So the City of San Jose is distraught that Tesla pulled the plug on their planned factory in San Jose. Check out their math.
Construction would mean 600 jobs and $40 million in wages, according to an analysis by city staff, and the facility ultimately would employ 525 people with an annual payroll exceeding $100 million.
[From Plans for Tesla auto plant in San Jose appear doomed – San Jose Mercury News]
Let’s look past the construction jobs and focus on permanent payroll… the average employee at the Tesla factory, according to San Jose officials, would earn $190,000. We could speculate on bonus structures and additional taxable compensation components, but at any rate that is a lot for per employee at a car factory, it pretty much puts GM’s $78 per hour cost to shame. Okay, it’s also company HQ and has R&D but that is still a lot of coin.
I also question city officials for the wisdom of basing these projections and plans on a company that has failed to meet any of the original targets they set for themselves in the timeframes made public and to date has delivered a mere 160 cars.
PS- I pulled up behind a Tesla yesterday at stop sign, the car has some wicked acceleration.
Luxury car manufacturers are always trying to convince themselves that they are recession proof. It’s foolish.
Let’s take a look at Ferrari, they sell an average of 600 new cars a month… in November they sold 92, laid off up to 300 employees and announced plans to idle their Maranello factory for 20 days in December. Despite coming into the summer with a 2 year waiting list, the company is now watching vehicles pile up in markets like the UK and US.
This a perfect storm for Tesla: inability to access credit markets for expansion and vehicle financing, gas prices plummeting distract buyers from the advantages of plug-in vehicles, and taxpayer dollars being funneled to companies like GM. The company also suffers from a self-inflicted wound, the hype that they built up made it impossible to exceed expectations once they started delivering cars, and in many ways this is exactly what Segway did to themselves and they have never recovered.
Tesla shouldn’t fool themselves, retail sales numbers for december are showing luxury goods plummeting 37%, more than any other category. Tesla may need to sell just 1k to break even but they need to sell a lot more than that to invest in R&D in order to drive future sales and given the questions surrounding the viability of this company I think they have a tough road ahead, no pun intended.
A recession might seem like the wrong time to be selling luxury cars of any kind, much less ones that use an all-electric technology unfamiliar to most Americans. But sales of unique, high-end vehicles usually don’t plunge during downturns, according to auto industry analyst Jesse Toprak.
[From Electric car startup downshifts for rough road]
It’s interesting to look at this one statement regarding Tesla’s finances, $9m in the bank after taking deposits on 1,200 orders. I picked a number at random, a number between the $4k and $60k deposit required when placing an order calculated that they have taken $20m in deposits, which means they have burned through half of the money committed by customers before delivering but a fraction of the orders they took.
This might not be a bad thing because I’d bet that a very large percentage of those customers would still have placed an order with a deposit even knowing that Tesla lacked all of the capital to deliver on the cars they committed to selling.
You couldn’t do it because of SEC regulations covering the number of allowable investors (as well as being accredited investors) but it would be quite dramatic if Tesla had come out and said from the get to that the first 1,000 customers would in fact become investors in the company in exchange for a larger upfront deposit. That could have generated the additional $20m that Musk says he needs to break even without all of the drama they are experiencing right now.
In an employee meeting, Musk shared the company’s finances, which indicated that Tesla has about $9 million in cash.
[From Tesla Motors seeks cash to keep moving forward | Green Tech – CNET News]
I love the idea of the Tesla, a high performance electric car that is fun to drive and good to look at. I wonder if it ends being the next Segway, a promised revolutionary product that ends up being underwhelming in reality. I drive by their new showroom in Menlo Park all the time and there just doesn’t appear to be a lot of stuff going on there on a typical day. With tax and licensing they are selling a $125k car, which is a lot of money in any economy, and when the novelty wears off I wonder where they go. Maybe instead of comparing it to the Segway, a more appropriate comparison is the DeLorean.
Chairman and Chief Executive Elon Musk said Friday that Tesla would cut as many as 87 staff and full-time contract workers, or 24% of the 363-person total. The company also will attempt to raise $25 million, rather than the $100 million it had been seeking.
[From Electric carmaker Tesla plans big round of layoffs – Los Angeles Times]