Since the CNBC article is by far the most factual, and doesn't seem to have been discussed yet on HN, I'm going to try burying this submission and rolling back the clock on the first post of that one: https://news.ycombinator.com/item?id=16587249.
The Bloomberg article isn't bad, but it's so generic that the discussion is generic as well (Tesla in general, short selling in general). That's the main trouble with articles that don't contain enough factual fiber.
They had the same production problems on the roadster, the Model S, and the Model X. Each time, the new vehicle was a “make or break” for the company. Each time, there were reports of how these production problems would sink the company. The company never sank. Tesla is now apparently “good” at making the Model S and Model X. I always assumed they would have similar nightmarish production problems with the Model 3, so all of these reports are sort of expected for me. But I also know that Teslas are extremely popular in Silicon Valley, where I live. That to me indicates that those with the means really like the cars. So it stands to reason that once they are good at making an affordable car, they’ll sell like hot cakes.
Musk mentioned recently that two things really stress him out: Artifical Intelligence and what to do about the risks is poses for humanity, and the Model 3 launch. I still have a lot of faith that Elon can make it happen.
And personally I really want Tesla to succeed. I think a lot of other people do too.
I do wonder if Tesla's biggest problem around the Model 3 launch was starting by establishing very aggressive production targets. According to Bloomberg's Model 3 Tracker linked in that article, the Model 3 already is the top selling electric car in the country. It outsold the Chevy Bolt by over 2x in January and February. That should be a huge accomplishment, but it is viewed as a failure because it is a small fraction of what Tesla initially predicted.
All the previous models and problems with them happened in small production volume luxury car segment. Luxury car customers tolerate more defects and it's economical to repair them quickly with good service.
Model 3 is completely different animal. Learning from history does not help here. Model 3 is 'entry level luxury' similar to Audi A4 and BMW 3 Series.
Tesla is very creative and innovative in every level, not just in their technology. Their financial innovation has finally reached it's limit with Model 3 and it's the breaking point. They can't afford large setbacks or partial delivery and gradual development over the years. They are running out of cheap money.
Tesla is leveraged to the gills and there can't be another year or two until delivery or Musk loses the company and some other car maker or PE firm buys them cheap and finishes the product. I wouldn't be surprised if Tesla is GM or Toyota brand within next five years.
I also see more Teslas than I would expect here in Florida. It's apparently catching on with the retirees-with-money demographic. Along with all the old boomers buying sports cars - porsches, corvettes, etc., it's getting harder to identify and avoid all of the older, dangerous drivers anymore. They used to have the courtesy to identify themselves by driving giant full-size Cadillacs and Buicks :(
People forget just how bad the Model X launch was. It was a complete disaster. They had I think literally three of them ready for launch and then total silence for weeks. Then took months to get any sort of small run volume off the ground.
And because people have totally forgotten about that, people will probably totally forget about just how (comparatively mildly!) bad the Model 3 launch is going. It will stutter for a year, and in three years everyone will want one.
I lived through my dad owning 4 Jaguars, totally inexplicably. One of them he carried around a box of brake fluid because he had to add a little each day. If a car is that special to you, you just mentally set aside production issues. Electric cars are even more special.
Enzo Ferrari probably never said the apocryphal quote: "I don't care if the door gaps are straight. When the driver steps on the gas I want him to shit his pants." But for a big demographic its essentially true.
So Tesla will make it out of this year, and then everyone will forget that the Model 3 ever had problems in the first place, just like with the X.
I think you are applying the software startup metric to industrial company. For typical SV startup lack of demand is the single most critical issue (hence the "make something people want" YC motto), nothing comes close. Tesla has plenty of demand.
But being industrial company, Tesla is not solely about making something people want. It's about making it on scale, and showing profit.
So far, each model Tesla made meant more debt on balance sheet, and bigger quarterly losses. Once they break this trend, they are golden. But this moment is not yet, and not even on the horizon, meaning another capital rise this year.
