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“China's Tesla” NIO slashes thousands of jobs as losses mount (nikkei.com)
171 points by partingshots 21 days ago | hide | past | web | favorite | 177 comments

China has around 25 electric car manufacturers not too unlike Detroit in its hay-day in 1920s. Sooner or later many will crash and burn and some merge to become bigger players. Long story short, industries with heavy CapEx sooner or later end up being handful of players.

BYD buses and ABQ rapid transit saga is an interesting one. Most of the Chinese electrics are not up to the snuff and so Albuquerque decided not to order any new buses and send back the ones delivered.

Sadly, the people in ABQ I know blame their city government for this fiasco, and not the manufacturer. They're still sore about the empty bus-only lanes running down some main streets that were built for this.

to be fair the buses are/were just one in a long line ART fiascos

and who selected the manufacturer?

Well, yeah, but there was no reason to look at their bid and assume they'd shit the bed.

Yet Indy is using BYD electric buses for their new Red Line rapid transit. The line just opened a few weeks ago.

Be interesting how it'll function during the cold weather - there were problems with these buses that BYD is scrambling to fix.


Are you including Geely in your list of manufacturers? Geely owns Volvo, and I'm eagerly looking forward to the (electric) 2020 Polestar 2 going on sale[1].

The tech will likely percolate downwards to Geely's non-flagship cars over the next few years.

1. https://arstechnica.com/cars/2019/02/volvo-spinoff-polestar-...

So far no Volvo’s built in China have left China, the Volvo’s driven in the rest of the world are built outside of China. Will be interesting to see how Chinese vehicle production for international market works out.

Interesting. I've only seen their gas vehicles in Egypt where they are a popular middle class car. Didn't know they're doing electric.

Now that is one good looking electric car... I can see a bit of the Volvo aesthetic there.

Geely only owns Volvo Cars. The buses and trucks are still Swedish (AB Volvo).

Yes and I recently read overall investment is around $28 billion in electric vehicles, across all these startups. By comparison, VW alone is investing €80 billion.

Just fyi, €80 billion is $87.55 billion.

Yeah there are some good articles noting how many manufacturers there are and they basically expect a large % to fall by the wayside dude to being behind with tech, funding, connections, etc. My understanding is there are maybe a handful at most that investors and analysts think have nearly enough of what is needed to make a good longer term run at it.

Could buy them from Volvo in Sweden instead. That's the truck and bus company that is still Swedish not the car company that was sold off to Ford in 1999 and is now owned by Geely.

Or Solaris (25% share of 2019 Euro electric bus market). https://www.solarisbus.com/en/vehicles/zero-emissions/urbino... >3500 buses deployed and operational in Europe to date with more orders coming in.

Same with LA Metro's BYD order. Their buses are some of the newest in the fleet but have the same quantity and severity of maintenance issues as the oldest operational buses in the fleet.

They should have ordered Solaris instead of BYD. My city was considering BYD but they were handling low temperature well.

I'm surprised as Shenzhen has 16,000+ electric buses (BYD?)

IIRC China heavily incentivized bus conversions to electric. Neighboring Hong Kong tested and rejected BYD buses because the range was very poor and got eaten up by the hills, and they weren’t getting money from China to do it. That’s part of the reason why Albuquerque had such a poor experience; the route has 1000 ft of elevation gain.

> got eaten up by the hills

Maybe the busses sucked, but this doesn’t make sense as a general point against electric: hills are where EVs shine most. Through regen you can get back most of the energy you spent getting up the hill.

You probably need a big capacitor though, or a very big battery with good cooling. So I can imagine cheap-o electric buses would have issues.

I would love to see the math on what kind of capacitor/battery you would need to capture 1000 ft of elevation loss by a city bus.

The issue is not torque or power, the issue is the range, particularly going uphill consistently. Regen is not 100% efficient, the route seems to be 1000 ft of gain or loss in one direction, and the Albuquerque buses were sold on the explicit promise that they could last pretty much a full day without charging, which turned out to be false.

If you can't run the bus back and forth a full day without charging, this requires more buses to run the same service as a diesel fleet, which makes it a very expensive CapEx item because sourcing decently located space to store and maintain buses is not cheap, nor is maintaining all those extra buses.

It seems to me like China wants the electric car manufacturing revolution to mainly be under their control/borders. My guess is that the reason they allowed Tesla so willingly is that Nio and other local companies had already started crashing hard and BYD with their tiny battery packs were unlikely to drive sufficient adoption, especially for export. The only way to grab the market was to lure in the best and drive more internal competition.

> The only way to grab the market was to lure in the best and drive more internal competition

Post-Xi China isn't really about internal competition. More likely they're hoping to replicate Tesla's IP. (Tesla, in turn, bets it can gain more from selling in China than the IP it will lose in domestically-fabricated components.)

Thanks for being a realist. All the significant "competitors" domestically are arms of the Chinese state. Tesla's calculations have to be aware of that.

Elon has said that the key Tesla technology is the factories. The battery factory and the car factory that they are constantly evolving. That's much harder to replicate in China, mainly because those companies can operate very inefficiently thanks to State sponsorship.


Tesla doesn't seem to keep engineering of new factory processes out of china [0]. The batteries for GF3 seem to be bought from LG Chem [1]. So yeah, I don't see Tesla being that worried about their IP or something like that.

[0] https://old.reddit.com/r/teslamotors/comments/d8un7f/tesla_i... [1] https://old.reddit.com/r/teslamotors/comments/d7i0vk/lg_chem...

Most Android phones are made in China, many by Chinese companies. Yet iPhones are still popular there.

I don’t see why Tesla can’t do the same as the more upmarket brand.

