Electric Car Prediction - Whatdayathing???

[kdh]

Speaking of back to the future, I spent the weekend frustrated that our local NBC signal through cable, on which the Olympics is broadcast, is total crap. It's compressed into garbage.

I decided to hook up an old UHF loop antenna circa 1972 to my set to see what I could get. Everything within 35 miles or so is gorgeous! I'm going to replace my cable stations with the over-the-air signals where I can.

I watched speed skating marveling at this newfangled wireless technology!

[LarryHoward]

I should clarify my thoughts. I believe there is a breakthrough in “battery” technology coming soon. Energy storage of some fashion that can be “charged” once. And won’t require teeth breaking, low friction tires, wheezy AC, or dumbed down electronics. The current form factor is pretty much at its maximum. We might be able to squeeze another 100 miles out of it, but that won’t be enough. I truly hope Musk is concerned about battery technology today for passenger vehicles.

Or

What may happen, given Musk’s cultural popularity, he develops infrastructure that keeps the battery charged on the road. Maybe charging towers every 10 miles or something beaming “charge juice”. Some kind of induction charging or something.

Induction charging is real for cell phones and small UAS systems already. Techniques for small battery UAS is "Perch and stare" much like a crow on a power line. inductive charging from the transmission line powers the battery and keeps sensors and coms up and running. When it's time to move, it flies off to another location. Problem with doing it for large consumers such as cars will be public acceptance. We already have plenty of tin foil hat folks who are convinces cell phones cause brain cancer as does living anywhere near high tension lines or microwave towers. Convince them that you can safely drive around with a constant stream of high energy beams powering you along.

As to electric cars, it is getting better but still needs significantly better infrastructure support. Goodenough, if he stays alive, has a tremendous track record and his glass battery tech may well be be the next big step.
Beau's discussion on buying what you need for 95% of the time is a good one. Plenty of F-350's around here with fifth wheel hitches for big campers and horse trailers that commute to work daily, belching clouds of diesel as they run unloaded 98% of the time. As long as I can tow 2,500-3000# up to 20 miles, I'm covered most of the time and already borrow an F-150 when I need higher gross weight towing. On the other hand, most of my trips away from home don't involve driving somwhere and back and I rarely see an empty charging station in the DC/Baltimore area. Even at the airport, they are usually occupied. Given a 110V/20A outlet will recharge a Model S to the tune of 3-4 miles per hour of charge, high power infrastructure needs to be routinely available when away from a supercharger station or home charger.

We are starting to consider electric for our next vehicle but the decision is far from a "done deal."

[Ajax]

I had Historic tags. Exempt from emissions.

[BeauV]

Larry,

I just took a look at the ChargePoint map for the Baltimore/Washinton Airport area and for downtown Baltimore and there were a lot of chargers in each area. They were all Level 2 or better (L2==240VAC*40Amp) We have a Level 2 charger at home and it typically does about 180 miles in 4 hours or thereabouts. (Hard for us to track as we charge between mid-night, when the rates drop, and sometime in the very early morning when the car's "full".)

ChargePoint has over 45,000 locations, and there are a lot of others. No need to restrict oneself to just the SuperChargers, although they are certainly fast.

BTW - If anyone want to get free SuperCharger use for the life of their Tesla give us a shout. We can give you a code to apply to your purchase to a new Tesla S or X that will give you that and a few other benefits.

[kdh]

Funny article in Bloomberg about Tesla today:

Tesla's current problem is a simple one to define: It has built a footprint, market cap and balance sheet sized for a mass-market producer of cars, but thus far lacks the crucial element -- the cars.

http://www.bloomberg.com/gadfly/articles/2018-03-29/tesla-push-to-prove-haters-wrong-just-proves-them-right

[Rob McAlpine]

I've never understood the logic behind Tesla' market cap. My son explained It as being able to buy stock in Scientology.

The cars are nice, the tech is great.

[Ish]

I've never understood the logic behind Tesla' market cap. My son explained It as being able to buy stock in Scientology.

The cars are nice, the tech is great.

And realistically should cost about $4 million each to break even.

[kdh]

I've never understood the logic behind Tesla' market cap. My son explained It as being able to buy stock in Scientology.

The cars are nice, the tech is great.

Yes, Elon Musk is our modern day Jesus Christ, or maybe Jim Jones.

