Having listened to the earnings call, this article makes me facepalm. When explaining the internal July 1 target date, Elon repeatedly said he would explain it at the risk of it being misinterpreted by the media, and then this article misinterprets it. That date was never meant to actually be the production start date, only a date that they are aiming for with all suppliers so that they can hold their feet to the fire when an inevitable few of the thousands of needed parts have delays. Also, about the complexity of building Tesla cars, he points out that the Model 3 is vastly easier to produce than any of the other models, since it was designed expressly for being simple and very easy to manufacture. Go listen to the actual earnings call.
>That date was never meant to actually be the production start date
I listen to or read the transcripts of nearly all of them. They're full of ambiguous information and half-truths, and I take them with a grain of salt. This is a classic example; we have a deadline that's not really a deadline. Tesla wants this stuff to be news.
>an inevitable few of the thousands of needed parts have delays.
Is this inevitable? Does it happen to other manufacturers, who, according to critics, are building far more complex vehicles?
>this article makes me facepalm.
You don't facepalm at gems like this:
UBS Analyst: "And any color when you think about the $190 per kilowatt hour, how much like a CAGR of decline until the Gigafactory is open, another 30% once that's on line?"
Elon Musk: "Yeah, next question."
So the guy wanted to know how Tesla plans on benefitting from the scale and battery efficiency of the Gigafactory production (originally planned for 2020) if they're moving up the production timetable. In other words, how much is that going to affect the cost of Model 3 production? You don't think that's a valid question?
Re: the UBS analyst question - I thought this was a totally fair response by Elon. In his previous question, the UBS guy asked Elon where their battery costs would be by the time the Model 3 launches, and Elon said he felt was proprietary.
Then the guy basically asks the EXACT same thing, but rather than asking for the final price, he asked for the pace of reduction (CAGR) in price, over a given amount of time (until the Gigafactory is open, and once it is online)... which would allow him to calculate cost/kwh when Model 3 launches.
Musk politely answered a whole series of questions from this and other analysts, only cutting them off if they asked something stupid - like this guy. You're not gonna trick Elon Musk into giving you more data by asking the question a different way.
>the UBS guy asked Elon where their battery costs would be by the time the Model 3 launches, and Elon said he felt was proprietary.
What is "proprietary" about it? Previous plans and costing were based on the Gigafactory being able to achieve scale by 2020. That production is being bumped forward two years, so what effect will it have on costs? Why would we assume they can suddenly get the same savings in less time? It's a good question from an investor's perspective.
>Musk politely answered a whole series of questions from this and other analysts
Yeah, he loves answering Adam Jonas. Many of these guys are practically shills. Some of their questions are embarrassing.
>You're not gonna trick Elon Musk into giving you more data by asking the question a different way.
Here's the thing HN doesn't seem to get: this is a public company. People have the right to ask questions. In fact, more questions should be asked of companies like this, that are losing vast sums of money yet have sky-high valuations. That's the difference between genuinely curious people and those who are willing to take what the CEO says at his word, for everything.
Watch for an equity offering soon, something else that we were told wouldn't happen.
> this is a public company. People have the right to ask questions.
He did ask the question. You have the right to ask questions of a private company too. And both private and public companies have the right not to answer. Everything they're required to make public is already in the filings. You seem to be indicating that they're required to say more, but they're not.
>Everything they're required to make public is already in the filings
We never really know that, ex ante. Everyone looks like they're reporting what they need to, until we find out they aren't. That's the point of asking questions.
But it isn't about requirements. It's a valid question, that was sidestepped by Musk (and here, apparently). Here it is for posterity: the pricing for the Model 3 was based on achieving scale and efficiency in battery production from the Gigafactory. With production bumped up two years, what effect will that have on pricing? If it's none, how is that achieved?
What Elon said made perfect sense to me. They have an internal date of July 1 for both external and internal suppliers to meet. But statistically, given there are thousands of parts, they know it's very unlikely that even with the highest committment, everyone will be ready on time. That's all factored in. So as he said, it will then take some number of months to get those last stragglers sorted out before production can actually start. What would you suggest? Maybe he should just not have mentioned the earlier internal target date, if people are going to be that confused by it.
