Guest essay by Eric Worrall
Elon Musk’s Tesla shares have plunged in value this week. Analysts cite competition and production concerns.
Tesla’s Stock Selloff Messes Up Musk’s Big Week
By Dana Hull
8 July 2017, 02:47 GMT+10
- Execution and competitive risks cloud cheaper car’s arrival
- Stock is on course for its worst week since February 2016
This was supposed to be Elon Musk’s big week, capped by Tesla Inc.’s first Model 3 sedan rolling off the assembly line. Instead, shares that had been riding high in anticipation of his most consequential car yet are poised for their worst week in almost a year and a half.
A troublesome quarterly sales report, the emergence of competing electric vehicles from the likes of Volvo Car Group and lingering concern about Tesla’s ability to mass produce have sent its stock down 13 percent this week. Modest gains in Friday trading still have left the shares on course for their steepest weekly drop since February 2016, and Tesla’s market value has dropped back below General Motors Co.
This week’s worries put a damper on the arrival of the linchpin to Musk’s growth ambitions. For Tesla, bringing out Model 3 and becoming more of a mass-market carmaker will require overcoming the routine manufacturing issues that have handicapped output of batteries or Model X sport utility vehicles. And so-called legacy automakers have sent a clear signal they won’t go down without a fight — Volvo underscored this by announcing all of its new models will have hybrid or fully electric powertrains from 2019.
…
Tesla will soon have more competition coming from major carmakers, Barclays Plc analyst Brian Johnson said.
“We’ve long argued that Tesla as an EV company is not truly disruptive, in that legacy carmakers will eventually wake up and offer fully electric vehicles by the early 2020s,” Johnson wrote in a report Wednesday.
…
This plunge in share value could be a short term blip. But given the interest expressed by established carmakers in embracing the electric or hybrid car markets, the pressure appears to be on for Elon Musk to explain what he does which is so different – why people should continue to invest with him, rather than investing with other, more established carmakers.
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I really have never understood how Tesla could be such a wildly profitable company when they can’t make a profit. It seems to me that this is a bet on future success, I am betting a lot of people will eventually be disappointed.
To be fair, that was said of Amazon, and Amazon wasn’t subsidized by the US gov’t.
Amazon was subsidized by state governments, by refusing to pay state sales tax for 15 years in most of the places where they sold their products.
It wasn’t Amazon’s job to be tax collector for the states. As the Supreme Court ruled over and over again.
Except that Amazon has now agreed to collect state sales tax. Why did they agree to do it?
Tesla stock was down one point, this Thursday, almost 20% from its high of June 23. There is now a prediction from a major brokerage that Tesla stock price could fall to $180 per share, as compared to the June high of $384 per share.
Tesla’s stock price was based on hype, rather than sales and an analysis of Tesla’s strengths and weakness compared.
A key issue, is it is a fact, that the automobile industry is very, very competitive.
All of massive established automobile manufacturing companies could and would manufacture an all-electric vehicle (if they do not already manufacture an all-electric vehicle), if there was a market.
Tesla predicted sales of their model 3 electric vehicle of 100,000 to 200,000 units per month in the second half of 2017.
The Tesla estimated model 3 sales for late 2017 have been revised down to 20,000 units per month, a reduction of a factor of 5 to 10.
http://www.marketwatch.com/story/teslas-bad-week-gets-worse-as-elon-musks-credibility-takes-another-hit-2017-07-06?siteid=yhoof2&yptr=yahoo
I have mixed feelings about Elon Musk and his various activities. While I am glad that he has
produced electric cars that people don’t laugh at, I dislike his tendency to eliminate the best feature of an electric vehicle, namely its simplicity and (excluding battery costs) low cost to produce.
