bmwexpat

For potential buys of Tesla cars, Thursdays announcements of a base model 3 and significant price cuts on the model S & X is good news. As Porsche has not announced any formal pricing on the Taycan, it remains to be seen if and how that may or may not affect price points for the Taycan.

As a Sales & Marketing Manager, I see nothing but bad news in the Tesla announcements. I believe they have painted themselves in a corner, from which it will be almost impossible to escape from:

By cutting the prices on their flagship products as well as the model 3, Tesla just devalued the brand. Cutting prices is not a show of strength it's a sign of weakness. If you bought a Tesla in the past 6 months you are not happy as you just got screwed out of several thousand dollars.

Tesla was at best modestly profitable the last 2 quarters, By cutting prices, Tesla just guaranteed they will not be profitable for all of 2019. Elon even said so in the news conference. On Friday Tesla had to pay $920 million in cash to satisfy a loan obligation. While they had the cash to make the payment, it robbed they of the ability to put that money to work in other future areas. If Tesla remains unprofitable through 2019, they will burn through their remaining cash and have to raise more capital to stay alive. Given that Tesla is about to face on onslaught of competitors that may not be as simple as in previous years.

Dumping out the sales centers and going to 100% online sales will save money for a few months but will prove to be a disaster and will likely be the single decision that will have potential fatal consequences. In the short run Tesla can tap into the backlog of buyers for the base model 3 and the price reductions may help to bolster model S & X sales for the group of buys that may have been on the fences but have not pulled the trigger. However once you get past the next couple of months how is Tesla going to tap into new buyers that may see a Tesla on the road but have never looked or sat in one? Also, starting in the fall of 2019 and going forward there is a wave of new BEV's coming from multiple manufacturers. These are the big guys that will advertise and encourage car buyers to visit showrooms to touch and drive their BEV's. If you want to test drive a Tesla, go on-line buy one??? As buying a car is the second biggest purchase in most people lives, the on-line strategy will fail miserably.

I admit, I have never been a Tesla fan but I truly believe that announcement on February 28th, will be looked at as the start of Tesla's death spiral to bankruptcy.

doshc

Do the math on prices today vs 6 months ago. After accounting the difference in tax rebates the difference in prices are not much, $2500 or so depending on the model. When you buy a new car from a traditional dealer you may pay MSRP (or in some cases above), or many thousands below depending on incentives or negotiating. Tesla is trying to find the optimal price elasticity point but because of their transparent sales model everyone sees what price people pay vs the old model of being silently screwed or never knowing if you really did a good job on your price.

You may have wanted to actually read the transcript of the conference before writing a long opinion on it. Elon said Q1 2019 not all of 2019. Profitability for Q1 2019 was uncertain and was already disclosed in their earnings.

Again, you might want to read the transcript so you actually know what you're talking about. Here, I'll do it for you:

“And then another key point is where we're moving all sales online. This is extremely extremely profound worldwide. The only way to buy a Tesla will be online and you can buy your car like buy your car on your phone in about one minute in the US and there will make it just as easy to literally one minute purchase and possibly the world as well. We also have stores that there will be converted to galleries and information centers so you can go there and learn about Tesla or learn about electric vehicles. [Inaudible] Tesla merchandise but all sales will be online. So if you do go to the store they'll simply show you how to buy the car online and then in order to get the need for a test drive.”

“I think this is actually going to online only is incredibly helpful to us for selling anywhere in the US because in many parts of the US we are unable to sell effectively because of franchise laws whereas if the sales concluded online we now have anyone can buy the car anywhere in the United States immediately so this I think really substantially opens up our ability to sell the cars. And It's 2019. People want to buy things online.”

“I'm sure the franchise dealers will try to franchise or dealers will try to oppose us in some way but this would be a fundamental restraint of interstate commerce and violate constitution. So good luck with that.”

“We will be closing some stores. And there will be some reduction in headcount as a result. There's no question about that. There's no other way for us to achieve the savings required to provide this car and be financially sustainable. "We will actually be significantly increasing headcount in service technicians and service is directly reporting to me. At this point but I really have as my top priority this year is making service amazing at Tesla.”

“It is it is a hard decision but I think it's the right decision for the future and I think ultimately this will be a very strong competitive strength of Tesla because we do not have franchise dealers. So I think this is this will be a fundamental long term competitive advantage of Tesla that that maybe only a startup - only a startup could replicate. No one who has sold franchises could could replicate. I think this was an extremely important strategic decision and definitely the right one.”

