Musk endeavours

[odysseus2000]

This is a transcript of the latest Tesla earnings call:

https://seekingalpha.com/article/421413 ... transcript

one can also listen to the recording which is better but which takes more time.

Thought it was interesting how Tesla focus on the weakest part of the car for safety tests and don't game the system by adding strength only at the test points.

Also the comments on the neural net and coming upgrades along with the need for more powerful processors in older cars which can by done with a 30 minute upgrade.

Time from car to delivery has been long at 30 days but they are working to get this a lot lower.

Tons of useful stuff.

Regards,

[PeterGray]

There were clear historical warnings from the demise of the British car industry as to what happens if you let a competitor in who makes stuff folk want to buy, but that lesson was ignored.

Absolutely true, but the main thing people wanted from UK built cars, and weren't getting, when the home owned industry was declining was reliability. The Far Eastern cars are still way ahead on that score (with German ones next) - even though some are built in the UK, for now. And that of course includes the many electric cars made by Nissan, for example.

Sadly, the Consumer Reports study suggests that Tesla is yet to get that right. Of course, they are entitled to some leeway as a new manufacturer of new models, but only for a while. If they can't turn that around they will not achieve what you think they should, or anything like it.

That doesn't mean they won't survive, and make a profit, US car buyers have a long history of buying less reliable home built cars, just as the British used to, but that won't cut any ice in China or the global markets. And in a very short time they'll be up against German electrics with a proven reliability record, and of course Far Eastern made ones, both nearer to home and even better reliability records.

As an aside it's sad to see Volvo at the bottom of that list. So much for Swedish reliability. I have fond memories of my trusty Amazon estate in the 70s, already 16 years old when I owned it.

[dspp]

Thank you o2000.

[edit: the earnings call letter is here http://ir.tesla.com/static-files/725970 ... 2d4045f799]

Managing AR and AP is obviously getting attention, and we investors need to watch that as well. They appear to be throwing off working capital as they scale (the Dell model) which is unusual for an auto maker. Very nice to see profits and positive cash flow, and paying down debt (and intention to do more), and ability to grow organically from own resources.

They have insourced battery packs, and battery pack tools. Ditto for driver automation. So they own their own toolchain in a way none of the other auto-makers do (except perhaps Toyota).

Factory productivity is improving very nicely and accounts for a lot of the GM improvements.

Safety has been getting attention and is good, in a holistic way. I am willing to bet that they will now tackle quality.

Knowledgeable buyers are prepared to trade up as well as across. Buyers are not only premium brand owners, but also EV and HEV trade across, and economy brand owners. That fits with what I hear. That bodes well for S&M going forwards.

Listening to this they will open the China factory in 2019, and I am guessing that they can't do two factories in one year so that means they'll open the Europe factory in 2020. Reading around they will have both a battery & pack line in these factories, and a vehicle line. That way they reduce the logistics footprint that has been an issue in USA with the split factories.

At 20GW a year they are supporting about 7,000 vehicles/week. About 2,000 S/X and 5,000 of the 3. They are indicating that just continued no-shutdown line debottlenecking will get the 3-line to 7,000 per week. Reading between the lines they don't want to do a line shutdown until they have China and/or Europe running (it needs a line shutdown & additional capex to get a line to 10k/week).

So fast forward two years and you get:
USA: 2,000 S/X + 7,000 3/Y per week and 25GWh/year
China: 7,000 3/Y per week and 20GWh/year
Europe: 7,000 3/Y per week and 20GWh/year
TOTAL: 23,000 vehicles/week = 1.15 mln/year and 65GWh per year (using 50 weeks/year to allow for factory shuts)

To put that in perspective BMW made 2.3 mln vehicles in 2016 in 14th place, and VAG and Toyota are doing 10 mln each per https://en.wikipedia.org/wiki/List_of_m ... production

That would be about 300k vehicles/year per Tesla factory. Contrast that with Nissan Sunderland at about 500k for a sanity check.

To put that in perspective Tesla/Panasonic are now making about half the lithium cells of the entire world, in one factory.

Toyota market cap is $175 bln
VAG market cap is $63 bln
BMW market cap is $48 bln (about equal to Tesla today)

Interesting times. Unless other auto makers are prepared to put their own battery factories in at these scales then they cannot compete. If they put them in at lesser scales they will be uncompetitive, and if they don't invest then they will be uncompetitive.

