12 ms·
Say what you will about their "antiquated" business practices, but Ford consistently does one thing that Tesla never does: it turns a profit
by rjdagost 10y ago
Say what you will about their "antiquated" business practices, but Ford consistently does one thing that Tesla never does: it turns a profit
- dpcx 10y agoYou know why Ford turns a profit? Because they've gotten those economies of scale. If/when Tesla does, I'm sure they'll make a profit, too.
- jsprogrammer 10y ago>You know why Ford turns a profit? Because they've gotten those economies of scale. Ford was immediately profitable, was it not? Even before implementing an assembly line?
- warfangle 10y agoThey also weren't competing against several companies that already had an assembly line.
- swalsh 10y agoWhen ford came on the market, it only had to be better than a horse. A tesla has to be better than a masarati on the high end, a jaguar on the "medium" end, and a subaru on the "low" end.
- intrasight 10y agoLove it. Presented the crux of their business challenge in a very succinct fashion.
- setpatchaddress 10y agoThat's not true. Other automakers existed before Ford; he had automotive competition. In what world is a Jaguar a "medium" end car? The high end Jaguars extend into Maserati territory. If Tesla wants to be better than a Maserati or Jaguar, they need to observe how much nicer the interiors of those cars are. Consumer Reports doesn't care about that above a certain level of basic competence, but a Maserati or Jaguar buyer does.
- creshal 10y ago> If Tesla wants to be better than a Maserati or Jaguar, they need to observe how much nicer the interiors of those cars are. Indeed. I was shocked when I first hitched a ride in a Model S – the interior is more spartan and cramped than that of a 90s Japanese keicar (an impressive feat, in a sense) apart from the entertainment system, which had an uglier, clunkier UI than what any web developer could have drawn you up in a week. The sales rep's "oh don't worry about battery replacement cycles, nobody keeps a car for longer than five years anyway" statement was only the final nail in the coffin.
- dexterdog 10y agoThat's his sales market. Tesla wants fanboy buyers who will be upgrading within five years and that's not a bad thing. They are such a small player that they can do this. I used to lease SUVs on 2-year lease. They had massive incentives and very high residuals because the manufacturers realize they can sell you 5 cars every decade if you are loyal. I did it because the savings were awesome, but I eventually stopped because I got sick of shopping for a new car every two years.
- kartD 10y agoDoesn't seem eco-friendly or world changing but more consumerist to me, can the batteries be recycled then? Note: I'd still like to believe in Tesla's world improving ambitions
- HeyLaughingBoy 10y agoI'm not sure I understand. Are you saying it cost less to lease 5 cars over a 10-year period than to buy one and hold it?
- dexterdog 10y agoNot at all, but it was incredibly affordable considering that in 10 years I never had a car older than 2 years. There is zero maintenance other than a few oil changes. Like I said, the residuals were usually so high that the buy-out was not realistic. That kept the lease rate very low and made it unthinkable to keep it at the end.
- Jeema101 10y agoThey also had to be better than all the other competitors. There are hundreds of manufacturers from the early days that no longer exist: https://en.wikipedia.org/wiki/List_of_defunct_automobile_manufacturers_of_the_United_States https://en.wikipedia.org/wiki/List_of_defunct_automobile_man...
- na85 10y agoDon't they lose money on every single model except the F-150?
- rjdagost 10y agoThe F series is their big profit center, but they do still make money on their other vehicles.
- gambiting 10y agoThe F150 is not even sold in Europe so I don't think Ford only loses money there :P I would imagine that Focus and Fiesta are quite profitable.
- mikeash 10y agoThat would imply something like a $10,000 profit on each F-150, if all the other models just broke even. Seems unlikely.
- 8611m 10y agoIf this was the only thing that mattered for businesses, we wouldn't have Amazon as Walmart has consistently produced more net profit over Amazon since the last 22 years. 1 1. http://revenuesandprofits.com/amazon-vs-walmart-revenues-and-profits-1995-2014/ http://revenuesandprofits.com/amazon-vs-walmart-revenues-and...
