Yes, I do follow the travails of Tesla, as it’s the most interesting story in the industry in decades. From a historical perspective, this is the first attempt to establish a new mass-production car company in America since the ill-fated effort by Henry Kaiser, another rich megalomaniac Californian who decided to take on the Big Three. Tesla has already outlasted Kaiser-Frazer so far. Unfortunately coverage of Tesla is mostly highly polarized, emotional and often focused on Elon Musk’s personality traits rather than the cars itself. This article by Alex Roy puts that issue in perspective.
Obviously, the critical issue facing Tesla now is producing the Model 3 profitably, as Musk has said that Tesla must and will be profitable in the second half of 2018 in order to prove its viability. There’s a lot of folks out there who’ve said that’s impossible, including Munro and Associates, which specializes in tearing cars down to their component parts and making detailed cost analyses for competitor manufacturers a suppliers. After their initial tear down of the Model 3, the verdict was not so good. But now that the tear down and analysis is complete, Sandy Munro “is eating crow”, as he’s extremely impressed by its engineering and cost controls. Now he’s saying the Model 3 has a solid 30+% profit margin potential, which is huge in industry standards.
Of course that doesn’t mean the Model 3 is yet generating that degree of profit, as Tesla continues to work through their “production hell”. The focus most recently is in getting production up to and in excess of 5,000 per week. That’s been attained, but possibly not yet in a sustainable fashion. But clearly the potential is there.
There’s no denying that the Model 3 is a brilliantly engineered (and a superb driving) car, as Sandy Munro had to acknowledge as his company dug deeper into its systems and cost-optimized engineering and design. And there’s little doubt that Munro will have some eager buyers for the $78,000 report on the 3 he’s now selling. GM will undoubtedly be one of the first, as not long ago they essentially admitted to losing up to $9,000 on each Bolt they manufactured. GM and other “compliance-mobile EV manufacturers recoup some/much/all of that in not having to buy ZEV credits from Tesla in order to meet ZEV mandates.
All of the existing manufacturers are very concerned about their ability to manufacture EVs with any profit margin, or even just a small loss. The potential profit of the Model 3 shows that it’s possible, and undoubtedly many aspects of its engineering will find their way into competitor’s EVs.
I find all the Tesla schadenfreude perplexing. Elon Musk is an amazing man: he’s developed rockets that can take off and land. He’s pushed the boundaries of engineering way, way out. It’s pretty amazing science.
Electrics don’t mean you have to give up your cherished gasoline car. They’ll be around for as long as there are people interested in driving them.
The day I can drive an electric for the same cost as a gasoline car, I’ll have one. That day is coming very soon.
He’s no doubt got an incredible knack for engineering and created some game changing products, but he’s got a fragile ego and recently called one of the divers that rescued the Thai kids a pedophile. And a lot of the “production hell” was his fault. I don’t necessarily fault people for being skeptical of him because he’s done some things that deserve to be criticized.
Regardless of the ability of the current cars Tesla builds, I’m with you on the aborhent “pedo” rant. That was my game changer right there. Skeptical prior, firmly hell no now. Imagine if a different CEO of practicality anything, let alone an auto manufacturer, said this? Yep, goodbye. Musk gets one hell of a weird pass from way too many people, in my opinion.
Agree with you. The tweet was a brainsnap that demonstrates the complexities in dealing with super-high-functioning individuals such as Musk. As of now, Tesla investors are calling for an apology.
https://www.theguardian.com/technology/2018/jul/17/tesla-elon-musk-thailand-diver-pedo
Musk’s problem is that he might not be as crucial to the future of Tesla as he was to its inception. See Uber and Kalanick for recent parallel.
I’m a fan of the car, but that statement was absolutely unacceptable.
For the record, Musk has apologized. I still agree it was inexcusable.
Details and background on the dive team’s request for Musk to keep working on it are in this article.
