Tesla Says It Is Now Profitable, Ships 109 Roadsters In July(techcrunch.com)
techcrunch.com
Tesla Says It Is Now Profitable, Ships 109 Roadsters In July
http://www.techcrunch.com/2009/08/07/tesla-says-it-is-now-profitable-ships-109-roadsters-in-july/
8 comments
While I agree, keep in mind however that buying a new car every 18 months isn't something that most consumers are yet used to. That is the end result of the quick turnover that defines the tech industry.
It's also extremely wasteful.
It's also extremely wasteful.
There is reason to believe these cars can be sold in the lucrative metal export market, so it's not a total waste. Perhaps our old cars will help build the new chinese infrastructure.
I agree, it seems quite wasteful, but how wasteful remains to be seen.
I agree, it seems quite wasteful, but how wasteful remains to be seen.
Ideally, I think what you want is an upgradable car, like a jet fighter, that can maintain a single body and have replaceable components.
I don't think we'll ever get that though because consumers are too fickle, and there is no real benefit to the manufacturer.
I don't think we'll ever get that though because consumers are too fickle, and there is no real benefit to the manufacturer.
Yes, even for cars with significant onboard user-oriented software systems (like the Prius) there is no upgrade path. It seems we are currently in the "early cellphone" phase, rather than the "iPhone" era where automotive software is concerned.
Yeah - the buying patterns of tech and cars are quite different. As you say, people don't buy a new car every eighteen months. Buying cars also involves a lot more intangibles than buying technology does, and costs a lot more.
There's also the whole system of buying (dealer networks with huge overheards), as well as the difference in how long it takes to bring something from concept to market (based on safety testing).
There's also the whole system of buying (dealer networks with huge overheards), as well as the difference in how long it takes to bring something from concept to market (based on safety testing).
Still, I can't get over the nagging doubt that the all-electric vehicle could be more of an idealistic attempt to appeal to popular biases rather than a sober decision based on product and market research.
A co-worker of mine did rough calculations on the cost of charging an electric car vs. buying gas and they concluded gas would have to be $8 per gallon before electric was cheaper than gas purely on fuel cost.
Really? I'm surprised at that. Did they take into consideration the lower price of electricity at off-peak times?
Tesla took money from the government. I think this is why they're profitable.
http://green.venturebeat.com/2009/06/24/government-dumps-fun...
http://green.venturebeat.com/2009/06/24/government-dumps-fun...
Something doesn't add up.
109 roadsters at $109,000 = $11,881,000. So car sales, which are Tesla's main business, only account for a little over half of their reported $20 mil revenue. Something else contributed about $8 million dollars, and I suspect was either partially or wholly responsible for them being profitable.
With the relatively small Tesla brand I doubt it's merchandising or licensing (where companies like Ferrari or Porsche can pull in big bucks). My guess is that it may be either realizing future income (Roadster & S model deposits) or a income from the 10% stake Daimler acquired in mid May.
I really hope that Tesla succeeds, my biggest concern is whether they'll be able to successfully scale into the mass market and remain profitable while doing so.
109 roadsters at $109,000 = $11,881,000. So car sales, which are Tesla's main business, only account for a little over half of their reported $20 mil revenue. Something else contributed about $8 million dollars, and I suspect was either partially or wholly responsible for them being profitable.
With the relatively small Tesla brand I doubt it's merchandising or licensing (where companies like Ferrari or Porsche can pull in big bucks). My guess is that it may be either realizing future income (Roadster & S model deposits) or a income from the 10% stake Daimler acquired in mid May.
I really hope that Tesla succeeds, my biggest concern is whether they'll be able to successfully scale into the mass market and remain profitable while doing so.
For a given month, they probably recognize a portion of the value of cars shipped. So, in July they probably recognized less than $11,881,000 for those particular 109 roadsters.
However, they also recognize a portion of cars sold in July, deposits taken during the month, and probably a portion of the price of cars ordered in previous months that will be shipped in future months, but were built during July.
The amount of revenue recognized for a month is never as simple as (cars_shipped * car_price).
However, they also recognize a portion of cars sold in July, deposits taken during the month, and probably a portion of the price of cars ordered in previous months that will be shipped in future months, but were built during July.
