Make sure to see Whitehat's response inside the thread
Unlike WhiteHat ( "TSLA Taxpayers Stuck with Lifeless Assets" and "10 Facts/Headscratchers from the Ongoing TSLA Saga"), I’m a big fan of Tesla Motors.
Why I like Tesla:
Tesla has followed a typical learning curve - Tesla began in 2003 by taking stock Lotus Elise’s and converting them into fully electric vehicles. Essentially a proof of concept, the car’s purpose was to show the world that an electric vehicle could be sexy and fast.
Fast forward to today; the roadster has been put out to pasture and the Model S is the new flagship. So far the sedan has received both rave reviews (Motor Trends 2013 car of the year) and media criticism (New York Times), but every single driver (including me!) will tell you the same thing: the car itself is phenomenal. It is leaps and bounds better than the Roadster and still less expensive.
The model X, due out in 2014 (pushed back to “focus on 2013 profitability”) is designed to follow the same path.
Tesla sells energy at a profit – Clearly the supercharger network is still in its infancy: There aren’t enough stations to take care of the existing Tesla customers let alone a nation dominated by EV’s, and it takes far too long (>1 hour) to charge a Model S to capacity. That said, more supercharger stations are being installed regularly, and as battery technology improves (According to U.S. Energy Secretary Chu, costs for a 40 mile range battery will drop from a price in 2008 of $12K to $3,600 in 2015 and further to $1,500 by 2020: http://www.reuters.com/article/2012/01/11/us-autoshow-batteries-idUSTRE80A1FA20120111) the frequency and duration of charges will decrease substantially.
Furthermore, the supercharger networks are Solar Powered, with parts and labour supplied by sister company SolarCity, so any excess energy is sold back into the grid at a profit.
Tesla has partnered with industry leaders – Rather than trying to take the 900 pound gorillas head-on, Tesla has elected to partner with them. Daimler, Toyota, and Panasonic have all invested 10’s of millions of dollars in Tesla, and Toyota jointly developed their new Rav4 with Tesla. Tesla sells advanced powertrains to Daimler and Toyota. When major players in the industry are coming to a small player for engineering assistance, you know they are doing something right.
The CEO is a genius - For those who don’t know, serial entrepreneur Elon Musk is at the helm. Armed with a degree in business from Wharton and another in Physics from Penn, past successful ventures include:
Zip2 – online content publishing software for news organizations (sold for $340 million when Musk was 28).
Paypal – online transaction processing system (sold for $1.5 billion 3 years after the Zip2 sale)
Along with Tesla, Musk serves as CEO of Spacex, the aerospace firm that became the first commercial launch company to dock with the International Space Station in May of 2012. Elon also provided seed capital and serves as Chairman of the Board for SolarCity (founded by his cousins Lyndon and Peter Rive), North America’s largest solar panel installation firm.
Management has a large stake in the company – It is reported that Elon himself owns 32% of Tesla, and Tesla employees own another 33%. When the company nearly went bankrupt in 2008, Elon led the investment round by offering to put up the entire $20 million that was required.
Electric vehicles are fundamentally better than their gas powered counterparts– Electric vehicles provide instant power and torque, no pollution, low repair costs, and get their energy from a renewable source. The inverse is true for internal combustion engines. Once the technology has fully matured, there is no question that the internal combustion engine, much like it’s fuel, will be a relic of the stone age.
Now, to some of WhiteHat’s points:
For what it’s worth, they expect 4,500 of Model S deliveries to come in the first quarter of 2013
And they met that goal as you note here:
Musk posts a blog on Tesla’s website just after midnight on April 1 announcing that Tesla has achieved profitability for Q1 and exceeded its company-supplied guidance of 4,500 Model S deliveries, clocking in at “over 4,750 Model S sales,”
Getting to 4,750 Q1 deliveries was a stretch for the business in one aspect or another, or in all aspects.
Agreed. They set very ambitious goals... And then exceeded them.
On the other side of the coin, an all-electric car just doesn’t meet the demands of the average Joe yet.
No, but at one time DVD players cost over $1000 and were only available in high end video stores... Now you can pick one up for 40 bucks at Wal-Mart.
However, a few things can’t be denied by anyone: Tesla has a lot of work today before they have officially proven themselves.
Agreed. The company is still very much a startup.
In order to even get remotely close to a $500/month lease payment, according to Tesla’s lease calculator, one must live in California and receive a full $13,000 EV tax credit, have a superior credit rating, be able to deduct the Model S as a business expense, value their time at a minimum of $100/hr and take advantage of EV access to the carpool lane on the highway to save several hours worth of time doing so. Also, the lessee will need to save at least 2-3 hours a month (at a rate of $100/hr minimum, again) by not having to waste time pumping gas. Tesla does not account for the fact that charging a Model S typically takes at minimum 1 hour and filling up a tank of gas takes around 10% as long. For what it’s worth, most estimates so far have the monthly rate pegged at about $1200/month, not including the 10% down payment required to begin the “blease.”
