TSLA - Tesla Motors Inc (NASDAQ)
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JohnDe
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A fair discussion about TSLA on another thread, some members mentioning that profit is poor and productivity low and that Tesla is not much better than all the major vehicle manufacturers.
Instead of continuing the discussion over in the Inflation thread, I thought best to post some factual info here.
Remembering that this article was released before Tesla's glowing sales numbers from early January 2022
The secret behind Tesla’s 30% gross margin
The company's Q3 sales rose 58% year-on-year despite a 6% decrease in average selling price, allowing for high margins for the electric vehicle manufacturer
Manufacturers of vehicles using internal combustion engines say large investments funded by revenue from selling gas and diesel vehicles can make up for the deficit incurred by the production of electric vehicles (EVs).
This is why governments worldwide offer huge subsidies to buyers of such eco-friendly vehicles, which are not profitable for manufacturers, to expand the supply of EVs.
US-based Tesla, the world's largest EV maker, however, has broken this paradigm in the sector. Its recent report on its third quarter performance refutes the idea that the company cannot earn huge profits by selling EVs.
Gross sales margin that outstrips that of luxury automakers
Tesla's car sales in the third quarter rose to an estimated US$12.1 billion, up 58% or US$4.4 billion won from the same quarter last year, as the number of units sold from July to September this year was around 240,000, up 100,000 over the same period.
A noteworthy detail is that automotive gross profit — overall sales minus manufacturing costs — surged 74% over the same period. The automotive gross margin of such vehicles — the ratio of gross profit divided by sales — also rose from 27.7% to a record-high 30.5%, meaning Tesla earned a profit of around US$25,000 for every roughly US$90,000 vehicle it sold.
Im Eun-young, a senior analyst at Samsung Securities, told the Hankyoreh over the phone, "The gross sales margin of 30% is higher than those of German luxury carmakers BMW and Mercedes-Benz, and this standard is exclusive to the best luxury automakers like Porsche and Ferrari."
Germany-based Daimler AG, which owns Mercedes-Benz, had a gross sales margin of 23% in this year's second quarter, while Toyota — nicknamed the "master of cost reduction" — had 21% and Hyundai Motor only 19%.
The average selling price (ASP) of Tesla EVs is also falling. The figure fell 6% in a year from around US$54,000 in the third quarter last year to around US$50,000 in the same quarter this year. This is because the Tesla Model S and Model X — each priced around or over US$90,000 — saw their share shrink to about 4% of overall sales, but the lower-priced Model 3 and Model Y saw jumps in sales.
Despite this, the company's profit margin improved because manufacturing costs decreased significantly more than sticker prices. Over the cited period, the cost per unit decreased 12% from around US$40,000 to roughly US$35,200.
The Tesla report said, "Our operating margin reached an all-time high as we continue to reduce cost at a higher rate than declines in ASP." Thus, cost cutting seems to be the secret to achieving high profitability.
The "economy of scale" effect and a low-cost plant in China
How did Tesla earn such a high margin by selling electric vehicles, which are traditionally money losers?
The first factor is its economy of scale. In industries with a large proportion of fixed costs such as facility investment and development expenses such as cars, profits surge when sales increase due to the profit-leverage effect, in which the manufacturing cost per unit falls with high sales volume.
Tesla makes four models: the Model S, Model X, Model 3 and Model Y. Lower production costs are made possible through efforts like cutting the unit price of parts and maintaining fixed costs due to rising sales. Makers of cars using internal combustion engines that entered the EV market late face different circumstances, however. Until sales of electric vehicles reach a given scale, losses are inevitable due to massive investment costs.
Koh Tae-bong, head of research at Hi Investment and Securities, said, "The profitability of EVs basically depends on the scale of output using the EV-only framework [platform] developed by the manufacturer," adding, "Tesla will produce about a million units this year, resulting in economies of scale, but Hyundai is only capable of doing the same by 2025."
Also helping Tesla's margins is the company's expansion of factories in China, where labor and logistics costs are relatively cheap. Output capacity at the automaker's Shanghai plant, which went online in late 2019, is 450,000 units, and production there growing enough to cover the recent scale of exports to Europe.
The magic of "giga casting"
Analysts point to another factor behind Tesla's high profit margin. Park Hyung-keun, a senior researcher at POSCO Research Institute, said, "Through vertical integration by directly being involved from floor design to parts supply and demand, production and service, Tesla has helped reduce costs by raising the degree of its parts integration and cutting overlapping costs."