The amount of revenue recognized for a month is never as simple as (cars_shipped * car_price).
Yes you're right, it's probably the revenue from future sales that have given them the boost.
They can't recognize that until it's shipped.
They might have had deferred revenue in terms of warranty. They probably have to allocate a portion of each sale as warranty and recognize that revenue over the length of the warranty (similar to iPod). Problem with that is it means they would have had defer a portion of revenue this months sales as well... so this theory only holds true if they had sold a large number before this month.
Maybe OEM accessories and upgrades (like the Sport Package). Also they might sell a license to an after market shop so they can say they are the official Tesla parts brands.
They might have had deferred revenue in terms of warranty. They probably have to allocate a portion of each sale as warranty and recognize that revenue over the length of the warranty (similar to iPod). Problem with that is it means they would have had defer a portion of revenue this months sales as well... so this theory only holds true if they had sold a large number before this month.
Maybe OEM accessories and upgrades (like the Sport Package). Also they might sell a license to an after market shop so they can say they are the official Tesla parts brands.
Is that still legal ? I thought that the AA+Enron debacle put a solid stop to that practice.
Musk briefly explains how they will reach profitability here:
http://www.teslamotors.com/blog2/
Obviously we don't have the whole picture for the numbers. However, he does state material cost of the car was 140k and as of a month or two ago is 80k. They also raised the price of their vehicle to 109 from 92. Lastly , he mentions good sales of their more expensive Tesla sport which is 128k.
http://www.teslamotors.com/blog2/
Obviously we don't have the whole picture for the numbers. However, he does state material cost of the car was 140k and as of a month or two ago is 80k. They also raised the price of their vehicle to 109 from 92. Lastly , he mentions good sales of their more expensive Tesla sport which is 128k.
I bet a large proportion of purchasers buy the Roadster Sport model which costs an extra $19,500 which would be worth up to an extra $2m in revenue.
I agree that they're probably counting deposits to some degree - they have a 500+ strong waiting list each paying a $9,900 deposit for the Roadster, afterall.
I agree that they're probably counting deposits to some degree - they have a 500+ strong waiting list each paying a $9,900 deposit for the Roadster, afterall.
Daimler's stake would not affect sales numbers.
Deposit money itself would not significantly affect sales numbers either (it might a little depending on recognition policy). The sales may be booked as a function of the rate of completion of vehicles, which if they have already been ordered could be construed as revenue by GAAP standards. That's probably what's happening. Which would seem to indicate some significant outstanding demand for the vehicles.
Deposit money itself would not significantly affect sales numbers either (it might a little depending on recognition policy). The sales may be booked as a function of the rate of completion of vehicles, which if they have already been ordered could be construed as revenue by GAAP standards. That's probably what's happening. Which would seem to indicate some significant outstanding demand for the vehicles.
I usually think about this, and reading this post made me think about it some more: How do people like Elon Musk operate? How does one person start hyper-successful companies in completely different fields and stay on top of his game? This isn't something that can be taught; I wonder what in his life happened that made him take these challenges on.
My usual thread of thought before I take on anything interesting: Well, I'm smart but by far not the smartest or the more experienced. People with more experience probably had the thought to build this and decided it wasn't worth their time. Thus, it's probably not worth the time. This pattern of thought is extremely self-destructive and I've been trying to figure out a way to escape it.
My usual thread of thought before I take on anything interesting: Well, I'm smart but by far not the smartest or the more experienced. People with more experience probably had the thought to build this and decided it wasn't worth their time. Thus, it's probably not worth the time. This pattern of thought is extremely self-destructive and I've been trying to figure out a way to escape it.
The way to escape it is to:
1) Stop thinking that
2) Research the industry heavily. That means reading everything you can, that means contacting everyone you can in the industry to pick their brains, and it sometimes means actually getting a job in the industry for a while to get a feel for the issues they have.
3) When you figure out the pain point or disruption, go do it. Build the product, sell the service, whatever -- just go sell something to someone. Start making money and worry about the details later.
1) Stop thinking that
2) Research the industry heavily. That means reading everything you can, that means contacting everyone you can in the industry to pick their brains, and it sometimes means actually getting a job in the industry for a while to get a feel for the issues they have.
