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SmartieParts

Long test drive in a Tesla Model S. WOW

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Going from a gas smart to a Tesla Model S... of course I expected a bit of a performance increase, but that was ridiculous! I have never been a have-to-compensate-for-some-shortcoming horsepower guy, which is why I never really considered the smart a compromise. I just don't care about 0-60 times, top speeds, etc. So when I went for a short test drive in a Tesla when they came to down a couple months back, my eyes would just gloss over when the guy started spewing performance figures. Blah, blah, blah. All I cared about was the reasonable range (I can get from Kelowna to Vancouver with only a 30 minute stop in Hope), all the techno-gadgetry, and of course the zero emissions. I also wanted to support a company that was bringing electric cars to the fore and not for emissions credits so they can sell a giant truck (hello Nissan, I'm talking to you). I couldn't give a crap about the performance and I drove it like I would normally drive during that short 15 minute test where I paid far more attention to the gadgets than the drive itself.

I loved it, so I tried to see if there was any way I could justify the immense price tag and I obsessed about that beautiful beast for a couple of months.

I guess my back-and-forth softened them a little, as they invited me to come to Vancouver and take one of their cards for an extended drive. They gave it to me from 3:00pm one day until 9:00am the next. I took them up on the offer.

Remember how I didn't care about the power? Ehem. *cough* Well, that quickly became the focus of my little jaunt. It was un-be-liEV-able. Wow. I couldn't help myself. I planted that accelerator every single opportunity I got. Zero-to-60 is almost irrelevant because by the time you think to take your foot off, you're already over :) The thing was, it was with control. Always. I drove a monster HP Mustang before and it felt like if you didn't back off the gas you were going to lose the road. This just wanted more and you absolutely went exactly where you wanted to go.

I took it from Vancouver out to Hope, because I wanted to get the "real experience" since that's the charger I would be using, if I were ever insane enough to mortgage my family's financial future on a car. I'm glad I did that, because I ended up getting stuck in Hope when their chargers wouldn't work at 11:oopm, I didn't have the juice to get back, and their 24/7 help line wasn't answered for 30 minutes so I left a message that, to this day, was never returned.

It is a company that has a lot of growing still to do, and I'm sure they'll get there. But man... what a car.

I sure hope I get to buy one some day :)

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Thanks for the report. I am thinking I should test one too. I hear you on the comparison with Nissan, dead right. I don't like the interior of the cars I have sat in, it seems far too nasty - like an upmarket Chevy Cavalier - for a mega buck car. I am also not a fan of touch screens for HVAC controls, which to my way of thinking should have dedicated controls for reasons of ergonomics (adjust by touch).

Also, with Tesla losing a few thousand dollars on each one they make, the future of this company is far from assured, though I wish them the best.

That said, the drive trains seem to be remarkable. So yeah, maybe it is time for a test drive.

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I dunno Mike.

In the last 30 months, Tesla stock rose from $35 to around $260.

They're attracting a lot of investment and have some strategic agreements with big companies in place.

They're developing new product and new battery technologies.

If they ever get their head out of California's ass, l think they've got a long-term chance.

Maybe they'll buy Volkswagon (haha...... but, maybe) :)

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Yes, but they're still losing $4000 per car.

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Once their new battery plant comes online in the next year or so, i'm sure a significant chunk of money that they're sending to outside suppliers will come in-house. The Model 3's entire existence (and USD$35k price target) is predicated on Tesla manufacturing its own battery packs.

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I thought Tesla already builds battery packs themselves -- since the Roadster in fact -- but has to source the cells from outside.

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Yes, i meant manufacturing the packs from beginning to end, not just assembling cells from an outside supplier.

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Yes, but they're still losing $4000 per car.

No, they're not. Often times, when perfect information isn't available, we fall to Judge Judy's mantrine... "if it doesn't make sense, it isn't true". No company would ever build something to sell it at a loss. Ever. Companies may build something and have to sell at a loss because they screwed up, but they wouldn't continue to build them at a loss per unit. In fact, Tesla is making a hefty margin on each Model S... it is precisely what is keeping them even close to afloat. They only get to make the Model 3 (their short term "end game") if the Model S and X continue to sell. Clearly, if they were losing $4k per unit then they'd be getting further from that goal, not closer, and their correct course would be to cease operation.

