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Tesla reports first quarterly profit in more than three years (reuters.com)
822 points by blastofpast on Oct 26, 2016 | hide | past | web | favorite | 278 comments



Really great news! But something that shouldn't be overlooked is the discounts they gave in Q3 to push deliveries up.

First, those that know me know that I am a Tesla FANATIC. My girlfriend once challenged me to not talk about Tesla (motors, energy, something) for a 24 hour period. I dunno if I've ever done that honestly. I'm also an owner (no surprise given my fanaticism, lucky to be able to afford one). And I also own some TSLA.

Elon sent a company-wide email in Q3 to push sales to show profitability. I don't think its a fluke but they did something they never really do to help reach this number: they offered significant discounts on vehicles (new, pre-owned, showroom). Like, really big discounts (relative to the price of the car).

That certainly helped. Elon also sent an email at the start of Q4 that NO MORE DISCOUNTS are allowed. So I'm really very interested to compare Q3 to Q4 when that comes.

I also happen to know a lot of the people who bought a heavily discounted Tesla in Q3 feel kind of burned that right at the beginning of Q4 Tesla announced the new Autopilot hardware (that isn't retrotfitable on old vehicles). If you did your homework on Tesla though, this wasn't a surprise. It was expected that Tesla would make some big announcement to spur Q4 sales especially after Elon said there wouldn't be any capital raises in Q4 while he expected to hit Q4 numbers. You generally can't do that without some big news.

Just wanted to color this news with that. I'm still very excited!


> "I also happen to know a lot of the people who bought a heavily discounted Tesla in Q3 feel kind of burned that right at the beginning of Q4 Tesla announced the new Autopilot hardware (that isn't retrotfitable on old vehicles). "

Wow I guess this is the best proof of how Tesla is really changing the way auto owners think, this is something that wasn't unthinkable before Tesla and their over the air updates. Can you imagine a BMW owner complaining that his 2015 model does not have stuff that new 2017 models will get??


No, but I can imagine a BMW owner complaining that the 2016 model came out 3 weeks after he bought his 2015, with no notice from BMW, the sales guy, or the press. And that the 2016 model came with a bunch of new features he really wanted and would've been willing to pay for.


> no notice from BMW, the sales guy, or the press

Tesla has done this for a long while. Newer larger battery pack options, newer interior and tech package options, and completely new performance and configuration options (insane, dual motor, and autopilot 1.0 all hit at once)

While there wern't announcements ahead of time what was coming, there were often advance notice that there was an announcement coming, and even when there wasn't - there was a big period of quiet from Tesla leading up to it.

For Autopilot 2.0 everyone knew it was coming for at least the Model 3 launch (Elon said as much at the Model 3 announcement), they just brought it forward.

It is really no different to what happens to customers for a bunch of other tech companies. Canon sure doesn't tell anyone when their new models are coming out - you know it'll probably happen at a major trade show, but only if you're someone that follows that kind of thing. The average customer at their camera shop isn't going to have the sales guy say "Hey, wait a week and we'll have the next version available."


Yes, they keep doing it, and if you pay close attention to Tesla, you’re aware of it. You’re also aware of rumors of AP2 coming. If you don’t follow Tesla news, you’re in for a surprise.

Regardless, I think it’s a fair critique: buyer’s remorse is a real thing with Tesla. It’s one thing to buy a $3000 computer from Apple and have it replaced with a much better one the next week, it’s another to buy a $100K car and have a major improvement two weeks later.


Everyone discounts before they launch a new product. You don't need to follow Tesla to know a new product is eminent when you walk into a show room and they knock $10k of the price because you look pretty or walk nicely. Big deals and big discounts with serious need are always informative to the buyer.

Plus people but cars when then want cars, some will always lament they could have waited a bit, but most I expect will be happy to own a Tesla that was (and is) amazing just a few days ago.


I don't think making an good buying decision should need to take subliminal cues into account, like someone predicting a storm by a sudden shift in wind behavior, and forcing your customer base into this buying paradigm is a huge risk for resentment and product dissatisfaction.


Car manufacturers generally telegraph their intentions for introducing new technologies in advance of actually unveiling the new models. People who buy a new 2016 Honda Accord generally can find out exactly what's going to be in the 2017 model just by googling around a little. Not the case with Tesla.


At the end of the day however, it is not Tesla's responsibility nor in their best interest to educate their customers to make intelligent purchasing decisions.

If you want change in this regard, it's not going to come from Tesla.


It can lead to buyer hesitance, which is a problem. Why buy now when the car can suddenly become better? Without any understanding of when it would get better, or how much, the fear of the regret can be substantial.


Well if BMW communicate upcoming changes much better than Tesla do, maybe I'll buy BMW instead. Shrug.


depends what kind of brand they are trying to develop. with cars many people are still traditionalists and stick to what they were happy with.


It doesn't help that Tesla tends to have long delays for cars.

For instance, let's say I pre-ordered a Model 3 now. But I won't get it the first half of 2019. And then a month later, Tesla announces Model 3 with Autopilot 2.5 hardware or whatever, holographic HUD, and so on. And that new car will ship within 2 months. Then I'd feel pretty screwed by Tesla...


You don't understand the Tesla order process. People waiting in line for Model 3 have not picked the exact details of their cars -- they do that right before the car is produced. If new stuff is announced, it's immediately available. So the only people who are pissed are those whose cars are in the assembly line.

In short, the delay between reservation and receiving the car is not an issue.


If they announced upgrades and that the new car was shipping in 2 months you would be at whatever current build was being deliver (sans any cosmetic changes they may request your input on). If the manufacturing lines are updated to add features as a baseline after you order but before your build, you will get whatever they are.


Canon sure doesn't tell anyone when their new models are coming out

Big difference between buying a camera and buying a car.


Depends entirely on perspective - for a student just getting into photography, buying a DSLR from Canon is pretty evenful and a significant portion of their income/savings.

For a young professional, buying a $35k car is probably just as eventful and significant to their savings/expenditure.


You sure? Cause in this analogy, the 2015 model was at a serious discount while the 2016 has no discount at all.


I'm sure. It's one thing to be told "Hey, there's a new model right around the corner. But we have this guy on a steep discount to clear out inventory."

vs. "Hey, we have this great sale going on. What, new model? Naww, we are just having a sale!!"

The incumbent MFG's literally have "new inventory" sales on their last-years model to clear out inventory. They let you know well in advance that a new car is coming with new features so you can make an informed decision.


> It's one thing to be told "Hey, there's a new model right around the corner. But we have this guy on a steep discount to clear out inventory."

Is this not what "hey this 1-2 year old model is on super duper sale right now, it's really cheap, you should buy it!" means? Is a steep discount on older stock not always code for "better shift these before new model comes out"?

You see Apple fanboys fall for this one every time, too. "Yay I got a new iPhone 5 last week and it was SO CHEAP, I'm a genius... wait wtf they just announced the iPhone 6."