I have bought one chunk of Tesla for my portfolio. A lot of the risk is now out of the way in my opinion. Mind you it is still very high risk imho.

regards, dspp

[odysseus2000]

There were clear historical warnings from the demise of the British car industry as to what happens if you let a competitor in who makes stuff folk want to buy, but that lesson was ignored.

Absolutely true, but the main thing people wanted from UK built cars, and weren't getting, when the home owned industry was declining was reliability. The Far Eastern cars are still way ahead on that score (with German ones next) - even though some are built in the UK, for now. And that of course includes the many electric cars made by Nissan, for example.

Sadly, the Consumer Reports study suggests that Tesla is yet to get that right. Of course, they are entitled to some leeway as a new manufacturer of new models, but only for a while. If they can't turn that around they will not achieve what you think they should, or anything like it.

That doesn't mean they won't survive, and make a profit, US car buyers have a long history of buying less reliable home built cars, just as the British used to, but that won't cut any ice in China or the global markets. And in a very short time they'll be up against German electrics with a proven reliability record, and of course Far Eastern made ones, both nearer to home and even better reliability records.

As an aside it's sad to see Volvo at the bottom of that list. So much for Swedish reliability. I have fond memories of my trusty Amazon estate in the 70s, already 16 years old when I owned it.

Once I used to follow Consumer Reports and Which but I now don't bother with either as they rely too much on owner comments, ill informed examiners and are subject to bias imho.

Many years ago an acquaintance was developing computer games and had some success selling something to WHSmiths. In the deal he asked about the promotion and they replied they would put his game in at number 1 on the list. He noted they hadn't sold any yet, but they pointed out that within a week it would be the best selling game and it was.

I have no idea if similar practices continue but when I have looked at Which and similar I have been struck by their focus on stuff that I didn't feel was important and one day talking to a salesman in a box store he told me that Which had more than once recommended some to the worst machines that they sold.

Yes, Volvo are a tragedy. They went wrong when they sold themselves to Ford as did Saab selling themselves to GM. This lead to Ford and GM engines, chassis and such that were just not unto Volvo's previous standards. Then they got sold to the Chinese (I believe) and things don't seem to have got better. Sad really as they were imho the first company to promote safety for the occupants. Clarkson argues that it Mercedes but from my experience it was Volvo who made this a selling point which was one of the things that I thought singled out Tesla as something new when they too began to make very safe cars and promote this.

Regards,

[odysseus2000]

Thank you o2000.

[edit: the earnings call letter is here http://ir.tesla.com/static-files/725970 ... 2d4045f799]

Managing AR and AP is obviously getting attention, and we investors need to watch that as well. They appear to be throwing off working capital as they scale (the Dell model) which is unusual for an auto maker. Very nice to see profits and positive cash flow, and paying down debt (and intention to do more), and ability to grow organically from own resources.

They have insourced battery packs, and battery pack tools. Ditto for driver automation. So they own their own toolchain in a way none of the other auto-makers do (except perhaps Toyota).

Factory productivity is improving very nicely and accounts for a lot of the GM improvements.

Safety has been getting attention and is good, in a holistic way. I am willing to bet that they will now tackle quality.

Knowledgeable buyers are prepared to trade up as well as across. Buyers are not only premium brand owners, but also EV and HEV trade across, and economy brand owners. That fits with what I hear. That bodes well for S&M going forwards.

Listening to this they will open the China factory in 2019, and I am guessing that they can't do two factories in one year so that means they'll open the Europe factory in 2020. Reading around they will have both a battery & pack line in these factories, and a vehicle line. That way they reduce the logistics footprint that has been an issue in USA with the split factories.

At 20GW a year they are supporting about 7,000 vehicles/week. About 2,000 S/X and 5,000 of the 3. They are indicating that just continued no-shutdown line debottlenecking will get the 3-line to 7,000 per week. Reading between the lines they don't want to do a line shutdown until they have China and/or Europe running (it needs a line shutdown & additional capex to get a line to 10k/week).

So fast forward two years and you get:
USA: 2,000 S/X + 7,000 3/Y per week and 25GWh/year
China: 7,000 3/Y per week and 20GWh/year
Europe: 7,000 3/Y per week and 20GWh/year
TOTAL: 23,000 vehicles/week = 1.15 mln/year and 65GWh per year (using 50 weeks/year to allow for factory shuts)

To put that in perspective BMW made 2.3 mln vehicles in 2016 in 14th place, and VAG and Toyota are doing 10 mln each per https://en.wikipedia.org/wiki/List_of_m ... production

That would be about 300k vehicles/year per Tesla factory. Contrast that with Nissan Sunderland at about 500k for a sanity check.

