By on April 15, 2016

Tesla Model 3 Prototype on road, Image: Tesla Motors

Orders of the life changing, marriage-saving Tesla Model 3 are poised to hit 400,000, but Fiat Chrysler Automobiles CEO Sergio Marchionne doesn’t think they’ve got the right stuff.

Diarmuid O’Connell, Tesla’s vice-president of business development, confirmed the number of orders at an electric vehicle conference in Amsterdam yesterday, two weeks after the low-priced model’s glitzy unveiling, Electrek has reported.

The numbers seem like a slam dunk win for the electric automaker, but turning those orders into actual cars in a timely fashion is where the trouble lies. Following the launch, Tesla founder Elon Musk said production capacity will need to be ramped up in order to deliver vehicles as fast as possible once production starts in late 2017.

“It’s a success as far as it is right now,” O’Connell said during a question-and-answer session. “The real success will be delivering a great product at the volumes are possible and necessary.”

One industry leader doubts Tesla’s ability to turn a profit with the Model 3, and that man is none other than Sergio, lover of aggressive metaphors and industry partnerships that never happen.

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.

[Image: Tesla Motors]

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105 Comments on “Tesla Model 3 Nears 400,000 Orders; Sergio Disses Musk...”


  • avatar
    DeadWeight

    Tesla should just announce a price cut to $28,000 on the pre-order of a Model 3.

    That way, they can get to 1 million $1,000 deposits for a cool billion in play money.

    Tesla can worry about the actual feasability of manufacturing capacity, supplier constraints, QC, profit/loss, etc., later.

  • avatar

    He’s not wrong, but its hard to take anything seriously said by the guy who couldn’t get a 500L off the lot if he popped the clutch and let it roll downhill out the driveway.

    • 0 avatar
      Pch101

      FCA is turning a modest profit, unlike Tesla.

      • 0 avatar
        orenwolf

        Is it fun saying Telsa isn’t turning a profit when everyone and their dog knows they are reinvesting all their money into R&D and production ramp?

        I can’t tell if it’s cognitive dissonance or just plain ol’ confirmation bias/intellectual dishonesty at work.

        Does anyone seriously expect Tesla not to dump every red cent they have (and can borrow) into scaling up at this point?

        • 0 avatar
          Pch101

          I’m willing to bet that I forgot more about finance this morning than you’ve ever known.

          • 0 avatar
            orenwolf

            If you’d prefer to stand behind “I’m smarter than you therefore your statements have no merit” vs, you know, discussing them, more power to you sir.

          • 0 avatar
            Pch101

            Is there a point in explaining it to you when you obviously have no interest in understanding it?

          • 0 avatar
            wumpus

            Another thing he forgot is how much money Microsoft “lost” between 1983 and 2003. Well at least they made no more than *zero* profit, at least by any accounting that insists Tesla is losing money on each car.

            Look it up, no “profit” until 2003, every last dime was reinvested or paid as wages (and to not lose money assumes that the stock options that made so many employees millionares were free). So obviously anyone hanging on to Telsa stock would be well to learn of the Microsoft debacle.

          • 0 avatar
            Pch101

            Microsoft is a technology company, i.e. potential for high margins.

            Tesla is a manufacturing company, i.e. almost no potential for high margins.

            The fact that the fanboys don’t understand the significance of this difference is part of the problem with these discussions.

        • 0 avatar
          mcs

          @orenwolf Exactly. Until they get all of their manufacturing/sales/service facilities in place and get the 3 and Y out the door, their going to be burning cash on building the company. That’s the way it works for any new business. Look at how long it took for Amazon to start turning a profit.

          http://www.fool.com/investing/general/2016/03/27/how-tesla-motors-could-be-profitable-if-it-wanted.aspx

          • 0 avatar
            Pch101

            You finance geniuses act as if R&D is some sort of option, so that its costs don’t matter.

            Just because the cost isn’t included in gross margin doesn’t meant that it isn’t mandatory.

            One reason that automotive startups don’t work is precisely because the R&D costs can’t be amortized and will invariably be inadequate due to the inability to make the per-unit costs reasonable.

