3 ms·

Do they not lose money per car if you factor in the R&D?

mikeash 10y ago
Revenue minus costs might be negative, but phrasing it as "lose money per car" is highly misleading. The pertinent question is, if they sell more cars, what happens to their finances? Most people interpret "lose money per car" to mean that additional sales results in additional financial losses. If each car is profitable but you haven't yet made back your R&D then each additional sale improves your financial picture and brings you closer to profitability.
- blakeyrat 10y ago
  I wonder if they report the same way when, say, Boeing introduces a new airliner. I mean by that logic, each Dreamliner sold "lost" millions...
basseq 10y ago
"Unit Profit" vs. "Business Profit". Yes, if you factor in the R&D they "lost money per car", but at scale, they would make money per car. If your unit cost is $50 and your unit revenue is $100, your unit profit is $50. If you sell 100,000 units, your business revenue is is $10M. If you spend $10M on R&D (and other overhead), your business costs are $15M and your business profit is -$5M. BUT, if you sell 1M units, your revenue is $100M, your costs are $60M ($50M unit + $10M R&D), and your profit is $40M. That's the power of scale. (Compare this to a business with a negative unit profit: it won't scale no matter what you do.)
- Gibbon1 10y ago
  Exactly. Also there is the learning curve, as you scale up your unit cost drops. Would not be out of line to assume going from 100k units to 1M units for your unit cost to drop 30%. So $50/unit becomes $35/unit. $100M revenue - ($35M + $10M) ==> $55M profit.
make3 10y ago
losing money per car usually means that the more cars you sell the less money you have, not that overall you haven't sold a high enough number of cars to make a profit on your overall investment
oh_sigh 10y ago
The difference is that R&D spends money, and car sales make money. So for every incremental car you sell, you make money(or - lose less money). Tesla would lose money per car if, for example, the raw materials cost more money than they were selling it for (this is not the case)

Revenue minus costs might be negative, but phrasing it as "lose money per car" is highly misleading. The pertinent question is, if they sell more cars, what happens to their finances? Most people interpret "lose money per car" to mean that additional sales results in additional financial losses. If each car is profitable but you haven't yet made back your R&D then each additional sale improves your financial picture and brings you closer to profitability.

blakeyrat 10y ago
I wonder if they report the same way when, say, Boeing introduces a new airliner. I mean by that logic, each Dreamliner sold "lost" millions...

basseq 10y ago

"Unit Profit" vs. "Business Profit". Yes, if you factor in the R&D they "lost money per car", but at scale, they would make money per car. If your unit cost is $50 and your unit revenue is $100, your unit profit is $50. If you sell 100,000 units, your business revenue is is $10M. If you spend $10M on R&D (and other overhead), your business costs are $15M and your business profit is -$5M. BUT, if you sell 1M units, your revenue is $100M, your costs are $60M ($50M unit + $10M R&D), and your profit is $40M. That's the power of scale. (Compare this to a business with a negative unit profit: it won't scale no matter what you do.)

Gibbon1 10y ago
Exactly. Also there is the learning curve, as you scale up your unit cost drops. Would not be out of line to assume going from 100k units to 1M units for your unit cost to drop 30%. So $50/unit becomes $35/unit. $100M revenue - ($35M + $10M) ==> $55M profit.

make3 10y ago

losing money per car usually means that the more cars you sell the less money you have, not that overall you haven't sold a high enough number of cars to make a profit on your overall investment

oh_sigh 10y ago

The difference is that R&D spends money, and car sales make money. So for every incremental car you sell, you make money(or - lose less money). Tesla would lose money per car if, for example, the raw materials cost more money than they were selling it for (this is not the case)