"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.