Elon reveals Cybertruck details / production expectations on Q3 2023 call

[Crissa]

Also, with any error process, you need to make enough units to know if the error rate is 'the first five in a set of one hundred' or 'one in five over a hundred.' They mean different things.

-Crissa

Sponsored

 

[SamsianGas]

Great News for Tesla and early Cybertruck reservation holders in the US.
Hope we get some news soon on RHD Cybertrucks for the UK.

Although I have 24/11/2019 Reservation for Cybertruck Duel Motor AWD, with FSD.
I doubt we will see the Cybertruck released in the UK until 2025, if at all.
Patience is a virtue, or so they say.

Similar order and date - Equally looking forward to some news from the company :/

 

[Arctic_White]

that’s *not* obvious, especially in the long term

they are two very different business models, which are widely recognized across industries, each representing a different balance of risk and benefits

dealerships are like McDonald’s franchises - in exchange for the “parasitic” value McDonald’s corporate “gives” to the owner of a retail location, that owner takes on the business risks and and OpEx of being in the retail last mile. There are downsides to McDonalds, and upsides to McDonalds.

In contrast, your local wholly-owned mom-and-pop burger joint, gets to retain all margin to the point of the customer - but only in exchange for retaining the business risks and OpEx of the retail last mile. There are downsides to mom-and-pop, and upsides to mom-and-pop.

Point being, to act like Ford et al merely and accidentally “lose” money by not owning and controlling the retail arm of their business is to ignore that this is done for a reason that is risk-adjusted. To act like the mom-and-pop are by some definition brilliant for retaining the entire margin vertical is to ignore that doing so is at the expense of various retail-business risk.

Now, there are good and interesting discussions to be had regarding whether, when applied to the car industry, one strategy is superior to the other.

But yours and other commenters never get to any of those discussions, and instead just suggest some cartoon-simplistic view of the world where “keeping more of the vertical is better as demonstrated by Tesla getting more margin,” as though you don’t even appreciate that Tesla also takes on more risk and OpEx.

To which I would point out, since you claim to be so agile with the financials of Tesla:

(1) VERY bizarrely, Tesla calculates its vehicle margin AFTER backing out the OpEx for its retail distribution arms - that’s both unusual and perhaps an explanation of why folks like you appear to miss its importance.

(2) as a company, like McDonalds, begins to scale globally, the risks, OpEx, and compliance loads avoided at the “dealership” level begin increasing almost exponentially - meaning the larger retail footprint onboarded, the more it makes sense to exchange a tail of margin for someone else to take on those downsides.

So, not only is it a matter of deep debate (or mere strategy) as to whether it’s better/worse for Tesla to not have dealerships (just as with McDonalds vs wholly owned mom-and-pop), that calculation changes as global footprint and penetration increases (just as with McDonalds vs wholly-owned mom-and-pop).

None of this is to say the dealership model as currently exists doesn’t have problems, or that on a merely theoretical level it is the better approach for car companies.

instead only to say quips like yours appear to betray only a deep, misguided, misunderstanding of whether or to what degree the “lack of dealership network” is a “major advantage” of Tesla in the long run, both as markets shift (and so risks can be realized” and as Tesla’s penetration increases.

frankly, until you say a lot more, I’m left feeling only embarrassed to see someone say “I understand a company deeply” along with such a basic misstatement of the risk/benefits of a business strategy that is widely recognized in this and other industries as being a matter of basic risk/scale strategy

I think I lost what you're trying to say.

So let me ask you directly: which model do you prefer, the direct-sales one or the dealership model? Which do you prefer from a consumer standpoint? Which do you prefer as an investor?

I will also say that the fact that every car company wants to go to direct-sales method tells you something. Ford is trying to do it but got huge pushback from its dealership network. BMW and Mercedes both want to do this as well.

More importantly, the consumer prefers to deal directly with the manufacturer. Most customers hate the dealership model.

