from the elon-watchers dept.
Auto production is hard:
Having racked up its first quarter of burning through more than $1 billion of cash in the three months ending in June, Tesla topped that with $1.4 billion of negative free cash flow in the third quarter. In the past two quarters, therefore, Tesla has burned through more cash than the previous six combined. More importantly, it has burned through roughly four out of every five of the $3.2 billion dollars it has raised since late March through selling new equity and convertible debt and its debut in the high-yield bond market.
Consequently, debt has soared. Even just using debt with recourse to the company, on a net basis it has almost tripled since the start of the year to $3.36 billion.This would matter less if the primary objective of sucking in most of that external funding -- mass production of the Model 3 -- was fast approaching. Instead, it has receded further.
When Musk first talked about production targets for the Model 3 in 2016, they implied Tesla would be producing roughly 3,800 to 7,600 a week in the second half of 2017. By July of this year, Musk was guiding toward production hitting about 5,000 a week by the end of December. I estimated at the time that this implied a second-half average of maybe 1,400 a week.
Now, Musk estimates production might hit 5,000 a week by the end of the first quarter of 2018. As for this year, it might be in "the thousands" by the time New Year's Eve rolls around. He refused to say what the current run rate was. But I would estimate Tesla will be lucky to produce 10,000 Model 3 vehicles in total this year, or an average of 400 a week for the second half -- roughly 5 to 10 percent of the original guidance. As for the earlier target of 10,000 a week in 2018 ...
Previously: Tesla Adds Lots of Certified Pre-Owned Model S Vehicles for Under $40,000 with New Warranty
Time to Bash Tesla Model 3
Tesla Reportedly Teaming Up With AMD for Custom AI Chip
Tesla Fires Hundreds of Employees
Tesla holds a tight grip on its used vehicle market through its certified pre-owned program. As previously reported, it resulted in the Tesla Model S retaining its value better than gas-powered cars in its segment – losing only 28% after 50,000 miles, according to an Autolist report.
Unfortunately for people looking to get a cheap second-hand Tesla, it wasn't the easiest thing to find a good bargain... until now.
The automaker is now listing a lot of new Certified Pre-Owned Model S vehicles for less than $40,000.
While you could sometimes find a used Model S in the $40,000 price range from different resellers or directly from the owners, it was rare to find a used Tesla Model S for that price in Tesla's Certified Pre-Owned program.
Under the program, the vehicles receive a full inspection and a four-year, 50,000 miles limited warranty with 24 hour roadside assistance on top of the remaining years/mileage of their battery and drivetrain warranty.
But now Tesla is introducing a new version of the program for high mileage cars. They added dozens of them to their list and several are just over $30,000
Though one could argue it's just another auto company pushing its wares, there is the impact that having more Tesla cars on the road increases the incentives for building out more charging stations. With more stations, there is less range anxiety, so more people become willing to buy an electric car, and so the positive feedback loop continues. Those the actual numbers in this case are relatively small, consider that Tesla is on the cusp of rolling out the Model 3 in the near future, as well.
Tesla is beginning to deliver a small number of Model 3 cars, but there are concerns that Tesla will not be able to produce enough cars to meet demand:
Wall Street finally got to see all the details of the Tesla Model 3 during the car's launch event Friday. So far investors have given it the thumbs down with the electric car maker's shares down more than 2 percent midday Monday.
"We believe the Model 3 was as good as or better than expected, and pricing was as expected with considerable initial upsell. That said, the rubber now hits the road, and the fundamental questions remain unanswered," Bernstein's Toni Sacconaghi wrote in a note to clients Monday. "CEO Elon Musk sounds increasingly squeamish about the production ramp." The analyst cited how the $35,000 Model 3 car will not be available until early 2018 with only a higher-priced $49,000 model available this year. He also noted Musk's comment to employees to prepare for "production hell."
Speaking of "production hell", Tesla employees in California are threatening to unionize:
Employees at the electric automaker's factory in Fremont, California, have been agitating for a union since Jose Moran, a production associate, wrote a Medium post in January detailing difficult work conditions at the flagship plant. The bulk of the demands has since centered on improving equipment to reduce workplace injuries.
