
Tesla opens the Model 3 reservation floodgates - sidcool
https://techcrunch.com/2018/06/28/tesla-opens-model-3-reservations/
======
venning
Last I read, Tesla is holding $985MM in customer deposits. [1] Now they are
asking for, I'm assuming, full payment for cars starting at $48,000. However,
the soonest one can be delivered is in "two to four months" and that's only
for the trim that starts at $64,000. Plus there are now quite a few options
costing in the thousands.

For every 10,000 customers that place an order of the, likely, several hundred
thousand current deposit holders, that's somewhere around $600 MM in
additional customer money that Tesla would be holding. For every 10,000
customers. But that money won't deliver a physical product for months.

Is this a play to make billions more in deposit money? Is this how they plan
to take no more investment/debt this year?

Is there anyone on the list looking to buy one that can confirm if this
requires full payment?

EDIT: Apparently, the ask is for an additional $2,500. [2] That would make
$25MM per 10,000 customers that place an order.

Putting forth the additional $2,500 also removes the ability for you receive a
refund of the original $1,000 deposit if you do not cancel within three days.

[1] [https://www.bloomberg.com/graphics/2018-tesla-burns-
cash/](https://www.bloomberg.com/graphics/2018-tesla-burns-cash/)

[2] [https://www.cnbc.com/2018/06/28/tesla-model-3-orders-
cost-25...](https://www.cnbc.com/2018/06/28/tesla-model-3-orders-
cost-2500-more.html)

~~~
frgewut
They say that cars will be delivered in 2 to 4 months. Also ordering costs
$2500.

I thought it is common to pay full amount upfront upon ordering cars, then
wait a month or two for actual delivery.

~~~
greglindahl
It is, with the proviso that it's rare for Americans to order a car before
it's made -- we mostly buy them "off the lot". Tesla is unusual in that
regard.

~~~
venning
As a former car salesperson, I can tell you that, in the state of Virginia,
car sales contracts are not valid until the customer has physically taken
possession of the vehicle. As a result, we were always very reticent to sell a
car "off the truck". Customers would swear up and down that they'll definitely
follow through but, most of the time, they'd just never come to pick up the
vehicle and we'd be stuck trying to unwind a contract. I'm sure this is common
in a lot of states.

------
jillesvangurp
The way I see it, logistics aside, Tesla has awesome cars that are loved by
those that manage to get one delivered, customers are actually lining up to
buy them to the extent of paying just to get in line for that years ahead of
time, and they are pretty much guaranteed to sell anything they ship for the
foreseeable future.

Better still most of their would be competitors are either not shipping at all
right now, years away from shipping at scale, just plain not even bothering to
compete, or shipping limited volumes of not so great products, and generally
being vague about timelines, volumes, etc. On top of that they and are
struggling with over production of vehicles based on legacy petrol/diesel
technology.

E.g. the Germans are doing a lot of hand waving around maybe shipping some
electric cars in the next decade while the likes of BMW continue to ship
seriously underwhelming electric cars. Ford just discontinued a lot of their
petrol sedans. And diesel gate continues to impact most manufacturers involved
with basically anything Diesel based.

The way I see it, Tesla will be essentially unchallenged for the next 2-3
years. That's a lot of time to get on top of some simple logistics. And that's
assuming the existing car manufacturers actually get their act together. IMHO,
most of them are at far bigger risk of bankruptcy than Tesla since they'll be
bogged down in demand issues, layoffs, and restructurings for the next few
decades.

I don't see the logistical situation as something that can't be resolved by
Tesla. Kind of silly to short Tesla under the assumption that this won't be
solved; cannot be solved; and that Tesla will perpetually be unable to solve
this. The argument seems to be that it is simply impossible to produce the
vehicles for Tesla.

If the latest rumors are to be believed, they are pretty much close to the
promised rate of 5K cars/week. At 50K price (conservative) that means 250M per
week in revenue, or 1 Billion per month. That sounds like a decent business to
me. I'm assuming they are not stopping at 5K per week.

~~~
catherinezng
Tesla lost ~$2B last year, owes ~$10B in debt, and owes >$400M in interest
payments per year alone.

