No surprise EVs a lot more profitable than ICE vehicles.

[101101]

https://cleantechnica.com/2018/03/12/tesla-model-3-profit-target-5x-higher-average-ford-vehicle/

You could see this coming 10 miles away. While Lutz was whining that EVs could never reach parity and never perform and most of all, really most of all would never be profitable all the while investing his own electric truck firm and quietly calling EVs the future...

It turns out that EVs have passed parity and with the Model 3 will be 5x more profitable than Fords fare, more than justifying the share price of Tesla relative to Ford This really is an excellent article. One thing that is funny is this level of profit margin is cited as Porsche level of margin- the very tippy top of wasteful ICE margin, but guess what its on a commodity car.

Might have something to do with that commodity car being virtually solid state. Did you see Porsche put the plastic cladding on the wheel wells of its supposed Tesla competitor- might have as well been mud flaps!

So you can see all that blather out of the ice contingent about it being impossible for Telsa or ICE makes to have much margin or be profitable was just a preemptive strike.

It occurs to me that when I say Barra's job is to fail convincingly on EVs she would just be doing what GM has done for the last 50 years. Build stuff that will nickle you and fail convincingly but no do it so much notice it and refuse to buy another nickle you lemon.
That is commodity designed in built to fail mentality. This is the mentality of every firm that thinks its stock holders (and various other parasites- think of what a GM stock holder is if they do it intentionally) come way before their actual customers.

 

[Feed The Trees]

This is a terrible article actually. It compares world wide full bucket of products of Ford against the very narrowly released Tesla car.

This person has probably never been in a micro economics class or conveniently forgotten all they learned if they have. Margins are a not thing to chase if your goal is profitability. I know it's oft quoted in companies to maintain margin but that doesn't necessarily maximize profits.

For a young company like Tesla who is resource constrained (cant build as fast as a they can sell) they're naturally going to get more profits per car because the market clearing price of their limited production car is high. The supply is low so the clearing price can be higher.

For a mature global company like Ford they don't really have the same resource constraints and a ton more direct competitors. Their unit prices are naturally going to be lower.

None of this at all says anything about an EV being more profitable than a gas car. It merely says Ford's global operational model is different than Teslas. This is news to exactly nobody.

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[WadeTyhon]

This is a terrible article actually. It compares world wide full bucket of products of Ford against the very narrowly released Tesla car.

This person has probably never been in a micro economics class or conveniently forgotten all they learned if they have. Margins are a not thing to chase if your goal is profitability. I know it's oft quoted in companies to maintain margin but that doesn't necessarily maximize profits.

For a young company like Tesla who is resource constrained (cant build as fast as a they can sell) they're naturally going to get more profits per car because the market clearing price of their limited production car is high. The supply is low so the clearing price can be higher.

For a mature global company like Ford they don't really have the same resource constraints and a ton more direct competitors. Their unit prices are naturally going to be lower.

None of this at all says anything about an EV being more profitable than a gas car. It merely says Ford's global operational model is different than Teslas. This is news to exactly nobody.

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"This person has probably never been in a micro economics class or conveniently forgotten all they learned if they have."

It's an EVANNEX article so I didn't even bother to read it.

 

[Feed The Trees]

Also notable this is based on Ford wholesale as mentioned in the article. If I'm not mistaken they're referring to the sale of cars to dealers who then in turn make their own profits. So some of this has to also do with Teslas sales model.

Also baked into that is fleet sales.

So yeah sorry not sorry you can't make a broad sweeping statement like the article does and expect to be taken seriously by anyone but fanbois.

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[Feed The Trees]

"This person has probably never been in a micro economics class or conveniently forgotten all they learned if they have."

It's an EVANNEX article so I didn't even bother to read it.

These kinds of articles are very harmful imo. Anyone who can process even a little bit of it understands what a farce their comparison and conclusion is. Then when they see this obviously misinforming article they wonder how many they've seen on EVs being more this or that than ICE cars were also misinformed and maybe they just didn't pick up on it when they read. They start to question things that don't need questioning. Or someone who touts it to their friends are true and gets shot down feels like a dolt.

