Elon Musk admits Tesla car quality flaws, says mass production is “hell”
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He normally lives in an area where winter temps are at a low of 40 F (~5 C). He came to visit, an I live in an area where temperatures routinely go above and below the freezing point of water. I also live in a very humid environmant (close to a large body of water).
My brother plugged in his Tesla overnight to charge, and the morning he was suppoed to leave, the charger would not come out. After after 15 minutes of searching online for a fix, it turns out that it is surprisngly common that the charger was frozen into the charger! Thankfully, we had a hair dryer and were able to unfreeze it.
I share this story because I an frankly surprised that for buying a new tesla, something like that was not tested and/or accounted for, and frankly makes me worry about buying one, because I wonder what else they do not test/account for.
I don't have enough experience in California to say just how cold it gets in some parts but it certainly does snow in mountainous areas.
What I am getting out of your comment is that their weather doesn't go below freezing (which as a sister comment pointed out, California has plenty of places that are cold and snowy), which was my point. They don't have a test plan to include testing their cars for regular usage (I would think plugging in a car charger outside of a garage qualifies as normal usage) in weather conditions that a significant portion of the US population in fact have (weather conditions below freezing and humidity), but such weather conditions are not in their area.
What else is their test plan missing then?
Would be shocked if Tesla did not have this capability.
So who knows if this is part of their testing and validation, but it is not true that you can’t test for different environments than where the core design takes place. It is extremely common to do this in rapid fashion without having to transport things to an alternate climate.
"Designed in Chennai and Winnipeg."
They'll probably be going through growing pains for years to come. Rapid expansion at the cost of quality. However, they clearly don't have a demand problem as people are willing to tolerate these issues, for now.
Instead, preferring to reinvent manufacturing, one poorly assembled $75,000 car at a time.
Besides, the quality issues are mostly cosmetic, structurally the cars are very sound. Look at crash test data if you don't believe me.
Some of Tesla's vehicles are priced to compete with Porsche, high end Mercedes, high end BMW's, Land Rover's, etc. The things all those car manufacturers have in common is quality fit-and-finish on their expensive vehicles.
When your brand new vehicle has mis-aligned body panels - it does make you wonder what else is mis-aligned that you can't see...
Body panels being mis-aligned isn't some new manufacturing technique Tesla is experimenting with - that's just plain shoddy workmanship and a total lack of quality control. You cannot just hand-wave those issues away, particularly at the price point Tesla has maneuvered into for even their less expensive offerings.
[1] https://teslaownersonline.com/threads/pre-delivery-panel-gap...
[2] https://teslamotorsclub.com/tmc/threads/body-panel-alignment...
[3] https://teslamotorsclub.com/tmc/threads/panel-mis-alignment-...
If you watch tear down by Sandy you can compare old Model 3 manufacturing and the new Model 3 manufacturing. There is a lot of changes in welding techniques, amount of welds etc. everything gets simplified and more streamlined. With one piece casts as the final goal.
Are we to believe Tesla has zero QC? How do things like this occur? These are all solved problems companies like VW figured out decades and decades ago... Tesla is just insisting on figuring them out on their own all over again.
It's not like there are hundreds of books on the Toyota Production System. It's not even a secret. He had to actively ignore it.
https://www.forbes.com/sites/joannmuller/2018/02/16/tesla-th...
Also in the TPS you only automate processes that you know exactly how to do manually. Elon tried to start with automation from the start, ignoring that automation of processes you only know partially ends up multiplying your quality issues.
I highly doubt QC was sending cars out they didn't know about - it simply was too time consuming to manually fix, so they only fixed the absolute worst ones and hoped most customers wouldn't care enough to force them to fix later.
Tesla is some mix between car company and software company. Someone did a calculation where it was cheaper to ship now and take a hit on the % of customers they upset. That someone obviously was completely vindicated in their decision - the vast majority of their current customers apparently do not care enough body gaps to stop buying.
You can buy a $20,000 car and still expect body panels to be aligned correctly.
These quality issues Tesla is having are the absolute basics for automotive manufacturing. There's no reasonable excuse here...
But it's subjective. I have friends that prefer an EVs with tech gadgets. And they're happy with their Telsa.
Feels like an efficient market to me. There's lot of car options at different price points and quality standards. Clearly a lot of Tesla's customer are happy with their offering.