To put that in perspective Tesla/Panasonic are now making about half the lithium cells of the entire world, in one factory.

Toyota market cap is $175 bln
VAG market cap is $63 bln
BMW market cap is $48 bln (about equal to Tesla today)

Interesting times. Unless other auto makers are prepared to put their own battery factories in at these scales then they cannot compete. If they put them in at lesser scales they will be uncompetitive, and if they don't invest then they will be uncompetitive.

I have bought one chunk of Tesla for my portfolio. A lot of the risk is now out of the way in my opinion. Mind you it is still very high risk imho.

regards, dspp

Thanks dspp, some very useful and interesting stuff.

The production numbers are most fascinating.

If self driving happens and is accepted I believe the needed number of cars will fall substantially: One self drive car can perhaps replace two or more cars if the current owner driver model falls away.

Even a factor of two reduction in the number of cars needed would have substantial industry impact leading to substantial job cuts and likely the demise of smaller players who are currently in trouble suffering lost sales.

Interesting times as you say,

Regards,

[odysseus2000]

Powerwall keeps a house running for 42 hours when emergency shut down of grid was needed;

https://cleantechnica.com/2018/10/22/te ... ty-outage/

Hap tip to Elon Musk on twitter for the link

Regards,

[BobbyD]

One of the reasons I am asking is because there is an investment opportunity in the supply chain that deserves to be analysed. In doing so I am trying to understand whether there is a dominant design emerging, or whether it is just a free-for-all.

There appears to be a line of thought that once EV production starts to ramp anybody who can source the materials will be able to sell whatever they produce...

VAG appear to be hedging their bets and planning for all three. They appear to be buying in at pack level. Whereas Tesla appear to have close-coupled themselves with Panasonic such that within the Gigafactory Panasonic's line manufactures the cells, then Tesla's lines manufacture the packs. So Tesla see the pack as a core competence, whereas VAG do not.

Panasonic provided the batteries for the original e-Golf, and it's not impossible to come to the conclusion that car firms who aren't Tesla might have decided to take a step away from Panasonic given their close relationship with Tesla.

Retaining flexibility to use all three does have obvious advantages. It might also be that different suppliers will be used in different regions, with VAG taking what is available where they need it. We are currently at such a small percentage of whatever peak ev battery production will be I doubt any trends emerging now would have a great deal of long term predictive power.

To put that in perspective Tesla/Panasonic are now making about half the lithium cells of the entire world, in one factory.

Toyota market cap is $175 bln
VAG market cap is $63 bln
BMW market cap is $48 bln (about equal to Tesla today)

Interesting times. Unless other auto makers are prepared to put their own battery factories in at these scales then they cannot compete. If they put them in at lesser scales they will be uncompetitive, and if they don't invest then they will be uncompetitive.

That assumes EV's stick to lithium, if they don't having just invested heavily in Lithium would turn out to be a really bad thing... again we are so far from peak EV battery production that owning half the market now is more a sign that nobody else has started in earnest yet and the factories which will satisfy the increased demand are already scheduled for openings, whether other players buy in or start to produce their own to credit Tesla with a scale advantage seems somewhat ingenuous given their very modest production rates, even allowing for perfectly executed factory openings in Europe and China with no teething problems, and their product remaining competitive in the face of serious competition.

[dspp]

@bD,

Looking at the electrical, mechanical & control layouts of the battery packs they are what I would term closely coupled designs. So changing one thing, changes many other things. That is because it is essential to the optimal functioning of the vehicle that as much energy is delivered from as little weight and volume as possible, and over as wide a range of operational and environmental demands & circumstances as possible. That in turn means that once a particular vehicle design has locked in to a particular cell design, then it becomes very difficult to change to a different cell as that would create a sub-optimal pack and vehicle. It will be difficult for vehicle OEMs to have parallel cell/pack selections in different vehicle ranges, so that in turn locks the whole OEM entity into a cell/pack architecture. Since vehicle designs last a decade or so (with mid-life refreshes), and since OEMs phase new design roll outs between vehicle types, that means there is an ongoing rolling architectural design lock-in.