The distance between genius and insanity is measured only by success. You have to be insane to do what he is doing. I know that bridge all too well.
I find all the Tesla fandom perplexing. Elon Musk seems to me to be more of a rent seeker and hustler than anything else. Visionary? I don’t want to go where his vision wants to take me. Game changer? I don’t want my game changed.
I frankly don’t see lithium-ion batteries as a suitable long-term power source for an electric car. Until there is a super-battery or “Mister Fusion” developed and deployed I’m not particularly interested.
He has managed to keep Tesla going for 15 years without making a profit on the cars so I guess that is some kind of accomplishment.
Rent seeker? His companies build and deliver tangible products. Unlike a rent-seeking landlord or banker. Hustler? Certainly an entrepreneur, but again look at the dozens of successful rocket launches and hundreds of thousands of real cars on the road.
As we saw in this video, batteries are improving steadily. Not just in capacity, weight and cost, but in charge time too. New chemistry and better materials keep coming online.
His vision of interplanetary travel, tapping the wealth that’s in the moon, Mars and the asteroids, and his vision of a healthy atmosphere and exciting cars, are unsurpassed.
Wake up my fellow CCer, it’s the 21st Century.
About battery charging time: 40 liter of gasoline can be refueled in few minutes. For charging batteries with equivalent (not the same as electric motor has higher efficiency ) energy in the same time charger power has to be around megawatts. And this became a global problem.
Yes, the peak power on fast recharging would be very high. For example, the “310 mile / 500 km” Tesla Model 3 has a 75 kWh battery pack. Even in the future 75 kWh is a good figure for how much electricity must be delivered to “fill up” a long-range EV. To do that in 5 minutes would take 75 kWh * 60 min/hr / 5 min = 900 kW.
That’s a whole lot of power. It will take many years for batteries to be chargeable that fast, as it will take many years for the utilities to be able to deliver into peak loads like that. But as high power EV charging develops they’ll grow into it.
A large fraction of EV charging will still be at the home and the workplace. Just taking half a minute to plug in the car for a two or three hour recharge is my reality today, and it’s way better than having to go to a station and wait five minutes.
I agree, home/work charging is convenient if you could do it. But if you live in block of flats and in work park car along curb? Carrying 100 meters power cord in the trunk?
Problem with megawatt chargers isn’t related only to chargers itself, electrical grid doesn’t like high power fluctuation. And charging/refuelling cars on the station is highly variable in time.
I agree that EV for few applications are great but in my opinion they can not replace combustion engines one in few others (eg. travelling, no home/work power socket etc)
I was just thinking about this the other day, ndv. What will happen in cities like NYC when electric cars come down in price? A lot of car owners just use on-street parking. And sure, given their commutes they don’t need to charge as often. But when they do, where will they go? Make a trip somewhere to charge?
Parking meter charging stations. In NYC, the electric lines already run under the sidewalks.
I give you permission to crawl back into your cave now. 🙂
Tumbs up
I was looking at a new tesla saloon they really are something they really have the X factor and if I had £140.000 I would buy one there one of the few modern cars I would buy but it’s a lot of money tesla would own everything if the brought out a handsome robust complex free ultra reliable saloon estate coupe pick up and van for £15.000 that did 500 per charge regardless of driving style or conditions and cost £5.00 to charge and it took 10mins I know it’s maybe fantasy.. But you never know
I think that Tesla has a
reasonableplausible chance of surviving long enough to reach profitability. The brand has cache and that is Tesla’s most valuable asset. As long as the car has perceived status, Tesla will sell all they can build.However, they sunk tremendous amounts into their robotized assembly system, and right now that expense is an almost total waste. I have personally been through a plant opening where we had a new product, a new system, and a new staff. We had to do what Tesla is now doing – work around our fabulous new technology to get product out the door. The dangers -besides the wasted expense of the switched-off equipment- are many. The management staff and the workers get exhausted. Mistakes are made, and compromises (without telling the boss) are made to keep things rolling. The workers grumble, start to turn over, and then organize. There’s just a limit to how hard you can push them, no matter how tasty the overtime. In short you can’t keep the staff at sprint speed forever without encountering an array of problems.
