Does the $9K loss figure "add up"?

[oilerlord]

Yes but the idea is the Model 3 will eventually make money. If Tesla ramps up to 500k vehicles and it's still losing a lot of money then I don't think they'll be in a good position. At some point that future profitability has to arrive.

If Tesla produced 500k M3s with a $9k loss on each then they'd be losing's $4.5 billion dollars per year. Even at 250k that would be a pretty big loss, and I don't think they could sustain it. That is so suicidal that I think they must believe they can produce the car at a profit, at least once volume ramps up.

GM already has volume production coming out of their plants, even if not specifically with the Bolt. It should be a lot easier for them to approach profitability even at say 30k per year.

For some perspective, consider that GM sold 237,388 vehicles last month, only 952 of them were Bolts. The huge "game changer" hype resulted in a total of 2114 cars sold in 2017. Unless GM decides to bring on the discounts and cheap leases (adding to the Bolt's loss), they may have trouble moving 15K units, let alone 30K.

At some point, GM may offer the car in all 50 states but it's already available in the hottest EV markets - and early indications show it's pretty much a sales flop thus far.

You keep thinking that Model 3 profitability is key to Tesla's survival. It isn't. Growth is all that matters. As long as the company continues to report appropriate growth, the Wall Street money will keep flowing in.

 

[phil0909]

Are you seriously comparing Bolt sales volume with a car from 1909? I hope you're joking because I'm still laughing.

I dunno, I kind of liked the Model T comparison. It started out slow, but 15 million were manufactured over 20 years, eventually reaching just over 2 million cars sold per year. Of course, what the comparison really shows is that neither Bolt nor Tesla has a prayer of following in the Model T's footsteps. The key to Ford's huge success was cost efficiency - the Bolt and Teslas are way too pricey for the value they deliver. But maybe someday in our lifetimes there will be an electric Model T...

Wall St. certainly has been kind to Tesla so far, but you can't grow forever without a profit in sight. The bubble will continue, right up until it doesn't. Nothing in Tesla's history suggests that they are capable of building a $35k car at a profit. Ever. They are doomed to fail, but it may take a while - after all, there's a sucker born every minute, and most of them buy Tesla stock!

 

[GetOffYourGas]

Nothing in Tesla's history suggests that they are capable of building a $35k car at a profit. Ever.

Tesla started out with their Roadster. They were not able to make a profit on the $120k+ cars, but at least they got attention. That attention brought in enough money to develop the Model S. Today, using what they have learned about making cars, they are capable of making a profit on the $70k Model S.

Of course, that profit (and experience) is going into making a profitable $35k car. In time, and assuming they don't go belly-up, I don't see any reason they wouldn't profit on the Model 3.

I would be willing to place a friendly wager on that.

 

[phil0909]

Of course, that profit (and experience) is going into making a profitable $35k car. In time, and assuming they don't go belly-up, I don't see any reason they wouldn't profit on the Model 3.

I would be willing to place a friendly wager on that.

Well, that's the crux of the matter, isn't it? In time, and if they survive.

Tesla's been working on this for fourteen years now, and they still have a very long way to go to become cost efficient. My guess is that it would take them another 10 years, and that they cannot survive that long as a money loser.

 

[GetOffYourGas]

You keep thinking that Model 3 profitability is key to Tesla's survival. It isn't. Growth is all that matters. As long as the company continues to report appropriate growth, the Wall Street money will keep flowing in.

And you keep stating that growth is key to Tesla's survival as a fact. Repeating it does not make it a fact. Tesla's growth is unsustainable. Therefore it cannot be key to their long term survival. If they try to keep growing like this, fueled only by the promise of more growth (and never profits), then they will fail. It seems reasonable to state, therefore, that eventual profitability is key to their survival.

Tesla's public plan has been, and continues to be, using growth to create enough income in order to bring the Model 3 to market. This is supposed to be the car that stabilizes their trajectory. That's out of the mouth of Tesla.

Put another way, the fact that up until now Tesla has been driven entirely by growth does not mean that their entire future hinges on continued growth.

 

[GetOffYourGas]

Of course, that profit (and experience) is going into making a profitable $35k car. In time, and assuming they don't go belly-up, I don't see any reason they wouldn't profit on the Model 3.

I would be willing to place a friendly wager on that.

Well, that's the crux of the matter, isn't it? In time, and if they survive.

