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Tesla raises $1.8B (reuters.com)
323 points by rising-sky 6 months ago | hide | past | web | favorite | 194 comments

Let's talk about Solar City.

Their product is intended to be a solar roof, indistinguishable from a typical roof from street level. Costs look to be in the $50,000+ range. The marketing is that homeowners will not only drive electric vehicles, but go completely off grid by storing the energy collected into Tesla batteries.

In order for this to make financial sense, there needs to be an ROI for the homeowner. So... how long will it take the homeowner to recoup that, say, $75,000 investment?

I am currently spending about $125/month on electricity. That's $1,500 per year. Two Tesla's would run through about $1,000 [0] of electricity in the same year. That's $2,500 per year I'd spend on electricity to my grid operator.

That's 30 years to break even.

I could probably buy an equivalent roof-mounted system for half that, and the batteries, and see a return in 15 years. Is the aesthetic worth the longer term payoff?

Or would Tesla see more uptake in new home construction where the cost of the roof can be amortized into the construction cost?

I understand that Solar City has a different financing biz model, are they going to continue with that.

[0] http://www.greencarreports.com/news/1090685_life-with-tesla-...

Homeowners often pay extra for aesthetics that appeal to them.

But lets pretend they don't. How quickly does a normal roof recoup its costs? For at least the beginnings of a fair comparison, you should look at recouping the surplus over the normal cost of a roof.

Also, how are you spending $25k on batteries?

This sort of comment seems to attempt to try to take the most negative reasonable possible look on the situation, then throw in a bunch of exaggeration and unreasonable suppositions.

If your point is that normal roof-mounted solar is going to be cheaper, then yes, they pay for themselves in much less than 15 in many locales. But your solar panels plus new traditional roof are not going to pay for themselves in 15 years unless it's an amazing market for solar.

Normal roof mounted solar doesn't pay for itself unless you plan on staying in the same home for a longggg time.

It pays for itself when you sell the house.

Unclear. It may be a negative if it looks ugly or if it's an old system.

The complicated financing deals with some solar can also be a problem when you sell if you don't actually own the panels.

That used to be "common" knowledge with pools in my area as well... now they are a liability/nice-to-have based on one's perspective and don't add a dime to value.

Pools create costs, solar removes costs

I've always heard that pools decrease the home value.

How so? Unless you assume the buyer is too stupid to do the same math? Then you might as well go full-blown McMansion.

You can be guaranteed that most buyers don't do the same math. You see this all the time where e.g. things like extensions or other work adds substantially more value than they cost to carry out.

My home's roof has another 20 years on it. So I'll be tossing half of it's lifetime if I replaced it now. That's partly why I mentioned new home construction would likely be an easier market. Moreover, it's a 3000 sq ft ranch, with larger than the average roof area. The Tesla roof is likely going to start at $50,000, (I said "$50,000+") so I'm thinking $65,000 for my house. Batteries are probably in the range of $10,000 for enough to hold charge for the cars and run the house.

They have a calculator. Check it out instead of guessing wildly

I did the calculation back in May when this article [0] came out and recalled the rough numbers correctly for my home (they changed the calculator on their web site, now only talks about the value of electricity the roof would produce).

The quote from the article is: "The average home in the United States is 2,467 square feet. According to Tesla’s handy solar calculator, the new system will set an average homeowner back $51,200 for a 70% solar roof. The company also recommends purchasing the additional, but optional, Powerwall battery to store all that new energy at $7,000, bringing the grand total of installation to $58,200."

My roof is much larger than the average (2,750 livable + roof over garage) because mine is a ranch and the average includes 2-story homes which will have much smaller roof area for the same home square footage. So it's quite reasonable to get from an average cost of $58,200 to $75,000 for my specific home.

[0] https://www.forbes.com/sites/sleasca/2017/05/16/tesla-solar-...

FWIW, I have some colleagues who are researching how to reduce energy usage in buildings. It's a lot harder than you would assume just based on pure math, since you have to take Jevon's paradox [1] and other "psychological" effects into account. I.e. when energy gets cheaper, you use more of it.

In my area (same latitude as Anchorage, ~ 65% of the incoming solar energy as in San Francisco), they calculated that solar roof panels on a typical house doesn't break even over a 25 year period, you're still thousands of dollars in the red.

Only the "cheap" air-to-air heat pumps (AC in reverse) and solar heating of your hot water give good ROI. What both these have in common is that the purchase and installation cost is much lower than e.g. rooftop solar.

[1] https://en.wikipedia.org/wiki/Jevons_paradox

Reminds me of this 2010 New Yorker story about Saul Griffith:


Saul did a more recent long now talk on some of the rough numbers for homes: http://longnow.org/seminars/02015/sep/21/infrastructure-and-...

Ah, thanks -- hadn't seen that before.

Why would you take those into account? Using more energy doesn't mean it "takes longer to recoup", because now you're getting value in the form of additional energy to use.

Are you really getting value? Or are you just not bothering anymore to conserve a resource when it's less expensive to waste it?

