Guest Post by Eric Peters
Even long cons can only run for so long.
Elon Musk’s electric car con may be on the verge – finally – of coming unglued. This week, he’ll be forced to reveal actual production numbers for the first quarter of the year which are expected to fall well short of what he promised investors – and buyers, who ponied up deposits based on those promises.
Last year, Musk breezily assured both groups that an improbable 5,000 Model 3s – Tesla’s first “mass-produced” electric car – would be rolling off the production line in Fremont, CA each week.
He’s come as close to reaching that goal as he has to sending space tourists to Mars, another promise.
Thousands of people who were promised cars last year are still waiting for cars this year.
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They may still be waiting next year, given that Musk – so far – has only been able to build a relative handful of Model 3s. The backlog is giga-normous. Which means that even if he somehow manages to ramp up the production to what he promised last year, it’ll take an increase in production over that promised number just to catch up this year.
Meanwhile, the marks – whoops, buyers – wait.
And wait, again.
It’s scandalous.
If GM, say, took cash deposits from thousands of people and promsied them cars by “x” date but hadn’t delivered them by “y” (or even “z”) the abuse chorus from the press would be shrill and endless. There would be howls from the gypped, demanding their money back. But Musk gets away with serially breaking promises because what he promises jibes with the vision which the technocratic elites who control the press as well as the fanbois who practically worship him are desperate to see realized:
The electrified – and automated – future.
But what if it isn’t workable? Damn the facts! Full speed ahead!
It’s very much of a piece with Lysenkoism – the Soviet-era rejection of inconvenient facts in favor of politically correct bromides.
Wishes vs. reality. 
But reality eventually bites back, whether it’s the idiot nostrums of Lysenkoism or the similarly short-bus delusions about electric cars.
And the reality isn’t “production Hell” – manufacturing problems – as Musk claims. Rather, it is that his cars – and electric cars in general – are not a market-driven product.
They are a mandate-driven product.
Economic (and functional) reality is suspended by mandates. It will be built – or done – because we – the government – so decree. Not because it makes sense. Irrespective of sense.
If it did make sense, the mandates wouldn’t be necessary. It’s interesting that this basic axiom of economics is not only not understood by the gullible but deliberately stomped on by rent-seeking crony capitalist, Musk being perhaps the greatest of them all.
There is a reason why government contracts for products and services are invariably riddled with cost-overruns and outright fraud.
There is a disconnect between value and cost.
When the market expresses a need/desire for some thing, that value is represented by a cost to the buyer and the seller that makes sense – else the item in question is not worth producing, because it’s too expensive to produce and sell for an amount sufficient to cover its cost to produce, plus a profit for the manufacturer.
This dynamic preserves reality – a natural equilibrium. Things that do not make sense, for which there is no real (i.e., not artificially created, as by mandates) demand, are not produced.
At least, not until they make sense.
Electric cars might eventually make economic and even possibly functional sense. But the mandates and subsidies have literally Frankensteined them. Cars that were supposed to cost us less than cars with internal combustion engines not only cost more, they cost a great deal more.
Tesla’s cars are about style and acceleration and technology. There is no economic case to be made for them – because they have been designed as cost-no-object toys for the affluent, subsidized by the rest of us.
Musk has not had to deal with economic – and functional realities. He builds what he wants – or wishes he wants – irrespective of what the market wants and irrespective of hard nuts-and-bolts (and dollars-and-cents) realities.
He – in his glibly narcissistic manner – simply announced himself as the Great Game Changer who would at a nod end the internal combustion engine’s domination of the roads. An image of Yul Brynner playing Ramses II comes to mind.
So let it be written, so let it be done!
Musk made promises he couldn’t keep.
Usually, this leads to SEC investigations. Recall the fate of Preston Tucker. He was vilified. Musk is patiently glad-handed, no matter how often he fails to deliver.
Because he is in sync with the agenda.
Because it has been decided that electric/automated cars are The Future – no matter what it costs us.
