Tesla Seeks $1.5 Billion Junk Bonds Issue To Fund Model 3 Production (reuters.com) 159
As Tesla seeks fresh sources of cash to increase production of its new Model 3 sedan, the company announced on Monday that it would raise about $1.5 billion through its first-ever high-yield junk bond offering. "The debt offering marks Tesla's debut in the junk-bond market and the company will start road-shows on Monday, IFR reported, citing lead bankers on the deal," reports Reuters. From the report: Tesla has been riding high on investor expectations that its Model 3 will be a mass-market hit, with shareholders pushing its market value above that of General Motors Co and Ford Motor Co, the top two U.S. automakers that produce millions of cars each annually. But Tesla has yet to make an annual profit and its stock is a favorite among short-sellers, who continue to bet Tesla will fall short of its shareholders' high hopes. So far, Tesla has been raising money to pay its bills with a combination of equity offerings and convertible bonds, which eventually convert into shares. In March, the company raised $1.4 billion through a convertible debt offering. Following the announcement, Standard & Poor's assigned a "B-1" rating for the bond issue -- deep into junk credit territory. S&P also maintained its "B-" long-term corporate credit rating on Tesla. "We could lower our ratings on Tesla is execution issues related to the Model 3 launch later this year or the ongoing expansion of its Models S and X production lead to significant cost overruns," S&P said in a statement on the bonds. Meanwhile, Moody's assigned a junk "B3" rating to the bond issue and said the company's rating outlook was stable.
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Delorean was a rookie at the fundraising game, though, which is why he turned to an illegal income stream.
Elon's getting free press, government contracts, and all the lined-up, round the block, VC capitol he wants.
Edison didn't win the electricity game by producing a better product... he simply understood the way things worked better than Tesla.
Re:John DeLorean (Score:5, Insightful)
Edison didn't win the electricity game by producing a better product... he simply understood the way things worked better than Tesla.
No, Edison was an asshole who literally electrocuted neighborhood dogs and sued his competition of rudimentary patents because the only thing he cared about was money. Telsa cared about science and the advancement of society rather than profit and allowed companies infringing on his patents to continue, despite holding arguably the most valuable patents in history.
Telsa wasn't perfect but Edison was a total asshole.
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Re: John DeLorean (Score:3, Interesting)
very little of the blame for the spread of the inferior Philips drive belongs to Ford. By far the blame is on the corrupt legal system in England for burning entrepeneurs with better drives and leading to an unwillingness to scale manufacture of these fasteners to levels necessary for Ford. Clearly Robertson refused to license the design of his drive, it was not that Ford was unwilling to pay, because serious offers were made.
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Most Americans still don't know how horrible a Philips head screw is
Every American has had a few choice words with stripping and jumping Phillips screws. Everybody hates them -- just not enough to bother replacing it.
and that they have Ford to thank for that
No. There was a better screw of the day - the Robertson, but he wasn't willing to license his patent to the auto industry.
The Phillips Screw Company was an "IP" company that licensed their patent. The Phillips head was first tested in production on the 1936 Cadillac, and spread like wildfire across the American automotive industry, and from there, into everythi
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Every American has had a few choice words with stripping and jumping Phillips screws. Everybody hates them -- just not enough to bother replacing it.
Except that camming out is a feature if putting something together as if you overdrive, it won't break the bit or damage the thing being screwed together. Robinson doesn't strip as easy but it also doesn't cam out and thus, you eventually end up with a lot of broken robinson bits or split boards. While I hear the Robinson wouldn't sell bit with Ford a lot, I've also heard that he chose the Phillips head because it would cam out without damaging the product which is better for manufacturing (and a stripped P
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Yeah. "Customer issue"
Granted, it really was useful for the power drivers used in factories back in the day. We have torque limiters on the cheapest electric drivers these days.
Stripped screws are still a great way to tamper-proof while looking shoddy at the same time.
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Edison didn't win the electricity game by producing a better product... he simply understood the way things worked better than Tesla.
No, Edison was an asshole who literally electrocuted neighborhood dogs and sued his competition of rudimentary patents because the only thing he cared about was money. Telsa cared about science and the advancement of society rather than profit and allowed companies infringing on his patents to continue, despite holding arguably the most valuable patents in history.
Telsa wasn't perfect but Edison was a total asshole.
This probably goes a long way towards explaining why Musk's new automotive release isn't the Edison Model S.
