Let's talk about the health of the company

Let's talk about the health of the company

IMHO, all is good currently.
Stock price is stable (around $200).

I think the biggest danger might be in taking on too many orders and too many product lines.
For instance, suppose orders climb to a million, no, 1.5 million. Then Tesla would be tempted to build another Gigafactory for batteries, plus another couple of factories for cars, possibly side by side in Cal, or in China and Europe. Then a Model Y and a Roadster, pickup, trucks and buses, (and Solar City and Mars). And an interest in Hyperloop and other new toys.

The cost there could become burdensome, with the associated rampups 2 or 3 times, again.
However, if the product is successful, minimal recalls, no fires etc or AP2 deaths, Tesla Motors would be an attractive buy by another co. whether it be Apple, Google or India or China etc.

So IMHO, the health depends on the above successes and always having a saleable product.
That product might well be even 'partnerships' to rebadge as Mazdas of Fords or Fiats etc, or all.

That would achieve Elon's goal of Sustainability, without the requirement for him to produce millions of cars. After all, I assume that is not his real interest, nor his strong suit.

What is your opinion?

michelrusso57 | 23 ottobre 2016

Totally agree. Move from 'over promise, under deliver' to 'under promise, over deliver'...! Kind of what Elon seems to be doing with the Model ≡... which should be on time, with a headturning, spaceship like interior and (hopefully) 250 miles autonomy rather than 215!! :-)

gregcropper | 23 ottobre 2016

EM has already said that they will need to build a bunch more Gigafactories. That said, absolutely, growing too fast can destroy a company. I doubt Tesla would need to build another car factory for a while because there are so many abandoned factories in the United States and abroad.

Red Sage ca us | 23 ottobre 2016

Location, location, location... Tesla got Fremont for barely a song and a jig. That will NEVER happen again. No one, anywhere, will allow them to purchase an existing manufacturing facility in a readily affordable fashion EVER again. So it is best they build their next location from the ground up to be the purpose built 'Machine That Builds The Machine' they will need going forward. And that site will be both a Gigafactory as well as a vehicle assembly plant. I figure Nevada, Arizona, New Mexico, and Texas will be prime candidates to build the Tesla Pickup Truck, as well as possible commercial vehicles. Otherwise, Europe and Asia would have sites for passenger cars and SUVs bound for those territories. Depending upon how well the Model 3 is received, those sites may need to break ground as early as 2018.

tstolz | 23 ottobre 2016

Elon stated he would grow Tesla ... no reason not to. While the OEMs are all announcing their entry into the game, they are not commuting to volume (ie where are their Gigafactories?).

Tesla currently owns the car market in that they produce cars that are about 5 years more advanced than the competition and the gap is growing. Now is the time to be aggressive ... the OEMs have underestimated the demand for compelling EVs and continue to underestimate them!

EaglesPDX | 23 ottobre 2016

With $20B in orders providing sales out three years to fund build out of Fremont production facility (500,000 car capacity) and battery Gigafactory and Tesla is building high end ($50K-$130K) high profit margin (24%) vehicles. Tesla's financial health is pretty much guaranteed.

Ross1 | 23 ottobre 2016

Eagles, not so simple.

sp_tesla | 23 ottobre 2016

"EaglesPDX | October 23, 2016
Tesla's financial health is pretty much guaranteed."

It would be a lot more guaranteed if they improved: reliability, availability of replacement parts, competitive interior options.

EaglesPDX | 23 ottobre 2016

@sp_tesla "It would be a lot more guaranteed if they improved: reliability, availability of replacement parts, competitive interior options."

Those have little affect on Tesla's financial health going forward. Tesla is making 24% gross profit on expensive cars and has a three year sales backlog of $20B. It has a manufacturing plant capable of 500,000 vehicles, it's 2018 production goal, and a battery plant capable of providing the most costly component for those 500,000 cars. Even if Tesla can't meet the 500,000 in 2018 goal, it is in a can't lose position.

Ross1 | 23 ottobre 2016

As I said above, if they are tempted to build more factories, therein is a real danger.

EaglesPDX | 23 ottobre 2016

@Ross "As I said above, if they are tempted to build more factories, therein is a real danger."

Therein is smart long term strategic planning especially if they are going to be hitting 500,000 per year capacity in three years. It takes years to plan, build and equip a car factory. I'm sure someone at Tesla is looking at that right now as they should be.

Red Sage ca us | 23 ottobre 2016

sp_tesla: Reliability is important. I rely on electricity to turn electric motors every day. As long as there is power it seems to work fine. Using electricity to turn over an Internal Combustion Engine is considerably less reliable as vehicles get older.

