Tesla Suffering Cash Flow Issues; Every Model S Means a $4,000 Loss 232
An anonymous reader writes: The latest reports from Tesla show a trend of missing positive cash flow targets. Despite previous guidance to the contrary, Tesla is losing more than $4000 per car in operating margin and no sign of near term improvement as they are now reducing their production targets at a time when they are also experiencing pricing pressure. A scan of articles published today on this news reveals a common opinion that Tesla will need to raise more capital soon.
A small slice of the Reuters report linked: Tesla has signaled capital spending will drop next year because the company won't be spending on a major vehicle launch. In 2017, Tesla plans to launch its Model 3 line, which the company says will start at about $35,000 and push total sales toward the goal of 500,000 vehicles a year by 2020.
Barclays analyst Brian Johnson disagreed with the company's estimates, and said he expects Tesla's capital spending will go up in 2016 and 2017 as the company ramps up its battery factory and Model 3 development. "Their small scale means the cash generation is not as great as they might have hoped for," he said.
change name to Tesla-Bank (Score:2)
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And yes, Ford was bailed out since we lent them 10's of billions to revamp with NO INTEREST.
How to stop the losses (Score:5, Insightful)
Stopping the losses is easy, but would kill the company:
Stop investing in the battery gigafactory
Stop investing in the upcoming new models
Stop investing in the Supercharger network.
They'd be profitable, but sitting still and would have squandered their future.
Re:How to stop the losses (Score:5, Insightful)
That's a serious point. They're not losing money "on every car sold", in that it implies that it's the cost of making the cars that's losing them money. It's the cost of scaling up by orders of magnitude that's losing them money. But that's obviously to be expected.
Companies investing in Tesla aren't investing on a valuation of them making a few tens of thousands of Model S's per year. They're investing on the prospect of Tesla churning out hundreds of thousands or even millions of electric vehicles, mostly lower end, per year.
Re:How to stop the losses (Score:5, Funny)
Well, the summary claims they're losing money on "operating margin", which would exclude capital expenditures due to scaling up. I suppose it's possible a slashdut summary isn't infallible, but I'm pretty sure they've never been wrong before.
Re:How to stop the losses (Score:5, Informative)
They have an extremely healthy positive operating margin of over 20% per car (well better than the industry at large).
And as the revenue from every car goes towards both variable costs and a portion of the fixed cost of the factory and capital equipment to make the cars, they can make it up in volume. The significant positive gross margin per car tells you that they more than cover the variable cost of each car, thus every additional car produced makes them more profitable.
Not to mention that operating profit at Tesla includes accounting for costs of installing new superchargers, building new sales locations, new Tesla energy business, etc. all of which they continue to significantly invest in the growth of.
The linked article was written by someone who at best has no idea what they are talking about, and at worst, was purposely spreading FUD.
Looking forward to the automated electric car revolution that Tesla will bring us in the coming decade. Got my popcorn ready.
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Mod parent up.
Re:How to stop the losses (Score:4, Informative)
They have an extremely healthy positive operating margin of over 20% per car (well better than the industry at large).
You should be careful with such a generic statement. Most other car manufacturers include product specific R&D, overhead, and sales in their margins. There are different acceptable accounting practices, and so comparing apples to apples can't be done without a little digging and pointing out the differences. It appears that Tesla does not include administrative overhead nor sales and marketing in their operating margin calculation, which I think is kind of odd, but that's Wall Street for you. If you include everything but R&D, they are closer to break even.
Re: How to stop the losses (Score:5, Informative)
I can't believe the stupidity of the financial press. Tesla actually makes 23% profit on every car. The company is investing heavily in new production capacity (batteries,production lines,new models) so they loose money but they have a lot of investors willing to finance their expansion.
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"The financial press is criticizing a company I like so I'm going to make up a stat that says they're actually doing well and call the press stupid"
Seriously, you throw out "actually making 23% profit" but then put no source what so ever. And you say that investing heavily in new production capacity means that it's fine to lose money. You can only do that for so long. I used to work for a company (the name will go unmentioned for anonymity reasons, but I'll say the were a competitor to Tokyo Joes) that o
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If they are only losing 4000 / car, I am impressed. Chance are that when they open gigafactory AND have Model X up to at least 20K cars / year ( along with 50K / year on MS), they will be breakeven or close to it.
