Tesla Q2 2019 Letter
ir.tesla.comBeing able to test your code out in the real world and dark launch a feature gives Tesla a ridiculous advantage. No other company has the infrastructure to be able to do that. Plus they can even tell if the decision the neural net made was wrong because I assume even Tesla knows you got into an accident. And this over thousands of cars. The speed at which they are collecting data is unprecedented.
I'm so tired of this unapologetic Tesla hand holding.
> No other company has the infrastructure to be able to do that.
Because they don't want it. They don't want AP regressions we've already seen happen. They don't want engineers testing code out on real people's lives.
You really think other companies just don't know how to send OTA updates to an ECU or other car components?
I could literally put that together with scraps in my garage, my car's ECU can be flashed over OBD, it'd be trivial to write firmware for a microcontroller to repeat a set of OBD commands downloaded from a webserver.
Obviously an auto manufacturer would do more than that, but there is literally nothing but choice stopping other manufacturers from doing this.
Why is everything Tesla does always suddenly some sort of competitive advantage. Next people will be saying the fact they have cars that spell out "S3XY" is a competitive advantage.
Running the latest neural net build in a shadow mode pitted against the real world driver and relaying back telemetry where the shadow NN took an opposing action is a little more sophisticated than pushing out an ECU update.
I think you're being a little uncharitable or simply don't understand what Tesla are doing.
I say you're intentionally confusing two points.
>Being able to test your code out in the real world and dark launch a feature gives Tesla a ridiculous advantage.
Is the comment I'm responding to.
You're intentionally dragging the rest of it into the conversation to make my point seem absurd.
Par for the course for Tesla defenders.
>> Being able to test your code out in the real world and dark launch a feature gives Tesla a ridiculous advantage.
> Is the comment I'm responding to.
And that dark launching includes sending the latest neural net builds to the fleet to safely shadow test the changes, collecting millions of hours of real-world telemetry and rapidly iterating without end users even needing to pick their nose. You either intentionally or through ignorance reduced OP's statement to being an OTA ECU update that you "could literally put that together with scraps in my garage".
But feel free to keep shifting the goal posts.
I hate it when people say "keep shifting goal posts" in the most random contexts to sound pithy.
I said no OEM wants their engineers to have a capability and you're fixating on the uses of the capability.
My comment is saying it doesn't matter if they wanted to use it for something as trivial as ECU updates, They. Do. Not. Want. It.
If you want a case study in why, AP regressions are a fine one.
They don't want the liability when an updates goes wrong and kills people. They do not see people's lives as prod vs dev. They do not want to hotfix safety critical systems. They want to get it right the first time, and that's why they're conservative and by god, they get it right a lot more than they get it wrong.
Because no matter how much spin TSLA fanboys put on these things, they are liabilities as much as, if not more, than they are strengths, especially combined with the flippant approach to valuing human life the company that called Adaptive Cruise Control + Lane Centering "Autopilot"
> My comment is saying it doesn't matter if they wanted to use it for something as trivial as ECU updates
What I'm saying is that you've completely missed the OP's point: The advantage Tesla has in the autopilot space is that they are able to have hundreds of thousands of real-world test units for their autopilot systems by running the neural net in parallel with the driver inputs (i.e. shadow mode) versus companies that at best have a few hundred test units thus limited material to improve/iterate on their deep learning models.
A metaphor for the situation is Apple playing catchup in the AI and voice recognition space to Google because Google had years of material and huge sums of it to build their deep learning models while Apple had comparatively little. The underlying technologies used by either company might be very similar, but you can't throw hardware at the problem to play catch up -- you need that real-world input/learning material for the deep-learning model to be robust.
I haven't completely missed any point, you just seem to be insistent on missing mine.
My point is the way that Tesla has gained this, using consumer vehicles as testbeds, not just for collection, but for actual running code in charge of managing peoples lives is utter nonsense and traditional automakers are choosing to stay away from it.
I mean, this isn't even a hypothetical, we've literally seen it happen, AP regressions where a lane transition your car was taking fine one day suddenly sends your car aimed at a concrete barrier!
You can call them slow, or whatever you want, but thank god the real auto manufacturers are not so flippant about the value of human life.
As someone in the industry (with domain knowledge), I can tell you that you are oversimplifying the problem and ignoring Tesla’s advantage and leadership in this space. Other manufacturers have to account for legacy systems/designs, it is not as trivial as you make it sound.
I even state that I'm oversimplifying the problem.
Other manufacturers do have to account for legacy systems, you don't need to be in the industry to understand the relationships manufacturers have with companies like Bosch and know they're not in full control of their destiny.
But their advantage is not a "let's ignore dumpster fire financials quarter of quarter to earn them a multi billion dollar market cap" big.
Tesla is not worth 42B dollars because manufacturers can't figure out OTA updates, and the fact other manufacturers don't have OTA updates should be a rounding error when you list advantages that warrant that market cap. It doesn't take any insider knowledge to know that, just common sense, and for far too long people have been ignoring that in preference for TSLA hype.
I got out last year during the 420 nonsense so honestly I don't know why I'm even bothering with all this, the fact anyone needs more than that to see TSLA is not worth your time is interesting. Anything from that point onward was just icing on the bear cake for me.
Everyone else not doing updates is the symptom of the larger issue, everyone else is a slow moving hardware company that outsources their software. Tesla is a software company first. And software beats hardware whenever you're doing something complex.
Plus lack of legacy self competition, no one else wants to cannibalise their other sales, and no one else has really invested in batteries. Most other car companies can't make enough EV cars to fulfill demand. They're all out of stock until next year because they make so few of them.
Treating safety critical software like a web server is not being fast moving, it's being reckless.
We've seen regressions in AP behavior.
Situations where a route that was safe yesterday will send your Tesla into a concrete barrier if you don't catch it
Simply. 100%. Unacceptable.
Honestly, the more I think about it, the more I do not want to be on the road with these people. I did not sign away my life to be someone's SDC test environment after all.
Are you referring to https://www.reddit.com/r/teslamotors/comments/b36x27/its_bac... ?
Not good, and they fixed it again.