3) When you figure out the pain point or disruption, go do it. Build the product, sell the service, whatever -- just go sell something to someone. Start making money and worry about the details later.
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This is great news. Hopefully once they iron out the powertrain and battery engineering (making it more cost effective), they can start manufacturing small inexpensive cars that at least middle america can afford. I really think this is the future for tesla. They could have an entire line of cars, one for every class of citizen.
Tesla Pico - 2 seater smart-car-esque communter car. With 100 mi range and 45 minute recharge time. Price ~$15,000
Tesla Executive - Economy 5 seater sedan, 200 mi range with 1.5 hr recharge time. Basically a cheaper Tesla Model S, without the fancy entertainment system, and a more toned down interior/exterior. Would be comparable to a BMW 3 series in size, a good bit smaller than the Model S. Also would be less powerful and have less pricey wheels, speakers etc. Price ~$35,000
Then of course we have the Model S and Roadster 1/2. These are just my ideas on where they should go from here.
Tesla Pico - 2 seater smart-car-esque communter car. With 100 mi range and 45 minute recharge time. Price ~$15,000
Tesla Executive - Economy 5 seater sedan, 200 mi range with 1.5 hr recharge time. Basically a cheaper Tesla Model S, without the fancy entertainment system, and a more toned down interior/exterior. Would be comparable to a BMW 3 series in size, a good bit smaller than the Model S. Also would be less powerful and have less pricey wheels, speakers etc. Price ~$35,000
Then of course we have the Model S and Roadster 1/2. These are just my ideas on where they should go from here.
This just sounds like PR to me.
If the production costs (labor, parts etc) happened over a lengthy period and then they recognized profit for 109 shipped cars in July... of course they have a profitable month in July. I'd want to examine the end to end costs of the cars.
Also there fixed costs and I really doubt they have even come close to covering the fixed costs associated with automobile production.
I'm really glad they are profitable for July, it means they might be only a few years away from mass producing these babies.
If the production costs (labor, parts etc) happened over a lengthy period and then they recognized profit for 109 shipped cars in July... of course they have a profitable month in July. I'd want to examine the end to end costs of the cars.
Also there fixed costs and I really doubt they have even come close to covering the fixed costs associated with automobile production.
I'm really glad they are profitable for July, it means they might be only a few years away from mass producing these babies.
I highly doubt that their math was that simple. The article even mentions that the revenues reflect GAAP accounting standards. Also, 109 * $109k != $20m, so obviously their revenue numbers for July are not directly based on how many roadsters were actually shipped during that month.
The article is quoting two separate stats about Tesla's July: 1) They were profitable 2) They shipped 109 roadsters
The first is not directly and solely due to the second.
The article is quoting two separate stats about Tesla's July: 1) They were profitable 2) They shipped 109 roadsters
The first is not directly and solely due to the second.
I'm not a GAAP Accounting whiz, but you need to book labor related expenses on the months they occur which much be a large portion of Tesla's expenses. You then can reach profitability by recognizing all sales in one month whereas if you spread out your sales over a few months you would not have. This kind of cookie jarring is borderline illegal but I suspect happens all the time in corporations because it is brilliant press and satisfies your investors.
Also, I'd hope that most of their revenue is directly attributable to selling cars. What they might have is an amount of each sale hitting deferred revenue and recognize it over the length of the warranty (similar to iPod).
Edit: Apologies for finance nerd rage, I'd love for someone to clarify what can and can't be done under GAAP though.
Also, I'd hope that most of their revenue is directly attributable to selling cars. What they might have is an amount of each sale hitting deferred revenue and recognize it over the length of the warranty (similar to iPod).
Edit: Apologies for finance nerd rage, I'd love for someone to clarify what can and can't be done under GAAP though.
If musk can do with his cars what he did with spacex he will be able to produce items for his vehicles himself and overcome the fixed cost dilemma. I recall him making some of the parts for his vehicles in the spacex plant. Most of (90 some percent) of his rockets are made in house, which is why he can undercut orbital, lockheed, and the russians by a factor of 3. Last I heard theyare building a tesla manufacturing plant in san jose. Let's wish them luck.
Definitely! I'd love to see a big Tesla plant driving down 101.