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Tesla was always somewhat eccentric & became increasingly so in old age.
But thanks to George Westinghouse, Tesla's ideas & inventions became the foundation for the electrical grid.
Westinghouse doesn't get enough credit & recognition for his work & achievements.
His 1st invention, at age 22, of failsafe simultaneousa air brakes for railway cars is worthy of a medal & has probably saved many thousands of lives.
Prior to that, brakemen had to run from car to car, applying brakes manually on e
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If only there were some way we could go back to the time that he was alive, and solicit his sage advice.
Maybe the Fed will buy it (Score:2)
Tesla's gotta be better than mortgage-backed securities, right? And Bernanke/Yellen bought plenty of those.
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Tesla's gotta be better than mortgage-backed securities, right?
Mortgages have the real estate as collateral. FNMA securities also have an implicit taxpayer funded backstop.
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No mortgage backed securities are supposed to have real estate as collateral. In the lead up to the 2008 crash, the whole market was more or less fraudulent.
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from what you can analyze it really isn't.
at least mortgage backed securities are _supposed_ to be backed by mortgage.
these are.. well these are lending money to someone who should already have the money and should be able to get it somewhere else at better terms but somehow is not getting it.
The shorts are loose (Score:3)
This is after another press release a few days ago where they stated that Tesla lost 60k pre-orders. That stock could be a hyperloop if manufacturing slips at all.
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*sigh*.
60k cancellations over the course of a year. Meanwhile they've grown to nearly half a million active preorders. And since the launch event they've been netting (new orders minus lost orders) 1800 per day since the launch event. All this with Tesla attempting to anti-sell the Model 3 to preferentially push sales of S and X, since that means short-term cash that can be used to help fund their scaleup.
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anti sell? that's a new.
so tell me again why did they repay their another loan in record time and then pursue this presumably more expensive loan?
anyways, it doesn't really matter until they start talking about actual sales... and production.. ..but the one thing that should matter would be just to try to guess if they can make and sell them at a profit. doesn't matter if it's 101001230120 preorders if they can't meet them at profit.
the reason why this is sort of interesting is that they're seeking money th
Re:The shorts are loose (Score:5, Interesting)
Only to people who are not paying attention [google.is] is that "a new".
For one, by repaying early they avoided letting the US government cash out on $300m worth of stock options [slate.com]. For two, it deprived people like you of a cudgel to say "See, they're dependent on the government". Not like it stopped you, or not like people like you ever bring that up about companies like Chrysler that never repaid part of their loans.
You know, by the way, you don't need to ask these things, you can just look them up for yourself.
So you think that stockholders should want to be diluted rather than pay interest, in a company undergoing a rapid expansion? Praytell why?
Ah, yes, because you can just put $1,5 billion dollars on your credit card.
Given that Ford Motor Company wasn't even founded until 1903, that's a stupid comparison.
In your analogy, 1901 is 2001 (Tesla was founded in 2003). Ford's prototype car Sweepstakes is AC Propulsion's tzero. The equivalent on Ford's timeline to the present is the middle of 1917. And ironically, in 1917 Ford was just starting on the River Rouge complex, the Gigafactory of its day.
And as for your long "bank" screed, I don't even know which bank you're talking about. Tesla Motors as received investments from numerous sources (including banks) over the years. Tesla's starting capital was provided by Elon Musk and Mark Tarpenning out of their personal assets (Musk's from the sale of Paypal); the Series B funding round added in Valor Equity Partners. Wait a minute, is it Paypal that you're trying to say is a "bank that is not a bank" in your screed?
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RESERVATIONS. Not pre-orders. People paid for the opportunity to secure a place in line, not for the vehicle itself (although that money CAN be applied to the vehicle if you choose to buy one or fully refunded). It was a masterful coup by Musk, he got a $5B interest-free loan from consumers almost instantly with no penalties assuming they don't go bankrupt, which I doubt they will.
As for the "60K lost orders", a non-trivial chunk of those were people who got tired of waiting and instead ordered a S or X,
Better title. (Score:3)
Tesla Model 3 in Full Production
I'm not sure why people are focused on stocks when there is a technology website rather than a business/trader website. I keep reading all this bad-mouthing about Elon's ventures but they have all been panning out albeit a bit delayed. I get the feeling the people writing these articles may have a vested interesting in causing a momentary dip in the stock price because they continue to be wrong time and time again.
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Elon's ventures ... have all been panning out albeit a bit delayed.
