Here's The Real Reason Tesla Makes No Money

Tyler Durden's picture

Elon Musk bills Tesla as the pinnacle of "lean" manufacturing.  Just search for pictures of Tesla's manufacturing plant and you'll undoubtedly be served up futuristic looking images, like the one below, depicting 100's of red robots building vehicles without a single employee in sight.

Tesla

 

But, if Tesla is truly the lean manufacturing powerhouse that it purports itself to be then we do wonder why it continues to burn through ~$600 million of cash every single quarter, or roughly $30,000 for every car that it sells?

 

Perhaps this 'anomaly' has something to do with the fact that, as Automotive News points out, Tesla's real 'capacity problem' has nothing to do with the size of their manufacturing facility but rather the staggering number of people they're using to build their cars.

The 5.3 million square feet of manufacturing space that Tesla now occupies started off as a joint operation between General Motors and Toyota which began in 1984 and was intended to help the Japanese automaker learn about doing business in America and teach GM the principles of lean manufacturing.  20 years ago the plant pumped out over 350,000 new cars each year or roughly 74 vehicles per worker. 

Meanwhile, Tesla, the 'pinnacle' of lean manufacturing with a 20-year technology advantage, somehow only manages to build somewhere between 8-14 cars per employee.  

It's because in this temple of lean manufacturing, Tesla uses far more workers than NUMMI employed to build far fewer cars. In 1985, its first full year of production, NUMMI had 2,470 employees and produced 64,764 vehicles — about 26 vehicles per worker per year. By 1997, it had 4,844 ? workers and produced 357,809 vehicles — about 74 vehicles per worker per year.

 

Tesla, on the other hand, had between 6,000 and 10,000 workers in 2016 and manufactured 83,922 vehicles. That puts its vehicle-per-worker number between 8 and 14, about one-seventh the efficiency of NUMMI at its peak.

 

"The number of people Musk's got in there has a great deal to do with why he doesn't make money building vehicles," said automotive manufacturing consultant Michael Tracy of Agile Group in Howell, Mich. "Toyota's numbers reflect the number of people you expect to have if you were going to efficiently build vehicles for a profit."

Of course, given that Musk intends to go from manufacturing 100,000 cars a year to 500,000 with the launch of the Model 3, one has to wonder whether or not that is actually possible.

The Fremont factory assembles the Model S sedan, Model X crossover and the soon-to-launch Model 3. Musk said the upcoming Model Y will be built in a separate factory.

 

In Tesla's fourth-quarter earnings call in February, Musk said that once the Model 3 launches, he plans to begin producing 5,000 vehicles per week in the fourth quarter, and ramp up to 10,000 vehicles per week by 2018.

 

"Going from 100,000 to 500,000 units is a huge leap for any company," said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. "For them to build a half a million units next year, it would be an amazing ramp-up for what is still a startup company. There's all kinds of red flags."

But, as we pointed out earlier this month when Tesla's market cap surpassed that of BMW, Ford and GM, the market doesn't seem to care much about Tesla's manufacturing inefficiencies and will undoubtedly underwrite however many billions of dollars are needed to build additional manufacturing capacity.

 

And, given that the investors seem to think Tesla is worth about $800,000 per vehicle it cranks out, we see no reason why the company shouldn't be worth $400 billion within a year or so when they start pumping out 500,000 cars per year.

 

Finally, for all the Tesla investors looking to retire off their stock gains, we have some beautiful ocean front property in Oklahoma that we think might be just perfect for you.

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SloMoe's picture

It should be noted, Toyota is not building a machine able to drill a hole to the planet Mars.

Jus7tme's picture

Real reason: Elon Musk is a six-sigma idiot.

fx's picture

Wrong. He is a six-sigma con-man.

That's why he will emerge as a billionaire when all is said and done, while shareholders, current shorts and taxpayers will all count their losses.

With the right timing, shorting this POS will make you a ton of money.

Stuck on Zero's picture

Most of this piece is hogwash. GM, BMW, and others subcontract a lot of their production. That's partly to avoid high union costs. Tesla subcontracts almost nothing therefore their labor hours look greater.

Jim Sampson's picture

So...  Elon's kinda like Marissa Mayer, will get rich and let the rest crash and burn.  And these people are looked up to.  smh

Alt RightGirl's picture

More good news for Musk.

This will put Tesla out to pasture for good.

Conservatives Go For Musk’s Green Tax Subsidies


Automatic Choke's picture

This article makes very unfair comparisons of Tesla to conventional car companies.    Of COURSE Tesla requires more employees....they are a sensitive modern new age company, and have a huge overhead of non productive employees running sensitivity training, non-discriminatory coffee-brewing seminars, self-esteem workshops, as well as marketing real estate on Mars and advanced sales of tickets on self-exploding rockets (buy one for your mother-in-law today!).  It is no surprise that they are losing money on every car, but they promise to make it up in volume.