And realistically should cost about $4 million each to break even.

I'm sure GM builds an electric car for much less than that. Tesla should have stuck to being a luxury brand.

[Ajax]

The GM Bolt EV is priced competitively with the Tesla Model 3 and advertises a slightly higher range. It is not "far cheaper."

That all sounds nice on paper, but given my past experiences with GM products and trying to get them to honor warranties, etc, I am not at all inclined to buy "new technology" from them. I'll buy a Nissan Leaf before I buy a Bolt.

[TheOffice]

A neighbor who has a Model S just got the Model 3. No test drive allowed. Sit in it, sign the papers and drive off.

I'll be damned if I am spending that kind of money with no test drive!

VW and others are making a massive push into EVs. Tesla has about a 24 month window to get in front of this or it will be a footnote in automotive history in 25 years.

[LarryHoward]

Tesla absolutely "made the market" for luxury EV's. I'd love a model S and consider the $60,000 Model 3 but we haven't seen the $35,00 version yet and probably won't before the credits dry up. A lot of us predicted that Tesla would have a challenge moving from bespoke production of luxury vehicles to mass production as their IT company model of selling the hype and excitement had to shift to an efficient production model.

Now, "real" car companies are rushing headlong into EV's and Tesla may find themselves as the forgotten innovator. The capital market is starting to punish them for continuous overpromising and under delivering. I read an opinion piece a couple of days ago that stated "Tesla needs a COO. Now." in order to temper the promises and concentrate on delivering. Once Audi, MB, BMW, the Japanese builders, Ford and GM routinely produce EVs that work and China's EV start ups get moving, Tesla will be fighting in a different market.

[Ajax]

Tesla absolutely "made the market" for luxury EV's. I'd love a model S and consider the $60,000 Model 3 but we haven't seen the $35,00 version yet and probably won't before the credits dry up. A lot of us predicted that Tesla would have a challenge moving from bespoke production of luxury vehicles to mass production as their IT company model of selling the hype and excitement had to shift to an efficient production model.

Now, "real" car companies are rushing headlong into EV's and Tesla may find themselves as the forgotten innovator. The capital market is starting to punish them for continuous overpromising and under delivering. I read an opinion piece a couple of days ago that stated "Tesla needs a COO. Now." in order to temper the promises and concentrate on delivering. Once Audi, MB, BMW, the Japanese builders, Ford and GM routinely produce EVs that work and China's EV start ups get moving, Tesla will be fighting in a different market.

Yup.

I really, really don't want to see Elon Musk end up as the next John Z. DeLorean.

[LarryHoward]

Tesla absolutely "made the market" for luxury EV's. I'd love a model S and consider the $60,000 Model 3 but we haven't seen the $35,00 version yet and probably won't before the credits dry up. A lot of us predicted that Tesla would have a challenge moving from bespoke production of luxury vehicles to mass production as their IT company model of selling the hype and excitement had to shift to an efficient production model.

Now, "real" car companies are rushing headlong into EV's and Tesla may find themselves as the forgotten innovator. The capital market is starting to punish them for continuous overpromising and under delivering. I read an opinion piece a couple of days ago that stated "Tesla needs a COO. Now." in order to temper the promises and concentrate on delivering. Once Audi, MB, BMW, the Japanese builders, Ford and GM routinely produce EVs that work and China's EV start ups get moving, Tesla will be fighting in a different market.

Yup.

I really, really don't want to see Elon Musk end up as the next John Z. DeLorean.

I love Musk as a risk taking innovator. I think it’s time for the car company to put a relatively hard nosed manager in place. There are probably 10 men and women with the experience and performance to step right in but they would require freedom and authority to manage. Successful mass manufacturers of cars exist on single digit margins unless they offer something unique. Tesla offers something unique but the competition is catching up and already has efficient and in place production, financing, sales and service functions.

[BeauV]

Larry,

With a lot of respect, I disagree. Yes, Tesla needs a real auto company guy as COO, but that's 1/10,000th of what they need. While I'm a big believer in leadership making a big difference, there are just too many things going on at Tesla for a COO to "fix" the company quickly. I have more info that I need or can talk about publicly because various folks who work there (including my son-in-law) have confided in me or asked for help. But here's what I can talk about because most of it is public.

