- Sergio tossed a wet sweater onto Tesla’s enthusiasm, telling Automotive News Europe that if the Model 3 was able to make money, he’d copy it in a second and add some Italian “flair.”
“I’m am not surprised by the high number of reservations but you have then to build and deliver them and also be profitable,” he said, adding that FCA was in some ways dodging a bullet by not diving headlong into the EV fray.
“Better late than sorry,” he said, probably right before phoning Musk to ask for a meeting.
I'm thinking with $400 Million in capital, Tesla will have a good chance at making sure its parts and distribution networks are capable of delivering. Marchionne is probably just salty because he failed to realize that if you merge two crummy brands without actually trying to improve, you get nothing to show for it as a result.
Marchionne is salty because Tesla doesn't have to make a profit, while he purchased a troubled asset at fire-sale prices and lo and behold, 8 years later it's still not selling. It's funny. Peugeot thinks they're coming back. I remember back in the '00s there was a Volvo dealer in Ballard that hung up a Peugeot sign, only to discover that Peugeot would eventually come to their senses. That's kind of like the rest of the world in the American market: your brands have no power here. Daihatsu failed, Mitsubishi failed, Daimler made a small fortune out of a large one, Fiat is flailing. I reckon it has to do with the massive tweaks world platforms must undergo to meet American safety and emissions standards. I mean, the US Smart Fourtwo is a dog compared to the Canadian one, even. Tesla? Hey, if you get to sell cars at a loss, that makes it easier to look profitable...
I knew that developing for the American market was an issue, but I didn't know it was that hard. Mitsubishi though, seems to think so. They're down to three available models here in the States and I remember a few years ago, when they were announcing the cancellation of the Eclipse, they hinted that they were gonna stop developing cars with America in mind. It must be really hard to get market shares here, with so many companies already established and selling decent if not great products. Kia and Hyundai both have shown that it's still possible though. I'm confused now, though, about Tesla. I thought the Model 3, being their mainstream target car, was their attempt to turn profitable. Is that not the case? If they're not selling cars with profit in mind, why are people investing so heavily in Tesla? For their development in battery technology and charging infrastructure? Is there money in that or anything Tesla is doing? Is this an Emporer's New Clothes situation?
That's Honda - their #1 selling car in the world is the Jazz but they pretty much sat out the US market for about six years because they had to redesign the front end. Purely for crash standards, mind you - really what it comes down to is cars in the US are a lot more likely to hit each other at great speed so NHTSA cares more than most foreign markets. Then there's the varied emissions standards, as we discussed. Try buying a child safety seat in the US vs "rest of world" - everyone else has the same car seats, ours are different. Then there's the fact that the exchange rate on yen virtually doubled between 2007 and 2015, and the fact that the US Government bailed out two out of three automakers. All in all, shit gets tricky. I mean... a Fiat 500 makes perfect sense in Italy. Everything's that big. And you don't have to pay to ship the bitch across the Atlantic and the exchange rate is never an issue. I remember seeing one at the LA Auto Show before everyone had one. We were all "huh. Kinda cute." Then we asked how much and it was like ARE YOU FUCKING KIDDING ME. Tesla... That's a legitimate beef every other manufacturer can have with Tesla: they don't have to make money to have money. They can just sell shares. Right now, Tesla's market cap is $33 billion. GM's market cap is $47 billion. Last year, Tesla's revenue was $4 billion. GM's revenue was $152 billion. Last year, Tesla sold 50,000 cars. GM sold 150,000 cars a month.