 

[Arctic_White]

True, it's very short-sighted to measure the amount of R&D each company does by how much they spend on R&D. Tesla is far more efficient with their R&D spending than legacy auto, not even in the same ballpark.

Anyone who thinks Tesla must be similar to legacy auto doesn't understand the fundamental way that Tesla is transforming the entire auto industry.

More importantly, some smart folks still think that the legacy automakers (GM, Ford, VW, etc.) will survive this transition to EVs.

I don't believe they will, especially given that these companies are no longer going full steam ahead. They are focusing too much on short-term profits.

Koreans and the Chinese will be eating the legacy lunch. What a lost opportunity.

 

[Arctic_White]

Tesla is indeed doing things very differently. The decades-old methods of the auto industry were overdue for disruption.

The mistake is when some assert that Tesla's profit/loss dollars are somehow different from everyone else's dollars. You can't count unhatched chickens.

Dollars are dollars. Profits are profits.

Tesla doesn't even need to innovate anymore. If they simply copy/paste their existing methods (the machine that builds the machine), I just don't see how they do not get to 20M annual vehicles sales with a decent profit margin (10% net). That's about $1T market cap just from their EV division alone.

Here is the kicker, though: I strongly believe that Tesla's EV side will make up less than one-quarter of all future revenue and profits. The biggest growth potential isn't Tesla getting to 20M annual sales by 2032 or what-have-you, but rather Tesla unleashing its RoboTaxi network once FSD is fully solved.

Not financial guidnace. I'm just a random guy on the internet. Do your own research.

 

[cvalue13]

I think I lost what you're trying to say.

So let me ask you directly: which model do you prefer, the direct-sales one or the dealership model? Which do you prefer from a consumer standpoint? Which do you prefer as an investor?

I will also say that the fact that every car company wants to go to direct-sales method tells you something. Ford is trying to do it but got huge pushback from its dealership network. BMW and Mercedes both want to do this as well.

More importantly, the consumer prefers to deal directly with the manufacturer. Most customers hate the dealership model.

Let's first make an important level-set here:

• it is an absolute strawman to weigh in an analysis a poor version of X as though it's inherent to X
• That the current OEM dealer models contain various features that are 'bad' or sub-optimal, does not entail that dealership models are inherently and necessary so.
• That sort of strawman is like a kid trying a bite of fish prepared by my wife (she's terrible at preparing fish), and declaring "all fish is bad inherently."

All the time on this forum, I see people build the same exact strawman: "I know people who hate their dealer because X, Y, Z, so OEM's with a dealership model are doomed to fail."​

That said, then, to get around to your question:

I didn't take any position on what *I* prefer, as a consumer. As a consumer, it's simply: I like things that are good, and dislike things that are bad. I believe dealership models can be done well, just like Tesla could make changes that result in its model being done poorly.

To wit, OEM's are making moves to cleanse and reconnoiter their dealership models to improve them. It has growing pains, but that's life/business. Their new E-arm is billed to move to something more like a D2C model, where dealers transition to being more of a distribution facilitator, deliverer, and service center.

Something like that is clearly where 'dealership' models must move, and it's not news to any of the OEMs.

What I think about the models personally is irrelevant and beside the fact:

My post wasn't about what I prefer.

My post was about how two very different business models, from the perspective of the business, reflect two different approaches to allocating risk, capex, opex, and compliance load. I'm not sure what could be confusing about that:

• Tesla takes 100% of risk, capex, opex, and compliance load, from manufacturing all the way to the customer, in exchange for retaining 100% of the margin, and 100% of any reductions to MSRP (i.e., pricing power is limited to viability of retail MSRP).
  • This is analogous, in the restaurant world, to a more mom-and-pop restaurant that is 'vertically integrated' all the way to from growing the food to paying waitresses and paying the lease on the building. All the risk and expense, for all the profit.

