Musk endeavours

[BobbyD]

Cost comparisons of Tesla model 3 to fossil engined car. Please correct me if you find errors.

Model 3 is $35,000, about £27,000 for base model: 50kWh with a range of 220 miles.

Have you factored in 18 months worth of taxis whilst you wait for delivery?

IAre the cutting-edge innovators like Musk trying to do too much at once in the car-market though?

Musk has a perfectly decent electric car, he might find looking for a way to reliably manufacture it would get him a lot closer to his aim with Tesla than messing about with the AI, which whilst sexy is taking resources away from achieving the environmental benefits of widespread electric car take up, and seems a battle he is very unlikely to come out on top of since he is out-resourced and out specialised.

If one can reliably make stuff in house, the advantages as I see it are substantial.

If only because it prevents your suppliers publicly distancing themselves from your project, expressing serious concerns over your safety regime, and dissolving their relationship with you, as Mobileye did with Tesla.

[odysseus2000]

Some interesting comments exposing view points that may be more poster dependent than investor actionable.

In terms of car range, it is likely that all manufacturers including Tesla will tell you what the range is under ideal conditions and most car makers have test setups to mimic as best as possible those conditions to give a ‘practical’ range under these conditions. Nevertheless if one compares ideal ranges then one has some theoretical model, if not a practical one and it is likely that most punters will follow these number, see next paragraph.

The bias on this board is to folk who count their pennies. I e.g. run a 2000 year Mercedes diesel that I substantially rebuilt and I have one 200 w solar panel that I bought for a tenner-ish since it had a crazed surface and I then use transparent epoxy to fix it. I have an iPhone 4s, bought second hand. However, I realise I am not typical and for investment purposes I look at what other folk do. In our prosperous times most folk that I see who have jobs want the best that is going. They don’t want commodity products, they e.g. want an iPhone not a some Indian copy, if for no other reasons that it makes them feel upto date, modern and prosperous, and because it is easy to use. The local guy who has a unit empire, told me he would never buy an iPhone or a BMW, but he has now got both. My business partner who poured scorn on iPhones ended up with one and it will now be hard for any cheaper phone to get her back. Consequently folk who argue that an electric car should be basic, no frills etc are imho not living in the minds of current punters who imho wants exactly the opposite. I doubt whether any motor that doesn’t have self drive will stand a chance of them buying it. In my own experience flogging stuff, there is no market for bog standard stuff, folk want bells whistles and frills and yet still want it cheap.

I also believe that many punter will want power walls for similar reasons, because they see this as a new thing and because the idea of buying power at x and selling at x/2 will vex them. Most I imagine won't even look at costings beyond the positive patter or the salesperson.

Musk regarding wanting to control things is behaving like most other folk who don’t like being messed around with suppliers. Henry Ford was similarly minded. In my small business I have got to hate having to deal with anyone and spend a lot of time avoiding doing so. E.g. I used to get the field grass cut by a contractor who turned up or not as suited him, not me and I eventually gave up and got the kit to do it myself and currently I am having the best results with a hand scythe, allowing me to cut what I can dry in a day or two and not having too much to deal with as was the case with the contractor. Plus I can cut around orchid and such and so I feel its a win win. Of course this wouldn’t work on a large property where there would have to be dedicated employees, but the rational is the same, the more you control of the process the more it works to suit you.

Having typed all of that it still looks to me like Musk has a potential for a huge win with the model 3 as it is very cost effective, full of bells and whistles and practical and folk are prepared to wait for it, keeping what ever they have till they can get a model 3.

The worry with Tesla is whether they can get the production up. I don’t buy the argument that they should copy how existing makers do it. I image that most of these systems have a lot of complacency and we ‘do it this way’ in them. Henry Ford endlessly innovated, asking workers to make suggestions and out produced all his competition, getting sued by the Dodge brothers for selling too cheap, but his low cost came from innovations that others didn’t do. He even had parts shipped in wooden crates that were taken apart and used on the model T.

However, what is the competition doing? I looked at an e-golf which costs more than a model 3 and I have no interest in owning one. A very cheap second hand Nissan Leaf might interest me, but only for cheapness reasons, I doubt most will be interested in anything second hand. So far all the competition I have researched looks lame in comparison to a model 3 in terms of less range, much less safe in collision tests, no self drive, no hype, generally boring presentations… It maybe that someone comes out with something compelling, but for now i don’t see it.

Regards,

[BobbyD]

Consequently folk who argue that an electric car should be basic, no frills etc are imho not living in the minds of current punters who imho wants exactly the opposite. I doubt whether any motor that doesn’t have self drive will stand a chance of them buying it. In my own experience flogging stuff, there is no market for bog standard stuff, folk want bells whistles and frills and yet still want it cheap.