Then there’s the trap that management is too busy getting product out to even attempt to fix the problems with the process, so you must bring in more engineers and managers to work out the problems, again at great expense, or you are doomed forever to use your expensive jerry-rigged manufacturing system. Even if you bring in the necessary staff, it’s hard to interupt production to test individual parts of a complete process; e.g. take a car you’ve been building manually over there, and put it into the assembly line to test the robots, and then take it back out to return it to the manual process for completion and subsequent testing.
So it’s a race at Tesla to get the system working before the expense and exhaustion inherent in their current assembly process overwhelms them, and also to get expenses down before the cache of owning a Tesla wears off. I think it’s possible but not probable. In the internet age, problems with cars go viral, and we all know how quickly the public can turn against their former heros.
Musk wants to sell 200,000 cars per year. That’s twice the number of BMW 3(and 4) Series cars sold each year. Can he do it? Can he service them if there is a problem that impacts 10,000 cars?
I’m not convinced.
“Can he service them if there is a problem that impacts 10,000 cars?”
Good question, particularly if it’s a physical build-quality issue that can’t be fixed with an over-the-air software update.
I’m really struck by the electronics integration. It’s exactly what brought down the cost of computers and home electronics so sharply as experience and generations of development time sinked in. The cost fraction that’s electronics is much higher in EVs than ICE cars, but lower than purely electronic products, so of course we won’t see EVs getting 10x cheaper like computers did. But EVs will sure become profitable and come down in price, probably matching ICE cars in 5 to 10 years.
Those new batteries are impressive too. Tesla is its own primary supplier of batteries, in partnership with Panasonic, which is starting to pay off big time. It’s a strategic advantage that has taken years and $$$ to build. Not something a GM or a startup can catch up to quickly.
Personally, Elon Musk has been an incredibly smart and bold leader of both SpaceX and Tesla. But now he and his team are going through the school of hard knocks on real world production engineering. (His inexcusable comment about the diver is the product of extreme stress; he really needs to get himself back together.) It will take time but Wall St. appears to be patient, so Tesla manufacturing will eventually get its act together and produce Model 3 in volume with quality.
Part of me really likes what Elon Musk is doing, part of me thinks he’s a 21st Century John Z DeLorean. 2 points on the actual cars though:
1. The Model S SELLS. It’s a fantastic looking and driving car. It should fly off the lots, and it does, at least in my neck of the woods. Much more so than a BMW 7 or MB S.
2. This is going to be unpopular, as I haven’t heard anyone say it yet- the first Models S (Model Ss?) are getting to be a few years old now, and I feel like they don’t hold up as well as other vehicles in their price class. They seem to be a little more… for lack of a better term… rattly. Not quite 72 Impala rattly, but not as well constructed as their counterparts.
One more thing:
3. Tesla also proves that richer, more urban/coastal Americans don’t necessarily want IMPORTS, they want non-Detroit cars. Other American manufacturers have a century of baggage behind them, even if they pull a Saturn and try to reinvent themselves. I wonder what would happen if the Model S was rebadged as a Cadillac?
I’ve kind of noticed the same thing as you, that Tesla’s in some ways are very advanced and well engineered, while in some areas they struggle a bit with some of the “basic car” stuff. Stuff like suspension, power windows, rattles, and things like that. I kind of chalk it up to them being new – a lot of that stuff you’re only really going to learn through designing and building cars for a few decades. Though there does seem to be a bit “we can do it better” – perhaps true, but if the likes of Toyota and GM are doing something a certain way, they probably have a good reason for that.
It’s even more true for the Model X, as Tesla was being even more ambitious with that vehicle. Gull-wing doors may look really sweet, but there are reasons why so few vehicles have used them.
