Also it seems like Tesla drivers in particular always want to talk about their car. Heck, much of the time you can’t get them to stop talking about it! 
1 Like
That page appears to be here now - Schedule a Demo Drive | Tesla
1 Like
That says more about people in CT than it does about batteries or Florida.
Andy
3 Likes
Could you provide a link to even one instance of this claim I’ve supposedly made “over and over”? I’m pretty sure I haven’t. Nor do I believe that is the case.
2 Likes
The problem it is people from CT in Florida.
No - they’re just not going to be able to maintain a negative cash conversion cycle.
There’s a reason why nearly no other companies are able to do that. Not just nearly no other car companies - nearly no other companies in almost any industry.
It’s not because every other company is stupid. It’s because one typically doesn’t have the ability to get your customers and suppliers to do that for you. Because the conditions that allow that to happen are very uncommon.
I’m not claiming Tesla is going to get stupid. I’m claiming that their period of operating with no competitors offering BEV’s for immediate purchase at volume is going to soon come to a close. I expect that will force them to start doing the things that virtually every other company in every other sector (not just car companies) has to do in the face of competition - advertise and offer their products for purchase at retailers.
2 Likes
They don’t really have a negative CCC, unless you consider one or two days. That’s because you order your car and pay only about $100 (sometimes refundable, and negligible compared to the total cost of the item). Then you pay the balance the day, or a day before, you take delivery.
Meanwhile, the company paid for much of the materials and labor in advance of that. Maybe there are some suppliers at 30 days or maybe even 60 days, but I suspect very few of those because of the high level of vertical integration at Tesla.
How about in this thread?
You keep pretending that somehow if you make cars available for customers to buy that you must have a “dealership” and its attendant issues. You pretend that there aren’t better solutions.
It seems inevitable that you’ll simply redefine “dealership” until it’s whatever solution Tesla comes up with for delivery, test drives, and inventory storage.
-IGU-
1 Like
Yes, they really do.
-IGU-
Sez you.
Is this Amazon cash conversion cycle data wrong? (may not work due to paywall – it showed me -30 to -40 days recently).
Right. Typically. As Tesla becomes more of a manufacturing powerhouse they increase their leverage over suppliers. Payment with 30 day or 60 day terms is normal.
The only requirement is that Tesla get its vehicles into customers’ hands, paid for, on average before they have to pay their suppliers. And they keep their overhead low. The more they have vehicles sitting around unsold the less likely that will become, so they won’t go for that model. Your constant insistence that “they must” notwithstanding.
You would do much better to spend your mental energy figuring out how they will do that rather than conducting a rear-guard defense of your untenable position.
-IGU-
2 Likes
IGU,
You are incredibly informative and not entirely one sided.
There are forces outside of Tesla that will need to be factored in. The FED/Economy as of now going forward a few quarters and the competition. The last factor Tesla is a car company it is capital intensive. That does not add up to the current valuation.
There is no math needed the company wont stay at a PE of 56.
Then again if Tesla hits upon something the way Amazon hit upon AWS…but then again right now Amzn does not have a positive PE.
1 Like
Not old fashioned test drives, they offer “DemoDrives” like every other software company! 
The Captain
I posted this some time ago. The Purchaser at a supermarket client of ours explained how they managed to get a 35% return on capital selling products at razor thin margins, “I have to sell the merchandise three times before I pay for it.” Translation, for an item that sits on the shelf for 10 days they need net 30 days terms. Being the largest supermarket in their region they had no problem getting it. This also illustrates the cost of inventory, get rid of it as fast as you can. When I first talked to the owner he told me about the time he inherited the business, “My father kept goods on the shelf for ever. One of the first things I did was to get rid of all the old stuff.”
Maybe it’s hard to understand business if you have never been in business.
The Captain
2 Likes
Nope. I didn’t say anything about test drives in that thread. I would think someone who is so blisteringly critical of other posters would themselves be a bit more rigorous in their own posts.
Nor am I “redefining” dealership to match whatever Tesla comes up with. If a Tesla facility does all of the major functions of a car dealership, then it’s a dealership. Right now, they don’t do that. Tesla showrooms do not typically maintain non trivial inventory for available purchase, which is one of the main functions of a dealer. I expect that will change over time.
Tesla might not have independent dealerships. They might not abandon their fixed price model. But they will, I believe, end up having dealerships in order to preserve market share against competitors who offer same day acquisition of vehicles.
