[w1]

Thank you, being reasonable is really important, and being unreasonable when investing can be very expensive!

Producing 55k Model 3's per quarter [1] will definitely help with the cash flow situation. I think the biggest questions that determine if they can be self-sustaining are:

- Can they ramp up Model 3 production quickly enough to meet the debt obligations they have accumulated to date?

- What will the average Model 3 margin be, given the price distribution from 60k to 35k?

The bull case [2] aligns with your basic assumptions that the 3 will add significant cash flow that allows them to get over the "debt maturity hump". Note that their analysis does include other sources of cash flow (energy credits, remaining line of credit).

The bear case, basically, disagrees. They suppose that there will not be sufficient demand for the higher end Model 3, given increased competition from vehicles like 2019 Jaguar I-Pace (69.5k, 240mi); Chevy Bolt (37.5k, 235mi); and maybe Hyundai Kona EV (? $, 250 mi). This could then put Tesla into a negative spiral, where shrinking orders cause their accounts payable to not keep up with their lagged accounts receivable.

Also it's worth noting that they are probably on track to spend 2.5B in capital on PP&E this year based on 1.25B in first six months [3], and spent 3.6B, 1.3B, and 1.6B in the previous three years[4]. Adding in another 0.75 - 1.0 in selling/general/admin and R&D costs per quarter, on top of the cost of producing their cars and servicing their debt, makes even the 3B/yr in Model 3 gross profit case less of a slam dunk for Tesla success.

I think it really could go either way at this point, and the next six months will be telling. Elon does has a tendency to just make things work, but I am taking a risk here and siding more with the negative case.

[1] https://www.bloomberg.com/graphics/2018-tesla-tracker/

[2] https://www.cnbc.com/2018/10/09/tesla-on-path-to-profitabili...

[3] http://ir.tesla.com/node/18946/html

[4] http://ir.tesla.com/node/18501/html

[Latteland]

W1, what do you think of Tesla new 'medium range car' tonight? I think it's a master stroke. They now have a 45k car (yes, not there yet for the 35k one), but consider this - the people buying this now will get the 7500 tax credit if they get it before the end of the year. So people who were thinking of waiting till they could buy a 35k car can now buy a 45k car! They will pay tesla more, trading off getting that car now for 7500 off. Vs the 35k car, it's 10k more money but effectively 45-7.5=37.5 for more range.

I think it's a brilliant way to harvet more money from people and maximize the benefit of the fed tax credit.

I should be honest that I want tesla to succeed because we need aggressive electric car companies to move the whole industry along. I don't want them to fail. I think their business strategy looks better than ever. IF there is a bunch of people, lets say 100k americans who want this car in this range and price, they'll be golden.

[Latteland]

Thinking about q3, q4, q1/19 - the i-pace won't come in their small 20k annual run rate until next year, so it doesn't matter much for now. It does look like a reasonable car. Probably better interior than the tesla, decent range, good design - without access to superchargers not very practical for long trips, but I think it's a perfect example of what legacy automakers can do if they try hard. The other big question is where will they get enough batteries to mass produce an ev - apparently that's a major reason they can't make many. It's the best competitor to the tesla so far. Does that car have chademo or ccs charging? I've never seen a ccs charger, wonder if there is one around seattle.

The chevy bolt is a great little car, it's just not as a sexy as the m3 (will tesla take this over from bmw's namespace :-)). Of course it's half the price of the current selling model 3's. I think the bolt is a fine car, not too sexy, but sales in the us are anemic, yet people complain they are hard to find. Also gm isn't making many of them, perhaps for same reason as ipace. hyundai kona ev looks like a nice car too.

All those cars are inferior evs to even the model 3, but they aren't that far away. If only they could mass produce them, and the biggie, get auto dealers to try to sell them - that's the part that's really missing so far. It's literally against their own interest at least in the short term to sell evs.

I think you should look out more than 6 months. Tesla has enough customers world wide for the 3 to sell another 100-150k of them - remember they are hardly even selling them in Canada up to now, just recently ramped up. It's only after the pent up demand is handled that we'll know. I'd say look at what q3 and q4 next year do - Tesla sales are set through mid next year just be putting their cars in other countries. The optimistic case if they'll reduce manu. costs and be able to make the base short range model and survive making a 35k car. Meanwhile, and this is the exciting bit, the higher-midrange of bmw, mercedes, audi, maybe low end porsche will face significantly reduced sales because of model 3. Those companies aren't doomed, but the 3 is so awesome, there's so much pent up demand. Even in seattle the sales office was packed last weekend, and they put 100s and 100s of them on the road last month.