Anyone really believe Ford could make a Truck that could compete with Tesla's?

Is this your wish for what Tesla management should do or is it something that you believe is what the Tesla management strategy is about? As a public company, quoted on a stock exchange, with institutional and individual stockholders, the expectations from the stockholders are unfortunately different. If Tesla was private, Tesla owners could do whatever they wanted within reason.

 

To accelerate the transition of auto industry to sustainable fuels is the stated goal of Tesla. Tesla does not pay dividends, most investors either support Tesla for their goal or because they count on the value of the stock going up. As long as it goes up, they don't care about P/E.

 

Well that's a good point. After all, Tesla didn't ever get 10 billion in investments all at once, either. If that one billion is just the first round of funding, then that might be the start of something significant.

"A billion here, a billion there, pretty soon, you're talking real money." -- attributed to Illinois senator Everett Dirksen

Yes, and Tesla has been poaching Apple engineers and executives. There's a similar culture, so fertile ground for poaching. And if Apple is planning on an "Apple inside" product for self-driving cars, then they would naturally want to poach Tesla's and Waymo's engineers and computer programmers.

Of course, the "Apple inside" idea is just my own hypothesis; I can't point to any evidence other than rumors about Apple's "Titan" project, which was supposed to be development of some sort of EV prototype. Many people have interpreted that as indicating Apple wants to get into the business of building EVs, but I'd argue that it can just as easily be interpreted as Apple wanting to build its own fleet of test cars for self-driving development, just as Google/Waymo has its own fleet of specialized cars for that.

Sure, they could hire Magna Steyr to make a limited production EV. But in that case, what does Apple bring to the table? It has no in-house experience building cars. Would Apple also farm out the design to another company?

I'm reminded of what was said about the original IBM PC: That the only part IBM made was the little plate with the "IBM" logo on it. But at least IBM had the corporate knowledge to design a desktop computer. Apple has no such knowledge of how to design a car.

What about washing machines? Apple could contract with another company to build washing machines with the "Apple" logo on it. But why would they want to? Everybody seems to get excited about the idea of Apple building electric cars, but they all seem to ignore that question. Why would Apple want to get into the business of building cars, any more than washing machines?

I don't at all think it's farfetched that China will want to build luxury EVs, possibly even trying to do a clone of Tesla's cars. I think it's very nearly inevitable that Chinese companies will start selling EVs to first world countries. I think the question is when, not if. As you say, the Chinese government would much rather see rich Chinese buy Chinese made luxury cars than Tesla cars.

I'm just speculating too. History points very strongly to other startup EV companies entering the market, to challenge Tesla's lead. But which companies will actually be able to thrive and grow... who can say?



Thanks for an interesting discussion, InterestedinEV!

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Tesla's mission statement: "Tesla's mission is to accelerate the world's transition to sustainable energy."

Sure, as a for-profit company, Tesla's primary goal (at least from the stockholder perspective) must be to make money. But one can argue that making money to stay in business is merely the means Tesla uses to achieve its real goal.

Whether that argument actually represents the groupthink of Tesla's board and top executives, is of course a question on which opinions sharply differ, along the spectrum of whether one is an enthusiastic Tesla fan, a Tesla basher, or somewhere in between. The bashers will be happy to "explain" to you that this is merely part of Elon Musk's evil scheme to hoodwink investors and to suck fans into a cult where they are convinced to buy poorly made cars which, being brainwashed, they think are wonderful.

 

All please help me understand this argument that Elon has no profit motive (and may be we are going of topic)


A real non-profit (not the sham ones) has a social objective and if they cannot cover their operating costs, overheads and needed investments from revenue, they need to cover it through donations, grants etc. On the other hand a for profit firm, if you are follower of Milton Friedman, has one and only objective, maximizing shareholder value, which could be through maximizing profits or today through financial engineering. As a slight revolt against this, some companies have in addition to the goal of maximizing shareholder value, one or more social goals (environment, sustainability, human rights, global health, peace etc.) These companies justify these additional goal by either stating that they can be both socially responsible and profitable at the same time or that they are willing to sacrifice a small amount of profitability for greater social good.

Even these socially responsible for profits are expected to generate shareholder value but for the lack of a better word, in more humane way. At no time have I heard Elon say that profitability does not matter. In fact he claims that the company will be profitable this quarter, so he is interested in making profits, but he also is showing a social conscience and wants to prove that they are not mutually exclusive.

Tesla has borrowed significant amounts of money. Elon was astute enough to borrow a large chunk in form of interest free deposits (about $450 million and I am still one of them) and he has used that to develop products and services that can be sold. That interest free money to a large extent, has been returned or converted into sales for the most part. There is still a lot of outstanding debt that is coming due and he has to continue to sell cars at the current or higher volumes with sufficient margins (profit) so that he can both meet his debt service obligations and invest in future products and services.

