Electric cars

BenjaG

BeenThroughItAll wrote: »

It's going to be a hell of a lot longer than 4 years before we're all trundling around in electric cars.


I won't be buying another for some time after my bloody awful experience owning a Renault Zoe for a year.

I had considered buying a Zoe.
What made your electric car experience so awful ?

Martyn1981

AdrianC wrote: »

OK, great.
But I'm intrigued as to how that's different to FYTD18 being $1b down.

No probs, happy to explain.

The line "FYTD18 being $1b down." isn't a statement in its own right, as you are now desperately trying to pretend, but is actually a deliberately edited part of the original statement:

AdrianC wrote: »

Umm, the bet was over Q3, while that comment was replying to your attempt to deny FYTD18 being down $1b, remember?

This statement is a lie as I never said that, and clearly you know I never said that because you have had to resort to editing the comment for misrepresentation purposes.

I suspect your actions started as a misunderstanding, but on repetition have become a lie as you know I never said that, and further repetition is heading for trolling since the only reason for repeating a known lie, over and over is for trolling purposes.*

On the subject of repeated lies, are you know ready (and able) to explain your claim that US F-150 sales are 22x greater than TM3 production? At this point wouldn't it be easier for you to admit that you got all the maths wrong, or that you greatly exaggerated the figure by a factor of 11 just to mislead and spread FUD?


*Or as I've mentioned previously, to distract the conversation away from the Tesla profits and large scale TM3 production, on which you have spent the last year in denial. Sore loser perhaps?

Martyn1981

AdrianC wrote: »

From the Q3 update letter...

So ~370k reservations. 110k built to date. ~260k still in the queue. So the queue is still about 60 weeks, at current production rates. That's without any word on the number of post-summer "direct orders". So place your Model 3 order today, delivery's currently likely to be in early 2020.

LOL. Still trying to spin popularity as a negative. Is there no depth to which you won't sink?

If Tesla expand sales outside of N. America, and Tesla start selling the $35k model as production rates get high enough, and Tesla start selling cars on lease (currently cash/loan only), and people start to hear about Tesla and EV's, then imagine how BAD that waiting list could get. What a terrible company and business model ....... you think they have.

zeupater

AdrianC wrote: »

Ah... I see.

Yes, "cumulative... for the year" did mean I was referring to the entire FY. What I didn't clarify, of course, that it's only so far this year. Sorry, I assumed it would have been obvious I was talking about YTD, rather than full FY, since obviously we don't have Q4 18 figures yet. My apologies for the confusion.

(I s'pose I could have been talking about the last four quarters for a rolling year... But if you then add the $675m lost in Q4 17...)


I think you might be forgetting that increasing production will incur substantial additional variable costs - the need to buy parts and raw materials for those extra cars...

Hi

- "Cumulative for the year ..." no, I understand what you say, it's just that you're not really saying what you were saying until recently ... at that point in time you were concentrating argument on Tesla's ability to turn profitable in Q3, that was the basis of your 'bet' with Martyn, however, having lost that 'bet' you're now concentrating on whole year profitability as this suits your general anti-Tesla/anti-EV position rather than accepting that TM3 build volumes have reached a threshold where Tesla as a group are now profitable ... spin as you like, but the past is the past and it can't be changed, however, the future is different & as we move through it Tesla, from their latest results and outlook are looking to remain profitable ...

- "I think you might be forgetting that increasing production will incur substantial additional variable costs - the need to buy parts and raw materials for those extra cars..." ... do you actually read before commenting or is it a problem with understanding of volume relate business matters? ... for clarity the relevant paragraph you seem to be having trouble with is ...

... Once build volume at a particular selling price reaches the point where all of the fixed operating costs have been recovered, additional incremental sales beyond this threshold don't provide profit on a simple pro rata basis, they become hugely profitable and there's plenty of detailed analysis by automotive specialists that suggest the unit margin is above 30% at planned production volumes, so if fixed costs, development, financing & administration account for a typical ~1/3 of total overall costs, we're potentially looking at a realistic profit of around 50% after the fixed cost threshold has been passed ...

... as you can see, it describes a position where when production volume reaches a particular threshold all of the associated fixed costs are recovered and the product moves into profit, so with no more fixed cost to recover the profit moves from (SellingPrice-Materials-DL&VWO-Fo/h) -to- (SellingPrice-Materials-DL&VWO) ...