I'm indifferent on whether Tesla succeeds. I do appreciate that they sparked a modern revival of EV technology, and I'd be happy if some day an EV made sense for me. At this time, it does not. Range is still too short and charge times too long.
> So it stands to reason that once they are good at making an affordable car, they’ll sell like hot cakes.
For me, this puts the cart very much before the horse. Once they're good?
Making an expensive car is much, much easier than making an affordable one. The fact that they previously struggled with making an expensive one could just as well be a sign that their process improvement and cost reduction skills just aren't good enough to play in the big leagues.
Their being at 15% of projected output sure doesn't conflict with that; if they learned a lot from S and X, I'd think they'd be doing much better.
Tesla is the bitcoin of EVs :) or maybe it's the other way around.
I think Musk persona and SpaceX makes many want to bet on high risk but high gains project. I wonder how Tesla stock did after the dual rocket landing.
That, instead of a sound financial analysis, seems to be the cause of your bullish position. I hope you’re not calling what you’re doing with your money “investing”.
I have a model 3 and it basically feels like the iPhone of cars. Financial issues could take them down, but you'd have to be a fool to bet against them.
Comparing the model 3 to other electric vehicles reminds me of when people were comparing the iPod to other MP3 players based upon tech specs. At this stage, the electric nature of the car just bolsters the design and UX of it. Comparing it to other EVs because they happen to share the same type of motors is stupid. They should be comparing the Model 3 to high end luxury combustion vehicles because from my vantage point you're getting that kind of driving experience, better even, for half the price. The only place where the electric nature of the car creeps into your life in a negative way is when you consider long trips. And even then, the impact is minimal because of the supercharger network. (You are going to stop regularly on long trips for breaks anyhow, so just charge the car.)
Beyond that, the only way the electric nature of the car impacts your life is beneficial -- no more trips to gas stations and less cost of ownership. At some point you stop even making the comparison because it's just a plain better ownership experience so you don't think about it anymore.
>They should be comparing the Model 3 to high end luxury combustion vehicles because from my vantage point you're getting that kind of driving experience, better even, for half the price.
The Model 3 can't compare to high end luxury combustion vehicles.
In the run up to model 3 production Musk mentioned that "the production line is the product" because it was needed to be highly automated to make a great car at a low price.
Clearly getting the production line wrinkles ironed out has been a much bigger challenge than Musk expected but that is typical of almost every thing that Musk as done: Envision a way to make things an order of magnitude better. Work like a bugger (while blowing through a dozen deadlines) to make that happen. Eventually, come out the other side smelling like a genius -- because the original vision had merit and was not just a pipe dream. The model 3 fits this mold.
In terms of finance and cash flow, unlike previous near death experiences with Tesla and SpaceX, now Musk could quite easily sell of a chunk of equity in SpaceX to finance what's yet to be done in debugging the production line if the markets won't oblige. But likely the bigger problem right now is time rather than money before things come right. Most of the upfront production line expenses will have already been spent, now it's a learning curve to make it tick along as expected.
Tesla is facing a test. There are some bad signs that point to deferring profitability longer than expected, such as high defect and rework rates.
On the one hand, despite the challenges, Tesla has built more Series 3s than Chevrolet has built Bolts. On the other hand that's about 15% as many per week as Tesla thought they could do. The reason this isn't a fatal disaster is that nobody else is yet willing to try to beat that. There is no real replacement for a Model 3 available.
Building hundreds of thousands of cars per year is not something that industry newcomers have managed to do for a very long time, nevermind electric aluminum cars. This is a different challenge than competing against high-end BMWs and Mercedes that also have relatively small production runs.
The advantage Tesla has is that they started the learning process early. The competition is still a couple years from profitably selling a direct alternative. But every month Tesla is late is a month of sales runway and revenue gone.
A lot of the value in buying a company like Tesla is the patent portfolio. In 2014 Musk announced that these would be "open source", but I can't actually seem to find any legalese with the details.