His Model 3 was always an attempt to correct these things, only to go into production after battery prices had declined way down from their previously enormous costs of $40,00 for a battery pack. I saw where someone claimed $200 per kWhr battery costs, which is in error – GM recently claimed costs of $150 per kWhr for the batteries being installed in its new all electric Chevy Bolt, and Tesla claims $190 for their batteries, including everything require to install them into a vehicle. That reduces the cost of a Tesla Model S 80kWhr pack from $40,000 five year ago, to around $15,000, or in the case of GM, $12,000, producing a fully competitive (actually a superior) electric vehicle in the $40,00 and up price range. One has to realize that many systems required by a gas powered vehicle, do not even exist in an electric car (cooling system (not always), fuel system, which includes many pricey injectors, computer driven electronic monitors, etc, exhaust system,.starter motors, a transmission, etc).
Musk also claimed his automatic mass produced batteries coming out of his gigafactories would reduce costs by a third. I am quite certain that Asian countries will all be able match or exceed that. There are also encouraging reports of a new cathode produced by nanotechnological methods which claim the ability to not only produce superior batteries, but batteries that cost half of what they do today.
Bateries were ALWAYS the obstacle to the electric car, as Henry Ford discovered when he spent a fortune trying to build a practical electric vehicle, his friend Thomas Edison tasked to create a practical battery. Analysts have always cited $100 per kWhr as the battery costs that will propel a revolution in the auto business. There may still be gas powered vehicles that cannot be electrified
(large pickup trucks, ets) very soon, if at all. Generally speaking, todays’s gas powered cars have a large number of electrically powered accessories and , except for the gas engine and its accessories, an electric vesion would differ not that much from their current gas powered versions, which means that it is unlikely that any major automaker who’s vehicles shine because of styling, handling,etc would fear an electrification of their vehicles. The vast reduction in the number of parts that would result from electrification would not be an unwelcomed event. And for those lower income, struggling automakers, electrification would be viewed as a potential salvation, since the costly to design and produce engines, transmissions, combustion components, etc would disappear, and they would be on an equal footing with even the richest automakers for their car’s drive trains, which they can buy off the shelf just as easily as the richest automakers can.
I’m not sure I understand what you’re saying. There is NO small car ICE drivetrain (to compare it to the Bolt or LEAF) that costs $12,000. That would be anywhere from 1/2 to 2/3 the cost of the entire vehicle! And I’m sorry, but comparing just the batteries to an ICE is simply apples and oranges. You need to add in any motor, transmission, and regen equipment.
Look at the costs for replacement engines online. For small compacts and even midsize cars and SUVs, they’re $2k-$4k.
Battery costs have a ridiculously huge cost gap to cover before they even come close to matching the ICE.
“gigafactories” lol, they’re just factories, lots of people have built large facilities producing lots of parts/assemblies before.
It’s a factory.
Do people buy used Teslas?
What is the range of a used electric?
How much are replacement batteries?
“What is the range of a used electric?”
Less than half of a comparable petro car.
“How much are replacement batteries?”
The same or more than the cost of a new petro engine after about 7 years. Petro engines last, what… 15-20 years?
A new battery for my 10 year old Honda Civic Hybrid is about $3,000. You can buy a decent used ICE car for that kind of money. If I tried to sell my car, with 300k+ miles, I would never recoup the cost of the battery. EV’s or even Hybrids won’t become viable for most people or applications until that cost comes down, significantly.
Battery capacity declines with use.
I’m not against electric cars, just overblown environment/co2 claims.. as soon as manufacturers make viable cars – ie completive with petrol/diesel I’d happily buy one..
https://www.jaguar.com/jaguar-range/i-pace-concept-car/index.html
This Jaguar, looks pretty good, (next years) might get one as a second car.
cars like this Tesla, will destroy Tesla (ie the share price bubble will burst,)
Jaguars are best left to being second cars considering how often they are in the shop.
BMW and Audi are not destroying Tesla with their electric cars. They’re getting dominated.
That Jaguar will compete with high-end Tesla models for limited sales. Volume sales will be the Tesla Model 3, Chevy Bolt, and others. And the Model 3 performance might be comparable to the Jaguar I-Pace Concept with 215 mile range (Jaguar projects 220 miles) and 0-60 in under 6 seconds. So why spend $100k for the Jag as a 2nd car instead of the Model 3 at $35k?