There are a lot of really good examples that illustrate this. Sometimes there's little tweeks that need to be made, other times it's drastic changes, like the Honda Fit. Take the new Ford Mustang for example. Different countries have different laws. If you go to the UK, the Mustang's tail lights will be different than here in the States, a reflection of those laws. I remember when the Tata Nano became internet famous for being so inexpensive that people were all "when are we gonna get the Tata Nano in the States! That thing would sell like hot cakes." Only, it took car people to point out that one, the car was a piece of shit brand new, and two, to bring it to the States and bring it up to our safety standards would inflate the price to about $11,000. No one is gonna pay $11,000 for a brand new car that sucks balls right out of the gate. Similarly, GM, Nissan, and an ass ton of other countries sell cars in South East Asia and South America without what we think are standard safety features, such as airbags. Just like the Nano, those safety features add a lot to the price that would suddenly make the cars unaffordable to their target markets. A lot of those same countries don't pay the same mind to safety as we do either, especially when it comes to cars and work place safety. I know entering the American Market isn't easy, every now and again I check up to see how Mahindra is doing in their attempts because it's like one big joke of high expectations and embarrassing broken promises. Here's where I can't understand how it's so hard. Let's take California for example. I might be wrong on the exact specifics, but I think I remember the gist well enough. I'm pretty certain CARB is the organization I'm thinking about. At various times in America's history, California has had stricter emissions standards than the rest of the country (which makes sense, seeing as how they argue that your office chair will give you cancer). Car manufacturers here in the States saw they had two options. Either they build a set of engines that'll work for California and a set of engines that'll work for everyone else or they build a set of engines that work for both, knowing California is stricter. So, if America has stricter safety standards, especially for frontal impact, pedestrian safety, and roll over, wouldn't it be easier to just design platforms with those standards in mind, period, and then scale back when possible for less strict markets? Same concept applies for emissions, though I know Europe and the States tend to trade back and forth every few years as to who has more stringent emissions laws. I honestly can't imagine that designing platforms with America in mind first would make things that much more expensive, especially if you can use those same platforms and tweak them a little bit to make vehichles that'll work for other markets, such as the Chevrolet Montana/Tornado. Granted, the Montana is based off the Opel Corsa, but I don't think it would be that hard to turn the Chevrolet Cruze into a pickup for Mexico and Latin America. The whole stocks thing for Tesla is crazy when you actually write out those numbers and put them in front of me. Even with bioemerl's explanation, which seems very plausible, Tesla stock sounds like a stupid gamble, especially when companies like Ford and Toyota have proven to be able to whether financial difficulties throughout the decades. All it takes is the price of Lithium to jump through the roof or one of Tesla's parts suppliers royally screwing up to put the company in real jeopardy. I thought we learned from the Dot Com crash that it's a dumb idea to invest in a company that isn't returning money.
It's simpler than that, actually. To meet California emissions all you need to do is tilt the emissions/power balance in favor of emissions. Backintheday this meant air pumps to scavenge stuff out of the exhaust, leaner carb mixture, and generally a bunch of shit hanging off the exhaust side of things that provided greater flow restriction (but decreased NOx, particulates, CO, etc). Manufacturers were happy to pass this along to dealers, and dealers were happy to pass this along to customers, and nobody was happy. It's the exact same issue you discuss with the Tata - if you wanted to hang all the shit necessary to get that thing up to NHTSA snuff, Tata would have to make that up somewhere in the price. Manufacturers were perfectly happy to let Californians know they were paying more than everybody else for their cars because they were trying to pressure California into relaxing CARB. But it doesn't work that way across governments. Tata doesn't get to add "Federally mandated safety and emissions equipment: $11,000" to their stickers and not make Tata (and India) look like a shithole. Especially when there are four fine manufacturers that have no difficulty whatsoever meeting American emissions and safety standards. And how many cars are you going to sell? There's the tricky part. Let's take Hyundai. Last month they sold 75,000 cars in the US. They sold 100,000 in the rest of the world. Hyundai went hard into the US market and it paid off. Mitsubishi? Quickest figures I can see say they sold 50,000 cars in the US in the first six months of 2015. Let's assume they finished out the year even, for 100k cars. they sold 400,000 cars worldwide. So yeah - it seems like a lot of business to give up - but remember, they had a plant in Illinois until last July. Now they're going to have to ship all that stuff across the ocean. TESLA: So nobody is investing in Tesla. They're speculating in Tesla. They're buying the stock now to sell it later when it's worth more. "Later" could mean "Later this year." It could mean "later this month." It could mean "later today." And they could have already sold the stock, without owning it, so that they can buy it later at a lower price and pocket the difference. That's the nature of short sales, and 1/4 of all the interest in Tesla is currently short. Put another way: one in four people with money in Tesla are expecting it to lose value. Here's what "investing" looks like: http://www.nasdaq.com/symbol/gm/dividend-history That's reliably giving back ~30 cents a share every 3 months. Considering the stock is about 30 bucks, GM is good for a consistent yield of 1%. Not spectacular, but that means if you on 10,000 shares of GM (worth a third of a million dollars), every three months you pocket 3 grand. Here's Tesla: http://www.nasdaq.com/symbol/tsla/dividend-historyEither they build a set of engines that'll work for California and a set of engines that'll work for everyone else or they build a set of engines that work for both, knowing California is stricter.
Dividend History information is presently unavailable for this company. This could indicate that the company has never provided a dividend or that a dividend is pending.
I have to say, I really think South Korea has some pretty impressive game plan with cars going on right now. i know Kia and Ford were tight for forever and when Kia went bankrupt and Hyundai bought the shit out of them shutting out Ford, I wouldn't be surprised if the Korean government played a hand in that. Now, almost 20 years later, both companies are doing great, with Hyundai focusing hard on the States (which you've shown me they're doing even better than I first thought) and Kia being pretty successful both here and in Europe. The quality of their cars are improving, their public image is improving, and Hyundai just recently created a luxury division much like Lexus, Acura, and Infiniti. Both brands have shown it's more than doable, but the success is hard earned and definitely isn't something that's gonna happen overnight. I wonder, as far as Tesla and their shares are concerned, if speculating in them is the greatest idea. If I'm wrong, with short sales, if you don't strike when the time is right, you're stuck holding a bunch of worthless stocks. The problem is, no one really knows when the time is right so a lot of it boils down to luck. That sounds just as crazy as actually investing in them.