• Conversely, traditional OEM's
  • take (let's call it for simplicity), only 60% of the risk, capex, opex, and compliance load, of the vertical, in exchange for only 60% of the margin, and only some fraction of the risk of reduction in wholesale pricing (i.e.., pricing power is limited to wholesale margins)
  • the remaining 40% of risk, capex, opex, and compliance load is taken on by the dealerships, in exchange for the remaining 40% of margin, and some fraction of the risk of reduction in retail/MSRP pricing (i.e., pricing power is limited to viability of retail MSRP)
    • This is analogous, in the restaurant world, to McDonalds franchises: the franchisee takes on the costs and risks of buying the real estate, whether customers visit that location, dealing with highschool employees, etc.

Neither of these two business models are inherently better or worse than the other. They are a trade-off of risks and benefits. That neither is inherently better than the other can be witnessed by the fact that businesses across industries choose to take one approach or the other (or some hybrid).​

​

A deep dive into Tesla's financials shows that it's margins are not what is colloquially discussed by the pop culture fanbois. It shows [X]% of margins in its top line, but what people tend to miss is that Tesla's (somewhat ... odd) accounting for this occurs AFTER moving distribution capex/opex to a different part of its balance sheet. In other words, you cant compare apples to apples when comparing Tesla's margins to traditional OEM's margins, even on a pure cost basis.​

​

And moreover, beyond the balance sheet, you also cant compare them apples to apples because "risk" doesn't show up on the balance sheet in good times. Nor does pricing power.​

​

​

But in hard times, especially as footprint/scale expands, that's when risk and pricing power start to indirectly show their face on balance sheets.​

​

Case in point: Tesla's margins have plummeted last quarter due to MSRP reductions that have resulted from softened demand. And softened demand, according to Musk, is resulting not only from the interest environment etc, but also market penetration. "You can't grow 50% forever."​

​

Last quarter, Tesla's top line margins were lower than Toyota's, despite how Tesla calculates margins, and despite that - unlike Toyota - Tesla takes 100% of margins to the customer. *This* is when risk and pricing power show their face on balance sheets.​

​

In good times "dealership" models catch a lot of heat for how they pad MSRP pricing. But in bad times, dealerships are the ones that have to fire people, close their doors, and take hits on below-MSRP sales. *THIS* is the risk dealerships have taken on, and taken away from (at lest in part) the OEMs.​

​

Traditional OEMs are that much more insulated from that end of the margin, which gives them pretty considerable pricing power in down market environments, and a level risk remoteness from the tail end of consumer behaviors.​

Based on the above, here are the resulting points:

(1) some folks around here quip "Tesla's so smart because they take all the margin, and obviously more margin is better" ... like they have negative amounts of business sense to realize that taking all that margin occurs only in virtue of also taking on costs, risks, and compliance load, all of which only grow exponentially as scale increases. This is why you tend to see, e.g., McDonald's taking the franchise route, and mom-and-pop restaurants having more limited expansion.

(2) so, as Tesla's scale and penetration expands, it is possible Tesla comes to more deeply understand why traditional OEMs with material global footprints have settled into a dealership / franchise framework.

(3) at the same time, the internet, customer behaviors, and poor dealership behavior, at also teaching traditional OEMs that the old ways have to be changed.


The above was the point / extent of my prior post.

But since you've asked: I think that both Tesla (as it expands) and traditional OEMs (as they adapt) are going to have distribution models that begin to converge in a middle path. Traditional OEMs are already modifying their models towards a more hybrid dealer / D2C model (see Ford discussion above). On the other end of the spectrum, in a sustained down-turn occurring alongside market penetration, Tesla will begin to feel the realities of a purely integrated distribution to customer model, and at some point in scaling have to move towards the center as well.

 

[Arctic_White]

Let's first make an important level-set here:

• it is an absolute strawman to weigh in an analysis a poor version of X as though it's inherent to X
• That the current OEM dealer models contain various features that are 'bad' or sub-optimal, does not entail that dealership models are inherently and necessary so.
• That sort of strawman is like a kid trying a bite of fish prepared by my wife (she's terrible at preparing fish), and declaring "all fish is bad inherently."

