Lots of interesting news this morning from Blue Origin's normally quiet press room. Also of note is a series of videos showing progress at their Cape Canaveral rocket factory & launch facility:
It's exciting to see BO making progress on their campaign to catch SpaceX in the commercial launch space. I'm curious whether the slow, deliberative approach they show here will pay off in reliability, ability to scale, etc once they start putting kgs in orbit.
Those are some impressive facilities. Billions of dollars for a factory and a launch complex for a rocket smaller than the massive one that SpaceX is building in tents at Boca Chica, Texas.
It seems obvious that you have to build the factory before you can build a rocket but Musk has figured out how to get around that.
He did it the old way at Tesla for the Model 3: built out the factory before building the car, his "alien dreadnought" highly automated factory that then went through "production hell" and was 2 weeks away from bankrupting the company.
He then built a giant tent in the parking lot of his factory, and iterated on a factory design, took that design and used it to build giga-Shanghai, producing vehicles of higher quality than his American built ones.
Who knew that a factory design doesn't have to be "big design up front" and can instead be more software style iterative design?
> Who knew that a factory design doesn't have to be "big design up front" and can instead be more software style iterative design?
Anyone who's ever done manufacturing? Anyone who's ever built something with their hands? Anyone who realizes that when assembling anything from 30,000 parts, it's going to take a lot of time and iteration to get your build quality to an acceptable level?
Now, this may all come as a shock to software people, but anyone who has actually built stuff out of real, physical objects, would be aware of this... And why you should never buy a version 1.0 of anything.
I legitimately don't understand why software engineers think that other professionals can't understand the concept of iteration. When GM builds a car factory, they aren't doing it from zero. They are building it on top of a hundred years of manufacturing experience and iteration. When Tesla was building its first car factory, it had nearly-zero years of institutional manufacturing experience and iteration. Of course a big up-front build was going to be a disaster. It's why they still can't figure out how to align the interior panels in their cars.
Yep. I know Tesla has manufacturing people who get it, but some of Tesla fans are just lost in the wilderness. "Tesla's plant has so many robots!" -- that's every car plant these days! Nobody wants to pay for labor or deal with recalls for inconsistent welds.
Here's a random video of a GM SUV production process -- just filled to the brim with robots.
They're obviously aiming to cut cost and build time as much as possible, so they automate where they can without sacrificing quality for things like spacing gaps. Over time, that'll be automated too. GM as an example spends like $30 billion/year in CapEx -- that'll buy a lot of robots!
That is the problem. The Execs at GM are MBAs who are good at pulling financial levers. "Reduce costs by X%", "Increase R&D budget by Y%".
Tesla is playing a different game based on first principals. "How low can we get cell cost?", "How can we get range to 300 miles without extra costs?"
Obviously finance is important. If you run out of cash you can go bankrupt. But in the long run whoever is innovating the fastest without going bankrupt wins.
This is pretty meme-y. Elon's got a degree in physics and econ... Mary Barra has an engineering degree and managed an auto manufacturing plant. Which is probably why GM makes a profit on every car they sell and Tesla.. doesn't...
There is no doubt Tesla is a revolutionary company and as a "car guy", I'm ecstatic that they somehow bootstrapped a new American auto manufacturer. Their commitment to reducing electric car costs likely put a huge dent in the trajectory of climate change which as an unequivocal good. My only point is that they could have done all that and built a "normal" manufacturing plant in the South somewhere and never have been two weeks away from shutting the company down vs. trying to "First Principles" design a new way to build cars that had them reinventing the wheel in messier, more expensive way.
GM (and all other auto manufacturers) include their R&D expense in their COGS since they acknowledge they must release new models every year. Tesla, doesn't.
Tesla also doesn't include showroom costs in their COGS, but they can't sell cars without them.. (all other autos only include the revenue they receive from their dealer networks as the top-line revenue figure).
These are the kinds of thing that makes people suspicious about their ultimate financials.
I don't care at all about stock prices, I'm actively shopping for an electric car and Teslas are near the top of my list since they're so technologically advanced, but they're just not very well as a manufacturer or as a responsibly run corporation which annoys me since I'm in corporate finance.
As an example, if Tesla and GM both had $10,000 cars for sale. GM's "Cost of Goods Sold" would include the manufacturing costs, costs for R&D and their revenue would only be $8k since the dealer networks have their own books - but then GM isn't responsible for all of the showrooms and sales staff, etc.
Tesla's revenue would show $10k, but would only include the cost to manufacturer (the R&D expense is "below the line") and they wouldn't include any costs to have hundreds of showroom locations - even those those showrooms are necessary to sell cars at any volume, and Tesla has to pay for out of that $10k sales price.
It's obviously not apples-to-apples to compare those "GAAP Gross Margin" between those two things.
Your original statement "Tesla doesn't make a profit on every car" is a blatant untruth. That's an understandable mistake for a layman to make given the misinformation out there, but you claim to be in corporate finance and should have better standards.
I felt like “by the accounting standards used by literally every other company in the auto industry” was implicit. So apologies - “Tesla doesn’t make a profit on every car, If you use the accounting standards in place for every other auto manufacturer.”
There are a lot of weird short seller conspiracies out there but “In order to increase apparent profitability, Tesla uses different accounting than every other auto company” is a factual statement and so is “If you use actual industry GAAP, Tesla isn’t yet GM profitable.”
I hope they get there! I hope they sell 10M cars per year.. but to hold them up as a manufacturing leader is pretty silly.
If you understand the point about COGS, it's pretty disingenuous to try and compare GAAP between the two and make that claim. If you don't understand the point about COGS, you're not really in a position to denigrate his standards on corporate finance.