Have any of the Chinese companies come close to designing something as nice as any of the Tesla cars?

This. Tesla Model S’s are going to those who would be driving black Audi A6s anyways. There isn’t Chinese brand loyalty in the high end car market, no one thinks any BYD can substitute for a BMW, Mercedes, or Audi. Note all these are already made in China anyways.

I would almost think that the higher end of Chinese consumers, educated in other countries and working for international firms, might even prefer non-Chinese brands.

Which is also why iPhones are popular there. American plus expensive is cool. It also doesn’t hurt that they are the best phones around and Tesla 3 seems to be doing pretty well in their market position with their unique cars which stand out.

> Tesla's calculations have to be aware of that.

Ehn, everyone seems prone to short term thinking.

Tesla has two calculations:

1) Is demand outpacing supply? Yes? Great, therefore...

2) The more cars we can build, the more money we make

3) The more EVs on the road, the more demand there is for Teslas.

That’s about it. That leaves them with two opportunities: A) scaling manufacturing, and B) encouraging EV adoption. That’s part of why they spend so much effort making the cars appealing, super fast, etc.

They can self sustain a virtuous cycle with just A) but if they scale manufacturing enough B) will eventually matter.

They want China to steal their IP. They also want China to help them build factories. It’s really a win-win for them.

Source for them being arms of the Chinese state?

Some of them are state-owned, but the two largest electric vehicle manufacturers in China are not. In descending order of revenue from electric vehicles (source: [1]):

* BYD (a publicly traded company, listed on the Hong Kong Stock Exchange)

* Geely (also traded on the HK Stock Exchange)

* BAIC (state-owned, sells a lot of plug-in hybrids)

* SAIC (state-owned)

* JAC motors (state-owned)

BYD and Geely's combined electric-vehicle revenue is significantly larger than that of BAIC, SAIC and JAC (combined). The electric vehicle market in China does not appear to be dominated by state-owned companies.

1. https://www.bloomberg.com/opinion/articles/2019-09-20/electr...

This is a de facto requirement for operating out of China.

What is a requirement?

Instead of vague statements about everything in China being state controlled, how about some actual facts? What, concretely, does this control entail? How does it function?

State control of the massive private sector companies - de facto or de jure, either way works for the CPC - is increasingly a requirement.

Sept 23: "China Boosts Government Presence at Alibaba, Private Giants"

"The government of one of China’s top technology hubs is dispatching officials to 100 local corporations including e-commerce giant Alibaba Group Holding Ltd., the latest effort to exert greater influence over the country’s massive private sector."

“They might be checking whether the Communist party units are working effectively within the companies,” said Paul Gillis, a professor at Peking University’s Guanghua School of Management. “While China legitimized capitalism, the level of government influence was never intended to disappear. Occasionally private entrepreneurs forget about this and are reminded of it.”



> What, concretely, does this control entail? How does it function?

Party members "inspecting" facilities, demanding access to records, issuing whimsical and unappealable orders, et cetera.

You're asserting that the Chinese government uses these mechanisms to set the business plans of BYD and Geely? In other words, that BYD and Geely do not make decisions based on business considerations and the profit motive, but rather because the Chinese government orders them to make those decisions?

I'm trying to understand just how you imagine things work in China.

It's not even a new reality Post-Xi. The Party: The Secret World of China's Communist Rulers by Richard McGregor detailed

- the forced induction of heads of companies into the CCP under threat of corruption charges

- the historic use of the Army as a flexible labor force

- the CCP picking winners and losers in industries

All back in 2012, before Xi became premier.

How good is tesla’s ip really? I am aware the battery tech is sophisticated but how hard it is to copy if you ignore regulatory capture?

Quite hard, actually. There's a lot more that goes into it than people think. It's not just "slap a battery pack into the powertrain and away you go", there's a huge amount of engineering (both hardware and software) that goes into power cell load balancing, thermal management, fault detection, efficient wiring, charging safely, regenerative braking, integrating the pack itself into your frame, choosing the right components for alternators, converters, electric motors, etc.

Anyone can make an electric go-kart. Making a performance electric car that will be on the road for 150,000 miles is hard.

Sure, but China has far more resources than Tesla does. This is gonna go commodity quickly.

That’s what people have been saying about the iPhone for 12 years now. I suspect it will be several decades before we get close to tapping out the technological improvements and engineering optimisation potential in EVs. We’ve really only just got started with them seriously in the last few years. There’s also plenty of scope for further advances in the manufacturing processes. Building EVs is incredibly complex. It’s not just another electric commodity like a washing machine.

> That’s what people have been saying about the iPhone for 12 years now.

And they've been correct for the past ~six of those years? The only reason people buy iPhones today is walled garden capture and brand identity. None of the technology is superior to what Huawei or Samsung or even Motorola is selling.

The tech in iPhones is so ludicrously ahead of anything else, it's not even funny anymore.

Their CPUs are 3 years ahead at least.

They have proprietary low power, high reliability Flash memory tech.

They have unique 3D scanning face identification tech and secure ID data storage.

They have far superior battery life for the battery weight.

The camera systems are best in class, I would agree several other phones have camera tech and software that is close enough for most people, but not for everyone.

They have Samsung made screens that even Samsung can't use, some of the tech and QA process is proprietary to Apple.

Also the sensor precision and calibration is considerably better on iPhones than Android phones and highly consistent across models. There's a photo of a bunch of phones showing their magnetometers, with all the iPhones pointing in the same direction, and the Android phones pointing all over the place.

Well, if you look at the facts:

The brand new Apple A13 CPU beats e.g. the 2018 Snapdragon 855, fair enough. But benchmarks have already leaked for next years Snapdragon 865 (e.g. for the Samsung S11) that beat the A13 again. So far from "3 years ahead", they appear to be very much equal, just being launched in alternating years.