Money talks. That investors aren't will to accept less than B+ interest rates means a lot more than your personal opinion. If you really think this is a sure thing, then go long on these bonds and get rich. When you cash in, please come back here and post a picture of your new yacht. Good luck.
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Meh, it's understandable - bondholders face only the risks, without the long-term benefits. Stockholders have floated Tesla's value to such highs because they're invested in the future of the company, selling millions of cars per year (M3 is being tooled for half a million on its own). Bondholders get none of that, they only get interest. So they take all of the risk with none of the reward (beyond interest). Since the risk is quite real, the interest rates have to be higher to compensate.
Meanwhile, to Tesl
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I honestly do not fully understand all the Musk / Tesla hate that's been going on recently, particularly on slashdot, however...
Stockholders have floated Tesla's value to such highs because they're invested in the future of the company
If memory serves even Elon said fairly recently that he thought Tesla stock was 'overpriced'. (No, sorry I do not have any citation for that, just a vague memory - can't say it troubles me one way or the other)
Now I generally don't follow share prices but, if my memory is correct, that would explain the rumours of the recent shorts on Tesla's stock. Taking those rumours along with
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I'm sorry that you hate me (enough to mention me by name, apparently), but facts matter to me.
Tesla [boston.com]'s recall rate in 2016 per 1000 vehicles was 936. This places it lower than Mazda, GM, Subaru, Toyota, Nissan, Jaguar / Land Rover, Mitsubishi, Ford, Volvo, BMW, Hyundai, Honda, Chrysler, and Volkswagen (by the end of that list we're up to 1805 recalls per 1000 vehicles). Only three manufacturers had a lower recall rate than Tesla - Porsche, Mercedes, and Kia. Furthermore, Tesla was ranked the most proactive
Data? (Score:2)
What's the symbol? What's the yield?
Re:Gov handouts not enough? (Score:5, Informative)
https://www.tesla.com/blog/tes... [tesla.com]
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1. Source [wikipedia.org]: "Zero Hedge is an English-language financial blog that aggregates news and presents editorial opinions from original and outside sources. The news portion of the site is written by a group of editors who collectively write under the pseudonym "Tyler Durden" (a character from the novel and film Fight Club). Zero Hedge's content has been classified as anti-establishment, and economically pessimistic,[3] and has been criticized for presenting extreme and sometimes pro-Russian views.[1][4]"
2. This so
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I see the wannabe-martyr narrative has flipped from "Slashdot worships Tesla!" to "Slashdot hates Tesla!"
Re:Intelligent man loses his mind (Score:5, Insightful)
With the Model 3 costing just under Eighty Thousand there aren't going to be many buyers.
First of all, you have the price all wrong because the base model is $35K. Secondly, Tesla already has more preorders to fill than they can keep up with which is why you don't see advertisements for Tesla's cars.
People with money, are not going to open their wallets for it.
That must explain why Tesla sells every single car they make. -_-
You're a dummy.
Re:Intelligent man loses his mind (Score:4, Interesting)
Model S was a $50k car for $60k, the Model 3 is a $35k car for & 49k. This is not a surprise to anyone who's been watching tesla for any length of time.
I own a model S, I love it and think it's the best car ever made. It is also nowhere even close to what Elon promised it would be.
Tesla is the absolute slimiest company I've ever done business with. When they aren't flat out lying about what their product can do, they're wildly exaggerating it, or actively at war with their existing customers.
The Model S is still the best car on the market today. But if I have to replace mine, I could not in good conscience give another penny to such an unethical company. Which is a shame because no other company has yet decided to try to compete with Tesla. I really hope I can keep my Model S going until a competitor arrives, but Tesla isn't making it easy.
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"Tesla is the absolute slimiest company I've ever done business with." And you accuse Tesla of exaggerating? I own a 2016 S and I can say without hesitation that it's the best car buying experience and the best "dealer" experience of any car I've owned. Ever. The car is exactly what I hoped for and even exceeded my expectations. Autopilot is wonderful on long trips. Charging/Supercharging works as advertised. The car is wicked powerful and will effortlessly (really, half throttle, no drama) embarrass
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Autopilot is amazing yes but it still can't do even a single one of the many items listed at the D reveal event. You rave about how great the car is and I agree it is the best car ever made. However Tesla has lied about every single function they've put on it they've been caught lying about battery pack sizes, horsepower, capabilities of autopilot, not to mention the little scndal where they put counters in ludacris cars to disable the feature if you use it more than a handful of times. In addition to that
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The car can't look around the dirt on the camera. You can. Thinking of which, Tesla's AP cameras (with the exception of the front one) have no way of cleaning dirt or even rain off of them. They won't work in inclement weather.