Since acceleration (and the associated braking) significantly increase fuel consumption I like the petrol/electric hybrid, particularly where the motor & generator system can be used to eliminate the cost/weight/complexity of the transmission while also providing much of the braking requirements. The Mitsubishi Outlander PHEV goes a long way towards this having motors at both ends for 4 wheel drive, a generator on the engine and only mechanically connecting the engine to the (front) wheels through a clutch at cruising speed eliminating a lot of mechanical complexity. Personally I’d reduce the battery size (sacrificing the plug-in capability) to what’s needed for storing the energy recovered from braking.
Not new of course, diesel-electric locomotives have been doing a similar thing for a long time.
Question: What are the rent-a-car companies doing? Are they going electric?
No. They have a few hybrid cars but, no they aren’t going electric.
Do any of these electrics or hybrids have a plug-in feature where one could hook them up to their house in an emergency during a power outage?
There might be quite a demand for such a thing. Especially in areas where windmills are a high percentage of the electric generation facilities, such as South Australia. 🙂
I guess I should restrict that question to hybrids, since pure electrics wouldn’t last long in a power outage.
Just wait until the neighbor hoods figure out that they can run around the neighborhood at night unplugging cars charging in the driveways (oh dear God please forgive me for I did back then).
Mercedes solved the EV vehicle issues some time ago. Here’s the commercial:
Tesla sells battery storage for houses…
The “feature” would be in your power box. You would have the equivalent of a bloody big powerwall battery. A diesel generator would be cheaper.
He who lives by subsidies, eventually dies by them…
Trump dumped the Paris Accord in the Siene River and thinks CAGW is a ho@x. Trump’s appointments of Pruitt and Perry at EPA//DOE, will also likely to lead to greatly reduced subsidies for wind/solar/electric car industries.
Wall Street can read the signs, and are dubious of Musk’s companies viability should $billions of solar/wind/electric car subsidies be scrapped or significantly curtailed—as they obviously should…
As the CAGW hypothesis inexorably continiues its slide to disconfirmation, the decline of subsidies will accelerate.
Government subsidies and interventions in markets eventually leads to misallocations of limited land, labor and capital, which eventually all gets unwound….
It won’t be pretty when many of Musk’s enterprises collapse after the subsidies are pulled.
Writing on the wall since his chief fund raiser came to the end of his second term.
Just a few thoughts for redesign of urban vehicles for when oil is running out.
.
1) Cassette style batteries for suitably designed, as light as possible, electric only vehicles
2) Automated battery drop off/ pickup Service Stations enabling round the clock charging and enhanced range from home.
3) Vehicles that last for 50 years with minimal maintenance.
So unit costs down, no peak charging period and maximised range. Getting from A to B and economically is more important than vehicle styling when needs must.
Flux capacitors!
No way. That whole time travel thing gets to be a pesky nuisance.
plutonium stirling engines.. only require filling every 80 years or do
This assumes car mfgs. will use a common battery mechanical/electrical interface. We are a ways from that.
Battery exchange could only work under car leasing, or buying cars without batteries and then leasing battery service. The cost of such a service would be ridiculous. If I owned a new battery there’s no way I’d exchange it for an older one. That’s just throwing money down the drain.
Interesting that Tesla’s market CAP is nearly that of GM and they only produce a tiny fraction of vehicles comparatively. That simply can’t maintain itself since. Have they ever shown a profit or paid taxes? I wonder what they look like less the large government subsidies? Just sayin……
http://financials.morningstar.com/ratios/r.html?t=TSLA
Making transport all electric requires about 25% more generating capacity. And where will that come from?
And this does not include avaition, which accounts for another 15% of total energy usage. Replacing jet fuel with electricity is a non-starter, as avtur has 20x the energy density of batteries. The only renewable for aviation, would be some kind of bio-fuel.
See the charts in Fig 18.1 in “Renewable energy Without Hot Air”
http://www.inference.org.uk/sustainable/book/tex/sewtha.pdf
This analysis is by the UK science advisor to government. He was a bit of a greenie, but nevertheless concluded that renewables cannot work without a nuclear baseload.