 

max_leering's picture

a few more not listed: "Finding a Safe Space among Idiot Co-Workers", and "How to NOT Trip My Trigger Bitchez"

BaBaBouy's picture

TYLER give us a break...

You should know that TSLA is in a MAJOR ramp up right now to push out mass produce the new MOD3.

They are building a battery gigafactory largest in the world right now...

THOSE Red Robots, yes ELON bought the entire German Co. that makes them, cutting edge. Right now they only produce for TSLA factories!

They have multiple vehicles in the pipe, trucks, Rigs, Racing, you name it...

Solar shingles rolling out soon.

L-ION is our future like it or not... GOT Cobalt???

>>>

In continuation of Tesla referencing the movie ‘Spaceballs’ for its performance modes, like ‘Ludicrous mode’, CEO Elon Musk said that the automaker is reserving the ‘Maximum Plaid’ mode for the next generation Tesla Roadster.

Now Musk is hinting at just how quick Maximum Plaid could be right off the production line.

Tesla already has the ‘Quickest Production Car in the World’ title with the Model S P100D Ludicrous.

The company is listing it with a 0 to 60 mph acceleration in 2.5 seconds, but several owners managed to achieve a 2.3 second time.

Tesla Roadster next-gen: Elon Musk considers 0-60 mph target under 2-second for ‘Maximum Plaid’

https://electrek.co/2017/06/13/tesla-roadster-next-gen-elon-musk-maximum...

Schlump's picture

FFF (fossil fuel-funded) article

Funny the way conservatives hate renewable energy

ebworthen's picture

Cars charged with electricity created from coal, oil, and natural gas are not "renewable energy".

Did you skip 8th Grade Science classes?  Do you think the Earth is warmed by something other than the Sun?

Only 7-10 years to get the payout from the solar panels - that is - if you have the real estate and money to buy it.

Not to mention the toxic batteries, plastics, mercury, lead, and other toxins required to produce these high price U.S.A. Yugo's?

http://news.energysage.com/what-does-it-cost-to-charge-a-tesla-with-solar-energy/

forestgump227's picture

What does electricity coming from coal have to do with Tesla? It does not change the fact that Tesla's is the fastest accelerating production car. It does not change the fact that it is far cheaper to recharge then refuel a car.

ebworthen's picture

Sure, if you ignore:  the purchase price, the charge price, where the charge energy comes from, maintenance costs, toxic materials in production and recycling when it goes to the junk heap in 3 years.  Other than that, fantastic!  Unicorn jumps the rainbow!

RAT005's picture

The battery life price is around $0.10/mile or the same as a 30 mpg car with $3 gasoline.  If the electricity were free, Tesla costs more per mile.

The Prius and even Volt are efficient because they only store a little electricity and get a lot of it from recycling otherwise lost kinetic energy.

BLOTTO's picture

The real Tesla wanted free energy for the entire world.
.
AC>DC

luky luke's picture

The ONLY thing America's good at these days is setting the MIDDLE EAST on fire for IsraHell.

http://biblicisminstitute.wordpress.com/2015/06/25/imperial-warmongering/

Manthong's picture

 

Well, the good news is that musk oil is a great lubricant.

 

jeff montanye's picture

it's not the only thing but the u.s. is far to good at it, that's for sure.  find out who killed seth rich and that may change.

tesla does offer a pure ev play but these lists seem to imply other electric cars are more efficient.  now if we can just get to work on ways of transporting efficiently the electricity made in sunny and windy places to the places people drive, these may have a chance.  i love the maps.

http://www.hybridcars.com/the-6-most-efficient--electric-cars/

https://cleantechnica.com/2016/07/15/10-fuel-efficient-cars-course-elect...

http://www.cheatsheet.com/automobiles/the-10-most-efficient-electric-car...

https://electrek.co/2016/11/21/hyundai-ioniq-electric-efficient-electric...

 

http://solarcellcentral.com/solar_page.html

https://www.google.com/search?q=map+of+world's+windiest+places+for+generating+electricity&client=safari&rls=en&tbm=isch&imgil=NrFWTHoSH4UEaM%253A%253BJwqBDjzWB8ycHM%253Bhttps%25253A%25252F%25252Fdupontconsulting.wordpress.com%25252Ftag%25252Felectricity-generation%25252F&source=iu&pf=m&fir=NrFWTHoSH4UEaM%253A%252CJwqBDjzWB8ycHM%252C_&usg=__Vt0ixrDSqfPIuh-WGg9A35VXY7Q%3D&biw=961&bih=525&ved=0ahUKEwj02YKtgL3UAhUD02MKHUF7BGIQyjcIOw&ei=LP9AWfSTDoOmjwPB9pGQBg#imgrc=NrFWTHoSH4UEaM:

https://earth.nullschool.net

https://www.greentechmedia.com/articles/read/these-new-energy-maps-show-...

http://spectrum.ieee.org/green-tech/solar/windiest-or-sunniest-sites-not...