Availability of replacement parts is a necessarily much lower priority than having them on hand to build new cars. With certain States blocking Tesla from even having Service Centers at all, it does not make distribution of components any easier. A lean operation is not likely to tie up as much inventory in warehouses 'just in case' someone needs a particular part some day. Since ICE vehicle parts are designed to fail in a predictable fashion it makes ordering and stocking those items a lot easier over the lifetime of those cars. Especially when purposely fallible designs are shared across multiple brands. It probably helps that no one else is increasing annual Deliveries by 50% year over year too.

The plethora of 'competitive interior options' offered by Porsche and AUDI have not allowed their combined sales of Panamera and A8 to match or surpass the Tesla Model S in the US for what will soon be four straight calendar years. Your continued presumption that old school concepts of 'luxury' are needed for Tesla Motors products to survive the rumored onslaught of proper 'luxury' electric cars from traditional automobile manufacturers is woefully incorrect. Tesla is about the future -- not Victorian Era holdovers in craftsmanship of coachwork for horsedrawn carriages. Sure, a steampunk Model S would be wondrous to behold, but I'd be more likely to get a TARDIS instead.

Red Sage ca us | 23 ottobre 2016

Ross: A danger to... What, exactly? Tesla's direct competitors are already seeing faltering sales. If there is some financial upheaval that leads to a worldwide credit crunch and subsequent recession in all territories with an obligatory rise in peyroleum based fuel costs, that will have a much more detrimental effect on traditional automobile manufacturers in the 'luxury' segment than Tesla Motors. Those who have stated that Tesla's offerings are naught more than a 'passing fad' have certainly been proven entirely wring by now. They are after all the very same idiots who have professed the Gigafactory was a 'big risk' for nearly three years while pointing out the 'folly' of A123 and predicting further that Tesla just wanted to become a battery supplier to 'real' automotive manufacturers. So, no... If things go bad, that will not be represented by a bunch of interest in Tesla products drying up, accompanied by a resurgence of the love affair with conspicuous consumption and enhanced sales of gas guzzling behemoths. No, if things go bad Tesla will remain the best remaining option for anyone left willing to buy. Tesla is not going to end up with greater Capacity than Demand for a good, long while.

Ross1 | 23 ottobre 2016

....a real danger of becoming too heavy to handle, of going belly up, and being under funded for too long, which will disappoint stake holders and collapse the share price.

Reread the OP...

And producing more and more models will not help anything that I can see.

gekcut | 23 ottobre 2016

I worry about issues related to AP and AP+. If there are accidents and fatalities, government intervention will follow. People are fixated on safety and it doesn't take much to set off a firestorm. Ask Samsung and Boeing. This can work in Tesla's favor if the AP implementation goes well as people will purchase because it offers safety. But if things go wrong, it could poison the brand. Think Corvair.

Red Sage ca us | 23 ottobre 2016

Ross: OK. See, I sort of didn't read the whole OP, as it seemed... weird. And stuff. But yeah, I still disagree with you. I think.

Red Sage ca us | 24 ottobre 2016

I think it more likely that once Tesla Motors is able to demonstrate an Autonomous equipped vehicle is ten times less likely to have an accident compared to an attentive human being, they'll only have to prove it to insurance companies. Seeing as most accidents take place because someone is under emotional distress (sad, angry), the influence of drugs (legal and illicit), or during inclement weather conditions...? The full weight of insurance companies will be on Tesla's side to lobby for changing the laws to allow its use. Because computers don't break up with or cheat on exes, don't get drunk or high, and will be smart enough to park themselves if the weather gets too bad outside for safe operation.

Ross1 | 24 ottobre 2016

Uhuh, but.. insurance companies need to make money and increase revenue annually.
Not looking good there, complicated.

EaglesPDX | 24 ottobre 2016

@Ross "Uhuh, but.. insurance companies need to make money and increase revenue annually.
Not looking good there, complicated."

Tesla and Insurance Institute for Highway Safety are on the same lobbying side for things like auto braking, side and rear warnings, dynamic cruise, trying to make them standard issue in cars. People do confuse the Autonomous driving with those real safety technologies.

While IIHS has not tested Teslas on how Tesla performs on the main one, autobraking and dynamic cruise braking, it is a feature that IIHS feels is essential and for which the stats back it up.