Meanwhile, the con has raked in billions for Musk, whose company has yet to earn an honest dollar and burns through dollars at a pace and rate that would leave Kenny Lay boggled, were he still around to witness it.
Of course, Kenny’s con wasn’t PC – which is why he’s no longer around.
Elon may last a little longer. But – eventually – reality will bite.
Well Elio has taken deposits on over 65,000 ELIOs, and every year he tells us he will make them “next” year. I want one – but I’m not holding my breath.
LOL, I’ve been keeping my eye on the Elio for some time as well. If I remember correctly they were originally targeted for a list price of under 6K, looks like now they’re aiming for 7+K. I’d expect that if/when they ever actually go into general production it’ll be closer to 10k.
Does nobody on this site know how to do maff? Certainly Peters doesn’t know how. Tesla is a monster. Tesla delivered a hundred thousand Model S and Model X cars last year. They averaged over $100,000 per car. Do the maff. What’s the weekly cash flow? They just got Model 3 production up to 2000 a week, and they expect to improve that exponentially in the next few months. At 40+ grand a copy, what’s the weekly cash flow? Then just add that to the S and X number. They’re killing it. All those financial writers are crying because Tesla has to refinance 320 million dollars in bonds next month. They don’t have to refinance jackshit. They can just write the check, with like a week or two’s cash flow. Peter’s writes, “And the reality isn’t “production Hell” – manufacturing problems – as Musk claims. Rather, it is that his cars – and electric cars in general – are not a market-driven product.” I beg to differ with that numbskull. If you have 500,000 cash deposits on cars that will carry no tax breaks, what part of that is not market-driven? What car company would not give their front teeth to be in that position? What’s the saying around here, the stupid it burns.
We’re going to start making you do a disclaimer at the end of your Tesla rants disclosing how many shares you own.
Do the math, Francis. Let me know what you discover.
Too much maff hurts my head.
Maff for starfckr: 1 + 1 = 3 for large values of one.
Well. if Tesla’s rolling in the dough like that now, maybe it’s time to end all tax subsidies since they’re no longer needed.
I thought we had some bean counters on this site. Nobody willing to do the math? Do it, you’re going to feel pretty dumb
Lots of thumbs down. Still no math. Courage fellas, courage
If they are making so much cash, why the monthly cash burn? I think your ‘maff’ neglects all their other expenses (overhead, production costs, etc.).
(one of many stories below)
https://money.usnews.com/investing/stock-market-news/articles/2017-12-18/tesla-inc-tsla-stock
The fact that they aren’t making a profit means … well it means they aren’t making a profit.
(EPS of negative $11.83 per share)
Ever hear of capex, numbskull? You think factories to build 10,000 cars a week and the batteries to power them are free? Somebody asked the question on here a long time ago to the same group of math illiterates, how much does the first bar of soap from a 10 million-dollar factory cost? Still scared to do the math, just talking out of your ass. Do the math, stop looking backwards, look forwards. Tesla is a monster. Make an idiot out of me. You can’t. And I can certainly make an idiot out of you just by doing the math and posting it
Time is running out for Tesla’s unmet promises.
The leading electric car maker’s struggles to ramp up production of its first mass-market car, the Model 3, could mean a cash crunch for the upstart automaker.
Tesla (TSLA) has thousands of customers lined up ready to buy a Model 3, which has a $35,000 starting price. But it keeps badly missing its production targets, and it is burning through cash as it does so. And it faces deadlines to pay more than $1 billion in bonds due over the the next year – $230 million due in November and $920 million next March.
Concerns about its cash positions could grow worse when it reports actual first quarter numbers next week. Moody’s downgraded its debt deeper into junk bond status on Tuesday and warned more downgrades could be coming. Standard & Poor’s also has warned of the possibility of a downgrade.
Bloomberg has been tracking production by continuously monitoring the issuance of vehicle identification numbers issued by the NTSB. It estimates that production stands at 1,026 a week, a big jump from the fourth quarter but less than half the 2,500 a week target that Tesla has set for the end of the third quarter, which concludes Saturday.
