Tesla are running out of money and will be bankrupt by early 2019, they're asking suppliers to offer "retroactive price cuts"

[dalekphalm]

5 minutes ago, Zodiark1593 said:

Not sure I would appreciate adding 30 minutes to my already lengthy 5 hour drive to the bay area, thank you very much, safety be damned...

For the sake of other drivers on the road, if you're doing a 5 hour non-stop trip in one go? Please, stop and take a break in the middle.

 

30 minutes (or frankly, even 15, 10, or 5 minutes) is not worth risking your safety, not to mention the safety of every car around you.

[Zodiark1593]

Just now, dalekphalm said:

For the sake of other drivers on the road, if you're doing a 5 hour non-stop trip in one go? Please, stop and take a break in the middle.

 

30 minutes (or frankly, even 15, 10, or 5 minutes) is not worth risking your safety, not to mention the safety of every car around you.

Actually, I've done multiple 5+ hour non-stop trips (Both going, and the return trip in the same day) several times this year already. I've also ridden along for some long non-stop trips as well, again, several times a year throughout most of my life, (not to mention my long daily commute) so I'm rather accustomed to long car journeys. 3 hours (or even 5 hours) I hardly consider to be a "long trip".

 

Though if it helps you sleep at night, I can cut this particular trip down to the 3 hour mark by leaving at 4:00 in the morning, due to lack of traffic.

[Unimportant]

On 7/24/2018 at 7:16 PM, Froody129 said:

or get some form of government bailout or something

No! Try to grasp some basic economics before saying stuff like that (or worse, vote for politicians that promise to do such things). Where does government get the money to fund such bailouts ? From taxes, off course. Who pays taxes? Companies and individuals that are doing things right and efficient and as a result make profits. That's a given because you don't pay taxes when you're making losses.

 

So, you want to tax economic actors that do things right and have their sh*t together, thereby stifling their growth so the money can then be thrown in a bottomless money burning pit? Thereby even incentivising bad performance.

 

Capital is not endless. Every buck government would hand Tesla to waste is a buck taken from someone else that can no longer be used to start/run/grow another company that might do better. Losses are the markets way to get rid off the losers that waste precious capital and resources, that's too important a mechanism to mess with. Imagine if every baker wastes more input then he outputs, aka makes losses, there'd be no bread.

[Froody129]

23 minutes ago, Unimportant said:

No! Try to grasp some basic economics before saying stuff like that (or worse, vote for politicians that promise to do such things). Where does government get the money to fund such bailouts ? From taxes, off course. Who pays taxes? Companies and individuals that are doing things right and efficient and as a result make profits. That's a given because you don't pay taxes when you're making losses.

 

So, you want to tax economic actors that do things right and have their sh*t together, thereby stifling their growth so the money can then be thrown in a bottomless money burning pit? Thereby even incentivising bad performance.

 

Capital is not endless. Every buck government would hand Tesla to waste is a buck taken from someone else that can no longer be used to start/run/grow another company that might do better. Losses are the markets way to get rid off the losers that waste precious capital and resources, that's too important a mechanism to mess with. Imagine if every baker wastes more input then he outputs, aka makes losses, there'd be no bread.

Imagine if we had governments that actually follow their mandate! The government's mandate is to care for its people. What I mean is that electric vehicles are the way forward and we have to get off the ICE boat ASAP. Pure capitalism is not the way 

 

The government isn't just going to bail out any dumbass who drove their company into the ground, they do bailouts when it is beneficial to the public. If it is decided that given more capital a business could be an asset to the country (infrastructure, jobs, investment etc.) then they may bail it out

 

And why would use government be giving some other business the money, to start their own business, which may or not work out? If you're gonna take on this bullshit attitude of treating people like idiots then you can expect the same in return 

[Unimportant]

4 minutes ago, Froody129 said:

The government isn't just going to bail out any dumbass who drove their company into the ground

Guess you never heard of Solyndra? And that's just the first one out of an endless list that comes to mind.

 

5 minutes ago, Froody129 said:

If it is decided that given more capital a business could be an asset to the country (infrastructure, jobs, investment etc.) then they may bail it out

The market decides that already, better then any central planner can, history is pretty clear on that. If it were up to the soviet union we'd still be driving Lada's.

 

8 minutes ago, Froody129 said:

And why would use government be giving some other business the money, to start their own business, which may or not work out?

Not sure what that sentence is supposed to say but whatever government gives to economic actor A it has to take from economic actor B. You only see the plus side of the government handing money to actor A to be bailed out, you do not see the economic activity that could've been but never was because actor B was taxed to pay for A.

 

As a simple example, imagine government taxes someone for $100 and spends it on a new desk for a bureaucrat. You see the desk being purchased so government grew the economy by $100 and helped create jobs in the desk-building industry. What you fail to see is what the person being taxed would've done with his 100$ if it weren't taxed. For all we know he could've used it to purchase materials in order to produce 150$ worth of goods. You cannot know because it never was...

 

One might be interested in Frédéric Bastiat's "What Is Seen and What Is Not Seen":

https://www.econlib.org/library/Bastiat/basEss.html?chapter_num=4#book-reader

 

I'm not going to debate this further because I know it tends to lead to an endless back-and-forth. I just had to post a reaction in the hopes that some-one happening to read this sees the light.