Re:How to stop the losses (Score:5, Informative)
Nope. Learn the difference between operating losses versus capital investments. Yes, Tesla is losing money on every car they make.
And in reality, Tesla has a $14,000 operating loss per car. (not the $4,000 using Telsa's creative accounting.)
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Mod parent up. GAAP accounting says ~ $14 000 loss per car, the $4k figure is a random 'creative accounting' thing
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I have almost 50k in Tesla stock actually. I picked it up in 2011, it is now worth much more than I paid for it. So, I guess you could say that I am rooting for them. I realize that scaling up takes a goodly sum of money and my investments are almost never short term so I am rooting for them to scale as much as they need to and perhaps a bit more than that just to be sure. If the stocks drop again then I will likely double my investment. Right now they are a bit high and unpredictable though they show plent
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So they should turn into GM?
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Stop the losses for by far the majority of modern corporations are a lot simpler than that. Stop fudging the books to cheat on taxes ie how many Movies regardless of box office revenues or the self apparent wealth of those conspiring to cheat on tax, are 'losing' money.
It is normal for a modern business to 'lose' money for the first few years via conspired tax laws and when the initial investment can no longer by fudged to continue to not pay tax, additional 'losing' investments are made. This also inclu
The hell you say... (Score:5, Interesting)
Despite that, it still works sometimes: are Jeff Bezos' ear's ringing?
There's more to it than profit. (Score:5, Insightful)
Amazon's lack of profitability was/is in some ways artificial - they spent (are spending) a goodly chunk of cash on infrastructure. And even when they weren't (technically) profitable, they still had a healthy cash flow (which Tesla doesn't have).
With their debt load, an unhealthy cash flow is a real problem. Without cash flow, you're limited in your ability to re-finance or to pay interest while pushing the repayment of principal into the future. (Which isn't the best strategy overall, though it can work if the stars align.)
Re:There's more to it than profit. (Score:5, Insightful)
Tesla's solution to running short on cash is, and has always been, to sell equity. Which is a common approach to startups, and they're still really in a sort of startup mode. It works fine, so long as others think that their plans after scaleup will be profitable. And so far there seems to be plenty of investors who think so.
Not just equity. (Score:3)
They've sold plenty of debt alongside that equity. It's a viable strategy, but imposes burdens that equity doesn't. If you don't have a healthy cash flow, equity doesn't come back to bite you in that ass - debt does.
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Tesla's solution to running short on cash is, and has always been, to sell equity. Which is a common approach to startups, and they're still really in a sort of startup mode. It works fine, so long as others think that their plans after scaleup will be profitable. And so far there seems to be plenty of investors who think so.
They also need the stock price to stay high so they can easily raise capital. So the bigger problem is not margin, but it is in missing projections, both in cost and in sales. If you miss your target projections, stock prices will take a hit. A 10 percent drop in sales from projected is pretty bad, not only from a credibility standpoint, but also from a marginal cost of production standpoint. The one thing Tesla has working in its favor is low inventory, so at least they are not likely to get caught in that
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Facebook was founded in 2004. So what?
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Amazon's lack of profitability was/is in some ways artificial - they spent (are spending) a goodly chunk of cash on infrastructure.
Infrastructure. You mean like building a free supercharger network across the country and internationally?
The word you're looking for isn't infrastructure. (Score:3, Insightful)
No, I mean things like warehouses and distribution centers and data centers - things that turn around and generate cash flow. I mean the normal meaning of the word infrastructure.
The word you're looking for is loss leader.
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Then I'm afraid you don't know what infrastructure means.
noun
1.
the basic, underlying framework or features of a system or organization.
2.
the fundamental facilities and systems serving a country, city, or area, as transportation and communication systems, power plants, and schools.
http://dictionary.reference.co... [reference.com]
Infrastructure is exactly what the supercharger network is.
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Yeah, any long-term Slashdotters remember the jokes year after year about Amazon losing money and implying that anyone who invested in them was an idiot. Heck, it wasn't just Slashdot making jokes about that, even Futurama cracked a joke at Amazon's expense. Of course, Amazon turned their first profit in 2002, and anyone who invested significantly in them in the early days would be filthy rich right now, as they're the US's largest internet retailer and the world's largest cloud computing provider with 54
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Amazon is not profitable because they're pouring money into expansion. If they weren't doing that, that money would show up in their books as profit. I haven't read TFA, but Summary says Tesla is reducing production.