And why should they not be equal, when they are produced by the exact same manufacturer (TSMC) using the exact same 7nm process and have basically identical physical constraints on cooling, footprint and power budgets? Ain't no arguing with physics.

Their camera systems have lagged behind other maker's flagships for several years. You don't have to take my word for it; here is a quote from Austin Mann's recent review of the iPhone 11 Pro:

> Many of us iPhone photographers have watched as other phones like the Pixel and the Huawei P30 have passed us in low light performance.

I gather from his review that the iPhone 11 Pro is now on-par with the Huawei camera flagship.

When was the last time you heard of the flash memory on anyone's phone failing? I have a LG P500 from 2011 that the kids literally throw around in their toy box, that still boots and works just fine.

Modern day screens are far beyond what the human eye is capable of resolving. Pick up a $200 Motorola, and you need a strong magnifying glass to even make out the pixels.

> None of the technology is superior to what Huawei or Samsung or even Motorola is selling.

Can you expand on what you mean by "the technology"?

As an end user: are the things you can do with it the same as with anothet phone? Can you take equally good photos with another brand of phone? Yes. Can you run the same AAA games? Yes. Can you run the same apps (apart from ones Apple deliberately limits to iOS)? Yes. Do you get the same network speed? Yes.

I'm not saying there aren't small differences. The secure enclave is very nice, and I understand that for audio creation it's significantly better than Android phones.

But these advantages in some niches (and disadvantages in others, like cost, storage, display size etc) are not sufficient to say that "the technology is clearly superior". It's not, it's just different.

Agreed that the end experience is similar, but holy moly, the latest CPU benchmarks for the iPhone 11 are pretty amazing.

There's already benchmarks leaked from next year's Snapdragon 865 that beat the A13, FWIW.

The iphone’s hardware is commodity or worse—they give you basically no choice for form factor or functionality beyond the disk size. You buy it for the software.

> The iphone’s hardware is commodity or worse

The iphone has the best mobile processing chips and it's not even close. The intel modems they use are inferior to qualcomm's modems, but "commodity or worse" is a bizarre take.

Better in a very limited sense. It’s a smartphone. Nobody cares about the chips. Everyone makes the same phone: screen, battery, antenna, camera. When it dies you buy another that is mostly the same. You’re browsing the web and taking photos; why would you care about who manufactured the cpu?

Software, brand, and culture play much larger roles than a milquetoast smartphone offering. What’s this chip that customers are raving about? The only points of continually tweaking the hardware are to shorten the lifespan and remove the ability to customize and repair it with any real scale.

  BYD with their tiny battery packs
My friend bought a BYD sedan last year for 100k RMB ($15k) and it gets ~300km per charge.

E6 is an interesting case

It's freaking heavy at 2t. It's not that small or aerodynamic. It's battery pack is definitely behind leaders in net capacity.

What makes it run that long is that they don't overprovision the battery that much, so much more of those 60kwh is available for driving.

In addition to that, BYD uses PM BLDC motors that are better than induction motors at doing regen at low and very low speeds, which is much more important for city driving.

Add to this that their battery and electronics can take more regen current, and do it more efficiently.

>What makes it run that long is that they don't overprovision the battery that much, so much more of those 60kwh is available for driving.

there's a reason they overprovision. the battery is going to wear out way sooner than their competitors.

They specifically use a battery chemistry with very high cycle life and high current tolerance just for that.

Interesting. Is there a reason this technology isn't used by competitors? What are the downsides? Is it their "secret sauce"?

BYD owns the biggest factory for LFP batteries around. That's point one

The biggest downside is its lower specific energy, but it is compensated by all of things above, so the net capacity and energy density comes close to other chemistries. However, working around all of those "sharp corners" requires a very different engineering approach from mainstream EVs. So that's a second point. Competitors largely don't bother going deep with engineering.

The engineering philosophy there is much closer to their electric busses. Much more manufacturing conscious, with a lot considerations for commercial use.

They think of heavy users who will use the battery for 2k+ cycles with minimal service, and go through multiple battery packs through the life of a vehicle.

I bought a used 2016 Leaf with the idea that I could use it for the next 5 years or so and then upgrade to a car with larger capacity (my car is only 30 KWh). Out of curiosity, I asked the sales person how much a new battery would cost in case I had problems: ~$7K. At that price (and assuming it's installed price... I forgot to ask), I might actually be tempted to do do a battery swap after the 5 years if the car is otherwise OK. However, it seriously doesn't look like I'll need it. After a year of use, the battery capacity doesn't seem to have moved at all. In the summer on the slow roads around here I even get about 230 km (~140 miles) range on that tiny battery, which is quite a bit more than I was expecting.

So with all that said, I wonder if they are on to a good idea. There is so little maintenance on these EVs that the occasional battery swap might be fine, cost-wise. You could even sell it upfront in installments -- new battery after x years.

186 miles is not a lot... model 3 is 220-325 depending on config.

For $15K?!? Let's compare apples to apples.

Apples to apples here. My '16 leaf was 15K after generous incentives and it only gets 120 miles on a very good day.

Makes sense. I think there’s also a bit of the killer being killed by Tesla here, because people want Teslas more.

Yeah maybe. Pretty sure Nio will tank though. Building car owner club houses despite their losses is weird. I don't understand why they don't spend money on improving their product.

I got the impression you feel that's a bad thing, but I think it's just me. To me a rational governments would want its country to grow. And economic growth is accomplished by having new or growing businesses.