Well, you could argue the same if I double your income, but you spend the increase. Like it or not, demand through consumption is the root source of value in capitalism.

I doubt you would need all 3000 sq ft of roof to be solar.

Let's take my use case into account. Home built in 1974. Currently needs about 40-50k in "greenifying" it. I just put a metal roof and radiant barrier on it. Total spend on this was 70k. My inefficient home in the Houston area costs between 200(winter) and 600(august) to heat/air condition. It's not a mansion but large enough for my family (7) to live in. If the option for a solar city roof existed when I did this I would have jumped at the chance to use their panels. Even if it only subsidized my electric bill I would feel like that is a win. Its easy to get caught up with numbers/profits when it comes to electric tech But I think that people aren't as unforgiving with traditional building materials as they are with new/green tech. I'm not a Tesla apologist but having an option for electric roofing is a win in my humble opinion.

It can take 30 years to break even. It's attached to a house, which will be around at least that long.

When you sell that house in the future, it's STILL worth $2500 a year off the electricity bill. The house buyer will be willing to pay more for the house for that; if they keep the house for five years, they will have spent $12500 less on electricity, and they'll still have an electric roof to sell to the next buyer. So you should be able to recoup a chunk of that investment when you sell, because a house that can fuel cars using sunlight is worth more than one that can't.

What will the power generation capacity of that roof be after so much time? Don't solar panels wear out?

yes they do and its a very valid question as to when you need to replace the tiles.

Realistically, Tesla's solar roofs will probably be usable for 30 years before needing to be replaced.


Obviously probably solar but it would last long enough to break even.

And, of course, you've got a free roof included with the purchase.

If it works perfectly and you never have to replace anything, yes.

But you aren't making the sort of "profit" you would if you just put that money into the market.

Actually the solar roofs are made to be about the same cost or cheaper than conventional rooftops WITHOUT factoring in the money saved from the electrcity. So anyone that needs a roof replacement (5 million households/yr is the market size iir) might as well get solar roofs. In that sense their ROI is immediate and they have nothing to lose. It only doesn't make sense financially if they weren't planning on roof replacement and they are doing it solely for solar roofs, but Tesla is not marketing it to those folks and even admit that that won't make sense finacially. Those people can get Tesla's regular solar panels and their soon to be released high efficiency(~22%) solar panels.

My roof is slate and nearly 100 years old. It'll last another 100 with minor maintenance so removing it would be negative ROI because of increased maintenance costs vs what I have today.

Still, I'll gladly swap the asphalt roof on my garage when the early adopters drive the price down enough... As an early adopter of everything from CDs to minidiscs I think I'm sitting this one out for a while longer. I don't need the solar roof equivalent of $5 blank CD-R media or Jaz drives; one is a few cents each now and the other was a failure.

I could be wrong but it seems like the better payoff is in waiting a little longer, like 2-5 years.

Assuming your garage roof is flat, unfortunately it won't generate too much electricity. The panels need to be at right angles to the sun for some of the time (even better if they rotate), and except in some parts of the world near the equator the sun is never directly overhead.

They don't needs to, they're just more cost-effective if they do. For now, anway — sufficiently cheap future photovoltaics could well be cheaper than the cost of adding a tilt (already cheaper than adding a sun tracker, which is why grid-scale solar plants don't track the sun)

Only true if you look at designer roofs.

I got 30 year shingles on my roof last year. About 2000 square feet (I know roofs are measured in squares but I forgot the square number). Cost like $6500 installed. Solar city roof is like 45k.

Sure it looks better. And if you compare it to a 25k nice looking roof, the math is way better. But tons of us do not have 25k roofs, we have 5-10k roofs..

Same things as with electric cars, 10 years ago Tesla started as a luxury car manufacturer and now it moves to wider and wider auditory. And there's plenty of 25k roofs for them to be busy for years...

Also, I think math for new houses should include the fact that property is usually mortgaged. So, you take part of the cost that's over 25k and it's mortgaged for 25-30 years. You don't pay $30k at once, you pay $100 a month for it, and it saves you $150 in electricity. So it works right from the start. Now there's plenty of roof space for the beginning and let's see where tech will be in 10 years.

For the exact same reason Tesla won't be able to sell the Model S, because taking the difference between electricity and petrol prices, it will take 50 years to pay off the price difference from a Toyota.

Tesla's sales of model s's seem to have peaked at a level where the model s may never have a net profit margin. (manipulated gross margin figures not withstanding)

If the market isn't big enough the company isn't viable.

Personally I think the long run place of private cars in a TaaS world is questionable.

Bad comparison. You can buy renewable from your electricity provider so the entire 'being green' factor goes away in this comparison.

People buy Teslas because they are fun to drive/nice cars and they get environmentalism bragging rights. There is nothing special about a solar roof compared to paying the utility for the renewable source.

> Tesla won't be able to sell the Model S

Citation needed.

