Cybertruck has achieved positive gross margin (profit)! -- per Tesla Q3 2024 earnings results

[Crissa]

Tesla didn't double the prices.

2019 dollars were worth a heck of a lot more than 2024 dollars due to accomodative fiscal and monetary policies that caused rampant inflation.

This is not true.

I don't know why this misinformation keeps being repeated.

The average price of a new truck has gone from $49K in 2019 to $60K in 2024. Not from $50K to $80K.

It's normal for there to be 2-4% inflation; this is intentional... so that it's a worse deal to stuff your mattress with dollars and sit on them. So any price announced would have to expect that inflation to already exist. And then, that price would have to be valid through the initial run of a couple years. So the average truck price this year is exactly what you'd expect had there been 4% inflation every year.

Which of course, there wasn't, because there was deflation a couple months during the pandemic, and inflation was already pretty low.

-Crissa

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[carsly]

This is not true.

I don't know why this misinformation keeps being repeated.

The average price of a new truck has gone from $49K in 2019 to $60K in 2024. Not from $50K to $80K.

It's normal for there to be 2-4% inflation; this is intentional... so that it's a worse deal to stuff your mattress with dollars and sit on them. So any price announced would have to expect that inflation to already exist. And then, that price would have to be valid through the initial run of a couple years. So the average truck price this year is exactly what you'd expect had there been 4% inflation every year.

Which of course, there wasn't, because there was deflation a couple months during the pandemic, and inflation was already pretty low.

-Crissa

Data is your friend: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

The size of the Fed's balance sheet in Nov 18, 2019 was $4.03 trillion. The Cybertruck was announced three days later, I don't have data for that day but we'll be pretty close.

The size of the Fed's balance sheet on Nov 27 2023 was $7.80 trillion. The Cybertruck was released three days later, data for that day is also not available but we're within spitting distance.

A little mathing would tell us that $40,300 in Nov 2019 would equate to roughly $78,000 in Nov 2023 due to nothing other than printing dollars. But wait, what about monetary aggregates?

You're right, there is a multiplier effect as people, companies, etc. can leverage those increase dollars in circulation. Simple example is a mortgage with 20% down where we're seeing four extra dollars created for every one dollar in circulation. You can keep going down this rabbit role and look at M1 and M2.

In Nov 2019, M1 was $3,926 billion and M2 was $15,280 billion. Nov 2023 M1 was $17,975 billion and M2 was $20,673 billion. Yes, that was the fastest growth in money supply in US history since the Fed began reporting data. Take a look yourself: https://fred.stlouisfed.org/graph/?id=M2NS,M1NS,

Unless you're choosing to dispel the Federal Reserve as a data source, there was an extraordinary amount of printing of US dollars. That's just a proven fact.

As for inflation, and why it's been sticky and will likely to continue to be sticky for quite a long time we need look no further than the above. Sure, raising the Fed funds target rate dampens enthusiasm for debt in the near term, but until those dollars come out of circulation inflation will be troublesome to return to the target of near 2% while retaining full employment. The other rub with inflation is that it's compounding. Choose your inflation measure, here's looking at CPE: https://www.federalreserve.gov/economy-at-a-glance-inflation-pce.htm

Throughout most of 2019 the prints were in the low 1% range - Sept 2019, likely the last report available before the Nov 2019 unveil, was 1.3%. Holy price stability Batman!

How about Sept 2021 - 4.8%. Sept 2022 - 6.7%. Sept 2023 - 3.4%. Aug 2024 is the most recent data we've got and that's 2.2% or still 69.2% higher than it was running in Sept 2019. And those numbers build on top of one another.

As for pricing, Tesla needs to make some assumptions about future inflation as well. If I'm sitting in the pricing group looking at all that money supply and the compound effects of inflation what am I thinking? If I underprice and get behind on parts costs I'll drive the business towards negative margins - here's looking at you Fisker, Rivian, Ford EV's, GM EV's, VW EV's, etc. So the only safe play is to position pricing ahead of inflation so you don't have to raise prices on new products as this only upsets customers - even more so an issue with all the media-induced FUD directed at Tesla. So instead you start prices a little higher on new products, keep the extra margins to invest in R&D and expansion, add incentives, and slowly trend prices down as manufacturing volumes increase and you reap economies of scale hopefully yielding ongoing efficiency and scale benefits to stay ahead of inflation-related materials and input factor increases enabling you to drop prices and maintain strong margins.