Of course not, that would be absurd. Tesla has enjoyed a ravenous fanbase for quite some time - majority of which might be willing to accept shoddy workmanship just so they can claim to own a Tesla - that doesn't make it right nor okay.
Like I said earlier... the quality issues coming out of Tesla have no excuses. They are the absolute basics of production automobile manufacturing. The basics.
30 seconds spent in QC would catch mis-aligned body panels... but they allow them to go all the way out to customers, and then pretend they had no idea what's wrong if the customer tries to reject the vehicle.
These things are not mutually exclusive - you can simultaneously be in love with your Tesla while also being disappointed at the lack of fit-and-finish and quality control.
I'd rather have a misaligned panel than a garbage infotainment system since my interactions with the infotainment are significantly higher. I'm assuming you don't check 99% of the cars you see for panel issues, but if it's a Tesla, you do - it's kind of a self-fulfilling prophecy.
While Tesla can probably improve its manufacturing and QC processes over time (as they have), other OEMs have it much harder with insourcing half the vehicle components back in-house while developing great software capabilities.
But it also has to be said that since Tesla has come up with a lot of new solutions that nobody else is using. Meta Casting being a nice manufacturing example.
Its easy to shit on somebody for doing something new, but that very sprit made it possible for Tesla and SpaceX to shake up their industries in the first place.
If Tesla had done everything like other car companies, they wouldn't be close to were they are today.
The same exists with buildings. Door and window placement is messed up all the time, despite being a few millenia old art.
It seems fields never really mature, they reach maybe some 90% level and can stay there at best. No problem is ever really solved. If you look away, it might actually get worse.
Meanwhile outside the Tesla/Musk bubble, traditional car companies do not have QC issues like Tesla’s and are even outselling Tesla in major EV markets like Europe.
At least Musk is finally admitting to the QC issues.
Wait for cars made in Giga Berlin that will be exempted from tariffs.
They are because among other things Tesla has 10% tariffs.
The top selling EV in Europe in 2020 was the Renault Zoe, Volkswagen is catching up fast (they sold 56k ID 3 despite only going on sale in the second half of last year VS 85k Model 3 over 12 months), Tesla model 3 was second, but numbers are dropping.
If we are talking about quality, I think the new BMW and Mercedes will take the lead in the segment Tesla is being marketed right now.
Tesla numbers are good thanks to Norway buying a lot of them.
The fact that Model 3 is second only to a car almost half the price is kind of crazy.
And Tesla will probably drop this price by some 5000 euro as soon as they will start production at Giga Berlin.
Also, this decade will not be about EV vs. ICE. It will be about self-driving.
My guess is that Tesla will have robotaxis driving all around the world somewhere after 2025, but before 2030.
Traditional car companies have no expertise in software as they themselves admit.
You are probably not accounting for VAT
AFAIK self driving as in unattended driving is not big in Europe, given that most of the driving happens in crowded cities and country roads.
Self driving is welcome on highways, but almost any modern car have some kind of auto pilot system that works well enough.
> Traditional car companies have no expertise in software as they themselves admit.
That's simply not true anymore.
All manufacturers are working on it, Honda will release a level 3 at the end of March this year, Tesla is a level 2 (if I am not wrong)
p.s. I am from Italy
Nobody is able to do true self driving like a taxi in city today. But it will be possible in this decade (I have 95% confidence) and it will be happening in Europe as well. Whoever achieves true, reliable, widely deployed self-driving first will crash competition. Car ownership will effectively disappear in the decade after that i.e. 2030 and later.
as a former car owner that has been car-free for 7 years (using only car sharing and short term rentals) I sincerely hope you're right.
Note that the subsidies can be up to 10k here in Italy, but that's true for Tesla as well.
In the UK at least they will not only have to work fine in very busy roads but also be fine in country lanes which are often very thin, very green, and pretty fast - this will be disproportionately a problem for Tesla's because this is where the rich live.
Just like how they had a cross country summon in 2017, coast to coast drive in 2018, and tesla network "robotaxis" by 2019 already?
But Tesla is making progress. Maybe even more importantly, the world is making progress on fundamentals of machine learning. If you want more reliable estimate than Musk, then you can check forecast aggregators with established track record [0]. I've asked "When will Tesla self-driving taxis be available to Metaculus users?" [1] Metaculus being the forecast aggregator. Community predicts 25% before 2024, 50% before 2026, 75% before 2029, 95% before 2035.