They should probably put a warning like: Warning: Autosteer is intended for use only on highways and limited-access roads with a fully attentive driver. When using Autosteer, hold the steering wheel and be mindful of road conditions and surrounding traffic. Do not use Autosteer on city streets, in construction zones, or in areas where bicyclists or pedestrians may be present. Never depend on Autosteer to determine an appropriate driving path. Always be prepared to take immediate action. Failure to follow these instructions could cause damage, serious injury or death.
This is a glorified bumper car. Why does it needs updates at all? It should be KISS... instead they complicate for the sake of complication.
Mostly because people ask for features. And to support new charging stuff. Everyone loves Sentry mode, automatic video recordings of people damaging your car while it's parked.
Then there's "entertain people while charging" stuff.
And then there's autopilot stuff. NoA, Stop light detection, emergency lane departure avoidance, automatic lane changing, conditional speed limits (eg slower in winter)
Tesla has to account for legacy systems and designs, since they refresh models all the time without even bothering with distinct ("set in stone") model identifiers (like year). For example, there is no such thing as a "2018 Model 3" as there were multiple variants released over the year with changes over the year, not including the range-based option packages.
In fact, Tesla's legacy systems are actually a disadvantage perspective, since they have to account for a much larger range of hardware configurations than do legacy automakers.
> They don't want engineers testing code out on real people's lives.
When Tesla pushes and runs code in the shadow mode, it is run in parallel to the "production" version of the software. The actual behavior of a car, even with the test code in, still relies on decisions made by the "production" version of the software[1]. The purpose of such testing is to compare decisions made by the updated code vs those made by the old version, and use this info for fine-tuning the next gen algorithms.
So? Tesla is still changing the production mode code on their cars with forced updates and no oversight in addition to running code in "shadow mode"
They've used this capability to introduce regressions in the safety of autopilot before.
When a stinky old "traditional automaker" wants to update a safety critical component, they spend months developing and testing before slowly rolling out to dealers. They want to change as little as humanly possible to limit their liability if something goes wrong.
Now some of you think this attitude is a bad thing, and that safety critical systems should be something you can update on a whim like you update your web server and keep iterating on.
But knowing developers like I know developers, being one myself, slow-as-molasses processes for safety critical code is a feature, not a bug for me.
>Why is everything Tesla does always suddenly some sort of competitive advantage
Because the difference between could do and did is massive.
And difference between "did" and "should or should not do" is even more massive, although completely beyond Elon's (admittedly rather limited) powers of understanding.
You are giving big OEM's way too much credit, imo, haha.
What you suggested would take at least a year for them to setup at all, let alone work the bugs and making it useful.
Rest of the car companies are like Boeing. I hope you are keeping up with that. If not here's the latest - https://www.cnn.com/2019/07/24/business/boeing-loss/index.ht...
Have you considered that OTA updates undercut the dealership network and could be seen as servicing vehicles which in many states is illegal for the manufacturer to do so they could suffer consequences, maybe getting banned from selling in that state?
Seems like those states should change their laws. There’s no law guaranteeing me a job. Why are dealers so special?
Car dealers produce significant local employment and generate significant state and local tax dollars. What is the advantage to the state of favoring an out of state company over them?
I agree they should change their laws. This is where Tesla has an advantage. People are importing the cars in states that don't allow it.
Well, maybe. Since most of this data will be very repetitive, I don't think we can know for sure how much it helps?
You (and neural nets) learn the most when a boring repetition is violated. The error function was activated and that's worth feeding back into learning.
Ask any kid, they probably couldn't say what happened at school all week. But if they do remember something, it would have been something outside of their routine.
You (and neural nets) learn the most in the smaller number of cases when a boring repetition is violated. The error function was activated and that's worth feeding back into learning.
Ask any kid, they probably couldn't say what happened at school all week. But if they do remember something, it would have been something outside of their routine.
Yes, exactly! We don't know the amount or quality of interesting data from the total amount of data.
Judging by the nosedive that the stock price is taking in after hours trading (down over 12% from $264.88 at close an hour ago to $236 right now), the outlook of this letter isn't great.
They missed market expectations. They lost 6x more money (-$2.31/share vs expected -$0.35/share) and sold less cars ($6.3b sales vs $6.5b expected) than the market wanted with more capex to come (China Gigafactory, Model Y).
Not sure how does the CapEx gets allocated for the projects that are already progressing. For example: Tesla started building GF2 in China a few months ago so any idea in which Quarter(s) Tesla account for the CapEx? Is it before the project starts or at the end or every month gets even distribution of CapEx allocation from Start until End of the project.
China GF is GF3. GF2 is in Buffalo, NY (old SolarCity facility, which also manufactures Supercharger station hardware).
I can't speak to how GF3 capex is being accounted for, but competition was fierce to provide financing to Tesla [1]. China pulled out all of the stops not just for permitting and financing, but also construction (GF3 is already having Model 3 production line equipment installed, after breaking ground in January [2]). In less than a year, it will go from vacant land to producing Model 3s.
[1] https://www.teslarati.com/tesla-gigafactory-3-funding-chines...
[2] https://www.youtube.com/watch?v=XI6nJOic4BM (June 22 2019) Tesla Gigafactory 3 in Shanghai China Update
Linking to a Teslarati article, that's a laugh.
When will you realize that this company makes things up at every turn? They are cutting capex, again. They are slashing prices on cars with "unlimited demand". Let's see in a year how it's going,and what excuse you and they will have.
Is that Youtube video fake? The ~90k vehicles Tesla sold this quarter? "Fake news"? I have no excuses, just proof of hundreds of thousands of Tesla vehicles on the road, and billions of dollars worth of manufacturing capacity running.
Come back in a year we shall.
>The ~90k vehicles Tesla sold this quarter
And made less revenue than last quarter. Brilliant.
Is the 1 billion dollars lost this year after saying profits forever fake? The lawsuits from whistleblowers? Months long waits for parts? The miniscule growth after slashing prices greatly? The securities violations? Tesla Solar selling the least it ever has?
I could care less about some factory shell in China. They told you they'd build 10k a week in Fremont, didn't they? You have rose coloured glasses.
> And made less revenue than last quarter. Brilliant.
