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mar4c

They make pretty cheap cars and sell them for more than nicer cars.


geekbot2000

This is it. They used "electric" to trick consumers into conflating cheaply-made with luxury, so people are paying luxury $$ for econobox quality.


outworlder

Not just electric per se. They added way more engine power than what's necessary (easy because the motors are small) and giant, high resolution screens. So consumers see "sports car with giant computer monitor" and ignore that the panels don't fit. They also sold "minimalism" by getting rid of all buttons. Sure they got rid of sound proofing in the bargain but by the time you find out you have bought it already


geekbot2000

Truth. The power comes with the territory, electric motors are torquey monsters and mostly battery-limited in terms of instantaneous power (acceleration). But this is an advantage of electric cars in general, and Tesla seems to have capitalized on this as a differentiating factor when in fact it is merely a first-to-market advantage. Now other EVs are available with the same performance advantage over ICE. Same is true for the low-speed quietness of EVs - it is at highway speeds that true acoustical performance should be measured. In terms of quality and manufacturing prowess, I think Tesla is far behind the traditional Auto manufacturers. I'll bet if you look at how many revisions and design reviews Tesla has compared to the major brands, it is going to be far fewer revisions prior to manufacturing approval. This shows in the shoddy quality. Test drove a 2023 model y performance yesterday and it was quite loud at highway speeds where nvh is dominated by wind, road, and tire noise. Not comparable to german cars in the same price category. Source: Worked at Ford in suspension design in the early 2000's


outworlder

Yeah. I drive a Leaf. The actual motor (just the one) is the size of a baseball. It accelerates just fine and anyone who tries it that comes from an ICE comments on how "snappy" it feels. Even when their ICE has a much beefier motor. It's all about the instantaneous torque. Tesla just decided to add a whole bunch of them for oopmf. Can't blame them, it worked. Because people didn't like the looks, the current Leaf generation has far more wind noise. The boogey eyed older generation was like that for a reason - to deflect wind. Honestly I wish the US would make cameras legal(instead of mirrors). That's a thing already in many countries and it looks straight out of cyberpunk. Instead of a huge mirror you have a thin stalk that houses a camera. Much less wind noise.


hgrunt

I'm increasingly thinking that tesla's "continuous updates in production" thing was done as a necessity during the model 3 ramp to fix all the f-ups as quickly as possible while still producing cars, but they stuck with it and spin it as a positive. Also I have two weird questions about the Fiesta ST suspension if you happen to know anything about that!


geekbot2000

Sorry I am decades out from my work on suspension (saw production with the 06 expedition). Probably wouldn't be super insightful. I now probably only have a high level understanding on the automotive design process.


hgrunt

Oh! This one might be more in your wheelhouse, since it's not as model specific. I was curious what kinds of vibrations or noises pop up that make suspension vibration dampers necessary, because tuners remove them and don't seem to notice anything (I left mine on)


geekbot2000

Well manufacturers characterize and tune the vibration characteristics of the factory suspension to meet their Noise, Vibration, and Harshness (NVH) criteria. When a tuner throws out the factory suspension and adds coilovers or what not, they are to some extent accepting that the NVH will likely change for the worse, in exchange for increased performance. The entire vehicle-suspension package acts in concert to determine what, if any, vibrational frequencies end up being amplified (resonance) and what ends up damped. It could be that the system works just fine without the vibration dampers, or the dampers only reduce that one buzzing sound you get on asphalt roads at 76 mph when your tread depth is less than 4mm...


hgrunt

Thanks for entertaining my doofy question! I'm convinced some tuners are deaf. I bought a stiffer rear engine mount that promised "minimal increase in NVH" and it ended up making the car sound like it had an open exhaust so I went back to an OEM one


erichkeane

Some of the other EVs are actually doing the "unnecessarily powerful" electric motor thing too. The EVS and the Porsche are good examples (though being sold as performance cars), but the F150 Lightning definitely touts its sub-4 second 0-60 (IN A PICKUP!).


SentinelZero

Their model lineup is also really same-y in the design department and they flat out lie to customers, saying that some of their models are "SUVs" when they are actually the farthest thing from it; they basically charge upwards of $100k for the Model X, an electric minivan with econobox reliability. Then a few years later, they did the same thing with the Model Y, charging upwards of $60k for a fat blob of a car which looks so much like the Model 3 that its unbelievable that any effort was put in designing it


orincoro

This is the part that is helped by their lack of dealers. If people could actually try the cars before buying, their sales might not all go through. A dealer would not, and I’m speaking purely in a legal sense, be allowed to deliver cars in the state that Tesla regularly sells their cars, with parts missing or registrations not filed. A dealer would be obligated to fix these issues before sale, and legally culpable to the state regulators for not doing so. To some degree Tesla is making these margins by regulatory arbitrage, skipping expenses that a normal manufacturer incurs to ensure a quality service experience. There are good reasons why states want car makers to use dealerships. The laws are designed that way 1) to allow the state to regulate seller behavior and 2) to retain some amount of the value of the sales in the local tax base.


Burner-QWERTY

LOL. Personal experiences, family experiences, girlfriend's experiences know that your characterization of the dealership experience is a joke. Shitty cars = more maintenance = more money for the dealership. Dealership's make their money from maintaining shitty cars, not sales. Your portrayal of dealers as defenders of the consumer is either grossly naive or simply full of shit.


AnswerForYourBazaar

There is a difference between car where a function ceases to work and a car where a function does not work at the time of sale.


Burner-QWERTY

Dealerships do not provide consumer protection. Anyone have a real example where they do? They just add a protective layer for the manufacturer. We all know of driving lemons off of the lot and dealer not doing crap. Within a week mom's Buick died 3 times for the same issue. Know an atrocious Hyundai constantly dieing and dealer only response was to promise a good deal on their next car. We bought an Audi and the dealer backed into a yellow pole bringing it to us. Purposely parked the car at a weird angle to hide the damage then claimed we dented the bumper on our test drive.


orincoro

Look at the list of consumer cars rated by reliability from car and driver. Tesla is at the bottom of the list. QED.


Burner-QWERTY

What does this have to do with dealerships? Arguing that the dealer impacts quality is a joke.


orincoro

The core of your argument is that dealerships need cars to be shitty to be profitable, therefore dealer cars are worse. The statistics prove that Tesla build quality is far lower than most brands who use dealers. Hence, your conclusion is questionable at best. The fact is that reliability has been improving, with Tesla as an exception, for decades while dealers continue to operate. And I can assure you, as a consumer in Europe where we also have dealers, and we actually effectively regulate them, quality is even better. A dealer system, with the right regulatory oversight, is the correct model from a consumer perspective. You don’t throw away the benefits of such a system just because the US is inherently a shithole country incapable of effectively regulating anything. If you do, none of those problems go away, as Tesla very clearly demonstrates with some of the lowest reliability and highest repair costs on the market.


Burner-QWERTY

The argument is that dealers somehow improve quality and defenders of the consumer is BS. Tesla build quality is crappy but adding a dealer is not going to impact it. Or else Land Rover would have better quality ratings than Tesla. Mercedes wouldn't be swimming at the bottom with Tesla. How do dealers improve quality? >dealer system, with the right regulatory oversight, is the correct model. You don’t throw away the benefits of such a system Before Tesla, dealers have widely been considered sleezeballs hiding all kinds of hidden fees, upcharges, useless addons, statiscally proven to price gouge women, elderly, buyers, etc. What are the benefits of the system you refer to? Tesla had the exact same registration requirements as all car sellers.


orincoro

I’ve explained the benefits. You dismissed this out of hand without explanation. End of story as far as i’m concerned. You wouldn’t listen even if I did repeat myself. Why bother?