According to CNBC, Tesla is teaming up with AMD to develop a custom chip optimized for AI, to be used for self-driving features in Tesla cars. The head of Tesla's "Autopilot" team is Jim Keller, formerly of AMD and Apple, who helped design the A4 and A5 chips while working at Apple and was lead architect on the Athlon 64 at AMD.
GlobalFoundries, which fabricates chips for Advanced Micro Devices Inc, said on Thursday that Tesla had not committed to working with it on any autonomous driving technology or product, contradicting an earlier media report. [...] The spokesperson for GlobalFoundries said that Jha’s comments at the GlobalFoundries Technology Conference were not reported accurately.
Tesla has fired several hundred of its employees following performance evaluations. Tesla recently conducted the biggest expansion of its workforce in the company's history, and is struggling to increase production of its Model 3 sedan:
Tesla Inc. has fired an undetermined number of employees following a series of performance evaluations after the company significantly boosted its workforce with the purchase of solar panel maker SolarCity Corp.
The departures are part of an annual review, the Palo Alto, California-based company said in an email, without providing a number of people affected. The maker of the Model S this week dismissed between 400 and 700 employees, including engineers, managers and factory workers, the San Jose Mercury News reported on Oct. 13, citing unidentified current and former workers.
"As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures," the company said in the statement. "Tesla is continuing to grow and hire new employees around the world."
The company has more than 2,000 job openings on its careers website.
The dismissals come after Tesla said it built just 260 Model 3 sedans during the third quarter, less than a fifth of its 1,500-unit forecast. The company has offered scant detail about the problems it's having producing the car. The vehicle's entry price starts at $35,000, roughly half the cost of Tesla's least-expensive Model S sedan.
Tesla has been sued by an employee for alleged racist harassment and termination for complaining:
Tesla Inc.'s production floor is a "hotbed for racist behavior," an African-American employee claimed in a lawsuit in which he alleged black workers at the electric carmaker suffer severe and pervasive harassment. The employee says he's one of more than 100 African-American Tesla workers affected and is seeking permission from a judge to sue on behalf of the group. He's seeking unspecified general and punitive monetary damages as well as an order for Tesla to implement policies to prevent and correct harassment.
[...] The lawsuit was filed on behalf of Marcus Vaughn, who worked in the Fremont factory from April 23 to Oct. 31. Vaughn alleged that employees and supervisors regularly used the "N word" around him and other black colleagues. Vaughn said he complained in writing to human resources and Musk and was terminated in late October for "not having a positive attitude."
Although customers who have reserved a Tesla Model 3 (at a cost of $1000) have seen their delivery dates pushed back, they apparently remain loyal to the company:
Even as the company led by Elon Musk struggles with manufacturing bottlenecks and pushes back production targets by at least a quarter, many reservation holders aren't budging. Bloomberg News contacted 20 consumers who paid deposits for the Model 3 and none had canceled their orders. Regardless of the concerns raised by slower output and an uncertain future for U.S. electric-car tax credits, Nomura analyst Romit Shah predicts the affinity for Tesla Inc. products will prevail. "We believe there is a real passion for the brand," Shah wrote in a report to clients that reiterated a $500 price target for Tesla shares, the highest on Wall Street. "It is bigger than loyalty because much of the enthusiasm comes from people who have never owned a Tesla. The only comparable we see is the iPhone."
Finally, Elon Musk says that the Tesla Semi Truck will be unveiled during a live webcast at 8 PM on Thursday, and that it will "blow your mind clear out of your skull and into an alternate dimension".
Previously: Elon Musk Says Tesla Pickup and Semi-Trucks Are Coming
Time to Bash Tesla Model 3
Tesla Discussing Autonomous Semi Truck Testing in Nevada
Tesla Fires Hundreds of Employees
Tesla Burns More Cash, Fails to Meet Production Targets
Elon Musk has unveiled the Tesla Semi Truck. It supposedly boasts a single-charge range of over 500 miles, more than what analysts had expected. Tesla could begin producing the vehicles by the end of 2019 (assuming it isn't delayed):
The truck can go from zero to 60 miles per hour in five seconds without a trailer, and in 20 seconds when carrying a maximum load of 80,000 pounds, less than a third of the time required for a diesel truck, he said.