First, people who don't drive Teslas or work on them simply don't understand the basis of their competitive advantage. Tesla is basically building a computer with wheels. What I mean by this is that almost everything is different. What also comes out of this is that a "car guy" is useless at figuring out what to do about manufacturing problems. The Tesla team isn't stupid, they have legions of "car guys" working at Tesla trying to teach the "tech guys" about building cars. Most of those efforts have failed.

Case-in-point: there is a very large number of independent computer systems inside a Tesla. They don't link together with a primitive network with each bit pretending to be some Iron Age piece of equipment, they talk to each other with sophisticated APIs. Good news, you can update one module over the cell network to fix a bug (something Tesla is about 100 years ahead of the competition with). Bad news, "car guys" have no clue what the hell is going on. All of a sudden the "comfort module" (AC and seat heaters) is asking for a parameter from the "suspension module" and they've no idea what that means.

Simply put, the electric motor drive is NOT the differentiation between a Tesla and a BMW. You see this as soon as you drive a Volt/Bolt or a Leaf or a BMW 3i. Those "car guys" have built a car with an electric motor and a battery. Tesla has built a computer on wheels that happens to have an electric drive train. Frankly, if Tesla has used a diesel engine they would still be building the best luxury sedan in the world today. (with the exception of the $250k bracket which doesn't matter outside of Vegas, Beverly Hills, and Dubai)

Second, mass production problems with the Model 3 have been primarily caused by "car guys" and a lack of production ramp at the battery factory. Oddly, the press really has it backwards. The "car guys" who were hired to ramp production on the Model 3 actually tried to use too many robots. While robots do well in building the mechanical structure, they SUCK at building computers until the phase where everything is on PC Cards and the real work is put into chips. Frankly, the "car guys" are now correctly getting the blame they deserve for taking a 1990s attitude toward building what is really a computer.

The ramp on the battery factory is the real problem. There's nothing critically wrong with the Model 3 production line that isn't wrong with any other complex computer production line. They know how to put the doors and wheels on, they don't know how to build more Li batteries (yet).

Finally, to return to the issue of the drive unit not being the real differentiation. The reason that there is still a truly massive waiting list for Model 3s is that they are wonderful cars. Having driven one, I understand completely why my daughter who adored her BMW 328i is over-the-moon with her Model 3. It's a much better car. I can go into a lot of reasons, but the most fundamental one is that it drives great. Yes, better than the BMW.

In conclusion, I think the position that having an electric drive is one of the small number of things that they other car manufacturers have to "solve" is to miss what's really going on. On twitter recently Elon asked for suggestions on how to improve Tesla cars. He received about 5,000 reasonable responses and a heap more unreasonable or asinine ones. The top 15 or 20 of those suggestions were all implemented and deployed to the cars within a couple of weeks. The company literally re-configured certain features of the radio, climate control, and autopilot within weeks. There is no other car company I know of who can do anything like that. As you can image, it is amazing to get an email from Elon (probably not really from him) that says that the feature you asked for has just been installed in your Tesla last night while it was parked in your drive way. The customer loyalty that engenders is amazing. Another example, there is a re-call to replace some bolts in the power steering. No known problem, but a predicted one. Not only did my lovely Admiral and I get a personal email describing what needed to happen, but the dashboard let us know and the car will let us know when to bring the car in by selecting a date/time for the recall fix. You just press the day/time on the screen and it's scheduled. Again, the "car guys" have no clue how to do this and it really matters to customers.

Too many car guys focus on the mechanical stuff that the customer never sees. Tesla focuses on the interface between the car and the customer and between the company and the customer. It's the primary reason that the drive motor technology is relatively irrelevant to anyone but a nerd. (Other than giving folks bragging rights)

Beau Vrolyk

[BeauV]

In re-reading your post, Larry, I realize you didn't say "car guy" you said hard nosed manager. Sorry to mis-read you. But I think my points still apply. The only place to find the sort of COO that Tesla needs is probably in the semiconductor business, or maybe disk drives.

[LarryHoward]

In re-reading your post, Larry, I realize you didn't say "car guy" you said hard nosed manager. Sorry to mis-read you. But I think my points still apply. The only place to find the sort of COO that Tesla needs is probably in the semiconductor business, or maybe disk drives.