Pretty sure that was sarcasm :)

Well damn, live and learn. While I've gotten very good at detecting online sarcasm, it's still not a perfect game. (:

The Tesla roof is not positioned against asphalt shingles and the cheapest panels you get. It's positioned against high-end roofs, some of which are outrageously expensive. People buying high-end roofing (hint: they're rich) are much more likely to care about aesthetics. They're also unlikely to actually care about the cost of electricity but would like to Do Something For The Environment.

If you don't understand the Tesla roof, you're probably just not part of its target demographic. Is there enough of this demographic to make it worthwhile? I dunno, but Elon and his neighbors have a lot of money.

I see it a little differently. What they seem to be after is the dollars that homeowners currently spend on both gasoline and electricity. They can wrap that up nicely if they can offer the batteries and shingles at a monthly cost that is at or below the gasoline spend. That's about $5,000 in gasoline (2 cars, 18,000 miles @, 22.5 mpg, $3 gal), plus $1,500 in electricity for the home (very round numbers) = $6,500 annually that is in play.

In 10 years, it's feasible that middle class homeowners will have 1-2 electric cars. So if Tesla can offer self sufficiency in energy, which is really what their play is, for a cost that is similar or less than $6,500/year, they have a market.

What it all turns on, which wasn't immediately obvious to me, is that the electric cars are appealing both in performance and style. If not, mass adoption languishes, and Tesla's $1.8 Billion ROI may languish as both the gigafactory and solar shingle manufacturing sit idle.

It's somewhat heartening that Model 3 has such a great initial reception in the press. But what a gamble...

For people who are going to pay for a fancy new roof anyway, the solar is almost free.

For people who were going to pay for a regular roof anyway, the tesla solar roof is still very expensive compared to a regular roof + regular panels

This was my take on it when pricing things in Austin, Texas.

For people who don't need a new roof at all, tesla solar roof is nonsensical.

> I am currently spending about $125/month on electricity. That's $1,500 per year.

That right there is not the market they're targeting. You'll also see very few solar panel pitches in Washington and Oregon, as the hydropower costs are so low, the solar system will take a while to recoup.

Think sunny but AC-dependent homes of Southern California, Arizona, Nevada, Nevada, New Mexico, Texas, Florida or Georgia. I live in Southern California and from our local NextDoor many residential electricity bills are running at $600-700 a month pre-solar. Granted, the houses are in 3,500 sq ft and above, but frequent A/C needs combined with SC Edison's high rates are driving many to rooftop solar and powerpacks.

Throw in an electric vehicle or two that you prefer to recharge at home on a nightly basis and those kWh add up.

>That right there is not the market they're targeting.

They think they can anyway. You have solar salesmen all over you in Massachusetts and I'm in exactly the same situation. I have basically no AC--I may pop in a small window unit in a heat wave--and pay <$1500/year in electricity. And I don't drive a huge amount (and when I do it's often weekend trips) so I'm not seeing an electric vehicle in my near future.

Hard to see the payoff with solar.

> You have solar salesmen all over you in Massachusetts and I'm in exactly the same situation.

Solar is heavily subsidized in MA, one of the best markets to have it installed if you're a homeowner.

You can cut maybe 5-8 years off that if you factor in the cost of non-solar roofing. I doubt too many people are signing up to replace their roof if it doesn't already need replacing.

How much would it cost for a roof-mounted device that makes gasoline for you?

Add your local transportation bill to your electricity bill and now tell me how many years it is.

You can use a Tesla on the grid, and potentially see quicker ROI, depending on your local per-kW rate.

It would lengthen it for me. I buy cheap subcompacts with good gas mileage. My total cost (annually) for fuel is ~$1k at which point the gas is basically free due to the $12k price difference.

The cost difference between an electric car and a cheap compact car is so high that it pays to fuel the compact car for 100,000 miles +.

That's an impossible question to answer without running real numbers. It might be cheaper to buy the gasoline (or electricity). Or not.

Yeah, I kinda think they and the investors are hoping that electricity demand increases and the tech becomes much cheaper while their RnD is funded by millionaires who care about the aesthetics and the environment.

Which is basically how Tesla started - toys for rich people funded RnD until they could scale and get their costs down.

It's still how Tesla exists now until they can deliver the 3 at scale.

While I'm not typical, I think there are a good number in a similar position:

I've got a house with a roof approaching it's end of life. I use 4MWh/month. My electricity bill goes between $1.2k and 2.4k. A Solar City roof is about equivalent in long term (20-30 yrs) cost with a much better warranty.

What on earth do you use that much electricity for?!

My guess is cryptocurrency mining or grow lights

You can actually "hire" a company to put solar panels on your roofs. They not only install it for you and maintain it, but they take responsibility for the upfront costs. "Hire" is in quotes because in many place you don't pay them anything so much as pay a portion of the savings you got by using solar.

To me, that isn't really a technology thing. It's a financing thing. Banks and insurance deal with smoothing out costs all the time, and I think that's all you really need to make it work. All you really need to do is mortgage the solar panels and the panels will pay for their own premium.

Financing makes lots of things work (for better or worse) for many people that otherwise wouldn't. Like buying new cars.