“Fanboys” don’t, they’re well aware a new iPhone is coming in September. And no, Apple doesn’t lower old iPhone prices until after the new is on sale.


I think we know which path leads to better sales.


Both, depending on where in the company lifecycle the sales happen.

The upstart, by virtue of simply not yet having that many potential repeat customers around, is targeting first time buyers. The goodwill created by having as little obsolescence as possible far outweighs the extra sales they might get through it. This tradeoff changes significantly once a company is established and the number of potential repeat customers is high. Now it's always a balance between repeat sale likelihood and repeat sale cycle duration.

Different forms of obsolescence have different effects in different markets. E.g. unlike smartphone makers, car manufacturers tread very carefully when it comes to longevity. Red book value and all that. So what do they do? They have perfected the generational model update cycle. New generation cars are literally designed to make the predecessor look old, because that is the most acceptable repeat sale driver. Tesla just isn't there yet.


And which path leads to buyers remorse.


It's similar to iPhones, countless complaints yet those same people keep buying them.


Really? iPhones seem to have somewhat predictable cycles. I have owned 4 and every time I pretty much knew when a new one would come out.


iPhone 7s or maybe iPhone 10 will ship around September 20th 2017.


I doubt any auto dealer's sales person will gamble to let a customer know that he should not buy the car right now and he should wait for later...they have bonuses to collect, and the faster they move old inventory the better bonuses are.


I thought Tesla doesn't sell through dealers?

edit: I'm absolutely positive I'm missing the joke here


The fact that they 'don't sell through dealers' just means that they are the dealer. All of the usual sales guff still applies.


So that's what I mean - I thought there was no opportunity to haggle for a Tesla - they're a shop and the price is what it is. I thought?


This might be true if you think that all salespeople are scumbags and that the Internet doesn't exist as a source of information on future models.


Can you image going to a BMW dealership and having the salesguy tell you "You shouldn't buy this car, we have new ones coming out in two weeks"?


Even in the case the 2015 model was heavily discounted? Seems like a classic deprecation strategy.


They don't reduce prices on "last year's car" unless its been driven as a demonstrator. There were scattered rumors of a few cars being discounted - Tesla said we shouldn't ever do that but it seems a few places did it. There's never been heavy discounting.


New models of cars come out every year. It seems something easy to be unsympathetic about; Nostradamus could have predicted that new cars with new features are right around the corner. That's the perpetual status quo.


I can see why that would be irritating. But they did it the last two years - announce updates in Oct/Nov. And they will do it again next year. The difference from regular cars is there's not such a long lead time between announcement and delivery, it just kind of hits the market right after. They are going for a cell phone kind of experience, where it's continually improving.


Doesn't BMW update models roughly on the same schedule every year?


Yes, the manufacturing gets reset with very minor updates, but nothing too major.

It's tough because if you are custom ordering a car mid-year there's a question as to whether to wait for a production allocation in the new model year or not.


No, there is no "schedule every year": https://en.wikipedia.org/wiki/BMW_5_Series


There is a difference between the platform update, and model year updates.


I am actually complaining quite a lot that my 2016 Mercedes does not have(and probably won't have the option to retrofit) Android Auto compatibility, while the 2017 model has it. It's literally the same head unit, with a firmware upgrade - it pisses me off.


For the past 2 years they also announced new stuff at the October/November boundary. 2 years ago, it was the autopilot hardware with the camera in the front and radar. Cars before Nov 2014 didn't have the camera in the front (some of the them had the front radar). It was obvious to anyone paying attention that this is the time frame when they announce updates.


I am complaining about my recently purchased 2016 Mercedes e-class doesn't include similar autopilot features as 2017 e-class.

Check :)


Correct me if I misunderstood your comment, but I'm not sure how that's relevant. The point here was that Tesla's upgrades were seemingly random and unannounced, leaving buyers unsure of whether to take advantage of a discount or whether it was a "trap." In my experience with conventional car companies one can usually ask the company or read postings on when the next model year will be released, but minor changes are typically not made at random times.


It's strange from the other side too. With technology it's normal to be able to get updates, but for new tech to eventually come out that makes the old stuff obsolete. A clear sign that this is about to happen is... deep discounts on the existing product.


> Can you imagine a BMW owner complaining that his 2015 model does not have stuff that new 2017 models will get??

I am complaining, at least inwardly :-)


I take it you don't spend a lot of time on car forums. People complain about this kind of stuff all the time.


It's actually a very Apple strategy - discount the old iPhone, the fans realize a new one is in the pipeline but nothing's announced, and then the new one is finally released.


The iPhone is on an extremely predictable release cycle. Especially fans would absolutely know that one comes around the last week of September every year. This scheduling got changed only _once_ (moved from June to September), and this was not kept secret.


But the iPhone is predictably released each year, so I'm not sure this is really the same.


But differing times of year. So fans use the discounts as a leading indicator of releases on the month to 2 month scale.


>Really great news! But something that shouldn't be overlooked is the discounts they gave in Q3 to push deliveries up.

Elon stressed in the call that they did not give significant discounts, and the few that did happen were not to be repeated.


The exact quote:

"Our vehicle gross margin increased Q2 to Q3. One of the other things I've seen out there is that somehow we achieved these numbers as a result of widespread discounting. That is absolutely false. There were a few discounts but they were few and far between and that has been absolutely shut down to zero. You can see that in the fact that the vehicle profitability increased, even excluding ZEV credits, Q2 to Q3."


I'm guessing this is a bit of misdirection. Outright discounts on the purchase price probably were rare and not supposed to happen, as he says. However, from what I've seen from new buyers in that period, it was nearly universal for Tesla to waive the $1,200 "destination fee," which is effectively a $1,200 discount on the purchase price. They also have a referral program going which gets you $1,000 off, although that's been going for something like a year now and isn't new for Q3. That's a $2,200 total discount on many vehicles, which isn't a whole lot on a car that starts at $66,000, but it's something.


Exactly! There were very few discounts, and they were never sanctioned to begin with. Elon made it clear in that internal email that these were not allowed by Tesla's internal policy. Had nothing to do with this quarter's profitability, as reaffirmed by him in today's earnings call.


Did the Q3 email say that it was to boost sales to show profitability?

I think it's fair to assume that they discounted the price because they were close to announce an "hardware" update.


The Q3 email specifically said it was to boost sales to show profitability. You can find it via Google, it was publicly leaked.

That doesn't make your latter point wrong though, that was probably true too!


I checked the Q3 email [1] and while it is indeed about motivating their teams to reach profitability, it doesn't mention any discount.



This email does not mention anything about discounts. It does not even mention sales. It does talk about "building and delivering every car we possibly can".


I think GP just linked to the email because I cited it but forgot the link.


Along with discounts, it's worth mentioning there were also some accounting changes in Q3 and they cashed in all of their ZEV credits for the year. So the profit didn't come easy.


How do significant discounts create more profitability? Isn't that like "we lose money on every sale, but make it up in volume."?


