<story><title>Model 3 Unveiling [video]</title><url>https://model3.tesla.com/</url></story><parent_chain><item><author>Animats</author><text>OK, $35K, 115,000 pre-orders, delivery early 2018.  (Yeah, he said &amp;quot;next year&amp;quot;, and then the projection said &amp;quot;late next year&amp;quot;, and then he waffled, so 2018 is realistic.)&lt;p&gt;Tesla&amp;#x27;s current production rate is about 70,000 units a year. Yes, the NUMMI plant once produced 500K vehicles a year on that site, but that just means Tesla has lots of empty building shell into which they can expand.&lt;p&gt;The real problem is profitability. Bloomberg is skeptical.[1] Tesla isn&amp;#x27;t profitable, and they have a high price point now.  Cutting the price means they have to produce at a far lower cost while expanding factory capacity. That will be very tough.   Jason Wheeler, Tesla&amp;#x27;s CFO, is going to have to come up with some creative financial strategies.  But with near-zero interest rates, and lots of pre-orders, they can probably borrow heavily for plant at very low cost.&lt;p&gt;[1] &lt;a href=&quot;http:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;news&amp;#x2F;videos&amp;#x2F;2016-03-31&amp;#x2F;tesla-doubles-down-with-the-model-3&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;news&amp;#x2F;videos&amp;#x2F;2016-03-31&amp;#x2F;tesla-double...&lt;/a&gt;</text></item></parent_chain><comment><author>abtinf</author><text>&amp;gt;Tesla isn&amp;#x27;t profitable&lt;p&gt;On a per-unit sold basis, Tesla Model S is wildly profitable, with a gross margin north of 30% [1]. However, they are obviously still in startup mode, so they reinvest all of those earnings along with investor capital into improving the business.&lt;p&gt;&amp;gt;Cutting the price means they have to produce at a far lower cost while expanding factory capacity.&lt;p&gt;Corporate finance is a little more nuanced than that. The price of expanding factory capacity is not an interesting number by itself; what matters is whether that investment will yield a profit over its useful life. Or, in more technical jargon, over the useful life of this investment, will marginal revenue per unit made possible by this investment exceed average total cost of producing units with this investment. Moreover, a dramatic expansion of capacity, executed competently, will reduce production costs across all product lines due to economies of scale, economies of scope, and improved negotiating power.&lt;p&gt;&amp;gt;But with near-zero interest rates, and lots of pre-orders, they can probably borrow heavily for plant at very low cost.&lt;p&gt;Tesla&amp;#x27;s credit rating is in junk bond territory [2] and their weighted average cost of capital is almost 9% (which includes interest free loans from pre-order reservation payments). So there isn&amp;#x27;t a lot of financial magic here - they need to produce units profitably to be successful.&lt;p&gt;[1] &lt;a href=&quot;http:&amp;#x2F;&amp;#x2F;seekingalpha.com&amp;#x2F;article&amp;#x2F;855661-tesla-profit-point&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;seekingalpha.com&amp;#x2F;article&amp;#x2F;855661-tesla-profit-point&lt;/a&gt;
[2] &lt;a href=&quot;http:&amp;#x2F;&amp;#x2F;www.businessinsider.com&amp;#x2F;tesla-rated-junk-by-sp-2014-5&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;www.businessinsider.com&amp;#x2F;tesla-rated-junk-by-sp-2014-5&lt;/a&gt;</text></comment>
<story><title>Model 3 Unveiling [video]</title><url>https://model3.tesla.com/</url></story><parent_chain><item><author>Animats</author><text>OK, $35K, 115,000 pre-orders, delivery early 2018.  (Yeah, he said &amp;quot;next year&amp;quot;, and then the projection said &amp;quot;late next year&amp;quot;, and then he waffled, so 2018 is realistic.)&lt;p&gt;Tesla&amp;#x27;s current production rate is about 70,000 units a year. Yes, the NUMMI plant once produced 500K vehicles a year on that site, but that just means Tesla has lots of empty building shell into which they can expand.&lt;p&gt;The real problem is profitability. Bloomberg is skeptical.[1] Tesla isn&amp;#x27;t profitable, and they have a high price point now.  Cutting the price means they have to produce at a far lower cost while expanding factory capacity. That will be very tough.   Jason Wheeler, Tesla&amp;#x27;s CFO, is going to have to come up with some creative financial strategies.  But with near-zero interest rates, and lots of pre-orders, they can probably borrow heavily for plant at very low cost.&lt;p&gt;[1] &lt;a href=&quot;http:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;news&amp;#x2F;videos&amp;#x2F;2016-03-31&amp;#x2F;tesla-doubles-down-with-the-model-3&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;news&amp;#x2F;videos&amp;#x2F;2016-03-31&amp;#x2F;tesla-double...&lt;/a&gt;</text></item></parent_chain><comment><author>slg</author><text>They did just get a zero interest 2 year loan of $115 million.</text></comment>