Sorry Beau, the semiconductor and hard drive gutters are littered with failed managers.

I understand part of what you say is that Elon is spending time “fixing minor nuisances that really don’t matter” while he misses another production forecast. That does engender loyalty in the already converted. Took Apple a hell of a long time to figure out that making a great computer was only a part of it. Jobs learned a lot while he was in purgatory. They did a lot better in making the PDA market but like the Teslarati, there was a time when you really had to want to be a MAC user (I was) and today chrome books are outselling the arguably better MACs something like 10:1. MS learned from MAC that folks really didn’t want to spend time writing autoexec files and would accept a UI that simply works.

The average car buyer isn’t loooking to be “wow’ed”with a $100k computer. Affordable transportation that just works and meets the delivery date would be a start. Losing 25% of market cap should be a message. Given the reported labor issues, I find it funny that Tesla execs are trying to rally the team to higher production targets with a “they don’t believe we can do it. Let’s show them” while simultaneously announcing shutdowns and temporary layoffs for Model S and X lines. That’ll build loyalty and keep the unions away.

[Olaf Hart]

Beau, it looks like LiFeO2 batteries are going to be passed by graphene capacitors as an energy storage medium, is Musk into that market as well?

[BeauV]

Larry, again, I disagree. Have a good look at in the Intel and Seagate manufacturing processes and you'll see some of the most closely and best managed process lines in the world. In disk drives especially one has to deal with magnetics for heads, mechanical sputtering for media, aerodynamics for head flight, electric motors and servos, and one then does one get to the electronics. People have been trying to kick Intel's ass for a long time and when it comes to running a fab on the limit of what can be done they just keep winning. Only niche markets like ARM, memories and ASICS give them any competition at all. So, I'm not buying your statement, having lived in these industries and others for over 45 years.

As to MAC vs WinTel PCs and the current battle between Apple and Samsung, I think most folks look at unit volume as the mark of market share while Apple looks at total share of profits. Consider that in 2017 Apple took home 93% of ALL of the profits in the smartphone market place. The rest went to Samsung, about 5% points, and everyone else was 2% of profits. Precisely the same thing is going on with MacBooks and ChromeBooks. Apple takes home the vast majority of the profits. Units don't matter when you're making zero profits, especially when the other guy is making billions. (But, we really weren't talking about Apple were we?)

Tesla, like any start up, spends/looses money like crazy to gain market leadership and share. Obviously, one typically starts with the high profit margin products (like sports cars), then moves to the lower profit margin cars (like lux sedans and SUVs), and only then moves to high volume cars. Consider that this strategy worked so well that Porsche came very very close to being able to buy Volkswagen (a company massively larger). They would have pulled it off if VW didn't have massive family and government of Saxony ownership. Why? Because while those sports cars and SUVs, are only a tiny percentage of the unit volume they represented a massive percentage of the industry profits.

You're right, the key point will come when Tesla needs to raise money and can't or has to do so at a very low price. But that hasn't happened yet and given their backlog and continuing product advances I'm not certain it will anytime soon as debt markets are willing to loan freely. One can disagree with this, but at this point in time market cap doesn't matter. Will they grow into their market cap later? Obviously, a tremendous number of folks who make these sorts of investments think they will. I have mixed feelings and there are certainly fewer foaming-at-the-mouth Tesla stock buyers than there used to be. But people have been wrong about Tesla and about Elon so many times, I don't think I can make the call either way. (I don't hold any Tesla stock, and perhaps that's all I need to say.)

However, ultimately corporate warfare is based on profit share and not on unit market share. Both Tesla and Apple have massive customer loyalty that translates into much much better profits. Yes, Tesla is loosing money as a company right now, but if they win they'll most certainly be the Apple of the auto biz. Yes, it's a BIG BET. But since I posted what I said a few hours ago I asked 5 Tesla owners if they'd have still bought a Tesla if it had a gasoline engine and 100% of them said yes. The key point, which almost every industry pundit misses, is that the car endears itself to folks because it's a great car, being electric is a secondary criteria. That is precisely why they are kicking the shit out of the Mercedes S Class and the BMW 7 series, and why (based on having driven this years BMW 3 series and the Tesla Model 3) I believe they will extract most of the profit from that expensive mid-sized sedan category also.