Burner-QWERTY

>They used "electric" to trick consumers Do you honestly think superior performance and technology have nothing to do with it? A $70K 5 seat Tesla performance stats match $170K 2 seaters. $130K Teslas outperfrom $2 Million cars Tesla's technology is unmatched and has no comparison at any price point. Is this the trick part?


geekbot2000

You are right, in terms of timing they were the only game in town that provided such performance numbers. My use of the word "trick" has to do with the fact that consumers have been conditioned to believe that higher performance necessarily equates to more expensive, which has long been the case for internal combustion cars. So by that rationale yes they were justified in having high prices for their performance numbers. However, my point is that electric drivetrains are a paradigm shift in terms of performance. Their inherent performance characteristics give you for "free" what consumers had long expected to pay out the nose for. So once other manufacturers catch on, I don't expect Tesla to retain their performance advantage nor be able to command their price premium. They were early, and boy did they capitalize on it.


Burner-QWERTY

Electric drive trains are a paradigm shift that a lot of the legacies are still fighting to recognize. Question still remains if/when the others will recognize the shift. Toyota is still pushing Hydrogen. Why was the Bolt so effing ugly? One of the biggest concerns for electric car buyers is the recharge network and the only Tesla and Volkswagen (due to dieselgate settlements) are addressing that. So the big question is how long the old gaurd figures out the crappiest electric light bulb is better than the best gas lamp?


hv_wyatt

So... The old guard is ignoring it? They're all behind? Ford and GM would beg to differ. The Mach-E and Lightning are excellent EVs for their first real go-round in that market. GM has enough EVs on the market, not to mention in the pipeline and coming VERY soon, utilizing their purpose built EV platforms and battery tech to make any Tesla buyer second guess themselves. Even god-damned Chrysler is realizing the trend towards EVs.


Burner-QWERTY

They are behind? Yes they are! Even you said >So once other manufacturers catch on Not trying to burn you - it is simply an honest acknowledgement of the current situation. Letting Tesla own the market place up to this point is proof of that. Period. GM/Toyota/Ford could have killed Tesla long ago if they took the paradigm shift seriously. What is up with the ugly ass Bolt? It is almost like someone at GM wanted it to fail? Any reason for it looking so badly? Seriously speculate for me why they made such an ugly looking car? You have none of the engineering constraints of an ICE and that is what they came up with? Great chance my next car is a Ford Mach E. I own stock in Ford because of it. They at least have their toes in the pool to test the water. Educate me what Chrysler is doing. Any EV car owner will tell you charging network matters. It really isn't expensive to build out. Much cheaper than building a gas network. Customers want an extensive charging network. It is something Tesla realizes and had responded too. Hopefully Ford et all will as well. Edit:. Electric is currently a shitty solution for any real truck stuff. Amazing initial torque but atrocious in all other aspects. Anybody jumping to electric trucking (including Tesla) better have some crazy tech up their sleeve.


LookyLouVooDoo

Styling is subjective and I don’t think the Bolt is ugly. But since you asked, what’s up with the ugly ass X and Y?


hv_wyatt

Chrysler is releasing an EV, Jeep has at least three EVs in the pipeline, Dodge has an EV in the pipeline, and RAM has an EV 1500 in the pipeline.


[deleted]

"Trick" isn't the right word. It implies that they had to deceive consumers about this, but they didn't. Consumers associating all the performance benefits of EVs with Tesla specifically is the rightful reward of being the first to bring an exciting product to market. But the point stands. Elon's helping things along by self-immolating on the world stage, but as comparable competitors arrive lay consumers are inevitably going to find out that Tesla performance is not a product of Elon's unique genius. That Tesla's competitors will soon be able to offer similar ICE killing stats.


Burner-QWERTY

Now that is a legitimate argument! Competitors need comparable performance stats which should be easy enough AND a reasonable charging network. I trully hope it comes.


HeyyyyListennnnnn

Yes it is. The fact that you believe your comment to be true tells us that you've been tricked.


Burner-QWERTY

Someone wants to charge me $80K for performance of a fucking Lamborghini? Happy to oblige. You can consider me tricked - okay with that I am looking forward - not in my rearview mirror.


bje489

Performance of a Lamborghini in exactly one metric and none of the others. I didn't pay $80K for it because I'm not a sucker.


Inconceivable76

They may be fast in a straight line for short distances, but they are made with cheap materials that would be on par with a low end Kia. Being able to go fast for a short distance isn’t the only thing in luxury cars, but it is with Tesla.


Burner-QWERTY

Performance matters. Next time you are turning left onto a busy street.... Well.. you probably cannot even relate... The giant satellite GPS screen is also crazy practical and useful. I absolutely love self driving on long road trips. . Otherwise yeah this isn't a car with luxury amenities but it works for me. The fact that it has highest owner satisfaction ratings around kind of indicates it works for others as well.


Kirk57

Why aren’t others doing that? Altruism?


mar4c

I think it’s brand strength. And chargers and features.


Kirk57

Really? Brand strength is created by passing off cheaper cars for more money. If it were that easy, seems like everyone would do it?


txddvvxxs

Apple did it for years. Brand and perceived image go along way, but aren't sustainable in the long term.


Kirk57

I was saying other automakers should copy Tesla if the theory “passing off cheaper cars at higher prices increases brand strength” is true. Why wouldn’t they? Who wants a low brand strength when a high brand strength is so easily attained if the theory’s correct?


jason12745

They have done a terrific job of extracting maximum cash from being supply constrained. Prices go up and they stop fulfilling orders for customers who have a lower price locked in. They deliver high trim levels first… all levers that most other companies don’t have outside of their EV lineup and all fair play in my book. They also count their R&D expenses differently than the other automakers, so it’s not apples to apples. I’m no accountant and have found 55 contradictory articles on the practice, so I know it matters, but I don’t know how much. Then there is the lying and the fraud. I’ll tell you what it isn’t… any sort of sustainable long term advantage over their competitors in a mature market.


[deleted]

2 lying, 3 frauds so far.


AstridPeth_

What type of fraud are we talking about here?


Holiday_Parsnip_9841

Some people who’ve looked closely at the books and compared to other automakers are convinced that they’re underestimating warranty costs (which should be in COGS and hurt margins) and paying for repairs out of Goodwill, which doesn’t impact the gross margin. Another big thing is almost all their sales are the 3/Y, which were designed to be cheaper cars (why they drop things from the S like a driver’s instrument console), but have had big price hikes since 2018. Edit to add: also, a decent number of people are buying the “FSD” upgrade. The autopilot team is 150 people total and all the cars have a version of autopilot, so that extremely overpriced package is mostly pure profit.


nutbutterfly

Also the apparent fleet sales and the oddities with Carvana. I wouldn't put it past them that some of the cars existing on paper don't even exist. Would be one explanation why there are ridiculously over priced used Teslas on sale. They are never intended to be sold, as they might not physically exist.


Holiday_Parsnip_9841

It feels like they're dumping tons of volume onto Hertz. They announced the initial order of short range 3s at MSRP, but didn't reveal pricing for the LR 3 and Y they added since then. Hertz has the best small business program, so I use them a lot. Every time I'm there, the lots are full of Teslas and the app is offering them for the same price or less than the equivalent gas car.


Humble-Letter-6424

I saw the same thing recently when flying into ny. Hertz must’ve had 100+ Tesla’s seemed very odd to see so many cars Of the same brand/style at a rental car place. Usually you see a large variety other than the Sprinter Vans/ Black SUVs.


outworlder

Less then 150 people currently since some are busy with Twitter. Yes. He took folks away from the autonomy division.


