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The headline is not only wrong but it is intentionally misleading. I don’t understand the games people play when certain financial numbers line up and they wan

by zaroth 5y ago

The headline is not only wrong but it is intentionally misleading. I don’t understand the games people play when certain financial numbers line up and they want to “give credit” for all the profit to one thing or another. It’s not reality, and it’s not how a company is run. Tesla is trying to grow as quickly as possible, and will deploy as much capital to that end that they can do so reasonably efficiently. They sold about $10 billion of product with a gross margin over 20%. That’s $2 billion of gross profit that can fund their growth. They also had ~$500 million of credits due to making all those cars, so it’s $2.5 billion in gross profit from selling cars that funds their future growth. Additionally they apparently reported another ~$100 million of capital gains from Bitcoin. That’s an additional 4%. The Bitcoin did not drive their profit. The credits did not drive their profit. What drives profit — when selling a product with 20-25% gross margin - is how much you are spending on future growth. And they are growing at 50% YoY which is nothing short of incredible at their scale.

misiti3780 5y ago
The same people shitting on Tesla now were shitting on Amazon 10 years ago (and we know how that turned out). It's the exact same situation, only Elon Musk is more active/controversial on Twitter than Bezos ever was.
- adventured 5y ago
  It's not the same situation at all. The car industry is a known quantity in terms of sales potential, margins, costs and possible overall scale. Tesla will never exceed today's version of Toyota or VW in terms of size. There's your cap. And that's all before the market is entirely flooded with EV competition. AWS is a better profit machine than anything Tesla will ever produce. Tesla will never own half the automobile market, nor will they ever have AWS operating income margins (Tesla's operating income margins are typically 5-10% in a good quarter, and that's normal for the auto industry; which is half to 1/4 that of AWS). That's the reason Tesla will never have an Amazon-like result. It wasn't retail that made Amazon worth so much. There's nothing special about electric cars, there's no magic that will expand the car market by ten fold just because they're EVs; there's no super margin jump that makes electric cars two or three times as profitable compared to selling a $45,000 BMW or Mercedes. AWS can generate $20 to $30 billion in operating income on $100b-$120b in sales. It's very likely to get there at this point. There is almost no scenario where Tesla makes that much money selling expensive electric vehicles (and solar panels are a horrific business for generating profit, as is the battery industry). Tesla needs tens of billions of dollars in annual profit to float its market cap (and that's just to support where it's already at). I was defending Tesla when a zillion people on HN were saying they could never mass produce the Model 3. I was right. I was defending Tesla when a zillion people on HN were claiming it was going to go bankrupt. I was right. Before that I was defending the Model S in its early days. I was right. And I'm right about this too, and it's very obvious Tesla's just going to end up as another automobile company (best case scenario). There's nothing special about being the next Mercedes, it isn't worth $500-$900 billion to be that.
  - sneak 5y ago
    > There's nothing special about electric cars, there's no magic that will expand the car market by ten fold just because they're EVs; If Tesla achieves FSD (big if) first, that is indeed some magic that will expand the car market by (not tenfold, but significantly) just because they're Teslas. FSD semis is precisely some magic that will increase that market several times. (The fact that they have not actually shipped their human-driven semi yet notwithstanding.)
    - Grustaf 5y ago
      How would self driving make the car market 10 times larger? The only real point of self driving for local trips is to radically DEcrease the number of cars by efficient and convenient pooling.
  - golergka 5y ago
    > It's not the same situation at all. The car industry is a known quantity in terms of sales potential, margins, costs and possible overall scale. It's only true if probability of autonomous taxi fleet is zero. I'm not saying it's 100%, or even high. But even if it's 1%, then your statement is already incorrect.
  - Jyaif 5y ago
    > Tesla will never exceed today's version of Toyota or VW in terms of size. There's your cap. Just like Amazon will never exceed the cap of Barnes & Noble?
  - bryanlarsen 5y ago
    Current non-Tesla car makers are massively undervalued because: - they have a massive amount of debt - (many of them but not all) have a poor gross margin - EVs are an existential threat that will likely destroy a couple of them, we just don't know which ones yet. Any car maker that gets past all three points above AND has a VW or Toyota like market share AND has a substantial growth rate in its profit margin will likely have a trillion dollar market cap as long as we are still in a cheap capital market. That's a lot of if's for anybody, including Tesla. And Tesla with a market cap of $1T in a decade is basically just keeping up with inflation, so not a great investment even if there weren't any risks. Transportation and energy are both trillion dollar markets. They can support trillion dollar market caps. But trillion dollar caps require Apple levels of profit risk, not car manufacturer levels of risk.
gutino 5y ago
Exactly, wall street journal can write shit like this because most people do not read the company's earning report.
deleted 5y ago
[deleted]
thomaskcr 5y ago
Yeah, and then if you under reserve on warranty costs and stuff repairs into "goodwill" under Services/Other, people who don't know better will go on the internet and talk about how it's fine for the company to not have an overall profit because your margin is 20% even though you spend a good amount fixing cars you already sold because quality control is poor. And to answer the other responder's response about Amazon - Amazon raised money twice, totaling $108M. Tesla is still raising money $20B later, they are funding their efforts primarily off investors not their own operations.