I agree Tesla was allowed as part of their benefit. I don't think Tesla benefits any of those Chinese automakers. No one wants a competitor. Sure, Tesla would help the crap companies die faster and force the rest to adapt to higher standards. But I think the real intention is for Chinese consumers to benefit from a superior and less polluting product. They are aggressively environmental nowadays afterall.

I am convinced that everyone prefixing headlines with "China's Tesla" is trying to short Tesla.

Yes, everyone criticizing the company is a short seller making up lies to earn a few bucks. The lawsuits, fraudulent buyouts, sketchy accounting, executive overturn, ridiculous promises, lousy financials...

It's all made up. A giant conspiracy of short sellers.

You deliberately misinterpreted me. Criticizing Tesla or NIO is fine. Using headlines like this is intentionally misleading, carefully crafted to get ROI when the news hits the public (and when it hits the bots).

Tesla stock is down almost 8% today. Wonder why?

Well the problem with cars is they cost a lot to make and the leeway for do overs is very less. China can co-opt IP but getting things right is very different with cars compared to consumer electronics, where they can iterate and improve.

Somewhat tangential, I just visited a Polestar 2 booth set-up downtown Toronto, it's designed by Volvo but will be manufactured in China, it is really impressive vehicle, both looks and specs.

Over 50k euro price though. You get what you pay for.

Nitpick: You never get more than you pay for. You can easily get less than you pay for.

Edit: Why is this an unpopular opinion? If I offended the fanboys by implying Tesla or Toyota or Apple made overpriced products I would understand but I'm struggling to understand what thought process leads to disagreeing with my statement in the general case.

Nit picking a turn of phrase doesn’t add much to the conversation.

You can read the comment you replied to as “but it costs more, and more expensive things tend to be better”.

downvotes don't (mostly don't) imply disagreement, except for some hot button topics. which for better or worse this one is.

in this case i would tend to think it's appropriate, whether or not they were given for the right reasons. your nitpick only serves to detract from substantive conversation.

nitpicks (other than security nits, which tend to be substantive) and typo corrections are highly discouraged here.

A purchase is a transaction between two parties, each with incomplete information. You can certainly get more than you pay for and there are at least two situations where that's true.

First, if you have a lot of money, the relative or marginal value of money for you is probably pretty low. You could spend a lot on something, and actually get lots of utility and value from it, exceeding the value of the money.

Second, you could just have useful information about the thing that you're purchasing that the seller lacks, or you could have skills or some other ability to extract greater value out of the item you purchase. For example - a property or building that you happen to be able to rent, sell or otherwise turn into a profitable business.

Of course there's cases where a sale must be made quickly so you may get the widget for $4 but one could argue that you're bringing $1 of value by being able to make the transaction at that time.

If a widget is generally sold for $5 and you can make some amount of that back using the widget doesn't mean you're getting more than you pay for if you pay $5 for it.

My coworker is buying a lightly used $7500 Chevy spark. It's a $7500 car for a reason. Most people don't want it because its small, pretty slow and the specs aren't that great. It is a great car for his use case, equal or better than lots of $10k cars. That doesn't mean he's getting more than he's paying for.

I don't think that's what I'm saying.

I'm saying that in any transaction, the value transferred could be more or less for either party. If I go to auction, I can buy something for $1 and sell it later for $100. Did I get more than I paid for? I think so. Because the auction house doesn't want to do the leg work of finding a qualified buyer, they are happy to get $1 instead of dumping the item in the trash, but it's still more valuable than the purchase price.

Purchase price does not dictate ultimate value. There are many ways to evaluate the value of something.

What about if I get a product for less than it cost the seller, like moviepass when it was first released, or an uber ride right now?

While I agree the Polestars are neat from a performance perspective, Volvos are some of the most unreliable vehicles that you can buy. But Luxury && Performance != Quality.

I guess Volvo owners are the ones down voting. I suppose I should have provided sources...

Look, they're nice driving cars with really nice design and safety features. But:

- https://www.businessinsider.com/car-brands-least-reliable-20...

> Volvo ranked last with an average reliability score of 22 out of 100, and Cadillac ranked second-to-last with a reliability score of 32.

- https://www.forbes.com/sites/jimgorzelany/2018/10/25/the-mos...

> Volvo is the lowest-ranked brand for reliability, due largely to problems with its electronics.

- https://cars.usnews.com/cars-trucks/most-reliable-car-brands

> Bear in mind that luxury doesn’t necessarily equate to reliability, with Volvo and Land Rover falling near the bottom.

Is this an opinion or is your position supported by evidence?

The only thing I think of when I hear "Volvo" is safety. Not luxury, not performance, not quality, not reliability, not anything but safety.

I would be very surprised if they were less reliable than most sports cars.

I wonder why the American listings put Volvo at bottom (as there is no comprehensive annual inspection like the MOT or TÜV checks in Europe). In Europe, the bottom quality tends to be American and some French and Italian cars.

A fairly detailed statistics is from TÜV annual inspection reports, found here: http://www.anusedcar.com/

There, Volvo is rather average. Where I live (Finland), Volvos tend to get a bit more kilometers than most other brands, so being not at the bottom of listing means they're doing reasonable quality.

Volvo is down there with American brands in the American reports...

I can only speak anecdotally but Volvos have a reputation in America for requiring more maintenance more frequently than other manufacturers.


This is just one data point, sourced from Consumer Reports. They put Volvo last behind Cadillac and Tesla.

Then I look here... https://www.jdpower.com/Cars/Ratings

And Cadillac is on top. But I'd personally trust Consumer Reports over JD Power.