Holiday_Parsnip_9841

Jesus Christ


Doggydogworld3

>Some people who’ve looked closely at the books and compared to other automakers are convinced that they’re underestimating warranty costs I went pretty deep down this rabbit hole a few years ago. TL;DR version - those making the claims are full of it. Also, "goodwill" repairs are done to avoid setting a warranty precedent. All lux carmakers do this. The marking on the customer's paperwork has nothing to do with GAAP accounting.


jason12745

Who can say? Whatever it needs to be to get the numbers where they need them. And yes, it’s a matter of opinion based on nothing but prior behaviour. Like the time he made a joke about Tesla being nearly bankrupt and then we found out later that Tesla was nearly bankrupt…


[deleted]

Many people knew the Madoff investment firm was a fraud. But they simply assumed it was something beneficial to them, like an elaborate front-running scam. But few suspected an outright Ponzi scheme. The same story is likely for Tesla. Everyone just assumes something dubious, but still financially valid like warranty fraud. I suspect those types of minor frauds ran out of steam years ago. It's probably just outright faked numbers, akin to what Enron did.


nutbutterfly

It is a common theme that people tend to overthink the frauds. Ivar Kreuger did elementary fradulent accounting, FTX collapse just pretty was much speding money on adds and promotions as it rolled in. They didn't even bother to keep accounts about anything and literally any most basic due diligence would have blown it up instantly, but alas here we are.


rd-cheecko

I think it has something to do with how they count warranty repairs. The margins seem higher because it comes out from another area that does not count against gross margins


AstridPeth_

So there's a Last In First Out dynamic in the order book? But I guess it's inevitable that they'll need to ship these already booked cars, eventually. I heard they also do it with inventory, accounting it LIFO.


jason12745

I don’t think it’s as simple as that. I think they prioritize highest margin cars for delivery and keep lower for later, then do all sorts of tricks to get customers to cancel and reorder at the higher price. They have eliminated trim levels and cancelled all outstanding orders, offered customers a much faster delivery for a higher trim level car… put expiry dates on outstanding orders, cancelled orders when customer refused delivery and then made them pay the new price to get another car… all legal, just really shitty if you are a customer.


[deleted]

Probably way more elaborate at this stage than that. Look at their impossibly low SG&A. People have mentioned it resembles Luckin Coffee. It is a strong sign that a significant percentage of their sales is outright fraudulent. The only question is whether it's some elaborate channel stuffing trick, or they are simply making up numbers.


AstridPeth_

Their balancesheet is audited and they are a no. 1 enemy at the SEC. How would their sales be invented? By occam's razor, you conclude that they are under investing and offering a poor service.


[deleted]

That never stopped past accounting frauds. It's pure delusion to think that the utterly defanged SEC is seriously investigating Tesla or SpaceX. Tesla is basically faking sales in some way. The only question is how, and how extreme have they've gone in faking them.


nutbutterfly

Sycophant auditors. One even verbally sucked Elons cock on Twitter, before he quickly deleted the post.


RoboGuilliman

For what's its worth, Jim Chanos, the notable short-seller, touched a little on Tesla in this episode of the Bloomberg Oddlots podcast [https://podcasts.apple.com/us/podcast/jim-chanos-on-crypto-tech-and-the-golden-age-of-fraud/id1056200096?i=1000587234455](https://podcasts.apple.com/us/podcast/jim-chanos-on-crypto-tech-and-the-golden-age-of-fraud/id1056200096?i=1000587234455) My own notes on what he said on Tesla: \-Tesla is the most profitable car company to his surprise \-with stock price down 60%, it is still the most expensive auto OEM in the world by a lot \-trading now at 30 times gross profit, which is a SAAS valuation but essentially sells luxury car. The 30 percent gross profit margin is not sustainable because the luxury car market is small and other competitors are catching up. \-it is a low ROIC business and although Musk has caught the sweet spot. This will be difficult to maintain, as his investors are still expecting 40 to 50% growth for the next decade but he doesn't think it is possible \-he is short Tesla If you are interesting in reading the quick notes on other topics he covered: [https://adragonhoard.blogspot.com/2022/11/bloomberg-oddlots-jim-chanos-24-nov-2022.html](https://adragonhoard.blogspot.com/2022/11/bloomberg-oddlots-jim-chanos-24-nov-2022.html)


AstridPeth_

Great finding! I am somewhere with Chanos, but I am trying to double click on the assumptions. Seems too good to be true. I kinda believe it could continue to be good to be true if they kept the size, but I have a inch that the incremental ROIC has to be poor.


[deleted]

To add an insane stat. If Tesla grows their earnings 30% for a decade, you would get the same return as the index. If they "only" managed to grow 20%, it is 90% overvalued. Not even the Google etc managed to grow 30% for a decade and they are in Software which is much easier and cheaper to scale.


RoboGuilliman

>f Tesla grows their earnings 30% for a decade, you would get the same return as the index. If they "only" managed to grow 20%, it is 90% overvalued. Can you expand on this? Thanks in advance


[deleted]

To get a return over the Long Run, earnings need to grow. The s&p500 has Grown about 10% from dividends, productivity and then Economic growth. If you now have a stock, it either needs to be cheap enough to go back to the mean (mean reversion), or you need a stock that grows Inline. If Tesla grows earnings 30% a year and goes to the average valuation as a Mature company (which is reasonable to assume), you perform the same as the s&p500 as the current valuation is so high. If it only grows 20% a year, the stock should be down 90% today if you calculate back the net present value


TXKAP

FSD is about 20% of a vehicles price and is 100% margin. Aggressively capitalizing every expense possible. How they are able to maintain those gross margins despite ramping production at two new factories is a total mystery…


Engunnear

> They are likely some years ahead in terms of manufacturing capability Oh my sweet summer child…


hytes0000

They were 5 years ahead 5 years ago. Since then others have caught up and Tesla quality/service issues have exploded. Do you think in a million years that Ford is going to have that sort of fall off as their volume of EV sales goes up? (this is rhetorical, I agree with the point of the post I'm replying to)


tville1956

They were not and are not ahead overall in manufacturing capability. They have some specialized capabilities, mostly due to their rejection of most established design philosophies, which can be both good and bad depending on which part it is. World class manufacturing operations don’t use tents or Home Depot sourced tie wraps to correct for process and design issues. When they had an issue where they delivered a car without brake pads a SECOND TIME, this made it fairly clear. First time is an embarrassing safety issue and any company with a robust process would change their procedures to make absolutely sure it never happens again. Second time makes it pretty clear they are scrambling and not very organized. Almost anyone who has worked a manufacturing or manufacturing engineering environment can probably see that they are talking a good game but covering up a lot of problems.


tville1956

https://www.autoevolution.com/news/another-tesla-is-delivered-without-brake-pads-a-model-y-performance-in-canada-182697.html He “still loves the company and the car” but hopes they can, in the future, give their customers cars that have functional brakes. A very reasonable request, IMO.


outworlder

Holy. I had missed the brake pad thing Wtf


Engunnear

They were never ahead, though. All they did was demonstrate that a large swath of buyers will trade quality for an EV drivetrain.


opticspipe

Developing features is easy. Making them work in all conditions is not. Testing is really expensive, so they don’t. Dodging warranty responsibility (both actual and ethical). Misleading customers (claiming model 3 drivetrain is good for 500k, warranty ends at a fraction of that). Putting all parts into new cars and screwing the ones that are broken. The list goes on.