On the other hand, under most circumstances, if something doesn't make sense for someone with cash in the bank who is willing to put that cash down on the barrelhead, it still doesn't make sense because someone obfuscates costs through financing.

I don't have a link at hand, but there is a company offering a metal-roof-based solar roof product at about half Tesla's price. My limited understanding is that it looks like a metal roof -- said roofs having been growing in popularity.

I guess I should add that, as best I recall, they have not yet actually launched consumer sales, although I believe they did/do have a working product.

(Good, and properly installed) Metal roofs (non-solar) are... I seem to recall from 5 or 6 years ago, about twice the price of an asphalt shingle roof. But, good quality and properly installed, they can last 50 years. If this Tesla substitute were to have a similar lifespan and electrical output comparable to Tesla's or at least enough for self-sufficiency, I could see paying for it.

Perhaps a principal problem/consideration being how far technology will advance during that time and will it be desperately obsolete long before then. The other being, will the company be around to provide needed support for anything like that timeframe?

Not just amoritized though - less the cost of alt new roof, maintenance, and replacement. I believe Tesla is offering a lifetime warranty

It straight up doesn't make financial sense unless there are massive subsidies. I live in the Desert Southwest where we have 300+ days of sunshine a year. The Industrial Commision has been "compelled" to lower the rates of energy going back into the system. That is, we pay 08-14 cents a kWh with some BS pricing schedules that need a Gantt expert to decode... WHILE we get paid somewhere between 2-5 cents a kWh.

Solar doesn't make sense for me in other ways too... when I average my electricity usage over the year, it is around $98 per month for a family of 4, 2300 sqft home, in Arizona. If I go with solar city my bill would be $120 and I would be in a lease for 20 years. Nah...

Forget about buying the equipment myself as well due to the reasons above. The time that would be required to recoup the "investment" just isn't worth the hassle.

This is the point, the amount of money used for this acquisition could have been used to bring the Model 3 to market quicker and make batteries in Reno quicker, not to mention any unforeseen problems with production, scaling, and recalls go away that much quicker too.

Which is the bigger market? Solar or cars? They might both be similar sized, but demand for solar sure would have been helped by having the Model 3 on the road. Hope the acquisition doesn't hold Tesla back, like most of the market thought at the time.

(Pacific time zone waking up....)

Either you forgot the cost of externalities from the nonrenewable power generation that is likely supplying your electricity today, or you believe it's zero.

Tesla's mission isn't to make cheaper roofs; it's to accelerate the transition to sustainable energy. If you place any value on that mission, then you should be able to quantify it here.

It's only 30 years if the cost of electricity stays low. Considering electric cars are coming in much faster than utilities are building new electricity generation infrastructure that's likely to be an incorrect assumption. Prices are going to go up a lot.

That doesn't change the solar-city-versus-an-alternative question, but it makes the both more attractive.

The analysis I read had Tesla roof plus batteries closer to $60k for an average house plus batteries.

For payback, you could also subtract the cost of a standard roof assuming your not ripping the old off simply to get solar. That takes $10 to $20k off for many people. Plus traffic feeding depending where you live. So for a new build it would drop the payback time quite a bit.

It might make sense to others, even if it doesn't for you. I live in Hawaii where the cost of electricity is nearly three times the national average. My breakeven point would be ten years. And there's the added benefit of having some independence from the grid, which would be nice in hurricane season.

You are missing the point.

Tesla customers care about money as much as Apple customers do...they don't.

What they care about is being part of the future...today! Tesla customers look at ICE cars and grid dependence like Apple owners look at feature phones...pity full.

That's what I disagree with. Tesla customers are just looking for the next status symbol.

I have talked to enough tesla owners and fans to tell you that they haven't even heard of Renault Zoe or BYD ev300. And they would never consider Chevy bolt. Its all about the brand name, and not about futuristic electric cars. Tesla could start making ICE cars and they will still buy them

Go look at the UI/UX of a Tesla and compare it to the old car manfacturer crappy UI in Zoe. Compare range. Fast charging options. Fun of driving (Zoe has 16s 0-100km; that's much worse than my old small city ICE). And that's before comparing to Model 3's soon to be only a bit higher price for much better experience.

You don't know what you're talking about. Drive a Tesla before lecturing about how I'm looking for a status symbol.

People that want grid independence are quite selfish when they simultaneously demand that the grid pay them retail rates for excess electricity. They are free riders on the transmission and deliver at suboptimal times.

IMO grid independence is not a laudable goal because it means no scalable energy storage and production systems. Particularly when someone still wants the option to use the grid at their convenience. The maintenance burden is now spread across fewer paying customers with the same number of lines to maintain.

What they care about is being part of the future...today!

And why is this bad?

No one has told that this is a bad thing in this discussion.

People will buy the roof for status and it will likely be used on new luxury homes.

Don't forget I think the roof has a lifetime warranty too. So you'd want to factor in the cost of not replacing your roof one or two times.

What is the ROI on a louis vuitton handbag?

Tesla peddles luxury good for price insensitive people.

You want a solar roof that looks good - tesla is the only game in town right now.