"full self driving" is just as honest as "hands free on-ramp to off-ramp" was on AP1, or how about "will come to you anywhere you are on private property" remember that lie? how about "recognizes stop signs and traffic lights"? AP 1 was going to do that too. in fact of all the claims
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Maybe I need to clarify. Most advanced. Best features. Best practicality.
I won't claim best build quality or best reliability.
There is simply nothing else on the market like it though, it has zero competition, so they can basically get away with anything, as they constantly prove. It's mind boggling to me that no other company is even making the slightest effort to compete.
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Wow, so much stupidity in one post, where to begin...
Electric cars are old but long-range electric cars are not. As for advanced it's not just the electric powertrain, though that alone does put it away above anything else on the road today, it is also about all the other technology, it would be almost impossible for me to go back to a car that did not have all the simple features that I'm used to now, such things as the ability to turn on the climate control from my SmartWatch ahead of time even if the veh
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Show me a Camry with autopilot, a 17" touch screen, remote climate control, an always on Internet connection, 60 cubic feet of cargo volume, does 0 to 60 in 4.2, and that never needs to visit a gas station ever.
As for your links about repair I don't have a clue what you're trying to prove. I've already told you that the company that makes the car is the worst company on the face of the planet, I don't know how continuing to prove it is making any point. The car is great, I have absolutely no complaints with
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Every word out of their mouths is a lie.
When they unveiled AP originally they made the following promises as they took everyone's money:
- hands free on ramp to off ramp driving
- summon that will find It's way to you anywhere you are on private property
- automatic emergency braking that would bring the vehicle to a complete stop
- stop sign and traffic light detection
- automatically adjust to speed limits
- system that worked at any speed
Not a single one of those items was ever delivered. Now they have AP2.0 w
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You've obviously never experienced Tesla. They make Apple look honest, open, and inexpensive.
I really dislike Apple, but Tesla takes every horrible thing that Apple does she cranks it up to 11.
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I never said the car wasn't the best car in existence. In fact I specifically said it was.
Is the company, not the car, I have a problem with.
Exaggerating is one thing, but they flat out lied. They haven't delivered even a single one of the feature they claimed autopilot would do, they lied about the battery capacity, and the horsepower, and they actively STOLE functionally from the vehicle after delivery.
Yes I test drove it, but the features I paid for weren't available at the time. Yes I researched, and ev
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It's all part of a pattern.
My 85kWh battery is only 77kWh,
the P85D's 691 horespower is only 463,
Ludicrous mode batteries had a counter in them to neuter the acceleration after a set number of launches,
The list goes on. These are not the actions of a reputable company.
As for the Mobileye thing, that had no bearing on many of Tesla's actions. For instance, the AP1 cars have nags if you take your hands off the wheel, originally they only occurred in turns, now they occur every 30 seconds, and if they happen 3
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Wow... Stockholm syndrome much?
No, my battery is NOT software limited, it is quite simply less than 85kWh. They lied about the capacity. This has been confirmed by people disassembling the battery, and testing the individual cells. This is NOT a software limit, this is false advertising.
The horsepower output of the motors isn't relevant if the battery can't output it. Why don't normal car manufacturers say that their axles are capable of 50,000 horsepower then? because it would be stupid to quote the horesp
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According to this page [teslarati.com], a Model 3 with every option costs $59,500.
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Personally I am considering a model 3. I would get the $5K luxury package and maybe an alternate color. $41K, minus perhaps $5K in government subsidy by the time my number comes up. Then, I save $1K per year in fuel and probably some additional in maintenance...and it become a pretty average-price car. Sure if you get all the options it costs more, but that's true of all cars.
Regular stores and malls are closing because ways of competition from Amazon, not a general decline in people buying stuff.
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Who the heck modded the parent up?
I'm pretty sure the most tricked out Model 3 offered is in the mid 50s.
And stores and malls are closing because they are being replaced by online sales and Walmart - not due to any drop in consumer spending.
Even with Walmart, I drove through for my groceries today instead of going in. Once they develop free autonomous delivery, they can move to a warehouse on less valuable land.