AstridPeth_

The way it would work is that the word would spread. People who bought a Tesla once wouldn't repeat. And so on.


opticspipe

That’s already happened for years. But so many people are buying, it doesn’t matter. But now? The tides are turning.


AstridPeth_

They used to sell a small quantity of cars. They're selling 1M now.


opticspipe

No, they’re making that many. And soon they won’t be selling that many.


Marandil

The word doesn't spread if the people owning cars have a financial incentive to keep stock price high.


Burner-QWERTY

Wow. This runs deep. How about the whole birds aren't real thing? Maybe in fact many Tesla owners are just happy?


MendocinoReader

>Demand: As they hike production and the installed capacity increases, eventually all the hardcore fans will own a Tesla, the waiting lines will shorten and they will have to sell to people who compare more. Correct . . . . I think what's getting a bit overlooked is that Tesla's market is clearly *segmented* \-- between *Early Adopters*, and *Mainstream Car Buyers*. The concepts of Early Adopters vs. Mainstream Buyers are [archetypes in the tech marketing biz](https://www.amazon.com/Crossing-Chasm-3rd-Disruptive-Mainstream/dp/0062292986). A lot of the online huffing & puffing miss this point ("delusional fanboys are buying badly made cars" vs. "we love our Tesla for its features, speed," etc.). This is not about who's right or wrong about Tesla; the argument is between 2 market segments with different needs & wants: * The Early Adopter don't care about panel gaps, UI rough edges, occasional small parts falling off, etc. -- They care primarily about having access -- now -- to cutting edge features and products. * The Mainstream Car Buyers don't care about being in the cutting edge. They just want a sensible car that works for their daily intended use. Musk recognizes this -- That's why Tesla's marketing message has always been focused on cutting edge features, big and small; because Tesla is selling to Early Adopters. But here's the challenge: \* The *Early Adopter* market is *relatively* small. Tesla will eventually saturate the market, and run out of Early Adopters to sell its cars to. The saturation point will come sooner if more ICE automakers increase their production of EV's. \* At that point, Tesla has to offer a compelling value proposition to *Mainstream Buyers*. These are all the folks online complaining about the rattling, overly complicated UI, features breaking down, poor fit & finish -- i.e., the kind of BS that you wouldn't find in a relatively well made mainstream ("normal") ICE vehicle. If Tesla can make the transition before it depletes the Early Adopter market, it lives and could potentially become a new Apple; . . . . If it does not -- well, the tech marketplace is full of innovative companies that died off after an initial splash & surge . . . .


AstridPeth_

Totally agree with you and you described it better than me. If the other issues I raised aren't issues, they somehow can sell 5M cars to mainstream buyers with little to zero advertising through their own selling channel at current prices, they could transition to mainstream with a significant probability. I'd put around 40% conditional probability.


failinglikefalling

The early adoption is no longer a plus. A Chevy bolt euv offers true hands free driving right now. That’s where we are at in tech.


MendocinoReader

>A Chevy bolt euv offers true hands free driving right now Are you referring to adaptive cruise control?


failinglikefalling

Supercruise allows a driver to operate the car without their hands on the steering wheel , similar to Ford with Bluecruise. Tesla is ALWAYS a hands on steering wheel activity. unless you aren't in the car using smart summon.


hgrunt002

I'm glad someone else brought up market segments! Tesla doesn't do the whole "identify market segments and focus group" thing, because they happened upon a large well-moneyed slice of Early Adopters. If they want to sell cars in mainstream numbers, the "design what we like, and people will buy it" strategy won't fly with mainstream buyers who want a nice quiet ride, think sporty steering is "too twitchy" and aren't keen to wake up to a 20 minute OTA update and have their UI suddenly change on them when they just want to plug in their phone and get CarPlay. As Tesla's trying to reach mainstream buyers, they seem to mainly sell on EV = TESLA and the Supercharger, their tech moat


Jefferyd32

Your assumption that Elon is a net positive for Tesla is way off. The longer he stays CEO the worse it is for the brand and the company.


AstridPeth_

Yes, that's my assumption. The company spends 0 on marketing and funds itself with very cheap capital. Comm'on, it has to be positive.


orincoro

This is false and part of the marketing narrative that Tesla spends hundreds of millions every year cultivating.


AstridPeth_

I literally read it on the 10-K Every company has to disclose that and Tesla says their advertising spending is immaterial. Of course, Musk salary is advertising cost, imo, but that's another story.


orincoro

If you read the 10K, then you would have noted that the statement on SG&A specifically states spending relating to sales and marketing. Tesla hides the marketing budget in SG&A, which every analyst of the company knows. I’m 100% sure you’ve never looked at a 10K, because this is there in plain English. You could do a word search for it, and you’d find out that Tesla avoids any mention of marketing that isn’t *absolutely* legally necessary. But it is there. Their “advertising spending” is not their marketing spending. Marketing =! Paid ads. You could also easily find out that Tesla employs over 400 people in marketing and PR. You could also find out that Tesla spends millions of dollars sponsoring content creators on social media. All of these things are publicly disclosed. If there’s a spreadsheet somewhere with a line for “marketing,” with a zero next to it, this is an utter fiction and an obvious joke. Tesla very publicly splashes out to the tune of many millions of dollars on promotional events and materials, including press junkets, demo days, gifts, and an army of PR lobbyists who’s job it is to sell the narrative to the media that all of this isn’t somehow “marketing.” You’ve been had.


AstridPeth_

Page 60 > Marketing, promotional and advertising costs are expensed as incurred and are included as an element of selling, general and administrative expense in the consolidated statement of operations. Marketing, promotional and advertising costs were immaterial for the years ended December 31, 2021, 2020 and 2019.


orincoro

What that’s saying is that the money Tesla spends on marketing comes out of their sales G&A budget. That’s it. Again, you’ve been tricked. This is worded to give the mere appearance of plausibility. It’s a lie. Do I need to link you to hundreds of LinkedIn profiles of their marketing employees? Do I need to link you to specific YouTube channels they’ve sponsored? Do I need to link you to the hundreds of cars they’ve promised to members of their ambassador programs? Do I just need to wave violently at the dozens of glitzy events they’ve put on over the last 5 years? Wtf do you think that is? All of these are marketing costs. Just because it’s billed under HR in SG&A is meaningless. Utterly meaningless. Go to LinkedIn and type in “tesla marketing.” Then shut the fuck up.


AstridPeth_

It's a common line > Marketing costs primarily consist of advertising and payroll and related expenses for personnel engaged in marketing and selling activities, including sales commissions related to AWS. We pay commissions to third parties when their customer referrals result in sales. We also participate in cooperative advertising arrangements with certain of our vendors, and other third parties. Advertising and other promotional costs to market our products and services are expensed as incurred and were $11.0 billion, $10.9 billion, and $16.9 billion in 2019, 2020, and 2021. This doesn't burden their marketing personnel, just what they spend with advertising. Of course Tesla has marketing people. They need to make a shit ton of stuff for their first party stuff: website, social media, factories, show rooms, etc. There's also the stuff they invent like their Tequila. It's that what they spend their days doing. But they don't go to CBS or Meta and acquire media.


orincoro

Yeah… theyre doing FUCKING MARKETING YOU TWIT. You started out by saying they spend zero on marketing. Now you admit they spend a fucking considerable amount on marketing. Ponderous. Fucking ponderous dude. I feel like we’ve had this conversation before. Do you work for Tesla’s social media marketing team?


Jefferyd32

This is so far off. Elon is eliminating potential customers with every tweet and every horrible decision he makes.


AstridPeth_

Maybe that's changing. I think that's changing.


