More Tesla price cuts === cheaper Cybertruck (6 oct)

[Throwcomputer]

Were you told that participation here is mandatory? Making a post about too much discussion on a discussion forum is absurd.

My point is.. what else is there to debate? People be so sure of their opinions and those opinions have been repeated multiple times. I'm just amazed at the continued heated discussion on this topic.


I'll continue to be absurd in pointing that out when the urge arises. You may block me whenever you get sick of me. I'm sure I've got a long list of people ignoring my posts. Doesn't offend me in the slightest.

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[Arctic_White]

Well, not to be too much of a stickler, but Tesla didn’t turn profit off vehicle income until 2021. Before that, Tesla only turned profit by selling federal credits and Bitcoin. More power to them.

I’d say the problem isn’t that GM and Ford won’t “make money” on EV’s anytime soon, but that people wielding that quip conveniently forget (or are ignorant of) how long and what it took for Tesla to.

Which is only to say it’s hard and expensive to build an EV business.

To say nothing of the fact that Tesla and legacy business models are so different it’s hard to make many honest comparisons between them.

Well said.

Not to mention that Tesla doesn't have that dealership model which takes a cut. So in order to make comparable car with equal pricing, legacy automakers will not be as profitable as Tesla because of their dealership network.

To say nothing of advertising costs, inefficient operations, old-school un-innovative thinking, etc. that are plaguing legacy automakers.

I kinda feel bad for everyone else because Tesla will eat everyone's lunch!

 

[anionic1]

Well said.

Not to mention that Tesla doesn't have that dealership model which takes a cut. So in order to make comparable car with equal pricing, legacy automakers will not be as profitable as Tesla because of their dealership network.

To say nothing of advertising costs, inefficient operations, old-school un-innovative thinking, etc. that are plaguing legacy automakers.

I kinda feel bad for everyone else because Tesla will eat everyone's lunch!

Also they are up against foreign competition that is basically very largely government funded.

 

[cvalue13]

Not to mention that Tesla doesn't have that dealership model which takes a cut. So in order to make comparable car with equal pricing, legacy automakers will not be as profitable as Tesla because of their dealership network.

I certainly take the point, and there’s a lot of drag in the dealership model, no doubt

but there are also many benefits. relative to the topic we’re on, one way in which it’s difficult to make honest comparisons between Tesla’s profit margins and legacy margins is that legacy “margins” are bifurcated: part of that margin goes to the manufacturer, another part goes to the dealerships.

so when people say, eg, “Ford has a negative 40% margin on their trucks” it’s actually missing that the to-consumer margin may only be negative 20% - and if/when Ford gets back above it’s skis on BEVs, a Ford 10% margin is really possibly double that on a to-consumer basis

to which someone may reply, “see how dumb Ford is losing margin to dealers!” - but it’s not so simple. Ford actually extracts quite a lot of value from dealers for that shared margin. Distribution, advertising, logistics, sales, real estate, etc., are effectively all outsourced for that margin.

what’s more, people undervalue the kind of pricing power that gives ford on ITS margin. in a reversing price environment, for can keep ITS margin nearly the same - it’s the dealerships that eat the bulk of volatility, up and down. From the manufacturing perspective, every dollar shielded from downside is worth losing several dollars to dealers during the upside. (Upside has a reflective ceiling, but downside is an absorptive floor.)

none of this to take any position that legacies don’t have their problems, and that they may not miss a bus and it be ultimately deeply detrimental.

instead only to say that for every unit of FUD leveled at Tesla’s model, there’s some meaningful fraction of a unit of FUD incorrectly directed toward the legacy model.

people tend to cherry-pick or over-emphasize the challenges of the legacy model, while under appreciating or under-reporting how the two models are so dissimilar that one-to-one comparisons of a given metric often fail to tell the full picture of the relative strengths/weaknesses of each model.

if you’re Ford proper, dealerships absorb a lot of downside costs and risks that often make the margin bifurcation “worth” it - even during the hay days.