            (I realize that this is like talking to a wall made of dead batteries, but whatever.)

          • 0 avatar
            porschespeed

            Pch, Don’t fear, the illiterati are the dipsh-t dupes paying for the rest of us to either buy a highly subsidized car, or get rich shorting a completely failed company.

            Just like old GM. I’ll ride this train right off the cliff. All the while listening to fanbois tell me that it won’t happen.

        • 0 avatar
          deanst

          If they were “investing”, the expense would be capitalized and not hit their income statement.

          • 0 avatar
            Pch101

            “If they were ‘investing’, the expense would be capitalized and not hit their income statement.”

            Those guys have no idea what you mean by this.

          • 0 avatar
            raffi14

            Building a 6 billion dollar battery factory isn’t mandatory. Alternatively they could stay a niche automaker forever and just report profits from Model S margins.

            They could keep spending at 2013 or 2014 levels for R&D/sales and just make small improvements to the platform over time.

          • 0 avatar
            Pch101

            Argh. The cost of capital equipment such as factories is not included in profit and loss.

            Do I have to put this in all-caps in order to get the point across?

          • 0 avatar
            CarnotCycle

            I recall Warren Buffett in one of his Owner Manual things talking about auto-business in particular as example of business-type Berk will never buy, because it costs so much money to make even a little.

            Margins don’t matter as much to Warren, who wants bizzes that just throw some cash off free-and-clear and without all that work and risk – like retail (low margin), shilling insurance with a Gecko (mid margin), or timely pure deals with desperate counterparts like GE or Goldman Sachs (high margin).

          • 0 avatar
            orenwolf

            So, pch, when Tesla reports revenue of 940M (893M from auto), cost of revenue (including service) at 680M, 196M operating expenses, and 168M R&D expenses, for a total of 102M operating loss, you believe that Tesla is losing money and R&D has nothing to do with it?

            Because, to me, it looks like they spent $100M more on R&D than their income, leading to their posted loss.

            http://ir.teslamotors.com/secfiling.cfm?filingID=1564590-15-3789&CIK=1318605

          • 0 avatar
            Pch101

            If Tesla had adequate R&D spending, then its releases would not be so behind schedule. (That being said, the company was wise to refresh the Model S.)

            It’s not a matter of spending some money on R&D, but on spending enough. Tesla has smaller losses than it would have otherwise.

          • 0 avatar
            28-Cars-Later

            I’m not disagreeing Tesla has not spent adequate amounts on R&D in order to meet milestones, but I will point out it is entirely possible the challenges the company faces are partially compounded by the fact the wrong people are involved in the first place. A common response to missing dates in software development is to add more resources to the project/sprint etc, but this is actually counterproductive as explained by Brooks Law. Perhaps Tesla is in a similar situation and had succumb to the same problem?

            “Brooks’ law is a claim about software project management according to which “adding manpower to a late software project makes it later”.[1][2] It was coined by Fred Brooks in his 1975 book The Mythical Man-Month. According to Brooks, there is an incremental person who, when added to a project, makes it take more, not less time.”

            https://en.wikipedia.org/wiki/Brooks%E2%80%99_law

          • 0 avatar
            Pch101

            Tesla is well-managed and it has done an outstanding job of brand building. Musk may be tedious, but he deserves more than a little respect for getting this far.

            But Tesla faces the same scale issues that plague all low-volume automakers, which is compounded by the fact that its car has a high-cost component (the battery) that doesn’t scale well.

            So when automakers avoid diving deep into the EV space, it isn’t because they’re all morons. It’s because the numbers involved don’t make sense.

          • 0 avatar
            28-Cars-Later

            So without scale, how can Tesla hope to survive long term?

          • 0 avatar
            Pch101

            Tesla has built a brand that is solid enough that it may prove to eventually be a good acquisition target.

            But the stock price is very frothy. Getting the kind of earnings that would justify the current price will be difficult.

            The smart thing to do would be to morph the business so that it becomes something more than an automotive company. In that regard, I personally like the Gigafactory concept even though I don’t see that becoming a particularly high-margin business, either. If the company can’t use the brand to build margins, then it will have to find some kind of volume (that doesn’t necessarily have to be automotive.)

