydrogen economy feels like it could work when scaled up. Somehow it feels practical as the most abundant element in the universe, with high energy density. Lithium/cobalt reserves are limited, though recycling measures might could solve that problem.
Platinum-group element coated electrodes powered by ~25 year life spans of cadmium/tellurium solar cells (or Perovskite, and many others I'm sure, but Cd/Te is the one I've deployed en masse personally) would allow for low maintenance hydrogen generation and a shift away from natural gas sourcing.
Nafion is necessary for the fuel cells themselves but I'm not sure about the production process behind that.
Not to mention that the equivalent mpg for a Tesla is 100mpg.
Add to that the fact that mass produced grid electricity is massively more efficient and clean than everyone generating energy themselves. (ala internal combustion engine).
It would be like saying that everyone having their own gas generator at home is just as bad as having a single gas power plant that powers the grid.
Sure, there are other sources of pollution like the batteries but "all in", electric cars are still significantly better for the environment.
> A lot of FUD from the media said Elon stated they will only have 10 months left before cash balance is zero. No where in this letter stated such a thing and Elon just used an arbitrary number(in this case the newly raised capital) to express the point that 2.4 billion may seem like a lot of money, but we shouldn't take it for granted. In fact their cash balance is most likely over 4 billion.
> This letter to me shows the maturity of a company. Elon is telling his team that just because I can raise 2.4 billion whenever I want doesn't mean money is falling from the sky. Everyone must continue to be vigilant about cost cutting, and we must prove to our investors that we will take cost cutting seriously.
> From Q1 conference call, Elon alluded that the reason why he is against raising capital all the time is because he wants to focus on cost cutting as the primary objective. So his letter does not seem anything out of the ordinary. > So no, the sky is not falling.
> https://www.reddit.com/r/teslamotors/comments/bq50s8/elons_a...
So it sounds to me that Elon musk does not want Tesla to burn money like Uber. He says they most certainly could, but he would rather focus on cost cutting. This seems to be a very mature reaction, something every mature company does. This makes Tesla less and less like a startup and more like a mature company. Granted, they are not there yet but I believe they could be there very soon.
Elon Musk also always makes things “hardcore”, or more extreme then a normal company would do. Instead of cost cutting over years, he wants it done fast but might underestimate the time it actually takes to achieve his goal. We have seen that move from him many times, when a released the model 3, he gave a very very optimistic release timeline. While he missed it, it was still a lot faster then his original plan to release it in 2020 and still faster then a lot people estimated. While this doesn’t always work out (like his autopilot goals), by setting such hard goals and deadlines, things move much faster then they normally would. Only time can tell if his cost cutting plan actually works but he has shown that such extreme actions can often lead to much better results because everyone wakes up and doesn’t just put it on goals for the next 3 to 5 years list.
That being said, I am not really worried about Tesla. They have shown that they are able to get a lot more money if necessary and their demand is still going strong. The competition doesn’t look very promising (the audi E-Tron is often compared to the 2013 model S, and while it is most certainly superior in some aspects, I believe Tesla is still a few years ahead from the competition).
This is what's not clear, and a major risk factor for them. I think Musk views 35k as the inflection point where quantity demanded sky rockets and he's not been able to get there. Seems like a lot of decisions were made based on assuming that would happen by 2019.
10 months is a weird number and frequency for someone to pull out of a hat arbitrarily, especially the CEO of a public company. Something that lined up with a quarter or a year, ok, but 10 months? Why not 3 quarters, or less than a year?
You get to 10 months when you have a monthly burn rate in mind and you divide that by your available cash and it says 10.
They raised $2.4 billion a few weeks ago, about half of which must go toward servicing existing debt, and had about $900m in the bank before the offering, leaving them about $2.1billion in cash.
Or in other words, 10 months of cash based on the trend established by the first 3 months of the year if they do not either cut losses, dramatically increase sales, or both.
https://ir.tesla.com/static-files/7235e525-db16-470c-8dce-9e...