“That would be a pretty significant miss,” said Bruce Clark, the credit analyst at Moody’s. “We’re not drawing a line in the sand by any means. But part of the issue is reestablishing credibility with constituents. At the end of the day, the company’s credibility will be significantly impacted by how close they are to that 2,500 run rate.”
The company had originally promised it would be making 5,000 Model 3’s every week by the end of last year, but delivered only 222 in the third quarter, and another 1,542 throughout the entire fourth quarter. It has now pushed the 5,000 a week target back to the end of June.
Tesla has never made a full-year profit as its grown into a major force in the auto industry. But investors, lenders and customers have been big believers in its charismatic CEO Elon Musk, at least to this point. They’ve provided him with the cash he needed to challenge the established players in the industry.
They’ve bought additional shares sold by the company in secondary offerings. They’ve driven up stock price to give the company nearly the market value of established automakers like Ford (F) or General Motors (GM), which both produce billions in annual profits and sell millions of vehicles. Customers have paid deposits of $1,000 each for cars they wouldn’t see for years, giving Tesla nearly $1 billion worth of deposits. And, of course, it has also been able to sell bonds to raise cash.
Clark said he doesn’t believe the company is facing any imminent cash crunch, but that if it continues to struggle to ramp up production of the Model 3 its “liquidity position is going to get tight in the next several quarters. That’s why we see the need for them to go back to the financial markets.”
And it will become more difficult, and more expensive, to raise that money if there are further doubts about it meeting its production goals.
Apparently Moody’s and S&P have done the math.
I’ll do the math. Not a bean counter but I got an A in differential equations. I’m going to need their books.
Stop with the excuses. Just do the simple math. Current production numbers x price of the cars. It’s staggering.
Maff lesson from someone who thought he had a 30 year fixed mortgage rate of 6% in 1990. That’s funny.
OK, 2,000 cars / week X $35,000 = GROSS income of only $70 mil/week. Net income is a negative number. Whether that’s all attributable to capital expenditures is 1) unknowable by us amateurs on the outside and 2) extremely unlikely.
Some maff:
$20 billion of debt versus $5.6 billion of equity. $600 million of interest expense, up from $245 million in 2016. With bonds plunging, interest expense will surge in 2018. All is well. Just a hiccup.
Ooh boy, help him, Jim. No model 3 is getting sold right now for less than about 50k, so your number is conservative, but that’s fine. I was just using 40k above, still super conservative. Now add the 200 million a week gross that they’re making from the S and X models(also a conservative number). You’re looking at damn close to 300 million dollars a week gross income. 600 million a year in interest payments? Please. That’s chickenshit. And the model 3 production and sales should grow exponentially from there. Tesla is a monster. I win. Watch.
I’ve been watching. Your projections are bullshit. He promises and never delivers. His 2,000 produced cars will have 1,000 defective cars. Quality control is a disaster. Deposits aren’t sales. I was at Toll Brothers when it turned. We had thousands of deposits. Then 50% cancelled. Oops. No sale.
Tesla is a fraud. It will go bankrupt within two years. Watch.
Tell the truth. Did you ever own Enron stock?
Capex is quite knowable. 4 billion in 2017. One and a half billion in 2016 and 2015. Never owned Enron stock.
1989. And I checked. For most of that loan I paid 6.75. It stayed steady so long I forgot I had an adjustable.
Star implies that they’ve been plowing their money into factories – capital investments. I don’t know the limitations on expensing that (section 179, etc.) but it seems that you’d want to start with their EBITDA – earnings before interest, taxes, depreciation and amortization. Again, I assume that Moody’s and S&P are capable of assessing Tesla’s financial strength. If anything, they’re usually biased to overestimate the health of a company.
Moody’s and S&P have a different job. Their task is to drive down share price, so their masters can scoop up more at a discount. Somebody please fucking do the math. It’s like arguing with women
Uh, yeah. $40,000/copy times 2000 copies equals $80 million. So far, so good. That’s revenue. Unfortunately, it seems that Teslas’ expenses far exceed revenue so there isn’t anything left to write checks against. Unless they sucker in some more naive investors. Who deserve to lose it all if they can’t do a simple analysis.