Most likely going for another Tesla playbook where wealthy customers (what's $25k on a $3MM+ house?) buy in and subsidize future development.

The key is how the solar is financed. If the customer's monthly electric expenses are the same as before (or close), many would go for it.

You're forgetting that they're expected to outlive the usual roof's lifetime, which can be several thousand dollars.

On your comment about homeowners leaving the grid, electrically --

I personally haven't heard this promoted by Tesla/SolarCity, though I have heard them promote reducing loads on traditional energy sources.

I have however heard it promoted that people with installations like these roofs will be able to earn dividends on a microgrid. I haven't worked out the numbers yet myself (as it's kind of a mercurial interest, but something I keep my eye on), but I have heard a few good talks on the subject and noted a few experiments ongoing relating to just that model.

In the microgrid model, electricity contributors and low-energy users stand to earn for their habits and are paid by other users and excess users on the same microgrid -- I hope I'm summarizing this correctly.

In this last deck there is particular mention of excluding the utility service from the energy trade by utilizing blockchain tech to aid in the trade operations, so that the homeowner directly sees the benefit (at least, directly in some sense.) I recommend looking him and that centre up, there's a lot of interesting work being done -- it's just unfortunate it's not happening faster. It's hard to maintain the public's belief.

I guess I digress from the issue of the cost of the "invisible" roof vs. mounted panels. I wanted contribute to questions of the cost rebates, though.


(0) Brooklyn Microgrid - http://brooklynmicrogrid.com/, https://www.nytimes.com/2017/03/13/business/energy-environme...

(1) Ryerson University Toronto - http://www.ryerson.ca/cue/research/sponsored-projects/contro... (more info: http://www.ryerson.ca/ryersontoday/data/news/2015/03/2015030..., http://www.ryerson.ca/cue/ )

(2) I know of number (1) because I recently heard a talk by Dr McGillivray on microgrids -- he's the former executive director of the CUE at Ryerson and current "Distinguished Visiting Professor, Faculty of Engineering & Architectural Science" there. I didn't know this, but he has been promoting the idea since around 2010[0] and is still active in research and promotion of the system[1a,b]. Ontario (Canada) is running programs open to funding these systems for research and social benefit[2]


[0] I couldn't get the file to link properly, sorry. Here's a download link: https://send.firefox.com/download/245d16f808/#tFZ6GdEh1l2B1v...

[1a] https://eda-connect.ca/wp-content/uploads/2017/03/Trends-in-...

[1b] http://www.thinkingpower.ca/PDFs/Roundtable2016/Microgrid%20...

[2] http://www.forms.ssb.gov.on.ca/mbs/ssb/forms/ssbforms.nsf/Ge...

ITT: people who don't live in areas that routinely get hail and periodic roof replacements.

Well, yeah, an area that routinely gets hail and requires roof replacement more often would not have as long of a window for a solar roof to recoup the investment.

And the parts of the US that one would expect to dominate HN are overwhelmingly those that don't get hail.

Solar City claim their tiles are far more hail-resistant than regular roofs. If they can fulfill that promise could that make them worth it?

It's interesting to me that in May of last year Snap, Inc raised about the same amount of money. I've never understood how some companies need so much money. To me it makes sense for Tesla. They are building actual cars and that is expensive. What on earth did Snap need a 1.8 billion for?

What on earth did Snap need a 1.8 billion for?

To put it in a pool and swim in it, like Scrooge McDuck?

Precisely. It looks a little something like this:


Hahahaha. Someone needs to take the first 27 seconds of that video and make it into a meme for situations like this.

Did you see how much Snap was/is paying on infrastructure? It is _insane_. $2 billion over 5 years.

The amount of waste that is obviously happening there is maddening.

That's more than maddening. One company is working on the forefront of an entire ecosystem transformation in a 100 year old entrenched customer base the other...well, let's just say in another 100 years you'll be lucky to find anyone that knows what snap was.

Depends. If Snap fails, and Facebook gets a monopoly for centuries due to network lock-in, we'll know Snap as the last competitor to Facebook.

"Competitor". Externally funded R&D for Facebook.

True - but can you ELI5 for everyone - even though we can infer based on being in tech and can see this - but spell it out for others...

$2 per user year?

From Twitter:

Chris Moore‏ @ctmoore91 Aug 10 More Quick math on $SNAP marketing numbers: - $3.60 per existing user - $89 per acquired user to make revenue of $1.05 per user in... 3 months

That's a little on the high side, but it's not surprising. I work for a company that pays even more for new customers, though we have much higher revenue. An "acquired" user is like an asset when you sell your company.

That's not the same thing though (infrastructure cost).

Just imagine how much profit Amazon would make if it were only AWS and no retail operation.

> What on earth did Snap need a 1.8 billion for?

because it's available.

Last week snap was being shot down by some finance guy. They got bubble like fame, and failed to show how to convert user base into money. They're basically worthless

Well, the CEO fluff on the ER call was amusing. Probably doesn't help to brand yourself the same thing as a food stamp program, but I digress.


I would dump that shit if I owned it.