Richard Chesler's picture

Half the emmployees are there exclusively to tell Musk how cool he is.

 

MEFOBILLS's picture

The well to wheel equation includes most variables, including conversion losses.  So, the equation only inverts to being positive when rooftop solar is factored in. 

Elon and others don't factor in the costs of finance, for example to finance a roof, or a car, etc., which is more loss.

Others think a hybrid is efficiency loss due to carrying around a gas generator (gas engine), plus its conversion losses to co generate electricity.  

Christian Von Koenigseggs KDD system is a direct mechanical drive through a hydraulic torque converter, and no transmission.  This is an efficient lightweight system, where both gas and electricity work together to their respective advantages.  

If I were Musk, I would be legitimately concerned about KDD system as being superior technology.  It may not make its way down to normal cars at first, but it will eventually.

https://www.youtube.com/watch?v=glf_k4qGBAA

 

BigJim's picture

Automotive history is full of promising technologies that never make it to production.

Just sayin'...

Knob Creek's picture

Good video. Thanks for posting 

Helicopter Rides's picture

Idiots/normies are skilled at ignoring most the steps or layers of something.

 

Somehow tesla's car are ecological. It's insane.

RAT005's picture

But the subsidies are justified to save the planet

 

jeff montanye's picture

fossil fuels receive many subsidies.  one of the few things that the market doesn't price well are resources such as air, land and water that are shared, "the tragedy of the commons".

https://www.google.com/search?client=safari&rls=en&q=subsidies+to+fossil...

A. Boaty's picture

G20.gov annual subsidies for fossil fuel = $444 billion

USA.gov annual subsidies for fossil fuel = $20 billion

Posthttps://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opini...

Bwana's picture

The gas company used to advertise that if you cook anything on a gas stove it uses 1/3 the gas you would use to make the electricity and cook the same whatever on an electric stove. Likewise burning the fuel in an efficient engine uses less fuel than burning the fuel to make electricity, transmitting the electricity, charging a battery and then using that battery to power a car. From my college days we learned by actual demonstration that if you use electricity to run a motor that turns a generator you lose about 10% of the power. Electricity is transmitted as high to very high voltage and when it arrives at its destination it is stepped down in transformers.

An electric car requires a utility to burn fossil fuel to turn turbines which produce electricity with generators. They have smoke stacks to vent the excess or lost heat which is a loss of power. that power is stepped up to transmit it and stepped down when it get to your local station. Then it is sent to you charger which puts it into the battery which holds the electricity until the accelerator is used to send electricity to the motor via a rheostat. From the energy contained in the fuel it goes through conversions to make your car move and at each one there is a loss of power. Burning the fuel,converting the heat to steam(1), driving the turbine(2), turbine spinning the generator(3), voltage stepped up for transmission(4), transmitting the voltage(5), stepping down the voltage once it arrives(6), changing AC to DC current(7), charging the battery(8), with the loss in wiring(9), taking electricity from the battery to the electric motor to make the car move(10). Some of these are a small loss and some are large. If you want to know how bad all this is rent a small diesel generator. Use it to charge your battery, and I'm sure if that diesel was burned in a diesel vehicle it would be more efficient. As soon as these cars get popular everyone who owns one will be heavily taxed.

Underground's picture

Ummm you just also explained also combustion engine powerd vehicles. The difference I see here is one doesn't eminent combustion byproducts or fumes or need massive amounts of oil. The electric vehicles batteries can be recycled as well as the combustion. Also no need for Oil changes which accounts for a lot of pollution in our waterways. Have you see the parking lot at Walmart? Some areas you can't even step it's so saturated with oil from all those leaking gaskets ect. When it rains all this washes into waterways. Tesla could source as much materials he can from combustion engine batteries to manufacture in a way that helps recycle rather than mine. I believe it takes some other metals he must absolutely mine to make these high efficiency. And to recharge the electric you will  still need coal? gas? or nuclear. Pick your posion essentially.

bluez's picture

The ONLY one of Musks delusions that will possibly ever make real money is the SpaceX rocket thing. The age of "lithium batteries" is over (so Musk is basically over). We are moving to glass dielectric sodium batteries. Much cheaper and much better. Musk is the new Madoff.

(But don't listen to me.)

jeff montanye's picture

thanks for the heads up.  the guy that invented the lithium battery thinks they are the coming thing as well (p.s. he is 94 and still doing research):

http://spectrum.ieee.org/energywise/energy/renewables/does-new-glass-bat...