"Consumer Reports said multiple Volvo vehicles, including the XC60 and XC90 SUVs and the S90 sedan, were reported to have issues with their display screens and infotainment systems, including freezes and a failure to display. The publication said issues had also been reported with the XC60's climate system along with rattles inside its cabin, while the S90 also had problems reported relating to engine knocking or pinging. Of the three Volvo models it analyzed, Consumer Reports rated the XC60 as Volvo's most reliable vehicle and the S90 as the brand's least reliable vehicle."

Really? The infotainment system makes it rank low?

edit: and looking at the _actual_ report https://www.consumerreports.org/car-reliability-owner-satisf... - no volvo's on the list?

>"Really? The infotainment system makes it rank low"

Yes, because modern cars are so good nowadays that people expect perfection.

We are a two car family. In the past decade I've owned Volkswagen, Honda, Toyota, Ford, Mazda, Subaru and Nissan. All have been perfectly good cars, reliability wise. My last two leases I didn't do a thing beyond oil changes for four years, not even tires or brakes. Besides the odd car having some random thing replaced at the dealership under warranty, nothing ever went wrong with any of them.

I realize that's not everyone's experience, but I'm not a lottery winner either. Modern cars are a feat of engineering.

I’m pretty sure that’s not the full report, irc they release a beefy car buyers guide each year to members with the full report, and Consumer Reports has rules against the republishing of the data in their reports.

It makes sense to me. A new car shouldn't have problems, full stop. My 25 yo car got its first maintenance in 5 years apart from oil, the only problem it has is the air switcher is cranky, and that took over 20 years to crop up. If i bought a Volvo (which I’ve been considering because all I want to upgrade on is safety) and it has a problem in the first few years of ownership, even if it was under warranty, I’d be LIVID! And while we are on the topic of reliability, with the warranties that come with most unreliable cars, why _wouldnt_ a bugged infotainment system rank the car lower just as much as mechanical issues—either way it’s just a trip to the dealer.

I see cars as an appliance, I don’t want to think about it, I just want to use it. So none of this really makes sense to me, if all consumers shared the same sentiment, I feel certain that the market would look considerably different.

Geely's Volvo is solidly a luxury proposition. I see people cross-shopping Volvo and Porsche SUVs.

Old Volvos had that unreliable reliable quality to them where something was always broken or going wrong but you could keep it essentially useable forever. My handyman was an old Russian dude with something like 360k miles on an old Volvo station wagon. Another old dude in my village has similar miles on theirs. I don't expect modern Volvos are going to hit these kind of miles.

I once wrote about them here. I questioned their rationale of trying to "beat" Tesla when Tesla itself was deep in red.

Were they took the enormous amount amount of money they got from investors, and put it into making electric Suzuki Alto lookalikes, they would've been bathing in cash now.

But no, those guys not only did not recognise Tesla's failure, but they doubled down on it, and ran a car company as if it was some Internet dotcom.

Tesla has not failed and is clearly not a failure.

I think Tesla is making the best electric cars you can buy, although they are still a little too expensive for the mainstream.

But as a company, they still have to find a way to make money, and that is not a given at this point.


You cannot say they have failed, because they haven't yet closed the doors. But I don't see how they are "clearly not a failure" if you include "profitable business" in their list of goals.

,,Tesla’s losses are piling up despite record unit sales''

Tesla has losses _because of_ record unit sales.

Increasing manufacturing capacity is capital intensive. It would be much easier for Tesla to stop expanding and just sell luxury vehicles, but that's not the goal of Tesla (and it would be a bad long term financial decision).

On point - I don't know why so many people seem to have a hard time grasping this.

A $40k Tesla is on equal footing with a $25k ICE car in terms of TCO so I’m not sure why you think they are still expensive. They have come down a lot.

And many people who walk onto a car sales lot with $25k in mind end up getting talked into a $35k car, so with all the savings Tesla really can be the cheaper option.

With Tesla if you get talked into the $50k+ stealth performance you’re still on equal footing with the $35k car until you add future self driving.

According to Tesla themselves, the "potential savings" on the Model 3 are $8,675.

They advertise the cheapest Model 3 at being on equal footing with a $30,315 ICE car. In a quite misleading way I must say.

AFAIK, Tesla's "savings" number is not meant to be TCO, just an adjustment for the price of gas vs. electricity. It doesn't factor in the lower amount of maintenance needed on an EV (maybe because they still want to sell service plans).

What chc said. But yes I agree I don’t like the way they display the price after savings first. I guess they are fighting the issue that most people don’t have this savings top of mind. It’s their call to make. I’m sure it rubs some people the wrong way enough to scare them off. I wonder if they have done A/B testing with it.

> A $40k Tesla is on equal footing with a $25k ICE car in terms of TCO so I’m not sure why you think they are still expensive. They have come down a lot.

In the American market. In Canada, a Model 3 now costs the same as a Model S did at launch. Other manufacturers have worked out ways to soften the price increase due to currency fluctuations.

Every so often I run numbers on electric cars for my use, but I'm never able to get a break-even point that isn't measured in decades.

What is the cost going to be if the permafrost releases all its methane? Pretty high.

I'd absolutely support a carbon tax to capture such externalities (which would increase the purchase and fuel costs for all cars, but proportionally less so for electrics), but I don't have the personal luxury of spending the additional money for electric car - I'd just drive my ICE car less.

If enough people think like you the carbon tax is going to be an everything tax (sea walls, relocations of populations, etc.) which is going to cost a lot more than a Tesla price differential.

Well... no, a carbon tax can/should be sufficiently high to cover those externalities. I'd support that. I'd probably wouldn't be able to afford a car at all anymore, which would be much more environmentally friendly than an electric car.

>I'd probably wouldn't be able to afford a car at all anymore

If you have purchased a Tesla before that point, others will be paying you for rides in your self-driving car as part of a ride-hailing fleet. Just a thought, might not pan out, as with any investment.