Burning (through) it mostly.

On what though?

This[0] discussion from the other day has some interesting comments about employee compensation. And then there are acquisitions like this[1], in addition to the infrastructure costs that have been mentioned.

[0]https://news.ycombinator.com/item?id=14983800 [1]https://techcrunch.com/2017/06/21/snapchat-buys-zenly/


Snapchat is the social networking equivalent of the Kardashians.

Is there a difference between 'raises' and 'borrows'?

I read this as Tesla took investment of $1.8B (presumably in return for shares), but in this case they have issued $1.8B of bonds, so they've effectively taken out a loan.

Quite a few of the "investment" rounds for companies have terms which look like loans more than ownership as well. It can get rather fuzzy distinguishing one from the other.

Yeah this was just a loan. The first time for them that it wasn't attached in some way to shares.

Not only that it is unsecured "junk" debt, and the interest rate is incredibly low at 5.3%.

5.3% is not incredibly low for a corporation borrowing 1.8 billion. it is pretty high which is why investors are jumping on it.

This adds $95 million in interest expense per year which is pretty substantial.

It is incredibly low for bonds in the "junk" trough. For companies with Tesla's credit rating, you're typically looking at 6.5-7.8%. If you're GE, you're of course going to pay a lot less, but GE has a much more robust credit history.

"Raises" could be a debt or equity event. If you're selling portions of a company (equity) you would call it a "raise" but you're not "borrowing."

Tesla sold $1.8 billion of eight-year unsecured bonds at a yield of 5.30 percent.

That's considered junk bond level today. Historically, it's not a bad interest rate. It's an OK deal for Tesla.

Yes, it's a testament to how strange the financial environment is that people would lend such money speculatively at low interest.

Those are the prevailing rates but I think the bond holders are getting a lousy deal considering tesla's actual risks

It's hard to quantify those risks when you have a rock star CEO. As long as Musk can keep the hype train going he'll be able to borrow money cheaply, which will make today's investment less risky.

Doesn't seem to be phasing internet financiers: they're all in on this issue on Reddit.

Shorts take note: Tesla has access to dumb capital that you haven't necessarily factored into your models.

"Tesla aims to boost production to 500,000 cars next year, about six times its 2016 output."

What is the new goal to 2020? 2 years[0] ago they were expecting delivery 500,000 cars in 2020. If they will do that this year, maybe their new goal is to finally put a foot in the top 20 group of world manufacturers[1]?

[0]http://www.businessinsider.com/everything-tesla-promises-to-... [1]https://en.wikipedia.org/wiki/List_of_manufacturers_by_motor...

I wonder if they mean Tesla is going to actually produce a half million cars next year, or if they're going to ramp up production to a half million cars per year by the end of the year.

The latter.

certainly they're going to ramp up the hype 1.8B loan to produce how many cars? How much they make on each car sold? How much of it would ever go to paying their debt instead of being burned in place?

1 million by 2020

It's heartening to see financial markets helping a company with such potential for positive externalities. Sometimes maybe the system does work!

Tesla, just like any other successful company games the system well. The system is neutral at its wildest.

The seventy first worthless coin offering just made umpteen million dollars and this site feels it's the market speaking truth to power. The most innovative industrial manufacturer in decades raises money, and it's "gaming the system". Right.

Your poetic parody reflects a truth, that's why I stated it is neutral. Gaming the system isn't inherently evil, it wasn't an accusation of bad ethics. To clarify my point, I'd like to paraphrase my previous statement without metaphors.

Many evil/fraud companies game the system to access unjust benefits. But every now and then one is able to find some company rising among the other, deserves appreciation. It is only natural to think that such companies must have analyzed the system more than the ones they surpassed, otherwise they would go unnoticed among all the cheaters.

Back to metaphor; The system is like a blade: a killing device on a killer, a life saving device on a surgeon. It is true that there seems to exist more killers than savers.

Positive externalities like 8-year-olds mining cobalt to make the batteries?

Do you have any examples of eight year olds habitually employed mining cobalt? Tougher, can you tie that in to Tesla with confidence?

Disclosure: I own quite a few shares in Tesla. They were only ~24.00 USD when I bought them. I admit my bias.

There was a discussion on HN a few days ago dealing with this issue.


Thank you. I missed that one. I do notice it is specifically about cell phones, though I suspect it is difficult to tell where else it is used.

I don't own enough shares to pressure them into ethical sourcing and, honestly, hadn't even given it much thought until just now. I only have ~850 shares. Which, while a bunch, isn't going to influence much.

It does make me curious.

Yes, that article isn't specifically about automotive batteries but I figured it was still fresh in reader's minds. It wouldn't surprise me if ICE cars had similar problems with conflict minerals, particularly in the catalytic converters.

I'd love to see a really exhaustive study comparing the environmental effects of ICE and EV cars when taking into account the entire product lifecycle from mining, transport, manufacturing, power generation and distribution, refining, etc. I've seen studies comparing a few of these things but nothing that goes from the time some alloy is mined or oil is taken from the ground through the entire life of an automobile.