Do I know that Tesla is doing all this? Heck no. But from reading the 10-Q's and 10-K's it's clear they have some smart cookies in the pricing group. Credit where it's due.

So did inflation drive up prices from the reveal to start of production? Yes. But so did the massive increase in money supply which will have tailwind effects on expectations of future inflation which are likely to be much higher than projected inflation at the time of the Cybertruck unveil.

Pick it apart at your leisure, but please include hard data points and sources ;-)

 

[Facedown]

My guess is the primary reason they stopped the Foundation Series was because they finally got to the point where the Non-FS wasn't losing money without all of the mandatory high margin add-ons of the FS. A lot of us had guessed that it was due to decreasing demand for a $100k vehicle vs an $80k vehicle (which could also be true). But I bet the FS/non-FS margin story has more to do with it.

 

[igs]

My guess is the primary reason they stopped the Foundation Series was because they finally got to the point where the Non-FS wasn't losing money without all of the mandatory high margin add-ons of the FS. A lot of us had guessed that it was due to decreasing demand for a $100k vehicle vs an $80k vehicle (which could also be true). But I bet the FS/non-FS margin story has more to do with it.

First people were complaining they were building too many FS. Now they are complaining Tesla is building too few. ?‍

 

[HaulingAss]

First people were complaining they were building too many FS. Now they are complaining Tesla is building too few. ?‍

That was predictable.

There is a very vocal minority whose seemingly only purpose online is to complain about Tesla and Elon Musk. It doesn't matter whether they raise the prices or lower them.

If they make a vehicle that looks like a traditional car they complain it looks boring and dated. If they make a futuristic looking vehicle, they claim it's ugly, too radical. If they dominate EV sales they complain Tesla is stifling competition and there's not enough variety. If their sales fall, people claim Elon's "antics" scared all the buyers away. If they have a proprietary DCFC Network people complain it's an unfair walled garden, if they let others in people claim it ruins the exclusivity of Tesla owners. ?‍

 

[Crissa]

Data is your friend:

I noticed that your reply is not, in fact, basic data. It's political propaganda and misinformation. The federal deficit doesn't affect the cost of new cars.

Because this site is not for politics, I will explain this with math.

4% inflation is like 104% after every annual period. If you're planning a project you need to expect a d pad this into your projections, as out into the future it gets more and more uncertain.

We will start with 49, since that's a simple truncation of the average price of a new truck in 2019 when this projection began.

If the average in 2019 was 49 * 1.04 = 50.96 in 2020
50.96 * 1.04 = 52.9984 in 2021
52.9984 * 1.04 = 55.118336 in 2022
55.118336 * 1.04 = 57.32306944 in 2023
57.32306944 * 1.04 = 59.6159922176 in 2024

Now, the real world is much less predictable than this. In 2020, it went up, but only to $50k, and in 2021 it leapt to $60k due to supply chain problems and a spike in demand. And there it's basically sat as supply increased to meet demand, and then demand fell.

Demand went up not because of government buying trucks. Or paying more people to buy trucks. It went up because people adapted to a pandemic with more driving and more personal vehicles.

Now that has eased, plus incentives (the interest rate) are now against buying new, and the totally predictable result:

https://www.coxautoinc.com/market-insights/kbb-atp-november-2023/

Data. It's your friend.

-Crissa

PS, at no point in this data did the average price of trucks increase from 50k to 80-100k. So no, it wasn't 'the government'.

 

[Dahongfei]

Data is your friend: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

The size of the Fed's balance sheet in Nov 18, 2019 was $4.03 trillion. The Cybertruck was announced three days later, I don't have data for that day but we'll be pretty close.

The size of the Fed's balance sheet on Nov 27 2023 was $7.80 trillion. The Cybertruck was released three days later, data for that day is also not available but we're within spitting distance.

A little mathing would tell us that $40,300 in Nov 2019 would equate to roughly $78,000 in Nov 2023 due to nothing other than printing dollars. But wait, what about monetary aggregates?

You're right, there is a multiplier effect as people, companies, etc. can leverage those increase dollars in circulation. Simple example is a mortgage with 20% down where we're seeing four extra dollars created for every one dollar in circulation. You can keep going down this rabbit role and look at M1 and M2.