Whilst you obviously know different people to me, I know far more £100,000 a year households without an iphone than with, once again your overlooking a small hole in your logic. Given the choice between a really good electric car which comes with an autodrive but which doesn't actuallyexist, and a really good electric car without autodrive which can be sat on your drive in 7 days time...

If Tesla could actually roll a few of the base for cheap models out of a factory and in to consumers hands they would have a business, and a chance to set the standard in what very much appears to be the future direction of the automobile business whilst fulfilling Musk's original objectives. As it is everything they are shipping so far comes with $1000's of dollars of bolt on kit which definitely isn't an autopilot, eventually, probably.

Musk regarding wanting to control things is behaving like most other folk who don’t like being messed around with suppliers.

Notably unlike people who actually produce cars in volume for a living... The idea that Tesla are going to design the best everything, or that doing so would be the best use of their time and resources even as they fail to give people the vehicles they are willing to pay $10,000's for is an interesting one.

Musk regarding wanting to control things is behaving like most other folk who don’t like being messed around with suppliers. Henry Ford was similarly minded. In my small business I have got to hate having to deal with anyone and spend a lot of time avoiding doing so. E.g. I used to get the field grass cut by a contractor who turned up or not as suited him, not me and I eventually gave up and got the kit to do it myself and currently I am having the best results with a hand scythe, allowing me to cut what I can dry in a day or two and not having too much to deal with as was the case with the contractor. Plus I can cut around orchid and such and so I feel its a win win. Of course this wouldn’t work on a large property where there would have to be dedicated employees, but the rational is the same, the more you control of the process the more it works to suit you.

Having typed all of that it still looks to me like Musk has a potential for a huge win with the model 3 as it is very cost effective, full of bells and whistles and practical and folk are prepared to wait for it, keeping what ever they have till they can get a model 3.

The worry with Tesla is whether they can get the production up.

It's almost like Tesla's engineers would be better off working on increasing production than mowing the lawn or working on what still isn't an autopilot to fit to the cars which they can't currently build to give to the people trying desperately to throw money at them...

The iphone parallel is an interesting one, and you can argue about the best market segments for Tesla to target, although given the environmental motivation behind Tesla making good, cheap electric cars available to the world in high numbers would be the obvious way to go, but the bit where the parallel falls down is that Apple produce 200 million iphones a year... If you want an iphone you can walk in to a store and buy one!

[odysseus2000]

BobbyD
Whilst you obviously know different people to me, I know far more £100,000 a year households without an iphone than with, once again your overlooking a small hole in your logic.

I just look at Apple sales and user figures and that tells me iPhones are very popular in all the advanced economies.

If Tesla could actually roll a few of the base for cheap models out of a factory and in to consumers hands they would have a business, and a chance to set the standard in what very much appears to be the future direction of the automobile business whilst fulfilling Musk's original objectives. As it is everything they are shipping so far comes with $1000's of dollars of bolt on kit which definitely isn't an autopilot, eventually, probably.

Yes, but that is not the plan. Musk like Jobs has always targeted the wealthy as providers of capital to advance his business, creating the capital to develop lower cost models and make him rich, intending or so he says to do good works with the money and perhaps if it happens he will.

It's almost like Tesla's engineers would be better off working on increasing production than mowing the lawn or working on what still isn't an autopilot to fit to the cars which they can't currently build to give to the people trying desperately to throw money at them...

The iphone parallel is an interesting one, and you can argue about the best market segments for Tesla to target, although given the environmental motivation behind Tesla making good, cheap electric cars available to the world in high numbers would be the obvious way to go, but the bit where the parallel falls down is that Apple produce 200 million iphones a year... If you want an iphone you can walk in to a store and buy one!

Once there was no iPhone, now there are billions of them. How Apple went from zero to current production is imho what one needs to examine for parallels and one can do the same for Henry Ford. Suggesting the Tesla should do things differently is a valid opinion, but what counts is what they are doing.

Regards,

[odysseus2000]

Tesla impact on California:

https://www.mercurynews.com/2018/05/15/ ... ssion=true

Regards,

[dspp]

1.a. The iPhone, iTunes, iPod etc economies had both scale effects AND strong network effects. A network effect allows you to lock in a early-mover advantage for at least one product generation, but properly handled more likely several replacement generations within one technological/innovation cycle. So any risk taken has a potentially very long payoff opportunity, and a high probability of success.