There are a lot of externalities but here's a recent one with a bunch of information.


This is a bit older and more about energy consumption.


I'm not sure what to make of this argument. Should we only attempt to convert to electric automobiles if it means everything involved is optimal? Are you implying they are mutually exclusive?

A little imprecision in the article: "The company, founded by Musk in 2003" is untrue. Musk joined the company after it was funded.


'....a Tesla representative said that Eberhard and other principals in the dispute have come to an agreement. The company did not reveal any details of the resolution, except to say that there are now five, rather than two, agreed-upon "founders" of Tesla.'

Just because he pays them to say he is a founder doesn't make him one (in the technical sense of the word).

But also, it doesn't matter that much, few would disagree that JB and Elon has done a tremendous amount for Tesla and that it wouldn't exist without them).

Precisely. Tesla today is today's Tesla because of these two gentlemen.

I remember that there were quite a few EV startups back in the day - aside from Tesla next none of them exist today.

I keep seeing that. I'm not sure where it comes from. You're correct, obviously. I'm just not sure why people think he was a founder, or the founder?

I'm surprised to learn he wasn't, but I hadn't given it that much thought.

I thought it common knowledge. That's probably a mistake on my part. I know it because I invested pretty early on. My mistake is in thinking others would have read the history and knew the details.

I'd like to hope a journalist would know, however. Well, at least research it. I'm pretty sure Wikipedia knows all about it.

Still, I think it's a mistake on my part, to think others would know - more so, given the pervasiveness of the misinformation.

Musk is a genius business man... You should not underestimate his skill of creating illusions.

I for myself only learnt this ~2010... Before I always thought he was the founder...

It's not much of an illusion. Tesla was still working on hybrids when Musk joined on. For better or for worse, Tesla as it is now is Musk's baby. Not untruthful to say he was a cofounder, though with a heavy caveat.

I bought a baby, sure, still my baby. But please not say I gave birth to the baby. Fact is fact, period.

More like adoption.

The interesting question is whether Musk himself portrays himself as the founder. I don't think he does? There are lots of stories though of how people take a business and make it huge, and take credit for being the founder when they weren't. The most popular story these days may be Ray Kroc due to his work at McDonald's and the corresponding movie The Founder.

I pay moderate attention to the press surrounding him and I don't believe he portrays himself as the founder. Maybe, perhaps, portraying himself as the driver.

He does, I think, deserve lots of credit. Him not being one of the originals in no way detracts from his work and skill.

Wikipedia lists him as a founder?

5.3% counts as junk these days? Wow, I miss the 13 - 22% days :-). Certainly shows a lot of confidence in Teslas ability to produce Model 3's. It also is going to squeeze the short sellers a bit harder as the capital is going to push out their 'dead by' dates. I feel no pity for them.

If there are any college student hackers interested in pushing boundaries MHacks is going to allow you to hack a Tesla this September in Ann Arbor.

Sounds like fun, I took the time to apply on https://mhacks.org.

The mhacks.org site could use some work though:

- no password reset

- you lose your profile after saving it and re-navigating

Are applications open?

Go to mhacks.org and create an account. According to the FAQ that will let you then apply.

Maybe they can use it to pay their workers fair wages [0] or to improve work conditions to be not twice as bad as in the rest of the industry [1]

[0] https://www.forbes.com/sites/alanohnsman/2017/02/09/unionizi... [1] https://amp.theguardian.com/technology/2017/may/24/tesla-fac...

"The Guardian reports that new data shows illness and injury rates are now 32 percent better than the industry average, too.

And at any rate, Musk has argued, Tesla staff earn equity. That bags them as much as $100,000 more than the average auto worker over a four-year period."


Do they have incentive to do that?

Not really, Tesla is very much like Apple in the sense that they expect their employees to be 100% compliant and not "overshare", with overbearing corporate security that'll handle you if you step out of line one iota. I don't see why Tesla would change, apparently working conditions are terrible at their factories: http://www.thedailybeast.com/workers-say-tesla-is-trying-to-...

On a vaguely related tangent, the sheer duplication of work I saw at Apple was impressive, their corporate culture has secrecy so ingrained that large chunks of the company are duplicating eachother's work needlessly, out of fear of communicating effectively.

Funny you should say that about Apple. I think about the saying about software reflecting the organization in structure. Apples effectively static binaries are a bit the same thing. (The ".app" folders.) They contain everything needed to run the application, no libraries are shared between apps. Massive waste, but at the same time, the system is more robust this way. Apps can be upgraded and redone without caring about potential sharing and conflicts with other applications.

This has benefits. I think it's the same with organisations. The secrecy and keeping to yourself, also means you are free to do your thing and there is less need to communicate, "build a shared view" and so on.

That's the general direction that things are headed more broadly with containers. It's sort of amusing how this came about because containers are really an outgrowth of OS virtualization work while app virtualization never really went anywhere in a mainstream way--but os virt (containers) has really developed into a way of encapsulating apps.

Storage is cheap. It's much more efficient overall to bundle apps with essentially everything they need to run--modulo the kernel although there's some debate about that last point.