[GoodBytes]

3 hours ago, Unimportant said:

No! Try to grasp some basic economics before saying stuff like that (or worse, vote for politicians that promise to do such things). Where does government get the money to fund such bailouts ? From taxes, off course. Who pays taxes? Companies and individuals that are doing things right and efficient and as a result make profits. That's a given because you don't pay taxes when you're making losses.

 

So, you want to tax economic actors that do things right and have their sh*t together, thereby stifling their growth so the money can then be thrown in a bottomless money burning pit? Thereby even incentivising bad performance.

 

Capital is not endless. Every buck government would hand Tesla to waste is a buck taken from someone else that can no longer be used to start/run/grow another company that might do better. Losses are the markets way to get rid off the losers that waste precious capital and resources, that's too important a mechanism to mess with. Imagine if every baker wastes more input then he outputs, aka makes losses, there'd be no bread.

I'll challenge you by saying that the billions needed to help a company who employs thousands of people are less than the multi-year impact from having all these people without jobs, especially in a economic state (back during the recession), where no other company is interesting in hiring, growing, or even competing (if possible, if they are the market disturber), and just watching every penny.

 

Tesla is not going go bankrupt, and in a few years you'll see GM go and say that their biggest is take was not buying Tesla when they released their first car.

What people don't understand are the following:

• As long as you have a business case that shows potential growth and potential target value, you'll have investors ready to give funding. This includes banks, and investment firms and individuals (except restaurants, too risky, 'no one' loans money to those). Case in point, Facebook, look how Facebook drop so much, because of their latest report indicated that the potential growth is no longer there, and revenue will be limited due to privacy rules limiting their revenues. It doesn't matter if you burn cash or not. Making a mass production car cost a fortune. you have nothing to start with.
   
• New products are ALWAYS a loss. Here, is a simple graph that is often used to explain the product life cycle against profit. Now this graph is used for your "typical", low cost good or service:
  
  
  Notice that only at Growth you START to see profits. Tesla is, with the Model 3, at the early stage of introduction. The reason why Product Development and Introduction is low, is because R&D and the cost of production. When you finally paid all the equipment, land, R&D for the product back, and you have sufficient sales to pay your operation (which you start optimizing) you start you reach the Growth stage (assuming your product is successful to reach that stage). And usually at the "Maturity" stage, is where you are almost ready to release your newer model of your product. This newer model usually improve the product based on feedback, and added time and from the received revenue from the success of the previous product. Another thing it improved is the reduction of the production cost. This is done by identifying issues in the production line, to reduce bad batch or productions of a unit, resulting in reduce wasted money, and reduce warranty servicing of a good. In addition, you find ways to reduce the cost of the product, such as cutting things out that the mass user base is not interested in, or won't notice, finding new suppliers, re-negotiating orders.
   

Let's see how the above graph compares to Tesla's  cash flow:

Graph Source: Ars Technica - https://arstechnica.com/cars/2018/07/teslas-cash-crunch-explained/

 

What do we see? We see the product life cycle in action. Lose money due to R&D and buying what you need to start production of the product (facilities, machinery, staff, staff training, etc.), production started, and products being delivered, and now you have profit. Rinse and repeat for EACH car model.

Remember that the Model S and Model X where hand build... Hand build cars are inexpensive in terms of production material cost (you don't need massive custom made robotic painting arms, massive multi-lift systems to push the car being built in a conveyor system, etc.), but the end result is that the car is very costly as the man hour needs to be paid off. Model 3 needed all this facility (not to mention the massive R&D JUST for the production line logistic and and see what you need, PLUS the R&D of the car itself). We can see right after the peek of the first Model 3, there is a massive cut back on spending as Model 3 are being sold, bringing in lots of money. And the massive spending once again, is to meet the production number set. This means, very soon, they make and sale their car at a more massive scale bringing money. And you can expect another down curve soon after for the Model Y that is coming after the Model 3, and then the new electric trucks which might be worked on at the same time as Y series. In fact the Y series was already started work and you can bet that the massive spending from late 2016-2017 include the Model Y and the new trucks that they shown early prototypes. This shows how big Tesla has gotten where multiple things can happen at the same time.

[Selah]

12 hours ago, kuddlesworth9419 said:

Are you crazy. Ever had a driving job where you need to get somewhere? Ever been on a driving holiday? You can drive for days on end in a petrol or diesel with very fast 2 minute fill ups. Fucking around with waiting for your stupid car to charge is going to piss you off.

if you are angry over something simple like that I hope you never have a mission critical job or encounter tough life decisions!

 

[Bensemus]

On 2018-07-28 at 11:18 AM, Monkey Dust said:

Ford and GM are huge, massive employers, with a gargantuan number of pensioners dependent on their Ford/GM pensions. And then there are the huge number of parts suppliers they keep in business. Letting Ford and/or GM go bust wasn't an option, like most of the banks. Tesla going bust would have tiny repercussions by comparison, tiny number of employees, no pensioners.