If you are so certain that you are correct and these are a fair comparison, can you please explain how his breakdown between the two is either incorrect or not relevant to your point?
He said that Tesla was unprofitable on a per car basis. The whole company including R&D, SG&A etc was profitable, so unless the solar part of the company was subsidizing the car business, that's a flat out falsehood. We can reasonably argue whether GM or Tesla are more profitable per car, but that wasn't the original claim.
Sorry for the late response, but, yes, their car business is being subsidized. They lose money on each car. It is not being subsidized by solar, however.
Multiple states in the US require companies sell a certain amount of zero-emission vehicles or buy regulatory credits from companies that do sell that amount. Tesla is one of these companies they buy credits from. They were paid 1.6 billion USD in 2020 for these credits. That is more than double their 2020 net income. [1]
I see, sounds like GM's financials are in good shape. I hope that helps them in 14 years when they are no longer making ICE cars that those dealerships make all their profits off of from maintenance.
Yeah there's no doubt they're in for a really big disruption - and I think dealers are just about the least sympathetic "businesspeople" in America so I won't mourn their loss.
You’re greatly misstating what happened at Tesla. They threw away book built over 100 years of how to build car factories with model 3, because Elon thought they’re smarter than everybody. He was big talking at that time that manufacturing is easy.
It failed spectacularly and nearly bankrupted them and they had to scramble to implement standard processes in manufacturing. Fremont factory is still clusterfuck as a result. Then when they were building Shanghai, they decided to follow more standard playbooks from a start.
And Elon now is taking how manufacturing is really hard.
The whole Tesla model 3 story is “nobody knew healthcare could be so complicated” moment.
Space-X has a large rocket factory. It's in Hawthorne, California. It looks much like an ICBM factory from the 1960s. Boca Chica is a launch and final assembly facility.
Yes SpaceX's Raptor engines would be built in Hawthorne, CA and tested in McGregor, TX like the Merlin before it. But at Boca Chica, TX they are not just fitting the components into the an already completed fuselage, but welding the entire air frame together, including the pressure vessel bulkheads and stacking the stainless steel rings into Starship and Super Heavy. As far as I know Boca Chica receives stainless-steel sheet metal and turns it into the rings segments. The rings have a 9 meter diameter, so cross-country road transportation would be a problem.
The engines are built in Hawthorne, CA before being shipped to McGregor, TX to be tested then are integrated into the final assembly in Boca Chica, TX. Every other part of the launch vehicle (besides avionics systems, also manufactured and tested in Hawthorne) is manufactured and welded on site.
By mass and size, Boca Chica produces the majority of the rocket. By cost and complexity - rocket engines (of Raptor kind) and control systems (of SpaceX kind - with all kinds of telemetry channels) win from Hawthorne.
I'm not a hater, just hard to even take Blue Origin seriously in comparison to SpaceX. Musk will be putting feet on Mars and we'll still be reading about all the great things Blue Origin is going to do. Virgin Galactic is going to reach Space before they do.
> It's exciting to see BO making progress on their campaign to catch SpaceX in the commercial launch space.
They are actually falling behind faster then they are catching up.
> I'm curious whether the slow, deliberative approach they show here will pay off in reliability, ability to scale, etc once they start putting kgs in orbit.
This such a strange thing to consider. The logic that if you just go super slow for long enough, then once you start you will automatically go super fast? Why would that be the case? Of course once they put one kg into orbit, they will put more kg into orbit faster then SpaceX did in 2008. But that is strange definition of 'pay off', in fact its the opposite, its that you didn't get 'pay off' for 10+ years.
Believing that once they finally launch something after 20+ years of moving incredibly slowly, it will simply take of like crazy and they will launch some huge number is just not how the rocket industry works.
SpaceX has scaled faster then literally any space company ever, and is increasing the speed of its scaling over time. funds.
SpaceX has the highest reliability of basically any rocket, no other rocket is human rated, rated for all DoD and NASA flights and has the lowest insurance cost in the industry.
The simply fact is, BO and SpaceX have existed for the same amount of time. BlueOrigin had massive amounts of money put in it, literally billion, many, many billions and they will invest a number of extra billions before they get to their first orbital launch, or probably first significant revenue. Basically all paid of of pocket by Bezos.
SpaceX started with an investment from Musk on the order of 80M and everything since then has been raised threw revenue and private investment.
This race has started 20 years ago, it doesn't start when BO put 1kg into orbit.
In fact, I would argue Bezos whole strategy has been an utter disaster. BO was started to test out landing things, but before they ever even tested orbital landing, SpaceX has already mastered it. Bezos could have invested in SpaceX around 2010 and put the rest of his money into what is need in-space and he would be 10x further along in his plans.
If Bezos goal was millions of people living in space, it would make way more sense to take all those billions he invest in New Glenn, into building moon water mining system. Rather then being a slow copy of SpaceX that is always 10 steps behind.
Together they could achieve so much more, but apparently another heavy lift launcher in a market that already has to many is what he wants to spend money on.
The stage 1 simulator, and integration & test facilities: https://twitter.com/blueorigin/status/1364968313047162880?s=...
"Tank Cleaning and Testing" facility: https://twitter.com/blueorigin/status/1364968720364429317?s=...
Launch Complex 36: https://twitter.com/blueorigin/status/1364969291746074628?s=...
It's exciting to see BO making progress on their campaign to catch SpaceX in the commercial launch space. I'm curious whether the slow, deliberative approach they show here will pay off in reliability, ability to scale, etc once they start putting kgs in orbit.