Sandy Munro gives a presentation on who will survive in the auto world

[firsttruck]

Karma for the killing of EV1??

Your Move OEMs...Who Will Survive?
Nov 24, 2021
Munro Live

 

[FutureBoy]

Very interesting Thanksgiving video. It certainly buoys my Tesla investment choice.

I wouldn't say everything in quite the same way but I certainly do find a lot of common ground with what he is saying.

 

[Crissa]

I think he's really smart about the tech, but he's so utterly blind politically that it hurts.

How are we supposed to get from here to there without massive economic damage if we don't cajole these companies into following Tesla's lead?

The number of cars bought would become a serious issue if manufacturing falters and doesn't keep up with technology. Then not only wouldn't we have the supply, but demand would crater, too.

-Crissa

 

[Ogre]

I think he's really smart about the tech, but he's so utterly blind politically that it hurts.

Seems to me he is very very knowledgeable about some things, but tends to talk on much broader things than where his expertise lies.

This video was Ok and there are a ton of interesting bits here, just… grain of salt.

 

[Ogre]

All of the billions of dollars in debt represented here is sunk costs. These companies have collectively spent these billions on producing cars and technology which is depreciating far faster than the debt service to pay for it. All of these companies (save Tesla) are going to be servicing debt on worthless equipment, intellectual property, and capital improvements around ICE drivetrains for years after it’s worthless.

How many tens of billions are they going to add to their debt load as they try to play catch up with Tesla over the next 10 years? Look at GM with $110 billion **after a government bailout just a few years ago**.

Tesla paid down I think $6b in debt this year so the number here might even overstate the small amount of debt Tesla has.

 

[Sirfun]

I think he's really smart about the tech, but he's so utterly blind politically that it hurts.

How are we supposed to get from here to there without massive economic damage if we don't cajole these companies into following Tesla's lead?

The number of cars bought would become a serious issue if manufacturing falters and doesn't keep up with technology. Then not only wouldn't we have the supply, but demand would crater, too.

-Crissa

One thing nobody is talking about is the lack of demand when Robo Taxi's exist in massive numbers. How's that going to effect sales of vehicles? Or how is that going to effect employment? Personally, I think Tesla will be selling software to other manufacturers, and making massive amounts of money from that. Elon has a plan.

 

[FutureBoy]

Elon has a plan.

From what I can see, Elon has set himself up with a very solid plan for most every scenario. The big 3 here in the US don’t have much chance to catch up.

Long term though his real rival will be the Chinese government. They can fund basically anything they need to compete with Elon. And domestically (in China) at least they could take over Tesla plants to disable his reach there.

But if Tesla can get FSD and other related tech out in the mainstream soon enough to be the dominant standard before China gets enough developed to catch up, he might have a chance at staying ahead.

 

[firsttruck]

All of the billions of dollars in debt represented here is sunk costs. These companies have collectively spent these billions on producing cars and technology which is depreciating far faster than the debt service to pay for it. All of these companies (save Tesla) are going to be servicing debt on worthless equipment, intellectual property, and capital improvements around ICE drivetrains for years after it’s worthless.

How many tens of billions are they going to add to their debt load as they try to play catch up with Tesla over the next 10 years? Look at GM with $110 billion **after a government bailout just a few years ago**.

Tesla paid down I think $6b in debt this year so the number here might even overstate the small amount of debt Tesla has.

Yup, since April 2021 Tesla has continued to pay off debt. In some cases almost 10 years early.

Has any of the legacy paid down any significant amounts ahead of schedule?

--------------------------

Tesla got a penalty when it paid back its $465 million DoE loan nine years early
By Simon Alvarez
Posted on November 27, 2021
https://www.teslarati.com/tesla-doe-loan-early-repayment-penalty-elon-musk/

.....
We learned our lesson with $465M DoE loan received in 2010/2011 – onerous terms exceed value of money received. That’s why we paid it back so early, despite an early repayment penalty.
— Elon Musk (@elonmusk) November 27, 2021

--------------------------

Tesla has paid off six loans worth over $1B in 2021
By Joey Klender
October 26, 2021
https://www.teslarati.com/tesla-loan-payoff-debts-2021/

--------------------------

 

[Ogre]

Yup, since April 2021 Tesla has continued to pay off debt. In some cases almost 10 years early.

