Elon must need to start tweeting again to pump up the sinking ship.

A Tesla Crackup Foretold

The real problem is that governments everywhere have ordained that electric cars will be sold at a loss.


People look at new Tesla cars at a showroom in the Meatpacking district in New York City on June 6.
Photo: Spencer Platt/Getty Images

By Holman W. Jenkins, Jr.

Before we get to the looming Tesla funding crisis, let’s notice that the web still isn’t living up to its reputation. Given all the agencies and organizations dying to inform you about global warming, it’s almost maddening that one piece of data is unavailable: how much of the global emissions “problem” is caused by cars and light trucks that consumers buy.

Take the Union of Concerned Scientists. It’s happy to tell you: “Our personal vehicles are a major cause of global warming. Collectively, cars and trucks account for nearly one-fifth of all US emissions.”

But the atmosphere does not distinguish between U.S. emissions and global emissions (U.S. emissions are less than 15% of the total). And “our personal vehicles” and “cars and trucks” are overlapping but not identical categories. Most personal vehicles sit idle most of the time. Heavier vehicles used commercially account for just 2.5% of the fleet and 27% of the emissions. Also, it might surprise you to know that U.S. farm and construction machinery and similar equipment (such as forklifts) emits about 60% as much as America’s beloved pickup trucks.

Nobody really knows but the total global vehicle fleet has recently been estimated at 1.2 billion. Even recklessly assuming that foreigners drive big American cars and rack up big American annual mileages, personal vehicles likely account for much less than 10% of emissions. The U.N.’s climate panel estimated in 2010 that transportation in total (cars, trucks, planes, trains and ships) amounted to just 14% of global emissions.

So it was always silly to imagine Tesla’s luxury passenger cars could ever be anything more than a rounding error. Even more so when you remember that electric cars need to be charged up on something, and 68% of global electricity generation is powered by coal, natural gas and oil.

Elon Musk is not stupid. He knows this. His preachments about climate change, to put a rational gloss on it, were a sales pitch. It added to the considerable allure of his cars, which they also get from being fabulous gadgets, status symbols and eligible for government subsidies.

In the coming crackup, it will be natural to ask what went wrong. Mr. Musk is an entrepreneur but other entrepreneurs are not Mr. Musk. They live and die by whether their good or service commands a price that can cover its costs.

Mr. Musk has been able to duck this so-called hard budget constraint for years not only because of government handouts (though those have been plenty) but because investors were willing to continue throwing in new capital despite his failure to generate a profit.

His recent grousing on earnings calls and other behavior suggests Mr. Musk knows this is ending. But why? When he has missed so many targets, are investors really adamant that he hit his stated Model 3 production goal of 5,000 units a week in June and begin to show positive cash flow? Or is this failure just incidental to their questioning of the unspoken premise of the Tesla project, namely the idea that governments will assure Tesla’s success by progressively taking away buyers’ freedom to opt for gasoline-powered cars despite their superior utility over electric-powered cars?

The answer is neither. In fact, the real news is that governments everywhere have decided, perversely, that electric cars will not be profitable. In every major market—the U.S., Europe, China—the same political dispensation now applies: Established auto makers effectively will be required to make and sell electric cars at a loss in order to continue profiting from gas-powered vehicles.

This has rapidly become the institutional structure of the electric-car industry world-wide, for the benefit of the incumbents, whether GM in the U.S. or Daimler in Germany. Let’s face it, the political class always had a bigger investment in these incumbents than it ever did in Tesla.

Tesla has a great brand, great technology and great vehicles. To survive, it also needs to mate itself to a nonelectric pickup truck business. We said as much here two years ago and many readers thought we were kidding. We weren’t kidding.

We’ll save for another day the relating of this phenomenon to Mr. Musk’s recently erratic behavior and pronouncements. You can find on the web his latest email to his employees blaming a saboteur plus a speculative conspiracy of the oil and traditional auto industries for his company’s struggles with the Model 3. Keep your eye on the bigger picture—the bigger picture is the global regulatory capture of the electric car moment by the status quo. And note the irony that Tesla’s home state of California was the original pioneer of this insiders’ regulatory bargain with its so-called zero-emissions-vehicle mandate.

