Saturday, February 22, 2014

Tesla Reports Earnings

Tesla reported good progress in their quest to become profitable.   They certainly have sold more cars than the analysts expected and they sold these cars with a decent gross margin.   The average car sold for $90,000 and the gross margin was in the $20,000 range.   They also sold approximately 6,500 cars in fourth quarter worldwide.

Guys like Dr. P and Mr. J are very happy with their Teslas and it seems that despite thermodynamics the Tesla is still considered as a green car by more affluent folks who simply do not care about thermodynamics but care about their image and the image the car they drive projects.   Tesla is brilliant at cultivating that image and their customers are very satisfied.  Tesla is the Aston Martin of Electric Vehicles.  I have to hand it to Elon Musk who is a marketing genius.    He keeps on delaying his people’s EV as he knows that thermodynamics does not allow him to price a luxury EV with any real range at anything near $50,000.  There is even talk of larger battery packs for the Model S so the rich can have more range in their subsidized vehicles.

Fisker may come back to life with new Chinese ownership.  It has been reported that besides the US DOE debt that we took a bath on, the unsecured creditors are owed over $950 million and they will be getting about a dime on a dollar.  The equity investors in Fiskers got blown away.

So far Tesla has had cumulative losses of approximately $1 billion but they are now starting to become profitable, and I do believe they will have an economically sustainable business as a luxury brand catering to affluent customers who wish to be green.  The press is full of news that Tesla intends to have its own captive giga battery factory and that within three years they will drive down the cost of batteries by half.

I do think Tesla will have a giga battery factory but I do not believe the people’s TESLA with 300 miles of range on batteries and a cost of $30,000 will appear.   The CNN article above talks of the Model S being a $69,000 car yet in the 4th quarter the average price of a Tesla sold is more like $90,000.  Tesla will be smart to stick to the very high end niche market and let others break their backs selling low margin or negative margin $30,000 electric vehicles.   Remember Coda Blue!!

Maybe the EPA will come clean and provide consumers with real data on the equivalent MPGs of electric cars and maybe Tesla will have a profitable business selling a $30,000 EV with 300 miles of range but I don’t think either will happen.  The EPA will simply hype the MPGe of EVs for political purposes and Elon will hype his future $30,000 car for the purpose of tantalizing the masses that they too can drive in style.  

The carbon dioxide concentration in the atmosphere will continue to increase, and I will continue to write boring blogs that try to get the average person to comprehend that thermodynamics constrains useful work and the cost of stored energy in EVs.  CNN, CNBC, ABC, and other media outlets will continue to report that the people’s EV from Tesla with a cost of $30,000 and a range of 300 miles is just around the corner.  Sometimes I wish I could forget Thermo and simply drink the green cool aid as ignorance is bliss.  

Update: 2/23/14  I received several emails that my thermo blogs are not boring, and that I should not drink the green cool aid, and that ignorance is not bliss.   I will therefore continue to plod on and try make Dr. Moniz obey the second law before he hands out billions of dollars to Elon for the new mega battery factory.


  1. Lindsay - batteries (right now) are so much worse from a carbon perspective than people even realize. The wholesale power plants with a good carbon profile (nuclear, wind, and solar) all bid zero into wholesale markets (nuclear probably even bids negative because there is a cost to shutting down) becuase their fual is free and their marginal cost of operation is zero. As such, these plants are ALWAYS dispatched by balancing authorities when available (utilities in vertically integrated markets like CO/AZ, independent system operators in places like CA, the midwest, TX, and northeast) and therefore ALWAYS ON. This means that any incremental grid demand from battery charging is creating an incremental demand for energy from plants that are not always on: natural gas combined cycle in the best case scenario and natural gas peakers during peak hours (coal instead of combined cycle in dirtier grids). Until we are at a point where there are so many renewables/nuclear they they meet our entire base load constantly, batteries only create an incremental demand for fossil fired plants, even when they are charging at night.

    Just look at data from a place with high renewable penetration like CA. CAISO shows daily data through its renewables watch. Until there are hours out of the year where thermal generation is zero, batteries are always creating an incremental demand for fossil generation only, and aren't green at all.

    Maybe you have already touched on this.


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