GWPF Newsletter: Tesla Is Burning So Much Cash It Could Go Broke By The End Of The Year

Electric Cars Are Failing To Woo Average American

In this newsletter:

1) Tesla Is Burning So Much Cash It Could Go Broke By The End Of The Year
Bloomberg, 30 April 2018
 
2) Electric Cars Are Failing To Woo Average American
Jon LeSage, Business Insider, 1 May 2018

 
3) How Tesla “Shot Itself In The Foot” By Trying To Hyper-Automate Its Factory
Quartz, 1 May 2018
 
4) Washington State Clean Vehicle Tax Exemption To Expire May 31
Green Car Report, 1 May 2018
 
5) Bosch Diesel "Breakthrough" Great News For Auto Finances, Might Slow Switch To Electric Cars
Forbes, 26 April 2018 

6) Rising Levels Of ‘Frustration’ At UN Climate Stalemate Over Paris Agreement
Matt McGrath, BBC News, 1 May 2018

Full details:

1) Tesla Is Burning So Much Cash It Could Go Broke By The End Of The Year
Bloomberg, 30 April 2018
 
The company that Elon Musk built to usher in the electric-car future might not have enough cash to make it through the calendar year.


 
The anxieties that lurk beneath the tremendous ambition of Tesla Inc. moved into the forefront in recent weeks. The company again fell far short of its own production targets for the mass-market Model 3 sedan, another person died in a crash involving its assisted-driving feature and Musk entered into a public dispute with federal safety regulators. Tesla’s once high-flying stock, buffeted by a downgrade from credit analysts, has dropped 24 percent from its peak in September.
 
There’s a good reason to worry: No one has raised or spent money the way Elon Musk has. Nor has any other chief executive officer of a public company made a bankruptcy joke on Twitter at a time when so much seemed to be unraveling.
 
Tesla is going through money so fast that, without additional financing, there is now a genuine risk that the 15-year-old company could run out of cash in 2018. The company burns through more than $6,500 every minute, according to data compiled by Bloomberg. Free cash flow—the amount of cash a company generates after accounting for capital expenditures—has been negative for five consecutive quarters. That will be a key figure to watch when Tesla reports earnings May 2.
 
Full post
 
2) Electric Cars Are Failing To Woo Average American
Jon LeSage, Business Insider, 1 May 2018
 
Electric cars are having a hard time wooing the average American and the high prices are just one roadblock.  No wonder that 80% of tax credits are taken by households making more than $100,000 a year.


 
Volkswagen is spending $2 billion in America to correct its “Dieselgate” cheating scandal — and to move beyond the typical upscale electric car shopper that tends to be much more interested in driving a Tesla Model S or Model X.

Electrify America, Volkswagen’s subsidiary carrying out the Dieselgate settlement by supporting electric vehicle purchases and charging infrastructure, has been making deals to bring fast chargers to shopping malls. After making an agreement this month to bring 100 charging locations in 34 states to Walmart, more retail outlets were just added. That includes Target, Sheetz, Casey’s General Stores, and Alltown convenience stores.
 
Walmart and Target shoppers tend to be quite different than Tesla owners, and those driving other electric vehicles from BMW, Chevrolet, Nissan, and other makers. Driving around upscale neighborhoods is usually the best place to find a Model S or Model X parked in the driveway of a high market-value home.
 
The average consumer car shopper — along with fleet managers overseeing acquisitions of a large part of new vehicles sales — have been tough to reach. Buying and driving their first EVs can raise concerns over driving range, safety, and how reliable the new technology will be over their typical lifecycle ownership.
 
Building a charging infrastructure under Electrify America, Tesla Superchargers, and other charging networks, is considered critical for reaching mass adoption of EVs. Bringing down the purchase price is another wall to climb — as demonstrated by Tesla investing heavily in its Model 3 with a $35,000 starting price, and General Motors focusing on the Chevrolet Bolt that starts at $37,500. Federal and state incentives bring those costs down even more.
 