They made $5.3B this quarter and $3.7B last quarter.
Where are you getting your numbers from?
I meant the last delivery record quarter. Information overload on Tesla ER day. More cars, less revenue was the point.
Anyway, like the financials matter here. It's all about the next promise.
> I could care less about some factory shell in China.
Images of equipment installed GF3 in China.
Simply buying a capital asset is not an expense. It just moves assets from one asset account (cash, for example) to another (fixed asset account).
You then depreciate the asset over the expected life of the asset. So if you depreciate it over 30 years, then in year 1 you would record a depreciation expense of 3.33%. (That's for straight line depreciation.. there are accelerated schedules.)
In other words.. It's spread out over the expected life of the asset.
Also the depreciation usually wouldn't start until the asset has been put into production.
When invoices arrive from the build of the project they would be put into a capital expense account. I would imagine that the costs include upfront and ongoing components, as that's what contractors need. The asset (plant) is valued as the total of the invoices received and depreciation applies, which gives an ongoing tax shield.
"Buy on rumours, sell on news". The stock is up about 50% since its low a month and a half ago when rumours of good deliveries started. A small pullback is expected. But maybe not 12%.
Still down 40% from 52 week highs.
Still up over 10x since 2010...
It’s really a question of when bought/shorted if things are looking good or bad.
The letter is usually the tip of the Tesla bad news iceberg. The 10-Q won't be released for several days and will almost certainly do more damage because it adds more detail (both intentional and unintentional).
In 2017 Intel acquired mobileye( the makers of the autopilot radar in the early Teslas), for 15.3 Billion. That begs the question, if Tesla were to sell their autopilot system tomorrow, , given it's safety record, amount of training data, and new FPGA processor IP, how much would it be worth? 15, 20, 40?
This is why I find their delivery numbers completely and utterly irrelevant to company value. This is a just a technology company that has produced a great user experience and is now scaling it.
Their main bottleneck is battery production and they're very competitive at it.
If the bottleneck was auto-manufacturing they would have no trouble raising enough investment to just buy out a car company.
Tesla has 11bn in debt, alongside other obligations like warranties.
If they can't make the car thing work, and their autopilot tech sells for as much as mobileye, shareholders are going to be wiped out in the event of liquidation.
How the cars are selling and what margins they're getting matters a great deal, even if you believe that the long term value comes from autopilot.
Looking at the competition, ford, VW, Mercedes. Their battery production numbers look pretty mediocre. Also their cars are less and less competitive in a rising carbon market.
You're making an argument that Tesla is going to sell cars. That's fine.
But previously you said delivery numbers don't matter because autopilot is valuable. That's what I was responding to and could not be more wrong.
It's not really easy to compare value of Tesla autopilot IP with mobileye.
Tesla AP is a highly integrated, custom product, that works only with Tesla cars.
Mobileye was (and still is) general automotive supplier, with most of car companies as their clients. Intel didn't buy just tech - it bought all also the integrations and market share.
Which car company do you imagine Tesla would have "just bought out"?
Keep in mind that Tesla couldn't even raise enough money to buy out themselves, not even at the incredibly discounted price of $420/share.
Actually they could and did raise enough to buy themselves out and have done so every time.
anyone care to talk about this part "This feature is currently operating in “shadow mode” in the fleet, which compares our software algorithm to real-world driver behavior across tens of millions of instances around the world."
that seems very juicy?
edit: it seems people put a disclaimer on their ownership of tesla stock on hn about tesla threads. i dont own any.
> We are making progress towards stopping at stop signs and traffic lights. This feature is currently operating in “shadow mode” in the fleet, which compares our software algorithm to real-world driver behavior across tens of millions of instances around the world.
It's cool that they can collect that data and no doubt will help refine the feature, but otherwise marketing speak. Says nothing about how accurate their algorithm is or how long it may take. There's nothing stopping them from rolling out an algo for anything and running it in "shadow mode".
They run autopilot in all the cars whether it is turned on or not.
If it is not turned on, they still send the inputs to autopilot, without controlling the car. I think they can also compare what the driver does against what the autopilot would have done.
They can also ask their "fleet" to match specific conditions, and collect data if they are met.
The autonomy day video showed some interesting images, for example "animals" the fleet had seen.
I think this is the video https://youtu.be/tbgtGQIygZQ
This is a known feature unveiled, I believe, on Tesla's autonomy day. It just means they're able to test Autopilot on cars even if they aren't running autopilot.
Or, it means that the feature is running and the neural nets exercising, but not outputting actual control. The results are captured, but not acted on.
That's how I took it. They can then compare to what the human driver actually did, and find false positives (driver continued when the AI would've stopped) and false negatives (driver stopped when the AI would've continued).
ugh! the amount of supervised training data that would generate is staggering.
Hence why many investors don't mind that Tesla isn't generating wonderful cash flow. If there's a reasonable expectation that this data collection will lead to full autonomy, then Tesla should price their cars at whatever level is necessary to move their maximum production into consumers' hands, even if it were a loss (which it's not).
And even if they don't use the data to train, they can use it as an argument for how much better they are than humans. That's one hurdle that Waymo could have trouble with, whereas Tesla could point to tens of millions of miles where their sensors would have avoided crashes that humans failed to avoid.
Do you think they keep all that data on premise or use AWS/Azure/GCP?
edit: probably AWS [1]
[1] https://www.theinquirer.net/inquirer/news/3027077/hackers-hi...
For compute, during the autonomy day video they mention they use their own clusters, because they've designed their own "full self driving computer" with a custom set of neural network accelerator ASICs. So to do test runs on their own driving computers, of course, they need to build their own machine clusters.
Custom built clusters can be much cheaper than the cloud anyway.
For storage, they say they actually pull data on demand from the fleet. They have NNs that can detect similar-looking stuff to input samples, so if they want more videos of construction sites they just ask the fleet to send them more videos of construction sites. Actual storage of all video isn't required except for their test suites.
Competitors buying hundreds of cars and continuously driving over mannequins.
neat. I would say im optomistic on this actual self driving stuff. But coming from almost no machine learning knowledge, doesn't this make tesla way ahead of google/waymo and others? Because they can simply check when they failed and tweak.