One may ask how is that Amazon for example, makes no profit but is so highly valued. The reason is that a company can use tax avoidance strategies to show no profit, but Amazon generates so much in free cash flow, that it can continue to invest in products and services. If Elon can generate free cash flow (which means he has to have healthy margins on his products), he does not have to show paper profitability, but he has to make money. Tesla is not a charity or a non profit. It is very much a for profit company, but in a socially responsible way. The OP in a latter post as did a couple of others, state the mission of Tesla is not to make money but to accelerate the transition from fossil fuels.

I believe that what Tesla is trying to do is both, be profitable and to accelerate the transition from fossil fuels. The first is given if they are a for profit organization. The second is not a given as GM, Ford....... etc want to make a profit and they do not care if it comes for fossil fuels or hurts the environment. Again to repeat, Tesla does not have to make paper profits, they have to generate free cash flow and for that they need to sell and continue to sell about 25,000 or more cars a month with current margins month after month. If margins go down, they have to sell much more cars. If their volumes go down for whatever reason, Tesla could be in grave danger and Elon's larger than life personality may not be sufficient. I do not think it will happen, but is a non-trivial risk.

 

The electronics and the controls in a EV are significant portion of the IC and cost of a car. In a mechanical product like an ICE, there is a lot of precision engineering. While there is a some precision in electronic, electrical and electro-mechanical components, a lot of it is embedded software, which are Apple's strengths. It is just not EV's alone, it is EV's with autonomous driving, which deals with pattern recognition, data analysis and controls. Apple will not come out with a EV if it does not have autonomous driving and that this skill of developing such complex software is one that many of automobile manufacturers do not have. Apple can get people to design the car and do the manufacturing but keep the controls and systems which are actually more difficult to do.

A washing machine does not need that level of software capability. I have seen Tesla described a software company that manufactures cars and that makes sense given the amount of software. You do not need a software company to manufacture washing machines, most the variables are known and limited.

Second is information. Knowing how many times I wash my clothes may not be of much monetary value. Knowing which grocery stores I frequent, where I work, what Pizzas store I like, what music or radio station I listen to could be worth a lot of money if someone wants to collect the information and sells it. Make no mistake, if a company can track your movement, they are going to monetize it. So I do not believe that Wyamo necessarily is developing self driving technology just to license it, I am sure they will find a way to use the information. I will not be surprised if Apple is not eyeing the same pie of information.

But Apple does not license its technology, unlike Google. So if they develop self driving technology, they have to change their strategy and license the technology or a build a product around it. Being more of a product company than Google, I would not surprised if Apple comes out with a product.

 

That certainly seems to be Elon's goal. Entrepreneurs do not become self-made billionaires by accident, nor do they do so if they have no interest in making a profit.

There is unquestionably a certain amount of hero-worship by fans of Elon Musk and/or Tesla. And yes, some of them apparently have managed to convince themselves that Elon doesn't care about making a profit. But to call those people "cultists" seem to be going too far. Surely that's no worse than those who attach the label "hero" to grown men who get paid millions of dollars to play ball for a living! Worship by fans can and often does leave common sense far behind. It's human nature for people to idolize their role models. If it wasn't, the term "idolize" -- with all its implications, including ignoring the idol's faults -- wouldn't exist. That doesn't mean sports fans are "cultists", does it? I think most people would reject that term even for the most fanatic of sports fans.


Sports fanatics? Definitely. But "cultists"?
I think that's stretching the term.

Let us say, rather, that Elon Musk shows less interest in Tesla making a profit than most CEOs of large companies do. It may be reasonable to claim that for Elon, the mission of Tesla is more important than the company making profits. How many billionaires have bet their entire personal fortune, as Elon claims to have done with Tesla, to bail out a company on the verge of bankruptcy? That shows a dedication to something far stronger than mere money.

Likewise, Elon offering to share all of Tesla's patents free to any company also willing to share its patents, is behavior not seen in people interested only in making profits.

The fallacy here is claiming there must be a binary choice: Either Elon thinks making profits is the most important thing for Tesla, or he thinks that making profits is entirely unimportant. A more reasonable interpretation of the available evidence is that Elon considers Tesla's mission statement to be the most important thing for how he runs the company, with making profits only of secondary importance.

Amazon.com has been regularly profitable for the past three (or three-plus) years. If you doubt this is true, then look it up for yourself.

Right, not mutually exclusive. But I think you misunderstand why Elon has recently been so insistent that Tesla must start showing a regular profit. I think Elon would have been quite happy for Tesla to follow the Amazon.com model, and continue to show very little or no profits, until -- just like Amazon.com -- it has finished growing rapidly to the size he wants it to have. Then, just like Amazon.com, it can slow its rate of growth and start showing a comfortable profit margin on a regular basis.

Unfortunately for Elon's plans, investors have become more and more insistent on Tesla showing it can make a profit on a sustainable basis, before they will be willing to invest more money. My reading of the situation is that the only reason that Elon has been talking up profitability of late is to placate investors, and not because he personally thinks Tesla ought to be "taking" profits. Rather, this early in its growth phase, Tesla ought to be continuing to wisely reinvest most or all its profits (gross profits, not net profits) in growing the company.

At any rate, that's how I see it. Just my personal interpretation of the available evidence, not necessarily the Truth in all cases.