Tesla's unique structure of vertical integration, ranging from the development of semiconductor chips, software and batteries for electric vehicles, to charging, unmanned driving and insurance services, helps lower costs. Its “do-it-all” approach simplifies the automotive production process in a manner resembling that of electronic products. In contrast, other automakers actively utilize production outsourcing to diversify vehicle quality risks and raise output efficiency.
A leading example is Tesla's “giga” aluminum die-casting process. A Giga Press weighing more than 1 giga pound (400 tonnes, or around 900,000 pounds) stamps the entire rear chassis of a car with a large aluminum alloy. About 70 metal plates can be welded to the chassis, but giga casting can simplify the process and slash production costs by about 40%. This is why Tesla electric vehicles have recently reduced panel gaps issues — defects caused by misaligned steel plate seams.
The company plans to expand the use of giga casting, which it began applying last year, to the front of its EVs.
By Park Jong-o, staff reporter
english.hani.co.kr
Instead of continuing the discussion over in the Inflation thread, I thought best to post some factual info here.
Remembering that this article was released before Tesla's glowing sales numbers from early January 2022
The secret behind Tesla’s 30% gross margin
The company's Q3 sales rose 58% year-on-year despite a 6% decrease in average selling price, allowing for high margins for the electric vehicle manufacturer
Manufacturers of vehicles using internal combustion engines say large investments funded by revenue from selling gas and diesel vehicles can make up for the deficit incurred by the production of electric vehicles (EVs).
This is why governments worldwide offer huge subsidies to buyers of such eco-friendly vehicles, which are not profitable for manufacturers, to expand the supply of EVs.
US-based Tesla, the world's largest EV maker, however, has broken this paradigm in the sector. Its recent report on its third quarter performance refutes the idea that the company cannot earn huge profits by selling EVs.
Gross sales margin that outstrips that of luxury automakers
Tesla's car sales in the third quarter rose to an estimated US$12.1 billion, up 58% or US$4.4 billion won from the same quarter last year, as the number of units sold from July to September this year was around 240,000, up 100,000 over the same period.
A noteworthy detail is that automotive gross profit — overall sales minus manufacturing costs — surged 74% over the same period. The automotive gross margin of such vehicles — the ratio of gross profit divided by sales — also rose from 27.7% to a record-high 30.5%, meaning Tesla earned a profit of around US$25,000 for every roughly US$90,000 vehicle it sold.
Im Eun-young, a senior analyst at Samsung Securities, told the Hankyoreh over the phone, "The gross sales margin of 30% is higher than those of German luxury carmakers BMW and Mercedes-Benz, and this standard is exclusive to the best luxury automakers like Porsche and Ferrari."
Germany-based Daimler AG, which owns Mercedes-Benz, had a gross sales margin of 23% in this year's second quarter, while Toyota — nicknamed the "master of cost reduction" — had 21% and Hyundai Motor only 19%.
The average selling price (ASP) of Tesla EVs is also falling. The figure fell 6% in a year from around US$54,000 in the third quarter last year to around US$50,000 in the same quarter this year. This is because the Tesla Model S and Model X — each priced around or over US$90,000 — saw their share shrink to about 4% of overall sales, but the lower-priced Model 3 and Model Y saw jumps in sales.
Despite this, the company's profit margin improved because manufacturing costs decreased significantly more than sticker prices. Over the cited period, the cost per unit decreased 12% from around US$40,000 to roughly US$35,200.
The Tesla report said, "Our operating margin reached an all-time high as we continue to reduce cost at a higher rate than declines in ASP." Thus, cost cutting seems to be the secret to achieving high profitability.
The "economy of scale" effect and a low-cost plant in China
How did Tesla earn such a high margin by selling electric vehicles, which are traditionally money losers?
The first factor is its economy of scale. In industries with a large proportion of fixed costs such as facility investment and development expenses such as cars, profits surge when sales increase due to the profit-leverage effect, in which the manufacturing cost per unit falls with high sales volume.
Tesla makes four models: the Model S, Model X, Model 3 and Model Y. Lower production costs are made possible through efforts like cutting the unit price of parts and maintaining fixed costs due to rising sales. Makers of cars using internal combustion engines that entered the EV market late face different circumstances, however. Until sales of electric vehicles reach a given scale, losses are inevitable due to massive investment costs.
Koh Tae-bong, head of research at Hi Investment and Securities, said, "The profitability of EVs basically depends on the scale of output using the EV-only framework [platform] developed by the manufacturer," adding, "Tesla will produce about a million units this year, resulting in economies of scale, but Hyundai is only capable of doing the same by 2025."