I’ve noticed the interior quality of Teslas isn’t up to the standards of the Germans but you’re right, they’re a young company and that kind of stuff is to be expected.
The Model X’s gullwing doors are good for one thing though: getting people’s attention. I was at a car show the other day and they had three new electric cars by the entrance: an i3, a Mini, and a Model X. You could hear the crickets by the i3 and the Mini but the Model X had people swarming it. Now, Teslas are already cool – cool brand image, bigass touchscreen, neat styling – but those gullwing doors really help draw a crowd.
Tesla needs to have high profit margins because they have to make up for their high sales expenses by running dealerships and service facilities that other manufacturers don’t have because their dealers take those costs on.
EVs need a lot less service than ordinary cars. First service on my 2017 Fiat 500e is in two years, just to change the cabin air filter and look everything over.
Paul,
it’s a bit less, around $7,500 per Bolt sold. Source: https://www.youtube.com/watch?time_continue=4&v=Sl3cUMIX9Uo&ab_channel=AutolineNetwork
I’ve just read that over 400,000 miles to run a Tesla S cost is $0.05 per mile. I think it’s pretty low. Compare to a Lincoln Town Car $0.22 per mile. Source: https://www.tesloop.com/blog/2018/7/16/tesloops-tesla-model-s-surpasses-400000-miles-643737-kilometers
I saw that 30% profit margin per car statement but wonder what it is based on – As in WHICH configuration?
They can’t yet know what the model mix will be since not all the reservation holders have yet been able to order every possible configuration. Chevy may in fact be losing $9k on every Bolt but then again the Bolt tops out around $40k or so sticker.
I can’t decide if Musk is a net positive or a net negative in regard to actually getting people to buy the cars, maybe it exactly balances out. I find the cars extremely interesting from a technical standpoint and having driven a Model S found it to be an absolute giggle-generator from a performance standpoint, but I find Musk’s personality extremely off-putting. As with another well-known figure, he needs to lay off Twitter, if I was aware of less I’d probably feel better about it/him.
Presumably the configuration they took apart, which is the only one they’ve been selling until just now.
It’s already been established (by Musk) that the two-motor and high-performance versions will have substantially higher profit margins, which is why they are now in production and available in as little as a month or two.
The base version ($35k) is being held off until the end of this year as it of course has a lower profit.
This 30% profit margin estimate by Munro is just an educated guess. If Tesla’s production is less efficient than average, the assembly costs will eat into that. And there are other variables. I assume Munro’s estimate is based on component costs and assumptions about the costs of the parts that Tesla makes, which is much higher than average (they even make their own seats).
So this number is just that. YMMV.
I doubt that the base version will cost them much less to build than the high dollar cars they’re building now. My SWAG is that a $35k base Model 3 is dangerously close to just breaking even which is why they aren’t in production yet.
I recently had the opportunity to look at a used Model S and, frankly, was less than impressed. Now, I admit, I didn’t drive it — primarily because I couldn’t. In fact, I was barely able to squeeze inside. I’m a big guy, but I can drive my daughter’s 2007 Mazda 3 OK, but there was no way I could drive the Tesla, there simply wasn’t enough leg room/knee room to safely drive the car. I found the seats flat, and frankly, too small for my backside, and the interior finishes seemed cheap and plasticky. I admit they’re drop dead gorgeous, and I haven’t heard anyone anywhere complain about the way they drive, but for a car that size, it just seemed so incredibly small inside.
That complaint may have nothing to do with the technology, or it might — how much interior space is lost to batteries? But no matter how Starship Enterprise futuristic a car is, it still has to work as a car, and for me, it just doesn’t.
Musk’s comment about the diver represents a much bigger wart than just the stress brainsnap of an over-achiever.