It's not so much about what you support... the tax will come down from above with or without your support. It's more about what investments are you willing to make personally, because that part is really up to you. There are risks, to be sure, but in the meantime it's a fun, safe car that doesn't cost as much as people think.

I'm willing (and have already) stopped eating meat, among other things. I can't afford an electric car. I'd be more willing and able to invest in a lifestyle that doesn't involve owning a car.

I couldn't find a total cost of ownership on the Tesla Model 3, but the car I drive has a 5-year TCO of about $32k for all insurance, gas, etc. (Assuming bought new - I got it for under $20k with 8,000 miles on it.)


So I'm allowed to think the Model 3 is expensive. Of course, I'm just me, I'm not "mainstream." I think it's too expensive for mainstream because the only person I know that bought one is accustomed to driving high-end German cars, and she paid $60k for her Model 3. I get the feeling the mainstream doesn't believe a Tesla is affordable. Maybe they are wrong, in that if they have a garage for charging, they'd save enough in gas and maintenance to make up the difference, but most people don't buy cars based on TCO (well, I don't know that for sure, but I have a feeling that's true.)

Where can I find a breakdown of the TCO like this? Is there any source?

I would think that Tesla TCO would be through the roof once the cars start aging.

It's one thing to have the dealership fix every little thing under warranty - quite another to pay $5,000 to have your sunroof fixed because it requires a special encryption chip.

Nice hyperbole but you’re either making stuff up, or confusing Tesla with Porsche.

Model 3 doesn’t have a sunroof.

For me, the problem for tesla is not the cost itself but

1) If you are in a crash, spare parts/body work takes months to complete, I can't afford to be without a car for 3-6 months.

2) Requires charging. I live in an apartment, it is unclear where I can charge.

1) Is a false dichotomy. First of all, you're presuming that Tesla repairs will take 3-6 months. Secondly, you're presuming that non-Tesla repairs will take 0 minutes.

I don't doubt that Tesla has more issues with parts availability than other manufacturers, but if you need a car every day, you should have a backup plan -- eg, rental car add-on to your insurance policy so you have something to drive while your primary vehicle is being repaired. I've had gas-powered cars that were in the body shop for a month or more.

Most rental car insurance is for 1 month, which is enough to repair most cars. I am ok with losing my car for 1 month to repair. The problem with Tesla is that people get stuck with body repair queues that are ~6 months [0]

[0] - https://www.sfgate.com/cars/article/tesla-repair-wait-time-c...

I guess you haven’t been keeping up or reading the replies to your own comments. Tesla has in house body work now to address this kind of thing. They are fixing the problems you have heard about.

We have one and live in an apartment. I charge at work (free) usually and other times at a supercharger. Using a supercharger all the time slightly shortens battery life in theory especially if you do it wrong, but we do it less wrong. And Model S owners who have been exclusively supercharging have been reporting that their battery degradation is not bad at all.

The body work issues you mention are mostly in the past. And you wouldn’t be without a car.

So, red herrings.

I'm not sure that is a goal though. Plenty of businesses are run at a loss intentionally nowadays for tax reasons. And unlike a lot of its software competitors, Tesla is in a capital-intensive business where investing in increased manufacturing capacity puts a nonspeculative asset on its books.

>Plenty of businesses are run at a loss intentionally nowadays for tax reasons

Please clarify this. I don't know of any tax regime where it pays to deliberately lose money (eg. setting money on fire).

obviously it's a loss on paper. When R&D investment counts against income for tax purposes; where T is the tax rate, R is the expected return made on R&D and I is interest paid on money to fund R&D, it makes sense to borrow enough money to offset all revenue while


and a lot of tech companies go nuts as a result with ridiculous acquisitions. In that sense, Tesla has a relative advantage because a factory's value is unlikely to go to zero.

How does this makes sense? There's no kind of existing taxes or math to make losing money more profitable than making money.


This comment was provocative by associating the Tesla-nay-sayers to anti-vaxxers and flat-earthers, but I think it's worth discussing, and so I vouched for it.

The author sixQuarks adds two points about difficulty in the automotive market that are level-headed and substantive. I had the same thoughts about Rivian, but if the Amazon truck deal becomes real and they can grow into the shell of another defunct car manufacturing plant, maybe they have a chance. Other replies add support about what Tesla has achieved ("make electric cars cool").

Tesla and Musk are polarizing for sure, fans and shorts abound here on HN. But I think this comment is right to highlight the irrational arguments around them, not to mention the outright hate.

I think one of the best things they did was make electric cars cool. For so long Prius had the rep of a dorky car for hippies.

Honestly, players like Rivian and NIO shouldn't try to manufacture their own cars - they should contract that out to someone who knows what they're doing and already has the capital invested in production tooling (ex. Magna). Rivian/NIO & co. are best suited to design and engineering until they reach a market threshold where it actually makes sense to spin up a dedicated factory.

>but even if they fail long-term, they're a success in my book. >People that think Tesla is a failure at this point are classified in the same category as anti-vaxxers and flat-earthers in my opinion.

Some people don't have the same definitions for words as you do, so you can't put them in the same category as flat-earthers.

I'm not so sure this latest battery innovation hasn't guaranteed their success. As I'd happily pay their premium for an ultra safe car and my only real concern, battery life, completely alleviated. A battery that outlives the frame will market itself. The safety, cheap operation, and less stressful augmented driving are just frosting at that point.

Let's wait a couple more quarters before being able to say it is clearly not a failure. The only reason they are still alive is the hype around Elon Musk.

I have been waiting for Tesla’s failure for 10 years. Tesla naysayers have been asking us to wait for couple of quarters for a decade now

Yeah I guess no one expected investors (and government subsidies) would keep pumping money into a sinking ship, yet here we are.

