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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 t

by 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.
itsoktocry 6y ago
And why are the gross margins best in industry? Do you think it has anything to do with the fact that they have a different model (no dealers) than other manufacturers, so comparing them is apples to oranges? Despite that, gross margins are shrinking, and their net margins are terrible. Also, can we stop comparing this company to Amazon, just because they both "lost money"? Their business models are not remotely similar.
- zaroth 6y ago
  Just because legacy auto has a painful and wasteful sales process doesn’t make comparing their vehicle gross margins “apples to oranges”. It means legacy auto needs to smarten up about their sales process. Their gross margins do fluctuate quarter to quarter but over the last couple years on average have increased and they expect they will continue to do so as their new factories come online. As I mentioned you have to example their operating profit (net margins) as a factor of their growth rate. Operating profit with no growth is the sign of a stagnating company. No physical good manufacturing company can be both high growth and high operating profit. By definition profits are being spent on expanding the manufacturing lines. The comparison with Amazon is because not many companies have year after year of CAGR in the realm of what Tesla has achieved.
  - itsoktocry 6y ago
    >It means legacy auto needs to smarten up about their sales process. No, it means their gross margins are necessarily lower because of the way the accounting works when manufacturers sell to dealers. Anyway, gross margins are not profit margins, so why should they try to maximize them? >Operating profit with no growth Let me give you the 101 on base rates: Tesla is small (sub 1% market share), so therefore big growth numbers as a % is easy. VW is massive, and therefore high % growth numbers are hard. VW made $12B in profit last year. >The comparison with Amazon is because not many companies have year after year of CAGR in the realm of what Tesla has achieved. Nonsense. No car companies have, lately, maybe. But plenty of companies have grown as fast or faster than Tesla. Their last 3 years of revenue are: $25B, $28B, $31B. Good, but nowhere approaching 50% CAGR.

by zaroth 6y ago

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.

itsoktocry 6y ago

And why are the gross margins best in industry? Do you think it has anything to do with the fact that they have a different model (no dealers) than other manufacturers, so comparing them is apples to oranges? Despite that, gross margins are shrinking, and their net margins are terrible. Also, can we stop comparing this company to Amazon, just because they both "lost money"? Their business models are not remotely similar.

zaroth 6y ago
Just because legacy auto has a painful and wasteful sales process doesn’t make comparing their vehicle gross margins “apples to oranges”. It means legacy auto needs to smarten up about their sales process. Their gross margins do fluctuate quarter to quarter but over the last couple years on average have increased and they expect they will continue to do so as their new factories come online. As I mentioned you have to example their operating profit (net margins) as a factor of their growth rate. Operating profit with no growth is the sign of a stagnating company. No physical good manufacturing company can be both high growth and high operating profit. By definition profits are being spent on expanding the manufacturing lines. The comparison with Amazon is because not many companies have year after year of CAGR in the realm of what Tesla has achieved.
- itsoktocry 6y ago
  >It means legacy auto needs to smarten up about their sales process. No, it means their gross margins are necessarily lower because of the way the accounting works when manufacturers sell to dealers. Anyway, gross margins are not profit margins, so why should they try to maximize them? >Operating profit with no growth Let me give you the 101 on base rates: Tesla is small (sub 1% market share), so therefore big growth numbers as a % is easy. VW is massive, and therefore high % growth numbers are hard. VW made $12B in profit last year. >The comparison with Amazon is because not many companies have year after year of CAGR in the realm of what Tesla has achieved. Nonsense. No car companies have, lately, maybe. But plenty of companies have grown as fast or faster than Tesla. Their last 3 years of revenue are: $25B, $28B, $31B. Good, but nowhere approaching 50% CAGR.