The workers agreed to work for what they are paid, voluntarily. How is it not fair exactly?

If some other company is willing to pay them more, they can go there.

So much for their running out of money. Impressive that they can get it from the bond markets. Highlights maturity as a company.

More likely it suggests they would have trouble selling that many new shares. Even Musk has said their share price is higher than they deserve, so selling shares makes more economic sense.

But this amount will only cover their loses for a few months and they probably want to demonstrate their ability to make future profits before diluting their stock significantly. If they sell equity too quickly, it'll look like the stock is crashing and encourage even more selling.

This is how Solar City floundered at the end - under crushing debt from junk bonds.

Isn't debt harder to raise than equity? My impression is that the risk tolerance for junk bond buyers is somewhere between high grade credit and equity, perhaps closer to equity. Certainly more conservative than growth or venture equity.

I'm the first to admit that I don't follow their specific financials to know how much runway they need to be profitable.

Normally, I would say that's the case, but Tesla stock isn't normal. When they sell debt, their stock price goes up.

Debt has one big advantage over equity too, which is that if the company goes under, bond holders are repaid if possible. Equity holders only own whatever is leftover.

The "junk bond" rating and high debt load makes me a little nervous, but maybe that's irrelevant and this is just them raising money as an accelerant because they can get it at a good price?

They need the money. From a few days ago:

"The company burned through $1.16 billion in cash in the second quarter [...] a little more than $3 billion in cash on hand"


Looking at the stock price, people seemed to know 5 days ago.

"Tesla (TSLA) bonds were oversubscribed by $300 million, $1.8 billion raised for Model 3 production"


I hope this works, otherwise we are all screwed when earth continues to catch fire

How much of this is actually being used to pay down SolarCity debt?

You can't pay debt with debt. They may be getting better interest rates on the bond market to refinance their existing loans but total liabilities are going up, not down.

Sure you can. That's the exact definition of "refinancing".

You may be paying off the note and it shows up as a different line item on the balance sheet, but it's not paying the debt.

I think I'm going to need a scanning electron microscope to see the hair you're splitting.

There are a lot of reasons why moving it to a different line item might be advantageous...

This is new debt not stock. These are bonds @5.3% which is close to the rate SolarCity was raising money.

Tesla should just mint their own crypto. IF filecoin gets 200M for a white paper, Tesla can get 20B.

I would not recommend committing securities fraud.

I'm curious. How is what was flippantly suggested related to securities fraud?

The SEC has taken a clear position that whether or not it's a "smart contract" or the like makes no material difference into whether or not you are offering a security. Making a cryptocurrency was suggested as a way to finance Tesla's business operations, so it is almost certainly a security in the eyes of the SEC. At this point, your choices are either to sell unregistered securities or to follow SEC rules anyways, at which point, why not just go through conventional channels?

"Fund your business by issuing cryptocurrencies" is an idea that will likely end in defending yourself legally against the SEC. Bad idea. I don't recommend it.

Crytocurrencies serve one purpose very well: they're presently not being prosecuted as Ponzi schemes.

Which they argueably are.


Yes, thank you. Fixed. Auto-incorrect strikes again.

I don't agree. I believe currencies not backed by countries have a real use in the world, and labeling any and all as a Ponzi scheme is a misnomer. Anything has value if we assign it, and even if 5% of the world considers crypto valuable I'd call that a successful currency, to those who value it.

Value is not the criteria for currency - otherwise Magic cards and Beanie Babies would count.

Currencies must be widely accepted in exchange for goods or services. Crypto is promising, but it's not there yet.

SEC regulates crypto currency issuances now.

Technically, they're claiming that the majority of ICO-style crypto currency issuances have always been under their jurisdiction. They're just not enforcing "Sale of unregistered securities" stuff against ones done before they put the market on notice through their legal findings.

If tesla can get 500,000 cars out there, ICE cars are toast. Enough of legacy cars and makers.

The Camry alone sells 400,000 a year in the US, where the market for new cars was 17.55 million units last year.

If Tesla can pump out 500K globally, that's respectable, but hardly a death knell to the 80 million unit industry.



Watch the trends, not the current year.

The Renault-Nissan group sold almost 500k EV worldwide in the first six months of the year (481,151 units, to be more exact), and I don't see any news out-there of ICE cars "being toast". Link: http://www.media.blog.alliance-renault-nissan.com/news/the-r...

economics: as market share for electric cars grows demand for gasoline goes down and the price for gasoline (already low) goes down thus exacerbating the already large gap in cost between electric and gas.

electric will always be a victim of its own success unless it can actually become competitive with ice on cost and energy density.

remember that the baseline cost for an ice car is about $1000 (used) and $5000 (new). there is a world outside of california (shock) and it has billions of potential customers.

ice isnt going anywhere.

The tension is building! They've got all this money, they've shown a few of the cars, they've got half a million deposits, but the cars are just dribbling out of the factory right now like pre-ejaculate.

They're coming soon.

I guess I'll just have to face it.

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