It does worry me that if he builds a large portion in house, does it then scale as well as say a Toyota? Is supply chain management somewhere in his background?
It does worry me that if he builds a large portion in house, does it then scale as well as say a Toyota? Is supply chain management somewhere in his background?
I think supply chain management is less of a problem now that a single CnC machine can make a wide range of parts. The goal of any supply chain should be balancing the number of suppliers with the overhead costs. And I think that's been shifting to fewer suppliers for a while now.
If Musk can combine Tesla and SpaceX so I can buy a single stage to orbit roadster that gets 300 miles on a charge for 100k I'd be very happy. I'd even sell my Moller stock.
Awesome. Now they just need to get cheaper so that it can be more accessible. Or release the sedan and make that the cheaper and more accessible car in their lineup.
My understanding of their plan is they're taking a tiered launch strategy.
They start with the low-volume, high priced roadster. Then they bring out the sedan at higher volume, and about half the price. Finally, the release a mass-market car at an affordable price after that.
It makes sense in the market. There is really no way to ramp up to immediately high volumes if you're new in the auto business. If you're selling in low volumes, the unit price will be very high. So if you're selling expensive cars, they might as well be sports cars that are worth the money, and raise your profile. (mostly paraphrased from what I've read Elon Musk saying.)
They start with the low-volume, high priced roadster. Then they bring out the sedan at higher volume, and about half the price. Finally, the release a mass-market car at an affordable price after that.
It makes sense in the market. There is really no way to ramp up to immediately high volumes if you're new in the auto business. If you're selling in low volumes, the unit price will be very high. So if you're selling expensive cars, they might as well be sports cars that are worth the money, and raise your profile. (mostly paraphrased from what I've read Elon Musk saying.)
They have another model coming out 2 or 3 years after the sedan. That will be in the 30k range. If I recall correctly, Musk once said as a rule of thumb once you raise your production by 10 fold then you can halve the cost of your item.
I simply don't believe that pricing for the sedan. The price of the roadster was originally hinted at being about $70k. It jumped several times to its current $109k, as the car came closer to production. And, if halving is the goal, we'd now have to guess the sedan will sell for $54.5k.
The sedan is planned to be sold for 59k. That is before the government refund of 8k.
Awesome, I'm looking forward to seeing what happens.
there are accounting tricks at work here. this is probably EBITDA profitable, which would means that amortization and depreciation is excluded (HUGE EXPENSES if you're building factories and buying machines)
so yes, you could borrow a ton of money and buy really expensive machinery and spend millions over the past 5 years on R&D and then be EBITDA profitable for a month because you sell 20 cars. but it doesn't really mean much.
so yes, you could borrow a ton of money and buy really expensive machinery and spend millions over the past 5 years on R&D and then be EBITDA profitable for a month because you sell 20 cars. but it doesn't really mean much.
Amazon, no matter how much you fiddled with the numbers, ran at an almost absurdist fiction level of loss for its first 5+ years of existence.
Some businesses take time. We can't all be groping around for that ycombinator brass ring and get gnarly, outsized profits ridiculously fast.
Some businesses take time. We can't all be groping around for that ycombinator brass ring and get gnarly, outsized profits ridiculously fast.
Fun fact: electric cars were very popular, before the Model T was introduced in 1908. Edison spent over a million dollars trying to improve the crucial component of electric cars: the battery. Unfortunately, gasoline was still superior for "touring and rural communities", and when gasoline cars became self-starting, electric cars lost their one key advantage. And that was that.
Tesla, not government bailouts, represents the future of America's auto industry. In the computer industry we can observe relatively short regenerative cycles whereby companies are founded, grow, and then slowly die off as the reins are passed to the next company. I think this is very healthy for the industry. It assures that we can adapt and use new methods that make more sense given changes in technology and society.
I realize that the barrier of entry into the automotive industry is much higher than the computer industry, but I still can't help thinking that the same players have existed in automotive for so long that it's just become stagnant. They're all bogged down in bureaucracy and committed to modes of operation that just don't make sense any more. The industry is in need of some healthy churn.
It looks like Tesla might succeed at contributing to this renaissance. I hope others are courageous enough to follow suit.