[planetjones]

I used to be one of the people who poked fun at Musk and suggested people short Tesla stock (as the valuation is crazy compared to the production and penetration numbers).

But I am no longer that person. I read his biography (Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future) and this is a guy who genuinely wants to change things on a macro scale: opening up space, changing transportation. He is also a genuine risk taker, who will bet his own money and risk everything for something he believes in. I now root for Musk and his companies to succeed. I wouldn't take short positions on Tesla now.

Plus the deletion of the SpaceX and Tesla facebook pages, when told over Twitter they existed was pretty funny.

[jacquesm]

Reading a book doesn't change fundamentals. Tesla is heading for a rough time, I sincerely hope they make it through and hope that Musk will not come to regret making that stupid joke.

[WhompingWindows]

The problem with your comment is the book addresses the history of the company and puts those fundamentals into perspective. I'd argue Tesla has been in rough times for most if not all of its existence. Do you think having 200 problem Roadsters in a warehouse in their first year was great? They had colossal issues with the conversion of Lotus Elise chasses to Tesla Roadsters, they were hand-building and customizing every single vehicle.

Then, when they wanted to build the Model S, they wasted a lot of time on luxury features like having flush door handles. Their output was delayed, despite having numerous pre-orders waiting.

Again, with Model X, they faced substantial delays with the falcon wing doors and the single-pylon-seat in the 2nd row. They received a lot of flak for that, and got past it in time.

Now with Model 3, they've had problems mainly at the Gigafactory with battery-pack assembly, as well as with the costly up-front labor that goes into automation of assembly lines.

And yet, here they are. They have substantial debt yes, and their credit rating is B- which isn't great, but compared to other automakers their financials are somewhat middle of the road. Look at Ford, they have a massive debt problem, or look at Chevy's electrification program, which has faced much weaker demand than Tesla will ever face with its legions of fans.

If you ask me, the "fundamentals" have never been great, but the simple fact is Tesla has hundreds of thousands of die-hard fans who have put up their own money in pre-orders and equity to keep the company going. No other car brand has this amount of loyalty and fandom, and that "fundamental" has been enough to get Tesla where they are now.

Tough times? Yes. But hoards of Muskivites will throw in cash to ensure this ship keeps sailing.

[jacquesm]

There is a problem that comes with operating at scale: yes, there are economies of scale, but they only work to your advantage when everything is running smoothly. When things are not running smoothly and you are for instance losing on every product sold those losses mount extremely rapidly. Car manufacturing is a scary undertaking for exactly that reason, especially in the Model 3 segment (where a certain amount of luxury is expected and fit and finish matter but the budget is much lower than for a luxury vehicle). There is not enough margin for error to fuck up your production, it will eat all the profits and then some.

That is why the problem of having 200 roadsters in a warehouse pales in comparison with the problem of having an assembly line that is supposed to crank out 5000 vehicles crank out 2500 (if that) instead. It means that you are losing money hand over fist, your capital expenditures and wages are identical but your income (if properly recognized) is half. This will totally wipe out your margins for quite a while to come. Car manufacturers have consolidated for a reason, even a small hickup can kill an otherwise healthy company.

[decacorn]

tesla does not lose money on model S or X.

[ucaetano]

It does.

https://seekingalpha.com/article/4075701-tesla-closer-look-m...

[jacquesm]

That's including R&D, which for a company that is relatively young is to be expected. GM1 is net positive though, and when people say 'X loses money on each item sold' they are typically talking about GM1, not about margins including R&D. This is important because the second depends very much on the number of items sold which one can not know until the run is over or a substantial number of years have passed. It's safe to say the VW beetle had it's R&D paid back fairly early on and that Tesla will take a bit longer (especially for their niche products) because there are simply fewer units to do the pay-back on. Even so, there is a fairly good reason to believe they will be OK on the Model S in the long run, will be about break even on the X and hopefully will end up making money on the Model 3 if they can deliver it in large enough numbers. Also important: the Model 3 R&D was to some extent paid for by the gross margins of the Model S, if not for that they would have had to receive even more outside capital.

[jacquesm]

I did not say that.

[qaq]

On the scale of Tesla's own history how would you rate that rough time? E.g. is it more rough vs 1st year of Tesla 2nd year? 3rd Year? How rough is it for people who actually pulled through all the challenges they faced from the founding till now. I think people are overestimating the "rough times" part. Musk and Tesla have a ton of good will that no other automaker has and they can leverage that in a rough situation.

[jacquesm]

There are a lot of things coming together that each individually would have been a serious challenge, to have them all at once and within 6 months of each other is pretty rough. Even so, I would not bet against Musk, he has a habit of making it through somehow. There is a book with a character in it called Reid Malenfant, Musk reminds me of that character.

https://en.wikipedia.org/wiki/Space_(Baxter_novel)

You get to chose: you're part of the bulldozer or you'll end up part of the highway. Even so, it will not be easy to do right by Tesla and not to ignore SpaceX, and that's before going into the fact that Tesla is now effectively subsidizing Solar City.