All the time on this forum, I see people build the same exact strawman: "I know people who hate their dealer because X, Y, Z, so OEM's with a dealership model are doomed to fail."​

That said, then, to get around to your question:

I didn't take any position on what *I* prefer, as a consumer. As a consumer, it's simply: I like things that are good, and dislike things that are bad. I believe dealership models can be done well, just like Tesla could make changes that result in its model being done poorly.

To wit, OEM's are making moves to cleanse and reconnoiter their dealership models to improve them. It has growing pains, but that's life/business. Their new E-arm is billed to move to something more like a D2C model, where dealers transition to being more of a distribution facilitator, deliverer, and service center.

Something like that is clearly where 'dealership' models must move, and it's not news to any of the OEMs.

What I think about the models personally is irrelevant and beside the fact:

My post wasn't about what I prefer.

My post was about how two very different business models, from the perspective of the business, reflect two different approaches to allocating risk, capex, opex, and compliance load. I'm not sure what could be confusing about that:

• Tesla takes 100% of risk, capex, opex, and compliance load, from manufacturing all the way to the customer, in exchange for retaining 100% of the margin, and 100% of any reductions to MSRP (i.e., pricing power is limited to viability of retail MSRP).
  • This is analogous, in the restaurant world, to a more mom-and-pop restaurant that is 'vertically integrated' all the way to from growing the food to paying waitresses and paying the lease on the building. All the risk and expense, for all the profit.

• Conversely, traditional OEM's
  • take (let's call it for simplicity), only 60% of the risk, capex, opex, and compliance load, of the vertical, in exchange for only 60% of the margin, and only some fraction of the risk of reduction in wholesale pricing (i.e.., pricing power is limited to wholesale margins)
  • the remaining 40% of risk, capex, opex, and compliance load is taken on by the dealerships, in exchange for the remaining 40% of margin, and some fraction of the risk of reduction in retail/MSRP pricing (i.e., pricing power is limited to viability of retail MSRP)
    • This is analogous, in the restaurant world, to McDonalds franchises: the franchisee takes on the costs and risks of buying the real estate, whether customers visit that location, dealing with highschool employees, etc.

Neither of these two business models are inherently better or worse than the other. They are a trade-off of risks and benefits. That neither is inherently better than the other can be witnessed by the fact that businesses across industries choose to take one approach or the other (or some hybrid).​

​

A deep dive into Tesla's financials shows that it's margins are not what is colloquially discussed by the pop culture fanbois. It shows [X]% of margins in its top line, but what people tend to miss is that Tesla's (somewhat ... odd) accounting for this occurs AFTER moving distribution capex/opex to a different part of its balance sheet. In other words, you cant compare apples to apples when comparing Tesla's margins to traditional OEM's margins, even on a pure cost basis.​

​

And moreover, beyond the balance sheet, you also cant compare them apples to apples because "risk" doesn't show up on the balance sheet in good times. Nor does pricing power.​

​

​

But in hard times, especially as footprint/scale expands, that's when risk and pricing power start to indirectly show their face on balance sheets.​

​

Case in point: Tesla's margins have plummeted last quarter due to MSRP reductions that have resulted from softened demand. And softened demand, according to Musk, is resulting not only from the interest environment etc, but also market penetration. "You can't grow 50% forever."​

​

Last quarter, Tesla's top line margins were lower than Toyota's, despite how Tesla calculates margins, and despite that - unlike Toyota - Tesla takes 100% of margins to the customer. *This* is when risk and pricing power show their face on balance sheets.​

​

In good times "dealership" models catch a lot of heat for how they pad MSRP pricing. But in bad times, dealerships are the ones that have to fire people, close their doors, and take hits on below-MSRP sales. *THIS* is the risk dealerships have taken on, and taken away from (at lest in part) the OEMs.​

​

Traditional OEMs are that much more insulated from that end of the margin, which gives them pretty considerable pricing power in down market environments, and a level risk remoteness from the tail end of consumer behaviors.​

Based on the above, here are the resulting points:

(1) some folks around here quip "Tesla's so smart because they take all the margin, and obviously more margin is better" ... like they have negative amounts of business sense to realize that taking all that margin occurs only in virtue of also taking on costs, risks, and compliance load, all of which only grow exponentially as scale increases. This is why you tend to see, e.g., McDonald's taking the franchise route, and mom-and-pop restaurants having more limited expansion.