This may be news for you, but NO ONE likes interacting or dealing with car salesmen. Yes, they want to sit and touch and feel the car. But the dread and distaste of interacting with salesmen actually causes many to hold off or not wish to purchase a new car. 80% of Tesla Model 3 sales were online. By the way, in the US there are 20 states where Tesla is already banned from direct sales and they must happen online. The locations were gallerias and now all locations will be effectively gallerias.

By the way with other manufacturers after you drive it off the lot you own it. Tesla has extended their return back period to 7 days. Direct from tesla.com/blog:

"Quite literally, you could buy a Tesla, drive several hundred miles for a weekend road trip with friends and then return it for free."

Right, nothing new here. You've been "predicting" this for years in the other forum and now this year is finally really the one. For certain. Did you put your whole house on a short? Imagine retiring from being a sales manager.

Myself, I'm not certain either way, but this is what disruptive companies do. They didn't get here by playing it safe. There is always a huge risk of it not working. But if it works, it's a MAJOR competitive advantage for Tesla as no existing automaker can easily replicate what Tesla has just done.

cometguy

It's interesting to see that Volvo/Polestar will only be selling their Polestar EV cars online -- no dealerships. Presumably they will be servicable at Volvo dealerships...

Tesla will need servicing centers. I wonder how that will play out. It's one thing to have supercharger stations set up across the US, but it's quite another to have service centers for maintenance. I suppose that Tesla is aiming mainly for large metropolitan areas and not worrying about selling their cars in between.

hf1

More on the bearish side. Profit margins seem to collide with sales volume, service, quality, and safety. Something's got to give:
https://www.zerohedge.com/news/2019-...-musk-end-road
https://www.zerohedge.com/news/2019-...-driver-deaths

Never heard of the "whompy wheel" problem. First link after googling "whompy wheel tesla" -- looks serious:
/

doshc

Good lord. That guy is a long time short seller (and his portfolio completely in the red because of it) and his grasp on facts & reality from those posts looks to be almost as tenuous as those bloggers who write about the faked moon landings.

Model Y unveiling was just announced for March 14 and that includes test rides as well as a working public supercharger V3.0. According to bmwexpat last year - the Y doesn't really exist because it "Cost's about 1 -1.5 Billion to retool an auto assembly line" and Tesla doesn't have the funds to develop it.

hf1

You say this as if being short or bearish is somehow inherently bad or divorced from facts and reality. Longs are bullish, shorts are bearish -- it only makes sense. I like to hear both sides of the story.

doshc

hf1

Again, I don't see how having a large short position disqualifies someone from having a well reasoned stance on the issue. His short position is perfectly consistent with his opinion/view. Musk and others have large long positions in Tesla. Should their opinions and statements be therefore also rejected outright? What did you find questionable about the posts' "grasp on facts & reality"?

manitou202

There isn't as much competition for Tesla over the next couple of years as is commonly stated.

No competition announced for the Model X. No other 3 row SUV competitors.

Model S has the most with the Taycan, Audi GT, the Etron SUV, and IPace. But the lack of charging network and slow rollout so far for sales, isn't that threatening. Plus the Taycan and GT or more sport sedans with limited room compared to the S. The S is roomier than a Panamera. Model S sales will probably be the hardest hit.

The Model 3 has no competition. Closest is the Volvo Polestar, but they have already stated limited sales and it will only be sold in certain states. I drove a performance Model 3 this weekend and couldn't have been more impressed. The car is unreal. Way better handling than expected, and the interior was extremely easy to get used to. I don't know why anyone would consider a Bolt, Leaf, etc compared to a Model 3. No other competition. Honestly I wouldn't even entertain a 3-series, C class, or A4/5. They feel a decade old.

As a side note I'm ordering a Model 3 performance tomorrow. I still can't stop thinking about it after my test drive. This will be my second Tesla in 4 months. I've been very skeptical of them and even had a bit of a negative impression until I really experienced their cars. You can now call me a fanboy. I'll probably be getting rid of my Sport Turismo in the mean time. First time I'll be without a Porsche in a long time. I still have a Taycan deposit so that may end up replacing the Model 3P or be added as an addition. All depends on what Porsche delivers.

I don't know what will happen to Tesla financially, but I'm convinced someone will save them worst case. Their products are too incredible.

doshc

Too many to list, but here's a sample just from the first post you posted:

“Whompy Wheel” is a well-documented fatal Tesla flaw"

It is not documented in any official (NHTA, etc) fashion as a vehicle flaw (meaning wheel/axel failure doesn't happen with greater frequency than other vehicles). It's neither mentioned or discussed much in the actual Tesla owner forums. If it was really a fatal design flaw there would be recalls and long threads on the Tesla forums about this 'flaw'.