- hueving 10y agoWhat? There are room for multiple companies that make a profit. The point is that claiming a business sucks that still makes a profit and provides value to lots of people is tone deaf.
- 8611m 10y agoAgreed. At the same time, it is remarkable to be an entrant and succeed in an industry which has high barriers to entry and economies of scale.
- deleted 10y ago[deleted]
- intrasight 10y agoAs Amazon looses money on every sale, and makes it up with funding from new shareholders, I'm going to call it a Ponzi scheme and not a business.
- garyclarke27 10y agoReminds me of the old accounting joke. CFO -> CEO We have a major problem, recent price cuts mean that we are now making a loss per unit on our major product lines. CEO -> CFO Don't worry about that, We'll make it up on the volume!
- kriro 10y agoI have this bookmarked just for these types of discussions. It's surprising how often I have used it: http://www.giantitp.com/comics/oots0135.html http://www.giantitp.com/comics/oots0135.html
- themartorana 10y agoWeeellll, except for that $30B loss from 2006-2008 [1] leading to them taking a $5.9B government "loan" in 2009. (It should also be noted that while not directly dipping into the $80B bailout pot, Ford told Congress that not bailing out other companies threatened Ford's continued existence. [2]) Plus they were second only to Toyota in the amount of money they drew from cash-for-clunkers - not exactly standing on their own two feet. The ship has been righted for now, but it was pretty good in 2000 as well. [1] http://mobile.reuters.com/article/idUSTRE70R0S420110128 http://mobile.reuters.com/article/idUSTRE70R0S420110128 [2] http://www.factcheck.org/2011/09/ford-motor-co-does-u-turn-on-bailouts/ http://www.factcheck.org/2011/09/ford-motor-co-does-u-turn-o...
- kartD 10y agoWell Tesla also relies on government subsidies as well a loan (which it paid back early, as did Ford). Also Ford is more than a 100 years old, so it's bound to have a bad period. We'll have to see what happens when tech companies are that old ( or will they even survive)
- sp527 10y agoSo what we're concluding is that a company has difficulty remaining competitive unless it fully abuses the system within which it operates? Hmm...
- jkestner 10y agoAbuses? How about "utilizes"? The subsidy is there to get more electric vehicles on the road.
- sp527 10y agoI don't trust the government to manipulate the free market efficiently. It's comprised of hapless morons who don't know what they're doing and whose favor is for sale to the highest bidder. Case in point are the tremendous number of bankrupt alternative energy companies built upon favorable treatment by the government. Market intervention doesn't suddenly become justifiable simply because the outcome of advancing the sustainability agenda is positive.
- dredmorbius 10y agoFord is subsidised by 100 million year-old bottled, well, barreled, sunlight. (Tesla's subsidised by lithium salt concentrations in Bolivia, but that's a rather smaller overall subsidy.)
- carterehsmith 10y agoIsn't Tesla also subsidized by the government?
- taf2 10y agoIsn't gas also subsidized by the government? http://priceofoil.org/fossil-fuel-subsidies/ http://priceofoil.org/fossil-fuel-subsidies/ https://en.m.wikipedia.org/wiki/Energy_subsidies https://en.m.wikipedia.org/wiki/Energy_subsidies
- dredmorbius 10y agoSee above. That is a valid claim to subsidy, but it's not the one I'm referring to, which involves, depending on your view / word choices: total factor costs, solar emergy cost, or natural capital costs.
- taf2 10y agoHowever you like to think about the end result is more dollars in my pocket - yes?
- dredmorbius 10y agoIt's a net decrease in total wealth, if you include natural capital in that metric. Various authorities differ on that. As early as the late 19th century, Adam Smith's biographer and scholar Edwin Cannan was noting that Smith's definition of wealth, "the annual labour and produce of the nation", doesn't account for natural capital: farmland, forests, fisheries, game, topsoil, and natural resources.