Re: The hell you say... (Score:2)
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Despite that, it still works sometimes
Try telling that to the people commenting against Uber in the recent Uber thread...
The funny thing is they probably worship Musk, and so no incongruity.
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In Elon's defense, do you suppose it's all gravy being a focking nerd hero?
Disrupting status quo (Score:4, Interesting)
Musk has repeatedly said that he's far more interested in changing the world than in making money. The dollars and cents are merely a vehicle for his visions.
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As long as he has the dough to back up this philosophy it's a good one...
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Hippies are stupid! News at 11.
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Ultimately, dollars and cents are what matters, not vision. "Vision" is only called that in hindsight when the idea succeeds economically. When it fails, we call the would-be visionary a "crackpot".
You can spend all your money buying Segway and giving them away. But that's only sustainable so long as you're pumping money into it. To really "cha
Where does that figure come from? (Score:2)
If they include all the investments made in battery technology, charging stations and future lines, then $4k/car is pretty much peanuts.
A huge risk, that's paying off well (Score:5, Interesting)
Tesla took a huge risk by taking a completely new technology (battery-powered cars) and applying it in a completely new and untested way (performance car). They went into it knowing that they'd be taking a loss for the medium term.
If Tesla are already at taking only a $4k loss / 10% loss, they're doing extremely well:
- The "Supercharger" units that are being aggressively installed across many countries will be accounted for within this unit cost... It won't be long until they reach diminshing returns on their deployment, and the impact of this will tail off.
- They added a number of new product lines, all sinking huge money into R&D. They're close to establishing a range of products so the impact of this will tail off shortly.
Musk could easily choose to add $4k to the sale cost of each cars with minimal impact and result in a 0-dollar P/L, but increasing production count ensures far better long-term return by economies of scale improvements, as well as learning opportunities when scaling aggressively.
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Electric cars have been around since the mid-1800s [wikipedia.org].
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Electric cars have been around since the mid-1800s
From what I've read lately, that's new enough for slashdot.
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Electric cars have been around since the mid-1800s
From what I've read lately, that's new enough for slashdot.
Interestingly enough, the first successful oil well was completed in 1859 by Edwin Drake in Titusville, Pa.
This led to cheap petroleum fuels for the internal combustion engine, signaling the death knell for the development of electric cars at the time.
Discuss.
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Ooh, inventing a time machine to "correct" mistakes of the past by murdering entrepreneurial industrialists. What could possible go wrong? Besides a cheesy sci-fi flick, that is.
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I know, right? I'm sure The Asylum [wikipedia.org] is already busy making one after reading your comment.
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Electric cars have been around since the mid-1800s [wikipedia.org].
And the Prius came out in 2000, 3 years before the founding of Tesla. Musk realized that he would have to sell a car for lots of money to fund R&D. The only cars that sell for lots of money are performance vehicles and sports cars. Plus, they typically don't need the range of regular cars.
I'd say the risk was similar to starting a luxury yacht company, not much more. Electric motors have always been recognized at having a lot of low end torque. Its the development of high end torque that would have
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Tesla took a huge risk by taking a completely new technology (battery-powered cars) and applying it in a completely new and untested way (performance car).
Battery-powered cars and utility vehicles have been around since 1896. Their advantages and limitations have been known from the beginning.
Henry Ford took the opposite direction from Tesla, beginning with a simply conceived but rugged and reliable internal combustion engine as the basis for a mass-market priced family car, light truck and tractor.
After-market conversions transformed the T into RVs, snow-cats, railcars, bookmobiles, hot rods and pretty anything else you could imagine. Used engines were pul
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Wat? (Score:3)
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If there was a big market for cars that can only drive 100 miles, auto manufacturers would be reducing the size of their gas tanks to reduce weight and gain 0.25mpg.
Since they're not doing that, clearly it's not a market big enough to care about.
No one has a gasoline pipeline to their house to constantly refill a 100 mile range gas tank, but many homes can conveniently recharge an electric car.