Has any of the legacy paid down any significant amounts ahead of schedule?

Wall street likes companies to have debt. Seems backwards, but companies will increase debt to buy back shares or pay dividends and It often improves the value of companies according to some common valuation techniques.

It works fantastic until there is a crisis and suddenly they need a bail out.

 

[Dusty]

... All of these companies (save Tesla) are going to be servicing debt on worthless equipment, intellectual property, and capital improvements around ICE drivetrains for years after it’s worthless.

How many tens of billions are they going to add to their debt load as they try to play catch up with Tesla over the next 10 years? Look at GM with $110 billion **after a government bailout just a few years ago**.

The situational mathematics is pretty gruesome for Ford's game of catch-up in the EV sector. They need their "battery campus" to catch up to Tesla's coming tsunami next year in battery production, development, and vehicle manufacturing.

They are planning on paying for their Battery Campus for EV manufacturing and development with profits from their sales. But their sales have been dropping by 10% per year.

On top of that, a slow roll-out of the Lightning is going to cannibalize their F150 sales. The Lightning won't eat sales from those who need towing, but it eats the lunch (spec-wise) of a massive portion of the f150 lineup. With things like the ability to provide ridiculous amounts of power output and the frunk. . . A lot of F150 buyers are going to choose to wait until they can get their hands on a lightning rather than buy an ICE F150. Ford is relying on selling 700K F150s per year, but they can only make (at best) 80K Lightnings with a reservation queue of 200K.

To me, that means they lose 100K f150 customers that year because of the wait for Lightning production. That's 1/7th of their sales. Sales that they're depending on to pay for their future battery campus.

That's called "painted into a corner".

 

[Ogre]

The situational mathematics is pretty gruesome for Ford's game of catch-up in the EV sector. They need their "battery campus" to catch up to Tesla's coming tsunami next year in battery production, development, and vehicle manufacturing.

They are planning on paying for their Battery Campus for EV manufacturing and development with profits from their sales. But their sales have been dropping by 10% per year.

On top of that, a slow roll-out of the Lightning is going to cannibalize their F150 sales. The Lightning won't eat sales from those who need towing, but it eats the lunch (spec-wise) of a massive portion of the f150 lineup. With things like the ability to provide ridiculous amounts of power output and the frunk. . . A lot of F150 buyers are going to choose to wait until they can get their hands on a lightning rather than buy an ICE F150. Ford is relying on selling 700K F150s per year, but they can only make (at best) 80K Lightnings with a reservation queue of 200K.

To me, that means they lose 100K f150 customers that year because of the wait for Lightning production. That's 1/7th of their sales. Sales that they're depending on to pay for their future battery campus.

That's called "painted into a corner".

They almost certainly make less on the Lightning as they make on their ICE trucks. Likely by a large margin. So the more successful they are at scaling up this version of the truck, the less money they have to build the next version of it.

They are likely in their back rooms trying to figure out what to charge for all the different trim levels to maximize profit (or minimize loss maybe?) and all they have to guide them in Tesla’s Cybertruck pricing and Rivian’s R1T pricing.

All the legacy auto makers are in a self-imposed Full Nelson. I think someone in the administration realizes how badly out-of-balance the EV market has become and that’s why we have the union clause and the incentives at all.

 

[Crissa]

All the legacy auto makers are in a self-imposed Full Nelson. I think someone in the administration realizes how badly out-of-balance the EV market has become and that’s why we have the union clause and the incentives at all.

And if we lose them, we'll take another two decades to build the production necessary to convert vehicle sales to EVs.