Red Sage ca us | 24 ottobre 2016

Ross: Please understand that in the US when someone says they are 'against big government' they never actually do anything to make government any 'smaller' at all. What they mean is that they want the highest authority in our nation to be the MONEY wielded by those who have somehow 'earned' it. That is increasingly corporate entities that seek to control the government so that the process of governance cannot does not will not regulate BUSINESS, at least not their own, while ensuring that everyone must bring their consumer dollars to them, more or less exclsively. That is why lobbyists are allowed to bribe our elected officials to influence the passage of monopolistic laws that are somehow 'in the public interest'. Laws that, for instance, state that EVERYONE MUST HAVE CAR INSURANCE no matter how few or many miles they drive or the status of their driving record. Insurance companies are not 'losing money' at all. Even if new car sales slump, the existing vehicles on the road must all be insured and cars cannot be licensed, or registered, unless they are insured. As long as big business is allowed to be 'bigger' than 'big government' such situations will continue.

PhillyGal | 24 ottobre 2016

It's a worthwhile discussion. When we were considering ordering a car, there had only been like 50,000 Teslas in the world. There was, to us, a real but slim possibility the company would fold and leave us with a hard-to-service vehicle.

That fear evaporated pretty quickly as sales kept growing but you're correct: too much growth can hurt a company. Mostly though, it hurts a company because they lose sales to the competition. (Think: a restaurant.) In this case there is as of yet no real competition. If that changes AND Tesla has growing pains, then we have something to think about.

rgrant | 24 ottobre 2016

I think the amount of good will towards Tesla in the Bay Area pretty much ensures his capital supply won't dry up any time soon. Investors see the writing on the wall for ICE and are willing to make the long term bet. EMs don't come around everyday, he's pretty much reinventing the world and a lot of people with deep pockets want to go along for the ride.

Red Sage ca us | 24 ottobre 2016

Meanwhile, I'm still wondering if 'rgrant' is my old buddy 'Blue B___erman' or not...

But no, I do not believe Tesla is growing 'too fast' at all. This pace seems just right to me.

rgrant | 24 ottobre 2016

@RedSage - sadly I'm not :)

rgrant | 24 ottobre 2016

What shocks me is that there are people going around accusing him of being a snake oil salesman etc. You really have to wonder about people and their ability to perceive reality. He's the real deal folks, and he's shaking up the world in amazing ways. (And that's why he'll get the money he needs when he needs it. He's proved himself worthy.)

Red Sage ca us | 24 ottobre 2016

rgrant: I've decided that those who want to denigrate Elon Musk are themselves the snake oil salesmen. Guys like Cory Johnson and Jim Cramer in particular. They have a narrative to sell and have been profiting from it since at least June 2010 despite being proven wrong time and again. Let's hope they don't catch a cold.

Bubba2000 | 24 ottobre 2016

Tesla needs to increase their manufacturing efficiency, by optimizing design, manufacturing processes, etc. Gross margins could reach 30+%. SG&A looks bloated and keeps growing and that needs to be optimized. Increased capital will allow Tesla to generated capital internally to fund expansion. It will be easier to raise capital by selling shares and debt.

Initially, I think is best to focus on few models like S3XY. Design them to share the most parts. May be Model X could be redesigned in the future with regular doors and share 70% components with Model S. Same 3&Y.

bj | 25 ottobre 2016

@Red - this is somewhat of a digression, but what type of car insurance is mandatory in the US? Here in Oz there are three types - third party injury, third party property, and comprehensive. Only the first is mandatory, you cannot register a car without it. It makes sense to me, because if you are at fault and injure or kill a third party in a motor vehicle accident and had no TPI insurance, they (or their estate) could only be financially compensated by suing you, which would neither be quick nor cheap for the affected party. Their financial needs may be immediate (hospitalisation, rehab costs etc) hence time is important. So in this case the greater social good is served by having compulsory TPI insurance.

The latter two are optional, and if you cause property damage (TPP) or have your car stolen or damaged and have no comprehensive insurance, you personally bear the consequences.

Red Sage ca us | 25 ottobre 2016

bj: Within the Great State of California the first two you mention are covered by what is called 'liability' insurance, I think. That is what is mandatory by law for all drivers. Comprehensive insurance is typically required by a lender as part of the loan conditions for a new car.

Mjenkinsatgbi | 25 ottobre 2016

I would not be surprised if they sold Tesla to another car company. Then who knows what would happen.

bj | 25 ottobre 2016

I think Tesla has reached a stage of size, significance and influence where its future is relatively assured. Even if the worst case happened and Tesla went bankrupt, another company would buy their assets, IP and customer lists and seek to continue the business in some shape or form. I can't see Tesla disappearing entirely, although under the worst case scenario it could become a very different business in terms of the mission and its market cachet.

