Compliance car and Honda execs don’t believe in plugs.
- Thread starter Wayne Wilson
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Wayne Wilson
Member
I can’t seem to find Honda’s press releases, but I Did find this from a media outlet - “The only change for the new model year is the addition of an updated Acoustic Vehicle Alert System (AVAS) that’s enabled when the car is being driven at low speeds on electric power only to alert pedestrians and road users of its presence.”
https://hondanews.com/en-US/honda-a...ellent-driving-range-and-fuel-economy-ratings
As noted in another thread, it appears to mention rain-sensing wipers on both trims.
As noted in another thread, it appears to mention rain-sensing wipers on both trims.
Wayne Wilson
Member
Thanks for that, it was not apparent to me from automobiles.honda.com. The rain sensing wipers seemed to be in the ‘continuing’ on part of the specs.
It will be interesting to do an inventory search in few weeks and see if more than a handful are available outside of California.
It will be interesting to see if even one 2020 Clarity PHEV is listed as available outside of California. Honda intimated that the car is now available only via special order in the other 49 states, so we'll see if that's true.
Ann Arbor's Germain Honda where I bought my Clarity in 2017 says Honda won't even let them special-order the car for a customer trying get one. In their frustration, Germain famously claimed on their website that the Clarity PHEV was discontinued, but later took down that misinformation.
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Pushmi-Pullyu
Well-Known Member
Lobbying by Big Oil certainly does have an impact on the regulatory climate and/or incentives for or against EVs, but that's far from the primary cause.
The real problem for legacy auto makers is what's called "The Innovator's Dilemma". Wikipedia has a good article which sums up the situation, and I'll quote that here:
* * * * *
Clayton Christensen [author of The Innovator's Dilemma] demonstrates how successful, outstanding companies can do everything "right" and yet still lose their market leadership – or even fail – as new, unexpected competitors rise and take over the market. There are two key parts to this dilemma.
* * * * *- Value to innovation is an S-curve: Improving a product takes time and many iterations. The first of these iterations provide minimal value to the customer but in time the base is created and the value increases exponentially. Once the base is created then each iteration is drastically better than the last. At some point the most valuable improvements are complete and the value per iteration is minimal again. So in the middle is the most value, at the beginning and end the value is minimal.
- Incumbent sized deals: The incumbent has the luxury of a huge customer set but high expectations of yearly sales. New entry next generation products find niches away from the incumbent customer set to build the new product. The new entry companies do not require the yearly sales of the incumbent and thus have more time to focus and innovate on this smaller venture.
That summary may be a bit too technical, so let me simplify it: In a disruptive tech revolution, such as the EV revolution, the market leaders in the old tech ("incumbents") are heavily invested in the old tech, and that's where most of their income comes from. Contrariwise, startups specializing in the new tech ("new entry companies") have no such investment, and are free to promote and sell the new tech without any consequence to their own customer base.
In a disruptive tech revolution, the market changes from the old tech to the new tech not in a linear fashion, but in an "S-curve":
Early in the revolution, the new tech is in an early stage of development, has only marginal advantage over the old tech, and prices are high, so sales if the new tech are low. As the revolution progresses, each new generation shows improvements while costs come down. Eventually the general public sees the new tech as better, overall, than the older tech, and at the same time costs have come down. After that point, sales start accelerating rather quickly, and after some years, exceed sales of the old tech. The upper end of the "S-curve" shows most of the market having switched to the new tech, but a small portion of the market still sticking to the old tech; that's the "diminishing returns" section of the S-curve, shown in the chart above.
Aside: Here's an example of how a disruptive tech revolution progresses: The first commercial cell phone, circa 1984, was a "brick" phone which cost thousands of dollars, had a talk time limited to just a few minutes before the phone needed recharging, and those using one could only reach a few other early customers. As cell phone tech progressed, the phones got smaller, energy consumption dropped so talk time increased, more cell towers were built, giving better call coverage, and more people got cell phones, making it more likely you could call someone on one. Eventually, cell phone use exceeded land line use, to the point that today, many or most people have gotten rid of their land line phones and now use only cell phones. (End of aside.)
As the EV revolution progresses, there will be more and more pressure on legacy auto makers to switch to making and selling EVs. As shown by the principles explained in "The Innovator's Dilemma", the problem legacy auto makers face in the EV revolution is that the primary competition for any given auto maker's BEVs will be that maker's own gasmobiles! So legacy auto makers face the stark reality that investing in switching to making and selling BEVs will primarily result in cannibalizing the company's own sales of gasmobiles.