I'm personally more aggressive and predict 95% before 2030.
[0] https://www.metaculus.com/questions/track-record/
[1] https://www.metaculus.com/questions/5304/widely-available-te...
And as soon as a prediction doesn't come true, they rejoice and celibate assuming because it hasn't come true in the original timeline it would never happen.
When SpaceX couldn't land the Falcon 9 for a couple years the amount of industry insider and SpaceX haters who celebrated was amazing to see, and now landing and re-flying boosters is beyond boring because it is so common.
I have seen this cycle so many times now. So, I guess sit around and feel superior for now, be sure in the fact that in 2027 nobody is gone remember all your comments.
Tesla has 23% of the global BEV market, that is the same market share as 2019. And many of those other cars are small low range city cars. So in terms of BEV revenue Tesla is much more then 23%.
Tesla has focused on the US and China first. While VW and others had to focus on Europe first. To use that fact and argue 'even outselling Tesla in major EV markets' is just disingenuous.
Next, it simply not true that traditional car companies don't have QC issues. If you look at analysis you will see that other expensive cars are often not so much better then Tesla. In terms of safety, battery and drivetrain, we have seen traditional car companies have lots of issues.
Also, Tesla is not using market share in Europe because of Quality issues. That is simply what Tesla hater want to believe because it fit the narrative.
Tesla is pretty much going through the same thing all automakers go through except it's "Tesla." Sure if they hired a few engineers out of retirement to consult they could have identified a few of these issues, but then they wouldn't have released before the balloon went up and the bulls gored them.
Generally, this isn't Tesla's biggest problem. Delivery, support, and maintenance are the big ones they are losing out on. That's what's making this recall such a big issue for them. They didn't have enough dealers to make repairs or spare parts which is why they are dragging their heels on recalls. But they are catching up there as well in typical Tesla fashion.
Sure they will piss off a few car owners, but people tend to be REALLY loyal to car brands. Just ask any Porsche owner who spends more time at the mechanic than on the road.
Even new designs have better fit and finish. The old automakers do know more about manufacturing.
Software is another issue though.
True, but 1980 was more than 40 years ago. The cars since the early 2000s have been trending towards cheaper parts, lower quality transmissions, and turbo charged low displacement engines. They are dialing most cars production costs down until they last just long enough for the warranty to run out. Most car manufacturer warranties don't even have more than 60k miles.
As an aside, car companies actually consult for others industries because they're so good at manufacturing. When I worked for a big defense/aerospace company I got a tour of their satellite assembly and they actually paid Honda to come in and improve their manufacturing pipeline. They claim the changes sped them up and lowered bugs found after manufacturing.
This does not excuse Tesla, I do own a model 3 from September 2018 and still find it a great car, but the idea that other manufacturers don't have problems is ludicrous. Ford had to issue a STOP SALE on Mach E because of issues.
Tesla has introduced so many innovations from OTA which other manufacturers will have to adapt to as well remote vehicle services which for the most part you cannot get elsewhere. VW suffered a lot of issues on this, their software stack is apparently really a mess.
https://fordauthority.com/2021/01/ford-issues-mustang-mach-e...
It helps that they have money that allows them to delay shipping one of their models, if needed.
When we release new cars, there are huge production line issues and inefficiencies. There are a huge number of little things that add up, and most of this wisdom is held by people who have been these companies for a life time.
I am surprised that Tesla hasn't acqui-hired a smaller automobile company just for knowledge transfer.
Now-a-days, they pretty much take parts from higher-end / niche cars, and put them in production vehicles. In such cases, a car that's a Frankenstein's monster of generally reliable parts will usually be reliable, even in a version 1.
But if it is brand new, brand new...you might want to be cautious. Especially if it is a convertible or a car in a new segment that they didn't cater to before.
Lastly, some sub-brands are too important to tarnish even in a version 1. Civic, Corolla, Rav4, Wrangler and similar bread-and-butter models go through significantly higher scrutiny and are generally safe to buy in any version.
Where I was wrong is that I thought the market would punish them heavily for that as customers for a car in this price range would care. I totally missed that the segment of rich people with enough disposable income to buy an average electric car as a statement was big enough to be viable. So, well played Tesla I guess.