by zaroth 5y ago

misiti3780 5y ago

The same people shitting on Tesla now were shitting on Amazon 10 years ago (and we know how that turned out). It's the exact same situation, only Elon Musk is more active/controversial on Twitter than Bezos ever was.

adventured 5y ago
It's not the same situation at all. The car industry is a known quantity in terms of sales potential, margins, costs and possible overall scale. Tesla will never exceed today's version of Toyota or VW in terms of size. There's your cap. And that's all before the market is entirely flooded with EV competition. AWS is a better profit machine than anything Tesla will ever produce. Tesla will never own half the automobile market, nor will they ever have AWS operating income margins (Tesla's operating income margins are typically 5-10% in a good quarter, and that's normal for the auto industry; which is half to 1/4 that of AWS). That's the reason Tesla will never have an Amazon-like result. It wasn't retail that made Amazon worth so much. There's nothing special about electric cars, there's no magic that will expand the car market by ten fold just because they're EVs; there's no super margin jump that makes electric cars two or three times as profitable compared to selling a $45,000 BMW or Mercedes. AWS can generate $20 to $30 billion in operating income on $100b-$120b in sales. It's very likely to get there at this point. There is almost no scenario where Tesla makes that much money selling expensive electric vehicles (and solar panels are a horrific business for generating profit, as is the battery industry). Tesla needs tens of billions of dollars in annual profit to float its market cap (and that's just to support where it's already at). I was defending Tesla when a zillion people on HN were saying they could never mass produce the Model 3. I was right. I was defending Tesla when a zillion people on HN were claiming it was going to go bankrupt. I was right. Before that I was defending the Model S in its early days. I was right. And I'm right about this too, and it's very obvious Tesla's just going to end up as another automobile company (best case scenario). There's nothing special about being the next Mercedes, it isn't worth $500-$900 billion to be that.
- sneak 5y ago
  > There's nothing special about electric cars, there's no magic that will expand the car market by ten fold just because they're EVs; If Tesla achieves FSD (big if) first, that is indeed some magic that will expand the car market by (not tenfold, but significantly) just because they're Teslas. FSD semis is precisely some magic that will increase that market several times. (The fact that they have not actually shipped their human-driven semi yet notwithstanding.)
  - Grustaf 5y ago
    How would self driving make the car market 10 times larger? The only real point of self driving for local trips is to radically DEcrease the number of cars by efficient and convenient pooling.
- golergka 5y ago
  > It's not the same situation at all. The car industry is a known quantity in terms of sales potential, margins, costs and possible overall scale. It's only true if probability of autonomous taxi fleet is zero. I'm not saying it's 100%, or even high. But even if it's 1%, then your statement is already incorrect.
- Jyaif 5y ago
  > Tesla will never exceed today's version of Toyota or VW in terms of size. There's your cap. Just like Amazon will never exceed the cap of Barnes & Noble?
- bryanlarsen 5y ago
  Current non-Tesla car makers are massively undervalued because: - they have a massive amount of debt - (many of them but not all) have a poor gross margin - EVs are an existential threat that will likely destroy a couple of them, we just don't know which ones yet. Any car maker that gets past all three points above AND has a VW or Toyota like market share AND has a substantial growth rate in its profit margin will likely have a trillion dollar market cap as long as we are still in a cheap capital market. That's a lot of if's for anybody, including Tesla. And Tesla with a market cap of $1T in a decade is basically just keeping up with inflation, so not a great investment even if there weren't any risks. Transportation and energy are both trillion dollar markets. They can support trillion dollar market caps. But trillion dollar caps require Apple levels of profit risk, not car manufacturer levels of risk.

gutino 5y ago

Exactly, wall street journal can write shit like this because most people do not read the company's earning report.

deleted 5y ago

[deleted]

thomaskcr 5y ago

Yeah, and then if you under reserve on warranty costs and stuff repairs into "goodwill" under Services/Other, people who don't know better will go on the internet and talk about how it's fine for the company to not have an overall profit because your margin is 20% even though you spend a good amount fixing cars you already sold because quality control is poor. And to answer the other responder's response about Amazon - Amazon raised money twice, totaling $108M. Tesla is still raising money $20B later, they are funding their efforts primarily off investors not their own operations.