Not The Boring Company, but The Hopeless Company.
The dizzying hype and promises emanating from Tesla can just blow you away if you don’t brace for them. But beyond them, what Tesla proudly announced today was a quarterly net loss attributable to common stockholders of $710 million. This was more than double its record loss a year ago, and its largest net loss ever in its history now spanning over a decade. It was the fifth relentlessly mind-blowing quarterly record loss in a row:
There is one rule that applies to Tesla: The more it sells, the more it loses. Not exactly an ingenious business model. Total revenues – automotive and energy combined – rose 26% to $3.41 billion in Q1. This 26% increase in revenues caused a 114% jump in net losses.
And vehicle sales, well here we go: Globally in Q1, Tesla “delivered” nearly 30,000 vehicles: 21,815 Model S and Model X vehicles and 8,182 Model 3 vehicles.
This gives Tesla a global market share of about 0.15%. If Tesla were able to multiply its deliveries by a factor of six right now – so from 30,000 vehicles a quarter to 180,000 a quarter, right now – its global market share would still be less than 1%.
In other words, in terms of overall vehicle sales, Tesla simply doesn’t matter. It’s just a niche automaker. There’s nothing wrong with being a niche automaker. Except for two things in Tesla’s case: Its ludicrous market capitalization, which is still an inexplicable $50 billion, and its mega-losses and cash-burn that investors – the true believers – are still all too willing to feed with new money.
In terms of living up to its projections, well forget it. Tesla’s projection of producing 5,000 Model 3 vehicles per week by the end of last year has long ago swirled down the toilet. The projection has been replaced with other projections that have since swirled down the toilet as well. In reality, in Q1, Model 3 production averaged about 800 per week.
For a few weeks in April – so this is Q2 – Tesla said it built a little over 2,000 Model 3 vehicles a week. But then Tesla disclosed this:
Model 3 gross margin remained negative in Q1 due to temporary underutilization of our manufacturing capacity, which was in line with our expectations.
In other words, Tesla admits that the more Model 3 vehicles it builds, the more money it loses. So at this rate, the Q2 losses are going to be an even bigger zinger.
It’s still dreaming about a 25% gross margin for the Model 3 long-term. However, “in the medium term” – eternity? – it will face continued margin pressures “due to higher labor content in certain areas of manufacturing where we have temporarily dialed back automation, as well as higher material costs from recently imposed tariffs, commodity price increases and a weaker US dollar.”
In other words, “manufacturing hell,” as CEO Elon Musk had so elegantly put it last year, will continue to reign, which is not a good thing for an amateur manufacturer in a world full of pros.
Cash flow was a horror story. In the quarter, Tesla burned $398 million in its operations and another $729 million with capital expenditures, including “Payments for the cost of solar energy systems, leased and to be leased,” and “business combinations.” This adds up to a total of $1.13 billion in cash, POOF, gone in three months.
Tesla also raised some new funds, including from borrowing and the sale of asset-backed securities. Total cash flow from these and other financing activities was $372 million.
On net, cash burn minus financing activities pulled down its total cash on hand by $721 million in three months, from $3.37 billion at the end of Q4 to $2.67 billion on March 31.
Maybe investors and perhaps even the true believers and Wall Street hype promoters are getting tired of the hype that is supposed to cover up for the broken promises, record losses, mind-blowing cash burn, and the relentless inability to mass-produce vehicles. In after-hours trading, Tesla’s shares are down nearly 5%. One of Musk’s other outfits is The Boring Company. As a perfect match, Tesla should be renamed, The Hopeless Company.
This is the end of an era in the US Auto industry. Read… Carmageddon for Cars: “Cars” Are Scheduled to Die
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