-Crissa

 

[CyberGus]

While "Big Auto Co." may want to transition to a new desirable product line that consumers will want to buy, the people running it do not. The EV changeover requires retooling, retraining, union battles, and years of stunted growth and profit. For these executives, it means more work and missed bonuses. It's easier to just maintain the status quo, and pull the rip cord on the Golden Parachute™ when it starts to get ugly.

Even if they found the will to really change, and could nimbly execute their plans, the ICE-makers are a decade behind Tesla just on logistics. Need batteries for all those EVs you want to make? Get in line, Tesla has the worldwide supply bought out for the next 5 years. "Oh fine, I just go dig up my own lithium!" Great! I hope you started the permitting process in 2012 because it takes 5-10 years to get a mine producing.

The collapse of the Big Three wouldn't help Tesla, but would cost hundreds of thousands of US jobs. Even Tesla can't move fast enough to fulfill that much production capacity, so demand would be met by increasing imports.

Do you really think that no one in the US Government has heard of Elon Musk or Tesla? Biden decided to start puffing up the Big Three, because if they don't start making the hard choices now, their long-term prospects are dim.

 

[Sirfun]

While "Big Auto Co." may want to transition to a new desirable product line that consumers will want to buy, the people running it do not. The EV changeover requires retooling, retraining, union battles, and years of stunted growth and profit. For these executives, it means more work and missed bonuses. It's easier to just maintain the status quo, and pull the rip cord on the Golden Parachute™ when it starts to get ugly.

Even if they found the will to really change, and could nimbly execute their plans, the ICE-makers are a decade behind Tesla just on logistics. Need batteries for all those EVs you want to make? Get in line, Tesla has the worldwide supply bought out for the next 5 years. "Oh fine, I just go dig up my own lithium!" Great! I hope you started the permitting process in 2012 because it takes 5-10 years to get a mine producing.

The collapse of the Big Three wouldn't help Tesla, but would cost hundreds of thousands of US jobs. Even Tesla can't move fast enough to fulfill that much production capacity, so demand would be met by increasing imports.

Do you really think that no one in the US Government has heard of Elon Musk or Tesla? Biden decided to start puffing up the Big Three, because if they don't start making the hard choices now, their long-term prospects are dim.

To me, there is one even larger part of the puzzle you didn’t mention. The dealer networks! When Elon started his company with no dealerships, that was a major reason why the big 3 felt Tesla didn't have a chance to succeed. Imagine the big 3 have their business model, where they just build vehicles and SELL franchise Dealerships all over the world. Almost any good-sized town in America has their own dealership that SOMEBODY pays the OEM for that opportunity. That somebody, pays to build all that infrastucture, and find and train their own employees. Tesla on the other hand had to decide where they wanted to have service centers and sales galleries. Then Tesla had to spend their own money (potential profits), to pay for all of that infrastructure. Also, imagine trying to find and train all those employees. The big 3 thought of that, as the noose around Tesla's neck that would never let them succeed. But now the opposite has happened. The dealerships have become a massive weight holding back the adoption of EV technology.

Business is about making money! Dealerships make most of the profit off of parts and service. EV's don't require many parts or service, also they have the potential to last longer. All this means very little profit. No wonder that for years, dealerships bad mouth EV's, and steer customers away from EV's (including EV's in their inventory).

 

[Luke42]

How are we supposed to get from here to there without massive economic damage if we don't cajole these companies into following Tesla's lead?

That all depends on how quickly the change occurs.

If it occurs slowly over a decade or two, it could be possible for legacy automakers' factories to be bought and repurposed without destroying the economies built up around them. As far as economic shocks go, it doesn't matter who owns the factory, just so long as it employees people in the community, and the transition is managed responsibly.

If it happens all at once, though, having hundreds of thousands of auto workers unemployed -- and concentrated in the same place -- will be like the textile plant shutdowns of the early 2000s, or the military base closings of the 1990s, or any number of other economic shocks that local areas still haven't recovered from decades later.

Time and continuity matter.