The ABC (Aus broadcasting Corporation) had this week a very detailed account of the cave rescue from the divers. From their direct account, it’s clear the device shown by Musk on the net was utterly impractical. The particular diver attacked by Musk was understandably irritated by Musk’s intrusion. Let’s assume Musk was well-motivated (not entirely guaranteed); let’s put aside the appalling bully aspect of his comment. What’s concerning is that the man couldn’t be told, in the face of immovable reality, that his device could not work in this case. And when challenged, he chose bullying and bluster. How often has this mentality come up in the hard grind of manufacturing his (as yet) profitless cars?
Musk is far from the sole inventor of his cars, or rockets or submarine for that matter. He is a super-talented person leading the charge, but one who, it seems, has trouble hearing that he may not be God.
As for the cars, the batteries, they are an astonishing achievement, and are the template for the future. And if Munro’s assessment is correct, an economically viable one for Tesla. Whether Musk is viable leading it long-term is another thing.
Elon Musk has one real talent. Burning through other peoples money. The monorail episode on the Simpsons was written with people like him in mind. Yeah, I am not a fan.
First and foremost, Musk developed one thing himself (along with a few friends) and that was PayPal. Using the cash cow, he has created other companies that use the skills and talents of some great engineers, developers, and the like, but other than his outlandish ideas that he can turn into reality via his bank account and the work of others, he really does not do anything himself. That he is rich is the only reason we pay attention to him.
Now, as to most of his products, yeah, they are cool, but for the most part, are just vaporware, smoke, and mirrors. Tunnel Boring and SpaceX seem to be the exception, along with Tesla, as nothing else seems to come to fruition. Even then, he over-promises and under-delivers. People invest in his dreams, and I for one don’t see how they reasonably expect much of a return. IF they do meet expectations, then yes, one will see windfall profits, but how much money is going into utter crap that will fail miserably. And on top of it all, he is an egomaniac with a Twitter account, and we are seeing the folly of combining those two things.
For Tesla to be profitable, it has to sell a whole lot of the expensive models. People got excited over the Model 3 being a low price model, less than $30K. The versions being called profitable are selling for over $50K. If Ford was making 30 margin on stripper Fusions, we would see millions of them on the road. Instead, they are being removed from the US market, even when selling 200K units annually. If those Fusions were all selling at $50K versus less than $30K (which is closer to what is happening with the CUVs of Ford) then it would be a different situation. The mass market wants a Model 3 for $30K, and when it becomes painfully obvious that that price point is fantasy, you will see the demand drop significantly. With few cars selling, they better be at 30% margin or Tesla will be bankrupt before you can blink. The investors are a fickle bunch, and when the hype dies, a lot of folks will be poorer and Tesla shares will be worth a whole lot less than now.
“For the most part they are vaporware… except Tesla, Tunnel Boring and SpaceX”
So not for the most part, then?
Perhaps I should be clearer. Those are the main companies, but all three have limited product and inventory. The only working things are 3 models of cars, of which 2 are similar (S and X), an unproven tunnel boring machine with grandiose plans for the hyperloop, and Space-X, which seems to be running mostly without him. Has Solar City done anywhere near as well as they could be? Did they rework the Puerto Rican power grid as he said he would do? Yet, seems he claims to be developing the supersonic rapid transit tube, mission to Mars, advance AI, the Semi Truck, the pickup truck, the model Y, and several other projects that look to have little to no chance of advancing. As shown with the Model 3, producing is a lot harder than presenting a concept. He is a master at selling a concept. And he has done a hell of a lot more than I have, so I give him credit for that, but at the end of the day, he more image than result. The real Tesla actually created a lot of things and never got credit, while the opposite seems to be true for Musk.
Same color, same locale… same car?
https://detroit.craigslist.org/okl/cto/d/2018-tesla-model-3/6640098637.html
I can’t believe no one has made *this* correlation yet: between Elon Musk and Malcolm Bricklin! I haven’t thought this through, yet. The idea just came to me.