Red Sage ca us | 25 ottobre 2016

Mjenkinsatgbi: Who exactly is 'they'...? There are those who have formulated a similar opinion over the past six, ten, thirteen years. They claim that Elon Musk is just a 'serial entrepreneur' and that Tesla Motors is naught more than a Silicon Valley pyramid scheme. Two of the most prominent to espouse that opinion are guys like Jim Cramer and Cory Johnson, along with an armada of Tesla Naysayers that work for the Los Angeles Times, New York Times, Forbes, The Motley Fool, Wall Street Journal, and probably even the Commercial Appeal have prophesied since the IPO in 2010 that this was all an attempt to fleece the market. It has seemed to me that the evidence shows something else entirely. It is a position I feel is similar to that in the late 1980s when similar publications kept spouting the leading rhetorical query, "What does Jesse Jackson WANT?!?" As if he hadn't been running for the Democratic nomination for the Presidency of the United States of America for two years. If nothing else, it is surely rather plainly obvious that NO ONE among traditional automobile manufacturers is interested in buying Tesla Motors. Those who might have been on the fence made their final decision in 2014 when both Daimler and Toyota divested entirely of their shares in TSLA.

So please, pretty please, with sugar on top, do tell us who it is that would not surprise you to find that they would choose to buy Tesla, and who exactly do you think is going to sell it? When is this sale going through? And how much will they offer per share? Because really, I'm not aware of 'another car company' that just happens to have around 30,000,000,000 bucks lying around, burning a hole in their pocket to make such an investment. If someone really wanted to buy out Tesla, they probably should have done so sometime before the share price jumped from around $35 to $85, then $120, then kept climbing.

Red Sage ca us | 25 ottobre 2016

bj: As much of a Friendly Neighborhood Over-the-Top Optimistic Tesla Motors Apologist Fanboy as I may be, even I don't go quite as far as to say their success and survival is 'assured'. I trust that there are those who are sufficiently threatened by Tesla's very existence that they would use means that were entirely illegal to stop them if they thought they could get away with it. They probably feel they are still 'playing nice' by courting regulators and lobbying elected officials to get Tesla's sales and service method banned in various States. Further, if those in opposition to Tesla were to successfully manage to 'kill' the company through some insidious method, or even by somehow managing to have their products ruled 'illegal' beyond all reason I can fathom, and that lead to bankruptcy proceedings? Those entities would simply absorb and shelve Tesla's work indefinitely, aside from incorporating them in some minor fashion into their own Hybrids and Hydrogen Fuel Cell vehicles. In short, the worst is yet to come, and I sincerely hope that Elon Musk has spectacular security services at his immediate disposal.

jamiesommerfeldt | 26 ottobre 2016

Agreed, Red Sage. The naysayers have been trying to depress Tesla stock for years. Maybe they want to drive the price down to tank the company or maybe pick it up themselves at a bargain. I've been a shareholder since the IPO, and my finance guy says that's a pretty common stunt.

bt456 | 26 ottobre 2016

Get big very fast or get dead. No other way to survive in this hyper-competitive world.

I think Tesla is ok financially, at least with 100k car run rate, and they need billions for their projects.

Solar City on the other hand, is a failure. It would not survive another 6 months. Hence the Tesla Bailout, I mean merger and the eye-raising Panasonic solar [potential] deal.

cpmarino | 26 ottobre 2016

There comes a time, in every successful business, where you reach the fulcrum of profitability. You then have two choices: You can become more efficient, allowing you to increase profit or reduce cost to increase revenues and just be happy being exactly what you are, OR you can grow, perhaps into new product lines or start offering alternative but related products, which requires more investment, more spend, more growth, etc. I've seen wonderful companies, who could have perpetually earned their 10 - 12% each year, make tragic mistakes by being caught up in growth. Too soon, frankly, to make such a call about Tesla, but even while Apple has diversified to some degree (hardware, software, the app store, iTunes, etc.) it's all one basic ecosystem. I suspect that may be why they abandoned the car business. My only concern for Tesla is that it tries to do too much too soon ... X was a mistake, they should have rolled that investment into the 3 and it should be deployed already. They'll make many more mistakes too, but the deciding factor is the same as it has been for every business since the beginning of time: make something that people want, and that they'll buy, and that they'll keep buying. Jury is still out, but if the Model 3 is as compelling as it seems and they actually can produce 500k or 1m cars a year within the next 2-3 years, then I'd agree their future is solid.

