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Munro Teardown Shows Tesla Model 3 Solidly Profitable [video] (youtube.com)
162 points by solarkraft 7 months ago | hide | past | web | favorite | 140 comments



That's bill of materials cost. What's killing Tesla is labor cost in assembly. Tesla has about 10,000 employees in Fremont, to produce about 3500 cars a week., per Bloomberg.[1] (No, not 5000 cars; they got up to 4500 once, though.)

Modern auto assembly plants typically run about 15-30 labor hours per car.[2] Tesla's Fremont plant is somewhere over 110, even in good weeks. In bad weeks, the ratio is much worse.

The point of the teardown is that the design isn't inherently expensive. If Tesla ever gets their assembly plant working properly, they could make money.

Musk commented "go to Ford, it looks like a morgue", after apparently visiting the Ford Rouge plant. Ford's PR person replied "No doubt the vibe is funky in that 'makeshift tent,' but it's not bad either across the street at the #FordRouge plant where a high quality, high-tech F-150 rolls off the line every 53 seconds like clockwork." That's what's supposed to happen. Cars coming off the line at a steady rate, union workers not being worked to death.

[1] https://www.bloomberg.com/graphics/2018-tesla-tracker/ [2] https://www.motortrend.com/news/toyota-chrysler-have-north-a...


Not true, Munro does labor of cost assessments as well, not just BoM. If Munro is saying car is profitable then I am pretty sure he factored that in.


Other reviews have predicted that the Model 3, itself, is profitable. These say Tesla's bigger financial issue is the Supercharger network. Ideally, they would pay for Supercharger through perpetuities - or perpetual annuities - from interest on part of the profit from the car; but the invested profits are sequestered from operations' use.


Does it factor in the warranty maintenance? Tesla seems to have a high rate of warranty work from noisy drive units to retrofitting titanium armor to all the battery packs.


You're referring to changes made to Model S vehicle manufacturing over half a decade ago. The lubrication of the drive units has been automated, and battery pack armoring is built into the current cost model for all production vehicles.


Is your figure of 10,000 employees just for the Model 3 lines, or is it for the entire factory? Because they’re making about 2,000 Model S and X per week, so your numbers need to account for that if it’s the entire factory.


Animats has been repeatedly told that mixing the labor numbers for low-volume high-end aluminum-bodied cars with some parts insourced with a new high-volume line with kinks to be worked out is meaningless. But don't worry, he will probably be making the same comment next month, and the month after, in rotation with his other usual negative Tesla comments he makes in every Tesla thread.


Your tone is definitely negative, but, in this case, I'm afraid that it might be warranted. Its hard to imagine being this far off on production numbers by accident.


I'm all for having a conversation about Tesla's staffing numbers. Seeing the same comments repeated with absolutely no interaction, post after post, that's not conversing.


I cannot comment either way on Animats' thoughts (because I do not have enough information to do any concrete analysis).

However, for what it is worth, Bloomberg's latest article on the trials and tribulations of Model 3 production (https://www.bloomberg.com/news/features/2018-07-12/how-tesla...) indicates that "compared with Toyota...even with all the robots, Tesla spends more than three times that number of hours on each car".

Overall, I thought the Bloomberg article cited was pretty interesting/revealing and, crucially, it seemed pretty balanced.

Where I think that Tesla might have some issues is on Model 3 quality. The "burst periods" may be contributing negatively to that. But that remains an open question in terms of how it compares with competitors' first model year problems and industry standards overall (information that I do not have). There is some anecdotal evidence in the "Tesla forums" of strange quality issues. How representative that is, again, an open question in my view.


Tesla does more than final assembly, so it's an apples-to-oranges comparison. Plus, aluminum-bodied cars are famous for needing more human labor. Bloomberg fails to go into that, which makes for bad journalism. Great to have an actual discussion about it... for a change.


> Tesla does more than final assembly, so it's an apples-to-oranges comparison.

True, but, this estimate of labor was provided by Michelle Hill, a manufacturing expert at management consulting firm Oliver Wyman who is likely aware of that and, I would think, would add that fact into their analysis. Naturally, I cannot be sure that Michelle did this (because I do not have access to the report), but it is probable I suppose given their time in this industry.

> Plus, aluminum-bodied cars are famous for needing more human labor.

As someone who has worked in automative assembly (I design automation equipment and industrial systems), the "body line" where most of the "aluminum handling/assembly/welding" is typically highly automated (> 95% by time). This is true of Tesla now I think (https://electrek.co/2018/06/08/tesla-model-3-body-line/) and very much true of several of the big name automotive manufacturers that I have had the occasion to work with.

Again, it is difficult for me to make broad generalizations of Tesla's manufacturing situation. Mr. Musk has indicated some "over-automation" issues (a pretty classic amateur manufacturing mistake). The "tent" thing was strange, but I think it was a necessary evil likely in terms of the lack of capacity planning at the get-go. So Tesla did what it needed to.

If I were Tesla, I would take a serious look at quality over production volume (not implying that they are neglecting quality). Mandatory recalls and serious/safety quality issues in terms of consumer perception can bite much harder than just meeting a 5,000/week production volume.


F-150s are fully aluminum and they do pretty well turning those around.


Yep, but do they do the labor-intensive stuff in the plant that does final assembly? Given that it converted from steel to aluminum in a couple of steps (initially, just the hood was aluminum) and stayed at the same volume, I'd guess "no way".


It's much-discussed in the industry.[1] Tesla Fremont is running 3 shifts, 7 days, to get about 3500 cars a week out the door.

[1] https://www.forbes.com/sites/joannmuller/2018/05/01/no-way-t...


