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Making people want a product isn't enough to get economics to work. They struggle to produce it cheaply enough, at least as of right now. Manufacturing, at sca

Making people want a product isn't enough to get economics to work. They struggle to produce it cheaply enough, at least as of right now. Manufacturing, at scale and within costs is really really hard. Tesla's initial math for cracking the economy was based on full automation of the production, that failed spectacularly. As a result they have a lot of human labor costs they didn't plan for, so problem of optimizing it got even harder. Did Tesla made desirable product? Yes, of course. Can they crack the economy of it? We'll see.

matthewdgreen 7y ago
Tesla didn’t make people want the product. That’s meaningless. What they did that matters is that they made people pay for the product, at a price point that competes favorably with BMW’s low-end luxury cars. You’re correct that Tesla’s future and costs are uncertain, but that’s irrelevant. What is relevant is that the production cost of a Model 3-type EV will never be as high as it was in 2018. It will never be as high as it is in 2019. Even without miraculous supply chain improvements, the cost of lithium batteries and electric drivetrains is on a relentless downward path. If Tesla can make one now at $10 in profit (obviously they make more than that), then whichever company is doing so in 5-8 years will be earning thousands in profit. And if the manufacturer is not BMW, it will be the end of that company as a viable competitor.
- Gibbon1 7y ago
  Tesla was able to sell electric cars for more than the marginal cost per unit in a large enough volume to be viable. Full stop. After that Tesla's profitability or not is just accounting shenanigans. How bad/good a deal was this for the investors. And is this company viable and make money. Are two separate things. Investors can lose their shirt on a viable company. Just as they can make bank on a company that's a flash in the pan. Investors can often make money on companies that are actually failing and going to fail. There is probably an correlation between how hardball the company plays it's investors and the companies ultimate viability.
  - matthewdgreen 7y ago
    As I said above, it really doesn't matter whether Tesla survives long term. Just as it doesn't matter to the cellphone industry whether Nokia survives, or to the PC industry whether IBM, Apple and Commodore survived. Tesla built the product that proved the consumer demand existed today. BMW (and other manufucturers') strategy was predicated on the idea that large-scale consumer demand was years away. Tesla made that strategy obsolete.

matthewdgreen 7y ago

Tesla didn’t make people want the product. That’s meaningless. What they did that matters is that they made people pay for the product, at a price point that competes favorably with BMW’s low-end luxury cars. You’re correct that Tesla’s future and costs are uncertain, but that’s irrelevant. What is relevant is that the production cost of a Model 3-type EV will never be as high as it was in 2018. It will never be as high as it is in 2019. Even without miraculous supply chain improvements, the cost of lithium batteries and electric drivetrains is on a relentless downward path. If Tesla can make one now at $10 in profit (obviously they make more than that), then whichever company is doing so in 5-8 years will be earning thousands in profit. And if the manufacturer is not BMW, it will be the end of that company as a viable competitor.

Gibbon1 7y ago
Tesla was able to sell electric cars for more than the marginal cost per unit in a large enough volume to be viable. Full stop. After that Tesla's profitability or not is just accounting shenanigans. How bad/good a deal was this for the investors. And is this company viable and make money. Are two separate things. Investors can lose their shirt on a viable company. Just as they can make bank on a company that's a flash in the pan. Investors can often make money on companies that are actually failing and going to fail. There is probably an correlation between how hardball the company plays it's investors and the companies ultimate viability.
- matthewdgreen 7y ago
  As I said above, it really doesn't matter whether Tesla survives long term. Just as it doesn't matter to the cellphone industry whether Nokia survives, or to the PC industry whether IBM, Apple and Commodore survived. Tesla built the product that proved the consumer demand existed today. BMW (and other manufucturers') strategy was predicated on the idea that large-scale consumer demand was years away. Tesla made that strategy obsolete.