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Tesla’s battery day affirms Wright’s Law and spells trouble for the competition
- cma 6y agoWhy are they focused on improvements in margins that are this small now? At autonomy investor day last year they promised a Robotaxi network this year that would give around a $150,000 margin on each car. They would quit selling the cars at current prices at that time, so they said customers better buy FSD early to get in on the action. Your car would generated you around $30,000 per year in profit according to the event. These plans eventually lead to the stock price shooting up ten-fold in anticipation. They could get battery cost down to zero and it wouldn't be as profitable as what they were talking about just last year. The announcement at this new event of a $25,000 car available for sale to consumers because people don't all have enough for the model 3 doesn't make any sense given what was promised last year. It could add to the Robotaxi fleet, but would make no sense to sell to consumers without enough money when it could be operating as an automated taxi driver earning Tesla money instead. One thing Musk says in this new presentation is that all manufacturers will eventually have autonomy, so this battery stuff is what really makes Tesla a valuable company. But the timeframe doesn't make sense. Either Tesla has some decent exclusivity period on autonomy, or autonomy isn't worth much to people buying FSD now, because there will be lots of Robotaxi competition. And in the case of a decent exclusivity period on autonomy, none of these margin improvements matter and the near term release of a $25,000 car to consumers is a huge mistake. Go back and watch autonomy investor day and see if any of it holds up to scrutiny.
- brianwawok 6y agoRobo taxi fleet is one business line that currently has 0 revenue. Making cars is a business line that currently had a lot of revenue, and if mapped out to a 25k car could take a large percentage of the worldwide car sales business. There is also the grid level batteries, or selling batteries to others if they pull far enough ahead in batter production. You don’t just stop battery research and assign those scientists to AI driving. They are fundamentally different hard problems.
- cma 6y agoGo back and watch autonomy day and listen to the conviction that it would be ready this year. Obv. COVID may impact that, but no more so than advanced battery research would be impacted. How does, say, the Cybertruck factory make any sense if there is a limited period of time that is immediately imminent where hey will be the exclusive car producer with autonomy? In the end, I think Nikola and Tesla have a lot in common beyond their namesake.
- zwily 6y agoMusk is delusional with his timeframes, but I think he's sincere about his aspirations, and has a track record of eventually delivering. Milton (Nikola) just flat out made stuff up all the time that had no basis in truth.
- cma 6y agoMusk demoed non-functional solar shingles on the set of Desperate Housewives and basically got a billion in solar subsidies from New York and never delivered. The shingles are coming from China. Near a billion in California subsidies for fast battery swapping, and they just did one or a few demo stations then canceled it. It probably just used some hacked factory equipment and would never work with normal wear and tear on the cars.
- Robotbeat 6y agoTesla has delivered for New York what was contracted in terms of jobs and the factory is used for making solar panels. If they hadn't, they would have had to pay a penalty.
- cma 6y agoI believe they weren't on track to meet the goal before coronavirus and then got an extension ostensibly because of coronavirus (in reality it was more likely for the governor to save face): https://en.wikipedia.org/wiki/Giga_New_York#Jobs_commitment https://en.wikipedia.org/wiki/Giga_New_York#Jobs_commitment
- woliveirajr 6y ago> Tesla's speed of iteration and degree of verticalization make leaks and learnings harder to apply to other companies. This is a point that has more value than IP itself. Being ahead allows you to protect your research about some new tech that no one is looking at, ok. But just having to figure details in a factory is the real thing, it's what makes difference. Quality is a product of repetition with near perfection. Figuring it out is time consuming, see Intel x TMSC.
- cma 6y agoTesla opened all their patents to competitors for this reason (under weird terms that no one has taken them up on, giving them more rights than the patent system itself ever gives, such as competitors can't copy their unpatented designs, even unknown future ones, if they take them up on the offer to use their patents for free). According to them patents aren't valuable, it's the velocity of innovation. It made for nice sound bites of how the valley works differently than stodgy old companies. But in reality it seemed to be a sham of you can use our patents only if you don't use our stuff that isn't even patented.
- chii 6y agoI don't see why this is a bad outcome for consumers. I don't care that other car companies cannot compete. There will be car companies that can, eventually. There may even be new car companies that doesn't exist yet competing!