But the customer satisfaction scores were off the charts. It was the right mix of things. I suspect this is what’s boosting Tesla.
The overall experience is beyond what other companies are striving for.
Software features, like cut and paste, can be added later. Indeed it was.
But Tesla is getting fundamental build quality issues wrong.
“Fundamental build quality” must be subjective because it is not getting in the way of orders.
From the sound of the video, the problem seems to be variant, with paint problems one month then fixed the next.
The examples I gave for iPhone are representative of customers overlooking obvious problems.
The iPhone’s EDGE only internet, terrible screen resolution, low battery life.
These were hardware (and sw) based limitations of mass production that customers overlooked and apple handles in later gens.
You have to look at this from the perspective of Windows mobile users at the time. I.e the Wizard. That is what people who don’t get Tesla are using right now.
This is pretty dismissive. I'm not sure how many Tesla owners are trying to make a statement, nor are all Tesla owners over the moon with the product. You can see a prior comment I made: https://news.ycombinator.com/item?id=21173756
There is probably much wider variation in Tesla quality than other car manufacturers, as the Model Y stories (detaching roof, hardware store wood trim hack jobs to hold assemblies) suggest. Their lack of respect for "legacy" practices throws the baby out with the bathwater. There's lots of valid criticism for Tesla.
All that being said, if you get a unit without the worst of those issues, you quickly learn to see the bigger picture and realize no competitors have yet built a comparably-capable EV. That is what drives the sales. They are here today.
EVs are not for everybody. But if they fit your automotive use case, when you need a car for transportation duties rather than the kind of pleasure that comes from driving a high-performance combustion-driven vehicle, they are so clearly the future. It's like using an LCD flat-panel monitor with a VGA connection in the early 2000s. Even before they got to the high standards they have now, those early units presaged that LCD monitors were obviously going to make CRTs obsolete. Tesla cars are the automotive equivalent of those LCDs. And it will be great for the consumer when Tesla no longer has the enormous lead that it still enjoys (years away).
Well, actually, I found your post to be mostly in agreement with me.
> There's lots of valid criticism for Tesla.
So it could be said they are an average car (in the sense that their quality is neither exceptional nor bad enough to be considered poor).
> EVs are not for everybody. But if they fit your automotive use case, when you need a car for transportation duties rather than the kind of pleasure that comes from driving a high-performance combustion-driven vehicle, they are so clearly the future.
We do agree they are the future, keyword being future. If you buy one today that's what you want to be seen as buying and are ready to suffer the pain points for it. That's what I call making a statement.
Most people would interpret "making a statement" to be a matter of signaling to others. I tried to make clear that people who buy these cars appreciate the benefits to themselves as the ones that drive and experience it, and that it has little-to-nothing to do with signaling to others. Early on in Tesla history, particularly with the Model S, I think you could argue there was a signaling element. Particularly well into in the Model 3 era, I don't think that holds to any major degree.
It was technology. It was cutting edge. The potential was instantly and tangibly apparent.
There was definitely an "early adopter" feel to it as well. But you were hopping onto something fundamentally different that yet another turbocharged BMW with 400HP and leather.
I guess you either drive in one and get that feeling, or, well, you don't.
People looking to spend a lot of money on a car that isn't used are going to look for something that justifies the cost. A lot of people look at BMWs and think that's a waste of money, you can get a used german auto, a cadillac, or similar. The Tesla has instant differentiation.
Sure the big companies are talking a big game about getting into EVs...
People trump up Rivian and Lucid as "they'll show them how its done". Ditto with Porsche, even though I have great faith in their engineers eventually.
With whose battery factories? You could say the same about Lucid, VW, GM, Hummer, Cadillac. VW is at least starting on this, as is the EU, but they are behind.
It's like a small group of knights walking up to an army challenging them to a fight. Sure they may have slightly better armor and weapons, but an army is .. an army, and they get to say "you and what battery factory?"
I used to think that the possibility for solid state batteries would close the gap overnight, but I suspect that steady progress on lithium ion cells will simply match/outpace any headline splashing battery tech.
Tesla still has a big big lead in the battery, drivetrain, and architecture over the new players. The chinese companies are likely the biggest competition over the next 10 years.