I hope that they all die, and we restore the land to parks. Much of it is near roads in accessibl
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I think you're justifying your views based on your preferences. I don't think the evidence supports your view as being in the dominant trend, but I'm no economic expert.
From what I see, consumer spending gains have been steadily outpacing inflation even in the face of a falloff in vehicle sales since vehicles peaked in the 2014 timeframe. If that isn't due to an increase in spending on the stuff normally sold in stores even while stores are closing, then what is it?
In addition, it appears that e-commerce ha
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Hehe... um... might want to check your pricing. Model 3 starts at $35k (without credits). With a standard featureset comparable to a BMW 3-Series optioned up to $41-42k.
Of course you can option it up further. The current announced options are:
* Premium upgrade package (misc added luxury details): +$5k
* Metallic paint: +$1k
* Long-range (310 instead of 220 miles range; 5,1 second instead of 5,6 second 0-60; 8yr/120k mi battery warranty instead of 8yr/100k mi): +$9k
* 19" "turb
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Oh yeah, I forgot - you can also add in autopilot for $5k, and full self driving (not yet available) for $3k.
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"not yet available" is a bit of an exaggeration considering it will NEVER be available with the hardware currently on those cars.
Of course considering that the original AP hardware on the S can't do any of the things that Elon promised it would when it was first launched either, that's no suprise. Of course Tesla's been getting a pass on the outright lies around the model S so I'm not sure why they would bother caring about telling the truth on their newer cars.
Anyone who pays for "full self driving" is a s
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I actually agree with that. I think it's stupid to pay for full self driving, and I think Tesla is being way too optimistic the timeframe. I'm not prepared to say that the hardware can't support it, but I think the challenge - both regulatory and technological - is IMHO much harder than their timeframe supports.
AP works, although its reliability level gives it mixed reviews (more positive than negative, but still decidedly mixed). Tesla really got set back when they had to start over with AP2 after the cont
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The 3 with PUP and the 310mi range starts at $44k. The short range version deliveries begin in fall, so not exactly a long wait.
And your data that it wasn't commonly purchased is?
The higher-range S and X models have continuously drifted down in price over time. Just this week, Model X prices were reduced by $3k. Do you have a problem with that? How exactly do you think t
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The 3 with PUP and the 310mi range starts at $44k. The short range version deliveries begin in fall, so not exactly a long wait.
That's an awful lot of certainty when talking about a company that has never once met a single deadline that they've imposed on themselves and has a history of many outright lies about future (and even current) products.
You probably also believed that the $50,000 Model S was going to happen.
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You mean like delivering the first 30 vehicles at the end of July 2017? When the original announcement was that delivery would begin in late 2017 [tesla.com]?
They're currently selling a $35k Model S (the Model 3). I'll have that one, thanks.
And for the record, the Model S was supposed t
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They're currently selling a $35k Model S (the Model 3). I'll have that one, thanks.
The Model 3 is not a $35k Model S. The Model S already has iffy interior quality compared to other vehicles in its price class, the Model 3 degrades that even further to meet the price point.
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The abundant test drive reviews disagree with you.
Motor Trend - Exclusive: Tesla Model 3 First Drive Review - Motor Trend [motortrend.com]
Top Gear- Tesla Model 3 review: first drive of Elon Musk's affordable EV [topgear.com]
The Verge - A closer look at Tesla Model 3's spartan interior [theverge.com]
The Verge - Tesla Model 3 first drive: this is the car that Elon Musk promised [theverge.com]
Bloomberg - Tesla’s Model 3 Arrives With a Surprise 310-Mile Range [bloomberg.com]
Bloomberg[/COLOR] - Driving Tesla’s Model 3 Changes Everything [bloomberg.com]
Car and Driver - 2018 Tesla Mod [caranddriver.com]
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The reviewers I watch on Youtube have all commented on the cheapness of the interior. I don't think that it's going to impede sales or anything, but it's not a luxury vehicle. Even the Model S is only mid-range in terms of luxury appointments. An Audi ten years older is nicer inside. Mine is even older than that, and at least everything is soft-touch, which is still not true inside the Model S. They've also just eliminated the leather seating option; making it non-standard is the best decision for a lot of
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I don't know what "reviewers you watch on Youtube", but I'm going to guess that a whopping zero percent of them have ever been inside a Model 3. The vehicle was opened up to the press, which is not a huge total number of people, at the launch event. People who were at the launch event - mainly employees and their guests - also got rides. The only other people to ride in them are the first 30 owners - mainly Tesla board mem
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I don't know what "reviewers you watch on Youtube", but I'm going to guess that a whopping zero percent of them have ever been inside a Model 3.