- eru 6y agoDid anyone say this would be bad for consumers?
- ricw 6y agoThis means the competition will have to stomach a loss per electric car sale until they catch up to Tesla’s price advantage or not be cost competitive. According to the author Tesla was 3-4 years ahead, with a growing gap given the battery day announcement (5+ years?). This can already be seen when looking at existing competition. VW’s ID4 compact SUV will cost $40k pre-subsidy when introduced next year, vs Tesla’s model Y at the same price. VW itself isn’t a luxury brand, unlike Tesla, and wouldn’t normally be compared. The audis, BMWs etc would likely produce a more expensive car. The most comparable luxury brand cars are Porsche’s taycan which starts at $100k vs Tesla’s model S at ~$75k, polestar (Volvos electric brand), Jaguar I-pace, Audi etron etc which are all substantially more expensive while typically delivering less range and a worse software experience (which i’d say is the new panel gap). All in all this looks to me very much like the smart phone transition when apple and Samsung/google took over the market. Maybe 1-2 of the old guard will survive, with everyone else ending in the slaughterhouse.
- lern_too_spel 6y agoID.4 comes with three years of free charging and with all of its pieces attached.
- shiftpgdn 6y agoMy wife took delivery of a tiguan in 2013 that had a fender painted a different color and loosely attached.
- clouddrover 6y ago> This means the competition will have to stomach a loss per electric car sale until they catch up to Tesla’s price advantage or not be cost competitive. The Renault Zoe has outsold all Tesla models combined in Europe so far this year: https://ev-sales.blogspot.com/2020/09/europe-august-2020.html https://ev-sales.blogspot.com/2020/09/europe-august-2020.htm... And the Porsche Taycan and the Audi e-tron (both Volkswagen brands) have outsold the Model S and Model X.
- maxerickson 6y agoSo setting aside brand weight, how will the fit and finish on the VW compare to the fit and finish on the Tesla? Is it gonna be full of cheaper materials and be poorly assembled?
- twic 6y agoWhat is the nature of Tesla's relationship with Panasonic the days? To what extent is this Tesla's battery technology, and to what extent is it Panasonic's?
- tenuousemphasis 6y agoPanasonic still occupies a portion of the Nevada gigafactory, manufacturing cells that Tesla puts into packs which go into their cars. They are ramping up production capacity further, in fact. The new batteries are entirely Tesla's design, based on work by their research partners. So the new factories they're building in Germany, Texas, and possibly an addition to Shanghai will produce these new batteries.
- nomad543 6y agoThe twitter poster is delusional. There is no such tech gap, in fact, building electric vehicles is much easier than ICE vehicles, the only reason the traditional car makers are not heavily invested in EVs is because there is not much profit in this segment at this time.
- TooCreative 6y agoEasier when you know how. It might be easier to cook dinner then to write a web app. But not for me :) Might be easier to build a digital camera then a film camera. But where is Polaroid now? Kodak also did not fare well in the transition to digital. It is certainly easier to run an online marketplace then a gazillion stores you have to restock everyday, right? Yet, Walmart has a hard time in the ecommerce landgrap.
- CPLX 6y agoKodak wasn’t that notable as a camera maker when the transition happened. The companies that dominated the film camera market, Nikon and Canon, also dominate the digital camera market.
- TooCreative 6y agoNikon's market cap is down 90% since the 2000s. I think with Canon it is similar - I can't find a long term chart right now though.
- lukeramsden 6y agoNot surprising considering that the vast majority of people just use their smartphone as their digital camera. Both companies did just fine in the transition to digital, it was the transition to mobile that they lost out in.
- TooCreative 6y agoI can very well see similar statements in 20 years: "Not surprising considering that the vast majority of people just use robo taxis now. The ICE manufacturers did just fine in the transition to EVs. It was the transition to self-driving they lost out in."
- xbmcuser 6y agoBattery prices are falling around 15-20% every couple of years for everyone not just Tesla. Tesla 3 year target is not much different from over all price declines https://www.statista.com/statistics/883118/global-lithium-ion-battery-pack-costs/ https://www.statista.com/statistics/883118/global-lithium-io...