Also helping Tesla's margins is the company's expansion of factories in China, where labor and logistics costs are relatively cheap. Output capacity at the automaker's Shanghai plant, which went online in late 2019, is 450,000 units, and production there growing enough to cover the recent scale of exports to Europe.
The magic of "giga casting"
Analysts point to another factor behind Tesla's high profit margin. Park Hyung-keun, a senior researcher at POSCO Research Institute, said, "Through vertical integration by directly being involved from floor design to parts supply and demand, production and service, Tesla has helped reduce costs by raising the degree of its parts integration and cutting overlapping costs."
Tesla's unique structure of vertical integration, ranging from the development of semiconductor chips, software and batteries for electric vehicles, to charging, unmanned driving and insurance services, helps lower costs. Its “do-it-all” approach simplifies the automotive production process in a manner resembling that of electronic products. In contrast, other automakers actively utilize production outsourcing to diversify vehicle quality risks and raise output efficiency.
A leading example is Tesla's “giga” aluminum die-casting process. A Giga Press weighing more than 1 giga pound (400 tonnes, or around 900,000 pounds) stamps the entire rear chassis of a car with a large aluminum alloy. About 70 metal plates can be welded to the chassis, but giga casting can simplify the process and slash production costs by about 40%. This is why Tesla electric vehicles have recently reduced panel gaps issues — defects caused by misaligned steel plate seams.
The company plans to expand the use of giga casting, which it began applying last year, to the front of its EVs.
By Park Jong-o, staff reporter
The secret behind Tesla’s 30% gross margin
The company's Q3 sales rose 58% year-on-year despite a 6% decrease in average selling price, allowing for high margins for the electric vehicle manufacturer
Garpal Gumnut
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I believe that is from an article in the WSJ on Tesla vertical integration.
Ole Elon must have been saving it for the Tesla BTC price correction.
gg
Ole Elon must have been saving it for the Tesla BTC price correction.
gg
JohnDe
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For anyone that thinking that the big manufacturers are just warming up with their EV production, watch this -
JohnDe
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January 26 will be two interesting days -
First day is in Australia as 70% of the population celebrate Australia Day and the other 30% protest and rebel against it.
The second is in the USA Fourth Quarter and Full Year 2021 Financial Results and Webcast.
Good news and happiness and positivity will push all up and over the lows of he past few months. Bad news and things sink lower.
I will be one of the positive ones, brining out the Australia flag and a few beers.
First day is in Australia as 70% of the population celebrate Australia Day and the other 30% protest and rebel against it.
The second is in the USA Fourth Quarter and Full Year 2021 Financial Results and Webcast.
AUSTIN, Texas, January 12, 2022 – Tesla will post its financial results for the fourth quarter and full year ended December 31, 2021 after market close on Wednesday, January 26, 2022. At that time, Tesla will issue a brief advisory containing a link to the Q4 and full year 2021 update, which will be available on Tesla’s Investor Relations website. Tesla management will hold a live question and answer webcast that day at 4:30 p.m. Central Time (5:30 p.m. Eastern Time) to discuss the Company’s financial and business results and outlook.
Good news and happiness and positivity will push all up and over the lows of he past few months. Bad news and things sink lower.
I will be one of the positive ones, brining out the Australia flag and a few beers.
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Well, Jd, I suggest you skip the beers and go to Champagne.
Tesla has confounded many doubters (me included), and excited the faithfull (you) by producing a record annual profit.
From The Australian
And for his answer to labour shortages, Musk is turning to robotics.
Mick
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After reading this thread and watching the price drop I thought that tesla was in trouble. I'll have to look up what others are saying to confirm
JohnDe
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The next few years will be very interesting in the automotive vehicle industry. All the big guns are spending billions of $'s to be able tp ramp up production of their EV line up, all while they continue to produce ICEVs and a massive shortage in raw materials for battery production. Tesla is only a minnow in the car industry but they have the jump by about 5 years and all the contracts signed for batteries and minerals. In the next 10 years Tesla could be the the biggest automotive vehicle manufacturers in the wold, it all depends on how their management runs the business. And with two more gigafactories coming on line in the next month, well let's see what happens.
Tesla’s Fremont Factory was the most productive auto factory in the U.S. in 2021
New data from Bloomberg states that Tesla’s Fremont Factory in Northern California was the most-productive automotive plant in the U.S., outpacing 70 other plants in the country.