Do keep in mind that Tesla has no plans to compete with Toyota Corolla and the array of Hyundai/Kia tin-can cars. Tesla is and will remain a high-end player, much like the Mini which is a $40-50k tiny car, not an economy car. In this way, I do agree that Apple and Tesla are alike. But, if we agree to that, then I suppose we'll need to agree that Tesla's market cap will resemble Apple more than IBM, Lenovo, HP, Dell, Compaq or any of the other current and past PC vendors which Apple is busy excluding from the high-quality high-profit end of the market.

--

OH, I have no idea if Elon's battery guys are looking at graphene capacitors. My guess would be that they are. I do know that there are Tesla engineers at every battery conference, and especially at every battery charge control conference, I've attended (which is about 6). Another poorly understood feature of Tesla is exhibited by the simple fact that when Toyota needed to build zero tail-pipe emission cars a few years back they bought the power train, battery, and charge technology from Tesla and stuck it in a RAV-4. They then sold those at a retail price point that was almost exactly what they had paid Tesla for the power train, battery, and charge technology. They gave the car away free. Effectively, Tesla extracted more than 100% of the profit from the car sale.

While I'm sure that new battery technologies will emerge, it's now clear that it has to reach massive volume before it can be considered "real" for electric cars, busses, semi-trucks, boats, etc.... The nice think about good old Li batteries is that folks can finally get them to work without catching fire. Well, with the exception of an Apple laptop design about 15 years ago and the last generation of Samsung phones.

[kdh]

Do keep in mind that Tesla has no plans to compete with Toyota Corolla and the array of Hyundai/Kia tin-can cars. Tesla is and will remain a high-end player, much like the Mini which is a $40-50k tiny car, not an economy car. In this way, I do agree that Apple and Tesla are alike. But, if we agree to that, then I suppose we'll need to agree that Tesla's market cap will resemble Apple more than IBM, Lenovo, HP, Dell, Compaq or any of the other current and past PC vendors which Apple is busy excluding from the high-quality high-profit end of the market.

Really? Building the Model 3 at the price point sought is all about volume, efficiency, and capturing thin margins. Period.

Computers vs cars is irrelevant. Tesla wants to be Dell, not Apple.

[BeauV]

Do keep in mind that Tesla has no plans to compete with Toyota Corolla and the array of Hyundai/Kia tin-can cars. Tesla is and will remain a high-end player, much like the Mini which is a $40-50k tiny car, not an economy car. In this way, I do agree that Apple and Tesla are alike. But, if we agree to that, then I suppose we'll need to agree that Tesla's market cap will resemble Apple more than IBM, Lenovo, HP, Dell, Compaq or any of the other current and past PC vendors which Apple is busy excluding from the high-quality high-profit end of the market.

Really? Building the Model 3 at the price point sought is all about volume, efficiency, and capturing thin margins. Period.

Computers vs cars is irrelevant. Tesla wants to be Dell, not Apple.

No, Keith, the price point of a Tesla Model 3 is directly aimed at the BWM 3 series just as the Tesla Model S was aimed at the BMW 7 Series, not at the low end of the market. They are most certainly NOT in the high-volume market. The high volume bit of the market is a decimal order of magnitude larger.

BMW 3+4 Series cars ship about 150,000 cars/year in the US a few years ago, hardly a high volume mfg. Source
Audi A3 & A4 together get to about 70,000 cars/year in the US, Source
MBZ C Class is about 75,000 cars/per year, same source
Acura is about 62,000 cars/per year, same source
Lexus is about 60,000 cars/per year, same source

These aren't massive numbers and they are in the market the Tesla Model 3 is aimed at. Having driven most of these, I think the Model 3 will do VERY well against the competition in the entry level luxury car market. Note: there are about 400,000 folks who have put down a $1,000 refundable deposit on a Tesla Model 3. Which means that just filling the backlog would make Tesla the largest vendor in this market, utterly crushing BMW.

To put this in perspective, Toyota sold about 340,000 Corolla econoboxes in 2017 out of about 2,500,000 total cars, same source.

Do I think that Tesla will eventually get to the Corolla level? Maybe, but not soon. I'd guess that they'll stay in the entry level luxury market and above for the foreseeable future. In those markets, margins are much better and manufacturing volume demands are far easier.