For example, if the unit cost breakdown for the year at a planned volume was ..
(A)
Mat - 23.33
Var - 23.33
Fix - 23.33
Profit - 30

---

Sell - 100

... then until the fixed overhead recovery threshold has been passed the unit contributing position could be seen within the accounts as ...
(B)
Mat - 23.33
Var - 23.33
Fix - 53.33

---

Sell - 100

... and consequentially, after recovering all of the fixed costs the unit position could be seen as ...
(C)
Mat - 23.33
Var - 23.33
Profit - 53.33

---

Sell - 100


- If the planned production hits target and the cost accountants set their standards correctly then (A) would apply to the entire period by simply adjusting on a volume related basis, and the volume adjusted combination of (B)+(C) would equal (A) ..

- If production is lower than planned as well as being lower than that required to recover all fixed overheads, then (B) applies, with the volume related shortfall being a loss ...

- If production is lower than planned but higher than the fixed overhead threshold, then (B) applies until the threshold is reached, followed by incremental per unit profitability of (C) ... in this case (B)+(C) would be lower than expected within the (A) calculation

- If production is higher than planned, then overall profitability would be as originally calculated in (A), plus the incremental unit sales returning a profit as in (C) ...


For example, using the figures above, a planned 100 units would be expected to have a revenue of 10000 returning 3000 profit (30% P/S) as per (A), but a 20% sales volume uplift would add a proportional 2000 in revenue but a disproportional 1067(53.33*20) to profit as per (C), thus moving overall profitability as a proportion of revenue for the period from 30% to 33.9% (4067/12000) ...

This form of volume related cost benefit allows the company to become more profitable, or to develop new standard costs for the next period and use these to reduce the selling price to a level which maintains either margin% or profit/unit and use this as a competitive advantage to attract more custom ... this is normally referred to as volume related economies of scale! ... organisations that understand this pretty basic concept are normally much more successful than those that don't ..



Hope everyone can follow this ... :cool::eek:


HTH
Z

Martyn1981

zeupater wrote: »

Hi
Hope everyone can follow this ... :cool::eek:


HTH
Z

Yep I'm following you. I loved the bit where he tried to disagree with your fixed cost explanation by pointing to variable costs! :wall:

Smoke and mirrors, duck and dive, spin and FUD.

AdrianC

zeupater wrote: »

at that point in time you were concentrating argument on Tesla's ability to turn profitable in Q3, that was the basis of your 'bet' with Martyn, however, having lost that 'bet' you're now concentrating on whole year profitability

Well, naturally.


One profitable quarter - sure, great. It's a change of direction. Great.

But that quarterly profit is c.25% of the loss from the first two quarters of the FY. And what's needed is SUSTAINABLE profit.


Has that corner been turned? <shrug> Nobody knows. We're not even a third of the way through Q4.

have reached a threshold where Tesla as a group are now profitable

For one quarter.
The full FY is, as you said, looking unlikely.
Will it sustain? Will the full FY19 be profitable?

Tesla, from their latest results and outlook are looking to remain profitable

Well, of course THEY spin it positively...

organisations that understand this pretty basic concept are normally much more successful than those that don't ..

Well, obviously...


But are you really suggesting with a straight face that there's 50% margin in the cars above 4,100/week production...?[/QUOTE]


Even industry analysts who've actually taken the car apart only talk about 30%.
And that's assuming the current high-spec-only products. As Martyn just reminded us, once production is established, the $35k M3 is on the way. That's still going to have the majority of the production cost of the $50k+ cars. Then there's the deferral of sales revenue when the leasing model finally becomes available.


A corner has unequivocally been turned. This is, I repeat, a good thing. But looking at the first sprouting daffodils and promptly reaching for the shorts, flip-flops and factor 30 is premature.

zeupater

AdrianC wrote: »

... But are you really suggesting with a straight face that there's 50% margin in the cars above 4,100/week production...?


Even industry analysts who've actually taken the car apart only talk about 30%.

Hi

Okay, so you're still failing to understand business and profit ...

What you're missing is that a margin is 30% would be the average profit across full planned build across the year, whereas until you've recovered all of the fixed costs there's no profit, just a decreasing loss as each unit is sold ... after that then the per unit profitability is at the higher percentage, in the example provided that's the 53% figure ...

In summary (yet again!) ... no profit below the threshold and high profit above the threshold averages the 30% you're concerned about ...

You could also look at the figures in the example to estimate at what proportion of total sales the threshold is passed (X) ...