As for the cash conversion cycle, I’m aware of Amazon. That’s why I said “nearly” no other companies. A handful can, especially in service or retail industries. It’s very rare in heavy goods manufacturing, like Tesla operates in. Not because all those companies are stupid, but because it is difficult to maintain that kind of pressure on customers and suppliers in a competitive environment. Tesla has not been operating in too competitive an environment for most of its history, and that is finally starting to change. So I don’t think they’ll be able to keep up this distribution model for much longer, even if it affects their CCC.
6 Likes
I remember you saying this same sort of thing, that Tesla wouldn’t need local dealerships, and then about a month later they opened a local dealership - I’m sorry, a local showroom - about 5 miles from my house. Where I can see the car, sit in the car, and with an appointment, drive the car, just like at a dealership. They will help with the paperwork and do all the other things a dealership does, but heaven forbid we call it a dealership.
Bah. They’ve already changed their marketing. I have little doubt they will change again. No, I am not predicting every jot and tittle will be identical to a Ford dealership, not at all. But I will find most of those differences to be without much of a distinction.
5 Likes
To veer back on topic for a moment…
Industry inventory was about 60 days worth in February. Regarding Tesla, the nonsensical discussion was about how 16 days of inventory is some kind of harbinger of doom, since it’s up from recent numbers like 13 and 9. Way lower than anybody else in the business, regardless.
-IGU-
4 Likes
On a bit of a tangent in today’s news:
Note Polestar had the #1 and the #2 spot (dual motor and single motor versions) with over 20% of all EV sales. Tesla had 6th and 9th at just under 9% for the top 10 ranked vehicles sold.
Hawkwin
Who would be driving a Polestar 2 today if it still had the fed incentive.
2 Likes
Except they don’t and won’t. But go ahead and call it whatever you like, because, as you know, words mean nothing.
Sure. But what does Tesla’s marketing have to do with anything?
Tesla’s mission, at least so far as vehicles go, is to get pretty much all polluting vehicles off the road, replacing existing transport with something cleaner and more efficient. They think the way to accomplish this is by providing alternatives that are cheaper, more efficient, safer, and more appealing.
There is absolutely nothing in these goals that require “dealerships”. The company is relentlessly engineering driven. Tesla puts all its energy into making better products and pretty much none into coddling their customers. Many people, especially rich people who are used to being coddled, find that annoying. Tesla doesn’t care. They just keep making their products better, and people find that compelling.
Tesla vehicles, and the experience of owning their vehicles, is already significantly better than that of any other make. And because of Tesla’s focus, they’re continuing to get further ahead. Even ignoring everything else about the cars, never needing to go to a gas station and having the car improve every couple of months due to software updates; these things alone are sufficient to put Tesla in a class above pretty much any other make.
And just to put the “dealership” thing into perspective, I doubt if more than 10% of Tesla customers have ever been to a Tesla showroom.
-IGU-
There are some relevant examples of companies with negative cash conversion cycles. Apple, Dell, HP to name a few. Build a brand strong enough to do most sales online, be very efficient at moving inventory, and grab enough market share to negotiate from strength with suppliers. Tesla is checking all those boxes so far.
Using Apple as the model, as long as Tesla is perceived as being technologically more advanced with a product that provides superior consumer satisfaction, they should be able to continue their business model. The fact that people constantly talk about a Tesla cult and fanboys is a good sign.
I think it will move the other way. As vehicles become more like computers, on-demand production will replace mass production. That’s how consumers will be able to customize their car without manufacturers having to mass produce tons of different models and having them sit on dealer lots. Robotic casting and 3D printing are leading the way for this change. Tesla has a big advantage here because so much of their car functions come from the software. Much easier to customize through software than hardware.
Tesla with small showrooms where people can order their car is the future, not GM with its massive dealerships.
You just made the Tesla fanboy argument. A Tesla showroom can do most of what a dealership can do with respect to selling cars but more efficiently with a much smaller footprint and a much better customer experience. Seems like a Tesla win to me.
3 Likes
Which you can do when you’re in a brand new segment, catering primarily to early adopters who are really interested in the product, and face almost no competition.
That changes when your market segment matures, new growth has to come from people who aren’t necessarily deep enthusiasts, and there’s ample product volume from other companies who will compete with you on coddling customers.
That means advertising (pushing information about your product to customers instead of making them discover that information on their own) and point-of-sale retail services (letting them buy from a robust amount of available inventory for immediate acquisition). Having a great product doesn’t excuse you from having to do that if you want to maximize sales - just look at Apple, which advertises heavily and keeps its products on shelves for immediate purchase in both its own stores and third party vendors.
2 Likes