The problem is that people believe what the media tells them. The media spews figures they don't understand, that the accountants provide them. The accountants report the numbers they are legally required to report. The numbers don't lie... but they require context. If Apple, for example, built the world's largest factory (as Tesla is doing) and was then required to report a $1B loss in a particular quarter and they sold (for example) 10M phones that quarter... do we say they lost $100 a phone? Maybe, but those that understand what's going on would still be pumping money into the stock knowing that really, they are making a good margin on every unit.

Once the R&D and capital expenditures are over the hump, Tesla's probably going to find itself in a position of buying VW and Apple just for fun.

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Yes, but they're still losing $4000 per car.

No, they're not. Often times, when perfect information isn't available, we fall to Judge Judy's mantrine... "if it doesn't make sense, it isn't true". No company would ever build something to sell it at a loss. Ever.

http://www.autonews.com/article/20150809/OEM01/150809854/tesla-burns-cash-loses-more-than-$4000-on-every-car-sold

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The problem is that people believe what the media tells them. The media spews figures they don't understand, that the accountants provide them. The accountants report the numbers they are legally required to report. The numbers don't lie... but they require context

I stand by that. Context matters. Financial reports in the media... well... don't. If for no other reason then they are always at least a quarter in the past.

I'm not saying your'e wrong for taking it in. We get the info we get. But it stands to reason that if they were truly losing money on each unit, that the ONLY reasonable response would be to sell less and pack up the shop. Clearly they see profit in the future or they wouldn't be doing it. Per vehicle, ignoring overhead, R&D of other products, construction of battery plants, etc... they MUST be making money.

Edited by SmartieParts

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Automotive News is only a trade publication that treats other automakers' finances similarly. Take it up with them if you must.

Isolating costs other than production and distribution and pretending they don't exist would be comforting to lots of manufacturers but that's not how the business works.

They're an ambitious company and haven't been profitable yet. At some point the profit in a global sense must come.

"...see profit in the future..." as you wrote, well yes, that's it. Not right now.

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We're making the same point, but you (and Automotive News) are choosing to take big picture numbers and arbitrarily boil it down to small picture items. Why not say they are losing $853.20 per pencil sharpened (or whatever that might turn out to be)? Let's say GE posted a loss one quarter... do they assign that loss specifically to lightbulbs? Or wind turbines? Which is it? "How the business works" isn't nearly as simple as you're trying to say. IF you want to pretend the only function of their expenditures is the production of a single model car then you MUST pretend inputs not related to that don't exist. If you want to instead report an aggregate loss, then the whole forest has to be seen, not just a single tree.

I don't care how qualified you might think that trade publication's authors are... in this case, they're pandering just like most media does, and sensationalizing a figure that is almost irrelevant without proper context (and actually they do a reasonable job of providing that context, but their reader - you - is taking from it what they want you to take from it)

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Why not say they are losing $853.20 per pencil sharpened (or whatever that might turn out to be)?

Because the only product they sell is the Model S automobile. LOL

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What else do they sell then

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Why do I feel I'm being baited? Lol.

The PowerWall

The Model X

The Model 3

Batteries to *ALL* other manufacturers of electric cars, phones, drones, satellites, watches, toys...

An emissions free future

Trips to Mars?

And your response will be that none of these are sold NOW. But you're fine attributing expenses for future projects to current revenues. It is nonsensical.

If we were privy to Tesla's own books, we would see a profit associated with each unit coming off the line. They would have a margin, and it certainly wouldn't be negative. "That's their books!", you'd reply cynically... but that's the point! Those aren't books to say to the world, "look how good we're doing", those are books for their own internal management, projections, etc. They are the LEAST likely to be manipulated, but the MOST likely to tell a true story. And they simply have to tell a positive story or else (I feel I've said this before) Tesla would rather burn their factory down than pay employees to produce another money-losing-unit. Again, NO business would EVER produce a good deliberately to sell at a loss. Once they discover they're selling at a loss, they stop production (At the retail level, like grocery stores, a company may sell a good at a loss to push sales of higher profit items - so called "loss leaders" - but at the manufacturing level of those goods, a profit is obviously made).

The company is losing money any given quarter, true. Attributing a per-unit figure to that is just media fluff. It means absolutely nothing more than, again, a loss per pencil figure. They could take the same number and divide it by the number of times the company urinals are flushed and give you another just-as-useless figure.

But if you REALLY believe they are losing money on each car - which can only be defined as the cost of production of that car is actually less than the price paid - then go and buy one before they come to their senses! Its a bargain!

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If the company were named Thévenot or Curie you wouldn't be having this discussion.

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