The average pre-incentive price of 10 electric cars with the longest per-charge driving ranges was nearly $42,000 last year. That compares with about $34,000 for an average new car and $20,000 for an average new compact car.
 
Purchase incentives such as rebates and tax credits have been critical for electric vehicle sales to increase in the U.S., China, and Europe. But who’s tapping into these incentives?
 
A new study by Pacific Research Institute analyzed where tax credits in the U.S. have gone to. Reviewing the latest figures on tax credits for EV purchases, 79 percent were taken by consumers with annual household incomes greater than $100,000 per year. Extending that out a bit showed that households with $50,000 per year or more made up 99 percent of EV tax credits.
 
Full story
 
3) How Tesla “Shot Itself In The Foot” By Trying To Hyper-Automate Its Factory
Quartz, 1 May 2018
Helen Edwards & Dave Edwards
 



Investors and fans of Tesla are anxious to hear what the company has to say about the production ramp of the Model 3, the main driver of future profits and cash-flow, when it releases its first-quarter results on May 2.
 
Analysts at Bernstein and UBS recently released reports that focus specifically on the problems with “over-automation” of the Model 3 line, production of which is now approximately 2,000 vehicles per week—nowhere near the company’s target of 5,000 vehicles per week.
 
Founder and CEO Elon Musk, for years one of strongest proponents of a future where there are no people in the production process and his factory looks like an alien spaceship, is now acknowledging that the optimal level of automation remains a complex balancing act of design, productivity, quality, and human and machine skills.
 
He recently blamed an overly automated production process as the reason for missing Tesla’s output targets. “Humans are underrated,” he tweeted. And Musk added to CBS, “We had this crazy, complex network of conveyor belts… and it was not working, so we got rid of that whole thing.”
 
In the Bernstein analysis, Toni Sacconaghi and Max Warburton offer some explanation as to why it’s proving so difficult to ramp up production on an overly automated line. Warburton’s background includes time spent benchmarking vehicle-assembly plants and he states that, in attempting to hyper-automate Model 3 production at its Fremont plant in California, Tesla “may have shot itself in the foot.”
 
“Automation simply can’t deal with the complexity, inconsistencies, variation and ‘things gone wrong’ that humans can,” and “can create quality problems further down the line,” they say. The Bernstein analysts deduce that Tesla’s troubles are because of the complexity of automating final assembly, where the car is put together.
 
This is something that’s been tried before by other manufacturers—such as Fiat, Volkswagen, and GM—and they have all failed. Sacconaghi and Warburton say:
 
In final assembly, robots can apply torque consistently—but they don’t detect and account for threads that aren’t straight, bolts that don’t quite fit, fasteners that don’t align or seals that have a defect. Humans are really good at this. Have you wondered why Teslas have wind-noise problems, squeaks and rattles, and bits of trim that fall off? Now you have your answer.
 
The Bernstein analysts point out that final assembly is fundamentally an exercise in flexibility because the process is constrained by the ability to feed the right part at the right time. Humans are able to spot things that aren’t right, stop the process, and try to get them fixed.
 
One of the important ways that simple design contributes to simpler final assembly is in how many parts and how much space is required alongside the assembly line. Robots aren’t as flexible as humans; they aren’t as good as humans at adapting to product variants nor can they handle as many complex movements as humans.
 
This means that, beyond a certain point, automation can raise costs, and contrary to what you’d expect, not help quality or productivity. 
 
Full story
 
4) Washington State Clean Vehicle Tax Exemption To Expire May 31
Green Car Report, 1 May 2018
 
The hotbed of electric cars so far has been the U.S. West Coast. California, of course, is the leader, with its zero-emissions vehicle mandates. Going up the coast, the selection—and sales—get steadily thinner, but remain conspicuous.