All of them have. Stop choking on old media cock.
and at least everything is soft-touch, which is still not true inside the Model S.
Again, facepalm. One of the main things reviewers have described about the Model 3 is how soft everything is. The seats are described as being almost like a pillow.
The fact that you are talking about seats shows that you know fuck-all about what "soft-touch materials" means in automotive interior. Please fuck off.
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Well, gee, this should be really easy then! Link one.
Believe it or not, seats are part of an interior. And please reread the first sentence, with a focus on the word everything.
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Yes, they keep getting pushed back, and have been a whopping zero times. The only pushing of the schedule was when the whole schedule got pushed forward last year. And so far at least they've met the pushed-forward schedule.
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$35k is approximately the average price for a new car in the US.
As for insurance, over on the Tesla forums, most people's quotes are coming at surprisingly low amounts - often replacing vehicles that are several years old at the same rate. A likely reason is Tesla's heavy focus on crash safety, including various crash avoidance features (autobraking, etc).
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Yeah, nobody wants their stupid Model 3. Except for the half million people waiting in line for it, but apart from that, nobody! ;)
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If another person on this thread makes that stupid misunderstanding of the "60k cancellations" statement I'm literally going to hit my head on the wall. That's 60k over the coarse of the past year, while the total number of active reservations has climbed to nearly half a million. After the first deliveries they were netting (read: positive) 1800 new reservations per day.
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The 60k number comes from Tesla. Do you pick and choose to believe only the things Tesla says that you can scream "Dooooom!" about and call everything else a lie?
The cash flow from customer deposits makes up revenue that is declared in SEC filings. So if you think that the company is faking it, and for some reason the SEC is missing it, by all means take your conspiracy to the SEC.
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Got it. Tesla is lying to the SEC, and the SEC doesn't give a rat's arse.
You've convinced me! Subscribe me to your newsletter!
Re: Why not just build some cars, sell them, then (Score:1)
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We need a new round of short sellers to lose another half billion dollars [cnbc.com] betting against Tesla ;) Hey, maybe a new TTAC Tesla Deathwatch while we're at it! ;)
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Yeah, try googling "Tesla stock" and clicking the "5 year" button. All of those smart people who craftily avoided having their money increase 12-fold....
Hey, you should write for TTAC! [cleantechnica.com] ;)
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You know, the "Tesla is going to go bankrupt any day now" screed was tiresome back when TTAC was doing it a decade ago. Now it's just silly.
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I wouldn't be surprised if the stock dropped in value once this bubble cools down. But I think the company will still be around in 5 years and they'll deliver more Model 3s.
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Anyway, since Slashdot has gone hard on bear articles about Tesla, have a bull one [seekingalpha.com].
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Re:Bad comments (Score:5, Insightful)
The margin on S and X is 25%. Model 3's expected margin is also around 25%.
Furthermore - and please pay attention to this part - A company undergoing an exponential scaleup is not supposed to be returning profits. They're supposed to be investing every last penny they take in in order to minimize how much additional capital they have to raise to fund the scaleup.
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Uhh, that's a 25% GROSS margin. The profit margin of TSLA is currently -12.06%. Negative. Tesla does not make a profit [cnn.com] today, nor has it in the past.
Snapchat lost over $500 million in 2016, and was even arrogant enough to declare in their IPO that they haven't made a profit, and may never make a profit. Yet they're worth billions.
Your talk of "profits" and financial common sense has no place in 21st century business. Narcissism, fake news, and hype are the new currency.
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but they have no path to profitability right now,
What do you think massive expanding production is?
Look at their financial statements, remove the factory expansion, and they still lose money.
The whole point of the factory expansion is that you have to spend money to make money. The automakers spent a lot more growing their businesses.
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What do you think massive expanding production is?
A path to destruction without massively expanding sales to go with it.
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Did your company have literally two years of advanced orders lined up for products from its new shops, without any advertising and without the customers ever having had a chance to try the product out?
Your speaking apples and oranges. (Score:2)
Tesla can make 25% profit on each vehicle, and still not be a profitable company. They're not the same thing.