Sell batteries as an end product (Score:2)
It has been suggested that Tesla should get into the battery business, as a product. They've done a lot of work to improve battery energy density. If they were to market these to laptop and cell phone vendors, would they be able to use that cashflow as a means to prop up the rest of the business?
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My understanding is that the Tesla car batteries are built from large arrays of commodity Li-ion battery cells, they're nothing special in terms of capacity or size or design. An 80kWh Tesla battery pack might have ten thousand cells each of which is a 3.7V 2.2AH unit of the sort you'd find in a laptop battery pack, arranged in series-parallel.
Tesla's "secret sauce" is the charging and conditioning of their batteries as well as armouring them against damage in a collision and preventing propagation of a fir
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Large Lithium-based batteries do exist, but at the moment the risks associated with them outweigh the packaging headaches when using small commodity batteries. My guess is that as battery control/maintenance technology improv
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There are also satchel charges which can be, in extremis, thrown a certain distance by hand so they could be classed as "large hand grenades", I suppose. On the other hand there's the Special Atomic Demolition Munition which was (theoretically) man-portable...
I suspect that large Li-ion technology cells are used in certain circumstances such as submarines but not usually in "civilian" environments like cars because of Li-ion's ability to release its stored energy in a short period of time as heat or even a
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I suspect that large Li-ion technology cells are used in certain circumstances such as submarines but not usually in "civilian" environments like cars because of Li-ion's ability to release its stored energy in a short period of time as heat or even a low-order explosion due to its low internal resistance.
If I were designing a submarine, in my probable ignorance, I would use LiFePo. Their big drawback is that they are expensive, but otherwise they are a nice replacement for LiPo. High capacity, high discharge rate if you want it.
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How do any/all of these react to seawater?
Li-Ion and LiPo? Very poorly. LiFePo? Not as poorly.
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https://en.wikipedia.org/wiki/... [wikipedia.org]
Seems portable enough to me.
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Tesla's "secret sauce" is the charging and conditioning of their batteries as well as armouring them against damage in a collision and preventing propagation of a fire in a series of cells spreading too quickly to the other cells in the pack.
I'd say that makes a "Tesla Battery" a unique product even if its constitutent cells aren't that unique.
If they would/could sell their batteries or powertrains I think there's probably other markets that could use them. Recreational boats is one application that comes to mind.
Lighting, electronics, small refrigeration, ventilation (excluding AC) all can run off batteries on boats, forgoing running the main engine or a generator but lead acid batteries are heavy and have limited capacity, especially if you
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I worked on a hybrid boat with over 18,000 Li-ion batteries in the bilge!
(You don't want it to sink!)
It had 2 X 100 HP electric motors between the 500 HP diesels and the pod drives. You could run them for an hour at max output (about 12 knots) with the battery capacity it had, and you could get a whole days worth of putting around if you took it easy.
It recharged with solar panels in under a week, so you could use it every weekend using only the sun.
Recharging on shorepower was problematic to say the leas
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What kind of boat was this? 1000 HP of diesel plus Li batteries and seperate motor propulsion? That sounds like a big boat but strangely long runtime on DC power for only needing a week to recharge.
If I had the money/skill/etc, I'd be sorely tempted to pick up a 20 year old 30' "sport cruiser" in the Searay Sundancer mode for under $20k and try to convert it myself to some kind of low-speed battery-electric populsion.
A lot of these older cuisers have twin big-block V8s plus room for a 4kw generator and 1
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Some details and pictures from when the boat was at the Miami Boat Show:
http://www.tradeonlytoday.com/... [tradeonlytoday.com]
We had a number of different battery configurations that we tested to try and find the right balance of capacity and weight.
To get the batteries to charge that fast, the sunpads on the deck unfolded to expose more solar panels, and some dual surface panels were used that had higher output. We also had the batteries in banks that we could selectively charge (or discharge) them based on the power availabl
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Your link returns a blank page, which is disappointing, I'd like to read about this.
I think solar is a worthy marine battery extender for any boat -- even if its only a couple of hundred watts, it negates a lot of house power for things like a small DC fridge, stereo, etc. I don't know why every hardtop doesn't have panels or why sundecks aren't lined with them. Net positive (or no worse than net zero) solar for full house functionality seems a stretch if you start including bigger or hungrier appliances,
This is not new, Tesla has never made a profit (Score:2)
In more than ten years, Tesla turned in a quarterly profit one time. It takes real genius to lose money year-after-yearjust like Steve Jobs. Oh wait, Steve’s companies were profitable.
