Hacker News Reader

I do wonder if Tesla's biggest problem around the Model 3 launch was starting by establishing very aggressive production targets. According to Bloomberg's Model 3 Tracker linked in that article, the Model 3 already is the top selling electric car in the country. It outsold the Chevy Bolt by over 2x in January and February. That should be a huge accomplishment, but it is viewed as a failure because it is a small fraction of what Tesla initially predicted.

> That should be a huge accomplishment, but it is viewed as a failure because it is a small fraction of what Tesla initially predicted.

It's a failure because Tesla made financial bet that they deliver high volumes of Model 3. It does not matter if Model 3 is good car and customers love it. Tesla must ramp up their production very fast or Tesla runs out of cheap money.

Tesla has no problems with customers love the car with passion. It's the investors who will choke Musk to death later this year if he has to ask more money to continue with struggling production. He will get the money but it will have high interest rate and Tesla stock will come down 20-50 percent.

Currently Tesla is producing 20% of it's target. Their production curve is not growing steeply enough. In fact it's slowing down.

https://www.bloomberg.com/graphics/2018-tesla-tracker/

Those production targets were established for a reason. Tesla is burning unbelievable amounts of cash [0], and they need to convince investors and bond holders that they will break this trend soon. Showing very agressive production targets for M3 is the only way to do it.

[0] https://arstechnica.com/cars/2018/02/tesla-loses-another-675... "Tesla loses another $675 million in Q4, its biggest quarterly loss yet"

Tesla's bond offerings are routinely oversubscribed. The market is clearly willing to continue to give them more and more money. I therefore find the idea dubious that Tesla needed to be super aggressive with their production targets or else they would run out of cash.

If I recall correctly, their last offering was more or less positioned like "according to our production estimates, this is, probably, last time we ask capital markets for cash infusion", and it was at the height of excitement about the Model 3.

As of now, however, these bonds (1.8bln, issued last August) are trading underwater [0]. They will probably tap the market once again this year, and we will see what happen.

[0] https://www.marketwatch.com/story/teslas-junk-bonds-are-trad...

Those were junk bonds in August. Tesla is still having success with other types of bonds. Here is a more recent offering from January with lease backed bonds [1]. Tesla sold $546m worth but had orders for roughly $7b.

[1] - https://www.bloomberg.com/news/articles/2018-01-31/when-it-c...

Lease backed bonds don't scale. He can't tap to lease again and again.

Tesla is burning $4.2 billion per year now.

>Tesla is burning $4.2 billion per year now.

Where is this number is coming from? Their 2017 loss was around 2 billions, half of what you say.

It comes from Barclay's analysis (they are very bearish).

Model 3 is not small volume luxury car as previous models. They are investing wast sums for large scale production. Burning trough vast amounts of cash is OK only as long as the production volume ramp up really happens in limited time frame and quality and recall numbers are similar to Audi 4A.

Tesla must ramp up the production volume within a year or Tesla is financially in the ropes.

If Tesla pays back debt $1000 for every car it sells. It must sell 4 million cars to pay this year's projected cash burn. Tesla made a bet that it can become large car manufacturer with Model 3, there will be no second changes.

> Tesla's bond offerings are routinely oversubscribed.

Historically, this does not count for much. Business history is littered with the bones of infallible stars that just needed a little cash to tide them over.

Cherry-picking Jan and Feb obscures the fact that the Bolt seems to be extremely competitive. Bolt outsold Tesla Model 3 by 3x in Dec (3,227 versus 1,060). And it's true that January was down for the Bolt, but not by 2x (1,177 versus 1,875).

Tesla's production woes are a serious problem. My i3 lease is up in a couple of months and I can't even consider replacing it with a Model 3, since the end of the reservation line is years out.

According to the previously mentioned Bloomberg tracker, Tesla built 5,933 in January and February. Tesla is selling and delivering the Model 3 as fast as they can built them. GM delivered 2,601 Bolts in January and February.