Except that their current production rate, according to your previous Bloomberg link and the well-known and little-changing S and X numbers, is 5,500/week.


Just one day later, and the Bloomberg estimate is 4,330 Model 3's per week, plus the usual 2,000 S/X. Good timing for getting a pessimistic comment in.


It’s easy for me to imagine. All attention is on the Model 3. You see a figure like “3,500 cars/week” and it’s easy to assume that’s everything they’re making, and forget they have two other models. Of course, this becomes less believable if it persists after correction....


It's always worth noting the disclaimer that Bloomberg has on their tracker:

> Given the exponential trajectory of a production ramp up, there may be sudden increases in output that this model is slow to catch.

When you're looking at Tesla's numbers, the tracker becomes more reflective of progress several weeks after a production peak. Given that the 5,000 peak was hit relatively recently, this means that we should expect the tracker to reflect this substantially later.


It's triple the labor hours, so you can happily assume a higher production ceteris paribus and it still looks bad.


I'm not sure where you got the idea that it is "triple the labor hours"?


"At a typical plant run by Toyota Motor Corp., widely seen as the most capable carmaker, a new car requires about 30 hours of labor. Even with all the robots, Tesla spends more than three times that number of hours on each car, says Michelle Hill, a manufacturing expert at management consulting firm Oliver Wyman."

https://www.bloomberg.com/news/features/2018-07-12/how-tesla...


If Tesla makes more components in-house than other automakers, that could shift costs from parts to labor without affecting overall costs. So I don't think having more employees or hours per car is evidence they're dysfunctional on the face of it.


Tesla produced 53,339 vehicles in the most recent quarter. That works out to ~4,444 vehicles per week. Also, the vehicles per week figure is increasing.

To be fair, they would only produce ~231k/year at this run rate, which would be disappointing for a factory that is capable of ~430k/year. Hopefully their production rate will improve considerably by the end of the year.


53,339 vehicles, but only 28,578 Model 3 sedans or ~2.3k per week. The 5k per-week goal is for the Model 3, not all vehicles combined.


The core flaw to most negative comments on HN since the Model S was first announced or produced is: the skeptics pretend there will be zero volume improvement and Tesla is going bankrupt soon. If you remove those two absurdities, their arguments always implode.

With the Model S it was routinely claimed that because Tesla got off to a slow production start, that they'd therefore never manufacture the car in any volume. The same ridiculous argument was then wheeled out again for the Model 3. It will be wheeled out for the next model that has a slow production start or production problems. Which points to the obvious conclusion: it's about attacking Tesla, it's not about logic, reason, facts.

The Model 3 starts slow on manufacturing. The skeptic says: see, they've failed, it's over, they'll never produce it in volume. The Model 3 weekly production moves up to 500 or 1,000 units. The skeptic says: see, they have no idea what they're doing, they can't produce it any real volume, and besides they're going bankrupt in 1Q19 or sooner anyway. The Model 3 weekly production moves up to 2,500 or 3,000. The skeptic says: yeah but the car sucks, they're building them in tents, and besides they'll never manufacture 5,000 per week, and they're going bankrupt anyway. The Model 3 production moves up to 5,000+ units per week. The skeptic says: yeah, but they'll never make 10,000 per week, and they're still going bankrupt, they can't make money on the car.

That's how the Tesla attack, goal post moving has worked thus far. And it'll perpetually continue to work that way, they'll just move on to the next thing to focus on as an attack.


> The Model 3 production moves up to 5,000+ units per week

Do you have evidence that this has happened ?

Because from all accounts the 5,000 number was a once-off.


‘Hi-tech’ F150? A cheap truck that doesn’t have to comply with the same safety or emissions standards as cars? It’s a very different beast to a BMW, let alone a Tesla..


Cheap? You clearly haven't looked at a dealership lately. F150s start around $30k for the most basic two-wheel drive v6s. Models people actually buy are closer to 40k, 45k new.

There's a reason Ford quit making sedans.


Wow, and absolutely brutal amount of work must have been put into those reports. How do they estimate the cost of parts made inhouse?


Looking at the shape of a part, estimated quantity required, etc. an experienced manufacturing engineer can give you a very good guess as for how it was made. One of my industrial engineering professors encouraged us to bring any parts we were uncertain of to him for analysis (and I did stump him one time with the plastic molding on the end of a DVI cable).

There are fixed costs and variable costs for production. Creating the dies and molds is a very large fixed cost which gets spread across all units created. Based on the size of the part, estimated tolerances required for successful operation, and other factors, an estimated die or mold cost could be created.

The material, electricity, and labor are variable costs of production, all of which can be quite easily estimated.

Now, on the rear view mirrors they had cost down to the penny. Unless they have some other datasources they're using, I'm guessing it's an estimated cost. Unless I learn more, I'd be skeptical of those prices. I'd be more comfortable if they posed an estimated cost per component and rolled it up into an estimated cost for the rear view mirror assembly.


I agree on the "per component" estimated costs. It is conceivable that Munro, having been in the business for a number of years, would have access to all sorts of data sources that the general public (or even higher quality data sources than even the big automotive companies).

I do think, many times, Musk's contributions to various fields have been overblown. However, I do think that Musk's companies' do challenge incumbents to really re-evaluate their internal processes, costs and organization. If I were General Motors, I would think it foolish to ignore this Munro report entirely.

In that way, the market is working as expected in my view.


How much off was your professor about the DVI cable?