Tesla's been working on this for fourteen years now, and they still have a very long way to go to become cost efficient. My guess is that it would take them another 10 years, and that they cannot survive that long as a money loser.

Well that's a slightly different story from your previous post.

Nothing in Tesla's history suggests that they are capable of building a $35k car at a profit. Ever.

To clarify my position, I believe that they are capable of building a $35k car at a profit. I also believe it will take time. Whether they have the time depends on whether they can keep their investors from losing faith in the company. Your guess is 10 years. Mine is less, but still 3-5 years.

 

[phil0909]

Well that's a slightly different story from your previous post.

No it isn't. It would take them 10 years, which they do not have. Wall Street's patience has its limits. So Tesla can not do it. Ever.

 

[GetOffYourGas]

Well that's a slightly different story from your previous post.

No it isn't. It would take them 10 years, which they do not have. Wall Street's patience has its limits. So Tesla can not do it. Ever.

In that case, I still wouldn't say that Tesla cannot do it, but that Wall Street does not have the patience to wait for their timeline. You might think it's semantics, but it's a different story to me.

I am an engineer by profession. I know full well the difference between "I cannot meet requirement X" and "I cannot meet requirement X in T time and for D dollars".

 

[oilerlord]

Tesla's growth is unsustainable.

Huh?? Around 1% of all cars sold this year will be an EV. There is plenty of room for Tesla to grow, and compete for market share.

It seems reasonable to state, therefore, that eventual profitability is key to their survival.

Obviously, eventual profitability matters as it does with any startup and/or growth play. I was responding to another's point that the Model 3's profitability was key to Tesla's survival. It isn't. It took Amazon a long time to become profitable, but they continued to show growth so Wall Street was patient. Who knows how long Wall Street is willing to wait for Tesla to become profitable, but if the Model 3 is a home run (even at a loss), they probably will. This is outlined as one of several risk factors in their Safe Harbor statements in Tesla's 10K release. If the cash pipeline stops, the Tesla party is over.

 

[phil0909]

In that case, I still wouldn't say that Tesla cannot do it, but that Wall Street does not have the patience to wait for their timeline. You might think it's semantics, but it's a different story to me.

I am an engineer by profession. I know full well the difference between "I cannot meet requirement X" and "I cannot meet requirement X in T time and for D dollars".

Oh, just stop it. Your argument is ridiculous, and being an engineer is not a sufficient excuse!

I could make the greatest, most profitable electric car ever, given unlimited time and funding. Your saying that Tesla can do so means exactly nothing. Because unlimited time and funding do not exist.

 

[SparkE]

This is not a Tesla thread. Please move your discussion of Tesla's corporate future into a new thread (in the 'off topic' area, preferably).

 

[GetOffYourGas]

Is there such a thread? If so, could a moderator move the last several comments (mine included, obviously) to said thread?

 

[oilerlord]

This is not a Tesla thread. Please move your discussion of Tesla's corporate future into a new thread (in the 'off topic' area, preferably).

Please allow some latitude. In the absence of actual GM data or company press release pertaining to whether the Bolt is or is not profitable - the reference to Tesla's loss on their income statement is relevant to the discussion.

 

[SparkE]

This is not a Tesla thread. Please move your discussion of Tesla's corporate future into a new thread (in the 'off topic' area, preferably).

Please allow some latitude. In the absence of actual GM data or company press release pertaining to whether the Bolt is or is not profitable - the reference to Tesla's loss on their income statement is relevant to the discussion.

ONE post would fine - over a page of Tesla and it's future really isn't relevant. (and the income statement wasn't about the company's future per se.) And I'm not trying to single out one poster (or post) out - the thread took a left turn (as threads sometimes do) and I'm trying to get it back on the original road. Which is funny, because I think the whole (original) discussion on how much GM is losing per car is ridiculous, since none of us knows and every poster has basically blown imaginary smoke up everybody else's hole. Everybody is imagining about what GM is losing (or not), whether it is reasonable (or not), how much maybe they won't lose soon, when/if what/if battery prices change, etc., ad infinitum.

Anyhow, start a *different* ridiculous thread about Tesla financials if any of you really care about the subject, and leave this thread for to original ridiculousness. :lol:

 

[WetEV]

Wall Street keeps pouring money into Tesla only because of it's growth, and the M3 only feeds into that. It's pretty much a forgone conclusion that the M3 WILL lose money.