Moody’s downgraded Tesla’s bond rating because Tesla will need to raise more
money this year, at least $2B (which is an extremely conservative figure), to
avoid Chapter 11 bankruptcy.

Elon Musk also owes >$600M in personal debt that he financed using Tesla stock
as collateral. This means that if Tesla stock dips below around $233/share,
Musk would face a margin call (sell Tesla stock, driving stock prices lower),
or put down more Tesla stock as collateral to fund his debt.

By the way, 90% of the Boring company’s funds come from Elon Musk himself,
possibly funded by this personal debt.

Other red flags are that shareholders sued Tesla board members for breaching
their fiduciary duties by allowing Tesla to acquire Solar City, assuming an
extra ~$3B in debt; and Tesla’s CFO Jason Wheeler left Tesla in 2017 with over
half of his stock left to vest.

The reason people are shorting Tesla is that beyond Elon Musk’s cult of
personality, the numbers don’t add up. Tesla will need to raise more money
this year to survive.

Feel free to fact check all of this.

~~~
sdhgaiojfsa
OK, all of this is true, and concerning to me, despite that I would never buy
a Tesla (when there are perfectly good used Nissan Leafs out there!). This is
part of the reason I never invest in individual stocks: I have no tolerance
for the risk, and no confidence that I can interpret all these facts to come
up with a coherent estimate of whether the price will go up or down.

I guess my question right now is: if the situation is so dire, and the facts
are all out there, why is TSLA not priced lower? Is it that there's enough
dumb money holding/buying it propping up the price? Or are investors confident
in Musk's ability to raise money and eventually turn the corner? Or something
else entirely?

~~~
spectrum1234
If perfectly good means ugly :). Not that non EVs are much better though.

Model 3 is honestly the best looking car I have ever seen.

~~~
mrguyorama
Remember that car attractiveness is an opinion. Plenty of people (including
me) feel the exact opposite, ie that the Model 3 is really derpy and dumb
looking

------
sschueller
Someone tweeted this video[1] of the tent production line a over a week ago.
It looks a lot less clean than the picture Elon tweeted thats in the article.

I don't know if I would purchase a 35K+ car that was assembled outside in the
open. Also it appears quite chaotic with chassis being transported around also
in the open.

[1]
[https://twitter.com/IspyTsla/status/1009134913881190400?s=19](https://twitter.com/IspyTsla/status/1009134913881190400?s=19)

~~~
ben_w
I have nothing to compare against, so if I was in the market for a $35k car
[1] I’d probably be fine with this.

[1] I’d prefer to invest most of the money and have a cheaper second hand car,
and if I had enough spare that $35k was pocket change, I’d be more interested
in a tiny aircraft or a small liveaboard boat.

~~~
compcoffee
> _I 'd prefer to invest most of the money_

Is "I don't own a car" the new "I don't own a TV" virtue signalling?

Seriously, you are offering up your opinion on a product you admittedly have
no knowledge of,and no interest in owning.

~~~
ben_w
Everything humans do, including asking questions about virtue signalling, is
virtue signaling.

That said, although I don’t own a car, I didn’t actually say that in my
previous post. I’m _lucky_ that where I live, I don’t need to. That situation
is likely to change, and I have no intention to build an identity of, or make
a virtue out of, _either_ having _or_ not having a car. If that seems
contradictory, consider it virtue signaling “flexibility”.

~~~
hnaccy
>Everything humans do, including asking questions about virtue signalling, is
virtue signaling.

Do you not believe in the existence of true dialectics?

~~~
ben_w
I had to look up the word dialectics. Rarely, is my answer to the definition I
saw, and to my memory thus far only in the context that the tripartite
definition of knowledge is horribly flawed because nobody can be 100% certain
that what they call knowledge is really true, that instead all we have is the
belief — an opinion, in one sense of the word — that the thing we are claiming
to know is in fact true.

------
pg_bot
I know then tent is getting a lot of criticism from the public but it is a
smart move. The tent gives extra space to add more individual steps to the
assembly line and humans are best suited for tasks that are rapidly changing.