They aren't because things change and the burn rate for 2018Q2 didn't represent 2018Q3/Q4.
That's $200m/month in net losses during a purely operational stage. It doesn't even include the costs of a planned Model Y launch or self-driving network.
>In Q1, we experienced non-recurring items that negatively impacted our net loss by $188 million.
https://ir.tesla.com/static-files/b2218d34-fbee-4f1f-ac95-05...
The drop in S/X deliveries from the updates to their production lines, discontinuation of the 75kWh pack, and the pull-forward from Q4 of last year due to the reduction in the US tax credit also reduced profits by ~$300-400 million.
Like I said, a single data point doesn't make a trend.
One Sunday morning the entire engineering team was on the manufacturing floor helping the struggling manufacturing team build vehicles and Elon appeared trailing a gaggle of execs. They started poking about and work started to grind to a halt. The engineering lead went over and asked what was up. Elon said that they were wanting to see first hand what was holding up production.
The engineering lead loudly told Elon to get the fuck off the manufacturing floor if he wanted any vehicles finished that day, that the engineering team didn't come in on a Sunday to dick about with execs and they would walk out if the execs didn't leave. If they wanted to talk they could schedule a meeting for Monday morning. Elon shut up and left and the team went back to building vehicles.
The engineering lead left the company several months after the Model S shipped as did most of the powertrain group. Tesla continues to burn through engineering talent, but like Apple, has a still continuous stream of bright eyed naive true believers willing to sign up.
By comparison, Elon claims the drivetrain in the Model 3 is the same unit that they are putting in the Semi, and that they test it to 1 million miles.
Connects with 4 bolts and 3 wires. Drops out for easy service, it’s an extremely impressive piece of tech;
https://www.teslarati.com/tesla-model-3-drivetrain-design-el...
The original letter says the 2.4 billion raised a few weeks ago, would be used up in 10 months at current burn rate.
It's for the money recently raised, not the entire company's bank account. Headline is misleading
Of the $2.4 billion raised, about half must go toward servicing existing debt, and with the money they already had in the bank (about $900m), they have about $2.1b liquid cash to see them through the next 10 months, assuming the same burn rate (losing $200m/month).
Granted, I am sure Elon exaggerates numbers, but shouldn't that be factored in?
Are those statements incorrect?
The shorts are everywhere and they are not reliable.
The original post and every article online is citing Elon's email
Sensational headlines declaring Elon says Tesla will die, are headlines that generate clicks and views
Followed by a massive quarterly loss of $700MM and the pronouncement that the company has less than 10 months of cash after raising money (which we were also told would never be needed again). Can someone explain how that happens?
If they could have snapped their fingers and manufactured as many as they needed, I would guess based on passenger vehicle sales numbers, they could have sold 300,000 in a single quarter at that price. They barely build that many in a year.
I’m sorry, you were never going to see a Model 3 for $27,500. With the way the credit phases out, they could never have built up the capacity to fulfill $35k orders under the full credit, just to have the price then spike as the credit phased out and be left with huge excess capacity as it came back to full price.
You may have missed out on the deal of the century. Sorry to hear you are missing out on the car of the century because of it!
Mind me asking what EV you would get in its place?
"The most you could said is that [Tesla] executives were too optimistic. They presented a better face to the situation that should have been presented in the final few months, but then, if they didn't do that, it would have become a self-fulfilling prophecy - as soon as a CEO says I'm not sure if we'll survive, you're dead. You know, I think people are making too much of this [Tesla] thing."
https://www.cnbc.com/2019/01/30/musk-says-tesla-cfo-deepak-a...
Who then maintains the proprietary software that keeps the vehicle running?
There are a number of Tesla vehicles out in the wild that for various reasons no longer connect to Tesla and do not receive over-the-air software updates. Some of them are running software versions that are now several years old.
Sure, they don't get the latest software features or UI design, but as a car they still work just fine.