          • 0 avatar
            28-Cars-Later

            Thx for the explanation Pch.

        • 0 avatar
          johnny ro

          Not sure if Orenwolf is pro or con Tesla. Prob Pro.

          Accounting income does not tell if value is being created. They are creating plenty of value. Vast huge value.

          It is not allowed to recognize internally generated intangible assets in financial statements shared with investors. And worse, not all value is recognizable as intangible assets when purchased from another company. Under IFRS. Or “local GAAP”; USGAAP.

          Accounting does tell if they are increasing or decreasing cash, and if increase, if it is borrowed or internally generated. Cash flow statement.

          To fail they have to run out of cash. I don’t see that happening any time soon.

          Also look at the order book. What other company has huge preorders? Who can sell 400k units of one model as soon as push out the door? I see huge success.

          With my range anxiety, I am waiting for more range.

        • 0 avatar
          hreardon

          orenwolf –

          What many people forget is that the cost structure for a technology company and a heavy manufacturing firm are light years different.

          Apple, Microsoft, et al. manufacture intellectual property. Auto manufacture, with the immense cost structure, regulatory burdens and fixed assets involved is monumentally different.

          It’s not that Musk can’t or won’t find a way to turn a profit – it’s just that a lot of pundits seem to forget that there’s a big difference between technology companies and auto manufacturers.

      • 0 avatar
        probert

        If you look at the reporting on this , you’ll see it’s a matter of interpretation.

        I consider investment in R/D just that, an investment, not a loss. Particularly if you take into account that they’re making the most advanced car in the world.

        They are also investing in creating a fueling infrastructure.

        They are also investing in the largest battery factory in the world. This alone will give them control over the costliest part of the car. BTW: the factory is partially functioning and producing home battery power units, which are selling quite well.

        As an investor, I look at this and say: thats a company that’s thinking things through. It gives me confidence.

        • 0 avatar
          Pch101

          R&D isn’t an option in the automotive business, it’s mandatory.

          Tesla is spending money on R&D because it has no choice. It’s not heroic or special or a sign of genius, but an obligation; no automaker can survive without it.

          The issue is that Tesla’s R&D effort is not sufficient to keep up with the industry. If it was, then the losses would be even larger than they are.

          The reason that other automakers don’t follow the same approach as Tesla is because it would lose money. If you need any proof of this, then look at Tesla — its financial results are exactly the sort of thing that one would expect from a company that can’t sell a product for more than it costs to make it. And R&D is one of those necessary expenses that are part of the cost of making it.

        • 0 avatar
          porschespeed

          “…the most advanced car in the world.”

          That statement is so far beyond hilarious it makes one question your sanity. That you’re an “investor” is even funnier – I’ll be taking your money on the short…

    • 0 avatar
      raffi14

      Sure but massively expanding headcount in anticipation of Model 3 sure does. And it’s going to get worse before it gets better, there’s something like 1500 openings, mostly in service and sales.

    • 0 avatar
      Splorg McGillicuddy

      Thread winner:
      orenwolf. Thread loser: Pch101

      Me? I bought TSLA at $27 and I’m holding onto it.

  • avatar
    JustPassinThru

    Marchionne is right. Tesa doesn’t have the right stuff.

    Neither does FCA, however. Pot, meet Kettle.

    See the both of y’all in Bankruptcy Court.

  • avatar

    The day TESLA hits $300/share I AM OUT

  • avatar
    SCE to AUX

    There will be 628k Model 3 pre-orders by the end of 2016.

    Instead of Sergio looking for someone else to produce the unloved 200 and Dart, maybe FCA could help Tesla build Model 3s, in the same way car mfrs built bombers during WWII. But they’d need a plant first.

  • avatar
    stuki

    Just out of curiosity, who the heck preorders a car not even in production yet?

    Is it just the same crew, that camps out for the latest Isomethings and Florida Condos?

    Tesla may be great and all, but with a buying public like this, how come Nigerian Motors is leaving their buddy from down south, to pick over all the deposits?

    • 0 avatar
      Sjalabais

      Sanity. On the internet. I applaud your comment with everything I’ve got.

