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They're Running Scared

They're Running Scared

I have never seen anything quite like this. I have an app called EV News that collects press stories about EVs plus stories on individual companies that make them. The overall tone is intensely negative for EVs in general and Tesla in particular. The complaints about EV's... consumers don't want 'em... too expensive... range anxiety... children forced to mine cobalt and lithium... you all know the litany. When it comes to Tesla... wow. Someone opined Tesla may be the most hated company on Wall St; I think they're right. Thought it might be somewhat entertaining to go through some of the common themes.

1. Tesla's sales are in the toilet and will be shortly bankrupt.
Musk recently laughed that one off adding that he expects TSLA to turn a profit starting in the third quarter. The "analysts" don't like that. Lately, the meme has shifted to "They'll have to borrow more money this year no matter what Musk says." Really? How do they know this? Inside EVs, known for cataloguing EV sales, has a story up indicating that Tesla became the world's top EV maker in the first quarter with 29k+ cars delivered. In April in the US alone, Tesla delivered 3,875 M3's, 1,250 MS's, and 1,025 MX's, a total of 6,150 vehicles. April 2018 compared to April 2017: 3,875 M3's to 0 [+100%]; 1,250 MS's to 1,125 (+125) [+11.1%]; 1,025 MX's to 715 (+310) [+43.7%]. Year to Date: MS: 7225 in 2017, 6550 in 2018 (-675) [-9.3%]; MX: 5,015 in 2017, 5,525 in 2018 (+510) [+10.1%]. Globally speaking, in the Q! Tesla sold 29,980 vehicles to rank #1 compared to China's BYD @ #2 which sold 28,545. BMW finished third with 24,108 cars delivered. March was the second best month ever on record for plug-in electric car sales @ 142,000, up 53% year-over-year. This is not a market niche falling apart and Tesla is leading the pack.

2. Here's a headline from Forbes I found fun: "No Way to Run A Factory: Tesla's Hiring Binge Is a Sign of Trouble, Not Progress"
The thesis here is that Tesla's continued hiring is putting hundreds of untrained workers on the assembly line coupled with an inference that they shouldn't be hiring at all. Ahem, maybe I truly am an old fossil, but hiring new workers used to indicate growth. That was a good thing once upon a time. Adding a third shift means somebody out there wants what you're making and you're working to accommodate them. Now it's a negative? Really? I watched my father rotate shifts from days to evenings to nights at Y-12 in Oak Ridge, TN to make nuclear warheads and nobody ever jumped Union Carbide over having that much business. Third shifts are a sign of strong demand, not desperation.

3. Tesla can't make well constructed cars. (This is fueled by the Munro breakdown where he criticized the gaps and so forth in M3s).
Munro took a couple of early built M3s and tore them apart. He was critical of the early build quality -- Tesla did point out the gap deficit has been reduced 40% and build quality is now comparable to BMW, Mercedes ICE vehicles, etc. What isn't highlighted is that the technology in the M3 absolutely blew Munro away. He called what Tesla is doing head and shoulders above anyone else in the industry. Munro also lauded Tesla's battery packs and management system. The rest of the press doesn't mention that much. They also don't mention that a couple of M3's have made their way to Germany where various car company engineers, after letting executives drive them for a while, tore them apart to practice a little reverse engineering. What they found scared them to death. The M3 absolutely wowed and terrified them at the same time. Don't hear much about that do we?

The forums here are a solid indicator of what goes on. When Tesla first introduced the MX in 2016, that forum was full of posts complaining about this and that. Go over there now and look, it's fairly quiet. Why? Because the early pangs of manufacturing a new model were worked out. I own an MX and it's fantastic. I had a couple of small nits after picking it up, which Tesla happily rectified, and it works great. No complaints, only praise from me. The M3 forum is full of the same kind of chatter that was on the MX forum for the first year or two — most of it fueled by ignorance. Guess what? These will decrease over time as well. There was one poster there who bitched about everything Tesla. Then his M3 arrived. He put up a post saying he loved his car and they haven't seen him since.

That's just the way it is with any new model, ICE or EV. The early vehicles off the assembly line have some problems. These are worked out and after 1-2 years no more bitching.

BTW, there's another story I loved that suggests Tesla should merge with Fiat Chrysler to take advantage of its balance sheet. Chrysler? The company notorious for churning out poorly made cars? That Chrysler? You have got to be kidding.

4. There is even a thesis out there that Tesla's revenue is going down because the M3 costs less.
Say what? For years you "analysts" hammered Tesla for not making an "affordable" EV for the masses. Well, now they are, at least for a much bigger segment of the market. And now you're criticizing them because revenue per unit is bound to be down? If Tesla is still selling plenty of MS's and MX's, which they are, and they're adding revenue from thousands of M3's headed out to customers every month, whatcha talking about, Willis? That doesn't even make bad sense.