1.b. A Tesla economy would only have partial scale effect, but only a very weak network effect. That does not allow Tesla to lock-in (and benefit from) early-mover advantage for multiple product generations. In some respects Tesla has moved from having late-mover advantage (Tesla 'S') to potentially early-mover disadvantage. So any risk taken has a short payoff opportunity, and a low probability of success.

2. Apple did not seek to reinvent a manufacturing/production model with any of its products. All its innovation was at the product level, none at the manufacturing (or design) level, though it did also do marketing-level innovation (direct sales/bypassing carriers). Tesla on the other hand is seeking both product level innovation, and production level innovation, and marketing level innovation (also direct sales, bypassing dealers). In fact its strategy requires success at all three levels. The greatest weakness appears to be at the manufacturing level, not the product or marketing level. The difficulty in achieving successful lasting advantage in automotive innovation will come as no surprise to anyone who has been exposed to automotive. The only people who seem to have swallowed the manufacturing-level claims prematurely are the luvvies, or those who have spent their lives dealing with electronic/software product spaces.

regards, dspp

[woolly]

With all due respect, dspp, I would say Apple continues to innovate in all the categories you list - like Amazon, it seeks to innovate in every facet of its operations. It invests continually in manufacturing innovation (often in partners' facilities) and its retail and marketing and even packaging have, while not always hitting the mark, similarly aimed to redefine their spaces.

Examples of the former include perfecting the economic machining of aluminium billets into first laptop and later phone enclosures at scale (when competitors either stamped metal or moulded plastic), their formidable lead in low power consumption silicon (OK, arguably a product-level innovation...), their $1b Advanced Manufacturing fund, those times they bought up the entire global supply of flash memory or shipping capacity (supply-chain and logistics innovations in that nobody else had done that in the industry before), etc.

For the latter one could cite their well-respected and continually evolving retail stores, the attention they devote to the process of unboxing a product, the ever-shrinking packaging their products are shipped in (in part due to the ever-shrinking nature of those products), and so on.

To get back on topic, Tesla is not devoid of network effects - over-the-air software updates add to, fix and refine the car's capabilities across the entire fleet literally overnight (the latest example of this was an update to the braking system on the model 3 that improved stopping distance around 15%), which obviously will increase the savings made on recalls the more cars there are on the road. Meanwhile the entire fleet continues to rack up many millions of real-world autopilot miles, orders of magnitude more data than any competitors (which continue to rely on simulations), which all feeds into making the system better.

Musk's vision goes way beyond Tesla - his strategy encompasses the entire industry and beyond, and he is only too happy for competitors to contribute to forcing the pace of innovation and adoption. The company made electric vehicles credible and desirable to the extent that all manufacturers and governments now have their electric vehicle strategy, and (as an example) the storage increase each Telsa (and competitors') product adds to the grid will increase the resilience of the system to poor weather and variations in demand, thereby enabling further renewables capacity.
By radically increasing demand for, and manufacturing capacity of, Li-ion batteries, Tesla has also ensured the price of batteries will drop, which will fuel more widespread e-vehicle adoption, etc etc.
Musk's aim is not to make Tesla the no 1 car manufacturer per se, but to change the entire transport and energy system globally to a more sustainable one - ultimately if Tesla went bust but the planet was operating largely on renewable electricity I think he would feel he had succeeded.

[BobbyD]

I just look at Apple sales and user figures and that tells me iPhones are very popular in all the advanced economies.

Strange, a moment ago it was based on your experience selling things...

Once there was no iPhone, now there are billions of them.,

Yes, Apple took the radical step of ensuring they had a product they could actually produce so that people could buy them. Tesla would do well to pay attention to this bold and visionary move.

[dspp]

With all due respect, dspp, I would say Apple continues to innovate in all the categories you list - like Amazon, it seeks to innovate in every facet of its operations. It invests continually in manufacturing innovation (often in partners' facilities) and its retail and marketing and even packaging have, while not always hitting the mark, similarly aimed to redefine their spaces.

Examples of the former include perfecting the economic machining of aluminium billets into first laptop and later phone enclosures at scale (when competitors either stamped metal or moulded plastic), their formidable lead in low power consumption silicon (OK, arguably a product-level innovation...), their $1b Advanced Manufacturing fund, those times they bought up the entire global supply of flash memory or shipping capacity (supply-chain and logistics innovations in that nobody else had done that in the industry before), etc..............

To get back on topic, Tesla is not devoid of network effects - over-the-air software updates add to, fix and refine the car's capabilities across the entire fleet literally overnight (the latest example of this was an update to the braking system on the model 3 that improved stopping distance around 15%),.......

Musk's vision goes way beyond Tesla - his strategy encompasses .........