In Nov 2019, M1 was $3,926 billion and M2 was $15,280 billion. Nov 2023 M1 was $17,975 billion and M2 was $20,673 billion. Yes, that was the fastest growth in money supply in US history since the Fed began reporting data. Take a look yourself: https://fred.stlouisfed.org/graph/?id=M2NS,M1NS,

Unless you're choosing to dispel the Federal Reserve as a data source, there was an extraordinary amount of printing of US dollars. That's just a proven fact.

As for inflation, and why it's been sticky and will likely to continue to be sticky for quite a long time we need look no further than the above. Sure, raising the Fed funds target rate dampens enthusiasm for debt in the near term, but until those dollars come out of circulation inflation will be troublesome to return to the target of near 2% while retaining full employment. The other rub with inflation is that it's compounding. Choose your inflation measure, here's looking at CPE: https://www.federalreserve.gov/economy-at-a-glance-inflation-pce.htm

Throughout most of 2019 the prints were in the low 1% range - Sept 2019, likely the last report available before the Nov 2019 unveil, was 1.3%. Holy price stability Batman!

How about Sept 2021 - 4.8%. Sept 2022 - 6.7%. Sept 2023 - 3.4%. Aug 2024 is the most recent data we've got and that's 2.2% or still 69.2% higher than it was running in Sept 2019. And those numbers build on top of one another.

As for pricing, Tesla needs to make some assumptions about future inflation as well. If I'm sitting in the pricing group looking at all that money supply and the compound effects of inflation what am I thinking? If I underprice and get behind on parts costs I'll drive the business towards negative margins - here's looking at you Fisker, Rivian, Ford EV's, GM EV's, VW EV's, etc. So the only safe play is to position pricing ahead of inflation so you don't have to raise prices on new products as this only upsets customers - even more so an issue with all the media-induced FUD directed at Tesla. So instead you start prices a little higher on new products, keep the extra margins to invest in R&D and expansion, add incentives, and slowly trend prices down as manufacturing volumes increase and you reap economies of scale hopefully yielding ongoing efficiency and scale benefits to stay ahead of inflation-related materials and input factor increases enabling you to drop prices and maintain strong margins.

Do I know that Tesla is doing all this? Heck no. But from reading the 10-Q's and 10-K's it's clear they have some smart cookies in the pricing group. Credit where it's due.

So did inflation drive up prices from the reveal to start of production? Yes. But so did the massive increase in money supply which will have tailwind effects on expectations of future inflation which are likely to be much higher than projected inflation at the time of the Cybertruck unveil.

Pick it apart at your leisure, but please include hard data points and sources ;-)

Couldn’t agree more. All you need to know is that the money supply increased roughly 40% during that Covid Printing spree. And the year thereafter, prices are up in every category around 40%.

 

[Crissa]

Couldn’t agree more. All you need to know is that the money supply increased roughly 40% during that Covid Printing spree. And the year thereafter, prices are up in every category around 40%.

This is straight up incorrect, and political propaganda.

Why is it people who make these statements never back it up with actual cites other than political statements?

Trucks aren't up 40%. The average price is $60K, up 20% from five years ago.
Gas isn't up 40%. The average price today is $3.16, up 21% from five years ago.

Now eggs... Eggs are up to an average of $3, which is 200% over what it was in 2019. But we don't make trucks out of eggs - and trucks aren't susceptible to avian flu, nor do they eat grains which were damaged by extreme weather.

Making ridiculous statements about inflation which are flatly untrue is political propaganda, and doesn't belong on this forum.

-Crissa

 

[cyberos]

these days everyone with "smart' phone thinks they're investor-all they have is blunt itchy fingers-selling & buying stock in deluge on Emotions but no fundamentals.

? Not to be that guy, but… most trading volume on the stock market is done through algorithmic trading. Bots are chasing key words from quarterly reports and news briefs

There’s an infamous incident of Anne Hathaway spiking the price of Berkshire Hathaway shares

More sophisticated bots then trade on patterns, amplifying stock price swings. Only Reddit-organized retail investors seem able to beat the bots

 

[Jack27]

I was about to comment in this thread but I was to
Busy enjoying my amazing CT!

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