For example, my 1999 VW has a mechanical headlight switch, dead simple mechanical starter engagement, manually-controlled climate controls (there's a direct physical connection between the dials and the flaps), electro-mechanical wiper control relay module, a basic self-contained radio, manual windows, and directly switched interior lights. Heck, the only thing that is computer-controlled is the engine timing, fuel injection, turbo actuator, dashboard dials, ABS, accelerator pedal/cruise control, airbags, and locks. And my car is hardly out of the ordinary.
You could lose features that depend on connectivity, but you’ll still be able to drive.
If someone does it I would imagine they would charge for it. Considering Tesla is considered a luxury brand there would probably be a decent business there.
I mean, if the value of the underlying asset is suddenly reduced, you'd expect delinquencies to rise markedly.
Another is Tesla had ~$2B Cash before the raised, ~$2B Receivables, and newly $2.4B Cash raised. Not sure on Net total, and he $200M / month burn rate is only last quarter figurer and not a representative trend.
I don't know which one is right or which one is wrong, I don't have time to dig out figures either. But this proves even basic numbers that are wrong ( Assuming one of them are ) could easily be spread out.
That said: come on, people, Tesla isn't filing for bankruptcy. There are hundreds to thousands of perfectly normal financing options available to run a company with revenues like this that will stretch a cash shortfall into a decades-long decline. And that's assuming that their revenue won't continue to grow.
This is a story you cite if you want to "prove" that Tesla won't take over the world or is eventually going to be passed by Toyota or whoever. Large corporations just don't die like this.
I still don't understand the community of people who... really, desperately want Tesla to fail. Is this a politics thing about EVs? A reverse cult of personality around Musk? Hipster group think? It's really unsightly.
It doesn’t really matter whether it is Tesla or Uber.
I think the point was that by the time it gets to you there's hardly anything left though?
MG Rover Group collapsed pretty spectacularly.
He was entrapped, but he certainly said yes to bankrolling a cocaine smuggling operation, there's a recording of that event. While that was enough to escape conviction, it still cost him money and reputation at a time when he couldn’t afford it.
11 U.S.C. § 507(a)(7) provides the priority for Customer Deposits: “The following expenses and claims have priority in the following order: … (7) Seventh, allowed unsecured claims of individuals, to the extent of $2,600 for each such individual, arising from the deposit, before the commencement of the case, of money in connection with the purchase, lease, or rental of property, or the purchase of services, for the personal, family, or household use of such individuals, that were not delivered or provided.
The Ford-Mazda partnership that ended around 2015 is one possible model.
I'm more and more convinced that we need strong, supportive policy to transition to a carbonfree future in time to avoid the worst effects of climate change, and that the current political situation looks incredibly grim from that perspective. It's pretty common for states nowadays to pass punitive taxes on EVs as "compensation" for lost gas taxes, universally over-estimating the number of miles an EV driver typically does in a year: https://www2.greencarreports.com/news/1123069_1000-illinois-... https://cleantechnica.com/2019/05/17/whos-behind-the-war-on-...
China has incredibly supportive policy for EVs right now. From a purely industrial policy standpoint, we're close to strangling our own nascent EV industry with the sunsetting of the EV tax credit and all these new punitive state-level EV taxes. (Few Bolts are made, the Volt was recently canceled, and Tesla is struggling after having to deal with roughly a $3750 impact on their car price, soon to be increased to $5625 and then $7500... many of the rest are compliance cars or are available only in extremely limited quantities.)
If things don't change soon on the political front, it could be really bad. For the US and the world.
Edit: Why did people downvote this question lol
Seriously though the car will still be a car even in 100 years. It will drive.
You think it's reasonable that the CEO of 3? 4? Multi-billion dollar companies is personally signing off on company expenses? It's unfathomable to me.
They've guided for a "significantly smaller" loss in Q2, and positive cash flow in Q3 and Q4.
With $2.4 billion raised, $2.2 billion in the bank, and $2 billion worth of payments coming from Fiat Chrysler cash is not as much of a concern as the headline would suggest.