Electric cars were going to remain a niche in any case, but public policy is quickly ruling out the possibility (which Tesla needed) of them at least being a profitable niche.

Appeared in the June 23, 2018, print edition.

https://www.wsj.com/articles/a...yahoo_itp&yptr=yahoo

The Future of Tesla Hinges on This Gigantic Tent

Elon Musk loves it. Critics hate it. The all-important Model 3 sedan depends on it.


Tesla obsessives on Twitter and other websites have circulated photos of the tent alongside comments either praising or ridiculing the parking-lot big top.
Photographer: David Paul Morris/Bloomberg

Elon Musk has six days to make good on his pledge that Tesla Inc. will be pumping out 5,000 Model 3 sedans a week by the end of the month. If he succeeds, it may be thanks to the curious structure outside the company’s factory. It’s a tent the size of two football fields that Musk calls “pretty sweet” and that manufacturing experts deride as, basically, nuts.

“Words fail me. It’s insanity,” said Sanford C. Bernstein & Co.’s Max Warburton, who benchmarked auto-assembly plants around the world before becoming a financial analyst.

Inside the tent in Fremont, California, is an assembly line Musk hastily pulled together for the Model 3. That’s the electric car that is supposed to vault Tesla from niche player for the wealthy to high-volume automaker, bringing a more affordable electric vehicle to the masses.
The newly constructed production tent, right, at the Tesla factory in Fremont, California. The temporary structure is home to a general assembly line needed to help the electric-car maker reach its production targets for the Model 3 sedan.
Photographer: David Paul Morris/Bloomberg

Tesla has had a heck of a time making the leap. Musk’s expectation two years ago was that 100,000 to 200,000 Model 3s would be produced in the second half of 2017. Just 9,766 rolled out in the first quarter—a weekly output rate of roughly 750.

Hence, apparently, the tent. Musk announced it on Twitter on June 16, saying the company had put together an “entire new general assembly line” in three weeks with spare parts; the building permit was issued on June 13, though the company could have started working on aspects of the project before that.

Whether this new line is fully operational is unclear. Company officials declined to comment. The Tesla-obsessed users of Twitter and other internet forums have posted photos and videos and comments either praising or ridiculing the parking-lot big top. Apparently in response to the intense interest, the tent has recently been surrounded by very large trucks, which obstruct the view.

When Tesla releases second-quarter production and delivery figures in early July, the hundreds of thousands of customers who’ve been waiting since March 2016 for their Model 3s, having put down $1,000 deposits, will get a better sense of how much longer they’ll be in the queue. “The question is, how much rope Musk will get from customers who have had to wait years for delivery?” said Jeff Liker, a University of Michigan engineering professor who’s written books on Toyota Motor Corp.’s vaunted production system.
New vehicles are loaded onto a truck outside the Tesla factory. The company has fallen far short of its own production targets so far.
Photographer: David Paul Morris/Bloomberg

What gives manufacturing experts pause about Tesla’s tent is that it was pitched to shelter an assembly line cobbled together with scraps lying around the brick-and-mortar plant. It smacks of a Hail Mary move after months of stopping and starting production to make on-the-fly fixes to automated equipment, which Musk himself has said was a mistake.

“The existing line isn’t functional, it can’t build cars as planned and there isn’t room to get people into work stations to replace the non-functioning robots,” Warburton said in an email. “So here we have it—build cars manually in the parking lot.”

An admission in April that he erred by putting too many robots in Tesla’s plants was a humbling moment for Musk. The chief executive officer had boasted in the past that his company would build an “alien dreadnought,” sci-fi bro code for a factory so advanced and robotic, it would be incomprehensible to primitive earthlings.

During a February earnings call, Musk told analysts that Tesla had an automated-parts conveyance system that was “probably the most sophisticated in the world.” But by the spring, it had been ripped out of the factory.

“We had this crazy, complex network of conveyor belts,” Musk told CBS This Morning in April. “And it was not working, so we got rid of that whole thing.”