    • 0 avatar
      DeadWeight

      Faraday Future is taking pre-orders, too!

      You down, BRAH????!!!!

      http://www.faradayfuture.com/

      *Yep. I just compared the vaporware that will be the Model 3 (if not vaporware, then 1st unit delivered in 2021, and 75,000th unit delivered in 2023, all at a loss per unit) to Faraday Future.

      **BREAKING NEWS*** – Elon Musk today announced that the actual MSRP of the Model 3 will be $27,999.99 before any available state or federal tax credits, and that the standard Model 3 will now come with a standard battery pack that will produce a minimum range of 888 miles.

      • 0 avatar
        mcs

        I’d go to Rimac before I’d ever get near Faraday.

      • 0 avatar
        suspekt

        I know you hate Tesla and Elon and all…. but the Model S is a genuinely interesting car that actually does appeal to a wide swath of the public… the fact that in some iterations it can lay down sub 12 second 1/4 mile runs is worth some kudos….

        I just dont understand the Elon/Tesla hate…. he is a brilliant entrepeneur and has delivered the product… the question of profitability and subsidy built into each unit is contentious but I really do feel the man has delivered on a very ambitious vision that few people could have pulled off…. Tesla isnt going anywwhere and I think in 10 years time will be an established marque that has the “want” factor

        • 0 avatar
          TonyJZX

          Yeah this. I understand the skepticism but the Tesla 3 isnt the first model. People have eyes. They can see that the Model S is on the road and it drives and people own it and they are happy.

          It doesnt take a huge stretch of the imagination to see that Musk will have the same success with the Model 3 as the Model S.

          btw. didnt Musk also do something with a rocket? Like land it autonomously… on a platform in the sea.

          I dont disagree that the Model S has had issues. So have other companies but in this case, success breeds success breeds success.

        • 0 avatar
          porschespeed

          ‘Brilliant on-ta-panoor’ (Eddie Murphy look it up).

          Are you kidding? He’s rich because his startup merged with a different startup that turned into Paypal and got sold to ebay. He was dismissed long before the sale – because he wasn’t that talented. He got to keep his stock grant, that’s his “genius”.

          The Roadster was a POS, the S is rather mediocre. They were all late, over budget, and, most important, don’t make money. Not to mention long term durability issues.

          If you didn’t “think of” the fast train in a vacuum tube when you were a kid 40 years ago, you lacked imagination and didn’t read enough science fiction. You know the French used to deliver mail via pneumatic tubes – about 100 years ago.

          Every engineer that I’ve ever met from JPL or NASA has always opined that if only we bought off-the-shelf and didn’t test as much we could really do neat sh-t. There’s SpaceX.

          Musk does NONE of this on his own. He’s a ‘idea man’ and a carnival barker.

          • 0 avatar
            Whatnext

            So I guess Henry Ford was just a carnival barker?

          • 0 avatar
            porschespeed

            Henry Ford did a bunch of things that Musk can’t/won’t do.

            Comparing the two is like comparing your mom’s baked chicken to Thomas Keller’s.

    • 0 avatar
      orenwolf

      I put down a deposit. I did it to have more control over an eventual delivery date (as in, not waiting for a bazillion preorder cars first). To me it’s not much different than paying for a kickstarter campaign, just on a longer timeframe.

      I have some awesome digital locks I bought for $250 that way, took 18 months to deliver. It took them another year, nearly, before they cleared backorders and were able to deliver to “normal folk”.

      So for me, it’s a way to 1) provide modest assistance and stability to Tesla as they go down this path, and 2) hopefully get my vehicle sooner than later.

      Pretty straightforward.

      • 0 avatar
        WheelMcCoy

        @orenwolf and @VoGo – Geez you guyz! Just for that, I’m lining up to pre-order my Apple Car tomorrow. :)

        Kidding aside, you make fair points. And for those who mock Apple fans boys who camp out, or Star Wars fan boys who camp out, or Harry Potter fans who wait in line for midnight Barnes and Nobles book sales, I get that it’s a social event. Too often, these kids / young adults are criticized for staying in front of their computers in their Mom’s basement and being anti-social, but they have their own way of interacting with the world.