I know that the fanboys love to compare Tesla to Amazon, because Jeff Bezos is a loser too (his company also loses money), but both Tesla and Amazon will ultimately fail because you can’t lose money forever. As soon as Amazon tries to raise prices, people will shop elsewhere. Bezos’ strategy is to undercut co
Tesla "Losing Money" (Score:4, Interesting)
Let's look at a few other companies that are "losing money"
1. Sony
2. Sprint
3. Amazon
4. Instagram
5. Snapchat
6. Box
7. Twitter
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That bastard PopeRatzo never posts citations for his ridiculous assertions.
http://money.cnn.com/2015/01/2... [cnn.com]
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Sony
A once hugely profitable company that got hit hard by competitors. What's your point?
Sprint
Another once successful company that fell on hard times.
Amazon
Unlike Tesla, could have been profitable years and years ago, but chose to plow money into expanding. They could cut all that expansion money and be instantly profitable.
Instagram, Snapchat, Box, Twitter
Internet companies that may never justify the high evaluations or prices paid for them.
Tesla may or may not pay off in the long run. They've got plenty of competition and lots of expenses, and they nee
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Amazon also benefited from the government subsidizing it by not having it charge sales tax for so many years.
Now that it's on a more even playing field with other stores, it will be interesting to watch.
It's not for a lack of orders (Score:2)
Here in Canada, at least, if you want a Tesla there's a 5 month waiting period to get it. That's how far back the order queue is. There's definitely massive demand, so at least there's that.
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So... what are we going to do? Say good bye to mobility? For if we don't have the means to produce electricity to power cars, we sure don't have the oil to do so, considering that you can produce electricity out of oil PLUS a lot of other means, too...
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Congratulations, you moved the discussion over to your pet topic.
*golfclap*
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Oh, sorry, I thought we're talking about the US. You know, the country with zero public transport to speak of outside of a handful of towns where it so-so works.
But hey, if we're talking countries that actually HAVE a public transport system worth mentioning, you have a point.
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Actually we could replace 25-30% of the cars on the road with electrics without increasing electricity production at all. You would be surprised at the amount of baseload electricity that gets produced produced in the nighttime that gets wasted.
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PG&E made those statistics for California back when the EV-1 was being planned in the 1990s.
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I don't see you pointing to any sources either. Especially for your claimed decrease in electrical capacity.
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So they are using more electric power but more of it comes from out of state. The energy mix is changing from Coal and Nuclear to Natural Gas.
I still don't think the amount of available peak generation capacity to power electric vehicles changed tremendously though.
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It was in the movie "Who Killed the Electric Car". Accurate enough for you?
Re:Good riddance, Tesla (Score:4)
Whereas oil - I mean there's just an infinite supply of that, isn't there?
Idiot.
An electric car can be powered from anything. A hydrogen car can only be powered by hydrogen, and a petrol car only by petrol and a diesel car only by diesel.
The last time I priced up an electric bike, it worked out something like 10p of electricity for each trip, which would have worked out less than 1/40th of my petrol costs over the course of a month. I can put the savings from that into something that produces a pittance of electricity quite easily.
However, that's on the cusp of being true for cars too. So much so that I'd rather have a 220V/32A outside connector on my house than anything to do with any competing technology.
Fuck, if it comes to it, I'll go to an electric bike for 90% of my journeys and literally NOT PAY for propulsion overall. I could do that in a crappy, cloudy, still country and still find a way to produce that electricity that's cheaper than running a petrol equivalent.
The only thing we don't have power for is the PEAK hours, nothing else. Otherwise, the pittance drawn by a car is eclipsed by your heating, lighting, etc.
But the beauty of electricity? It can come from ANY source. We could quite literally just burn petrol in a huge petrol engine and keep MORE electric cars powered than that petrol could have run direct.
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What do you think provides the 220 voltage to the connector outside your house or to make the hydrogen or to make the steel to make the cars (or bicycles)?
http://blogs.wsj.com/numbers/m... [wsj.com]
We have a long way to go still ;).