I'm just curious if it does make them way ahead, and if so how much more ahead? Is this driving a car vs horse wagon levels?
I think the real answer is nobody knows.
It's obviously got some benefits, and I think most people in ML would agree that real world data from the "average person" (as in "not a Dev or paid to do this") is worlds better than simulations.
Still, "ahead" and "behind" isn't really a thing before you reach the finish line here. Many think Tesla will never reach full self driving or won't reach it without additional sensors, others think it's possible but decades or more away, still others think it's right around the corner and can be done with what is on a Tesla right now.
Until someone reaches that finish line, we won't have anything to compare it to, so we don't have any idea how close or far anyone really is.
Is there any public research or data regarding the value or predicted delta value of long tail "average person" driving data of this kind versus the kind of data captured by driving around the same small portions of SF or MV? I've looked around but haven't found anything. Granted, Tesla and its competitors don't have an incentive to publish this kind of data...but are they even in a position to be able to calculate it currently?
Probably not. Ordinary staying-on-road is pretty much solved. There's years of dashcam imagery available.
The last minute of video before each crash would probably be more useful. Training on dashcam data of people doing stupid stuff from Youtube might be useful. You don't need steering, braking, and accel data; you can run a 3D SLAM algorithm to extract the path and get that.
My 2 problems with Musk is that he has dismissed lidar in favor of just cameras because lidar is expensive. So far most of the Tesla auto pilot accidents would have been avoided with lidar. Even 2 very basic lidar sensors on the front and back could make a huge difference. And he calls a driver assistance system autopilot when it hasn't reached the level of autonomy which the word autopilot implies.
Tesla's approach means there isn't a finishing line. Just a long stream of over-the-air updates that incrementally enable more and more complex scenarios. They could be at it years. One day people will cross a psychological threshold where manual intervention is needed rarely enough that we talk about it as fully self-driving rather than limited driving assistance.
Which company is in the lead is a very contentious topic it seems. This one specific feature doesn't seem to push it one way or the other. But IMO Tesla has the best approach and has a huge lead on the data collection pipeline. No other self driving company has even close to as many cars to test on / gather data from.
> But IMO Tesla has the best approach and has a huge lead on the data collection pipeline.
Not only that, but by using cheap hardware that consumers can reasonably afford, they really only need to get to level 3 (eyes off so you can work/entertain but driver still in the seat) for it to be massively beneficial for everyone who commutes to work.
Waymo pretty much requires level 4 as it's too expensive to be sold as a consumer car and nobody will be in a taxi when it is driving between customers.
contentious? Genuinely curious for a source here. everything ive ever seen says Waymo is far in the lead, though I dont work in this space.
The contentious part is that Waymo doesn't have a product yet. It's easy to imagine something is better when you can't actually use it.
In truth there are only 3 self driving products that I know of available today. Tesla's Autopilot, GM's Supercruise (only on CT6), and commma.ai's openpilot.
Of those Autopilot is easily the best.
I never know why a source would matter in these cases as the writers of these sources usually have no idea and the answer isn't clear anyways. But if you want you can use me as a source because I'm an engineer who worked in automotive and has driven all 3 of aforementiond products. I also am not sure Waymo will ever release a feasible product other than their LIDAR.
>> It's easy to imagine something is better when you can't actually use it.
Yup. Carmack illustrated this very well in his interviews when he would not talk about unreleased games vs. Doom/Quake/whatever. He always said: "It's really easy to be the best graphics engine when it isn't available to the public."
That is a great point. Would you agree that the _narrative_ is that Waymo has the superior tech right now? Or did I misjudge that?
I suppose I used the wrong word. Any expert or well-informed opinion is what I was after.
Yes I would agree Waymo owns the narrative and a lot of it is based on their disengagement stats. I wouldn't say those tell the whole story.
They are also completely different approaches, i.e. Waymo using LIDAR and Tesla relying on cameras as the primary sensor.
But the major question is can LIDAR _ever_ be financially feasible, and if so can it become feasible faster than camera gets good enough at vision. Right now the sensors on the Waymo van probably cost more than the van itself.
That's either a very expensive purchase for the consumer or a very large amount of cap-ex Waymo would have to put up for a fleet of self-driving taxis.
And if it turns out cameras were the right choice, or visa versa, that means the opposite company would have spent a LOT of their R&D funding on the wrong tech, and would be way behind.
Waymo quotes $7500 per car for the LIDAR unit, which is financially feasible today for consumer vehicles, even if it only supplied level 3. It's trivial for a level 4 robotaxi. But only once the software works.
Even discounting aesthetics, Tesla couldn't have bolted it on to every car sold in the hope that it'll work in a few years time. They'd be bankrupt by now. They were forced to use cameras if they wanted any intermediate progress.
I get that there's a lot of misinformation about Tesla and you're trying to correct it. Even as a Tesla bear I acknowledge that.
But don't do it by creating further misinformation about competitors. You're just adding to the noise.
That's just one LIDAR, count how many are on their vans. (I think 5)
It's for the main one. The others are much cheaper. The total price is not 5x$7500.
These are not levels where it makes sense to question if it will "ever" be financially viable. It's less than the premium people paid gladly for a Model S.
A true level 3 on consumer cars would sell like hotcakes.
Probably not way ahead but definitely ahead. Waymo has hundreds, if not thousands of fleet vehicles driving all day, every day around various parts of the country too and they can also check when people took over or when the brakes were hit. I think Tesla's approach is a little neater and nicer but that's just an opinion.
Tesla has hundreds of thousands driving and growing rapidly?
There are a lot of Teslas that do not have the hardware necessary to do the training required. Additionally, Waymo cars are driving all day long while most Teslas are still commuter vehicles.
Disclaimer: I own no financial stake in Tesla, and while I love the goal of converting the world towards electric vehicles as whole I am not a fan of Tesla or Elon Musk.
There are people much more informed than myself that believe Shadow Mode isn't real, and that Tesla is outright lying about its existence.
That twitter thread (which is great, btw, everyone interested in this stuff should be following @greentheonly) doesn't remotely substantiate "Shadow Mode isn't real, and that Tesla is outright lying".