Now the Evergreen State, which has a strong electric-car presence even though it does not follow California zero-emissions mandates, is about to lose its biggest incentive for plug-in car buyers: the sales tax exemption.
 
The latest two- year program, started in July 2017, was so successful that it is scheduled to run out of credits at the end of May after 11 months.
 
The state program allowed for sales tax exemptions for non-luxury plug in cars, but the legislature limited the number of exemptions to 7,500 over the two years. Now so many drivers have bought plug-in cars that those exemptions are scheduled to run out by the end of May.
 
This is the second round of the program in Washington State, and it's not clear if there will be a third.
 
Full story
 
5) Bosch Diesel "Breakthrough" Great News For Auto Finances, Might Slow Switch To Electric Cars
Forbes, 26 April 2018 
Neil Winton

If this works as claimed, car manufacturers will breathe a sigh of relief, and it will ease the pressure to quickly switch to electric vehicles.
 
German engineering giant Robert Bosch’s new diesel exhaust system might be the silver bullet Europe’s car makers have been dreaming about as their sales of diesels plummet.
 
It might also ease the pressure on car manufacturers for an early, and very expensive, switch to electric cars.
 
According to a report from Fitch Ratings, Bosch’s technology breakthrough, which is said to slash nitrogen oxide emissions from diesel engines, has the potential to reverse diesel's recent weakness.
 
Big manufacturers have yet to confirm if this will be a viable new system for them.
 
Diesel engines have been subsidized by European governments for years because their superior efficiency compared with gasoline was said to help in the fight against CO2-induced global warning. But recently, environmental groups across Europe have pointed to diesel pollution as causing a huge amount of premature deaths. They have been demanding curbs on diesel access to cities and an end to the subsidies on diesel fuel.
 
A recent court case in Germany gave the green light to curbs on diesels, and sales of the vehicles have plunged.

Resale values have been trashed. The European industry was relying on diesel power to meet tougher E.U. emissions and fuel economy rules. If they fail to meet these targets financially crippling fines will be handed out.
 
Bosch, in a statement Wednesday, said its technology cuts emissions far below legal limits taking effect in 2020 and can help automakers avoid driving bans which threaten to doom the technology.
 
Bosch said its new process optimizes thermal management of exhaust temperatures, slashing nitrogen oxide emissions to one-tenth of the legally permitted limit, and doesn’t require new hardware. The system keeps emissions stable even at cold temperatures.
 
Full story
 
6) Rising Levels Of ‘Frustration’ At UN Climate Stalemate Over Paris Agreement
Matt McGrath, BBC News, 1 May 2018
 
Old divisions between rich and poor over money and ambition are again threatening to limit progress in UN climate negotiations. Developing countries say they are “frustrated” with the lack of leadership from the developed world.


 
Discussions between negotiators from nearly 200 countries have resumed in Germany, aiming to flesh out the rules on the Paris climate pact.
 
But developing countries say they are “frustrated” with the lack of leadership from the developed world.
 
Commitments to cut carbon are still “woefully inadequate” they said.
 
2018 marks a critical stage in the global climate negotiations process. By the end of this year, governments will meet in Poland to finalise the so-called “rulebook” of the Paris deal, agreed in the French capital in December 2015.
 
This is seen as a key test.
 
The rules will define the ways in which every country reports on their emissions and on their carbon-cutting actions and, importantly, how they will increase these actions in the years ahead.
 
But while rich and poor countries united in Paris to push through the deal, significant ruptures have re-appeared in wrangles over key technical details.
 
The developed nations want almost all countries to share the same set of rules on how carbon emissions are measured, reported and verified. This issue, called “transparency” in the negotiations, has run into difficulties with many emerging economies arguing for more “flexibility”.
 
According to some observers, the richer countries believe that some in the talks are trying to turn the clock back to the time when only wealthier countries had any commitments to cut carbon, while developing countries including India and China had no obligations.
 
Full story

The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.