As for the rest, I imagine the residual value is brand, a lot of which is deeply entangled with Musk himself. As a buyer I'd be asking for a hefty discount because I would expect Musk wouldn't stick around to spruik the goods.
Warning: This page will automatically blast audio without asking, potentially ruining whatever you were recording, damaging your ears, waking the baby, annoying the boss, etc.
I'm with you on this, autoplay is evil. But I'm curious about the "ruining whatever you were recording" part. Why are you clicking random Internet links if you're in the middle of "recording" something (presumably, audio or video)?
The mechanics are that you loan shares, sell them at the price you think is too high, buy them at the lower price, then hand those cheaper shares back.
The argument for doing so is that humans err in favour of optimism -- ie, that prices will rise. But you can make money on the market moving either way.
Looking on it as a total outsider with limited knowledge, it seems like a fascinating niche in the financial world. But I imagine it is also even more stressful than betting on the price rise, because you're more often going to be outside the pack.
"Short selling" is the process of selling something you don't have, promising to deliver later, on the basis that you expect the price to go down. Then, later, when someone requires you to deliver the items you sold them, you buy them at the current market price and deliver them.
If the price has indeed gone down then you win. Problem is, the price may have gone up, and now you have to buy at a higher price, so you lose. The worst part of this is that the loses are unbounded, since the price rise could be arbitrarily large.
In practice it's not a problem, some you win, some you lose, and you are effectively betting on price market movements.
You can now deal with options. So when you promise to sell someone something in the future at price X, they have the option in the future of taking you up on that. If the price of X has gone down then obviously they will go and buy it directly, but if the price has gone up then they come to you and demand that you supply at the agreed price. In return for this option, they pay you when the deal is strike. Thus you are selling them the option of buying at a price.
Similarly you can sell them the option to sell you something at a price. These options are derivatives from the original concepts of buying and selling at given prices.
There's more, but I'll stop, not least because that's pretty much all I know.
The standard thing everyone understands is you buy a stock S1 at time t1 and sell it later at t2 (let this be S2). The difference (S2 - S1) is your profit. You are hoping the stock price goes up. If it drops you lose money.
I understand short selling, but the guy in this story says he's been shorting Tesla for years. In that time, the stock as done nothing but go up, AFAIK. How can he afford to still be shorting? As I understand it, a short position is not something you can hold indefinitely... there's a point in time where you need to provide the shares.
That's a pretty terrible article title, the mods should consider changing it from "Tesla Is Facing a Crucible" to e.g. “Tesla’s Make-Or-Break Moment.” which was the much better title of the article this article is based around.
I cannot tell if it was titled this to add an air of mystery or trying to be too clever for its own good, but it is pretty shoddy either way.
The Model 3 seems like it was premature. It gets mediocre reviews ( https://www.caranddriver.com/tesla/model-3 ), they have 180,000 orders, and they're fulfilling them at about 3200 a month, i.e. 4.6 years to satisfy the current backlog. For scale, Toyota sold about 32,000 Camrys a month last year just in the US. Heck, BMW sold about 34,000 3-series a month.
Tesla should have stuck to high-end markets. It looks like their foray into mass production will end badly.
Tesla is another "solution looking for a problem" type of company. They make nice cars but the electric engine concept has yet to provide a real benefit over combustion. (They say less solution but that's not really true is it?)
Another concept looking for a problem is crypto; as the only problems crypto really solves are the ones faced when doing illegal transactions or hiding money.
1. No oil changes.
2. Fewer moving parts, fewer repairs, longer life.
3. Instant acceleration.
4. Zero emissions.
5. Ability to be fully powered by renewable energy.
The medium-term future of the automobile industry is definitely in the electric engines and drivetrains. If you don't see that, you either live in some parallel universe or just don't understand the market at all. You're welcome to prove all of us wrong by shorting Tesla and all other elecric car companies.