He was quite close.

https://commons.wikimedia.org/wiki/File:Dvi-cable.jpg

This image shows a small amount of flash (extra material where two halves of a mold meet) on the edge near the screw. The main question was how the plastic housing was manufactured. The piece I gave him had no visible flash. It was either two pieces attached together (with an adhesive, solvent bonding, or ultrasonic welding) or the metal plug components were inserted into the mold and the plastic was injected (overmolding).

He suggested overmolding because there was no seam to be found. Even feeling the edge felt like one piece. There was some misalignment on the screw hole though, which was the reason it couldn't have been overmolding.


Heh, I loved the answer when I read about it a while back:

https://jalopnik.com/the-fascinating-company-that-tears-cars...

In short, get a bunch of experts together and review each part, then add up the result.


And charging $150K for the report enables you to do that.



They sell the reports for $1M.



...at what selling price? M3 Long Range starts at $49K, which can be configured with a $2500 deposit for delivery in a few months.

The M3 short range (starting at $35K) can't be configure for delivery at this time.


The short-range Model 3 is just the long-range one with a smaller battery and a less fancy interior package, so it's not rocket science to estimate its margin from the long-range car teardown.


It also lacks the glass roof. Maybe there are a few other small feature differences as well? But I agree, it isn't exactly impossible to estimate its cost from the cost of the LR PUP version.


This needs an answer. One would hope it is profitable at 40% above it's base price. The real question is if they'll be able to eek out a profit when they start selling to the masses.


Good, I hope Tesla can find their space and actually become a feasible company. My "commuter" vehicle is paid off in 2 years, so I hope in 3 or 4 EVs are widespread enough to buy one. I drive about 120km round trip, so an EV makes a lot of sense. Don't let my comment history fool you; I'm pro EV, and even pro Tesla. I simply believe TSLA is overvalued, because they aren't going to rule the world.

That said, there's a big gap between "theoretically" profitable, and GAAP profitable. Tesla's problem won't be the margin on their assembly and parts; it will be the ongoing maintenance and potentially demand for cars that, up to now, are far more expensive than advertised.


I'm in the same boat. I'm not rich enough to afford a Tesla so I'm hoping the Leaf or similar hit the 20k - 30k mark when I'm ready to buy. I have a 4km (!) commute so range is not an issue. What will be an issue is fitting my house with a charging station.


You can get a low-mileage used Leaf under $10k today.


I wish my friend. I'm in Canada. I looked on autotrader.ca. Postal code C0A1Y0. Nissan LEAFs are going for > 30k Edit: Seems I was mistaken, however I would have to drive to Montreal to get it. Worth looking at when the time comes I suppose.


>You can get a low-mileage used Leaf under $10k today.

Doesn't meet my requirements, unfortunately.

I need 2nd gen.


Why?


Why on earth do you go by car for 4km?


Rain. Wind. Snow. Freezing temperatures. Hot & humid temperatures. Bad neighborhoods. Heavy briefcase.

All sorts of reasons.

Several years ago in Houston, we (there were several of us) drove across the street to have lunch most days. Over the course of a year, I never walked the route. Line of sight was maybe 500 yards, but a busy freeway was between the restaurant and our office. While you might think I'm crazy, I don't recall ever seeing any other business-dressed people walk under that freeway. you would be soaking wet from the heat & humidity by the time you got to lunch.


Y'all need pedestrian tunnels.


Funny enough, we have them downtown. They've flooded a few times due to the monstrous rains we get here (see hurricane harvey).

I think Minneapolis figured this out the best with a downtown connected by skybridges on the 2nd floor connecting tons (most?) of the buildings).


>Y'all need pedestrian tunnels.

Yeah, and? Most people also find pickup trucks excessive. And yet, they are the most profitable vehicles on the planet. So much so that Tesla wants to make one. There's a whole world outside the urban bubble, for better or worse.


> I have a 4km (!) commute so range is not an issue.

You could just get a long extension cord ;)


First, batteries are the critical path for EVs. That is, cost, adoption, range, power, etc all a function of the quality of the battery.

Second but Tesla seems to have the best battery by far. Unfortunately we can't know this for sure, because businesses like Munro & Associates charge millions of dollars for this info, but what they and others do reveal points to that. There's no reason to believe that any other manufacturer can make a better EV. Nissan, for example, can charge you less, but also give you less battery.

Unfortunately for everyone involved, batteries as a whole are still expensive, so it'll take time for the industry to spin up and for used models to become available. My personal guess is that in ~5years, Tesla will be able sell you a $25k car with 400km range.

In the meantime, you could look into used Leafs, Volts or i3s, or just wait. For ~4km you also don't need a charging station for those, just a cable.


>Second but Tesla seems to have the best battery by far.

So you base this on, what, Elon's tweets?

Big tradeoff in batteries...expense, reliability, durability. Where are they?


Where Tesla excels is in the Model 3's skateboard-like, lithium-ion battery pack and related power electronics. "We are shocked by the advanced integration and advanced manufacturing techniques" used in the electronic control center, Chief Executive Sandy Munro told members of the Automotive Press Association on Wednesday. "This is the brilliance of the Tesla Model 3."

"Everything that's below the floor pan is amazing."

https://www.forbes.com/sites/joannmuller/2018/04/25/teslas-b...


A CPO i3 might be just what you’re looking for today, particularly if you live in a CARB state where you get the super-extended battery (and generator, if you get the “back up plan” range extender).

I picked up a 2015 CPO with the Tech Package for the very low end of your price range late last year.


i have a similar commute, i just bought a 2013 leaf for $7k cash. I plug in a regular extension cable to my wall once a week. It's easier to upkeep than a boosted board.