What about the 200 million a week from the S and X models, John?
I don’t know about any of that. BUT, I do wonder why Tesla gets $500 million dollars a year in government financial support if all those numbers are real?
Bee, citation please.
With debt of $20 billion and growing exponentially, and bonds now at 7.5% and rising, the interest expense will exceed $1 billion in no time. No worries. Keep on believing. That’s what you do best.
How Severe Are Tesla’s Model 3 Production Problems?
Tesla will soon exhaust its $7,500 Federal Income Tax subsidy balance, and customers faced with higher prices, lost subsidies and indefinite delays will cancel their reservations and reclaim their refundable deposits. Moreover, quality issues associated with the troubled ramp may further cause demand to erode.
https://seekingalpha.com/article/4160986-severe-teslas-model-3-production-problems
“Customers will cancel their reservations and reclaim their refundable deposits.” Now you’re quoting Karnak the Magnificent or something? Then why does the number of deposits Tesla is holding rise every month?
star,
2,000 cars/week at $40,000 equals $80,000,000,which equals 4.16 billion per annum–
100,000 delivered cars at $100,000/per equals $10,000,000 per annum–
now for the $14 billion question–
what are the pre subsidy costs and what are the post subsidy costs?
What the fuck are you talking about? Do the math. 200 million dollars a week in Model X & S sales alone. What does that have to do with this mystery subsidy everyone keeps talking about? Link me to something please. All I know about is a tax break for the CUSTOMER, which has nothing to do with direct subsidy to the company. And that tax break is almost over, it won’t affect Model 3 sales at all, which should rise to about two hundred million dollars a week by summer. (5000 units per week)
Greetings,
Numbers vary but in the 3rd quarter of 2017, Tesla lost over $13k per car produced. The faster he makes cars, the more he will burn through his money. It is just that simple.
Deal with it.
Wrong. 4 billion in capex in 2017. It was either spend the money building, or wait till the factory fairy splashed one down on the pad. When people put capex cost on to unit cost of production you get distorted numbers like that Nickel.
Would any of YOU, TBP readers, turn into a con man if you knew it would make you a billionaire?
Come on, let’s be honest.
There are lots of sharp folks here, doctors, lawyers, Indian chiefs. Just like engineer Elon is a pretty sharp cat.
Billionaire, the temptation would be great, you could have literally anything your heart desires.
Except you’d be looking in the mirror and seeing a con man……
So what you you are saying is sooner or later this electric car is going to run out of uh… gas?
Say it ain’t so , the section 8 landlord of the subsidized electric car can’t deliver . Would we even give a rats ass if it were not for the fact that every taxpayer has been driven deeper in debt with nothing to show for it AGAIN ?
No doubt the electric car , especially a Tesla is a cool idea not quite ready for prime time . Regardless we as a nation line Musks pockets the same way we line the pockets of section 8 landlords . We make a nonperforming investment pay off for a few while indenting the many . The big question is what politician gets held to account for all this finincal nonsense ? I smell tar and feathers coming in the near future !
“I smell tar and feathers coming in the near future !” Nah, hydrocarbons are politically incorrect. How about the “electric” chair?
A lot of companies whose gross receipts are – in Star’s words – “staggering” go bankrupt – slowly, at first, then all of a sudden.
How much do you want to bet starfcker was a huge fan of Enron?
BTFD
Star- Musk is another of the conjured billionaires here on the entertainment planet. So far Tesla has been a black hole where US .gov funny money disappears into who knows where. Your maff is flawed, the whole thing is a con.
I like to think of Tesla as Solyndra with legs.
Tesla has been losing billions every year, but has been kept alive by the dreaming of very poorly informed investors. And then there is Solar City….
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street
When will investors get tired of feeding their capital into this cash-burn machine?