Now I am not entirely certain of this. It is possible that, to an extent, there is a design cleavage possible at pack level. But that requires certain architectural decisions to be made in early stage of vehicle design. There is not enough public domain evidence as to which OEMs have made those decisions, and how well they have made them. Even if they have made them well, then it still leaves the in-pack optimisation problem which I think is quite strong at least for the next decade. Why the next decade ? Well for the coming decade there will be incredible pressure for the hi-end model of a given vehicle to deliver maximum range, minimum recharge time, etc. So any sub-optimality within the pack will give the premier vehicle a poor market start. You see this already with Tesla touting market leading metrics when they talk about $/kWh; cm3/kWh; kg/kWh; km/kWh; km/min recharge. There is a reason they are doing that.

I think you may be correct that some cell manufacturers will closely ally with some vehicle OEMs, and others may not. So far I have formed the view that I cannot figure the cell-level game out enough to form a clear investible opinion. And I have the advantage of having had Yuasa, LG, Panasonic, etc knocking on my door in my last job !

Hence my decision to go long on Tesla at this point, with a small amount. I can see advantage gelling in Tesla, and I can see the business reaching a level of organic sustaining growth. So it now becomes [primarily] a valuation game, not a survival game.

In the valuation game if you just stack up vehicle OEMs mkt caps against each other, then on a PE basis Tesla is overvalued as a vehicle manufacturer. But switch to a PEG ratio and it becomes more plausible. Add in autonomy, and storage, and charger networks, and all the business models that come out of those in so many different fields that I am now sufficiently comfortable to take on the risk. Before I was not.

But I am very alert to the level of risk here. One piece of good news is that they haven't started talking about dividends as that is a real PITA for a UK-holder.

regards, dspp

[dspp]

I've been crunching some numbers for TSLA, always a dangerous thing to do. If nothing else it gives me a simple spreadsheet model to use to assess future quarters. o2000 may be directly connected to market sentiment, but I am not - though I recognise its importance - and so I use other tools to help me.

PE is currently 45 on an annualised basis at $314/share, fully diluted. That's pretty high of course.

I've avoided direct exposure to the FANG stocks, and the dotbombs were a long time ago, so PEG ratios is not something I play with often. Delving back into my memory bank and so on here is PEG stuff:
https://en.wikipedia.org/wiki/PEG_ratio
https://www.investopedia.com/terms/p/pegratio.asp
Bottom line: A lower ratio is "better" (cheaper) and a higher ratio is "worse" (expensive). Fair value is 1.0 if nothing odd is going on, and numbers above 1 indicate a lot of growth is being priced into the shareprice.

Just using internet numbers (e.g https://www.gurufocus.com/term/peg/FB/P ... book%20Inc) and so of course the raw data may be wildly wrong (and in fact looking around I am not at all confident that the below are up to date or reliable), I get the following current PEGs:

First some typical TMT growth stocks:
Facebook = 0.37
Apple = 1.61
Google (Alphabet) = 3.60

Now some mainstream automotive:
Ford = 1.48
Nissan = 0.49
SAIC = 1.28
Honda = 0.6
Daimler = 0.67
BMW = 0.88
FiatChrysler = 1.17

For Tesla I calculate that this quarter (if annualised) gives a result of about 0.28.
TSLA = 0.28

The caveats are of course that this is based on the management presented numbers, and doesn't strip out any balance sheet trickery, and uses the YoY growth of 158%. Since QoQ growth is 82% one could use that as a better future proxy, yielding a PEG = 0.55.

A really scary thing that comes out of crunching some numbers is that the avge all-up revenue per blended vehicle sold in the quarter is $81.5k. I appreciate that is very crude as it includes all sorts of revenue streams (storage etc), but nonetheless it does highlight how atypical Tesla is in its model & client mix at the moment. The cars parked in my street are probably averaging $30k - $40k when sold new, and I am in an utterly typical UK street.

On an annualised basis they are doing 335,000 cars/year (6,444 cars/week) @ 22% GM overall. If they can get the 3 line to 7,000/wk (which they say they can do with no line shutdowns and no capex) and keep the S/X line at 2000/wk, that is 450,000 cars/year. Assuming the same price mix (which of course it would not be, but I resisted doing a model-by model complication) and if they can hold the GM steady at 22%, and hold SGA and R&D constant, and keep the balance sheet from going awry, then a PE of 20 gives a share price of $452. That is the maximum they could deliver with one factory, though in reality they would have to push the S/X line up to 3,000/week to keep that price mix going.

Anyway other things to do now.

regards, dspp

[PeterGray]

Interesting bit of spreadsheet work, as usual, dspp.

Where my concern would lie is with the assumptions about PEGs.