Choosing January and February is not cherry picking because Tesla is ramping up production of the Model 3. That said, I acknowledge that the Bolt may have some seasonal effect that greatly increased sales at the end of last year when compared to the beginning of this year. Let's expand the January-February window back another month to account for that. We get 6,993 Model 3s versus 5,828 Bolts. No longer over 2x but still clearly outselling the Bolt.

It's also worth mentioning that the Bolt is a loss leader for GM, so they are actually losing money on those cars. I think it's reasonable to worry that the economics for Tesla, who have far less experience manufacturing cars at scale, could be even worse.

I am bearish on Tesla, but I never thought they would get this far, so obviously I've been wrong before. My suspicion though is if Tesla isn't self-sustaining before the next economic downturn, they're fucked.

I think most Bolts are leases, so it probably works out in the end for GM.

Works out how?

Bolts are compliance vehicles, sold by GM to meet fleet fuel efficiency and emissions requirements. Selling Bolts at a loss enables them to continue selling larger vehicles which actually turn a profit. Hopefully in a few more years battery costs will drop enough to make electric cars profitable in their own right.

All the previous models and problems with them happened in small production volume luxury car segment. Luxury car customers tolerate more defects and it's economical to repair them quickly with good service.

Model 3 is completely different animal. Learning from history does not help here. Model 3 is 'entry level luxury' similar to Audi A4 and BMW 3 Series.

Tesla is very creative and innovative in every level, not just in their technology. Their financial innovation has finally reached it's limit with Model 3 and it's the breaking point. They can't afford large setbacks or partial delivery and gradual development over the years. They are running out of cheap money.

Tesla is leveraged to the gills and there can't be another year or two until delivery or Musk loses the company and some other car maker or PE firm buys them cheap and finishes the product. I wouldn't be surprised if Tesla is GM or Toyota brand within next five years.

https://www.bloomberg.com/graphics/2018-tesla-tracker/

I also see more Teslas than I would expect here in Florida. It's apparently catching on with the retirees-with-money demographic. Along with all the old boomers buying sports cars - porsches, corvettes, etc., it's getting harder to identify and avoid all of the older, dangerous drivers anymore. They used to have the courtesy to identify themselves by driving giant full-size Cadillacs and Buicks :(

I'm in Tampa, and I can't tell you how many times people ask me about my Model S when I'm parked somewhere. I made a flyer, ran off 500 copies, and just hand those to people when they ask instead of spending 15-30 minutes explaining everything. I can tell its moving the needle based on my referral code stats.

Yeah, my bull case is similar.

People forget just how bad the Model X launch was. It was a complete disaster. They had I think literally three of them ready for launch and then total silence for weeks. Then took months to get any sort of small run volume off the ground.

And because people have totally forgotten about that, people will probably totally forget about just how (comparatively mildly!) bad the Model 3 launch is going. It will stutter for a year, and in three years everyone will want one.

I lived through my dad owning 4 Jaguars, totally inexplicably. One of them he carried around a box of brake fluid because he had to add a little each day. If a car is that special to you, you just mentally set aside production issues. Electric cars are even more special.

Enzo Ferrari probably never said the apocryphal quote: "I don't care if the door gaps are straight. When the driver steps on the gas I want him to shit his pants." But for a big demographic its essentially true.

So Tesla will make it out of this year, and then everyone will forget that the Model 3 ever had problems in the first place, just like with the X.

I think you are applying the software startup metric to industrial company. For typical SV startup lack of demand is the single most critical issue (hence the "make something people want" YC motto), nothing comes close. Tesla has plenty of demand.

But being industrial company, Tesla is not solely about making something people want. It's about making it on scale, and showing profit.

So far, each model Tesla made meant more debt on balance sheet, and bigger quarterly losses. Once they break this trend, they are golden. But this moment is not yet, and not even on the horizon, meaning another capital rise this year.