 

[Martin Williams]

Surely if it is more profitable to the people selling it, then that is an excellent reason for the buyers to go buy something comparable but more reasonably priced?

Could this be one reason why EV sales remain such a tiny percentage of all cars sold?

 

[Feed The Trees]

Surely if it is more profitable to the people selling it, then that is an excellent reason for the buyers to go buy something comparable but more reasonably priced?

Could this be one reason why EV sales remain such a tiny percentage of all cars sold?

Were it more profitable then the makers would be falling over themselves to build them. I'm sure our binary friend will tell us the reason they're not doing this is the oil and gas companies are in a conspiracy to feed the makers cash on the side that's beyond EV profits can sustain.

 

[Martin Williams]

Well, Tesla has yet to turn a profit. Its speciality seems to be making a thumping loss! Hopefully (for the investors) this may turn round some day.

 

[WadeTyhon]

These kinds of articles are very harmful imo. Anyone who can process even a little bit of it understands what a farce their comparison and conclusion is. Then when they see this obviously misinforming article they wonder how many they've seen on EVs being more this or that than ICE cars were also misinformed and maybe they just didn't pick up on it when they read. They start to question things that don't need questioning. Or someone who touts it to their friends are true and gets shot down feels like a dolt.

I agree. Like I said, Evannex articles aren't worth reading. Plus, 101101 posted it.

But since ya'll have already read it, I'll bend to peer pressure and skim it lol.

From the article:

Looking at Ford’s recently filed 2017 annual report, Lee reports that Ford “sold approximately 6,607,000 vehicles at wholesale throughout the world.’ Ford’s 2017 automotive revenue was 145.6B, which means that the average revenue per vehicle was roughly $22,000. Ford’s gross margin on automotive in 2017 was roughly 10%, and their profit margin (before taxes) was roughly 5%.”

“For an average priced $22,000 car that Ford sells, their gross margin is $2,200 and their profit margin is $1,100. On average, Ford makes $1,100 per vehicle.”

On the other hand, “let’s look at Tesla and the Model 3. Tesla is aiming for 25% gross margin on the Model 3 and mid-teens profit margin (let’s say 14%). The average price of the Model 3 is projected at around $42,000 … [so] the average gross margin on a Model 3 would be $10,500 and profit margin would be $5,880. Compared to Ford’s average vehicle profit margin of $1,100, the Model 3 would be 5x as profitable.”

Ugh.

Looking at Ford's entire lineup globally and then comparing it against a single model for Tesla? With emerging market vehicles and cheap cars like the Fiesta or Focus in the mix... what's the point of comparing them in this way?

Tesla doesn't need Evannex to stretch the truth or lie for them or provide information out of context. Tesla is a cool, desirable car company that is also cleaner and has huge potential for growth and profitability.

The Model X and S have good margins and the Model 3 (especially the mid-to-high priced builds) should be more profitable than the average Ford. Great!

But what's the point of this article? If Tesla started selling $13,000 cars their profit on an individual car won't look as hot either, they too would have to make it up in huge volumes.

It's best to compare the Model 3 to its peers, EVANNEX.

 

[Martin Williams]

Looking at the bottom line, Ford made a profit last quarter. Tesla managed to make the biggest quarterly loss in its history. I suppose it all depends on what you mean by 'profitable'!

 

[Feed The Trees]

Let's compare some like ice car. Some sought after $80-150k car in limited releases. Sounds like the 911 to me. Its long been documented that the 911 is the most profitable car in the world. So really EVs should be 2 door German sports cars with a long racing tradition behind them.

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[WadeTyhon]

Let's compare some like ice car. Some sought after $80-150k car in limited releases. Sounds like the 911 to me. Its long been documented that the 911 is the most profitable car in the world. So really EVs should be 2 door German sports cars with a long racing tradition behind them.

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A Porsche 911 starts above 90k. That might be comparable to a Model S P100D or but not a Tesla Model 3!

 

[Feed The Trees]

A Porsche 911 starts above 90k. That might be comparable to a Model S P100D or but not a Tesla Model 3!