Aside from VW, I don't have faith the execs will follow through on what is at least a decade long push. They're all just dabbling, and we'll see what happens when activist investors, earnings misses, stock options lost, and CEO turnover happens.
Turned out that there are huge number of issues when manufacturing an automobile. And that the knowledge to prevent or resolve a lot of those issues exist only in the heads of people who have gone through it before.
The build quality of early Tesla's was... not great. And while my understanding is that it has improved quite a bit in recent years. That said, most people in the industry seem to feel that Tesla still has a ways to go before they are "world class" in build quality.
Take advice from Toyota, and stop your production lines when something's wrong. If the same thing is wrong again and again, fix it instead of just churning out terrible looking vehicles and hoping your customers don't care.
To quote my mom, "Whining about it won't fix it."
Yes, because the immediate value and pending sales numbers are the only metrics that matter. Reputation, repeat business, and the company health beyond the existing sales pipeline appear to mean nothing anymore.
</rant>
He gets flak for when he posts things like this on twitter because "omg, the stonks!?" but I find the criticism more indicative of systemic problems with the fiduciary duties of publicly traded companies than something Elon is doing wrong.
It seems like the impulse to just speak some blunt truth is as likely to be off the target as on.
So say I buy a Tesla, and I have some sort of manufacturing issue. Can I go to a Tesla service station to have it fixed? (Once again, I genuinely don't know, and I am curious actually).
If they are taking steps to fix it, I would applaud them as well, but I would not be happy to spend money on a Tesla, have an issue, and have these sorts of issues awknowledged, but then be stuck with said issue.
Tesla runs service centers and dealerships across their sales area.
More shocking to me is that some people will accept (new!!) from Tesla cars with paint and panel fit this bad. Some of the Model Y examples in my neighborhood are truly shocking - several of them the rear hatch door just does not sit flush at all when closed, yet the buyer still drove it home?
If a dealer sells you a brand new car with paint and panel fit issues, it's probably a good idea to refuse and request one free of defects. Sadly there are now some online checklists for buying Teslas that walk you through the most common cosmetic defects so you can spot them at pickup time (sad because this should not be necessary).
I think the problem is that the general trend is to put people either into the "good" or "bad" category in total. This doesn't allow to recognize that people are flawed and do some good and some bad things. Instead people want to perceive them as always good or always bad.
You see the same in politics. A politician does 10 things of which you make like some and not like others. But a lot of partisans bend their minds to like everything a certain politician does or hate everything he does.
> He is pretty honest
"pedo guy"
Like, yeah, who knew mass-producing quality cars was way harder than it looks at first? How about the millions of people who’ve been doing it for a century?
What, specifically, is the moat that they are behind? Auto manufacturing is one of the leanest and most competitive industries in the world.
If they “got lazy” how come many manufacturers are still better than Tesla at basic fit and finish and hardware reliability? Do we suppose that Tesla is even lazier? (I don’t think that Tesla is lazy at all; I’m pointing out the flaw in using “laziness” as a metric.)
A car is a collection of many things. Musk properly understands the impact of Tesla’s electric drivetrain. He underestimated the sustained difficulty of manufacturing the rest of the physical car at scale, just like you are.
It’s tempting to look around the world at things as they are, and think that they must be easy since they’re already happening. People have been building cars for 100 years! How hard can it be? The truth is, a lot of what we take for granted in life is delivered through continuous effort against sustained difficulties.
Tesla is certainly not the only carmaker who struggles with automation and quality. Musk does seem like the only carmaker CEO who is regularly surprised that those things are hard.
Obviously I'm being slightly facetious, but surely nobody can be impressed with the innovation of car companies over the past 30 years.
With many things, Musk was right. Both in automotive and in space, people 'insiders' have many believes and many of them turned out to be wrong.
SpaceX and Tesla got where they are by breaking conventional wisdom and if they had not done so, they wouldn't exist any more.
It so happens reinventing mass manufacturing was not as easy as other things. Tesla is still working on it, and they are making improvements that other car companies have not thought about. With each factory and each now Model of car they are interdicting improvements.
The very guy who does the interview with Elon that this information is built on was the former lead engineer at Ford and he believes Tesla is improving faster then anybody. He is incredibly impressed with the engineering and manufacturing at Tesla and how fast it is improving.