Last year, Tesla’s Fremont Factory averaged a weekly production pace of 8,550 vehicles. That’s about 1,221 cars per day, 51 cars per hour, or about .85 cars per minute. However you break it down, the Fremont Factory’s manufacturing prowess showed its domination in 2021, as it was the most productive automotive factory in the United States in 2021, outpacing Toyota, BMW, and Ford factories that have long created the most robust figures of car production in previous decades.
For comparison, Toyota’s plant in Georgetown, Kentucky built 8,427 cars per week, BMW’s facility in South Carolina managed 8,343 units per week, and Ford’s Dearborn, Michigan hub managed just 5,564 vehicles weekly. All figures were provided by Bloomberg.
The history of the Fremont Factory tells the story of long-standing automotive companies that simply vacated the factory to make way for the next big thing. In the 1960s, GM operated the plant. Then in 1984, Toyota’s New United Motor Manufacturing, Inc partnered with GM to run the plant. Ultimately, GM’s bankruptcy in 2009 left the 5.3 million square foot plant vacant. Tesla took ownership in 2010, renovated several portions of the factory, expanded production availability (a project that continues to this day), and currently has more than 10,000 active employees at the plant. The Model S, Model X, Model 3, and Model Y are all produced at the site.
2020 and 2021 were arguably the darkest years of the global automotive market in recent memory. Only rivaled by perhaps the 2008 recession, which brought GM and other automakers to their knees, the 2020 COVID-19 pandemic was a dark spot in an emerging sector.
The rebirth of American automotive manufacturing had taken a turn as Tesla had basically influenced an entire sector to rethink its strategies. Instead of continuing to develop powertrains powered from gas or petrol, legacy automakers have transitioned to EVs. The industry’s entire move could basically be hinged on the fact that Tesla has switched a massive amount of drivers to electric cars, and the production figures are proving that.
While Tesla has only one operational U.S. plant as Gigafactory Texas nears production soon, its North American customer base has been accepting cars from the Northern California plant. However, this one plant has managed to avoid heavy delivery delays due to bottlenecks in the supply chain and parts shortages and become the most proactive American automotive manufacturing facility in 2021.
Most impressively, Tesla has continued to expand its yearly production capacity as a company. Last year, it was mostly due to Gigafactory Shanghai’s massive production figures, which accounted for a majority of vehicle deliveries as it is Tesla’s main export hub to the extremely competitive European market. Tesla managed 936,172 deliveries in 2021, a 47 percent increase from a year prior.
www.teslarati.com
Tesla’s Fremont Factory was the most productive auto factory in the U.S. in 2021
New data from Bloomberg states that Tesla’s Fremont Factory in Northern California was the most-productive automotive plant in the U.S., outpacing 70 other plants in the country.
Last year, Tesla’s Fremont Factory averaged a weekly production pace of 8,550 vehicles. That’s about 1,221 cars per day, 51 cars per hour, or about .85 cars per minute. However you break it down, the Fremont Factory’s manufacturing prowess showed its domination in 2021, as it was the most productive automotive factory in the United States in 2021, outpacing Toyota, BMW, and Ford factories that have long created the most robust figures of car production in previous decades.
For comparison, Toyota’s plant in Georgetown, Kentucky built 8,427 cars per week, BMW’s facility in South Carolina managed 8,343 units per week, and Ford’s Dearborn, Michigan hub managed just 5,564 vehicles weekly. All figures were provided by Bloomberg.
The history of the Fremont Factory tells the story of long-standing automotive companies that simply vacated the factory to make way for the next big thing. In the 1960s, GM operated the plant. Then in 1984, Toyota’s New United Motor Manufacturing, Inc partnered with GM to run the plant. Ultimately, GM’s bankruptcy in 2009 left the 5.3 million square foot plant vacant. Tesla took ownership in 2010, renovated several portions of the factory, expanded production availability (a project that continues to this day), and currently has more than 10,000 active employees at the plant. The Model S, Model X, Model 3, and Model Y are all produced at the site.
2020 and 2021 were arguably the darkest years of the global automotive market in recent memory. Only rivaled by perhaps the 2008 recession, which brought GM and other automakers to their knees, the 2020 COVID-19 pandemic was a dark spot in an emerging sector.
The rebirth of American automotive manufacturing had taken a turn as Tesla had basically influenced an entire sector to rethink its strategies. Instead of continuing to develop powertrains powered from gas or petrol, legacy automakers have transitioned to EVs. The industry’s entire move could basically be hinged on the fact that Tesla has switched a massive amount of drivers to electric cars, and the production figures are proving that.