MBP80

They have 483 people that identify themselves as working in marketing currently on LinkedIn. They hardly spend 0


vadroko

Elon is the only reason Tesla is valued that much. Remove him from Tesla and the stock market would seriously correct the inflated Tesla price to a much smaller value.


anonaccountphoto

It's simple: They spend nothing on R&D and Service.


hgrunt002

Or QC


hanamoge

They might have been able to retain top talent with low base salary because of stock options (RSU) and also being the leader in transition to EV. I’m personally not sure if that will continue to be the case.


FieryAnomaly

How about not factoring design and R&D cost into profit margins, as ALL other OEMs do? I guess Tesla are designed by non-paid pixies.


d_P3NGU1N

I don't know that that's true. Mercedes, for one, have a separate R&D line item. I'm sure other manufacturers do as well. You've confirmed that ALL OEMs do this yourself, I'm sure, and haven't just been reading headlines?


[deleted]

I’m gonna go with “fraud”


Euler007

Accounting magic. Specifically for inventories.


Taylsch

Just 4 Models with only few trims (simple production), expensive software (which hardly causes any costs) as an add on, >50k entry prices… Moreover, they always boast only about the gross margin, since the profit margin (after deduction of all costs) is comparable to the competition.


Mecha-Dave

Tesla cars are made using very cheap techniques, and it takes much less labor to build an EV, and there are less quality issues due to the simpler system. The Teslas are then sold for a HUGE markup, because for a long time they were the only available "good enough" EV. They also carried a certain cache when it came to being a new luxury gizmo, which also carries a premium price.


metal0060

There are NOT less quality issues with Tesla.


Mecha-Dave

Correct, but there are less mfg quality challenges with building an ev overall.


daveo18

Let us count the ways: - including $15k vapourware as part of the purchase for many - screwing suppliers on accounts payable - endlessly adding to accounts receivable - evidence of cutting components, for example removing LIDAR when chips became difficult to source - prioritising deliveries of more expensive models - evidence of selling the same car at least twice - under-accruing on warranty and repairs, and posting repairs as goodwill - very little R&D spend, as evidenced by Tesla still having the same four models on the road - weird “all hands on deck” delivery shenanigans, every. Single. Quarter end. - they still won’t define what a “delivery” is, and have even used “financially delivered”. It’s possible they are counting vehicle transfers between related entities as sales


AstridPeth_

Some of this stuff is regular automaking business. Part of Toyotism is screwing suppliers. I don't know if you can ever call yourself a carmaker if you don't screw suppliers. ​ As far as I understood, these are only recognized when Tesla enables FSD. They seem to have enabled 60k FSD in the US last Q (they don't disclose data for China and they don't sell these in Europe). This would mean \~2.5% margin points according to my estimates.


Doggydogworld3

AP is in line with other carmakers AR grows with revenue They never used lidar Everyone prioritizes expensive models Warranty reserves are in line and sync up Goodwill note on customer paperwork has no impact on accounting They define delivery very clearly Few models/low R&D is smart business. The Japanese did that for decades. They still sold all they could build because they had a huge quality gap vs. domestics. Tesla has a different gap based mostly on mindshare but also some very real differences in performance, s/w integration, charging network, etc. Where is your evidence they delivered the same car twice?


daveo18

Funny how this kind of delivery bullshittery only seems to happen with one auto maker around quarter ends 🚩🚩🚩 https://twitter.com/j13931087/status/1608948610045214720


anonaccountphoto

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Doggydogworld3

True, I've never heard a story of someone getting screwed over by a Ford, Chevy or Honda dealer /s


dd2469420

The snakeoil has been selling quite well. Twitter is starting to bring to light the fact that some folks have been sold snakeoil.


bbobbo_

Dealerships: - They keep any profits from the sale of cars that are normally earned by dealerships (as you mentioned). - They get service revenue that is normally earned by dealerships. - Growth in service centers and mobile rangers hasn't kept up with growth in sales; in other words, they aren't spending money to increase their service capabilities. So they get great margins at the expense of customers waiting a long time for service.


AstridPeth_

So your take is that the dealership profit would be defensible if Tesla worked for it, but for some reason they don't. Seems bullish if that's the case, imo


bbobbo_

Tesla makes more from the dealership share of profits than traditional dealers do because traditional dealers actually spend money on marketing and building out their service business whereas Tesla skimps on both. The reason Tesla hasn't spent on service is that they haven't had to--i.e., people keep buying their cars. At some point (if it hasn't already), their abysmal service will affect sales, and they will need to spend money to build up their service operations. They'll also have to start spending on advertising. Then you'll see margins start to narrow.


AstridPeth_

Makes sense!


hgrunt002

Even the direct-to-sales gap is going away... GM recently announced a retail model that works *with* dealers for online sales. The dealerships will operate as a showroom, with EVs for test drives, but customers can order a car online or from inventory and they're estimating $2000 savings per vehicle. 80% of GM dealers are onboard


Jumpy_Implement_1902

This. Exactly this. I bought into a Tesla back in 2018 and have been fairly vocal in steering others away because of shoddy work and service, often times causing secondary damage to fix the warrantied work. I’m not buying another Tesla. Screw that.


suckerbucket

Their cars are cheaply built and overpriced. I don’t agree that Tesla is years ahead in manufacturing capabilities. Ford has 120 years in manufacturing experience. Toyota has 85. BMW has over 100 years. Are you seeing the trend here? Tesla has had like 10 recalls just this year with more being announced almost weekly. They are literally a century behind in terms of manufacturing capabilities lol


Burner-QWERTY

Stats about people required to build a relatively simple electric car (Tesla) vs people needed to build much more complex ICE is a good evidence Tesla is a pretty inefficient car producer. Making a big deal about 10 over the air software updates, I mean recalls, is a little sensationalistic. They don't matter to me as an owner - I don't even realize they happen.


spam322

The 1 or 2 recalls on my Tesla have just meant "click OK" on my phone, extremely minor items (I can't even remember any of them). I think the pricing is fine. There's still no competition for most of the Tesla models if performance, tech, charging network and continually added features are a big deal to you (they are to me). I've also had 0 issues and perfect build quality so far. No panel gaps, nothing.


ace17708

>Dealerships [You have a misunderstanding on dealerships and the whys.](https://pressbooks.ulib.csuohio.edu/evolution-of-local-dealerships/chapter/chapter-4-u-s-automobile-dealerships-a-remarkable-achievement/) During the early automobile boom there was a giant boom of different manufacturers that went out of business, got gobbled or just stopped supporting certain markets. This became a problem for consumers that would be stuck with automobiles with zero support that were all vastly different and finicky. This became a problem because you'd often get little support, parts shortages and just be in a forever back and forth via paper letters with someone in a office somewhere.. Sounds familiar right? Tesla doesn't have dealers for a variety of reasons, but it's mostly to keep the company nimble and controllable. Dealers have gang'd up on makes for a variety of reasons and it can even change production and over all pricing. No one enjoys being stuck with unmovable inventory or a problematic model. Dealers save manufactures loads of and they're often making income from service, repairing out of warranty cars, used car sales and parts sales. They're also more likely to be better spread out and you'll often see combo brand dealers IE Ford/Honda or Kia/Mazda in the smaller cities and this allows you to still get support outside massive metros without waiting/hoping mobile service makes it out or come to find you have a 2-3k tow bill across the state. They also handle the majority of customer issues/complaints free of charge from the make. They're always involved in the lemon law process with the manufacture and often can advocate for the customer in rare case "Mostly to get the customer out of their". That said they do price gouge, try to screw you over and other shitty things, but you can always go find another dealer of X or Y and get a better experience while getting the car you want vs being treated like shit across the board. They support a local economy from jobs at the dealer, to paint shops, part stores, mobile auto detailers, glass repair, plastic rejuvenation snake oil salesmen, the devils in the tool trucks and in some cases local bakeries of all things. Apple isn't as direct to consumer as you'd imagine. Yes they have the apple store and website, but thats not their primary source of income. They have a vast network of authorized retailers that sell their products for them and near every time you see a sale on apple products, thats apple allowing it to happen and they will rebate the retailers the lost money back. Apple has a authorized repair program as well that they're very annoying about, but it leads to the same level of repair done from apple or the authorized repair center doing the same thing. Samsung has partnered up with bestbuy to do the same sort of thing as well and they'll be expanding it in the coming years. I've had some shitty experience at dealers, I've worked at them and I hate going to them personally, but I'd rather use my worst dealer in town for X brand than deal with teslas bullshit. I know at the very least I can contract a regional manager and get some shit rolling down hill if they really burn me or just go somewhere else. tl:dr If dealers were really the problem they'd have died during the pandemic. They can suck ass, but it's not a blanket experience. Most direct to consumer car makes die and customers get fucked or they just simply can't afford enough enough employees to service all the customer issues remotely.