See: https://youtu.be/BwoiFC-HwPE?t=273
- Structural Battery Cell (Packs are structural in some cars, not cells)
Eventually these two things together will basically be the main part of the car. This is nothing like anybody else does it:
https://cdn.shopify.com/s/files/1/0173/8204/7844/articles/1_...
- Fully integrated heating/cooling system 'Octovalve' (https://www.youtube.com/watch?v=eGffUODWWSE)
- Unifying chips to central computer
- Stainless Steel Exoskeleton
You can see a full breakdown of a last year Model Y here (same guy that did this interview with Elon, was very critical during Model 3 and impressed now): https://www.youtube.com/c/MunroLive/videos
That is of course only for cars, the improvement in battery production that Tesla has made are arguably more interesting. A whole video series on this: https://www.youtube.com/watch?v=_ZQ5OmYf-Vg&list=PLyvdbTy3v1...
SpaceX did everything it could to collect and leverage what was known about making rockets. They climbed as high as they could onto the shoulders of previous efforts before they started inventing. Remember, Musk started out trying to buy rockets. It was only after he had done all that research that he started to realize that he could make them instead.
With Tesla, Musk did less of that. He allowed himself to think that since automakers couldn’t see the obvious opportunity in electric cars, they were hopelessly outdated in everything. Turns out that was wrong; carmakers do actually know how to make cars. This is evident in Tesla mistakes like buying a production line and not proving it before trying to use it in production.
Musk is extremely smart and Tesla is full of smart people. They are making huge strides and maybe their manufacturing ops will pass existing automakers someday. But they haven’t yet (despite the hype), and I think they would be in even better shape today if they had been a bit more humble and done a more thorough job of tapping what was already known about automaking.
The majority of articles about the Nevada factory still use the fake render of that factory rather than any actual images as just one example of the enablement of the lies and fantasy around the company.
The argument that everybody around Elon is a Yes men is also just nonsense, Tesla tries to do difficult things and sometimes they manage it and sometimes they hit delays. Tesla did actually hit their manufacturing goals eventually. Maybe a half a year later then Elon hoped but it did happen. And if you look at Model 3 in Shanghai, its much better. Model Y in Fremont was better and Model Y in Shanghai is better again. These program hit their goals pretty consistently. Tesla is clearly improving in their ability to execute mass manufacturing.
Nevada equally worked out perfectly. Its literally being cooped by everybody. Your criticism has literally nothing to do with Tesla, but rather with the media. The factory targeted 35GWh capacity in 2019, and it managed that in 2020. Its beyond that now. The building is only supposed to be complete, once its producing 150GWh.
Nevada hit both cell production targets and meet all state contracts in terms of employment numbers.
This isn't a very convincing argument.
I don't know if the market evaluation is right or wrong but Musk is clearly making cars that many people like. Hard for me to see how that is a bad translation.
(Enjoy your future Tesla.)
You are replacing "high-quality cars" with "a successful business", and then responding in the affirmative.
I'm assuming this is because you misread the subject of the debate.
Oh please, now you’re just being obtuse. The discussion is about hardware failures due to poor manufacturing.
I don't think Tesla is bad, in fact, I think Tesla is the future. That doesn't mean I want to be the consumer with paint problem or leaking body while Tesla ramps up.
And the iterative design works perfectly. Compare the Model 3 ramp in Fremont to the Model 3 ramp in Shanghai. Compare that to the ramp of Model Y and now to the Model Y in Shanghai. They managed the Model Y ramp with much better margin, much less issues. Their financials are improving year over year while growth continued.
Saying there were issues with the first real mass production car, and then concluding that iteration doesn't work, seems like a nonsensical argument.
If you look at their second and third generation manufacturing lines you see massive improvement and many more improvements are coming.
Tesla has 23% of the global market and leading margin in the automotive space. Just a few years ago making money with electric vehicles was supposed to be 'impossible'.
They have made amazing technology innovations, they are the most vertically integrated manufacturer in the world, they manufacture lots of things that other OEMs don't.
They have for years worked on turning into a battery company, reinventing the whole process of how batteries are produced, including active materials production. They designed their own battery cells being the first to bring to market a number of amazing innovations. They will likely be one of the biggest battery makers in the world within a few years.
So, this argument simply doesn't hold up.
Tesla made some mistakes, some due to hubris, some due to speed, some due to the newness of EVs.