[+] [-] neonate|8 years ago|reply
http://archive.is/wCQls
The WSJ article it refers to is called "Tesla’s Make-Or-Break Moment Is Fast Approaching":
http://archive.is/ucf9q
The CNBC article it refers to is called "Tesla employees say automaker is churning out a high volume of flawed parts requiring costly rework":
https://www.cnbc.com/2018/03/14/tesla-manufacturing-high-vol...
[+] [-] dang|8 years ago|reply
The Bloomberg article isn't bad, but it's so generic that the discussion is generic as well (Tesla in general, short selling in general). That's the main trouble with articles that don't contain enough factual fiber.
[+] [-] TaylorAlexander|8 years ago|reply
They had the same production problems on the roadster, the Model S, and the Model X. Each time, the new vehicle was a “make or break” for the company. Each time, there were reports of how these production problems would sink the company. The company never sank. Tesla is now apparently “good” at making the Model S and Model X. I always assumed they would have similar nightmarish production problems with the Model 3, so all of these reports are sort of expected for me. But I also know that Teslas are extremely popular in Silicon Valley, where I live. That to me indicates that those with the means really like the cars. So it stands to reason that once they are good at making an affordable car, they’ll sell like hot cakes.
Musk mentioned recently that two things really stress him out: Artifical Intelligence and what to do about the risks is poses for humanity, and the Model 3 launch. I still have a lot of faith that Elon can make it happen.
And personally I really want Tesla to succeed. I think a lot of other people do too.
[+] [-] slg|8 years ago|reply
[+] [-] Nokinside|8 years ago|reply
Model 3 is completely different animal. Learning from history does not help here. Model 3 is 'entry level luxury' similar to Audi A4 and BMW 3 Series.
Tesla is very creative and innovative in every level, not just in their technology. Their financial innovation has finally reached it's limit with Model 3 and it's the breaking point. They can't afford large setbacks or partial delivery and gradual development over the years. They are running out of cheap money.
Tesla is leveraged to the gills and there can't be another year or two until delivery or Musk loses the company and some other car maker or PE firm buys them cheap and finishes the product. I wouldn't be surprised if Tesla is GM or Toyota brand within next five years.
https://www.bloomberg.com/graphics/2018-tesla-tracker/
[+] [-] jcadam|8 years ago|reply
[+] [-] simonsarris|8 years ago|reply
People forget just how bad the Model X launch was. It was a complete disaster. They had I think literally three of them ready for launch and then total silence for weeks. Then took months to get any sort of small run volume off the ground.
And because people have totally forgotten about that, people will probably totally forget about just how (comparatively mildly!) bad the Model 3 launch is going. It will stutter for a year, and in three years everyone will want one.
I lived through my dad owning 4 Jaguars, totally inexplicably. One of them he carried around a box of brake fluid because he had to add a little each day. If a car is that special to you, you just mentally set aside production issues. Electric cars are even more special.
Enzo Ferrari probably never said the apocryphal quote: "I don't care if the door gaps are straight. When the driver steps on the gas I want him to shit his pants." But for a big demographic its essentially true.
So Tesla will make it out of this year, and then everyone will forget that the Model 3 ever had problems in the first place, just like with the X.
[+] [-] nopriorarrests|8 years ago|reply
But being industrial company, Tesla is not solely about making something people want. It's about making it on scale, and showing profit.
So far, each model Tesla made meant more debt on balance sheet, and bigger quarterly losses. Once they break this trend, they are golden. But this moment is not yet, and not even on the horizon, meaning another capital rise this year.
[+] [-] ams6110|8 years ago|reply
[+] [-] wpietri|8 years ago|reply
For me, this puts the cart very much before the horse. Once they're good?
Making an expensive car is much, much easier than making an affordable one. The fact that they previously struggled with making an expensive one could just as well be a sign that their process improvement and cost reduction skills just aren't good enough to play in the big leagues.