How do you justify commuting in a car with poor crash ratings? Leaf is a small (tiny) car from a relatively low rated manufacturer. I understand that somebody may not be worried about dying in a car accident, but the problem really is being hurt and surviving. Assuming you are an engineer, concussion, brain damage, can't work, can't support family, burden on everyone, financial ruin. The car cost is a minor issue, considering.


Leaf has a 5* safety rating in Europe. And it is not a tiny car.

https://www.euroncap.com/en/results/nissan/leaf/10939


At 4km, why not ride a bike?


Because, like, it's a death wish? Riding bike in a city environment in US us very very dangerous.


I mean, I know that's the case in a lot of places.

But it's also not the case in a lot of places so I figured I'd see if OP had considered the possibility.


Legit point. In the summer I do on sunny days. I live near Halifax, Nova Scotia, Canada where it doesn't make sense/isn't possible in the winter.


I'm not rich enough to afford a Tesla so I'm hoping the Leaf or similar hit the 20k - 30k mark when I'm ready to buy.

You can't give a used < 2018 Leaf away. Go buy one of those, or if you must have new, see if you can find a leftover 2017 (the old version before the '18s came out). You could tolerate riding a wooden plank for 4Km, you're not going to notice the niceties of a Tesla anyway.

What will be an issue is fitting my house with a charging station.

With your commute, you could charge off house mains (110V/220V, depending on country). Especially Europe, where AFAIK a lot use 220V for house mains, meaning faster charge times than the glacial 110V we get in the U. S.


US houses have 220V. Electric dryers and ranges require it. It's divided into two 110V phases in the electric box.


US houses have 220V.

A fact I was made well aware of when I wired the charging station in our garage. But you're not going to use the 110V charger that comes with the car on a dryer outlet. Parent's issue was having to wire a charging station. I'm saying that with a short commute, you can just use the mains charger that's in the trunk. And that's going to use the same socket that your desk lamp uses, not a dryer outlet.


The mains charger comes with adapters for both 115V 15A or 240V 40A.


Must be a more recent thing, then. Our 2011 has 15A and that's it. Do you know if it actually charges at a faster rate on 40A, or is it just a "cheater" to use in a pinch? Because I'd be tempted to seek out a more recent charger if it would actually charge faster.


My 2013 Tesla Model S charges at 240V 40A (or sometimes 35A) with the plug-in adapter. Maybe you're talking about a different car?


Sorry, our wires are crossed. I was referring to the Nissan Leaf. OP said they couldn't afford a Tesla, and they were hoping for a cheaper Leaf, but they still needed a charging station. I was suggesting buying a used Leaf, and using the "emergency" charger that only offers 110V/15A. Apologies for the confusion.


>You could tolerate riding a wooden plank for 4Km

Im Canadian so in the winter my Pomeranian drags me to work. I want the LEAF for the AC :)


There was a story about people inside Tesla identifying weld simpification. I'm interested if the teardown was before or after that change, because my working assumption is construction time impacts cost. But not bill-of-materials inputs, so the impact on the cost side, might be low, it just goes to flow-rate of amounts of cars made.

Love to know: does changing manufacture of fixed-size parts like this alter cost?


The old saying "time is money" definitely important in manufacturing


This isn't the first time this kind of teardown has been performed and they all show the same thing. The $35k base model made at scale later this year will be profitable.

I know this doesn't sit well with the whole "Musk is a fraudster/bullshit artist" wave that's hit HN and most online forums recently, but sometimes things are really simple. They'll make the car and sell it a profit.


I'll believe it when I see positive cash flow being generated through reading a 10-K statement filed with the SEC.

Historically, Tesla has never done this without selling ZEV credits (there were those two quarters it posted a profit but the amount of cash they've burned is many times greater than those two miniscule profits they posted). I say this because selling ZEV credits isn't an advantage, any automaker can do this if they sell vehicles, even if those vehicles are sold at a loss.


> The $35k base model made at scale later this year will be profitable

Here's the thing. SV Tech companies aren't too great at the whole "at scale" manufacturing thing. Maybe Tesla can figure it out, but they need to pay more attention to what the "boring dinosaurs" are doing this this regard.

If you're interested, this video is great: https://www.youtube.com/watch?v=CpCrkO1x-Qo


"Here's the thing. SV Tech companies aren't too great at the whole "at scale" manufacturing thing."

There was a time when Apple was notorious for problems with manufacturing shortages, but somewhere along the line of becoming a juggernaut they seem to have figured it out.


They outsourced it to foxconn. Apple didn't figure anything out themselves.


Is this chronologically consistent? I'm skeptical that the point at which they started outsourcing was the point at which they solved their problems. The latter is relatively recent, and the former must be a long time ago, surely? They made Mac SE/30s in Singapore.


What $35k model?

https://arstechnica.com/cars/2018/07/tesla-drops-35000-price...

I’ll believe it’s a thing when it starts to ship, until then it’s PR for a car that’s much less affordable.

Edit: the mass downvoting of any comment critical of Tesla/Musk, and flagging of any negative article is getting really old. It’s especially galling when people float conspiracy theories about an anti-Musk bent as a justification for this.


Have you considered the fact that you're getting downvoted because the negativity requires an increasingly conspirational mindset?

What I'm saying is, what you you're seeing could be explained thus: "It takes a few months to spin up production of new trim levels. Like other companies, this company's years-long plans sometimes get delayed by several weeks or months. The company has spent a lot of capital on fixed costs and are focusing on being cashflow positive by prioritizing high-margin sales first"

To make sense of Tesla's actions doesn't require your to believe anything out of the ordinary, nor even anything specific to Tesla. I might have just as easily described Intel shipping a chip.

