Model 3 Profitability

From the article;

If this were 2004, I would swear the article's talk of high tech & profitability were all about the Gen 2 Prius.
I guess it makes for good drama.

.

 

who cares if it is profitable, just keep pushing forwards

 

shorters!
their skin crawls at the very thought ~
.

 

good

 

The real issue isn't if the Model 3 can be profitable to build, but whether Tesla will survive as an independent brand to build it. Toyota had a lot more financial foundation on which to take a risk than Tesla does. A publicly traded company cannot continue to pile up billions of dollars in losses and survive in the face of large notes being due. They need to raise more capital, in my opinion.

 

really? ever hear of GM? ever hear of bankruptyy? ever consider how many billions (w/ a 'B' - though court receivers initially claimed GM's 40 toxic Superfund sites would 'only' cost taxpayers a ½billion) of debt that GM shed - just from their polluted manufacturing sites alone? not even counting their creditor/subcontractors?
Remaining independent? How is Tesla remaining independent even a question, w/ such a magic 'reset' button - if ever it's needed.
.

 

We shall see. I am only expressing an opinion.

The auto industry is replete with failures (of both startups and established firms), and there is no guarantee that a Tesla bankruptcy would be handled like GM and Chrysler, or any other bankruptcy, for that matter. I am not discounting the importance of Tesla in advancing certain aspects of battery electric vehicles (BEVs), but the notion that there is a magic reset button that sheds debt without affecting corporate structure is naive. It seems far more likely that Tesla's assets may be gobbled up by another manufacturer and we will end up with Tesla power in, say, a GM or Hyundai wrapper.

The auto industry is in turmoil. Sales are declining, the new generation shuns car ownership, the ride sharing economy and microtransporation are also having an effect. Mix in the autonomous vehicle movement, etc., and the future of autos in general is a bit murky.

 

Since Tesla surviving is largely reliant on Tesla making a profit (consistently), I don’t see how the real issue isn’t exactly if the Model 3 can be bought profitability.

Your post brings to mind the constant moving of goalposts that others (not you) do.

Years ago, Tesla could never build the Model S.
Then they would never deliver 20k/year.
Some said Tesla could never sell 5000 cars of a specific model per month.
Once Tesla pushed past that, it moved to “sales numbers don’t matter, Tesla can’t sell profitably”.

Now, we are close to reaching that level. I wonder what will be next?

 

Agreed! I'll never* buy a Tesla, but I still really want them to push forward and get some cool things invented and on the market. Get some excitement going. It will eventually inspire a lot more cool electric cars.

*never say never.

 

Tesla is, in many ways, a remarkable company. However, the "moving of the goal posts" by naysayers is happening in a dynamic period for Tesla itself. Tesla is not the same company it was even a year ago. When Tesla was smaller, financial hurdles were also smaller and could be overcome by funding from wealthy individuals and high-tech, risk-comfortable angel investor speculation. The size of the firm and its financial challenges have grown, however. If memory serves, Tesla's market valuation is about $50 billion, with $20 billion in debt and about $3 billion due in notes over the next 18 months. These numbers (the goal posts) continue to move. If the firm's debt cannot be reduced, it will become more likely the note holders may force bankruptcy while the value offers some level of return.

 

I think the question is if the whole company can be profitable, not just a specific trim level of a specific model. If they can sell the $35K model at near break-even and make $15K on a $50K model and they have enough sales of the $50K model to float the boat, then that's fine. Also they are not standing still at M3. New models are coming and more profit is possible as they tune their production lines, supply contracts, giga-factory, etc. So the question of $35K model being profitable is largely academical.

 

The rate of car ownership per household in the US is up to what it was pre-2010(IIRC). The new generation didn't shun car ownership, they just it off. They didn't need a car when young like previous generations, but now they are buying homes and starting families.