- jasonlingx 10y agoAnd they will go the way of Nokia and Blackberry if those practices don't change pronto.
- puranjay 10y agoI find the obsession with "turning a profit" when it comes to Tesla a bit weird, especially on this forum. Remind me again: this is Hacker News run by Y Combinator, right?
- taf2 10y agoI agree, they have an extremely compelling and valuable product. They have aggressive aspirations and so far have a track record of achievement. This is pretty similar to other companies that rarely turn a profit e.g. Amazon. That said they certainly have a huge hill to climb, but as he said its one we all need to climb so great that they are pushing ahead with a business model to make it there
- rjdagost 10y agoRemind me- is Tesla a for-profit corporation or are they a non-profit organization? Making a profit is sort of the main point, though obviously not the only point. They've been around since 2003 so it's not like they're a scrappy Y-Combinator incubator company.
- chongli 10y agoscrappy Y-Combinator incubator company. Right. What Tesla is attempting is orders of magnitude more difficult than your typical YC app shop with an exit strategy. I think they deserve a bit more slack than you seem willing to cut them. If it all blows up in their faces you can have your day with a smug "I told you so" but you won't be able to deny the benefits they've already provided to society via Musk's aggressive strategy and the effect that's had on the wider industry.
- radiorental 10y agoI agree with you but there is a very important difference. They're a publicly traded company and all that entails.
- Hermel 10y agoMusk founded Tesla with a vision to make the world more sustainable, and not with the vision to become obscenely rich. Being profitable is a means to an end for him, and not the other way around. And that's fine. The founders of a company are free to specify its purpose in the company's articles. There is no legal requirement that says corporations must seek profits.
- chc 10y agoThis seems more like a sneer than a legitimate criticism. AFAIK Tesla's business is fundamentally pretty solid. They make a net profit on their cars, but they are currently investing it all into aggressive expansion. Is it surprising that a young, growing company is spending a lot on growth compared to a century-old company? Do you think it would be better for Tesla if they didn't invest in the future?
- rjdagost 10y agoI admire what Tesla has been able to achieve from a technological and a marketing point of view but I wouldn't call their business "fundamentally solid". Tesla stock has been one of the most heavily shorted equities for some time and it's because their balance sheet is a train wreck while their valuation is sky-high. Tesla burns cash at a phenomenal rate and regularly has to take on debt and / or raise new capital through equity offerings in order to stay in business. Of course they have to invest in the future- automobile manufacturing is a highly competitive, extremely capital intensive business and every OEM (Ford, GM, Toyota, Volkswagen,..) has to regularly invest huge sums of money in staying relevant. Tesla is no different in that regard.
- Alupis 10y agoUnlike Ford, GM, etc... Tesla has a much narrower market potential. Yes Tesla's cars are "cool" and everybody wants one, but even the new "cheaper" model costs far more than the average person spends on a car. Right now, Tesla caters to the luxury market, and is viewed as a "cool alternative" to more traditional luxury makes. Ford, Toyota et al, have models that cover just about every price range and every type of customer, from the extreme budget oriented to the extreme luxury sports car fanatic. Toyota owns Scion, Toyota, and Lexus for example - so if you need a car, chances are one of the Toyota offerings will satisfy your needs and budget. This opens the market potential to include just about every person. The one thing that has worried me about Tesla for a long while, is Musk's claims that next year they'll sell 30% more cars, every year - something that's now proving to be an impossible feat. At some point, they were going to hit a ceiling of maximum potential sales as they attempted to wedge into the already entrenched high-end luxury sports car market - there just aren't enough buyers to keep that growth at these prices.
- pipio21 10y agoAs I understand, Tesla has way bigger profits margins than Ford. What the company does is reinvest the profits, instead of giving it back to shareholders. It makes a lot of sense in a growing market.
- joe563323 10y agoAlso burns more carbon. Does not make cars any cheaper. No good for a poor man.
- simplyluke 10y agoFord is 113 years old, Tesla is 13.