[qaq]

I'll give you a hypothetical about what I tried to convey. Qatar is spending 200 billion in relation to world cup 2022 in large part as a part of PR effort. Now imaging 2 hypothetical news stories VW AG is opening and innovation center in Doha, Qatar. Tesla Inc. is opening an innovation center in Doha, Qatar. What would be a PR value for each of them be for Tamim bin Hamad Al Thani just ballpark a figure that he would be willing to put up for each one.

[jacquesm]

Oh sure, but then you're in rescue territory. But that's not what we are talking about here, we are evaluating - or at least, I am trying to evaluate - how serious the problems are in isolation. That there will be some white knight is beyond a doubt for me even if things do go very wrong.

[dmode]

This. When the first Model X came off the line and it was full of quality issues, that was a rough time. When NYT wrote a tough piece on the early Model S, that was a tough time. When the early Model S caught on fire that was a rough time. This is definitely NOT even close to rough time. 2000 Model 3 per week is close to Model S numbers.

[jacquesm]

It does not matter that the numbers are 'close to model S numbers', the Model 3 is far less profitable than the S ever was and you'd need to crank out a multiple of them on that line anyway to be in the black in the long term.

It surprises me that people think that making a budget car is easier than a luxury sedan. Make no mistake: successfully launching a budget vehicle is much harder than making a luxury vehicle.

[pm90]

Very astute comment. And lets remember that Musk himself is a big fan of "first principles". By the first principles (fundamentals) of business and finance, it doesn't look very good. But I too sincerely hope that Tesla does succeed.

[xutopia]

How are they headed for hard times? I'm genuinely uneducated on the matter and want to know more.

[jacquesm]

Tesla is attempting to change too much at once. New model, new (highly automated) production line and adding a degree of self driving over and beyond what is currently present in other cars, probably will run out of cash somewhere this year.

Any one of those would be a major challenge and a major achievement to lick. While I totally admire Elon Musk for challenging all these things at once you have to wonder about the wisdom of it all, especially when taking into account that he has another major project (SpaceX) that would normally be enough to tax any CEO.

Furthermore they decided to roll Solar City into Tesla which makes Tesla even more encumbered with debt. I get why he did it but I firmly believe that cross-tying losing businesses and winning businesses at that level is a failure prone strategy, it is gambling rather than managing.

[WhompingWindows]

I don't think any of it is too much for Elon to handle. I think the problem is that he over-hypes the potential output of his companies, leading to constant "delays" and "setbacks". If he just kept his numeric predictions to himself and said "we will perform an exponential ramp over the first few years on par with the Model T", he wouldn't see so much flak for not hitting Model 3 production claims.

[jacquesm]

Agreed, but that's the problem with going public. Once you do that you have to show numbers.

[tim333]

Losing money. Almost out of cash. Model 3 numbers less that predicted. Bonds down. I'm just summarising the issues - they may well do fine.

See https://news.ycombinator.com/item?id=16612805 for example.

[dsugarman]

Valuation isn't everything, people compare Tesla to other car makers and say "hey, they are way smaller and getting valued higher, what a sham!", what people should be looking at is Enterprise Value. GM has 10x the debt as Tesla, and 2x the Enterprise Value. People are worried about Tesla burning billions of dollars, if they were to solve this problem with level of debt GM has, they would have another $85B to spend.

Tesla has done the hard things, they've made a great product, they've created a ton of demand and they found an entry point into a really tough market to enter. If the biggest worry right now is their need for cash to scale, I'm very bullish on their future.

[vermontdevil]

That biography was mind blowing. Shows all sides of Elon good or bad. But showed how hard he really worked to build companies to scale.

[uniformlyrandom]

I think there is a high probability that some of his risk-taking initiatives backfire at some point in time, but I cannot deny that this guy is moving several industries forward at much faster pace than said industries would move on their own.

This observation is not going to affect my investment decisions though. I will not go as far as shorting TSLA ('the market can stay irrational longer than any investor can stay solvent'), but I would not buy TSLA either.

[justacat]

> Plus the deletion of the SpaceX and Tesla facebook pages, when told over Twitter they existed was pretty funny.

Wait, did Elon not know about them and then just got them deleted upon finding out?

[solarkraft]

- as part of the whole "Delete Facebook" movement.

[projectramo]

Yes!

edit: I should say "apparently!" since I wasn't there myself

[paulcole]

You think the author of the biography would’ve been given “exclusive access to Musk, his family and friends” if the book didn’t portray him in a positive way?

It’s marketing and (among other things) Elon Musk is an excellent marketer.

[planetjones]

Did you read the biography? This point is specifically addressed by the author and the author also refused Musk the control he wanted e.g. in terms of a right of reply to all points in the book. Some of the book is very vivid in its portrayal of Musk’a flaws and others’ opinions of him.

[paulcole]

> the author also refused Musk the control he wanted

You can believe this if you want. But to me the author saying this isn't worth the paper it's printed on.

[rcMgD2BwE72F]

Did you read it?