I'm indifferent on whether Tesla succeeds. I do appreciate that they sparked a modern revival of EV technology, and I'd be happy if some day an EV made sense for me. At this time, it does not. Range is still too short and charge times too long.

Do you travel more than 200 miles in a day frequently?

For me, an EV is so much better because I can charge every night and I won't have to go anywhere to fill up my tank ever again.

Depends. At least a couple of times a month. And arranging rentals or owning another car for those trips is not really appealing.

Another big reason is that I don't buy new cars. So for an EV to make sense for me it would need to be a used one, at least 5 years old, and still have useful range and battery life.

Many EV owners who moved back to gas or hybrid cars find the hunt for gas stations and time spent on fill ups infuriating. You can charge an EV from any mains, very quickly on the special mains installed in your own garage.

If you're commuting hundreds of miles per day, my heart goes out to you regardless.

> So it stands to reason that once they are good at making an affordable car, they’ll sell like hot cakes.

For me, this puts the cart very much before the horse. Once they're good?

Making an expensive car is much, much easier than making an affordable one. The fact that they previously struggled with making an expensive one could just as well be a sign that their process improvement and cost reduction skills just aren't good enough to play in the big leagues.

Their being at 15% of projected output sure doesn't conflict with that; if they learned a lot from S and X, I'd think they'd be doing much better.

I find it amusing that in a forum that gets angry about cults of personality, this comment is on top

Tesla is the bitcoin of EVs :) or maybe it's the other way around.

I think Musk persona and SpaceX makes many want to bet on high risk but high gains project. I wonder how Tesla stock did after the dual rocket landing.

Please explain the relationship between Bitcoin and Tesla, other than "high risk but high gains".

Always listed as dead, still there. Thank you

Some people have made sensational headlines about them being dead at one point or another. That happens with everything. And you aren't looking at things on a large enough timeline.

> The company never sank.

The company refreshed its financing.

This is always possible, until it isn't.

> That to me indicates that those with the means really like the cars.

Cashflow is no respecter of brand power.

Brand power can result in more sales, though, which usually does increase cash flow? We don't know yet at what point they'll transition from being supply-limited to demand-limited.

Tesla owners seem to be pretty forgiving of quality issues so far. We'll see how well that holds up.

> Brand power can result in more sales, though, which usually does increase cash flow?

Yes, when you can get to the point where cash changes hand (this may be a very different moment from the "sale"). If cash shows up too late, then it doesn't matter how much demand there is, the game is over.

Endings from cashflow crunch can be very abrupt. A very dangerous time for many companies is under conditions of growth, because very often your outgoing cash happens now and your incoming cash comes later.

Tesla has to pay its employees each month, has to pay its suppliers on time (or lose them), pay its utility bills etc etc. The outgoing cash does not stop going out. But the bulk of the cash comes in only when they can hand a car over. And that's not happening very fast right now. The monthly outgoings per-car appear to be negative.

after looking at the monroe video on the 3, i'm waiting for the all EV camry that goes 400 mi on a charge

You might be waiting 10 years?

> And personally I really want Tesla to succeed.

That, instead of a sound financial analysis, seems to be the cause of your bullish position. I hope you’re not calling what you’re doing with your money “investing”.

Would you please read https://news.ycombinator.com/newsguidelines.html and abide by the rules when commenting here?

We don't want snark—it's both a poison and a fertilizer. I'm dismayed to see that you've posted uncivil comments in the past as well.

How many times have you predicted Tesla's demise over the past 10 years? Just like those people on radio shows believing they've identified the impending end of the world.

I’m not in the finance industry, hence I’m not predicting anything. I rather read analyses some pros do.

And how many times have these 'pros' predicted Tesla's demise in the last 10 years? How many times does someone have to be wrong before you stop standing behind their opinions?

If you listen to Graham&Dodd types, I can’t recall a case where they’ve been totally wrong. Btw Tesla is a public company for less than 10 years.