[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.

[ucaetano]

> when people say 'X loses money on each item sold' they are typically talking about GM1, not about margins including R&D

It depends on the industry.

[jacquesm]

I did not say that.