OTOH, the negative case is always shifting, there are always rumours, the books are cooked, the production numbers are bunk, the QC issues are underreported, etc etc. Until a few weeks ago, the line was that they couldn't make them in large numbers. Now that that's gone and forgotten, the current line is about the base model. When that ships, the line will shift to the Model Y or FSD.


What I’m saying is based on missed targets, a price point that has never materialized, and a total lack of personal investment in Musk or Tesla on a financial or emotional level. If Intel made as many claims and delivered so little I’d be skeptical of their ability to ever deliver as well. When I look at Tesla I see a company that can only make its stated targets when they work out of a tent with all hands on deck. That same company is saddled with debt and has never turned a profit. It’s hardly doomed, but there are clearly real problems to be overcome.

Then I contrast that with the pie-eyed faith of the “Musk is saving the world for us,” fanboys and it makes me tired. The gulf between the reality of Tesla and the “negative case” as you call it isn’t that wide, while between the promise of changing energy forever blah blah blah is a lot of PR. The most likely cases are Tesla succeeding as a car company or failing as a car company and nothing more either way.

I don’t care if Tesla fails or succeeds, and I don’t know whether failure or success lies ahead for it. I do increasingly see Musk as unstable and unpleasant, and his most rabid fans as unbearable though. I’m approaching console-wars and cryptocurrency levels of burnout with this topic and how online communities discuss it. I feel dread at another predictable and heavily flagged discussion every time Musk and Tesla is submitted, not excitement or intellectual stimulation.


> Then I contrast that with the pie-eyed faith of the “Musk is saving the world for us,” fanboys and it makes me tired.

There are things that the fanboys understand that critics don't. It will make more sense to everyone once people understand that the Model 3 is the iPhone of cars and the Gigafactory and other investments start paying for themselves.

As far as the pro-Tesla and anti-Tesla arguments, I find the two sides talk past each other because the time frames being discussed are very different. Case in point, it's not that Tesla investors are covering their ears and saying "lalalala" about Tesla's missed deadlines. It's that they don't care. Based on the Model X delays, I didn't expect the Model 3 to even enter production until the end of this year. Besides the financial risk factor, I couldn't care less about the company missing its deadlines by a year. It simply does not matter. Repeat for many other topics.


There are things that the fanboys understand that critics don't. It will make more sense to everyone once people understand that the Model 3 is the iPhone of cars and the Gigafactory and other investments start paying for themselves.

If. IF. It could be the iPhone 1, or it could be a distant memory, or it could just be another car. It’s the certainty and sense of destiny that makes the fanboys so impossible to deal with, like cryptocurrency fanatics who can only talk about “fiat is dead,” lines. Putting aside the extreme positions, Tesla shows no signs beyond aspirations of being more than a car company. They don’t seem like they’re about to keel over, or conquer the world, they’re just making cars.


> It could be the iPhone 1, or it could be a distant memory, or it could just be another car.

I think your mistake is thinking that this is a roll of the die. Just because something is difficult to discuss doesn't mean there aren't people that understand it. And many pro-Tesla arguments are systemic, which also makes them difficult to convey (concepts like "game-theoretic equilibrium" are not in common lingo). Many pro-Tesla-ites will sound hype-y because they don't have a good way of explaining their conclusions, not because they don't have a clear understanding.


“It should be possible to explain the laws of physics to a barmaid.” -Rutherford

No offense, but this isn’t physics, and I’m skeptical of grand designs that live and die in someone’s head without the ability to be communicated to others. Maybe it’s hard to explain because it’s bullshit, and actually is hype-y?


It's important to not mistake your personal dislike of something for objective fact though. For example:

> a price point that has never materialized

Why would something that hasn't been scheduled to happen have happened? It's like criticizing Democrats for not winning the 2018 midterms. It's just plain nonsense.

> changing energy forever blah blah blah is a lot of PR.

Maybe that's just cynicism? Many people care about their success because it is a proxy for Climate Change. A future where Tesla succeeds is a future in which there is significant movement towards cutting carbon emissions. A future where Tesla fails is more likely to be fossil-dependent than not. There is no future where Tesla is successful and we're heavily dependent on fossil fuels.

Maybe you'd find it more intellectually stimulating if you paid attention to what they're actually doing, versus whatever dumb shit Musk says on twitter.


They’re making cars, not as fast as they’d like, but faster than their most ardent naysayers seemed to think they could. The recall rates on the cars are pretty average compare to the rest of the industry, so I’m skeptical of claims by naysayers that they’re shoddily made. However, they’re yet to turn a profit, yet to show any signs of profit, they’re heavily in debt, and have given a lot of time to competing industry giants to wake up and catch up. I’d say the future is uncertain based on what they’re actually doing, rather than the dumb shit on Twitter as you say.

As for cynicism, that only really fits if a cynical outlook is conflated with an uncertain outlook. Really, I’m getting a strong, “your lack of faith is disturbing,” vibe here. I don’t know if Musk can make Tesla the kind of success that SpaceX is; it’s possible, as is abject failure. I feel quite comfortable betting against the “save the world” scenario, since I’m taking your advice and ignoring the bullshit tweets.

How about this, I’ve already clearly spelled out what I think and why. How about you explain in detail, clearly and concretely how present matters imply what you see as likely? Not in terms of what “must” happen to avert a dire future, or in optimistic terms... just get realistic with me. Convince me.


I think you're being pretty disingenuous though.

The line was that they couldn't make the Model 3 in SUSTAINABLE numbers. Not some one week sprint where you took people from other lines and (allegedly) aggressively cut corners on quality. People have a right to be negative until Tesla can prove that they can build cars quickly, profitably, sustainably and with a reasonable level of quality.