(2) so, as Tesla's scale and penetration expands, it is possible Tesla comes to more deeply understand why traditional OEMs with material global footprints have settled into a dealership / franchise framework.

(3) at the same time, the internet, customer behaviors, and poor dealership behavior, at also teaching traditional OEMs that the old ways have to be changed.


The above was the point / extent of my prior post.

But since you've asked: I think that both Tesla (as it expands) and traditional OEMs (as they adapt) are going to have distribution models that begin to converge in a middle path. Traditional OEMs are already modifying their models towards a more hybrid dealer / D2C model (see Ford discussion above). On the other end of the spectrum, in a sustained down-turn occurring alongside market penetration, Tesla will begin to feel the realities of a purely integrated distribution to customer model, and at some point in scaling have to move towards the center as well.

I see. I now understand your point(s) better.

OK, so here is my rebuttal: you are focusing way too much on gross margins. Do you know what actually matters? It's net profits that matter, and specifically, cash flow.

There are so many ways to (legally) manipulate financial statements. So I mostly focus on cash that is generated from a company to evaluate whether it is a good company or not.

Finally, Tesla has stated that they look at net profit margin rather than gross, and try their best to reduce costs.

 

[cvalue13]

I see. I now understand your point(s) better.

OK, so here is my rebuttal: you are focusing way too much on gross margins. Do you know what actually matters? It's net profits that matter, and specifically, cash flow.

There are so many ways to (legally) manipulate financial statements. So I mostly focus on cash that is generated from a company to evaluate whether it is a good company or not.

Finally, Tesla has stated that they look at net profit margin rather than gross, and try their best to reduce costs.

huh?

I never said "gross margins"

"net profits" is "net profit margin"

choosing the sense of "margin" that makes my comments nonsensible, then saying my comments are nonsensible (hate to utter it because it's such forum quip) isn't

and otherwise, I was discussing how *others* focus on vehicle margins as some litmus for how Tesla's non-dealer model is inherently superior because it keeps margin to POS - if you also disagree with them, you should tell them, not me. Tell them to focus on top line net margin.

And when you do, point out that Musk/Tesla made clear that the below net margin effect is due primarily to reducing MSRP (and so vehicle margin) due to demand softening


�

Date	TTM Revenue	TTM Net Income	Net Margin
Tesla Net Profit Margin Historical Data
2023-09-30	$95.92B	$10.79B	11.25%
2023-06-30	$94.03B	$12.23B	13.01%
2023-03-31	$86.04B	$11.79B	13.70%
2022-12-31	$81.46B	$12.58B	15.45%
2022-09-30	$74.86B	$11.19B	14.95%
2022-06-30	$67.17B	$9.52B	14.17%
2022-03-31	$62.19B	$8.40B	13.51%
2021-12-31	$53.82B	$5.52B	10.26%
2021-09-30	$46.85B	$3.47B	7.40%
2021-06-30	$41.86B	$2.15B	5.14%
2021-03-31	$35.94B	$1.11B	3.09%

 

[Arctic_White]

huh?

I never said "gross margins"

"net profits" is "net profit margin"

choosing the sense of "margin" that makes my comments nonsensible, then saying my comments are nonsensible (hate to utter it because it's such forum quip) isn't

and otherwise, I was discussing how *others* focus on vehicle margins as some litmus for how Tesla's non-dealer model is inherently superior because it keeps margin to POS - if you also disagree with them, you should tell them, not me. Tell them to focus on top line net margin.