The auto industry is particularly prone to the problems of "The Innovator's Dilemma" because of the heavy capital investment required for building cars. This is why we are already seeing some of the "incumbents" close some of their factories, rather than convert them to building BEVs or parts for them. Auto makers won't have the money to convert all their factories over to making BEVs at once; it's going to have to be a gradual process, and they will be losing money constantly until that process is complete. Therefore, factories which are making only marginal profits will likely be closed rather than converted to making BEVs or parts for them.
It's not going to be easy for legacy auto makers to survive the EV revolution, and it's safe to predict several of the market leaders today won't still be in business 15 (or perhaps even 10) years from now. Even for those current market leaders which survive the transition, there's no guarantee they will still be among the market leaders when things settle out again.
Every disruptive tech revolution results in some new market leaders emerging, and some failures of old market leaders. The EV revolution won't be any different in that respect.
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Pushmi-Pullyu
Well-Known Member
Tesla's cars are quite profitable; Tesla has a gross profit margin significantly higher than industry average. (Caveat: That's true for all smaller auto makers. Small auto makers have a higher overhead on a per-car basis, so have to make a higher gross profit margin per car.)
Tesla only shows a lack of net profits because they're re-investing most of their profits in growing the company. That's a choice, not evidence of poor management, as serial Tesla bashers keep trying to insinuate or claim.
Want to know where Tesla's profits are going? Perhaps this will make it clear:
Tesla’s global automobile sales totals:
2012: 2650
2013: 22,300
2014: 31,655 (+41.95%)
2015: 50,580 (+59.8%)
2016: 76,230 (+50.7%)
2017: 101,312 (+32.9%)
2018: 245,240 (+142%)
2019: ~367,500 (+49.9%)
Re 2018: "To put our growth into perspective, we delivered almost as many vehicles in 2018 as we did in all prior years combined."
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Pushmi-Pullyu
Well-Known Member
Well said! The EV "purists" who look down their noses at PHEVs and claim that only BEVs are "real" EVs, give me a swift pain. The EV market needs all the well-made EVs it can get, both PHEVs and BEVs. limiting the market to just one type would be foolish; real EV enthusiasts should embrace both types of plug-in EVs.
I think it's a tragedy that Honda seems to be headed for discontinuing the Clarity PHEV. The Clarity section of this forum, the InsideEVs Forum, has been the most active section. Clearly a lot of people appreciate their Clarity PHEV!
KentuckyKen
Well-Known Member
It depends on your definition of profitable. @Landshark may be taking into consideration the huge amount of debt that Tesla is carrying. That increased from 3 billion to 12 billion, or a staggering 400% in only 3 years.
Clearly, that is not sustainable and is one reason why there are so many short sellers. I do hope they make it, but historically, not all pioneers make it to their destination. History proves that having a great idea or invention or even outselling your rivals doesn’t always mean that you can make a long term go at it.
You can’t continually and increasingly borrow your way into profitability no more than you can tax your way into prosperity. Until Tesla can start slowly reducing or even stop adding to their debt load, you can’t really call them profitable no matter how many cars they sell at any margin or even how much their stock has increased.
Here is the source for the graph that breaks down Tesla’s debts using Tesla’s own reportings. It shows that Tesla’s lack of net profits is not just because they are investing their relatively small profits into growing their business. They didn’t make enough profit to service their existing debt. Hopefully, they can turn that around in time before it bites them in the bumper.
https://stockdividendscreener.com/auto-manufacturers/how-much-debt-does-tesla-have/
I don't completely agree with this statement. They have positive gross margin, but their cars were not profitable as of 2019.
You need to read this article to understand the impact of CAPEX on income statement.
https://www.investopedia.com/ask/an...apex-immediately-affect-income-statements.asp
It has some impact in terms of depreciation, but it has no direct impact, e.g. if in a year you make $1m and spend $2m on CAPEX, your income will be still be the same $1m. It won't be reported as $1m loss. Next year you will depreciate the $2m and it will impact your income, but it is not a direct subtraction. Most of Tesla CAPEX has been paid by borrowing and new equity, car sales have never generated free cash flow to invest in new factories or such. The business model relies on increasing production, until you can reduce overhead per car to a degree that will make the company profitable. As of 2019 it has not happened yet. In 2020 with Model 3 and Model Y they could be profitable, but it depends on many factors.
It's not possible to compare gross margin when looking at the established companies and startups. The major differences are that Tesla pays for its own sales and service groups, but tranditional auto companies don't. However, established companies, especially automotive, have to pay shareholder dividends and retiree benefits. They also can't layoff whenever they want, but startups can do so routinely.