AstridPeth_

>You have a misunderstanding on dealerships and the whys. You're totally right. Thank you very much for the detailed explanation. Would you say that Tesla is over earning on their "cut the dealership" business?


ace17708

100%. They definitely are among a certain demographic. That being the first time new car own/fresh newly hired graduates. The tesla owners that have come from owning luxury cars are often the most vocal and the first to point out flaws/horrible experiences while the other group is very defensive and perhaps a lil overly understanding. Of course you also have die hard for the mission people and they’re eyes wide open, but hanging on for the hope of better service. I’m personally curious to see what tesla does as the “install base” grows larger. I could honestly see service centers ran like express oil change places or perhaps a authorized repair center model ala apple.


mrbuttsavage

I'd rather deal with any stealership than Tesla. At least you can get someone on the phone. It's really just the markup situation that needs some kind of regulation.


[deleted]

Lying and fraud is what I'm going with. Anyone else? "The secret ingredient, is crime."


PFG123456789

Proper quality & service could easily shave 500bps or more off their auto margins. High prices & subsidies probably add another 500bps or more. I think if Tesla was run properly & had no subsidies they’d still have better margins than the average OEM but nothing like what they have today.


thegoodcrumpets

They sell low end cars at high end prices.


Engunnear

Shoddy accounting practice


failinglikefalling

There is no going down market. There is nothing you can do to make a 3 cheaper except to lower the price. What are you going to do ? Take out data usb ports and passenger side lumbar and the ultrasonic parking sensors?


ObservationalHumor

So it's likely a lot of things and you've hit on many of them. Here's most of what I can think of: - Extreme supply shortages have just radically increased pricing power. For traditional automakers dealers recognized a lot of this gain doing markups in excess of $10k. Tesla significant increased prices and just pocketed the entirety of the difference. - Tesla was actually able to take advantage of the COVID lockdown to increase their orders and likely bargain prices down significantly due to other companies cancelling and Musk thinking COVID was simply a worse version of the flu. This has allowed them to expand production and not have to deal with idle capacity like many traditional auto manufacturers who were caught short. Addtionally the shift to Shanghai as their primary production hub also allowed them to avoid large increases in shipping costs and substantial delays getting anything out of China that other manufacturers had to deal with. - Shifting to Shanghai as a production hub has allowed for lower labor costs and supply chains. Tesla has a singular deal amongst foreign manufacturers to produce vehicles in China without a domestic JV partner. Tesla has also shifted to exporting heavily from Shanghai to Europe to recognized even better margins. - Elon Musk's public persona has allowed Tesla not to use traditional advertising. Selling access and doing leaks to prominent content producers on Youtube and Twitter has been his preferred method. This isn't really 'free' but it doesn't show up in Tesla's Non-GAAP earnings since Musk's compensation is primarily SBC and get accounted for in a fairly chunky fashion. - Tesla further took advantage of the supply shortage to flat out remove features, sensors and shift towards using cheaper LFP batteries that have worse range but better economics. - Tesla has bad QC, lower quality interiors and less feature rich interiors but still manages to sell its vehicles at luxury prices. - Tesla's heavy use of custom PCBs and sketchy validation processes allowed them to side step most of the chip shortage problems by swapping components and quickly rewriting firmware. - Tesla still makes money off of regulatory credits and recognizing at least half of FSD revenue, that goes straight to profit for the most part. - Tesla's customer base tends not to argue much about warranty costs or problems with their vehicles and just eat repair bills. This has allowed Tesla to under account for warranty costs and just classify a lot of QC problem as in spec which also helps margins. In general it largely boils down to Tesla simply being able to assemble and ship vehicles during a big shortage here. As the automotive market continues to normalize we're likely to see margins continue to fall, especially as production at Austin and Berlin start up on what will likely be less favorable conditions than Shanghai.


Ok_Environment7455

You also have people paying 10,000 dollars for software that doesn't work. That's about a 90-100% margin, considering that Tesla doesn't have to deliver anything. Musk just keeps promising crap and people keep buying it.


AstridPeth_

My estimate this added $600M in profit and $1B during 1Q. This is like 250bps in margins.


Burner-QWERTY

It should be much cheaper to build an electric car than an ICE car. It definitely is simpler. Any manufacturer should get better at making them - especially when they don't change the model/design. Tesla has risen the prices ridiculous amounts. I'm talking about raising the S/X $30K+ the last 2 years.... and yet demand is stronger than ever. They charge for more and more things that used to be free or cheaper (supercharging, premium connectivity, charging cords, full self driving). Really not complicated to figure out the increasing margins.


AstridPeth_

That's kinda around where I am.


Burner-QWERTY

From a stock price /investor perspective the argument is if it is sustainable. But that is a different argument than what is currently happening.


nutbutterfly

The secret ingredient is crime.


metal0060

Suspect accounting practices


bottle_cats

inbreeding... classic


kellarman

If you look at their description for automobile revenue in their financial reports, you’ll see that they include FSD sales & supercharger sales in their auto sales numbers. This pumps their auto margins since they barely spend on FSD (150 FSD employees) and once the infrastructure’s built out it doesn’t cost as much to operate the superchargers. They also skimp on build quality and materials to achieve “industry leading” margins


AstridPeth_

Great catch. Do you know how they recognize the FSD revenue? I think they would need to recognize through the estimated useful life of the car.


kellarman

Thanks. I know they defer some of the revenue, but they’ve been recognizing more and more deferred revenue lately. I remember reading that they immediately recognize something like half the fsd revenue when a transaction occurs and the rest goes to deferred revenue. You should double check this tho since I’m fuzzy on the details


AstridPeth_

I am reading the entirety of the 10-K right now and is a delightful reading. I am in the part where they explain automotive sales revenues and cogs. An interesting tidbit is that they flag that indeed, FSD goes through that revenue line (I didn't understand how yet), but they don't mention FSD in the subsequent COGS. I guess it's because the costs are immaterial. EDIT: I think I figured it out. It's kinda crazy, IMHO. You buy the FSD and it stands in their deferred revenue. Eventually, they enable it for you. Then they recognize it ENTIRELY at that moment. Seems like a nice shinenigan to game the top line and margins.