And when you do, point out that Musk/Tesla made clear that the below net margin effect is due primarily to reducing MSRP (and so vehicle margin) due to demand softening


�

Tesla Net Profit Margin Historical Data
Date	TTM Revenue	TTM Net Income	Net Margin
2023-09-30	$95.92B	$10.79B	11.25%
2023-06-30	$94.03B	$12.23B	13.01%
2023-03-31	$86.04B	$11.79B	13.70%
2022-12-31	$81.46B	$12.58B	15.45%
2022-09-30	$74.86B	$11.19B	14.95%
2022-06-30	$67.17B	$9.52B	14.17%
2022-03-31	$62.19B	$8.40B	13.51%
2021-12-31	$53.82B	$5.52B	10.26%
2021-09-30	$46.85B	$3.47B	7.40%
2021-06-30	$41.86B	$2.15B	5.14%
2021-03-31	$35.94B	$1.11B	3.09%

So despite the macro environment and reduction of prices, Tesla is still able to get 10% net margin which is what they are aiming for.

What am I missing?

 

[cvalue13]

So despite the macro environment and reduction of prices, Tesla is still able to get 10% net margin which is what they are aiming for.

What am I missing?

only the point

which at this stage seems unavoidable

so we can leave it be

honestly, you're just frame-shifting away from the obvious point, in order to do nothing more than respond with some side-quip that you feel is some 'gotcha'

a maneuver of self-delusion to deep that you've probably *actually* forgotten what this conversation was about.

that’s *not* obvious, especially in the long term

they are two very different business models, which are widely recognized across industries, each representing a different balance of risk and benefits

Cvalue, it's obvious that Tesla has several major advantages. One is the lack of dealership network. Dealers parasites and such value.

ive explained (trice) the point of *that* discussion, to which do things like respond "but if they're still able to get their 10% net margin ..." which is total nonsequiter

you said Tesla's "obvious" advantage is not having a dealership network.

you should just stick with those sorts of unsubstantive regurgitations of xwitter $TSLA quips, and at least not feign interest in a discussion in order to waste people's time by circling back to a different unsubstantive xwitter regurgitation.

 

[Arctic_White]

only the point

which at this stage seems unavoidable

so we can leave it be

honestly, you're just frame-shifting away from the obvious point, in order to do nothing more than respond with some side-quip that you feel is some 'gotcha'

a maneuver of self-delusion to deep that you've probably *actually* forgotten what this conversation was about.




ive explained (trice) the point of *that* discussion, to which do things like respond "but if they're still able to get their 10% net margin ..." which is total nonsequiter

you said Tesla's "obvious" advantage is not having a dealership network.

you should just stick with those sorts of unsubstantive regurgitations of xwitter $TSLA quips, and at least not feign interest in a discussion in order to waste people's time by circling back to a different unsubstantive xwitter regurgitation.

I respectfully disagree with you.

The initial convo was around Tesla and its competitive advantage (lack of dealer, their engineering prowess and talent they have, lack of union). You then went on a tangent talking about Tesla from a financial perspective totally ignoring that there is no one who makes any profits selling BEVs!

I'm not sure how I can discuss these points with you when you continue to talk about different things, or perhaps I am not explaining things properly?

Here, again, I will add some points:

- There will be many bankruptcies from existing automakers
- The landscape is changing rapidly
- Those that transition to EV quickly will survive (Hyundai/Kia, BMW, Mercedes)
- Those that are sitting on their behinds will not (Toyota, Big 3, etc.)

It appears that you got upset when I mentioned bankruptcies. This is pure speculation on my part as I can't predict the future!

 

[Sirfun]

The interesting part of this discussion to me, is how Cvalue13 wants to show support for the Dealership business model. I agree there are massive benefits for a manufacturer to that model. But, not so much for the customers. That is why ALL the legacy manufacturers thought Tesla would never survive, and also why they ignored and resisted going to EV's. They thought wrongly that they could ignore Tesla because they would go away.
Now that Tesla has been able to survive spending Billions on Service Centers, Supercharging stations worldwide, with building 6 GIGA factories, and hiring a workforce of 127,000 Non-Union employees. AND MAKE PROFITS. All the other manufacturers KNOW that Tesla has a HUGE advantage.
I can't imagine any legacy auto manufacturers that aren't envious of Tesla's business model, and wish they too could do that. But it's not going to be possible, and they know it. They are all scrambling to find their way through this new tech revolution. And yes, there's going to be a bloodbath. Even Sandy Munro is saying that.