I don't know the extent of public statements about it, but comparing collected data like the stuff detailed there to driver behavior is certainly feasible and almost certainly being done. It's also likely true that the marketing department had their way with the announcement and made it sound more like an on-vehicle entity, but.. meh.
I just don't see how you got from that (again, really great) analysis to such an outraged conclusion.
I was stating his opinion, but I'll just quote him directly:
> We'll start with the bitter truth. The "shadow driver that just sits there in the computer comparing notes and sending discrepancies and interesting events to Tesla" is a myth. I used to think people just misunderstood Elon, but now I believe Tesla lies about it on purpose
I really did not mean for my comment to be inflammatory (hence the disclaimer and including a source), but considering how quickly it was downvoted I guess people do not approve.
That quote has no substance still. In the thread he proves that he can inspect some data logging routines in his Tesla, how does that lead to “shadow mode does not exist” is a mystery.
It is an obvious thing to do and the ‘shadowing’ aspect would not be particularly challenging tech, why the disbelief?
The thread then goes on to not support this statement very well. Including a Tesla employee disagreeing with him directly.
If we're starting with the assumption that Tesla is lying about shadow mode, which is the entire premise of the claim, it would not be surprising for a Tesla employee to disagree. Obviously this is one of those you-can't-win scenarios, so I fully understand the Tesla employee could be acting in good faith, but that alone is no more evidence than the original hacker's claim that it doesn't exist considering the context.
I consider it a very interesting thread where someone went looking for proof of shadow mode and couldn't find it. Maybe his conclusion is a little extreme, and I guess people thought I was trying to derail a Tesla thread with FUD when really I was trying to share an interesting piece and someone else's better-informed opinion (which is why I worded it the way I did). I sort of consider it similar to saying "expert A believes that..." but I guess I communicated that poorly.
For what it's worth, I'm glad people are actually looking at the source and critiquing it.
> I consider it a very interesting thread where someone went looking for proof of shadow mode and couldn't find it.
This seems to be assuming that it's something that exists entirely within the car, whereas the more sensible implementation is that the car uploads the sensor data and driver choices to a server in a datacenter somewhere and "shadow mode" happens there by running the autopilot code against the data.
That way you can continue to use the data even with newer or experimental versions of the autopilot code that didn't exist when some of the data was collected, compare different versions to see which ones do better and when, etc.
How does that person know they are running the latest software with every feature turned on? Just because their car doesn't run in shadow mode doesn't seem to mean that no cars are.
Sounds like they're running their autopilot software on some (all?) of the cars in the wild, where they can compare what the autopilot would do with the actions taken by the human driving the car, and use this to analyze/refine their model/system.
In casual talks with friends, this is something I've expected would be the competitive edge Tesla has over Waymo and the others; driving millions of "virtual miles" strikes me as far less useful than having a human baseline to compare to along with data capture from a fleet in all manner of real situations/locations.
Which makes me imagine a crazy marketing video where they demonstrate their system is driving the right path and the human crashes.
In huge black font, then they just show the statistics of how often that happens.
They do this a lot when they're trying out new automation. It's part of the payback for all the investment they've put into field updates and telemetry. I think this data-gathering is part of the reason they continue to absorb the costs of LTE communications.
It's an excellent way to prove (or disprove) the effectiveness of new safety-related features.
As for non-safety-related features, my 3-yr-old granddaughter calls my Model S the "fartmobile" because of a recent electronic whoopee-cushion easter egg.
Doubt the model will coverage as the actions are from human drivers, not generated by the model.
Looks like the cash situation is finally under control.
They generated over $600 million in FCF in Q2. Compare this to only $200 million by Ford over the same period, also announced today: https://s22.q4cdn.com/857684434/files/doc_financials/2019/q2...
You are misreading the Ford statements and comparing the wrong numbers.
Tesla's non-GAAP "Operating cash flow less capital expenditures" is $ 613,929 [edit: in thousands, so $614 million]. Ford's same GAAP amount is $6.5 billion, or 10x Tesla's non-GAAP FCF for the same period (Q2).
Ford's "company adj. free cash flow" is a non-GAAP item that includes other items beyond capital expenditures.
They increased cash by increasing their accrued liabilities. Accounting tricks.
They sold a lot of existing inventory (as in, cars sitting on lots) this quarter. That generates cash.
Loss is more than $400M on record sales.
Tesla has a demand problem and is discounting cars in order to maintain the growth story.
This report is bad news for Tesla, but I think it disproves the "demand problem" narrative. Tesla delivered more cars than they could produce this quarter. Both delivery and production numbers were at record highs. The average sale price of the Model 3 remained stable. Meanwhile they are nearing production of the Model Y which is likely depressing demand of both the Model 3 and Model X. Once the Model Y is available, people expect it to have more ongoing demand than any of their current vehicles. Tesla has a lot of problems, but people not wanting their cars doesn't appear to be one of them.
Agree with most of the above except for the "Model Y likely depressing demand"- is there any indication that the Model Y is in demand at all?
I personally don't have hard data on it, which is why I used qualifiers such as "likely" and "people expected". Tesla has repeatedly said they expect higher demand for the Y and that fits with what usually sells well in the market. Plus it addresses common complaints about the 3 being "too small" and about the X being "too expensive".
I’ve seen them say that and in the general it’s true, but Tesla has been hush on revelaing any sort of demand with the Y and it doesn’t seem like the Y is that much bigger than a 3 to entice those people who’re holding out on a low end Tesla due to roomy interiors.
In most markets, sedans are in decreasing demand and the popularity of SUV/CUV vehicles is increasing. By that, the Y should be in larger demand than the 3.
Also, the Y addresses some of the tradeoffs made for efficiency on the Model 3: the missing hatch and the low second row. The Model Y will have a proper hatch, more cargo space, more vertical space in row 2 and optionally even a 3rd row of seats, increasing the attractivity for families with many children.
Putting that together, there is a lot of reason to assume the demand for the Model Y might eclipse the one for the Model 3.
People with families strongly prefer crossover models and they've mostly pushed sedans out of the market. It would stand that an electric crossover would outsell a 4 door sedan.