I think someone finally realized that you can have as many steps in the
assembly line as you want so long as no single step exceeds your quota divided
by the time per day. (i.e. need to make 1000 cars per day, no single step in
your production process can last longer than 86.4 seconds; but you can have as
many steps as you want) In order to make 5,000 cars a week you need to keep
your slowest step in your manufacturing process to around 2 minutes. This
should be doable.

~~~
std_throwaway
They probably made 1000 bets on how to do things and won 99% of them - the
remaining 10 steps turned out to be manufacturing nightmares. If they knew
beforehand what wouldn't work (and you never know that beforehand but
afterwards it's easy to point out) they would have designed their
manufacturing line differently. Now they lose a lot of time, need more space
and workforce but probably will get there anyways if money doesn't run out in
the meantime.

------
melling
Tesla has had an extremely difficult time ramping up production of the Model
3.

Hopefully they to to 700 cars a day this week.

However, getting to the 10,000 cars a week (another doubling) seems impossible
unless they add another factory.

~~~
Brotkrumen
I wouldn't want to make that assumption without further information.

If you are right, a lot of highly trained and paid people have made a grave
mistake in their throughput estimates and might still be lying about it.

On the other hand there could be bottlenecks they know how to solve but are
waiting for the tooling to be done.

~~~
nabla9
Within last 1.5 years highly trained and paid people have made something like
5-7 large mistakes in their Model 3 throughput estimates in a row already. Few
more is not that surprising.

They are constantly facing bottlenecks that take them by surprise while they
are learning to mass manufacture. Tesla is small volume luxury car maker that
attempts to transfer into mass manufacturer with NIH attitude.

~~~
HeadsUpHigh
Tesla has had an insane learning curve to climb. Making a car... just think of
how many different subsystems exist. A lot of them could be offloaded to
contractors but they chose to do as much in house as possible( which also
aligns with Musk's character).

~~~
jcranmer
Tesla's only been making cars for a decade before they started on the Model 3.
So it's understandable that they totally need to learn how to make a car, it's
just so hard...

------
thisisit
This is interesting. Lot of people complain when Tesla bad news are reported.
The refrain being - this is clickbait and will media make a news out of this
if it was another company or ICE car.

But in this thread I see no complains about why this also not clickbait. How
often do we see another companies car launches - electric, ICE or otherwise
getting so much attention on HN?

So, for Tesla fans I can only say this - you will live the sword you die by
the sword. Tesla gets coverage irrespective of bad, good or neutral. So, next
time there is a negative news let's try and have a healthy debate about Tesla
issue rather than about "biased media".

~~~
aae42
But do you see how all of the comments spin this to be bad news? "Tesla needs
money, that's why they're opening the floodgates, they're hemorrhaging money!"

~~~
danso
Are you arguing that Tesla is not losing money? Just a couple weeks ago they
had a 9% workforce reduction to “reduce costs and become profitable”. The
company has only had 2 profitable quarters in its history, and had record
losses in its most recent quarter.

------
brightball
In the electric space it seems like it's going to be Tesla and GM for the
foreseeable future. None of Tesla's other competitors are putting out anything
remotely close to the Volt and Bolt.