 

[Deleted member 3316]

Because its too soon for GM to sell volume. They are apparently in the midst of revamping Ultium to include cylindrical cells.

That doesn’t answer the question. It just highlights the compounding issue.

 

[Arctic_White]

I certainly take the point, and there’s a lot of drag in the dealership model, no doubt

but there are also many benefits. relative to the topic we’re on, one way in which it’s difficult to make honest comparisons between Tesla’s profit margins and legacy margins is that legacy “margins” are bifurcated: part of that margin goes to the manufacturer, another part goes to the dealerships.

so when people say, eg, “Ford has a negative 40% margin on their trucks” it’s actually missing that the to-consumer margin may only be negative 20% - and if/when Ford gets back above it’s skis on BEVs, a Ford 10% margin is really possibly double that on a to-consumer basis

to which someone may reply, “see how dumb Ford is losing margin to dealers!” - but it’s not so simple. Ford actually extracts quite a lot of value from dealers for that shared margin. Distribution, advertising, logistics, sales, real estate, etc., are effectively all outsourced for that margin.

what’s more, people undervalue the kind of pricing power that gives ford on ITS margin. in a reversing price environment, for can keep ITS margin nearly the same - it’s the dealerships that eat the bulk of volatility, up and down. From the manufacturing perspective, every dollar shielded from downside is worth losing several dollars to dealers during the upside. (Upside has a reflective ceiling, but downside is an absorptive floor.)

none of this to take any position that legacies don’t have their problems, and that they may not miss a bus and it be ultimately deeply detrimental.

instead only to say that for every unit of FUD leveled at Tesla’s model, there’s some meaningful fraction of a unit of FUD incorrectly directed toward the legacy model.

people tend to cherry-pick or over-emphasize the challenges of the legacy model, while under appreciating or under-reporting how the two models are so dissimilar that one-to-one comparisons of a given metric often fail to tell the full picture of the relative strengths/weaknesses of each model.

if you’re Ford proper, dealerships absorb a lot of downside costs and risks that often make the margin bifurcation “worth” it - even during the hay days.

Valid points. But most people I talk to hate going to dealerships, dislike negotiating with dealerships and overall do not have a pleasant experience at the dealerships. Tons of sales techniques and sales pressure are applied at the dealer level.

EVs for example require minimal maintenance. Have you seen what these dealerships are charging to "maintain" an EV? Both Ford and Hyundai/Kia are guilty of this.

Notwithstanding some interesting points you raised, dealerships are a net negative. if legacy automakers could get rid of the middlemen, I bet you they would love to do it.

On the flip side if they want to keep the middlemen and give them their profits because they can't figure out logistics & distribution, something that Tesla continues to excel at, where do you think the legacy autos will be in 10 years' time?

 

[cvalue13]

Valid points. But most people I talk to hate going to dealerships, dislike negotiating with dealerships and overall do not have a pleasant experience at the dealerships. Tons of sales techniques and sales pressure are applied at the dealer level.
Notwithstanding some interesting points you raised, dealerships are a net negative. if legacy automakers could get rid of the middlemen, I bet you they would love to do it.

I see the points in there, but they’re sort of covered over by some fluff and hyperbole!

yes, dealerships in the U.S. are made a cartoon as being slimy without exception, but: that’s neither consistently true, nor is it a necessary outcome. Also, how many cars have you purchased in the rest of the world, or is for “legacy” just your Ford dealership down the street?

Then you kind of Olympic-level leap to “Notwithstanding some interesting points you raised, dealerships are a net negative.” It may or may not be true, but you’ve shown no work.

And again, there’s a distinction to be made between (A) how dealership models have worked in the past, and (B) how they could work in future. You’ve described nothing that is inherent to the model, only what rotten spots need coring - seemingly from the narrowest of perspectives of a U.S. buyer with some bad experiences.

Remember, whether you like or agree with it or not, other forums are full of just as many prior or current Tesla owners who have terrible things to say about their experiences with the company and it’s sales model.

And I take those comments with as many grains of salt as I do the reciprocal.