Wouldn’t families strongly prefer a larger car period? Is the Y really that much bigger that it’d convert families who are holding out on a 3 due to size? I haven’t seen anything to suggest as much, and both the 3 and Y are def less roomy than other (albeit non electric) cars that families go for.
ASP on the Model 3 has been falling quarter over quarter, as have margins. S and X demand and prices have dropped significantly.
Model 3 prices dropped yet again less than a week ago.
Your comment directly conflicts with what was stated in this letter:
>During the quarter, a majority of orders continued to be for a long-range battery option and the Model 3 average selling price (ASP) was stable at approximately $50,000. At the same time, manufacturing costs continued to decline.
Yes, the ASP was stable... during the quarter.
In 2018 the Model 3 ASP was above $57K.
It is a bit misleading to use an ASP number from 2018 as a measure of demand since they weren't delivering the entire range of vehicles at that tine. Tesla started out focusing on the cars with a high price and margin which artificially increased the ASP over where it would naturally settle. Therefore a decrease from that initial high is not any type of indicator of demand.
Why is this being downvoted? The only reason FCF was generated was because they had a lot of inventory undelivered that was produced in Q1 that got delivered in Q2 instead. This isn't a sustainable way to generate cash.
There is now $11bn of debt and $4bn of accounts payable on the balance sheet. It's costing not far off $1bn a year to service that debt, plus they are also very reliant on capital markets to roll over this debt every year or so. If there was a significant decline in corporate debt markets and Tesla couldn't roll the debt over, they would be out of cash very quickly (regardless of the losses).
"GAAP net loss of $408M" - the number that matters.
Tesla isn't doing that badly. But now that they have some production volume, they have to be evaluated as a car company, not a startup. Can they make lots of cars at a profit? They got the production quantity up by throwing people, money, and a big tent at the Fremont plant. That ran up the cost per car. Although it's better than their previous state of low production with a full staff. Can they get to a smooth running production plant with labor hours per car comparable to Detroit? (About 30-50 labor hours per car is typical in the industry.)
"Model 3 average selling price was stable at approximately $50,000."
That's nice, but the Model 3 was supposed to be $35,000. Tesla has caught up with their backlog, and you can now buy a Tesla Model 3 off the lot, just like regular car dealers.[1] That's good; they're now like a normal car company. But it also means they've saturated the market at their high price point, which is about where BMW is.
They're also at the point where all their models need a refresh or a replacement. Tesla is slow at new models compared to the competition.
[1] https://www.extremetech.com/extreme/289911-what-shortage-tes...
"they have to be evaluated as a car company"
Take a look at the rate of growth in capacity both of their cars and their batteries. I don't know what it is, but with Shanghai Giga coming online this year, Model Y next year, Pickup + Semi thereafter, the growth in capacity and the capital requirements to install it, is not matched by any other car company, possibly in the history of car companies (Musk's posit, to be fact checked).
All that growth is very expensive, but they may be able to fund it from operations. That is 'super impressive'.
In terms of production volumes, they are still small relative to GM, Toyota, VW, I'd still put them in the startup category. But not for much longer.
Building production plants is folded into GAAP numbers. Those are real assets with real depreciation.
Actual production at Tesla's battery "gigafactory" is only around 23GWh/yr.[1] That puts them well behind BYD and Contemporary Amperex Technology. About five other companies have battery factories in the 10-100GWh/yr range under construction or operating.
[1] https://electrek.co/2019/04/14/tesla-gigafactory-1-battery-c...
>Actual production at Tesla's battery "gigafactory" is only around 23GWh/yr.
It has already increased to 28 GWh per the latest earning call, and it is still growing. Panasonic said they already installed the equipment for 35 GWh of production and will invest further as soon as they're able to reach that rate.
> That's nice, but the Model 3 was supposed to be $35,000.
I'm sorry, this part is really misleading. The entry price for a 220 mile model was supposed to be $35k.
https://arstechnica.com/cars/2016/04/the-post-model-3-reveal...
Now a much nicer vehicle than originally announced with 240 miles of range is ~39k and the top end is right around the anticipated 60k.
The base model is $35.5k.
But now that they have some production volume, they have to be evaluated as a car company
I'm generally critical of Tesla.. but this isnt right in my experience. If the company's volume is growing rapidly, they are going to have higher expenses than a stable low growth competitor. Because as volume approaches the capacity of the equipment and staff, you must throw more people at it, reduce maintenance, buy more equipment, etc. And all of that costs money. Capital assets are being built for their future volume, which is going to be more expensive, since they would be overbuilding for their current volume (which can be a big problem if growth slows). And the growth also creates urgency, which reduces the company's leverage when negotiating prices.
Only once growth is under control can a company then turn its full attention to controlling costs.
>They're also at the point where all their models need a refresh or a replacement. Tesla is slow at new models compared to the competition.
They're definitely at the point where their competitors would have released a replacement (Model S) or refresh (Model X). I'm not sure it's clear that Tesla actually needs to do that. Ford and GM don't release new models just because the clock demands it, they release new models when the market demands it. Is the market demanding a replacement to the model S, or did the Model 3 hype cycle alleviate that demand?
I think you're right - the market is demanding a minivan and a pickup more than a new model S.
> Tesla isn't doing that badly. But now that they have some production volume, they have to be evaluated as a car company, not a startup.
While they're growing at this rate, they're still a startup and expected to use their available cash to improve their market share.
They are lowering customer's urge of refreshed models with nice and quite meaningful software updates. Clever move, if you ask me.
Looking healthy to move along for Chinese factory, Model Y and pickup truck later this year.
I like that they don't stop moving even if it scares a few investors with heavy capex spending on their next products.
Heavy capex spending???
Did you even look at the financials? It doesn't even cover depreciation!
Edit: Downvoters want to explain how $250mm is "heavy capex spending" in the automotive world, particularly in a "high growth" company?
Tesla's stock has massively under-performed over the past 5 years (will be up 8% over that period if the after hours price action holds). The opportunity cost of owning it has been huge while the rest of the market ripped up.
Yes, if you pick the most embarrassing time period for a given stock, it probably massively under-performed. Alternately, you can pick the most flattering time period.