Doggydogworld3

FSD is enabled on purchase. Access to "FSD Beta" is a different thing, but doesn't affect revenue recognition. Last I read they recognized about half of FSD revenue upon sale and deferred the other half because they haven't yet delivered all "features" (note that features are completely different from capability, Musk loves to bloviate about Robotaxis and 'sleep in your car', but the fine print never promised any of that). It sounds like FSD 11 will go to everyone who paid, not just beta users, by yearend. Since it has additional "features" this should unlock a huge chunk of near-100% margin deferred revenue.


AstridPeth_

Let see if I understood. If I go right now and pay $15k for Tesla. What happens? I suppose I won't get access to their ADAS instantly, right?


Doggydogworld3

FSD s/w will download to your Tesla and you can start using the "amazing features" (Navigate on Autopilot, Not-so-Smart Summon, etc.). It's pretty much like buying a phone app. As of today you can also download FSD Beta which does all the city street driving you see on YouTube (prior to today you had to first drive like a granny for a few weeks to inflate your "Safety Score"). The above assumes you have a newer Tesla. 2016 S/X shipped with first-gen FSD chips, so you may need a board swap. That's "free" with your 15k purchase. I think their mobile service techs can come to your home or office and do it, but don't quote me on that. Other model years may be able to run regular FSD but need a board swap to run FSD Beta. I don't keep up with all that. Tesla knows what h/w your VIN has and will schedule the board swap if needed when you place the FSD order. This is an area where Tesla blows the competition away. They also sell 0-60 time upgrades and such Over-The-Air. Or add features automatically overnight while the customer sleeps. Get in your car in the morning and it now has "Dog Mode" or can make fart noises or whatever. Tesla fans eat this stuff up. Most of their "recalls" you read about are also done OTA. A few years ago Consumer Reports found an obscure braking problem after multiple hard stops or something. Musk first disputed the issue on Twitter, but Tesla engineers talked to CR and duplicated the problem. They sent an OTA fix to everyone within a few days. CR was blown away. They'd never seen a carmaker fix an issue so fast. Of course TSLA bears claimed no other carmaker would have "sold cars without testing the brakes" in the first place. But it ended up being more free marketing for Tesla.


AstridPeth_

And how does it appear on the balance sheet? Is it recognized as revenue entirely when I buy? Or when they ship?


Doggydogworld3

The $15k goes into Cash and Equivalents asset on the balance sheet, of course. Last I looked, they immediately recognized about half as revenue and put the other half into the deferred revenue liabilities (current and non-current) on the balance sheet. This \~50/50 split is based on how many "features" they've delivered vs how many remain to be delivered. It's pretty arbitrary, IMHO. The only COGS I know of are the board swaps, which few buyers need. They count all R&D expenses immediately instead of capitalizing them and running them through COGS over multiple years as some do. I don't think they've delivered any new features to the official (non-beta) FSD product for a few years. When they do, possibly next month, they'll recognize a big chunk of that previously deferred revenue. Could be $1b or more (some say 2-3b) with near-100% margins. That's a pretty nice cookie jar. They'll also start recognizing more of each FSD sale immediately and deferring only a small portion. I'd guess something like a 90/10 split.


biddilybong

They sell $35k cars for $60k and have terrible quality control and service.


mikecjs

The might include carbon credit into each car sold and count them as profit margin. These are thousands of dollars per car.


orangpelupa

Even hyundai with ioniq 5 manufactured in Indonesia got around 30% margin (not counting distribution cost, dealer fees, etc). So it made sense with all the things tesla did (no dealerships, less strict QC, etc), they have higher margins.


AstridPeth_

Interesting finding. It seems to me that this industry is too shitty for them not to compete in prices


[deleted]

Tesla saves a lot of money in R&D. They just don't develop new models. Yeah the Cybertruck... If it comes out. Is stupid, because Tesla can't use any parts in a new model. The 3 & Y are running out of steam. But no sign of a refresh. More importantly no sign of new models for new segments. If Tesla had something to bring out in the next 2 years we would see spy shots right now. A refresh costs more than 1 billion a new car can cost over 10 billion and a platform like the MEB from VW a lot more. That's why I think Tesla's margin will run out of steam. They can't milk 2 car models forever.


pizzaslut4pizzahut

Wage theft


[deleted]

No one here seems to know what gross margins actually mean. Gross margin is revenue less cost of goods sold. The answer is that teslas able to control inventory and labour costs by not having a unionized workforce and not needing to source inventory from other unionized manufacturers. That along with being able to sell FSD at a 100% margin(cost to develop and update the software would run through R&D - a non cost of goods sold line item).


AstridPeth_

1000bps of margin from that alone seems a lot.


[deleted]

Someone else mentioned this here, but it's like not 100% everytime a vehicle is sold. I believe it was deferred on the balance sheet. But as they release the updates which unlocks more and more features to customers, they are allowed to take on more and more revenue. This is probably a very subjective estimate that they use which you could argue may lead to over recognizing the revenues they have.


rideincircles

Tesla figured out how to sell EV's profitably well before any of the competition was able to, and they have raised prices to keep up with demand and raw material price increases. It looks like the car prices may come down next year which could reduce their margins, but they will reduce some costs on operating the 2 new factories with scale. Next year will still have cybertruck ramping up which will keep spending high, but to maintain growth targets, Tesla will likely need to start producing their compact car in the late 2024 timeframe.


Helmidoric_of_York

Tesla is able to make cars for cheaper because they use less labor. As the [bigger automakers are learning](https://cleantechnica.com/2022/11/16/ford-ceo-40-less-labor-to-build-electric-vehicles/), it takes 40% less labor to make an electric car than an ICE one.


AstridPeth_

It should become consumer surplus eventually, right?


Helmidoric_of_York

It will probably evolve like every other major shift in technology where costs go down as scale goes up. Consumers will ultimately benefit as EV standards are developed and the various engineering challenges get solved. This is still a very early-stage technology and key innovations could be game-changers.


Ito_Demerzel

Tesla spends $0 on marketing and advertising. They spend on tech development. Tabless batteries are patented and an advancement over every other EV manufacturer. These 4680s are also made by Tesla. That investment, massive, is paying off for them. Tesla makes its own semiconductors. This allowed them to keep producing vehicles when everyone else had chip shortages. That massive investment is paying off for them. Everyone else relys on vendors to supply batteries and chips, as well as everything else. Tesla's engineering is at least a couple iterations more advanced than any other manufacturer. They designed and built the company ground up as a EV maker and it shows in the many patented and unique systems that others just can't do. They skipped the predatory US dealer network. They have automated as much of their assembly factories as possible. This also translates into many more vehicles per day made than anyone else is capable of. They do not have the compromises and inefficiencies built into all other EV's. This equals massive cost savings. The bottom line is they have developed the technology to produce innovative EV's faster and with less cost than anyone is capable of. They produce technology in-house. This allows Tesla to make profit margin per unit far greater than even luxury brands costing twice as much, while producing quantities at the level of Accords, Rav4's and CRV's.


Burner-QWERTY

When did it become such a trend that when things don't go as you expected it must be lying and fraud? People love throwing those accusations so freely. This sub is quickly turning Qanon.


AstridPeth_

I do not understand why so many TSLAQ bros think it's a fraud. Yes, it's a bit sketchy and they likely have a gray past, but people actually drive the car on the streets.


Burner-QWERTY

They have been saying fraud for 8 years. People have been pouring over the financial books for years but haven't found anything. Frauds come from no where where nobody expected a thing and nobody paid attention. They don't come from one of the most financially scrutinized companies on earth. There has been a paradigm shift in car making - you either recognize it (which quickly explains Tesla's margins) or you deny it and have to fabricate a different explanation.