~~~
KallDrexx
What about Nissan? The Leaf seems to be doing well even though it gets ignored
in these conversations.

~~~
cptskippy
Leaf owner here...

The Leaf is mostly ignored because unlike the Model 3 and Bolt, it is a
compromise due to it's limited range and it is not a true replacement for an
ICE car. For normal usage it's fine but exceptions like mid-day doctor
appointments or spontaneous errands after work are sometimes impossible.

The first generation Leafs had a 24kWh battery with an EPA MPGe range rating
of 84 miles. The second generation 2018 model has a 40kWh battery with an EPA
MPGe rage rating of 151 miles.

The first generation base models of the Tesla Model 3 and Chevy Bolt have EPA
MPGe ranges of 220 and 238 miles respectively.

That might not seem like a big deal and an 84 mile range should be fine for
most people most of the time. The problem is that the 84 mile range is not
entirely accurate.

My Leaf typically reports my range as 90+ miles and my 25 mile commute can use
anywhere from 28-42 miles of that reported range. So if I drive to work and
back without charging in between then my remaining range is 8-34 miles. That's
ok unless I get home from work and my kid needs to go to the music store 5
miles away to buy a replacement reed for their oboe.

Additionally Nissan recommends not charging above 80% or letting the battery
fall below 20% to increase the longevity of the battery as over/under charging
can degrade the Lithium Ion Cells. So basically they're telling you not to
charge your car past 80% and to stop driving when you hit 20% which means they
recommend you only ever use 60% of your battery (50 miles).

In comparison, Chevy and Tesla both have built-in buffer capacity in their
batteries that's unavailable to you. This buffer prevents you from over/under
charging your battery. Because of this buffer you're able to utilize the full
advertised range of the vehicles without fear of battery degradation.

------
jokoon
I don't really care if Tesla's account balance is ok, as long as it's selling
something big and new, it's an improvement.

Making electric cars is not just a business, money and accounting doesn't
matter at this point. The money side for large projects like this, is an
abstraction you cannot focus on. Negative account books will always exist
where innovation happens.

Forget the money, and try to think what gets made. That's all that matters.

~~~
danso
Tesla is a public company. Accounting is very much an important thing, or are
you suggesting it’s OK for them to cook the books as long as they do it for a
good cause?

~~~
cptskippy
I believe he's saying it's ok to operate at a loss as long as you are
demonstrably making progress. In this case by building and selling new
vehicles in volume.

------
jmull
It will be interesting to see how this plays out.

If nothing else, Tesla customers are buying (or attempting to buy) a piece of
history.

------
baybal2
In the meanwhile, Chinese electric cars have long broke the $30k barrier.

~~~
BugsJustFindMe
Oh yes? How are their crash safety ratings?

~~~
baybal2
There are no mandatory crashworthiness rating requirements in China

------
std_throwaway
Will my money be safe if they go bankrupt between payment and delivery?

~~~
jacquesm
No, in that case you'll be lining up with the rest of the creditors and I'd
assume you will get back nothing at all or pennies on the dollar at best.

You're playing bank. Hot tip: don't buy cars that are not in front of you and
that you can walk around, only buy cars from manufacturers with long term
stability to ensure that the vehicle you've bought will function during its
economic life in your hands.

~~~
_ph_
Technically speaking, aren't Tesla and Ford the only two American car
companies, who haven't ever gone bankrupt? :)

~~~
mrguyorama
That's a kind of meaningless assertion though, since Tesla is significantly
younger than Ford and others

------
Gravityloss
Too bad that as an european reader I just get redirected to some oath.com page
instead of the article. If you can't show me the page without tracking me,
then no thank you.

~~~
jokoon
What I often do with ublock origin, is right clicking on greyed background or
div that hide the article, and keep adding rules until I can read the article.

I use firefox containers, I disabled 3rd party cookies, and all of my cookies
are cleared when I exit firefox.

Not sure if doing this really escapes tracking though. I'm still wondering
what the firefox tracking protection is really doing.

------
agumonkey
So the BFR won't be to save humanity from catastrophy but simply to save Elon
from (catastrophic) debt.

------
andy_ppp
I think Tesla should offer a public bond on some kind of block chain that can
earn interest and go towards a car automatically in 2-3 years. Effectively
using an ICO for something with actual value. The point being you can sell
your place in the queue (should your circumstances change) and also provide
you with a secure saving scheme. Just a thought!

~~~
Faaak
What would the blockchain offer that you can't do actually ?

AFAIK, you can buy bonds, buy a Tesla reservation, and sell this reservation
without the blockchain.

~~~
andy_ppp
Maybe you're correct - it's closer to a valid use of the technology than most
other uses though. Maybe the reason to use this technology would be to
decrease transaction costs and to allow people who want it now to pay a
premium for someone else's space. Didn't realise you could sell the
reservation so probably you're right centralisation is probably always better
than blockchain.

~~~
this_user
> decrease transaction costs

How so? If you a decentralised system like that, you need some sort of
consensus mechanism, and that is costly, especially when using like PoW. All
this would do is to replace robust established mechanisms with expensive and
fragile technological overkill that offers no advantage for the user.