So then your reciprocal FUD:

On the flip side if they want to keep the middlemen and give them their profits because they can't figure out logistics & distribution, something that Tesla continues to excel at, where do you think the legacy autos will be in 10 years' time?

Suggesting that legacy automakers et al “can't figure out logistics & distribution” is a classic example of the sort of FUD I was referring to before. It’s a sort of fanboi quip that has propagated amongst themselves, that somehow fails to acknowledge the painfully obvious. To the point of being embarrassing to serious ears to hear someone say it.

70,000,000 new vehicles were sold globally last year. Only 1.8% of those were Teslas. Other manufacturers have figured out supply chain just fine, and across many more countries.

The pre-existing global presence of other legacy automakers is one of the chief advantages over Tesla. Tesla has begun with a superior BEV, and on its back now needs to establish distribution centers and manufacturing units from scratch around the world. Conversely, major legacy manufacturers are attempting to catch up in their BEV products, but once they get close, already have bought and paid for distribution centers and manufacturing units from scratch around the world.

Tesla has tens to hundreds of billions of dollars yet to expend to construct this type of infrastructure globally, and it’ll take an astounding level of effort.

Now, I think they’ll do it just fine, and with creative efficiencies that flattens their effort curve. And what legacy has in its pocket is mute if they can’t catch up in their BEV products, or otherwise fumble other pieces of strategy.

But to be so biased and narrow of vision as to flatly assert that Tesla’s distribution and logistics are their advantage over legacy is flipping the world stage on its head.

Finally:

EVs for example require minimal maintenance. Have you seen what these dealerships are charging to "maintain" an EV? Both Ford and Hyundai/Kia are guilty of this.

No clue to what you’re referring here. I own a lightning for nearly a year now, haven’t spent anything on maintenance (aside from two flat tires), and in fact Ford recently gave me something like 5 years of free routine service (fluid checks, filter replacements, etc.).

[mine was one of the ~100 or so units requiring a module replacement, and the free service was a bit of lagniappe they extended]

 

[cvalue13]

Also they are up against foreign competition that is basically very largely government funded.

now this is real market factor. Tesla’s BEV competition in China has some serious home-field advantages. Legacy just the same.

It’s an issue that any US-based BEV manufacturer has to be losing sleep over.

not only are the competition government funded, they face near zero ESG constraints.

 

[Gurule92]

While we are on the dealership topic. Do we think they're sustainable as more and more BEV come out and less ICE do? I mean, they will be able to sell cars yea, but doesn't a lot of their money come from the maintenence and repair? I'm not suggesting there is no maintenance with BEVs but it is significantly less. And there are in general less things to go wrong. I think the number of dealers has to drop. Or they have to at least shrink.

 

[Ehninger1212]

While we are on the dealership topic. Do we think they're sustainable as more and more BEV come out and less ICE do? I mean, they will be able to sell cars yea, but doesn't a lot of their money come from the maintenence and repair? I'm not suggesting there is no maintenance with BEVs but it is significantly less. And there are in general less things to go wrong. I think the number of dealers has to drop. Or they have to at least shrink.

I can tell you from first hand experience dealerships are not shrinking. Non of them (whom i work with) view EV's in a negative light. They still require maintenance (think about how much tesla is trying to expand service) Technicians are becoming more like IT specialist with a tool box and grease under their finger nails (This is also closing the tech gender gap). The dealership experience is evolving and growing. They are knowingly transitioning towards a delivery hub and PDI style business model.

 

[TBONO]

I can tell you from first hand experience dealerships are not shrinking. Non of them (whom i work with) view EV's in a negative light. They still require maintenance (think about how much tesla is trying to expand service) Technicians are becoming more like IT specialist with a tool box and grease under their finger nails (This is also closing the tech gender gap). The dealership experience is evolving and growing. They are knowingly transitioning towards a delivery hub and PDI style business model.

Interesting.

But as Gurule92 points out, isn’t the overall value add and additional revenue they can generate substantially lower? What’s the real value of a delivery hub?
What I’ve spent in 5 years and 85k miles on my M3 is a fraction of what I spent over the same period on our Subaru Outback.