    • 0 avatar
      VoGo

      I pre-ordered in the first hour. I am probably like #99,000, but now I’m ahead of 225K other guys, many of whom will pay me to move up. Worst case, I cancel my order and get my money back.

      • 0 avatar
        Pch101

        “I’m ahead of 225K other guys, many of whom will pay me to move up.”

        Your place in the queue isn’t transferable.

        I have to wonder how many deposits were made by those who did so because they wrongly assumed that it was.

        • 0 avatar
          VoGo

          I simplified. My place isn’t transferable, but if demand remains high when my turn comes up, Tesla can’t stop me from buying the car optioned how someone else wants it, and then re-selling it to them at a higher price.

          • 0 avatar
            Pch101

            My point is that I have to wonder how many of the reservations are being placed by those who are doing it just for speculative purposes and who have no intention of buying the car.

          • 0 avatar
            Scoutdude

            I do think that some of those earlier orders were speculative. The question of course is just how many. Even if half of those that ordered early on thinking that someone later on would want to move up and indeed they succeed in finding a “buyer” for their space they still have 200,000 orders.

            Personally I don’t think the speculators and people who are willing to pay to move up in line is that high. I think that 25% is on the high end.

            I know the 3 people I know who put their $1000 down did so fully intending to go through with the purchase. All 3 do have a plug in vehicle or 3 already. Yes two of those are an Energi and a Volt so they might not be prepared for the reality of a pure EV. Now the 3rd person is an EV only person with in the order acquired are a Roadster, RAV-4 EV (one of the early lease only that ended up for sale and they paid to have it shipped from CA to WA) and finally a Leaf. Not sure why they bypassed the S or X since both benefited heavily from Microsoft stock options.

          • 0 avatar
            porschespeed

            ‘Preorders’ mean precisely jack-shit.

            Tons of people who can’t afford to buy now, tons who will change their minds long before the car actually happens (if it ever does).

            It *might* turn into 50K morons who are slavishly devoted. Maybe.

    • 0 avatar
      SCE to AUX

      @stuki: I pre-ordered an hour before the car was presented. I’m not that guy who camps out for the latest iPhone or concert tickets.

      I had a Leaf, and really liked the EV ownership & driving experience.

      I’ve test-driven a Model S.

      Zero to whatever without a gear change, no slipping torque converter or clutch, silent driving, and a full tank of electrons every morning is easy to get used to. Low-to-no maintenance is sweet, too.

      The Model 3 is the car I’ve been waiting for, and apparently that’s true for many others.

      The barrier to entry is relatively low ($1000), and refundable, so the risk is minimal.

    • 0 avatar
      Kyree S. Williams

      “Is it just the same crew, that camps out for the latest Isomethings and Florida Condos?”

      No. At least when you sit outside of the Apple store waiting for the iPhone 97—not that I do that, either—you know it’s a real thing.

      Call this more of a crowd-funding effort on Tesla’s part. Although those deposits didn’t even make a dent in the budget that will be necessary to bring the Model 3 to production. What they did do, however, is allow Tesla to get much larger sums of money from investors, as well as driving up the company’s stock price.

      Who knows whether or not it’ll be profitable in the end.

    • 0 avatar
      raffi14

      It’s a simple math calculation, if there’s any interest in buying, it’s worth it to hold a place before the $7500 tax credit is reduced or phased out entirely.

      • 0 avatar
        Mandalorian

        It’s because Teslas aren’t a calculated rational pragmatic purchase, they’re the latest and greatest tech fashion accessory. Car buying usually does have some emotional drive behind it, but the vast majority of people do want something at least a bit proven and don’t want to be first adopters.

        Tech toys on the other hand are all about as new as possible. Every Silicon valley office beta-male drone has to have newest iPhone/iPad/iPoop ASAP.

        • 0 avatar
          Kyree S. Williams

          I don’t know about that. Plenty of people like being early-adopters. They just don’t want or can’t afford to put down $1,000 for something they won’t see for almost two years. They aren’t willing to pay the premium to be an early adopter. But apparently…400,000 people were, which is a lot. That’s almost as many Camrys (Camries?) as Toyota sold in 2015.