It may move volume up enough for a brief period to display profitability, but the catch is that if the quarter following it does not have a very special attraction of its own that you will likely see the quarter after it substantially lower. Essentially it moves sales from the next quarter to the current one.

Tesla likely reasoned that they would have a huge up in Q4 and instead of having one quarter with profitability (Q4) they could spread it out and show two consecutive profitable quarters with even higher profits in Q4.

This may indicate they will be attempting to raise more money early next year, it's the kind of 'good news' that investors like to see.


Per-unit margin goes down (but is still profitable per unit) but you make up in volume to create a profit.

Tesla's main costs aren't the cost per unit but the engineer/software costs iirc.


@cortesoft - It takes a lot of time and infrastructure investment to ramp up production to those sort of levels.

This has actually been Tesla's business plan all along: start with a low volume, high-priced product (the Roadster) and gradually move towards successively higher volume, lower cost models.


As per the earnings call, the profit per unit actually went up, and the discounts were never sanctioned and also not relevant to this end result.


If they make more profit by selling more units at a lower price... then why don't they always just do that?


They don't make more profit per vehicle, they just made more profit in a short window of time by doing more sales but this may not be sustainable because it just shifts sales around rather in time at a lower profit per vehicle.


Production bottlenecks.

Tesla is constantly behind on producing cars for its customers. They just wanted to generate money now rather than later.


Building lots of cars is hard. It takes a lot of time and money to ramp up production capacity to this level. They've been building cars as fast as they could for years now.


If that was the case why did their gross margins also go up?


ZEV credits count as automotive revenue.


"My girlfriend once challenged me to not talk about Tesla (motors, energy, something) for a 24 hour period. I dunno if I've ever done that honestly. I'm also an owner (no surprise given my fanaticism, lucky to be able to afford one). And I also own some TSLA."

I talk about Tesla a ton as well. My GF is similar, but with dogs. We made an agreement that whenever I talk about Tesla I have to replace 'Tesla' with 'dog'. She does the reverse.

Let me tell you, there is this new dog, it is so fast. And this dog has a low center of gravity which is great for handling. The craziest thing is that this dog can go from 0-60mph in just 2.8 seconds, it is ludicrous!


Out of interest, what levels of discount were on offer?


It was common for Tesla to waive the $1,200 "destination fee," and they also have a referral program going which gets another $1,000 off.

There were also some stories of people getting bigger discounts, like getting the 60kWh to 75kWh battery upgrade at no additional charge. Those were supposedly rare and were not supposed to happen, though.



You're telling me I could have gotten a steep discount on an S in Q3? How big a discount are you talking about; I've avoided test-driving one because I don't want to drop that much cash on a car.


It's probably good that you missed it. They made a huge improvement in the Autopilot hardware in cars built after October 10th. Tesla says that with software updates, that hardware will be capable of full self-driving.


I don't see how a discount changes their profits(!) dramatically – especially considering Tesla does its accounting on an accrual basis. It's perfectly possible (and actually wanted) that someone walks onto a car lot with a fat bundle of cash, uses it to buy a car, drives off – and the whole transaction didn't change profits at all.


If the discount is what brought profitability, than wouldn't this mean the car is mispriced?


Nice writeup. I do think this quarter is a bit misleading because of the 139million emission credit. Howerver, I believe they've done just enough to move the needle and support investor confidence.

By the way, huge fan of HashiCorp Mitchell. ;-)


I didn't notice that was Mitchell. Makes sense. The one time I met him in person we talked about Tesla.

Now I need to track down Elon Musk to discuss Consul.


Hah! How random to see someone I used to play warcraft on hackernews posting about TSLA, what up mitch.

Totally agree with you on this, long elon musk is always the play.


My girlfriend also told me to stop talking about Tesla. She would actually get angry when I started talking about Tesla news :(


That sounds like extreme short-term thinking that is used to fool investors and partners until the gig is up next quarter.


They always do a "end of quarter push" of sorts. It's the terrible reality of being a publicly traded company where a few discrete points in time decide the up and down.

Presumably that is also why Elon doesn't want SpaceX to go public. That kind of push could easily end in a giant fireball there.


The Economist recently did a good article on the financing of Elon Musk's companies that flew under the radar of Hacker News that probably warranted further discussion [1] [2]. (Though the author of that piece completely misses the relative importance of each company to Musk, suggesting "he could try to sell [...] SpaceX, through gritted teeth, to a defence firm")

It's unfortunate there's a bit of a reality distortion field around discussion Elon Musk's companies sometimes. Maybe because everyone wants his companies to succeed...

[1] http://www.economist.com/news/business/21709061-entrepreneur...

[2] http://www.economist.com/blogs/economist-explains/2016/10/ec...


> Maybe because everyone wants his companies to succeed...

Surely the only ones who don't want dramatically cheaper space launches, cheaper, widely available solar PV installations and attractive, affordable electric vehicles are deeply entrenched incumbents whose continued profitability involves polluting the planet, or those who really hate the environment for whatever reason.

There are valid criticisms you can level at Musk (I wouldn't like to be a direct employee), but taking on the Wall Street quarter to quarter thinking with enormous, risky endeavours that have the potential to completely revolutionise some of the biggest industries out there (energy and transport) takes an extreme type of individual to succeed.


Considering how most of his current businesses exist thanks to gov't incentives/tax advantages in the domains, there are legitimate criticisms to the way in which his businesses are run.

Though I think it's proof the system works! Offer tax incentives for electric cars, get electric cars. Though it seems like Musk isn't making a super sustainable business just yet....

Solar City is arguably "good solar", but that company hasn't done well enough to hold up on its own, getting the Tesla bailout.

Tesla's made the great push for electrics, and that's awesome.

Also, I imagine there are many people who do _not_ want SpaceX to waste its time sending stuff to Mars, but want it to be a successful sattelite launching company. Meanwhile they're a sattelite launching company that blows stuff up more than average


You mean "Considering how most of his current businesses exist with some subsidies to slightly counter the massive government subsidies to fossile fuel companies and polluting-car externalities" ?


It's odd how these subsidies are somehow seen as a negative for Tesla, when they are not tesla specific, they apply to all EV regardless of manufacturer, in addition the incumbents have been getting subsidies and bailouts for longer than Tesla Motors has existed and it would take a huge amount of government support for tesla to come even close to say GM in terms of public money received.


Not odd at all. Greenpeace attacks Apple for using the same environmentally-unfriendly materials that everyone else uses... because Apple is popular. The subsidy-for-Tesla narrative is driven by folks who either don't like the government, don't think climate change exists, or don't like the hype around Elon/Tesla.


There are just as many people who point Tesla subsidy as proof that "the market" does not produce good outcomes by itself, and that government subsidy was vital for all solar power and EV vehicles.

Bith sides are full of shit.


I think the reason they are necessary for solar and EV is because non-solar and non-ev have had so many subsidies over the years that it is difficult to compete with them.


> his current businesses exist thanks to gov't incentives/tax advantages in the domains

What do you mean? It's not like the oil/petrol car/traditional space launch industries exist without government subsidies... This is basically just levelling the playing field (and ensuring a better future)!


sure, like I said I like the system.