“Words fail me. It’s insanity.”

James Womack, the founder of the Lean Enterprise Institute in Cambridge, Massachusetts, called Tesla’s haphazard approach worrisome. “The chaos of how Musk is going about this makes it difficult for him to provide the standardized, repeatable work routines that allow people to function,” said Womack, author of “The Machine That Changed the World,” which sprang from an influential study of Toyota’s production techniques. “He’s going to need a second tent for repair and rework.”

The word “temporary” may be in Tesla’s tent permits with Fremont, but Musk has suggested it could stick around a while. He told one Twitter follower last week that he’s not sure the company actually needs a building anyway. He described the new assembly line as “way better” than the one in the plant that cost the company hundreds of millions.
Tesla vehicles sit in a parking lot outside of the tent, which is described as temporary in permits but might remain in use indefinitely.
Photographer: David Paul Morris/Bloomberg

That tweet spoke volumes to Dave Sullivan, an analyst at research firm AutoPacific who used to supervise Ford Motor Co. factories. “To say that it’s more efficient to build this with scrap pieces laying around means that either somebody made really bad decisions with the parts in the plant inside, or there are a lot of other problems yet to be discovered with Tesla’s efficiency.”

Fremont is working closely with Tesla to make sure that the tent is in compliance with building and fire codes, said Gary West, an official for the city. Tesla applied for a building permit to erect the tent on June 7, according to municipal records. A permit has been issued for equipment installation and one for an overhead fire sprinkler system is pending. The tent doesn’t have air conditioning, according to the city documents.

The tent was supplied by a company called Sprung, which refers to its products as “high performance tensioned membrane structures” and constructed the facility that housed the NASA Space Shuttle in the 1980s. The one at Tesla covers 137,250 square feet. Building plans show that it’s adjacent to the factory’s north paint shop; it’s visible from the platform of the Warm Springs BART station.

The assembly line inside will start out as fully manual and gradually convert to automation in steps, according to Brian Johnson, an analyst at Barclays Plc who met with Tesla’s investor relations department last week.

“It’s preposterous,” Bernstein’s Warburton said. “I don’t think anyone’s seen anything like this outside of the military trying to service vehicles in a war zone. I pity any customer taking delivery of one of these cars. The quality will be shocking.”

https://www.bloomberg.com/news....headline&yptr=yahoo

Sounds like they are drowning.

Oh well.

260 cars made in a quarter when the backlog is 450,000...and here I thought SIG's P365 lack of production was the epitome of woeful.

quote:

260 cars made in a quarter when the backlog is 450,000.

And cancellations on those reservations are greatly outnumbering new sales. So the backlog is shrinking without even ramping up production on Model 3. Model 3 is supposed to be what turns them profitable.... but they are burning through cash.

They will have to raise more capital, debt or watered down equity, before the end of 2018.

quote:

Originally posted by chellim1:
They will have to raise more capital, debt or watered down equity, before the end of 2018.

How will that happen? From what I've read, Tesla was cash strapped before Musk acquired Solar City, and his cash and borrowing position only got worse after that acquisition. I know there's still a lot of excitement around the stock (hence its current value), but I have to believe reality is going to set in for investors at some point?

The Ultimate Shell game...at taxpayer expense, of course.

How Tesla uses cash from Nevada casinos to boost its bottom line

Startling Drone Footage Of Tesla's Model 3 "Tent" Reveals "The Stone Age Of Auto Manufacturing"

New photographs and drone footage of Tesla's "state of the art" Fremont production tent, which the company is using to "temporarily" boost Model 3 production, show that Tesla is using what has been dubbed "stone age" processes that fly in the face of the "alien dreadnaught" concept that Elon Musk had touted for the company's production.

The following video taken on June 26 was uploaded on Twitter by a user who was able to capture footage of what the new temporary facility in Fremont California, which Elon Musk has gone to extreme measures to cover up such as putting trucks along the periphery fence to hinder onlookers, looked like.