 

I have to admit that the title of this thread made me laugh. The reality is can Tesla make a truck to compete with Ford? On this Elon fan site that is already a forgone conclusion. Nobody here doubts that Tesla will lead the industry with just 7 models, S,X, 3, Y, pickup, semi, and roadster. Of that list the roadster is the least important as it will be a low volume halo car. Tesla has in the past done one new development at a time, and this has been a practical necessity due to financial and resource constraints. Now they want to bring 4 new products to market almost simultaneously and to do that they need a lot more capital. The recent fiascos with the stock market make that far less likely and I think this will slow Tesla's progress. Of course I think the first on the chopping block should be the Roadster, but it is also likely that it is closest to production both because we have seen versions driving around and because of its low volume and high price does not require a high degree of automation. So if I am right we should see this on the market in about a year, but if there is significant development to be done I think it should be postponed. So at this point, I think the pick-up truck is the one that will be postponed the longest while Tesla puts their resources into the Model Y and Semi. Unfortunately it will be many years before Tesla can overtake Fords small truck business. Ford just might smarten up enough by then to keep their crown.

 

I think that's an exaggeration. The Model Y and perhaps the next-gen Roadster are the only ones that Tesla appears to be readying for production soon, and by "soon" I mean within the next two years.

The Semi Truck has been moved to more of a back-burner project, with Tesla admitting not long ago that it needs to develop a second prototype, which presumably will be close to a production prototype -- unlike the first two prototypes, which (as I had been saying all along) were more technology demonstrators or concept vehicles, and not at all production prototypes like the other prototypes Tesla has shown. Plus, there hasn't been the slightest hint by Tesla about how they would service a Semi Truck. Those are too big to fit into standard service bays at an auto service shop. Nor has Tesla even hinted as to where a large vehicle such as a Semi Truck would be assembled.

The Pickup... That, I think, is more of just a gleam in Elon's eye than anything Tesla is actively working on. Of course I could be wrong, but I doubt Tesla has created any pickup development mules. My guess is that a Tesla Pickup is at least 4 years away from production, and that any current Pickup project exists only on paper and/or in computer simulations and spreadsheets.

That would be the last new model that Tesla should consider axing. Halo cars, at least good ones, have a value to the company far beyond what they directly generate in sales.

In fact, if I was Elon, I'd fast track the next-gen Roadster, to maximize the amount of positive media attention Tesla receives -- and that includes interest from investors. All the positive attention that Tesla will get from the next-gen Roadster would be exactly the antidote Tesla needs for the media poison of Elon's recent public mis-steps and antics.

The other upcoming Tesla models -- Model Y, Semi Truck, and Pickup -- will need dedicated mass production lines for those vehicles, and that will (as I see it) either require new vehicle assembly plants, or perhaps, for the Semi Truck, a partnership with an existing truck builder. (Such a partnership would also solve the problem of where the trucks will be serviced.)

But the next-gen Roadster will be at least partially hand-built, in small numbers. No dedicated auto assembly line needed. So Tesla could start producing them as soon as they start getting parts from suppliers.

 

@Roy_H you make a good point. Ford has to protect their small truck franchise, it is their bread and butter. Tesla may (does?) not have the bandwidth to be able to compete in all segments. Ford it may be do or die, Tesla needs to fend of competition from the high end and shore up the middle where they have stated they will bring a $35K car. Ford has a window of opportunity, if they are willing to commit everything.

 

@Pushmi-Pullyu
I have not called anyone a cultist and do not intend it, but I do sometimes find it difficult to understand the reasoning of some fans

Stand corrected on Amazon

I think we both agree that profitability is important to Tesla and Elon today. However, you feel that left to himself Elon, will not emphasize profitability but concentrate on growth, which is delving into intent. I do not know the intent, but I agree with you that Elon has to placate investors and more importantly lenders. Bonds are coming due and if he does not get favorable terms, that could be disastrous. So rightly or wrongly, he cannot ignore the need to show some profitability, how much is I do not know.

 

Sorry! I have a bad habit of starting a comment by responding to one person but then wandering off into a more general comment or argument on the subject. Mea culpa.

I should have inserted some disclaimer such as "And while I'm on the subject of people who idolize Elon Musk, or idolize Tesla as a company 'dedicated to saving the world', you didn't use the term "cultist", but far too many others have tried to paste that label onto dedicated Tesla fans..."

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Sorry to learn you were caught in the hurricane!

I hope you, your family and your home are okay?

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There's some very interesting discussion here about the future and those making cars/trucks. I really like what 1010101 reminded us of, ...to accelerate the transition... (There may be more than one,) but one perspective not mentioned here is, the i-Pace, the Max-C, the Leaf and any others are not Tesla rivals. Those are sisters not rivals. The rival is the Ford F-150, the Chevy Corvette, the VW Passat ICE. Everything not electric is a rival. Everything running on battery is a sister. I believe if you could wave a wand and overnight every ICE became a battery powered car, Elon would stop making cars and do something else. He does what he does because no one else was doing it. He's helped the planet in other ways if he didn't have to build cars.