Just that some people out there innovate without taking subsidies, and some people would find that to be a "purer" form of success.


> Considering how most of his current businesses exist thanks to gov't incentives/tax advantages in the domains, there are legitimate criticisms to the way in which his businesses are run.

Many of his Detroit competitors wouldn't exist/would be a shadow of their current selves if it wasn't for a massive bailout in 2008. Why is this never mentioned? If this is how low the bar is set (bailing out large, badly-managed companies) then why shouldn't the government provide incentives for exciting new industries that promise to provide huge wealth and employment in the future?

Furthermore, many of Tesla's non-US competitors are given generous subsidies, e.g. German car makers[1]

> Offer tax incentives for electric cars, get electric cars.

Everyone always mentions this also, what about fossil fuel subsidies (a gigantic, highly-profitable, self sustainable industry)? To tune of $5.3 trillion per year globally[2] You could argue that the loan provided to Tesla (now paid off in full, with interest, ahead of schedule) was just leveling the playing field.

What about the devastating human rights impact of backroom dealings with the likes of Saudi Arabia? What is a few hundred million in subsidies compared to cloak and dagger political dealings with with one of the most repressive, backwards regimes on the planet, simply because they are the main oil producer? [3] The funders/supports of Al Qaeda, the Taliban, ISIS, provider of most of the 9/11 hijackers, not to mention the same people who spread their twisted branch of Islam in European countries, by refusing to take Syrian refugees from the conflict they fund, instead funding extremism in Europe through Wahhabist mosques [4] [5]. When the solar PV industry and the EV industry become mainstream and cost competitive with fossil fuels (a process well underway [6]), this backwards regime will collapse in on itself through the lack of funding, and will totally cease to matter strategically. So we get a cleaner environment, and less human rights abuses in the world.

> Though it seems like Musk isn't making a super sustainable business just yet....

Using profit as the only measure of a sustainable business is another classic example of Wall Street short term bullshit. Amazon ploughs most/all of it's revenue into expanding it's operations, withholding profit, and they are currently valued at $390bn[7] Granted, it's still possible that Tesla will fail, but even if it does, Tesla will go down in the history books as the company who finally made the car industry get off it's ass and actually take advantage of lithium ion batteries to mass produce attractive electric cars, getting the world off the oil addiction in the process.

> Also, I imagine there are many people who do _not_ want SpaceX to waste its time sending stuff to Mars, but want it to be a successful sattelite launching company. Meanwhile they're a sattelite launching company that blows stuff up more than average

I suppose the solution is to continue to go with the existing, bloated players, with their fat cost-plus contracts, won by ripping off the government with the help of regulatory capture? [8]

In summary, Musk is attempting to disrupt energy, transport and space launch industries, often against competitors who are heavily subsidised and often have government officials in their back pockets, further tilting that playing field. He's trying to fundamentally disrupt these huge, sometimes corrupt industries, and yet people still shit on him for trying. I really, really don't get this attitude. Even if all his companies fail, he forced the competitors to up their game, so in fact he will have succeeded at most of his goals (perhaps not the multi-planetary goal for mankind if SpaceX fails).

[1] http://theconversation.com/factcheck-do-other-countries-subs...

[2] https://www.theguardian.com/environment/2015/may/18/fossil-f...

[3] http://www.bloomberg.com/news/features/2016-05-30/the-untold...

[4] http://www.pbs.org/wgbh/pages/frontline/shows/saudi/analyses...

[5] http://www.independent.co.uk/news/world/europe/saudi-arabia-...

[6] https://www.youtube.com/watch?v=Kxryv2XrnqM

[7] https://finance.yahoo.com/quote/AMZN?ltr=1

[8] http://www.latimes.com/business/la-fi-spacex-investigation-2...

"Coffman’s congressional district includes United Launch Alliance’s headquarters. Many of the congressmen represent states where ULA has operations."


>simply because they are the main oil producer?

You realize that the US is a net oil exporter now, right? The SA regime will collapse because of many factors.

Your comments read like you believe everyone in the world is corrupt except Elon Musk.


every politician IS corrupt in this world, usually on many layers by many parties at the same time.

I am sure there are few exceptions out there, but as described - few, and exceptions.


Having different priorities than you is not the same as corrupt.


As an European, I sincerly hope that the Saudi regime collapse, for all the BS they are creating here and in the Middle-East.

Still, for Syria, they are not the sole guilty party.


the US can't let that happen because the hegemony the dollar has over the world economy would be at a very high risk. Oil is traded in Dollars exclusively. This gives the Dollar some very powerful and unique powers. Saudi Arabia has a strong hold on the OPEC cartel.


If oil stops being so important to the world economy (which might happen, but not right now), this would reduce the risk to the world economy. And as oil loose its importance, the OPEC cartel will weaken (also OPEC do not contain all oil-producing countries).


I don't have anything against Musk. I simply don't care much one way or the other because the things he's working on will never affect me.

Electric cars are not something I'm interested in owning at the price Tesla is asking. Or even half what Tesla is asking.

Utility electricity works fine for me, is a small fraction of my monthly budget, and is reliable. I.e. something I never really worry about. Payments for and maintenance of a personal PV system do not interest me.

Space travel? Again if he wants to spend his money there, fine. But I don't see it changing my life.

I am not an entrenched encumbent either. I just drive cheap, old cars and have no interest in visiting Mars. I don't even care for conventional air travel.


With all due respect, that is the standpoint of a cynic or perhaps nihilist. Which is totally fine, people should have the right to not care about stuff without being judged for it.

However, if everyone was a perfect nihilist, you wouldn't have cheap old cars to drive because nobody would have made cars. You wouldn't have a cell phone, and especially a data connection, if not for the space program. And so on.

So while I don't think it's a problem if some people take your viewpoint, I think it's a problem when everyone does. Somebody has to care enough about the environment to stop rampant capitalism from destroying it so that we have a planet to live on 50 years from now (electric cars, improved public transit.) Someone has to care enough to get humans off the planet so that when it is inevitably destroyed (asteroid, nuclear war, virus, overpopulation) the human race can continue elsewhere.


> cynic or perhaps nihilist

Nonsense. It is a perfectly reasonable perspective for someone who isn't terribly interested in technological development and wants to live practically with what exists today. There's a place for dreaming about Mars, but most people don't. That's fine, and it has absolutely nothing whatsoever to do with cynicism or nihilism.


Do you think this comment would be better received without the "Nonsense" intro? It's tough to bring someone around to your way of thinking when you dismiss theirs out of hand.


this is beyond one's personal dreams. only total anarchist/nihilist truly doesn't care about state of the environment where he lives. solarcity - cheap storage of solar energy for daily uses in household - not for everybody, but potentially for billions for sure.

space - indirect windfall of discoveries and improvements made in materials, manufacturing processes etc - it happened in the past with Nasa, it happens/will happen with them and others.

I drive 13 year old diesel bmw that costed 25% of a new one and probably will never buy a new car, so what? Mankind needs people like him, now more than ever.

It's not perfectly reasonable perspective. It's a perspective of an old, grumpy person who only cares about himself, and the world he lives in. Sure, we have plenty of those, but it ain't the best attitude to say at least.


> anarchist/nihilist

You seem to be throwing these around as pejoratives, but neither of these terms has anything to do with this topic.

> doesn't care about state of the environment

Nobody but you said anything about not caring about the state of the environment.

> an old, grumpy person

You have no basis to make such remarks. Plenty of people care about the people around them, their immediate environment, and the circumstances they can personally and directly affect without getting caught up in fantasies about the future.

Wanting to send people to Mars for the good of the species is a fine idea, but your enthusiasm about it doesn't make you any more noble than someone who is simply more practically minded or not as optimistic as you are.

This kind of disrespect for the perspectives of others makes it that much more difficult to achieve the political compromises necessary to make any of these dreams a reality.


> You wouldn't have a cell phone, and especially a data connection, if not for the space program. And so on.

Given enough time, it would've been invented regardless. You are right that we probably would be further behind technologically if it wasn't for the space race though.


> You wouldn't have a cell phone, and especially a data connection, if not for the space program.

Is that so? Can you give me a source?


The integrated circuit came out of Apollo[1], and apparently the cellphone camera came from NASA's work[2]. Not sure about the rest. We wouldn't have GPS, obviously.

You can credit a lot of stuff to the space program if you want, since all tech is built on other tech, and NASA was a big source of R&D in the 1950s onward.

[1] https://www.hq.nasa.gov/alsj/apollo-ic.html [2] http://www.space.com/10635-space-spinoff-technology-cellphon...


To continue this train of thought, the entire reason Silicon Valley exists in the first place is because of Department of Defense spending: https://www.youtube.com/watch?v=ZTC_RxWN_xo (aka Big Government spending.)

The foundations of the web were laid down by Tim Berners-Lee while working at CERN, a huge, expensive physics research organisation funded by European governments: https://en.wikipedia.org/wiki/CERN#Computer_science


While this is true, its also not the point. Russia and other places have and had tons of programs like it, but they don't have a Silicon Valley.

Government is usually always involved in nearly everything, because they are spending almost 50% of the GDP, and even 100 years ago they spent 20% or so. Other countries its sometimes as high as 70%.

Saying that computers, the web, satellites would not exist without government is a pretty absurd claim. The idea of satellites, networks and all this stuff was around and would have happened. The US was commercially successful, actually uniquely successful in almost all of world history, during a period when federal government spent only about 2% of GDP. During this time tons of innovation, the most in the world, came out of the US.

Tesla is successful not because of government handouts anymore then many other large companies. It of course helps them, just like with any other large company. Elon would be a idiot if he didn't advocate for tax breaks, you have to play the politics game.


Governments can't innovate but can absorb a ton of risk (like waging war levels of risk), Businesses can innovate but really cannot take large risk.

When a government absorbs risks by spending on research it can have businesses do the work on the promise the benefit is shared. Christopher Columbus finding America and the companies that launched Apollo both worked this way. It seems to work well in practice.

It is hard to say that we would definitely be this far without Government spending. It is reasonable to make a case we could never leave the planet without an Apollo like initiative. How would the space industry would have gotten started purely in the private sector? Its not like they could have contracted the launches out, there were no launch companies. I don't hold this extreme view but I can see how it could be held.

To go to the most extreme view I can see possible: It is entirely possible that without that spending humanity wouldn't have GPS. It is also possible a foreign power that was hostile could have GPS and use it in war against us. With a few tech changes like that in the worst of these scenarios there could be enough tech lopsided-ness that MAD never worked and one side could have ruined the planet with nukes during the cold war.


Eh, so IC was invented and commercialized before Apollo, but Apollo was instrumental in accelerating the development of ICs. That's a far cry from "we wouldn't have cell phones without NASA"...


All satellites for many years were only launched as part of the space race between the US and the USSR. Of course there would be no satellite communication without the space program.

https://en.wikipedia.org/wiki/Explorer_1


But cell phones aren't satellite phones. Am I missing something? Do cellular networks rely on satellites indirectly?

I'm not talking about GPS, which isn't an essential feature of cell phones.


Yes, satellites can be used when you're making a long distance calls.


Pollution affects everyone. Terrorist attacks and the multiple wars fought affect most people, certainly everyone in the West.

Only a self centered ignoramus thinks reducing need for oil doesn't help them.


>Terrorist attacks and the multiple wars fought affect most people, certainly everyone in the West.

The West? I'm going to go out on a limb and say that the people in the Middle East (you know, where the bombs are actually being dropped*) are "certainly" affected.


Even if you use none of these things directly, other people's use of them affects you. Electrified transport benefits everyone, even people who never use it. Same for energy storage.


You forgot driverless transportation, which very soon will impact virtually every good sold in the country.


...particularly when a self-driving Tesla slams into it!


Model 3 is going to cost $35k, and like $28k after incentives. It will SAVE about $1500/year on gas and $500 on maintenance. This is cheaper than a Honda Civic.

Are you sure you aren't interested at this price?


Really? I have a 20 year old Honda del Sol--which is essentially a 2-seater Civic variant--on which I spend under $500/yr on gas and under $500/year on maintenance. That's not typical I'm sure--and I do have another vehicle--but you can't claim your numbers as general savings.


Speaking of savings, it's funny how no one is including safety in this breakdown of cost.

The Model S/X are considered some of the safest vehicles on the planet, even breaking testing equipment, while I'm not convinced you'd do as well in that 20 year old del a Sol (or any older vehicle for that matter).

And once you start dealing with kids and safety, it becomes even more important.


Can you really compare a 20 year old honda del sol to a new model 3 (when it comes out obvioulsly) though? I don't have anything against used cars, but its apples and oranges. You can totally claim those numbers as savings, in an apples to apples comparison to a similar class car from a close year.


The claim was around saving money vs. a Civic. You're going to have to assume a lot of miles (and make favorable assumptions about long-term maintenance) to make the numbers work. I have nothing against EVs but they're generally not a good purely financial decision for most people today.

[ADDED: The mass-market Tesla is going to still be a premium vehicle relative to other options. There's nothing wrong with that. But it's unrealistic to expect that crunching the numbers the right way will make Tesla the optimal financial decision for everyone.]


When you're what comparing is gas and maintenance, certainly - the main disadvantage of 20 year old cars is that they're worse for both.


Are you sure about maintenance? Consumer Reports has all of the currently released cars at below average reliability.


Consumer Reports now says Model S is average for reliability -- that's the good news that the LA Times buried in their article.


Good luck on that 28K price point ... maybe if you're shopping for a Chevy but not a Tesla.


That means I have to drive it for 15 years before it's 'free'... That's a long time to go with one car.

Edit: Still a (relative) good deal though, depending on what car you'd otherwise have bought.


