Official Tesla Model 3 thread

[lorenfb]

Actually, I thought the big news was that Tesla is on track to deliver 100,000 model S and model X vehicles in 2017. That sounds to me that Tesla has figured out how to manufacture cars in substantial numbers. Now, two big questions remain. Can Tesla build 100s of thousands of model 3s at a profit, and can Tesla support (parts, warranty repairs, etc) a user base as it grows to many 100s of thousands of owners? We'll see.

Producing unprofitable vehicles at a 100K per year run rate hardly qualifies as a viable and long term
automotive company!

Are you stating that the current cash burn rate is 100K per produced car per year? If so, what numbers are you using?

No, re-read. It states that Tesla is now producing about 100K Model S & Model X per year and losing money.

 

[hyperionmark]

Please clarify your question.

Please show me a source showing that they are losing money on each car they produce.

Please just read any Tesla quarterly financial statement. Yes, their GP (gross profit) per vehicle is positive but
when the other costs (besides direct costs - parts & labor), e.g. sales & R&D, Tesla loses money. A viable business
in the long run can't continually float debt and issue stock to fund operations. Apple's GP per iPhone is much greater
than Tesla's and they are very profitable on the "bottom line" too.

Furthermore, now with the M3, they'll probably lose more money as the M3 will cannibalize sales of the MS.
Many new Tesla buyers will see little value in an MS for the additional cost versus a M3 and will buy the M3
resulting in less GP per vehicle for Tesla. Yes, the M3 is smaller but most who buy the MS rarely buy the
MS as a family vehicle like a CUV and are older buyers. Besides, why buy a MS with about the same range
and carry another 500+ lbs with a MS. Also, the M3 can be ordered with many of the same features as a MS.

You must not know very much about business if you think that isn't very common with new companies, especially ones like Tesla. You do realize that factories have to be built and that costs money right? How do you expect a company to show a profit with capital expenditures as big as what Tesla has had?
Amazon "lost" money hand over fist for years and years before making a profit. I'm guessing you shorted them as well? How did that go for you?

 

[cwerdna]

You must not know very much about business if you think that isn't very common with new companies, especially ones like Tesla. You do realize that factories have to be built and that costs money right? How do you expect a company to show a profit with capital expenditures as big as what Tesla has had?

Capital expenditures are barely a blip in Tesla's P&L and are already included in their cost of revenues.

We went over this before:
http://www.mynissanleaf.com/viewtopic.php?f=10&t=18016&p=498759&hilit=gigafactory#p498759
http://www.mynissanleaf.com/viewtopic.php?p=494496#p494496

The depreciation expense for capex is part of the cost of revenues, which has a positive gross profit. Problem is, they have a a bunch of other expenses like R&D, SG&A and interest that takes them into the red.

See pages 5, 34 and 35 of http://ir.tesla.com/secfiling.cfm?filingID=1564590-17-15705&CIK=1318605.

 

[webb14leafs]

Furthermore, now with the M3, they'll probably lose more money as the M3 will cannibalize sales of the MS.
Many new Tesla buyers will see little value in an MS for the additional cost versus a M3 and will buy the M3
resulting in less GP per vehicle for Tesla. Yes, the M3 is smaller but most who buy the MS rarely buy the
MS as a family vehicle like a CUV and are older buyers. Besides, why buy a MS with about the same range
and carry another 500+ lbs with a MS. Also, the M3 can be ordered with many of the same features as a MS.

This point is a very interesting conversation. I thought the same thing, but someone pointed out that it has been a successfull model for other luxury car manufacturers and shows that rich people will buy anything as long as it's expensive.

It seems logical that the 5-series BMW would cannibalize the 7-series, and the 3 the 5, but they don't. Each model represents a slight bump in trim-level, size and horsepower. Also, each one can be optioned out in a way that makes it more expensive than the next level base model. Makes no sense to me, but apparently it does to people who buy such cars.

Anyway, not saying you're off base at all - we'll have to see how it plays out - but there's a precedent for it succeeding.

 

[LTLFTcomposite]

The cannibalization may be worse in the case of Tesla as it has been pretty well understood many of their buyers don't normally spend in that price range for a vehicle. As with most things though that won't happen in isolation; higher volumes bring increased brand awareness and validation, all of which further fuels the desire for a larger number of people to have something better than the next guy.

 

[lorenfb]

Furthermore, now with the M3, they'll probably lose more money as the M3 will cannibalize sales of the MS.
Many new Tesla buyers will see little value in an MS for the additional cost versus a M3 and will buy the M3
resulting in less GP per vehicle for Tesla. Yes, the M3 is smaller but most who buy the MS rarely buy the
MS as a family vehicle like a CUV and are older buyers. Besides, why buy a MS with about the same range
and carry another 500+ lbs with a MS. Also, the M3 can be ordered with many of the same features as a MS.