While Tesla has only one operational U.S. plant as Gigafactory Texas nears production soon, its North American customer base has been accepting cars from the Northern California plant. However, this one plant has managed to avoid heavy delivery delays due to bottlenecks in the supply chain and parts shortages and become the most proactive American automotive manufacturing facility in 2021.
Most impressively, Tesla has continued to expand its yearly production capacity as a company. Last year, it was mostly due to Gigafactory Shanghai’s massive production figures, which accounted for a majority of vehicle deliveries as it is Tesla’s main export hub to the extremely competitive European market. Tesla managed 936,172 deliveries in 2021, a 47 percent increase from a year prior.
Tesla's Fremont Factory was the most productive auto factory in the U.S. in 2021
New data from Bloomberg states that Tesla’s Fremont Factory in Northern California was the most-productive automotive plant in the U.S., outpacing 70 other plants in the country. Last year, Tesla’s Fremont Factory averaged a weekly production pace of 8,550 vehicles. That’s about 1,221 cars per...
www.teslarati.com
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On the down side, Tesla has been accused of fudging its sales figures in Australia.
From Drive Australia
And just to add to its list of "issues" comes news of another recall.
From Wral tech Wire
Ans you get a good talking to.
Mick
From Drive Australia
A 25% discrepancy is a tad more than a rounding error.
And just to add to its list of "issues" comes news of another recall.
From Wral tech Wire
Don't know what happens in other states, but in Victoria, rolling through a stop sign is a $540 fine and 3 demerit points.
Ans you get a good talking to.
Mick
Value Collector
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It could be a matter of when they count sales, for example do they count “sale” at the moment a make my online transfer payment for the car, or a couple of weeks later when I actually take delivery and the number plates are asssigned?
As far as company reporting goes I am happy for Tesla to count a “sale” the moment the customer completes the online sales process and transfers their payment, but I can see that some people might not count a sale until the car is registered and delivered.
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There may well be discrepancies in the timing of sales, but a 25% discrepancy is just too big.
And if the issue is timing of sales, what you lose in the beginning of the year you should pick up at the end of the year when people pay for their cars, but they are some way from being delivered or registered in the next year.
Mick
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MSN
www.msn.com
2 February 2022
JohnDe
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New app update for the Tesla, very handy to work out energy cost & fuel savings. Needs a bit of fine tuning, I can’t adjust the cost of petrol and they have it on the low side, I know this because I can see we have made a large savings each month from the fuel account statement.
JohnDe
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"The feud between Elon Musk and Tesla with President Biden after Biden has snubbed Tesla in favor of GM and Ford as leaders of EV revolution in America, may be coming to an end and there may be some hope for reconciliation. State of Charge host Tom Moloughney will be here to sort through the drama, plus other electric car news of the week."
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Elon Musk has admitted that Tesla "dropped the Ball" on its rollout of Tesla Model X and Model S vehicles.
From Zero Hedge
From Zero Hedge
Mick
JohnDe
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It's all in the book, a very interesting and informative read - Power Play: Tesla, Elon Musk, and the Bet of the Century
I use to live in Fremont, CA so interesting to see Tesla's investment activity there. Tesla's head start and tech lead in the EV space will of course be reined in by competition from the majors over time. Top engineers and designers get poached all the time and Tesla has already experienced this talent drain. EVs will become cheaper and margins squeezed so Tesla will need those gigafactories and lower production costs to stay competitive. Touting FSD as a big advantage and revenue earner is premature. I am more excited about the prospects for Tesla's energy business, this will likely be the main driver of explosive revenue growth in years ahead - less competition in this space.
They do and have...But it cuts both ways... you need only to look at Franz von Holzhausen C.V... And you also have ask where is fresh thinking going to go to get appreciated???
I'd be more in the camp that's thinking the other Auto OEM's will need 'Gigafactories' to become competative.
What are the Chinese upto ??? I'd luv to know...
But what I do know is that Volvo have started 'mega casting' chassis components.... And it's not that they and all the other manufacturers didn't know about it as a process; It was the internal cultures of the companies themselves that killed the idea in the crib.
Internal Managment Cultures get nimble.... or go bankrupt.
JohnDe
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Altman Z score: Tesla putting LEGACY Auto in bankruptcy zone
(What Is the Altman Z-Score?
The Altman Z-score is the output of a credit-strength test that gauges a publicly traded manufacturing company's likelihood of bankruptcy.)