- Robotbeat 6y agoBattery price declines are driven by volume. There's been a marked plateau in other electric car makers' volume in the United States, at least, so it makes sense there'd be a plateau in prices as well absent action by Tesla (or someone else) to increase volume.
- rsynnott 6y agoWhere are you getting that? Global electric car sales, despite covid, are already higher for 2020 now than they were for the whole of 2019. If anything, Tesla’s sales look more plateau-y then the market as a whole.
- Robotbeat 6y agoSpeaking of the US.
- rsynnott 6y agoThat would only really be relevant if the US was the only market that existed (or if the industry was really balkanised, I suppose). As it stands, the US is the third largest electric car market, and proportionately shrinking fast; the behaviour of the US market isn’t super relevant to market dynamics as a whole. If the US market is stagnating but the global market is growing fast, the demand for batteries continues to grow fast. To be clear, I don’t think it’s at all inevitable that the US continues to stagnate, but even if it does, he global market should be expected to grow.
- 6y ago
- snemvalts 6y agoModel 3 was supposed to be the 25k car, 3 years ago according to Tesla
- Robotbeat 6y agoNope, never was promoted as $25k but instead as $35k car, not $25k. Also, you can apparently still buy the $35k car (same as the $38k Standard Range Plus but with some of the range locked out at autopilot features reduced--but you still can get that 200 mile range Model 3 if you really want it), but you have to call them about it. Only 8% less money, though, for like 20% less range and fewer features so probably isn't worth it.
- sgerenser 6y agoI think it was originally promised to be $30k but bumped up to $35k a year or two later.
- tpmx 6y ago2011: https://web.archive.org/web/20110122221115/http://gigaom.com/cleantech/elon-musk-model-x-suv-to-be-unveiled-in-2011-30k-car-in-4-years/ https://web.archive.org/web/20110122221115/http://gigaom.com... > ... said Musk, and in about four years will have developed a truly “mainstream” car that will cost $30,000. 2018: https://www.cnbc.com/2018/08/18/elon-musk-tesla-could-produce-a-25000-car-in-3-years--.html https://www.cnbc.com/2018/08/18/elon-musk-tesla-could-produc... > Elon Musk: Tesla could produce a $25,000 car in around 3 years 2020: https://www.caranddriver.com/news/a34112343/tesla-battery-day-cutting-battery-cost/ https://www.caranddriver.com/news/a34112343/tesla-battery-da... > Tesla Promises $25,000 EV in Three Years
- wankeler 6y agoI thought the really interesting part was the vertical integration from “ore “ through production to recycle plus the manufacturing streamlining / integration of the cells. If they pull this off and eliminate all the margins otherwise involved they will put themselves at a $/kWh point that only those with very deep pockets will have a chance of matching. So a lot of consolidation to come and remaining others going niche / upmarket.
- lern_too_spel 6y agoAll of that integration can be done by a battery supplier like SVolt. There is no need for vertical integration with a car company to get that savings.
- baybal2 6y agoIf you follow that guy's logic, then BYD would've been steamrolling every competition left, and right, Musk included, but it doesn't happen. There are quite a number of laggards in the market making decent money, and some probably have better margins than the competitors at the bleeding edge.
- hwillis 6y agoAs written, the twitter thread is basically augury. Fitting a curve does not make it true; the processes of science, reality, academic research, and human discovery do not follow neat lines. They are messy. Even economics is a hell of a lot more complex than "logarithmic increases have linear returns". You need actual engineers and scientists doing research; "cumulative kWh" is just an extremely rough proxy. There is value in plotting data like this: to dispel anecdotal notions of progress or stalls. Progress has been incremental for a long time. The future expectations are incremental. It's probably going to stay incremental for now. There is little evidence of a stall, or that Tesla suddenly tore down the walls of physics.
- mensetmanusman 6y agoThis is fascinating. Tesla needs as much driving data as possible. Every of order of magnitude makes it that much harder for competitors to reach. Once they get a critical amount, the AI of driverless will fall into place. They will be subsidizing low cost vehicles just to get the driver data.
- new_realist 6y agoGiven that Tesla's battery capacity is a small fraction of that already purchased by legacy OEMs, any pricing advantage will accrue to these larger OEMs.