Really? That's an amazing projection that the Model 3 will lose money. Care to back it up?

"The early Model 3s will be horribly negative margin, particularly on day one, when I say literally day one. Because you're starting at a tiny, tiny rate, as you spool up this giant machine. So, it's – like, no company on Earth could – it's not a function of Tesla. It is like physically impossible. "?So, you have to get the production rate to some reasonable capacity percentage of the system."

- Elon Reeve Musk
2/22/17

Read carefully. "The early Model3s ..."

Not every Model3. Or the total of Model 3 production...

The first of any requires a lot of debugging, adjusting, fixing, wasted materials and support. The workers don't know their jobs as well as they will later. The machines are not adjusted just right yet and the programming probably needs some work. First components cost more as are ordered in smaller volumes. And so on.

Mr Musk didn't say that the Model 3 would never be profitable. Or that the M3 program will never be profitable. Only that the early Model 3s could not be profitable.

So you didn't back up your statement that the M3 will lose money in total. Adam Smith knew, I know, you know, everyone should know that the start up of producing anything and everything will be followed by declining costs of production as tools are improved, people learn how to do the job, and so on.

For example: Ford Motor, first year of production of Model T built and sold 3 Model Ts. The Model T on these first 3 lost $67 on sales of $2080, not including "experimental expenses" of $26,563.71 (not broken down by car, Ford was producing several) for the year.

So the early Model T lost money.

 

[WetEV]

Anyhow, start a *different* ridiculous thread about Tesla financials if any of you really care about the subject, and leave this thread for to original ridiculousness. :lol:

Why not a Model T thread? :lol:

 

[Nagorak]

For some perspective, consider that GM sold 237,388 vehicles last month, only 952 of them were Bolts. The huge "game changer" hype resulted in a total of 2114 cars sold in 2017. Unless GM decides to bring on the discounts and cheap leases (adding to the Bolt's loss), they may have trouble moving 15K units, let alone 30K.

At some point, GM may offer the car in all 50 states but it's already available in the hottest EV markets - and early indications show it's pretty much a sales flop thus far.

You keep thinking that Model 3 profitability is key to Tesla's survival. It isn't. Growth is all that matters. As long as the company continues to report appropriate growth, the Wall Street money will keep flowing in.

Honestly, I think the Bolt is just too expensive. Not giving the entire 7.5K rebate on the lease is not helping things either, even with the "inflated residual" argument. If the lease price for an Lt was closer to $200 a month the car would sell a lot better.

They're clearly pricing the car high for a reason. Whether it's because they're losing money, or trying to break even it's not clear.

 

[LeftieBiker]

If the lease price for an Lt was closer to $200 a month the car would sell a lot better.

$200 a month is Bargain Basement these days. $300 a month for a modestly-optioned (DCFC and one package) LT, and $400 for a similar Premiere would be very enticing.

 

[oilerlord]

Honestly, I think the Bolt is just too expensive. Not giving the entire 7.5K rebate on the lease is not helping things either, even with the "inflated residual" argument. If the lease price for an Lt was closer to $200 a month the car would sell a lot better.

They're clearly pricing the car high for a reason. Whether it's because they're losing money, or trying to break even it's not clear.

It "feels" too expensive because it's a small econobox, but it's the expensive battery that puts it over the top. Personally, I don't like the car but still recognize that the Bolt is a great deal for it's price. Regardless what side of the "9K loss" debate you're on - I think we can all agree that the margin on this car is either non-existent or razor thin.

Take out all the electrical bits, and you're pretty much are left with a $20,000 Chevy Trax. With all of the (actually affordable) small crossovers available on the market, the Bolt is a tough sell. You can say the same for the i3, Kia Soul EV, VW eGolf, etc. I'm guessing that most of us are comfortable paying more for the EV experience, but sadly, most aren't.

For those willing to wait, I'm guessing that GM is going to soon begin rolling out the cheap leases and rebates to get Bolts moving. The discounting has already started. GM has to move a LOT more than 1,000 Bolts per month for any chance of return on investment.

 

[phil0909]

I'm guessing that most of us are comfortable paying more for the EV experience, but sadly, most aren't.

I mostly agree, but I would instead say "happily, most aren't."

It is because consumers demand cost efficiency that manufacturers are compelled to supply it. Auto makers will do their best to maximize profits, either by building us better, cheaper electric cars or by building us better, cheaper non-electric cars. It's a win-win!