 

[cvalue13]

The interesting part of this discussion to me, is how Cvalue13 wants to show support for the Dealership business model. I agree there are massive benefits for a manufacturer to that model. But, not so much for the customers.

this is the same fallacy I’ve already addressed: dealership models are not inherently flawed

The initial convo was around Tesla and its competitive advantage (lack of dealer, their engineering prowess and talent they have, lack of union). You then went on a tangent talking about Tesla from a financial perspective

You’re unbelievable!

You called the dealer model a primary example of Tesla’s competitive advantage, and called it obvious.

I described how it’s not obvious

It’s you who then came in with broad financials tangents that I was responsive to - suggesting you understand them fromt and back, while never offering a single insight nor gleaned from xwitter $TSLA influencers.

You don’t even move the goalposts, you change the sport.

let me make it simple: anyone who says a lack of dealership model is an “obvious” competitive advantage is an ignoramus - if you like to know why, re-read my comments but ignore your non-sequiturs (or where I responded to your non-sequitur)

But in short; Franchise-esque, last-mile distributor arrangements, are a widely used strategy that has strengths and weaknesses (even in their idealized form); meanwhile, D2C manufacturing is another widely used strategy that also has strengths and weaknesses.

Importantly, how valuable those respective strategies are can depend heavily on scale and footprint - where Tesla has not yet proved that it’s specific D2C model will be as effective and valuable as it and when it scales to sufficient size.

Meanwhile, OEMs have to fix their dealership model to be more consumer friendly, but you will not see them move to a manufacture-to-consumer model anytime soon, because they will lose pricing power and onboard risks that aren’t necessary to onboard.

Saying that “Cracker-Barrel has an *obvious* competitive advantage to McDonald’s, because Cracker-Barrel doesn’t franchise” is silly on its face, and even more so when one looks at the map of McDonald’s vs Cracker-Barrel footprint/scale.

 

[Sirfun]

this is the same fallacy I’ve already addressed: dealership models are not inherently flawed




You’re unbelievable!

You called the dealer model a primary example of Tesla’s competitive advantage, and called it obvious.

I described how it’s not obvious

It’s you who then came in with broad financials tangents that I was responsive to - suggesting you understand them fromt and back, while never offering a single insight nor gleaned from xwitter $TSLA influencers.

You don’t even move the goalposts, you change the sport.

let me make it simple: anyone who says a lack of dealership model is an “obvious” competitive advantage is an ignoramus - if you like to know why, re-read my comments but ignore your non-sequiturs (or where I responded to your non-sequitur)

But in short; Franchise-esque, last-mile distributor arrangements, are a widely used strategy that has strengths and weaknesses (even in their idealized form); meanwhile, D2C manufacturing is another widely used strategy that also has strengths and weaknesses.

Importantly, how valuable those respective strategies are can depend heavily on scale and footprint - where Tesla has not yet proved that it’s specific D2C model will be as effective and valuable as it and when it scales to sufficient size.

Meanwhile, OEMs have to fix their dealership model to be more consumer friendly, but you will not see them move to a manufacture-to-consumer model anytime soon, because they will lose pricing power and onboard risks that aren’t necessary to onboard.

Saying that “Cracker-Barrel has an *obvious* competitive advantage to McDonald’s, because Cracker-Barrel doesn’t franchise” is silly on its face, and even more so when one looks at the map of McDonald’s vs Cracker-Barrel footprint/scale.