It was a statement about a 5-year period in a stock issued just a few weeks longer than 9 years ago. Are you seriously making a cherry picking argument?
The period chosen misses a 10x run-up just before it.
Its under-performance over 2 and 5 years explains why it's been such a great short. Investors like Chanos have a basket of shorts so any one stock ripping up would hurt but wouldn't kill them. And the shorts ultimately let them be even more net-long the market.
As a non owner of a vehicle or stock... I don’t see a reason why the average interested watcher should care. There’s significant speculation and huge financial forces putting unusually large efforts to push this stock up or down.
Personally I don’t think it matters or changes the likelihood that they’ll eventually succeed or not succeed.
Up 8%? It's down 10%+, what made you think it would go up? Rest of the market ripped up? The S&P is up 20% this year while Tesla has gone down 20%.
Edit: >The opportunity cost of owning it has been huge while the rest of the market ripped up
The S&P is up over 50% in five years. TSLA could go up 20% tomorrow (and ignore today's after hours change) and the S&P would still be outperforming TSLA.
He was using "ripped up" as a positive term, I assume synonymous with "Shot up" or "went up". You're agreeing with him, both of yall are saying Tesla has massively underperformed the market
That makes a lot more sense, I interpreted "ripped up" as "torn to shreds".
He meant up 8% over the five year period.
>The opportunity cost of owning it has been huge while the rest of the market ripped up
Still doesn't make any sense. The S&P is up over 50% over five years. Outperforming TSLA by almost 3x (including the after-market change it is 5x).
No, that’s exactly what “opportunity cost” means.
I think the term we are looking for here is "alpha" [0], and you want a "good" stock to generate "alpha" in respect to the overall market.
You and the parent comment are in agreement, I think you misunderstood their comment.
Sheer will-power
Most recent story of Tesla's profitability was built around Musk's manufacturing innovations, that will make Model 3 much cheaper to produce. Experts disagreed, got fired, and alien dreadnought continued. It was such a huge failure, that to this day, portion of Model 3 production is happening a tent. With forklifts, leaking roof and space-heaters.
Tesla now has new profitability story - Musk's innovations in FSD, will make them a lot of money, and make cars appreciating assets. Experts disagreed, got fired, and FSD continues. Wonder how will that end?
I could be wrong here, but I believe experts will disagree and get fired.
> It was such a huge failure, that to this day, portion of Model 3 production is happening a tent. With forklifts, leaking roof and space-heaters.
Citation needed?
https://www.cnbc.com/2019/07/15/tesla-workers-in-ga4-tent-de...
Tent was temporary, and year later - it's still there
>Tent was temporary
So what? It ended easier and cheaper to design, set up and operate than a traditional building (the GA in the tent is already far more efficient that the other ones). It can last for decades, too.
FSD is snake oil and is a distraction. In no way will a Tesla ever be an “appreciating asset”. Ever. Full stop.
Tesla would be wise to focus on being a car company first and foremost.
So can someone explain to my why the Tesla stock made a nose dive to about $170 and is now almost back to where it was 3 months ago?
I don't understand how such huge volatility could happen assuming that the efficient market hypothesis is real.
Sidenote: I can't stand the ipad in the middle of Tesla cars (and other carmakers who choose this path). I got a BMW because of the sheer usefulness of physical buttons while driving / keeping eyes on the road.
Guess people like fiddling through an ipad while driving a 2 ton machine at highway speeds? ¯\_(ツ)_/¯. Looks like Tesla drivers are becoming the "Toyota Camry/Prius" drivers of the past.
I've found that the majority of functions needed when driving are available through the steering column's stalks, left/right buttons, or voice commands. If I ever do need to use the touch screen, I can activate TACC & Autosteer, and glance back and forth between the screen and road while finding the next button to press. And for the common functions, I've developed an awareness of the button locations, so I can press them while maintaining a view of the road. Sort of like how I had a sense for the physical buttons of my last car; only difference is that now the sequence of button pushes must also be learned, not just the physical location.
Maybe I'm not familiar with what the steering wheel buttons do in a Tesla.
Volume, change stations, change tracks, voice command (siri), adaptive cruise control (including mph selection) and auto-steering are available on my steering wheel in my BMW. In the middle of the car, climate zone and drive modes are available as physical buttons and knobs.
The stalks and buttons on the Model 3 can access all of those same features, as well as adjust the follow distance for adaptive cruise control. Climate settings are through the screen, via a fan symbol button in the center. That pops up a temperature selection slider with buttons to increase/decrease the setpoint, and (de)sync the driver/passenger set points. Press the button again, and you get a full screen with more settings (auto-flow vs manual, air stream splitting and direction, etc.)
Sounds like just the thing one should be doing in a moving vehicle! /s
Your hypothesis is that this model (screen instead of knobs) is more dangerous. Do you have any data to back this up?
Are you seriously suggesting that something that does require you to pay attention to a screen entire time you're using it (and touchscreen in a moving vehicle is not the easiest thing to operate even when you're not the one driving) is less distracting that something that is operable entirely by touch?
I'll stick with my experience trying to operate both. ANd I'll stick with cars that have real controls. Not that there were much reliable data yet, what with Tesla being pretty much the only ones who made something like that. Their crash statistics aren't all that impressive, BTW, but it is hard to discern which ones are pure accidents, and which ones are tied to controls, or AutoPilot, or general stupidity.
It will be interesting to see crash statistics of e-Tron vs. regular Q series, though, that would give some apples to apples comparison options.But then that assumes that Audi can actually sell a meaningful number of them...
Is there some historical problem with camry/prius drivers?
I think they're viewed as the antitheses of "driving enthusiasts" (for better or worse).
Someone who appreciates physical buttons in a BMW likely falls closer to that side of the camp than a stereotypical Prius driver.
I personally would consider myself a driving enthusiast but would have no issue with driving a Prius as a commuter. Quiet, reliable, efficient.. and then I can feel less guilty if I want to have an inefficient "fun car" for the odd sunny weekend.
Sidenote: I remember when people said the same thing about idrive and avoiding the brand because of it.
They jumped the shark with the Model 3, and I really wanted to like it.