Woolly,

I think your examples both prove my point, and indicate we are debating the quantum rather than the presence.

Apple has historically been a very weak production innovator. Buying out the global supply of flash is not the same as investing in manufacturing flash. Machining aluminium .... er, yawn (don't get me wrong: it's great, but it is weak production innovation). So just like any large corporation it does stuff, but it is not its primary focus, which is - as you rightly say - about the whole-product-experience.

In contrast Tesla has very weak network effects. Yes there are some, examples of which you give, but they are weak and not necessarily unique to Tesla. So the enduring network effect advantage for Tesla is very little. Contrast that with the enduring network effect that Apple has gained and defends fiercely.

Musk's vision is great. However I cannot invest in Musk (or SpaceX). I can invest in Tesla and so it is Tesla I pay attention to - and my conclusion is that the pureplay Tesla manufacturing-level advantage is debatable, and the network effect is weak, and the scale effect is so-so. (and I thought the situation was even less attractive with SolarCity, and so the impure Tesla that now exists is now likewise less attractive). Therefore I do not wish to be over-exposed, and so my index tracker exposure is sufficient. I am however paying fairly close attention to it as it affects other things I do, hence being very happy to discuss different views on it.

I am acutely aware that colleagues of mine, who are all very smart people, are furiously beavering away inside Apple, and Tesla, and legacy-auto, and their tier 1s and tier 2s. So at any time one of them could come up with something that changes the game, and I'd be the last to know. In the meantime what I can see and know is that they switch jobs & employers back and forth between legacyauto and Tesla and Lear and Apple and etc in such a way that I think there is not as great a difference as media articles might lead one to think. There is a lot of crossover in this space and the incumbents aren't dumb.

Bottom line questions: do you think Musk can get Tesla's series 3 manufacturing to breakeven before needing another cash call ? What do you think the breakeven volume is - and when will they reach it ?

regards, dspp

[PeterGray]

I think a critical difference between an iPhone and any car is the key thing that makes an iPhone so successful is the integration with iOS, the operating system. The user interface side of a smart phone is central to it. The hardware is important, but beyond a small extent only in so far as it will run the (proprietary) software. iOS can't run on other hardware, and it integrates remarkably well a range of different Apple hardware so that they act in the same, predictable manner.

The problem for a car manufacturer is that the essentials of the user interface were laid down decades ago, and are incredibly simple (wheel and 2/3 peddles) and open source.

Yes, you can put all sorts of wonderful technology under the bonnet, integrate autodriving systems and sat navs etc, but at the end of the day it's a car, which you drive in the same way. And you are not going to notice too much is a different manufacturer makes a different component. Neither Tesla, or anyone else is ever going to dominate the car market in the way Apple has the smart phone market.

Peter

[odysseus2000]

Some more interesting points:

BobbyD
Yes, Apple took the radical step of ensuring they had a product they could actually produce so that people could buy them. Tesla would do well to pay attention to this bold and visionary move.

As Jobs used to note, it is not seeing is believing, it is believing that is seeing.

We shall see.

dspp
I am acutely aware that colleagues of mine, who are all very smart people, are furiously beavering away inside Apple, and Tesla, and legacy-auto, and their tier 1s and tier 2s. So at any time one of them could come up with something that changes the game, and I'd be the last to know. In the meantime what I can see and know is that they switch jobs & employers back and forth between legacyauto and Tesla and Lear and Apple and etc in such a way that I think there is not as great a difference as media articles might lead one to think. There is a lot of crossover in this space and the incumbents aren't dumb.

Yes, but there have always been smart folk chasing the next pay rise, promotion what ever, very fluid folk who have no loyalty to anyone but themselves. With GM, Ford … all the legacy motor makers including folk in the collapsed UK car manufacturing industry, not so much the rejuvenated UK makers: Landrover, Jaguar etc, the issues have never been about having smart engineers, it has always been about the ability of management to run the business sensibly. GM went bust in the financial crisis and was rescued by the Obama administration, not due to faults in their engineers, but in how these folk were told to work and the cost structures imposed on them,… We can argue about why these huge business have been such miserable investments but they are not the sort of business that anyone wants to copy. The same can be generally said about most electronics business, most of which have many similar issues to the legacy autos, msft, imho, is not doing well for its software business, but for its cloud computing even though that is a commodity business. Apple by comparison has imho much better hardware and software products not again because of the engineers, but because of the management and where they are steering the business. imho to focus on engineers is to miss the big picture that although one must have good engineers they are not what determines whether a business is a success of a failure.