It's all until the shorts get busted. It will calm down a bit afterwards.


The parent comment explicitly says the "$35K model coming later this year". Your comment would be more helpful if you provided a critique of why it is not coming rather than just asserting it in an overly-combative way.


There's being cautious and there's being intentionally negative and hateful. It's all a matter of perspective.


[flagged]


I assure you it’s not an AstroTurf. I’m highly critical. I used to own some of their stock before they started doing things I didn’t like (YEARS ago, when they first hit $100).

I don’t like the way Musk tends to run things, always in a panic and missing dates.

I don’t think it’s smart to ignore decades of hard won wisdom about building cars. You don’t have to follow it, but you shouldn’t blindly toss it out.

On a personal level I don’t like the design of the interior of the 3. The S/X seem nice enough.

But my criticism does not come from being paid to make them look bad. No one is paying me anything and I don’t hold any of their stock anymore.


>The $35k base model made at scale later this year will be profitable."

We've been hearing about it forever. Let's see it. It's always "coming".

>"Musk is a fraudster/bullshit artist" wave that's hit HN and most online forums recently"

Give me a break. You're "wave" is my, finally, balance. Tesla, or more specifically Musk, has got far more postive press than they deserve. I never see any Nissan, Porsche, Audi, or rarely, GM articles on this site. Meanwhile, every time the Tesla blog/Electrek make a post, it's upvoted here.


I just saw a Nissan article on here a few days ago. It was about how they cheated their emissions tests.


They didn't "cheat their" emissions test unless you're lowering the standards for "cheating" because you're running out of witches to burn.

Workers at a factory falsified test data to make it look like cars that didn't pass their internal tests passed. The cars were still complaint with the relevant regulations and the tests are not advertised to customers. Nobody got cheated except Nissan itself. It's like promising your customers 99.99% up-time, considering 99.999% up-time the bar for success internally, delivering 99.99% and then fudging the numbers so that it says 99.999% internally.

I love getting triggered by corporate misconduct as much as the next guy but the Nissan thing was a nothing-burger with a catchy headline.

Edit: Since apparently I'mWrong(TM) can explain to me how the Nissan thing is anything worth paying attention to?


>falsified test data to make it look like cars that didn't pass their internal tests passed

Sounds an awful lot like cheating to me, but OK.


"Still met emissions requirements, but failed internal QA".


>I just saw a Nissan article on here a few days ago. It was about how they cheated their emissions tests.

Exactly. Some stupid story that wasn't true. I rest my case.


It will come as soon as the company exhausts demand for the higher-ASP variants. In what world does it make business sense for a production-constrained company to prioritize its least expensive products?


When the least expensive products have higher margins than the most expensive ones?


I haven't researched specifics on Tesla, but typically bigger => larger margins in the automotive world. Manufacturers weren't thrilled when the Obama administration pushed for higher fuel economy after the bailouts. The margins on the small cars were much lower than on trucks and SUV's.

For example, Ford's F-150 line is worth an incredible amount of money.

"Morgan Stanley analyst Adam Jonas has estimated that the F-Series, which includes F-150 and Super Duty trucks and remains the best-selling lineup in America, is responsible for 90% of the automaker’s global profits."

https://www.foxbusiness.com/markets/why-the-ford-f-150-is-a-...


And even then only margins in $, not as a %. With a price difference of $49k vs $35k I don't see that as being likely, unless it is something in the upgrade package that is an assembly line bottleneck.


Nissan, Porsche, Audi, GM are all behemoths. Tesla, by comparison, is an underdog (hence the widespread emotional appeal), has framed themselves as being principally for "changing how humans use energy" rather than "just a little better than the next car", and has a CEO+chairman who says outlandish things... and delivers on some of them.

I would argue Musk gets press for nearly the same reasons Trump does. And it works.


Tesla also makes really, really nice cars that appeal strongly to the HN demographic.


This reminds of the teardown German engineers did back in May to reach the same conclusion:

https://medium.com/@chrisvnicholson/analysis-teslas-model-3-...


Also check this analysis of the same report by German Handelsblatt (in English): https://global.handelsblatt.com/companies/german-fears-cover...

For reference, that's a quality German news publication making the point that German car manufacturers are getting worried, which is probably an understatement.

Basically last year, Tesla outsold the German manufacturers in their home market for electrical vehicles. This year is not looking much better. The total amount sold in Germany per month last year was about half what tesla is claiming to do per week last recently. Meanwhile the model S is outselling essentially all similarly priced traditional cars in Europe as well.

Unsurprisingly, VW, Audi, Mercedes, etc. have all announced electric vehicles starting to ship "from next year" (numbers unknown, presumably nowhere near 5k a week any time soon). Most manufacturers are being hand wavy about early 2020s type time frames for volume production. If they do have cost issues like this analysis suggests, they'll be struggling to compete on price and volume for quite some time.

So, Tesla undercutting them on price and volume is a big deal. Tesla doing battery production and other components in house is a big deal as well. Tesla opening up more giga factories in places with cheaper labor (e.g. China) or in Europe (Germany is being rumored) is a big deal as well.

I've been reading all these comments about the imminent implosion of Tesla here on hacker news and I just don't see it. Basically people pulling numbers out of their ass and predicting they won't even last until end of the year. Last time I read comments like this about a company was when I was reading internal comments on the iphone launch while working at Nokia. Needless to say, Apple did rather well regardless of those comments. Basically high placed Nokia seniors were arguing passionately the iphone was shit, the cost was way to high, and no way Apple could match their logistics, and btw. the latest Nokia phones had feature X, Y, and Z so obviously Apple was fucked. Spectacularly wrong on all fronts and Nokia was history five years later because it never managed to recover from being so spectacularly wrong in time to come up with decent, competitive products.