Tesla cannot be possibly dying out. Don't you see Tesla cars everywhere in the US? yes they are spending money, buying things to grow as they are so incredibly successful they cannot satisfy demand. Dying out? you make me laugh.
If you spend 10M dollars buying equipment that in a year is worth 100M dollars, you are not dying out.
No I don't, might see one once a week or month. They're common in Silicon Valley but that's a small fraction of the US.
edit: Tesla has sold something like 300k cars in the US which comes out to under 0.15% of all cars in the US. So basically, negligible. And a third to a half of that seems to have been in California. So in most of the US you'd need to look at on average 2000 cars before you see a Tesla.
Tesla Model 3 outsold them all in 2018. Not cumulatively, but the Tesla Model 3 was the top selling luxury car in the US in 2018.
I see them everywhere in Silicon Valley. When I go to other parts of the US I rarely see them.
And on the lower end a friend has a Renault Zoe. An excellent car on all accounts. I saw a base level black model 3 the other day parked and I tought what a cheap looking car, it was truly underwhelming (where I live there aren't many Teslas). Then I saw that it was a Tesla which costs about 50000$ here...
I don't care about model S ludicrous mode acceleration, nobody actually needs that kind of acceleration from traffic lights. Well maybe if you have low self esteem and try to compensate for something?
2. I work in automotive. I was a the room with 3 VPs from a BIG 3. They weren't threatened by Tesla (right or wrong), they merely agreed that some day soon Tesla was going to learn "how hard it is to build a real car". Knowing the backend, and understanding the difference between acceptable failure rates on say a McLaren 570 vs a Toyota Corolla. What they meant was it's one thing to ship a few cars, it's another to get where Tesla seems they need to be to get profitable. Just an anecdote.
Many people do know...Depreciation is subject to specific tax and accounting rules. While for tax purposes some (but not all) of Tesla's spending is immediately depreciable, for accounting purposes, none of it is, so their tooling costs must be depreciated over the useful life of the equipment. Depreciation also isn't relevant to a discussion of cash flow, as depreciation is merely an abstract number representing estimated wear and tear.
And the point is, it’s foolish to assume that what happened last quarter is what will happen this quarter. If you don’t think so, please show me the billions you’ve made in the stock market.
And with Tesla and Elon Musk especially, it's extremely foolish to assume that Tesla will meet any of the benchmarks that Elon has ever set...since they never have.
Right now, Elon is saying they have 10 months until cash runs out. And knowing Elon, that's almost certainly an overly optimistic prediction since it doesn't take into account the increased burn rates necessary to launch the Model Y or the self-driving taxi fleet, so less than 10 months. If Tesla doesn't raise additional capital by the end of 2019, they won't see the end of 2020 as a going concern.
"the problem I see is not that Bill Gates has shaped the world of useless trinkets in software, but has also managed to spread his competitiveness and his personal fear of losing to imaginary competitors to businesses and homes everywhere, so now everybody is _afraid_ of losing some battle which isn't happening, instead of getting about their own lives."
https://www.xach.com/naggum/articles/3141310154691952@naggum...
This discussion has reminded me that your oft-quoted "quote" doesn't seem to originate from any actual translation, but is a rephrasing of a bit of chapter 1, where it says "Therefore, when able, seem to be unable;" followed by a lot of other things. It's also worth pointing out what immediately precedes the 'therefore', which is: "Warfare is the art of deceit."
That simple line left out of the version you quoted is crucial. Context matters, and applies for quotes even when the original is in English (see the full context of Knuth's premature optimization quote for instance). The context here is about deception in war. At best you could extrapolate it to situations where deception against your foes is needed in general, but even that is stretching things, and certainly doesn't apply all that much to publicly traded companies like Tesla. The closest analog for them is guarding trade secrets. Besides, deception is usually frowned upon outside of armed conflict, and if a public company deceives the wrong people about the wrong things, and gets called on it, then the company and its higher ups aren't going to have a good time. For example, cooking the books to 'appear strong' would be a rather egregious deception.
