Electric cars

AdrianC

Martyn1981 wrote: »

The profitabilty of a production line will obviously be linked to the output of that production line, so CAPEX expenditure in the early days before production, and during low production, will naturally lead to losses, until such time as production rates are high enough to exceed variable costs, then higher still to also exceed fixed costs, then you have profits.

Tesla's Q2 results show a decrease to $610m capex and an increase to $1.24bn opex, with an improvement to a $717m loss for the quarter.

Perhaps you need to be more clear in your throwaway comments about Tesla. Are you saying they can't make a profit? Are you saying they won't make a profit in the near term?

They have shown no sign of being able to make a profit so far. I do not possess a crystal ball. Model 3 deliveries will certainly result in an increase in revenue, but that increased production will inevitably result in increased costs of sales.

How much margin is in a Model 3? The Q2 "update letter" says that they aim to get the gross margin per Model 3 up to 15% by the end of Q3 and 20% by the end of Q4. But that'll still be on high-revenue high-spec cars - "3-6mo after 5k/wk" is when Musk said the entry-level, low-revenue cars are coming through.

Tesla delivered 30,000 cars during Q1 2018 - and posted a loss of $785m. I make that $26,000 per car. They shifted around 100,000 cars during FY2017 - and posted a loss of $2.24bn - $22,400 per car - so that loss per car built has increased.

That is, at least, turning round, if slowly.
They delivered 40,000 cars during Q2 2018, so only lost $17,900 per car on revenue of $3.357bn. Or, to put it another way, they sold each car for an average of $84,000, despite it costing them an average of $102,000 to build.

There's a VERY long way to go to be profitable in Q3, or even Q4 - and Musk's predictions are rarely shown to be pessimistic.

AdrianC

Martyn1981 wrote: »

Of course if they expand at this rate, they may not show a 'profit' (like Amazon)

Amazon's quarterly profit in Q2 2018 was $2.53bn, on sales of ~$53bn.

https://www.bbc.co.uk/news/business-44972149

Martyn1981

AdrianC wrote: »

They have shown no sign of being able to make a profit so far.

That's entirely false. They have gone profitable after both the S and X, but both times investment in new production was greater.

You need to re-think your position on this issue, your constant rabid anti-Tesla comments do not reflect reality.

You still won't admit that Tesla had two operational semi's at the launch, you still won't admit that Tesla only needs a twofold, not 22 fold increase in TM3's to match F-150 US sales.

Perhaps it's time to stop posting false statements?

Martyn1981

AdrianC wrote: »

Amazon's quarterly profit in Q2 2018 was $2.53bn, on sales of ~$53bn.

https://www.bbc.co.uk/news/business-44972149

So investing in the future is good then?

The Amazon Era: No Profits, No Problem

There is a new calculus in corporate boardrooms. Profits are so yesterday. Now it’s all about vision and great storytelling.

Blame Amazon.com. The online behemoth cracked the code. Despite posting just a handful of profitable quarters in its two-decade history, it’s the fourth-largest public company at almost $470 billion in market capitalization. Now, its copycats are changing the game.

AdrianC

That's a May 2017 article. Even then, it's still not quite putting the full picture forward by saying "just a handful of profitable quarters", is it?




from

https://www.recode.net/2018/2/1/16961598/amazon-jeff-bezos-record-profit-11-quarter-q4-2017-earnings
(Feb 2018, so there have been two more quarters of profit since)

However, I guess you missed this line in your Forbes article - "Tesla makes very cool electric cars. It also makes lots of big losses."

zeupater

Martyn1981 wrote: »

The profitabilty of a production line will obviously be linked to the output of that production line, so CAPEX expenditure in the early days before production, and during low production, will naturally lead to losses, until such time as production rates are high enough to exceed variable costs, then higher still to also exceed fixed costs, then you have profits.

Perhaps you need to be more clear in your throwaway comments about Tesla. Are you saying they can't make a profit? Are you saying they won't make a profit in the near term? Are you saying/conflating new investment (at higher rates than the company income) is a loss?

Hi

It's not just the capital cost of new plant & machinery where none existed before, but also the associated revenue costs of R&D prior to production & labour etc whilst production is being ramped up ... as these costs are significant & for the majority can't be classified as an asset that can be written-down over time, the hit on the accounts is immediate ...

There's also supplied component tooling costs ... often this is payable up-front as a revenue item as it's something that can't have a capital value because the tooling could only ever be used on the suppliers' own capital equipment, sometimes it can be for tooling that can be moved to another supplier if necessary, but sometimes there are IPO issues that prevent this.

Often there's the option of amortisation of tooling into piece-pricing but that's normally dependant on a longer-term customer/supplier relationship so I'd be surprised if a relatively new entrant to high volume production would be able to access such an arrangement until they've established a decent trading track record ... there's a long history of the supply chain losing-out on amortisation of supply contract tooling when production fails to scale to expectations - no supplier really wants to be caught-out by a Delorean type failure so it's likely that the establishment of a totally new 'pick'n'mix' high volume parts box is going to be pretty revenue intensive.

What also needs to be recognised is that established vehicle manufacturers have current product of similar build quantities to support the cost of development of new models and that model change on a modern multi-platform assembly line can be managed on a rolling-change basis .... Tesla haven't had this luxury to date, however as new models are introduced they will have the ability to mirror what everyone else does, so the margin impact becomes less of an issue ...

HTH
Z

Martyn1981

It's all in the headline, great news on growth:-

4 Million Electrified Vehicles Sold Globally, 5 Million Expected In 6 Months (BNEF)

Martyn1981

AdrianC wrote: »

That's a May 2017 article. Even then, it's still not quite putting the full picture forward by saying "just a handful of profitable quarters", is it?




from

https://www.recode.net/2018/2/1/16961598/amazon-jeff-bezos-record-profit-11-quarter-q4-2017-earnings
(Feb 2018, so there have been two more quarters of profit since)

However, I guess you missed this line in your Forbes article - "Tesla makes very cool electric cars. It also makes lots of big losses."

So Amazon's long history of investment for growth and eventual profits is good, but Tesla is bad. Make your mind up, you are now arguing both sides as the business models for both companies are very, very similar.

PS, since you are now in a talkative mood, any comments on the questions I've asked you so many times about the semi, or any change of opinion on the 22x claim?

AdrianC

I thought you had hybrids flagged as not-really-counting? The vast, vast majority of those 4m are hybrids, and only a small proportion of those are plug-in.

As the graphic in that article shows, even in California, "pure" EVs are only around 3% of new car sales in H1 2018, same as plug-ins, with non-plug-in at around 4%. That leaves 90% as "pure" IC.

Martyn1981

AdrianC wrote: »

I thought you had hybrids flagged as not-really-counting? The vast, vast majority of those 4m are hybrids, and only a small proportion of those are plug-in.

As the graphic in that article shows, even in California, "pure" EVs are only around 3% of new car sales in H1 2018, same as plug-ins, with non-plug-in at around 4%. That leaves 90% as "pure" IC.

Still looking for desperate negatives I see.