"yet another Tesla has lost a wheel due to “Whompy Wheel”."

He's referring to the Florida crash and the only official statement is the car lost control due to a high rate of speed. Nothing on 'whompy wheels', he made that aspect up and posted as fact.

"Tesla is closing most stores and service centers to save money."

The actual conference transcript says Tesla is closing some stores and expanding its service. Again making up facts.

"The cars have proven to be the most dangerous luxury cars on the road."

There are no statistics even remotely pointing to this and most that exist show the opposite (not even counting extremely impressive NHTA crash testing data). It's one thing to state an opinion and say it's an opinion but here he's fabricating facts.

"Tesla has cut servicing to zero."

Completely fabricated and as mentioned they are expanding service not cutting. Clearly he didn't do the basic reading of the transcript.

"Tesla is functionally bankrupt"

He's been saying this since mid 2013 when the stock was just in the mid 30s.

"yet severance and lease termination will likely be larger than Tesla’s current liquidity balance."

I'll put money that once Q1 results come he's a few orders of magnitude wrong about severance and lease terminations being larger than Tesla's current liquidity balance.

"Tesla put spreads are a freebie here and it won’t last."

So, who here is going to take financial advice from this guy?

doshc

Congrats on the Model 3 Performance order. I know quite a few folks who own Porsche, BMW and other performance cars add or switch to a Model 3 Performance. At our local autocross events the Model 3s have been placing top spots (over a sea of 100+ cars). The only cars that seem to beat them are cars highly modified (with wide wheels RE-71 tires, etc) and with extremely talented drivers. Even stock the Model 3 handles incredibly well. Add in all the cool features and consistent new features via over-the-air updates, the charging network and it's just an extremely compelling package.

daveo4porsche

earl pottinger

It was not that long ago (pre-1990's) that people asked me what is the use of a computer at home.

Suddenly, everyone was asking me to come over and help them (1990's to early 2000's) setup their internet/photo printing.

Today, you will be consider strange if you don't have a computer or smart-phone at home.

Change comes fast, the same people who were laughing at me for get big into home computers were the same people asking for help setting up their own computer.

And it is not just computers, Big Flat Screens, Digital Cameras, Smart-Phones. The change over was fast. And it not just electronics., look around - I bet half the special restaurants you see were not around ten years ago.

bmwexpat

Must say it is entertaining to debate with Acolytes:

What Elon annouced on Thursday was not a temporary or promotional price decrease. It was a permanent price reduction on the flagship models S & X along with the $35K model . While it's hard to quantify what those price reductions represent across the entire Tesla portfolio, it's safe to say they represent at least $ 1 Billion. That not a billion dollars in sales that is a billion dollars in profits that just evaporated. For a company that that has posted 2 profitable quarters in the past 20 quarters, that does not bode well for the future. Also, to show a profit in those two quarters ,it did not go unnoticed that payments to suppliers were delayed and that R&D and capital spending has been cut back. Tesla is starting to pull levers that bump up short term results but can have detrimental effects down the road.

The Model Y announcement on the 14th....... Ignore the bad financial news from last week and oh that nasty SEC, nothing to worry about there either. Model Y announcement....... watch the shiny ball in my left hand please. The last paragraph of the announcement has the real news..... It's unclear where Tesla will build the model Y or what the cost of preparing a new vehicle assembly plant will be. Bottom line fancy announcement with no plant to actually build the model Y in volume. Don't hold your breath for a test ride any time soon.

Buy on-line and drive the car for 7 days or just return it....... Programs like this have been rolled out by other Automakers. At the end of the day the buyer is signing a purchase or lease agreement with the right to return the vehicle within 7 days. So before you can test drive a Tesla you actually have a credit check performed and will be entering into a purchase contract. I'm sure that will go well to promote future Tesla sales to the future buyers who have seen but never driven a Tesla.

Also, Some interesting articles have already shown up in the Bay Area papers about Tesla informing their Sales teams that bonuses are terminated immediately and that warm fuzzy Tesla is actually trying to force out sales people as a majority of their incomes are tied to bonuses. As Sales Manager I have seen competitors tank and have experienced the results first hand when management screws up a sales channel. The end result is unit volumes drop. BEV's are still less than 2% of the total auto market in the US. Tesla just cut off a significant number of touch points to consumers. This experiment will not end well for Tesla.

As far as predicting gloom and doom for Tesla, I've always stated that 2019 would be the last year with minimal competition and that competition kicks in stating in 2020. 2021 is going to be a very rough year for Tesla and unless there is some type of major turn around bankruptcy will be a distinct possibility by 2022. Time will tell.

Lorenfb

Tesla euphoria exists over there too: