I disagree completely. Building a quality, desirable electric car is a trivial engineering problem with sufficient capital (hundreds of millions at least) to throw at it.

Building a car company from the ground up with low capital is a pretty hard business problem. Musk succeeded at that. But what does that tell us? Not much.

Building a newfangled company that manages energy products and old world utilities from scratch, and building it up in a few years to become the darling of all of Wall Street, is an incredibly hard thing to do as well. Harder than Musk's task. Look where Enron ended up.

Building a pharmaceuticals company that buys and manages drug portfolios to make vast sums of profit while committing and getting away with mass fraud is an incredibly hard thing to do too. Probably on par with Musk's task. Look where VRX ended up.

Fleecing the entire Wall Street NY set for 30 years in the greatest Ponzi scheme in history, as Madoff did, is an astonishingly difficult thing to do, probably more impressive than what Musk has done.

So I'm not sure what your point is. Musk has been as successful at doing something hard as other businessmen and charlatans. He in fact has far more in common with them than he does with successful businesses and businessmen.

My contention is that building a profitable electric car company that takes a decent chunk of the world's car sales, enough to be a major player, is a near-impossible thing to do once starting from behind, once the price of batteries get low enough that the majors start seriously competing against you - which is just around the corner.

And it's the last paragraph that matters. I contend that Musk is incapable of it. The guy is clown - overpromises, underdelivers, makes extremely stupid mistakes like the gull wing doors, falls year behind his own deadlines. If he was other than a loser, he'd be pumping out 100K Model 3 this quarter. Maybe someone could do it from here, but that person has to be brighter than Musk imo.

So to recap, our points of disagreement are:

1. I think it's easy (compared to other tasks that car companies routinely undertake) to mass produce a desirable electric car - as long as you don't mind losing vast amounts of money, as Musk has. You think it's incredibly hard even with losing vast amounts of money.

I think the quality and capability and variety of electric prototypes that have been built disproves that, frankly. It's a straightforward engineering problem to build a quality electric car. Beyond that it's the kind of problem that car companies solve every day and have for decades.

2. I think Musk is a brilliant self promoter, good at creating a cult following both among employees and people like you, a reasonable businessman, and not much else. You think he's the greatest manufacturing genius to walk the Earth, ever.

Time will tell I guess. I do think my take looks more reasonable on the evidence, however, especially on #2.

A new ICE vehicle platform runs in the mid-single-digit billions at the auto majors. And that's within their core competencies, with untold billions of fixed costs already in place.

But you contend that building a de novo, software-centric BEV platform will be radically cheaper for them? Nonsense, my good sir. Nonsense.

At this point I do not see good evidence that the auto incumbents are capable of matching what the Tesla software engineering team has done, for any amount of money. For example, GM spent over a billion dollars (which is already greater than hundreds of millions, for those keeping score) to acqui-hire the Cruise Automation team. Cruise's last post-money valuation was $90M, and according to people in the know, they had nothing/demo-ware. Software is damn hard.

Meanwhile Tesla is adding people like Chris Lattner and not slowing down. (To the contrary---as you have noted repeatedly ITT, the Tesla Autopilot team is setting goals that would appear to be not just hard, but downright impossible.)

If Elon hadn't simultaneously revolutionized the rocket industry with basically ~zero capital, I could be roughly sympathetic to this point of view. But he did.

Again, the Model S is the best-selling luxury sedan in the US and Europe at least (can't quickly find worldwide sales numbers).

Yep.

Pretty much.

Agreed.

That's not what I'm saying at all. I'm saying that producing in ultra low volume an unprofitable (I'm going to underline all of these so you get the point) electric car is not a difficult thing. Period.

The "billions" are what is required to build a car to a mass produced extremely high standard such that a profit can be made. You can make a few Tesla prototypes for the 10s of millions. You can low-volume produce it unprofitably for the hundreds of millions.

I really don't think you understand my point about profitability, and how it's absolutely central to this whole argument.
So this is all about autonomy, then? Because none of this relates to building an electric car. I've already explained, convincingly, why autonomy adds zero value to Tesla, even if I posit that Tesla has the greatest autonomous software team and the greatest concentration of autonomous software geniuses available.

I will explain that to you again if you like.

a) The capital was provided by the government
b) It is FAR easier to revolutionize the rocket industry than the car industry. Far, far easier. Rockets have a sexiness to them, but in the end, it's a business with close to zero competition or commercial interest apart from picking up some government contracts.

They are far behind worldwide. They do well in the US.

By the way, I underlined and bolded it this time. BMW could soak up most of the world's luxury car sales if they were willing to lose many billions a year subsidizing their cars. Who wouldn't buy a $25,000 BMW that actually costs $40,000 to make?? The thing is, they would gain absolutely nothing from it, as $40,000 cars aren't $600 iPhones. The price/demand curve is completely different, and always will be because we're bumping up into yearly salaries instead of weekly ones.

I think your problem is that you're a software guy who doesn't understand business. I'm willing to concede all your claims about Tesla software, for the sake of this particular argument.

I am still right even if I do that.

Just to give you an idea of what we're talking about here - Ford for example deploys $150 billion a year in capital plus existing assets to generate $5 billion a year in profit on 6 million cars. That's less than $1000/car. The $150 billion in capital they deploy is a fraction of the capital actually needed to produce a car - that's made up by vast distributed global chains of suppliered, numbers in the thousands per car. Doing business this way is the only way you can make a profit as a carmaker on volume.

Tesla and Ford are valued the same. Ford pays a 5% dividend.

In comparison, Tesla deploys $5 billion a year in capital in order to lose $1 billion a year in cold hard cash, while making 1/50th of the number of cars that Ford makes, even while charging very high prices that capture the <1% of wealthy, fault-forgiving, litigation avoiding, high end toy seekers.

You believe that Musk is such an engineering genius that he will be able to vertically integrate a $1,000,000,000,000 global supply chain such that he can find vastly greater efficiencies in manufacturing than this $2 trillion/year industry.

Frankly, with complete respect and deference to your high intelligence, I think you are a fool.

Cars are a cutthroat business requiring the outlay of truly astonishing sums of capital - and even that buttressed by a global supply chain in which Tesla is in fact disadvantaged - just to make a razor thin profit. You think Tesla is going to walk in and do what, exactly? Make their own tyres and seats and joiners and door handles and lubricants and brakes and screws and steering wheels and control chips and carpets and latches and paints such that they can pull a level of profit out this industry that has completely eluded a cutthroat worldwide business for 30+ years? Where, precisely, in real components and prices and processes and not off in fluff land where abstracts ideas have magical power, is this saving from "extremely difficult" vertical integration going to come from?

You've swallowed the Musk spin, dude. This is at least a 90% chance of failure even if I accept everything you're positing.

Oh yea, madoff really had it figured out. Work hard your whole life, have everything you could ever want materially, and then use the reputation you've built your entire life to scam people out of money you'll never need without adequately covering your tracks and spending the rest of your life in prison - that's a real touch of brilliance. I guess as long as you get to eat high grade caviar and **** on a golden toilet for a couple of years though it's all worth it. Yolo.

Everyone understands that if you evaluate Tesla as a conventional car company, there isn't a good reason for it to exist. Traditional ROA and ROIC in the sector aren't nearly attractive enough to try to make it to scale and someday find some retained earnings at the end of the rainbow. (Under any scenario, it's unreasonable to expect Tesla to have even positive operating income this early in the game.)

But this is not a conventional moment for the transportation sector, as everybody also understands. Electrification is a really hard transition if you have to cannibalize your entire goddamn business to do it. And autonomy is just so hard, period, that it's likely out of reach for traditional automakers unless they enter partnerships that commoditize them even further.

So most people (but not you, I guess) would see a pretty big opportunity for the first company to offer an electrified autonomy platform---an opportunity not at all analogous to bringing the n-th ICE commodity to market.

As for vertical integration, it's not rocket science to see that people take this differently when Elon Musk says it; since most people (again, of course not you) are pretty amazed when SpaceX uses a tiny fraction of Chinese/USA/Russian space budgets and becomes the only organization on the planet who can do this:


This is not merely a matter of access to capital. It is a matter of vision, a matter of sacrifice and synthesis within a human collective of rare talents. There is no other organization or, in fact, nation on earth that can do what SpaceX can do.

When Tesla says they are going to reinvent auto manufacturing, speed up production by a factor of five, integrate transportation with energy storage and production, and do things nobody else can do, obviously the chances of success are low. But people listen when Elon says that the chances are not zero.

And that's all it takes to make a plausible case for Tesla's existence. A non-zero chance of future success. Looking at their cash flow statement today is pointless.

Considering he's gone out of his way to make all his patents public domain it seems pretty obvious that he doesn't care about maximizing shareholder equity anyways. I would guess at this point in his life most of what he does has an altruistic motive.

Poor stupid elon. One day he's going to wake up and his portfolio will plummet below 10b, and before you know it he'll be forced to work as a code monkey to pay the bills.

What a waste of a mind. Maybe one day he'll wake up from this fantasy world and realize what all true great businessmen of our time know - it's all about the money. More money is more good. Bigger numbers more impressive. After all, you can buy things with money!

All good so far.

This is just abstract word salad dude. You're basically a politer, smarter form of Mikhel05.

Musk hire men who build rocket. Musk cool. Musk say he can build car at 5x speed. Musk hire men who build rocket!

Also, you're missing the fact that a bald headed clown called Bezos, not really taking it seriously or investing as much money, actually beat SpaceX to successfully re-landing a rocket. The rocket was smaller and not going as high, but they still beat them. So much so that golden boy got extremely deeply butthurt, and fired off a snarky tweet, Trump style, so incensed was he by being upstaged after his many failures that he let the PR face slide. He's a got an sick ego, that one.
I realize you've swallowed the spin, because Elon is a Special Person, that he's going to Make Manufacturing Great Again (did you buy a red #MMGA hat? Have you watched his Ted Talk rallies online??)

So I take it you agree with this statement then? All I'm arguing are that Tesla are a horrible investment:
No dude. You need a lot more than a "non-zero chance of future success" in order to invest in Tesla. They're already priced at Ford's level of success.

You've been conned beautifully. He's nothing if not a brilliant PR man. "Giving away" his patents was pure PR to fool gullible fools, nothing more.

Actually, his recent fraud in joining failing, underwater SCTY with TSLA has given him (and his relatives and insiders) a nice chunk of cash, taken out of the pockets of TSLA shareholders.

His SCTY deal proves he's already very well aware of that. Why do you think he goes to such careful effort to manage PR, and hook live ones like you and Subfallen, rather than just quietly get on with the business of saving the world?

Not really. Tesla will not take legal action if it is done in good faith. Which means that companies will still have to ask permission and not just straight out copy. And Tesla has very few patents since they believe patents are blueprints for the Chinese and prefer to keep their technology secret.

You can argue if this is +EV or -EV, but I assume some very smart people at Tesla with a lot on stake thought this was +EV. As a share holder I liked it. I think a lot of people like to buy the story and this sure is a nice story.

lol. Kind of like the Russians won the space race because they launched Sputnik first....comparing these feats is laughable.

Also - it's pretty likely that Bezos has invested way more money into Blue Origin than Musk ever invested into SpaceX. I'd say putting $500m++ in qualifies as taking it pretty seriously...


It's a good thing your posts are a balanced, no-spin zone!

Then why did Musk get so deeply butthurt, and lash out in a Twitter rage?
That's enormous money to Musk, but toy money to Bezos.

What Musk is good at is PR and courting government money. Bezos is a quiet rich guy with a side hobby - he's already successful beyond any doubt - whereas Musk's very salvation depended on SpaceX. Thus, having nothing better to do, he spent tremendous time buttering up various arms of government to give him money.

I don't think there is such a thing as "no spin" - how you view the world informs how you present facts in a thousand different ways - but imo they're easily the most factual and rational here.

Lol how is this bad for them? By the way $120-130/Kwh is a lowball estimate. And this lowers their costs by ~$50/kwh, or per the latest quarter, by a $100 million. This implies that if they ramp up to 500,000 cars, operating profit is going to be about $3 billion on just the first ramp up.

But then I read this quote:
and you lost all credibility. How is landing some small rocket compared to landing a massive rocket that went up much higher in space?

If you even had basic calculus you would know this would be a huge difference.:



But I guess I saw you throwing the word cuck around, you must be one of those blind idiots. Again it is probably going to be fun quoting your posts 2-3 years from now.

I don't think you understand that LG Chem is already at these numbers. Multi billion dollar battery "gigafactories" (another great word by Musk to bamboozle chumps) are sprouting up all over Asia to make car batteries with economies of scale.

Once battery costs are low enough that the majors can make profit in the volume categories and hence find it worthwhile mass producing electric cars, it's over for Musk.
Funny, I see the opposite.

What if it another competitor went up 4x higher than SpaceX's rocket? Would that be more impressive - a first-ever stable return landing - than SpaceX's feat?

That graph is just to impress idiots who don't think. "Oh gee one went up further and came back!! More impressive landing then!!" Um, no.

I love most of all how they include the water to make it look more "dangerous". Pure propaganda nonsense.
Premature celebration is in the domain of small minds. It was the people not "throwing that word around" who did that last time.

Anyway, I've previously said you can give Musk some credit for SpaceX. What does it mean for competing in the car industry, though? Not much.