 

Tesla are in serious trouble, their total debt as a percentage of turnover is massive. Even if they can make some profit on the Model 3 they have long way to go before they are in stable financial position.

 

Their hard squeeze on their suppliers is a big risk. Short term suppliers may decide to stop dealing with Tesla, which carries a high risk of disrupting production. Long term suppliers will seek to reduce their costs, and consequently the quality of many of the components they supply. Or of course suppliers could go bankrupt, again disrupting production.      

I’m not saying it was wrong to bail out those companies. Ford actually never risked bankruptcy and instead took out a loan so it didn’t have to compete with subsidized companies. My point was that Tesla isn’t being propped up with subsidies. The actual money they have borrowed from the government has been payed back. They do have tax deals but so does every company. 

[dalekphalm]

9 hours ago, Bensemus said:

I’m not saying it was wrong to bail out those companies. Ford actually never risked bankruptcy and instead took out a loan so it didn’t have to compete with subsidized companies. My point was that Tesla isn’t being propped up with subsidies. The actual money they have borrowed from the government has been payed back. They do have tax deals but so does every company. 

This is one of the reasons why after the 2008 recession, my respect for Ford increased massively.

 

They saw the writing on the wall, and they actually prepared fairly well for the recession. They took a loan with really good terms, yes. But they didn't need a bailout (and the bailouts came with a lot of concessions, like the Government owning shares and controlling the board, etc).

[Real_PhillBert]

10 hours ago, Bensemus said:

I’m not saying it was wrong to bail out those companies. Ford actually never risked bankruptcy and instead took out a loan so it didn’t have to compete with subsidized companies. My point was that Tesla isn’t being propped up with subsidies. The actual money they have borrowed from the government has been payed back. They do have tax deals but so does every company. 

Yes and no. 

 

Tesla as a company is not being propped up by subsidies in the form of a cash bailout like GM was, however Tesla sales are definitely being assisted by the $7500 federal tax credit for each of their vehicles. The government may not be directly giving them money, but they are supporting Tesla sales. 

 

https://www.fueleconomy.gov/feg/taxevb.shtml

 

 

[GoodBytes]

2 minutes ago, Real_PhillBert said:

Yes and no. 

 

Tesla as a company is not being propped up by subsidies in the form of a cash bailout like GM was, however Tesla sales are definitely being assisted by the $7500 federal tax credit for each of their vehicles. The government may not be directly giving them money, but they are supporting Tesla sales. 

 

https://www.fueleconomy.gov/feg/taxevb.shtml

Hang on, every electric card has the same governmental tax credit offer. It isn't specific to Tesla.

[Real_PhillBert]

6 minutes ago, GoodBytes said:

Hang on, every electric card has the same governmental tax credit offer. It isn't specific to Tesla.

I never said it was. The government is bolstering their sales too. 

 

I'm simply pointing out that the government can assist these companies in more ways than a simple cash bail out. 

[dalekphalm]

4 minutes ago, Real_PhillBert said:

Yes and no. 

 

Tesla as a company is not being propped up by subsidies in the form of a cash bailout like GM was, however Tesla sales are definitely being assisted by the $7500 federal tax credit for each of their vehicles. The government may not be directly giving them money, but they are supporting Tesla sales. 

 

https://www.fueleconomy.gov/feg/taxevb.shtml

 

 

As GoodBytes said, that's for all EV's. If you want to argue that no EV at all should receive a tax incentive, that's fine, but you cannot single out Tesla, when Ford, GM, Toyota, Nissan, VW, etc, are all producing EV's that qualify for that same $7500 rebate.

1 minute ago, GoodBytes said:

Hang on, every electric card has the same governmental tax credit offer. It isn't specific to Tesla.

Agreed.

 

The fact that people think this will be the end of EV's is actually ridiculous, and hilarious. Companies like Ford, Toyota, and VW are investing billions into EV's, and are rolling out EV's for most of their lineup.

[Real_PhillBert]

6 minutes ago, dalekphalm said:

As GoodBytes said, that's for all EV's. If you want to argue that no EV at all should receive a tax incentive, that's fine, but you cannot single out Tesla, when Ford, GM, Toyota, Nissan, VW, etc, are all producing EV's that qualify for that same $7500 rebate.

Agreed.

Go back and re-read. 

 

I did not make any statements about these tax incentives being good or bad. 

 

I'm simply pointing out that the government assists companies in more ways than a cash subsidies. 

[GoodBytes]

31 minutes ago, Real_PhillBert said:

I never said it was. The government is bolstering their sales too. 

 

I'm simply pointing out that the government can assist these companies in more ways than a simple cash bail out. 

Oh ok. It sounded like you meant that Tesla was the only one getting this specific gov rebate.

 

[GoodBytes]

Update

 

Tesla released its financial reports, and Tesla shares went up 13% on Wednesday. This is because, despite the massive spending, the Model 3 makes a lot of money (for a car of this type), and loses have been reduced, confirming everything I mentioned. In short, investors sees this point to be a turning point for the company. This means that the return on investment by investors has started.  So looking at the Ars graph in my previous post, you should see the orange bars reduce and reach positive soon. (assuming everything goes to plan).