PEGs only really work if the growth rates used to calculate them are likely to be maintained for at least the near/mid term future. So a fair value assumption has to assume, as o2000 does, that they can continue to grow US sales massively from here, over the next few years, and successfully start up China production and sales, on a large scale.

That is possible, I have to agree, but I can see risks with assuming that. As you say, Tesla are definitely selling at the upper price end, and there seems no real change to that planned - the $30k car doesn't seem likely to materialise, let alone something more mass market.

Plus I am very wary that we are seeing what could be a short term burst of sales. The Model 3 has been pushed for ages, and now finally become really available. The competition are a bit behind, but I'd expect them to catch up fast now, and the real quality of Teslas, and their reliability have yet to be proven.

If all those things work out buying here, and Trump's trade war doesn't get too much further out of control. But I remain sceptical.

[Howard]

There is a danger of looking at Tesla just from the manufacturing angle. Many promising companies have failed by being too production-orientated.

Tesla have a number of advantages in manufacturing and battery technology, but they are selling to consumers and they have to convince an ever increasing number of customers to buy their, expensive cars, to make their manufacturing scale pay off. We know that the car industry is now almost as much a service industry as a manufacturing industry.

The next year will show whether Tesla have improved their quality, fault-handling and service capabilities. The significant increase in production in the third quarter will test the ability of their agents to provide after-sales service. The load on Tesla service centres will be increased fourfold if it matches sales increases compared with Q3 in 2017 and the level will continue to grow with further production uplifts.

The recent major consumer survey (link above) showed that in the USA Tesla was one of the worst auto brands for reliability, so unless quality has improved this will add a strain on their sales and service outlets.

Obviously the management are aware of this issue and have implemented plans to handle the workload. For investors, the hope is that the quality issues are over and that customers are delighted with every facet of the Tesla experience. We won't have to wait too long to see if Elon Musk has addressed this problem satisfactorily.

regards

Howard

[BobbyD]

A really scary thing that comes out of crunching some numbers is that the avge all-up revenue per blended vehicle sold in the quarter is $81.5

Not a surprise surely, bearing in mind they have never got close to the bottom end of their promised price range.

I wonder if the ending of the full tax credit on Teslas in the US will affect their price blend.

[odysseus2000]

Canada institutes new carbon tax:

https://twitter.com/CanadianPM/status/1 ... 2185996288

Regards,

[Howard]

Words are cheap. But we won't have to wait too long (say three years) to see if the CEO of Volkswagen proves correct.

"Volkswagen's CEO said it will make EVs that are as good as Tesla's for half the price in 2020".

http://uk.businessinsider.com/volkswage ... ?r=US&IR=T

If they can produce a Golf which is as good as my wife's but with an electric motor, a range of more than 250 miles, a price around £25k and a delivery quote less than 3 months, I would lease one like a shot and I suspect millions more consumers would.

Interesting times?

regards

Howard

[redsturgeon]

Words are cheap. But we won't have to wait too long (say three years) to see if the CEO of Volkswagen proves correct.

"Volkswagen's CEO said it will make EVs that are as good as Tesla's for half the price in 2020".

http://uk.businessinsider.com/volkswage ... ?r=US&IR=T

If they can produce a Golf which is as good as my wife's but with an electric motor, a range of more than 250 miles, a price around £25k and a delivery quote less than 3 months, I would lease one like a shot and I suspect millions more consumers would.

Interesting times?

regards

Howard

Indeed that is why I just leased my present Golf for two years. I expect something to turn up in 2020.

John

[Howard]

Of course, if lots of us buy VWs, and charge our cars in our garages, on our drives or in the street if this is possible, it will increase the load on the public electricity supply dramatically.

As others have asked, will the utilities and their cables be able to meet the demand?

My wife's previous hybrid took 4.5 hours to charge from a 13 amp socket to give an electric range of 17 miles. Obviously if we had a car with a battery range of 250 miles I'd have to invest in a faster charger (anything more than 8 hours to top up a battery would be a little impractical). As others have predicted, there's going to be a high demand for public and private fast chargers if VW and the other big manufacturers can ramp up their production this fast.

It will be interesting to see how the USA utilities manage the supplies to an extra 6,000 Teslas a month. For those living in the "sunshine states" presumably solar will be an answer. Again, we'll see how this situation develops within a year or two.

regards

Howard

[Markblox]

Of course, if lots of us buy VWs, and charge our cars in our garages, on our drives or in the street if this is possible, it will increase the load on the public electricity supply dramatically.