Ross1 | 26 ottobre 2016

cpmarino: well said

Red Sage ca us | 26 ottobre 2016

cpmarino: No. The Model X was not a mistake at all. It will prove to be a more than decent moneymaker for Tesla Motors for years to come. The Model S 40 was a mistake, and that was corrected by eliminating it. Not realizing that the highest capacity battery pack would be the most popular purchase was a mistake. That has been solved by only offering it on the 'Maximum Performance, Maximum Range' version of vehicles. But strategically, the Model X was absolutely necessary. In the US, flagship Sedans are typically ousold by their SUV counterpart within a marque. This is why I am certain that just as the Porsche Panamera is outsold by the Cayenne, the Model S will someday be outsold by Model X. That is a GOOD thing, because the Model S currently outsells the Cayenne and Panamera COMBINED... And further, the Model X outsells the Cayenne.

EaglesPDX | 26 ottobre 2016

@cpmarino "There comes a time, in every successful business, where you reach the fulcrum of profitability. You then have two choices:"

Or three or four or five choices. Rather than useless cliches from C grade B schools best to look at Tesla specifically.

It has a business plan that it is ahead of schedule in fulfilling. It purchased a 500,000 car production facility and built the "Gigafactory" to supply the one component (also the main cost component) in order to meet the 500,000 a year production goal. Tesla has an assembly plant in Europe capable of an additional 52,000 vehicles.

It came out with a lower priced model that insures it has sales in hand to meet that 500,000 per year production. It has a profit ratio per car of 24% and that will likely continue for years with the T3 sales based on Tesla's policy of fulfilling fully loaded T3 orders before non-optioned T3's.

Tesla has $1K deposit orders in hand for production over next three years.

Once at full production of 550,000 per year at current plants Tesla will no doubt have other models and production facilities coming online to move it to 1,000,000 per year.

The only thing that could derail Tesla would be major quality issues with the T3.

Ross1 | 26 ottobre 2016

We might revisit this topic in a year's time.

Haggy | 27 ottobre 2016

A million cars a year would mean more than enough revenue to expand. The designs are already in place. Duplicating assembly lines won't be expensive if Tesla will grow at that volume.

What I don't know is how SolarCity will affect any of this.

tstolz | 27 ottobre 2016

Solar City is fine ... it just uses a business model that thinks long-term and as a result requires capital. Since capital is cheap ... it isn't a problem. There is way too much spin in the media for the average person to understand what is real (pick the subject). Neither Tesla nor Solar City can be evaluated based on their cash flow alone ... you really need to look at the balance sheet too.

JHB10 | 28 ottobre 2016

Solar city functions like a bank.
Borrows money at interest rate x,
Lend money at interest rate y.
Part of the process just involves payment / money transfer in solar panels.

JHB10 | 28 ottobre 2016

They have high debt, but also a lot of debtors to pay that debt.
Their overheads may be a bit high, because they anticipated higher demand that didn't materialise due to tariff changes in selling electricity, but that will probably be cut back under tesla, and used to install powerwalls and car chargers, to offset their cost.

gregcropper | 28 ottobre 2016

I don't think that buying Solar City will be the disaster so many people assume it will be. The main problem I see for SC is that they have been entering into these power purchase agreements which have been fairly dependent upon existing feed-in tariffs. As we have learned recently in Nevada and Florida, these tariffs aren't guaranteed.

I think that Tesla can continue to be profitable with Solar City if they can get away from the more expensive and complicated residential installations and focus more on commercial and grid level installations. Integrating them with Powerpacks will solidify their profitability and make them more attractive as a replacement for fossil fuel generation.

Ross1 | 28 ottobre 2016

Tesla: Car production could become just an amusing sideline compared with the potential for disruptive energy applications.

tstolz | 29 ottobre 2016

@Ross - I agree .. but Tesla will do both. It is sooo cool to witness this company develop into the biggest corporation on the planet.

JHB10 | 29 ottobre 2016

After the solar roof reveal, I don't think too many people are going to vote AGAINST merging...

gregcropper | 29 ottobre 2016

This new power wall 2 is an awesome deal. It's like getting two of the old power walls and an inverter for just a little more money. I read somewhere that it's an $11,000 value for $5500.

Badbot | 29 ottobre 2016

The new cells are the difference double the amp hours plus a bit more then the 18650's
That tells me the capacity of the M3 will be way better then a Dolt but software limited to a bit better than the Dolt as a base and the next step the 80's and after delivery unveiling at least 2 more steps of upgrade staggered at least a year apart.