Likedeeler's picture

"Do you think the Earth is warmed by something other than the Sun?"
Considering all the facts, indeed I know.
https://en.wikipedia.org/wiki/Geothermal_heating

Lucky you, that you have the money to buy a natural gas facility for real independance.
And lucky us that we can forego the lead in conventional car batteries with lithium as there is mor lithium available than lead and it is much less toxic. If you choose LiFePO batteries there even is no cobalt in it.
I wish you a nice day in school.

 

ebworthen's picture

Oh man, thanks, I knew there was a power greater than the Sun warming our planet!

I just knew there was a fantasy to roll things forward until we kick the bucket.

Geothermal and lefty wet dreams to the rescue!  Sure, grocery deliveries, etc.

Praise the globalist church of the holy sepulcher of delusional dreams!

Thank you, I will sleep easy this 'eve lying to my children.

Rotterdam delusion dittos to you my friend.

The Jihad immigrants behind you 100%!

(well, if you want to be slaughtered).

Europa!

Nothing's picture

According to the EIA, out of the total electricity generation in the USA last year, solar panels provided even LESS than firewood.  Less than 1% of the total.  Coal, for example, still provides 3500% more than solar panels, DESPITE years and years and years of the propaganda machine and massive Federal, State and local subsidies and tax benefits .....

A. Boaty's picture

...massive Federal, State and local subsidies and tax benefits...

G20.gov annual subsidies for fossil fuel = $444 billion

USA.gov annual subsidies for fossil fuel = $20 billion

Posthttps://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opini...

A. Boaty's picture

- Wind and solar power have been rapidly winning market acceptance. Last year, the installed capacity of solar power in the United States nearly doubled. And wind is now being harnessed to produce 5.5 percent of America's electricity, according to the U.S. Energy Information Administration. http://nyti.ms/2oO4DRV

A. Boaty's picture

Lots of EVs charging at night smooths out the day/night demand cycle, allowing power plants to run more efficiently, as they would not have to power up during the day and power down at night.

7 -10 year payback or solar? One has to do the reverse amortization calculations for each system to get payback time.

DownWithYogaPants's picture

Lefties just can't do hard science as you just have proven Mr Schlump.

That's probably because in order to be good at math requires a good dose of testosterone that reorganizes the brain around the time of puberty.  Given you lefties are sort of iimp soft friend zoners who paint their toenails that leaves you right out of engineering.

jeff montanye's picture

actually in utero is pretty important too, for women as well.

ideally, for math, you want to be a male with lower testosterone levels (https://www.ncbi.nlm.nih.gov/pubmed/1745699) or, if a woman, higher testosterone levels.

yarpos's picture

The article isnt about renewable energy its about efficient and profitable manufacturing.  There is nothing much that is cost effectively renewable about a Tesla vehicle.

forestgump227's picture

Tyler is doing anything he can to lessen his losses from shorting this.

 

He is probably driving to an edge of a cliff right now, as are many Zerohedge readers who drank his anti Tesla cool aid.

Tesla has been the most heavily shorted stock for a long long time and it keeps going up.

Common_Law's picture

Actually Tesla just bought the German company that uses the robots in their machines. The red robots are Kukas and currently 95% owned by the Chinese.

Underground's picture

China owns us or should I say our companies. I went to the Apple store with friends who where looking to buy a few phones. After completing the sale with them he turned to me and said hey would you like one also? I said perhaps when apple decided to produce in the states I might in a better position about spending close to a grand on a pocket toy.  He said, what do I care, apple is paying me good. He totally missed the point and that is what's a matter with the US. A vast majority? Does not have the comprehension "what's good for the goose is good for the gander". Haven't they ever played Sim City?

AVmaster's picture

OR, B: You are trying to force a product down the throat of a market that doesn't want said product...

 

In order to make a government subsidized buck of course...

willmont's picture

The robots themselves are made by Kuka and Fanuc. Kuka was bought by Chinese Midea- Fanuc is still listed in Tokyo. Tesla bought a German robot integrator company. Last mile installation, software enhancement, service. None of these solutions are all that unique and would be seen in a rival auto plant.

apocalypticbrother's picture

You really drank the kool aid dude. I bought silver and gold instead of investing in this tesla scam. That musk guy is a crook obviously.

jimmy12345's picture

Tesla hires the brightest engineers and they work very hard.

EddieLomax's picture

I has hestitant to put all of my life savings in until you convinced me with that last line, after all, as you say making a loss on each car is irrelevant as it can clearly be compensated for by volume.

booboo's picture

The VAST majority of anyone involved in the Yukon Gold Rush were the people sitting on the docks selling fools pick and shovels, one such entrepreneur sold a bug repellant in a box wrapped and instructions not to open until the miner arrived as his claim, upon opening the box he found 2 slats of wood to mash the bugs between.