He gave no price for the truck but hinted that it would be costly. "Tesla stuff is expensive," Mr. Musk said, drawing another cheer from the crowd, gathered at an airfield outside of Los Angeles. But he also said the electric truck would be less expensive to operate, in part because it has fewer components that require regular maintenance (no engine, transmission or drive shaft). Instead, the truck, called the Tesla Semi, is powered by a giant battery beneath the cab. It has two rear axles, each outfitted with two electric motors, one for each wheel. Its acceleration and uphill speeds will allow it to cover more distance in less time than diesel trucks, he added.
As a result, Tesla is estimating it will cost $1.26 per mile to operate, compared with $1.51 a mile for a diesel truck. The cost can fall further — to 85 cents a mile, according to Tesla — if groups of trucks travel together in convoys, which reduces wind drag. "This beats rail," Mr. Musk said.
In typical Tesla fashion, the truck is a sharp departure from industry norms. The cabin is spacious enough for a driver and passenger to stand. The driver's seat is in the center of the cab, not on the left side. It is flanked by two laptop-size video screens providing navigation and scheduling data as well as images of blind spots and other areas around the truck. It will be equipped with radar sensors, cameras and processors to enable drivers to use a version of Autopilot, the advanced driver-assistance system featured in Tesla cars such as the Model S and the new Model 3.
Tesla will also produce a new version of the Tesla Roadster that can go from 0-60 in 1.9 seconds.
Pre-conference coverage at Bloomberg
The German Aerospace Center (DLR) believes that SpaceX will realize significant cost savings with reusable boosters (archive) without needing to launch them ten times each — as bitter SpaceX competitor United Launch Alliance asserts:
Gerd Gruppe, a member of DLR's executive board and responsible for DLR's space program, said the agency has concluded that SpaceX is on the verge of realizing the savings it has promised from reusing first stages. "With 20 launches a year the Falcon 9 uses around 200 engines, and while their cost of refurbishment is unknown, we think SpaceX is well on the way to establishing a competitive system based on the reusability" of the rocket's first stage, Gruppe said here Oct. 24 at the Space Tech Expo conference.
Not everyone is so sure. Leslie Kovacs, executive branch director at United Launch Alliance (ULA), said ULA has concluded that SpaceX needs to refly Falcon 9 first stages 10 times each to make reusability pay. "The question of reusability is not a technical problem. It boils down to an economic problem," Kovacs siad here Oct. 24. "Our internal analysis shows that if you are going to do that [reuse the first stage], the break-even point is about 10 times. You have to bring back that first stage 10 times for it to be economically beneficial for you."
Meanwhile, SpaceX has thrown the future of the European commercial launch provider Arianespace into doubt. Although Arianespace plans to launch its cheaper Ariane 6 rocket in 2020, it may not be able to compete with SpaceX's reusable rockets even with European subsidies (which Germany is reluctant to provide):
If Elon Musk can increase Tesla's market value 12-fold in the next 10 years, he may be entitled to a maximum of $56 billion in stock awards (likely lower if more shares are sold to the public). This, along with the ballooning of Musk's existing $12 billion share in his company, and his stake in SpaceX and other companies, could help Musk become a Kardashev I trillionaire alongside Jeff Bezos:
A new payment plan for the CEO was approved by Tesla (TSLA) shareholders Wednesday, a spokesperson confirmed. The incentive-based package essentially states that if Musk hits a series of performance milestones between now and January 2028, and he drives his electric car company's market value 12 times higher — taking it from $54 billion to $650 billion — he'll become astronomically rich.
Now, if Musk does drive a 12-fold increase in Tesla's market value, that doesn't necessarily mean the price of a single share in the company will be 12 times larger. The company can do things like issue new stock that could dilute the value of existing shares. But let's assume Musk's Tesla stock would grow at least 10 times more valuable. That would mean just the shares Musk owns today would be worth $120 billion.
Plus, reaching the agreed upon milestones means Musk would get additional stock awards. According to the new compensation plan, Tesla estimates the value of the stock awards to be $2.6 billion, using accounting methods for estimating the cash value of stock options. But if Tesla's market value balloons just as the payment plan hopes, those stock awards could be worth nearly $56 billion, according to a public filing.