Their emphasis is on speed since their mission is accelerating sustainable energy. That results in rapid iteration to reduce cost and simplify production. All those changes result in deviance but also improvements. The speed helps them quickly fix novel problems.
So you get panel gaps in some cars as they change and fix processes but you also get improved range due to the lighter rear casting. You get paint defects in some cars as they speed up the production line and don’t initially notice that it decreased drying time. You also get cheaper cars since they can produce more cars in the same time. You get a rattling heat pump that they subsequently insulate but you also get better range especially in cold weather.
This is why he said that if you want perfection, you either get an early car (since they will be inspected thoroughly) or you get a car at the end after all processes have stabilized. What should theoretically be happening all along the way though is a car that is overall better than competition since it is being much more rapidly improved (and with Tesla learning along the way). It’s up to each consumer to decide.
[0]https://www.fool.com/investing/2021/01/27/tesla-earnings-tod...
[1]https://www.sec.gov/Archives/edgar/data/1318605/000119312510...
Tesla achieves a 23.7% automotive margin, excluding regulator credits [#1 p. 31].
Regulatory credits for Q4 were $401M [p4] while they increased their quarter over quarter R&D spending by $156M [p. 28] and paid stock based compensation charge of $633M, up from roughly $347M in Q2 as the stock boomed [p.30]. Call that an additional $286M of stock based compensation and adding $156M in R&D we have an additional $442M in Q4 expenses.
So the Q4 regulator credits are slightly less than the combined 42% Q/Q R&D increase (a great thing) and increased SBC charges (also a good thing as caused by rising share price).
Keeping net income flat by investing in R&D, and 'suffering' from increased SBC charges as the stock soars, is a great thing for a high growth company to do! Why pay taxes on net-income when it's FAR more profitable longterm to invest more in R&D.
Said differently, their $3B net cash from operations in Q4, and then $1B in cash invested in investment, are the real news of the quarter.
[#1] https://tesla-cdn.thron.com/static/1LRLZK_2020_Q4_Quarterly_...
They run factories on three continents and will be constructing more for the foreseeable future.
Tesla's operating margin is 5.4%.
The story with Tesla is funny to me, the anti-Tesla crowed is just running down the field with goal post as fast as they possibly can. The TSLAQ crowd basically has two last bunkers they are defending, profit from regulatory credits and Tesla cars are literal trash when the come out of the factory. Both are vastly blown out of proportion.
When Model 3 started to come out people said Tesla could never bring a mass market car to market. Prediction over prediction how it would kill the company. When that was accomplished people said, well but you can never make a mass market EV and be profitable, and the rules and regulation around regulatory credits have not changed since then.
Now Tesla is making a profit for 6 quarters, now even in a pandemic year its not enough profit, because some revenue might go away in 2-3 years.
What they ignore is the progression of both growth and margin, even excluding credits. Tesla grew automotive deliveries by 36% in a pandemic year and improved overall operational margin from basically less then 0% to among the best of any car company. During 2020 they have innovated technologically in many ways, most uniquely literally turning into a battery company that makes not only its own cell but also its own cell manufacturing equipment. Guidance for next year, and Tesla has been conservative with guidance since 2017 disaster, is another year of growth of around 50% and with operational margin that are as good or better then 2020.
During 2020 they have massively expanded, more the doubled, Shanghai factory, they have begun billing truly huge factories in both Europe (Berlin) and the US (Austin). This required huge amounts of capital and will only real start to really make them money in 2022, but its massive operational leverage that is being generated here.
Even when taking this into account, what many still ignore is that Tesla has to make massive investments in things they don't get a return for yes. Massive expansion of the supercharger network, service centres and stores. Basically every existing car company is making a huge amount of money from service (essentially parts), this is because they are not growing and the have millions and millions of cars that are out of warranty on the road. Tesla because of its growth has way more cars under warranty in relation to those out of warranty and that, plus building up new locations, makes their service a huge drain on the company.
In the long run, both the super chargers and service will be making lots of cash for Tesla but you never hear this mentioned, specially in the sites that cater to the TSLAQ. There is just a large market out there for negative prediction on Tesla. The Fool is one of those pages who has been writing negative Tesla articles, for many years now. They have completely gotten the story wrong so many times and the often had known short seller write articles for them.
The 'Tesla can not make money without credits' storyline will hold up maybe a 1-2 more quarters.