As others have asked, will the utilities and their cables be able to meet the demand?

My wife's previous hybrid took 4.5 hours to charge from a 13 amp socket to give an electric range of 17 miles. Obviously if we had a car with a battery range of 250 miles I'd have to invest in a faster charger (anything more than 8 hours to top up a battery would be a little impractical). As others have predicted, there's going to be a high demand for public and private fast chargers if VW and the other big manufacturers can ramp up their production this fast.

It will be interesting to see how the USA utilities manage the supplies to an extra 6,000 Teslas a month. For those living in the "sunshine states" presumably solar will be an answer. Again, we'll see how this situation develops within a year or two.

regards

Howard

You might find this very interesting:
https://www.oxfordenergy.org/wpcms/wp-c ... ght-36.pdf

Among other things it details how the grid in the UK should only require a 30% upgrade by 2030
With a BEV you would require a dedicated 40A circuit though.

[odysseus2000]

Of course, if lots of us buy VWs, and charge our cars in our garages, on our drives or in the street if this is possible, it will increase the load on the public electricity supply dramatically.

As others have asked, will the utilities and their cables be able to meet the demand?

My wife's previous hybrid took 4.5 hours to charge from a 13 amp socket to give an electric range of 17 miles. Obviously if we had a car with a battery range of 250 miles I'd have to invest in a faster charger (anything more than 8 hours to top up a battery would be a little impractical). As others have predicted, there's going to be a high demand for public and private fast chargers if VW and the other big manufacturers can ramp up their production this fast.

It will be interesting to see how the USA utilities manage the supplies to an extra 6,000 Teslas a month. For those living in the "sunshine states" presumably solar will be an answer. Again, we'll see how this situation develops within a year or two.

regards

Howard

You might find this very interesting:
https://www.oxfordenergy.org/wpcms/wp-c ... ght-36.pdf

Among other things it details how the grid in the UK should only require a 30% upgrade by 2030
With a BEV you would require a dedicated 40A circuit though.

Very good article but already dating, e.g. in Fig 3, the graph does not include the $100/kWh that Tesla say they have reached.

But the general trend of the article is consistent with my read of the situation although in some aspects there may be some difficulties with power. For example when I lived in Alabama there were often brown outs and power was iffy during the hot summers as millions of ac units were turned on, even though they have the generating capability of the Tennessee valley authority. The problem was peak demand but with battery ev that demand is more off peak where as with ac it was a huge win for the electric generators in the US. Likely now Alabama has a lot of solar so this issue may no longer happen although friends tell me it was still an issue a few years back, so I wonder if there will be areas that do need more than small upfront generation upgrades and this may slow bev (battery electric vehicle) technology in these areas.

Overall though as I look at things the Oxford report looks to be a good summary and I mostly agree with the forward projections although I believe uptake of bev will be faster than the author thinks. I expect substantial carbon taxes to begin to rise from around 2021 in most of the developed world, the new taxes in Canada are I believe the first of many.

Regards,

[odysseus2000]

Words are cheap. But we won't have to wait too long (say three years) to see if the CEO of Volkswagen proves correct.

"Volkswagen's CEO said it will make EVs that are as good as Tesla's for half the price in 2020".

http://uk.businessinsider.com/volkswage ... ?r=US&IR=T

If they can produce a Golf which is as good as my wife's but with an electric motor, a range of more than 250 miles, a price around £25k and a delivery quote less than 3 months, I would lease one like a shot and I suspect millions more consumers would.

Interesting times?

regards

Howard

Find the VW claims unrealistic. Munro said the Tesla had gross margins of 30%. If VW are to make a car for half the price of a Tesla in 2020 what margins are they thinking?

As I have mentioned several times the problems for VW have just begun. What will they do with all the lease cars that come back in two years and which I suspect will then be very difficult to sell at a profit as I doubt anyone will want to buy one other than at a very significant discount.

Regards,

[dspp]

For vw to make an eV as good as the existing tesla 3 they need to

1. Make the electric bits as good as T
2. Make the electric bits as cheap as T
3. Add autonomy at sil2 minimum, as good as T
4. Eliminate their dealer network, or make them work for zero profit
5. Put in a fairly global charge network
6. And make 20%+ gm

And that is just assuming the target is where tesla are today. Fast forward 3 years and that will be a sil4 target.

I think vw are as well placed to do this as any of the incumbents, and ironically have been motivated more than the others because of diesel scandal. But it is non trivial nevertheless.

Regards, dspp