Related: Tesla Fires Hundreds of Employees
Tesla Burns More Cash, Fails to Meet Production Targets
Tesla Sued Over Alleged Racism; Deliveries Pushed Back; Semi Truck to be Unveiled
Tesla Semi Truck Will Have a 500+ Mile Range
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Woz Likes his Tesla, Doesn't Trust Elon
Tesla Creating Huge Virtual Power Plant
Elon Musk Expects to Do Coast-to-Coast Autonomous Tesla Drive in 3 to 6 Months
But 16 months after Chief Executive Officer Elon Musk kicked up controversy by acquiring the solar-panel installer founded by two of his cousins, its obligations are a strain on Tesla's finances. The $2 billion purchase came with a $2.9 billion debt load, and a chunk of that is soon coming due. That's bad timing for a company churning through about $6,500 a minute and trying to stave off the need for another capital raise. "SolarCity debt may not be the immediate cause of Tesla's problems, but it certainly isn't helping right now," said Alexander Diaz-Matos, an analyst at credit research firm Covenant Review LLC.
[...] Tesla's debt runs the gamut -- convertible bonds, promissory notes, term loans, cash-equity debt, asset-backed securities. Most of the total is tied to Tesla the automaker. But the energy unit, which includes the solar business, accounts for 27 of the 29 maturities set to come due through 2019.
[...] In recent months, Tesla's solar business lost the residential-solar throne to rival Sunrun Inc., a San Francisco-based installer with a market capitalization about half the SolarCity purchase price. Tesla ceded market share as it attempted to boost energy-unit profitability and scrapped SolarCity's costly door-to-door retail sales strategy. That was a smart move, according to Ross Gerber, co-founder of Gerber Kawasaki Wealth & Investment Management, which oversees more than $10 million in Tesla shares and options. He criticized the SolarCity deal but is still bullish on the company and Musk. "SolarCity was probably going to go bankrupt," Gerber said.
[...] For his part, Musk hasn't wavered from his commitment to turn Tesla into a one-stop shop selling solar panels to capture power, devices to store the energy and cars that can be charged in the garage. The company started producing photovoltaic glass tiles in December at a factory in Buffalo, New York, and has begun selling solar at some of its own stores and through retailer Home Depot Inc.
At least Tesla production is higher than ever.
Tesla's stock dropped despite "better than expected" quarterly numbers, probably due to either the company posting its worst quarterly loss ever, or a conference call in which Elon Musk complained about "boring, bonehead questions" and much more:
Tesla Inc. Chief Executive Elon Musk held a long, odd earnings conference call Wednesday in which he insulted analysts, the media, federal regulators and people who died behind the wheel of his cars, and then told anyone concerned about volatility not to invest in his company. Unsurprisingly, volatility ensued, as Tesla shares dropped quickly during an increasingly bizarre call with the very analysts and media whom Musk attacked.
Tesla on Wednesday disclosed the largest quarterly loss in the history of a company known far and wide for losing vast sums of money, with a net loss of almost $785 million. The numbers still managed to beat expectations that have been repeatedly lowered for more than a year, which led Musk to take a victory lap on Twitter after losing more than three quarters of a billion dollars in three months.
There's no doubt that Ford is embracing electrification. It was first to market with an electric pickup truck for the US market, and a darn good one at that. It has a solid midsize electric crossover that's becoming more and more common on the road, even if it does still upset the occasional Mustangophile. And there's an electric Transit van for the trades. But its electric vehicle division will lose $3 billion this year as it continues to build new factories and buy raw materials.
The news came in a peek into Ford's financials released this morning. As we reported last year, Ford has split its passenger vehicle operations into two divisions. Electric vehicles fall under Ford Model e, with internal combustion engine-powered Fords (including hybrids and plug-in hybrids) falling under Ford Blue. The move was in large part to placate investors and analysts, no doubt starry-eyed during a time when any EV-related stock was booming.
Tesla Exceeded Revenue Estimates in Q4 2021 by More than $1 Billion (20220127)
Tesla Burns More Cash, Fails to Meet Production Targets (20171102)
Ford Investing $4.5 Billion to Bring Electrification to 40% of Its Vehicles by 2020 (20151214)