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9% drop in revenue leading to a 54% drop in income, this suggests the main factor for the income reduction is an increase in costs/loss moreso than the drop in

9% drop in revenue leading to a 54% drop in income, this suggests the main factor for the income reduction is an increase in costs/loss moreso than the drop in revenue.

AnthonyMouse 3y ago
Could also just be reversion to the mean. COVID issues restricted the supply of new cars in general, resulting in higher prices/margins. Now that they're getting sorted out, prices return to normal and margins go back down.
Tuna-Fish 3y ago
No. Their gross margin only fell by 0.2%, and operating expenses only increased by 151 million, neither of which explains more than a small fraction of what happened. The problem is simply that because they are so vertically integrated, they have high fixed costs, and so a relatively small drop in revenue means a huge loss in profit. Another 9% less revenue and they will be making a loss, unless they fire a lot of people.
Stranger43 3y ago
Tesla failed at the monopoly grab that most VC funded tech companies depend on for their "valuation" and super-normal profits. Cars have no network effect as the roads are open standard accessible to any vendor and Tesla never had any secret sauce that kept well funded competitors from competing. Once the big traditional manufacturers started taking electric cars with diver assist features seriously they had the skill and money to match(and in some cases exceed) Tesla and that means Tesla will have to price their cars competitively.
- red-iron-pine 3y ago
  network effects and the broader value network are the big ones. without creating and then exploring that network, you're just a hot new product until someone else catches up. put another way, it's not just making cars, it's making the ecosystem. every phone after the iphone was trying to be the iphone, for example. for Tesla, it would have been something like getting charging stations everywhere, and getting the 3 price so low that they become ubiquitous. then the Hertz buy might have made sense, you'd see taxis everywhere switching (and they kind of did in some cities), and stronger adoption outside of tech-bro cities.

9% drop in revenue leading to a 54% drop in income, this suggests the main factor for the income reduction is an increase in costs/loss moreso than the drop in revenue.

AnthonyMouse 3y ago

Could also just be reversion to the mean. COVID issues restricted the supply of new cars in general, resulting in higher prices/margins. Now that they're getting sorted out, prices return to normal and margins go back down.

Tuna-Fish 3y ago

No. Their gross margin only fell by 0.2%, and operating expenses only increased by 151 million, neither of which explains more than a small fraction of what happened. The problem is simply that because they are so vertically integrated, they have high fixed costs, and so a relatively small drop in revenue means a huge loss in profit. Another 9% less revenue and they will be making a loss, unless they fire a lot of people.

Stranger43 3y ago

Tesla failed at the monopoly grab that most VC funded tech companies depend on for their "valuation" and super-normal profits. Cars have no network effect as the roads are open standard accessible to any vendor and Tesla never had any secret sauce that kept well funded competitors from competing. Once the big traditional manufacturers started taking electric cars with diver assist features seriously they had the skill and money to match(and in some cases exceed) Tesla and that means Tesla will have to price their cars competitively.

red-iron-pine 3y ago
network effects and the broader value network are the big ones. without creating and then exploring that network, you're just a hot new product until someone else catches up. put another way, it's not just making cars, it's making the ecosystem. every phone after the iphone was trying to be the iphone, for example. for Tesla, it would have been something like getting charging stations everywhere, and getting the 3 price so low that they become ubiquitous. then the Hertz buy might have made sense, you'd see taxis everywhere switching (and they kind of did in some cities), and stronger adoption outside of tech-bro cities.