South Korea is more than willing to subsidize the shit out of heavy industry to establish an industrial basis. They recognized that they could either compete toe-to-toe with Japan or be a vassal state of Japan and they went as fascist as they needed to. It worked - they have an industrial base to rival Japan's now and a much younger workforce. They also want to be the ones to sell to China when China gets its shit together. Everybody I know who plays the ponies has made some coin on Tesla. It's always about timing. Thing about Tesla is you aren't betting on Tesla's actual performance, you're betting on the market reaction to Tesla. Wanna see the /b/ of investing?
Everyone (at least in cars) seems to be shifting their game plan to focus more on China, and to a lesser extent, India as emerging markets. The politics behind it are really weird, diplomatically and economically. It's very interesting. I'm on mobile at the moment, so I can't post links, but for example Buick as a brand name is seen as desirable, the Chinese are more than willing to create bootleg versions of popular vehichles, and as a reflection of China's passion for making knock off products, a lot of car companies are nervous to work with China for fear that their patents and technology will be lifted and the Chinese government won't intervene. I've learned bits and pieces about this over the years as I read car blogs, but when I think about it all at once, it feels very overwhelming. I'm not judging anyone who does this, with Tesla's stock or any other stock. I know the stock market has tools built in that encourages this type of behavior. There's something about it though, that makes it seem kind of immoral to me. I feel like maybe treating companies like speculative commodities like gold or oil keeps us from appreciating their real value, and that's the products they offer and the jobs they create. I think owning something makes you responsible to feel concerned for its well being, and that if you decide to own part of a company, you do so not just because you expect it to do well, but because you want it to do well because you value it. I think thats where I'm getting my difficulty wrapping my head around short stocks and how they work. That's probably a really naive way to look at stocks though.Thing about Tesla is you aren't betting on Tesla's actual performance, you're betting on the market reaction to Tesla.
You can look at it that way. You'll get creamed, but you can look at it that way. A better way to look at it is as a method of passive income that has grown ever more important as interest rates cease to reward savers in any meaningful way. Monetary policy is such that your government is deliberately fucking you if you expect to be able to put your money in a savings account and expect to live off of it in the future. That's one perspective, anyway. Me? I hate shorting. Perhaps it's because I short things because I hate them, not because I actually have any real insight into their performance. Bet you haven't heard this one before. (link is dead; here's the content)
I don't think Korea could have stayed in the market without government backing and support from other divisions. They were loosing tons of money on their extended warranties and horrible lease residuals. They are probably making ok money now that the brand has finally stabilized and their quality has gotten a lot better but before that they were burning though lots of money. I think thats basically what it takes to get established in an industry that has such a high barrier to entry. You have to burn lots of money until you have enough volume and knowledge to finally make money.
Shoot. That sounds a bit like Tesla's strategy at the moment.They are probably making ok money now that the brand has finally stabilized and their quality has gotten a lot better but before that they were burning though lots of money. I think thats basically what it takes to get established in an industry that has such a high barrier to entry. You have to burn lots of money until you have enough volume and knowledge to finally make money.
All those brands had absolutely terrible reliability and got killed in the secondary market. I don't think one can maintain a profitable brand in the us and have a shitty resale price. So many cars in the us are now sold as leases 30% or more. Brands with bad resale prices will be unable to complete on lease rates since lease rates have to set as a function of initial price - residual . More and more Americans think of cars as monthly payments so if a manufacturer can't offer a good lease rate they just can't compete in the market or end up subsidizing the lease too much to be profitable. Ford for example is imo smartly reducing fleet sales because they significant reduce residual on a product and don't generate much in profits. I think that's going to generate a lot of future benefits when compared to Chrysler and Nissan who are doing the opposite.
Tesla is trying to found a revolution in cars, to be the founding company that turns electric cars into the thing that replaces gas. They are setting up the infrastructure, setting up the mechanics that build and distribute these cars. That holds the potential for massive profits in the long run. Imagine being the company that owns all/most of the gas stations in the world, and invented the gasoline engine.
Tesla commands a huge brand premium. It's like iPod vs zune or even i3 vs leaf. You buy into the prestige of the brand when you get one. It's not about the techical merits of the vehicle people are buying them for the ohoo factor and bragging rights. There are now multiple generations train to buy into cool. From Nike to iPods, tesla cars are the next logical step
If they can capitalize on it and push into mainstream, they could become pretty powerful. Apple went from niche to selling iPhones to retirees. If Tesla can do the same, it could really shake up the industry.