So they're all dumber than the naysayers, or.... ?

Well, yes.

I wouldn’t discount hundreds of millions of dollars in free cash flow. They have a product that is in heavy demand.

I’ve been hearing about the death of Tesla for almost 10 years. It’s getting old.

I mean don’t they still make a loss on every car. They have been alive for the duration of the stock market bull run. being sceptical of their chances in a recession is normal.

The cars are not produced at a loss. Each car is profit. The negative cash flow is created by investing heavily in factory expansion like the model 3/Y production line and the record time construction of gigafactory 3.

More about profit margins in second quarter report. It seems it is currently 19% per car. https://ir.tesla.com/static-files/1e70a30c-20a7-48b3-a1f6-69...

The cars are not produced at a loss. Each car is profit.

Only under magical unicorn fantasy accounting. Under the same accounting standards every other car maker uses (GAAP), Tesla still loses money on each car.

From Tesla's own financial report:

"excluding regulatory credit revenue, automotive gross margin improved by ~200bp (compared to a decrease of 125bp on a GAAP basis). [emphasis added]

Totally false on both counts.

1) Tesla's GAAP gross margin was (positive) 14.5% for the most recent quarter [https://ir.tesla.com/static-files/1e70a30c-20a7-48b3-a1f6-69...]

2) Breaking out GAAP and non-GAAP figures is totally standard and commonplace among publicly traded companies. Take a look at Ford's Q2 letter, for example, which has a whole page describing why they use Non-GAAP financial measures to supplement GAAP figures [https://s22.q4cdn.com/857684434/files/doc_financials/2019/q2...]

"Fantasy" number is 19% gross margin. GAAP number is 15% gross margin. Still positive.

As of August 2018 that appears to not be the case:

  Tesla says that the Model 3’s gross margin “should grow significantly” to approximately 15 percent in the third quarter and 20 percent in fourth quarter, thanks to “continued reduction in manufacturing costs and to some extent an improving mix.” From here on out, CEO Elon said during a call with analysts Wednesday evening, “the goal is to be profitable and cash flow positive every quarter going forward.”
Source: https://www.theverge.com/2018/8/1/17639588/tesla-earning-q2-...

>Tesla says that the Model 3’s gross margin “should grow significantly” to approximately 15 percent in the third quarter and 20 percent in fourth quarter, thanks to “continued reduction in manufacturing costs and to some extent an improving mix.” From here on out, CEO Elon said during a call with analysts Wednesday evening, “the goal is to be profitable and cash flow positive every quarter going forward.”

Please do not quote by using a code box. Use italics (put an asterisk on either end) or a carrot > to indicate a quote, rather than creating a endlessly long sideways scroller.

Last quarter's gross margin was 15%. Given that the small number of Model S and X's probably have much better margins, the Model 3 margin is below 15%, but probably not much below.


Important caveat: this is under Tesla's made-up accounting rubric. Under GAAP accounting (i.e., the standardized accounting methods everyone else uses) they lose money on each car, i.e., they have a negative gross margin.

Totally false on both counts.

1) Tesla's GAAP gross margin was 14.5% for the most recent quarter [https://ir.tesla.com/static-files/1e70a30c-20a7-48b3-a1f6-69...]

2) Breaking out GAAP and non-GAAP figures is totally standard and commonplace among publicly traded companies. Take a look at Ford's Q2 letter, for example, which includes a whole page describing how and why they use Non-GAAP financial measures to supplement GAAP figures [https://s22.q4cdn.com/857684434/files/doc_financials/2019/q2...]

GAAP gross margin last quarter is 15% versus the 19% "made-up" number they quote in their press release. It's not negative.

This should be upvoted to the top of the page.

I'm not rooting against or for Tesla, but they are extra shady regarding accounting. They are losing money on each car. There is so much misinformation around this pushed by Tesla fans and the company itself though that you might easily believe they are profitable, but they are not!

Yeah, that keeps getting repeated by the anti-Tesla crowd. But they make a great profit on every car, and have consistently keep growing in sales.

Right now they just can't manufacture the cars fast enough for the demand. They'll have to keep building factories which takes a big chunk from their cash.

Tesla's Gross Margin is 15%, the same as Ford's. They make a sizable profit on every car. R&D etc is what turns that profit into a loss.

The person was makeing a factually false statment. I corrected it.

What your opinion about the future of the company is doesn't matter about what current situation is.

People have been saying Tesla will fail 'soon' for a long time. Once they actually do fail, then we can say they have failed. Before then its just personal opinions.

people wait in lines and put deposits to buy Tesla’s product

I don't know why you're down-voted. Tesla's brand is super valuable; their electric car tech (particularly their efficiency and energy density and charging technology--not just raw rate, but the form factor of their charging tech) is heads above their competitors. If they ran into serious trouble, someone would buy them up so hard.

Electric cars (heck, automotive manufacturing in general) are a tough business. Tesla is now competing at a (soon) $7500 disadvantage in the US compared to most of their competitors due to the phase out of the EV credit. Gas prices are incredibly, ridiculously low. And yet they're still in very high demand, outselling everyone else in the US in raw unit sales and globally in revenue.

That's no guarantee that things couldn't get worse, but Tesla has outlived many of its detractors before, and it's not just because of Elon Musk.

Sorry but WHAT? That's not how it works.

The 7500$ is a huge advantage for Tesla today that was pushed through a lot of lobbying. It literally means that everyone's tax money is subsidizing luxury cars for the rich.

Once this gets phased out, they will have to compete with regular prices against normal car and their high price point will make it way less attractive.