ToothSayer -

Your posts are too long and frequent for me to keep up with, sorry. (How do you even type so fast?) I think there's going to be a final Model 3 reveal in a few months, will be interested to see your reaction to that.

Til then, happy trolling.

lol. You are either a bad troll or you are the idiot. Good stuff.


Do you have any real financial position related to Tesla? Maybe you've posted that already, if so, sorry for grunching.

I trade both long and short quite a few times a year for decent size. It's one my biggest earners. Have posted quite a few entries and exit points in this thread. I'm on record at the start of this thread as saying not to short Tesla when it was $100 or so, despite the company being a huge turd. Very good hit rate, couple of misses.

If I didn't make more at options trading news events/shorter term setups on Tesla, I'd be short TSLA here at $250 expecting to make about 30% within a year.

I appreciate all the good humor, Sub. I have great respect for your intelligence, and hope you're not long Tesla.

I have no intention of buying a tesla and i would agree with you that the stock is likely overvalued in part because of the hype that surrounds him. I'm just saying your judgment of his intentions are most likely way off.

You're saying he's wasted huge amounts of money because he won't be able to monetize the results of the R&D / infrastructure because all other competitors will cash in on the benefits. Well - that's the bottleneck that's been holding back electric cars. Because there's no way to fully capture the benefits of the R&D / infrastructure it didn't get as much action as it would if the legal system was fully capable of protecting the fruits of their labor. The reason he's been able to lobby governments into subsidizing it is because they agree.

Musk is either not very smart, or not a nice guy. He's there to self aggrandize, imo.
I'm saying that all of his research is a total waste of money and time. Once batteries are cheap enough, electric cars get mass produced. The tens of billions flowing into battery research flows in anyway - Musk has nothing to do with that - and that research and nothing else will determine when cars get mass produced. For example, LG Chem has batteries as cheap as what Tesla claim they'll be able to do.

The engineering problems in building an electric car are trivial. It's only the engineering problems for building an electric car with not-ready batteries that was difficult/expensive/unprofitable. Which is why none of the majors did it.

The battery chemistry and layout of mass produced electric cars will be quite different to the crap Musk has produced. Much faster charging & more capable batteries.

What do you think gets "developed" when you do R&D on a car?

So who is wrong?

One big difference is that they have an almost undifferentiatable product where there're a lot of competitors that're compelled to provide competitively priced components. When dealing with new tech that would likely be dominated by a small number of suppliers who'll be able to charge larger premiums. I'd imagine as it becomes more common there would be a transition to the conventional methods used by major car manufactures, which brings us to....


Does tesla not buy from LG chem?

https://www.wsj.com/articles/tesla-g...hem-1446007554


And I think you could reasonably argue that companies like LG chem are highly incentivized to commit the R&D that they have because the infrastructure exists. It's a lot more difficult to justify those expenses when the payoff is so remote, both because of general uncertainty of whether all the other factors will fall into place, and because there's the significant increased probability that someone else will come up with an alternative before they're able to capitalize on it.


No, it's a combination of not being able to monetize the benefits (ie: environmental impact... even if you reject climate science air quality is a big concern in most large cities) and requiring enormous investments in infrastructure, the benefits of which will be shared by a large number of uncoordinated market participants. And trying to coordinate the most likely participants would fail since there's a conflict of interest in that the growth of the electric car industry will only come at the expense of their current business model.

There're a lot of ways/reasons that market economies can fail to offer an efficient allocation of resources.

Tesla are a tiny fraction of the global battery market and almost none of the profit. They're irrelevant. They're a cuckshow. They make 100K cars/years.

Global plug in EV sales are already > 1 million/year and climbing rapidly. The global battery business overall is worth $60 billion.

And it's growing exponentially in all fields. Tesla are a nothing.

The market has made the sane choice here. In 2010 battery vehicles were impossible without huge economic drag for no benefit. In 2020 it'll be worth replacing ICE with them, and mass production will ramp up. By 2025, the gasoline car will be mostly dead as a new car. This is why Tesla are screwed. They have no moat, no advantages, and are about to whacked in the face by the most competent and cutthroat manufacturing industry on Earth. Even their battery design is crappy - slow charging, various problems. There are prototypes out already like the Porsche Mission E battery that are far superior.

This just isn't true, FWIW. For example, a large car consortium in Europe just funded a mass rollout of electric charging station that are 3x faster than Tesla's. Musk's response was like a scared child's:

He's so much like Trump it's amazing. He is truly is the nerd-Trump: huge ego, thin skinned, decent at business, low engineering competence, a bit detached from reality, but hard-working, great at self promotion and hiring and getting the loyalty of the best people.