EDIT: as for other manufacturers, I have no idea, but the question is more whether they talk about their internal target dates at all. Elon never said that production actually would start on July 1 (but more like "before end of 2017"), so calling this a "delay" is just wrong.
You seem to be confused about what "factored in" means:
>it will then take some number of months
How many months? That's "factoring it in". "Some months" provides zero information.
>so calling this a "delay" is just wrong.
Of course there's no delay yet, it's all just talk. I think it's people planning for the inevitable delay, based on historical manufacturing results and this nebulous fudge factor.
The big news is the call of 500k cars by 2018 (100k-200k in 2017). If they can pull that off it's insane.
>their internal target dates at all
Again, who cares about some random internal date that may be off by some unknown number of months? What information do we glean from it? It's nigh useless.
And other manufacturers are far more transparent about their actual financial and production information.
I don't feel confused about this and still think the article makes it sound like they are missing a publicly promised date (which may still happen in the future, but at the moment and regarding the July 1 date, that's just wrong), but I invite everyone to listen to the call themselves: http://edge.media-server.com/m/p/c67hnavs
EDIT: If you do add a bunch of stuff to your comments after the fact, it'd be nice to put an EDIT marker somewhere at least.
>If you do add a bunch of stuff to your comments after the fact
I added a couple lines and fixed typos, within minutes of posting. Maybe you could mellow out and not feel like you need to reply instantaneously? The Tesla fans are touchy today...
Your comments continue to be uncivil despite repeated requests to stop doing this. I almost banned your account for this, but it does seem like your comments have improved, so instead I'll just ask you to please improve them more. That means respecting the people you're talking to, even if they're wrong, instead of jabbing them.
I find articles like this, and the subsequent discussion about them, interesting. Tesla is a very aggressive auto company, and they have made a lot of huge bets. If more of their bets pay off than don't, they come out ahead. That is very hard for investors to understand but some get it and some don't.
And the really interesting thing is that Elon speaks pretty clearly about the things they are doing that they don't know how they will come out, and this sets up an interesting cognitive dissonance in investors. When you tell someone "this date is the one we put out to get alignment of our suppliers, we assumed not all of them would be ready." Financial people's heads explode. They struggle with management not knowing exactly what is going to happen with events that are critical to the survival of the company. In their head a little dialogue goes "well if they don't know that, how do they even know they will exist next year?" and I expect the truth is they don't. Operating without a net is something Elon seems to be able to pull off when others can't.
I do think the departures are a challenge though. Coming into an organization at a senior level and learning the strengths and weaknesses of the team is a hugely challenging thing to do. It takes time and if you don't have that time it can be really stressful. You find yourself counting on teams to deliver that you have no idea whether or not they have what it takes. So you are hyperfocused on everything and keeping your baloney detector set to max sensitivity to try quickly identify what is working and what isn't. It has to make replacing people at that level very difficult indeed.
"If more of their bets pay off than don't, they come out ahead. That is very hard for investors to understand but some get it and some don't."
If you are an investor and don't understand that, I strongly suggest you change jobs. Investing isn't a lottery with guaranteed wins.
Also, the article hints that Tesla doesn't have enough money in its pockets to withstand making few bad bets. They may have a strategy that is guaranteed to move them ahead after 20 bets, but if they have money for only 3 bets, they may run out of money before they can pay for those 20 bets.
But yes, from what I understand, the financial journalists aren't reporting what kind of deadline was talked about. If you have a zillion suppliers, you don't tell them "July 1, but if you don't make it, it is OK", but you also know that, statistically, something will go wrong. A fire in a factory, a strike, an earthquake, or a design change, all can lead to delays, and cannot be avoided.
>When you tell someone "this date is the one we put out to get alignment of our suppliers, we assumed not all of them would be ready." Financial people's heads explode.