It is true that soon competitors will still get the 7500$ tax cut while Tesla exhausted theirs. That's simply because they use all their credits and now need to come to a price point that makes sense without subsidies.

It IS how it works.

The $7500 credit is all but completely phased out already for Tesla (it's only $1,875 right now). And yet they're STILL outcompeting the other Plug-in electric cars in the US by a large margin (13,150 Model 3s in August versus 2500 Prius Prime, the next most-sold plug-in vehicle). That is my point.

It's an advantage to conventional carmakers who wait to the last minute to invest in electrification, after someone else has done all the hard work, and just integrate some off the shelf electric drivetrain. It puts those who actually invest in a full, cleansheet efficient electric drivetrain domestically in the US (like Tesla and GM) at a big disadvantage versus foreign firms or for multinational corporations like the Volkswagen group who have multiple subsidiaries like Audi, VW, Porsche who each get their own group of credits (even though the Volkswagen Group's MEB platform will be available to all their subsidiaries).

It makes no sense and incentivizes the wrong behavior: advantages foreign firms above domestic. Advantages latecomers over those with the foresight to invest early (Tesla and GM, for example). There either should be one big pot of credits, or the credits should be sunsetted on a global timeline (instead of by number).

And until conventional cars are paying for their full externalities from carbon emissions (and others), they are being implicitly subsidized and an EV credit of some sort (although imperfect) will be needed to level the playing field.

>The only reason they are still alive is the hype around Elon Musk. The same was true of Apple and Steve Jobs, once upon a time.

"China's Tesla" IS Tesla

It took Tesla 16 years to become profitable, does Nio have enough cash to last another 12?

Do you mean does China have enough cash?

That is also questionable these days with trade wars and China slow down, not sure even the communist party is willing to fund such companies.

The entire Belt and Road is not profitable. Most of their "investments" are deep underwater with no signs of turning around.

B&R is cheap and smart vs. US military expenditure.


Personal attacks, which you leapt into there, are not allowed on HN. Please don't post like this again. Please don't break this guideline either: "Eschew flamebait. Don't introduce flamewar topics unless you have something genuinely new to say. Avoid unrelated controversies and generic tangents."


Hello dang, bringing up CCP concentration camps on a public forum is not flame bait, unless you are trying to hide their existence on an American website.

However there was an antagonistic tone which I won't repeat.

It certainly is flamebait when you bring in an inflammatory and divisive topic into a thread like that. Doubly so after trawling through another account's history in order to find something to attack them with. Please don't do these things in HN threads again.

> divisive topic

The only way Chinese concentration camps are "divisive" is if there are many people who are very pro Chinese concentration camps, and are offended when I refer to them in a negative way. Or, I shouldn't be discussing them at all. Is that what you found to be inflammatory? Bringing up something that is happening?

I already apologized for an antagonistic tone, I won't for pointing out documented history.

Sigh. Straw man. Actually I'm a student of ancient history and have many concerns about China, but love living here as it's a fascinating place and a great environment for hardware technology development, macro-level progressive, plus if you place any credence in Musk a glimpse of the future. The point is, if you look at any long living empire, saber-rattling doesn't expand as fast or leave the same legacy as cultural expansion and integration. China's got the upper hand there. One should view B&R as a diplomatic move toward influence expansion. Whereas, I've read that US's stated goal is to be viewed as an irrational military actor as a 'force multiplier', with rapid global military strike capability. US imprisons a huge percentage of its population, China just shoot them. Neither are great options. Of course, if the world were to adopt a scientifically supported penal strategy of rehab like Scandinavia, we could be happy little capers on one big open sandwich. Then get eaten.

I really think China is the future, very impressive. - Elon Musk (2019)

Benefiting from a system of oppression that kills people isn't a straw man, it's the entire point.

> US imprisons a huge percentage of its population, China just shoot them.

I can't tell if this is moral equivalence or simply ignorance of what China is actually doing to its population. I'll give you the benefit of the doubt and conclude you think US prisons arresting non-violent drug offenders to 3 years in prison is the same as kidnapping/torturing and disappearing an entire ethnicity.

I think you have come to that understanding by knowing you depend on the status quo in China for your own personal wealth, not unlike many Han Chinese. And that makes me sad.

> I really think China is the future, very impressive. - Elon Musk (2019)

This means nothing, every large investor kisses up to the gatekeepers of a growing market. Every single one.

Is it profitable?

Profitability judged at any moment in time, difficult to say. They've had a couple profitable quarters, and mostly losses in quarters. Then again, those losses are largely attributed to expanding manufacturing and tech, which presumably could fuel greater profits down the line.

At the end of the day, if we get serious about climate, Tesla is the #1 BEV company that's well positioned to actually reap the rewards of green consumers and green regulations.

> yes https://ir.tesla.com/static-files/1e70a30c-20a7-48b3-a1f6-69....

from your link

> GAAP operating loss of $167M, GAAP net loss of $408M, including $117M of restructuring and other charges

So, no they aren't profitable

In what sense is Tesla profitable? They've had a few profitable quarters, but no profitable year yet.

The graph on the first page is free cash flow and deliveries not profits.

For fun, I looked at the quarterly net incomes[1] and the profits from the profitable quarters were wiped out in the very next quarter. Heck, 2019Q1 wiped out all profits on its own.

[1] https://www.macrotrends.net/stocks/charts/TSLA/tesla/net-inc...

> Yes.

Cash flow is not profit.

Has an "X" Killer company or product ever actually Killed X?

Mozilla comes to mind.

What has Mozilla ever killed? If you're about to say Internet Explorer--Google did that.

Blackberry, iPhone

I heard the idea that the Blackberry devices circa 2008 were iPhone killers more than the other way around

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