I learned a lot about seemingly smart people being completely wrong and suffering from confirmation bias in that phase of my career. I'm seeing exactly the same patterns in the car industry today.

I'm seeing a company doing more or less what Apple did to traditional phone manufacturers about a decade ago doing more or less the same for cars. The same kind of arguments and the same disbelief as Tesla ticks off milestone after milestone. Also the same kind of excited user base. Teslas are selling in a way that is very similar to how the iphone market has been rock solid for a decade now. I wouldn't be surprised to learn that most Tesla owners were also early iphone adopters. Sure Tesla is behind schedule. But what schedule is that other than their own ambition? What clock is ticking exactly? What other manufacturer is shipping 5K electric vehicles per week; or even planning to, or realistically close to our producing and undercutting Tesla on price and quality?


I think you underestimate how fast the car companies can set up a production, at the same time Northvolt is making europes biggest battery factory to open in 2020. I think that every european carmaker is going to have up to multiple electric cars before IAA next year. Also you need to remember that apple never really solved the production problem they outsourced it to Foxconn, and are first now taking some of the production back.


I think car manufacturers are acting like they are behind schedule on a number of fronts and are cutting corners to catch up. The fact is that Tesla has a good 2-3 years ahead of them where they are essentially unchallenged. IAA is nice for product demos but it's not the same thing as shipping products in volume. Tesla announced the model 3 years ago, revealed it two years ago and only started shipping in volume this year. The other car manufacturers are talking about revealing products next year that they will start shipping from 2020.

Tis article suggests that Tesla has a pretty strong competitive advantage with their batteries. That suggests that existing manufacturers are going to have cost issues even if they get their production capacity ready on time and batteries completely dominate the cost of the cars. The way I see it, they are several years away from meeting current cost/production levels of Tesla today.


I think you underestimate how far Tesla already is:

- Northvolt doesn't have a factory for production yet. When they plan to open in 2020, Tesla is probably already constructing its second or third battery factory. Also mind the amount of batteries needed for mass-market EV.

- Tesla is said to have a significant edge in battery production cost, compared to its competitors. Given that the batteries are the most expensive part of an electric car, that's significant.

- Without checking all european car manufacturers: At least the first mass-market EV from VW is expected to hit market in 2020.


Which was the original video where he didn't like the fittings etc?



TL;DW of the original video is

* Electronics, batteries etc. are far ahead of others

* Car drives very well.

* Traditional car parts are total crap. Chassis very heavy without any safety or other reasons.

Munro says in a interview that had Tesla outsourced the manufacture and design of of the car minus the scateboard to a company like Magna they would have hit every target and even Toyota would be crapping their pants now. If the traditional mechanical parts of the car would have been even decent, Tesla would have mopped the floor with everybody.

Tesla has been throwing money away because they didn't outsource and they have been loosing time against competition that comes behind.


Outsourcing stuff usually hurts in the longer term as company knowledge is not build up within the company itself. For many parts this is crucial in a car, for other parts it has no effect.


They did this with the Roadster, though.


Fisker outsourced everything.

Fisker who?

Valmet Automotive build the A Class Mercedes, they used to build the Porsche mid-engine products and plenty of other quality cars. It went badly wrong with Fisker.

Outsourcing is no magic bullet, design, management, sales, marketing, supply chain management, finance and plenty of other stuff has to happen.

The bit we only ever see on the news is final assembly - the production line. The sub-assemblies are not shown.

There was a time when things like seats were made in house by the auto makers. Over time the likes of Johnson Controls have ended up doing all of that. The 'persons needed to make a car' goes down dramatically if you have a guy and a forklift dropping off the seats at final assembly with those seats coming from a supplier. If you have a gigafactory sized floor full of women and sewing machines making seats, dashboards and steering wheel covers then 'persons needed to make a car' goes up considerably.

There was a famous strike in the UK where the women that made the seats went on strike - allegedly they were not getting equal pay. Ford could not sell cars without seats in them so it was not a good situation.

The real reason for outsourcing some parts and not others is because the outsourced components can be better than what you can make in house, even if you are Elon Musk.For instance, in a crash you do not want that plastic dashboard to shatter into pieces that can kill the driver, you want it to disintegrate more gracefully. Although the Tesla may be with its own funky design the interior is almost certainly mostly outsourced to the same companies that make all the other interiors but specified differently.

The example in the Munro teardown of the rear view mirror, that is something that can be specified correctly for a contractor to make, for someone on final assembly to just glue in place. The other brands - GM and BMW presumably have traditional embedded electronics driving the thing, not some high end 'PC' tucked under the back seats. So they have to specify a more convoluted mirror.

Tesla did learn from the original Roadster on what they needed to do to build a car. There was a poor cultural fit between what they were trying to do and their 'leaded petrol' friends at Lotus etc. were doing. As evidenced by the unfortunate Fisker Karma there is no way to magically build a car just by getting the whole thing outsourced.


Pfft, Fiskers main problem was their battery supplier bankrupting them up - quite possibly on purpose, if not that - they could have been successful.


Another large problem was that the Karma was a bad car, at least according to critics. Some called it "awful". If your car is incredibly expensive, you should make it fun to drive.

The original Tesla Roadster, was like one of those rollercoasters with the linear accelerator motors, except that it ran on roads and could (sort of) turn.


So was that an outsourced component?