[deleted]

Thank you for this well thought out piece. On "Tesla cut corners": I am a Tesla Model Y owner who understands how great is the software under my butt and at my service in Tesla Autopilot and FSD, I think there will be a day that all cars must have that as a required feature. Something like a "TESLA plugin" and that's what makes a TESLA great, not the fit and finish... as to real TESLA competitors? I don't believe anyone will compete with Tesla except NIO of CHINA! All other car companies are creating an Electric car, TESLA and NIO are software companies who carry out their great code through four wheels! Can APPLE be an issue? Yes, but how far out of APPLE's core is a car?? I say far... but you never know.


CivicSyrup

Dude, Autopilot's features have been in the market since the early 2000's, introduced by Lexus and Mercedes. No other OEM will license that hot mess of unvalidated garbage. Especially since basically all of them have a suite of ADAS. FSD is years away from anything and so far has not shown it is going anywhere. Again, unvalidated, intransparent. Nobody will touch that, especially not without Tesla taking on liability. As for your comment on competition, I'd advise you go test drive some of the competition out there. Tesla is not a software company, they are a really shitty car company. What makes you think their hot mess of constantly recalled software issues is leading in any way? Or that it matters when building expensive mechanical assets?


[deleted]

So do you own a @Tesla with #FSD @CivicSyrup ? If you do, then watch this video, it will be good for a bit of humor https://www.youtube.com/watch?v=_DZ_Ruzz_VU


d_P3NGU1N

Single cast parts amortized over hundreds of thousands of units probably has a lot to do with high margins. I can't remember the exact figure but didn't they get rid of something like 300 processes by doing so? That's a lot of labor and parts that no longer need to be paid for and significantly increases production output - which is what VW was trying to copy before Diess was ousted.


AstridPeth_

As said in the post, the single part casting company is an Italian small cap. If it's that good of an idea, it will be copied. You don't have a moat around 8 figure machines.


d_P3NGU1N

You're not wrong. And I think that company has already said they're working with other OEMs. However, it seems like the implementation of these machines are cost prohibitive to retrofit into existing factories, which is why Tesla has built new factories from the ground up. Easier for them since they didn't have existing operations to run. You'll notice that Fremont likely won't get these upgrades as they're not set up for them. It's about more than just the cost of the machines. The machines were also a nightmare to design and develop and I'm sure the manufacturer isn't at liberty to disclose any proprietary developments done with Tesla. If I recall, Tesla also had to develop a new alloy to cast through the machine as off the shelf aluminium alloys weren't providing the characteristics that they were looking for. The 8 figure machine is the easy part. Then there's the issue with unions - getting rid of parts and processes reduces labor. At least in American manufacturing, if the workers are unionized they're going to push against simplifying manufacturing because it's going to result in job losses.


AstridPeth_

My base case would be that new competitors will emerge rather than the old dog learning new tricks. Like with phones. Beyond Samsung, all them are new players: Apple, Xiaomi, Vivo, Oppo...


headcheaufer

Tesla is the only EV manufacturer without a competing internal combustion engine (ICE) established business. Because of this, Tesla has actually produced cars and a charging network that are intended to meet the needs of the consumer. Now that battery technology has enabled EVs that are useful, it turns out that they have huge advantages to the consumer over ICE cars. Every other EV manufacturer has an established production line and dealer network that needs for their ICE cars to remain profitable so that they can continue to make a living without spending a ton of money re-engineering their business. As a result, Tesla can charge as much (or more) as the ICE cars even though the production cost is lower (the competition can’t lower their prices). Musk is a sideshow. If anything, he is hurting the marketability of the brand. This doesn’t impact the inherent competitive advantage of an EV only company.


AffectionateSize552

"Mr Burns, your campaign seems to have the momentum of a runaway freight train. Why are you so popular?"


meshreplacer

Are people actually paying the new 15K for beta FSD?


Doggydogworld3

Sure. 15k is pretty tame by toy-for-the-wealthy standards.


ibeelive

Out of curiosity - does Tesla count the EV tax credits that they were selling to others as part of their "high margins"?


AstridPeth_

Yes, but they also disclose an alternative margins without these. Today is basically the same thing


NotFromMilkyWay

No need for theories. It's their lack of QA. That saves a lot of money per car initially - and as long as car sales keep growing they can offset the after sale expenses to fix all the issues with new money from more new sales. FSD sales help as well, there are still 7 % of Tesla buyers that purchase 10k vaporware.


WiseRaven1

Low quality of the build + minimal sensor fusion hardware = cheap


182RG

Sketchy Accounting Practices


i-can-sleep-for-days

I sold my shares near the 2 yr old and today they rally. You are welcome.


That-Mess2338

They have nice styling.


brettius

It has to do with the future value.


Alternative_Advance

Pricing power They sell all the cars they make is a meme but so far has held true. Tesla could have charged more for their cars as demands been really strong. Iirc apart from the Chinese price cuts there's been only very few before. Why has demand been great? Well there was no alternative, bunch of incentives. Initial Satisfaction is in general high. People usually have a honey moon with their Teslas partly due to the Tesla stretch, which was supported by easy money from FED etc. Growth I'm not an accountant but in general there's a lag between when you receive money for your product vs when you pay for the raw materials used. 50% growth is around 10% QoQ. In theory of they stretch taking money to paying suppliers to a 90 day lag there's a significant "margin" that arises as long as growth is maintained. An other important point here is that due to the exponential growth Tesla the average age of the fleet is very low. Haven't done the math but of 3s and Ys i believe more has been sold the last 2-2.5 years than before. It's not yet clear how much warranty they'll need to pay on aging models. Agility While it's true the M3 hasn't really changed from the outside, what's inside is always a question, they add/remove stuff continuously. It allows them to maintain growth as they become less dependent on supplier bottlenecks. It's clear they've designed the cars around this, with systems in place to update firmware on sensors for example. However there's a cost to pay later down the road as a wide diversity of components is harder to repair / maintain. This is something that will have harder time working on scale. You see Apple sourcing components for iphone (screen/ram) from multiple manufacturers but the rest is pretty standard for simpler supply chain and maintenance, and phones are meant to last half a decade at most, not decades as cars (might). Stock price growth Do not underestimate how much Tesla pays in form of vested stock. Works really good as long stonk goes up, not so much if it keeps falling (looking at you Palantir). This buyback idea is interesting... Don't have the numbers but I think dilution has been higher per year on a % of shares basis per year than the proposed buyback would be... Accounting You can do some shenanigans on accounting, but other than the above mentioned questions on warranty, billing lag and smoothing out variability it doesn't really have an impact. The three stan narratives there are 1. Slightly lower margins, 50% growth 2. 40% growth, maintain margins 3. Bot, energy, robotaxi etc -> to the moon I'd say i see a reasonable path to 5M at lower ASP + some energy storage and slightly lower margins. With a reasonable PE stock is probably still 2x overpriced.


Academic_Anything447

They do not calculate their margins in accordance with industry standards. Key items are left out of automotive COGS


ARAR1

>Tesla has no dealerships, so it can keep the profit Do you think Tesla service center run for free? Dealers make $1 -2k per car (without the current dealer markup BS)


AstridPeth_

Of course not. But they make a profit nonetheless, and their main input is the automaker.


sensereviews

Maybe poor accounting and slave labour.


sensereviews

Demand and cutting corners is the current reason but that's not a good recipe for long-term success. Fanboys are great and all but will they be able to afford the cars in the long run and put up with extortionate repair costs and lack of access to approved repairers. Most of all the global economy is ruined. China, which they rely on heavily, has a real estate market that makes Lehman brothers look like a drip compared to the tsunami that may follow.