Not mentioned on the conference call or in the press release but present at the bottom of a page on Tesla’s website pertaining to the leasing program, the “blease” financing is only available in 8 states: CA, CO, IL, FL, NJ, NY, OR and WA. Coincidentally, these are all higher-income states and all have generous EV kickbacks for owners, as well as emissions credits for anyone who sells a car in their jurisdiction. That would mean Tesla gets their all-important emissions credits on leases as well.
Yeah I played with the Model S financing tool on their website and unless you meet most/all of the strict conditions mentioned here, the incentives offered in the “blease” will not make a significant dent in your monthly payments.
That said, the Model S’ target market are the same people who are most likely to be able to take advantage of the incentives:
With the introduction of the Model S, Elon Musk and his gang at Tesla have aimed to capture the doctor, lawyer, and mid-level businessman who can afford the 60-70k the car may cost them with modest upgrades.
A lawyer/doctor/business owner in California or Florida making 300k a year actually does value their time at over $100/hr, so saving X hours per month would be very valuable to them.
And you’re absolutely right that charging a Model S typically takes 1 hour and filling up a tank of gas takes around 10% as long... But you would never go to a Tesla charging station in a normal day, you would simply plug it in when you got home at night; most people don’t drive over 270 miles to and from work every day. Now cross country drives? Totally different story, and EV technology is not there yet, but at one time neither was the internal combustion engine.
Besides, the important piece here is the buyback program:
On Tuesday, 4/2 at 2:00pm PST, Tesla makes its much-awaited major announcement: they have reached an agreement with Wells Fargo and US Bank to provide financing for the Model S, with a guaranteed buyback agreement in which Tesla will repurchase the Model S from the customer after 36 months (if they so choose) with residual value pegged to that of the Mercedes S Class. Tesla announces on a conference call that the financing will be in the area of $500/month for qualified lessees.
This is the first step towards a REAL leasing program, something that is absolutely crucial for the Model S. Higher end vehicles are leased more often than not, and by providing a price floor for used Tesla’s, Elon Musk has made it simple for banks to value pre-owned Model S’ and thus provided the groundwork for future lessees.
Bottom line for me, and hopefully for many others, is that normal, legitimate companies do not act this way. Executive officers do not spend this level of time on spin, publicity, and media access; they are too busy running their companies [properly].
I beg to differ. By all accounts Elon is intimately involved in every aspect of Tesla, from design and production, to accounting and finance. He has gone on record multiple times saying he would much rather be behind the scenes building products, that he is only the CEO because he does a better job of it than everyone he has hired so far. CEO’s of public companies in the 21st century are expected to maintain a public profile. Personally I think his tweets, Youtube videos, and battles with the media are pure genius – he is turning his customers into evangelists, and driving interest in his company. The man plays the game better than anyone I’ve ever seen.
Also, let’s not forget about Detroit Electric company, a new Tesla-lite firm that is marketing a $135,000 luxury EV that may compete with the higher-end Model S configurations. While they could easily flop due to Tesla’s great name recognition, we can’t deny that if anything it can only have a negative impact on TSLA.
Disagree. New players in the market suggests others see profit potential, which bodes well for the industry as a whole. The fact that you, an esteemed hedge fund worker (lol), is aware of a tiny EV startup suggests electric cars are gaining ground. Furthermore the SP01 would have been a direct competitor to the Tesla roadster, not the Model S.
And if he thinks breakthrough technology isn’t something the car business is very good with, yet he runs a car business that essentially sells breakthrough technology… well, I don’t know what to make of that.
Sounds like an excellent opportunity for innovation.
Tesla misrepresented their financing product in many material aspects.
A little harsh, no?
Not only that, but Tesla has additional support from the government in the form of a mid-$400M loan from the Department of Energy (DoE), which provides capital Tesla would be powerless without.
Keep in mind that Nissan as well as Ford, a company you have used as a benchmark for Tesla to be measured against, received funds from the same Advanced Technology Vehicle Manufacturing program. Goldman Sachs has received billions of dollars in loans from the government, would you short them? You can’t look at Tesla as you would a Fortune 500 company. Given the role the government has taken in the economy, Elon’s ability to get government funding is actually encouraging to me.
I think Secretariat was spot on when he said “Your upside is literally 10x or more if they execute on Gen III and manage to walk the tightrope with Model S subisidzing R&D for the next 1 - 2 years. Being short as a trade could work, but I would not hold on too long. And what you said about nobody intelligent ever wanting to invest in this company is clearly off base, there are a lot of smart shareholders who have done a lot of work and probably are well aware of the negative points you bring up....arrogance can be fatal in investing so keep that in mind.”
I hope some people found this write up thought provoking.