Their being at 15% of projected output sure doesn't conflict with that; if they learned a lot from S and X, I'd think they'd be doing much better.
[+] [-] brian-armstrong|8 years ago|reply
[+] [-] agumonkey|8 years ago|reply
I think Musk persona and SpaceX makes many want to bet on high risk but high gains project. I wonder how Tesla stock did after the dual rocket landing.
[+] [-] jacques_chester|8 years ago|reply
The company refreshed its financing.
This is always possible, until it isn't.
> That to me indicates that those with the means really like the cars.
Cashflow is no respecter of brand power.
[+] [-] sabujp|8 years ago|reply
[+] [-] Jdam|8 years ago|reply
That, instead of a sound financial analysis, seems to be the cause of your bullish position. I hope you’re not calling what you’re doing with your money “investing”.
[+] [-] gfodor|8 years ago|reply
Comparing the model 3 to other electric vehicles reminds me of when people were comparing the iPod to other MP3 players based upon tech specs. At this stage, the electric nature of the car just bolsters the design and UX of it. Comparing it to other EVs because they happen to share the same type of motors is stupid. They should be comparing the Model 3 to high end luxury combustion vehicles because from my vantage point you're getting that kind of driving experience, better even, for half the price. The only place where the electric nature of the car creeps into your life in a negative way is when you consider long trips. And even then, the impact is minimal because of the supercharger network. (You are going to stop regularly on long trips for breaks anyhow, so just charge the car.)
Beyond that, the only way the electric nature of the car impacts your life is beneficial -- no more trips to gas stations and less cost of ownership. At some point you stop even making the comparison because it's just a plain better ownership experience so you don't think about it anymore.
[+] [-] BoorishBears|8 years ago|reply
I ask because the Model S can’t compare with the S Class or 7 series on comfort and luxury, yet you’re saying the model 3 should be compared
[+] [-] nawitus|8 years ago|reply
The Model 3 can't compare to high end luxury combustion vehicles.
[+] [-] sunstone|8 years ago|reply
Clearly getting the production line wrinkles ironed out has been a much bigger challenge than Musk expected but that is typical of almost every thing that Musk as done: Envision a way to make things an order of magnitude better. Work like a bugger (while blowing through a dozen deadlines) to make that happen. Eventually, come out the other side smelling like a genius -- because the original vision had merit and was not just a pipe dream. The model 3 fits this mold.
In terms of finance and cash flow, unlike previous near death experiences with Tesla and SpaceX, now Musk could quite easily sell of a chunk of equity in SpaceX to finance what's yet to be done in debugging the production line if the markets won't oblige. But likely the bigger problem right now is time rather than money before things come right. Most of the upfront production line expenses will have already been spent, now it's a learning curve to make it tick along as expected.
[+] [-] crowbahr|8 years ago|reply
Musk plays the edge of these things. If it wasn't way too ambitious it doesn't seem like he'd do it.
[+] [-] Zigurd|8 years ago|reply
On the one hand, despite the challenges, Tesla has built more Series 3s than Chevrolet has built Bolts. On the other hand that's about 15% as many per week as Tesla thought they could do. The reason this isn't a fatal disaster is that nobody else is yet willing to try to beat that. There is no real replacement for a Model 3 available.
Building hundreds of thousands of cars per year is not something that industry newcomers have managed to do for a very long time, nevermind electric aluminum cars. This is a different challenge than competing against high-end BMWs and Mercedes that also have relatively small production runs.
The advantage Tesla has is that they started the learning process early. The competition is still a couple years from profitably selling a direct alternative. But every month Tesla is late is a month of sales runway and revenue gone.
[+] [-] xattt|8 years ago|reply
[+] [-] resource0x|8 years ago|reply
[+] [-] jacques_chester|8 years ago|reply
A lot of the value in buying a company like Tesla is the patent portfolio. In 2014 Musk announced that these would be "open source", but I can't actually seem to find any legalese with the details.