    • 0 avatar
      Luke42

      “Just out of curiosity, who the heck preorders a car not even in production yet?”

      Me.

      Electric cars brought me back into car enthusiasm. Before that, the basically reliable cars if the early 2000s had made the car thing into a solved problem. Now, electric makes it interesting again.

      The Model 3 really is the car I’ve been looking for all these years. It’s not perfect (and it’s not even designed yet), but it’s far more to my taste than anything on the market today. By a lot.

  • avatar
    sportyaccordy

    This guy is like the Eric Cartman of auto execs. JFC

  • avatar
    Master Baiter

    Guy sounds like Ballmer talking about the iPhone in 2007.
    .
    .

    • 0 avatar
      mcs

      We were showing mockups of smartphones running on PDA’s in the late 90’s and a VP I worked for insisted no one would ever buy a phone missing a physical keyboard. He also once stated that texting was just a Japanese thing and would never catch on in the US.

      • 0 avatar
        Mach

        Before retiring, my father worked for a major food company. He got a chance to ask the owner (who’s last name is the brand) if he ever missed out on anything big. He told my father that someone pitched selling bottled water back in the early 1990’s, and was laughed out of the company. “Who the hell would pay for a bottle of water?!” Sometimes people just can’t see what’s coming.

  • avatar
    VoGo

    I am curious about this line: ” if the Model 3 was able to make money, he’d copy it in a second and add some Italian “flair.””

    What does Sergio mean by Italian flair? He’ll give it a 9-speed transmission that can’t find the right gear to save its life? The back seat will be too small for its class? It’ll have the lowest quality rankings?

    Or does he mean “flair” like in Office Space? I need to know.

    • 0 avatar
      Pch101

      The Italians don’t lead the automotive world generally speaking, but the coachwork is hard to beat.

      • 0 avatar
        TheDoctorIsOut

        If by “coachwork” and you’re not including visual abominations like the Fiat 500M, the 500X, or the historically hideous Multipla, then you’re wrong.

        But if by “coachwork” and you have overlooked every consumer publication or J.D. Power where their reliability, ergonomics, and hardware integrity sleep with the fishes, well you’re wrong there too. I’d rather bet on Musk; even if Tesla fails, and I don’t think I’m wrong on that, it would be more worthwhile than a boatload of sweaters.

    • 0 avatar
      SCE to AUX

      +1 VoGo.

      I’d say Tesla’s gone mainstream if their designs are viewed as needing “flair.”

      • 0 avatar
        Pch101

        Marchionne is making a snarky statement about the styling (and I would say that he’s wrong about that aspect of it — the car looks good), but his central point is that the major automakers don’t do more than they have to in this space because the cars aren’t profitable. The power storage costs are too high, the demand too low.

        • 0 avatar
          el scotto

          Sergio would walk down Woodward AVE on his hands with his sweater slipping down, please God may he have a t-shirt on, to get the demographics of Model S buyers. High tech but not bleeding edge, with enough income to easily afford one. Not pimptastic and MOAR POWER! Snark;s the best he can do.

    • 0 avatar
      Kyree S. Williams

      Oh. My. God. The 9-Speed in the Jeep Cherokee I’m currently driving is so irritating. It just exacerbates the thrashy nature of the 2.4-liter Tigershark. A nice 6-speed would have been far better.

      • 0 avatar
        VoGo

        You obviously have no appreciation for flair.

      • 0 avatar
        JustPassinThru

        No, Mr. Williams, you got it wrong.

        That nine-speed would be MUCH better mated to a more proven engine – a Willys Go-Devil four, with a Zenith carburetor. Connected by a straight rod to your throttle linkage – no drive-by-wire complexity needed.

        I’ll forward this suggestion to Sergio with your name alongside my own.

        You’re welcome.

      • 0 avatar
        SCE to AUX

        Kyree,

        Well, I’ve driven the 2.0 Tigershark with the 6-speed Hyundai-sourced transmission back in 2013. The transmission was fine, but it didn’t mask the Tigershark thrash.

        And as you say, the 2.4 with 9A is terrible, at least per my experience in a Renegade. I couldn’t wait to get out of that vehicle.