R
“legacy carmakers will eventually wake up and offer fully electric vehicles by the early 2020s,” Johnson wrote in a report Wednesday.”
Yes, because if you offer something, people might decide that that’s what they want, even if it costs more, and has half the range, and you need to worry about when and where to charge it, and you still need a “regular” car for long distance driving, and a huge garage to store all your vehicles in.
Or not.
Why is Musk so desperate to sell 129MWh of batteries to the South Australian grid? Aren’t his cars selling well enough?
I’ve got an easy solution to the problem. When you buy an EV, buy a fossil fuel generator big enough to recharge your car. Every home on the block will be running generators for their super clean cars.
Good. The Muskrat is just a “gift of the gob” subsidy-sucker.
T. E. Lawrence liked Rolls Royce.
@ur momisugly M Simon
July 8, 2017 at 10:36 am: He had Rolls armoured cars in a unit that carried its own mobile workshop. They worked very well in the desert, and sure impressed the locals as well. Mobile artillery, with little air opposition.
e musk is a con man stealing from the taxpayers……..
A lot of interesting comments here, but let us not forget once the Government gets involved they will turn it into an almighty f*** up. They always do regardless of what Country we are talking about.
Another problem for Tesla is that they’re now undercutting and competing with themselves. They’ve admitted that Model 3 orders (their $35k car) are taking away from the demand for their models that cost 2-3 times as much. Their margins are declining.
While their margins would almost certainly decline if the Model 3 robs sales from their high-priced models, their subsidies could increase substantially if the subsidy is on a per car basis. Tesla will sell far more cars at $35,000 and therefore their collection of subsidies will increase accordingly.
But I understand the federal subsidy cuts off after they sell their 200,000th car. Whether state subsidies will take up the slack is an issue.
It all comes down to subsidies. End those altogether and Tesla would probably not be financially viable.
There’s nothing amazing or profitable about electric cars. The free market knows what to do the most efficient way with no government intervention. If I was able to trade my 5 year old Camry for a new Model 3 at no cost it would still make no sense at all. My mobility and standard of living would go down immediately. I would have to installing charging equipment which would not come on during peak hours. I’d have to rent a car for a month of the year when I am on vacation. The real market for electric cars is very small and the model 3 isn’t going to change that.
“I would have to installing charging equipment which would not come on during peak hours.”
No, you just need a 240V or 120V outlet. The cost is a few hundred to $1000.
‘I’d have to rent a car for a month of the year when I am on vacation.”
First, many families have 2 cars. So have one electric and one hybrid or gas/diesel. Problem solved.
Many think Elon Musk is a magician. South Australia just ordered grid battery storage from Tesla despite an Australian company’s bid to supply the same storage for two thirds of the price.
“South Australia just ordered grid battery storage from Tesla despite an Australian company’s bid to supply the same storage for two thirds of the price.”
Proof of that claim?
Unless or until they make an electric car with a 400 mile range that can charge in five minutes or less, there won’t be a huge market for them. And what happens if there’s some kind of natural disaster or terrorist attack where the power goes out? Once the battery in the car dies, you’re screwed. Yes, gas stations require electricity to run, but fuel can still be transported to people to be able to move their vehicles. I don’t think that will be possible with electric cars.
I do applaud Musk nonetheless for changing the dynamics of the industry though. Even if Tesla ultimately, fails, Musk will have enacted major change in the automotive industry.
Tesla Model 3 is crap. Zero to 60 mph in 5.6 sec. LOL
That’s slower than my grandma’s sports car, the 1962 Shelby Cobra, 0 to 60 in 4.9 sec.
http://www.dailytelegraph.com.au/blogs/tim-blair/great-big-battery-impresses-rubes/news-story/a180622548da51f9cac2e194823faca1
That starry eyed mug alongside Musk is, incredibly, the Premier of South Australia, Jay Weatherill. As bottom-feeder-in-chief, his insane coal killing renewables shambles has delivered to hapless households the highest electricity prices in the world, even outdoing Denmark. The equally nutty Premier of Victoria is intent on pushing prices even higher.