In conclusion, we revert back to the anonymous user who recorded the drone video, who asks a pointedly rhetorical question: "when will Elon Musk stop lying to the public about what his company can achieve? Or, when will the public, regulatory bodies, and elected officials begin to hold him accountable?"

https://www.zerohedge.com/news...e-auto-manufacturing

Is Elon Musk Deceiving Investors and Creditors About Tesla’s True Production Capacity?

While Elon Musk and Tesla seem to have successfully managed to focus investor attention entirely on the Model 3's claimed 5,000 per week production rate rather than the company's lack of profitability and - if numerous forum posts are any indication- lack of reliability, it seems that even the veracity of the production capability claim may be in question.

Reuters yesterday published a story pointing out that one of Tesla's major production bottlenecks may be the paint shop, and today Twitter user @eriz35 posted a potential multi-part explanation as to why.

If this research is correct, Tesla potentially does not have the physical capacity required to paint more than 5000 cars a week in total, including 2000 or so Models S and X.

The basis of this thesis is the compelling evidence that Tesla only installed half of the equipment from a 2014 permit application that was represented as required to achieve a total capacity of 520,000 units per year. If this is accurate (and we're still awaiting a specific refutation from the company) it means Tesla CEO Elon Musk has a lot of explaining to do relative to what he has told investors and, even more importantly, what he has told the company’s creditors.

Here's the Tweetstorm, which comes on the day the company's Chief Information Officer became the latest executive to quit:

https://www.zerohedge.com/news...ity#comment-11927656

The more that comes out the more it seems like he is running a shell game using tax money and "deposits" from easy marks.

I'm not saying the concept of the electric cars is a shell game, they're not, but I don't think he ever planned on delivering the quantity he boasted about.

You'll never build a competitively priced auto in California.

Electric vehicles can eventually succeed but they should of gone after the Long Haul Trucking Market first.

quote:

Originally posted by mbinky:
The more that comes out the more it seems like he is running a shell game using tax money and "deposits" from easy marks.
I'm not saying the concept of the electric cars is a shell game, they're not, but I don't think he ever planned on delivering the quantity he boasted about.

Exactly, mbinky.

I don't have a problem with Tesla, the vehicle. I don't have a problem with electric vehicles. If the market will support them.
What I have a problem with is all of the public/gov taxpayer funded subsidies. Subsidies lead to corruption.

How Elon Musk funded his massive business empire with $4.9 billion in government subsidies leaving the U.S. taxpayer to shoulder much of the cost

http://www.dailymail.co.uk/new...r-shoulder-cost.html

Stock is dropping today

Tesla’s stock surged in pre-market trading following the news that it achieved its production target of 5,000 Model 3 vehicles per week. Now the stock is taking a tumble as Wall Street throws cold water on the Model 3 production ramp.

It looks like Elon Musk’s prediction that people betting against Tesla seeing ‘their position explode’ has yet to happen.

The stock took a turn after CFRA analyst Efraim Levy told clients to sell the stock following the delivery and production results.

He said that the new Model 3 production rate is not “operationally or financially sustainable” despite Tesla reiterating that they expect to be cash flow positive during the second half of the year after achieving the new production rate.

Levy also expressed concern about Tesla’s order deposit for the Model 3 (via MarketWatch):

Separately, he said reports that Tesla is asking for another $2,500 non-refundable deposit from Model 3 reservation holders “as a little unnerving, as it seems to be an aggressive attempt to meet otherwise difficult targets of being cash flow positive in Q3.,” he wrote.

The CFRA analyst is changing his ‘hold’ rating to a ‘sell’ rating in the note to clients.

I don't need anything else in my life that needs recharging .

Tesla Asks Suppliers for Cash Back to Help Turn a Profit

Tesla Inc. TSLA -4.84% has asked some suppliers to refund a portion of what the electric-car company has spent previously, an appeal that reflects the auto maker’s urgency to sustain operations during a critical production period.

The Silicon Valley electric-car company said it is asking its suppliers for cash back to help it become profitable, according to a memo reviewed by The Wall Street Journal that was sent to a supplier last week. Tesla requested the supplier return what it calls a meaningful amount of money of its payments since 2016, according to the memo.