    • 0 avatar
      Lou_BC

      Sweater Sergio and Italian flair oh with Fiat Chrysler logos in the back ground.

      Talk about cognitive dissonance.

      Now I know where the “left’s suicide cult” comes from.

      BTSR shoot me now ;)

  • avatar
    deanst

    Jerry: I don’t understand. Do you have my reservation?
    Rental Car Agent: We have your reservation, we just ran out of cars.
    Jerry: But the reservation keeps the car here. That’s why you have the reservation.
    Rental Car Agent: I think I know why we have reservations.
    Jerry: I don’t think you do. You see, you know how to *take* the reservation, you just don’t know how to *hold* the reservation. And that’s really the most important part of the reservation: the holding. Anybody can just take them.

    • 0 avatar
      SCE to AUX

      I’m not sure why this is hard for people to understand.

      A Tesla pre-order is like giving your building contractor some hand money to begin construction on your house, except in this case you can get your money back.

      Nobody thinks they can pick up their Model 3 anytime soon.

  • avatar
    TimK

    Maybe I’m just a simpleton, but aren’t the refundable customer deposits entered as liabilities on the corporate balance sheet? Yes, Tesla can spend the non-refundable deposits, but if they dick around and don’t deliver in a timely manner there will surely be a class action lawsuit or two.

    And how exactly does a company with little or no experience at mass production build 400-500 thousand complex vehicles in any reasonable time period?

    Lots of wishful and magic thinking. My guess is it ends in tears.

    • 0 avatar
      mcs

      Little or no experience? They’re pumping out cars at a production rate of about 80,000 cars a year now. How does that qualify as no mass production experience? The Model 3 is not as complex as either of their current Models or any ICE car.

      • 0 avatar
        TimK

        So their current processes scale to 6X or 7X the current rate of production? All in the next two years? Somebody’s smokin’ rope.

        • 0 avatar
          derekson

          These people have no clue what goes into setting up automobile manufacturing at that scale. Or the engineering challenges involved, etc. They seem to think that there’s no difference in producing 75k cars per year and 300k+.

          • 0 avatar
            mcs

            No, they’re not going to be able to scale the current processes. Hopefully they won’t try.

            They need a second line at Fremont (there was a second one back in the days when I was working with GMAD and spent time at Fremont) and they would run it separately at a higher rate. They don’t have a prayer if they try to run these down the S/X line.

            Looking at the Model 3, it looks like a lot of attention was paid to ease of assembly and I suspect a high percentage of the line will be automated. Even then, I think they may be able to get Fremont around 300k per year. Again, that’s just an educated guess. Looking at that car I can tell you that they certainly do have a clue on how to put a car together quickly. Both the roof and dash are prime evidence. Those features aren’t there for styling – it’s for ease of manufacturing.

  • avatar
    01 Deville

    1. Tesla has a very strong brand (I am still scratching my head why, but they do)
    2. Tesla has lots of cash reserves and massive credit line. (Credit line was the reason Ford did not go under but GM did)
    3. Musk is driven and putting nearly everything on the line for success. I would rather route for that person than a room full of inept fat bellies driving the heard of drug addicts indifferently bolting together cars.
    4. Delivering model 3 is a monumental challenge, but Tesla has faced sterner challenges for S and roadster, and nearly gone bankrupt. I wouldn’t bet against them.
    5. If everything does not go to plan, Tesla still has the brand cache, and environment change agent status to get help from the Treasury (Yes my tax dollars), and possibly cash injection from Apple or Google.

    • 0 avatar
      CarnotCycle

      As to your point #2, Tesla may have cray-cray credit line, but cash on hand covers losses in their operations for two years, and that’s it. Not any massive capital expansion, just current operational losses. Such a situation I think leads to your #5, but the ‘cash injection’ will be equity purchase and assumption of liabilities if anything.

    • 0 avatar
      mcs

      Tesla is also in the process of locking up lithium hydroxide sources in Sonora and Nevada with supplier agreements. If they have a lock on a sizable chunk of North American lithium hydroxide, it would make it tougher for a competitor like FCA to compete with them. The German companies might have the same problem. The Tesla supplier agreements might also force would-be competitors to go to higher cost suppliers. That’s the potential down-side of being late to the EV game.