I could go on, but it comes down to this: Tesla has them running scared and the auto press is falling in line dutifully thinking up any angle they can to criticize. Amazon went through the same process. If you go back and look at what analysts were saying in 2010, the criticisms that Amazon couldn't turn a profit were white hot. Most were predicting imminent failure and bankruptcy. You don't hear that much any more. These days, the fear is that Amazon is going to drive every other retailer in America out of business. Amazon is swallowing everything. What the "experts" failed to realize in 2010 was that Amazon was plowing every dollar it made and then some into growth. They weren't concerned about making a quarterly nut and paying out a nice dividend; Bezos saw a way to turn the entire retail industry upside down and he went ahead and did it.

Demand for the M3 remains strong, reservations are not falling. Production is increasing with the usual hiccups. Demand for the MS/MX is still strong and growing despite the hefty price tag. Does the MS need a refresh? Yeah. So what? It'll happen.

Inside Business, Forbes, CNBC, either really figure out what's going on with EV's, particularly Tesla, or STFU. You're boring me... and ticking me off.

Tropopause | May 1, 2018

Bravo!

TeslaTap.com | May 1, 2018

Well stated. There are a lot of people who want Tesla to fail. Here's my short list (from another thread):

1) Dealers
2) All other car makers
3) Stock shorters (who make money if stock goes down)
4) People scared of change
5) EV startups
6) Oil & Gas related companies and employees
7) Coal industry
8) Deranged people (Mr. Niedermeyer comes to mind, who files imaginary reports to NHTSA)
9) Unions

That's a lot of people against Tesla. Luckily Tesla has a far superior product, technology, distribution methods and leadership. It's a winning combination that so far no one else seems able to duplicate. Bring on the Tesla killers - there are going to be a lot of failures, but I don't see Tesla as one of them.

Middledawg | May 1, 2018

Your list about covers the waterfront, TeslaTap. I'd add the Auto Press that depends on annual model changes to have something to talk/write about. They're in the pocket of Big ICE more than they realize and are doing their bidding whether willful, naive or ignorant.

NoMoPetrol | May 2, 2018

The watershed moment when the rest of the auto industry shifted its attitude towards Tesla from one of irritation and disdain to that of panic and fear was on the evening of March 31, 2016. On that night they realized that there was such a pent up demand for fully functioning EVs that 400,000 people were willing to shell out $1,000 in advance for a car that would not even be available for another two years.

And they had nothing to satisfy that demand. Not in inventory. Not on the drawing board. Nothing. It would have made interesting YouTube content to have had hidden cameras in corporate board rooms shortly after the Model 3 Reveal night.

Middledawg | May 2, 2018

I've been poring over Inside EVs sales charts and have noticed a few things.
1. Previous model sales tend to take a hit when a new model introduced by Tesla starts to show up in significant numbers. The previous example was the MX. Globally speaking, the Model X joined Tesla's lineup in significant numbers the first quarter of 2016. That year, Tesla delivered 17,272 MS's in Q4 2015, then 12,420 in Q1 2016. Model X saw 206 deliveries in the 4th Q of 2015, but picked up some of the slack with 2,400 delivered in Q1 2016.
2. Overall deliveries for all of 2016, however, saw a significant increase from 50,658 to 76,243 MS/MX's, roughly a 50% increase in overall sales.
3. There was undoubtedly some short term cannibalization as people who probably would have bought a MS if no MX had been available did indeed shift over to the MX. By Q3, MS sales had shot up and the MS was once again Tesla's top seller with MX settling in around 2-3,000 units behind in sales ever since.
4. We're seeing the same pattern again. Year over year combined MS and MX sales declined in the 1st quarter (from 25,000 in Q1 2017 to 21,800 in Q1 2017). The arrival of M3 is probably responsible for this just as the MX impacted MS sales immediately after becoming available.
5. This time it will be different. MS/MX sale should recover by summer and continue on their previous growth paths. The difference will be that M3 will not perform like the MX did by running a reasonably close 2nd to MS. This time M3 promises to outstrip the sales of both MS/MX by a wide and growing margin as production increases. M3's lower price tag makes Teslas within reach for far more people.
6. MY, if introduction/production go as planned, should repeat M3's performance becoming Tesla's top seller in 2020. Just a guess, but I expect MY to become Tesla's best seller over time eclipsing M3.
7. If you add M3 into the MS/MX mix, Tesla's sales did not do the usual 1st quarter swan dive instead holding steady at just under 30,000 total units. This bodes well for the remainder of 2018.
8. I read somewhere that the average selling price for MS/MX is around $90,000. M3 is currently much lower, probably around $49,000 (figure $44,000 for the model currently available along with $5,000 or so in options -- not everyone wants black paint!). The net result is that Tesla will report relatively flat gross revenues, but it should look very rosy compared to Q1 2017.

All Tesla has to do is to get more M3's out the door and the bucks will follow.

TeslaTap.com | May 2, 2018

@dmm1240 - I slightly disagree about he automotive press :) I subscribe to about 7 car magazines, and overall the coverage of Tesla has been fair and mostly very positive. Surprising, considering Tesla has never bought an ad in these magazines. Tesla seems a bit tight on test cars too, as I've seen a few multicar competitive reviews claim they couldn't get a Tesla to be included in the comparison. I do see a few oddballs, like Bob Lutz, who seems clueless, but that's rare. I don't follow the online press as much, where there may be more Tesla bashing - usually by people who have never test driven a Tesla or have some vested interest in ICE.