You don't need the car to be "free" though. If you were going to buy a Civic in any case, you were going to get the intrinsic value of getting around in a decent car. Now you're getting the same thing and in addition, a little spare change. If the numbers that person quoted are correct, it's a strictly better deal.


And all the other trade offs involved in electric vehicles. e.g. Worse for road trips,


How long do you have to drive a Honda Civic before it's free?


Do you walk around with an effective pollution mask?

One that helps you avoid pollution but doesn't make you look like Bane from the Dark Knight Rises?

Please send me a link, thanks.


> Electric cars are not something I'm interested in owning at the price Tesla is asking. Or even half what Tesla is asking.

This was written 10 years ago:

https://www.tesla.com/blog/secret-tesla-motors-master-plan-j...

In summary the idea was to start with expensive electric cars (roadster, model S, model X which was initially not planned) to fund research on affordable electric cars (model 3 supposed to be first of them). As electric cars are becoming more popular and there are technological advances, we'll get them cheaper and cheaper.


What kind of unconventional air travel do you care for?


I meant, as opposed to space travel. I actually don't care much for travel at all.


Still - the change that he is pushing will affect you. Like it or not he has become a large player in car industry, which by itself affects many economies on the world. Not to mention what looks like a slow, deliberate and imho unfortunate transition from owning a car to being driven somewhere. Do you think you will be allowed to drive your own car in 30 years time? No more than the horses are allowed on streets nowadays. You can take them for a stroll, but you go on highways with them.


> the things he's working on will never affect me.

Perhaps not in next 5 years, but what about 20 years? Do you expect that electric cars will never be cheaper than petrol cars? Do you expect to never ride in an autonomous vehicle?


[flagged]


This is a personal attack and isn't OK on HN. Please don't comment like this.


I don't think that's the only reason someone might express skepticism of Musk at this point. They might want Musk to succeed at these things very, very much, but fear that his sketchier tendencies might lead to failure.


I'm curious - what sketchier tendencies do you mean?


How autopilot was enabled for example. It has potentially created a difficult public perception of self driving cars.


Poor judgment with the name... but sketchy? I don't think introducing the feature is sketchy, since it certainly seems to be working pretty well so far, right?


There's a difference between wanting something to be true, and acknowledging whether a business is succeeding or not on its own terms.


>but taking on the Wall Street quarter to quarter thinking with enormous

It's delusional to think that Tesla isn't in bed with the big banks and playing all the Wall Street games. In fact, I think they do it more than any prominent company out there.

If they don't play "quarter to quarter" games, what was the big rush to sell all the ZEV credits this quarter to get profitable? Why not just carry on as they were? My bet: there's another capital raise coming, and the argument will be, "See? We can be profitable whenever we want."

But I'm more concerned with TSLA the stock, not the company.


> taking on the Wall Street quarter to quarter thinking with enormous, risky endeavours that have the potential to completely revolutionise some of the biggest industries out there (energy and transport) takes an extreme type of individual to succeed.

Does it? It makes for a good narrative, but are the burnout-inducing hours and unusall funding sources actually making them more likely to succeed than a company taking a more conventional approach would be, or less?


I agree with patrickk that it isn't that people want his companies to succeed so much as they want the product he is bringing to market. I've wanted a no compromise electric car for a long time before Tesla came around, and got it in the Model S, now I don't want the company that brought it out to fail before there is incontrovertible market proof that the demand for electric cars is real and will continue. That takes on the order of 10 years of market participation AFAICT.

I also wanted to exploit the solar power that is available in moderate climates like the Bay Area. I did that by "over paying" for my solar install in 2003 but at the same time the creative financing that Solar City brought to the market enabled tremendous volumes (and a price war from the Chinese government helped of course but that is a different story).

I also want to go to space for less than $20M on a 1960's tech space ship to a kludged together of modules. Back when Regan's Star Wars vision was creating capital availability for companies like Rotary Rocket and DC-X I was hoping that would finally be the point where regular commercial access to space was made possible. It died and I spend a couple of decades wondering if we'd die as a species on this planet. Now Bezos and Musk are racing to create a capability that promises to take me to orbit for significantly less cash, I'm all for the product and so I want the companies working on that product to succeed.

It wasn't until the decade of the idle billionaire that this even became possible.


The first article was discussed on Hacker News: https://news.ycombinator.com/item?id=12773035


that flew under the radar of Hacker News

It was on the hn front page for at least 24 hours

https://news.ycombinator.com/item?id=12773035


Related, at the beginning of Q3 Elon Musk sent email to employees urging to cut costs:

> I thought it was important to write you a note directly to let you know how critical this quarter is, The third quarter will be our last chance to show investors that Tesla can be at least slightly positive cash flow and profitable before the Model 3 reaches full production.


Although now he says (in the earnings call) there is a slight chance that Q4 will also be profitable.


Direct link to the letter: http://files.shareholder.com/downloads/ABEA-4CW8X0/310041501...

> Total Q3 GAAP revenue was $2.30 billion, up 145% from Q3 2015, while total Q3 gross margin was 27.7%, compared to 21.6% in Q2. Total automotive revenue was $2.15 billion on a GAAP basis, up 152% from Q3 2015. Our final Q3 delivery count was 24,821,over 300 more than the estimated delivery count we shared on October 2nd. Deliveries increased 114% from the third quarter of 2015, and was comprised of 16,047 Model S and 8,774 Model X vehicles. In addition, 5,065 vehicles were in transit to customers at the end of the quarter. These vehicles will be delivered in Q4.


> We achieved record production levels in Q3, rising to 25,185 vehicles for an increase of 37% from Q2 and an increase of 92% from Q3 last year.

An almost 100% production increase Year over Year, they said it couldn't be done and yet here we are.


Compare with Toyota's annual production of approximately 9 million vehicles for some perspective.


Compare with Toyota's head start of approximately 66 years for some perspective.


They're literally building them in an old Toyota plant, that at peak output was 426,000 vehicles annually.


They're building televisions in an old lawnmower plant. For the most part they built a new factory inside the old one.


More like building tv sets into lawnmower.


Not just that they mentioned that they could push that to a million cars annually but that it would be very unwise/taxing for them.


When it was full of Toyota equipment and staff.


Why does this comparison keep coming up? Relative growth and absolute count is not the same. Neither is the company in the same phase. Neither is there demand for 9MM Teslas per year.


> Relative growth and absolute count is not the same.

That's exactly why it keeps coming up. It's easy to grow 50% when you're making a relatively small number of items, it's another thing entirely when you're much larger. So for Tesla to post these growth figures is meaningless without taking the actual numbers of cars shipped into account.


Firstly, I don't think this way "easy". It may be easier. Secondly, I don't think that's obviously true. In fact, I doubt it. If you get into millions and millions you've probably already encountered and solved most every scaling problem you will ever have. When you are in the lower numbers there are multiple different levels of scaling, all of which need to be solved.