  • avatar
    SunnyvaleCA

    Do you think this might put a damper on efforts by other car companies to sell $35k electrics? I mean, who would want that e-Golf when you could just wait a little bit for the Model 3? I can think of a few high-tech companies pre-announcing stuff way beforehand just to stifle competition.

  • avatar

    The Tesla Model S has been, undeniably, a status symbol. Now that they’re restyling the Model S to match the front ends of the Model X and Model 3, I wonder what that will do to the residual value of used Model S examples.

  • avatar
    kurtamaxxguy

    Possibly the first time a vehicle, currently represented by a prototype, has been ordered by 400,000 people without any test drives or review of what they have ordered. Are these buyers expecting their potential car to be an I-Drive, or what?

  • avatar
    wsn

    By the time model 3 has any real production, I am sure that Prius will have a full electric version to compete.

    • 0 avatar
      mcs

      But, will Toyota have a charging infrastructure in place? Using dealerships as charging locations does not work well. Another hazard of being late to the game is that they won’t have the supplier contracts for batteries and the raw materials for the batteries. Since the Mirai is the closest to a full electric that they have, I’d assume it would be the basis rather than the Prius, so you’d have it’s lovely styling going up against the Model 3.

      More likely, I think we’ll see Nissan with a range of EVs competing with it. I’m betting they’ll craft together an Infinity clone of the Model 3. They have autopilot coming and hopefully are realizing the dealer based charging network sucks big time. Next to Tesla, they have the biggest commitment to EV technology. You can bet they see that Model 3 pre-order list as prime low hanging fruit for the taking if they can get the right product out.

      • 0 avatar
        porschespeed

        ‘Charging infrastructure’ Who seriously gives this garbage a good flying eff?

        If you aren’t a slavish fanboi, the ‘infrastructure’ better be as plentiful as gas stations on your daily commute, and refill in the same time.

        Oh wait, it can’t?

    • 0 avatar
      SunnyvaleCA

      I think it’s more likely we’ll see the plug-in Prius version with bigger battery, more powerful electric propulsion, and much smaller gasoline engine. That would leverage the Prius feature set. Imagine such a Prius with a 50 mile around-town electric range and acceleration on par with Model 3 (both due to increase on electrical side capability) and a 50 or 60 MPG unlimited highway cruising due to the gasoline motor. The car would have unlimited around-town cruising range too just in case of some unexpected use situation.

      The real downside of pure electrics is the highway cruising. I don’t think people are worried about “only” being able to do 50 to 100 miles in stop-and-go city traffic. They are worried about only having 200 mile range on the highway and dropping to 150 mile range at higher speed with the A/C and lights on.

  • avatar
    thegamper

    I am skeptical that this vehicle will be delivered on time, in sufficient numbers, at something close to $30K. I would love to be wrong on that though because it seem like such a great deal.

    I am also skeptical that Tesla can deliver to the average car buyer in this price range. You know….people who need their cars to work….all the time. I am not sure the average consumer is prepared to put up with the “Quirks” that Model S buyers have put up with in something they need as a daily driver. So in addition to ramping up production, they will likely have to ramp up service in a big way as well.

    I also would not discount the possibility that there is an Apple car in the future that totally destroys Tesla’s demand. I could easily see most of those preorders being diverted to Apple if that happened.

    While I have doubts that 100% of promises will come to fruition, I would not bet against Elon Musk. He has already silenced quite a few naysayers.

  • avatar
    laserwizard

    This whole Tesla thing has all the harmarks of another episode of “American Greed”. We hear more about the number of preorders for a car that doesn’t exist than we do how hard Musk is working to build the factories to supply the ponzi scheme some legitimacy.

  • avatar
    WildcatMatt

    Huh. FCA makes noises about wanting a merger. FCA makes noises about wanting to farm out small car production. FCA makes noises about how they would make a Tesla Model 3 if it was profitable.

    Are we looking at a FCA-Tesla tie-up if the new model comes out and doesn’t suck?

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