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Natural gas. Your WSJ article is a year out-of-date, and simply wrong:
http://pipedot.org/story/2015-... [pipedot.org]
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The problem with electric is that massive areas of Europe are totally and utterly useless for owning electric vehicles, because the norm here is for unallocated street parking, meaning you can't charge it overnight.
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Unless of course electric chargers are installed which can be used to charge any car (for a fee of course).
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Who is going to fund hundreds of millions of such chargers...?
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Who would that be, exactly? The oil companies? I don't think you thought that one through...
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Those places usually have decent public transport though.
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You really haven't been to the UK, have you?
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Re:Good riddance, Tesla (Score:4, Informative)
As much as I'm a fan of electric vehicles, this analysis looks pretty flawed. They talk about "energy" efficiency (and cite "electricity + natural gas" as money spent by refineries), then immediately turn around and assume it's all electricity.
it can be estimated that about 21,000 Btu—the equivalent of 6 kWh—of energy are used per gallon of gasoline refined.
It is a simple fact that the refining of gasoline requires approximately 6 kWh of electricity per gallon of gasoline.
Here is a counterpoint that seems to make more sense. http://longtailpipe.com/ebooks... [longtailpipe.com]
Main points:
1) Not all the energy they use is electricity, most is actually burnt oil.
2) The process of refinement produces several products; it's unfair to attribute all the electricity to the gasoline produced.
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1) That's oil that could have been left in the ground or used to produce electricity or some other use.
2) That's almost entirely accounted for. The calculation takes the BTU of a barrel of crude, refining efficiency (~85%) and the BTU of the resulting refined products and converts the difference to kilowatt-hours.
Keep in mind that's only the energy consumption of the refining process. If you do a full "well-to-wheels" analysis of the various energy sources, fossil fuels start to look ugly very quickly.
http: [plugincars.com]
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Now imagine someone having the great idea of introducing a new car that burns fossil fuels and just throws out its carcinogenic exhaust fumes wherever it's driving. You would smell it whenever one passed by (you can't now because you're so used to it). People would say it's scandalous that those things were allowed anywhere near population centers
Just have to look at history to see that as long as the fossil fuel burning car is cheaper and/or better in other ways such as range, it'll displace the electric vehicle even with the toxic stinky fumes. https://en.wikipedia.org/wiki/... [wikipedia.org]
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Yeah I was wondering the same thing...
That "4000$ lost per car", does it take into account all the R&D expense for the other product Tesla's working on? Because, AFAIK, it cannot make 4000$ lost per unit on their "only" product if the company was profitable last year.
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Don't get me wrong, from an automaker's perspective it makes sense to build cars in Mexico as it's part of both NAFTA and ALDAI (a Latin-American free-trade zone) so cars built in Mexico can be sold in nearly all of North and South America without much in the way of tariffs.
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Don't knock it, it worked for the other ostensibly American automakers, producing many of their cars and parts in Canada
True, and to keep it that way they got a as well and they are not even Canadian companies! [theglobeandmail.com]
Personally I would much rather have my tax money bail out a company like Tesla than GM/Ford/Chrysler. If Tesla can get their technology and business model to work then society will benefit in the long term from less pollution and less hassle purchasing cars. I'm not really sure what, if any, the long term benefits are of propping up a company like GM is. It might save job losses in the short term but given their r
Re: So if every American gives them a penny per ca (Score:5, Informative)
Hardly something to fault him for.
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It's a scam if it isn't going to the oil companies for 'exploration'.
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Re:So if every American gives them a penny per car (Score:4, Informative)
The $4.9 billion includes SpaceX and SolarCity as well. It also includes loans which have been paid back.
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The U.S.A. government is giving a lot more money to GM, Ford, oil companies, etc. It's also wasting a lot of money on pointless wars and armed conflicts.
And you're worried about Tesla?
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They'll make up for their losses with high volume? Because -4000 (loss) * 1000 (high volume) is, like, a positive number?
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Citation please, because as of this year [fortune.com], Amazon is finally bringing in profits. They stole the Costco/SamsClub model and are making money through a membership program that incentives a small number of people to spend dramatically more.
That said, I sold all my AMZN shares years ago. I probably should have kept them, I could have paid off my house with them.