[kdh]

Musk once spoke of building 400,000 Model 3s in 2018.

I guess falling short of that makes the target more BMW than Toyota.

What matters is making money by selling cars, eventually.

[LarryHoward]

Just this and I’ll drop it. What I hear beau saying is that Teala has no intention of actually building the “bait and switch” $35,000 car. Pretty obvious given the model 3’s delivered to date are $59,000 versions and the next announced version is the even more expensive 4 WD luxury variant with base cars not planned until mid 2019 (in Elon speak, I guess that’s 3 qtr 2020)

Various sources report more than 60,000 of the original estimates of 450,000 depositors have cancelled. As a public company, I’d expect Tesla would have to report deposits held and cancelled in their 10K but I guess transparency isn’t required. I wonder how many of those remaining depositors will eventually fold as their $35,000 tesla is still 2 years off.

Deliveries outside Tesla employee beta testers are still in their infancy and very much going to “teslarati” and most appear to be current Model S owners who got priority reservations. Next will be the “early adopters”. By the time base model 3’s are available, there will be competition in that space. From folks with mature distribution and support organizations. Folks looking for a quality 35,000 electric vehicle may not care if it’s a car or a computer. I’m betting they just want it to be on time, work and be repairable when something breaks.

Remaining a luxury only brand is a strategy. Time will tell if it works and if the market will reward that. My son has some Ferrari stock (what else do you buy a gear head F-1 fan for Christmas?) performance is pretty unimpressive but the stock symbol “RACE” is cool.

[kdh]

The deposits are treated as deferred revenue. There's usually an estimate/accrual associated with cancellations.

[BeauV]

The Tesla deposits are shown on the financial reports. It’s pretty damned had to hide 400,000 X $1,000 !!

One of the reasons that the guys started out shipping the high end version of the 3 is because it is certainly more profitable, but according to my sources only about 10% of the deposits were for the least expensive model. I’m not surprised by that at all. I don’t know how many people buy the cheapest version of a BMW 3, but I’ll guess it’s a tiny number. How many BMW 318i models have you seen around? I don’t think BMW even bothers importing them. But, they are the low price they talk about in the press.

Keith, without doubt Tesla will be challenged to grow into it’s valuation. Frankly, I’d expect one of the government subsidized car companies like VW or Toyota to buy them ultimately. Mean time, they will just keep on building cars that folks are clamoring for.

Larry, I don’t know any more than a tiny handful of Tesla owners who even think about the market cap. Sure some Silicon Valley sorts made a lot of money on stock, they also did on bitcoin, but the car customers seem to accept that Tesla (or someone) will be around to take care of the cars.

[Ajax]

Obviously, I wasn't the only one to make this connection:
https://www.usatoday.com/story/money/ca ... 472347002/

[BeauV]

Obviously, I wasn't the only one to make this connection:
https://www.usatoday.com/story/money/ca ... 472347002/

Yup, there are h ape of reporters basically saying what other reporters have already said. Frankly, the discussion here is as good or better than anything I’ve read in the press.

Here are a few things to consider:

- Tesla market cap is about $240 billion, USD.
- Bigest risk factor, IMHO, is running out of money.
- The company needs to raise about $2 billion soonish
- At 50% discount to current price, that’s almost 4% dilution.

My conclusion, the company really isn’t at risk. They can raise the money. But, that isn’t “news”. The same sort of non-news “news” surrounds the Autopilot and the handwringing about safety and minor recalls for rusty bolts.

[Ajax]

What methods do they have for raising more money?

They can sell more stock, but that will make the price per share drop, right? That could be a good thing for people like me, who missed the elevator the first time around.

[TheOffice]

They'll do another bond offering. Each round gets more expensive as debt piles up.

[kdh]

What methods do they have for raising more money?

They can sell more stock, but that will make the price per share drop, right? That could be a good thing for people like me, who missed the elevator the first time around.

Beau is right. The speculation is that Tesla will raise $2b or so to get to the end of the year through a combination of equity and convertible debt. The near-term financing, though more expensive than in the past, isn't a problem.

But again, the problem is this: A successful car business is based on selling cars for more than the cost of building them.

[Anomaly]

But again, the problem is this: A successful car business is based on selling cars for more than the cost of building them.

This is why you earn the big bucks Keith. I was never very good with higher level concepts like this...