8 ms·

Tesla's dirty little secret: Its net profit doesn't come from selling cars

21 points by bdcravens 6y ago

allears 6y ago
This is neither dirty nor a secret. Tesla is only able to sell these credits because they actually make zero-emissions cars, and they can only sell credits proportional to the cars they make. If anything, it's a dirty secret that other manufacturers are able to get away with making polluting vehicles by purchasing credits from Tesla.
- ndiscussion 6y ago
  I agree that it's not a secret, but it is kind of dirty... it's all legal of course, but those credits aren't going to last forever, and unless Tesla can dramatically reduce their costs, they're going to run into problems when the credits expire. And, regardless of whether it's a secret or not, the populist BULL TSLA!!!! crowd is largely ignorant of it.
  - deleted 6y ago
    [deleted]
  - Farfignoggen 6y ago
    That's the goal of those credits to make it easier for anyone looking to make electrical vehicles to succeed and reduce environmental pollution in the process of switching to Electric cars/trucks. And factor in the Health cost of Transportation related ICE pollution and that makes good financial sense for the credits to continue as the goal for the credits creation extends beyond only Tesla's business model. The Heath affects of over a Century on ICE pollution must be part of the math as well. And one need only look at the degradation of Building Facades and Statues and the cost there in Urban areas from ICE related pollution and that's more billions spent there over the years as well.
Kaibeezy 6y ago
A "dirty secret" that's posted for all to see? https://tesla-cdn.thron.com/static/1LRLZK_2020_Q4_Quarterly_Update_Deck_-_Searchable_LVA2GL.pdf https://tesla-cdn.thron.com/static/1LRLZK_2020_Q4_Quarterly_... Regulatory credits were reported as $1.58 billion out of total automotive revenue of over $27 billion, or less than 6%. Doesn't seem like excessive exposure. Does seem smart to take that money from dirty externality polluters.
- zaroth 6y ago
  This is the right way to look at this. Before even counting the regulatory credits, Tesla’s gross margin on their cars is the best in the industry. That means their cars are profitable on their own. Their gross revenue is ~5% from regulatory credits. Which are not 100% profit by the way, because they had to build things to get those credits. What the credits are doing is financing Tesla’s rapid expansion while allowing them to maintain positive net income. Amazon, for instance, just maintained negative net income for decades to finance their growth. Tesla is doing it with the regulatory credits instead. Shorts like to say that Tesla is “structurally unprofitable” because they finance future growth with regulatory credits and stock issuance. What’s actually happening is that TSLA is growing at a 50% CAGR and that will absolutely increase current year expenses. The fact that they can grow 50% YoY while maintaining a net profit building automobiles is nothing short of incredible.
  - Farfignoggen 6y ago
    Tesla's got Berlin and Austin Texas plants coming online and one need only go and watch the YouTube videos on those Factories to see that Berlin is almost Shell complete with those Buildings and already the lines are being installed by the German Millwrights. At Tesla's Austin Factory the Giga Press Die Casting machines can already be seen being assembled/installed even before the part of that Building Section's precast concrete roof is installed! Those Giga Press Die Casting machines will free up more plant space for other operations to produce even more autos and Trucks as that Die Casting process matures and replaces even the robotic/other assembly steps that were required previously. So Tesla's earlier Fremont Die Casting production will be followed up by more and larger sections of the Autos/Trucks that are cast in a single step on to the point where the vehicle's entire unibody can be Die Cast in a single step.
Farfignoggen 6y ago
The Author makes no mention of Tesla's use of that "Giga Press" Die Casting IP in its automotive fabrication process and how in one casting 70 different "body shop" assembly steps are reduced into one single casting step. So Tesla will eventually get to the point where the entire car/truck unibody will be cast in one step and that cost and unit time to produce a car/truck will be further reduced. And if the other automakers can not match Tesla's productivity via those Giga Press Die casting processes they will not be able to compete on price with Tesla!
- p_l 6y ago
  The Italian-Chinese die casting tech is available to other customers too - it just has less impact when you already have high-performing manufacturing lines vs building a new one. But companies are buying, and Tesla only happened to be first customer for the largest model at the time, IIRC.
  - Farfignoggen 6y ago
    Yes but the Others are not using that currently and Tesla's got some IP of its own included there to achieve such large Die Cast parts' production so there's that to consider. So Tesla has been making use of that and bringing that IP further along whereas the competition will have a learning curve that will not catch up to Tesla in time to keep Tesla from gaining more Electric Vehicle market share!
    - itsoktocry 6y ago
      Can you post evidence of anything you are saying here?
      - Farfignoggen 6y ago
        There is this(1) and I'm looking for some metallurgical patent that I read about but I have not bookmarked that page. So even if Tesla's not creating the Die Cast machines themselves there are alloy compositions and procedures that Tesla makes use of that are of proprietary nature such as recipes for metal alloys and casting procedures that produce acceptable results that are considered Trade Secrets related. (1) "Tesla Files Patent Application For Die-Cast Unibody Machine" https://cleantechnica.com/2019/07/23/tesla-files-patent-application-for-die-cast-unibody-machine/ https://cleantechnica.com/2019/07/23/tesla-files-patent-appl...
lupire 6y ago
That's not how net profit works. All income and expenses combine into a total.