I don't think the apples to oranges comparison helps make the point anyway. It's just a throw-away. If someone writes "Toyota makes 9MM cars", I discard as "wrong thread". Even if the difficulty curve changes shape against Tesla starting right now, Toyota's production capacity remains pretty irrelevant.


One thing to note, I have a few friends who work at Tesla service centers. They cut A LOT of corners when it comes to service to show profits this quarter. For example, for the location that one of my friends works at (which happens to be one of the busiest locations in Southern California), they sold almost every single loaner vehicle as a used car.


While it's obvious that Tesla did whatever they could in Q3, it's worth noting that that's the strategy for loaner cars: they are supposed to be new, loaded cars, so that owners with a 2-3 year old car are tempted to upgrade.

Given the new sensors, they need to update the loaner fleet.


Right, I don't think that's dishonest. These were vehicles essentially already paid for by Tesla in previous quarters. The fact that they could still sell them is a good sign.


I'm pretty sure they do that every quarter. It's pretty well known in the owner community that loaners might be hard to come by around the end of the quarter.


I imagine this is because the majority of revenue is spent on growing the buisness, rather than going into profit (As profit = revenue - expenses). As Tesla still has a lot more space to grow. Same method Amazon did until recently for years.


Yes, but note that a lot of investments can be made without reducing profit.

"Expenses", in this sense is not "cash out". When you buy a building, you're just moving value from one store to another (cash -> assets). Only the deprecation (something like 5% p.a. for a building) has an impact on profits.

(although, for technology companies, investments often hurt profits more than for more traditional companies, mainly b/c typical tech investments are hard to value accurately and therefore deprecate immediately or faster – self-created IP as one example)


Excellent! Thank you for pointing that out. "Profit" is a comical term, how can we measure the net savings for humanity-at-large from such endeavors?


I wouldn't exactly call it comical. It's just that it's a political term rather than a financial one. Deciding to take a profit this year is an important signifier for the investors, who all must have the same question in mind, how long is it going to take for their investment to pay off.

As long as Musk decides to roll all revenues back into operations, investors get nothing. Musk has a reputation as someone who doesn't really care all that much about his investors, this is a move carefully designed to massage that image. Musk still doesn't care about his investors, but throwing a little cash their way keeps their voices from building to a crescendo.

As for what humanity is getting out of the deal, they already got the Model S and X, it's soon going to get the 3.


humanity is getting out of the deal, they already got the Model S and X, it's soon going to get the 3

Let's not be too breathless when we describe the cars that a few hundred thousand of the wealthiest people on the planet have purchased.


> Let's not be too breathless

Well, you know, I wasn't. The opposite actually.


... at a considerable cost to taxpayers in what was essentially a large upward wealth transfer.

It might be worth it in the end, but call a spade a spade.


In the US gas is subsidized to hell. It's not even close compared to EV credits paid out.


The ZEV credits that Tesla receives, and sells on, aren't paid for by taxpayers - they're paid for by other automakers.

Ultimately, it comes out of the profits of whichever automakers aren't producing enough low-emission cars.


Interesting. This is my first time learning about ZEV credits. That's actually pretty cool.


Gasoline is not subsidized, it is heavily taxed.


Yes, gasoline is taxed at the retail level (though not particularly heavily in the US).

However oil & gas production receives significant subsidies in many (most?) countries around the world, including the US.

In addition, oil used for things like aviation fuel, heating, power generation, and maritime fuels used for shipping, are typically completely tax-free.


> As long as Musk decides to roll all revenues back into operations, investors get nothing.

Don't investors get a higher-valued company (and thus higher share price)? At the end of the day, capital gains is capital gains, whether it's realized via dividends or share buybacks or not.


Most investors value growth as well as income. And that's especially the case for Tesla investors, who bought a stock that has a ton of growth already priced into it.


Yeah that's right. Further, it's not that Musk just tells investors to go do one for humanity. They know if they let the business grow more now, they get even larger profits later.


SCTY acquisition is locked up.

EDIT: Elon just said on the investor call "Our current plan requires no capital raise whatsoever for the Model 3 production. Solar City will be neutral to cash contributor in Q4.


I'm not sure it does. All it shows is that Tesla, may at some point in the future be consistently profitable. It doesn't change anything about the prospects of SolarCity to be consistently profitable and if I were a Tesla owner that's what I'd want to see, getting more value than I put in.


The whole is greater than its parts. Tesla, to 'own' the ecosystem, needed to eventually offer what SolarCity has or there'd be a segment in their market they are catering to.


By that logic, what's really preventing Ford and Toyota from reaching true success is that they don't own any oil rigs.

TSLA owning SCTY makes about as much sense as Toyota buying Exxon-Mobil, with a small helping of 'enormous conflict of interest.'


If ford and Toyota were marketing their vehicles to people that for the most part had substandard access to gas, or gas fluctuated enough that they were caught paying higher prices based on the time of day, they may very well have come out with accessories to deal with this, such as standard equipment tow-hitches on all cars and small gas trailers, so you could plan a trip to the gas station that might be a ways away, and for when gas is cheap.

We don't generally have that problem in the US thought, and places where that might be useful are dwarfed by the markets it's not at that point, so it doesn't make sense. Otherwise, yes, that would be a big missed market opportunity for car companies. A chance to sell more stuff, and put it all under the same financing.

That is, the difference between Tesla and the ICE automakers is that one of them has a resource (fuel) distribution problem that was already solved a long time ago, and one doesn't. That necessitates different strategies.


Right, because then Ford could sell you a backyard oil well and refinery to fuel the Focus parked in your garage.


What do you mean by true success? The more of an ecosystem you can provide for the more competitive you can potentially be. If Ford and Toyota owned or control enough oil, like say certain countries do, and they would sell that oil cheaper to you if you owned a Ford or Toyota - and yes, they could potentially be more successful.


I totally understand the argument for the merger, I'm just saying that this announcement of one profitable quarter (because they sold the ZEV credits) doesn't change anything about that merger math.


Tesla also generated cash, even if you subtract off ZEV credits. That's a big deal for a subset of investors, when a significant argument against the merger is that it's going to eat too much cash.


Most impressive here is a 70% increase in production.

Note that this occurred while Model 3 production is still starting.


The biggest news in this release is gross margin.

Gross Margin Jumped from 26.7% in Q2 to 33.2% in Q3.

For reference, MRQ,

GM gross margin: 13.9%

Toyota: 23.6%

VW: 19.9%

Granted, those are not luxury auto makers, but Tesla is more profitable on a gross margin basis. That margin fuels everything from cash flow to R&D spending. 33% for an automaker is huge.


Yup, and as battery prices drop those margins are going to get even better(although I doubt we'll see the same level on the Model 3).


Only if they can sustain prices as competition comes online from other makers.


It is going to take about 3 years for competition to reach where Tesla is right now with regards to range and charging networks.


Charging networks maybe, but range no. The Chevy Bolt that will start selling in a couple of months has 238 miles range.

GM doesn't have the superchargers, but they can afford to price these cars with zero profit for a while, if they want to undercut Tesla.