Let's simplify. I sell a widget for $100. Each widget costs me $75 to make. I earn $25 per widget. However, I can only build a 1,000 widgets. My maximum earnings are $25,000. But I have orders for 5,000 and market potential for 100,000. But in order to produce that many I will need to build a new factory for $500,000. So I borrow money to build the $500,000 factory. Now I have a $100,000 a year
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Furthermore - and please pay attention to this part - A company undergoing an exponential scaleup is not supposed to be returning profits. They're supposed to be investing every last penny they take in in order to minimize how much additional capital they have to raise to fund the scaleup.
Correct. I'd like to point out that when Amazon started in the 1990s that Wall Street types said it would never be profitable and their business model couldn't be sustained. I'm not saying that Tesla is Amazon, but you're quite right in pointing out that the time to complain about profits is not right now.
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A company undergoing an exponential scaleup is not supposed to be returning profits. They're supposed to be investing every last penny they take in in order to minimize how much additional capital they have to raise to fund the scaleup.
Reminds me of Amazon's profits early on - or rather, the lack of [slidesharecdn.com].
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Indeed. Anyone else remember this scene [youtube.com] from Futurama?
Auto Company Profits (Score:2)
Well look at all the other automobile manufacturers, many of them have failed to be profitable in many years. And these are well established corporations with almost a century of history building meager evolutionary products rather than innovative ones.
All things considered, Tesla is doing surprisingly well considering. I do hope they succeed. But I think they need to move beyond cars and expand into infrastructure to do that.
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"But I think they need to move beyond cars and expand into infrastructure to do that"
Already underway but I think Musk should forget about Boring & Hyperloop and build up the energy storage business & look at becoming or partnering with a utility.
Getting the Tres Amigas Superstation built & operating would be a huge win both for renewables & grid stability across the US South from Miami to Mt Shasta and backing it with battery storage would be a triumph for Tesla.
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Selling more convertible stock means more dilution. Selling bonds means that they want to hang onto their share in the company, and feel that paying interest after the plant is online is worth the benefit of not having to dilute.
NOPE, MAN NOPE (Score:2)
selling more stock would mean musk/tesla losing stock value, diluting their share.
selling bonds means EVERYONE who holds the stock loses value for that amount. ..are you getting perhaps now why it is being given junk bond ratings?
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If that happens the company will have to sell the machine
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Yeah we hear that thing about Amazon and people seem to think that just because Amazon was a start up that started out by losing money and is now hugely successful it means that all companies that start out losing money can become hugely successful at the flick of a switch.
Amazon had a truly disruptive business model and by the time anybody else realised they could do the same thing, Amazon already had such strong brand recognition, it didn't matter.
By contrast, Tesla is a car manufacturer. There is nothing
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"If Telsa can take this money and make 300% returns on it, than this bond deal is amazing for the shareholders!"
Re: NOPE, MAN NOPE (Score:2)
I bought ~$20,000 worth of Tesla stock, at a time when they sold at ~$24.00. So, about 830 shares. Each one is somewhere near $365.00 today. I haven't sold any. I still trust Musk with my money, in other words.
Re: NOPE, MAN NOPE (Score:2)
Re:So pre-orders aren't enough? (Score:5, Interesting)
Rei observed:
Selling more convertible stock means more dilution. Selling bonds means that they want to hang onto their share in the company, and feel that paying interest after the plant is online is worth the benefit of not having to dilute.
Exactly so.
Junk bond status begins at BBB- rating. That doesn't mean they aren't a good investment. It merely means that they carriy greater risk than do "investment grade" bonds. What type of risk that consists of, and the degree of risk involved varies from bond issue to bond issue. Wikipedia's article on high-yield debt [wikipedia.org] is fairly well-written, and it does a good job of explaining the basics. I recommend it to people who feel tempted to throw the term "junk bond" around without actually understanding what that actually means.
Elon haters are legion. Many of them are "car guys" who bet their reputations - and in some cases their shirts - that Tesla would fail before it ever sold a car. They resent Musk because he proved them wrong. Others are Washington beltway bandits who fear the disruptive effects of SpaceX's success on the defense industry gravy train, because it's their oxen that stand to be gored by it ...
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Nobody seems to notice this is a pay-day loan. Tesla is going to lose their shirt in interest if they can't pay it back PDQ.
Tesla is confident they can scale up and pay this off. The company's established; it has a strong mission; they believe in themselves, and this is demonstrative of that belief. Now they just have to avoid losing customers by taking the next 8 years to get those millions of Model 3 pre-orders out the door, so they better get their hands on some cash quick.