As for the rest, I imagine the residual value is brand, a lot of which is deeply entangled with Musk himself. As a buyer I'd be asking for a hefty discount because I would expect Musk wouldn't stick around to spruik the goods.
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] timewarrior|8 years ago|reply
[+] [-] brian-armstrong|8 years ago|reply
Also, would that endanger Musk's other projects? I seem to remember he's pretty leveraged in Tesla, but I assume financially each company is separate?
[+] [-] vondur|8 years ago|reply
[+] [-] mcbits|8 years ago|reply
[+] [-] tom_mellior|8 years ago|reply
[+] [-] intopieces|8 years ago|reply
[+] [-] antonkm|8 years ago|reply
[+] [-] neals|8 years ago|reply
You quickly sell these borrowed stock on the market for $100.
1 month passes. The stock goes down.
You buy the same amount of stock, but now for $50.
You return the stock to the person you borrowed it from.
You have profited $50 per stock.
You can now get a nice cold pint and wait for all this to blow over.
[+] [-] jacques_chester|8 years ago|reply
The argument for doing so is that humans err in favour of optimism -- ie, that prices will rise. But you can make money on the market moving either way.
Looking on it as a total outsider with limited knowledge, it seems like a fascinating niche in the financial world. But I imagine it is also even more stressful than betting on the price rise, because you're more often going to be outside the pack.
[+] [-] ColinWright|8 years ago|reply
If the price has indeed gone down then you win. Problem is, the price may have gone up, and now you have to buy at a higher price, so you lose. The worst part of this is that the loses are unbounded, since the price rise could be arbitrarily large.
In practice it's not a problem, some you win, some you lose, and you are effectively betting on price market movements.
You can now deal with options. So when you promise to sell someone something in the future at price X, they have the option in the future of taking you up on that. If the price of X has gone down then obviously they will go and buy it directly, but if the price has gone up then they come to you and demand that you supply at the agreed price. In return for this option, they pay you when the deal is strike. Thus you are selling them the option of buying at a price.
Similarly you can sell them the option to sell you something at a price. These options are derivatives from the original concepts of buying and selling at given prices.
There's more, but I'll stop, not least because that's pretty much all I know.
[+] [-] jfaucett|8 years ago|reply
Time(t) : ---buy(S1)------------------sell(S2)----->
In short selling, the buy's and sells are reversed, so you are hoping the stock price drops.
Time(t) : ---sell(S1)-----------------buy(S2)------>
Notice that if the stock price drops S2 - S1 is positive. Conversely, if the price rises you lost money.
There are other technical details, but this is conceptually an easy and accurate enough way to think about it.
[+] [-] ams6110|8 years ago|reply
[+] [-] Jack000|8 years ago|reply
with long you buy, then sell.
with short you sell, then buy.
[+] [-] aaronmdjones|8 years ago|reply
[+] [-] sgroppino|8 years ago|reply
[+] [-] Proven|8 years ago|reply
[deleted]
[+] [-] userbinator|8 years ago|reply
[+] [-] Someone1234|8 years ago|reply
I cannot tell if it was titled this to add an air of mystery or trying to be too clever for its own good, but it is pretty shoddy either way.
[+] [-] username223|8 years ago|reply
Tesla should have stuck to high-end markets. It looks like their foray into mass production will end badly.
[+] [-] fictionfuture|8 years ago|reply
Another concept looking for a problem is crypto; as the only problems crypto really solves are the ones faced when doing illegal transactions or hiding money.
[+] [-] matthewmacleod|8 years ago|reply
That comment has absolutely no merit whatsoever.
[+] [-] URSpider94|8 years ago|reply
[+] [-] pscsbs|8 years ago|reply
1. No oil changes. 2. Fewer moving parts, fewer repairs, longer life. 3. Instant acceleration. 4. Zero emissions. 5. Ability to be fully powered by renewable energy.
[+] [-] Erlich_Bachman|8 years ago|reply
[+] [-] adrianN|8 years ago|reply