The auto maker’s memo, sent by a global supply manager, described the request as essential to Tesla’s continued operation and characterized it as an investment in the car company to continue the long-term growth between both players.

While Tesla said in the memo that all suppliers were being asked to help it become profitable, it is unclear how many were asked for a discount on contracted spending amounts retroactively. Some suppliers contacted about the request said they were unaware of such a demand.

Tesla declined to comment on the specific memo. But it confirmed it is seeking price reductions from suppliers for projects, some of which date back to 2016, and some of which haven’t been completed. The company called such requests a standard part of procurement negotiations to improve its competitive advantage, especially as it ramps up Model 3 production.

The surprising requests raise further questions about Tesla’s cash position, which has dwindled after it struggled to boost production of its first car designed for mainstream buyers, the Model 3. After months of delays, Tesla last quarter reached its longstanding goal of making 5,000 Model 3s in a single week, which, if sustained, will help it generate cash.

Auto makers and suppliers have complicated relationships, each fighting for the best deal under immense pricing pressure. Supply-chain consultants say sometimes auto makers will demand a reduction in price for a current contract going forward or use leverage of awarding a new deal to get upfront savings on a contract. But they say it is unusual for an auto maker to ask for a refund for past work.

Dennis Virag, a manufacturing consultant who has worked in the automotive industry for 40 years, said a solicitation like Tesla’s could put suppliers in financial peril and jeopardize its future supply of car parts.

“It’s simply ludicrous and it just shows that Tesla is desperate right now,” he said. “They’re worried about their profitability but they don’t care about their suppliers’ profitability.”

Tesla has sought to balance its desire for rapid growth with paying for the expensive launch of new vehicles and building out infrastructure to compete against much larger auto makers.

Chief Executive Elon Musk has said he wants to avoid raising additional cash, promising the company can become cash-flow positive with the continued Model 3 build rate and turn a profit in the second half of the year. Many analysts expect Tesla eventually will need to raise more money.

Tesla has been burning cash at a rate of about $1 billion a quarter, and finished the first quarter with $2.7 billion in cash on hand. Tesla pledged to pare back planned capital expenditures this year to less than $3 billion from $3.4 billion last year. Its loss attributable to common shareholders in the first quarter was $710 million, the fifth consecutive quarter of record losses.

Tesla will need to pay down a $230 million convertible bond this November if its stock doesn’t reach a conversion price of $560.64, and a $920 million convertible note next March if the stock doesn’t reach $359.87. Shares closed Friday at $313.58, and are down about 4.5% over the past 12 months.

As part of Tesla’s bid to become profitable, Mr. Musk cut Tesla’s workforce by 9% in June and promised to slow other spending as well. He’s become focused intently on becoming cash-flow positive, a person familiar with his thinking said.

Last month, he told employees in an email: “What drives us is our mission to accelerate the world’s transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable. That is a valid and fair criticism of Tesla’s history to date.”

As a younger company, Tesla indicated it had trouble getting the attention of some of the most important suppliers. Mr. Musk has complained in the past that he wasn’t getting parts makers’ best teams, but he has said that changed with the Model 3.

Tesla has made changes with its suppliers in the past to help preserve its cash position.

In August, Mr. Musk told analysts Tesla was able to negotiate longer payment terms to about 60 days for Model 3 parts, in what he described as “the nirvana” that would allow the auto maker to make the car and get paid for it before the bill is due to suppliers.

“Obviously, that’s like the promised land right there,” he said.

Write to Tim Higgins at Tim.Higgins@WSJ.com

https://www.wsj.com/articles/t...-a-profit-1532301091

Tesla has been on a tear lately with a new plant opening outside of Shanghai.
I just shorted it again...
Am I nuts?

Musk needs a top hat and three rings to draw peoples attention to. He is a huckster. If it wasn’t for our tax dollars he’d be nobody.

Every time I read something about Musk or Tesla, I am reminded of Preston Tucker.

I'm shocked at Tesla's stock price!