My point was that the two are important together. A 240 mile range without a supercharger network is still a car that will not be particularly useful for a long trip (2+ hour drive).


But who would drive a Chevy Bolt if they could drive a Tesla? Even if the Bolt is a better car, Tesla has the better brand name for now.


Is the federal EV tax credit a component of the margin calculations?


No, the EV tax credit never goes to Tesla it goes to the consumer. The figures also exclude the CARB ZEV credits.


Doesn't the credit go to Tesla when it is leased?


It goes to the bank that handles the lease.


I guess that is my confusion, I thought Tesla was originating the lease.


Tesla sells the car to a bank, and the bank leases it to the customer. For leases done through Tesla directly, Tesla just talks to the bank for you.


Sorry, not trying to be difficult, but this doesn't clear things up for me. Are you saying that Tesla does not lease directly to the consumer?


Yes, that's right. They present it as if it were direct, but they're really just acting as a front for a third-party bank. They don't have their own finance arm.


Ok, got it now, thanks.

Any idea why they have to list automotive leasing as a separate line item on their report? If they are selling it to a bank who is then responsible for the lease, why list it separately?


Good question! I went poking around and turned up this article:

http://seekingalpha.com/amp/article/3988503-gaaps-treatment-...

If I understand it correctly (probability: moderate?) then it's basically an accounting artifact. The fact that Tesla arranges the lease means they have to book the revenue differently. Somehow....


Nice find, that helps. My reading is that it's slightly more than an artifact: Tesla is guaranteeing a residual, so the sale to the bank is conditional and so cannot be recorded as a simple sale.

GAAP strikes me as a set of things that, alone, are good intentions but combined are more confusing than they need to be.


>GAAP strikes me as a set of things that, alone, are good intentions but combined are more confusing than they need to be.

That's probably reasonably accurate. GAAP is intended to prevent various accounting reporting practices that, historically, were sometimes used to obscure material aspects of a company's financial position. However, GAAP numbers may also present a company's numbers in ways that aren't the most meaningful or "fair"--at least in the eyes of the company. That's one reason that companies often present both GAAP and non-GAAP results.


Makes sense. And thanks for your persistent questioning, I learned some new stuff!


Thanks for your patience :) I learned some new stuff too!


Another take on the Tesla financial story:

http://www.zerohedge.com/news/2016-10-26/tesla-earnings-smas...


Cashed in a large amount of ZEV credits, for a one-time revenue bump of $140MM. Excluding that, GAAP loss was $117MM. Big increase in accounts payable. But, all things considered, that's not bad.


Good point to note the ZEV credits. The first time they showed a profit that was part of it. But those credits keep on coming, they aren't necessarily a one time thing. Other car companies that don't produce electric cars in abundance or at all will have to keep buying them until they do.


FCA had to be strong armed into building the 500e. Ford hasn't previously taken the electric Focus seriously, but word is that the 2017 model will be range competitive with the current Leaf.

I believe I have read elsewhere that although GM will sell the Bolt in all 50 states, early inventory will be going to states with ZEV mandates.

With all that, I could see a future in which those ZEV credits aren't nearly so valuable.


LG Chem the supplier for the GM Bolt battery said they expect more than 35k this sounds to me like the car is going to be aggressively prioritized in ZEV states.


Not sure why you are getting downvoted. I am a Tesla bull, but you are correct. I'm very interested about the increase in AP. Hope the conf call will get into that.


If you're wondering who's buying and selling ZEV credits, here's the California score-card for Oct 2015 through August 1, 2016. No prices:

https://www.arb.ca.gov/msprog/zevprog/zevcredits/2015zevcred...

Tesla provides 80+% of the ZEV credits transferred, and the 2 biggest buyers are Fiat and Ford. It could be that this quarter's transfers aren't in this table.


Very first line of the Update linked to in another comment,

> The Tesla third quarter results reflect strong company-wide execution in many areas. Furthermore, we expect this to continue into Q4 and project positive GAAP net income (excluding non-cash stock-based compensation) despite ZEV credit sales in Q4 likely being negligible.

https://news.ycombinator.com/item?id=12800234


I'm not sure your point. That they expect profits to continue without the credits? I guess we will see. Not sure how this invalidates anything I wrote. I care less about projections than financial statements. Those credits composed a good chunk.


It's not a wild prediction, given that the new sensors means another surge in orders, which gives Tesla a chance to prioritize higher-margin, more expensive cars.

I don't know how many potential buyers were waiting, but I was expecting a bump in sensors and compute power sooner than later.


Er, should GAAP net income include SBC? Otherwise, it's non GAAP.


Dude (or dudette). I have no idea. I was merely responding to the assertion made up yonder. I was pointing out that while possibly not an incorrect assertion it is one that is contradicted by the estimated projections of the very first line from the report under discussion.


it seems like i see this basic comment every time Tesla reports earnings. this specific credit might be a one-time thing, but they somehow find another one every quarter.


Do you have a list?


Can someone explain what this[0] means? It would seem that when you buy the car, you don't own it after all.

[0] http://www.huffingtonpost.com/entry/tesla-self-driving-car-n...


When you buy a lot of computing equipment, there's a clause in the contract saying that you can't use it to control a nuclear power plant. Do you own the computer?


I think that is because of the law.

This clause is more like Microsoft saying you can't use Windows to write software for Apple computers.


It doesn't change the fact that you still own the hardware on which the software is executed.

You own the car and the computer but you don't own the autopilot software or windows that runs on the hardware.


That doesn't mean people can't be upset that there are limitations placed on how you can use the software. Imagine if you were told you couldn't use Microsoft Word to write about certain topics, for example.


At least in the UK, such a term would have to be brought to your attention before the sale, very clearly, for it to be part of the contract. Writing that in the manual would have no effect.


Interestingly, in the UK paperback books have a little contract in the front saying you can't rebind them into hardbacks, while in the US such a contract is forbidden by the right of first sale. The moral is that these things are less obvious than one would think.


The UK certainly has some weird laws, but that sounds...of dubious validity. Like roughly the equivalent of "not for individual resale"; a contractual matter between the supplier and the merchant, not something that could even theoretically be enforced on any buyer.


UK copyright law is old and unusually strict. E.g. crown copyright can be perpetual.


I doubt strongly that this would have any effect either, for the same reason. My legal knowledge is a little old fashioned and sporadic, but the classic authority on this used to be 'Olley v Marlborough Court Hotel'. Worth a read, if only for the way Denning used to write his judgements.


Same issue that many embedded devices have, you own the hardware, not the software to power it.


This is extremely anti-consumer, and I don't understand why you are being down-voted.


A point of clarification: you are able to use the car with a human operator in any ridesharing service. Tesla is saying that you can't share out your car on Uber's platform, with it operating at full autonomy, while you chill on your couch.


... Unless you do it via the TESLA NETWORK platform, paying an X% cut of your revenues to TSLA.

This is sharecropping, and is extremely anti-consumer.


Just Uber, or any (speculative) fully autonomous rideshare service?


That makes sense, thank you.


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