Tesla shares plunged 8.2% during regular trading hours on Tuesday and another 2% in after-hours trading to $272.50, below where they’d been a year ago ($277.45), and down 28% from September 18, when the market still had hopes for the Model 3.
The unsecured junk bond due in 2025 with a 5.3% coupon – which Tesla sold last August when its stock was still over $357 a share – dropped to a record low of 89 cents on the dollar in after-hours trading.
During a nasty day on the stock market, wunderkind Tesla got hammered by Tesla reality.
At First It Was the NTSB
The National Transportation Safety Board announced that it was sending investigators to California to investigate the fatal and fiery crash of a Model X on Friday morning that had shut down a carpool ramp and two lanes of Highway 101, the Silicon Valley artery, for almost six hours, twice as long as most accidents of this type, according to the California Highway Patrol. NTSB said it would examine various issues, including the post-crash fire and removing the vehicle from the accident site.
This is the second NTSB field investigation into the crash of a Tesla this year. In January, the NTSB opened an investigation into the crash of a Tesla — apparently in semi-autonomous mode — and a fire truck.
In the accident on Friday, the Model X hit a freeway divider, then was hit by a Mazda, and crashed into an Audi. The lithium-ion cells caught fire. The driver of the Tesla perished. The fire department ended up calling Tesla to determine how to extinguish the fire, as the exposed batteries were also an electrocution hazard.
Then It Was Moody’s.
During after-hours trading, Tesla got hit on the credit side with a resounding downgrade from Moody’s, which specifically:
Cut the corporate credit rating by one notch to B3, just above deep-junk Caa1.
Cut the unsecured-note rating one notch to Caa1
Cut the Speculative Grade Liquidity rating to SGL-4 from SGL-3.
Changed the outlook from stable to “negative.”
Moody’s cites these reasons:
Tesla’s ratings reflect the significant shortfall in the production rate of the company’s Model 3 electric vehicle.
Tesla produced only 2,425 Model 3s during the fourth quarter of 2017; it is currently targeting a weekly production rate of 2,500 by the end of March, and 5,000 per week by the end of June. This compares with the company’s year-earlier production expectations of 5,000 per week by the end of 2017 and 10,000 by the end of 2018.
These are just Tesla targets. Tesla never hits its targets. It overpromises to hype its shares. It didn’t overpromise, however, its “manufacturing hell,” as CEO Elon Musk put it so eloquently. And the few Model 3s now driving around out there appear to be beta-versions with scads of quality problems. Moody’s goes on relentlessly:
The company also faces liquidity pressures due to its large negative free cash flow and the pending maturities of convertible bonds ($230 million in November 2018 and $920 million in March 2019).
The negative outlook reflects the likelihood that Tesla will have to undertake a large, near-term capital raise in order to refund maturing obligations and avoid a liquidity short-fall.
Tesla has a lot of debt. Among the $23 billion in liabilities are: $10.2 billion in long-term debt and $854 million in customer deposits, according to its annual report. Tesla also had considerable liquidity at the end of December, including $3.4 billion in cash and securities, and a “moderate availability” under its $1.9 billion asset-based loan facility (some of which has been burned up in Q1). But Moody’s says that this is “not adequate to cover:”
1. The approximately $500 million in minimum cash that we estimate Tesla must maintain for normal operations;
2. A 2018 operating cash burn that will approximate $2 billion if Tesla maintains high discretionary capital expenditures to increase capacity; and
3. Convertible debt maturities of approximately $1.2 billion through early 2019.
These cash needs will likely require Tesla to undertake a near-term capital raise exceeding $2 billion. Moreover, if the company maintains its expected pace of expansion, it will likely need to raise additional capital during the second half of 2019.
Moody’s threatened that ratings could be cut even lower if:
There “are shortfalls from its updated Model 3 production targets”
And if Tesla “is unable to raise sufficient new capital to cover its late-2018 and early-2019 convertible maturities, and to cover the operating cash consumption that will likely continue into 2019.”
