Tesla’s earnings release just came out and just as I expected, they still don’t know how to manufacture cars at a profit. Even I’m aghast at how bad their position is. I thought that they might have improved even a little bit by now. Their entire profit this quarter and last is entirely due to protective measures enacted by the federal government to help EV companies at the expense of other automakers. I suppose they’re working since without those cash payments, Tesla would be dead by now.
Check this out. If you combine Q1 and Q2 they had a combined profit of $120 million. And guess how much money they raked in from Federal Regulatory credits? $782 million! That’s a huge amount of government welfare. So far they’ve raked in more regulatory credit largesse in 2020 than they did in all of 2019.
Nothing has changed. Tesla is still losing over $100 million per month making cars. The Model 3 has failed. The thesis that Tesla could convert to a mass market EV manufacturer and make a profit on enhanced economies of scale is dead. That’s why all the Tesla pumpers have tried to switch the focus to revolutionizing the self-driving world. Because Tesla took their best shot at making cars and has fallen far short.
It doesn’t matter whether Tesla is added to the S&P 500 or not. That’s not going to help them learn to make cars efficiently. It’s also not going to help them raise auto prices. Which is the crux of their predicament. See the chart below, Tesla’s growth is basically dead so there isn’t much coming in the way of economies of scale. So they need to figure out how to raise prices before the regulatory credit gravy train comes to an end. Which it probably will in 2021.
Nothing has changed. Tesla is still losing over $100 million per month making cars. The Model 3 has failed. The thesis that Tesla could convert to a mass market EV manufacturer and make a profit on enhanced economies of scale is dead. That’s why all the Tesla pumpers have tried to switch the focus to revolutionizing the self-driving world. Because Tesla took their best shot at making cars and has fallen far short.
It doesn’t matter whether Tesla is added to the S&P 500 or not. That’s not going to help them learn to make cars efficiently. It’s also not going to help them raise auto prices. Which is the crux of their predicament. See the chart below, Tesla’s growth is basically dead so there isn’t much coming in the way of economies of scale. So they need to figure out how to raise prices before the regulatory credit gravy train comes to an end. Which it probably will in 2021.
In fact, when it comes to manufacturing efficiencies, Tesla is going the wrong way. They continue to build more factories. In case Musk was unaware, “Economies of Scale” means that you produce more products with the same level of fixed assets. This is why Tesla isn’t really a tech company. Companies like Microsoft and Google don’t need to invest capital to double their sales. Tesla’s current Fremont factory was already the least efficient auto plant in the world when measuring the number of man-hours necessary per unit.
Whether the market understand how much of a basket case Tesla is remains to be seen. But I’m confident in my assessment that Tesla is still on the road to nowhere. The question isn’t whether or not they are added to the S&P 500, the question is what do they do next now that their best efforts at converting to mainstream products has failed?
Whether the market understand how much of a basket case Tesla is remains to be seen. But I’m confident in my assessment that Tesla is still on the road to nowhere. The question isn’t whether or not they are added to the S&P 500, the question is what do they do next now that their best efforts at converting to mainstream products has failed?
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