Another possibility that looks like cannibalization is Tesla's limited resources. When the X came out there was a huge backlog, and Tesla moved many people from S to the X line once Xs could be produced in volume, reducing the amount of S cars built. The same thing has happened to the 3, where employees were pulled from the S/X lines to get more 3s out. This seems to affect one or two quarters before Tesla rebalances and/or hires more employees. It's a tough balancing act with overall huge growth!

reed_lewis | May 2, 2018

After talking to my sales person at one of the Tesla stores, he tells me that the Model 3 is the best thing that has happened for all other Tesla model sales. People are coming into the store, asking about the 3, and when finding it will take a long time to get one, are looking at an S or X if they can afford it.

So in his mind, the 3 has not sabotaged S/X sales at all.

SamO | May 2, 2018

Yup. Model S/X wait times have gone up in the last few months.

Middledawg | May 2, 2018

To be clear, I don’t think cannibalization, if any, is permanent, at most a passing phenomenon. It’s even more difficult to determine in the case of the M3 rollout because of the significant difference in price points. M3 expands Tesla’s customer universe to a wider array of income levels. The MX drew in new customers in the same income brackets who didn’t want a sedan.

SamO | May 2, 2018

To be clear, there is ZERO cannibalization.

"Demand for our flagship Model S and Model X vehicles remains very strong. After all-time record orders in Q3 and Q4 2017, we had our highest ever Q1 for orders. With demand exceeding supply, we are making considerable progress with margin improvement. " Elon Musk

http://files.shareholder.com/downloads/ABEA-4CW8X0/6239622897x0x979026/4...

David N | May 2, 2018

The majority of media doesn’t like Tesla or Elon.
Wall Street doesn’t think too much of Elon or Tesla.
Established Auto companies don’t like Tesla or Elon.
Most news stories carry a negative tone on Tesla and Elon.
National Auto Dealer Assn doesn’t likeTesla or Elon,
A lot of politicians may like Tesla and Elon but because they “represent the people”(and hence their employers), they give in to creating roadblocks for Tesla.
The attacks will eventually change but it will still take more time.
I give Elon an enormous amount of credit for withstanding the onslaught towards him and Tesla.
An American company making American cars by American workers being constantly attacked and criticized,I pray that Elon stays the course.

Middledawg | May 2, 2018

Samo. Good to know.

OTOH, read my original post, any of my posts. Do I sound like a troll? There was no reason to get snarky about it.

SamO | May 2, 2018

Who was snarky and who called you a troll? I was just correcting this:

@dmm1240,

"I don’t think cannibalization, if any, is permanent, at most a passing phenomenon."

carlk | May 2, 2018

TeslaTape Very nice list but i'd like to add two more. Deniers and irrelevant people jealous at someone who is smart and successful.

Tesla-David | May 3, 2018

bump

Tesla-David | May 3, 2018

@dmm1240, excellent post and rant! An anecdote to all the negativity is to focus on the positives, which are summarized in linked utube below, worth watching IMHO.

https://forums.tesla.com/forum/forums/new-hobby

Tesla-David | May 3, 2018

This utube linked summary of earnings call yesterday by Galleo Russell who was invited onto the call and asked questions is fascinating and very positive news IMHO.

https://evannex.com/blogs/news/opinion-tesla-beats-expectations-wall-str...

Rumi11 | May 4, 2018

@dmm1240: Awesome! I have been noticing same negative coverage, even attacking Musk as a person now, and I am so over it. The media really knows how to lay it on thick! I kinda keep to basic kindergarten advice: when people talk shit about you, it is usually a sign you're on the right track.

Mike83 | May 5, 2018

Don't worry. the shorts are soon to be BarBecued,

Al1 | May 5, 2018

I don't think we have enough evidence to speak about cannibalization of any kind. In the last week of 1st quarter there was report of Tesla moving people from Model S production into Model 3. These type of things will impact Model S numbers short term, but have nothing to do with cannibalization.

Customer deposits are as strong as ever. You can't lie on that metric.

And Tesla has not yet even started advertising. Any other car maker that sells anything at that price point spends thousands to move each car. Electric vehicles are winning the battle, no doubt about it. Even the ones half-heartedly made.

Al1 | May 5, 2018

The only thing I am worried about, I don't have enough money to buy more Tesla shares.

SamO | May 5, 2018

I've backed up the truck but all the powder is wet . . . curses . . .

Tesla-David | May 7, 2018

bump

SamO | May 7, 2018

a moat filled with wet candy . . .

Tesla-David | May 8, 2018
SamO | May 8, 2018

Crush your head . . . crush it

https://imgur.com/gallery/85ciGY7

Tesla-David | May 11, 2018

bump

Tesla-David | May 11, 2018

bump

Middledawg | May 13, 2018

bump

Middledawg | May 13, 2018

Bump