The problems began a long time before that, they could not deliver and there were fires.


I don't understand how the rearview mirrors can be up to 5X difference in price and have the same features(eg: auto dimming). Also BMW and Chevy are likely sharing the rearview mirror with other models so the price difference even makes less sense to me.


It's right there on the page:

> Tesla Model 3 has a frameless electrochromatic mirror with no powered functionality, whereas the BMW i3 has buttons and powered functionality build-in. The Chevy Bold has powered functionality including backup camera display.

So the Tesla just has a mirror with, presumably, one set of wires going to it to power the dimming. The others have buttons, electronics, a bundle of wires, and an LCD display in the case of the Bolt. The BoM difference probably isn't too terrible, but the cost of assembly, as well as testing/QC of those features, likely results in the cost difference.

Extrapolating from that, I'd imagine that settling on one powerful touchscreen has saved Tesla some cost in a variety of places. Not just lowering BoM on things like buttons and electronics, but also ease of assembly, modularity, etc.


I believe it was in the Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future (audio-)book that I heard that at least for SpaceX, but I think also for Tesla, building the components in-house came out much cheaper compared to what their competitors would have to pay for the same components.

They were often more advanced, too, because the component could use whatever was most modern technology and was highly-optimized for SpaceX/Tesla's use case. In contrast, the components for other carmakers have to be much more uniform and satisfy everyone, as you said.

When it's a new type of product, it usually pays to become a system integrator in order to squeeze the maximum performance out of every component in the system and benefit from the synergy. The other carmakers haven't done that yet with EVs, and they were in an even worse shape a few years ago when they were still only repackaging their ICE cars into EVs.

Whenever they would do that, not only were they able to use only small battery packs inside those cars, because they weren't designed to be EVs from the ground-up, but they would also be significantly less efficient per kWh of battery pack.

By the way, that book is fantastic. I highly recommend it.


Because the mirror is otherwise extremely simple. There are no buttons or other electronics like you might find in the Bolt which would have OnStar.


There isn't going to be a cellular system and cpu for on-star in the rearview mirror. It's going to be a board that probably plugs into the infotainment system board. Also model 3 rearview mirror has a camera so $24 is very suspect.

https://electrek.co/2017/08/01/tesla-model-3-driver-facing-c...


Low res cameras are only $2-5 now anyway.

https://m.alibaba.com/product/1307752426/VGA-OV7670-Camera-M...


Having a hard time believing this - as they say in the video 30% profit margins are v rare in the auto industry. I trust Munro though...


EVs should have far better margins than ICE vehicles, at least in the interim transition period where prices still reflect the cost of comparable ICE vehicles.

They're far simpler to manufacture once all the electronics have matured enough to be integrated. If you look at the Model 3, the power system is largely bundled with the battery. So the gigafactory is pumping out that module where much of the cost and complexity resides, and the rest of the car is largely devoid of precision machining processes.

ICE vehicles have complicated transmissions and engines, lots of machining and delicate assembly processes.

I expect there to be a period where the margins on EVs are quite fat thanks to inertia in the market's price expectations established by high-cost ICE vehicles. It'll wane once the competition matures and the undercutting commences. These cars should be much cheaper to manufacture (as well as operate/own/maintain).


I think electrics will eventually be cheaper than gas (and I'm looking forward to that day), but right now production is bottle-necked on battery supply. So, manufacturers can sell cars for any price they like because electric cars are relatively rare. It won't last forever, but it's a nice position to be in for the companies that have a steady, reliable source for battery cells.


I'd say there isn't enough detail in this video to say. Munro said 30% net profit but I think he meant to say gross profit. Costings may have been based on like for like labor costs but in reality labor costs are highly variable with the California factory being one of the most expensive (one of the reasons why Toyota decided to stop manufacturing there). In addition it wasn't clear which exact model, sold in which country the 30% was based on and at what scale of manufacture. Taxes, grants, customer options and volumes change the pricing very significantly.

My take away is that at the right price point, cheap enough labor and sufficient volumes the Tesla model 3 could have gross margins of 30%. Whether it is saleable at that price point and volume is unknown but more likely than the i3 and Bolt.


All-electric drivetrains, $5000 software-enabled options, over-the-air service, vertical integration and direct sales are v rare in the auto industry too. Reasoning-by-analogy does not always hold up when comparing tech newcomers to incumbent players.


Surely stock owner will review this thoroughly


It isn't solidly profitable, in fact, its solidly unprofitable. They haven't been profitable yet.


The company has been unprofitable. The video claims the profit margin on the car is 30%. I've heard from a couple of analysts that Tesla needs to produce between 50,000-60,000 Model 3's a quarter to be profitable.

Musk has stated that Tesla will be profitable in Q3 and Q4.


Assuming it survives until then (bond's maturing, etc).


I think Tesla's only bonds due this year are $230 million in November, then $920 million n March 2019. They still have about $3.5 billion in cash.

Also, I believe next March's debt can be converted to equity if the stock price is about $360.


It would be crazy to think that they won't survive until the end of the year. Although if cash flow in Q3 and Q4 are bad, Q1 of next year could be the end.


[flagged]


This whole anti/pro-Musk psychosis needs to stop. This site is for discussing intellectually interesting things and that's it. We don't remove stuff, but users will flag stories purely about someone misbehaving on Twitter because it's off topic.

Finally, the guidelines specifically ask you to not make posts like this. So please don't.

> Please don't impute astroturfing or shillage. That degrades discussion and is usually mistaken. If you're worried about it, email us and we'll look at the data.

https://news.ycombinator.com/newsguidelines.html




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