21 points by bdcravens 6y ago

This is neither dirty nor a secret. Tesla is only able to sell these credits because they actually make zero-emissions cars, and they can only sell credits proportional to the cars they make. If anything, it's a dirty secret that other manufacturers are able to get away with making polluting vehicles by purchasing credits from Tesla.

ndiscussion 6y ago
I agree that it's not a secret, but it is kind of dirty... it's all legal of course, but those credits aren't going to last forever, and unless Tesla can dramatically reduce their costs, they're going to run into problems when the credits expire. And, regardless of whether it's a secret or not, the populist BULL TSLA!!!! crowd is largely ignorant of it.
- deleted 6y ago
  [deleted]
- Farfignoggen 6y ago
  That's the goal of those credits to make it easier for anyone looking to make electrical vehicles to succeed and reduce environmental pollution in the process of switching to Electric cars/trucks. And factor in the Health cost of Transportation related ICE pollution and that makes good financial sense for the credits to continue as the goal for the credits creation extends beyond only Tesla's business model. The Heath affects of over a Century on ICE pollution must be part of the math as well. And one need only look at the degradation of Building Facades and Statues and the cost there in Urban areas from ICE related pollution and that's more billions spent there over the years as well.

Kaibeezy 6y ago

A "dirty secret" that's posted for all to see? https://tesla-cdn.thron.com/static/1LRLZK_2020_Q4_Quarterly_Update_Deck_-_Searchable_LVA2GL.pdf https://tesla-cdn.thron.com/static/1LRLZK_2020_Q4_Quarterly_... Regulatory credits were reported as $1.58 billion out of total automotive revenue of over $27 billion, or less than 6%. Doesn't seem like excessive exposure. Does seem smart to take that money from dirty externality polluters.

zaroth 6y ago
This is the right way to look at this. Before even counting the regulatory credits, Tesla’s gross margin on their cars is the best in the industry. That means their cars are profitable on their own. Their gross revenue is ~5% from regulatory credits. Which are not 100% profit by the way, because they had to build things to get those credits. What the credits are doing is financing Tesla’s rapid expansion while allowing them to maintain positive net income. Amazon, for instance, just maintained negative net income for decades to finance their growth. Tesla is doing it with the regulatory credits instead. Shorts like to say that Tesla is “structurally unprofitable” because they finance future growth with regulatory credits and stock issuance. What’s actually happening is that TSLA is growing at a 50% CAGR and that will absolutely increase current year expenses. The fact that they can grow 50% YoY while maintaining a net profit building automobiles is nothing short of incredible.
- Farfignoggen 6y ago
  Tesla's got Berlin and Austin Texas plants coming online and one need only go and watch the YouTube videos on those Factories to see that Berlin is almost Shell complete with those Buildings and already the lines are being installed by the German Millwrights. At Tesla's Austin Factory the Giga Press Die Casting machines can already be seen being assembled/installed even before the part of that Building Section's precast concrete roof is installed! Those Giga Press Die Casting machines will free up more plant space for other operations to produce even more autos and Trucks as that Die Casting process matures and replaces even the robotic/other assembly steps that were required previously. So Tesla's earlier Fremont Die Casting production will be followed up by more and larger sections of the Autos/Trucks that are cast in a single step on to the point where the vehicle's entire unibody can be Die Cast in a single step.

Farfignoggen 6y ago

The Author makes no mention of Tesla's use of that "Giga Press" Die Casting IP in its automotive fabrication process and how in one casting 70 different "body shop" assembly steps are reduced into one single casting step. So Tesla will eventually get to the point where the entire car/truck unibody will be cast in one step and that cost and unit time to produce a car/truck will be further reduced. And if the other automakers can not match Tesla's productivity via those Giga Press Die casting processes they will not be able to compete on price with Tesla!

p_l 6y ago
The Italian-Chinese die casting tech is available to other customers too - it just has less impact when you already have high-performing manufacturing lines vs building a new one. But companies are buying, and Tesla only happened to be first customer for the largest model at the time, IIRC.
- Farfignoggen 6y ago
  Yes but the Others are not using that currently and Tesla's got some IP of its own included there to achieve such large Die Cast parts' production so there's that to consider. So Tesla has been making use of that and bringing that IP further along whereas the competition will have a learning curve that will not catch up to Tesla in time to keep Tesla from gaining more Electric Vehicle market share!
  - itsoktocry 6y ago
    Can you post evidence of anything you are saying here?
    - Farfignoggen 6y ago
      There is this(1) and I'm looking for some metallurgical patent that I read about but I have not bookmarked that page. So even if Tesla's not creating the Die Cast machines themselves there are alloy compositions and procedures that Tesla makes use of that are of proprietary nature such as recipes for metal alloys and casting procedures that produce acceptable results that are considered Trade Secrets related. (1) "Tesla Files Patent Application For Die-Cast Unibody Machine" https://cleantechnica.com/2019/07/23/tesla-files-patent-application-for-die-cast-unibody-machine/ https://cleantechnica.com/2019/07/23/tesla-files-patent-appl...

lupire 6y ago

That's not how net profit works. All income and expenses combine into a total.