(i) 30% P/S (A) on 100 sales at a value of 100 = 3000
(ii) 3000 profit is made on 56 (3000/53.33) unit sales above the threshold, therefore the threshold (X) would be 43units (100-56)

A period production /sales volume below X (43) results in a loss, above this there's a profit of 53.33% per unit which results in an overall 30% if planned production volumes are achieved, additionally - production/sales beyond the planned 100 continue to return 53.33% profit, thus lifting the overall margin to above 30% for the reporting period ...


Returning to Tesla and applying the above logic ... for the company to be showing a profit in Q3 they must have already passed the fixed cost threshold (X), therefore if they built an average of 4100 TM3s per week in Q3, the threshold must be below this - if they continue to build above the TM3 plant threshold, they will continue to make profit in that plant ...

Now, going forward - Tesla have established a revenue stream from TM3 production which can be used to finance further expansion to both the model range & production facilities, the cost of which will impact on their overall group profitability (likely resulting in further temporary losses) until each additional model/facility reaches it's own build threshold, however, each incremental expansion will have a proportionally smaller overall impact on the company's performance as it's unlikely that they would be planning for any of the individual increments to increase production by a factor of 6 as has been the case with the TM3!

It's basic stuff that anyone familiar with business processes or management should be aware of, so I'm surprised that it's taking so long to sink in! ...

HTH
Z

AdrianC

zeupater wrote: »

What you're missing is that a margin is 30% would be the average profit across full planned build across the year, whereas until you've recovered all of the fixed costs there's no profit

Except that they're clearly looking at the cost to build that car, as dismantled, compared to the retail price. It's a standard model for assessing rivals - all manufacturers do it - and have for decades.

Ford famously bought a very early Mini, took it apart, and decided that it couldn't possibly be built profitably.


On top of that unit profitability, you have the amortisation of the rest of the production facility, future R&D etc - and that's the difference between a car having 30% margin in it and a manufacturer making 30% profit over the year.

zeupater

AdrianC wrote: »

Except that they're clearly looking at the cost to build that car, as dismantled, compared to the retail price. It's a standard model for assessing rivals - all manufacturers do it - and have for decades.

Ford famously bought a very early Mini, took it apart, and decided that it couldn't possibly be built profitably.


On top of that unit profitability, you have the amortisation of the rest of the production facility, future R&D etc - and that's the difference between a car having 30% margin in it and a manufacturer making 30% profit over the year.

Hi

Forget the negativity and concentrating on the exact percentages as they are examples & just look to accept the logic ...


Regarding Ford's analysis on the mini ... they were probably right! ... the early mini wasn't a particularly profitable car.

As for ".. the amortisation of the rest of the production facility, future R&D etc .." ... these are the fixed cost elements being discussed ... the maintenance man, the security guard, the accounts payable department, the depreciation of the MD's car, the photocopier rental, the amortised cost per square meter of production & administration buildings, rates, rent, the R&D department, prototypes, sales literature, conferences, stands at the motor-show, various forms of advertising. etc, etc etc ...

That's what fixed costs are, they're the costs incurred whether you're producing at full tilt or on a shut-down, and that's the point being made - when you've covered the material. direct labour & variable costs (eg power for the machines when they're running etc) then you start to contribute towards all of the above fixed cost elements & when you've earned enough to do this, you start to make profit - if you can't, you make a loss!

Believe me, that's how business works ... if you don't follow this then I suggest you conduct your own research or simply go on a beginner's course ...

HTH
Z

Martyn1981

zeupater wrote: »

Hi

Believe me, that's how business works ... if you don't follow this then I suggest you conduct your own research or simply go on a beginner's course ...

HTH
Z

You also have to take into account the fact that Adrian isn't being truthful in his comments about the tear down reports and the price of the car.

Detailed discussions have always gone further and looked at the ASP of the cars, not each individual car, and profits on higher spec vehicles are (of course) far higher as additional profits are made on all additional items. In the case of the software options, the variable costs are tiny, almost non-existent.

One of the teardowns, the early German one, suggested a build price for the car of $28,000. Now that would have been a higher cost/spec LR model, but even adjusting their report down to a $35k model, then that's a 25% profit margin, which Tesla kinda acknowledged with a wink and a nod, and by not saying it was wrong when asked about it.


Seeing the enormous effort, and it has to be said 'sheer desperation' now going into trying to spin a negative, I'm ever more comfortable with my conclusion some time back that we were dealing with deliberate FUD.

Roll on Tesla, and all the other car manufacturers that start to take EV's seriously.