Awful hit piece in WSJ today by Holman Jenkins:
Opinion | Get Ready for a Pileup, Tesla
“Get Ready for a Pileup, Tesla”
I have WSJ subscription so am willing to add a comment with your help on some specifics, have 2 days before they close comments. Might be marginally useful because existing comments are largely uninformed or off-topic, including the few that are pro-BEV.
I will summarize here bcuz paywall, esp what data I think I need for a comment:
Basis for article data is cited as this one from McKinsey:
Improving electric vehicle economics | McKinsey
Let’s call that report “MKR” for reference.
Pitch of the article (NOT my pitch)
- Tesla is only making money because of tax incentives which are expiring, and “Morgan Stanley says Tesla sales will be 344k below its low end last predicted range”. Comment: WTF source and context missing for this number out of the blue.
- BEVs are being sold at a $12k loss, citing MKR. What MKR actually says if you follow the link is:
- However, there is a problem: today, most OEMs do not make a profit from the sale of EVs. In fact, these vehicles often cost $12,000 more to produce than comparable vehicles powered by internal-combustion engines (ICEs) in the small- to midsize-car segment and the small-utility-vehicle segment (Exhibit 1). What is more, carmakers often struggle to recoup those costs through pricing alone. The result: apart from a few premium models, OEMs stand to lose money on almost every EV sold, which is clearly unsustainable.
- Comment: Since there are so few BEVs being manufactured, sounds to me like this is really “Chevy Bolt is being sold at a $10k loss before tax incentive”. I think we knew that.
- A whole pile of new BEVs are coming to the US market this year, all by committing $300B to manufacture money-losing cars, but they can break even because of tax breaks.
- Tesla is losing the tax breaks this year, so it is totally screwed because:
- It’s sales are declining and it only makes money because of tax breaks
- All these new cars coming get the tax break.
- Comment: can we point to Tesla margins that exceed the original $7500 tax break, certainly exceeded the $3750 incentive level during Q1 which I believe exceeded Q4 in M3 sales, despite FUD we have all seen; also
- Jenkins goes on to claim that BEV successes elsewhere in the world are a sham because of government subsidies.
- Punchline at end of article: “The kicker is that Norway can afford its electric car habit partly because it’s one of the world’s biggest oil and gas exporters. Pretty much the same basic model now has been adopted by green regulators everywhere. The world is ruthlessly promoting an electric-car industry that is a hothouse flower and will need massive and continuing subsidies from buyers and users of gasoline-powered cars.”
- Comment: easy to refute that last?
This is really an awful stinker of a piece, would like to provide some focused reply, even without expectation that it will make much difference.
Thanks for your help.
"Tesla is only making money because of tax incentives which are expiring."
I don't feel like looking up ASPs, but M3 was
over $45k last year because it only went up from there. IIRC, Tesla guided for >20% gross margin which, at that point, is $9k -- greater than the $7.5k incentive then in place. Of course, the ASP was greater and even with ~15% gross margin they clearly and obviously made profit above and beyond the $7.5k. For this year
including price cuts Tesla guided for > 20% gross margin. Of course, this hasn't been proven yet but the burden of proof should be on those who counter the guidance. Not just "Elon's a liar" -- which has not been shown yet despite many filing opportunities.
"BEVs are being sold at a $12k loss, citing MKR."
As you elaborated, the citation was relating to "comparable" ICE. While that may be true for Bolt or Leaf, it is clearly
not true for the M3, and after price cuts I don't see how it is even remotely supportable for S/X. In other words, this is a problem for other manufacturers, not Tesla.
"A whole pile of new BEVs are coming to the US market this year"
What is this "whole pile" they are talking about? The practically DOA iPace? the not-ready-yet EQC? the over-priced-and-uncompetitive e-tron? the not-really-here polestar 2? Just nonsensical noise.
"Tesla is losing the tax breaks this year,"
The whole "demand" complaint when Tesla had 110% YOY growth. While that could be considered disappointing relative to the second half of last year, it is absurd to spin "slowing growth" into "declining sales" -- and that is without even bringing up the push for overseas and preparing production for the SR. The picture won't really be clear until at least Q3 in my opinion.
"Jenkins goes on to claim that BEV"
Ah, yes, Norway is a real thorn in the side of the bear case for Tesla and so is either ignored or undermined. I think there is no doubt that the government incentives have vastly speed up the adoption of EVs in Norway -- the real question is why other governments aren't doing the same. In other words, they are false framing the narrative.