Well, no. If that was the case then they wouldn't have put billions of dollars into Tesla. Investors understand that Tesla's strategy is a manic rush to scale, it's not actually a difficult business plan to understand just to successfully execute.
I think the commenter in your post is right but is forgetting about the outsourced complexity of the big autos.
Chassis assembly is only marginally simpler for an EV vs an ICE since the ICE relies on third party suppliers sending the highly complex parts to the line. The complexity of parts like the engine, transmission, exhaust system, fuel system, etc. is abstracted to the suppliers so that GM or whoever can just bolt it to the final car. Tesla has a big benefit here since if they were designing a brand new ICE, they'd be responsible for all those parts too.
It's not that they get the simplicity benefit from not installing an engine, it's that they don't have to wait for the most complex part of a car to be designed, engineered, constructed and delivered.
Why does Tesla not manufacture the doors themselves? I would think such a special part unique to their cars would be first produced in house until all the bugs are worked out.
Modern car doors are usually sheet metal with a large amount of forming to give a shape (close to) what the designer wanted. It's difficult, large, expensive, and the knowledge required already exists in outside suppliers. Maybe someday they'll do it in house.
I recommend the book "Car"[1] about the redesign of the Ford Taurus twenty years ago. One of the topics is how hard it was to actually manufacture the (at the time) very complex curves of the exterior.
I don't remember where I read it, so I can't provide a source, but I thought I read somewhere that after this issue with the doors it is a goal at Tesla to try to manufacture as many components as possible in-house as their resources grow.
Re: the part where Tesla only has $1.8B cash and needs more, Tesla recently announced a $500 million stock offering to help finance Model 3 production.
Then they lost 280 million this most recent quarter. They have 1.4 billion in assets and 1.4 billion in short term liabilities. They need more cash for sure
That's only one side of the transaction.. The cash is also held as an asset as cash on the balance sheet -- likely restricted cash. My only point is that their cash position to build out their production line is probably overstated if you only look at the cash/marketable securities line item.
I think they're actually accounting the pre-order money as straight up Cash on hand.
> My only point is that their cash position to build out their production line is probably overstated if you only look at the cash/marketable securities line item.
I agree with this. I'm just surprised at how they're accounting for this. I'm fairly certain they consider the pre-order money to be 'cash / cash-equivalents', the $1.4 Billion line item.
Why is there a sudden surge of articles pointing out delays, possible hickups for ramping up production etc recently? Is there an orchestration behind it? Sure, this is just an opinion piece, but still.
I have been semi-actively trading tesla for a little under a year, and have noticed this exact pattern. Every runup in price is followed by a spate of articles dogging the stock.
It's so, so noticeable that I would be surprised if there isn't some money behind this orchestration. And, of course, we can see from the most-shorted lists at NASDAQ that there is quite a lot of money short on Tesla.
No one notices when things go as planned/expected. Make media say you cannot do it, then do it.
You bet it will be noticed.
I am not saying that it is what is happening now. But just a thought.
I mean, if the guy is smart enough to do all the things he has done, isn't it too hard to imagine he will have a trick or two when it comes to PR?
I mean, every time, one of this article show up, it gets up voted to top, and people are talking and talking and talking, about it. For a couple of days, you see Tesla or SpaceX every where..It is like walking through a neighbourhood filled with Tesla/SpaceX billboards.
Point is, there articles are generating a lot of conversation involving these companies, which makes them very endearing to people involved. So after a while, people will take it as a personal insult, if you criticise these companies...
You know, all of those are good for the company, right?
This negative press followed by positive press happened to Tesla so many times, I can't help but think that it is just some guys found a way to make a couple extra bucks.
There is no point here. Yes this will be an issue, a totally new company is selling more units than the incumbents, obviously they are going to have problems. The point is that there is a huge demand for their vehicles, and they'll figure out a way to meet that demand. One way or another. In the end consumers will benefit from all this competition in 20 years we will be driving electric autonomous cars, all of us. Great news!
