
Tesla Says It Is Now Profitable, Ships 109 Roadsters In July - peter123
http://www.techcrunch.com/2009/08/07/tesla-says-it-is-now-profitable-ships-109-roadsters-in-july/
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mrshoe
I can't wait for Silicon Valley to be the next Detroit! Hmmm on second
thought... ;)

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.

~~~
run4yourlives
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.

~~~
j2d2
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.

~~~
run4yourlives
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.

~~~
frossie
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.

~~~
jacquesm
What is so upgradeable about the hardware in the iphone ?

~~~
frossie
Note my use of the word "software".

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ajg1977
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.

~~~
mrshoe
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).

~~~
ajg1977
Yes you're right, it's probably the revenue from future sales that have given
them the boost.

~~~
joez
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.

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yan
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.

~~~
pmichaud
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.

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oomkiller
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.

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joez
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.

~~~
andeka
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.

~~~
joez
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?

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Retric
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.

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Oompa
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.

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andeka
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.

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SwellJoe
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.

~~~
andeka
The sedan is planned to be sold for 59k. That is before the government refund
of 8k.

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billclerico
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.

~~~
muhfuhkuh
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.

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10ren
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.