 

[Gurule92]

I can tell you from first hand experience dealerships are not shrinking. Non of them (whom i work with) view EV's in a negative light. They still require maintenance (think about how much tesla is trying to expand service) Technicians are becoming more like IT specialist with a tool box and grease under their finger nails (This is also closing the tech gender gap). The dealership experience is evolving and growing. They are knowingly transitioning towards a delivery hub and PDI style business model.

Tesla does need to expand service centers for sure but it will never be at the level of ice dealer currently imo

And I don't think they want to be

 

[slomo]

I can tell you from first hand experience dealerships are not shrinking. Non of them (whom i work with) view EV's in a negative light. They still require maintenance (think about how much tesla is trying to expand service) Technicians are becoming more like IT specialist with a tool box and grease under their finger nails (This is also closing the tech gender gap). The dealership experience is evolving and growing. They are knowingly transitioning towards a delivery hub and PDI style business model.

Only because EV is new tech. Compare the complexity and moving of a high end engine and transmission to a Tesla Plaid. ICE is mature. EV is new.

EV propulsion will quickly become commoditized and as reliable as the many motors we use that are untouched for twenty years. Most furnace blower fans are never touched.

EV complexity will continue to increase in software, including self driving. But that won't be complexity where the dealer can profit.

But I do think many people underestimate the distribution benefit of dealership. Few dealerships would ever deliver a car with the obvious cosmetic flaws that sometimes slip through with Tesla.

Many Tesla fans don't know that there were times when Musk publicly regretted not using dealership distribution. I'm sure now he thinks direct distribution is best.

 

[Gurule92]

Only because EV is new tech. Compare the complexity and moving of a high end engine and transmission to a Tesla Plaid. ICE is mature. EV is new.

EV propulsion will quickly become commoditized and as reliable as the many motors we use that are untouched for twenty years. Most furnace blower fans are never touched.

EV complexity will continue to increase in software, including self driving. But that won't be complexity where the dealer can profit.

But I do think many people underestimate the distribution benefit of dealership. Few dealerships would ever deliver a car with the obvious cosmetic flaws that sometimes slip through with Tesla.

Many Tesla fans don't know that there were times when Musk publicly regretted not using dealership distribution. I'm sure now he thinks direct distribution is best.

Sales hub has huge benefit but can't have huge profit. For the dealer

 

[cvalue13]

Interesting.

But as Gurule92 points out, isn’t the overall value add and additional revenue they can generate substantially lower? What’s the real value of a delivery hub?
What I’ve spent in 5 years and 85k miles on my M3 is a fraction of what I spent over the same period on our Subaru Outback.

Tesla does need to expand service centers for sure but it will never be at the level of ice dealer currently imo

And I don't think they want to be

nor Is it reasonable to imply that legacy dealers view their BEV dealership future or footprint to look identical to the present ICE dealership environment

The whispers of this are already apparent in how Ford is bifurcating its business and letting dealers opt in/out of the model e unit. It’s still an elevator pitch of a storyboard of a first draft, but it’s directionally indicative

and it points to one of the broader tools legacy have in adapting their future dealership/distribution model.

for every FUD quip of modern dealerships being bloated and ill-suited to a BEV future, the answer to that “problem” is right there: it’s easier to carve back at a hog than to grow a piglet.

buried in that dynamic is the type of pricing and distribution power the dealership model allows Ford: if Ford feels they have more distribution centers than needed, the market itself will absorb that risk and cost - because it’s the losing dealerships that fold up shop, not Ford’s own properties. And if the market needs a nudge, fire has the power to tweak the marker incentives, such as their model e opt in/out step.

and when a dealership goes to fold up for market reasons but Ford decides it still wants it for strategic reasons, their franchise agreements have ROFRs and takeover rights - Ford merely absorb the location for fire sale prices.

None of which is to suggest legacy dealership models are a slam dunk to legacy future. Only instead to point out that it’s a fallacy to effectively say “what legacy is doing today necessarily entails they’ll be doing it in the future.”

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