Peter Gray
Yes, you can put all sorts of wonderful technology under the bonnet, integrate autodriving systems and sat navs etc, but at the end of the day it's a car, which you drive in the same way. And you are not going to notice too much is a different manufacturer makes a different component. Neither Tesla, or anyone else is ever going to dominate the car market in the way Apple has the smart phone market.

Actually I believe it will not be a car you drive in the same way. Software will drive the car, the steering wheel and pedals will likely go away and you will be left with an iPhone like product.

Regards,

[redsturgeon]

https://www.recode.net/2018/6/4/1741449 ... n-refunded

Oh dear, this could be significant...as of the end of April Tesla are now refunding deposits on the model 3 faster than they are taking new ones.

John

[dspp]

If Tesla refinances it will be the mother of all downrounds ...........

[PeterGray]

Actually I believe it will not be a car you drive in the same way. Software will drive the car, the steering wheel and pedals will likely go away and you will be left with an iPhone like product.

That may ultimately be the case - but we are a very long way from that - and the Model 3 is not it, or anywhere near.

Plus If you want to produce a car with some form of self drive, which I assume you are suggesting, there will be loads of regulations and specifications that ensure compatibility between vehicles on the road, and drivers, which I suspect will preclude one company solutions.

Peter

[GoSeigen]

Neither Tesla, or anyone else is ever going to dominate the car market in the way Apple has the smart phone market.

Peter

What if Apple enter the car market?


Well, Steve Jobs is gone so it's not a slam dunk, but could be interesting. More likely in 5-10 years time than now though, IMO...


GS

[odysseus2000]

Peter Gray
That may ultimately be the case - but we are a very long way from that - and the Model 3 is not it, or anywhere near.

Plus If you want to produce a car with some form of self drive, which I assume you are suggesting, there will be loads of regulations and specifications that ensure compatibility between vehicles on the road, and drivers, which I suspect will preclude one company solutions.

Yes, but the iPhone 1 is very different from the iPhone 10.

The modus operandi has been to sell something with features that attract punters, then next year another model with better features etc.

Whether Tesla are going to go this route probably depends on sales and market reaction, as was the case with iPhone 1.

If one believes that the model S, X and Y are the final version or some beginning level influences how you view Tesla longer term and depends on what the competitors do. For now the stuff I have studied a little: e-golf, Nissan Leaf is hugely out classed by the model 3 imho.

Regards,

[PeterGray]

What if Apple enter the car market?

I don't see it would make a difference, for the reasons I gave - they are fundamentally different markets. Yes, an Apple car could (conceivably) do well, but it could never dominate the market in the way they have smart phones.

[odysseus2000]

GoSeigen

What if Apple enter the car market?


Well, Steve Jobs is gone so it's not a slam dunk, but could be interesting. More likely in 5-10 years time than now though, IMO...

There have been many stories about Apple making an iCar, supported by patents, test tracks, permits etc & similar numbers saying they are not.

Musk wanted them to compete with Tesla, but with Apple so secretive who knows what they are doing.

We also have Dyson in the UK saying he is going to make an electric car.

Regards,

[BobbyD]

https://www.recode.net/2018/6/4/17414496/nearly-a-quarter-of-teslas-model-3-reservation-deposits-in-the-u-s-have-supposedly-been-refunded

Oh dear, this could be significant...as of the end of April Tesla are now refunding deposits on the model 3 faster than they are taking new ones.

Hardly surprising surely? The fact that they were buying the M3 indicates they were to some degree cost conscious, some will have had to rebox the Tesla dream and buy something which has the benefit of actually existing, confidence in ever seeing the car must be plummeting, and Tesla maybe selling tomorrows technology today, but the delivery date is Thursday week, maybe, which has to take the shine off it.

Yes, but the iPhone 1 is very different from the iPhone 10.

You can do that with phones, the chances of an iphone 1 killing anyone were quite small, and all apple had to do in the following years to improve the product was look at the improvements which had been made by component manufacturers as they competed to make the best screens, the best chips... they didn't bank their future on Apple internally developing a competitive screen and a competitive chip and a...

The modus operandi has been to sell something with features that attract punters, then next year another model with better features etc.

Again, what made Apple successful? The ability to get a product to market and exchange it for bundles of banknotes... What is it Tesla are currently incapable of doing? Getting a product to market and...

[odysseus2000]

BobbyD

Again, what made Apple successful? The ability to get a product to market and exchange it for bundles of banknotes... What is it Tesla are currently incapable of doing? Getting a product to market and...

Tesla managed to get some serious bundles of bank notes by offering registrations at $1000 a go a few years ago. Nice to have all those banknotes and not have product ready, kind of takes business cash flow to a new level.

Regards,