 

The model S and X are profitable and have been for the last 4 years. The reason that Tesla is not profitable is the investment in the SuC system, Gigafactory, Solar City, and automotive R&D. I am confident that Tesla will show a profit for the whole company for Q3/18.

I have no doubt that the model 3 will be profitable at every trim level now that Tesla appears to be emerging from "production hell." I believe that Elon will find a way to incentivize options on the $35K model 3 to increase that base model profit margin. Currently there is a huge profit margin in all Tesla options, at least 50% ($2000 for a $600 premium paint job? ) That $35K car will actually be selling for $40K+ to most consumers.

Even though the model 3 is selling well, the model Y will dwarf those figures. Only time will tell.

 

what does that mean, if the "whole company" can be profitable. Tesla is many individual companies. SpaceX, cars, massive battery backup systems that run entire regions, Solar Products, even the boring company.
One Tesla company does not depend on one element of that individual company.
BUT .... if we pretend that the entire existence of the Tesla car company turns on the cheap model 3 being profitable, then one considers weather profitability includes CARB credits or not. Unlike other companies, where carb credits offset just part of their substantial amount of land barges being sold by those companies - Tesla credits simply go to make their car company more profitable .... as an example of profitability.
The cheap model 3 profitability hand wringers forget - that Tesla's car company could merge (debt avoidance) with the SpaceX Corporation (now estimated at a value of 25 billion). This guy Musk is proficient at balancing all the financial interests, & yet those kinds of mergers haven't even been put on the table yet. So it's likely premature to put the company up on the auction block just yet.
But again, it makes for good drama. You don't see the media freaking out over SpaceX valuation, like they do with the car company - or wirh the battery backup valuation, but you do see it every day in the news how Tesla will implode - or Musk will implode - or he's on the verge of imploding. A sensible person has to wonder - what's driving that type of fodder. Or - maybe people really do start pulling their hair out & looking upward every time someone screams 'the sky is falling!!'.
.

 

Just to clarify, I meant the entity represented on the NASDAQ by TSLA symbol. Point taken about other businesses that are around and can be leveraged if necessary, but when speaking in terms of profit and viability, I think we are all talking about TSLA. But I could be wrong...

 

TSLA profitability is what ultimately matters, but in this case the contribution to that profit by the Model 3 (or lack thereof) is very important simply because it is by far the largest volume product they make. Tesla revenues in 2016 were $7b. At 5000 Model 3s a week at $50k ASP that would be $12.5b of Model 3s a year. It's such a large part of the company that if they can't make money it will drag the entire organization down. Compare that to GM where they sell probably 20 highly profitable pickup trucks for each Bolt. This also explains why GM went bankrupt when gas prices spiked, and they apparently haven't learned their lesson, but I digress.

More fun stats from the TSLA balance sheet: Prior to the Model 3, the total stockholder equity was increasing even though retained earnings were negative and decreasing. This would be consistent with a company investing for the future, as building a factory is a conversion of cash and earnings into equity. Since the Model 3, retained earnings continues to go negative but now total assets are dropping too. This is a sign of.. well, I'm not actually sure. Where is all the cash going if it's not into assets (including inventory)? That's not a rhetorical question, please provide an informative answer if you have a more detailed answer than simply "growth".

My concern is that too much cash is being burned in non-productive ways like this (as in literally cash -> diesel -> co2):

 

I am not sure what we are looking at in this picture. What is the context here? Are these cars belonging to Tesla or someone else? Who owns the generator and why is this going on? Are they charging the cars for test drives? This picture is devoid of information other than there are a bunch of cars that look a lot like Tesla around what looks like a generator. Is the generator running?

 

If you believe Twitter, they are inventory cars that had their batteries go dead during transport or storage. Thus, needing a charge before they can be moved to a delivery center.

It's not good if it's true and it's a widespread problem.

Posted via the PriusChat mobile app.

 

Thanks for the context. I think it's a waste of time to follow this kind of stuff on Twitter. For so many reasons!