Pushmi-Pullyu
Well-Known Member
As they say: "You're entitled to your own opinion, but you're not entitled to your own facts."
It's a fact that if Tesla wasn't spending lots of money every year to expand its production, then it would be in a position to show a net profit most years or perhaps every year, and likely would be paying dividends to stockholders.
Here's an example: In Q1 2019, Tesla had to pay off a $920 million loan. If Tesla hadn't been expanding its production significantly every year, it wouldn't have had to take out that loan, wouldn't have had to make the $920 million payment, would have shown a net profit for the quarter, and likely would have shown a profit for the entire year.
Facts... not mere opinion.
I think you don't pay attention to basic accounting principles. Paying off a debt has no direct impact on operation profit of a company. Here is the link to Tesla financial statement for Q1 2019:
https://ir.tesla.com/static-files/5cb2477b-8dca-479f-9dda-eb3f59fa67e3
If you go to page 5, you will see that the company was not operationally profitable. This doesn't have anything to do with $920m debt payment. If they hadn't pay that debt off, they would still be unprofitable.
The debt payoff affects page 8 (Cash Flows from Financing Activities).
As I said before, there is some indirect impact, for example when you invest in a new facility which is not operational yet, you could depreciate it while it still doesn't generate revenue, or you can hire workforce for a production line that is not operational yet, and their wages will affect your operating cash flow, but paying for a new factory or settling debt has no direct impact on operation statement. The statement of operation intentionally sets aside non-operational activities, so you can assess the profitability of the base business.
Pushmi-Pullyu
Well-Known Member
I don't see any gray area or confusion here. I was very careful to say Tesla makes a good gross profit margin off making and selling its cars. You are talking about net profits, not gross profit margin. Yes, with net profits you have to take into account servicing debt. But not with gross profits.
I'm no financial guy, but I can read, and I'm pretty sure I understand what "gross profit margin" means well enough to know that it doesn't include servicing debt.
I'll quote a couple of definitions from Investopedia.com:
* * * * *
The gross profit margin is calculated by taking total revenue minus the cost of goods sold (COGS) and dividing the difference by total revenue. The gross margin result is typically multiplied by 100 to show the figure as a percentage. The COGS is the amount it costs a company to produce the goods or services that it sells.
Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the good. It excludes indirect expenses, such as distribution costs and sales force costs.
Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the good. It excludes indirect expenses, such as distribution costs and sales force costs.
* * * * *
Yes, the reason that Tesla doesn't show an annual net profit is because it keeps borrowing a lot more money than it's making. I think we can all agree on that. But the reason why it keeps borrowing money, the reason why it carries such a large debt load, is because it's spending lots of money on increasing its production every year. Tesla is spending more than the profit it makes, to expand the company's production as fast as possible. That's the business model for a growth company, not the model for a company with steady sales.
Yes, of course there's a danger that Tesla could suffer financial collapse if it goes too heavily in debt. But Amazon dot-com used this business model to great success. Go back a mere three years, and you'll see people making exactly the same complaints about Amazon dot-com that they are now making about Tesla! Just three years ago. How quickly some people forget!
Of course, Amazon dot-com's success is no guarantee of Tesla's success. But due to the runaway success of the Model 3, Tesla is in far better financial shape than it was just a couple of years ago. Perhaps my confidence that Tesla is practically guaranteed to survive at least the next 5 years shows my pro-Tesla bias... but I don't think so.
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Pushmi-Pullyu
Well-Known Member
I just gave a very, very clear example of exactly that happening. I'm not a "financial guy", but that is as straightforward as saying 1 + 1 = 2. You're trying to argue that 1 + 1 equals something else.
As I said: You're entitled to your own opinions, but you aren't entitled to your own facts.
Let's be clear on what we're disagreeing on: Are you claiming that if Tesla had not paid that $920 million loan in that quarter, that it still wouldn't have shown a net profit for the quarter? I don't see how that's possible. Tesla's net profit/loss for the quarter was -$702.1 million, obviously less than the $920 million it used to repay the loan, or "convertible bonds". Are you trying to argue, as it appears, that even if Tesla hadn't repaid that loan, that somehow it still wouldn't have shown a profit for the quarter? Again, that appears to be arguing that 1 + 1 isn't really 2; that it's actually something else.
I've seen those who are "financial guys" get down into the weeds of which accounting column certain expenses should be placed in. I have absolutely no interest whatsoever into getting into such details. As I've said before: I treasure my ignorance of financial matters! Since those who are "financial guys" argue over such details, it's clear that those are opinions, not facts. I prefer to stick to facts when discussing financial matters.