Some forms of deception can have a more legitimate purpose in certain business dealings, it's true, as I'm now reminded of Gates' love of poker and some of his great bluffs in MS's early days. Though the consequences of failure wouldn't have been beheading. I'll quote the rest of the paragraph from my translation though and let you decide if Sun Tzu has anything to say about this narrow form at the poker table or when trying to arrange multi-party business dealings promising future deliveries:
"when nearby, seem far away; and when far away, seem near. If the enemy seeks some advantage, entice him with it. If he is in disorder, attack him and take him. If he is formidable, prepare against him. If he is strong, evade him. If he is incensed, provoke him. If he is humble, encourage his arrogance. If he is rested, wear him down. If he is internally harmonious, sow divisiveness in his ranks. Attack where he is not prepared; go by way of places where it would never occur to him you would go. These are the military strategist's calculations for victory--they cannot be settled in advance."
Demand is dropping off as (a) serious competitors come onto the market e.g. Mercedes EQC, (b) the time between a model refresh increases e.g. S and X models and (c) the concerns over customer service increase.
And I still believe that the Model 3 was a mistake to release at this time. It is cannibalising their higher priced models and squeezing the company's overall gross margins at at time when they need money.
I checked EQC, it still felt like a compliance/test vehicle compared to Taycan, which Porsche has been testing in several continents under extreme weather conditions for over a year now.
Personally I view any Porsche bigger than a Cayman as an abomination, but that doesn't fit with the demand for the company to constantly grow.
From this perspective the roll out of Model 3 was to be sooner rather than later. The 3 is an extremely good product that makes the S/X models appear dated, so it is a single model company really.
For the save the world vision to work that means selling as many Model 3's as possible and encouraging all other marques to be going carbon neutral too, with electric power being table stakes.
1. Is anyone still buying car? May be it's a huge necessessity in US but most of the cities are fairly packed and have good public transport and improving
2. Idea of self driving car will indeed be a big selling point. Still people will pool those and cost of transport in general will come down because of Uber's fleet. Self ownership will still not go up significantly unless idea is to buy for long distance travel (not city travel)
3. The rumors this could be beginning of Tesla being taken private by EM has merits, considering his recent spat with SEC
Is this like....a joke? I mean I get it - I used to live in a big city where owning a car just seemed stupid and wasteful. But once you live outside of the metropolis, where yes, there is public transport(in a form of a bus or two going every two hours), and you have kids and things to do, then yes, cars are still a necessity.
Kids today just aren't imaginative anymore.
2. Proper self driving cars are years away. Autopilot given the recent crashes are going to see some regulatory investigations and I suspect will be curtailed. Not that any of this is relevant since we have Uber today and not everyone is switching exclusively to it.
3. Tesla can't afford to go private.
an opinion piece in the Los Angeles Times today noted that the number of riders on the Metropolitan Transit Authority lines has decreased recently. people in LA, despite very severe traffic, are still willing to take private vehicles when they can. as the article notes, one reason is that about 20% of riders (reporting in one survey) said they had been sexually harrassed while riding the MTA.
"Metro is hemorrhaging riders. It needs to stop studying obvious fixes and start acting" - https://www.latimes.com/opinion/livable-city/la-oe-berker-la...
Cities like Houston are very much automobile cities. A large amount of the population lives in suburbs not well serviced (or serviced at all) by public transport, aside from park and rides to get into the city. I wouldn't call it good either - the commuter buses aren't bad, but the rail is scarce and feels very risky (https://abc13.com/travel/metro-promising-new-enforcement-too...), and the city buses feel even sketchier.
(I take the public transport into and out of Houston 3-5 times a week)
Yes and people still watch TVs even if you haven’t owned one in 15 years....
But just a little googling. 80 million worldwide.
https://www.statista.com/statistics/199974/us-car-sales-sinc...