Standard and Poor’s rates Tesla B-, one notch above CCC, and on a par with Moody’s lowered B3 rating.
Despite the drop on Tuesday, Tesla’s shares are still inexplicably above the single digits, considering how much it loses year after year, for ten years in a row, with every sign pointing to even bigger losses going forward, and how much investor-cash it burns at an accelerating rate, year-after-year, and considering the endless false promises and hype and the truly amazing “manufacturing hell” that is unequaled among automakers.
Once the true believers in this stock finally walk away and the shares go where they belong, Tesla’s debt will get in trouble. The reason is simple: The entire premise of the creditors is that Tesla will always have a high share price, and so it can always sell more shares to raise more money to service its debt. But once issuing more shares becomes difficult in an unwilling market, creditors won’t be able to figure out how on earth (not Mars) Tesla is going to pay them interest and principal, with no new money coming in, while also burning several billions a year on its operations.
Once this powerful cash-burn machine can no longer fuel itself by selling new shares and new debt, it’s a scenario for default. Moody’s would then slap a “D” rating on the company and its debt, by which time most investors have already watched their capital go up in smoke.
Ladies. I got to get some sleep. You’re giving me a headache.
The only thing that proves is that I’m smarter than Wolf Richter
Time will tell. Good luck. I got no dog in this fight. Btw, Star, what do you expect your upside to be on this? Tesla has a $42B market cap. Where do you think that’ll be in a year?
I have no dog in this either, Iska. But I understand what Musk is doing. And I understand where along the curve to profitability the company stands. They are in a terrific position. Musk is talking about lots of new projects, the only point I differ with him is, sometimes you have to pause and get caught up financially. He loves to lever everything. I have no idea what the stock price will do, I really don’t follow that much. I see how much disinformation gets rattled around. And they can’t chase Musk out, because the company would crumble without him. Amazing guy, really.
Tesla is toast. Google info on auto making units required to break even. Tesla is no where near it. Musk is over his head.
A greater snake oil salesman there has never been.
I understand that Musk is sucking on the government teat. He’s not playing with his own money.
Your second last paragraph just described a “Ponzi” Scheme.
However one thing not discussed is how the large (mammoth) competition, who have decades of Vehicle production under their belts are going to eat Elons lunch for him. Goodness even small vehicle manufactures are moving to production, even old Russian satellite states…
Lets not think of the damage Mercedes or BMW or Ford are going to dish out.
He’s Done!
I Am, I would disagree. Look at the damage the Tesla Model 3 is about to do to BMW’s bread and butter, the 3 series. That’s exactly who they intend to take their market share from.
Star – the big boys are going to eat him alive. But mostly, he does not have the volume to compete. Tesla is going to be the latest Edsel.
BMW’s advertising campaign:
Our Series 3 Doesn’t Incinerate You in an Accident
Musk is a cardboard cutout like so many others before him?
http://mileswmathis.com/musk.pdf
I think I’ve solved Tesla’s problem: if you make a $1,000 deposit, they promise you a Series 3. If you make a $30,000 deposit, they promise you a round trip to Mars.
Wait till someone spills the beans that having all your cars controls located on a big touch screen off to the right of your driving eyes is a major distraction. Current research suggests even talking on the phone, whether hands free or not, diverts 40 % of your visual cortex processing to audio processing. Now take into consideration the actual area in your view that your visual cortex is processing. Rule of thumb here is just hold your thumb out in front of you and focus on it. You don’t see much on the peripheral of the thumb. Another rule of thumb is most people can track 4 things in their view. Now when you turn the heat up, your entire vision system is focusing on the screen and touching it. Even worse, what if you touched what you didn’t expect. Further distraction. Next step: Crash! Might be better to let the car drive itself.
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I don’t claim to know the future of tesla as a company, but just from reading the comments on this post, and star repeating over and over to ‘just do the maff!” and getting more and more hysterical each time reminds me of the scene from Animal House where Kevin Bacon says, “Remain Calm, All is Well!”.