This point is a very interesting conversation. I thought the same thing, but someone pointed out that it has been a successfull model for other luxury car manufacturers and shows that rich people will buy anything as long as it's expensive.

It seems logical that the 5-series BMW would cannibalize the 7-series, and the 3 the 5, but they don't. Each model represents a slight bump in trim-level, size and horsepower. Also, each one can be optioned out in a way that makes it more expensive than the next level base model. Makes no sense to me, but apparently it does to people who buy such cars.

Anyway, not saying you're off base at all - we'll have to see how it plays out - but there's a precedent for it succeeding.

It was never implied that total cannibalization will occur. Surely you'd have to agree that some cannibalization will occur,
i.e. not all potential MS buyers need another 'Rolex watch' - a Timex will do as long as the features meet one's needs.

 

[GRA]

There was considerable discussion back around page 100 et. seq, about the comparative safety of touchscreen and voice command systems versus physical controls, and how to test them. At the beginning of a long post giving examples, I replied as follows:

As to resistance to change, please point to anyone here who is resistant to change which demonstrably improves functionality, safety and/or reliability, or else reduces cost while maintaining the same level of functionality/safety/reliability.

How would you like "demonstrably" to occur ?

Will a well powered, randomized, double blinded study of monkeys suffice ?

Adequate statistical data for safety and reliability, combined with comparative tests by a broad spectrum of users, both experienced and inexperienced, and with starting attitudes towards the different methods varying from one extreme to the other, plus those who have no initial opinion either way. Pretty much the same as any other human factors interface is tested. But anyone can start by comparing the time it takes to do the same function while timing it with a stopwatch (most cell phones probably come with this app), first sitting in a parked car,and then repeating it on the road, on first acquaintance and then after you have familiarity. Consumer Reports has done such tests of many car control interfaces, and the results vary considerably. . . .

The AAA Foundation for Traffic Safety has had the University of Utah do another such study, testing auditory/vocal, visual/manual and cognitive demands, the effect of control locations, and implementations by different manufacturers on 30 different vehicles:

Visual and
Cognitive Demands
of Using In-Vehicle
Infotainment Systems

which I've quoted from and linked to here: http://www.mynissanleaf.com/viewtopic.php?f=36&t=20808&p=507361#p507361

Some of the more important conclusions:

Univ. of Utah study finds many infotainment systems too distracting to be used when vehicle in motion. . . .

The researchers found drivers using features such as voice-based and touch-screen technology took their hands, eyes and mind off the road for more than 24 seconds to complete tasks.

Previous research from the National Highway Traffic Safety Administration found that the risk of a crash doubles when a driver takes his or her eyes off the road for two seconds. . . .

In the new study, programming navigation was the most distracting task—taking drivers on average 40 seconds to complete. When driving at 25 mph, a driver can travel the length of four football fields during the time it could take to enter a destination in navigation—all while distracted from the important task of driving.

Text messaging was the second most distracting task; audio entertainment and calling and dialing were the easiest to perform and did not significantly differ in overall demand. . . .

Second, we found that the overall workload associated with each mode of IVIS interaction was
greater than the high workload referent. Interactions using the center stack were significantly less
demanding than auditory vocal interactions, which were less demanding than center console
interactions. Interestingly, using voice-based commands to control IVIS functions resulted in lower
levels of visual demand than the SuRT task. However, the benefits of reduced visual demand were
offset by longer interaction times. Auditory vocal interactions took significantly longer than any other
IVIS interaction (an average of 30 seconds in our testing). . . .

The Model S was one of the vehicles tested, and along with 10 other vehicles came in almost exactly average, while 7 of the 30 vehicles in the test came in well below average (i.e. a better than average score) and 12 well above average (a worse score).

I strongly advise anyone who is interested in/concerned about the safety of using various types of controls while driving to read the study.

 

[SageBrush]

The limitations to the Utah study are obvious -- they are only able to to track eye movement away from the road. While that is one form of distraction, others exist that do not require eye deviation. E.g. drug intoxication. Or talking on the phone.

A useful study would have to quantitate the *effects* from distractions

 

[LTLFTcomposite]

This sounds pretty bad, is it?
http://dailykanban.com/2017/10/model-3-body-line-still-in-development-in-michigan/

 

[webb14leafs]

It was never implied that total cannibalization will occur. Surely you'd have to agree that some cannibalization will occur,
i.e. not all potential MS buyers need another 'Rolex watch' - a Timex will do as long as the features meet one's needs.

I understand what you were implying and totally agree that some cannibalization will occur. I just wanted to keep the discussion going, because I think it's an interesting one.