Well most of the data we have on Tesla is the S and X so the donkey is still pulling this cart. Which, by the way, also had a very high margin at initial creation of donkey/cart transportation if adjusted for today's dollars.

 

[Martin Williams]

Tesla cars are clearly being sold at a loss. (See the $619 million loss in the third quarter of 2017). Under such circumstances, you can't call them profitable at all, let alone claim they are more profitable than ICE cars. You might be able to find an ICE car making a bigger loss of course, but that doesn't make these cars profitable.

Of course, this might change in the future, but so far, Tesla's history is of (I think) only two quarters where the company showed a profit of a small number of millions. All the rest have been loss-making, with losses in the hundreds of millions in some cases.

In order to get the sales it has, Tesla has been heavily subsidising its cars. Whether future sales and economies of scale will turn this into a profit remains to be seen. Perhaps it will, who knows. As a risk-averse investor, I wouldn't touch it, but clearly, others think differently. I wish them luck. Interesting data on the company can be found here:

https://www.recode.net/2017/11/1/16593134/tesla-model-3-elon-musk-production-q3-earnings-2017

 

[101101]

Forbes pointed out that Ford and GM are structurally bankrupt. The idea that either of these firms is profitable is a joke. Ask yourself how profitable they were right before the crash that too GM out. Nothing has changed.

And for the prattle above- model 3 is a less expensive car with a projected 25% margin- more margin than Porsche likely as Tesla has to be starting to seriously erode its brand.

25% margin!!! on a lower priced car i.e., the Model 3 is better than what Porsche is doing on a higher end car. But lets keep in mind all the worry the ICE people put out over this like Lutz constant mantra on profitability and margin, because they saw it coming. Kind of like when
the petrol pusher Romney was trying to call Tesla a loser, we know what is losing and what is destined for bankruptcy.

 

[Feed The Trees]

Listen binary friend. I know you want to try and save face after posting a brutally terrible article and proclaiming it as great, but you're not doing yourself any more favors here.

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[Martin Williams]

If Ford and GM are 'structurally bankrupt', where does this leave Tesla?

On an annual loss of two billion dollars, Tesla managed to sell about 100,000 cars. I make this a loss of $20,000 dollars a car. This seems an awful lot to make up with economies of scale, but perhaps they can manage it. One wonders how many they would have sold had they charged $20,000 a car more for them?

 

[Domenick]

Here's a link to the piece on Forbes that talks about how Ford and GM are structurally bankrupt. He makes some interesting points.

 

[Feed The Trees]

Here's a link to the piece on Forbes that talks about how Ford and GM are structurally bankrupt. He makes some interesting points.

FCFO seems his basis, for the most part, and it's largely due to investments. The difference in Ford and GM and Tesla is that there are profits to fund the investment. If they peeled back some investment they would have positive FCFO. Tesla isn't there.

As for the dubious 25% margins on Model 3... perhaps on the ones being sold today, but those are $35k cars with options added. Options are cash cows which is why Tesla, in their limited releases, is very smart to only offer cash cows. No big surprise there.

The bigger battery adds $9k! That isn't a $9k worth of extra battery, I don't believe it for a second, not if the base car itself is $35k.

For $5k of added price you get some rather basic items that heated seats, tinted glass, and a subwoofer. I'd guess these extras probably cost Tesla $500. Almost pure profit.

$1k to change paint, could even be no cost to Tesla.

$1,500 to change to 19" wheels? That isn't $1500 extra to Tesla, not even close.

All these things are enormous profit margins to Tesla... and every other car maker on the planet. This does not make Tesla exceptional, it makes them normal.

 

[Feed The Trees]

Also on the Ford and GM FCFO... when they have cash as a public company they have the obligation to put it to the best use possible. If they feel they have so much cash they can't invest it internally on projects with a good projected ROI then they issue it to owners. If however they have enough good ROI projects in house to use the money on, and they feel it's a better investment than returning it to owners, then they will use it. So seeing these 2 using cash and calling them 'bankrupt' because of it doesn't add up in my book. They're investing for the future which they're supposed to. Now Apple, they have so much cash on hand they do get to the point of turning it back to owners via the anticipated $120B buyback, but these 2 are not there.