I realize you're in Texas, so you may not have heard of In-N-Out. But that's a much closer comparison to show franchise vs. Non Franchise. For years I've compared Tesla to In-N-Out. My main reason is because they do business very much alike. They specialize on a very small menu. And they do really well at what they do. BTW, In-N-Out has Massive long lines. Because they serve really good food at very competitive prices. Tesla has a very limited menu and if they have what you want, you will get a very good EV at very competitive prices. Ford actually started out that way and became the industry giant by being VERY efficient. But now just look at all the different grille choices for a F150. Having tons of different models and all these different options adds complexity and cost. And you can't focus as well on ALL those different vehicles. (I realize this doesn't have to do with the dealer model I got off the subject).

Anyway, compare McDonald's to In-N-Out. I guarantee you owners of McDonald's franchises dream they could have an In-N-Out franchise.

As a consumer, even though I've had some good transactions with car dealers, and I've never purchased from Tesla. I see many advantages in doing business with them, and their business model.
1. The price, is the price. With dealers, it's RARELY that way.
2. No middleman. This means something. Most consumers are looking for the best deal. That's why I bought a couple of Ebikes directly from a manufacturer last year. Even though I had to assemble them from out of a box. I got a good product at a reasonable price.
3. No dealer markups. I can't stand someone trying to take advantage of me. Dealer markups are exactly that. You think anyone has paid MSRP for a Corvette in the last 4 years? It drives me crazy when I see all these stories online about new awesome cars, and they say the price is something that you know isn't what dealers will charge.
4. Haggling. It sucks to go up against a professional, who does negotiating as their job. And spend hours trying to get the vehicle you want at a fair price.

 

[HaulingAss]

The interesting part of this discussion to me, is how Cvalue13 wants to show support for the Dealership business model.

I have to say there is a very high probability that anyone on this forum defending the despicable car selling model known as independent dealerships is a car dealer themselves. Let's not be naive, if it looks like a duck, walks like a duck, and talks like a duck, then it's almost certainly a duck. To think that there are not people here affiliated with auto dealers is naive to the extreme. Everyone else hates the dealership experience. Dealers like it because it's a license to steal and get rich, especially if they own a dealership franchise covering multible brands over a wide area (which, oddly enough, is not even illegal or considered anti-competitive).

For the most part, no one else defends the auto dealership model.

These dealership fan boys love to try to tear down the direct sales business model that consumers love. One common claim is that Tesla excludes the expenses of their service and delivery centers from the cost of producing and selling their products.

But anyone familiar with a Tesla Service Center knows that the cost of the showroom (and any employees there) is but a drop in the bucket compared to the service side of the business with the repair shop, service writers and all the technicians, lifts, tools and equipment. They also know that most sales happen online and the actual delivery only consumes minimal employee time and that those delivery specialists make very little compared to all the service writers and service technicians. It's about as close to insignificant as you can get. The delivery specialists do not get big sales comissions either, another win for the consumer.

The cost of the delivery center is a big nothingburger relative to total auto revenues. Tesla could try to back out those expenses, by seperating them from the service and repair side of the centers, and it would barely move the needle. It's just an anti-Tesla talking point.

Furthermore, addressing Tesla's net margins on the company as a whole, this DOES include a lot of expenses that have nothing to do with making and delivering the cars. There is spending on the Supercharger Network, an expense that legacy auto (to date) has not had. This expense dwarfs the cost to deliver the vehicles. Then there is the cost of development of Dojo and Optimus humanoid robots. How many other automakers are developing humanoid robots in-house and simultaneously ramping electric semi-trucks to high volume. All of this costs a lot of money and the fact that Tesla can do all this and have positive net margins overall is nothing short of astounding!

Dealership owners are running scared, and don't know what to do. So, some of them come here and spread FUD, hoping it will help slow dow the mass-migration to the more efficient direct to consumer business model. No one wants to pay for all the waste and profit that is legacy auto dealerships. Particularly not after being screwed over, time and again. People hate legacy auto dealerships, and the only reason new car and truck buyers did business with them at all is because there was no other choice.

Remember, if it looks like a duck, talks like a duck and walks like a duck, it's a frickin' duck!

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