 

[webb14leafs]

This sounds pretty bad, is it?
http://dailykanban.com/2017/10/model-3-body-line-still-in-development-in-michigan/

Not necessarily, but can't be sure without more info.

First - These automation cells go from "not producing" to "full production" very quickly. It would make sense for this to be a "bottleneck" issue, but it can be resolved.

Second - I would be surprised if this was their only supplier of stamped/welded bodies. They probably have others in the pipeline.

With the newish model of "Just In Time" production it's common for launches to be delayed. I really see it as a non-issue from a technical standpoint.

 

[sparky]

This sounds pretty bad, is it?
http://dailykanban.com/2017/10/model-3-body-line-still-in-development-in-michigan/

I'll be kind and just say the author Neidermeyer is a well known Tesla "contrarian".
The article infers things that make no sense. Is he trying to say that Tesla won't have a automated production line until these folks are finished?
That they will continue to hand-build Model 3's until late 2018?
It seems likely to me that this is a more advanced production line being tooled for Fremont in the next year. They have production tooling at Fremont for Model 3 but it's likely more along the lines of Model S/X volumes. I have no insight into automobile production but I assume this particular body line is being developed for a >250k/year rate. Perhaps even configured for Model Y as well.
So no, I don't read it as anything bad despite what the author is trying to hype to get those "Tesla" clicks.

Also this since Model 3 competition isn't LEAF 2 or Bolt 1.

 

[lpickup]

This sounds pretty bad, is it?
http://dailykanban.com/2017/10/model-3-body-line-still-in-development-in-michigan/

Not necessarily, but can't be sure without more info.

Agreed. Seems like a lot of speculation in the article, even including whether this line is even being used for Model 3 or perhaps even a future vehicle (semi?) Or, as the article does fairly point out, maybe this is for a future upgrade to the assembly line. Or, it could actually be a late delivery for the Model 3 production line.

But the part that doesn't add up to me is the fact that the article first states that the intended model is for the Michigan factory to operate for 18-24 months before the line is packed up and installed in Fremont:

This highly-automated body line will reportedly operate for 18-24 months, and then be shipped to Tesla’s Fremont, CA production plant if all goes well.

Yet development only STARTED in January 2017:

and one employee profile estimates that work on the project began in January of 2017.

and then the article appears to contradict its earlier 18-24 month statement by saying:

suggests that body panels produced at Thai Summit’s America’s Michigan factory will be delivered to Tesla by the end of 2017.

So already the article's credibility is suspect to me.

At any rate, even if we assume part of that is true (that work only began in January and there is a substantial period of time before the line is ready to be shipped to Fremont and the plan of record was to ship panels from the Michigan factory to CA for assembly, then certainly Elon had enough headlights on this situation when he originally tweeted his ramp up estimate that this would have already been taken into consideration in those estimates.

The only way I can try to make a plausible scenario out of this is that there was always a plan to run the pilot line in Michigan at least temporarily and the holdup is due to the fact that development of that line is falling behind and it's not running at full automation speed yet so the volume of panels coming from MI to CA is lower than expected.

That being the case it boils down putting focus on getting that line up and running at full speed, and you can be sure that it is getting a significant amount of attention. This kind of thing happens all the time in my industry (albeit not the automotive industry) where you have a complex system and any single component can become a bottleneck. Basically when that happens you get a lot of managers chasing that problem (which is sometimes detrimental to progress of course) but it does get attention and necessary resource and that bottleneck is cleared.

I suspect that is the case here. There are probably several areas that need focus on resource, and yes, delay is introduced, but this is almost expected in any large manufacturing endeavor. The problem is that Musk shared his goals (which were very aggressive) publicly (possibly as a way to spur his team on) and Tesla chose a release date as soon as practically possible rather than building in contingency to their schedule and priming the delivery pipeline, resulting in what seems like a slow ramp we see today.

Many people are clearly not comfortable with this somewhat behind the scenes view of how the manufacturing process works, as traditional carmakers hide all this from us. But that's not the way Tesla operates. Never has. But eventually they clear these hurdles and release their cars.

 

[lpickup]

I'll be kind and just say the author Neidermeyer is a well known Tesla "contrarian".

Yeah, I had to click on the title banner of the "Daily Kanban" to see what the heck it even was, and here is their current leading story's headline:

The indignity! Tesla Model 3 could be out-produced by “fool cell” Mirai this year

for sure somewhat improbable and mathematically meaningless, but certain click bait!
What's more, this article then takes the previous article's speculative result as gospel truth and uses it to justify their faulty math to reach the above conclusion:

While Tesla is waiting for a highly-automated body line that is being developed near Detroit for delivery sometime next year, the speed of Tesla’s Model 3 production should be limited to 250 units a month

Certainly the online equivalent of bird cage lining.