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Like I noticed before, it’s like arguing with women. My observations are top-line driven. Look at the numbers. Tesla is in a dominant position. Llpoh, I would disagree with you too. The big boys can’t figure this one out. None of them have been able to produce a desirable car, and they have had a ton more advantages than Tesla has had. Small and nimble can run rings around big and bureaucratic at times. By the end of the second quarter, Tesla’s cash flow should be over a billion five a month. It’s probably over a billion two right now. As long as sales stay strong, their liabilities become inconsequential to the health of the company. That’s what leverage looks like, used well.
Llpoh, they will pass Porsche this year in units produced. And the price points aren’t that much different. Porsche is a very profitable company. It has one of the highest profit per unit of any manufacturer. And remember back, Porsche was dead in stinking in the 90s.
Jesus Christ Star – who owns Porsche? Ummm, that be Volkswagen. They make, well, MILLIONS of cars a year. Tesla sales ARE NOT STRONG. Not for a car company. They suck.
Car makers need to make millions of cars a year to stay in business. Even then it is dicey. One reason why – the overheads are enormous. Another – the supplier base needs it to survive.
You are backing a losing horse.
And no joke – I have forgotten more about manufacturing than you know. I made a living turning around dying manufacturing companies. And I can smell a rotting corpse. Tesla has a major stench to it. The cashflow does not add up. Sure, if enough people pour enough money into it, they can keep thee corpse propped up.
But rest assured the big boys are coming, and when they start manufacturing electric cars in a big way they will do it cheaper with higher quality at extreme volumes if there is a market.
Tesla is toast.
Look what happens at GM. They’ve gone through two electric cars in a row, both total duds. The second one (Bolt) was supposed to do exactly what you are saying they will eventually do. They can’t give them away. Size can be an advantage, but it a certain point it can be a liability as well. The Volt and the Bolt are a perfect example No matter what they show us prototypes, by the time to get around to building it they’re building small Pontiac Aztek without any real functionality. I wouldn’t dream that I know more about manufacturing stuff than you do, but I know plenty about building companies. Time will tell. I think Musk has this. The top line numbers are too good. Cash flow like that can get you out of lots of trouble. Quick. Let’s see what happens.
Porsche and VW have been married for a long, long time. When I was 20 I had a Porsche 914 and it had a Volkswagen engine. And I think Porsche owned VW up until maybe 10 years ago. But VW gains immensely from the engineers at Porsche. And Porsche is very profitable as a standalone company, even though it is part of the VW group. Look at what they’re doing to Lamborghini. They are now German engineered cars, and you could drive a Huracan everyday the same way you could the Audi product that it’s based on. I’m a car guy so I know a lot about this dumb shit.
Star – Porsche would struggle as a stand alone. It currently, as a division, is profitable. Take away the buying power, cross engineering benefits, and overhead absorption that comes with VW partnership, and things would be very different.
Musk has none of those things, and he also has no economy of scale going for it. The big boys are not going to give up. And they will devour him in the end. He is burning through too much cash, and is unprofitable on a unit basis, and is unable to deliver to commitments. Plus, as an aside, the unions have not yet eaten his lunch. But they will, most likely.
Yeah, I think the unions have been sort of soft targeting him for a while. If they get serious, it could cause a lot of problems for sure. Here’s an article of some of the numbers on Porsche, I think they’re the most profitable per unit other than Ferrari. Ferrari is sick, I don’t think it’s in this article, but I think they make like 90 grand a car. No one else is even close to that. http://www.thetruthaboutcars.com/2017/03/porsche-rakes-17250-pure-profit-per-car/
I think the Volt design makes good sense. If the battery runs out, you have the engine to get you where you need to go. The problem is that people aren’t interested in electric vehicles unless forced or paid to drive them.
Sara, GM has all the same incentives that Tesla has, plus that enormous history and wherewithal standing behind them. and Ithey can’t make a car that anybody wants. They can’t give away Volts or Bolts. It’s all about execution. They have failed miserably now twice.