It's still the most popular car in it's class by a mile, how is that "jumping the shark"?
Someone should jump an actual shark in one as a stunt though.
If the cold gas thrusters on the new Roadster are powerful enough, that car could straight out pull some Speed Racer Mach 5 antics!
People wanted a Model S for a third of the price
The model 3 is a better car by many accounts, what’s the disappointment exactly?
It ended up in the wrong class.
Huh? How so? I'm a Model 3 owner and I love this damn car.
Was the most popular car in its class,as it unloaded years worth of demand.
They've achieved a 0.5% increase in production volume in Q2, compared to Q4 2018, to 87,084 vehicles. I'd hardly call that "rapid progress". For comparison, Toyota make around 2.2 million vehicles per quarter.
A more reasonable brand comparison might be Mercedes-Benz Cars, which made 575,639 vehicles in Q2. It's quite impressive that Tesla have got to about 15% the volume that Merc do, but they're hardly going to take over the world with that kind of growth rate.
IMO they should stop chasing volume sales of lower cost vehicles and concentrate on premium vehicles with higher margins. What's the point of killing themselves trying to lift production numbers to try to make all the analysts who seem to be obsessed with that happy, which doesn't yet seem to be working, if the margins aren't worth bothering? It won't end well.
They're not killing themselves with production numbers to make analysts happy, it's literally in the mission statement...
Mission statement: Tesla's mission is to accelerate the world's transition to sustainable energy. [1]
Strategy (paraphrasing): Start with low-volume, high margins. Over time introduce high-volume, low-margin. [2]
[1] https://www.tesla.com/about [2] https://www.tesla.com/blog/master-plan-part-deux
yeah but they made only 53k ish vehicles in q2 2018, so your stat is weird. and theyre about to bring online another factory (q1 2020).
I know at least one person that's decided not to buy a Tesla simply because their future is so murky and is not sure if they will be around for repairs. That's a problem they need to tackle now before it spirals out of control.
Also, it seems to me that Tesla should work with one of the big three automakers on manufacturing. Tesla has spent a lot of resources reinventing car manufacturing and yet they can't produce a vehicle that meets their needs. They need to focus on the high tech aspects and leave the mundane manufacturing to experts.
At the very least, Musk should trust his manufacturing experts on how to produce a car rather than try to make every decision by himself. He's a great marketer and should focus on that role and leave the rest to the experts.
Too bad they can't lower the cost of batteries enough. If they did that, they could lower the price of the car to a point where it would be a no brainer to buy one.
> I know at least one person that's decided not to buy a Tesla simply because their future is so murky and is not sure if they will be around for repairs. That's a problem they need to tackle now before it spirals out of control.
I’m sure there is one person that made a decision on that basis but I’ve heard many more not-real customers speculating about this as if they were in the market, but they very clearly wouldn’t buy a Tesla anyway and would’ve found another excuse (hint hint: with so much negative noise and FUD and hatred by big media it’s not hard to find one). The reality is even if Tesla hypothetically goes bankrupt, it’ll most likely cause a change in who owns the equity at large and will likely not materially impact the customer base.
In general, it’s much easier to expand the customer base by solving real problems for people who are eager to buy stuff but can’t (for example, due to real charging problems in urban areas or the car being expensive) than to try to soothe a skeptic. This applies to VCs you pitch too. Spending time changing people’s mind is often futile, and in this case it’s not at all clear that it materially impacts Tesla. They are for the most part production constrained still.
A company that is production constrained does not need to lower the price of its products. It can keep the price the same or even increase prices. This is basic economics.
Tesla has already lowered the price of its vehicles 3x this year...
Two points: the basic model assumes there’s a single market to sell to, but different geos ramping up may spike your supply in one market while your other segment is not deliverable yet, causing short term supply spike in one segment while simultaneously being production-constrained in total.
For the Model 3 specifically, the price cuts are mostly in-line with tax credit phaseout and they have reshuffled features (AP features moved to more expensive FSD option for instance). of course the higher end vehicles faced more price cuts, but that speaks little of the demand of the base vehicle.
Basic economics also tells us that at some point substitutes will be found for your product. So, if product x1 is too expensive then x2 will do. It's not a 1 to 1 substitute but if it meets your needs then x1 will need to find a way to lower the cost or make it more attractive in other ways.
Tesla is not the only car manufacturer. There are plenty of transportation options to choose from. It has a niche now but it needs to sell large quantities to survive long term.
“Tesla has spent a lot of resources reinventing car manufacturing and yet they can't produce a vehicle that meets their needs.” Where are you getting this information? Design and manufacturing influence one another. None of the “leaders” in automotive space outsource their design or manufacturing. You need to control and master both to compete in this space. Perhaps you can take the Apple route and outsource the labor (Foxconn), but Apple still controls much of the manufacturing process such as introducing friction-stir welding to shrink the iMac or introducing unibody aluminum machining to the MacBooks and iPhones.
https://www.forbes.com/sites/lensherman/2018/12/20/tesla-sur...
To start with, this article of many articles on the subject. Plus Musk has spoken on the subject too.
Manufacturers have known for decades that over automation is a problem. The dream is to put raw resources at one end and get a finished product at the other without humans touching any of it. The closer you get to total automation the harder it gets to do it. There's a fine line that must be found.
Tesla has not shown that they have found the best manufacturing process so they should get help.
Also, it is almost never the best practice to produce a product 100% in-house. It requires too many resources and it's very hard to do it at the lowest cost especially in low quantities. They aren't producing their product 100% in-house but from what I've seen in the past they've tried to produce as much as possible in house. Like I said there's a fine line that needs to be found.
Here's to hoping that they hire some creative talent to help make letters that don't look like they are from the 90's.
Found the problem: Microsoft Word - Q2 2019 Earnings Ex 99 - Final.docx
Designers didn't have anything to do with this mess.
http://www.berkshirehathaway.com/ really needs to be redesigned, too.
The drop shadows are straight out of a bad Photoshop Tutorial.
And here I am reading the numbers thinking, "wow, nearly doubled in sales revenue? Great job!"
Why is that important?
If they are going to release this to the public it would help encapsulate the brand as a whole and represent the company in a more professional way.