 

[webb14leafs]

After re-reading I think this article is worthless. It really doesn't make any sense and doesn't clarify if the cell is intended for production use in Michigan or if it is going to be wrapped up and sent to Fremont.

I was under the impression that Tesla was utilizing full vertical integration.

 

[lorenfb]

I was under the impression that Tesla was utilizing full vertical integration.

And what's the Giga status (not just Fremont) in all this, the $2B commitment from Panasonic, and full battery
production (total vertical) from Giga for the present MS/X battery production? Has Elon forgotten about Giga
since he started 'digging' around Hawthorne (SpaceX) here in SoCal to expedite trips to LAX to avoid SoCal
freeway traffic? Possibly more important than M3 production since Tesla 'received' the loan from 400k+ reservations?

 

[hyperionmark]

I was under the impression that Tesla was utilizing full vertical integration.

And what's the Giga status (not just Fremont) in all this, the $2B commitment from Panasonic, and full battery
production (total vertical) from Giga for the present MS/X battery production? Has Elon forgotten about Giga
since he started 'digging' around Hawthorne (SpaceX) here in SoCal to expedite trips to LAX to avoid SoCal
freeway traffic? Possibly more important than M3 production since Tesla 'received' the loan from 400k+ reservations?

Your insults about Tesla are now starting to roll off my back because I realize you truly have no idea about business.

 

[OrientExpress]

After re-reading I think this article is worthless. It really doesn't make any sense and doesn't clarify if the cell is intended for production use in Michigan or if it is going to be wrapped up and sent to Fremont.

I was under the impression that Tesla was utilizing full vertical integration.

This particular line is for making the cars structure and body. It is designed, manufactured, set up and tested, certified by the customer in Michigan, Then it is disassembled, shipped to Teslas Fremont plant, reassembled, retested, re-certified, and then slowly ramps production. For the model 3 there are least three subassembly line plants, that make the other major subsystems of the car. If the motor, chassis, battery, and other subsystems are OK they have been ramping up, for a much higher volume so that will help the actual production line because the main component is the metal stampings and parts. I believe this line is for the structures and body. I think I read in some industry blog that in most similar cases in automobile manufacturing this task is an eight month process.

I was highly skeptic by the ambitious reservation volume that Tesla was really up to the oldest pothole in the manufacturing business. Ramping demand too fast, rushing to make the product as fast as possible, which bring in a quality problem, which challenges the brands image, which lowers consumer confidence, and so on. With that said, I'm really rooting for the hometown team.

 

[edatoakrun]

This sounds pretty bad, is it?
http://dailykanban.com/2017/10/model-3-body-line-still-in-development-in-michigan/

I've been waiting for the inevitable attack on the author from one of TSLA's minions, to figure out just what that story means.

The silence is deafening...

The difficulty in discussing reasonably almost every aspect of TSLA is that Elon Musk is now totally lacking in credibility, having misled the public so many times previously, RE production levels and financial results.

So, since nobody believes Musk's model 3 production announcements, responsible reporters need to seek out extraneous data sources to discern what should be a simple matter of reporting factual corporate press releases.

Here is a summary of what is known about model three production levels and their significance, worth reading:

The Model 3 May Be A Mess, But Don't Short Tesla Yet

...The Niedermeyer Blockbuster

Tesla’s (NASDAQ:TSLA) rollout of the Model 3 appears to be in trouble. The latest evidence comes in a blockbuster article published yesterday by Edward Niedermeyer at the Daily Kanban.

According to Niedermeyer’s story, Tesla’s Model 3 body line is still not complete and, indeed, is not even at its Fremont, California, factory. Rather, a Michigan-based supplier called Thai Summit America is developing a pilot body panel line for Tesla which, if all goes well, will be shipped to Fremont at some point in 2018 or early 2019.

Niedermeyer notes his story is consistent with a September 19, 2017 news report in a Thai language newspaper, to which he links and from which he quotes.

Before publishing his story, Niedermeyer invited Tesla to comment on it and gave them 24 hours to do so. Tesla declined to do so and, as of the time I am submitting this article for publication (Friday morning), still has not done so...

https://seekingalpha.com/article/4112109-model-3-may-mess-short-tesla-yet

I am not, BTW, suggesting any investment RE TSLA by posting a comment with that title...

 

[lpickup]

Here is a summary of what is known about model three production levels and their significance, worth reading:
...

No! This is just another Tesla short picking up a non-story (or at the very least a very speculative one), treating it as gospel truth and using it to reinforce his own arguments. This is what the "non-mainstream" media does, reinforcing their stories and taking speculation as fact. In this case this all seems to come from one report that there is an unspecified pilot line in Michigan that employs (employed) two Thai nationals that may or may not be related to the Model 3.

I know there is a better example of what is actually happening here than this, but this seems somewhat appropriate as well:

https://xkcd.com/748/