It seems to me that's exactly what you're doing here: Arguing over which accounting column Tesla's debt repayment should be put into. I don't care. I do care about Tesla's long-term financial health, but quite clearly arguing over which column certain expenses should be placed into, isn't going to shed any light on that.
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jdonalds
Well-Known Member
What I have learned after two years of owning the Clarity is the ability to charge at home is a HUGE positive aspect of owning this car. Not only is it super convenient but it also allows me to charge from our roof solar system saving gobs of money. Any car that does not include refueling at home, that also allows me to take advantage of solar charging, will not likely find itself in my garage.
I see the benefits (long term) of Fuel Cell cars, but if I can't charge at home, using my solar system, they are worthless to me.
I see the benefits (long term) of Fuel Cell cars, but if I can't charge at home, using my solar system, they are worthless to me.
That is exactly what I am trying to say. Had Tesla not paid the $920m to repay the loan, they would still report -$702m loss. The reason is that paying debt is not an operating activity, it is a financing activity. Let me give you an example to clear it up. Let's say you are making $200k a year. Then you decide to buy a house for $500k. What is your annual income? Still $200k a year, it is not $700k. Buying a house is an investment, it doesn't affect your income. Now let's say next year you make another $200k, but you decide to take $500k from your savings and repay your mortgage. Now what is your income? Still $200k, it is not -$300k. It is very obvious with your day to day finances, but somehow people get confused when talking about companies. Now being able to pay your mortgage is another matter, that is when free cash flow , ability to raise cash, cash in hand, and ability to service debt comes in.
The loss making growth model works very well for software companies that don't have big fixed assets. For a software company it costs roughly the same to make 1 copy or 1m copy of their software, so they grow quickly with no regard to profitability and eventually they become profitable. For a carmaker it is in between, the tooling, design, and software cost is roughly the same, but materials, production capacity etc. will go up with increased production. For Tesla I guess their break even point long term is probably around 500k cars per year. For a company like Uber for example, most of the cost is what they pay to the driver, and it will go up linearly with increased rides, so right now the market has a negative view on Lyft and Uber and they have depressed valuations despite providing such a valuable service. I guess their path to profitability is autonomous cars, because the way I see it that is the only way to reduce ride cost significantly.
Pushmi-Pullyu
Well-Known Member
Who's talking about just income? We were discussing being profitable or not. That means adding up the total profits and losses (or debits and credits) at the end of the year, to get the net profit or loss.
If I take out a mortgage to buy a house, it certainly does have a significant affect on my monthly and annual budgets!
I don't confuse taking money out of savings with "income". Do you? That's just taking money out of one pocket and putting it in another. I don't see that your analogy has any relevance whatsoever to Tesla having to pay off convertible bonds in a lump sum. That is not just taking money out of one pocket and putting it in another. When Tesla paid off the $920 million loan, Tesla actually did wind up with $920 million less money at the end of that quarter than it would have had if it hadn't had to repay the loan in cash. I don't see how there can be any dispute over such a clear, straightforward situation.
Well, there we certainly agree! We just don't agree on which of us is confused.
If Joe the Barber decides to take out a loan to expand his barber shop, so he can serve more customers in a week, then his business might well show a net loss the year that he builds the expansion to his shop and hires more employees. But if it pays off in the end, then nobody would say that his business was "unprofitable", even if his business ledger shows a net loss the year that he built the expansion.
And if Joe's debt comes due some later year, and he has to pay it off in a lump sum, then that is most certainly going to have an impact on how much money he'll show in his business ledger at the end of that year!
For some strange reason, "financial guys" seem to lose sight of the basic, common-sense way to look at how much money a company is making, or isn't; and lose sight of how financially sound a business is, or isn't, when they start examining a large company's complex annual financial statement. When I see "financial guys" arguing over which column in the company's ledger certain expenses should be placed, then I know they've lost sight of the reality -- the facts -- and they're just arguing over opinions.
As I said: I treasure my ignorance of financial matters. For one thing, it helps prevent losing sight of the forest for the trees.
~17M passenger vehicles were sold in the US last year. ~12M were light trucks and SUV’s. BEV and PHEV sales accounted for less than 2% of those numbers. More than 65M passenger vehicles were sold worldwide.
Honda isn’t too far off the mark with US auto sales of ~1.4M and 20K Clarities.
It will be interesting to see if the water cooler conversations today are focused on commercials for EV’s.
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